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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) June 2, 1999
-------------------------------
DISPLAY TECHNOLOGIES, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Nevada 0-14427 33-2286268
- ---------------------------- ----------------- -----------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
5029 Edgewater Drive, Orlando, Florida 32810
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (407) 521-7477
-----------------------------
Not Applicable
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(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS
Effective July 30, 1999, the Registrant completed a private sale of 50,000
shares of its preferred stock, par value $.001 per share, designated as Series A
Convertible Preferred Stock ("Series A Preferred Stock") and stock purchase
warrants to purchase up to an aggregate of 150,000 shares of the Registrant's
common stock, par value $.001 per share (the "Stock Purchase Warrants"), to
Raymond James Capital Partners, L.P., Renaissance Capital Growth & Income Fund
III, Inc. and Renaissance U.S. Growth & Income Trust PLC, for total proceeds of
$5,000,000. A copy of the Certificate of Designation of the Series A Preferred
Stock is filed with this Report as Exhibit 4.32. A copy of the form of Stock
------------
Purchase Warrant is filed with this Report as Exhibit 4.33. A copy of the
------------
Securities Purchase Agreement pursuant to which the Series A Preferred Stock and
Stock Purchase Warrants were issued is filed with this Report as Exhibit 10.136.
--------------
Effective July 1, 1999, the Registrant acquired through a merger all of the
outstanding capital stock of Lockwood Sign Group, Inc. A copy of Agreement and
Plan of Merger and Reorganization entered into in connection with this
transaction is filed with this Report as Exhibit 2.5.
-----------
On June 17, 1999, the Registrant issued and sold in a private transaction
$2,500,000 principal amount of its variable/fixed rate secured promissory notes.
A copy of the Trust Indenture pursuant to which such notes were issued is filed
with this Report as Exhibit 4.34. A copy of the form of the notes is filed as
------------
Exhibit 4.35.
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Effective June 2, 1999, the Registrant entered into a Loan and Security
Agreement with SouthTrust Bank, National Association ("Loan Agreement"). The
Loan Agreement provides the Registrant a line of credit up to $10,000,000 and a
$1,000,000 term loan. A copy of the Loan Agreement is filed with this Report as
Exhibit 10.137.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits.
2.5 Agreement and Plan of Merger and Reorganization dated as of
July 1, 1999 among Registrant, Lockwood Acquisitions Corp.,
a wholly owned Florida subsidiary of Registrant, Lockwood
Sign Group, Inc., a Georgia corporation, and Larry L.
Johnson and Kurt R. Johnson
3.31 Articles of Incorporation of Lockwood Acquisitions Corp.
(n/k/a Lockwood Sign Group, Inc.), a Florida corporation
3.32 Articles of Merger of Lockwood Sign Group, Inc., a Georgia
corporation, into Lockwood Acquisitions Corp. (with the
surviving corporation, Lockwood Acquisitions Corp. changing
its name to Lockwood Sign Group, Inc.)
3.33 Bylaws of Lockwood Sign Group, Inc. f/k/a Lockwood
Acquisitions Corp
4.32 Certificate of Designation of the Series A Preferred Stock
4.33 Form of Stock Purchase Warrant issued to Raymond James
Capital Partners, L.P., Renaissance Capital Growth & Income
Fund III, Inc. and Renaissance U.S. Growth & Income Trust
PLC
4.34 Trust Indenture dated June 1, 1999 between the Registrant
and SouthTrust Bank, National Association
4.35 Form of $2,500,000 Variable/Fixed Rate Secured Notes
10.136 Securities Purchase Agreement dated as of July 30, 1999
between Registrant, Raymond James Capital Partners, L.P.,
Renaissance Capital Growth & Income Fund III, Inc. and
Renaissance U.S. Growth & Income Trust PLC
10.137 Loan and Security Agreement dated June 2, 1999 between
Registrant and SouthTrust Bank, National Association
10.138 Employment Agreement dated July 30, 1999 between and among
Registrant, Lockwood Sign Group, Inc. and Larry L. Johnson
10.139 Employment Agreement dated July 30, 1999 between and among
Registrant, Lockwood Sign Group, Inc. and Kurt R. Johnson
21 Subsidiaries
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report on Form 8-K to be signed on its behalf by
the undersigned hereunto duly authorized.
DISPLAY TECHNOLOGIES, INC.
(Registrant)
Date: August 10, 1999 By: Marshall S. Harris
--------------------------------
Marshall S. Harris
Vice President, Secretary
and General Counsel
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EXHIBIT 2.5
==============================================================================
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
among:
DISPLAY TECHNOLOGIES, INC.,
a Nevada corporation;
LOCKWOOD ACQUISITIONS CORP.,
a Florida corporation;
LOCKWOOD SIGN GROUP, INC.,
a Georgia corporation;
LARRY L. JOHNSON;
and
KURT R. JOHNSON
Dated as of July 1, 1999
==============================================================================
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TABLE OF CONTENTS
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SECTION 1. DESCRIPTION OF TRANSACTION................................................... 1
1.1 Merger of the Company into Merger Sub............................................. 1
1.2 Effect of the Merger.............................................................. 2
1.3 Closing; Effective Time........................................................... 2
1.4 Conversion of Shares; Additional Parent Common Stock.............................. 2
1.5 Closing of the Company's Transfer Books........................................... 3
1.6 Exchange of Certificates.......................................................... 3
1.7 Tax Consequences.................................................................. 4
1.8 Accounting Treatment.............................................................. 4
1.9 Issuance of Contingent Shares..................................................... 4
1.10 Further Action.................................................................... 6
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND
THE SHAREHOLDER.............................................................. 6
2.1 Due Organization; No Subsidiaries; Etc............................................ 6
2.2 Articles of Incorporation and Bylaws; Records..................................... 7
2.3 Capitalization, Etc............................................................... 7
2.4 Financial Statements.............................................................. 8
2.5 Absence of Changes................................................................ 8
2.6 Title to Assets................................................................... 10
2.7 Bank Accounts; Receivables; Payables.............................................. 10
2.8 Real Property; Equipment; Motor Vehicles.......................................... 11
2.9 Proprietary Assets................................................................ 11
2.10 Contracts......................................................................... 13
2.11 Liabilities....................................................................... 15
2.12 Compliance with Legal Requirements................................................ 15
2.13 Governmental Authorizations....................................................... 16
2.14 Tax Matters....................................................................... 16
2.15 Employee and Labor Matters; Benefit Plans......................................... 17
2.16 Environmental Matters............................................................. 19
2.17 Insurance......................................................................... 20
2.18 Related Party Transactions........................................................ 20
2.19 Legal Proceedings; Orders......................................................... 21
2.20 Company Warranties................................................................ 21
2.21 Authority; Binding Nature of Agreement............................................ 21
2.22 Non-Contravention; Consents....................................................... 22
2.23 Full Disclosure................................................................... 22
2.24 Information Systems............................................................... 23
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SECTION 3. ADDITIONAL REPRESENTATIONS, WARRANTIES AND
COVENANTS OF THE SHAREHOLDER................................ 24
3.1 Requisite Power and Authority.................................... 24
3.2 Title to Shares.................................................. 24
3.3 No Violation, Conflict, Etc...................................... 24
3.4 No Consent or Approval........................................... 24
3.5 No Injunctions, Orders, Etc...................................... 25
3.6 Dissenters' Rights............................................... 25
SECTION 4. REPRESENTATIONS AND WARRANTIES OF PARENT AND
MERGER SUB.................................................. 25
4.1 SEC Filings; Financial Statements................................ 25
4.2 Authority; Binding Nature of Agreement........................... 26
4.3 Valid Issuance................................................... 26
SECTION 5. COVENANTS OF THE COMPANY AND THE SHAREHOLDERS............... 26
5.1 Conduct of the Company's Business................................ 26
5.2 Necessary Consents and Other Actions............................. 27
5.3 Advice of Changes................................................ 27
5.4 Access to Information............................................ 27
5.5 Confidentiality; Public Announcements............................ 28
5.6 No Solicitation.................................................. 28
5.7 FIRPTA Matters................................................... 28
SECTION 6. ADDITIONAL COVENANTS OF THE PARTIES......................... 29
6.1 Filings and Consents............................................. 29
6.2 Environmental Review............................................. 29
6.3 Shareholder Guaranteed Obligations............................... 29
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND
MERGER SUB.................................................. 29
7.1 Accuracy of Representations...................................... 30
7.2 Performance of Covenants......................................... 30
7.3 Approval by the Company's Shareholders........................... 30
7.4 Completion of Due Diligence...................................... 30
7.5 Approval of Parent's Directors................................... 30
7.6 Acquisition Financing............................................ 30
7.7 Individual Loans................................................. 30
7.8 Consents......................................................... 30
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7.9 Agreements and Documents......................................... 30
7.10 FIRPTA Compliance................................................ 31
7.11 Legal Investment................................................. 31
7.12 No Restraints.................................................... 31
7.13 No Legal Proceedings............................................. 31
7.14 Employees........................................................ 31
7.15 New Employment Agreements........................................ 31
SECTION 8. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY
32
8.1 Accuracy of Representations...................................... 32
8.2 Performance of Covenants......................................... 32
8.3 Consents......................................................... 32
8.4 No Restraints.................................................... 32
SECTION 9. INDEMNIFICATION, ETC........................................ 32
9.1 Survival of Representations, Etc................................. 32
9.2 Indemnification by the Company's Shareholders.................... 33
9.3 No Contribution.................................................. 33
9.5 Interest......................................................... 34
9.6 Defense of Third Party Claims.................................... 34
9.7 Exercise of Remedies by Indemnitees Other Than Parent............ 35
SECTION 10. TERMINATION AND ABANDONMENT...................................... 35
10.1 Termination...................................................... 35
10.2 Procedure Upon Termination....................................... 36
SECTION 11. AGREEMENT TO VOTE SHARES......................................... 36
11.1 Agreement To Vote Shares......................................... 36
SECTION 12. REGISTRATION RIGHTS.............................................. 37
12.1 Piggyback Registration........................................... 37
12.2 Indemnification.................................................. 38
12.3 Transferability of Registration Rights........................... 39
12.4 Amendment of Section 12.......................................... 39
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SECTION 13. MISCELLANEOUS PROVISIONS........................................ 39
13.1 Further Assurances.............................................. 39
13.2 Fees and Expenses............................................... 39
13.3 Attorneys' Fees................................................. 39
13.4 Notices......................................................... 39
13.5 Time is of the Essence.......................................... 40
13.6 Headings........................................................ 40
13.7 Counterparts.................................................... 40
13.8 Governing Law; Venue; Arbitration............................... 41
13.9 Successors and Assigns.......................................... 41
13.10 Remedies Cumulative; Specific Performance....................... 41
13.11 Waiver.......................................................... 42
13.12 Amendments...................................................... 42
13.13 Severability.................................................... 42
13.14 Parties in Interest............................................. 42
13.15 Entire Agreement................................................ 42
13.16 Construction.................................................... 43
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EXHIBITS
Exhibit A - Certain Definitions
Exhibit B - Ownership of Company Common Stock
Exhibit C - Form of Noncompetition Agreement
Exhibit D - Form of Release
Exhibit E - Form of Legal Opinion of Cushing, Morris, Armbruster & Jones,
LLP
Exhibit F - Form of Spousal Consent, Power of Attorney and Waiver
Exhibit G - Form of Voting Agreement and Irrevocable Proxy
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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION ("Agreement") is made
and entered into as of July 1, 1999, by and among: DISPLAY TECHNOLOGIES, INC., a
Nevada corporation ("Parent"); LOCKWOOD ACQUISITIONS CORP., a Florida
corporation and a wholly owned subsidiary of Parent ("Merger Sub"); LOCKWOOD
SIGN GROUP, a Georgia corporation (the "Company"); and LARRY L. JOHNSON and KURT
R. JOHNSON (individually, "Shareholder" and collectively, "Shareholders").
Certain other capitalized terms used in this Agreement are defined elsewhere in
this Agreement and in Exhibit A.
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RECITALS:
A. Parent, Merger Sub and the Company intend to effect a merger of the
Company with and into Merger Sub in accordance with this Agreement, the Georgia
Business Corporation Code and the Florida Business Corporation Act (the
"Merger"). Upon consummation of the Merger, the Company will cease to exist.
B. For United States federal income tax purposes, It is intended that the
Merger qualify as a tax-free reorganization within the meaning of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code"), and that this
Agreement be, and is hereby adopted as, a plan of reorganization for purposes of
Section 368 of the Code. For accounting purposes, it is intended that the Merger
be accounted for as a purchase in accordance with GAAP.
C. The Shareholders own a total of 1,000 shares of common stock, $1.00
par value, of the Company (collectively, the "Company Common Stock"), as
reflected on Exhibit B.
---------
D. Each of the Shareholders will personally benefit from the transactions
contemplated by this Agreement and, in consideration thereof, agrees to be bound
the terms of this Agreement.
AGREEMENT
The parties to this Agreement, intending to be legally bound, agree as
follows:
SECTION 1. DESCRIPTION OF TRANSACTION
1.1 Merger of the Company into Merger Sub. Upon the terms and subject to
the conditions set forth in this Agreement, as of the Effective Time (as defined
in Section 1.3), the Company shall be merged with and into Merger Sub, and the
separate existence of the Company shall cease. Merger Sub will continue as the
surviving corporation in the Merger (the "Surviving Corporation").
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1.2 Effect of the Merger. The Merger shall have the effects set forth in
this Agreement and in the applicable provisions of the Georgia Business
Corporation Code and the Florida Business Corporation Act.
1.3 Closing; Effective Time. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Kilpatrick Stockton LLP, Suite 2800, 1100 Peachtree Street, Atlanta, Georgia
30309-4530 at 10:00 p.m., Eastern Standard Time, within three (3) business days
after the satisfaction or waiver of all conditions set forth in Sections 7 and 8
(the "Closing Date"). Contemporaneously with the Closing, a properly executed
certificate or agreement of merger conforming to the requirements of the Georgia
Business Corporation Code and properly executed articles of merger conforming to
the requirements of the Florida Business Corporation Act shall be filed with
each of (a) the Secretary of State of the State of Florida and (b) the Secretary
of State of the State of Georgia and (c) the office of the county recorder in
each county in each state within which any real property owned by the Company is
located. For accounting purposes, the Merger shall be deemed effective as of
July 1, 1999 (the "Effective Time").
1.4 Conversion of Shares; Additional Parent Common Stock.
(a) Subject to the other terms and provisions of this Agreement, at
the Effective Time, by virtue of the Merger and without any further action on
the part of Parent, Merger Sub, the Company or any shareholder of the Company,
each of the 1,000 shares of Company Common Stock outstanding immediately prior
to the Effective Time shall be converted into the right to receive (i) $1,900.00
cash, (ii) 415 shares of the common stock, par value $.001 per share, of Parent
("Parent Common Stock") and (iii) such additional shares of Parent Common Stock
as may become issuable pursuant to Section 1.4(c) and Section 1.9.
(b) If any shares of Company Common Stock outstanding immediately
prior to the Effective Time are unvested or are subject to a repurchase option,
risk of forfeiture or other condition under any applicable restricted stock
purchase agreement or other agreement with the Company, then the shares of
Parent Common Stock issued in exchange for such shares of Company Common Stock
will also be unvested and subject to the same repurchase option, risk of
forfeiture or other condition, and the certificates representing such shares of
Parent Common Stock may accordingly be marked with appropriate legends.
(c) In the event the average Trading Price of Parent Common Stock
(using a weighted average based on trading volume, straight unweighted
arithmetic average or such other mathematic formula that yields the highest such
average) for any 20 consecutive trading days ("Average Trading Price") during
the period commencing 20 trading days prior to the Closing Date and ending 12
months following the Closing Date (the "Measuring Period") does not equal or
exceed $4.60 per share (the "Target Price"), within 30 days following the end of
the Measuring Period Parent shall issue to the Shareholders, in the same
proportions as the shares issuable pursuant to Section 1.4(a) above, a number of
additional shares of Parent Common Stock equal to (i) the excess of the Target
Price over the highest Average Trading Price during the Measuring Period, (ii)
multiplied by the number of shares of Parent Common Stock issued pursuant to
Section 1.4(a) above that are owned by the shareholders on the last day of the
Measuring Period, and (iii) divided by the
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Average Trading Price of the Parent Common Stock for the last 31 calendar days
of the Measuring Period.
(d) The number of shares of Parent Common Stock issuable pursuant to
this Section 1.4(a) and the Target Price shall be ratably adjusted to take into
account any stock dividend (other than Parent's annual 5% stock dividend, if
any), stock split, reverse stock split or other distribution or consolidation of
securities on outstanding shares of Parent Common Stock effected between the
date of this Agreement and the date of issuance of such Parent Common Stock.
1.5 Closing of the Company's Transfer Books. At the Effective Time,
holders of certificates representing shares of the Company's capital stock that
were outstanding immediately prior to the Effective Time shall cease to have any
rights as shareholders of the Company, and the stock transfer books of the
Company shall be closed with respect to all shares of such capital stock
outstanding immediately prior to the Effective Time. No further transfer of any
such shares of the Company's capital stock shall be made on such stock transfer
books after the Effective Time. If, after the Effective Time, a valid
certificate previously representing any of such shares of the Company's capital
stock (a "Company Stock Certificate") is presented to the Surviving Corporation
or Parent, such Company Stock Certificate shall be canceled and shall be
exchanged as provided in Section 1.6.
1.6 Exchange of Certificates.
(a) At or as soon as practicable after the Effective Time, Parent will
send to the holders of Company Stock Certificates (i) a letter of transmittal in
customary form and containing such provisions as Parent may reasonably specify,
and (ii) instructions for use in effecting the surrender of Company Stock
Certificates in exchange for cash and certificates representing Parent Common
Stock. Upon surrender of a Company Stock Certificate to Parent for exchange,
together with a duly executed letter of transmittal and such other documents as
may be reasonably required by Parent, the holder of such Company Stock
Certificate shall be entitled to receive in exchange therefor cash and a
certificate representing the number of shares of Parent Common Stock that such
holder has the right to receive pursuant to the provisions of this Section 1,
and the Company Stock Certificate so surrendered shall be canceled. Until
surrendered as contemplated by this Section 1.6, each Company Stock Certificate
shall be deemed, from and after the Effective Time, to represent only the right
to receive upon such surrender cash and a certificate representing shares of
Parent Common Stock as provided in Section 1.4 If any Company Stock Certificate
shall have been lost, stolen or destroyed, Parent may, in its discretion and as
a condition precedent to the payment of any cash and the issuance of any
certificate representing Parent Common Stock, require the owner of such lost,
stolen or destroyed Company Stock Certificate to provide an appropriate
affidavit and execute and deliver to Parent an affidavit and indemnity
agreement, indemnifying Parent and the Surviving Corporation against any claim
that may be made against Parent or the Surviving Corporation with respect to
such Company Stock Certificate.
(b) No dividends or other distributions declared or made with respect
to Parent Common Stock with a record date after the Effective Time shall be paid
to the holder of any unsurrendered Company Stock Certificate with respect to the
shares of Parent Common Stock
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represented thereby, until such holder surrenders such Company Stock Certificate
in accordance with this Section 1.6 (at which time such holder shall be entitled
to receive all such dividends and distributions and such cash payment).
(c) No fractional shares of Parent Common Stock shall be issued in
connection with the Merger, and no certificates for any such fractional shares
shall be issued.
(d) Parent and the Surviving Corporation shall be entitled to deduct
and withhold from any consideration payable or otherwise deliverable to any
holder or former holder of capital stock of the Company pursuant to this
Agreement such amounts as Parent or the Surviving Corporation may be required to
deduct or withhold therefrom under the Code or under any provision of state,
local or foreign tax law. To the extent such amounts are so deducted or
withheld, such amounts shall be treated for all purposes under this Agreement as
having been paid to the Person to whom such amounts would otherwise have been
paid.
(e) Neither Parent nor the Surviving Corporation shall be liable to
any holder or former holder of capital stock of the Company for any shares of
Parent Common Stock (or dividends or distributions with respect thereto), or for
any cash amounts, delivered to any public official pursuant to any applicable
abandoned property, escheat or similar law.
1.7 Tax Consequences. For federal income tax purposes, the Merger is
intended to constitute a reorganization within the meaning of the Code. The
parties hereto shall use (and shall cause their respective affiliates to use)
all reasonable efforts to cause the Merger to so qualify, and the parties will
take (and cause their respective affiliates to take) the position for all
purposes that the Merger qualifies as a reorganization under such Sections of
the Code.
1.8 Accounting Treatment. For accounting purposes, the Merger is intended
to be accounted for as a purchase in accordance with GAAP.
1.9 Issuance of Contingent Shares.
(a) Subject to the provisions of Section 2.4 (b), as additional
consideration in the Merger, on or before October 15, 2000, Parent shall issue
to the Shareholders, in proportion to their respective percentage ownership
interests in the shares of Company Common Stock outstanding immediately prior to
the Effective Time, up to an additional 300,000 shares of Parent Common Stock
("Contingent Parent Shares"), as provided in clause (b) below.
(b) The issuance of Contingent Parent Shares shall be subject to, and
conditioned upon, the recognition by the Company and the Surviving Corporation
of certain levels of Contingent Period Net Income for the 12-month period ending
June 30, 2000. The number of Contingent Parent Shares, if any, to be issued
shall be calculated based on the following Contingent Period Net Income levels
recognized by the Company and the Surviving Corporation for such period:
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(c) In the event the Company and the Surviving Corporation recognize
Contingent Period Net Income in an amount between any of the levels specified in
clause (b) above, the number of Additional Parent Shares to be issued pursuant
to this Section 1.9 shall be adjusted on a pro rata basis.
(d) In the event the Average Trading Price of Parent Common Stock does
not equal or exceed the Target Price during the 12 months following the date of
issuance of the Contingent Shares (the "Contingent Measuring Period"), then
within 30 days following the end of the Contingent Measuring Period Parent shall
pay to the Shareholders, in the manner provided in clause (ii) below, the
following additional consideration:
(i) Parent shall pay to the Shareholders the amount by which the
Target Price exceeds the highest Average Trading Price of Parent Common Stock
during the Contingent Measuring Period, multiplied by the number of Contingent
Shares issued to the Shareholders pursuant to this Section 1.09 that are owned
by the Shareholders on the last day of the Contingent Measuring Period.
(ii) Parent shall have the right, in its sole discretion, to pay
any or all additional consideration required under clause (i) above in the form
of cash, promissory notes or additional shares of Parent Common Stock. In the
event Parent elects to pay any such additional consideration in the form of
promissory notes, such notes shall be unsecured, shall bear interest at the rate
of 8% annually and shall provide for amortization of principal in 12 equal
quarterly installments. In the event Parent elects to pay such additional
consideration in shares of Parent Common Stock, the number of shares of Parent
Common Stock to be so issued shall be determined by dividing the amount of such
additional consideration to be paid by the Average Trading Price of Parent
Common Stock for the last 31 calendar days of the Contingent Measuring Period.
Notwithstanding the foregoing, Parent shall have the right to pay any such
additional consideration in the form of cash or notes only to the extent that
all shares of Parent Common Stock received by
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the Shareholders as a result of the Merger have a value, on the dates received
by the Shareholders, of at least 40% of the aggregate consideration received by
the Shareholders as a result of the Merger.
(e) The number of Contingent Shares issuable pursuant to this Section
1.09 and the Target Price shall be ratably adjusted to take into account any
stock dividend (other than Parent's annual 5% stock dividend, if any), stock
split, reverse stock split or other distribution or consolidation of securities
on outstanding shares of Parent Common Stock effected between the date of this
Agreement and the date of issuance of such Contingent Shares.
1.10 Further Action. If, at any time after the Effective Time, any further
action is determined by Parent to be necessary or desirable to carry out the
purposes of this Agreement or to vest the Surviving Corporation or Parent with
full right, title and possession of and to all rights and property of Merger Sub
and the Company, the officers and directors of the Surviving Corporation and
Parent shall be fully authorized (in the name of Merger Sub, in the name of the
Company and otherwise) to take such action.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
SHAREHOLDERS
Each of the Company and the Shareholders, jointly and severally, represents
and warrants as follows:
2.1 Due Organization; No Subsidiaries; Etc.
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Georgia and has all necessary
power and authority: (i) to conduct its business in the manner in which its
business is currently being conducted; (ii) to own and use its assets in the
manner in which its assets are currently owned and used; and (iii) to perform
its obligations under all Company Contracts.
(b) Except as set forth in Part 2.1 of the Disclosure Schedule, the
Company has not conducted any business under or otherwise used, for any purpose
or in any jurisdiction, any fictitious name, assumed name, trade name or other
name.
(c) The Company is not and has not been required to be qualified,
authorized, registered or licensed to do business as a foreign corporation in
any jurisdiction, except where the failure to be so qualified, authorized,
registered or licensed has not had and will not have a Material Adverse Effect
on the Company.
(d) Part 2.1 of the Disclosure Schedule accurately sets forth (i) the
names of the members of the Company's board of directors and (ii) the names and
titles of the Company's officers. The board of directors of the Company does not
have and has never had any committees.
(e) The Company does not own any controlling interest in any Entity
and the Company has never owned, beneficially or otherwise, any shares or other
securities of, or any direct
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or indirect equity interest in, any Entity. The Company has not agreed and is
not obligated to make any future investment in or capital contribution to any
Entity. The Company has not guaranteed and is not responsible or liable for any
obligation of any of the Entities in which it owns or has owned any equity
interest.
2.2 Articles of Incorporation and Bylaws; Records. The Company has
delivered to Parent accurate and complete copies of: (1) the Company's
certificate or articles of incorporation and bylaws, including all amendments
thereto; (2) the stock records of the Company; and (3) the minutes and other
records of the meetings and other proceedings (including any actions taken by
written consent or otherwise without a meeting) of the shareholders of the
Company and the board of directors of the Company. There have been no formal
meetings or other proceedings of the shareholders of the Company and the board
of directors of the Company that are not fully reflected in such minutes or
other records. There has not been any violation of any of the provisions of the
Company's articles of incorporation or bylaws, and the Company has not taken any
action that is inconsistent in any material respect with any resolution adopted
by the Company's shareholders and the Company's board of directors. The books of
account, stock records, minute books and other records of the Company are
accurate, up-to-date and complete in all material respects, and have been
maintained in accordance with prudent business practices.
2.3 Capitalization, Etc.
(a) The authorized capital stock of the Company consists of 100,000
shares of common stock, $1.00 par value, of which 1,000 shares are issued and
outstanding as of the date of this Agreement. All of the outstanding shares of
Company Common Stock have been duly authorized and validly issued, and are fully
paid and non-assessable. Part 2.3 of the Disclosure Schedule provides an
accurate and complete description of the terms of each repurchase option which
is held by the Company and to which any of such shares is subject.
(b) Except for this Agreement and as set forth in Part 2.3 of the
Disclosure Schedule, there is no: (i) outstanding subscription, option, call,
warrant or right (whether or not currently exercisable) to acquire from the
Company any shares of the capital stock or other securities of the Company; (ii)
stock option plan, stock issuance plan or other similar plan of the Company;
(iii) outstanding security, instrument or obligation of the Company that is or
may become convertible into or exchangeable for any shares of the capital stock
or other securities of the Company; (iv) Contract under which the Company is or
may become obligated to sell or otherwise issue any shares of its capital stock
or any other securities; or (v) to the Knowledge of the Company and the
Shareholders, condition or circumstance that may give rise to or provide a basis
for the assertion of a claim by any Person to the effect that such Person is
entitled to acquire or receive from the Company any shares of capital stock or
other securities of the Company.
(c) All outstanding shares of Company Common Stock have been issued
and granted in compliance with (i) all applicable securities laws and other
applicable Legal Requirements, and (ii) all requirements set forth in applicable
Company Contracts.
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(d) Except as set forth in Part 2.3 of the Disclosure Schedule, the
Company has never repurchased, redeemed or otherwise reacquired any shares of
capital stock or other securities of the Company.
2.4 Financial Statements.
(a) The Company has delivered to Parent the unaudited balance sheets
of the Company as of December 31, 1998 and April 30, 1999, and the related
income statements, statements of shareholders' equity and statements of cash
flows for the respective12-month and 4-month periods then ended (the "Company
Financial Statements").
(b) The Company Financial Statements are true and complete in all
material respects and present fairly the financial position of the Company as of
the respective dates thereof and the results of operations and cash flows of the
Company for the respective periods covered thereby, and have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby.
2.5 Absence of Changes. Except as set forth in Part 2.5 of the Disclosure
Schedule, since April 30, 1999 (the "Interim Statement Date"):
(a) there has not been any material adverse change in the Company's
business, condition, assets, liabilities, operations, financial performance or
prospects, and, to the Knowledge of the Company and the Shareholders, no event
has occurred that will, or could reasonably be expected to, have a Material
Adverse Effect on the Company;
(b) there has not been any material loss, damage or destruction to, or
any material interruption in the use of, any of the Company's assets (whether or
not covered by insurance);
(c) the Company has not declared, accrued, set aside or paid any
dividend or made any other distribution in respect of any shares of capital
stock, and has not repurchased, redeemed or otherwise reacquired any shares of
capital stock or other securities;
(d) the Company has not sold, issued or authorized the issuance of (i)
any capital stock or other security, (ii) any option or right to acquire any
capital stock or any other security, or (iii) any instrument convertible into or
exchangeable for any capital stock or other security;
(e) there has been no amendment to the Company's certificate or
articles of incorporation or bylaws, and the Company has not effected or been a
party to any Acquisition Transaction, recapitalization, reclassification of
shares, stock split, reverse stock split or similar transaction;
(f) the Company has not formed any subsidiary or acquired any equity
interest or other interest in any other Entity;
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(g) the Company has not made any capital expenditure which, when added
to all other capital expenditures made on behalf of the Company since the
Interim Statement Date, exceeds $50,000;
(h) the Company has not (i) entered into or permitted any of the
assets owned or used by it to become bound by any Contract that is or would
constitute a Material Contract (as defined in Section 2.10(a)) or (ii) amended
or prematurely terminated, or waived any material right or remedy under, any
such Contract;
(i) the Company has not (i) acquired, leased or licensed any right or
other asset from any other Person, (ii) sold or otherwise disposed of, or leased
or licensed, any right or other asset to any other Person, or (iii) waived or
relinquished any right, except for rights or other assets acquired, leased,
licensed or disposed of in the ordinary course of business and consistent with
the Company's past practices;
(j) the Company has not written off as uncollectible, or established
any extraordinary reserve with respect to, any account receivable or other
indebtedness;
(k) the Company has not made any pledge of any of its assets or
otherwise permitted any of its assets to become subject to any Encumbrance,
except for pledges of assets made in the ordinary course of business and
consistent with the Company's past practices;
(l) the Company has not (i) loaned money to any Person (other than
pursuant to routine travel advances made to employees in the ordinary course of
business), or (ii) incurred or guaranteed any indebtedness for borrowed money;
(m) the Company has not (i) established or adopted any Employee
Benefit Plan, (ii) paid any bonus or made any profit-sharing or similar payment
to, or increased the amount of the wages, salary, commissions, fringe benefits
or other compensation or remuneration payable to, any of its directors, officers
or employees, or (iii) hired any new employee;
(n) the Company has not changed any of its methods of accounting or
accounting practices in any respect;
(o) the Company has not made any Tax election;
(p) the Company has not commenced or settled any Legal Proceeding;
(q) the Company has not entered into any material transaction or taken
any other material action outside the ordinary course of business or
inconsistent with its past practices; and
(r) the Company has not agreed or committed to take any of the actions
referred to in clauses "(c)" through "(q)" above.
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2.6 Title to Assets.
(a) Part 2.6 of the Disclosure Schedule identifies all assets that are
material to the business of the Company and owned by it. None of the assets set
forth in Part 2.6 of the Disclosure Schedule has been disposed of. Except as set
forth in Part 2.6 of the Disclosure Schedule, the Company owns, and has good,
valid and marketable title to, all assets purported to be owned by it,
including: (i) all assets reflected in the Company Financial Statements; (ii)
all assets referred to in Parts 2.1, 2.7(b) and 2.9 of the Disclosure Schedule
and all of the Company's rights under the Contracts identified in Part 2.10 of
the Disclosure Schedule; and (iii) all other assets reflected in the Company's
books and records as being owned by the Company. Except as set forth in Part 2.6
of the Disclosure Schedule, all of said assets are owned by the Company free and
clear of any liens or other Encumbrances, except for (x) any lien for current
taxes not yet due and payable, and (y) minor liens that have arisen in the
ordinary course of business and that do not (in any case or in the aggregate)
materially detract from the value of the assets subject thereto or materially
impair the operations of the Company.
(b) Part 2.6 of the Disclosure Schedule identifies all assets that are
material to the business of the Company and that are being leased or licensed to
the Company.
2.7 Bank Accounts; Receivables; Payables.
(a) Part 2.7(a) of the Disclosure Schedule provides accurate
information with respect to each account maintained by or for the benefit of the
Company at any bank or other financial institution.
(b) Part 2.7(b) of the Disclosure Schedule provides an accurate and
complete breakdown and aging of all accounts receivable, notes receivable and
other receivables of the Company as of June 30, 1999. All existing accounts
receivable of the Company (including those accounts receivable reflected in the
Company Financial Statements that have not yet been collected and those accounts
receivable that have arisen since June 30, 1999 and have not yet been collected)
(i) represent valid obligations of customers of the Company arising from bona
fide transactions entered into in the ordinary course of business, (ii) are
current and will be collected in full when due, without any counterclaim or set
off (net of an allowance for doubtful accounts not to exceed $10,000 in the
aggregate).
(c) The Company has heretofore delivered to Parent an aging schedule
of the Company's accounts payable as of June 30, 1999 ("Accounts Payable Aging
Schedule"), which schedule is and shall be accurate in all material respects as
of the Closing Date except for changes since June 30, 1999, resulting from the
conduct of the Company's business in the ordinary course. The accounts payable
of the Company are, and as of the Closing Date will be, current and bona fide
obligations incurred in the ordinary course of business payable when due after
the Closing Date without penalty or increase in amount, except for such non-
current accounts as will not cause the Company to incur any penalties or
increases in the amounts payable that singularly or in the aggregate would have
a Material Adverse Effect on the Company. Except as otherwise set forth in Part
2.7(c) of the Disclosure Schedule, no supplier of goods, products or services to
the Company
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is withholding the fulfillment of any orders by the Company for goods, products
or services or, to the Knowledge of the Company and the Shareholders, is
threatening to withhold fulfillment of any such orders or to institute any Legal
Proceeding against the Company, as the result of the nonperformance by the
Company of any of its obligations to such supplier.
2.8 Real Property; Equipment; Motor Vehicles.
(a) The Company does not own or lease any real property or any
interest in real property, except as identified in Part 2.8 of the Disclosure
Schedule.
(b) Part 2.8 of the Disclosure Schedule sets forth a correct and
complete list of (i) all real property owned, leased or used by the Company,
together with a description of the principal buildings, improvements and
structures located thereon, (ii) all machinery and equipment owned, leased or
used by the Company, and (iii) all automobiles, trucks or other vehicles owned
by or leased to the Company. The property listed on Part 2.8 of the Disclosure
Schedule is in conformity in all material respects with all applicable Legal
Requirements relating thereto or currently in effect or scheduled to come into
effect, except as to those Legal Requirements the failure of the Company to
conform with which would not have a Material Adverse Effect on the Company.
Except as reflected on Part 2.8 of the Disclosure Schedule, the fixed assets of
the Company are located on real property owned or leased by the Company.
(c) All material items of real property, personal property, equipment
and other tangible assets owned by or leased to the Company are adequate for the
uses to which they are being put, are in good condition and repair (ordinary
wear and tear excepted) and are adequate for the conduct of the Company's
business in the manner in which such business is currently being conducted.
2.9 Proprietary Assets.
(a) Part 2.9(a)(i) of the Disclosure Schedule sets forth, with respect
to each Company Proprietary Asset registered with any Governmental Body or for
which an application has been filed with any Governmental Body, (i) a brief
description of such Proprietary Asset, and (ii) the names of the jurisdictions
covered by the applicable registration or application. Part 2.9(a)(ii) of the
Disclosure Schedule identifies and provides a brief description of all other
Company Proprietary Assets owned by the Company. Part 2.9(a)(iii) of the
Disclosure Schedule identifies and provides a brief description of each
Proprietary Asset licensed to the Company by any Person (except for any
Proprietary Asset that is licensed to the Company under any third party software
license generally available to the public at a cost of less than $500), and
identifies the license agreement under which such Proprietary Asset is being
licensed to the Company. Except as set forth in Part 2.9(a)(iv) of the
Disclosure Schedule, the Company has good, valid and marketable title to all of
the Company Proprietary Assets identified in Parts 2.9(a)(i) and 2.9(a)(ii) of
the Disclosure Schedule, free and clear of all liens and other Encumbrances, and
has a valid right to use all Proprietary Assets identified in Part 2.9(a)(iii)
of the Disclosure Schedule. Except as set forth in Part 2.9(a)(v) of the
Disclosure Schedule, the Company is not obligated to make any payment to any
Person for the use of any Company Proprietary Asset. Except as set forth in Part
2.9(a)(vi) of the
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Disclosure Schedule, the Company has not developed jointly with any other Person
any Company Proprietary Asset with respect to which such other Person has any
rights.
(b) The Company has taken all measures and precautions reasonably
necessary to protect and maintain the confidentiality and secrecy of all Company
Proprietary Assets (except Company Proprietary Assets whose value would be
unimpaired by public disclosure) and otherwise to maintain and protect the value
of all Company Proprietary Assets. Except as provided in Part 2.9(b) of the
Disclosure Schedule, the Company has not (other than pursuant to license
agreements identified in Part 2.10 of the Disclosure Schedule) disclosed or
delivered to any Person, or permitted the disclosure or delivery to any Person
of, (i) the source code, or any portion or aspect of the source code, of any
Company Proprietary Asset, or (ii) the object code, or any portion or aspect of
the object code, of any Company Proprietary Asset.
(c) None of the Company Proprietary Assets infringes or conflicts
with any Proprietary Asset owned or used by any other Person, including, without
limitation, any former employers of any of the Company's Shareholders. The
Company is not infringing, misappropriating or making any unlawful use of, and
the Company has not at any time infringed, misappropriated or made any unlawful
use of, or received any notice or other communication (in writing or otherwise)
of any actual, alleged, possible or potential infringement, misappropriation or
unlawful use of, any Proprietary Asset owned or used by any other Person. To the
Knowledge of the Company and the Shareholders, no other Person is infringing,
misappropriating or making any unlawful use of, and no Proprietary Asset owned
or used by any other Person infringes or conflicts with, any Company Proprietary
Asset.
(d) (i) Each Company Proprietary Asset conforms in all material
respects with any specification, documentation, performance standard,
representation or statement made or provided with respect thereto by or on
behalf of the Company; and
(ii) there has not been any claim by any customer or other
Person alleging that any Company Proprietary Asset (including each version
thereof that has ever been licensed or otherwise made available by the Company
to any Person) does not conform in all material respects with any specification,
documentation, performance standard, representation, warranty or statement made
or provided by or on behalf of the Company, and, to the Knowledge of the Company
and the Shareholders, there is no basis for any such claim. There are no
obligations of the Company to correct or repair any programming errors or other
defects in the Company Proprietary Assets, and to the Knowledge of the Company
and the Shareholders, there is no reason for the Company to establish reserves
to cover any costs associated with any obligations of the Company to correct or
repair any programming errors or other defects in the Company Proprietary
Assets.
(e) The Company Proprietary Assets constitute all the Proprietary
Assets necessary to enable the Company to conduct its business in the manner in
which such business has been and is being conducted. Except as set forth on Part
2.9(e) of the Disclosure Schedule, the Company has not (i) licensed any of the
Company Proprietary Assets to any Person on an exclusive basis or (ii) entered
into any covenant not to compete or Contract limiting its ability to exploit
fully
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any of its Proprietary Assets or to transact business in any market or
geographical area or with any Person.
2.1 Contracts.
(a) Part 2.10(a) of the Disclosure Schedule identifies:
(i) all Sign Contracts in effect as of the date of this
Agreement that provide for or contemplate revenues to be received by the Company
after June 30, 1999, listing the respective contract identification numbers,
effective dates and expiration dates of each such Sign Contract, which list is
and shall be accurate in all material respects as of the Closing Date except for
changes since the date of this Agreement resulting from the conduct of the
Company's business in the ordinary course.
(ii) each Company Contract relating to the employment of, or
the performance of services by, any employee, consultant or independent
contractor;
(iii) each Company Contract relating to the acquisition,
transfer, use, development, sharing or license of any technology or any
Proprietary Asset;
(iv) each Company Contract imposing any restriction on the
Company's right or ability (A) to compete with any other Person, (B) to acquire
any product or other asset or any services from any other Person, to sell any
product or other asset to or perform any services for any other Person or to
transact business or deal in any other manner with any other Person, or (C) to
develop or distribute any technology;
(v) each Company Contract creating or involving any agency
relationship, distribution arrangement or franchise relationship;
(vi) each Company Contract relating to the acquisition,
issuance or transfer of any securities;
(vii) each Company Contract relating to the creation of any
Encumbrance with respect to any asset of the Company;
(viii) each Company Contract involving or incorporating any
guaranty, any pledge, any performance or completion bond, any indemnity or any
surety arrangement;
(ix) each Company Contract creating or relating to any
partnership or joint venture or any sharing of revenues, profits, losses, costs
or liabilities;
(x) each Company Contract relating to the purchase or sale of
any product or other asset by or to, or the performance of any services by or
for, any Related Party (as defined in Section 2.18);
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(xi) each Company Contract constituting or relating to a
Government Contract or Government Bid;
(xii) any other Company Contract that was entered into outside
the ordinary course of business or was inconsistent with the Company's past
practices;
(xiii) any other Company Contract that has a term of more than
60 days and that may not be terminated by the Company (without penalty) within
60 days after the delivery of a termination notice by the Company; and
(xiv) any other Company Contract that contemplates or involves
(A) the payment or delivery of cash or other consideration in an amount or
having a value in excess of $50,000 in the aggregate, or (B) the performance of
services having a value in excess of $50,000 in the aggregate.
(Contracts in the respective categories described in clauses (i) through (xiv)
above are referred to in this Agreement as "Material Contracts.")
(b) The Company has delivered to Parent accurate and complete copies
of all Material Contracts, including all amendments thereto. Part 2.10(b) of the
Disclosure Schedule provides an accurate description of the terms of each
Material Contract that is not in written form. Each Material Contract is valid
and in full force and effect and is enforceable by the Company in accordance
with its terms, subject to (i) laws of general application relating to
bankruptcy, insolvency and the relief of debtors, and (ii) rules of law
governing specific performance, injunctive relief and other equitable remedies.
(c) (i) The Company has not violated or breached, or committed any
default under, any Material Contract, and, to the Knowledge of the Company and
the Shareholders, no other Person has violated or breached, or committed any
default under, any Material Contract;
(ii) no event has occurred, and no circumstance or condition
exists, that (with or without notice or lapse of time) will, or could reasonably
be expected to, (A) result in a violation or breach of any of the provisions of
any Material Contract, (B) give any Person the right to declare a default or
exercise any remedy under any Material Contract, (C) give any Person the right
to accelerate the maturity or performance of any Material Contract, or (D) give
any Person the right to cancel, terminate or modify any Material Contract;
(iii) the Company has not received any notice or other
communication regarding any actual or possible violation or breach of, or
default under, any Material Contract; and
(iv) the Company has not waived any of its material rights
under any Material Contract.
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(d) No Person is renegotiating, or has a right pursuant to the terms
of any Material Contract to renegotiate, any amount paid or payable to the
Company under any Material Contract or any other material term or provision of
any Material Contract.
(e) The Contracts identified in Part 2.10(a) of the Disclosure
Schedule collectively constitute all of the Contracts necessary to enable the
Company to conduct its business in the manner in which its business is currently
being conducted.
(f) The Contracts between the Company and each of its distributors,
if any, require such distributor to enter into agreements with such
distributor's end-users on the same terms and conditions as those entered into
between the Company and its end-users, and, to the Knowledge of the Company and
the Shareholders, each of the Company's distributors has complied with such
terms.
(g) The Company is not a party to any Contract which extends the
Company's warranties beyond their standard respective durations or extends any
limitation on the Company's liability.
(h) The Company has delivered to Parent true and complete copies of
the respective forms of sale, leasing and maintenance Sign Contracts used by the
Company in the conduct of its business ("Sign Contract Forms"). Except as
otherwise specified in Part 2.10(h) of the Disclosure Schedule: (i) each of the
Sign Contracts is in form and substance identical or substantially similar to
the applicable Sign Contract Form, except for such Sign Contracts copies of
which have been delivered to Parent and collectively denoted as "Dissimilar Sign
Contracts"; and (ii) each Sign Contract was entered into in the ordinary course
of business.
2.11 Liabilities. The Company has no accrued, contingent or other
liabilities of any nature, either matured or unmatured (whether or not required
to be reflected in financial statements in accordance with GAAP, and whether due
or to become due), except for: (a) liabilities identified as such in the
"liabilities" column of the balance sheets included in the Company Financial
Statements; (b) accounts payable or accrued salaries that have been incurred by
the Company since the Interim Statement Date in the ordinary course of business
and consistent with the Company's past practices; (c) liabilities under Material
Contracts, to the extent the nature and magnitude of such liabilities can be
specifically ascertained by reference to the text of such Material Contracts;
and (d) the liabilities identified in Part 2.11 of the Disclosure Schedule. All
reserves contained in the Company Financial Statements, including reserves for
warranty liabilities, are adequate for their respective stated purposes.
2.12 Compliance with Legal Requirements. The Company is, and has at all
times since its formation been, in compliance with all applicable Legal
Requirements, except where the failure to comply with such Legal Requirements
has not had and will not have a Material Adverse Effect on the Company. Except
as set forth in Part 2.12 of the Disclosure Schedule, the Company has not
received any notice or other communication from any Governmental Body regarding
any actual or possible violation of, or failure to comply with, any Legal
Requirement.
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2.13 Governmental Authorizations. Part 2.13 of the Disclosure Schedule
identifies each material Governmental Authorization held by the Company, and the
Company has delivered to Parent accurate and complete copies of all Governmental
Authorizations identified in Part 2.13 of the Disclosure Schedule. To the
Knowledge of the Company and the Shareholders, the Governmental Authorizations
identified in Part 2.13 of the Disclosure Schedule are valid and in full force
and effect, and collectively constitute all Governmental Authorizations
necessary to enable the Company to conduct its business in the manner in which
its business is currently being conducted. The Company is, and at all times
since its formation has been, in compliance with all material terms and
requirements of the respective Governmental Authorizations identified in Part
2.13 of the Disclosure Schedule. To the Knowledge of the Company and the
Shareholders, the Company has not received any notice or other communication
from any Governmental Body regarding (a) any actual or possible violation of or
failure to comply with any term or requirement of any Governmental
Authorization, or (b) any actual or possible revocation, withdrawal, suspension,
cancellation, termination or modification of any Governmental Authorization.
2.14 Tax Matters.
(a) Except as otherwise set forth in Part 2.14 of the Disclosure
Schedule, all Tax Returns required to be filed by or on behalf of the Company
with any Governmental Body with respect to any taxable period ending on or
before the Closing Date (the "Company Returns") (i) have been or will be filed
on or before the applicable due date (including any extensions of such due
date), and (ii) have been, or will be when filed, accurately and completely
prepared in all material respects in compliance with all applicable Legal
Requirements. All amounts shown on the Company Returns to be due on or before
the Closing Date have been or will be paid on or before the Closing Date. The
Company has delivered to Parent accurate and complete copies of all Company
Returns filed by the Company which have been requested by Parent.
(b) Except as otherwise set forth in Part 2.14 of the Disclosure
Schedule, the Company Financial Statements, including the notes thereto, fully
accrue all actual and contingent liabilities for Taxes of the Company with
respect to all periods through the dates thereof in accordance with GAAP.
(c) The Company has delivered to Parent accurate and complete copies
of all reports and similar documents (to which the Company has access) relating
to all audits or examinations by any Governmental Body of the Company Returns.
No extension or waiver of the limitation period applicable to any of the Company
Returns has been granted (by the Company or any other Person), and no such
extension or waiver has been requested from the Company.
(d) No claim or Legal Proceeding is pending or has been threatened
against or with respect to the Company in respect of any Tax. There are no
unsatisfied liabilities for Taxes (including liabilities for interest, additions
to tax and penalties thereon and related expenses) with respect to any notice of
deficiency or similar document received by the Company with respect to any Tax
(other than liabilities for Taxes asserted under any such notice of deficiency
or similar document which are being contested in good faith by the Company and
with respect to which adequate reserves for payment have been established).
There are no liens for Taxes upon any of the assets of the
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Company except liens for current Taxes not yet due and payable. The Company has
not entered into or become bound by any agreement or consent pursuant to Section
341(f) of the Code. The Company has not been, and the Company will not be,
required to include any adjustment in taxable income for any tax period (or
portion thereof) pursuant to Section 481 or 263A of the Code or any comparable
provision under state or foreign Tax laws as a result of transactions or events
occurring, or accounting methods employed, prior to the Closing.
(e) There is no agreement, plan, arrangement or other Contract
covering any employee or independent contractor or former employee or
independent contractor of the Company that, considered individually or
considered collectively with any other such Contracts, will, or could reasonably
be expected to, give rise directly or indirectly to the payment of any amount
that would not be deductible pursuant to Section 28OG or Section 162 of the
Code. The Company is not, and has never been, a party to or bound by any tax
indemnity agreement, tax sharing agreement, tax allocation agreement or similar
Contract.
(f) Neither the Company nor either of the Shareholders knows of any
fact or has taken any action that could reasonably be expected to prevent the
Merger from qualifying as a reorganization within the meaning of Section 368(a)
of the Code.
2.15 Employee and Labor Matters; Benefit Plans.
(a) Part 2.15(a) of the Disclosure Schedule identifies each incentive
compensation, stock option, severance pay, termination pay, hospitalization,
medical, life or other insurance, supplemental unemployment benefits, profit-
sharing, pension or retirement plan, program or agreement (collectively, the
"Plans") sponsored, maintained, contributed to or required to be contributed to
by the Company for the benefit of any employee of the Company ("Employee"),
except for Plans which would not require the Company to make payments or provide
benefits having a value in excess of $25,000 in the aggregate.
(b) Except as specified in Part 2.15(b) of the Disclosure Schedule,
the Company does not maintain, sponsor or contribute to, and, to the Knowledge
of the Company and the Shareholders, has not at any time in the past maintained,
sponsored or contributed to, any employee pension benefit plan (as defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), whether or not excluded from coverage under specific Titles or Merger
Subtitles of ERISA) for the benefit of Employees or former Employees (a "Pension
Plan").
(c) The Company maintains, sponsors or contributes only to those
employee welfare benefit plans (as defined in Section 3(l) of ERISA, whether or
not excluded from coverage under specific Titles or Merger Subtitles of ERISA)
for the benefit of Employees or former Employees which are described in Part
2.15(c) of the Disclosure Schedule (the "Welfare Plans") and, except as
specified in Part 2.15(c) of the Disclosure Schedule, none of such plans is a
multi-employer plan (within the meaning of Section 3(37) of ERISA).
(d) With respect to each Plan, the Company has delivered to Parent:
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(i) an accurate and complete copy of such Plan (including all
amendments thereto);
(ii) an accurate and complete copy of the annual report, if
required under ERISA, with respect to such Plan for the last two years;
(iii) an accurate and complete copy of the most recent summary
plan description, together with each Summary of Material Modifications, if
required under ERISA, with respect to such Plan, and all material employee
communications relating to such Plan;
(iv) if such Plan is funded through a trust or any third party
funding vehicle, an accurate and complete copy of the trust or other funding
agreement (including all amendments thereto) and accurate and complete copies
the most recent financial statements thereof;
(v) accurate and complete copies of all Contracts relating to
such Plan, including service provider agreements, insurance contracts, minimum
premium contracts, stoploss agreements, investment management agreements,
subscription and participation agreements and recordkeeping agreements; and
(vi) an accurate and complete copy of the most recent
determination letter received from the Internal Revenue Service with respect to
such Plan (if such Plan is intended to be qualified under Section 401(a) of the
Code).
(e) Except as specified in Part 2.15(e) of the Disclosure Schedule:
(i) the Company is not required to be, and has never been required to be,
treated as a single employer with any other Person under Section 4001(b)(1) of
ERISA or Section 414(b), (c), (m) or (o) of the Code; (ii) the Company has never
been a member of an "affiliated service group" within the meaning of Section
414(m) of the Code; and (iii) the Company has never made a complete or partial
withdrawal from a multi-employer plan, as such term is defined in Section 3(37)
of ERISA, resulting in "withdrawal liability," as such term is defined in
Section 4201 of ERISA (without regard to subsequent reduction or waiver of such
liability under either Section 4207 or 4208 of ERISA).
(f) The Company does not have any plan or commitment to create any
additional Welfare Plan or any Pension Plan, or to modify or change any existing
Welfare Plan or Pension Plan (other than to comply with applicable law) in a
manner that would affect any Employee.
(g) No Welfare Plan provides death, medical or health benefits
(whether or not insured) with respect to any current or former Employee after
any such Employee's termination of service (other than (i) benefit coverage
mandated by applicable law, including coverage provided pursuant to Section
4980B of the Code, (ii) deferred compensation benefits accrued as liabilities on
the Company Financial Statements, and (iii) benefits the full cost of which are
borne by current or former Employees (or the Employees' beneficiaries)).
(h) To the Knowledge of the Company and the Shareholders, with
respect to each of the Welfare Plans constituting a group health plan within the
meaning of Section 4980B(g)(2) of
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the Code, the provisions of Section 4980B of the Code ("COBRA") have been
complied with in all material respects.
(i) To the Knowledge of the Company and the Shareholders, each of the
Plans has been operated and administered in all material respects in accordance
with applicable Legal Requirements, including but not limited to ERISA and the
Code.
(j) Each of the Plans intended to be qualified under Section 401 (a)
of the Code has received a favorable determination from the Internal Revenue
Service, and neither the Company nor any of the Shareholders has Knowledge of
any reason why any such determination letter should be revoked.
(k) Neither the execution, delivery or performance of this Agreement,
nor the consummation of the Merger or any of the other transactions contemplated
by this Agreement, will result in any payment (including any bonus, golden
parachute or severance payment) to any current or former Employee or director of
the Company (whether or not under any Plan), or materially increase the benefits
payable under any Plan, or result in any acceleration of the time of payment or
vesting of any such benefits.
(l) Part 2.15(l) of the Disclosure Schedule contains a list of all
salaried employees of the Company as of the date of this Agreement, and
correctly reflects, in all material respects, their dates of employment and
their positions. The Company is not a party to any collective bargaining
contract or other Contract with a labor union involving any of its Employees,
except as described in Part 2.15(e) of the Disclosure Schedule.
(m) Part 2.15(m) of the Disclosure Schedule identifies each Employee
who is not fully available to perform work because of disability or other leave
and sets forth the basis of such leave and the anticipated date of return to
full service.
(n) The Company is in compliance in all material respects with all
applicable Legal Requirements and Contracts relating to employment, employment
practices, wages, bonuses and terms and conditions of employment, including
employee compensation matters.
(o) The Company has good labor relations, and neither the Company nor
any of the Shareholders has any reason to believe that (i) the consummation of
the Merger or any of the other transactions contemplated by this Agreement will
have a Material Adverse Effect on the Company's labor relations, or (ii) any of
the Company's employees intends to terminate his or her employment with the
Company.
2.16 Environmental Matters. The Company is in compliance with all
applicable Environmental Laws, which compliance includes the possession by the
Company of all permits and other Governmental Authorizations required under
applicable Environmental Laws, and compliance with the terms and conditions
thereof. The Company has not received any notice or other communication (in
writing or otherwise), whether from a Governmental Body, citizens group,
employee or otherwise, that alleges that the Company is not in compliance with
any Environmental
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Law and, to the Knowledge of the Company and the Shareholders, there are no
circumstances that may prevent or interfere with the Company's compliance with
any Environmental Law in the future. Neither the Company nor, to the Knowledge
of the Company and the Shareholders, any other owner of any property leased or
controlled by the Company has received any notice or other communication (in
writing or otherwise), whether from a Governmental Body, citizens' group,
employee or otherwise, that alleges that the Company or such owner is not in
compliance with any Environmental Law. All Governmental Authorizations currently
held by the Company pursuant to Environmental Laws are identified in Part 2.16
of the Disclosure Schedule. (For purposes of this Section 2.16: (i)
"Environmental Law" means any present or future federal, state, local or foreign
Legal Requirement relating to pollution or protection of human health or the
environment (including ambient air, surface water, ground water, land surface or
subsurface strata), including any law or regulation relating to emissions,
discharges, releases or threatened releases of Materials of Environmental
Concern, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Materials of
Environmental Concern; and (ii) "Materials of Environmental Concern" include
chemicals, pollutants, contaminants, wastes, toxic substances, petroleum and
petroleum products and any other substance that is now or hereafter regulated by
any Environmental Law or that is otherwise a danger to health, reproduction or
the environment.)
2.17 Insurance. Part 2.17 of the Disclosure Schedule identifies all
insurance policies maintained by, at the expense of or for the benefit of the
Company and identifies any material claims made thereunder, and the Company has
delivered to Parent accurate and complete copies of the insurance policies
identified in Part 2.17 of the Disclosure Schedule. Each of the insurance
policies identified in Part 2.17 of the Disclosure Schedule is in full force and
effect. The Company has not received any notice or other communication regarding
any actual or possible (a) cancellation or invalidation of any insurance policy,
(b) refusal of any coverage or rejection of any claim under any insurance
policy, or (c) material adjustment in the amount of the premiums payable with
respect to any insurance policy.
2.18 Related Party Transactions. (a) No Related Party has, and no Related
Party has at any time had, any direct or indirect interest in any material asset
used in or otherwise relating to the business of the Company; (b) no Related
Party is, or has at any time since January 1, 1997 been, indebted to the
Company; (c) no Related Party has entered into, or has had any direct or
indirect (other than as a shareholder of the Company) financial interest in, any
Material Contract, transaction or business dealing involving the Company; (d) no
Related Party is competing, or has at any time competed, directly or indirectly,
with the Company; and (e) no Related Party has any claim or right against the
Company (other than rights as a shareholder, director or officer of the Company
and rights to receive compensation for services performed as an employee of the
Company). (For purposes of this Section 2.18 each of the following shall be
deemed to be a "Related Party": (i) each of the Shareholders; (ii) each
individual who is, or who has at any time been, an officer of the Company; (iii)
each member of the immediate family of each of the individuals referred to in
clauses "(i)" and "(ii)" above; and (iv) any trust or other Entity (other than
the Company) in which any one of the individuals referred to in clauses "(i)",
"(ii)" and "(iii)" above holds (or in which more than one of such individuals
collectively hold), beneficially or otherwise." a material voting, proprietary
or equity interest.)
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2.19 Legal Proceedings; Orders; Regulatory Filings.
(a) Except as described in Part 2.19(a) of the Disclosure Schedule:
(i) there is no pending Legal Proceeding, and, to the Knowledge of the Company
and the Shareholders, no Person has threatened to commence any Legal Proceeding,
(aa) that involves the Company or any of the assets owned or used by the Company
or any Person whose liability the Company has retained or assumed, either
contractually or by operation of law, or (bb) that challenges, or that may have
the effect of preventing, delaying, making illegal or otherwise interfering
with, the Merger or any of the other transactions contemplated by this
Agreement; and (ii), to the Knowledge of the Company and the Shareholders, no
event has occurred, and no claim, dispute or other condition or circumstance
exists, that will, or that could reasonably be expected to, give rise to the
commencement of any such Legal Proceeding.
(b) Part 2.19(b) of the Disclosure Schedule describes each Legal
Proceeding that has been commenced by or has been pending against the Company
since January 1, 1996.
(c) There is no order, writ, injunction, judgment or decree to which
the Company, or any of the assets owned or used by the Company, is subject.
Neither the Company nor any of the Shareholders is subject to any order, writ,
injunction, judgment or decree that relates to the Company's business or to any
of the assets owned or used by the Company. No officer or other employee of the
Company is subject to any order, writ, injunction, judgment or decree that
prohibits such officer or other employee from engaging in or continuing any
conduct, activity or practice relating to the Company's business.
(d) Part 2.19(d) of the Disclosure Schedule describes all permits and
other authorizations required by Governmental Bodies for the performance by the
Company of its obligations under all Material Contracts and the conduct of its
business in the manner presently conducted ("Material Permits"), except for such
permits or authorizations the absence of which will not have a Material Adverse
Effect on the Company. Except as described in Part 2.19(d) of the Disclosure
Schedule, all Material Permits are in full force and effect and the Company has
not failed to fulfill any material condition required to be fulfilled by the
Company under any such Material Permit prior to the date of this Agreement.
2.20 Company Warranties. The Company has delivered to Parent true,
complete and correct copies of the forms of all presently outstanding warranties
(including product and materials warranties, performance warranties and
warranties as to workmanship) provided to all purchasers and lessees of the
Company's products and other customers of the Company ("Company Warranties").
Except for the Company Warranties, the Company presently has outstanding no
other express or implied guaranties or warranties of product, materials,
performance or workmanship to any users of the Company's products.
2.21 Authority; Binding Nature of Agreement. The Company has the right,
power and authority to enter into and to perform its obligations under this
Agreement; and the execution, delivery and performance by the Company of this
Agreement have been duly authorized by all necessary action on the part of the
Company and its board of directors. This Agreement constitutes
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the legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, subject to (i) laws of general application
relating to bankruptcy, insolvency and the relief of debtors and (ii) rules of
law governing specific performance, injunctive relief and other equitable
remedies.
2.22 Non-Contravention; Consents. Neither the execution, delivery or
performance of this Agreement or any of the other agreements referred to in this
Agreement, nor the consummation of the Merger or any of the other transactions
contemplated by this Agreement, will directly or indirectly (with or without
notice or lapse of time):
(a) contravene, conflict with or result in a violation of (i) any of
the provisions of the Company's certificate or articles of incorporation or
bylaws, or (ii) any resolution adopted by the Company's shareholders or the
Company's board of directors;
(b) contravene, conflict with or result in a violation of any Legal
Requirement or any order, writ, injunction, judgment or decree to which the
Company, or any of the assets owned or used by the Company, is subject;
(c) to the Knowledge of the Company and the Shareholders, contravene,
conflict with or result in a violation of any of the terms or requirements of,
or give any Governmental Body the right to revoke, withdraw, suspend, cancel,
terminate or modify, any Governmental Authorization that is held by the Company
or that otherwise relates to the Company's business or to any of the assets
owned or used by the Company;
(d) contravene, conflict with or result in a violation or breach of,
or result in a default under, any provision of any Material Contract, or give
any Person the right to (i) declare a default or exercise any remedy under any
such Material Contract, (ii) accelerate the maturity or performance of any such
Material Contract, or (iii) cancel, terminate or modify any such Material
Contract; or
(e) result in the imposition or creation of any lien or other
Encumbrance upon or with respect to any asset owned or used by the Company
(except for minor liens that will not, in any case or in the aggregate,
materially detract from the value of the assets subject thereto or materially
impair the operations of the Company).
Except as otherwise provided in this Agreement, the Company is not and will not
be required to make any filing with or give any notice to, or to obtain any
Consent from, any Person in connection with (x) the execution, delivery or
performance of this Agreement or any of the other agreements referred to in this
Agreement, or (y) the consummation of the Merger or any of the other
transactions contemplated by this Agreement.
2.23 Full Disclosure. This Agreement (including the Disclosure Schedule)
does not, and the Closing Certificates (as defined in Section 7.5(h) below) will
not, (i) contain any representation, warranty or information that is false or
misleading with respect to any material fact, or (ii) omit to state any material
fact or necessary in order to make the representations, warranties and
information
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contained and to be contained herein and therein (in the light of the
circumstances under which such representations, warranties and information were
or will be made or provided) not false or misleading.
2.24 Information Systems.
(a) Set forth on Part 2.24 of the Disclosure Schedule is a true,
complete and accurate list of:
(i) all computer hardware and peripherals included in the
Information Systems;
(ii) all operating systems and software programs included in the
Information Systems;
(iii) all license agreements or other agreements to which the
Company is a party relating to the Information Systems;
(iv) the physical location of the server hosting the Company's
web site, together with a description of such site's features, including without
limitation downloadable software, ftp functionality, and IP telephony features;
(v) all manufacturer and other warranties covering the
Information Systems;
(vi) all license agreements used by the Company for web-
downloadable software and all third-party development agreements related
thereto.
(b) The Company's web site is properly inhabiting its present
location.
(c) To the Knowledge of the Company and the Shareholders, the Company
has all legal rights to operate the Information Systems in the manner presently
being operated and the Information Systems: (i) contain no defects or
documentation errors; (ii) conform to specifications; (iii) contain no viruses
which can cause data loss, corruption or system crashes; and (iv) function
properly at present in all respects and will function properly in all respects
before, during and after January 1, 2000.
(d) The Company has delivered to Parent true and complete copies of
all documentation and manuals of the Company with respect to the Information
Systems, including without limitation custom and internally developed software
products, all license agreements that the Company uses for web-downloadable
software, and all third-party software development agreements to which the
Company is a party.
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SECTION 3. ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
SHAREHOLDERS
Each of the Shareholders hereby, jointly and severally, represents,
warrants and covenants as follows (such representations and warranties do not
lessen or obviate the representations and warranties of the Company and the
Shareholders set forth in Section 2 of this Agreement):
3.1 Requisite Power and Authority. Each of the Shareholders has all
necessary power and authority under all applicable provisions of law to execute
and deliver this Agreement and to carry out its provisions. All action on the
Shareholders' part required for the lawful execution and delivery of this
Agreement has been or will be effectively taken prior to the Closing. Upon
execution and delivery, this Agreement will be the valid and binding obligation
of the Shareholders, enforceable in accordance with its terms.
3.2 Title to Shares. Each of the Shareholders is the beneficial and
record owner of the shares of Company Common Stock set forth opposite his or her
name on Exhibit B hereto, and has good and marketable title to such shares of
---------
Company Common Stock, free and clear of any Encumbrances. Each Shareholder has
the legal right to deliver such shares of Company Common Stock pursuant to this
Agreement. The shares of Company Common Stock include all shares of the
Company's capital stock outstanding and all such shares that are owned
beneficially or of record by the Shareholders, and the Shareholders own no other
securities of the Company. Except for this Agreement and as set forth in Part
3.2 of the Disclosure Schedule, the shares of Company Common Stock are not
subject to any proxy, voting trust agreement or other contract, agreement,
arrangement, commitment or understanding restricting or otherwise relating to
the voting, dividend rights or disposition of such shares. Except as set forth
in Part 3.2 of the Disclosure Schedule, none of the Shareholders has issued (and
is not committed to issue) any option, warrant or other right to subscribe for
or purchase any capital stock of the Company or securities convertible into or
exchangeable for any capital stock of the Company.
3.3 No Violation, Conflict, Etc. The execution and delivery of this
Agreement, and the consummation of the transactions contemplated hereby, by the
Shareholders do not and will not violate, conflict with, result in a breach of,
or constitute a default or result in or permit any acceleration of any
obligation under (i) any law, ordinance or governmental rule or regulation to
which any Shareholder is subject, (ii) any judgment, order, writ, injunction,
decree or award of any court, arbitrator or governmental or regulatory official,
body or authority which is applicable to any Shareholder, or (iii) any mortgage,
indenture, agreement, contract, commitment, lease, license, or other instrument
or document, oral or written, to which any Shareholder is a party, or by which
any of the shares of Company Common Stock of any Shareholder may be bound,
except where a waiver with respect hereto has been or will, prior to the
Closing, be obtained or except for such violation, default or conflict that
could not reasonably be expected to materially affect the ability of each
Shareholder to consummate the transactions provided for in this Agreement.
3.4 No Consent or Approval. Neither the execution and delivery by the
Shareholders, nor the consummation by the Shareholders of the transactions
contemplated by this Agreement, requires the consent or approval of, or the
giving of advance notice by any of the Shareholders to,
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or the registration by any Shareholder with, or the taking of any other action
by any Shareholder in respect of, any federal, state or local governmental
authority, and the execution, delivery and performance of this Agreement by the
Shareholders will not result in the creation of any Encumbrance upon any of the
shares of Company Common Stock owned by any Shareholder.
3.5 No Injunctions, Orders, Etc. There is no injunction, order or decree
of any court or administrative agency or any action or proceeding pending or, to
the Shareholder's Knowledge, threatened against any Shareholder to restrain or
prohibit the consummation of the transactions contemplated hereby.
3.6 Dissenters' Rights. Each of the Shareholders acknowledges that he or
she has been furnished a copy of, and has read and understands the provisions
of, Article 13 of the Georgia Business Corporation Code providing shareholders
of Georgia corporations rights, subject to certain conditions, to dissent from a
transaction such as the Merger, to have their shares appraised pursuant to such
statutes, and to receive payment of such appraised value.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub jointly and severally represent and warrant as
follows:
4.1 SEC Filings; Financial Statements.
(a) Parent has delivered to the Company accurate and complete copies
(excluding copies of exhibits) of its annual report on Form 10-KSB for the year
ended June 30, 1998, its quarterly reports on Form 10-QSB for the quarters ended
September 30, 1998, December 31, 1998 and March 31, 1999 and Parent's proxy
statement on Schedule 14A for the annual meeting of stockholders held on October
29, 1998, all as filed by Parent with the SEC (the "Parent SEC Documents"). As
of the time it was filed with the SEC (or, if amended or superseded by a filing
prior to the date of this Agreement, then on the date of such filing) each of
the Parent SEC Documents complied in all material respects with the applicable
requirements of the Securities Act or the Exchange Act, as the case may be.
(b) The consolidated financial statements contained in the Parent SEC
Documents: (i) comply as to form in all material respects with the published
rules and regulations of the SEC applicable thereto; (ii) were prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered, except as may be indicated in the notes to such financial statements
and (in the case of unaudited statements) as permitted by Form 10-QSB of the
SEC, and except that unaudited financial statements may not contain footnotes
and are subject to normal and recurring year-end audit adjustments which will
not, individually or in the aggregate, be material in magnitude; and (iii)
fairly present the consolidated financial position of Parent and its
subsidiaries as of the respective dates thereof and the consolidated results of
operations of Parent and its subsidiaries for the periods covered thereby.
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4.2 Authority; Binding Nature of Agreement. Parent and Merger Sub have the
right, power and authority to perform their obligations under this Agreement;
and the execution, delivery and performance by Parent and Merger Sub of this
Agreement (including the contemplated issuance of Parent Common Stock in the
Merger in accordance with this Agreement) have been duly authorized by all
necessary action on the part of Parent and Merger Sub and their respective
boards of directors. No vote of Parent's stockholders is needed to approve the
Merger. This Agreement constitutes the legal, valid and binding obligation of
Parent and Merger Sub, enforceable against them in accordance with its terms,
subject to (i) laws of general application relating to bankruptcy, insolvency
and the relief of debtors, and (ii) rules of law governing specific performance,
injunctive relief and other equitable remedies.
4.3 Valid Issuance. The Parent Common Stock to be issued in the Merger
will, when issued in accordance with the provisions of this Agreement, be
validly issued, fully paid and nonassessable.
4.4 Merger Sub; No Prior Activities. Merger Sub was formed by Parent as a
wholly-owned subsidiary solely for the purpose of engaging in the transactions
contemplated in this Agreement, and Merger Sub has otherwise conducted no prior
activities. Except for obligations or liabilities incurred in connection with
its incorporation or organization, and the transactions contemplated by this
Agreement, Merger Sub has not incurred, directly or indirectly, any obligations
or liabilities or engaged in any business activities of any kind or nature
whatsoever, or entered into any agreements or arrangements with any Person.
4.5 Absence of Changes. Since June 30, 1998, there has not been any
material adverse change in the business, condition, assets, liabilities,
operations, financial performance or prospects of the Parent and its
subsidiaries considered as a whole and, to the Knowledge of Parent, no event has
occurred that will or could reasonably be expected to have a Material Adverse
Effect on Parent and its subsidiaries considered as a whole.
SECTION 5. COVENANTS OF THE COMPANY AND THE SHAREHOLDERS
5.1 Conduct of the Company's Business. From and after the date hereof and
prior to the Closing, the Company will conduct, and the Shareholders will cause
the Company to conduct, its business and affairs only in the ordinary course,
consistent in all material respects with prior practice. Without limiting the
generality of the foregoing, prior to the Closing, the Company will not, and the
Shareholders will cause the Company not to, without Parent's prior written
approval or except as expressly provided for in this Agreement:
(a) change its certificate or articles of incorporation or bylaws or
merge or consolidate or obligate itself to do so with or into any other entity;
(b) enter into any contract, agreement, commitment or other
understanding or arrangement of a type which would have to be set forth in Part
2.10(a) of the Disclosure Schedule hereof; or
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(c) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction in the ordinary course of business
consistent with past practice or in accordance with their terms, of liabilities
reflected or reserved against in, or contemplated by, the Company Financial
Statements (or the notes thereto), provided that in no event shall the Company
repay any long-term indebtedness except to the extent required by the terms
thereof; or
(d) declare or pay any dividend or distribution on any of its shares
of capital stock; or
(e) perform, take any action or incur or permit to exist any acts,
transactions, events or occurrences of the type described in clauses (c) through
(q) of Section 2.5 hereto which would have been inconsistent with the
representations and warranties set forth in Section 2.5 had the same occurred
after the close of the Interim Statement Date and prior to the date hereof.
The Company and the Shareholders agree to use their best efforts
consistent with past practice and policies to preserve intact the Company's
present business organizations, keep available the services of its present
officers and key employees and preserve its relationships with customers,
suppliers and others having business dealings with it, to the end that its
goodwill and ongoing businesses shall be unimpaired at the Effective Time.
5.2 Necessary Consents and Other Actions. Prior to the Closing, the
Company will use its reasonable best efforts to obtain such written consents and
take such other actions as may be necessary or appropriate to allow the
consummation of the transactions contemplated hereby and to allow the Company to
carry on its business after the Closing.
5.3 Advice of Changes. Prior to the Closing, the Company will notify
Parent in writing promptly after learning of (a) any event subsequent to the
date of this Agreement which would render any representation or warranty of the
Company or any of the Shareholders contained in this Agreement, if made on or as
of the date of such event or the Closing Date, untrue or inaccurate in any
material respect or would cause the Company to fail to comply with its
obligations hereunder in any material respect, (b) any notice of default
received by the Company or any of the Shareholders under any material instrument
or material agreement to which any of them is a party or by which any of them is
bound, which default would, if not remedied, have a Material Adverse Effect on
the Company, or (c) any actions, suits, proceedings or investigations by or
before any court, board or governmental agency, initiated by or against it or
known by it to be threatened against the Company or any of the Shareholders. The
Company agrees to discuss with Parent in advance any major reductions in its
work force.
5.4 Access to Information. The Company will give Parent and Merger Sub and
their financing sources, together with their attorneys, accountants and other
representatives, during normal business hours reasonable access to the Company's
personnel and to its properties, documents, contracts, books and records, and
will furnish Parent and Merger Sub with copies of such documents and with such
information with respect to its affairs as Parent and Merger Sub and their
financing sources may from time to time reasonably request.
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5.5 Confidentiality; Public Announcements.
(a) The Company, its Board of Directors and the Shareholders will hold
in confidence all discussions and negotiations with Parent relating to the
acquisition of the assets or any equity interest in the Company by Parent except
for disclosure of such discussions and negotiations to its employees, legal
counsel, accountants and other advisors necessary in connection with such
acquisition and except for such disclosure as may be necessary pursuant to
applicable securities laws or as may be required of, or advisable for, the
Company's officers and directors to make in the exercise of their fiduciary
duties, as advised by the Company's counsel. In addition, from the date of this
Agreement until the Closing Date, the Company, the Shareholders and their
respective representatives will hold in confidence and not use any information
obtained from Parent that is not publicly available except for disclosures of
such information to sources of financing necessary in connection with this
Agreement, which disclosures shall only be made subject to a reasonable form of
confidentiality agreement customary in the industry. In the event that this
Agreement is terminated, all information obtained by the Company, the
Shareholders and their respective Representatives from Parent that is not
publicly available will be returned to Parent and will continue to be kept in
confidence and not used by the Company, the Shareholders and their respective
Representatives; and all information obtained by Parent and Merger Sub and their
respective Representatives from the Company, and the Shareholders that is not
publicly available will be returned to Company and the Shareholders,
respectively, and will continue to be kept in confidence and not used by Parent
and Merger Sub and their respective Representatives.
(b) (i) None of the Company or the Shareholders shall (and the Company
shall not permit any of its Representatives to) issue any press release or make
any public statement regarding this Agreement or the Merger, or regarding any of
the other transactions contemplated by this Agreement, without Parent's prior
written consent, and (ii) Parent will use reasonable efforts to consult with the
Company prior to issuing any press release or making any public statement
regarding the Merger.
5.6 No Solicitation. The Company undertakes and agrees that until the
Termination Date (as defined in Section 10.1 below), the Company shall not, and
shall cause its respective officers, representatives, agents, employees and
shareholders not to, directly or indirectly, solicit, encourage, entertain,
negotiate or conduct discussions regarding any transaction which entails the
sale of all or substantially all of its assets, any merger or consolidation of
the Company with any person other than Parent, the sale or other transfer of any
of the Company's outstanding capital stock to any person other than Parent or
the issuance and sale of any authorized but unissued shares of capital stock or
securities convertible into such shares to any third party. In the event the
Company receives, directly or indirectly, or learns that any of its shareholders
has received, from any third party any offer to enter into any such prohibited
transaction, then the Company shall promptly communicate to Parent in writing
the material terms of such offer and the identity of the third party making the
offer.
5.7 FIRPTA Matters. At the Closing, (a) the Company shall deliver to
Parent a statement (in such form as may be reasonably requested by counsel to
Parent) conforming to the requirements of Section 1.897 - 2(h)(1)(i) of the
United States Treasury Regulations, and (b) the
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Company shall deliver to the Internal Revenue Service the notification required
under Section 1.897 - 2(h)(2) of the United States Treasury Regulations.
SECTION 6. ADDITIONAL COVENANTS OF THE PARTIES
6.1 Filings and Consents. From and after the date hereof and prior to the
Closing, each party to this Agreement (a) shall make all filings (if any) and
give all notices (if any) required to be made and given by such party in
connection with the Merger and the other transactions contemplated by this
Agreement, and (b) shall use all commercially reasonable efforts to obtain all
Consents (if any) required to be obtained (pursuant to any applicable Legal
Requirement or Contract, or otherwise) by such party in connection with the
Merger and the other transactions contemplated by this Agreement. The Company
shall (upon request) promptly deliver to Parent a copy of each such filing made,
each such notice given and each such Consent obtained by the Company.
6.2 Environmental Review. Parent shall have the right to conduct any and
all inspections, investigations, tests and studies (including, without
limitation, investigations with regard to zoning, conditional use permits,
building codes and other environmental regulations, architectural inspections,
engineering tests, economic feasibility studies, availability of water, soils,
seismic and geologic reports and environmental testing) with respect to the real
property owned by the Company (the "Company Property"). Parent and its agents,
contractors and subcontractors shall have the right to enter upon such
properties at reasonable times during ordinary business hours to make any and
all inspections and tests as may be necessary or desirable in their sole
judgment and discretion. Parent and Merger Sub shall indemnify and hold the
Company harmless from any and all damage arising out of or as a result of the
negligence of Parent and its agents, contractors and/or subcontractors in
connection with such entry and/or activities upon such properties, except
liability which results from the release of pre-existing toxic or hazardous
materials on or about such properties resulting from normal environmental
testing procedures, which indemnity obligation will survive termination of this
Agreement.
6.3 Shareholder Guaranteed Obligations. The Merger Sub shall punctually pay
as and when due all obligations of the Company for which Shareholders have
extended guaranties, letters of credit or personal endorsements, including
without limitation the Company's obligations to Branch Banking and Trust Company
(the "Guaranteed Obligations"). Parent shall use its reasonable best efforts to
have the Shareholders released from their personal guarantees of the Guaranteed
Obligations; provided, however, that Parent shall not be required to guarantee
such obligations of the Company. This covenant shall survive the Closing.
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB
The obligations of Parent and Merger Sub to effect the Merger and otherwise
consummate the transactions contemplated by this Agreement are subject to the
satisfaction, at or prior to the Closing, of each of the following conditions:
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7.1 Accuracy of Representations. Each of the representations and
warranties made by the Company and the Shareholders in this Agreement and in
each of the other agreements and instruments delivered to Parent in connection
with the transactions contemplated by this Agreement shall have been accurate in
all material respects as of the date of this Agreement, and shall be accurate in
all material respects as of the Closing as if made at the Closing (without
giving effect to any update to the Disclosure Schedule).
7.2 Performance of Covenants. All of the covenants and obligations that
the Company and the Shareholders are required to comply with or to perform at or
prior to the Closing shall have been complied with and performed in all material
respects.
7.3 Approval by the Company's Shareholders. This Agreement and all
transactions contemplated hereby shall have been duly approved by the
affirmative vote of holders of 100% of the shares of Company Common Stock
entitled to vote with respect thereto.
7.4 Completion of Due Diligence. Parent shall have completed, to its
satisfaction in its sole and absolute discretion, its due diligence examination
of the capitalization, business, properties, financial condition, operations and
obligations of the Company.
7.5 Approval of Parent's Directors. This Agreement and all transactions
contemplated hereby shall have been duly approved by the Board of Directors of
Parent.
7.6 Acquisition Financing. Parent shall have obtained the Acquisition
Financing on terms acceptable to Parent.
7.7 Individual Loans. The repayment terms of all loans or advances from
individuals to the Company shall be acceptable to Parent.
7.8 Consents. All Consents required to be obtained in connection with the
Merger and the other transactions contemplated by this Agreement, including
without limitation any required consents from Parent's lending institutions,
shall have been obtained and shall be in full force and effect.
7.9 Agreements and Documents. Parent and Merger Sub shall have received
the following agreements and documents, each of which shall be in full force and
effect:
(a) Noncompetition Agreements, in the form of Exhibit C, executed by
---------
each of the Shareholders;
(b) a Release, in the form of Exhibit D, executed by each of the
---------
Shareholders;
(c) a Shareholder Investment Certification, satisfactory in form and
content to Parent, executed by each of the Shareholders receiving Parent Common
Stock in the Merger;
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(d) a landlord waiver dated as of a date not more than five days
prior to the Closing Date and satisfactory in form and content to Parent,
executed by each lessor under any real property lease to which the Company is a
party as tenant or subtenant.
(e) the legal opinion of Cushing, Morris, Armbruster & Jones, LLP,
counsel to the Company and the Shareholders and dated as of the Closing Date, in
the form of Exhibit E;
---------
(f) a certificate executed by each of the Shareholders to the effect
that each of the representations and warranties set forth in Sections 2 and 3 is
accurate in all respects as of the Closing Date as if made on the Closing Date
and that the conditions set forth in Sections 7.1, 7.2, 7.3 and 7.4 have been
duly satisfied (the "Closing Certificates");
(g) written resignations of all directors of the Company, effective
as of the Effective Time; and
(h) a Spousal Consent, Power of Attorney and Waiver, in the form of
Exhibit F, executed by each of the spouses (if any) of the Shareholders.
- ---------
7.10 FIRPTA Compliance. The Company shall have filed with the Internal
Revenue Service the notification referred to in Section 5.8(b).
7.11 Legal Investment. On the Closing Date, the issuance of the shares of
Parent Common Stock to the Shareholders shall be legally permitted by all laws
and regulations to which the Shareholders, the Company, Merger Sub and Parent
are subject.
7.12 No Restraints. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger illegal.
7.13 No Legal Proceedings. No Person shall have commenced or threatened to
commence any Legal Proceeding challenging or seeking the recovery of a material
amount of damages in connection with the Merger or seeking to prohibit or limit
the exercise by Merger Sub of any material right pertaining to its ownership of
the Company Common Stock following the Merger.
7.14 Employees. All of the employees of the Company necessary to the
continuation of the Company's business as presently conducted shall have agreed
to remain employees of the Company or shall not have ceased to be employed by,
or expressed an intention to terminate their employment with, the Company.
7.15 New Employment Agreements. Merger Sub shall have entered into
employment agreements or new employment agreements with each of the
Shareholders, terminating all prior and other employment or consulting
agreements with such parties and their Affiliates, on such financial and other
terms as agreed upon by Parent, Merger Sub and the Shareholders.
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SECTION 8. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND THE
SHAREHOLDERS
The obligations of the Company and the Shareholders to effect the Merger
and otherwise consummate the transactions contemplated by this Agreement are
subject to the satisfaction, at or prior to the Closing, of the following
conditions:
8.1 Accuracy of Representations. Each of the representations and
warranties made by Parent and Merger Sub in this Agreement shall have been
accurate in all material respects as of the date of this Agreement, and shall be
accurate in all material respects as of the Closing as if made at the Closing.
8.2 Performance of Covenants. All of the covenants and obligations that
Parent and Merger Sub are required to comply with or to perform at or prior to
the Closing shall have been complied with and performed in all material
respects.
8.3 Consents. All Consents required for the consummation by the Company
and the Shareholders of all transactions contemplated by this Agreement,
including without limitation any required Consents from the Company's lending
institutions, shall have been obtained and shall be in full force and effect.
8.4 No Restraints. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger illegal.
SECTION 9. INDEMNIFICATION, ETC.
9.1 Survival of Representations, Etc.
(a) The representations and warranties made by the Company and the
Shareholders (including the representations and warranties set forth in Sections
2 and 3 and the representations and warranties set forth in the Closing
Certificates), and the representations and warranties of Parent and Merger Sub
contained in Section 4, shall expire 30 months following the Closing Date,
except for the representations and warranties of the Company and the
Shareholders contained in Sections 2.1(a), 2.2, 2.3, 2.6, 2.14, 2.15, 2.16, 3.2
and 3.5, each of which shall survive until the expiration of its respective
statute of limitations; provided, however, that if, at any time prior to the
expiration of the applicable survival period, any Indemnitee (acting in good
faith) delivers to the Indemnitor a written notice alleging the existence of an
inaccuracy in or a breach of any of such representations and warranties (and
setting forth in reasonable detail the basis for such Indemnitee's belief that
such an inaccuracy or breach may exist) and asserting a claim for recovery under
Section 9.2 or Section 9.4 based on such alleged inaccuracy or breach, then the
claim asserted in such notice shall survive the applicable survival period until
such time as such claim is fully and finally resolved.
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(b) The representations, warranties, covenants and obligations of the
parties, and the rights and remedies that may be exercised by the Indemnitees,
shall not be limited or otherwise affected by or as a result of any information
furnished to, or any investigation made by or Knowledge of, any of the parties
hereto or any of their Representatives.
(c) For purposes of this Agreement, each statement or other item of
information set forth in the Disclosure Schedule or in any update to the
Disclosure Schedule shall be deemed to be a part of the representation and
warranty made by the Company and the Shareholders in the specific section or
subsection of this Agreement that makes reference to such Disclosure Schedule
statement.
9.2 Indemnification by the Company's Shareholders.
(a) From and after the Effective Time (but subject to the limitations
set forth in Section 9.1(a) and clause (b) below), the Company's Shareholders
jointly and severally shall hold harmless and indemnify each of the Indemnitees
from and against, and shall compensate and reimburse each of the Indemnitees
for, any Damages which are suffered or incurred by any of the Indemnitees or to
which any of the Indemnitees may otherwise become subject (regardless of whether
or not such Damages relate to any third-party claim) and which directly or
indirectly arise from or as a result of, or are directly or indirectly connected
with: (i) any breach of any representation or warranty set forth in Sections 2
or 3 or in the Closing Certificates; (ii) any breach of any covenant or
obligation of the Company or any Shareholder (including the covenants set forth
in Sections 5 or 6); or (iii) any Legal Proceeding relating to any breach of the
type referred to in clause (i) or (ii) hereof (including any Legal Proceeding
commenced by any Indemnitee for the purpose of enforcing any of its rights under
this Section 9.2).
(b) The Shareholders shall not be obligated to compensate and
reimburse the Indemnitees for Damages under this Section 9.2 unless and until
the aggregate amount of Damages exceeds $100,000; provided, further, that the
maximum aggregate liability of the Shareholders hereunder shall not exceed the
aggregate amount of all consideration received by the Shareholders as the result
of the Merger.
(c) The Shareholders acknowledge and agree that, if the Surviving
Corporation suffers, incurs or otherwise becomes subject to any Damages as a
result of or in connection with any inaccuracy in or breach of any
representation, warranty, covenant or obligation by the Company or the
Shareholders then (without limiting any of the rights of the Surviving
Corporation as an Indemnitee) Parent shall also be deemed, by virtue of its
ownership of the stock of the Surviving Corporation, to have incurred Damages as
a result of and in connection with such inaccuracy or breach.
9.3 No Contribution. Each of the Shareholders waives, and acknowledges and
agrees that none of them shall have or shall exercise or assert (or attempt to
exercise or assert), any right of contribution, right of indemnity or other
right or remedy against the Surviving Corporation in connection with any
indemnification obligation or any other liability for which he or she may become
subject under or in connection with this Agreement or the Closing Certificates.
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9.4 Indemnification by Parent and Merger Sub.
(a) Parent and Merger Sub jointly and severally shall hold harmless
and indemnify each of the Shareholders from and against, and shall compensate
and reimburse each of the Shareholders for, any Damages which are suffered or
incurred by either of the Shareholders or to which either of the Shareholders
may otherwise become subject (regardless of whether or not such Damages relate
to any third-party claim) and which directly or indirectly arise from or as the
result of, or are directly or indirectly connected with: (i) any breach of any
representation or warranty set forth in Section 4 of this Agreement; (ii) any
breach of any covenant or obligation of Parent or Merger Sub contained in this
Agreement; or (iii) any Legal Proceeding relating to any breach of a type
referred to in clause (i) or (ii) hereof (including any Legal Proceeding
commenced by either Shareholder for the purpose of enforcing any of his rights
under this Section 9.4).
(b) Notwithstanding Section 9.4(a), Parent and Merger Sub shall not be
obligated to compensate and reimburse the Shareholders for Damages under this
Section 9.4 unless and until the aggregate amount of Damages exceeds $100,000.
The foregoing limitation shall not apply to any Damages arising as the result of
any breach of Section 6.3.
9.5 Interest. In the event that any Indemnitor (as defined in Section
9.6(a) below) is required to hold harmless, indemnify, compensate or reimburse
any Indemnitee pursuant to this Section 9 with respect to any Damages, the
Indemnitor shall also be liable to such Indemnitee for interest on the amount of
such Damages (for the period commencing as of the date on which the Indemnitor
first received notice of a claim for recovery by such Indemnitee and ending on
the date on which the liability of the Indemnitor to such Indemnitee is fully
satisfied, at a floating rate equal to the rate of interest publicly announced
by SouthTrust, N.A., Orlando, Florida, from time to time as its prime, base or
reference rate.
9.6 Defense of Third Party Claims. The following procedures shall be
applicable with respect to indemnification for third party claims arising in
connection with any provision of this Section 9:
(a) Promptly after receipt by an Indemnitee of written notice of the
assertion or the commencement of any claim, liability or obligation by a third
party, whether by legal process or otherwise (a "Claim"), with respect to any
matter referred to in this Section 9, the Indemnitee shall give written notice
thereof (the "Notice") to the Indemnitor and shall thereafter keep the
Indemnitor reasonably informed with respect thereto, provided that failure of
the Indemnitee to give the Indemnitor prompt notice as provided herein shall not
relieve the Indemnitor of its obligations hereunder unless such failure alone
and not in conjunction with other factors results in (i) a default judgment,
(ii) the expiration of the time to answer a complaint, or (iii) the inability of
the Indemnitor to adequately defend against such Claim. In case any such Claim
is brought against any Indemnitee, the Indemnitor shall be entitled to assume
the defense thereof, by written notice of its intention to the Indemnitee within
30 days after receipt of the Notice, with counsel reasonably satisfactory to the
Indemnitee, with such expenses of counsel to be borne equally by the Indemnitor
and the Indemnitee. Notwithstanding the assumption by the Indemnitor of the
defense of any Claim as
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provided in this Section 9.5, the Indemnitee shall be permitted to join in the
defense of such claim and to employ counsel at its own expense.
(b) If the Indemnitor shall fail to notify the Indemnitee of its
desire to assume the defense of any such Claim within the prescribed period of
time, or shall notify the Indemnitee that it will not assume the defense of any
such Claim, then the Indemnitee shall assume the defense of any such Claim, in
which event it may do so in such manner as it may deem appropriate. The
Indemnitor shall be permitted to join in the defense of such Claim and to employ
counsel at its own expense.
(c) No Indemnitee shall make any settlement of any Claim which would
give rise to liability on the part of an Indemnitor hereunder without the
written consent of the Indemnitor, which consent shall not be unreasonably
withheld. Further, no Indemnitor shall settle any Claim without the consent of
the Indemnitee, which consent shall not be unreasonably withheld. If a firm
written offer is made to settle a Claim and the Indemnitor desires to accept
such settlement offer, but the Indemnitee elects not to consent thereto, then
the Indemnitee may continue to contest or defend such Claim; provided, however,
that the total maximum liability of the Indemnitor to indemnify or otherwise
reimburse the Indemnitee in accordance with this Agreement with respect to such
Claim shall be limited to and shall not exceed the amount of the settlement
offer rejected by the Indemnitee, plus reasonable out-of-pocket costs and
expenses (including attorneys' fees) to the date of notice that the Indemnitor
desires to accept such settlement offer.
(d) Amounts payable by an Indemnitor to an Indemnitee under this
Section 9 shall be payable by the Indemnitor as incurred by the Indemnitee.
9.7 Exercise of Remedies by Indemnitees Other Than Parent. No Indemnitee
(other than Parent or any successor thereto or assignee thereof) claiming
indemnity under Section 9.2 shall be permitted to assert any indemnification
claim or exercise any other remedy under this Agreement unless Parent (or any
successor thereto or assignee thereof) shall have consented to the assertion of
such indemnification claim or the exercise of such other remedy.
SECTION 10. TERMINATION AND ABANDONMENT
10.1 Termination. This Agreement may be terminated and the transactions
herein contemplated may be abandoned at any time prior to the Effective Time
notwithstanding approval thereof by the shareholders of the Company and Merger
Sub (and, in the event that such termination occurs pursuant to Section 10.1(a),
(b), (c) or (d) below, the date on which such termination occurs shall be
referred to as the "Termination Date"):
(a) by mutual written consent of the Company, Merger Sub and Parent;
or
(b) by Parent, if there shall have been a violation or breach by the
Company of any of the Shareholders of any material agreement, representation or
warranty contained in this Agreement which has rendered the satisfaction of any
condition to the obligations of Parent and Merger Sub impossible and such
violation or breach has not been waived by Parent; or
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(c) by the Company, if there shall have been a violation or breach by
Merger Sub or Parent of any material agreement, representation or warranty
contained in this Agreement which has rendered the satisfaction of any condition
to the obligations of the Company impossible and such violation or breach has
not been waived by the Company; or
(d) by Parent, Merger Sub or the Company, if the Effective Time shall
not have occurred on or before July 30, 1999.
10.2 Procedure Upon Termination. In the event of termination and
abandonment pursuant to this Section 10, written notice thereof shall forthwith
be given to each party, and this Agreement shall terminate and be abandoned
without further action by the Company, Parent or Merger Sub. If this Agreement
is terminated as provided herein:
(a) each party will redeliver all documents, work papers and other
material of any other party relating to the transactions contemplated hereby,
whether obtained before or after the execution hereof, to the party furnishing
the same;
(b) all information received by any party hereto with respect to the
business of any other party or its subsidiaries (other than information which is
a matter of public knowledge or which has heretofore been or is hereafter
published in any publication for public distribution or filed as public
information with any governmental authority) shall not at any time be used for
the advantage of, or disclosed to third parties by, such party for any reason
whatsoever; and
(c) no party hereto shall have any liability or further obligation to
any other party to this Agreement, except as stated in this Section 10.2 and
Section 5.5(a), and except for such legal and equitable rights and remedies
which any party may have by reason of any breach or violation by any other party
of any representation or warranty or any covenant or agreement made hereunder or
pursuant hereto.
SECTION 11. AGREEMENT TO VOTE SHARES
11.1 Agreement To Vote Shares. In consideration of Parent, the Company and
Merger Sub taking further actions necessary to effect the Merger, each of the
Shareholders agrees to vote, intending to be bound hereby, all of his or her
shares of Company Common Stock, pursuant to the terms and conditions of the
Voting Agreement and Irrevocable Proxy in the form of Exhibit G, in favor of the
---------
Merger on terms substantially as set forth in this Agreement as modified in any
manner that may be necessary to preserve the essential features of the
transaction. Each Shareholder shall execute and deliver the Voting Agreement and
Irrevocable Proxy in the form of Exhibit G on even date with this Agreement. In
---------
addition, each of such parties further agrees to take all such other actions and
to execute such documents as may be reasonably necessary to effect the Merger
and the transactions contemplated herein, including without limitation,
execution of any documents or certificates that may be reasonably required to
preserve desired tax and accounting treatment and to ensure compliance with
applicable federal and state securities laws. Each of such parties understands
that in reliance on the foregoing agreements, Parent, the Company and Merger Sub
have
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executed this Agreement and will proceed to take other actions that will involve
considerable expense to such companies.
SECTION 12. REGISTRATION RIGHTS
12.1 Piggyback Registration.
(a) Until the third (3/rd/) anniversary of the Closing Date, Parent
shall notify all recipients (each, a "Holder") of the Parent Common Stock
issuable pursuant to Section 1 hereof (the "Registrable Securities") in writing
at least 15 days prior to the filing of any registration statement under the
Securities Act for purposes of a public offering of securities of Parent
(including, but not limited to, registration statements relating to secondary
offerings of securities of Parent, but excluding registration statements
relating to employee benefit plans or with respect to corporate reorganizations
or other transactions under Rule 145 of the Securities Act) and will afford each
such Holder an opportunity to include in such registration statement all or part
of the Registrable Securities held by such Holder. Each Holder desiring to
include in any such registration statement all or any part of the Registrable
Securities held by it shall, within ten (10) days after the above-described
notice from Parent, so notify Parent in writing. If a Holder decides not to
include all of its Registrable Securities in any registration statement
thereafter filed by Parent, such Holder shall nevertheless continue to have the
right to include any Registrable Securities in any subsequent registration
statement or registration statements as may be filed by Parent with respect to
offerings of its securities, all upon the terms and conditions set forth herein.
(b) Underwriting. If the registration statement under which Parent
------------
gives notice under Section 12.1(a) is for an underwritten public offering,
Parent shall so advise the Holders of Registrable Securities. In such event,
the right of any such Holder to be included in a registration pursuant to this
Section 12.1 shall be conditioned upon such Holder's participation in the
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their Registrable Securities through such underwriting shall enter into an
underwriting agreement and selling shareholder documents in customary form with
the underwriter or underwriters selected for such underwriting by Parent.
Notwithstanding any other provision of this Section 12.1, if the underwriter
determines in good faith that marketing factors require a limitation of the
number of shares to be underwritten, the number of shares that may be included
in the underwriting shall be allocated, first, to Parent; second, to those
holders of Parent registration rights existing prior to the date of this
Agreement, to the extent priority over any subsequent holders of registration
rights is expressly provided for in such pre-existing rights, otherwise pro rata
with the Holders; third, to the Holders on a pro rata basis based on the total
Registrable Securities held by the Holders; and fourth, to any shareholder of
Parent (other than a Holder) on a pro rata basis. No such reduction shall
reduce the securities being offered by Parent for its own account to be included
in the registration and underwriting. If the underwriter so determines in good
faith, any or all of the Registrable Securities may be excluded from any
underwriting in accordance with this Section 12.1(b).
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(c) Right To Terminate Registration. Parent shall have the right to
-------------------------------
terminate or withdraw any registration initiated by it under this Section 12.1
prior to the effectiveness of such registration whether or not any Holder has
elected to include securities in such registration.
(d) Expenses. Parent shall bear all expenses incurred pursuant to
--------
this Section 12.1 in connection with the preparation and filing with the SEC of
the registration statement and any amendments and supplements thereto and the
prospectuses therewith. All underwriting discounts and selling commissions
incurred in connection with such registration shall be borne by the Holders of
the securities so registered pro rata on the basis of the number of Registrable
Securities so registered.
12.2 Indemnification.
(a) In connection with any registration statement in which a Holder
of Parent Common Stock with rights under this Section 12 is participating, each
such holder will furnish to Parent in writing such information and affidavits as
Parent reasonably requests for use in connection with such registration
statement or prospectus and, to the extent permitted by law, will indemnify
Parent, its directors and officers and each Person who controls Parent (within
the meaning of the Securities Act) against all Damages resulting from any untrue
or alleged untrue statement of material fact contained in such registration
statement, prospectus or preliminary prospectus or any amendment thereof or
supplement thereto or any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading, but only to the extent that such untrue statement or omission is
contained in any information or affidavit so furnished in writing by such holder
for inclusion in such registration statement; provided that the obligation to
indemnify will be several, not joint and several, among such Holders and the
liability of each such Holder will be in proportion to and limited to the net
amount received by such Holder from the sale of Parent Common Stock with rights
under this Section 12, pursuant to such registration statement.
(b) Any Person entitled to indemnification hereunder will (i) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification and (ii) unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. If such defense is assumed, the
indemnifying party will not be subject to any liability for any consent to the
entry of any judgment or any settlement made by the indemnified party without
its consent (but such consent will not be unreasonably withheld). An
indemnifying party who is not entitled to, or elects not to, assume the defense
of a claim will not be obligated to pay the fees and expenses of more than one
counsel for all parties indemnified by such indemnifying party with respect to
such claim, unless in the reasonable judgment of any indemnified party a
conflict of interest may exist between such indemnified party and any other of
such indemnified parties with respect to such claim.
(c) The indemnification provided for under this Section 12 will
remain in full force and effect regardless of any investigation made by or on
behalf of the indemnified party or any
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officer, director or controlling person of such indemnified party and will
survive the transfer of securities and the Merger. Parent also agrees to make
such provisions, as are reasonably requested by any indemnified party, for
contribution to such party in the event Parent's indemnification is unavailable
for any reason.
12.3 Transferability of Registration Rights. The rights under this Section
12 are not transferable except in connection with (a) a transfer by will or
intestacy and (b) estate planning transfers consisting of gifts to the spouse or
issue of the transferee and transfers to trusts for the benefit of the spouse or
issue of the transferee.
12.4 Amendment of Section 12. Notwithstanding anything to the contrary
contained in this Agreement, the provisions of this Section 12 may be amended by
Parent at any time with the consent of the Holders of a majority of the shares
of Parent Common Stock subject (or to be subject) to the provisions of this
Section 12.
SECTION 13. MISCELLANEOUS PROVISIONS
13.1 Further Assurances. Each party hereto shall execute and cause to be
delivered to each other party hereto such instruments and other documents, and
shall take such other actions, as such other party may reasonably request (prior
to, at or after the Closing) for the purpose of carrying out or evidencing any
of the transactions contemplated by this Agreement.
13.2 Fees and Expenses. Each Party shall bear and pay all fees, costs and
expenses (including legal fees and accounting fees) that have been incurred or
that are incurred by such party in connection with the transactions contemplated
by this Agreement, including all fees, costs and expenses incurred by such
parties in connection with or by virtue of (a) the negotiation, preparation and
review of this Agreement (including the Disclosure Schedule) and all agreements,
certificates, opinions and other instruments and documents delivered or to be
delivered in connection with the transactions contemplated by this Agreement,
(b) the preparation and submission of any filing or notice required to be made
or given in connection with any of the transactions contemplated by this
Agreement, and the obtaining of any Consent required to be obtained by the
Company in connection with any of such transactions, and (c) the consummation of
the Merger.
13.3 Attorneys' Fees. If any action or proceeding relating to this
Agreement or the enforcement of any provision of this Agreement is brought
against any party hereto, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs and disbursements (in addition to any other
relief to which the prevailing party may be entitled).
13.4 Notices. Any notice or other communication required or permitted to
be delivered to any party under this Agreement shall be in writing and shall be
deemed properly delivered, given and received when delivered (by hand, by
registered mail, by courier or express delivery service or by facsimile) to the
address or facsimile telephone number set forth beneath the name of such party
below (or to such other address or facsimile telephone number as such party
shall have specified in a written notice given to the other parties hereto):
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if to Parent: Display Technologies, Inc.
5029 Edgewater Drive
Orlando, Florida 32810
Attn: J. William Brandner, President
Facsimile: (407) 521-8767
with a copy to: Display Technologies, Inc.
5029 Edgewater Drive
Orlando, Florida 32810
Attn: Marshall S. Harris, VP, General Counsel &
Secretary
Facsimile: (407) 521-8767
if to the Company: Lockwood Sign Group, Inc.
10850-M Hanna Street
Beltsville, MD 20705
Attn: Larry L. Johnson, CEO
Facsimile: (301) 937-1385
if to the Shareholders: Larry L. Johnson
10850-M Hanna Street
Beltsville, MD 20705
Facsimile: (301) 937-1385
Kurt R. Johnson
829 Pickens Industrial Drive, Suite 5
Marietta, GA 30062
Facsimile: (770) 424-1186
with a copy to: Charles M. Cushing, Jr.
229 Peachtree St., Suite 2110
Atlanta, GA 30309
Facsimile: (404) 658-9865
Any notice sent by facsimile shall also be sent by first class mail or express
delivery service.
13.5 Time is of the Essence. Time is of the essence of this Agreement.
13.6 Headings. The underlined headings contained in this Agreement are for
convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
13.7 Counterparts. This Agreement may be executed in several counterparts,
each of which shall constitute an original and all of which, when taken
together, shall constitute one agreement.
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13.8 Governing Law; Venue; Arbitration. This Agreement shall be construed
in accordance with, and governed in all respects by, the internal laws of the
State of Florida, without giving effect to principles of conflicts of laws. Any
dispute, controversy or claim arising out of, relating to or in connection with
this Agreement including, without limitation, disputes pursuant to Section 1
hereof or disputes relating to the breach of this Agreement, shall be finally
settled by arbitration conducted in accordance with this Section 13.8. The
arbitration shall be conducted in accordance with the rules of the American
Arbitration Association (the "AAA") in effect at the time of the arbitration,
except as they may be modified herein or by mutual agreement of the parties. The
arbitration shall be conducted at a mutually agreed location. If the parties are
unable to agree on the location of the arbitration within ten (10) days after
the date of delivery of the Request of arbitration, the arbitration shall be
conducted in Orlando, Florida. Each party hereby irrevocably submits to the
jurisdiction of the arbitrator in Orlando, Florida, and waives any defense in an
arbitration based on any claim that such party is not subject personally to the
jurisdiction of such arbitrator, that such arbitration is brought in an
inconvenient forum or that such venue is improper. The arbitration shall be
conducted by three arbitrators, at least two of whom are attorneys with at least
seven years of experience in the fields of securities law and business
transactions. The party initiating the arbitration (the "Claimant") shall
appoint its arbitrator in its request for arbitration (the "Request"). The other
party (the "Respondent") shall appoint its arbitrator within twenty (20) days of
receipt of the Request and shall notify the Claimant of such appointment in
writing. If the Respondent fails to appoint an arbitrator within such twenty day
period, the arbitrator named in the Request shall decide the controversy or
claim as a sole arbitrator. Otherwise, the two arbitrators appointed by the
parties shall appoint a third arbitrator within ten (10) days after the
Respondent has notified Claimant of the appointment of the Respondent's
arbitrator. If the two arbitrators appointed by the parties fail or are unable
to appoint a third arbitrator, the appointment of the third arbitrator shall be
made by the AAA. The third arbitrator shall act as chair of the panel. The
arbitration award shall be in writing and shall be final and binding on the
parties. The award may include an award of costs, including reasonable
attorneys' fees and disbursements; except upon a finding of actual fraud,
intentional or knowing misrepresentation, willful and knowing omissions of
material fact or willful misconduct, no award shall include punitive damages.
Judgment upon the award may be entered by any court having jurisdiction thereof
or having jurisdiction over the parties or their assets.
13.9 Successors and Assigns. This Agreement shall be binding upon: the
Company and its successors and assigns (if any); the Shareholders and their
respective personal representatives, executors, administrators, estates, heirs,
successors and assigns (if any); Parent and its successors and assigns (if any);
and Merger Sub and its successors and assigns (if any). This Agreement shall
inure to the benefit of: the Company; the Company's Shareholders; Parent; Merger
Sub; the other Indemnitees (subject to Section 9.6); and the respective
successors and assigns (if any) of the foregoing. Parent may freely assign any
or all of its rights under this Agreement (including its indemnification rights
under Section 9), in whole or in part, to any other Person without obtaining the
consent or approval of any other party hereto or of any other Person.
13.10 Remedies Cumulative; Specific Performance. The rights and remedies
of the parties hereto shall be cumulative (and not alternative). The parties to
this Agreement agree that, in the event of any breach or threatened breach by
any party to this Agreement of any covenant, obligation or other provision set
forth in this Agreement for the benefit of any other party to this
41
<PAGE>
Agreement, such other party shall be entitled (in addition to any other remedy
that may be available to it) to (a) a decree or order of specific performance or
mandamus to enforce the observance and performance of such covenant, obligation
or other provision, and (b) an injunction restraining such breach or threatened
breach.
13.11 Waiver.
(a) No failure on the part of any Person to exercise any power,
right, privilege or remedy under this Agreement, and no delay on the part of any
Person in exercising any power, right, privilege or remedy under this Agreement,
shall operate as a waiver of such power, right, privilege or remedy; and no
single or partial exercise of any such power, right, privilege or remedy shall
preclude any other or further exercise thereof or of any other power, right,
privilege or remedy.
(b) No Person shall be deemed to have waived any claim arising out
of this Agreement, or any power, right, privilege or remedy under this
Agreement, unless the waiver of such claim, power, right, privilege or remedy is
expressly set forth in a written instrument duly executed and delivered on
behalf of such Person; and any such waiver shall not be applicable or have any
effect except in the specific instance in which it is given.
13.12 Amendments. This Agreement may not be amended, modified, altered or
supplemented other than by means of a written instrument duly executed and
delivered on behalf of all of the parties hereto.
13.13 Severability. In the event that any provision of this Agreement, or
the application of any such provision to any Person or set of circumstances
shall be determined to be invalid, unlawful, void or unenforceable to any
extent, the remainder of this Agreement, and the application of such provision
to Persons or circumstances other than those as to which it is determined to be
invalid, unlawful, void or unenforceable, shall not be impaired or otherwise
affected and shall continue to be valid and enforceable to the fullest extent
permitted by law.
13.14 Parties in Interest. Except for the provisions of Sections 1.4 and
12, none of the provisions of this Agreement is intended to provide any rights
or remedies to any Person other than the parties hereto and their respective
successors and assigns (if any).
13.15 Entire Agreement. This Agreement and the other agreements referred
to herein set forth the entire understanding of the parties hereto relating to
the subject matter hereof and thereof and supersede all prior agreements and
understandings among or between any of the parties relating to the subject
matter hereof and thereof; provided, however, that the Non-Disclosure and No-
Shop Agreement executed on behalf of Parent and the Company with respect to the
Merger shall not be superseded by this Agreement and shall remain in effect in
accordance with its terms until the earlier of (a) the Effective Time, or (b)
the date on which such Mutual Non-Disclosure Agreement is terminated in
accordance with its terms.
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13.16 Construction.
(a) For purposes of this Agreement, whenever the context requires:
the singular number shall include the plural, and vice versa; the masculine
gender shall include the feminine and neuter genders; the feminine gender shall
include the masculine and neuter genders; and the neuter gender shall include
the masculine and feminine genders.
(b) The parties hereto agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall not
be applied in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and "including,"
and variations thereof, shall not be deemed to be terms of limitation, but
rather shall be deemed to be followed by the words "without limitation."
(d) Except as otherwise indicated, all references in this Agreement
to "Sections" and "Exhibits" are intended to refer to Sections of this Agreement
and Exhibits to this Agreement.
43
<PAGE>
The parties hereto have caused this Agreement to be executed and delivered
as of the date first written above.
DISPLAY TECHNOLOGIES, INC.,
a Nevada corporation
By: /s/ J. William Brandner
-------------------------------------------
J. William Brandner, President and CEO
LOCKWOOD ACQUISITIONS CORP.,
a Florida corporation
By: /s/ J. William Brandner
-------------------------------------------
J. William Brandner, President
LOCKWOOD SIGN GROUP, INC.,
a Georgia corporation
By: /s/ Larry L. Johnson
-------------------------------------------
Larry L. Johnson, CEO
/s/ Larry L. Johnson
----------------------------------------------
LARRY L. JOHNSON, Individually
/s/ Kurt R. Johnson
----------------------------------------------
KURT R. JOHNSON, Individually
44
<PAGE>
EXHIBIT A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
---------
Acquisition Financing. "Acquisition Financing" shall mean the issuance and
sale by Parent of any combination of convertible debentures, Parent Common
Stock, and warrants to purchase Parent Common Stock intended to yield gross
proceeds of approximately $2,000,000 to Parent.
Acquisition Transaction. "Acquisition Transaction" shall mean any
transaction involving:
(a) the sale, license, disposition or acquisition of all or a material
portion of the Company's business or assets;
(b) the issuance, disposition or acquisition of (i) any capital stock
or other equity security of the Company (other than common stock issued to
employees of the Company, upon exercise of Company Options or otherwise, in
routine transactions in accordance with the Company's past practices), (ii) any
option, call, warrant or right (whether or not immediately exercisable) to
acquire any capital stock or other equity security of the Company (other than
stock options granted to employees of the Company in routine transactions in
accordance with the Company's past practices), or (iii) any security, instrument
or obligation that is or may become convertible into or exchangeable for any
capital stock or other equity security of the Company; or
(c) any merger, consolidation, business combination, reorganization or
similar transaction involving the Company.
Agreement. "Agreement" shall mean the Agreement and Plan of Merger and
Reorganization to which this Exhibit A is attached (including the Disclosure
---------
Schedule), as it may be amended from time to time.
Company Contract. "Company Contract" shall mean any Contract: (a) to which
the Company is a party; (b) by which the Company or any of its assets is or may
become bound or under which the Company has, or may become subject to, any
obligation; or (c) under which the Company has or may acquire any right or
interest.
Company Proprietary Asset. "Company Proprietary Asset" shall mean any
Proprietary Asset owned by or licensed to the Company or otherwise used by the
Company.
Consent. "Consent" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any Governmental Authorization).
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Contingent Period Net Income. "Contingent Period Net Income shall mean the
after tax net income (determined in accordance with GAAP) of the Company and the
Surviving Corporation for the 12-month period beginning July 1, 1999 and ending
June 30, 2000, determined by subtracting E from R and then subtracting T from
the resulting difference, where:
R = the sum of all revenues and income of the Company and the
Surviving Corporation from all sources;
E = the sum of all operating and other expenses (including
depreciation and amortization) of the Company and the Surviving
Corporation; and
T = the aggregate applicable federal and state income taxes
calculated on the difference between R and E on an accrual basis (not
including any tax expense resulting from or associated with the Company's
prior conversion from cash basis to accrual basis of accounting).
The items of revenue, income and expense as set forth above shall be
determined using GAAP. Notwithstanding any provisions herein to the contrary,
Contingent Period Net Income shall be determined without deduction for any of
the following:
. Any net operating loss carry forwards or carry backs
. Expenses incurred in connection with or attributable to the Merger
. General or administrative expenses of Parent (other than actual
interest paid by Parent on any working capital advance to the
Surviving Corporation)
. Any tax liability resulting from or associated with the conversion by
the Company from cash basis to accrual basis accounting.
In addition, in order for the Contingency Period Net Income to fairly
reflect the results of operations of the type and scope previously carried on by
the Company, in the event of the occurrence of any of the following, the parties
shall negotiate in good faith in order to redefine Contingent Period Net Income
so that the use of such defined term in Section 1.9 of the Agreement is fair and
equitable to Parent, Merger Sub and the Shareholders:
. Any material restrictions are imposed on the scope of the Surviving
Corporation's business
. Any material restrictions are imposed on the potential territory for
the Surviving Corporation's business
. Any material restrictions are imposed upon the customer base of the
Surviving Corporation
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. Any material changes are made in the organizational structure of the
Surviving Corporation resulting in increased overhead expenses, except
for changes made for the purpose of increasing revenues or reducing
expenses
. The acquisition by the Surviving Corporation of material assets or
businesses
. The incurrence by the Surviving Corporation of material indebtedness,
other than that needed for working capital to support increased
business
. The sale by the Surviving Corporation of material assets or businesses
other than in the ordinary course
Notwithstanding any provisions to the contrary herein, in the event of the
termination by the Surviving Corporation of the employment of Larry L. Johnson
without Cause, as defined in the employment agreement to be executed by Larry L.
Johnson and Surviving Corporation at the Closing, Contingent Period Net Income
shall conclusively be deemed to be $625,000, notwithstanding any calculations or
formulas contained herein.
Contract. "Contract" shall mean any written, oral or other agreement,
contract, subcontract, lease, instrument, note, warranty, insurance policy,
benefit plan or legally binding commitment or undertaking of any nature.
Damages. "Damages" shall include any loss, damage, injury, decline in
value, lost opportunity, liability, claim, demand, settlement, judgment, award,
fine, penalty, Tax, fee (including reasonable attorneys' fees), charge, cost
(including costs of investigation) or expense of any nature.
Disclosure Schedule. "Disclosure Schedule" shall mean the schedule (dated
as of the date of the Agreement) delivered to Parent on behalf of the Company
and the Shareholders.
Encumbrance. "Encumbrance" shall mean any lien, pledge, hypothecation,
charge, mortgage, security interest, encumbrance, claim, infringement,
interference, option, right of first refusal, preemptive right, community
property interest or restriction of any nature (including any restriction on the
voting of any security, any restriction on the transfer of any security or other
asset, any restriction on the receipt of any income derived from any asset, any
restriction on the use of any asset and any restriction on the possession,
exercise or transfer of any other attribute of ownership of any asset).
Entity. "Entity" shall mean any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, company (including any limited
liability company or joint stock company), firm or other enterprise,
association, organization or entity.
Exchange Act. "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
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GAAP. "GAAP" shall mean generally accepted accounting principles.
Government Bid. "Government Bid" shall mean any quotation, bid or proposal
submitted to any Governmental Body or any proposed prime contractor or higher-
tier subcontractor of any Governmental Body.
Government Contract. "Government Contract" shall mean any prime contract,
subcontract, letter contract, purchase order or delivery order executed or
submitted to or on behalf of any Governmental Body or any prime contractor or
higher-tier subcontractor, or under which any Governmental Body or any such
prime contractor or subcontractor otherwise has or may acquire any right or
interest.
Governmental Authorization. "Governmental Authorization" shall mean any:
(a) permit, license, certificate, franchise, permission, clearance,
registration, qualification or authorization issued, granted, given or otherwise
made available by or under the authority of any Governmental Body or pursuant to
any Legal Requirement; or (b) right under any Contract with any Governmental
Body.
Governmental Body. "Governmental Body" shall mean any domestic or foreign:
(a) nation, state, commonwealth, province, territory, county, municipality,
district or other jurisdiction of any nature; (b) federal, state, local,
municipal, foreign or other government; or (c) governmental or quasi-
governmental authority of any nature (including any governmental division,
department, agency, commission, instrumentality, official, organization, unit,
body or Entity and any court or other tribunal).
Indemnitee(s). "Indemnitee(s)" shall mean the following Persons: (a)
Parent; (b) Parent's current and future affiliates (including the Surviving
Corporation); (c) the Shareholders; (d) the respective Representatives of the
Persons referred to in clauses "(a)" and "(b)" above; and (e) the respective
successors and assigns of the Persons referred to in clauses "(a)," "(b)," "(c)"
and "(d)"above; provided, however, that the Shareholders shall not be deemed to
be "Indemnitees" for purposes of Section 9.2 or Section 9.3.
Indemnitor(s). "Indemnitor(s)" shall mean the Person or Persons from whom
indemnification is sought pursuant to Article 9 of this Agreement.
Information Systems. "Information Systems" shall mean all computer
hardware and peripherals, operating systems and software programs owned or
leased by the Company or otherwise used by the Company in the conduct of its
business.
Knowledge. An individual shall be deemed to have "Knowledge" of a
particular fact or other matter if:
(a) such individual is actually aware of such fact or other matter; or
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(b) a prudent individual could be expected to discover or otherwise
become aware of such fact or other matter in the course of conducting a
reasonably diligent and comprehensive investigation concerning the truth or
existence of such fact or other matter.
The Company shall be deemed to have "Knowledge" of a particular fact or other
matter if any principal officer of the Company has Knowledge of such fact or
other matter. The Shareholders shall be deemed to have "Knowledge" of a
particular fact or other matter if any Shareholder has Knowledge of such fact or
other matter or if any principal officer of the Company has Knowledge of such
fact or other matter.
Legal Proceeding. "Legal Proceeding" shall mean any domestic or foreign
action, suit, litigation, arbitration, proceeding (including any civil,
criminal, administrative, investigative or appellate proceeding), hearing,
inquiry, audit, examination or investigation commenced, brought, conducted or
heard by or before, or otherwise involving, any court or other Governmental Body
or any arbitrator or arbitration panel.
Legal Requirement. "Legal Requirement" shall mean any domestic or foreign
federal, state, local, municipal, foreign or other law, statute, constitution,
principle of common law, resolution, ordinance, code, edict, decree, rule,
regulation, ruling or requirement issued, enacted, adopted, promulgated,
implemented or otherwise put into effect by or under the authority of any
Governmental Body.
Material Adverse Effect. A violation or other matter will be deemed to
have a "Material Adverse Effect" on a Person if such violation or other matter
(considered together with all other matters that would constitute exceptions to
the representations and warranties set forth in the Agreement or in the Closing
Certificates but for the presence of "Material Adverse Effect" or other
materiality qualifications, or any similar qualifications, in such
representations and warranties) would have a material adverse impact or effect
on such Person's business, assets, liabilities, operations, financial condition
or prospects, or the ability of such person to perform any obligations under or
contemplated by this Agreement.
Person. "Person" shall mean any individual, Entity or Governmental Body.
Proprietary Asset. "Proprietary Asset" shall mean any: (a) patent, patent
application, trademark (whether registered or unregistered), trademark
application, trade name, fictitious business name, service mark (whether
registered or unregistered), service mark application, copyright (whether
registered or unregistered), copyright application, maskwork, maskwork
application, trade secret, know-how, customer list, franchise, system, computer
software, computer program, invention, design, blueprint, engineering drawing,
proprietary product, technology, proprietary right or other intellectual
property right or intangible asset; or (b) right to use or exploit any of the
foregoing.
Representatives. "Representatives" shall mean officers, directors,
employees, agents, attorneys, accountants, advisors and representatives.
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SEC. "SEC" shall mean the United States Securities and Exchange
Commission.
Securities Act. "Securities Act" shall mean the Securities Act of 1933, as
amended.
Shareholders. "Shareholders" shall mean the holders of Company Common
Stock set forth on Exhibit B, being all of the Company's shareholders.
---------
Sign Contracts. "Sign Contracts" shall mean Contracts entered into by the
Company for the sale, leasing, installing or maintenance of signs and other
outdoor advertising or display structures of any nature.
Tax. "Tax" shall mean any domestic or foreign tax (including any income
tax, franchise tax, capital gains tax, gross receipts tax, value-added tax,
surtax, excise tax, ad valorem tax, transfer tax, stamp tax, sales tax, use tax,
property tax, business tax, withholding tax or payroll tax), levy, assessment,
tariff, duty (including any customs duty), deficiency or fee, and any additional
related charge or amount (including any fine, penalty or interest), imposed,
assessed or collected by or under the authority of any Governmental Body.
Tax Return. "Tax Return" shall mean any domestic or foreign return
(including any information return), report, statement, declaration, estimate,
schedule, notice, notification, form, election, certificate or other similar
document or information filed with or submitted to, or required to be filed with
or submitted to, any Governmental Body in connection with the determination,
assessment, collection or payment of any Tax or in connection with the
administration, implementation or enforcement of or compliance with any Legal
Requirement relating to any Tax.
Trading Price. "Trading Price" shall mean the closing price per share of
Parent Common Stock as reported on the NASDAQ National Market System or, if not
so reported, as reported by a recognized quotation service in the event the
Parent Common Stock is not listed and traded on a recognized securities exchange
or quoted on NASDAQ.
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Exhibit 3.31
ARTICLES OF INCORPORATION
OF
LOCKWOOD ACQUISITIONS CORP.
============================================================
The undersigned incorporator of these Articles of Incorporation, a natural
person competent to contract, hereby forms a corporation for profit under the
laws of the State of Florida.
ARTICLE I - NAME
----------------
The name of the Corporation is LOCKWOOD ACQUISITIONS CORP.
ARTICLE II - NATURE OF BUSINESS
-------------------------------
The Corporation is organized for the purpose of transacting any and all
lawful business and shall have those powers generally conferred by Florida
Statutes upon corporations organized in this state, and in addition to but not
in limitation of such powers, shall also have the power:
(a) To acquire by purchase, lease or otherwise, lands and interests
in lands, and to own, hold, improve, develop and manage any real estate so
acquired, and to erect, or cause to be erected, on any lands owned, held, or
occupied by the Corporation, buildings or other structures, public or private,
with their appurtenances and to manage, operate, lease, rent, rebuild, enlarge,
alter or improve any buildings or other structures, now or hereafter erected on
any lands so owned, held, or occupied and to encumber or dispose of any lands or
interests in lands and any buildings or other structures, at any time owned or
held by the Corporation. To buy, sell, mortgage, exchange, lease, hold for
investment or otherwise, use and operate real estate of all kinds, improved or
unimproved, and any right or interest therein.
(b) To acquire, by purchase, lease, manufacture or otherwise any
personal property deemed necessary or useful in the equipment, furnishing,
improvement, development or management of any property, real or personal, at any
time owned, held or occupied by the Corporation and to invest, trade and deal in
any personal property deemed beneficial to the Corporation and to lease, rent,
encumber or dispose of any personal property at any time owned or held by the
Corporation.
(c) To contract debts and borrow money, issue and sell or pledge
bonds, debentures, notes and other evidences of indebtedness and to execute such
mortgages, transfers or corporate indebtedness as required.
(d) To purchase the corporate assets of any other corporation and
engage in the same or other character of business.
<PAGE>
(e) To guarantee, endorse, purchase, hold, sell, transfer, mortgage,
pledge or otherwise acquire or dispose of the shares of the capital stock of, or
any bonds, securities, or other evidences of indebtedness created by, any other
corporation of the State of Florida or any other state or government and while
owner of such stock to exercise all the rights, powers and privileges of
ownership, including the right to vote such stock.
(f) To enter into, make, perform and carry out contracts and
agreements of every kind, for any lawful purpose, without limit as to amount,
with any person, firm, association or corporation; and to transact any further
and other business necessarily connected with the purposes of the Corporation or
calculated to facilitate the same.
(g) To carry on any or all of its operations and businesses and to
promote its objects within the State of Florida or elsewhere, without
restriction as to place or amount; and to have, use, exercise and enjoy all of
the general powers of like corporations.
(h) To engage in any and all lawful businesses, trades, occupations
and professions.
(i) To do any or all of the things herein set forth to the same
extent as natural persons might or could do and in any part of the world as
principals, agents, contractors or otherwise, alone, or in company with others
and to do and perform all such other things and acts as may be necessary,
profitable or expedient in carrying on any of the business or acts above-named.
The intention is that none of the objects and powers as hereinabove set
forth, except where otherwise specified in this Article, shall be in anywise
limited or restricted by reference to or inference from the terms of any other
objects, powers or clauses of this Article or any other Articles; but that the
objects and powers specified in each of the clauses in this Article shall be
regarded as independent objects and powers.
ARTICLE III - CAPITAL STOCK
---------------------------
The maximum number of shares of capital stock that the Corporation is
authorized to have outstanding at any time is 10,000 shares of common stock,
each having the par value of $.001.
Authorized capital stock may be paid for in cash, services, or property, at
a just value to be fixed by the Board of Directors of the Corporation at any
regular or special meeting.
ARTICLE IV - COMMENCEMENT AND TERM OF EXISTENCE
-----------------------------------------------
The Corporation shall have perpetual existence. These Articles of
Incorporation shall be effective and the Corporation's existence shall commence
upon the filing of these Articles of Incorporation by the Department of State.
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<PAGE>
ARTICLE V - ADDRESS
-------------------
The initial street and mailing address of the principal office of the
Corporation is to be at 5029 Edgewater Drive, Orlando, Florida 32810. The Board
of Directors may from time to time designate such other address and place for
the principal office of the Corporation as it may see fit.
ARTICLE VI - DIRECTORS
----------------------
The Corporation shall have one (1) director initially. The number of
directors may be increased or diminished from time to time by the Bylaws. The
shareholders shall have the right and power at any regular meeting or at any
special meeting called for such purpose to remove any director of the
Corporation with or without cause.
ARTICLE VII - INITIAL DIRECTORS
-------------------------------
The name and address of the initial director who shall hold office until
his successors are elected and have qualified, is as follows:
J. William Brandner
5029 Edgewater Drive
Orlando, FL 32810
ARTICLE VIII - INCORPORATOR
---------------------------
The name and post office address of the incorporator of these Articles of
Incorporation is:
Marshall S. Harris
5029 Edgewater Drive
Orlando, FL 32810
ARTICLE IX - INITIAL REGISTERED OFFICE AND AGENT
------------------------------------------------
The initial registered agent of the Corporation is Marshall S. Harris whose
address is 5029 Edgewater Drive, Orlando, FL 32810.
ARTICLE X - VOTING RIGHTS
-------------------------
Except as otherwise provided by law, the entire voting power for the
election of directors and for all other purposes shall be vested exclusively in
the holders of the outstanding common shares.
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ARTICLE XI - BYLAWS
-------------------
The power to adopt, alter, amend or repeal the Bylaws of the Corporation
shall be reserved to and vested in the Shareholders of the Corporation.
ARTICLE XII - INDEMNIFICATION
-----------------------------
A. The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed action,
suit, or proceeding, whether civil or criminal, administrative or investigative,
by reason of the fact that he is or was a director, officer, employee, or agent
of the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise, against expenses (including attorneys'
fees), judgments, fines, and amounts paid in settlement, actually and reasonably
incurred by him in connection with such action, suit, or proceeding, including
any appeal thereof, if he acted in good faith or in a manner he reasonably
believed to be in or not opposed to the best interests of the Corporation, and
with respect to any criminal action or proceeding, if he had no reasonable cause
to believe his conduct was unlawful. However, with respect to any action by or
in the right of the Corporation to procure a judgment in its favor, no
indemnification shall be made in respect of any claim, issue, or matter as to
which such person is adjudged liable for negligence or misconduct in the
performance of his duty to the Corporation unless, and only to the extent that,
the court in which such action or suit was brought determines, on application,
that despite the adjudication of liability, such person is fairly and reasonably
entitled to indemnity in view of all the circumstances of the case. Any
indemnification hereunder shall be made only on a determination by a majority of
disinterested directors or a majority of shareholders that indemnification is
proper in the particular circumstances because the party to be indemnified has
met the applicable standard of conduct. Determination of any action, suit, or
proceeding by judgment, order, settlement, conviction, or on a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the party did not meet the applicable standard of conduct. Indemnification
hereunder may be paid by the Corporation in advance of the final disposition of
any action, suit, or proceeding, on a preliminary determination that the
director, officer, employee, or agent met the applicable standard of conduct and
on receipt of an undertaking by or on behalf of the director, officer, employee,
or agent to repay such amount, unless it is ultimately determined that he is
entitled to be indemnified by the Corporation as authorized in this section.
B. The Corporation shall also indemnify any director, officer, employee,
or agent who has been successful on the merits or otherwise, in defense of any
action, suit, or proceeding, or in defense of any claim, issue, or matter
therein, against all expenses, including attorneys' fees, actually and
reasonably incurred by him in connection therewith, without the necessity of an
independent determination that such director, officer, employee, or agent met
any appropriate standard of conduct.
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C. The indemnification provided for herein shall continue as to any
person who has ceased to be a director, officer, employee, or agent, and shall
inure to the benefit of the heirs, executors, and administrators of such person.
D. In addition to the indemnification provided for herein, the
Corporation shall have the power to make any other or further indemnification,
except an indemnification against gross negli gence or wilful misconduct, under
any resolution or agreement duly adopted by a majority of disinterested
directors, or duly authorized by a majority of shareholders.
E. If any expenses or other amounts are paid by way of indemnification,
otherwise than by court order or action by the shareholders, the Corporation
shall, not later than the time of delivery to the shareholders of written notice
of the next annual meeting, unless such meeting is held within three months from
the date of such payment, and, in any event, within fifteen months from the date
of such payment, deliver by mail to each shareholder of record at the time
entitled to vote for the election of directors, a statement specifying the
persons paid, the amounts paid, and the nature and status at the time of such
payment of the litigations or threatened litigation.
ARTICLE XIII - PREEMPTIVE RIGHTS
--------------------------------
Each shareholder of the Corporation shall have the right to purchase,
subscribe for, or receive a right or rights to purchase or subscribe for, at the
price at which it is offered to others, a pro rata portion of:
(1) Any stock of any class that the Corporation may issue or sell,
whether or not exchangeable for any stock of the Corporation of any class or
classes, and whether or not of unissued shares authorized by the Articles of
Incorporation as originally filed or by any amendment thereof or out of shares
of stock of the Corporation acquired by it after the issuance thereof, and
whether issued for cash, labor done, personal property, or real property or
leases thereof; or
(2) Any obligation that the Corporation may issue or sell which is
convertible into or exchangeable for any stock of the Corporation of any class
or classes, or to which is attached or pertinent any warrant or warrants or
other instrument or instruments conferring on the holder the right to subscribe
for or purchase from the Corporation any shares of its stock of any class or
classes.
ARTICLE XIV - RESTRICTIONS ON STOCK TRANSFERS
---------------------------------------------
All of the issued and outstanding shares of the Corporation may be made
subject to restrictions on their transferability by agreement among the holders
of such shares or between the holders of such shares and the Corporation. A
copy of any such agreement shall be kept on file with the Secretary of the
Corporation, and shall be subject to inspection by shareholders of record
5
<PAGE>
and bona fide creditors of the Corporation at reasonable times during business
hours. Any transfer of stock in the Corporation in violation of any such
agreement effectively restricting such transfer shall be void. Each share
certificate issued by the Corporation shall have printed or stamped thereon
either a notice that such shares are subject to transfer restrictions set forth
in a specifically referenced document or the following legend:
"The shares of capital stock evidenced by this certificate have
not been registered under applicable federal or state securities
laws and may not be sold or otherwise transferred unless so
registered or unless the Corporation receives a legal opinion
acceptable to the Corporation and its counsel that any such sale
or other transfer is exempt from such registration requirements."
ARTICLE XV - AMENDMENT
----------------------
These Articles of Incorporation may be amended in the manner provided by
law. Every amendment shall be approved by the Board of Directors, proposed by
them to the shareholders and approved at a shareholders' meeting by a majority
of the stock entitled to vote thereon, unless all the shareholders sign a
written statement manifesting their intention that a certain amendment of these
Articles of Incorporation may be made.
IN WITNESS WHEREOF, the undersigned has hereunto signed and acknowledged
the foregoing Articles of Incorporation under the laws of the State of Florida,
on the date set forth next to his signature.
/s/ Marshall S. Harris July 21, 1999
---------------------- -------------
Marshall S. Harris Date
Incorporator
6
<PAGE>
CERTIFICATE DESIGNATING PLACE OF REGISTERED OFFICE FOR
SERVICE OF PROCESS WITHIN THIS STATE AND
NAMING REGISTERED AGENT UPON WHOM PROCESS MAY BE SERVED
PURSUANT to Chapter 48.091 of the Florida Statutes, the following is
submitted in compliance with said Act:
LOCKWOOD ACQUISITIONS CORP., desiring to organize under the laws of the
State of Florida, with its principal office as indicated in the Articles of
Incorporation in the City of Orlando, County of Orange, State of Florida, has
named as Registered Agent, Marshall S. Harris and Registered Office at 5029
Edgewater Drive, Orlando, FL 32810, to accept service of process within this
State.
ACKNOWLEDGMENT:
Having been named to accept service of process for the above-stated
Corporation, at the place designated in this Certificate, I hereby accept to act
in this capacity and agree to comply with the provisions of said Act relative to
keeping open such office.
/s/ Marshall S. Harris
----------------------
Marshall S. Harris
Registered Agent
<PAGE>
Exhibit 3.32
ARTICLES OF MERGER
OF LOCKWOOD SIGN GROUP, INC.
INTO LOCKWOOD ACQUISITIONS CORP.
Pursuant to the provisions of Section 607.1105 of the Florida Business
Corporation Act, these Articles of Merger provide as follows:
ARTICLE I
Names and Surviving Corporation
-------------------------------
The names and states of incorporation of the corporations which are parties
to the merger are:
Name State of Incorporation
---- ----------------------
Lockwood Sign Group, Inc. Georgia
Lockwood Acquisitions Corp. Florida
Display Technologies, Inc. Nevada
Lockwood Acquisitions Corp. shall be the surviving corporation (the
"Surviving Corporation").
ARTICLE II
Plan of Merger
--------------
The Plan of Merger is attached hereto as Exhibit A.
---------
ARTICLE III
Approval of the Plan of Merger
------------------------------
The Plan of Merger was adopted and approved, in accordance with Georgia
law, by Lockwood Sign Group, Inc. ("Lockwood") as of July1, 1999, by unanimous
written consent of all of the directors, pursuant to which the board of
directors of Lockwood submitted it for vote by the shareholders with a
recommendation that it be approved. On the same date, one hundred percent (100%)
of all of the votes entitled to be cast of each class of shares entitled to
vote, approved the Plan of Merger by written consent.
The Plan of Merger was adopted by Lockwood Acquisitions Corp. as of July 1,
1999, in accordance with Florida law, by written consent of all of the directors
of Displays Acquisitions Corp., pursuant to which the board of directors of
Lockwood Acquisitions Corp. submitted it to the sole shareholder for its
approval. On the same date, the sole shareholder of Lockwood Acquisitions Corp.
approved the Plan of Merger by written consent.
<PAGE>
The Plan of Merger was adopted by Display Technologies, Inc. as of July 1,
1999, in accordance with Nevada law, by written consent of all of the directors
of Display Technologies, Inc. Approval by the shareholders of Display
Technologies, Inc. is not required for this transaction.
ARTICLE IV
Effective Date of Merger
------------------------
The merger shall be effective on the date of filing of these Articles of
Merger by the Secretary of State of Florida.
ARTICLE V
Amendment to Articles
---------------------
Simultaneously with filing of these Articles of Merger and without any
further action by the Surviving Corporation, the name of the surviving
corporation shall hereinafter be Lockwood Sign Group, Inc.
Dated as of the 30/th/ day of July, 1999.
LOCKWOOD SIGN GROUP, INC.
By:_________________________________________
Larry L. Johnson,
President/Chief Executive Officer
LOCKWOOD ACQUISITIONS CORP.
By:_________________________________________
J. William Brandner, President
DISPLAY TECHNOLOGIES, INC.
By:_________________________________________
J. William Brandner,
President/Chief Executive Officer
2
<PAGE>
EXHIBIT 3.33
================================================================================
BYLAWS
OF
LOCKWOOD SIGN GROUP, INC.
(f/k/a LOCKWOOD ACQUISITIONS CORP.)
================================================================================
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
Section Caption Page
- ------- ------- ----
<S> <C>
ARTICLE I - Meetings of Shareholders.............................. 1
Section 1 Annual Meeting.......................................................... 1
Section 2 Special Meetings........................................................ 1
Section 3 Place................................................................... 1
Section 4 Action by Shareholders Without a Meeting................................ 1
Section 5 Notice of Meeting....................................................... 2
Section 6 Notice of Adjourned Meetings............................................ 2
Section 7 Waiver of Notice........................................................ 3
Section 8 Record Date............................................................. 3
Section 9 Shareholders' List for Meeting.......................................... 3
Section 10 Voting Entitlement of Shares............................................ 4
Section 11 Proxies................................................................. 4
Section 12 Shareholder Quorum and Voting........................................... 5
Section 13 Voting Trusts........................................................... 5
Section 14 Shareholders' Agreements................................................ 5
ARTICLE II - Directors.................................... 6
Section 1 General Powers.......................................................... 6
Section 2 Qualifications of Directors............................................. 6
Section 3 Number.................................................................. 6
Section 4 Election and Term....................................................... 6
Section 5 Vacancy on Board........................................................ 6
Section 6 Removal of Directors by Shareholders.................................... 6
Section 7 Compensation............................................................ 7
Section 8 Presumption of Assent................................................... 7
Section 9 Directors' Meetings..................................................... 7
Section 10 Notice of Meetings...................................................... 7
Section 11 Waiver of Notice........................................................ 7
Section 12 Quorum and Voting....................................................... 7
Section 13 Action by Directors Without a Meeting................................... 7
Section 14 Adjournments............................................................ 8
Section 15 Participation by Conference Telephone................................... 8
</TABLE>
1
<PAGE>
<TABLE>
<S> <C>
ARTICLE III - Committees.................................. 8
Section 1 Executive and Other Committees........................................... 8
ARTICLE IV - Officers................................... 9
Section 1 Officers, Election and Terms of Office.................................. 9
Section 2 Resignation and Removal of Officers..................................... 9
Section 3 Vacancies............................................................... 9
Section 4 Chairman of the Board................................................... 9
Section 5 President............................................................... 10
Section 6 Vice President.......................................................... 10
Section 7 Secretary............................................................... 10
Section 8 Treasurer............................................................... 11
Section 9 Delegation of Duties.................................................... 11
ARTICLE V - Stock Certificates.............................. 11
Section 1 Issuance................................................................ 11
Section 2 Signatures; Form........................................................ 11
Section 3 Transfer of Stock....................................................... 12
Section 4 Lost Certificates....................................................... 12
ARTICLE VI - Indemnification................................ 13
Section 1 Definitions............................................................. 13
Section 2 Indemnification of Officers, Directors,
Employees and Agents................................................... 13
ARTICLE VII - General Provisions............................... 16
Section 1 Fiscal Year............................................................. 16
Section 2 Seal.................................................................... 17
Section 3 Amendment of Bylaws..................................................... 17
CERTIFICATE OF ADOPTION................................... 17
</TABLE>
2
<PAGE>
BYLAWS
OF
LOCKWOOD ACQUISITIONS CORP.
ARTICLE I
---------
Meetings of Shareholders
------------------------
Section 1. Annual Meeting. The annual meeting of the shareholders of
--------- --------------
this Corporation shall be held following the end of the Corporation's fiscal
year at such time as shall be determined by the Board of Directors. The annual
meeting shall be held for the election of directors of the Corporation and the
transaction of any business which may be brought before the meeting. The annual
meeting of the shareholders for any year shall be held no later than thirteen
months after the last preceding annual meeting of shareholders. The failure to
hold the annual meeting at the time stated shall not affect the validity of any
corporate action and shall not work a forfeiture of or dissolution of the
Corporation. Annual meetings shall be held at the Corporation's principal
office unless stated otherwise in the notice of the annual meeting.
Section 2. Special Meetings. Special meetings of the shareholders
--------- ----------------
shall be held when directed by the President or the Board of Directors, or when
requested in writing by the holders of not less than one-tenth of all the votes
entitled to be cast on any issue proposed to be considered at the proposed
special meeting. Shareholders should sign, date, and deliver to the
Corporation's Secretary one or more written demands for the meeting describing
the purpose or purposes for which it is to be held. A meeting requested by
shareholders shall be called for a date not less than ten nor more than sixty
days after the request is made. The call for the meeting shall be issued by the
Secretary, unless the President, the Board of Directors, or shareholders
requesting the calling of the meeting shall designate another person to do so.
Section 3. Place. Meetings of shareholders may be held either within
--------- -----
or without the State of Florida. Unless otherwise directed by the Board of
Directors, meetings of the shareholders shall be held at the principal offices
of the Corporation in the State of Florida.
Section 4. Action by Shareholders Without a Meeting. Action that is
--------- ----------------------------------------
required or permitted to be taken at an annual or special meeting of
shareholders may be taken without a meeting, without prior notice, and without a
vote if the action is taken by the holders of outstanding stock of each voting
group entitled to vote thereon having not less than a minimum number of votes
with respect to each voting group that would be necessary to authorize or take
such action at a meeting at which all voting groups and shares entitled to vote
thereon were present and voted. In order to be effective, the action must be
evidenced by one or more written consents
1
<PAGE>
describing the action taken, dated and signed by approving shareholders having
the requisite number of votes of each voting group entitled to vote thereon, and
delivered to the Corporation by delivery to its principal office in this State,
its principal place of business, the corporate secretary, or another officer or
agent of the Corporation having custody of the book in which proceedings of
meetings of shareholders are recorded. No written consent shall be effective to
take the corporate action referred to therein unless, within sixty days of the
date of the earliest dated consent delivered in the manner required by this
Section, written consent signed by the number of holders required to take action
is delivered to the Corporation by delivery as set forth in this Section.
Any written consent may be revoked prior to the date that the
Corporation receives the required number of consents to authorize the proposed
action. No revocation shall be effective unless in writing and until received
by the Corporation at its principal office in this State or its principal place
of business, or received by the corporate secretary or other officer or agent of
the Corporation having custody of the book in which proceedings of meetings of
shareholders are recorded.
Within ten days after obtaining such authorization by written consent,
notice must be given to those shareholders who have not consented in writing or
who are not entitled to vote on the action. The notice shall fairly summarize
the material features of the authorized action and, if the action be such for
which dissenters' rights are provided under Florida law, the notice shall
contain a clear statement of the right of shareholders dissenting therefrom to
be paid the fair value of their shares upon compliance with further provisions
of Florida law regarding the rights of dissenting shareholders.
A consent signed under this Section has the effect of a meeting vote
and may be described as such in any document.
Whenever action is taken pursuant to this Section, the written consent
of the shareholders consenting thereto or the written reports of inspectors
appointed to tabulate such consents shall be filed with the minutes of
proceedings of shareholders.
Section 5. Notice of Meeting. The Corporation shall notify
--------- -----------------
shareholders in writing of the date, time, and place of each annual and special
shareholders' meeting no fewer than ten or more than sixty days before the
meeting date. Notice of a shareholders' meeting may be communicated or
delivered to any shareholder in person, or by teletype, telegraph or other form
of electronic communication, or by mail, by or at the direction of the
President, the Secretary, or the officer or persons calling the meeting. If
notice is mailed, it shall be deemed to be delivered when deposited in the
United States mail addressed to the shareholder at his address as it appears on
the stock transfer books of the Corporation, with postage thereon prepaid.
2
<PAGE>
Section 6. Notice of Adjourned Meetings. When an annual or special
--------- ----------------------------
shareholders' meeting is adjourned to a different date, time or place, notice
need not be given of the new date, time or place if the new date, time or place
is announced at the meeting before an adjournment is taken, and any business may
be transacted at the adjourned meeting that might have been transacted on the
original date of the meeting. If, however, after the adjournment the Board of
Directors fixes a new record date for the adjourned meeting, a notice of the
adjourned meeting must be given to persons who are shareholders as of the new
record date who are entitled to notice of the meeting.
Section 7. Waiver of Notice. A shareholder may waive any notice
--------- ----------------
required by the Articles of Incorporation or Bylaws before or after the date and
time stated in the notice. The waiver must be in writing, be signed by the
shareholder entitled to the notice, and be delivered to the Corporation for
inclusion in the minutes or filing with the corporate records. Attendance by a
shareholder at a meeting waives objection to lack of notice or defective notice
of the meeting, unless the shareholder at the beginning of the meeting objects
to holding the meeting or transacting business at the meeting.
Section 8. Record Date. For the purpose of determining the
--------- -----------
shareholders entitled to notice of a shareholders' meeting, to demand a special
meeting, to vote, or to take any other action, the Board of Directors may fix
the record date for any such determination of shareholders.
The record date for determining shareholders entitled to demand a
special meeting is the date the first shareholder delivers his demand to the
Corporation. The record date for determining shareholders entitled to take
action without a meeting is the date the first signed written consent is
delivered to the Corporation under Section 4 of this Article. A record date for
purposes of this Section may not be more than 70 days before the meeting or
action requiring a determination of shareholders.
If the stock transfer books are not closed and no record date is fixed
for the determination of shareholders entitled to notice or to vote at a meeting
of shareholders, or shareholders entitled to receive payment of a dividend, the
date on which notice of the meeting is mailed or the date on which the
resolution of the Board of Directors declaring such dividend is adopted, as the
case may be, shall be the record date for such determination of shareholders.
When a determination of shareholders entitled to vote at any meeting
of shareholders has been made as provided in this Section, such determination
shall apply to any adjournment thereof, unless the Board of Directors fixes a
new record date for the adjourned meeting.
Section 9. Shareholders' List for Meeting. After fixing a record
--------- ------------------------------
date for a meeting, the Corporation shall prepare an alphabetical list of the
names of all its shareholders who are entitled to notice of a shareholders'
meeting, arranged by voting group with the address of,
3
<PAGE>
and the number and class and series, if any, of shares held by each. The
shareholders' list shall be available for inspection by any shareholder for a
period of ten days prior to the meeting or such shorter time as exists between
the record date and the meeting and continuing through the meeting at the
Corporation's principal office, at a place identified in the meeting notice in
the city where the meeting will be held, or at the office of the Corporation's
transfer agent or registrar. A shareholder or his agent or attorney is entitled
on written demand to inspect the list, during regular business hours and at the
shareholder's expense, during the period it is available for inspection.
The Corporation shall make the shareholders' list available at the
meeting, and any shareholder or his agent or attorney is entitled to inspect the
list at any time during the meeting or any adjournment.
Section 10. Voting Entitlement of Shares. Except as provided
---------- ----------------------------
otherwise in the Articles of Incorporation or herein, each outstanding share,
regardless of class, is entitled to one vote on each matter submitted to vote at
a meeting of the shareholders. Shares standing in the name of another
Corporation, domestic or foreign, may be voted by such officer, agent, or proxy
as the bylaws of the corporate shareholder may prescribe or, in the absence of
any applicable provision, by such person as the board of directors of the
corporate shareholder may designate. In the absence of any such designation or
in case of conflicting designation by the corporate shareholder, the President,
any Vice President, the Secretary, and the Treasurer of the corporate
shareholder, in that order, shall be presumed to be fully authorized to vote
such shares.
Shares entitled to vote held by an administrator, executor, guardian,
personal representative, or conservator may be voted by him, either in person or
by proxy, without a transfer of such shares into his name. Shares standing in
the name of a trustee may be voted by him, either in person or by proxy, but no
trustee shall be entitled to vote shares held by him without a transfer of such
shares into his name or the name of his nominee.
Shares held by or under the control of a receiver, a trustee in
bankruptcy proceedings, or an assignee for the benefit of creditors may be voted
by him without the transfer thereof into his name.
Nothing herein contained shall prevent trustees or other fiduciaries
holding shares registered in the name of a nominee from causing such shares to
be voted by such nominee as the trustee or other fiduciary may direct. Such
nominee may vote shares as directed by a trustee or other fiduciary without the
necessity of transferring the shares to the name of the trustee or other
fiduciary.
Section 11. Proxies. A shareholder, other person entitled to vote on
---------- -------
behalf of a shareholder pursuant to law, or attorney in fact, may vote the
shareholder's shares in person or by proxy.
4
<PAGE>
A shareholder may appoint a proxy to vote or otherwise act for him by
signing an appointment form, either personally or by his attorney in fact. An
executed telegram or cablegram appearing to have been transmitted by such
person, or a photographic, photostatic, telecopy or equivalent reproduction of
an appointment form is a sufficient appointment form. An appointment of a proxy
is effective when received by the Secretary or other officer authorized to
tabulate votes and is valid for up to eleven months unless a longer period is
expressly provided in the appointment form.
The death or incapacity of a shareholder appointing a proxy does not
affect the right of the Corporation to accept the proxy's authority unless
notice of the death or incapacity is received by the Secretary or other officer
or agent authorized to tabulate votes before the proxy exercises his authority
under the appointment.
Section 12. Shareholder Quorum and Voting. A majority of the shares
---------- -----------------------------
entitled to vote, represented in person or by proxy, shall constitutes a quorum
at a meeting of shareholders.
If a quorum exists, action on a matter (other than the election of
directors) by a voting group is approved if the votes cast within the voting
group favoring the action exceed the votes cast opposing the action, unless the
Articles of Incorporation or applicable law requires a greater number of
affirmative votes. After a quorum has been established at a shareholders'
meeting, a subsequent withdrawal of shareholders, so as to reduce the number of
shares entitled to vote at the meeting below the number required for a quorum,
shall not affect the validity of any action taken at the meeting or any
adjournment thereof.
Section 13. Voting Trusts. One or more shareholders may create a
---------- -------------
voting trust, conferring on a trustee the right to vote or otherwise act for
them, by signing an agreement setting out the provisions of the trust (which may
include anything consistent with its purpose) and transferring their shares to
the trustee. When a voting trust agreement is signed, the trustee shall prepare
a list of the names and addresses of all owners of beneficial interests in the
trust, together with the number and class of shares each transferred to the
trust, and deliver copies of the list and agreement to the Corporation's
principal office. After filing a copy of the list and agreement in the
Corporation's principal office, such copy shall be open to inspection by any
shareholder of the Corporation or any beneficiary of the trust under the
agreement during business hours.
A voting trust is valid for not more than ten years after its
effective date, provided that all or some of the parties to a voting trust may
extend it for additional terms of not more than ten years each by signing an
extension agreement and obtaining the voting trustee's written consent to the
extension. An extension is valid for the period set forth therein, up to ten
years, from the date the first shareholder signs the extension agreement. The
voting trustee must deliver copies of the extension agreement and list of
beneficial owners to the Corporation's principal office. An extension agreement
binds only those parties signing it.
5
<PAGE>
Section 14. Shareholders' Agreements. Two or more shareholders may
---------- ------------------------
provide for the manner in which they will vote their shares by signing an
agreement for that purpose.
When a shareholders' agreement is signed, the shareholders parties
thereto shall deliver copies of the agreement to the Corporation's principal
office. After filing a copy of the agreement in a Corporation's principal
office, such copy shall be open to inspection by any shareholder of the
Corporation, or any party to the agreement during business hours.
ARTICLE II
----------
Directors
---------
Section 1. General Powers. All corporate powers shall be exercised
--------- --------------
by or under the authority of, and the business and affairs of the Corporation
shall be managed under the direction of its Board of Directors.
Section 2. Qualifications of Directors. Directors must be natural
--------- ---------------------------
persons who are eighteen years of age or older but need not be residents of this
state or shareholders of this Corporation.
Section 3. Number. The Board of Directors of this Corporation as of
--------- ------
the date of adoption of these Bylaws shall consist of not less than one (1)
member and not more than ten (10) members. The maximum number of directors may
be increased or decreased from time to time by action of the Board of Directors,
but no decrease shall have the effect of shortening the terms of any incumbent
director. Directors are elected at each annual meeting of shareholders.
Section 4. Election and Term. Each person named in the Articles of
--------- -----------------
Incorporation as a member of the initial Board of Directors shall hold office
until the first shareholders' meeting at which directors are elected and until
such person's successor shall have been elected and qualified or until such
person's earlier resignation, removal from office or death.
At the first annual meeting of shareholders and at each annual meeting
thereafter the shareholders shall elect directors to hold office until the next
succeeding annual meeting. Each director shall hold office for the term for
which such director is elected and until such director's successor shall have
been elected and qualified or until such director's earlier resignation, removal
from office or death.
Section 5. Vacancy on Board. Any vacancy occurring in the Board of
--------- ----------------
Directors, including a vacancy from an increase in the number of directors, may
be filled by the affirmative vote of a majority of the remaining directors,
though less than a quorum of the Board of Directors. A director elected to fill
a vacancy shall hold office only until the next election of directors by the
shareholders.
6
<PAGE>
Section 6. Removal of Directors by Shareholders. The shareholders
--------- ------------------------------------
may remove one or more directors with or without cause. A director may be
removed by the shareholders at a meeting of shareholders, provided the notice of
the meeting states that the purpose, or one of the purposes, of the meeting is
removal of the director.
Section 7. Compensation. The Board of Directors shall have authority
--------- ------------
to fix the compensation of directors.
Section 8. Presumption of Assent. A director of the Corporation who
--------- ---------------------
is present at a meeting of the Board of Directors at which action on any
corporate matter is taken shall be presumed to have assented to the action taken
unless such director votes against such action or abstains from voting in
respect thereto because of an asserted conflict of interests.
Section 9. Directors' Meetings. The Board of Directors may hold
--------- -------------------
regular or special meetings in or out of the state. Meetings of the Board of
Directors may be called at any time by the President of the Corporation, or by
any two directors.
Section 10. Notice of Meetings. Regular meetings of the Board of
---------- ------------------
Directors may be held without notice of the date, time, place or purpose of the
meetings. Special meetings of the Board of Directors must be preceded by at
least two days' notice of the date, time and place of the meeting.
Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the Board of Directors need be specified in the
notice or waiver of notice of such meeting.
Section 11. Waiver of Notice. Notice of a meeting of the Board of
---------- ----------------
Directors need not be given to any director who signs a waiver of notice either
before or after the meeting. Attendance of a director at a meeting shall
constitute a waiver of notice of such meeting and waiver of any and all
objections to the place of the meeting, the time of the meeting, or the manner
in which it has been called or convened, except when a director states, at the
beginning of the meeting or promptly upon arrival at the meeting, any objection
to the transaction of business because the meeting is not lawfully called or
convened.
Section 12. Quorum and Voting. A majority of the number of directors
---------- -----------------
fixed by these Bylaws shall constitute a quorum for the transaction of business.
If a quorum is present when a vote is taken, the affirmative vote of a majority
of directors present is the act of the Board of Directors.
Section 13. Action by Directors Without a Meeting. Any action
---------- -------------------------------------
required or permitted by law to be taken at a Board of Directors' meeting or
committee meeting may be taken without a meeting if action is taken by all
members of the Board or the committee. The action
7
<PAGE>
must be evidenced by one or more written consents describing the action taken
and signed by each director or committee member. Action taken shall be effective
when the last director signs the consent, unless the consent specifies a
different effective date. The consent signed shall have the effect of a meeting
vote and may be described as such in any document.
Section 14. Adjournments. A majority of the directors present,
---------- ------------
whether or not a quorum exists, may adjourn any meeting of the Board of
Directors to another time and place. Notice of any such adjourned meeting shall
be given to the directors who were not present at the time of the adjournment
and, unless the time and place of the adjourned meeting are announced at the
time of the adjournment, to the other directors.
Section 15. Participation by Conference Telephone. Members of the
---------- -------------------------------------
Board of Directors may participate in a meeting of such Board by means of a
conference telephone or similar communications equipment by which all persons
participating in the meeting can hear each other at the same time.
Participation by such means shall constitute presence in person at a meeting.
ARTICLE III
-----------
Committees
----------
Section 1. Executive and Other Committees. The Board of Directors,
--------- ------------------------------
by resolution adopted by a majority of the full Board of Directors, may
designate from among its members an Executive Committee and one or more other
committees each of which, to the extent provided in such resolution, shall have
and may exercise all the authority of the Board of Directors, except that no
committee shall have the authority to:
(a) Approve or recommend to shareholders actions or proposals
required by law to be approved by shareholders.
(b) Fill vacancies on the Board of Directors or any committee
thereof.
(c) Adopt, amend, or repeal the Bylaws.
(d) Authorize or approve the reacquisition of shares unless pursuant
to a general formula or method specified by the Board of Directors.
(e) Authorize or approve the issuance or sale, or contract for the
sale of shares, or determine the designation and relative rights, preferences,
and limitations of a voting group except that the Board of Directors may
authorize a committee (or a senior executive officer of the Corporation) to do
so within limits specifically prescribed by the Board of Directors.
8
<PAGE>
Each committee must have two or more members who serve at the pleasure
of the Board of Directors. The Board, by resolution adopted in accordance with
this Section, may designate one or more directors as alternate members of any
such committee who may act in the place and stead of any absent member or
members at any meeting of such committee.
Neither the designation of any such committee, the delegation thereto
of authority, nor action by such committee pursuant to such authority shall
alone constitute compliance by any member of the Board of Directors not a member
of the committee in question with his responsibility to act in good faith, in a
manner he reasonably believes to be in the best interest of the Corporation, and
with such care as an ordinarily prudent person in a like position would use
under similar circumstances.
ARTICLE IV
----------
Officers
--------
Section 1. Officers, Election and Terms of Office. The principal
--------- --------------------------------------
officers of this Corporation shall consist of a Chairman, a President, a
Secretary, a Treasurer and, in the discretion of the Board of Directors, one or
more Vice Presidents, each of whom shall be elected by the Board of Directors at
the first meeting of directors immediately following the annual meeting of
shareholders of this Corporation, and shall hold their respective offices from
the date of the meeting at which elected until the time of the next succeeding
meeting of the Board following the annual meeting of the shareholders. The
Board of Directors shall have the power to elect or appoint, for such term as it
may see fit, such other officers and assistant officers and agents as it may
deem necessary, and to prescribe such duties for them to perform as it may deem
advisable. Any two or more offices may be held by the same person. Failure to
elect a Chairman, President, Vice President, Secretary or Treasurer shall not
affect the existence of the Corporation.
Section 2. Resignation and Removal of Officers. An officer may
--------- -----------------------------------
resign at any time by delivering notice to the Corporation. A resignation is
effective when the notice is delivered unless the notice specifies a later
effective date. If a resignation is made effective at a later date and the
Corporation accepts the future effective date, the Board of Directors may fill
the pending vacancy before the effective date if the Board of Directors provides
that the successor does not take office until the effective date.
The Board of Directors may remove any officer at any time with or
without cause. Any officer or assistant officer, if appointed by another
officer, may likewise be removed by such officer. Removal of any officer shall
be without prejudice to the contract rights, if any, of the person so removed;
however, election or appointment of an officer or agent shall not of itself
create contract rights.
9
<PAGE>
Section 3. Vacancies. Any vacancy, however occurring, in any office
--------- ---------
may be filled by the Board of Directors.
Section 4. Chairman. The Chairman of the Board of Directors shall
---------- --------
preside at all meetings of the Board of Directors, shall be deemed a senior
executive of the Corporation, and shall have and perform such other duties as
from time to time may be assigned to him by the Board of Directors.
Section 5. President. The President shall be the chief executive
--------- ---------
officer of the Corporation and, subject to the direction of and limitations
imposed by the Board of Directors, shall have general charge of the business,
affairs and property of the Corporation and general supervision over its other
officers and agents. The President shall preside at all meetings of the
shareholders and in the absence of the Chairman, the Board of Directors. The
President, unless some other person is thereunto expressly authorized by
resolution of the Board of Directors, shall sign all certificates of stock,
execute all contracts, deeds, notes, mortgages, bonds and other instruments and
papers in the name of the Corporation and on its behalf; subject, however, to
the control, when exercised, of the Board of Directors. The President shall, at
each annual meeting, present a report of the business and affairs of the
Corporation. The President shall have the power to employ and terminate the
employment of all such subordinate officers, agents, clerks and other employees
not herein provided to be selected by the Board, as such President may find
necessary to transact the business of the Corporation, and shall have the right
to fix the compensation thereof.
Section 6. Vice President. One or more Vice Presidents may be
--------- --------------
designated by that title or such additional title or titles as the Board of
Directors may determine. A Vice President shall have the powers and perform
such duties as may be delegated to such Vice President by the Board of
Directors, or in the absence of such action by the Board, then by the President.
A Vice President (in such order of seniority as may be determined by the Board
of Directors, if any) shall, except as may be expressly limited by action of the
Board of Directors, perform the duties and exercise the powers of the President
during the absence or disability of the President; and, in such case,
concurrently with the President, shall at all times have the power to sign all
certificates of stock, execute all contracts, deeds, notes, mortgages, bonds and
other instruments and documents in the name of the Corporation on its behalf
which the President is authorized to do, but subject to the control and
authority at all times of the Board of Directors. A Vice President also shall
have such powers and perform such duties as usually pertain to such office or as
are properly required by the Board of Directors.
Section 7. Secretary. The Secretary shall keep the minutes of all
--------- ---------
meetings of the shareholders and the Board of Directors in a book or books to be
kept for such purposes, and also, when so requested, the minutes of all meetings
of committees in a book or books to be kept for such purposes. The Secretary
shall attend to giving and serving of all notices, and such Secretary shall have
charge of all books and papers of the Corporation, except those hereinafter
directed to
10
<PAGE>
be in charge of the Treasurer, or except as otherwise expressly directed by the
Board of Directors. The Secretary shall keep the stock certificate book or
books. The Secretary shall be the custodian of the seal of the Corporation. The
Secretary shall sign with the President all certificates of stock as the
Secretary of this Corporation and as Secretary affix or cause to be affixed
thereto the seal of the Corporation. The Secretary may sign as Secretary of the
Corporation, with the President in the name of the Corporation and on its
behalf, all contracts, deeds, mortgages, bonds, notes and other papers,
instruments and documents, except as otherwise expressly provided by the Board
of Directors, and as such, the Secretary shall affix the seal of the Corporation
thereto when required thereby. Under the direction of the Board of Directors, or
the President, the Secretary shall perform all the duties usually pertaining to
the office of Secretary; and such Secretary shall perform such other duties as
may be prescribed by the Board of Directors or the President.
Section 8. Treasurer. The Treasurer shall have the custody of all
--------- ---------
the funds and securities of the Corporation except as may be otherwise provided
by the Board of Directors, and the Treasurer shall make such disposition of the
funds and other assets of the Corporation as such Treasurer may be directed by
the Board of Directors. The Treasurer shall keep or cause to be kept a record
of all money received and paid out, and all vouchers and receipts given
therefor, and all other financial transactions of the Corporation. The
Treasurer shall have general charge of all financial books, vouchers and papers
belonging to the Corporation or pertaining to its business. The Treasurer shall
render an account of the Corporation's funds at the first meeting of the Board
of Directors immediately following the annual meeting of shareholders of this
Corporation, and at such other meetings as such Treasurer may be requested, and
such Treasurer shall make an annual statement of the finances of the
Corporation. If at any time there is a person designated as Comptroller of the
Corporation, the Treasurer may delegate to such Comptroller such duties and
powers as to the Treasurer may seem proper. The Treasurer shall perform such
other duties as are usually incident by law or otherwise to the office of the
Treasurer, and as such Treasurer may be directed or required by the Board of
Directors or the President.
Section 9. Delegation of Duties. In the case of the absence or
--------- --------------------
disability of any officer of the Corporation, or in case of a vacancy in any
office or for any other reason that the Board of Directors may deem sufficient,
the Board of Directors, except as otherwise provided by law, may delegate the
powers or duties of any officer during the period of such officer's absence or
disability to any other officer or to any director.
ARTICLE V
---------
Stock Certificates
------------------
Section 1. Issuance. Every holder of shares in this Corporation
--------- --------
shall be entitled to have a certificate, representing all shares to which such
holder is entitled. No certificate shall be issued for any share until such
share is fully paid.
11
<PAGE>
Section 2. Signatures; Form. Certificates representing shares in
--------- ----------------
this Corporation shall be signed by the Chairman, the President or a Vice
President, and by the Secretary or an Assistant Secretary or the Treasurer and
may be sealed with the seal of this Corporation or a facsimile thereof. The
signatures of the President, the Secretary and the Treasurer may be facsimiles
if the certificate is manually signed on behalf of a transfer agent or a
registrar, other than the Corporation itself or an employee of the Corporation.
In case any officer who signed or whose facsimile signature has been placed upon
such certificate shall have ceased to be such officer before such certificate is
issued, it may be issued by the Corporation with the same effect as if such
person were such officer at the date of its issuance.
Every certificate representing shares which are restricted as to the
sale, disposition or other transfer of such shares shall state that such shares
are restricted as to transfer and shall set forth or fairly summarize such
restrictions upon the certificate. Alternatively, each certificate may state
conspicuously that the Corporation will furnish to any shareholder upon request
and without charge a full statement of such restrictions.
Section 3. Transfer of Stock. Shares of stock of the Corporation
--------- -----------------
shall be transferred on the books of the Corporation only upon surrender to the
Corporation of the certificate or certificates representing the shares to be
transferred accompanied by an assignment in writing of such shares properly
executed by the shareholder of record or his duly authorized attorney in fact
and with all taxes on the transfer having been paid. The Corporation may refuse
any requested transfer until furnished evidence satisfactory to it that such
transfer is proper. Upon the surrender of a certificate for transfer of stock,
such certificate shall be marked on its face "Canceled." The Board of Directors
may make such additional rules concerning the issuance, transfer and
registration of stock as it deems appropriate.
If any holder of any stock of the Corporation shall have entered into
an agreement with any other holder of any stock of the Corporation or with the
Corporation, or both, relating to a sale or sales or transfer of any shares of
stock of the Corporation, or wherein or whereby any restriction or condition is
imposed or placed upon or in connection with the sale or transfer of any share
of stock of the Corporation, and if a duly executed or certified copy thereof
shall have been filed with the Secretary of the Corporation, none of the shares
of stock covered by such agreement or to which it relates, of any such
contracting shareholder, shall be transferred upon the books of the Corporation
until there has been filed with the Secretary of the Corporation evidence
satisfactory to the Secretary of the Corporation of compliance with such
agreement, and any evidence of any kind or quality, of compliance with the terms
of such agreement which the Secretary deems satisfactory or sufficient shall be
conclusive upon all parties interested; provided, however, that neither the
Corporation nor any director, officer, employee or transfer agent thereof shall
be liable for transferring or effecting or permitting the transfer of any such
shares of stock contrary to or inconsistent with the terms of any such
agreement, in the absence of proof of willful disregard thereof or fraud, bad
faith or gross negligence on the part of the party to be charged; provided,
further, that the certificate of the Secretary, under the seal of the
Corporation, bearing
12
<PAGE>
the date of its issuance by the Secretary, certifying that such an agreement is
or is not on file with the Secretary, shall be conclusive as to such fact so
certified for a period of five days from the date of such certificate, with
respect to the rights of any innocent purchaser or transferee for value of any
such shares without actual notice of the existence of any restrictive agreement.
Section 4. Lost Certificates. Any shareholder claiming a certificate
--------- -----------------
of stock to be lost or destroyed shall make affidavit or affirmation of the fact
and the fact that such shareholder is the owner and holder thereof, and give
notice of the loss or destruction of same in such manner as the Board of
Directors may require, and shall give the Corporation a bond of indemnity in
form, and with one or more sureties satisfactory to the Board of Directors,
payable as may be required by the Board of Directors to protect the Corporation
and any person injured by the issuance of the new certificate from any liability
or expense which it or they may incur by reason of the original certificate
remaining outstanding, whereupon the President or a Vice President and the
Secretary or an Assistant Secretary may cause to be issued a new certificate in
the same tenor as the one alleged to be lost or destroyed, but always subject to
approval of the Board of Directors.
ARTICLE VI
----------
Indemnification
---------------
Section 1. Definitions. For purposes of this Article VI, the
--------- -----------
following terms shall have the meanings hereafter ascribed to them:
(a) "Agent" includes a volunteer.
(b) "Corporation" includes, in addition to the resulting corporation,
any constituent corporation (including any constituent of a constituent)
absorbed in a consolidation or merger, so that any person who is or was a
director, officer, employee, or agent of a constituent corporation, or is or was
serving at the request of a constituent corporation as a director, officer,
employee, or agent of another corporation, partnership, joint venture, trust or
other enterprise, is in the same position with respect to the resulting or
surviving corporation as he would have with respect to such constituent
corporation if its separate existence had continued.
(c) "Expenses" includes counsel's fees, including those for appeal.
(d) "Liability" includes obligations to pay a judgment, settlement,
penalty, fine (including an excise tax assessed with respect to any employee
benefit plan), and Expenses actually and reasonably incurred with respect to a
Proceeding.
13
<PAGE>
(e) "Proceeding" includes any threatened, pending, or completed
action, suit, or other type of proceeding, whether civil, criminal,
administrative, or investigative and whether formal or informal.
(f) "Serving at the Request of the Corporation" includes any service
as a director, officer, employee, or agent of the Corporation that imposes
duties on such persons, including duties relating to an employee benefit plan
and its participants or beneficiaries.
(g) "Not Opposed to the Best Interest of the Corporation" describes
the actions of a person who acts in good faith and in a manner he reasonably
believes to be in the best interests of the participants and beneficiaries of an
employee benefit plan.
(h) "Other Enterprise" includes employee benefit plans.
Section 2. Indemnification of Officers, Directors, Employees and
--------- -----------------------------------------------------
Agents.
- ------
A. The Corporation shall have power to indemnify any person who was
or is a party to any proceeding (other than an action by, or in the right of,
the Corporation), by reason of the fact that he is or was a director, officer,
employee, or agent of the Corporation or is or was serving at the request of the
Corporation as a director, officer, employee, or agent of another corporation,
partnership, joint venture, trust, or other enterprise against liability
incurred in connection with such proceeding, including any appeal thereof, if he
acted in good faith and in a manner he reasonably believed to be in, or not
opposed to, the best interest of the Corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. The termination of any proceeding by judgment, order, settlement,
or conviction or upon a plea of nolo contendere or its equivalent shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner in which he reasonably believed to be in, or not opposed to, the best
interest of the Corporation or, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
B. The Corporation shall have power to indemnify any person, who was
or is a party to any proceeding by or in the right of the Corporation to procure
a judgment in its favor by reason of the fact that he is or was a director,
officer, employee or agent of the Corporation or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, or other enterprise, against
expenses and amounts paid in settlement not exceeding, in the judgment of the
Board of Directors, the estimated expense of litigating the proceeding to
conclusion, actually and reasonably incurred in connection with the defense or
settlement of such proceeding, including any appeal thereof. Such
indemnification shall be authorized if such person acted in good faith and in a
manner he reasonably believed to be in, or not opposed to, the best interest of
the Corporation, except that no indemnification shall be made in respect of any
claim, issue, or matter as to which such person shall have been adjudged to be
liable unless, and only to the extent that, the court in which such
14
<PAGE>
proceeding was brought, or any other court of competent jurisdiction, shall
determine upon application that, despite the adjudication of liability that in
view of all circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which such court shall deem proper.
C. To the extent that a director, officer, employee, or agent of the
Corporation has been successful on the merits or otherwise in the defense of any
proceeding referred to in subsection A or subsection B, or in the defense of any
claim, issue, or matter therein, he shall be indemnified against expenses
actually and reasonably incurred by him in connection therewith.
D. Any indemnification under subsection A or subsection B, unless
pursuant to determination by a court, shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee, or agent is proper in the circumstances because he
has met the applicable standard of conduct set forth herein. Such determination
shall be made:
1. By the Board of Directors by a majority vote of a quorum
consisting of directors who are not parties to such proceeding;
2. If such a quorum is not obtainable or, even if obtainable,
by majority vote of a committee duly designated by the Board of Directors (in
which directors who are parties may participate) consisting solely of two or
more directors not at the time parties to the proceeding;
3. By independent legal counsel:
a. Selected by the Board of Directors or the committee;
b. If a quorum of the directors cannot be obtained and a
committee cannot be designated, selected by majority vote of the full Board of
Directors (in which directors who are parties may participate);
4. By the shareholders by a majority vote of a quorum
consisting of shareholders who were not parties to such proceeding or, if no
such quorum is obtainable, by a majority vote of shareholders who were not
parties to such proceeding.
E. Evaluation of the reasonableness of expenses and authorization of
indemnification shall be made in the same manner as the determination that
indemnification is permissible. However, if the determination of permissibility
is made by independent legal counsel, persons designated by independent legal
counsel shall evaluate the reasonableness of expenses and may authorize
indemnification.
15
<PAGE>
F. Expenses incurred by an officer or director in defending a civil
or criminal proceeding may be paid by the Corporation in advance of the final
disposition of the such proceeding upon receipt of an undertaking by or on
behalf of such director or officer to repay such amount if he is ultimately
found not to be entitled to indemnification by the Corporation pursuant to this
section. Expenses incurred by other employees and agents may be paid in advance
upon such terms or conditions that the Board of Directors deems appropriate.
G. The indemnification and advancement of expenses provided pursuant
to this Article are not exclusive, and the Corporation may make any other or
further indemnification or advancement of expenses of any of its directors,
officers, employees, or agents, under any bylaw, agreement, vote of
shareholders, or disinterested directors, or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office. However, indemnification or advancement of expenses shall not be made
to or on behalf of any director, officer, employee, or agent if a judgment or
other final adjudication establishes that his actions, or omissions to act, were
material to the cause of action so adjudicated and constitute:
1. A violation of the criminal law, unless the director,
officer, employee, or agent had reasonable cause to believe his conduct was
lawful or had no reasonable cause to believe his conduct was unlawful;
2. A transaction from which the director, officer, employee, or
agent derived an improper personal benefit;
3. In the case of a director, a circumstance under which the
liability provisions of Section 607.0834, Florida Statutes, are applicable; or
4. Willful misconduct or a conscious disregard for the best
interests of the Corporation in a proceeding by or in the right of the
Corporation to procure a judgment in its favor or in a proceeding by or in the
right of a shareholder.
H. Indemnification and advancement of expenses as provided in this
Article shall continue as, unless otherwise provided when authorized or
ratified, to a person who has ceased to be a director, officer, employee, or
agent and shall inure to the benefit of the heirs, executors, and administrators
of such a person, unless otherwise provided when authorized or ratified.
I. Notwithstanding the failure of the Corporation to provide
indemnification, and despite any contrary determination of the Board or of the
shareholders in the specific case, a director, officer, employee or agent of the
Corporation who is or was a party to a proceeding may apply for indemnification
or advancement of expenses, or both, to the court conducting the proceeding, to
the Circuit Court, or to another court of competent jurisdiction. On receipt of
an application, the court, after giving any notice that it considers necessary,
may order
16
<PAGE>
indemnification and advancement of expenses, including expenses incurred in
seeking court ordered indemnification or advancement of expenses, if it
determines that:
1. The director, officer, employee or agent is entitled to
mandatory indemnification in which case the court shall also order the
Corporation to pay the director reasonable expenses incurred in obtaining court
ordered indemnification or advancement of expenses;
2. The director, officer, employee or agent is entitled to
indemnification or advancement of expenses, or both, by virtue of the exercise
by the Corporation of its power; or
3. The director, officer, employee or agent is fairly and
reasonably entitled to indemnification or advancement of expenses, or both, in
view of all the relevant circumstances, regardless of whether such person met
the standard of conduct set forth herein.
ARTICLE VII
-----------
General Provisions
------------------
Section 1. Fiscal Year. The fiscal year of the Corporation shall
--------- -----------
begin on the first day of July and end on the last day of June in each year.
Section 2. Seal. The Board of Directors in its discretion may adopt
--------- ----
a seal for the Corporation in such form as may be determined from time to time
by the Board of Directors.
Section 3. Amendment of Bylaws. The Board of Directors shall have
--------- -------------------
the power to repeal, alter, amend, and rescind these Bylaws.
__________________________________
17
<PAGE>
CERTIFICATE OF ADOPTION
-----------------------
I hereby certify that the foregoing Bylaws were duly adopted
pursuant to written consent of the shareholders of the Corporation dated as of
July 1, 1999.
/s/ Marshall S. Harris
----------------------------------------
Marshall S. Harris
Secretary of the Corporation
18
<PAGE>
Exhibit 4.32
CERTIFICATE OF DESIGNATION
OF
SERIES A PREFERRED STOCK
OF
DISPLAY TECHNOLOGIES, INC.
Pursuant to Section 78.1955 of the General Corporation Law of the State of
Nevada, the undersigned, J. William Brandner being the President of DISPLAY
TECHNOLOGIES, INC., a corporation organized and existing under the laws of the
State of Nevada (the "Corporation"), hereby certifies that the following
resolution has been hereby adopted by the Board of Directors of the Corporation.
RESOLVED: That pursuant to the authority expressly granted to and
vested in the Board of Directors of the Corporation by the provisions of
its Articles of Incorporation (the "Articles of Incorporation") there is
hereby created, out of 50,000,000 shares of Preferred Stock, $.001 par
value, of the Corporation authorized in Article IV of the Corporation's
Restated Articles of Incorporation (the "Preferred Stock"), a series of
Preferred Stock of the Corporation designated as Series A Convertible
Preferred Stock consisting of 50,000 shares, which series shall have the
powers, preferences and relative, participating, optional and other rights,
and the qualifications, limitations and restrictions, as set forth on
Exhibit A hereto.
---------
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Designation this 30th day of July, 1999.
---------------------------------
Name: J. William Brandner
----------------------------
Title: President
---------------------------
<PAGE>
EXHIBIT A
---------
SERIES A CONVERTIBLE PREFERRED STOCK
I. Designation. The distinctive serial designation of the series shall
be "Series A Convertible Preferred Stock" ("Series A Preferred Stock"). Each
share of Series A Preferred Stock shall be identical in all respects to the
other shares of Series A Preferred Stock except as to the dates from and after
which dividends shall be cumulative thereon. The number of shares of Series A
Preferred Stock shall be 50,000 shares. Shares of Series A Preferred Stock
redeemed or purchased by the Corporation or converted into Common Stock shall be
canceled and shall revert to authorized but unissued shares of Preferred Stock
undesignated as to series .
II. Dividends.
1. Cumulative dividends shall be payable on shares of Series A
Preferred Stock at the rate of 5.25% per year from the date on which the shares
of Series A Preferred Stock are issued, payable quarterly on the last day of
March, June, September and December in each year, commencing on the first such
dividend payment date following the issuance of the Series A Preferred Stock.
The rate of dividends payable on each share of Series A Preferred Stock is
stated as a percentage of the Liquidation Amount. Dividends on the shares of
Series A Preferred Stock shall be cumulative on a quarterly basis. The holders
of Series A Preferred Stock, in preference to the holders of any Junior Stock,
shall be entitled to receive, as and when declared by the Board out of any funds
legally available therefor, cash dividends at the rate set forth in this Article
II.
2. In no event, so long as any shares of Series A Preferred Stock
shall be outstanding, shall any dividend, whether in cash or property, be paid
or declared, nor shall any distribution be made, on any Junior Stock, nor shall
any shares of any Junior Stock be purchased, redeemed (whether pursuant to
mandatory redemption or sinking fund provisions, optional redemption provisions
or otherwise) or otherwise acquired for value by the Corporation or by any
subsidiary of the Corporation, directly or indirectly, unless all dividends on
the Series A Preferred Stock for all past dividend periods and for the then
current period shall have been paid and all redemption payments then due in
respect of the Series A Preferred Stock have been made. The provisions of this
paragraph shall not, however, apply to a dividend payable in any Junior Stock,
or to the acquisition of shares of any Junior Stock in exchange for shares of
any other Junior Stock.
3. Subject to the foregoing and to any further limitations
prescribed in accordance with the provisions of Article IV of the Articles of
Incorporation, the Board may declare, out of any funds legally available
therefor, dividends upon the then outstanding
1
<PAGE>
shares of any Junior Stock and no holders of shares of Series A Preferred Stock
shall be entitled to share therein.
III. Liquidation. In the event of any Liquidation, then, before any
distribution or payment shall be made to the holders of any Junior Stock, the
holders of Series A Preferred Stock shall be entitled to be paid the greater of
(i) the full Liquidation Amount, and (ii) the amount distributable with respect
to the shares of Common Stock into which the shares of Series A Preferred Stock
are then convertible. If such payment shall have been made in full to the
holders of Series A Preferred Stock, the remaining assets and funds of the
Corporation shall be distributed among the holders of the Junior Stock,
according to their respective rights and preferences and in each case according
to their respective shares. If, upon any Liquidation, the amounts so payable
are not paid in full to the holders of all outstanding shares of Series A
Preferred Stock, then the holders of Series A Preferred Stock shall share
ratably in any distribution of assets in proportion to the full amounts to which
they would otherwise be respectively entitled. The merger or consolidation of
the Corporation with or into one or more other entities or the sale, lease or
conveyance of all or a part of its assets shall not be deemed to be a
Liquidation within the meaning of the foregoing provisions of this Article III.
IV. Redemption.
1. All shares of Series A Preferred Stock outstanding on the fifth
anniversary of the Original Issuance Date shall be redeemed by the Corporation,
without regard to whether a Redemption Option shall then be exercisable under
Article IV, Section 2(a) below and without regard to whether any such Redemption
Option may have become exercisable and expired under Section 2(b) or (c) below.
The redemption under this Section 1 shall take place on a date set by the
Majority in Interest by written notice to the Corporation, which date shall be
not less than thirty days and not more than 180 days after date of the written
notice, at which time the Corporation shall (unless otherwise prevented by law)
redeem from the holders of Series A Preferred Stock, at the Redemption Price (as
defined below), all the outstanding shares of Series A Preferred Stock.
2. The holders of Series A Preferred Stock shall have the right (the
"Redemption Option") to require the Corporation to redeem the shares of Series A
Preferred Stock in accordance with this Article IV, Section 2. The Redemption
Option may be exercised with respect to all or part of the shares of Series A
Preferred Stock, and if exercised in part, may be exercised from time to time,
provided that each exercise shall be for at least 5,000 shares (subject to stock
adjustments) or the number of shares remaining outstanding, whichever is less.
The Redemption Option shall become exercisable as follows:
(a) The Redemption Option shall become exercisable upon the
occurrence of a Redemption Event. At least 20 days but not more than 60 days
prior to each Redemption
2
<PAGE>
Event, the Corporation shall provide written notice of such Redemption Event (a
"Redemption Notice") to each holder of Series A Preferred Stock and the date on
which such Redemption Event is scheduled to occur. If the Redemption Event is
one that is not susceptible of such prior written notice, then the Corporation
shall deliver a Redemption Notice to each holder of the Series A Preferred Stock
within two (2) business days following the occurrence of such Redemption Event.
Upon becoming exercisable under this subsection (a), the Redemption Option shall
remain exercisable for a period of 30 days following receipt of the Redemption
Notice.
(b) The Redemption Option shall also become exercisable upon the
occurrence of an Event of Default. Upon becoming exercisable under this
subsection (b), the Redemption Option shall remain exercisable through the first
to occur of (x) the fifth anniversary of the Original Issuance Date or (y) in
the case of clauses (iv) through (vii) in the definition of the term "Event of
Default," the date on which the matter triggering the right to exercise the
Redemption Option is cured by the Corporation without any material adverse
consequences to the holders of the Series A Preferred Stock (including a
material diminution in value of the Series A Preferred Stock). Redemption of
the shares of Series A Preferred Stock shall not be an exclusive remedy for and
shall be in addition to all other legal and equitable remedies available to the
holders thereof if an Event of Default should occur.
3. Each holder of Series A Preferred Stock may exercise the
Redemption Option by sending not less than thirty days' prior written notice
(the "Election Notice") to the Corporation (which notice shall state the
holders' intention to exercise the Redemption Option, shall state whether the
Redemption Option is being exercised pursuant to Section 2(a) or (b) above and
the number of shares with respect to which the Redemption Option is being
exercised, and shall set a date (each, an "Optional Redemption Date") not less
than thirty days and not more than 180 days after such written notice is sent
for such redemption). If the Redemption Option is exercised in accordance with
this Article IV, the Corporation shall (unless otherwise prevented by law)
redeem from the holders of Series A Preferred Stock, at the Redemption Price,
all the outstanding shares of Series A Preferred Stock subject to the Election
Notice on the Optional Redemption Date.
4. If the assets of the Corporation available for redemption of
Series A Preferred Stock shall be insufficient to permit the payment of the full
price required to be paid under this Article IV, then the holders of Series A
Preferred Stock shall (in addition to their rights pursuant to Article IV,
Section 5 below), share ratably in any such redemption based on the respective
number of shares that such holders own.
5. The redemption price (the "Redemption Price") shall be equal to
(i) if the Redemption Option is being exercised pursuant to Article IV, Section
1 or Article IV, Section 2(b) above, the Liquidation Amount on the date of such
redemption, or (ii) if the Redemption Option is being exercised pursuant to
Article IV, Section 2(a) above, the greater
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of the Liquidation Amount on the date of such redemption or the amount
distributable with respect to the shares of Common Stock into which the shares
of Series A Preferred Stock are then convertible. On and after any date that the
Corporation actually redeems shares of Series A Preferred Stock pursuant to this
Article IV (the "Redemption Date"), all rights in respect of the shares of
Series A Preferred Stock to be redeemed, except the right to receive the
Redemption Price, shall cease and terminate, and such shares shall no longer be
deemed to be outstanding, whether or not the certificates representing such
shares have been received by the Corporation. The conversion of any shares of
Series A Preferred Stock into Common Stock shall have no effect on the
Redemption Price payable in connection with the redemption of the shares of
Series A Preferred Stock not so converted. In the event that the Corporation
does not have sufficient legally available funds to redeem all shares of Series
A Preferred Stock to be redeemed on the Redemption Date, at any time thereafter
when additional funds are legally available for redemption, such funds shall be
immediately applied by the Corporation to redeem the balance of the shares of
Series A Preferred Stock which the Corporation is obligated to redeem under this
Article IV.
6. Any communication or notice relating to redemption given pursuant
to this Article IV shall be sent by first-class certified mail, return receipt
requested, postage prepaid, to the holders of record of shares of Series A
Preferred Stock, at their respective addresses as the same shall appear on the
books of the Corporation, or to the Corporation at the address of its principal
or registered office, as the case may be. At any time on or after the
Redemption Date, the holders of record of shares of Series A Preferred Stock
being redeemed in accordance with this Article IV shall be entitled to receive
the Redemption Price upon actual delivery to the Corporation or its agents of
the certificates representing the shares to be redeemed.
V. Conversion.
1. Upon the terms set forth in this Article V, each holder of each
share of Series A Preferred Stock shall have the right, at such holder's option,
at any time and from time to time, to convert such share into the number of
fully paid and nonassessable shares of Common Stock equal to the quotient
obtained by dividing (i) the Series A Original Issuance Price by (ii) the
Conversion Price then in effect.
2. In the event the Closing Price for the Common Stock for a period
of 20 consecutive trading days at any time after the second anniversary of the
Original Issuance Date exceeds 200% of the Conversion Price then in effect, then
on the next succeeding business day each outstanding share of Series A Preferred
Stock, without any action on the part of the holder thereof, shall be deemed
automatically converted into the number of fully paid and nonassessable shares
of Common Stock specified in Article V, Section 1 above. This Section 2 shall
not apply unless the Corporation's Common Stock is listed on the NASDAQ National
Market or a national securities exchange.
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3. As promptly as practicable after the conversion of any shares of
Series A Preferred Stock into Common Stock, the Corporation shall issue and
deliver to or upon the written order of such holder, to the place designated by
such holder, a certificate or certificates for the number of full shares of
Common Stock to which such holder is entitled, and a cash amount in respect of
any fractional interest in a share of Common Stock as provided in Article V,
Section 4 below. The person in whose name the certificate or certificates for
Common Stock are to be issued shall be deemed to have become a stockholder of
record on the date the Corporation receives written notice of conversion (the
"Conversion Date") unless the transfer books of the Corporation are closed on
that date, in which event such person shall be deemed to have become a
stockholder of record on the next succeeding date on which the transfer books
are open, but the Conversion Price shall be that in effect on the Conversion
Date, and the rights of the holder of the shares of Series A Preferred Stock so
converted, except for the right to receive accrued but unpaid dividends, shall
cease on the Conversion Date. Upon conversion of only a portion of the number
of shares covered by a certificate representing shares of Series A Preferred
Stock surrendered for conversion, the Corporation shall issue and deliver to or
upon the written order of the holder of the certificate so surrendered for
conversion, at the expense of the Corporation, a new certificate covering the
number of shares of Series A Preferred Stock representing the unconverted
portion of the certificate so surrendered.
4. No fractional shares of Common Stock or scrip shall be issued
upon conversion of shares of Series A Preferred Stock. In lieu of fractional
shares of Common Stock which would otherwise be issuable upon conversion of any
shares of Series A Preferred Stock, the Corporation shall pay a cash adjustment
in respect of such fractional interest in an amount equal to the product of (i)
the price of one share of Common Stock as determined in good faith by the Board
and (ii) such fractional interest.
5. Unless such adjustment is waived in writing by the Majority in
Interest, the Conversion Price shall be subject to adjustment from time to time
as follows:
(a). if and whenever the Corporation shall issue, sell,
distribute or otherwise transfer any shares of its Common Stock (including
treasury shares), other than as the result of exercises of options or warrants
or conversion rights outstanding on the Original Issuance Date, for a
consideration per share less than the Conversion Price in effect immediately
prior to the time of such issuance, sale or transfer then, upon such event, the
Conversion Price shall be reduced to the price determined by dividing (aa) by
(bb), where "(aa)" is an amount equal to the sum of (x) the number of shares of
------
Common Stock outstanding immediately prior to such event (including as
outstanding all shares of Common Stock issuable upon conversion of convertible
securities of the Corporation, except for the Series A Preferred Stock, and
issuable upon the exercise of warrants, except for warrants issued pursuant to
the Purchase Agreement, and options of the Corporation) multiplied by the
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then existing Conversion Price, plus (y) the consideration, if any, received by
----
the Corporation upon such event, and "(bb)" is the total number of shares of
Common Stock outstanding immediately after such event (including as outstanding
all shares of Common Stock issuable upon conversion of convertible securities of
the Corporation, except for the Series A Preferred Stock, and issuable upon the
exercise of warrants, except for warrants issued pursuant to the Purchase
Agreement, and options of the Corporation); provided that, for this purpose in
computing the number of shares of Common Stock issuable upon conversion of
convertible securities or exercise of warrants or options, any adjustments in
the conversion price of such convertible securities or in the exercise price of
such warrants or options resulting from the transaction which gave rise to the
adjustment in the Conversion Price being calculated shall be taken into
account). For the purposes of any adjustment of the Conversion Price pursuant to
this clause (a), the following provisions shall be applicable:
(A) In the case of the issuance of Common Stock for cash,
the consideration shall be deemed to be the amount of cash paid therefor
after deducting therefrom any discounts, commissions, fees, or other
expenses allowed, paid, or incurred by the Corporation for any underwriting
or placement or otherwise in connection with the issuance and sale thereof.
(B) In the case of the issuance of Common Stock for a
consideration in whole or in part other than cash, the consideration other
than cash shall be deemed to be the fair market value thereof as determined
in good faith by the Board of Directors, irrespective of any accounting
treatment.
(C) In the case of the issuance of (x) options or warrants
to purchase or rights to subscribe for Common Stock, (y) securities by
their terms convertible into or exchangeable for Common Stock or (z)
options or warrants to purchase or rights to subscribe for such convertible
or exchangeable securities:
(i) the aggregate maximum number of shares of Common
Stock deliverable upon exercise of such options or warrants to
purchase or rights to subscribe for Common Stock shall be deemed to
have been issued at the time such options, warrants, or rights are
issued and for a consideration equal to the consideration (determined
in the manner provided in subdivisions (A) and (B) above), if any,
received by the Corporation upon the issuance of such options,
warrants, or rights plus the minimum purchase price provided in such
options, warrants, or rights for the Common Stock covered thereby;
(ii) the aggregate maximum number of shares of Common
Stock deliverable upon conversion of or in exchange for any such
convertible or exchangeable securities or upon the exercise of options
or
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warrants to purchase or rights to subscribe for such convertible or
exchangeable securities and subsequent conversion or exchange thereof
shall be deemed to have been issued at the time such securities are
issued or such options, warrants, or rights are issued and for a
consideration equal to the consideration received by the Corporation
for any such securities and related options, warrants, or rights
(excluding any cash received on account of accrued interest or accrued
dividends), plus the additional consideration, if any, to be received
by the Corporation upon the conversion or exchange of such securities
or the exercise of any related options, warrants, or rights (the
consideration in each case to be determined in the manner provided in
subdivisions (A) and (B) above); and
(iii) on any change in the number of shares of Common
Stock deliverable upon exercise of any such options, warrants, or
rights or conversions of or exchange for such convertible or
exchangeable securities or any change in the consideration to be
received by the Corporation upon the exercise of any such options,
warrants, or rights or conversions of or exchange for such convertible
or exchangeable securities, the Conversion Price of the Series A
Preferred Stock shall forthwith be readjusted to such Conversion Price
of the Series A Preferred Stock as would have applied had the
adjustment (made upon the issuance of such options, rights or
securities not converted prior to such change or options or rights
related to such securities not converted prior to such change) been
made upon the basis of such change.
(D) In the case of issuance of stock appreciation rights,
phantom stock options, or any other contractual arrangement ("SAR's") that
provide payments or benefits related to the value of securities ("Base
Securities") of the Company, the equivalent number of Base Securities shall
be deemed to be issued and outstanding, except that such Base Securities
shall not be deemed to be outstanding when calculating an adjustment to the
Conversion Price otherwise required hereunder as a result of the future
issuance of other securities. The issuance price of any Base Security
treated as issued pursuant to this subdivision (D) shall be deemed to be
the base value of the Base Security established in the SAR for purposes of
calculating payments due under the SAR as the result of appreciation of the
Base Security. For example, if an employee is granted the right to receive
cash equal to the future value of a specified number of shares of Common
Stock in excess of $3.00 per share, for the purposes of this Section 5(a)
such shares of Common Stock would be deemed to be issued at $3.00 per
share.
(E) In the case of any contingent agreement to issue
securities, the securities shall be deemed to be outstanding at the time
such agreement is entered into (except that such securities shall not be
deemed to be outstanding when
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calculating an adjustment to the Conversion Price otherwise required
hereunder as a result of the future issuance of other securities). The sale
price of such securities and the sale price of any securities actually
issued at the time of such agreement shall be determined for purposes of
this Section 5(a) by dividing the sum of the number of securities actually
issued and the securities issuable upon satisfaction of the contingency by
the total consideration received by the Corporation in connection with such
agreement. If the number of securities contingently issuable is not
determinable until the contingency occurs, the maximum number of securities
issuable upon such occurrence shall be deemed issued at the time of such
agreement. If the maximum number of securities is not determinable until
the contingency occurs, then upon occurrence of the contingency all
securities issued pursuant to the agreement shall be deemed to have been
issued at the time the agreement was entered into for the total
consideration received by the Corporation pursuant to the agreement and, if
such consideration per share of Common Stock is less than the Conversion
Price at the time of such agreement, a retroactive adjustment to the
Conversion Price shall be made.
(F) The Corporation is a party to that certain Agreement
and Plan of Merger and Reorganization dated as of July 1, 1999 (the
"Lockwood Agreement") by and among the Corporation, Lockwood Acquisitions
Corp., Lockwood Sign Group and the shareholders of Lockwood Sign Group (the
"Lockwood Shareholders"). The issuance to the Lockwood Shareholders of (i)
415,000 shares of Common Stock pursuant to Section 1.4(a)(ii) of the
Lockwood Agreement and (ii) up to 285,000 shares of Common Stock pursuant
to Section 1.9(a), (b) and (c) of the Lockwood Agreement shall not give
rise to an adjustment of the Conversion Price under this Section 5;
provided, however, if the Corporation issues additional shares of Common
Stock to the Lockwood Shareholders under Section 1.4(c) or pays additional
consideration to the Lockwood Shareholders under Section 1.9(d) of the
Lockwood Agreement (in shares of Common Stock), the issuance of shares of
Common Stock under Section 1.4(c) and the issuance of shares of Common
Stock and the payment of consideration (in shares of Common Stock or
otherwise) under Section 1.9(d) shall be considered to be events which may
give rise to an adjustment of the Conversion Price under this Section 5, as
follows:
(i) In the case of the issuance of additional shares of Common
Stock under Section 1.4(c) of the Lockwood Agreement, each share of
Common Stock issued under Section 1.4(c) of the Lockwood Agreement
shall be considered issued for the Average Trading Price (as defined
in the Lockwood Agreement) of the Common Stock for the last 31
calendar days of the Measuring Period (as defined in the Lockwood
Agreement).
(ii) In the case of the payment of additional shares of Common
Stock under Section 1.9(d) of the Lockwood Agreement, each share of
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Common Stock issued under Section 1.9(d) of the Lockwood Agreement
shall be considered issued for the Average Trading Price (as defined
in the Lockwood Agreement) during the last 31 days of the Contingent
Measuring Period (as defined in the Lockwood Agreement).
The Corporation is a party to that certain Agreement and Plan of
Merger and Reorganization dated as of February 17, 1998 (the "ESC
Agreement") by and among the Corporation, Displays Acquisitions Corp.,
Electronic Sign Corporation and the shareholders of Electronic Sign
Corporation (the "ESC Shareholders"). The issuance to the ECS Shareholders
of up to 540,000 shares of Common Stock pursuant to Section 1.11 of the ECS
Agreement shall not give rise to an adjustment of the Conversion Price
under this Section 5.
(b) If at any time the number of shares of Common Stock
outstanding is increased by a stock dividend payable in shares of Common Stock
or by a subdivision or split-up of shares of Common Stock, then, effective the
record date for such stock dividend, subdivision or split-up, the Conversion
Price shall be appropriately decreased so that the number of shares of Common
Stock issuable on conversion of each share of Series A Preferred Stock shall be
increased in proportion to such increase in outstanding shares.
(c) If at any time the number of shares of Common Stock
outstanding is decreased by a combination of the outstanding shares of Common
Stock, then, effective the record date for such combination, the Conversion
Price shall be appropriately increased so that the number of shares of Common
Stock issuable on conversion of each share of Series A Preferred Stock shall be
decreased in proportion to such decrease in outstanding shares.
(d) If, at any time, the Corporation shall fix a record date for
the making of a dividend or distribution to the holders of its Common Stock of
assets (other than regular cash dividends out of earned surplus), evidences of
its indebtedness, subscription rights, or warrants, then in each such case the
Conversion Price shall be reduced to the amount determined by multiplying (i)
the Conversion Price in effect immediately prior to such record date by (ii) a
fraction, of which the numerator shall be the total number of outstanding shares
of Common Stock (including as outstanding all shares of Common Stock issuable
upon conversion of convertible securities of the Corporation, except for Series
A Preferred Stock, and issuable upon the exercise of warrants, except for
warrants issued pursuant to the Purchase Agreement, and options of the
Corporation) multiplied by the current Conversion Price, less the fair market
value (as determined in good faith by the Company's Board of Directors) of the
portion of the assets or evidences of indebtedness to be distributed or of such
subscription rights or warrants, and of which the denominator shall be the total
number of outstanding shares of Common Stock on such record date (including as
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<PAGE>
outstanding all shares of Common Stock issuable upon conversion of convertible
securities of the Corporation, except for Series A Preferred Stock, and issuable
upon the exercise of warrants, except for warrants issued pursuant to the
Purchase Agreement, and options of the Corporation) multiplied by the current
Conversion Price. Such adjustment shall be made successively whenever such a
record date is fixed and shall become effective immediately after the record
date for the determination of shareholders entitled to receive the distribution.
(e) In any case in which the provisions of this Article V shall
require that an adjustment become effective immediately after a record date of
an event, the Corporation may defer until the occurrence of such event (aa)
issuing to the holder of any share of Series A Preferred Stock converted after
such record date and before the occurrence of such event the shares of capital
stock issuable upon such conversion by reason of the adjustment required by such
event in addition to the shares of capital stock issuable upon such conversion
before giving effect to such adjustments, and (bb) if applicable, paying to such
holder any amount in cash in lieu of a fractional share of capital stock;
provided, however, that the Corporation shall deliver to such holder an
appropriate instrument evidencing such holder's right to receive such additional
shares and cash.
(f) Whenever the Conversion Price shall be adjusted, the
Corporation shall make available for inspection during regular business hours,
at its principal executive offices or at such other place as may be designated
by the Corporation, a statement signed by its chief executive officer showing in
detail the facts requiring such adjustment and the Conversion Price that shall
be in effect after such adjustment. The Corporation shall also cause a copy of
such statement to be sent by first class certified mail, return receipt
requested and postage prepaid, to each holder of Series A Preferred Stock
affected by the adjustment. Where appropriate, such copy may be given in advance
and may be included as part of any notice required to be mailed under the
provisions of Article V, Section 5(e)(7) below.
(g) If the Corporation shall propose to take any action of the
types described in clauses (a), (b) or (c) of this Section 5, the Corporation
shall give notice to each holder of shares of Series A Preferred Stock, which
notice shall specify the record date, if any, with respect to any such action
and the date on which such action is to take place. Such notice shall also set
forth such facts with respect thereto as shall be reasonably necessary to
indicate the effect of such action (to the extent such effect may be known at
the date of such notice) on the Conversion Price and the number, kind or class
of shares or other securities or property which shall be deliverable or
purchasable upon the occurrence of such action or deliverable upon conversion of
shares of Series A Preferred Stock. In the case of any action which would
require the fixing of a record date, such notice shall be given at least 20 days
prior to the date so fixed, and in case of all other action, such notice shall
be given at least 30 days prior to the taking of such proposed action. Failure
to give such notice, or any defect therein, shall not affect the legality or
validity of any such action.
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(h) The Corporation shall at all times keep reserved, free from
preemptive rights, out of its authorized but unissued shares of Common Stock,
solely for the purpose of effecting the conversion of Series A Preferred Stock,
sufficient shares of Common Stock to provide for the conversion of all
outstanding shares of Series A Preferred Stock.
(i) Without duplication of any other adjustment provided for in
this Section 5 at any time the Corporation makes or fixes a record date for the
determination of holders of Common Stock entitled to receive a dividend or other
distribution payable in securities of the Corporation other than shares of
Common Stock, provision shall be made so that each holder of Series A Preferred
Stock shall receive upon conversion thereof, in addition to the shares of Common
Stock receivable thereupon, the number of securities of the Corporation which it
would have received had its shares of Series A Preferred Stock been converted
into shares of Common Stock on the date of such event and had such holder
thereafter, during the period from the date of such event to and including the
date of conversion, retained such securities receivable by it pursuant to this
paragraph during such period
(j) The Corporation will not, by amendment of its Articles of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Corporation, but will at all times in
good faith assist in the carrying out of all the provisions of this Section 5
and in the taking of all such action as may be necessary or appropriate in order
to protect the conversion rights of the holders of Series A Preferred Stock
against impairment.
(k) The computations of all amounts under this Section 5 shall
be made assuming all other anti-dilution or similar adjustments to be made to
the terms of all other securities resulting from the transaction causing an
adjustment pursuant to Section 5 have previously been made so as to maintain the
relative economic interest of the Series A Preferred Stock vis a vis all other
securities issued by the Corporation.
(l) The Corporation shall take or cause to be taken such steps
as shall be necessary to ensure that the par value per share of Common Stock is
at all times less than or equal to the Conversion Price.
VI. Voting Rights.
1. The holders of record of Series A Preferred Stock shall have the
right to vote with holders of the Common Stock as a single class on all matters
submitted for vote to holders of the Common Stock. The number of votes
represented by each outstanding share
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of Series A Preferred Stock outstanding and entitled to vote on such matters
shall be equal to the number of whole shares of Common Stock into which such
share of Series A Preferred Stock is convertible at the Conversion Price then in
effect. Holders of the Series A Preferred Stock shall not have any other voting
rights, except where otherwise required by applicable law and except as set
forth in Article VII below.
2. Holders of the Majority in Interest shall have the right to
designate one representative to attend and observe all meetings of the Board.
Following the designation of such representative of the Majority in Interest by
written notice to the Corporation, the Corporation shall deliver to such
Representative notice of all meetings of the Board of Directors simultaneously
with the delivery of notice to members of the Board.
VII. Prohibited Transactions.
For so long as any shares of Series A Preferred Stock are outstanding,
the Corporation shall not, without the affirmative written consent or approval
of the Majority in Interest:
1. in any manner authorize, create, designate, issue, distribute or
sell any class or series of capital stock (including any shares of treasury
stock) or rights, options, warrants or other securities convertible into or
exercisable or exchangeable for capital stock or any debt security which by its
terms is convertible into or exchangeable for any equity security or has any
other equity feature or any security that is a combination of debt and equity,
which, in each case, as to the payment of dividends, distribution of assets or
redemptions, including, without limitation, distributions to be made upon a
Liquidation, is senior to the Common Stock or which in any manner adversely
affects the holders of the Series A Preferred Stock;
2. in any manner (i) increase the authorized number of shares of
Series A Preferred Stock, (ii) alter or change the terms, designations, powers,
preferences or relative, participating, optional or other special rights, or the
qualifications, limitations or restrictions, of the Series A Preferred Stock, or
(iii) issue, distribute or sell any shares of Series A Preferred Stock other
than the 50,000 shares of Series A Preferred Stock issued pursuant to the
Purchase Agreement on the Original Issuance Date;
3. reclassify the shares of any class or series of capital stock into
shares of any class or series of capital stock (i) ranking, either as to payment
of dividends, distributions of assets or redemptions, including, without
limitation, distributions to be made upon a Liquidation, senior to the Common
Stock, or (ii) which in any manner adversely affects the rights of the holders
of the Series A Preferred Stock in their capacity as such;
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4. take any action to cause any amendment, alteration or repeal of
any of the provisions of the Articles of Incorporation or the Bylaws of the
Corporation, if such amendment, alteration or repeal would have an adverse
effect on the rights of the holders of the Series A Preferred Stock;
5. approve or authorize any Liquidation or any recapitalization of
the Corporation; or
6. enter into any agreement or arrangement to do any of the
foregoing.
VIII. Definitions.
As used herein, the following terms shall have the following
meanings:
"Affiliate" has the meaning ascribed to it under the Securities Act
of 1933, as amended.
"Board" shall mean the Board of Directors of the Corporation.
"Change of Control of the Corporation" shall mean any transaction or
any event as a result of which (i) any one or more Persons acquires or for the
first time controls or is able to vote (directly or through nominees or
beneficial ownership) after the Original Issuance Date 25% or more of any class
of stock of the Corporation outstanding at the time having power ordinarily to
vote for directors of the Corporation or (ii) the control of more than 25% of
the number of shares of Common Stock held by Persons on the Original Issuance
Date has been transferred (including transfers by and among such Persons) since
the Original Issuance Date in the aggregate. For purposes of this paragraph,
"Common Stock" shall include shares of Common Stock issuable upon exercise of
warrants, options and other rights to acquire Common Stock outstanding on the
Original Issuance Date, whether or not at the time exercised or exercisable.
"Closing Price" shall mean the closing price per share of the Common
Stock as reported on the NASDAQ National Market System or, if not so reported,
as reported by the principal national securities exchange on which the Common
Stock is then traded.
"Common Stock" shall mean and include the Corporation's authorized
Common Stock, par value $.001 per share, as constituted on the Original Issuance
Date, and shall also include any capital stock of any class of the Corporation
thereafter authorized which shall not be limited to a fixed sum or percentage of
par value in respect of the rights of the holders thereof to participate in
dividends or in the distribution of assets upon the voluntary or involuntary
liquidation, dissolution or winding up of the Corporation; provided that the
--------
shares of Common Stock receivable upon conversion of shares of the Preferred
Stock
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of the Corporation, shall include only shares designated as Common Stock of the
Corporation on the Original Issuance Date.
"Common Stock Equivalent" shall mean all shares of Common Stock
outstanding and all shares of Common Stock issuable (without regard to any
present restrictions on such issuance) upon the conversion, exchange or exercise
of all securities of the Corporation that are convertible, exchangeable or
exercisable for Common Stock and all Common Stock appreciation rights, phantom
Common Stock rights and other rights to acquire, or to receive or to be paid
amounts of, the Common Stock.
"Conversion Price" shall mean $3.50, subject to adjustment from time
to time in accordance with the provisions of Article V hereof.
"Directly and Indirectly" shall mean whenever any provision of this
Agreement requires or prohibits action to be taken by a Person, that the
provision applies regardless of whether the action is taken directly or
indirectly by the Person.
"Event of Default" shall mean (i) a default by the Corporation in the
performance of any covenant set forth in the Purchase Agreement or any Ancillary
Agreement (as defined in the Purchase Agreement) and the failure of the
Corporation to cure any such default within thirty days of receipt of written
notice specifying such default from a Majority in Interest, (ii) the
representations and warranties made by the Corporation in the Purchase
Agreement, or in any schedule or certificate delivered by the Corporation
pursuant to the Purchase Agreement, shall prove to be untrue with respect to any
material matter on the date as of which the facts set forth therein are stated
or certified, and the matter that is the subject of such misrepresentation or
breach of warranty shall have resulted in material damages or other material
adverse consequences to the holders of Series A Preferred Stock which shall not
have been mitigated in full within 90 days of receipt by the Corporation of
written notice specifying such misrepresentation or breach of warranty from a
Majority in Interest, (iii) the Corporation shall not have employed a chief
operating officer reasonably acceptable to a Majority in Interest within one
year following the Original Issuance Date, (iv) the Corporation shall fail to
declare and pay (on the dates specified in Article II, Section 1) dividends on
the Series A Preferred Stock in accordance with Article II, Section 1, (v) a
petition shall be filed against the Corporation under any bankruptcy,
reorganization, or insolvency law and shall not be dismissed within thirty days
after such filing, (vi) the Corporation shall file a petition in bankruptcy or
request reorganization under any provision of any bankruptcy, reorganization, or
insolvency law or shall consent to the filing of any petition against it under
any such law, or (vii) the Corporation shall make a formal or informal
assignment for the benefit of its creditors or admit in writing its inability to
pay its debts generally when they become due or shall consent to the appointment
of a receiver, trustee, or liquidator of the Corporation or of all or any part
of the property of the Corporation.
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"Junior Stock" shall mean the Common Stock and any other class of
stock of the Corporation hereafter authorized over which the Series A Preferred
Stock has preference or priority in the payment of dividends or in the
distribution of assets on any liquidation, dissolution or winding up of the
Corporation.
"Liquidation" shall mean any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation, other than any
dissolution, liquidation or winding up in connection with any reincorporation of
the Corporation in Florida or Delaware.
"Liquidation Amount" shall mean, as to each share of Series A
Preferred Stock, the Series A Original Issuance Price plus any accrued but
unpaid dividends.
"Majority in Interest" shall mean the registered holders of a majority
of the outstanding shares of Series A Preferred Stock at any given time.
"Original Issuance Date" for the Series A Preferred Stock means the
date of original issuance of the first share of the Series A Preferred Stock.
"Person" shall mean an individual, partnership, corporation, joint
stock company, firm, land trust, business trust, unincorporated organization,
limited liability company, or other business entity, or a government or agency
or political subdivision thereof.
"Purchase Agreement" shall mean the Securities Purchase Agreement
dated July 30, 1999 between the Company and certain purchasers of the Series A
Preferred Stock.
"Redemption Event" shall mean (i) a sale, merger, consolidation, or
share exchange of the Corporation resulting in the transfer of voting control or
majority economic interest of the Corporation, (ii) a sale or other disposition
of all or substantially all of the Corporation's assets, or (iii) a Change of
Control of the Corporation.
"Sale of the Corporation" shall mean (i) the sale of all or
substantially all of the Corporation's assets to a Person who is not an
Affiliate of the Corporation, (ii) the sale or transfer of the outstanding
capital stock of the Corporation to one or more Persons who are not Affiliates
of the Corporation, or (iii) the merger or consolidation of the Corporation with
or into another Person who is not an Affiliate of the Corporation, in each case
in clauses (ii) and (iii) above under circumstances in which the holders of a
majority in voting power of the outstanding capital stock of the Corporation,
immediately prior to such transaction, own less than a majority in voting power
of the outstanding capital stock of the Corporation or the surviving or
resulting corporation or acquirer, as the case may be, immediately following
such transaction. A sale (or multiple related sales) of one or more
subsidiaries of the
15
<PAGE>
Corporation (whether by way of merger, consolidation, reorganization or sale of
all or substantially all assets or securities) which constitutes all or
substantially all of the consolidated assets of the Corporation shall be deemed
a Sale of the Corporation.
"Series A Original Issuance Price" shall mean $100.00 per share of
Series A Preferred Stock.
"Stock" shall mean (i) the presently issued and outstanding shares of
Common Stock and Preferred Stock and any options or stock subscription warrants
exercisable therefor (which options and warrants shall be deemed to be that
number of outstanding shares of Stock for which they are exercisable), (ii) any
additional shares of capital stock of the Company hereafter issued and
outstanding and (iii) any shares of capital stock of the Company into which such
shares may be converted or for which they may be exchanged or exercised.
16
<PAGE>
EXHIBIT 4.33
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
("FEDERAL ACT") OR THE FLORIDA SECURITIES AND INVESTOR PROTECTION ACT, AS
AMENDED ("FLORIDA ACT"), AND HAVE NOT BEEN REGISTERED UNDER ANY OTHER STATE
SECURITIES LAW. THIS WARRANT HAS BEEN, AND ANY SHARES ISSUED UPON EXERCISE
OF THIS WARRANT WILL BE, ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR
SALE, SOLD, TRANSFERRED, HYPOTHECATED, OR OTHERWISE DISPOSED OF UNLESS A
REGISTRATION STATEMENT WITH RESPECT TO THIS WARRANT AND THE SHARES FOR
WHICH THIS WARRANT IS EXERCISABLE IS EFFECTIVE UNDER THE FEDERAL ACT, THE
FLORIDA ACT, AND ANY OTHER APPLICABLE STATE SECURITIES LAWS, OR SUCH
REGISTRATION IS NOT REQUIRED.
DISPLAY TECHNOLOGIES, INC.
Stock Purchase Warrant
Warrant to Purchase July 30, 1999
up to 120,000 shares of
Common Stock
THIS CERTIFIES that, for value received, RAYMOND JAMES CAPITAL PARTNERS,
L.P., or its registered and permitted assigns, is entitled to subscribe for and
purchase from DISPLAY TECHNOLOGIES, INC., a Nevada corporation (the
"Corporation"), at a price of $3.50 per share, subject to adjustment pursuant to
Section 3 below, (the "Exercise Price") at any time after the date hereof but
prior to the fifth anniversary of the date hereof 120,000 shares (subject to
adjustment pursuant to Section 2 below) of fully paid and nonassessable Common
Stock, $0.001 par value per share, of the Corporation (the "Common Stock"),
subject to the provisions and upon the terms and conditions hereinafter set
forth. This Warrant and any Warrant or Warrants subsequently issued upon
exchange or transfer hereof are hereinafter collectively called the "Warrant."
1. Exercise of Warrant. The rights represented by this Warrant may be
-------------------
exercised by the holder hereof, in whole at any time or in part from time to
time, but not as to a fractional share of Common Stock, by the surrender of this
Warrant (properly endorsed) at the office of the Corporation shown in Section 13
hereof, and by payment to the Corporation of the Exercise Price in cash, by
certified or official bank check or by wire transfer, for each share being
purchased. In lieu of payment of cash, the holder hereof may satisfy the
Exercise Price of shares being acquired hereunder by surrender of the right to
purchase a number of
<PAGE>
shares of Common Stock hereunder (the "Surrendered Shares") whose value, based
on the Closing Price on the day prior to such exercise, exceeds the aggregate
Exercise Price of the Surrendered Shares by an amount equal to the aggregate
Exercise Price of the shares with respect to which this Warrant is being
exercised. In the event of any exercise of the rights represented by this
Warrant, a certificate or certificates for the shares of Common Stock so
purchased, registered in the name of the holder hereof, shall be delivered to
the holder hereof within two days, after the rights represented by this Warrant
shall have been so exercised and, unless this Warrant has expired, a new Warrant
representing the number of shares (except a remaining fractional share), if any,
with respect to which this Warrant shall not then have been exercised shall also
be issued to the holder hereof within such time. The person in whose name any
certificate for shares of Common Stock is issued upon exercise of this Warrant
shall for all purposes be deemed to have become the holder of record of such
shares on the date on which the Warrant was surrendered and payment of the
Exercise Price was made, except that, if the date of such surrender and payment
is a date on which the stock transfer books of the Corporation are closed, such
person shall be deemed to have become the holder of such shares at the opening
of business on the next succeeding date on which the stock transfer books are
open. As used in this Warrant, "Closing Price" means the closing sale price of
the Common Stock on the NASDAQ National Market, or the principal market or
exchange on which the Common Stock is then traded, for the specified trading
day.
2. Adjustment of Number of Shares Subject to Warrant. Upon any adjustment
-------------------------------------------------
of the Exercise Price as provided in Section 3 hereof, the holder of this
Warrant shall thereafter be entitled to purchase, at the Exercise Price, as
adjusted, the number of shares (calculated to the nearest tenth of a share)
obtained by multiplying the Exercise Price in effect immediately prior to such
adjustment by the number of shares purchasable hereunder immediately prior to
such adjustment and dividing the product thereof by the Exercise Price resulting
from such adjustment.
3. Adjustment of Exercise Price. (a) If and whenever the Corporation
----------------------------
shall issue, sell, distribute or otherwise transfer any shares of its Common
Stock (including treasury shares), other than as the result of exercises of
options, warrants or conversion rights outstanding on the date hereof, for a
consideration per share less than the Exercise Price in effect immediately prior
to the time of such issue, sale, or transfer then, upon such event the Exercise
Price shall be reduced to the price determined by dividing (i) an amount equal
to the sum of (x) the number of shares of Common Stock outstanding immediately
prior to such event (including as outstanding all shares of Common Stock
issuable upon conversion of convertible securities of the Corporation, except
for Series A Preferred Stock issued pursuant to the Securities Purchase
Agreement dated July 30, 1999 (the "Purchase Agreement"), and issuable upon the
exercise of warrants, except for this Warrant and other warrants issued pursuant
to the Purchase Agreement, and options of the Corporation) multiplied by the
then existing Exercise Price and (y) the consideration, if any, received by the
Corporation upon such event, by (ii) the total number of shares of Common Stock
outstanding immediately after such event (including as outstanding all shares of
Common Stock issuable upon conversion of convertible securities of the
Corporation, except for Series A Preferred Stock
2
<PAGE>
issued pursuant to the Purchase Agreement, and issuable upon the exercise of
warrants, except for this Warrant and other warrants issued pursuant to the
Purchase Agreement, and options of the Corporation, provided that, for this
purpose, in computing the number of shares of Common Stock issuable upon
conversion of convertible securities or exercise of warrants or options, any
adjustments in the conversion price of such convertible securities or in the
exercise price of such warrants or options resulting from the transaction which
gave rise to the adjustment in the Exercise Price being calculated shall be
taken into account).
For purposes of this Section 3(a), the following paragraphs (1) to (6),
inclusive, shall also be applicable:
(1) In the case of the issuance of Common Stock for cash, the
consideration shall be deemed to be the amount of cash paid therefor after
deducting therefrom any discounts, commissions, fees, or other expenses
allowed, paid, or incurred by the Corporation for any underwriting or
placement or otherwise in connection with the issuance and sale thereof.
(2) In the case of the issuance of Common Stock for a consideration in
whole or in part other than cash, the consideration other than cash shall
be deemed to be the fair market value thereof as determined in good faith
by the Board of Directors, irrespective of any accounting treatment.
(3) In the case of the issuance of (x) options or warrants to purchase
or rights to subscribe for Common Stock, (y) securities by their terms
convertible into or exchangeable for Common Stock or (z) options or
warrants to purchase or rights to subscribe for such convertible or
exchangeable securities:
(A) the aggregate maximum number of shares of Common Stock
deliverable upon exercise of such options or warrants to purchase or
rights to subscribe for Common Stock shall be deemed to have been
issued at the time such options, warrants, or rights were issued and
for a consideration equal to the consideration (determined in the
manner provided in subdivisions (1) and (2) above), if any, received
by the Corporation upon the issuance of such options, warrants, or
rights plus the minimum purchase price provided in such options,
warrants, or rights for the Common Stock covered thereby;
(B) the aggregate maximum number of shares of Common Stock
deliverable upon conversion of or in exchange for any such convertible
or exchangeable securities or upon the exercise of options or warrants
to purchase or rights to subscribe for such convertible or
exchangeable securities and subsequent conversion or exchange thereof
shall be deemed to have been issued at the time such securities were
issued or such options, warrants, or rights were issued and for a
consideration equal to the consideration received by the Corporation
for any such securities and related options, warrants, or
3
<PAGE>
rights (excluding any cash received on account of accrued interest or
accrued dividends), plus the additional consideration, if any, to be
received by the Corporation upon the conversion or exchange of such
securities or the exercise of any related options, warrants, or rights
(the consideration in each case to be determined in the manner
provided in subdivisions (1) and (2) above); and
(C) on any change in the number of shares of Common Stock
deliverable upon exercise of any such options, warrants, or rights or
conversions of or exchange for such convertible or exchangeable
securities or any change in the consideration to be received by the
Corporation upon the exercise of any such options, warrants, or rights
or conversions of or exchange for such convertible or exchangeable
securities, the Exercise Price shall forthwith be readjusted to the
Exercise Price that would have applied had the adjustment (made upon
the issuance of such options, rights, or securities not converted
prior to such change or options or rights related to such securities
not converted prior to such change) been made upon the basis of such
change.
(4) In the case of issuance of stock appreciation rights, phantom
stock options, or any other contractual arrangements ("SAR's") that provide
payments or benefits related to the value of securities ("Base Securities")
of the Company, the equivalent number of Base Securities shall be deemed to
be issued and outstanding, except that such Base Securities shall not be
deemed to be outstanding when calculating an adjustment to the Exercise
Price otherwise required hereunder as a result of the future issuance of
other securities. The issuance price of any Base Security treated as issued
pursuant to this subdivision (4) shall be deemed to be the base value of
the Base Security established in the SAR for purposes of calculating
payments due under the SAR as the result of appreciation of the Base
Security. For example, if an employee is granted the right to receive cash
equal to the future value of a specified number of shares of Common Stock
in excess of $3.00 per share, for the purposes of this Section 3 such
shares of Common Stock would be deemed to be issued at $3.00 per share.
(5) In the case of any future contingent agreement to issue
securities, the securities shall be deemed to be outstanding at the time
such agreement is entered into (except that such securities shall not be
deemed to be outstanding when calculating an adjustment to the Exercise
Price otherwise required hereunder as a result of the future issuance of
other securities). The sale price of such securities and the sale price of
any securities actually issued at the time of such agreement shall be
determined for purposes of this Section 3 by dividing the sum of the number
of securities actually issued and the securities issuable upon satisfaction
of the contingency by the total consideration received by the Corporation
in connection with such agreement. If the number of securities
contingently issuable is not determinable until the contingency occurs, the
maximum number of securities issuable upon such occurrence shall be deemed
issued at the time of such agreement. If the maximum number of securities
is not determinable until the contingency occurs, then upon occurrence of
the contingency all securities
4
<PAGE>
issued pursuant to the agreement shall be deemed to have been issued at the
time the agreement was entered into for the total consideration received by
the Corporation pursuant to the agreement and, if such consideration per
share of Common Stock is less than the Exercise Price at the time of such
agreement, a retroactive adjustment to the Exercise Price shall be made.
(6) The Corporation is a party to that certain Agreement and Plan of
Merger and Reorganization dated as of July 1, 1999 (the "Lockwood
Agreement") by and among the Corporation, Lockwood Acquisitions Corp.,
Lockwood Sign Group and the shareholders of Lockwood Sign Group (the
"Lockwood Shareholders"). The issuance to the Lockwood Shareholders of (i)
415,000 shares of Common Stock pursuant to Section 1.4(a)(ii) of the
Lockwood Agreement and (ii) up to 285,000 shares of Common Stock pursuant
to Section 1.9(a), (b) and (c) of the Lockwood Agreement shall not give
rise to an adjustment of the Exercise Price under Section 3 hereof;
provided, however, if the Corporation issues additional shares of Common
Stock to the Lockwood Shareholders under Section 1.4(c) or pays additional
consideration to the Lockwood Shareholders under Section 1.9(d) of the
Lockwood Agreement (in shares of Common Stock), the issuance of shares of
Common Stock under Section 1.4(c) and the issuance of shares of Common
Stock and the payment of consideration (in shares of Common Stock or
otherwise) under Section 1.9(d) shall be considered to be events which may
give rise to an adjustment of the Exercise Price under Section 3, as
follows:
(A) In the case of the issuance of additional shares of Common Stock
under Section 1.4(c) of the Lockwood Agreement, each share of Common Stock
issued under Section 1.4(c) of the Lockwood Agreement shall be considered
issued for the Average Trading Price (as defined in the Lockwood Agreement)
of the Common Stock for the last 31 calendar days of the Measuring Period
(as defined in the Lockwood Agreement).
(B) In the case of the payment of additional shares of Common Stock
under Section 1.9(d) of the Lockwood Agreement, each share of Common Stock
issued under Section 1.9(d) of the Lockwood Agreement shall be considered
issued for the Average Trading Price (as defined in the Lockwood Agreement)
during the last 31 days of the Contingent Measuring Period (as defined in
the Lockwood Agreement).
The Corporation is a party to that certain Agreement and Plan of
Merger and Reorganization dated as of February 17, 1998 (the "ESC
Agreement") by and among the Corporation, Displays Acquisitions Corp.,
Electronic Sign Corporation and the shareholders of Electronic Sign
Corporation (the "ESC Shareholders"). The issuance to the ECS Shareholders
of up to 540,000 shares of Common Stock pursuant to Section 1.11 of the ECS
Agreement shall not give rise to an adjustment of the Exercise Price under
Section 3 hereof.
(b) If, at any time, the number of shares of Common Stock outstanding is
increased by a stock dividend payable in shares of Common Stock or by a
subdivision or
5
<PAGE>
split-up of shares of Common Stock, then, following the record date fixed for
the determination of holders of Common Stock entitled to receive such stock
dividend, subdivision, or split-up, the Exercise Price shall be proportionately
decreased so that the number of shares of Common Stock issuable on exercise of
this Warrant pursuant to Section 2 above shall be increased in proportion to
such increase in outstanding shares.
(c) If, at any time, the number of shares of Common Stock outstanding is
decreased by a combination of the outstanding shares of Common Stock, then,
following the record date for such combination, the Exercise Price shall be
appropriately increased so that the number of shares of Common Stock issuable on
exercise of this Warrant pursuant to Section 2 above shall be decreased in
proportion to such decrease in outstanding shares.
(d) If, at any time, the Corporation shall fix a record date for the making
of a dividend or distribution to the holders of its Common Stock of assets
(other than regular cash dividends out of earned surplus), evidences of its
indebtedness, subscription rights, or warrants, then in each such case the
Exercise Price shall be reduced to the amount determined by multiplying (i) the
Exercise Price in effect immediately prior to such record date by (ii) a
fraction, of which the numerator shall be the total number of outstanding shares
of Common Stock (including as outstanding all shares of Common Stock issuable
upon conversion of convertible securities of the Corporation, except for Series
A Convertible Preferred Stock issued pursuant to the Securities Purchase
Agreement, and issuable upon the exercise of warrants, except for this Warrant
and other Warrants issued pursuant to the Purchase Agreement, and options of the
Corporation) multiplied by the current Exercise Price, less the fair market
value (as determined in good faith by the Company's Board of Directors) of the
portion of the assets or evidences of indebtedness to be distributed or of such
subscription rights or warrants, and of which the denominator shall be the total
number of outstanding shares of Common Stock on such record date (including as
outstanding all shares of Common Stock issuable upon conversion of convertible
securities of the Corporation, except for Series A Convertible Preferred Stock
issued pursuant to the Securities Purchase Agreement, and issuable upon the
exercise of warrants, except for this Warrant and other Warrants issued pursuant
to the Purchase Agreement, and options of the Corporation) multiplied by the
current Exercise Price. Such adjustment shall be made successively whenever
such a record date is fixed and shall become effective immediately after the
record date for the determination of shareholders entitled to receive the
distribution.
(e) Whenever the Exercise Price shall be adjusted as provided in this
Section 3, the Corporation shall forthwith deliver to the holder hereof a
statement, signed by its chief financial officer, showing in detail the facts
requiring such adjustment and the Exercise Price and number of shares of Common
Stock subject hereto, such statement to be sent by first-class certified mail,
return receipt requested, postage prepaid.
4. Stock to Be Reserved. The Corporation will at all times reserve and
--------------------
keep available out of its authorized Common Stock or its treasury shares, solely
for the purpose of issue upon the exercise of this Warrant as herein provided,
such number of shares of
6
<PAGE>
Common Stock as shall then be issuable upon the exercise of this Warrant. The
Corporation covenants that all shares of Common Stock which shall be so issued
shall be duly and validly issued and fully paid and nonassessable and free from
all taxes (other than income taxes and other taxes on the holder), liens, and
charges with respect to the issue thereof. The Corporation will take all such
action as may be reasonably necessary to ensure that all such shares of Common
Stock may be so issued without violation of any applicable law or regulation, or
of any requirements, of any securities exchange or market upon which the Common
Stock of the Corporation may be listed or traded. The Corporation has not
granted and will not grant any right of first refusal with respect to shares
issuable upon exercise of this Warrant, and there are not preemptive rights
associated with such shares.
5. Issue Tax. The issuance of certificates for shares of Common Stock
---------
upon exercise of this Warrant shall be made without charge to the holder for any
issuance tax in respect thereof provided that the Corporation shall not be
required to pay any tax which may be payable in respect of any transfer involved
in the issuance and delivery of any certificate in a name other than that of the
holder.
6. Closing of Books. The Corporation will at no time close its transfer
----------------
books against the transfer of the shares of Common Stock issued or issuable upon
the exercise of this Warrant in any manner which interferes with the timely
exercise of this Warrant.
7. Consolidation, Merger, or Sale. If at any time the holders of Common
------------------------------
Stock shall be entitled to receive stock, securities, or assets with respect to
or in exchange for Common Stock by reason of any capital reorganization or
reclassification of the capital stock of the Corporation or any consolidation or
merger of the Corporation with another corporation, the sale of all or
substantially all of the Corporation's assets to another corporation or
otherwise (a "Significant Transaction") and this Warrant has not expired as of
the effective date of such Significant Transaction then, as a condition of such
Significant Transaction or other transaction, lawful and adequate provisions
shall be made whereby the holder shall thereafter have the right to purchase
upon the basis and upon the terms and conditions specified herein and in lieu of
the shares of Common Stock of the Corporation immediately theretofore
purchasable upon the exercise of this Warrant, such shares of stock, securities,
or assets (including cash) as may be issued or payable with respect to or in
exchange for a number of outstanding shares of such Common Stock equal to the
number of shares of such stock immediately theretofore purchasable had such
Significant Transaction or other transaction not taken place, and in any such
case appropriate provision shall be made with respect to the rights and
interests of holder to the end that the provisions hereof shall thereafter be
applicable, as nearly as may be, in relation to any shares of stock, securities,
or assets thereafter deliverable upon the exercise of this Warrant (including an
immediate adjustment, by reason of such Significant Transaction or other
transaction, of the Exercise Price to the value for the Common Stock reflected
by the terms of such Significant Transaction or other transaction if the value
so reflected is less than the Exercise Price). To the extent that this Warrant
has not expired, the Corporation will not effect any such
7
<PAGE>
Significant Transaction or other transaction unless prior to the consummation
thereof the successor corporation (if other than the Corporation) resulting from
such consolidation or merger or the corporation purchasing such assets shall
assume by written instrument executed and mailed or delivered to the holder of
this Warrant in accordance with Section 13 below, the obligation to deliver to
holder such shares of stock, securities, or assets as, in accordance with the
foregoing provisions, holder may be entitled to receive.
8. Notices of Record Dates. In the event of:
-----------------------
(a) any taking by the Corporation of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase, or otherwise acquire any shares of stock of any class
or any other securities or property, or to receive any other right, or
(b) any capital reorganization of the Corporation, any reclassification or
recapitalization of the capital stock of the Corporation, or any transfer of all
or substantially all the assets of the Corporation to, or consolidation or
merger of the Corporation with or into, any other corporation, or
(c) any voluntary or involuntary dissolution, liquidation, or winding-up of
the Corporation,
then and in each such event the Corporation will give notice to the holder of
this Warrant specifying (i) the date on which any such record is to be taken for
the purpose of such dividend, distribution, or right and stating the amount and
character of such dividend, distribution, or right, and (ii) the date on which
any such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation, or winding-up is expected to
take place, and the time, if any is to be fixed, as of which the holders of
record of Common Stock will be entitled to exchange their shares of Common Stock
for securities or other property deliverable upon such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation, or winding-up. Such notice shall be given at least 10
days and not more than 90 days prior to the date therein specified, and such
notice shall state that the action in question or the record date is subject to
the effectiveness of a registration statement under the Securities Act of 1933,
as amended, or to a favorable vote of stockholders, if either is required.
9. No Stockholder Rights or Liabilities. This Warrant shall not entitle
------------------------------------
the holder to any voting rights or other rights as a stockholder of the
Corporation. No provision hereof, in the absence of affirmative action by the
holder hereof to purchase shares of Common Stock, and no mere enumeration herein
of the rights or privileges of the holder hereof, shall give rise to any
liability of such holder for the Exercise price or as a shareholder of the
Corporation, whether such liability is asserted by the Corporation or by
creditors of the Corporation.
8
<PAGE>
10. Transferability. The holder of this Warrant may transfer this Warrant
---------------
and the rights represented thereby, in whole or in part, at any time prior to
the applicable expiration date set forth in Section 1 above, without the prior
written consent of the Corporation or any other party; provided that any
transfer may only be made in compliance with federal and applicable state
securities laws or exemptions therefrom. No transfer of this Warrant shall be
effective unless and until registered on the books of the Corporation maintained
for such purpose, and the Corporation may treat the registered holders as the
absolute owner of this Warrant for all purposes and the person entitled to
exercise the rights represented hereby until such a transfer is so registered.
Any transferee of this Warrant, by its acceptance thereof, agrees to be bound by
all of the terms and conditions of this Warrant. The provisions of this Section
10 shall not apply to Common Stock issued upon exercise of this Warrant.
11. Investment Representation and Legend. The holder, by acceptance of
------------------------------------
this Warrant, represents and warrants to the Corporation that it is acquiring
the Warrant and will acquire the shares of Common Stock (or other securities)
issuable upon the exercise hereof for investment purposes only and not with a
view toward the distribution thereof in violation of applicable securities laws.
The holder, by acceptance of this Warrant, agrees that the Corporation may affix
a legend to certificates for shares of Common Stock issued upon exercise of this
Warrant substantially similar to the legend set forth in the Investors' Rights
Agreement dated July 30, 1999. The holder hereof shall have the right to
registration under the Securities Act of 1933 of the shares of Common Stock
issued upon exercise of this Warrant pursuant to the Investors' Rights
Agreements.
12. Lost, Stolen, Mutilated or Destroyed Warrant. If this Warrant is
--------------------------------------------
lost, stolen, mutilated, or destroyed, the Corporation may, on such terms as to
indemnity or otherwise as it may in its discretion reasonably impose (which
shall, in the case of a mutilated Warrant, include the surrender thereof), issue
a new Warrant of like denomination and tenor as the Warrant so lost, stolen,
mutilated, or destroyed. Any such new Warrant shall constitute an original
contractual obligation of the Corporation, whether or not the allegedly lost,
stolen, mutilated, or destroyed Warrant shall be at any time enforceable by
anyone other than the holder of the new Warrant.
13. Notices. All notices, requests, and other communications required or
-------
permitted to be given or delivered hereunder shall be in writing, and shall be
delivered, or shall be sent by certified or registered mail, postage prepaid and
addressed, return receipt requested, if to the holder at:
Raymond James Capital Partners, L.P.
880 Carillon Parkway
St. Petersburg, FL 33716
Attention: Gary A. Downing
9
<PAGE>
and, if to the Corporation, at:
Display Technologies, Inc.
5029 Edgewater Drive
Orlando, Florida 32810
Attention: President
or at such other address as shall be furnished to either party by notice from
the other.
IN WITNESS WHEREOF, the Corporation has executed this Warrant under seal on
and as of the day and year first above written.
(Signatures on next page)
10
<PAGE>
DISPLAY TECHNOLOGIES, INC.
By: ______________________________
Its: _____________________________
Attest: __________________________
Its:______________________________
[CORPORATE SEAL]
11
<PAGE>
================================================================================
Exhibit 4.34
TRUST INDENTURE
Dated June 1, 1999
Between
DISPLAY TECHNOLOGIES, INC.
and
SOUTHTRUST BANK, NATIONAL ASSOCIATION
_________________________________________
Regarding
$2,500,000
Variable/Fixed Rate Secured Promissory Notes
_________________________________________
- --------------------------------------------------------------------------------
This Trust Indenture was prepared by Heyward C. Hosch, Walston, Wells, Anderson
& Bains, LLP, Suite 500, Financial Center, 505 20th Street North, Birmingham,
Alabama 35203
- --------------------------------------------------------------------------------
<PAGE>
TRUST INDENTURE
TABLE OF CONTENTS
(This Table of Contents is not a part of this Indenture
and is only for convenience of reference)
<TABLE>
<CAPTION>
PAGE
<S> <C>
PARTIES...................................................................... 1
RECITALS..................................................................... 1
GRANTING CLAUSES............................................................. 2
ARTICLE I
Definitions and Other Provisions
of General Application
-----------------------------
SECTION 1.01 Definitions.............................................. 2
SECTION 1.02 Acts of Noteholders...................................... 10
SECTION 1.03 Form and Contents of Documents Delivered to Trustee...... 11
SECTION 1.04 Compliance Certificates and Opinions..................... 12
SECTION 1.05 Effect of Headings and Table of Contents................. 13
SECTION 1.06 Date of Indenture........................................ 13
SECTION 1.07 Enforceability........................................... 13
SECTION 1.08 Governing Law............................................ 13
SECTION 1.09 Counterparts............................................. 13
SECTION 1.10 Notices.................................................. 13
SECTION 1.11 Notices to Noteholders; Waiver........................... 15
SECTION 1.12 Concerning the Credit Obligor and the Letter of Credit... 15
SECTION 1.13 Notice to Rating Agencies................................ 15
SECTION 1.14 Successors and Assigns................................... 16
SECTION 1.15 Benefits of Indenture.................................... 16
ARTICLE II
Granting Clauses
----------------
ARTICLE III
The Notes
---------
SECTION 3.01 General Terms............................................ 17
SECTION 3.02 Variable Rate............................................ 19
</TABLE>
<PAGE>
<TABLE>
<S> <C>
SECTION 3.03 Fixed Rate........................................................ 19
SECTION 3.04 Optional Tender................................................... 21
SECTION 3.05 Mandatory Tender.................................................. 22
SECTION 3.06 Procedures for Purchase and Remarketing of Notes;
Delivery of Purchased and Remarketed Notes.................... 25
SECTION 3.07 Execution, Authentication, Delivery and Dating.................... 28
SECTION 3.08 Temporary Notes................................................... 29
SECTION 3.09 Authentication and Delivery of Notes to Original
Purchasers.................................................... 29
SECTION 3.10 Letter of Credit.................................................. 29
SECTION 3.11 Additional Credit Enhancement..................................... 32
ARTICLE IV
Registration, Book-Entry System, and
General Provisions Regarding the Notes
--------------------------------------
SECTION 4.01 Registration of Notes............................................. 32
SECTION 4.02 Registration, Transfer, and Exchange of Notes; Replacement
of Mutilated, Lost, Destroyed or Stolen Notes................. 32
SECTION 4.03 Book-Entry System................................................. 34
SECTION 4.04 Payment of Interest on Notes; Interest Rights Preserved........... 36
SECTION 4.05 Paying Agent...................................................... 37
SECTION 4.06 Payments Due on Non-Business Days................................. 37
SECTION 4.07 Cancellation...................................................... 37
ARTICLE V
Redemption of Notes
-------------------
SECTION 5.01 When Notes Are Subject to Redemption.............................. 38
SECTION 5.02 Election to Redeem; Notice to Trustee............................. 38
SECTION 5.03 Selection of Notes to be Redeemed................................. 38
SECTION 5.04 Notice of Redemption.............................................. 39
SECTION 5.05 Deposit of Redemption Price....................................... 40
SECTION 5.06 Notes Payable on Redemption Date.................................. 40
SECTION 5.07 Notes Redeemed in Part............................................ 40
ARTICLE VI
Application of Proceeds of Notes
--------------------------------
ARTICLE VII
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Revenues
--------
SECTION 7.01 Note Fund and Letter of Credit Draws.............................. 41
SECTION 7.02 Note Purchase Fund................................................ 42
SECTION 7.03 Money for Note Payments to be Held in Trust; Repayment of
Unclaimed Money............................................... 44
SECTION 7.04 Investment of Special Funds....................................... 45
ARTICLE VIII
Representations and Covenants
-----------------------------
SECTION 8.01 General Representations........................................... 45
SECTION 8.02 Payment of Debt Service and Purchase of Tendered Notes............ 46
SECTION 8.03 Indemnity of Trustee.............................................. 47
SECTION 8.04 Obligations of Issuer Unconditional............................... 48
SECTION 8.05 General Covenants of the Issuer................................... 48
SECTION 8.06 Appointment of Successor Trustee.................................. 49
SECTION 8.07 Further Assurances................................................ 49
ARTICLE IX
Events of Default and Remedies
------------------------------
SECTION 9.01 Events of Default................................................. 49
SECTION 9.02 Acceleration of Maturity; Rescission and Annulment;
Exercise of Remedies.......................................... 50
SECTION 9.03 Rights and Remedies of Trustee in the Event of Bankruptcy,
and the Occurrence of Similar Events Regarding, the Issuer.... 52
SECTION 9.04 Subrogation Rights of Credit Obligor.............................. 52
SECTION 9.05 Application of Money Collected.................................... 53
SECTION 9.06 Trustee May Enforce Claims without Possession of Notes............ 54
SECTION 9.07 Limitation on Suits by Holders.................................... 54
SECTION 9.08 Unconditional Right of Noteholders to Receive Principal,
Premium and Interest.......................................... 55
SECTION 9.09 Restoration of Positions.......................................... 55
SECTION 9.10 Rights and Remedies Cumulative.................................... 55
SECTION 9.11 Delay or Omission Not Waiver...................................... 55
SECTION 9.12 Control by Credit Obligor and Noteholders......................... 56
SECTION 9.13 Waiver of Past Defaults........................................... 56
SECTION 9.14 Waiver of Appraisement and Other Laws............................. 57
SECTION 9.15 Suits to Protect the Trust Estate................................. 57
SECTION 9.16 Remedies Subject to Applicable Law................................ 57
ARTICLE X
</TABLE>
<PAGE>
<TABLE>
<S> <C>
The Trustee
-----------
SECTION 10.01 Certain Duties and Responsibilities.............................. 58
SECTION 10.02 Notice of Defaults............................................... 59
SECTION 10.03 Certain Rights of Trustee........................................ 59
SECTION 10.04 Not Responsible for Recitals..................................... 60
SECTION 10.05 May Hold Notes................................................... 60
SECTION 10.06 Money Held in Trust.............................................. 61
SECTION 10.07 Compensation and Reimbursement................................... 61
SECTION 10.08 Eligibility of Trustee; Appointment of Co-Trustee................ 61
SECTION 10.09 Resignation and Removal; Appointment of Successor................ 62
SECTION 10.10 Acceptance of Appointment by Successor........................... 64
SECTION 10.11 Merger, Conversion, Consolidation or Succession to Business...... 64
ARTICLE XI
Supplemental Indentures and Amendments of Letter of Credit
----------------------------------------------------------
SECTION 11.01 Supplemental Indentures Without Consent of Noteholders........... 65
SECTION 11.02 Supplemental Indentures With Consent of Noteholders.............. 66
SECTION 11.03 Discretion of Trustee; Acts of Noteholders....................... 67
SECTION 11.04 Consent of Credit Obligor........................................ 67
SECTION 11.05 Execution of Supplemental Indentures............................. 67
SECTION 11.06 Effect of Supplemental Indentures................................ 68
SECTION 11.07 Reference in Notes to Supplemental Indentures.................... 68
SECTION 11.08 Amendment of Letter of Credit.................................... 68
ARTICLE XII
The Remarketing Agent
and the Tender Agent
--------------------
SECTION 12.01 Remarketing Agent................................................ 68
SECTION 12.02 Tender Agent..................................................... 70
ARTICLE XIII
Defeasance
----------
SECTION 13.01 Payment of Indebtedness; Satisfaction and Discharge
of Indenture.................................................. 71
SECTION 13.02 Trust for Payment of Debt Service................................ 72
TESTIMONIUM........................................................................... 73
SIGNATURES............................................................................ 73
</TABLE>
<PAGE>
ACKNOWLEDGMENTS....................................................... 74-75
EXHIBIT A
EXHIBIT B
EXHIBIT C
<PAGE>
TRUST INDENTURE
---------------
THIS TRUST INDENTURE dated June 1, 1999 is entered into by DISPLAY
TECHNOLOGIES, INC., a Nevada corporation (the "Issuer"), and SOUTHTRUST BANK,
NATIONAL ASSOCIATION, a national banking association with its principal office
in Birmingham, Alabama (the "Trustee").
Recitals
--------
The Issuer has duly authorized, executed and delivered this Indenture and
has duly authorized the creation, execution and delivery pursuant hereto of
Variable/Fixed Rate Secured Promissory Notes dated the date of delivery and
payment therefor (the "Notes") to provide financing for various corporate
purposes.
As security for the payment of the Notes, the Issuer will cause SouthTrust
Bank, National Association (in its capacity as issuer of the initial letter of
credit referred to below, the "Credit Obligor") to issue an irrevocable letter
of credit in favor of the Trustee in the amount of (i) the aggregate principal
amount of the Notes, to enable the Trustee to pay the principal amount of the
Notes when due and to pay the principal portion of the purchase price of Notes
tendered (or deemed tendered) for purchase, plus (ii) interest on the Notes for
a period of 56 days at the rate of 12% per annum, to enable the Trustee to pay
interest on the Notes when due and to pay the interest portion of the purchase
price of Notes tendered (or deemed tendered) for purchase. The initial letter
of credit to be delivered to the Trustee and any substitute letter of credit
delivered to the Trustee pursuant to this Indenture are herein referred to as
the "Letter of Credit". The initial Letter of Credit is issued pursuant to
certain credit and security agreements between the Credit Obligor and the Issuer
which set forth and provide security for the obligations of the Issuer to
reimburse the Credit Obligor for all amounts drawn under the initial Letter of
Credit.
All things have been done which are necessary to make the Notes, when
executed by the Issuer and authenticated and delivered by the Trustee hereunder,
the valid obligations of the Issuer, and to constitute this Indenture a valid
trust indenture for the security of the Notes, in accordance with the terms of
the Notes and this Indenture.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
It is hereby covenanted and declared that all of the Notes are to be
authenticated and delivered and the property subject to this Indenture is to be
held and applied by the Trustee, subject to the covenants, conditions and trusts
hereinafter set forth, and the Issuer does hereby covenant and agree to and with
the Trustee, for the equal and proportionate benefit (except as otherwise
expressly provided herein) of all Holders (as hereinafter defined) of the Notes,
as follows:
<PAGE>
ARTICLE I
Definitions and Other Provisions
of General Application
------------------------------
SECTION 1.01 Definitions
-----------
For all purposes of this Indenture, except as otherwise expressly provided
or unless the context otherwise requires:
(1) The terms defined in this Article shall have the meanings assigned
in this Article. Singular terms shall include the plural as well as the
singular, and vice versa. Any pronoun shall include both singular and
plural and cover all genders.
(2) All accounting terms not otherwise defined herein have the
meanings assigned to them, and all computations herein provided for shall
be made, in accordance with generally accepted accounting principles. All
references herein to "generally accepted accounting principles" refer to
such principles as they exist at the date of application thereof.
(3) All references in this instrument to designated "Articles",
"Sections" and other subdivisions are to the designated Articles, Sections
and subdivisions of this instrument as originally executed.
(4) The terms "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
(5) The term "person" shall include any individual, corporation,
general or limited partnership, limited liability company or partnership,
joint venture, association, trust, unincorporated organization and any
government or any agency or political subdivision thereof.
Act, when used with respect to any Noteholder, has the meaning stated in
---
Section 1.02.
Act of Bankruptcy shall mean the filing of a petition in bankruptcy (or the
-----------------
other commencement of a bankruptcy or similar proceeding) by or against the
Issuer or the Issuer under any applicable bankruptcy, insolvency,
reorganization, or similar law, now or hereafter in effect.
Affiliate of any specified person shall mean any other person directly or
---------
indirectly controlling or controlled by or under direct or indirect common
control with such specified person. For purposes of this definition, "control"
when used with respect to any specified person means the power to direct the
management and policies of such person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
2
<PAGE>
Authorized Denomination or Denominations means with respect to all Notes
----------------------------------------
(i) during any Variable Rate Period the amount of $100,000 and any integral
multiple of $5,000 in excess thereof and (ii) during any Fixed Rate Period the
amount of $5,000 and any integral multiple thereof for each maturity.
Authorized Issuer Representative shall mean any officer of the Issuer or
--------------------------------
any agent of the Issuer authorized by the Issuer to act as "Authorized Issuer
Representative" for purposes of this Indenture and identified as such in writing
delivered to the Trustee.
Beneficial Owner shall have the meaning set forth in Section 4.03.
----------------
Board of Directors shall mean the board of directors of the Issuer as
------------------
constituted from time to time.
Book-Entry System means a book-entry only system of evidence of purchase
-----------------
and transfer of beneficial ownership interests in the Notes.
Business Day shall mean any day other than (1) a Saturday, a Sunday or (2)
------------
a day on which the payment system of the Federal Reserve System is not
operational, or (3) a day on which banking institutions are required or
authorized to remain closed in any of the following locations: (i) the city in
which the Principal Office of the Trustee is located, (ii) the city in which the
principal office of the Remarketing Agent is located, (iii) the city in which
the office of the Credit Obligor where drawings under the Letter of Credit are
to be made is located, or (iv) the City of New York, New York.
Conversion Date shall mean the first day of any Fixed Rate Period.
---------------
Credit Documents shall mean collectively that certain Credit Agreement
----------------
dated the date of execution and delivery among the Credit Obligor and the Issuer
and all agreements, documents, guaranties, instruments, notes, notices, and
other writings executed and delivered by the Issuer or any other person or
persons which evidence, guarantee or provide security for the obligations of the
Issuer with respect to the Letter of Credit, including any amendments or
supplements to any thereof from time to time entered into pursuant to the
applicable provisions thereof, until a Substitute Letter of Credit shall have
been accepted by the Trustee, and thereafter "Credit Documents" shall mean
collectively all agreements, documents, guaranties, instruments, notes, notices,
and other writings which evidence, guarantee or provide security for the
obligations of the Issuer with respect to such Substitute Letter of Credit.
Credit Obligor shall mean SouthTrust Bank, National Association, a national
--------------
banking association, and its successors and assigns, until a Substitute Letter
of Credit shall have been accepted by the Trustee, and thereafter "Credit
Obligor" shall mean the issuer of such Substitute Letter of Credit.
Credit Obligor Indebtedness shall mean all indebtedness or obligations of
---------------------------
the Issuer to the Credit Obligor under the Credit Documents including without
limitation (i) the Issuer's obligation
3
<PAGE>
to reimburse the Credit Obligor for draws made under the Letter of Credit and
(ii) the Issuer's obligation to pay fees and charges for the issuance and
continuation of the Letter of Credit.
Credit Obligor Insolvency Date shall mean the date on which the Credit
------------------------------
Obligor notifies the Trustee in writing, or the date on which the Trustee is
notified in writing by the Issuer, or any Governmental Authority, that (i) a
receiver or conservator of the Credit Obligor or of any of the respective
properties or assets thereof shall have been appointed by any Governmental
Authority, or (ii) possession of the property and business of the Credit Obligor
shall have been taken by any Governmental Authority, or (iii) the Credit Obligor
shall have taken advantage of any reorganization, liquidation or dissolution law
or statute, or (iv) if corporate action shall have been taken by the Credit
Obligor for the purpose of effecting any of the foregoing.
Debt Service shall mean the principal of, premium (if any) and interest
------------
payable on the Notes.
Defaulted Interest shall have the meaning stated in Section 4.04.
------------------
Direct Participant or Direct Participants means securities brokers and
------------------ -------------------
dealers, banks, trust companies and clearing corporations which have access to
the Book-Entry System.
Event of Default shall have the meaning stated in Article IX. An Event of
----------------
Default shall "exist" if an Event of Default shall have occurred and be
continuing.
Existing Letter of Credit means the Letter of Credit held by the Trustee at
-------------------------
the time a Substitute Letter of Credit is delivered to the Trustee.
Federal Securities shall mean any of the following so long as the same are
------------------
not subject to prepayment or redemption at the option of the issuer: direct
obligations of, or obligations the timely payment of the principal of and
interest on which is fully guaranteed by, the United States of America.
Financing Documents shall mean collectively the Notes, Indenture, the
-------------------
Credit Documents, the Remarketing Agreement and the Letter of Credit.
Fixed Rate shall mean the fixed interest rate borne by the Notes during a
----------
Fixed Rate Period, more particularly described in Section 3.03.
Fixed Rate Interest Payment Date shall mean a date on which interest
--------------------------------
calculated according to the Fixed Rate is payable on the Notes, more
particularly described in Section 3.01(i).
Fixed Rate Period shall mean a period specified by the Issuer during which
-----------------
the Notes shall bear interest at a fixed rate per annum, more particularly
described in Section 3.03.
Fully Paid, (i) when used with respect to Indenture Indebtedness, shall
----------
have the meaning stated in Section 13.01, and (ii) when used with respect to
Credit Obligor Indebtedness, shall mean that all indebtedness under the Credit
Documents has been paid.
4
<PAGE>
Governmental Authority shall mean any federal, state, county, municipal, or
----------------------
other government, domestic or foreign, and any agency, authority, department,
commission, bureau, board, court or other instrumentality thereof, having
jurisdiction in the premises.
Holder when used with respect to any Note shall mean the Noteholder with
------
respect to such Note.
Indebtedness shall mean collectively Indenture Indebtedness and Credit
------------
Obligor Indebtedness.
Indenture shall mean this instrument as originally executed or as it may
---------
from time to time be supplemented, modified or amended by one or more indentures
or other instruments supplemental hereto entered into pursuant to the applicable
provisions hereof.
Indenture Indebtedness shall mean all indebtedness of the Issuer at the
----------------------
time secured by this Indenture, including without limitation (i) all Debt
Service and (ii) all reasonable and proper fees, charges, expenses, and
disbursements of the Trustee for services performed and disbursements made under
this Indenture.
Independent, when used with respect to any person, shall mean a person who
-----------
(i) is in fact independent, (ii) does not have any direct financial interest or
any material indirect financial interest in the Issuer, the Credit Obligor, or
in any other obligor with respect to the Notes or in any Affiliate of the
Issuer, the Credit Obligor, or of such other obligor, and (iii) is not connected
with the Issuer, the Credit Obligor, or such other obligor as an officer, in-
house attorney, employee, promoter, underwriter, trustee, partner, director or
person performing similar functions.
Indirect Participant means a broker, dealer, bank or other financial
--------------------
institution for which the Securities Depository holds Notes as securities
depository through a Direct Participant.
Interest Payment Date, when used with respect to any installment of
---------------------
interest on a Note, means the date specified in such Note as the fixed date on
which such installment of interest is due and payable.
Internal Revenue Code shall mean whichever of the following shall be
---------------------
applicable in the context: the Internal Revenue Code of 1954, as amended; the
Internal Revenue Code of 1986, as amended; and the transition rules of related
legislation.
Issuer shall mean Display Technologies, Inc., a Nevada corporation and the
------
respective successors and assigns thereof, and thereafter "Issuer" shall mean
such persons.
Letter of Credit shall mean collectively the initial letters of credit
----------------
delivered to the Trustee on the date of delivery of the Notes, and, unless the
context or use indicates another or different meaning of intent, any Substitute
Letter of Credit accepted by the Trustee.
5
<PAGE>
Letter of Representation shall mean and include (i) the Letter of
------------------------
Representation with respect to the Notes by the Issuer to the Securities
Depository and (ii) any other or subsequent agreement with respect to the Notes
among said parties by whatever name or identification.
Mandatory Tender shall mean a tender of Notes required by Section 3.05.
----------------
Mandatory Tender Date shall mean a date on which any Mandatory Tender is
---------------------
required, more particularly described in Section 3.05.
Maximum Rate shall mean the lesser of (i) the rate of 12% per annum or (ii)
------------
for any period during which the Notes are supported by a Letter of Credit, the
maximum rate per annum, specified therein, upon which there has been calculated
the amount available to be drawn on such Letter of Credit to pay interest on the
Notes.
Note shall mean any note authenticated and delivered pursuant to this
----
Indenture.
Note Counsel shall mean counsel with experience in matters relating to the
------------
issuance of obligations by or on behalf of states or local governmental units
who shall not be unacceptable to the Issuer and the Trustee.
Note Fund shall mean the fund established pursuant to Section 7.01.
---------
Noteholder when used with respect to any Note shall mean the person in
----------
whose name such Note is registered in the Note Register (which, during the time
the Book-Entry System is in effect for the Notes, shall be the Securities
Depository or the Securities Depository Nominee).
Note Payment Date shall mean each date (including any date fixed for
-----------------
optional or mandatory redemption of Notes) on which Debt Service is due and
payable on the Notes.
Note Purchase Fund shall mean the fund established pursuant to Section
------------------
7.02.
Note Register shall mean the register or registers for the registration and
-------------
transfer of Notes maintained by the Issuer pursuant to Section 4.01.
Note Registrar shall mean the agent of the Issuer appointed as such
--------------
pursuant to Section 4.01 for the purpose of registering Notes and transfers of
Notes.
Notes shall mean the Variable/Fixed Rate Secured Promissory Notes,
-----
authorized to be issued pursuant to Section 3.01.
Opinion of Counsel shall mean a written opinion of counsel who may (except
------------------
as otherwise expressly provided in this Indenture) be counsel for the Credit
Obligor and which opinion shall not be unacceptable to the Trustee.
6
<PAGE>
Opinion of Note Counsel shall mean a written opinion of Note Counsel, which
-----------------------
opinion is not unacceptable to the Trustee.
Optional Tender shall mean a tender of Notes at the option of the Holder
---------------
thereof pursuant to Section 3.04.
Optional Tender Date shall mean any date on which Notes are to be purchased
--------------------
pursuant to an Optional Tender.
Outstanding when used with respect to Notes shall mean, as of the date of
-----------
determination, all Notes authenticated and delivered under this Indenture,
except:
(1) Notes canceled by the Trustee or delivered to the Trustee for
cancellation,
(2) Notes for the payment of which (either at maturity or upon prior
redemption) money in the necessary amount has been deposited with the
Trustee in trust for the Holders of such Notes, provided that, if such
Notes are to be redeemed, notice of such redemption has been duly given
pursuant to this Indenture or provision therefor satisfactory to the
Trustee has been made,
(3) Unsurrendered Notes for the purchase of which money in the
necessary amount has been deposited in the Note Purchase Fund and is held
in trust for the Holders of such Unsurrendered Notes, and
(4) Notes in exchange for or in lieu of which other Notes have been
authenticated and delivered under this Indenture;
provided, however, that in determining whether the Holders of the requisite
principal amount of Notes Outstanding have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Notes owned by
the Issuer or any other obligor with respect to the Notes or any Affiliate of
the Issuer or of such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Notes which the Trustee knows to be so owned shall be
disregarded. Notes so owned which have been pledged in good faith (including
Pledged Notes) may be regarded as Outstanding for such purposes if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to act
with respect to such Notes and that the pledgee is not the Issuer or any other
obligor with respect to the Notes or any Affiliate of the Issuer, or of such
other obligor.
Paying Agent shall mean the Trustee and any other person authorized by the
------------
Issuer to pay Debt Service on any Notes on behalf of the Issuer.
Pledged Notes shall mean Notes purchased pursuant to the Optional Tender or
-------------
Mandatory Tender provisions of this Indenture with money drawn under the Letter
of Credit and held by the Tender Agent or Trustee for the benefit of, or
registered in the name of, the Credit Obligor, as
7
<PAGE>
pledgee, pursuant to 3.06 of this Indenture and pursuant to any provision of the
Credit Documents with respect thereto.
Post-Default Rate shall mean (i) when used with respect to any payment of
-----------------
Debt Service on any Note, the rate specified in such Note for overdue
installments of Debt Service on such Note, computed as provided in such Note,
and (ii) when used with respect to all other payments due under this Indenture,
the rate of 9% per annum (computed on the basis of a 360-day year with 12 months
of 30 days each).
Principal Office of the Tender Agent shall mean the office where the Tender
------------------------------------
Agent maintains its principal office.
Principal Office of the Trustee shall mean the office where the Trustee
-------------------------------
maintains its principal corporate trust office in Birmingham, Alabama, or such
other office as shall be designated by the Trustee by written notice to the
Issuer, the Credit Obligor and the Holders of the Notes.
Qualified Investments shall mean:
---------------------
(1) Federal Securities,
(2) an interest in any trust or fund that invests solely in
obligations described in (1) or (4) of this definition (including without
limitation any fund or funds managed by the Trustee or any affiliate
thereof or person related thereto),
(3) a certificate of deposit or time deposit issued by (i) the
Trustee, or (ii) any other bank organized under the laws of the United
States of America or any state thereof with capital, surplus and undivided
profits of not less than $50,000,000, provided in each case such deposit is
insured by the Federal Deposit Insurance Corporation, or such deposit is
collaterally secured by the issuing bank by pledging Federal Securities
having a market value (exclusive of accrued interest) not less than the
face amount of such certificate less the amount of such deposit insured by
the Federal Deposit Insurance Corporation, and
(4) a repurchase agreement with respect to Federal Securities,
provided that the Federal Securities subject to such repurchase agreement
are held by or under the control of the Trustee free and clear of third-
party liens, and
(5) any other investment permitted by law.
Rating Agency shall mean any nationally recognized securities rating
-------------
agency.
Regular Record Date shall mean (i) with respect to any Variable Rate
-------------------
Interest Payment Date, the day immediately prior to such Interest Payment Date,
(ii) with respect to any Fixed Rate Interest Payment Date for a Fixed Rate
Period of less than 6 months, the day immediately prior to such Fixed Rate
Interest Payment Date, and (iii) with respect to any Fixed Rate Interest Payment
Date for a
8
<PAGE>
Fixed Rate Period of 6 months or more, the 15th day (whether or not a Business
Day) next preceding such Fixed Rate Interest Payment Date.
Remarketing Agent shall mean the person appointed as "Remarketing Agent"
-----------------
pursuant to Section 12.01, until a successor Remarketing Agent shall have become
such pursuant to the applicable provisions of this Indenture, and thereafter
"Remarketing Agent" shall mean such successor.
Remarketing Agreement shall mean that certain Remarketing Agreement dated
---------------------
as of June 1, 1999 among the Issuer and the Remarketing Agent.
Securities Depository means The Depository Trust Company, a limited purpose
---------------------
trust company organized under the laws of the State of New York, and the
successors and assigns thereof, and any substitute securities depository
therefor that maintains a Book-Entry System for the Notes.
Securities Depository Nominee means the Securities Depository or the
-----------------------------
nominee of such Securities Depository in whose name there shall be registered on
the Note Register the Notes to be delivered to such Securities Depository during
a period in which the Notes are held pursuant to the Book-Entry System.
Special Funds shall mean the Proceeds Fund created in Article VI (b), the
-------------
Note Fund, the Note Purchase Fund, and any other fund or account established
pursuant to this Indenture.
Special Record Date for the payment of any Defaulted Interest on the Notes
-------------------
means a date fixed by the Trustee pursuant to Section 4.04.
Stated Expiration Date shall mean the date on which the Letter of Credit
----------------------
will, by its terms, expire unless the Letter of Credit is terminated on an
earlier date in accordance with its terms.
Substitute Letter of Credit shall mean a letter of credit delivered to the
---------------------------
Trustee in substitution for an Existing Letter of Credit then held by the
Trustee, as more particularly described in Section 3.10.
Tender Agent shall mean any person appointed as "Tender Agent" pursuant to
------------
Section 12.02, until a successor Tender Agent shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Tender Agent" shall
mean such successor.
Tender Date shall mean an Optional Tender Date or a Mandatory Tender Date,
-----------
as the case may be.
Tendered Notes shall mean Notes tendered (or deemed tendered) for purchase
--------------
pursuant to the Optional Tender or Mandatory Tender provisions of this
Indenture.
Trust Estate shall have the meaning stated in the habendum to the granting
------------
clauses to this Indenture.
9
<PAGE>
Trustee shall mean SouthTrust Bank, National Association, a national
-------
banking association with its principal office in Birmingham, Alabama, until a
successor Trustee shall have become such pursuant to the applicable provisions
of this Indenture, and thereafter "Trustee" shall mean such successor.
Unsurrendered Note shall mean Notes (or portions thereof in authorized
------------------
denominations) which are deemed purchased pursuant to Optional Tender or
Mandatory Tender provisions hereof, but which have not been presented to the
Trustee by the Holders thereof; provided, any Note which the Holder thereof
elects to retain under Section 3.05(c) shall not be an Unsurrendered Note for
purposes of this Indenture.
Variable Rate shall mean the variable interest rate borne by the Notes
-------------
during a Variable Rate Period, more particularly described in Section 3.02.
Variable Rate Interest Payment Date shall mean a date on which interest
-----------------------------------
calculated at the Variable Rate is payable on the Notes, more particularly
described in Section 3.01(i).
Variable Rate Period shall mean a period during which the Notes bear
--------------------
interest at the Variable Rate, more particularly described in Section 3.02.
SECTION 1.02 Acts of Noteholders
-------------------
(a) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Indenture to be given, made or taken by
Noteholders may be embodied in and evidenced by one or more substantially
concurrent instruments of substantially similar tenor signed by such Noteholders
in person or by an agent duly appointed in writing; and, except as herein
otherwise expressly provided, such action shall become effective when such
instrument or instruments are delivered to the Trustee, and, where it is hereby
expressly required, to the Issuer. Such instrument or instruments (and the
action embodied therein and evidenced thereby) are herein sometimes referred to
as the "Act" of the Noteholders signing such instrument or instruments. Proof
of execution of any such instrument or of a writing appointing any such agent,
or of the holding by any person of Notes, shall be sufficient for any purpose of
this Indenture and conclusive in favor of the Issuer and (subject to Section
10.01) in favor of the Trustee, if made in the manner provided in this Section.
(b) The fact and date of the execution by any person of any such instrument
or writing may be proved by the affidavit of a witness of such execution or by
the certificate of any notary public or other officers authorized by law to take
acknowledgments of deeds, certifying that the individual signing such instrument
or writing acknowledged to him the execution thereof. Whenever such execution
is by an officer of a corporation or a member of a partnership, or limited
liability company or partnership, on behalf of any thereof, such certificate or
affidavit shall also constitute sufficient proof of the authority thereof.
(c) The ownership of Notes shall be proved by the Note Register.
10
<PAGE>
(d) Any request, demand, authorization, direction, notice, consent, waiver
or other action by the Holder of any Note shall bind every future Holder of the
same Note and the Holder of every Note issued upon the transfer thereof or in
exchange therefor or in lieu thereof, in respect of anything done or suffered to
be done by the Trustee or the Issuer in reliance thereon, whether or not
notation of such action is made upon such Note.
SECTION 1.03 Form and Contents of Documents Delivered to Trustee
---------------------------------------------------
(a) Whenever several matters are required to be certified by, or covered by
an opinion of, any specified person, it is not necessary that all such matters
be certified by, or covered by the opinion of, only one such person, or that
they be so certified or covered by only one document, but one such person may
certify or give an opinion with respect to some matters and one or more other
such persons as to other matters, and any such person may certify or give an
opinion as to such matters in one or several documents.
(b) Any certificate or opinion of an officer of the Issuer or of an officer
of the Issuer may be based, insofar as it relates to legal matters, upon a
certificate or opinion of, or representations by, counsel, unless such person
knows, or in the exercise of reasonable care should know, that the certificate
or opinion or representations with respect to the matters upon which his
certificate or opinion is based are erroneous. Any Opinion of Counsel may be
based, insofar as it relates to factual matters, upon a certificate or opinion
of, or representations by, an Authorized Issuer Representative stating that the
information with respect to such factual matters is in the possession of the
Issuer unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
(c) Whenever any person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
(d) Wherever in this Indenture, in connection with any application or
certificate or report to the Trustee, it is provided that the Issuer or the
Issuer shall deliver any document as a condition of the granting of such
application, or as evidence of the Issuer's or Issuer's compliance with any term
hereof, it is intended that the truth and accuracy, at the time of the granting
of such application or at the effective date of such certificate or report (as
the case may be), of the facts and opinions stated in such document shall in
such case be conditions precedent to the right of the Issuer or Issuer to have
such application granted or to the sufficiency of such certificate or report.
SECTION 1.04 Compliance Certificates and Opinions
------------------------------------
(a) Upon any application or request by the Issuer to the Trustee to take
any action under any provision of this Indenture, the Issuer, shall furnish to
the Trustee a certificate signed by an Authorized Issuer Representative stating
that all conditions precedent, if any, provided for in this Indenture relating
to the proposed action have been complied with and an Opinion of Counsel stating
that in the opinion of such counsel all such conditions precedent, if any, have
been complied with, except that in the case of any such application or request
as to which the furnishing of such
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documents is specifically required by any provision of this Indenture relating
to such particular application or request, no additional certificate or opinion
need be furnished.
(b) Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include
(1) a statement that each individual signing such certificate or
opinion has read such condition or covenant and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he or
she has made such examination or investigation as is necessary to enable
such individual to express an informed opinion as to whether or not such
condition or covenant has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 1.05 Effect of Headings and Table of Contents
----------------------------------------
The Article and Section headings herein and in the Table of Contents are
for convenience only and shall not affect the construction hereof.
SECTION 1.06 Date of Indenture
-----------------
The date of this Indenture is intended as and for a date for the convenient
identification of this Indenture and is not intended to indicate that this
Indenture was executed and delivered on said date.
SECTION 1.07 Enforceability
--------------
If any provision in this Indenture or in the Notes shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
SECTION 1.08 Governing Law
-------------
This Indenture shall be construed in accordance with and governed by the
laws of the State of Alabama.
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SECTION 1.09 Counterparts
------------
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed an original, but all such counterparts shall
together constitute but one and the same instrument.
SECTION 1.10 Notices
-------
(a) Any request, demand, authorization, direction, notice, consent, waiver
or Act of Noteholders or other document provided or permitted by this Indenture
to be made upon, given or furnished to, or filed with, the Issuer, the Trustee,
the Tender Agent, the Remarketing Agent, or the Credit Obligor shall be
sufficient for every purpose hereunder if in writing and (except as otherwise
provided in this Indenture) (i) delivered personally to the party or, if such
party is not an individual, to an officer or other legal representative of the
party to whom the same is directed, at the address specified below, (ii) mailed
by first-class, registered or certified mail, postage prepaid, addressed as
specified below, or (iii) sent by telex or telecopy or other facsimile
transmission system to the number specified below. The hand delivery and
mailing address and telex or telecopy number for the parties are as follows:
Trustee
- -------
SouthTrust Bank, National Association
Corporate Trust Department
110 Office Park Drive, 2/nd/ Floor (35223)
P.O. Box 2554 (35290)
Birmingham, Alabama
Telecopy number: 205/254-4180
Remarketing Agent
- -----------------
SouthTrust Securities, Inc.
112 North 20th Street
Birmingham, Alabama 35203
Telecopy number: 205/254-4989
Issuer
- ------
Display Technologies, Inc.
5029 Edgewater Drive
Orlando, Florida 32810
Telecopy number: (407) 521-8767
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Credit Obligor
- --------------
SouthTrust Bank, National Association
One Tampa City Center
201 N. Franklin Street
Ste 2950
Tampa, Florida 33602
Telecopy number: 813/222-0245
(b) Any of such parties may change the address or number for receiving any
such notice or other document by giving notice of the change to the other
parties named in this Section.
(c) Any notice or other document shall be deemed delivered when actually
received by the party to whom directed (or, if such party is not an individual,
to an officer or other legal representative of the party) at the address or
number specified pursuant to this Section, or, if sent by mail, 3 days after
such notice or document is deposited in the United States mail, first class
postage prepaid, addressed as provided above.
SECTION 1.11 Notices to Noteholders; Waiver
------------------------------
(a) Where this Indenture provides for publication of notice to Noteholders
of any event, such notice shall be sufficiently given (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage prepaid, or
sent by telecopy or other facsimile transmission system, to each Holder of such
Notes, at the address of such Holder as it appears in the Note Register, not
later than the latest date, and not earlier than the earliest date, prescribed
for the first publication of such notice.
(b) In any case where notice to Noteholders is given by mail, neither the
failure to mail such notice, nor any defect in any notice so mailed, to any
particular Noteholder shall affect the sufficiency of such notice with respect
to other Noteholders. Where this Indenture provides for notice in any manner,
such notice may be waived in writing by the person entitled to receive such
notice, either before or after the event, and such waiver shall be the
equivalent of such notice. Waivers of notice by Noteholders shall be filed with
the Trustee, but such filing shall not be a condition precedent to the validity
of any action taken in reliance upon such waiver.
SECTION 1.12 Concerning the Credit Obligor and the Letter of Credit
------------------------------------------------------
(a) No consent or direction or other exercise of discretion or control by
the Credit Obligor hereunder shall be required or permitted if the Letter of
Credit is no longer in effect or if the Credit Obligor has dishonored a draw
under the Letter of Credit or a Credit Obligor Insolvency Date shall have
occurred.
(b) Nothing contained in this Indenture shall be construed to require or
permit any consent or approval by the Credit Obligor for the performance by the
Trustee of its obligations under
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Sections 7.01, 7.02 or 9.02, with respect to draws under the Letter of Credit
and acceleration of the maturity of the Notes, except where such consent or
approval of the Credit Obligor is expressly required or permitted in any of such
Sections.
SECTION 1.13 Notice to Rating Agencies
-------------------------
The Trustee shall promptly furnish to each Rating Agency that maintains a
rating with respect to the Notes a notice of (i) any change of the Trustee, the
Remarketing Agent or the Tender Agent, (ii) any change or amendment of the
Indenture, or the Letter of Credit, (iii) the expiration or renewal or extension
or termination of the term of the Letter of Credit, or substitution of the
Letter of Credit, (iv) the conversion of the interest rate on the Notes to a
Fixed Rate, (v) the acceleration of payment of principal and interest on the
Notes pursuant to Section 9.02, (vi) the payment in full, or the redemption
prior to maturity, of all Notes Outstanding hereunder, or (vii) receipt of
notice of the Issuer's intent to establish a trust for the payment of the Notes
in accordance with Section 13.02.
SECTION 1.14 Successors and Assigns
----------------------
All covenants and agreements in this Indenture by the Issuer shall bind its
successors and assigns, whether so expressed or not.
SECTION 1.15 Benefits of Indenture
---------------------
Nothing in this Indenture or in the Notes, express or implied, shall give
to any person, other than the parties hereto and their successors hereunder, the
Holders of the Outstanding Notes, and the Credit Obligor, any benefit or any
legal or equitable right, remedy or claim under this Indenture.
ARTICLE II
Granting Clauses
----------------
To secure the payment of Debt Service on the Notes and all other Indenture
Indebtedness and the performance of the covenants contained herein and in the
Notes, and to declare the terms and conditions on which the Notes are secured,
and in consideration of the premises and of the purchase of the Notes by the
Holders thereof, the Issuer by these presents does hereby grant, bargain, sell,
alien, remise, release, convey, assign, transfer, mortgage, hypothecate, pledge,
set over and confirm unto the Trustee, and grant to the Trustee security title
to and a continuing security interest in, all and singular, the following
described property and all proceeds and products thereof:
I.
Money and investments from time to time on deposit in, or forming a part
of, the Special Funds, subject to the provisions of this Indenture permitting
the application thereof for the purposes and on the terms and conditions set
forth herein.
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II.
Any and all property of every kind or description which may, from time to
time hereafter, by delivery or by writing of any kind, be subjected to the lien
of this Indenture as additional security by the Issuer or anyone on its part or
with its written consent, or which pursuant to any of the provisions hereof may
come into the possession or control of the Trustee or a receiver appointed
pursuant to this Indenture; and the Trustee is hereby authorized to receive any
and all such property as and for additional security for the Notes and to hold
and apply all such property subject to the terms hereof;
TO HAVE AND TO HOLD all said property, rights and privileges of every kind
and description, real, personal or mixed, hereby and hereafter (by supplemental
indenture or otherwise) granted, bargained, sold, aliened, remised, released,
conveyed, assigned, transferred, mortgaged, hypothecated, pledged, set over or
confirmed as aforesaid, or intended, agreed or covenanted so to be, together
with all the appurtenances thereto appertaining (said property, rights and
privileges being herein called the "Trust Estate") unto the Trustee and its
------------
successors and assigns forever;
BUT IN TRUST, NEVERTHELESS, for the equal and proportionate benefit and
security of the Holders from time to time of the Notes without any priority of
any such Note over any other such Note;
PROVIDED, HOWEVER, that money collected by the Trustee pursuant to the
Letter of Credit shall be used solely for the purpose of paying Debt Service on
the Notes or the purchase price of Notes tendered for purchase pursuant to the
Optional Tender or Mandatory Tender provisions hereof.
ARTICLE III
The Notes
---------
SECTION 3.01 General Terms
-------------
(a) There is hereby authorized to be issued under and secured by this
Indenture a series of Notes in aggregate principal amount of $2,500,000 and
designated as provided in the form thereof set forth on Exhibit A hereto.
(b) No additional notes may be issued hereunder.
(c) The Notes shall be issued as registered notes, without coupons, in
Authorized Denominations, in substantially the form of Exhibit A to this
Indenture, with appropriate variations, omissions, insertions, notations,
legends or endorsements required by law or usage or permitted or required by
this Indenture. The Notes shall be numbered separately from 1 upward.
(d) The Notes shall mature on June 1, 2014 subject to the provisions of
Section 5.01(b).
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(e) The Notes shall be dated as of the date of initial delivery thereof
and shall bear interest from such date, or the most recent date to which
interest has been paid or duly provided for, at the applicable rate per annum
set forth in this Article.
(f) The Notes shall bear interest at the Variable Rate or at the Fixed
Rate, as provided in Sections 3.02 and 3.03.
(g) Interest at the Variable Rate and interest at a Fixed Rate for each
Fixed Rate Period of less than 6 months shall be computed on the basis of a 365
day year for the actual number of days elapsed. Interest at the Fixed Rate for
each Fixed Rate Period of 6 months or more shall be computed on the basis of a
360-day year with 12 months of 30 days each.
(h) Interest shall be payable on overdue principal on the Notes and (to
the extent legally enforceable) on any overdue installment of interest on the
Notes at the Post-Default Rate.
(i) Interest shall be payable in arrears on the following dates:
(1) with respect to interest payable at the Variable Rate, on (i) the
first day of each month (first interest payable July 1, 1999) of each year
during the Variable Rate Period and (ii) the day immediately following any
Variable Rate Period;
(2) with respect to interest payable at a Fixed Rate for any Fixed
Rate Period of less than 6 months, on the day immediately following such
Fixed Rate Period; and
(3) with respect to interest payable at a Fixed Rate for any Fixed
Rate Period of 6 months or more, (i) on the first day of the calendar month
that is 6 months after the first day of the calendar month in which such
Fixed Rate Period began, (ii) semiannually thereafter, and (iii) on the day
immediately following such Fixed Rate Period.
(j) Payment of interest on the Notes due on any Interest Payment Date
shall be made by check or draft mailed by the Trustee to the Noteholder or
Noteholders at the address thereof appearing in the Note Register. Such payments
of interest shall be deemed timely made if so mailed on the Interest Payment
Date (or, if such Interest Payment Date is not a Business Day, on the Business
Day next following such Interest Payment Date). Payment of principal of (and
premium, if any, on) the Notes and payment of accrued interest on the Notes due
upon redemption on any date other than an Interest Payment Date shall be made
only upon surrender thereof at the Principal Office of the Trustee or at the
office of any other Paying Agent therefor.
(k) Subsection (j) of this Section to the contrary notwithstanding, upon
the written request of the Holder of any Note in a principal amount of not less
than $100,000, the Trustee will make payment of the Debt Service due on such
Note by wire transfer to an account of such Holder maintained at a bank in the
continental United States or by any other method providing for payment in same-
day funds that is acceptable to the Trustee, provided that:
17
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(1) such written request contains adequate instructions for the method
of payment, and
(2) payment of the principal of (and redemption premium, if any, on)
such Note and payment of the accrued interest on such Note due upon
redemption on any date other than an Interest Payment Date shall be made
only upon surrender of such Note to the Trustee.
SECTION 3.02 Variable Rate
-------------
(a) The Notes shall initially bear interest at a Variable Rate. Upon the
expiration of any Fixed Rate Period for the Notes, such Notes shall bear
interest at the Variable Rate (unless the day immediately following such Fixed
Rate Period is a Conversion Date), and once the Variable Rate becomes effective,
it shall remain in effect until and including the day immediately prior to the
earlier of (i) a Conversion Date or (ii) the final maturity of the Notes.
(b) The Variable Rate shall be a fluctuating rate per annum determined by
the Remarketing Agent on the first day of each Variable Rate Period (beginning
upon initial issuance of the Notes and following a Fixed Rate Period) and on
each Thursday during a Variable Rate Period (or, if such Thursday is not a
Business Day, on the immediately preceding Business Day). The Variable Rate so
determined shall become effective (i) on the date of determination, if such date
is the first day of the Variable Rate Period, or (ii) if such date is not the
first day of a Variable Rate Period, on the day immediately following the date
of determination, and once effective shall remain in effect until and including
the next determination date or, if sooner, the end of such Variable Rate Period;
provided, however, that if the Remarketing Agent fails to determine the Variable
Rate on any such determination date, the last Variable Rate in effect shall
remain in effect until and including the next determination date, and provided
further, if the Remarketing Agent fails to determine the Variable Rate on two
consecutive determination dates therefor, the Variable Rate shall be equal to
the Maximum Rate until such determination date as the Remarketing Agent shall
determine the Variable Rate in accordance with the terms hereof.
(c) The Variable Rate shall be determined by the Remarketing Agent and
shall be the lowest interest rate that would, in the opinion of the Remarketing
Agent, result in the market value of the Notes being 100% of the principal
amount thereof on the date of such determination, taking into account relevant
market conditions and credit rating factors as they exist on such date;
provided, however, that the Variable Rate may never exceed the Maximum Rate. On
each Variable Rate determination date the Remarketing Agent shall deliver
written notice of the Variable Rate so determined to the Trustee, the Issuer.
Upon the request of any Noteholder, the Trustee shall confirm (by telephone and
in writing, if so requested) the Variable Rate then in effect.
(d) The Variable Rate determined from time to time by the Remarketing
Agent shall be conclusive and binding on the Issuer, the Trustee and the
Noteholders.
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SECTION 3.03 Fixed Rate
----------
(a) The Notes shall bear interest at a Fixed Rate during each period of
time specified by the Issuer as provided below in this Section. Upon the
expiration of a Fixed Rate Period, interest on the Notes will automatically
convert to a Variable Rate unless and until the Issuer elects to have the
interest rate converted to another Fixed Rate for a Fixed Rate Period designated
by the Issuer.
(b) The Fixed Rate shall be a fixed rate per annum which shall be
applicable during the entire Fixed Rate Period and for each Fixed Rate Period
shall be determined by the Remarketing Agent as provided below in this Section.
(c) The Issuer may elect that the Notes bear interest at a Fixed Rate for
any period after the initial Variable Rate Period by delivery of written notice
of such election to the Trustee not less than 45 days prior to the proposed
Conversion Date. Such notice shall specify the first day and the last day of
the Fixed Rate Period elected; provided, however, that (i) if such election is
made during a Fixed Rate Period, the specified Conversion Date may not be sooner
than the first day immediately following the Fixed Rate Period then in effect,
(ii) the Conversion Date may not be less than 45 days prior to the Stated
Expiration Date of the Letter of Credit (if any) then in effect, (iii) the
designated Fixed Rate Period may not be less than 15 days, and (iv) the Fixed
Rate Period may not extend beyond the day immediately prior to the final
maturity of the Notes. The Trustee shall deliver a copy of such notice to the
Remarketing Agent, the Tender Agent and the Credit Obligor on or before the
third following Business Day. Any such election by the Issuer shall be
irrevocable after 10:00 a.m. (Birmingham, Alabama time) on the last Business Day
immediately prior to the proposed Conversion Date.
(d) Not less than 1 nor more than 10 days prior to the proposed Conversion
Date the Remarketing Agent shall determine the interest rate for such Fixed Rate
Period, which shall be the lowest interest rate that would, in the opinion of
the Remarketing Agent, result in the market value of the Notes being 100% of the
principal amount thereof on the date of such determination, taking into account
relevant market conditions and credit rating factors as they exist on such date,
and assuming that the Fixed Rate Period begins on such date; provided, however,
that the Fixed Rate may not exceed the Maximum Rate. The Remarketing Agent
shall deliver written notice of the Fixed Rate or Rates to the Trustee and the
Issuer on the date the same are determined.
(e) Notwithstanding the foregoing, a Fixed Rate or Fixed Rates shall not
be established if (i) the Issuer delivers to the Trustee written notice of
revocation of its election to establish the Fixed Rate before 10:00 a.m.
(Birmingham, Alabama time) on the last Business Day immediately prior to the
proposed Conversion Date or (ii) prior to 10:00 a.m. (Birmingham, Alabama time)
on the Conversion Date the Trustee does not receive the Substitute Letter of
Credit (if any) that is to be effective on such Conversion Date.
(f) If all conditions to the establishment of a Fixed Rate or Fixed Rates
are not satisfied, the Notes shall continue (or, if a Fixed Rate Period ended on
the preceding day, shall begin) to bear interest at the Variable Rate from the
proposed Conversion Date.
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(g) The Fixed Rate or Rates determined by the Remarketing Agent shall be
conclusive and binding on the Issuer, the Trustee and the Noteholders.
SECTION 3.04 Optional Tender
---------------
(a) The Holder of any Note shall have the right to tender such Note to the
Trustee or Tender Agent for purchase in whole or in part (if in part, only in an
Authorized Denomination) on any Business Day during any Variable Rate Period,
but not during any Fixed Rate Period, at a purchase price equal to 100% of the
principal amount of Notes (or portions thereof) tendered plus accrued interest
to the specified purchase date. In order to exercise such option with respect
to any Note, the Holder thereof must deliver notice thereof to the Trustee, as
provided below in this Section, at its Principal Office at least 7 days prior to
the proposed Optional Tender Date.
(b) The written notice of Optional Tender must be substantially in the
form set forth on Exhibit C attached hereto, or in such other form as shall be
acceptable to the Trustee, and must be duly executed by the Noteholder and must
specify (i) the name of the registered Holder of the Note to be tendered for
purchase, (ii) the Optional Tender Date, (iii) the certificate number (if
applicable) and principal amount of such Note, and (iv) the principal amount of
such Note to be purchased (if such amount is less than the entire principal
amount, the amount to be purchased must be in an Authorized Denomination). Such
notice shall be given to the Trustee in writing or by telephone, but no such
telephonic notice shall be effective unless confirmed in writing delivered to
the Trustee not more than 2 Business Days after such telephonic notice.
(c) If any notice of Optional Tender specifies an Optional Tender Date
that is not a Business Day, then such notice shall be deemed to specify the next
following Business Day as the Optional Tender Date. Unless a notice of Optional
Tender indicates that less than the entire principal amount of the Note is being
tendered for purchase, the Holder will be deemed to have tendered the Note in
its entire principal amount for purchase.
(d) Not later than 3:00 p.m. (Birmingham, Alabama time) on the Business
Day after receipt of any such telephonic or written notice of Optional Tender
the Trustee shall deliver written notice to the Tender Agent, the Remarketing
Agent, the Issuer and the Credit Obligor specifying (i) the principal amount of
Notes for which a notice of Optional Tender has been given and (ii) the proposed
Optional Tender Date therefor.
(e) Upon delivery of a written notice of Optional Tender, the election to
tender shall be irrevocable and binding upon such Holder and may not be
withdrawn. The Trustee shall, in its sole discretion, determine whether, with
respect to any Note, the Holder thereof shall have properly exercised the option
to have his Note or any authorized part thereof purchased pursuant to this
Section.
(f) If a written notice of tender shall have been duly given with respect
to any Note or any authorized part thereof, the Holder of such Note shall
deliver such Note to the Trustee at its Principal Office or to the Tender Agent
at its Principal Office at or before 10:00 a.m. (Birmingham, Alabama time) on
the Optional Tender Date, together with an instrument of assignment or transfer
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duly executed in blank (which instrument of assignment or transfer shall be in
the form provided on such Note or in such other form as shall be acceptable to
the Trustee or the Tender Agent). During a period in which the Book-Entry
System is in effect for the Notes, transfers of the beneficial ownership
interests in the Notes on such date shall be effected on the records of the
Securities Depository by the Securities Depository in accordance with rules and
procedures therefor and any requirement for physical delivery of Notes on an
Optional Tender Date shall be deemed satisfied thereby. Any Note or any
authorized part thereof for which a notice of Optional Tender has been given but
which is not so delivered to the Trustee or Tender Agent or transferred on the
records of the Securities Depository shall nevertheless be deemed to have been
tendered by the Holder thereof on the Optional Tender Date.
(g) On each Optional Tender Date the Trustee shall purchase, or cause to
be purchased, all Notes or any authorized part thereof as to which written
notices of Optional Tender for purchase have been received at a purchase price
equal to 100% of the principal amount thereof plus accrued interest to the
Optional Tender Date. Funds for payment of the purchase price of such Notes or
such parts shall be drawn by the Trustee from the Note Purchase Fund as provided
in Section 7.02.
(h) If there has been irrevocably deposited in the Note Purchase Fund an
amount sufficient to pay the purchase price of all Notes or authorized parts
thereof tendered or deemed to be tendered for purchase on an Optional Tender
Date, any Unsurrendered Notes shall be deemed to have been tendered for purchase
and purchased from the Holder thereof on such Optional Tender Date and the
Holder of any Unsurrendered Note shall not be entitled to receive interest on
such Unsurrendered Note for any period on and after the Optional Tender Date.
The Trustee shall issue a new Note or Notes in the same aggregate principal
amount for any Unsurrendered Notes which are not tendered for purchase on any
Optional Tender Date and, upon receipt by the Trustee or Tender Agent of any
such Unsurrendered Notes from the Holders thereof, shall pay, or cause to be
paid, the purchase price of such Unsurrendered Notes to the Holders thereof and
cancel such Unsurrendered Notes.
(i) Anything in this Indenture to the contrary notwithstanding, no
Optional Tender of Notes shall be permitted for Pledged Notes or for any Note
which is deemed Fully Paid.
SECTION 3.05 Mandatory Tender
----------------
(a) The Holder of each Note other than a Pledged Note or a Note that has
been deemed Fully Paid shall be required to tender such Note to the Trustee or
Tender Agent for purchase on the following dates; provided, however, if any of
such dates is not a Business Day, the Mandatory Tender Date shall be deemed to
be the next succeeding Business Day; provided further, however, each such Holder
may elect to retain the Note or Notes thereof by written notice meeting the
requirements of subsection 3.05(c) delivered to the Principal Office of the
Trustee not less than five days prior to the Mandatory Tender Date:
(1) each proposed Conversion Date,
(2) the date immediately following the expiration of a Fixed Rate
Period,
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(3) the first day of the calendar month in which the Stated
Expiration Date of the Letter of Credit occurs, unless a Substitute Letter
of Credit and Related Documentation all meeting the requirements of this
Indenture therefor is delivered to the Trustee in accordance with the terms
of Section 3.10 of this Indenture,
(4) a Credit Obligor Insolvency Date,
(5) that date which is 15 days prior to the effective date of any
change in the frequency with which or the formula by which the interest
rate on the Notes is established during a Variable Rate Period,
(6) that date which is 15 days prior to the effective date of any
change in the optional tender terms of the Notes during a Variable Rate
Period, and
(7) that date which is 10 days after the Trustee receives a notice in
writing from the Credit Obligor, which notice (i) is delivered not later
than the close of business on the tenth day (if such tenth day is not a
Business Day, on the then next succeeding Business Day) after the date on
which the Credit Obligor has honored a B Drawing under the Letter of Credit
and (ii) states that the Interest Portion (as defined in the Letter of
Credit) will not be reinstated or that an Event of Default has occurred and
is continuing under the Credit Documents and (iii) directs the Trustee to
effect Mandatory Tender of the Notes on such date; provided, however, the
-----------------
Trustee shall not effect a Mandatory Tender of any Bond under this Section
4.05(a)(7) unless the Trustee verifies, prior to delivery of notice
pursuant to Section 4.05(b)(1)(ii), that the amount of the Interest Portion
(as defined in the Letter of Credit) under the Letter of Credit shall then
equal or exceed the amount necessary to pay interest accrued on such Bond
until and including the proposed Mandatory Tender Date, and if the amount
of said Interest Portion is then insufficient for such purpose, the Trustee
shall immediately notify the Credit Obligor thereof in writing, and shall
declare an Event of Default under Section 9.01(5) or Section 9.01(6) hereof
effective as of the date of receipt of the notice from the Credit Obligor
pursuant to this Section 4.05(a)(7).
(b) (1) Notice of a Mandatory Tender shall be given by the Trustee in
writing to the Tender Agent, the Remarketing Agent, the Issuer, and the Credit
Obligor and in writing by registered or certified mail to the Noteholder or
Noteholders at the address thereof appearing on the Note Register
(i) not less than 30 days prior to the Mandatory Tender Date
with respect to a Mandatory Tender pursuant to any of Section
3.05(a)(1) through Section 3.05(a)(6), inclusive, and
(ii) not less than 7 days prior to the Mandatory Tender Date with
respect to a Mandatory Tender pursuant to Section 3.05(a)(7).
(2) Such notice of Mandatory Tender shall
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(i) specify the Mandatory Tender Date,
(ii) state the reason for the Mandatory Tender (being the applicable
event listed in subsection (a) of this Section), and whether the then
Existing Letter of Credit or a Substitute Letter of Credit will be in
effect following the Mandatory Tender Date,
(iii) state that all Notes shall be tendered by the Holders thereof on
such Mandatory Tender Date by appropriate transfer on the records of the
Securities Depository or by delivery to the Trustee at its Principal Office
or to the Tender Agent at its Principal Office at or before 10:00 a.m.
(Birmingham, Alabama time) together with an instrument of assignment or
transfer duly executed in blank (which instrument of assignment or transfer
shall be in the form provided in the Notes or such other form as shall be
acceptable to the Trustee or Tender Agent),
(iv) state that all Notes shall be purchased on the Mandatory Tender
Date at a purchase price equal to 100% of the principal amount thereof plus
accrued interest, if any, to the Mandatory Tender Date, and any Note that
is not so transferred on the records of the Securities Depository or so
delivered to the Trustee or Tender Agent shall be deemed to have been
tendered for purchase by the Holder thereof on the Mandatory Tender Date,
(v) state that any Holder may elect to retain the Note or Notes
thereof by written notice meeting the requirements of subsection 3.05(c) (a
description of which requirements shall be included in such notice)
delivered to the Principal Office of the Trustee not less than five days
prior to the Mandatory Tender Date.
(c)(1) The Holder of any Note subject to a Mandatory Tender pursuant to
Section 3.05(a)(1) through 3.05(a)(6), inclusive, may elect to retain the Note
or Notes thereof by written notice delivered to the Principal Office of the
Trustee not less than five days prior to the Mandatory Tender Date, which notice
shall be effective upon receipt and shall:
(i) state that the person delivering the same is a Holder and
the principal amount of the Notes such Holder is electing to retain,
(ii) state that the Holder has received notice of the Mandatory
Tender and the reason therefor,
(iii) direct the Trustee not to purchase the specified principal
amount of the Notes of the Holder.
(2) Any notice delivered to the Trustee by any Holder pursuant to this
subsection 3.05(c) shall be irrevocable and binding upon the Holder delivering
the same and upon all subsequent Holders of the Notes so retained (including any
Notes issued in exchange therefor or upon transfer thereof).
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<PAGE>
(3) Any Note which the Holder thereof elects to retain under this
subsection 3.05(c) shall not be an "Unsurrendered Note" for purposes of this
Indenture.
(d) All Notes to be tendered by the Holders thereof for purchase shall be
delivered at or before 10:00 a.m. (Birmingham, Alabama time) on the Mandatory
Tender Date, to the Trustee at its Principal Office or to the Tender Agent at
its Principal Office, together with an instrument of assignment or transfer duly
executed in blank (which instrument of assignment or transfer shall be in the
form provided in the Notes or such other form as shall be acceptable to the
Trustee or Tender Agent). During a period in which the Book-Entry System is in
effect for the Notes, transfers of the beneficial ownership interests in the
Notes on such date shall be effected on the records of the Securities Depository
by the Securities Depository in accordance with rules and procedures therefor
and any requirement for physical delivery of Notes on a Mandatory Tender Date
shall be deemed satisfied thereby. All Unsurrendered Notes shall nevertheless
be deemed to have been tendered for purchase by the Holders thereof on the
Mandatory Tender Date.
(e) On the Mandatory Tender Date, the Trustee shall purchase, or cause to
be purchased, all Notes tendered or deemed tendered for purchase on such date at
a purchase price equal to 100% of the principal amount thereof plus accrued
interest, if any, to the Mandatory Tender Date. Funds for payment of the
purchase price of such Notes shall be drawn by the Trustee from the Note
Purchase Fund as provided in Section 7.02.
(f) If there has been irrevocably deposited in the Note Purchase Fund an
amount sufficient to pay the purchase price of all Notes tendered or deemed
tendered for purchase on the Mandatory Tender Date, any Unsurrendered Notes
shall be deemed to be tendered for purchase and purchased from the Holder
thereof on such Mandatory Tender Date and the Holder of any Unsurrendered Note
shall not be entitled to receive interest on such Unsurrendered Note for any
period on and after the relevant Mandatory Tender Date. The Trustee shall issue
a new Note or Notes in the same aggregate principal amount for any Unsurrendered
Notes which are not tendered for purchase on any Mandatory Tender Date and, upon
receipt by the Trustee or Tender Agent of any such Unsurrendered Notes from the
Holders thereof, shall pay, or cause to be paid, the purchase price of such
Unsurrendered Notes to the Holders thereof and cancel such Unsurrendered Notes.
(g) After notice of a Mandatory Tender has been given by the Trustee, the
Notes shall be subject to Mandatory Tender (except with respect to Notes which
the Holders thereof have elected to retain as provided in subsection 3.05(c))
notwithstanding the fact that the reasons for giving such notice cease to exist
or are no longer applicable.
SECTION 3.06 Procedures for Purchase and Remarketing of Notes; Delivery
----------------------------------------------------------
of Purchased and Remarketed Notes
- ---------------------------------
(a) Anything in this Indenture to the contrary notwithstanding, for
purposes of this Section 3.06 during a period in which the Book-Entry System is
in effect for the Notes:
24
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(1) the term "Note" and "Notes" when used in this Section 3.06 shall
mean and include the interests of the Beneficial Owners therein all or a
portion of which are tendered or deemed tendered for purchase pursuant to
this Indenture, and
(2) the term "Holder" and "Holders" when used in this Section 3.06
shall mean and include any Beneficial Owner or Beneficial Owners who shall
have tendered the interests (or a portion) thereof in the Notes for
purchase pursuant to this Indenture, and
(3) delivery, transfer, and registration of ownership and pledge of
the beneficial ownership interests in the Notes shall be effected on the
records of the Securities Depository by the Securities Depository in
accordance with rules and procedures therefor and any requirement for
physical delivery of Notes in connection with such tender shall be deemed
satisfied thereby.
(b) The Remarketing Agent will use its best efforts to remarket all Notes
tendered or deemed to be tendered for purchase pursuant to the Optional Tender
or Mandatory Tender provisions hereof, subject to the provisions of subsection
(h) of this Section. The Issuer may at any time, upon written direction to the
Remarketing Agent, direct the Remarketing Agent to cease or resume the
remarketing of some or all of the Notes.
(c) At or prior to 10:00 a.m. (Birmingham, Alabama time) on any Tender
Date (or at such other time to which the Trustee shall agree), the Remarketing
Agent shall give telegraphic or telephonic notice, promptly confirmed in
writing, to the Trustee specifying or confirming the names, addresses, and
taxpayer identification numbers of the purchasers of, and the principal amount
and denominations of, such Notes, if any, remarketed by it pursuant to this
Section. The Remarketing Agent shall make appropriate settlement arrangements
between the purchasers of such remarketed Notes and the Trustee, and shall
direct such purchasers by appropriate instructions to pay the purchase price of
such Notes to the Trustee at or before 12:00 noon (Birmingham, Alabama time) on
the Tender Date. The Trustee shall deposit the proceeds of any such remarketing
in the Note Purchase Fund.
(d) At or before 1:00 p.m. (Birmingham, Alabama time) on each Tender Date
the Trustee shall pay the purchase price to each Holder of a Note (or portion
thereof) tendered for purchase. The Trustee shall pay the purchase price of
each Note tendered by check or draft mailed by the Trustee to the Holder of such
Note at his address appearing in the Note Register or, upon the written request
of such Holder accompanied by adequate instructions, as provided in Section
3.01(k), by wire transfer to an account of such Holder maintained at a bank in
the continental United States or by any other method providing for payment in
same-day funds that is acceptable to the Trustee. The Trustee shall pay such
purchase price from money on deposit in the Note Purchase Fund in strict
compliance with the provisions thereof; provided, that the Trustee shall not pay
the purchase price of any Unsurrendered Note, unless and until the Holder of
such Unsurrendered Note presents such Unsurrendered Note to the Trustee or
Tender Agent. All Notes so purchased by the Trustee shall be delivered by the
Trustee or Tender Agent in accordance with this Section.
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(e) The Trustee and the Tender Agent shall hold all Notes delivered to
them pursuant to the Optional Tender or Mandatory Tender provisions hereof in
trust solely for the benefit of the respective Holders who shall have so
delivered such Notes until money representing the purchase price of such Notes
shall have been delivered to or for the account of such Holder.
(f) Pledged Notes shall be held subject to the following terms and
conditions:
(1) If, on the Tender Date, the Trustee receives written notice (a
"Reimbursement Notice") from the Credit Obligor stating that it has been
---------------------
reimbursed for the drawing made under the Letter of Credit to pay the
purchase price of such Pledged Notes and that the Letter of Credit has been
reinstated to the extent of the amount so drawn to pay the purchase price
of such Pledged Notes (except as limited by the provisions of the Letter of
Credit relating to the "Maximum Interest Coverage", as defined therein),
then such Notes shall no longer be considered "Pledged Notes" and the
Trustee shall register such Notes as follows: (i) if such Notes have been
remarketed by the Remarketing Agent, as directed by the Remarketing Agent,
or (ii) if such Notes have not been remarketed, in the name of the Issuer.
Notes registered as directed by the Remarketing Agent shall be delivered by
the Trustee or Tender Agent to, or upon the direction of, the Remarketing
Agent. Notes registered in the name of the Issuer shall be held by the
Trustee or Tender Agent for the account of the Issuer or, upon written
request of the Issuer, shall be delivered to the Issuer.
(2) If the Trustee does not receive a Reimbursement Notice by the
close of business on the Tender Date, then the Trustee shall register such
Pledged Notes in the name of the Credit Obligor, as pledgee. Any Pledged
Notes held by the Tender Agent shall be transmitted to the Trustee. Such
Pledged Notes shall be held by the Trustee on behalf of the Credit Obligor,
as pledgee, until the Trustee receives a Reimbursement Notice with respect
to such Notes or, upon written request of the Credit Obligor, shall be
delivered to the Credit Obligor. Upon receipt by the Trustee of a
Reimbursement Notice with respect to any Pledged Notes, such Notes shall no
longer be considered "Pledged Notes" and shall, subject to the provisions
of subsection (h) of this Section, be disposed of as provided in paragraph
(1) of this subsection (f). The Trustee shall give prompt notice to the
Tender Agent of the receipt of any Reimbursement Notice.
(g) Notes purchased by the Trustee with money from any source other than
money drawn under the Letter of Credit shall be registered as follows: (i) if
such Notes have been remarketed by the Remarketing Agent, as directed by the
Remarketing Agent, or (ii) if such Notes have not been remarketed, in the name
of the Issuer. Notes registered as directed by the Remarketing Agent shall be
delivered by the Trustee or Tender Agent to, or upon the direction of, the
Remarketing Agent. Notes registered in the name of the Issuer shall be held by
the Trustee or Tender Agent for the account of the Issuer or, upon written
request of the Issuer, shall be delivered to the Issuer.
(h) Any provision of this Indenture to the contrary notwithstanding, if
the Notes are purchased pursuant to the Optional Tender or Mandatory Tender
provisions of this Indenture and the Letter of Credit has expired or terminated
(or will expire or terminate within 30 days), the Notes may not be sold or
remarketed unless (i) the Issuer provides disclosure materials to prospective
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Noteholders that are adequate under securities laws and practices applicable to
remarketing under similar circumstances and (ii) the Notes will continue to
receive at least an "investment grade" rating by each Rating Agency then
maintaining a rating on the Notes following the expiration or termination of the
Letter of Credit, or the Issuer provides that the Notes will be remarketed only
to one or more financial institutions capable of assessing the risks of
ownership of the Notes, in which event any rating on the Notes may be reduced or
withdrawn and (iii) the Trustee and Issuer shall have received an Opinion of
Counsel stating in effect that the remarketing of the Notes under such
circumstances will not be in violation of any federal or state laws regarding
registration of, or other filing in connection with the issuance or sale of,
securities.
(i) Any Note remarketed by the Remarketing Agent that has been called for
prior redemption shall be delivered with a copy of the redemption notice, and
any Note as to which notice of Mandatory Tender has been given shall be
delivered with a copy of the notice of Mandatory Tender and any Note remarketed
by the Remarketing Agent that is subject to prepayment by acceleration under
Article IX hereof shall be delivered with a notice thereof, and in connection
with each such delivery the Remarketing Agent shall obtain an acknowledgment in
writing that each purchaser of such Notes understands the contents of such
notice.
(j) Any provision of this Indenture to the contrary notwithstanding, if the
Notes are purchased pursuant to a Mandatory Tender under Section 3.05(a)(7)
hereof, the Notes may not be remarketed unless the Trustee receives, on or
before the proposed date of such remarketing the written consent of the Credit
Obligor to such remarketing and reinstatement of the Existing Letter of Credit
by the Credit Obligor in the amount drawn to pay the purchase price of the
Notes, effective on the proposed date of such remarketing, or a Substitute
Letter of Credit effective on the proposed date of such remarketing.
(k) Notes purchased pursuant to the Optional Tender or Mandatory Tender
provisions of this Indenture shall not, by virtue of such purchase, be deemed
paid or canceled, but shall remain Outstanding until Fully Paid.
SECTION 3.07 Execution, Authentication, Delivery and Dating
----------------------------------------------
(a) The Notes shall be executed on behalf of the Issuer by its President or
Vice-President under its corporate seal affixed or reproduced thereon and
attested by its Secretary or one of its Assistant Secretaries. The signature of
any or all of these officers on the Notes may be manual or, to the extent
permitted by law, by facsimile. In case any officer whose signature or a
facsimile of whose signature shall appear on the Notes shall cease to be such
officer before the authentication and delivery of such Notes, such signature or
such facsimile shall nevertheless be valid and sufficient for all purposes, the
same as if such officer had remained in office until authentication and
delivery.
(b) At any time and from time to time after the execution and delivery of
this Indenture, the Issuer may deliver Notes executed by the Issuer to the
Trustee for authentication and registration and the Trustee or the Tender Agent
shall authenticate and register and deliver such Notes as in this Indenture
provided and not otherwise.
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(c) No Note shall be secured by, or be entitled to any lien, right or
benefit under, this Indenture or be valid or obligatory for any purpose, unless
there appears on such Note a certificate of authentication substantially in the
form provided for herein, executed by the Trustee or Tender Agent by the manual
signature of a duly authorized officer thereof, and such certificate upon any
Note shall be conclusive evidence, and the only evidence, that such Note has
been duly authenticated and delivered hereunder.
SECTION 3.08 Temporary Notes
---------------
(a) Pending the preparation of definitive Notes, the Issuer may execute,
and upon request of the Issuer the Trustee shall authenticate and deliver,
temporary Notes which are printed, lithographed, typewritten, mimeographed or
otherwise produced, in any denomination, substantially of the tenor of the
definitive Notes in lieu of which they are issued, with such appropriate
insertions, omissions, substitutions and other variations as the officers
executing such Notes may determine, as evidenced by their execution of such
Notes.
(b) If temporary Notes are issued, the Issuer will cause definitive Notes
to be prepared without unreasonable delay. After the preparation of definitive
Notes, the temporary Notes shall be exchangeable for definitive Notes upon
surrender of the temporary Notes at the Principal Office of the Trustee, without
charge to the Holder. Upon surrender for cancellation of any one or more
temporary Notes the Issuer shall execute and the Trustee shall authenticate,
register and deliver in exchange therefor a like principal amount of definitive
Notes of authorized denominations. Until so exchanged, temporary Notes shall in
all respects be entitled to the security and benefits of this Indenture.
SECTION 3.09 Authentication and Delivery of Notes to Original Purchasers
-----------------------------------------------------------
Upon the execution and delivery of this Indenture, Notes in the aggregate
principal amount authorized in this Article may be executed by the Issuer and
delivered to the Trustee for authentication and registration, and such Notes
shall thereupon be authenticated, registered and delivered by the Trustee to the
original purchaser or purchasers thereof.
SECTION 3.10 Letter of Credit
----------------
(a) Simultaneously with the delivery of the Notes to the original
purchasers thereof, the Issuer has caused the Credit Obligor to deliver to the
Trustee the Letter of Credit. The Letter of Credit will terminate on the Stated
Expiration Date, subject to extension (if applicable) by the Credit Obligor.
(b) The Issuer may at any time and from time to time deliver a Substitute
Letter of Credit to the Trustee in substitution for the Existing Letter of
Credit, provided that
(1) Notice of any intended delivery of a Substitute Letter of Credit
and the proposed issuer and effective date thereof is given (i) by the
Issuer to the Trustee not less than 45 days prior to the proposed effective
date of such Substitute Letter of Credit (unless
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a shorter period shall be satisfactory to the Trustee and enable the
Trustee to comply with this Section), and (ii) by the Trustee to the
Holders, or, if the Securities Depository or Securities Depository Nominee
is the Holder, as provided in the Letter of Representation, not less than
30 days prior to the proposed effective date of such Substitute Letter of
Credit; and
(2) such Substitute Letter of Credit complies with the applicable
conditions set forth in subsection (d) of this Section and
(3) simultaneously with the delivery of such Substitute Letter of
Credit the Issuer delivers to the Trustee any related documentation
required by subsection (e) of this Section (the "Related Documentation").
(c) The Issuer may, but shall not be required to, deliver a Substitute
Letter of Credit to the Trustee prior to the expiration of the then Existing
Letter of Credit; provided, however, that if a Substitute Letter of Credit and
the Related Documentation are not delivered to the Trustee not less than 30 days
prior to the Stated Expiration Date of the then Existing Letter of Credit, the
Notes shall be subject to a Mandatory Tender.
(d) Each Substitute Letter of Credit delivered to the Trustee pursuant to
this Section must meet the following criteria:
(1) such Substitute Letter of Credit must have an effective date not
less than 30 days prior to the stated Expiration Date of the then Existing
Letter of Credit,
(2) such Substitute Letter of Credit must be substantially in the
same form and of the same tenor as the Letter of Credit, except that such
Substitute Letter of Credit must provide for the payment of interest on the
Notes (or the interest portion of the purchase price of Notes tendered, or
deemed tendered, for purchase) at the Maximum Rate computed on the interest
rate basis then applicable as provided in Section 3.01(g), for not less
than 56 days,
(3) if such Substitute Letter of Credit is being delivered in
connection with a conversion of the interest rate on the Notes to a Fixed
Rate, the effective date shall be not later than the Conversion Date,
(4) if such Substitute Letter of Credit will be effective during a
Fixed Rate Period when the Notes are subject to optional redemption, such
Substitute Letter of Credit must provide for payment of the maximum
redemption premium payable with respect to the Notes, and
(5) such Substitute Letter of Credit must have a Stated Expiration
Date that is (i) the same calendar day in the same calendar month as the
expiration date of the then existing Letter of Credit being replaced and
(ii) not sooner than one year after its effective date; provided, however,
that any Substitute Letter of Credit that is to be substituted for an
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Existing Letter of Credit that is effective during a Fixed Rate Period must
have a Stated Expiration Date not sooner than the Stated Expiration Date of
such Existing Letter of Credit.
(e) Each Substitute Letter of Credit delivered to the Trustee must be
accompanied by the following, to the extent applicable:
(1) if any Rating Agency maintains a rating with respect to the Notes
at the time of delivery of such Substitute Letter of Credit to the Trustee,
written evidence from each such Rating Agency to the effect that the
substitution of the proposed Substitute Letter of Credit will not, by
itself, result in a reduction or withdrawal of its rating then assigned to
the Notes,
(2) an Opinion of Counsel for the issuer of such Substitute Letter of
Credit stating in effect that such Substitute Letter of Credit (1) is a
valid and binding obligation of the issuer thereof and (2) is exempt from
registration under the Securities Act of 1933, as amended.
(f) At the close of business on the effective date of any Substitute
Letter of Credit, the Trustee shall return the Existing Letter of Credit to the
issuer thereof, provided that any draws on such Existing Letter of Credit made
on or prior to such date have been honored. Any draws that, under the terms of
the Indenture, are to be made on the Letter of Credit on or prior to the
effective date of a Substitute Letter of Credit shall be made under the Existing
Letter of Credit. Not later than the close of business on the effective date of
a Substitute Letter of Credit, the Issuer shall certify in writing to the
Trustee that all obligations of the Issuer to the issuer of the Existing Letter
of Credit for reimbursement of amounts drawn thereunder have been satisfied, and
upon receipt of such evidence any Pledged Notes held by the Trustee or the
Tender Agent for the benefit of the issuer of the Existing Letter of Credit
shall be delivered to, or upon the order of, the Issuer.
(g) If the Trustee accepts a Substitute Letter of Credit as herein
provided, then, unless such Substitute Letter of Credit was described in a
notice of Mandatory Tender, the Trustee shall send written notice of such
substitution to the Noteholders.
(h) If Notes are redeemed prior to maturity, the Trustee shall take any
action necessary to reduce the interest portion of the Letter of Credit to the
Maximum Interest Coverage, as therein defined.
SECTION 3.11 Additional Credit Enhancement
-----------------------------
At the cost and expense of the Issuer, the Issuer may deliver to the
Trustee, and the Trustee shall accept, security for the payment of the Notes in
addition to the Letter of Credit then in effect, in the form of a confirmation
of such Letter of Credit, an additional standby letter of credit, insurance,
surety bonds, or otherwise.
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ARTICLE IV
Registration, Book-Entry System, and
General Provisions Regarding the Notes
--------------------------------------
SECTION 4.01 Registration of Notes
---------------------
(a) The Issuer shall cause to be kept at the Principal Office of the
Trustee a register (the "Note Register") in which, subject to such reasonable
-------------
regulations as it may prescribe, the Issuer shall provide for the registration
of Notes and registration of transfers of Notes entitled to be registered or
transferred as herein provided. The Trustee is hereby appointed "Note
----
Registrar" for the purpose of registering Notes and transfers of Notes as herein
- ---------
provided.
(b) Each of the Notes shall be registered in the name of the owner thereof
in the Note Register.
(c) The Issuer, the Trustee and any agent of the Issuer or the Trustee may
treat the person in whose name any Note is registered as the owner of such Note
for the purpose of receiving payment of Debt Service on such Note and for all
other purposes whatsoever whether or not such Note is overdue, and, to the
extent permitted by law, neither the Issuer, the Trustee nor any such agent
shall be affected by notice to the contrary.
SECTION 4.02 Registration, Transfer, and Exchange of Notes; Replacement
----------------------------------------------------------
of Mutilated, Lost, Destroyed or Stolen Notes
- ---------------------------------------------
(1) A Note shall be transferred by the Holders in person or by authorized
attorney only on the Note Register upon surrender of the Notes for transfer to
the Trustee or the Tender Agent. Upon surrender for transfer of any Note at the
Principal Office of the Trustee or the Principal Office of the Tender Agent, the
Issuer shall execute, and the Trustee or Tender Agent shall authenticate and
deliver, in the name of the designated transferee or transferees, one or more
new Notes of the same maturity, of any Authorized Denominations and of a like
aggregate principal amount.
(2) At the option of the Holder, Notes may be exchanged for other Notes of
the same maturity, of any Authorized Denominations and of a like aggregate
principal amount, upon surrender of the Notes to be exchanged at the Principal
Office of the Trustee or at the Principal Office of the Tender Agent. Whenever
any Notes are so surrendered for exchange, the Issuer shall execute, and the
Trustee or the Tender Agent shall authenticate and deliver, the Notes which the
Noteholder making the exchange is entitled to receive.
(3) All Notes surrendered upon any exchange or transfer provided for in
this Indenture shall be promptly canceled by the Trustee or the Tender Agent.
(4) All Notes issued upon any transfer or exchange of Notes shall be the
valid obligations of the Issuer and entitled to the same security and benefits
under this Indenture as the Notes surrendered upon such transfer or exchange.
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(5) Every Note presented or surrendered for transfer or exchange shall (if
so required by the Trustee or the Tender Agent) be duly endorsed, or be
accompanied by a written instrument of assignment or transfer in form
satisfactory to the Trustee or the Tender Agent duly executed, by the Holder
thereof or his attorney duly authorized in writing.
(6) The Issuer and the Trustee shall not be required (i) to transfer or
exchange any Note during a period beginning at the opening of business 15 days
before the day of the mailing of a notice of redemption of Notes and ending at
the close of business on the day of such mailing, or (ii) to transfer or
exchange any Note so selected for redemption in whole or in part, or (iii) to
exchange any Note during a period beginning at the opening of business on any
Regular Record Date for such Note and ending at the close of business on the
relevant Interest Payment Date therefor.
(7) If (i) any mutilated Note is surrendered to the Trustee, or the Issuer
and the Trustee receive evidence to their satisfaction of the destruction, loss
or theft of any Note, and (ii) there is delivered to the Issuer and the Trustee
such security or indemnity as may be required by them to save each of them
harmless, then, in the absence of notice to the Issuer or the Trustee that such
Note has been acquired by a bona fide purchaser, the Issuer shall execute and
upon its request the Trustee shall authenticate and deliver, in exchange for or
in lieu of any such mutilated, destroyed, lost or stolen Note, a new Note of
like tenor, principal amount, maturity, and bearing a number not
contemporaneously outstanding.
(8) Upon the transfer or exchange of any Note, or the issuance of any new
Note under this Section, the Holder shall pay a sum sufficient to cover any tax
or other governmental charge that may be imposed in relation thereto and any
other expenses connected therewith.
(9) Every new Note issued pursuant to this Section in lieu of any
mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Issuer, whether or not the mutilated,
destroyed, lost or stolen Note shall be at any time enforceable by anyone, and
shall be entitled to all the security and benefits of this Indenture equally and
ratably with all other Outstanding Notes.
(10) The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Notes.
SECTION 4.03 Book-Entry System.
-----------------
(a) The Notes shall be initially issued pursuant to a Book-Entry System
administered by the Securities Depository with no physical distribution of any
Note to any person. One Note for each maturity will be issued, registered in
the name of the Securities Depository Nominee, and immobilized in the custody of
the Securities Depository. Beneficial ownership interests in the Notes may be
purchased by or through Direct Participants. The holders of these beneficial
ownership interests in the Notes are referred to as the "Beneficial Owners". The
-----------------
Beneficial Owners will not receive certificated notes representing their
beneficial ownership interests. Ownership of the interests in Notes in
Authorized Denominations will be evidenced, and transfers of interests in the
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Notes will be effected, on the records of the Securities Depository and the
Direct Participants and Indirect Participants pursuant to rules and procedures
established by the Securities Depository. During a period in which the Book-
Entry System is in effect for the Notes the Issuer, the Trustee, and the
Remarketing Agent shall treat the Securities Depository or the Securities
Depository Nominee as the only registered owner of the Notes for all purposes
under this Indenture including receipt of all principal of, purchase price of,
premium (if any) and interest on the Notes, receipt of notices, voting, and
requesting or directing the Trustee or Issuer to take or not to take, or
consenting to, certain actions under this Indenture. In the event the
Securities Depository or the Securities Depository Nominee assigns its rights to
consent or vote under this Indenture to any Direct Participant or Indirect
Participant, the Issuer, the Trustee, and the Remarketing Agent shall treat such
assignee or assignees as the only registered owner or owners of the Notes for
the purpose of exercising such rights so assigned.
(b) During a period in which the Book-Entry System is in effect for the
Notes, payments of principal, purchase price, interest, and redemption premium,
if any, with respect to the Notes will be paid by the Trustee directly to the
Securities Depository, or the Securities Depository Nominee, as provided in the
Letter of Representation; provided, that payment of the principal of (premium,
if any) and interest on such Notes due at final maturity or upon redemption in
whole of any of such Notes shall be made only upon surrender thereof at the
principal office of the Trustee. The Securities Depository and the Direct
Participants and the Indirect Participants shall be responsible for the
disbursement of such payments to the Beneficial Owners. The Securities
Depository will disburse such payments to Direct Participants and such payments
will in turn be remitted by Direct Participants and, where appropriate, Indirect
Participants, to the Beneficial Owners. All such payments to the Securities
Depository or the Securities Depository Nominee of principal of, purchase price
of, premium (if any) and interest on the Notes on behalf of the Issuer or the
Trustee shall be valid and effectual to satisfy and discharge the liability of
the Issuer and the Trustee to the extent of the amounts so paid, and the Issuer,
the Remarketing Agent and the Trustee shall not be responsible or liable for
payment to any Beneficial Owner by the Securities Depository or by any Direct
Participant or by any Indirect Participant, or for sending transaction
statements or for maintaining, supervising or reviewing records maintained by
the Securities Depository or Direct Participants or Indirect Direct
Participants.
(c) Transfers of ownership interests in the Notes by the Beneficial Owners
thereof, conveyance of notices and other communications by the Securities
Depository to Direct Participants, by Direct Participants to Indirect
Participants, and by Direct Participants and Indirect Participants to Beneficial
Owners of the Notes, will be governed by arrangements among the Securities
Depository, Direct Participants, Indirect Participants and the Beneficial
Owners, subject to any statutory and regulatory requirements as may be in effect
from time to time. For every transfer and exchange of beneficial ownership in
the Notes, the Beneficial Owners may be charged a sum sufficient to cover any
tax, fee or other governmental charge that may be imposed in relation thereto.
(d) Redemption notices respecting the Notes held by the Securities
Depository shall be sent to the Securities Depository Nominee by the Trustee and
redemption of Notes shall be effected as provided in Article V.
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(e) A Beneficial Owner shall give notice of its election to have its
interests in the Notes purchased through its Direct Participant or Indirect
Participant to the Securities Depository Nominee and then to the Trustee as
provided in this Indenture and shall effect delivery of such interest by causing
said Direct Participant or Indirect Participant to transfer the interest of such
Beneficial Owner in the Notes to the Trustee (or Tender Agent) on the records of
the Securities Depository. The requirement for physical delivery of Notes in
connection with an Optional Tender or a Mandatory Tender will be satisfied when
the ownership rights in the Notes are transferred on the records of the
Securities Depository.
(f) In the event that (1) the Securities Depository ceases to act as the
securities depository for the Notes or (2) the Issuer determines that the
continuation of the Book-Entry System for the Notes would adversely affect the
interests of the Beneficial Owners of the Notes, the Issuer shall discontinue
the Book-Entry System. If the Issuer fails to appoint another qualified
securities depository to replace the then acting Securities Depository, the
Issuer will cause the Trustee to authenticate and deliver fully registered
certificated Notes to each Beneficial Owner in evidence of the ownership
interests thereof. If the Book-Entry System is discontinued, payments to and
transfers by the Beneficial Owners shall be governed by the provisions set forth
in this Indenture with respect thereto.
(g) The Issuer and the Remarketing Agent may enter into a custody
agreement with any bank or trust company serving as custodian (which may be the
Trustee serving in the capacity of custodian) to provide for a Book-Entry System
or similar method for the registration and transfer of the Notes.
(h) During the period in which a Book-Entry System is in effect for the
Notes in accordance herewith, the provisions of this Indenture and the Notes
shall be construed in accordance with the Letter of Representation and to give
full effect to such Book-Entry System.
(i) The Beneficial Owners of all the Notes, by their acquisition of any
beneficial interest in a Note or Notes, and the Securities Depository, the
Securities Depository Nominee, and all Direct Participants and all Indirect
Participants severally agree that the Issuer, the Issuer, the Remarketing Agent,
and the Trustee shall not have any responsibility or obligation to any Direct
Participant or any Indirect Participant or any Beneficial Owner with respect to
(1) the accuracy of any records maintained by the Securities Depository or any
Direct Participant or any Indirect Participant; (2) the payment by the
Securities Depository or any Direct Participant or any Indirect Participant of
any amount due to any Beneficial Owner in respect of the principal of, purchase
price of, premium (if any) and interest on the Notes; (3) the delivery or
timeliness of delivery by the Securities Depository or any Direct Participant or
any Indirect Participant of any notice due to any Beneficial Owner which is
required or permitted under the terms of this Indenture to be given to
Beneficial Owners; or (4) any consent given or other action taken by the
Securities Depository, or the Securities Depository Nominee, as owner.
(j) The Securities Depository may determine to discontinue the Book-Entry
System with respect to the Notes at any time upon notice to the Issuer, the
Remarketing Agent, and the Trustee and upon discharge of its responsibilities
with respect thereto under applicable law. Upon such
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notice and compliance with law the Book-Entry System for the Notes will be
discontinued unless a successor securities depository is appointed by the
Issuer. In addition, the Issuer may discontinue the Book-Entry System for the
Notes at any time by reasonable notice to the Securities Depository and to the
Beneficial Owners. In the event the Book-Entry System for the Notes is
discontinued, Notes in certificated form in Authorized Denominations will be
physically distributed to the Beneficial Owners thereof and the Notes will be
registered in the names of the owners thereof on the Note Register and the
Trustee will make payments of principal of, purchase price of, premium (if any)
and interest on the Notes to the registered owners thereof as provided in the
Notes and this Indenture.
SECTION 4.04 Payment of Interest on Notes; Interest Rights Preserved
-------------------------------------------------------
(a) Interest on any Note which is payable, and is punctually paid or duly
provided for, on any Interest Payment Date shall be paid to the person in whose
name that Note is registered at the close of business on the Regular Record Date
for such Interest Payment Date.
(b) Any interest on any Note which is payable, but is not punctually paid
or duly provided for, on any Interest Payment Date (herein called "Defaulted
Interest") shall forthwith cease to be payable to the Holder on the relevant
Regular Record Date solely by virtue of such Holder having been such Holder; and
such Defaulted Interest shall be paid by the Issuer to the persons in whose
names such Notes are registered at the close of business on a Special Record
Date for the payment of such Defaulted Interest, which shall be fixed in the
following manner. The Issuer shall notify the Trustee in writing of the amount
of Defaulted Interest proposed to be paid on each Note and the date of the
proposed payment (which date shall be such as will enable the Trustee to comply
with the provisions hereof), and at the same time the Issuer shall deposit with
the Trustee an amount of money equal to the aggregate amount proposed to be paid
in respect of such Defaulted Interest or shall make arrangements satisfactory to
the Trustee for such deposit prior to the date of the proposed payment, such
money when deposited to be held in trust for the benefit of the persons entitled
to such Defaulted Interest as in this subsection provided and not to be deemed
part of the Trust Estate. Thereupon the Trustee shall fix a Special Record Date
for the payment of such Defaulted Interest which shall be not more than 15 nor
less than 10 days prior to the date of the proposed payment and not less than 10
days after the receipt by the Trustee of the notice of the proposed payment.
The Trustee shall promptly notify the Issuer of such Special Record Date and, in
the name and at the expense of the Issuer, shall cause notice of the proposed
payment of such Defaulted Interest and the Special Record Date therefor to be
mailed, first-class postage prepaid, to the Noteholder or Noteholders at the
address thereof appearing in the Note Register not less than 10 days prior to
such Special Record Date. Notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor having been mailed as aforesaid,
such Defaulted Interest shall be paid to the persons in whose names the Notes
are registered on such Special Record Date.
(c) Subject to the foregoing provisions of this Section, each Note
delivered under this Indenture upon transfer of or in exchange for or in lieu of
any other Note shall carry all the rights to interest accrued and unpaid, and to
accrue, which were carried by such other Note and each such Note shall bear
interest from such date that neither gain nor loss in interest shall result from
such transfer, exchange or substitution.
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SECTION 4.05 Paying Agent
------------
The Debt Service on the Notes shall, except as otherwise provided herein,
be payable at the Principal Office of the Trustee. The Trustee is hereby
appointed as Paying Agent for the purpose of paying Debt Service on the Notes on
behalf of the Issuer.
SECTION 4.06 Payments Due on Non-Business Days
---------------------------------
If any payment on the Notes is due on a day which is not a Business Day,
such payment may be made on the first succeeding day which is a Business Day
with the same effect as if made on the day such payment was due.
SECTION 4.07 Cancellation
------------
All Notes surrendered for payment, redemption, transfer or exchange shall
be promptly canceled or destroyed by the Trustee. No Note shall be
authenticated in lieu of or in exchange for any Note canceled as provided in
this Section, except as expressly provided by this Indenture.
ARTICLE V
Redemption of Notes
-------------------
SECTION 5.01 When Notes Are Subject to Redemption
------------------------------------
(a) The Notes shall be subject to extraordinary, optional and mandatory
redemption as provided in the form thereof set forth on Exhibit A hereto.
(b) Notes shall be redeemed in accordance with the mandatory redemption
provisions of the Notes without any direction from or consent by the Issuer.
SECTION 5.02 Election to Redeem; Notice to Trustee
-------------------------------------
(a) In case of any redemption at the option of the Issuer of all of the
principal amount of the Outstanding Notes, the Authorized Issuer Representative
shall, not more than 60 and not less than 30 days prior to the proposed
redemption date (unless a shorter notice shall be satisfactory to the Trustee)
notify the Trustee of the redemption date, which notice, if required by this
Indenture, shall be accompanied by and the written consent of the Credit
Obligor.
(b) In case of any redemption at the option of the Issuer of less than all
of the principal amount of the Outstanding Notes, the Authorized Issuer
Representative shall, at least 60 days prior to the date fixed by the Issuer for
redemption of Notes (unless a shorter notice shall be satisfactory to the
Trustee) notify the Trustee of such redemption date and of the principal amount
of Notes to be redeemed.
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SECTION 5.03 Selection of Notes to be Redeemed
---------------------------------
(a) If less than all of the Outstanding Notes are to be redeemed during a
period in which the Book-Entry System is in effect for the Notes, the Securities
Depository shall determine the amount of the interest of each Direct Participant
in the Notes to be redeemed, on the basis of the smallest Authorized
Denomination of the Notes, by lot or by such other method as the Securities
Depository shall deem fair and appropriate. The Securities Depository shall so
determine the amount of the interest of each Direct Participant in the Notes to
be redeemed in such manner so as to assure that after such redemption no
Beneficial Owner shall retain a beneficial ownership interest in the Notes in an
aggregate amount less than an Authorized Denomination.
(b) If less than all the Outstanding Notes are to be redeemed during a
period in which the Book-Entry System is not in effect for the Notes, the
Trustee shall select the particular Notes to be redeemed not less than 30 nor
more than 60 days prior to the redemption date from the Outstanding Notes which
have not previously been called for redemption, on the basis of the smallest
Authorized Denomination of the Notes, by lot or by such method as the Trustee
shall deem fair and appropriate. The Trustee shall so select Notes for
redemption in such manner so as to assure that after such redemption no
Noteholder shall retain Notes in an aggregate amount less than an Authorized
Denomination.
(c) The Trustee shall promptly notify the Issuer and the Issuer in writing
of the Notes selected for redemption and, in the case of any Note selected for
partial redemption, the principal amount thereof to be redeemed.
(d) For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Notes shall relate, in
the case of any Note redeemed or to be redeemed only in part, to the portion of
the principal of such Note which has been or is to be redeemed.
SECTION 5.04 Notice of Redemption
--------------------
(a) Notice of any intended redemption shall be given by the Trustee to the
Holder of each Note, all or a portion of the principal of which is to be
redeemed, not less than 30 days prior to the proposed redemption date by United
States registered or certified mail or, if the Securities Depository or
Securities Depository Nominee is the Holder, at the times and in the manner as
provided in the Letter of Representation, at the address of such Holder
appearing in the Note Register; provided, however, any Holder may waive the
requirement of notice as to the redemption (in whole or in part) of the Note or
Notes thereof. During a period in which the Book-Entry System is in effect for
the Notes, notice of any intended redemption may be given to each Beneficial
Owner, all or any portion of the interest of which in the Notes is to be
redeemed, by the Direct Participants and, where appropriate, by the Indirect
Participants, pursuant to arrangements among said parties, subject to statutory
and regulatory requirements in effect from time to time; provided, however, any
Beneficial Owner may waive the requirement of notice as to the redemption of the
interest thereof in the Notes.
(b) All notices of redemption shall state:
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(1) the redemption date,
(2) the redemption price,
(3) the principal amount of Notes to be redeemed, and, if less than
all Outstanding Notes are to be redeemed, the respective principal amounts
of the Notes to be redeemed,
(4) that on the redemption date the redemption price of each of the
Notes to be redeemed will become due and payable and that the interest
thereon shall cease to accrue from and after said date, and
(5) the place or places where the Notes to be redeemed are to be
surrendered for payment of the redemption price.
(c) Notice of redemption of Notes to be redeemed shall be given by the
Trustee in the name of the Issuer and at the expense of the Issuer.
(d) The Issuer and the Trustee shall, to the extent practical under the
circumstances, comply with the standards set forth in Securities and Exchange
Commission's Exchange Act Release No. 23856 regarding redemption notices,
provided that their failure to do so shall not in any manner defeat the
effectiveness of a call for redemption if notice thereof is given as prescribed
in this Section.
SECTION 5.05 Deposit of Redemption Price
---------------------------
Prior to any redemption date, the Issuer shall deposit with the Trustee
pursuant to Section 8.02 an amount of money sufficient to pay the redemption
price of all the Notes which are to be redeemed on that date. Such money shall
be held in trust for the benefit of the persons entitled to such redemption
price and shall not be deemed to be part of the Trust Estate.
SECTION 5.06 Notes Payable on Redemption Date
--------------------------------
(a) Notice of redemption having been given as aforesaid, the Notes to be
redeemed shall, on the redemption date, become due and payable at the redemption
price therein specified and from and after such date (unless the Issuer shall
default in the payment of the redemption price) such Notes shall cease to bear
interest. Upon presentation of any such Note for redemption, or compliance with
the requirements of the Securities Depository with respect to redemption in
part, in accordance with said notice such Note shall be paid by the Issuer at
the redemption price. Installments of interest due on or prior to the redemption
date shall be payable to the Holders of the Notes registered as such on the
relevant Record Dates according to the terms of such Notes and the provisions of
Section 4.04.
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(b) If any Note called for redemption shall not be paid upon redemption
due to the failure of the Issuer or the Credit Obligor to make the required
payment, the principal (and premium, if any) shall, until paid, bear interest
from the redemption date at the Post-Default Rate.
SECTION 5.07 Notes Redeemed in Part
----------------------
(a) During a period in which the Book-Entry System is in effect for the
Notes, the recordation and evidence of any reduction in the aggregate principal
amount of the interest of the Direct Participants in the Notes as a result of
the redemption of a portion thereof shall be made in accordance with the Letter
of Representation and the rules and procedures of the Securities Depository with
respect thereto from time to time in effect.
(b) During a period in which the Book-Entry System is not in effect for
the Notes, unless otherwise provided herein, any Note which is to be redeemed
only in part shall be surrendered at the Principal Office of the Trustee (with,
if the Issuer or the Trustee requires, due endorsement by, or a written
instrument of assignment or transfer in form satisfactory to the Issuer and the
Trustee duly executed by the Holder thereof or his attorney duly authorized in
writing) and the Issuer shall execute and the Trustee shall authenticate and
deliver to the Holder of such Note, without service charge, a new Note or Notes
of any authorized denomination or denominations as requested by such Holder in
aggregate principal amount equal to and in exchange for the unredeemed portion
of the principal of the Note surrendered.
ARTICLE VI
Application of Proceeds of Notes
--------------------------------
(a) On the date of issuance of the Notes, the proceeds of the Notes in the
amount or amounts set forth on Exhibit D hereto shall be delivered to the
Trustee, shall be held by the Trustee in a special trust fund hereby created and
designated the "Proceeds Fund", and shall be paid by the Trustee to the Issuer
upon requisition therefor in the form of Exhibit B hereto, appropriately
completed,
(b) The Trustee shall have no liability for the use or application of the
funds in the Proceeds Fund if disbursed pursuant to the provisions of this
Article.
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ARTICLE VII
Revenues
--------
SECTION 7.01 Note Fund and Letter of Credit Draws
------------------------------------
(a) There is hereby established a special trust fund in the name of the
Issuer which shall be designated the "Variable/Fixed Rate Secured Promissory
Notes Note Fund". The Trustee shall be the depository, custodian and disbursing
agent for the Note Fund. The money in the Note Fund shall be used (i) to pay
Debt Service on the Notes as the same shall become due and payable or (ii) to
reimburse the Credit Obligor for amounts drawn under the Letter of Credit, as
provided in subsection (c) of this Section.
(b) There shall be deposited in the Note Fund, as and when received:
(1) in the manner provided in subsection 7.01(c), all money drawn by
the Trustee under the Letter of Credit for the purpose of paying the
principal amount of the Notes and the premium (if any) on the Notes, and
the interest due thereon on any Note Payment Date,
(2) All payments with respect to Debt Service on the Notes made by
the Issuer pursuant to Section 8.02(a)(1) and Section 8.02(b),
(3) All other money required to be deposited in the Note Fund
pursuant to this Indenture, and
(4) All other money received by the Trustee when accompanied by
written directions that such money is to be deposited in the Note Fund.
(c) If the Letter of Credit is then in effect, on each Note Payment Date,
the Trustee shall, without making any prior claim or demand upon the Issuer for
the payment of any amounts under Section 8.02(a)(1), submit a draft under the
Letter of Credit in accordance with the terms thereof (i) in an amount equal to
the amount of Debt Service due on such Note Payment Date on Notes other than
Pledged Notes and (ii) by such time (as stated in the Letter of Credit) in
advance as shall enable the Trustee to pay said Debt Service from the proceeds
of such draft on said Note Payment Date in accordance with the provisions of
this Indenture with respect thereto. Any such money drawn under the Letter of
Credit shall be deposited and held in a separate, segregated account in the Note
Fund, and shall not be commingled with other money in the Note Fund and no
investment thereof shall be made. If money from any source other than the
Letter of Credit was, at the time of such draw, on deposit in the Note Fund and
available for the payment of Debt Service on Notes other than Pledged Notes, the
Trustee shall nevertheless draw under the Letter of Credit to make such payment
of Debt Service in the amount of the Debt Service to be so paid, and the money
available from such other source shall, to the extent of the amount paid by the
Credit Obligor against such draw, be paid to the Credit Obligor. All money so
drawn under the Letter of Credit shall be used to pay Debt Service on Notes
other than Pledged Notes; Debt Service on Pledged Notes shall be paid with money
deposited in the Note Fund from any source other than the Letter of Credit.
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(d) The Issuer hereby authorizes and directs the Trustee to withdraw
sufficient money from the Note Fund to pay Debt Service on the Notes as the same
become due and payable, whether at maturity, by call for redemption,
acceleration, or otherwise, which authorization and direction the Trustee hereby
accepts. Funds for such payments of Debt Service on the Notes shall be derived
from the following sources in the order of priority indicated:
(1) First: money drawn by the Trustee under the Letter of Credit, and
-----
(2) Second: all other money on deposit in the Note Fund.
------
(e) Debt Service due on all Pledged Notes shall be paid to the Credit
Obligor.
SECTION 7.02 Note Purchase Fund
------------------
(a) There is hereby established a special trust fund in the name of the
Issuer which shall be designated the "Variable/Fixed Rate Secured Promissory
Notes Note Purchase Fund". The Trustee shall be the custodian for the Note
Purchase Fund, and money in such Fund may be disbursed by the Trustee as
hereinafter provided. The money in the Note Purchase Fund shall be used (i) to
pay the purchase price of Notes due on any Tender Date or (ii) to reimburse the
Credit Obligor for amounts drawn under the Letter of Credit, as provided in
subsection (c) of this Section.
(b) There shall be deposited in the Note Purchase Fund, as and when
received:
(1) in the manner provided in subsection 7.02(c), all money drawn by
the Trustee under the Letter of Credit for the purpose of paying the
purchase price of Notes due on any Tender Date,
(2) all payments with respect to the purchase price of Tendered Notes
made by the Issuer pursuant to Section 8.02(a)(2),
(3) the proceeds of any remarketing of Notes by the Remarketing
Agent,
(4) all other money required to be deposited in the Note Purchase
Fund pursuant to this Indenture, and
(5) all other money received by the Trustee when accompanied by
directions that such money is to be deposited in the Note Purchase Fund.
(c) If the Letter of Credit is then in effect, on each Tender Date, the
Trustee shall, without making any prior claim or demand upon the Issuer for
payments pursuant to Section 8.02(a)(2) with respect to the purchase price of
Tendered Notes, and without taking into account any proceeds anticipated (but
not then received) from the remarketing of Notes by the Remarketing Agent,
submit a draft under the Letter of Credit in accordance with the terms thereof
(i) in an amount equal to the purchase price of all Notes to be purchased on
such Tender Date and (ii) by such time (as stated in the Letter of Credit) in
advance as shall enable the Trustee to pay said purchase price from the
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proceeds of such draft on said Tender Date in accordance with the provisions of
this Indenture with respect thereto. Any such money drawn under the Letter of
Credit shall be deposited and held in a separate, segregated account in the Note
Purchase Fund, and shall not be commingled with other money in the Note Purchase
Fund and no investment thereof shall be made. Except as otherwise provided in
Section 7.02(f), if money from any source other than the Letter of Credit was,
at the time of such draw, on deposit in the Note Purchase Fund and available for
the payment of such purchase price, the Trustee shall nevertheless draw under
the Letter of Credit to make the payment of such purchase price in the amount of
such purchase price to be so paid, and any money available in the Note Purchase
Fund on such Tender Date from such other sources (including without limitation,
proceeds of remarketing of Notes) shall, to the extent of the amount paid by the
Credit Obligor against such draw, be paid to the Credit Obligor. If proceeds
from the remarketing of Notes are deposited in the Note Purchase Fund after such
Tender Date, the Trustee shall pay such proceeds to the Credit Obligor.
(d) The Trustee is hereby authorized and directed to withdraw sufficient
money from the Note Purchase Fund to pay the purchase price of Notes due on any
Tender Date. Except as otherwise provided in Section 7.02(f), funds for such
payments shall be derived from the following sources in the order of priority
indicated:
(1) First: money drawn by the Trustee under the Letter of Credit,
-----
(2) Second: money received by the Trustee from the remarketing of
------
Notes by the Remarketing Agent to persons other than the Issuer, or
any Affiliate of any thereof, and
(3) Third: all other money on deposit in the Note Purchase Fund.
-----
(e) Anything in this Indenture to the contrary notwithstanding, the
Trustee shall not purchase any Notes under Section 3.06 with proceeds received
from remarketing of Notes to the Issuer or any Affiliate thereof.
(f) Anything herein to the contrary notwithstanding, if proceeds from the
remarketing of Notes by the Remarketing Agent are actually on deposit in the
Note Purchase Fund (and not anticipated to be so on deposit) at or prior to the
time of submission by the Trustee of a draft under the Letter of Credit pursuant
to Section 7.02(c), the Trustee may reduce the amount of such draft by the
amount of such proceeds.
SECTION 7.03 Money for Note Payments to be Held in Trust; Repayment of
---------------------------------------------------------
Unclaimed Money
- ---------------
(a) If money is on deposit in the Note Fund on any Note Payment Date
sufficient to pay Debt Service on the Notes due and payable on such Note Payment
Date, but the Holder of any Note that matures on such Date or that is subject to
redemption on such Date fails to surrender such Note to the Trustee for payment
of Debt Service due and payable on such Date, the Trustee shall segregate and
hold in trust for the benefit of the person entitled thereto money sufficient to
pay the Debt
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Service due and payable on such Note on such Date. Money so segregated and held
in trust shall not be a part of the Trust Estate and shall not be invested, but
shall constitute a separate trust fund for the benefit of the persons entitled
to such Debt Service.
(b) If money is on deposit in the Note Purchase Fund on any Tender Date
sufficient to pay the purchase price on the Notes to be paid on such Tender
Date, but the Holder of any Note fails to deliver such Note to the Trustee or
Tender Agent for payment of such purchase price on such Tender Date, the Trustee
shall segregate and hold in trust, without liability for the investment thereof
for the benefit of the person entitled thereto money sufficient to pay such
purchase price due and payable on such Unsurrendered Note on such Tender Date.
Money so segregated and held in trust shall not be a part of the Trust Estate,
but shall constitute a separate trust fund for the benefit of the persons
entitled to such purchase price.
(c) Any money held in trust by the Trustee for the payment of Debt Service
on or the purchase price of any Note pursuant to subsections (a) and (b) of this
Section and remaining unclaimed for 3 years after such Debt Service has become
due and payable shall be paid to the Issuer upon request of an Authorized Issuer
Representative; and the Holder of such Note shall thereafter, as an unsecured
general creditor, look only to the Issuer for payment thereof, and all liability
of the Trustee with respect to such trust money, and all liability of the Issuer
with respect thereto, shall thereupon cease; provided, however, that the
Trustee, before being required to make any such payment to the Issuer, may at
the expense of the Issuer cause to be published once, in a newspaper of general
circulation in the city where the Principal Office of the Trustee is located,
notice that such money remains unclaimed and that, after a date specified
therein, which shall not be less than 30 days from the date of such publication,
any unclaimed balance of such money then remaining will be paid to the Issuer.
SECTION 7.04 Investment of Special Funds
---------------------------
(a) Any money held as part of a Special Fund shall be invested or
reinvested in Qualified Investments by the Trustee in accordance with the
written instructions of the Issuer if no Event of Default exists, to the extent
that such investment is feasible and consistent with the purposes for which such
Fund was created; provided, however, that, except as provided below, money in
the Note Fund and Note Purchase Fund shall be invested only in Federal
Securities (or a fund thereof) with a maturity not later than the date such
money will be needed for the payment of Debt Service on, or the purchase price
of, Notes. Any investment made with money on deposit in a Special Fund shall be
held by or under control of the Trustee and shall be deemed at all times a part
of the Special Fund where such money was on deposit, and the interest and
profits realized from such investment shall be credited to such Fund and any
loss resulting from such investment shall be charged to such Fund.
(b) The proceeds of a draw under the Letter of Credit shall not be
invested.
(c) Any investment of money in the Special Funds may be made by the
Trustee through its own bond department, investment department or other
commercial banking department providing
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investment services. Any certificate of deposit issued by, or other interest-
bearing deposit with, the Trustee shall be deemed an investment rather than a
deposit requiring security.
ARTICLE VIII
Representations and Covenants
-----------------------------
SECTION 8.01 General Representations
-----------------------
The Issuer makes the following representations and warranties as the basis
for the undertakings on its part herein contained:
(1) It is duly organized as a corporation under the laws of Nevada.
(2) It has the power to consummate the transactions contemplated by
the Financing Documents to which it is a party.
(3) By proper corporate action the Issuer has duly authorized the
issuance, execution and delivery of the Financing Documents to which it is
a party and the consummation of the transactions contemplated therein.
(4) It has obtained all consents, approvals, authorizations and
orders of governmental authorities that are required to be obtained by it
as a condition to the issuance of the Notes and the execution and delivery
of the Financing Documents to which it is a party.
(5) The execution and delivery by it of the Financing Documents to
which it is a party and the consummation by it of the transactions
contemplated therein will not (i) conflict with, be in violation of, or
result in a default under any bylaws or any agreement, instrument, order or
judgment to which it is a party or is subject or (ii) result in or require
the creation or imposition of any lien of any nature with respect to the
Trust Estate, except as contemplated by the Financing Documents.
(6) The Financing Documents to which it is a party constitute legal,
valid and binding obligations and are enforceable against it in accordance
with the terms of such instruments, except as enforcement thereof may be
limited by (i) the exercise of judicial discretion and (ii) bankruptcy,
insolvency, or other similar laws affecting the enforcement of creditors'
rights, to the extent constitutionally applicable.
(7) The Issuer has not created or permitted the creation of any
mortgage, pledge, encumbrance, security interest, assignment or other
charge of any kind with respect to the Trust Estate, except as effected or
contemplated by the Financing Documents.
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(8) There is no action, suit, proceeding, inquiry or investigation
pending before any court or governmental authority, or threatened against
or affecting it or its properties, that involves (i) the consummation of
the transactions contemplated by, or the validity or enforceability of, the
Financing Documents, (ii) its organization, (iii) the election or
qualification of its directors or officers, or (iv) its powers.
(9) The Issuer has not created or permitted the creation of any
mortgage, pledge, encumbrance, security interest, assignment or other
charge of any kind with respect to the Trust Estate, except as effected or
contemplated by the Financing Documents.
(10) The Issuer is not an "investment company" or a company
"controlled" by an "investment company", as such terms are defined in the
Investment Company Act of 1940, as amended.
SECTION 8.02 Payment of Debt Service and Purchase of Tendered Notes
------------------------------------------------------
(a) The Issuer shall:
(1) On or before 10:00 a.m. (Birmingham, Alabama time), on each Note
Payment Date, pay to the Trustee an amount equal to the Debt Service on the
Notes due on such Note Payment Date; provided, however, that (i) any amount
already on deposit in the Note Fund on the due date of such payment and
available for the payment of Debt Service on such Note Payment Date shall
be credited against the amount of such payment, and (ii) any amount drawn
by the Trustee pursuant to the Letter of Credit for the payment of such
Debt Service shall be credited against such payment; and
(2) On or before 10:00 a.m. (Birmingham, Alabama time), on each
Tender Date, pay to the Trustee an amount equal to the purchase price of
Notes tendered (or deemed tendered) for purchase on such Tender Date;
provided, however, that (i) any amount already on deposit in the Note
Purchase Fund on such Tender Date that is available for the payment of the
purchase price of such Tendered Notes shall be credited against the amount
of such payment, and (ii) any amount drawn by the Trustee pursuant to the
Letter of Credit for the payment of the purchase price of such Tendered
Notes shall be credited against such payment.
(b) Anything herein to the contrary notwithstanding, the Issuer shall pay
to the Trustee, on or before the first day of each March, June, September and
December, for deposit into the Note Fund, an amount equal to one-fourth (1/4) of
the principal of the Notes maturing or subject to mandatory redemption on the
then next succeeding June 1, which amounts shall be held, invested and applied
as provided for funds on deposit in the Note Fund.
(c) The Issuer covenants and agrees that until the Indenture Indebtedness
is paid in full the Issuer shall make such payments in such amounts and at such
times as shall be necessary to enable the Trustee to pay in full in accordance
with the Indenture (i) all Debt Service on the Notes when and as the same
becomes due and payable, whether at stated maturity and due dates, by call
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for acceleration, by optional or mandatory redemption, or otherwise, and (ii)
the purchase prices of all Tendered Notes when and as the same become due and
payable.
(d) Any overdue payment shall bear interest from the related Note Payment
Date until paid at the Post-Default Rate.
SECTION 8.03 Indemnity of Trustee
--------------------
(a) The Issuer agrees to pay, and to indemnify and hold the Trustee
harmless against, any and all liabilities, losses, damages, claims or actions
(including all reasonable attorneys' fees and expenses of the Trustee), of any
nature whatsoever incurred by the Trustee without willful misconduct arising
from or in connection with its performance or observance of any covenant or
condition on its part to be observed or performed under the Financing Documents.
(b) The Issuer hereby agrees that the Trustee shall not incur any
liability to the Issuer, and shall be indemnified against all liabilities, in
exercising or refraining from asserting, maintaining or exercising any right,
privilege or power of the Trustee under the Financing Documents if the Trustee
is acting in good faith and without willful misconduct or in reliance upon a
written request by the Issuer.
(c) If the Trustee shall be obligated to pay any claim, liability or loss,
and if in accordance with all applicable provisions of this Section the Issuer
shall be obligated to indemnify and hold the Trustee harmless against such
claim, liability or loss, then, in such case, the Issuer shall have a primary
obligation to pay such claim, liability or loss on behalf of such indemnifiable
party and may not defer discharge of its indemnity obligation hereunder until
such indemnifiable party shall have first paid such claim, liability or loss and
thereby incurred actual loss.
(d) The covenants of indemnity contained in this Section shall survive the
termination of this Indenture with respect to events or occurrences happening
prior to or upon the termination of this Indenture and shall remain in full
force and effect until the commencement of an action with respect to any such
event or occurrence shall be prohibited by law.
SECTION 8.04 Obligations of Issuer Unconditional
-----------------------------------
The obligation of the Issuer to make all payments provided for herein and
to perform and observe the other agreements and covenants on its part herein
contained shall be absolute and unconditional. The Issuer will not suspend or
discontinue any such payment or fail to perform and observe any of its other
agreements and covenants contained herein or terminate this Indenture for any
cause whatsoever, including, without limiting the generality of the foregoing,
the invalidity or unenforceability of the Notes or any of the Financing
Documents or any provision thereof, failure of consideration or commercial
frustration of purpose, any failure of the Credit Obligor to make a payment
pursuant to the Letter of Credit or to reinstate the appropriate amount thereof,
any change in the tax or other laws or administrative rulings, actions or
regulations of the United States of America or of the State of Alabama or any
political or taxing subdivision of either thereof, or any failure of any party
to perform and observe any agreement or covenant, whether express or implied,
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duty, liability or obligation arising out of or in connection with any of the
Financing Documents.
SECTION 8.05 General Covenants of the Issuer
-------------------------------
Until the Indenture Indebtedness is paid in full:
(a) The Issuer will maintain proper books of record and account, in which
full and correct entries will be made, in accordance with generally accepted
accounting principles (as the same exist on the date of application thereof), of
all its business and affairs. The Issuer shall, upon written request of the
Trustee, furnish to the Trustee with reasonable promptness audited annual
financial statements of the Issuer prepared by certified public accountants in
accordance with generally accepted accounting principles (as the same exist on
the date of application thereof).
(b) The Issuer will duly pay and discharge all taxes, assessments and
other governmental charges and liens lawfully imposed on the Issuer, and the
properties of the Issuer, provided, however, the Issuer will not be required to
pay any taxes, assessments or other governmental charges so long as in good
faith it shall contest the validity thereof by appropriate legal proceedings.
(c) Except as permitted by this Section the Issuer will maintain and
preserve its existence as a corporation under the laws of the State of Nevada
and will not voluntarily dissolve without first discharging its obligations
under this Indenture (except as permitted herein) and will comply with all valid
laws, ordinances, regulations and requirements applicable to it or to its
property.
(d) The Issuer will not in any manner transfer or convey any material
portion of its property, assets and licenses; without receipt of present and
adequate consideration therefor.
(e) The Issuer will do, execute, acknowledge, deliver and record such
further acts, conveyances, agreements, documents, instruments, financing
statements and assurances as the Trustee shall require for accomplishing the
purposes of the Financing Documents.
(f) The Issuer will (1) pay all amounts due after the dishonor of a
drawing request by or the insolvency of the Credit Obligor; and (2) not use the
proceeds of the Notes in violation of Regulations G, T, U or X of the Board of
Governors of the Federal Reserve System; and (c) will cause the proceeds from
(i) the sale of the Notes, (ii) the remarketing of the Notes and (iii) from
drawings on the Letter of Credit to be maintained in separate accounts,
segregated from each other and from any other funds provided by the Issuer to
make payments on the Notes or to reimburse the Credit Obligor.
SECTION 8.06 Appointment of Successor Trustee
--------------------------------
Whenever necessary to avoid or fill a vacancy in the office of the Trustee,
the Issuer will appoint a successor Trustee in the manner provided in Section
10.09.
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SECTION 8.07 Further Assurances
------------------
The Issuer will at any time or times do, execute, acknowledge, deliver and
record or cause to be done, executed, acknowledged, delivered, and recorded all
such further acts, deeds, conveyances, assignments, pledges, transfers and
assurances in law as the Trustee shall reasonably require for the better
assuring, assigning, transferring, pledging and confirming unto the Trustee, all
and singular, the property and rights herein assigned, transferred and pledged
or intended so to be.
ARTICLE IX
Events of Default and Remedies
------------------------------
SECTION 9.01 Events of Default
-----------------
Any one or more of the following shall constitute an event of default under
this Indenture (whatever the reason for such event and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(1) default in the payment of any interest upon any Note when such
interest becomes due and payable; or
(2) default in the payment of the principal of (or premium, if any,
on) any Note when such principal (or premium, if any) becomes due and
payable, whether at its stated maturity, by declaration of acceleration or
call for redemption or otherwise; or
(3) failure to pay when due the purchase price of any Note tendered
for purchase pursuant to the Optional Tender or Mandatory Tender provisions
hereof; or
(4) the Credit Obligor dishonors a draw under the Letter of Credit;
or
(5) receipt of notice by the Trustee from the Credit Obligor that the
Credit Obligor has not reinstated the Credit Amount of the Letter of Credit
(as defined therein) in accordance with the terms thereof and directing the
Trustee to declare the Notes immediately due and payable under Section 9.02
hereof; or
(6) receipt by the Trustee of written notice from the Credit Obligor
that an event of default, as therein defined, has occurred and is
continuing under the Credit Documents and directing the Trustee to declare
the Notes immediately due and payable under Section 9.02 hereof; or
(7) the occurrence of an event of default, as therein defined, under
any other Financing Document (other than the Credit Documents) and the
expiration of the applicable grace period, if any, specified therein; or
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(8) default in the performance, or breach, of any covenant,
representation or warranty of the Issuer in this Indenture (other than a
covenant or warranty a default in the performance or breach of which is
elsewhere in this Section specifically described), and continuance of such
default or breach for a period of 30 days after there has been given, by
registered or certified mail, to the Issuer, and the Credit Obligor by the
Trustee or to the Issuer, the Trustee and the Credit Obligor by the Holders
of at least 10% in principal amount of the Outstanding Notes, a written
notice specifying such default or breach and requiring it to be remedied
and stating that such notice is a "notice of default" hereunder.
SECTION 9.02 Acceleration of Maturity; Rescission and Annulment; Exercise
------------------------------------------------------------
of Remedies
- -----------
(a) If an Event of Default exists under any of Section 9.01(1), (2), (3),
(4), (5), or (6) and the Letter of Credit is in effect, the Trustee shall (1)
declare the principal of all the Notes and the interest accrued thereon to be
due and payable immediately, by a notice in writing to the Issuer and the Credit
Obligor, and upon any such declaration such principal and the interest accrued
thereon to the date of declaration shall become immediately due and payable and
interest on the Notes shall cease to accrue from and after the date of
declaration and (2) immediately draw under the Letter of Credit to the full
extent permitted by the terms thereof to pay the principal of the Notes and the
interest accrued and to accrue thereon until and including the date of such
declaration.
(b) If an Event of Default exists under Section 9.01(7) or (8) or if any
other Event of Default exists and the Letter of Credit is no longer in effect or
the Credit Obligor has dishonored a draw thereon or there has occurred a Credit
Obligor Insolvency Date, then and in every such case (1) the Trustee or the
Holders of not less than 25% in principal amount of the Notes Outstanding may
(but only with the consent of the Credit Obligor if the Letter of Credit is in
effect and the Credit Obligor has not dishonored a draw thereon and a Credit
Obligor Insolvency Date has not occurred) declare the principal of all the Notes
and the interest accrued thereon to be due and payable immediately, by a notice
in writing to the Issuer (and to the Trustee, if given by Holders), and upon any
such declaration such principal and the interest accrued thereon to the date of
declaration shall become immediately due and payable and (2) the Trustee shall,
if the Letter of Credit is then in effect, immediately draw under the Letter of
Credit to the full extent permitted by the terms thereof to pay the principal of
the Notes and the interest accrued and to accrue thereon until and including the
date of such declaration.
(c) At any time after such a declaration of acceleration has been made
pursuant to subsection (b) of this Section, the Holders of a majority in
principal amount of the Notes Outstanding may (but only with the consent of the
Credit Obligor if the Letter of Credit is in effect and an Event of Default has
not occurred under Section 9.01(4) and a Credit Obligor Insolvency Date has not
occurred), by written notice to the Issuer and the Trustee, rescind and annul
such declaration and its consequences if
(1) the Issuer has deposited with the Trustee a sum sufficient to pay
(A) all overdue installments of interest on all Notes,
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(B) the principal of (and premium, if any, on) any Notes which
have become due otherwise than by such declaration of acceleration and
interest thereon at the rate or rates prescribed therefor in such
Notes,
(C) to the extent that payment of such interest is lawful,
interest upon overdue installments of interest at the rate or rates
prescribed therefor in the Notes, and
(D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel; and
(2) all Events of Default, other than the nonpayment of the principal
of Notes which have become due solely by such declaration of acceleration,
have been cured or have been waived as provided in Section 9.13.
No such rescission and annulment shall affect any subsequent default or impair
any right consequent thereon.
(d) Upon the occurrence of any Event of Default specified in Section 9.01
the Trustee may, only with the consent of the Credit Obligor if the Letter of
Credit is in effect and has been reinstated to the full amount required to be
available thereunder and the Credit Obligor has not dishonored a draft
thereunder and there has not occurred a Credit Obligor Insolvency Date, subject
to the terms of this Indenture, proceed to protect and enforce its rights and
the rights of the Noteholders by any suit, action or proceeding at law or in
equity, including but not limited to an action for mandamus, or for specific
performance of any agreement herein contained, or for enforcing payment and
collection of any revenues due under this Indenture or for making a demand for
payment from the Issuer, or for taking action pursuant to any other document to
which the Trustee is a party by signature, assignment, operation of law, or
otherwise.
SECTION 9.03 Rights and Remedies of Trustee in the Event of Bankruptcy,
----------------------------------------------------------
and the Occurrence of Similar Events Regarding, the Issuer.
- -----------------------------------------------------------
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, composition or other judicial
proceeding relative to any person obligated for payment of the Notes, the
Trustee (irrespective of whether there has been a default under this Indenture)
shall be entitled and empowered to intervene in such proceedings on behalf of
the Noteholders, to file and prove a claim or claims for the whole amount owing
and unpaid and to file such other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee (including any claim for
reasonable compensation to the Trustee, its agents, attorneys and counsel, and
for reimbursement of all expenses and liabilities incurred, and all advances
made, by the Trustee except as a result of its gross negligence or bad faith)
and of the Noteholders allowed in any such judicial proceedings, to collect and
receive any moneys or other property payable or deliverable on any such claims,
and to take such other action therein as the Trustee may deem necessary or
appropriate to protect the interests of the Noteholders, and any receiver,
assignee or
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trustee, liquidator, sequestrator (or other similar official) in any such
judicial proceeding is hereby authorized by each of the Noteholders to make
payments to the Trustee.
SECTION 9.04 Subrogation Rights of Credit Obligor.
-------------------------------------
If money is collected by the Trustee pursuant to the Letter of Credit, the
Credit Obligor shall be subrogated to the rights possessed under this Indenture
by the Trustee and the Holders; provided, however, that the Credit Obligor shall
be precluded from exercising or enforcing such subrogation rights until the
principal of, premium, if any, and interest on all Notes shall have been paid in
full as provided in Article XIII hereof. For purposes of the subrogation rights
of the Credit Obligor hereunder, (i) any reference herein to the registered
owners or Holders of the Notes shall mean the Credit Obligor, (ii) any principal
of, mandatory redemption premium, optional redemption premium and interest on
the Notes paid with moneys collected pursuant to the Letter of Credit shall be
deemed to be unpaid hereunder, and (iii) the Credit Obligor may exercise any
rights it would have hereunder as the Holder of the Notes. The subrogation
rights granted to the Credit Obligor in this Indenture are not intended to be
exclusive of any other remedy or remedies available to the Credit Obligor, and
such subrogation rights shall be cumulative and shall be in addition to every
other remedy given hereunder or under the Financing Documents, or any other
instrument or agreement with respect to the reimbursement of moneys paid by the
Credit Obligor pursuant to the Letter of Credit, and every other remedy now or
hereafter existing at law or in equity or by statute.
SECTION 9.05 Application of Money Collected
------------------------------
(a) The Trustee shall apply the following funds solely for the purposes
for which they were collected and held under this Indenture and not otherwise:
(1) funds collected from a draw under the Letter of Credit, (2) money held in
trust under Section 7.03 for the benefit of Unsurrendered Notes, and (3) funds
and investments held in trust under Section 13.02 for the Notes to be paid
therefrom.
(b) Any money collected by the Trustee pursuant to this Article and any
other sums then held by the Trustee as part of the Trust Estate (other than the
funds referred to in subsection (a) above shall be applied in the following
order, at the date or dates fixed by the Trustee and, in case of the
distribution of such money on account of principal (or premium, if any) or
interest, upon presentation of the Notes and the notation thereon of the payment
if only partially paid and upon surrender thereof if fully paid:
(1) First: To the payment of all undeducted amounts due the Trustee
-----
under Section 10.07;
(2) Second: To the payment of the whole amount then due and unpaid
------
upon the Outstanding Notes for principal (and premium, if any) and
interest, in respect of which or for the benefit of which such money has
been collected, with interest (to the extent that such interest has been
collected by the Trustee or a sum sufficient therefor has been so collected
and payment thereof is legally enforceable at the respective rate or rates
prescribed therefor in the Notes) on overdue principal (and premium, if
any) and (to the extent legally
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enforceable) on overdue installments of interest; and in case such
proceeds shall be insufficient to pay in full the whole amount so due and
unpaid upon such Notes, then to the payment of such principal (and premium,
if any) and interest, without any preference or priority, ratably according
to the aggregate amount so due; provided, however, that payments with
respect to Pledged Notes shall be made only after all other Notes have been
Fully Paid;
(3) Third: To the payment of all amounts then due to the Credit
-----
Obligor pursuant to the Credit Documents; and
(4) Fourth: To the payment of the remainder, if any, to the Issuer
------
or to whosoever may be lawfully entitled to receive the same or as a court
of competent jurisdiction may direct.
SECTION 9.06 Trustee May Enforce Claims without Possession of Notes
------------------------------------------------------
All rights of action and claims under this Indenture or the Notes may be
prosecuted and enforced by the Trustee without the possession of any of the
Notes or the production thereof in any proceeding relating thereto, and any such
proceeding instituted by the Trustee shall be brought in its own name as trustee
of an express trust. Any recovery of judgment shall, after provision for the
payment of the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel, be for the ratable benefit of the Holders
of the Notes in respect of which such judgment has been recovered.
SECTION 9.07 Limitation on Suits by Holders
------------------------------
No Holder of any Note shall have any right to institute any proceeding,
judicial or otherwise, under or with respect to this Indenture, or for the
appointment of a receiver or trustee or for any other remedy hereunder, unless
(1) such Holder has previously given written notice to the Trustee of
a continuing Event of Default;
(2) the Holders of not less than 25% in principal amount of the
Outstanding Notes shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name
as Trustee hereunder;
(3) such Holder or Holders shall have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity shall have failed to institute any such proceeding;
(5) no direction inconsistent with such written request shall have
been given to the Trustee during such 60-day period by the Holders of 51%
in principal amount of the Outstanding Notes; and
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(6) if the Letter of Credit is in effect and an Event of Default does
not exist under Section 9.01(4), (5), or (6), the Credit Obligor shall have
given its written consent to such direction or request;
it being understood and intended that no one or more Holders of Notes shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the lien of this Indenture or
the rights of any other Holders of Notes, or to obtain or to seek to obtain
priority or preference over any other Holders or to enforce any right under this
Indenture, except in the manner herein provided and for the equal and ratable
benefit of all Outstanding Notes.
SECTION 9.08 Unconditional Right of Noteholders to Receive Principal,
--------------------------------------------------------
Premium and Interest
- --------------------
Notwithstanding any other provision in this Indenture, the Holder of any
Note shall have the right, which is absolute and unconditional, to receive
payment of the principal of (and premium, if any) and interest on such Note on
the respective stated maturities expressed in such Note (or, in the case of
redemption, on the redemption date) and to institute suit for the enforcement of
any such payment, and such rights shall not be impaired without the consent of
such Holder.
SECTION 9.09 Restoration of Positions
------------------------
If the Trustee or any Noteholder shall have instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding shall have
been discontinued or abandoned for any reason or shall have been determined
adversely to the Trustee or to such Noteholder, then and in every such case the
Issuer, the Trustee and the Noteholders shall, subject to any determination in
such proceeding, be restored to their former positions hereunder, and thereafter
all rights and remedies of the Trustee and the Noteholders shall continue as
though no such proceeding had been instituted.
SECTION 9.10 Rights and Remedies Cumulative
------------------------------
No right or remedy herein conferred upon or reserved to the Trustee or to
the Noteholders is intended to be exclusive of any other right or remedy, and
every such right and remedy shall, to the extent permitted by law, be cumulative
and in addition to every other right and remedy given hereunder or now or
hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
SECTION 9.11 Delay or Omission Not Waiver
----------------------------
No delay or omission of the Trustee or of any Holder of any Note to
exercise any right or remedy accruing upon an Event of Default shall impair any
such right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article or by law to
the Trustee or to the Noteholders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Noteholders, as the
case may be.
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SECTION 9.12 Control by Credit Obligor and Noteholders
-----------------------------------------
The Holders of 51% in principal amount of the Outstanding Notes (but only
with the consent of the Credit Obligor, if the Letter of Credit is in effect and
the Credit Obligor has not dishonored any draws thereunder and there has not
occurred a Credit Obligor Insolvency Date) shall have the right, during the
continuance of an Event of Default,
(1) to require the Trustee to proceed to enforce this Indenture,
either by judicial proceedings for the enforcement of the payment of the
Notes or otherwise, and
(2) to direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee, or exercising any trust or power
conferred upon the Trustee hereunder, provided that
(A) the provisions of Section 9.02 requiring a declaration of
acceleration and a draw under the Letter of Credit may not be modified
or waived without the consent of all Noteholders,
(B) such direction shall not be in conflict with any rule of law
or this Indenture,
(C) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction,
(D) if such direction is given by the Holders of a majority in
principal amount of Notes Outstanding, the Trustee shall have not
determined that the action so directed would be unjustly prejudicial
to the Holders not taking part in such direction.
SECTION 9.13 Waiver of Past Defaults
-----------------------
(a) The Holders of not less than 51% in principal amount of the
Outstanding Notes may (but only with the consent of the Credit Obligor if the
Letter of Credit is in effect and the Credit Obligor has not dishonored any
draws thereunder and there has not occurred a Credit Obligor Insolvency Date and
subject to subsection (b) below), by Act of such Noteholders delivered to the
Trustee, the Issuer and the Issuer, on behalf of the Holders of all the Notes,
waive any past default hereunder and its consequences, except a default
(1) in the payment of the principal of (or premium, if any) or
interest on any Note,
(2) in the payment of any amounts due by the Issuer under Section
8.02 hereof, or
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(3) in respect of a covenant or provision hereof which under Article
XI cannot be modified or amended without the consent of the Holder of each
Outstanding Note affected.
(b) Anything herein to the contrary notwithstanding no default may be
waived unless the Letter of Credit shall have been reinstated to the full amount
then required to be available thereunder and the Credit Obligor shall have
rescinded any notice of default under the Credit Documents or any notice of
nonreinstatement of the Credit Amount of the Letter of Credit.
(c) Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
SECTION 9.14 Waiver of Appraisement and Other Laws
-------------------------------------
(a) To the full extent that it may lawfully so agree, the Issuer will not
at any time insist upon, plead, claim or take the benefit or advantage of, any
appraisement, valuation, stay, extension or redemption law now or hereafter in
force, in order to prevent or hinder the enforcement of this Indenture; and the
Issuer, for itself and all who may claim under it, so far as it or they now or
hereafter may lawfully do so, hereby waives the benefit of all such laws. The
Issuer, for itself and all who may claim under it, waives, to the extent that it
may lawfully do so, all right to have the property in the Trust Estate
marshalled upon any enforcement hereof.
(b) If any law in this Section referred to and now in force, of which the
Issuer or its successor or successors might take advantage despite this Section,
shall hereafter be repealed or cease to be in force, such law shall not
thereafter be deemed to constitute any part of the contract herein contained or
to preclude the application of this Section.
SECTION 9.15 Suits to Protect the Trust Estate
---------------------------------
The Trustee shall have power to institute and to maintain such proceedings
as it may deem expedient to prevent any impairment of the Trust Estate by any
acts which may be unlawful or in violation of this Indenture and to protect its
interests and the interests of the Noteholders in the Trust Estate and in the
rents, issues, profits, revenues and other income arising therefrom, including
power to institute and maintain proceedings to restrain the enforcement of or
compliance with any governmental enactment, rule or order that may be
unconstitutional or otherwise invalid, if the enforcement of or compliance with
such enactment, rule or order would impair the security hereunder or be
prejudicial to the interests of the Noteholders or the Trustee.
SECTION 9.16 Remedies Subject to Applicable Law
----------------------------------
All rights, remedies and powers provided by this Article may be exercised
only to the extent that the exercise thereof does not violate any applicable
provision of law in the premises, and all the provisions of this Article are
intended to be subject to all applicable mandatory provisions of law which may
be controlling in the premises and to be limited to the extent necessary so that
they will
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not render this Indenture invalid, unenforceable or not entitled to be recorded,
registered or filed under the provisions of any applicable law.
ARTICLE X
The Trustee
-----------
SECTION 10.01 Certain Duties and Responsibilities
-----------------------------------
(a) Except during the continuance of an Event of Default,
(1) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture, and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture; but in
the case of any such certificates or opinions which by any provision hereof
are specifically required to be furnished to the Trustee, the Trustee shall
be under a duty to examine the same to determine whether or not they
conform to the requirements of this Indenture.
(b) If an Event of Default exists, the Trustee shall exercise such of the
rights and powers vested in it by this Indenture, and use the same degree of
care and skill in their exercise, as a prudent man would exercise or use under
the circumstances in the conduct of his own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own grossly negligent action, its own grossly
negligent failure to act, or its own willful misconduct, except that
(1) this subsection shall not be construed to limit the effect of
subsection (a) of this Section;
(2) the Trustee shall not be liable for any error of judgment made in
good faith, unless it shall be proved that the Trustee was grossly
negligent in ascertaining the pertinent facts;
(3) the Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in good faith in accordance with the direction
of the Holders of a majority in principal amount of the Outstanding Notes
relating to the time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power conferred
upon the Trustee, under this Indenture; and
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(4) no provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder, or in the exercise of any
of its rights or powers, if it shall have reasonable grounds for believing
that repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it.
(d) Whether or not therein expressly so provided, every provision of this
Indenture relating to the conduct or affecting the liability of or affording
protection to the Trustee shall be subject to the provisions of this Section.
SECTION 10.02 Notice of Defaults
------------------
Within 90 days after the occurrence of any default hereunder, the Trustee
shall transmit by mail to all Noteholders as their names and addresses appear in
the Note Register, notice of such default hereunder known to the Trustee, unless
such default shall have been cured or waived; provided, however, that, except in
the case of a default in the payment of Debt Service on any Note, the Trustee
shall be protected in withholding such notice if and so long as the Trustee in
good faith determines that the withholding of such notice is in the interests of
the Noteholders; and provided, further, that in the case of any default of the
character specified in Section 9.01(8) no such notice to Noteholders shall be
given until at least 30 days after the occurrence thereof. For the purpose of
this Section, the term "default" means any event which is, or after notice or
lapse of time or both would become, an Event of Default.
SECTION 10.03 Certain Rights of Trustee
-------------------------
Except as otherwise provided in Section 10.01:
(1) the Trustee may rely and shall be protected in acting or refraining
from acting upon any resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, note, debenture, coupon or
other paper or document believed by it to be genuine and to have been signed or
presented by the proper party or parties;
(2) any request or direction of the Issuer mentioned herein shall be
sufficiently evidenced by a certificate or order executed by an Authorized
Issuer Representative;
(3) whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be herein specifically prescribed) may, in the absence of bad faith on its part,
rely upon a certificate executed by an Authorized Issuer Representative;
(4) the Trustee may consult with counsel and the written advice of
Independent Counsel or any Opinion of Independent Counsel shall be full and
complete authorization and protection in respect of any action taken, suffered
or omitted by the Trustee hereunder in good faith and in reliance thereon;
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(5) the Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request or direction of any of
the Noteholders pursuant to this Indenture, unless such Noteholders shall have
offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by it in compliance with such
request or direction, provided, that the Trustee cannot require such security or
indemnity as a condition to the performance by the Trustee of its obligations
under Sections 7.01, 7.02 and 9.02;
(6) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, note, debenture,
coupon or other paper or document but the Trustee, in its discretion, may make
such further inquiry or investigation into such facts or matters as it may see
fit, and, if the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled to examine the books and records of the
Issuer, personally or by agent or attorney; and
(7) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder.
SECTION 10.04 Not Responsible for Recitals
----------------------------
The recitals contained herein and in the Notes, except the certificate of
authentication and registration on the Notes, shall be taken as the statements
of the Issuer, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the value or condition of the Trust
Estate or any part thereof, or as to the title of the Issuer thereto or as to
the security afforded thereby or hereby, or as to the validity or sufficiency of
this Indenture or of the Notes.
SECTION 10.05 May Hold Notes
--------------
The Trustee in its individual or any other capacity, may become the owner
or pledgee of Notes and may otherwise deal with the Issuer with the same rights
it would have if it were not Trustee.
SECTION 10.06 Money Held in Trust
-------------------
Money held by the Trustee in trust hereunder need not be segregated from
other funds except to the extent required by this Indenture or by law. The
Trustee shall be under no liability for interest on any money received by it
hereunder except as otherwise provided in Section 7.04.
SECTION 10.07 Compensation and Reimbursement
------------------------------
(a) The Issuer agrees to cause to be paid, solely from funds made
available to the Issuer for such purpose:
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(1) to the Trustee from time to time reasonable compensation for all
services rendered by it hereunder (which compensation shall not be limited
by any provision of law in regard to the compensation of a trustee of an
express trust); and
(2) except as otherwise expressly provided herein, upon request,
reimbursement for all reasonable expenses, disbursements and advances
incurred or made by the Trustee in accordance with any provision of this
Indenture (including the reasonable compensation and the expenses and
disbursements of its agents and Independent counsel), except any such
expense, disbursement or advance as may be determined by a court of
competent jurisdiction to be attributable to the Trustee's gross
negligence, or bad faith, or wilful misconduct.
(b) As security for the performance of the obligations of the Issuer under
this Section the Trustee shall be secured under this Indenture by a lien prior
to the Notes, and for the payment of such compensation, expenses, reimbursements
and indemnity the Trustee shall have the right to use and apply any money held
by it as a part of the Trust Estate; provided, however, that funds held by the
Trustee under Section 7.03 and Section 13.02 shall be used solely for the
purposes thereof and all funds received by the Trustee from the Letter of Credit
shall be used solely for the purpose of paying Debt Service on, or the purchase
price of, Notes as herein provided, and such funds held under Section 7.03 and
Section 13.02 and such funds received from the Letter of Credit shall never be
subject to any lien imposed by this Section in favor of the Trustee.
SECTION 10.08 Eligibility of Trustee; Appointment of Co-Trustee
-------------------------------------------------
(a) Except as provided in subsection (b), there shall at all times be a
Trustee hereunder which shall be a commercial bank or trust company organized
and doing business under the laws of the United States or of any State,
authorized under such laws to exercise corporate trust powers, having a combined
capital and surplus of at least $50,000,000, subject to supervision or
examination by Federal or State authority.
(b) It is the purpose of this Indenture that there shall be no violation
of the law of any jurisdiction denying or restricting the right of banking
corporations or associations to transact business as trustee in such
jurisdiction. It is recognized that in case of litigation under Financing
Documents, and in particular in case of the enforcement thereof on any default
or Event of Default, or in the case the Trustee deems that by reason of any
present or future law of any jurisdiction it may not exercise any of the powers,
rights, or remedies herein granted to the Trustee or hold title to the
properties, in trust, as herein granted, or take any action which may be
desirable or necessary in connection therewith, it may be necessary that the
Trustee appoint an additional individual or institution as a separate or co-
trustee pursuant to this section.
(c) In the event that the Trustee appoints an additional individual or
institution as a separate or co-trustee, each and every remedy, power, right,
claim, demand, cause of action, immunity, estate, title, interest and lien
expressed or intended by this Indenture to be exercised by or vested in or
conveyed to the Trustee with respect thereto shall be exercisable by and vest in
such separate or co-trustee but only to the extent necessary to enable such
separate or co-trustee to exercise such powers, rights and remedies, and every
covenant and obligation necessary to the
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exercise thereof by such separate or co-trustee shall run to and be enforceable
by either of them. The Trustee shall be jointly liable for the actions taken by
such separate or co-trustee, if such actions were taken at the direction of the
Trustee.
(d) Should any instrument in writing from the Issuer be required by the
separate or co-trustee so appointed by the Trustee for more fully and certainly
vesting in and confirming to him or it such properties, rights, powers, trusts,
duties and obligations, any and all such instruments in writing shall, on
request, be executed, acknowledged and delivered by the Issuer. In case any
separate or co-trustee or a successor to either shall die, become incapable of
acting, resign or be removed, all the estates, properties, rights, powers,
trusts, duties and obligations of such separate or co-trustee, so far as
permitted by law, shall vest in and be exercised by the Trustee until the
appointment of a new trustee or successor to such separate or co-trustee.
SECTION 10.09 Resignation and Removal; Appointment of Successor
-------------------------------------------------
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 10.10.
(b) The Trustee may resign at any time by giving written notice thereof to
the Issuer. If an instrument of acceptance by a successor Trustee shall not
have been delivered to the Trustee within 30 days after the giving of such
notice of resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may (but only with the consent of the Credit Obligor if
the Letter of Credit is in effect and the Credit Obligor has not dishonored any
draws thereunder and there has not otherwise been instituted insolvency
proceedings with respect to the Credit Obligor) be removed at any time by Act of
the Holders of 51% in principal amount of the Outstanding Notes delivered to the
Trustee, the Issuer.
(d) If at any time:
(1) the Trustee shall cease to be eligible under Section 10.08 and
shall fail to resign after written request therefor by the Issuer or by any
Noteholder who has been a Holder of a Note for at least 6 months, or
(2) the Trustee shall become incapable of acting or shall be adjudged
a bankrupt or insolvent or a receiver of the Trustee or of its property
shall be appointed or any public officer shall take charge or control of
the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Issuer by a resolution of its Board of Directors
may remove the Trustee, or (ii) any Noteholder who has been a Holder of a Note
for at least 6 months may, on behalf of himself and all others similarly
situated, petition any court of competent jurisdiction for the removal of the
Trustee and the appointment of a successor Trustee.
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(e) If the Trustee shall resign, be removed or become incapable of acting,
or if a vacancy shall occur in the office of Trustee for any cause, the Issuer,
by a resolution of its Board of Directors, shall (with the consent of the Credit
Obligor if the Letter of Credit is in effect and the Credit Obligor has not
dishonored any draws thereunder and there has not occurred a Credit Obligor
Insolvency Date) promptly appoint a successor Trustee. In case all or
substantially all of the Trust Estate shall be in the possession of a receiver
or trustee lawfully appointed, such receiver or trustee, by written instrument,
may (with the consent of the Credit Obligor if the Letter of Credit is in effect
and the Credit Obligor has not dishonored any draws thereunder and there has not
otherwise been instituted insolvency proceedings with respect to the Credit
Obligor) similarly appoint a successor to fill such vacancy until a new Trustee
shall be so appointed by the Noteholders. If, within 1 year after such
resignation, removal or incapability or the occurrence of such vacancy, a
successor Trustee shall (with the consent of the Credit Obligor under the
conditions herein prescribed) be appointed by Act of the Holders of a majority
in principal amount of the Outstanding Notes delivered to the Issuer, and the
retiring Trustee, the successor Trustee so appointed shall, forthwith upon its
acceptance of such appointment, become the successor Trustee and supersede the
successor Trustee appointed by the Issuer or by such receiver or trustee. If no
successor Trustee shall have been so appointed by the Issuer or the Noteholders
and accepted appointment in the manner hereinafter provided, any Noteholder who
has been a Holder of a Note for at least 6 months may, on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction for
the appointment of a successor Trustee.
(f) The Issuer shall give notice of each resignation and each removal of
the Trustee and each appointment of a successor Trustee by mailing written
notice of such event by first-class mail, postage prepaid, to the Holders of
Notes as their names and addresses appear in the Note Register. Each notice
shall include the name of the successor Trustee and the address of its Principal
Office.
(g) Any successor Trustee shall be acceptable to any Rating Agency which
shall then maintain a rating with respect to the Notes.
SECTION 10.10 Acceptance of Appointment by Successor
--------------------------------------
(a) Every successor Trustee appointed hereunder shall execute, acknowledge
and deliver to the Issuer and to the retiring Trustee an instrument accepting
such appointment, and thereupon the resignation or removal of the retiring
Trustee shall become effective and such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the estates, properties,
rights, powers, trusts and duties of the retiring Trustee; but, on request of
the Issuer or the successor Trustee, such retiring Trustee shall, upon payment
of its charges, execute and deliver an instrument conveying and transferring to
such successor Trustee upon the trusts herein expressed all the estates,
properties, rights, powers and trusts of the retiring Trustee, and shall duly
assign, transfer and deliver to such successor Trustee all property and money
held by such retiring Trustee hereunder, subject nevertheless to its lien, if
any, provided for in Section 10.07. Upon request of any such successor Trustee,
the Issuer shall execute any and all instruments for more fully and certainly
vesting in and confirming to such successor Trustee all such estates,
properties, rights, powers and trusts.
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(b) No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible under
this Article, to the extent operative.
SECTION 10.11 Merger, Conversion, Consolidation or Succession to Business
-----------------------------------------------------------
Any corporation or association into which the Trustee may be merged or
converted or with which it may be consolidated, or any corporation or
association resulting from any merger, conversion or consolidation to which the
Trustee shall be a party, or any corporation or association succeeding to all or
substantially all of the corporate trust business of the Trustee, shall be the
successor of the Trustee hereunder, provided such corporation or association
shall be otherwise qualified and eligible under this Article, to the extent
operative, without the execution or filing of any paper or any further act on
the part of any of the parties hereto. In case any Notes shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Notes so authenticated with the same effect
as if such successor Trustee had itself authenticated such Notes.
ARTICLE XI
Supplemental Indentures and Amendments of Letter of Credit
----------------------------------------------------------
SECTION 11.01 Supplemental Indentures Without Consent of Noteholders
------------------------------------------------------
Without the consent of the Holders of any Notes, the Issuer, when
authorized by a resolution of its Board of Directors, and the Trustee may,
subject to the provisions of Sections 11.03 and 11.04, from time to time enter
into one or more indentures supplemental hereto or in amendment hereof, in form
satisfactory to the Trustee, for any of the following purposes:
(1) to correct or amplify the description of any property at any time
subject to the lien of this Indenture, or better to assure, convey and
confirm unto the Trustee any property subject or required to be subjected
to the lien of this Indenture, or to subject to the lien of this Indenture
additional property; or
(2) to add to the conditions, limitations and restrictions on the
authorized amount, terms or purposes of issue of the Notes; or
(3) to evidence the succession of another corporation to the Issuer
and the assumption by any such successor of the covenants of the Issuer
herein and in the Notes contained; or
(4) to add to the covenants of the Issuer for the benefit of the
Holders of Notes and to make the occurrence, or the occurrence and
continuance, of a default in any of such additional covenants an Event of
Default permitting the enforcement of all or any of the
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several remedies provided in this Indenture; provided, however, that with
respect to any such covenant, such supplemental indenture may provide for a
particular period of grace after default (which period may be shorter or
longer than that allowed in the case of other defaults) or may provide for
an immediate enforcement upon such default or may limit the remedies
available to the Trustee upon such default;
(5) to surrender any right or power herein conferred upon the Issuer;
or
(6) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein or to make
any other provisions, with respect to matters or questions arising under
this Indenture, which shall not be inconsistent with the provisions of this
Indenture, provided such action shall not adversely affect the interests of
the Holders of the Notes; or
(7) to permit fully registered Notes to be exchanged for coupon Notes
(which may be registrable as to principal only); or
(8) to make further provisions with respect to the administration and
operation of the Book-Entry System and the transfer, payment, selection for
redemption and redemption of Notes in accordance therewith; or
(9) to secure or maintain ratings from a Rating Agency, provided that
(i) the changes necessary to obtain or secure such ratings do not adversely
affect the interests of the Holders of the Notes and (ii) the Trustee
receives an Opinion of Note Counsel to the effect that such changes are
permitted by applicable law; or
(10) to modify, amend or supplement this Indenture in such manner as
to permit the qualification hereof under the Trust Indenture Act of 1939 or
any similar federal statute hereafter in effect or to permit the
qualification of the Notes for sale under the securities laws of any of the
states of the United States, and, if they so determine, to add to this
Indenture such other terms, conditions and provisions as may be permitted
by said Trust Indenture Act of 1939 or similar federal statute.
SECTION 11.02 Supplemental Indentures With Consent of Noteholders
---------------------------------------------------
With the consent of the Holders of not less than a majority in principal
amount of the Notes then Outstanding affected by such supplemental or amendatory
indenture, by Act of such Holders delivered to the Issuer and the Trustee, the
Issuer, when authorized by a resolution of its Board of Directors, and the
Trustee may, subject to the provisions of Sections 11.03 and 11.04, enter into
an indenture or indentures supplemental hereto or in amendment hereof for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Indenture or of modifying in any manner the rights of
the Holders of the Notes under this Indenture; provided, however, that no such
supplemental indenture or any amendment shall, without the consent of the Holder
of each Outstanding Note affected thereby,
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(1) change the stated maturity of the principal of, or any
installment of interest on, any Note, or reduce the principal amount
thereof or the interest thereon or any premium payable upon the redemption
thereof, or change any place of payment where, or the coin or currency in
which, any Note, or the interest thereon is payable, or impair the right to
institute suit for the enforcement of any such payment on or after the
stated maturity thereof (or, in the case of redemption, on or after the
redemption date); or
(2) reduce the percentage in principal amount of the Outstanding
Notes the consent of whose Holders is required for any such supplemental
indenture or the consent of whose Holders is required for any waiver
provided for in this Indenture of compliance with certain provisions of
this Indenture or certain defaults hereunder and their consequences; or
(3) modify or alter the provisions of the proviso to the definition
of the term "Outstanding"; or
(4) modify any of the provisions of this Section or Section 9.13,
except to increase any percentage provided thereby or to provide that
certain other provisions of this Indenture cannot be modified or waived
without the consent of the Holder of each Note affected thereby; or
(5) permit the creation of any lien ranking prior to or on a parity
with the lien of this Indenture with respect to the Trust Estate or any
part thereof or terminate the lien of this Indenture on any property at any
time subject hereto or deprive the Holder of any Note of the security
afforded by the lien of this Indenture; or
(6) release any rights under the Letter of Credit; provided, however,
no consent of the Noteholders will be required for any extension of the
term of the Letter of Credit by the Credit Obligor, or for the acceptance
by the Trustee of a Substitute Letter of Credit and the concomitant release
of the then Existing Letter of Credit as provided in Section 3.10, or any
amendment to the Letter of Credit which is provided for, and contemplated
by, this Indenture.
SECTION 11.03 Discretion of Trustee; Acts of Noteholders
------------------------------------------
(a) The Trustee may in its discretion determine whether or not any Notes
would be affected by any supplemental indenture and any such determination shall
be conclusive upon the Holders of all Notes, whether theretofore or thereafter
authenticated and delivered hereunder. The Trustee shall not be liable for any
such determination made in good faith.
(b) It shall not be necessary for any Act of Noteholders under this
Section to approve the particular form of any proposed supplemental indenture
but it shall be sufficient if such Act shall approve the substance thereof.
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SECTION 11.04 Consent of Credit Obligor
-------------------------
Subject to Section 1.12, no amendment or change to this Indenture shall be
made without the prior written consent of the Credit Obligor.
SECTION 11.05 Execution of Supplemental Indentures
------------------------------------
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modification thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and, subject to Section 10.01, shall be fully protected in relying upon, an
Opinion of Independent Counsel stating that the execution of such supplemental
indenture or amendment is authorized or permitted by this Indenture. The
Trustee may, but shall not be obligated to, enter into any such supplemental
indenture or consent to any such amendment which affects the Trustee's own
rights, duties or immunities under this Indenture, or otherwise.
SECTION 11.06 Effect of Supplemental Indentures
---------------------------------
Upon the execution of any supplemental indenture under this Article, this
Indenture shall be modified in accordance therewith and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Notes theretofore or thereafter authenticated and delivered hereunder shall
be bound thereby.
SECTION 11.07 Reference in Notes to Supplemental Indentures
---------------------------------------------
Notes authenticated and delivered after the execution of any supplemental
indenture pursuant to this Article may, and if required by the Trustee shall,
bear a notation in form approved by the Trustee as to any matter provided for in
such supplemental indenture. If the Issuer shall so determine, new Notes so
modified as to conform, in the opinion of the Trustee and the Board of Directors
of the Issuer, to any such supplemental indenture may be prepared and executed
by the Issuer and authenticated and delivered by the Trustee in exchange for
Outstanding Notes.
SECTION 11.08 Amendment of Letter of Credit
-----------------------------
(a) The Trustee may, without the consent of or notice to the Holders of
the Notes, consent to any amendment, modification or other change of the Letter
of Credit for the purpose of curing any ambiguity or formal defect or omission
or obtaining a rating on the Notes from any Rating Agency, provided that the
Trustee shall receive an Opinion of Note Counsel with respect to the Notes, to
the effect that such change is permitted by applicable law.
(b) Except as provided in subsection (a) of this Section, and except for
extensions of the term of the Letter of Credit by the Credit Obligor, no
amendment, modification or other change of the Letter of Credit shall be made
without the consent of the Holders of all Notes Outstanding.
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ARTICLE XII
The Remarketing Agent
and the Tender Agent
--------------------
SECTION 12.01 Remarketing Agent
-----------------
(a) SouthTrust Securities, Inc. is hereby appointed as "Remarketing Agent"
for the Notes, subject to the conditions set forth in this Section.
(b) The Remarketing Agent shall signify its acceptance of the duties and
obligations imposed upon it by this Indenture by execution and delivery of an
agreement satisfactory to the Trustee.
(c) The Remarketing Agent shall be authorized by law to perform all the
duties imposed upon it by this Indenture.
(d) The Remarketing Agent may resign at any time by giving 30 days' prior
written notice thereof to the Issuer, the Trustee, and the Credit Obligor;
provided, however, that no such resignation shall become effective until a
successor Remarketing Agent has been appointed and has accepted its duties and
obligations hereunder.
(e) The Issuer may, with the prior written consent of the Credit Obligor,
remove the Remarketing Agent at any time upon 30 days' prior written notice
thereof to the Remarketing Agent, the Issuer and the Trustee.
(f) If at any time:
(1) the Remarketing Agent shall cease to be eligible under this
Section and shall fail to resign after written request therefor by the
Issuer, or
(2) the Remarketing Agent shall become incapable of acting or shall
be adjudged a bankrupt or insolvent or a receiver of the Remarketing Agent
or of its property shall be appointed or any public officer shall take
charge or control of the Remarketing Agent or of its property or affairs
for the purpose of rehabilitation, conservation or liquidation,
then, in any such case, the Issuer may remove the Remarketing Agent upon 7 days'
written notice thereof to the Remarketing Agent, the Credit Obligor, the Issuer.
(g) If the Remarketing Agent shall resign, be removed or become incapable
of acting, or if a vacancy shall occur in the office of Remarketing Agent for
any cause, the Issuer shall, with the prior written consent of the Issuer and
the Credit Obligor, promptly appoint a successor Remarketing Agent.
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(h) Any successor Remarketing Agent shall be appropriately registered and
licensed, and be acceptable to the Issuer, the Trustee and to any Rating Agency
which shall then maintain a rating with respect to the Notes.
(i) The Trustee shall give notice of each resignation and each removal of
the Remarketing Agent and each appointment of a successor Remarketing Agent by
mailing written notice of such event by first-class mail, postage prepaid, to
the Holders of Notes as their names and addresses appear in the Note Register.
Each notice shall include the name of the successor Remarketing Agent and the
address of its principal office.
SECTION 12.02 Tender Agent
------------
(a) The Trustee shall act as Tender Agent. At the written request of the
Trustee, the Issuer shall appoint an agent to act on behalf of the Trustee in
the acceptance of delivery of Notes tendered for purchase pursuant to the
Optional Tender or Mandatory Tender provisions of this Indenture and in the
authentication and delivery of Notes pursuant to the transfer and exchange
provisions of this Indenture. For all purposes of this Indenture, (i) Notes to
be purchased pursuant to the Optional Tender or Mandatory Tender provisions of
this Indenture may be delivered to the Tender Agent, as well as the Trustee, and
(ii) the authentication and delivery of Notes by a duly authorized officer of
the Tender Agent pursuant to the transfer and exchange provisions of this
Indenture shall be deemed to be the authentication and delivery of Notes "by the
Trustee".
(b) Any Tender Agent appointed hereunder shall signify its acceptance of
such appointment by execution and delivery of an agreement satisfactory to the
Trustee.
(c) Any such Tender Agent shall at all times be a bank or trust company
having its principal office in New York, New York and shall at all times be a
corporation organized and doing business under the laws of the United States or
of any state with a combined capital and surplus of at least $5,000,000 and
authorized under such laws to exercise corporate trust powers and subject to
supervision and examination by federal or state authority and shall be
acceptable to any Rating Agency which shall then maintain a rating with respect
to the Notes. If such corporation publishes reports of condition at least
annually pursuant to law or the requirements of such authority, then for the
purposes of this Section, the combined capital and surplus of such corporation
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published.
(d) Any corporation or association into which any Tender Agent may be
merged or converted or with which it may be consolidated, or any corporation or
association resulting from any merger, consolidation or conversion to which any
Tender Agent shall be a party, or any corporation or association succeeding to
the corporate trust business of any Tender Agent, shall be the successor of the
Tender Agent hereunder, if such successor corporation or association is
otherwise eligible under this Section, without the execution or filing of any
further act on the part of the parties hereto or the Tender Agent or such
successor corporation or association.
(e) Any Tender Agent may at any time resign by giving written notice of
resignation to the Trustee, the Issuer. The Trustee may at any time terminate
the agency of any Tender Agent by
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giving written notice of termination to such Tender Agent, the Issuer. Upon
receiving such a notice of resignation or upon such a termination, or in case at
any time any Tender Agent shall cease to be eligible under this Section, the
Issuer shall promptly appoint a successor Tender Agent, shall give written
notice of such appointment to the Issuer, and shall mail notice of such
appointment to all Holders of Notes as the names and addresses of such Holders
appear on the Note Register.
(f) The Issuer shall to pay to the Tender Agent from time to time
reasonable compensation for its services.
ARTICLE XIII
Defeasance
----------
SECTION 13.01 Payment of Indebtedness; Satisfaction and Discharge of
------------------------------------------------------
Indenture
- ---------
(a) Whenever all Indenture Indebtedness has been Fully Paid, then, upon
the request of an Authorized Issuer Representative, this Indenture and the lien,
rights and interests created hereby shall cease, determine and become null and
void (except as to any surviving rights of transfer or exchange of Notes herein
or therein provided for) and the Trustee shall execute and deliver a termination
statement and such instruments of satisfaction and discharge as may be necessary
and pay, assign, transfer and deliver to the Issuer or upon the order of the
Issuer, all cash and securities then held by it hereunder as a part of the Trust
Estate.
(b) A Note shall be deemed "Fully Paid" if
(1) such Note has been canceled by the Trustee or delivered to the
Trustee for cancellation, or
(2) such Note shall have matured or been called for redemption and,
on such maturity date or redemption date, money for the payment of Debt
Service on such Note is held by the Trustee in trust for the benefit of the
person entitled thereto, or
(3) such Note is alleged to have been mutilated, destroyed, lost or
stolen and has been replaced as provided in Section 4.02, or
(4) a trust for the payment of such Note has been established in
accordance with Section 13.02 and the Trustee shall have received (i) an
Opinion of Counsel experienced in bankruptcy matters stating in effect that
upon the occurrence of an Act of Bankruptcy, money and investments in such
trust will not be subject to any preference claim under the Federal
Bankruptcy Code, which opinion shall be satisfactory to any Rating Agency
then rating the Notes and (ii) a certificate of an Independent certified
public accountant or firm thereof to the effect that the funds on deposit
in such trust and the income therefrom without reinvestment will be
sufficient to pay when due the principal of, premium if any and interest on
such Notes. The Issuer shall give each Rating Agency that maintains a
rating with respect
68
<PAGE>
to the Notes 10 days' notice of its intent to establish such a trust for
the payment of Notes, but failure to give any such notice shall not result
in a Note not being deemed Fully Paid.
(c) Indenture Indebtedness other than Debt Service on the Notes shall be
deemed "Fully Paid" whenever the Issuer has paid, or made provisions
satisfactory to the Trustee for payment of, all such Indenture Indebtedness
other than Debt Service on the Notes.
SECTION 13.02 Trust for Payment of Debt Service
---------------------------------
(a) The Issuer may provide for the payment of any of the Notes by
establishing a trust for such purpose with the Trustee and depositing therein
cash or Federal Securities which (assuming the due and punctual payment of the
principal of and interest on such Federal Securities) will provide funds
sufficient to pay the Debt Service on such Notes as the same becomes due and
payable until the maturity or redemption of such Notes; provided, however, that
(1) such Federal Securities must not be subject to redemption prior
to their respective maturities at the option of the issuer of such
Securities,
(2) if any of such Notes are to be redeemed prior to their respective
maturities, either (i) the Trustee shall receive evidence that notice of
such redemption has been given in accordance with the provisions of this
Indenture and such Notes or (ii) the Issuer shall confer on the Trustee
irrevocable authority for the giving of such notice on behalf of the
Issuer,
(3) such trust must be established only during a Fixed Rate Period
and, if established during a Fixed Rate Period, all Notes to be retired
with funds from such trust must either mature or be called for redemption
on or before the date immediately following such Fixed Rate Period, and
(4) the Trustee has received the opinions referred to in Section
13.01(b)(4).
(b) Cash and Federal Securities deposited with the Trustee pursuant to
this Section shall not be a part of the Trust Estate but shall constitute a
separate, irrevocable trust fund for the benefit of the Holders of the Notes to
be paid from such fund. Such cash and the principal and interest payable on such
Federal Securities shall be applied by the Trustee solely to the payment of Debt
Service on such Notes. Any funds deposited with the Trustee pursuant to this
Section shall be invested only in Federal Securities meeting the requirements of
this Section.
69
<PAGE>
IN WITNESS WHEREOF, the Issuer and the Trustee have caused this instrument
to be duly executed, and their respective corporate seals to be hereunto affixed
and the same attested, by officers thereof duly authorized thereunto.
DISPLAY TECHNOLOGIES, INC.
By /s/ J. William Branden
------------------------------------
Its President
-----------------------------------
S E A L
- -------
Attest: /s/ Marshall S. Harris
-------------------------
Its: Secretary
-----------------------
SOUTHTRUST BANK,
NATIONAL ASSOCIATION
By /s/ Stephen G. Waldrip
------------------------------------
Its Vice President and Trust Officer
-----------------------------------
[S E A L]
Attest: /s/ K. Burton
-------------------------
Its Assistant Vice President
and Trust Officer
-----------------------------
70
<PAGE>
STATE OF ALABAMA
Jefferson COUNTY
I, the undersigned, a Notary Public in and for said County in said State,
do hereby certify that J. William Branden, whose name as President of Display
Technologies, Inc., a Nevada corporation, is signed to the foregoing instrument
and who is known to me, acknowledged before me on this day that, being informed
of the contents of said instrument, he, as such officer and with full authority,
executed the same voluntarily for and as the act of said corporation.
Given under my hand and seal this the 2/nd/ day of June, 1999.
/s/ Caralo Stancil Strong
------------------------------------
Notary Public
NOTARIAL SEAL
My commission expires: January 30, 2001.
------------------
71
<PAGE>
STATE OF ALABAMA
JEFFERSON COUNTY
I, the undersigned, a Notary Public in and for said County, in said State,
hereby certify that Stephen G. Waldrip, whose name as Vice President and Trust
Officer of SouthTrust Bank, National Association, a national banking
association, is signed to the foregoing instrument, and who is known to me,
acknowledged before me on this day that, being informed of the contents of said
instrument, (s)he, as such officer and with full authority, executed the same
voluntarily for and as the act of said national banking association.
Given under my hand and seal this the 14/th/ day of June, 1999.
/s/ [SIGNATURE ILLEGIBLE]^^
------------------------------------
Notary Public
NOTARIAL SEAL
My commission expires: NOTARY PUBLIC STATE OF ALABAMA
AT LARGE MY COMMISSION EXPIRES:
NOV. 19, 2002 BONDED THRU NOTARY
PUBLIC UNDERWRITERS
----------------------------------
72
<PAGE>
Exhibit 4.35
Interest on this Note is subject to federal and state taxation.
The principal of and interest on the Notes are payable from payments to be made
under the irrevocable, direct-pay letter of credit issued by SouthTrust Bank,
National Association, referenced herein, which constitutes a binding and
enforceable obligation thereof, or under any irrevocable, direct-pay letter of
credit issued in substitution therefor in accordance with the Indenture
referenced herein. The Notes are not deposits or obligations of SouthTrust
Bank, National Association, or any affiliate thereof, or of any issuer of any
substitute letter of credit. The Notes and the said letters of credit are not
insured by the Federal Deposit Insurance Corporation. The Notes are subject to
investment risks, including loss of principal amount invested.
Notice By Securities Depository
-------------------------------
Unless the within Note is presented by an authorized representative of the
Securities Depository (as defined in the Indenture referenced in the within
Note), to the Issuer or its agent for registration of transfer, exchange, or
payment, and any Note issued is registered in the name of the Securities
Depository or the Securities Depository Nominee (as defined in the Indenture
referenced in the within Note), as the case may be, or in such other name as is
requested by an authorized representative of the Securities Depository (and any
payment is made to the Securities Depository or the Securities Depository
Nominee or to such other entity as is requested by an authorized representative
of the Securities Depository), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, the Securities Depository or Securities Depository Nominee, as the
case may be, has an interest herein.
DISPLAY TECHNOLOGIES, INC.
VARIABLE/FIXED RATE
SECURED PROMISSORY NOTES
No. R-1
Dated Date: Maturity Date: CUSIP:
June 17, 1999 June 1, 2014 25469 VAA 0
Display Technologies, Inc., a corporation under the laws of the State of
Nevada (the "Issuer", which term includes any successor corporation under the
Indenture hereinafter referenced), for value received, hereby promises to pay
solely from the source hereinafter described to
CEDE & CO.,
<PAGE>
or registered assigns, the principal amount of
TWO MILLION FIVE HUNDRED THOUSAND DOLLARS
($2,500,000)
on the Maturity Date specified above and to pay solely from the source
hereinafter described interest on said principal amount from the date hereof or
the most recent date to which interest has been paid or duly provided for, until
the principal amount hereof shall become due and payable, at the Variable Rate
or the Fixed Rate, as hereinafter provided.
Authority for Issuance
- ----------------------
This note is one of a duly authorized issue of notes of the Issuer,
aggregating $2,500,000 in principal amount and of the above designation (the
"Notes"), issued pursuant to a Trust Indenture dated as of June 1, 1999 (the
"Indenture") between the Issuer and SouthTrust Bank, National Association, a
national banking association with its principal office in Birmingham, Alabama
(the "Trustee", which term includes any successor trustee under the Indenture).
Security
- --------
Pursuant to the Indenture the Issuer has agreed to make payments at times
and in amounts sufficient to pay Debt Service when due on the Notes and to pay
the purchase price of Notes tendered for purchase pursuant to the Mandatory
Tender and Optional Tender provisions of the Indenture (the "Issuer Note
Payments").
The obligation of the Issuer to pay the principal of, premium (if any) and
interest on this Note in the amounts and at the times, places and rates, and in
the coin or currency, herein prescribed, is absolute and unconditional, and no
reference herein to the Indenture or the Letter of Credit and no provision of
this Note or the Indenture shall operate or be construed to alter or impair said
obligation.
As additional security for the payment of the Notes, the Issuer will cause
SouthTrust Bank, National Association (in its capacity as issuer of the initial
Letter of Credit referred to below, the "Credit Obligor") to issue an
irrevocable letter of credit in favor of the Trustee in the amount of (i) the
aggregate principal amount of the Notes, to enable the Trustee to pay the
principal amount of Notes when due and to pay the principal portion of the
purchase price of Notes tendered (or deemed tendered) to the Trustee for
purchase, plus (ii) interest on the Notes at the Maximum Rate for a period of 56
days, to enable the Trustee to pay interest on the Notes when due and to pay the
interest portion of the purchase price of Notes tendered (or deemed tendered) to
the Trustee for purchase. The said letter of credit will expire, unless earlier
terminated or extended, on June 15, 2002. Subject to the terms and conditions of
the Indenture, the Issuer may, at its option, replace such letter of credit and
any subsequent letter of credit with a substitute letter of credit meeting the
requirements of the Indenture with respect thereto. The initial letter of credit
so delivered to the Trustee and any substitute letter of credit delivered to the
Trustee pursuant to the Indenture are herein referred to as the "Letter of
Credit". The initial Letter of Credit is issued pursuant to various credit and
security agreements among the Credit Obligor, the Issuer, and persons related to
the Issuer, which evidence, guarantee, or provide security for the obligations
to the Issuer to reimburse the
<PAGE>
Credit Obligor for draws under the Letter of Credit and the observance and
performance of various agreements of the Issuer related thereto (collectively
the "Credit Documents").
Copies of the Indenture, the initial Letter of Credit and the Credit
Documents are on file at the Principal Office of the Trustee and reference is
hereby made to such documents for the provisions, among others, with respect to
the respective rights, duties, obligations and security of the Issuer, the
Trustee, the Credit Obligor and the owners of beneficial interests in the Notes
and the terms and conditions upon which the purchase, transfer and exchange of
beneficial ownership interests in the Notes are to be made by means of a Book-
Entry System administered by the Securities Depository, to and by all of which
terms, conditions and provisions of said documents the owner of any beneficial
interest in this note, by the acquisition hereof, hereby assents and agrees to
be bound.
Payment of Debt Service
- -----------------------
Interest at the Variable Rate and interest at the Fixed Rate for a Fixed
Rate Period of less than 6 months shall be computed on the basis of a 365 day
year for the actual number of days elapsed. Interest at the Fixed Rate for each
Fixed Rate Period of 6 months or more shall be computed on the basis of a 360-
day year with 12 months of 30 days each. Interest shall be payable, solely from
the source hereinafter described, on overdue principal of this note and (to the
extent legally enforceable) on any overdue installment of interest on this note
at the rate of interest last applicable to this note when such overdue principal
or interest became delinquent.
Interest on this note shall be payable in arrears on the following dates
(each such date being herein called an "Interest Payment Date"): (1) with
respect to interest payable at the Variable Rate, on (i) the first day of each
month (first interest payable July 1, 1999) in each year during the Variable
Rate Period and (ii) on the day immediately following any Variable Rate Period
(each such date being herein called a "Variable Rate Interest Payment Date");
(2) with respect to interest payable at a Fixed Rate for any Fixed Rate Period
of less than 6 months, on the day immediately following such Fixed Rate Period
(each such date being herein called a "Fixed Rate Interest Payment Date"); and
(3) with respect to interest payable at a Fixed Rate for any Fixed Rate Period
of 6 months or more, (i) on the first day of the calendar month that is 6 months
after the first day of the calendar month in which such Fixed Rate Period began,
(ii) semiannually thereafter, and (iii) on the day immediately following such
Fixed Rate Period (each such date being herein called a "Fixed Rate Interest
Payment Date").
The interest so payable, and punctually paid or duly provided for, on any
Interest Payment Date will, as provided in the Indenture hereinafter referenced,
be paid to the person in whose name this note is registered at the close of
business on the Regular Record Date for such interest, which shall be the day
next preceding any Variable Rate Interest Payment Date or any Fixed Rate
Interest Payment Date with respect to a Fixed Rate Period of less than 6 months,
or the 15th day (whether or not a Business Day) next preceding any Fixed Rate
Interest Payment Date with respect to a Fixed Rate Period of 6 months or more.
Any such interest not so punctually paid or duly provided for shall forthwith
cease to be payable to the registered Holder on such Regular Record Date, and
shall be paid to the person in whose name this note is registered at the close
of business on a Special Record Date for the payment of such defaulted interest
to be fixed by the Trustee; notice of such Special
<PAGE>
Record Date to be given to Holders of the Notes not less than 10 days prior to
such Special Record Date.
Payment of interest on this note due on any Interest Payment Date shall be
made by check or draft mailed by the Trustee to the person entitled thereto at
the address thereof appearing in the Note Register maintained by the Trustee.
Such payments shall be deemed timely made if so mailed on the Interest Payment
Date (or, if such Interest Payment Date is not a Business Day, on the Business
Day next following such Interest Payment Date). Payment of the principal of (and
premium, if any, on) this note and payment of accrued interest on this note due
upon redemption on any date other than an Interest Payment Date shall be made
only upon surrender of this note at the Principal Office of the Trustee. Upon
the terms and conditions of the Indenture the Holder of any Note in a principal
amount of not less than $100,000 may request that payment of Debt Service on
such Note be made by wire transfer to an account of such Holder maintained at a
bank in the continental United States or by any other method providing for
payment in same-day funds that is acceptable to the Trustee.
All payments of principal of, premium, if any, and interest on this note
shall be made in such coin or currency of the United States of America as at the
time of payment is legal tender for the payment of public and private debts.
Interest Rate
- -------------
This Note may bear interest at either a variable rate or a fixed rate, and
if at a fixed rate, for varying periods of time, with such consequences as are
specified in the Indenture, without any notation being made hereon. Each owner
of this Note takes it subject to the terms then applicable hereto, and may
obtain from the Trustee verification of the then applicable provisions hereof.
Variable Rate
-------------
The Notes shall initially bear interest at a Variable Rate. Upon the
expiration of any Fixed Rate Period, the Notes shall again bear interest at the
Variable Rate, unless the day immediately following such Fixed Rate Period is
the effective date of a continuation or conversion of the interest rate to a
Fixed Rate (such date being herein called a "Conversion Date"). Once the
Variable Rate becomes effective, it shall remain in effect until and including
the day immediately prior to the earlier of (i) a Conversion Date or (ii) the
final maturity of the Notes. Each period during which the Variable Rate is in
effect is herein called a "Variable Rate Period".
The Variable Rate shall be a fluctuating rate per annum determined by the
Remarketing Agent periodically during a Variable Rate Period as provided in the
Indenture and described herein. The Variable Rate shall be determined on the
first day of each Variable Rate Period (beginning upon initial issuance of the
Notes and following a Fixed Rate Period) and on each Thursday during a Variable
Rate Period (or, if such Thursday is not a Business Day, on the immediately
preceding Business Day). The Variable Rate so determined shall become effective
(i) on the date of determination, if such date is the first day of the Variable
Rate Period, or (ii) if such date is not the first day of a Variable Rate
Period, on the day immediately following the date of determination, and once
effective shall remain in effect until and including the next determination date
or, if sooner, the
<PAGE>
end of such Variable Rate Period; provided, however, that if the Remarketing
Agent fails to determine the Variable Rate on any such determination date, the
last Variable Rate in effect shall remain in effect until and including the next
determination date, and provided further, if the Remarketing Agent fails to
determine the Variable Rate on two consecutive determination dates therefor, the
Variable Rate shall be equal to the Maximum Rate until such determination date
as the Remarketing Agent shall determine the Variable Rate in accordance with
the Indenture.
The Variable Rate shall be determined by the Remarketing Agent and shall be
the lowest interest rate that would, in the opinion of the Remarketing Agent,
result in the market value of the Notes being 100% of the principal amount
thereof on the date of such determination, taking into account relevant market
conditions and credit rating factors as they exist on such date; provided,
however, that the Variable Rate may never exceed the Maximum Rate. The Maximum
Rate is the lesser of (i) the rate of 12% per annum or (ii) for any period
during which the Notes are supported by a Letter of Credit, the maximum rate per
annum, specified therein, upon which there has been calculated the amount
available to be drawn on such Letter of Credit to pay interest on the Notes.
Upon the request of any Noteholder, the Trustee shall confirm (by telephone and
in writing, if so requested) the Variable Rate then in effect. SouthTrust
Securities, Inc., Birmingham, Alabama, has been appointed as "Remarketing Agent"
pursuant to the Indenture. The Indenture permits the Issuer, with the consent of
the Credit Obligor, to remove such Remarketing Agent and appoint a successor,
subject to certain terms and conditions specified in the Indenture therefor.
Fixed Rate
----------
The Notes shall bear interest at a Fixed Rate during each period of time
specified by the Issuer as provided in the Indenture and described herein. Each
period during which a Fixed Rate is in effect is herein called a "Fixed Rate
Period". The Fixed Rate shall be a fixed rate per annum which shall be
applicable during the entire Fixed Rate Period and for each Fixed Rate Period
shall be determined by the Remarketing Agent as provided in the Indenture and
described herein.
The Issuer may elect that the Notes bear interest at a Fixed Rate for any
period after the initial Variable Rate Period by delivery of written notice of
such election to the Trustee not less than 45 days prior to the proposed
Conversion Date. Such notice shall specify the first day and the last day of the
Fixed Rate Period elected; provided, however, that (i) if such election is made
during a Fixed Rate Period, the specified Conversion Date may not be sooner than
the first day immediately following the Fixed Rate Period then in effect, (ii)
the Conversion Date may not be less than 45 days prior to the Stated Expiration
Date of the Letter of Credit (if any) then in effect, (iii) the designated Fixed
Rate Period may not be less than 15 days, and (iv) the Fixed Rate Period may not
extend beyond the day immediately prior to the final maturity of the Notes. Any
such election by the Issuer shall be irrevocable after 10:00 a.m. (Birmingham,
Alabama time) on the last Business Day immediately prior to the proposed
Conversion Date.
Not less than 1 nor more than 10 days prior to the proposed Conversion
Date, the Remarketing Agent shall determine the interest rate for such Fixed
Rate Period (the "Fixed Rate"), which shall be the lowest interest rate that
would, in the opinion of the Remarketing Agent, result in the market value of
the Notes being 100% of the principal amount thereof on the date of such
determination, taking into account relevant market conditions and credit rating
factors as they exist
<PAGE>
on such date, and assuming that the Fixed Rate Period began on such date;
provided, however, that the Fixed Rate may not exceed the Maximum Rate.
Notwithstanding the foregoing, a Fixed Rate shall not be established if (i)
the Issuer delivers to the Trustee written notice of revocation of its election
to establish the Fixed Rate before 10:00 a.m. (Birmingham, Alabama time) on the
last Business Day immediately prior to the proposed Conversion Date or (ii)
prior to 10:00 a.m. (Birmingham, Alabama time) on the Conversion Date the
Trustee does not receive an Opinion of Note Counsel stating in effect that such
conversion to a Fixed Rate is lawful under applicable law and the Substitute
Letter of Credit (if any) that is to be effective on such Conversion Date. If
all conditions to the establishment of a Fixed Rate are not satisfied, the Notes
shall continue (or, if a Fixed Rate Period ended on the preceding day, shall
begin) to bear interest at the Variable Rate from the proposed Conversion Date.
Optional Tender
- ---------------
Upon the terms and conditions provided in the Indenture and described
herein, the Holder of any Note shall have the right to tender such Note to the
Trustee or to any Tender Agent appointed pursuant to the Indenture for purchase
in whole or in part (if in part, only in an Authorized Denomination) on any
Business Day during any Variable Rate Period, but not during any Fixed Rate
Period, at a purchase price equal to 100% of the principal amount of Notes (or
portions thereof) tendered plus accrued interest to the specified purchase date
(an "Optional Tender Date"). In order to exercise such option with respect to
any Note, the Holder thereof must deliver notice thereof to the Trustee, as
provided below, at its Principal Office at least 7 days prior to the proposed
Optional Tender Date.
Any such notice of Optional Tender must be duly executed by the Noteholder
and must specify (i) the name of the registered Holder of the Note to be
tendered for purchase, (ii) the Optional Tender Date, (iii) the certificate
number (if applicable) and principal amount of such Note, and (iv) the principal
amount of such Note to be purchased (if such amount is less than the entire
principal amount, the amount to be purchased must be in an Authorized
Denomination). Such notice may be given to the Trustee in writing or by
telephone, but no such telephonic notice shall be effective unless confirmed in
writing delivered to the Trustee not more than 2 Business Days after such
telephonic notice. A form of the Optional Tender Notice may be obtained from the
Trustee upon request. If any notice of Optional Tender specifies an Optional
Tender Date that is not a Business Day, then such notice shall be deemed to
specify the next following Business Day as the Optional Tender Date. Unless a
notice of Optional Tender indicates that less than the entire principal amount
of the Note is being tendered for purchase, the Holder will be deemed to have
tendered the Note in its entire principal amount for purchase. Upon delivery of
a written notice of Optional Tender, the election to tender shall be irrevocable
and binding upon such Holder and may not be withdrawn.
If a written notice of Optional Tender shall have been duly given with
respect to any Note or any authorized part thereof, the Holder of such Note
shall deliver such Note to the Trustee at its Principal Office or to the Tender
Agent at its Principal Office at or before 10:00 a.m. (Birmingham, Alabama time)
on the Optional Tender Date, together with an instrument of assignment or
transfer duly executed in blank. During a period in which the Book-Entry System
is in effect for the Notes,
<PAGE>
transfers of the beneficial ownership interests in the Notes on such date shall
be effected on the records of the Securities Depository by the Securities
Depository in accordance with rules and procedures therefor and any requirement
for physical delivery of Notes on an Optional Tender Date shall be deemed
satisfied thereby. Any Note or any authorized part thereof for which a notice of
Optional Tender has been given but which is not so delivered to the Trustee or
Tender Agent or transferred on the records of the Securities Depository (an
"Unsurrendered Note") shall nevertheless be deemed to have been tendered by the
Holder thereof on the Optional Tender Date. If there has been irrevocably
deposited in the Note Purchase Fund an amount sufficient to pay the purchase
price of all Notes or any authorized part thereof tendered or deemed to be
tendered for purchase on an Optional Tender Date, any Unsurrendered Note shall
be deemed to have been tendered for purchase and purchased from the Holder
thereof on such Optional Tender Date and the Holder of any Unsurrendered Note
shall not be entitled to receive interest on such Unsurrendered Note for any
period on and after the Optional Tender Date.
Anything in this Note or the Indenture to the contrary notwithstanding, no
Optional Tender of Notes shall be permitted for Pledged Notes or for any Note
which is deemed Fully Paid.
Mandatory Tender
- ----------------
The Holder of each Note (other than a Pledged Note or a Note that has been
deemed Fully Paid) who has not elected to retain the Note or Notes thereof in
the manner provided in the Indenture therefor shall be required to tender such
Note to the Trustee or Tender Agent for purchase on the following dates (each
such date being herein called a "Mandatory Tender Date"): (i) each proposed
Conversion Date, (ii) the date immediately following the expiration of a Fixed
Rate Period, (iii) the first day of the calendar month in which the Stated
Expiration Date of the Letter of Credit occurs, unless a Substitute Letter of
Credit and Related Documentation all meeting the requirements of the Indenture
therefor is delivered to the Trustee in accordance with the terms of Section
3.10 of the Indenture, (iv) a Credit Obligor Insolvency Date, (v) that date
which is 15 days prior to the effective date of any change in the frequency with
which or the formula by which the interest rate on the Notes is established
during a Variable Rate Period,(vi) that date which is 15 days prior to the
effective date of any change in the optional tender terms of the Notes during a
Variable Rate Period. If any of such dates is not a Business Day, the Mandatory
Tender Date shall be deemed to be the next succeeding Business Day, and (vii)
that date which is 10 days after the Trustee receives a notice in writing from
the Credit Obligor, which notice (1) is delivered not later than the close of
business on the tenth day (if such tenth day is not a Business Day, on the then
next succeeding Business Day) after the date on which the Credit Obligor has
honored a B Drawing under the Letter of Credit and (2) states that the Interest
Portion (as defined in the Letter of Credit) will not be reinstated or that an
Event of Default has occurred and is continuing under the Credit Documents and
(3) directs the Trustee to effect Mandatory Tender of the Notes on such date.
Notice of a Mandatory Tender shall be given by the Trustee by registered or
certified mail to the Noteholder or Noteholders at the address thereof appearing
on the Note Register (a) not less than 30 days prior to the Mandatory Tender
Date with respect to a Mandatory Tender pursuant to any of clauses (i), (ii),
(iii), (iv), (v) or (vi) of the immediately preceding paragraph and (b) not less
than 7 days prior to the Mandatory Tender Date with respect to a Mandatory
Tender pursuant to clause (vii) of the immediately preceding paragraph. Such
notice of Mandatory Tender shall, among
<PAGE>
other things, specify the Mandatory Tender Date and the procedure by which a
Holder may elect to retain the Note or Notes thereof.
Upon the terms and conditions provided in the Indenture, the Holder of any
Note subject to a Mandatory Tender may elect to retain the Note or Notes thereof
by written notice delivered to the Principal Office of the Trustee not less than
five days prior to the Mandatory Tender Date, which notice shall be effective
upon receipt, shall meet the requirements of the Indenture therefor, and shall
be irrevocable and binding upon the Holder delivering the same and upon all
subsequent Holders of the Notes so retained (including any Notes issued in
exchange therefor or upon transfer thereof).
All Notes to be tendered by the Holders thereof for purchase shall be
delivered at or before 10:00 a.m. (Birmingham, Alabama time) on the Mandatory
Tender Date to the Trustee at its Principal Office or to the Tender Agent at its
Principal Office, together with an instrument of assignment or transfer duly
executed in blank. During a period in which the Book-Entry System is in effect
for the Notes, transfers of the beneficial ownership interests in the Notes on
such date shall be effected on the records of the Securities Depository by the
Securities Depository in accordance with rules and procedures therefor and any
requirement for physical delivery of Notes on a Mandatory Tender Date shall be
deemed satisfied thereby. All Notes so to be purchased that are not so delivered
to the Trustee or Tender Agent on the Mandatory Tender Date or so transferred on
the records of the Securities Depository ("Unsurrendered Notes") shall
nevertheless be deemed to have been tendered for purchase by the Holders thereof
on the Mandatory Tender Date. If there has been irrevocably deposited in the
Note Purchase Fund an amount sufficient to pay the purchase price of all Notes
tendered or deemed tendered for purchase on the Mandatory Tender Date, any
Unsurrendered Note shall be deemed to be tendered for purchase and purchased
from the Holder thereof on such Mandatory Tender Date and the Holder of any
Unsurrendered Note shall not be entitled to receive interest on such
Unsurrendered Note for any period on and after the relevant Mandatory Tender
Date.
After notice of a Mandatory Tender has been given by the Trustee, the Notes
shall be subject to Mandatory Tender (except with respect to Notes which the
Holders thereof have elected to retain as provided in the Indenture)
notwithstanding the fact that the reasons for giving such notice cease to exist
or are no longer applicable.
Redemption
- ----------
In the manner and with the effect provided in the Indenture, the Notes will
be subject to redemption prior to maturity as follows:
(1) Optional Redemption
-------------------
The Notes are subject to optional redemption by the Issuer with consent of
the Credit Obligor and if no Event of Default exists as follows:
(A) during any Variable Rate Period, in whole or in part, in
authorized multiples of an Authorized Denomination on any Business Day at a
redemption price equal to 100%
<PAGE>
of the principal amount thereof plus accrued interest to the date of
redemption, without premium or penalty; and
(B) during any Fixed Rate Period, in whole or in part in authorized
multiples of an Authorized Denomination on any Business Day during the
applicable redemption period set forth in the table below at the applicable
redemption price (expressed as a percentage of principal amount) set forth
in the table below plus accrued interest to the date of redemption:
Redemption
Redemption Period Price
----------------- ----------
Fixed Rate Period of 4 years
or less:
Not subject to redemption N/A
Fixed Rate Period of more than
4 years but not more than 7 years:
Not subject to redemption prior
to 4th anniversary of Conversion Date N/A
4th anniversary of Conversion
Date through any day prior to
5th anniversary of Conversion Date 102%
5th anniversary of Conversion Date
through any day prior to
6th anniversary of Conversion Date 101%
6th anniversary of Conversion
Date and any day thereafter 100%
provided that there shall be no optional redemption which requires the payment
of a redemption premium unless there is then in effect a Letter of Credit which
may and shall be drawn on to pay such premium. If less than all Notes
Outstanding are called for redemption, the Notes or interests of the Beneficial
Owners thereon to be redeemed shall be selected as provided in the Indenture and
described herein.
(2) Mandatory Redemption
--------------------
The Notes are subject to mandatory redemption, by lot, by the Issuer at a
redemption price equal to the principal amount to be redeemed plus accrued
interest to the redemption date, without premium or penalty, on the first day in
June in the years and in the amounts (after credit as provided below) set forth
below:
<PAGE>
<TABLE>
<CAPTION>
Principal
Date Amount
---- ---------
<S> <C>
2000 $105,000
2001 110,000
2002 120,000
2003 125,000
2004 135,000
2005 145,000
2006 150,000
2007 160,000
2008 170,000
2009 180,000
2010 195,000
2011 205,000
2012 220,000
2013 235,000
</TABLE>
The balance of the Notes ($245,000) will be paid at maturity on June 1, 2014.
Unless Notes have been preselected for mandatory redemption, as described below,
not less than 45 or more than 60 days prior to each such scheduled mandatory
redemption date Notes, or interests of the Beneficial Owners in the Notes, shall
be selected for redemption, in the manner provided in the Indenture, in an
aggregate principal amount equal to the amount required to be redeemed and such
Notes or interests therein (or portions thereof) shall be called for redemption
on such scheduled mandatory redemption date and notice thereof given as provided
in the Indenture; provided, however, that if Notes have not been preselected for
mandatory redemption, as described below, the Issuer may, upon written direction
delivered to the Trustee not less than 60 days prior to such scheduled mandatory
redemption date, direct that any or all of the following amounts be credited
against the principal amount of Notes scheduled for redemption on such date: (i)
the principal amount of Notes delivered by the Issuer to the Trustee for
cancellation and not previously claimed as a credit; and (ii) the principal
amount of Notes previously redeemed pursuant to the optional redemption
provisions of the Notes and not previously claimed as a credit.
Upon the written request of the Issuer, the Trustee shall preselect Notes for
mandatory redemption according to the entire remaining schedule for such
mandatory redemptions set forth above; provided, however, that prior to such
preselection the principal amount of Notes previously redeemed pursuant to the
optional redemption provisions and not already credited against such mandatory
redemption requirements shall be credited against the remaining mandatory
redemption requirements in such years and in such amounts as shall be designated
by the Issuer. After taking into account such credits, the Securities
Depository or the Trustee, as appropriate, shall proceed to select Notes by lot
for mandatory redemption in accordance with the remaining schedule. The
procedure for such preselection shall provide for the preselection of portions
(equal to the smallest Authorized Denomination of the Notes, or a multiple
thereof) of the principal of Notes of a denomination larger than the smallest
Authorized Denomination. After such preselection procedure the term "Adjusted
Maturity Date", when used with respect to any Note, or any interest of a
<PAGE>
Beneficial Owner therein, shall mean the date on which such Note or such
interest therein shall be subject to scheduled mandatory redemption or, if such
Note is not so preselected, the stated maturity date of such Note. After Notes
have been preselected for mandatory redemption, the Securities Depository or the
Trustee, as appropriate, shall send notice of the results of such preselection
to the Securities Depository or Trustee (as appropriate), the Issuer, the
Remarketing Agent, the Credit Obligor and the holders of outstanding Notes. If
portions of any Note or any interest of a Beneficial Owner therein, of a
principal amount larger than the smallest Authorized Denomination are assigned
different Adjusted Maturity Dates then, upon receipt of such notice of
preselection, appropriate adjustments on the records of the Securities
Depository shall be made or the registered owner of such Note shall deliver the
same to the Trustee or Tender Agent in exchange for two or more Notes according
to the Adjusted Maturity Dates so assigned, it being intended that each Note
outstanding shall have a single Adjusted Maturity Date.
(4) Notice; Selection For Redemption
--------------------------------
Any redemption shall be made in the manner, upon the notice, and on the
terms and conditions provided in the Indenture. If less than all of the
Outstanding Notes are to be redeemed during a period in which the Book-Entry
System is in effect for the Notes, the Securities Depository shall determine the
amount of the interest of each Direct Participant in the Notes to be redeemed,
on the basis of the smallest Authorized Denomination of the Notes, by lot or by
such other method as the Securities Depository shall deem fair and appropriate.
The Securities Depository shall so determine the amount of the interest of each
Direct Participant in the Notes to be redeemed in such manner so as to assure
that after such redemption no Beneficial Owner shall retain a beneficial
ownership interest in the Notes in an aggregate amount less than an Authorized
Denomination. If less than all the Outstanding Notes are to be redeemed during
a period in which the Book-Entry System is not in effect for the Notes, the
Trustee shall select the particular Notes to be redeemed not less than 30 nor
more than 60 days prior to the redemption date from the Outstanding Notes which
have not previously been called for redemption, on the basis of the smallest
Authorized Denomination of the Notes, by lot or by such method as the Trustee
shall deem fair and appropriate. The Trustee shall so select Notes for
redemption in such manner so as to assure that after such redemption no
Noteholder shall retain Notes in an aggregate amount less than an Authorized
Denomination. Notes (or portions thereof) for the redemption and payment of
which provision has been made and notice thereof given all in accordance with
the Indenture shall thereupon cease to be entitled to the benefits of the
Indenture and shall cease to bear interest from and after the date fixed for
redemption unless default be made in payment of the redemption price.
Default, Remedies, Rights of Holders, Amendments
- ------------------------------------------------
If an "Event of Default", as defined in the Indenture, shall occur, the
principal of all Notes then Outstanding may become or be declared due and
payable in the manner and with the effect provided in the Indenture.
The Indenture contains provisions permitting the Holders of specified
percentages in principal amount of Notes at the time Outstanding, on behalf of
the Holders of all the Notes, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under such documents and
the consequences thereof. Any such consent or waiver by the Holder of
<PAGE>
this note shall be conclusive and binding upon such Holder and upon all future
Holders of this note and of any note issued in exchange therefor or in lieu
hereof, whether or not notation of such consent or waiver is made upon this
note. The Indenture provides that if the Letter of Credit is in effect and the
Credit Obligor has not dishonored any draws thereunder and there has not
occurred a Credit Obligor Insolvency Date, then (i) no amendment to the
Indenture may be made without the consent of the Credit Obligor and (ii) that
any remedies available under the Indenture (other than mandatory acceleration of
the Notes and mandatory draws under the Letter of Credit) may be exercised only
with the consent of the Credit Obligor.
The Holder of this note shall have no right to enforce the provisions of
the Indenture, or to institute any action to enforce the covenants therein, or
to take any action with respect to any default thereunder, or to institute,
appear in or defend any suit or other proceeding with respect thereto, except as
provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes at any time with the consent
of a majority in principal amount of the Notes at the time Outstanding affected
by such modification.
Registration, Transfer and Exchange
- -----------------------------------
The Notes are initially issued in Authorized Denominations pursuant to a
Book-Entry System to be administered by the Securities Depository and registered
in the name of and held by the Securities Depository Nominee all as more
particularly provided in the Indenture. In the event the Book-Entry System for
the Notes is discontinued, Notes in certificated form in Authorized
Denominations will be physically distributed to the Beneficial Owners thereof,
the Notes will be registered in the names of the owners thereof on the
registration books of the Trustee pertaining thereto, the Trustee shall make
payments of principal of, purchase price of, premium (if any) and interest on
the Notes to the registered owners thereof as provided in the Notes and the
Indenture, and the provisions of this note and of the Indenture with respect to
registration, transfer and exchange of Notes by the registered owners thereof
shall apply.
As provided in the Indenture and subject to certain limitations therein set
forth, this note is transferable on the Note Register maintained at the
Principal Office of the Trustee, upon surrender of this note for transfer at
such office or at the Principal Office of the Tender Agent, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Trustee or Tender Agent duly executed by, the registered Holder hereof or the
attorney thereof, duly authorized in writing, and thereupon one or more new
Notes of the same maturity, of any Authorized Denominations and for a like
aggregate principal amount, will be issued to the designated transferee or
transferees. As provided in the Indenture and subject to certain limitations
therein set forth, the Notes are exchangeable for other Notes of the same
maturity of any Authorized Denominations and of a like aggregate principal
amount, as requested by the Holder surrendering the same. No service charge
shall be made for any transfer or exchange hereinbefore referenced, but the
Holder hereof shall pay a sum sufficient to cover any tax or other governmental
charge payable in connection therewith.
<PAGE>
The Issuer, the Trustee and any agent of the Issuer or the Trustee may
treat the person in whose name this note is registered as the owner hereof for
the purpose of receiving payment as herein provided and for all other purposes,
whether or not this note is overdue, and neither the Issuer, the Trustee nor any
agent thereof shall be affected by notice to the contrary.
General
- -------
No covenant or agreement contained in this note or the Indenture shall be
deemed to be a covenant or agreement of any officer, agent or employee of the
Issuer, and neither any member of the Board of Directors of the Issuer nor any
officer executing this note shall be liable personally on this note or be
subject to any personal liability or accountability by reason of the issuance of
this note.
It is hereby certified, recited and declared that all acts, conditions and
things required to exist, happen and be performed precedent to and in the
execution and delivery of the Indenture and issuance of this note do exist, have
happened and have been performed in due time, form and manner as required by
law.
Unless the certificate of authentication and registration hereon has been
executed by the Trustee or by the Tender Agent by the manual signature of a duly
authorized officer thereof, this note shall not be entitled to any benefit under
the Indenture or be valid or obligatory for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this note to be executed in its
name under seal by officers thereof as duly authorized thereunto.
DISPLAY TECHNOLOGIES, INC.
By /s/ J. William Brandner
-------------------------------
Its President
----------------------------
S E A L
- -------
Attest: /s/ Marshall S. Harris
----------------------------
Its Secretary
--------------------------
<PAGE>
Certificate of Authentication and Registration
----------------------------------------------
Date of Authentication and Registration: 6-17-99
This is one of the Notes referred to in the within mentioned Trust
Indenture and has been registered by Display Technologies, Inc. on the
registration books maintained with the Trustee in the name of the above-named
registered owner on the Authentication and Registration Date noted above.
SOUTHTRUST BANK,
NATIONAL ASSOCIATION, as Trustee
By
------------------------------------
Its Authorized Officer
<PAGE>
Assignment
----------
For value received, ___________________________________ hereby sell(s),
assign(s) and transfer(s) unto _________________________________________ this
note and hereby irrevocably constitute(s) and appoint(s)
______________________________________________ attorney to transfer this note on
the books of the within named Issuer at the office of the within named Trustee,
with full power of substitution in the premises.
Dated: _____________
--------------------------
NOTE: The name signed to this assignment must
----
correspond with the name of the payee written on
the face of the within note in all respects,
without alteration, enlargement or change
whatsoever.
Signature Guaranteed:*
- ---------------------------
(Bank or Trust Company)
By_________________________
(Authorized Officer)
Medallion Number: ______________________
* Signature(s) must be guaranteed by an eligible guarantor institution which is
a member of the recognized signature guarantee program, i.e., Securities
Transfer Agents Medallion Program (STAMP), Stock Exchanges Medallion Program
(SEMP), or New York Stock Exchange Medallion Signature Program (MSP).
<PAGE>
Exhibit 10.136
DISPLAY TECHNOLOGIES, INC.
SECURITIES PURCHASE AGREEMENT
=======================================
50,000 SHARES OF
SERIES A CONVERTIBLE PREFERRED STOCK
AND
WARRANTS TO PURCHASE
150,000 SHARES OF COMMON STOCK
=======================================
July 30, 1999
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1. AUTHORIZATION AND SALE OF THE SECURITIES......................... 1
1.1 Authorization.................................................... 1
1.2 Sale of the Preferred Shares and Warrants........................ 1
1.3 Additional Purchases............................................. 1
ARTICLE 2. CLOSING DATE; DELIVERY........................................... 2
2.1 Closing.......................................................... 2
2.2 Deliveries....................................................... 2
ARTICLE 3. REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND MANAGEMENT.................................... 2
3.1 Organization and Qualification................................... 2
3.2 Articles of Incorporation and Bylaws............................. 3
3.3 Corporate Power.................................................. 3
3.4 Subsidiaries..................................................... 3
3.5 Capitalization................................................... 3
3.6 Authorization.................................................... 4
3.7 Registration Rights.............................................. 5
3.8 Title To Properties; Encumbrances................................ 5
3.9 Environmental Matters............................................ 6
3.10 Condition and Sufficiency of Properties.......................... 7
3.11 Financial Statements............................................. 8
3.12 Accounts Receivable.............................................. 8
3.13 Inventory........................................................ 9
3.14 Warranty Claims.................................................. 9
3.15 SEC Reports...................................................... 9
3.16 Permits.......................................................... 10
3.17 Intellectual Property............................................ 10
3.18 Material Contracts............................................... 10
3.19 Compliance with Laws and Other Instruments....................... 11
3.20 Litigation....................................................... 11
3.21 Governmental Consent............................................. 11
3.22 Employees........................................................ 12
3.23 Employee Benefit Plans........................................... 12
3.24 Tax Matters...................................................... 13
3.25 Brokers or Finders............................................... 14
3.26 Securities Act................................................... 14
3.27 Insurance........................................................ 14
<PAGE>
3.28 Proprietary Information of Third Parties......................... 14
3.29 Use of Proceeds.................................................. 15
3.30 Year 2000 Compliance............................................. 15
3.31 Disclosure....................................................... 15
ARTICLE 4. REPRESENTATIONS AND WARRANTIES
OF THE PURCHASERS................................................ 16
4.1 Experience....................................................... 16
4.2 Investment....................................................... 16
4.3 Access to Data................................................... 16
4.4 Authorization.................................................... 16
4.5 Brokers or Finders............................................... 16
4.6 Accredited Investor.............................................. 17
ARTICLE 5. CONDITIONS TO THE OBLIGATIONS
OF THE PURCHASERS................................................ 17
5.2 Covenants........................................................ 17
5.3 Compliance Certificate........................................... 17
5.4 Consents......................................................... 17
5.5 Certificate of Designation....................................... 17
5.6 Reservation of Stock............................................. 18
5.7 Proceedings and Documents........................................ 18
5.8 No Litigation.................................................... 18
5.9 Investors' Rights Agreement...................................... 18
5.10 Opinion of Counsel............................................... 18
5.11 Expenses......................................................... 18
5.12 Due Diligence.................................................... 18
5.13 Purchase by Other Purchasers..................................... 18
5.14 Renaissance Anti-Dilution Waiver................................. 18
ARTICLE 6. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY..................... 18
6.1 Representations and Warranties................................... 19
6.2 Covenants........................................................ 19
6.3 No Litigation.................................................... 19
6.4 Investors' Rights Agreement...................................... 19
ARTICLE 7. INDEMNIFICATIONS................................................. 19
7.1 Indemnification by the Company................................... 19
7.2 Indemnification by Purchasers.................................... 19
ARTICLE 8. GENERAL PROVISIONS............................................... 20
ii
<PAGE>
8.1 Governing Law.................................................... 20
8.2 Successors and Assigns; Third Party Beneficiaries................ 20
8.3 Entire Agreement; Amendment and Waiver........................... 20
8.4 Survival......................................................... 20
8.5 Notices, etc..................................................... 20
8.6 Delays or Omissions.............................................. 20
8.7 References....................................................... 21
8.8 Severability..................................................... 21
8.9 Pronouns......................................................... 21
8.10 Counterparts..................................................... 21
8.11 Remedies......................................................... 21
8.12 Certain Definitions.............................................. 21
8.13 Publicity........................................................ 25
8.14 Fees and Expenses................................................ 25
8.15 Exculpation Among Purchasers..................................... 25
EXHIBIT INDEX
- -------------
Exhibit A Schedule of Purchasers
Exhibit B Certificate of Designation
Exhibit C Warrant Certificate
Exhibit D Investors' Rights Agreement
Exhibit E Compliance Certificate
Exhibit F Opinion of Counsel
INDEX TO DEFINITIONS
- --------------------
Accounts Receivable Section 3.12
Affiliate Section 8.12
Ancillary Agreements Section 3.6
Articles Section 3.5
Balance Sheet Section 3.11(a)
Balance Sheet Date Section 3.11(a)
Certificate of Designation Section 1.1
Closing Section 2.1
Closing Date Section 2.1
Commission Section 3.15
Common Stock Preamble
Company Preamble
Control Section 7.12
Controlled Entity Section 3.9(a)
Conversion Shares Section 1.1
Disclosure Memorandum Article 3
Employee Benefit Plans Section 3.23
iii
<PAGE>
Environment Section 8.12
Environmental, Health, and Safety
Liabilities Section 8.12
Environmental Law Section 8.12
Facilities Section 8.12
Hazardous Activity Section 8.12
Hazardous Materials Section 8.12
Financials Section 3.11(a)
Intellectual Property Section 3.17
Investors' Rights Agreement Section 3.6
Knowledge Section 8.12
Laws Section 3.19
Material Adverse Effect Section 3.1
Material Contracts Section 3.18(a)
Occupational Safety and Health Law Section 8.12
Permits Section 3.16
Person Section 8.12
Preferred Shares Preamble
Preferred Stock Section 3.5
Purchase Price Section 1.2
Purchasers Preamble
Release Section 8.12
Schedule of Purchasers Preamble
SEC Reports Section 3.15
Securities Act Section 3.15
Subsidiary Section 3.4
Tax Returns Section 3.24
Threat of Release Section 8.12
Threatened Section 8.12
Warrant Certificate Section 2.2
Warrant Shares Section 1.1
Warrants Preamble
iv
<PAGE>
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, made and entered into this 30th
day of July, 1999, by and among DISPLAY TECHNOLOGIES, INC., a Nevada corporation
(the "Company") and each of the entities (the "Purchasers") set forth on the
Schedule of Purchasers (the "Schedule of Purchasers") attached hereto as Exhibit
"A."
W I T N E S S E T H:
- - - - - - - - - --
WHEREAS, the Purchasers desire to purchase from the Company, and the
Company desires to issue and sell to the Purchasers, 50,000 shares (the
"Preferred Shares") of Series A Convertible Preferred Stock, $.001 par value per
share, of the Company and warrants (the "Warrants") to purchase 150,000 shares
of Common Stock, $0.001 par value per share, of the Company ("Common Stock"), on
the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties, intending
to be legally bound, hereby agree as follows:
ARTICLE 1. AUTHORIZATION AND SALE OF THE SECURITIES
----------------------------------------
1.1 Authorization. Prior to the Closing (as defined below), the
-------------
Company shall duly execute and file with the Secretary of State of the State of
Nevada the Certificate of Designation attached hereto as Exhibit "B" (the
"Certificate of Designation") and shall authorize the issuance and sale of the
Preferred Shares, the shares of Common Stock issuable upon conversion of the
Preferred Shares ("Conversion Shares"), and the shares of Common Stock issuable
upon exercise of the Warrants ("Warrant Shares").
1.2 Sale of the Preferred Shares and Warrants. Subject to the terms
-----------------------------------------
and conditions hereof, at the Closing the Company shall issue and sell to each
Purchaser, and each Purchaser shall purchase from the Company, severally but not
jointly, the portion of the Preferred Shares and the Warrants allocated to such
Purchaser on the Schedule of Purchasers. The aggregate price for the Preferred
Shares and the Warrants shall be $5,000,000 (the "Purchase Price") and each
Purchaser shall pay that portion of the Purchase Price allocated to such
Purchaser on the Schedule of Purchasers. The Company's agreement with each of
the Purchasers is a separate agreement, and the sale of Preferred Shares and the
Warrants to each of the Purchasers is a separate sale.
1.3 Additional Purchases. If the Company requires additional capital
--------------------
during the six-month period following the Closing Date, it may request during
such period up to an additional $5 million investment from Purchasers. Each
Purchaser shall provide its pro rata portion of such financing (in accordance
with the percentage of Preferred Shares
<PAGE>
purchased by it hereunder) through the purchase of preferred stock and warrants
(with terms identical to the Preferred Shares and Warrants except that the
conversion price and exercise price would equal 110% of the average of the
closing trading prices on the NASDAQ National Market for the twenty consecutive
trading days prior to the funding date, but not in excess of $4.25) subject to
(i) each other Purchaser acquiring its proportionate share, (ii) approval of
such Purchaser's investment committee, (iii) satisfaction of such Purchaser, at
its sole discretion, with the trading price of the Common Stock and the results
of its due diligence investigation at such time, and (iv) documentation in
substantially the same form as this Agreement and the Ancillary Agreements
acceptable to such Purchaser. Purchasers will use their reasonably best efforts
to determine whether the above conditions are satisfied within 30 days of the
Company's request for additional funds and, if such conditions are satisfied, to
provide such funding within 45 days of the Company's request for additional
funds.
ARTICLE 2. CLOSING DATE; DELIVERY
----------------------
2.1 Closing. The purchase and sale (the "Closing") of the Preferred
-------
Shares and Warrants shall take place at the offices of Kilpatrick Stockton LLP,
1100 Peachtree Street, Atlanta, Georgia, at 10:00 a.m. (local time) on July 30,
1999, or at such other place and time as the parties may agree (the "Closing
Date").
2.2 Deliveries. At the Closing, the Company shall deliver to each
----------
Purchaser (i) a duly issued stock certificate representing the Preferred Shares
to be purchased by such Purchaser as set forth on the Schedule of Purchasers and
(ii) an executed warrant certificate in the form attached hereto as Exhibit "C"
(the "Warrant Certificate") evidencing the Warrants allocated to such Purchaser.
Each Purchaser shall pay its portion of the Purchase Price as set forth on the
Schedule of Purchasers by wire transfer of immediately available funds to an
account designated by the Company.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND MANAGEMENT.
------------------------------------------------------------
The representations and warranties set forth in this Article 3 are
modified and limited by the matters set forth in the Disclosure Memorandum dated
of even date herewith (the "Disclosure Memorandum") which the Company has
delivered to Purchasers, but only to the extent that any such matter is fully
and fairly disclosed in the Disclosure Memorandum. Any matter set forth in the
Disclosure Memorandum shall modify and limit only those representations and
warranties set forth in the Section of this Article 3 corresponding by section
number to the section of the Disclosure Memorandum in which such matter is
disclosed (or cross-referenced). Subject to the foregoing, the Company
represents and warrants to Purchasers as follows:
3.1 Organization and Qualification. The Company is a corporation duly
------------------------------
organized, validly existing, and in good standing under the laws of the State of
Nevada and
2
<PAGE>
has the requisite corporate power and authority to own, lease, and operate its
assets, properties, and business and to carry on its business as it is now being
conducted or proposed to be conducted. Each Subsidiary (as defined below) is a
corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its organization, as indicated in the Disclosure
Memorandum. Each of the Company and the Subsidiaries is duly qualified as a
foreign corporation to transact business, and is in good standing, in each
jurisdiction where it owns or leases real property or maintains employees or
where the nature of its activities make such qualification necessary, except
where the failure to be so qualified would not have a material adverse effect on
the business, assets, properties, operations, results of operations, condition
(financial or otherwise), or prospects of the Company and its Subsidiaries
considered as a whole (a "Material Adverse Effect").
3.2 Articles of Incorporation and Bylaws. The Company has delivered
------------------------------------
to the Purchasers true, correct, and complete copies of the Company's articles
or certificate of incorporation, as amended through the date hereof, and bylaws,
as amended through the date hereof.
3.3 Corporate Power. The Company has all requisite legal and
---------------
corporate power and authority to execute and deliver this Agreement and the
Ancillary Agreements (as defined below), to issue and sell the Preferred Shares
hereunder, to issue the Conversion Shares and the Warrant Shares, and to carry
out and perform its obligations under the terms of this Agreement, the
Certificate of Designation, and each of the Ancillary Agreements.
3.4 Subsidiaries. Each subsidiary (as defined in Rule 405 of the
------------
Securities and Exchange Commission) of the Company ("Subsidiary") and its
jurisdiction of organization or incorporation is listed in Section 3.4 of the
Disclosure Memorandum. Except as listed in Section 3.4 of the Disclosure
Memorandum and except for capital stock of the Subsidiaries, neither the Company
nor any Subsidiary, directly or indirectly, owns or controls or has any capital
or other equity interest or participation in (or any interest convertible into
or exchangeable or exercisable for, any capital or other equity interest or
participation in), nor is the Company or any Subsidiary, directly or indirectly,
subject to any obligation or requirement to provide funds to or invest in, any
Person. The Company owns of record and beneficially, either directly or through
one or more other Subsidiaries, all the equity interests in each Subsidiary. The
Company has not granted any option or other right to purchase, nor has it
entered into any agreement with respect to the purchase of, any shares of Common
Stock or other equity securities or other interests in any Subsidiary. No shares
or other security of any Subsidiary is subject to any lien, security interest,
pledge claim, or other encumbrance except as shown in Section 3.5 of the
Disclosure Memorandum.
3.5 Capitalization. The authorized capital stock of the Company will,
--------------
upon the filing of the Certificate of Designation, consist of 50,000,000 shares
of Common Stock and 50,000,000 shares of Preferred Stock ("Preferred Stock"),
50,000 of which shares of Preferred Stock have been designated as Series A
Preferred Stock. Immediately prior to the
3
<PAGE>
Closing 6,302,544 shares of Common Stock and no shares of Preferred Stock will
be issued and outstanding. Of the authorized shares of Common Stock, 1,428,572
shares are currently reserved for issuance upon conversion of the Series A
Preferred Shares, and 4,782,338 shares (including the Warrant Shares) are
reserved for issuance upon the conversion of other convertible securities, the
exercise of outstanding options and warrants to purchase Common Stock and
pursuant to existing contractual obligations of the Company, including earn-out
arrangements and other contingent obligations. All issued and outstanding shares
of the Company's capital stock have been duly authorized and validly issued, are
fully paid and nonassessable. All such shares and all other outstanding
securities of the Company were issued in compliance with all applicable federal
and state securities laws. The designations, preferences, limitations,
restrictions, and relative rights of the Series A Convertible Preferred Stock
and Common Stock will be as stated in the Articles of Incorporation ("Articles")
and the Certificate of Designation. Section 3.5 of the Disclosure Memorandum
sets forth a list and description of all options, warrants, conversion
privileges, rights, agreements, and other obligations pursuant to which the
Company is, or may become obligated to issue, sell, transfer, or distribute
shares of the capital stock or other securities of the Company or any
Subsidiary, the number and type of securities subject to each such obligation,
and the exercise, conversion, or purchase price as applicable. Section 3.5 of
the Disclosure Memorandum also lists all stock appreciation rights, phantom
stock options, and other obligations of the Company in any way directly or
indirectly tied or related to or based upon the value or appreciation of any
security of the Company or any Subsidiary. The Company holds no shares of its
capital stock in its treasury.
3.6 Authorization. All corporate action on the part of the Company
-------------
necessary for the authorization, execution, delivery, and performance of this
Agreement, the Warrant Certificates, the Investors' Rights Agreement by and
among the Company and the Purchasers in the form attached as Exhibit "D" hereto
(the "Investors' Rights Agreement"), and all other agreements executed in
connection with the transactions contemplated hereby (the Warrant Certificates,
Investors' Rights Agreement, and such other agreements contemplated hereby being
sometimes hereinafter referred to individually as an "Ancillary Agreement" and
collectively as the "Ancillary Agreements") by the Company, the authorization,
designation, issuance, sale, and delivery of the Preferred Shares, the Warrants,
the Conversion Shares, and the Warrant Shares and the performance of all of the
Company's obligations hereunder and thereunder have been taken or will be taken
prior to the Closing. This Agreement and each of the Ancillary Agreements, when
executed and delivered by the Company, will constitute a valid and legally
binding obligation of the Company, enforceable against the Company in accordance
with its terms, subject to (i) laws of general application relating to
bankruptcy, insolvency, and the relief of debtors, and (ii) rules of law
governing specific performance, injunctive relief, or other equitable remedies.
The Preferred Shares, the Conversion Shares, and the Warrant Shares when issued
in accordance with this Agreement, the Articles, the Certificate of Designation,
and the Warrant Certificates, as applicable, will be duly authorized, validly
issued, fully paid, and nonassessable, and will have the designations,
preferences, limitations, restrictions, and
4
<PAGE>
relative rights set forth in the Articles and the Certificate of Designation.
The Preferred Shares, the Conversion Shares, and the Warrant Shares, when
issued, will be free of any liens, claims, encumbrances, or restrictions on
transfer, except for restrictions imposed by the Investors' Rights Agreement.
The Preferred Shares, the Conversion Shares, and the Warrant Shares are not and
will not become as a result of the Closing subject to any preemptive rights or
rights of first refusal.
3.7 Registration Rights. Except as set forth in the Investors' Rights
-------------------
Agreement or described in Section 3.7 of the Disclosure Memorandum, the Company
is not under any obligation to register any of its presently outstanding
securities or any of its securities which may hereafter be issued.
3.8 Title To Properties; Encumbrances. Section 3.8 of the Disclosure
---------------------------------
Memorandum contains a complete and accurate list of all real property,
leaseholds, or other interests therein owned by the Company and the
Subsidiaries. The Company and the Subsidiaries own (with fee simple title in the
case of real property, subject only to the matters permitted by the following
sentence) all the properties and assets (whether real, personal, or mixed and
whether tangible or intangible) that are reflected in the Balance Sheet (except
for assets held under capitalized leases and personal property sold since the
date of the Balance Sheet in the ordinary course of business), and all of the
properties and assets purchased or otherwise acquired by the Company or a
Subsidiary since the date of the Balance Sheet (except for personal property
acquired and sold since the date of the Balance Sheet in the ordinary course of
business and consistent with past practice). Except as disclosed in Section 3.8
of the Disclosure Memorandum, all material properties and assets reflected in
the Balance Sheet are free and clear of all liens, security interests, claims,
restrictions, rights of first refusal, options, and other encumbrances and are
not, in the case of real property, subject to any rights of way, building use
restrictions, exceptions, variances, reservations, or limitations of any nature
except, with respect to all such properties and assets, (a) mortgages or
security interests securing specified liabilities or obligations, with respect
to which no default (or event that, with notice or lapse of time or both, would
constitute a default) exists, (b) mortgages or security interests incurred in
connection with the purchase of property or assets after the date of the Balance
Sheet (such mortgages and security interests being limited to the property or
assets so acquired), with respect to which no default (or event that, with
notice or lapse of time or both, would constitute a default) exists, (c) liens
for current taxes not yet due, and (d) with respect to real property, (i) minor
imperfections of title, if any, none of which is substantial in amount,
materially detracts from the value or impairs the use of the property subject
thereto, or impairs the operations of the Company and the Subsidiaries, and (ii)
zoning laws and other land use restrictions that do not impair the present or
anticipated use of the property subject thereto. All buildings, plants, and
structures owned by the Company and the Subsidiaries lie wholly within the
boundaries of the real property owned by the Company and the Subsidiaries and do
not encroach upon the property of, or otherwise conflict with the property
rights of, any other Person.
5
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3.9 Environmental Matters. Except as set forth in Section 3.9 of the
---------------------
Disclosure Memorandum:
(a) The Company and the Subsidiaries are in full compliance with, and
are not in violation of or liable under, any Environmental Law. The Company has
no basis to expect, nor has the Company, any Subsidiary, or any other entity in
which the Company or any Subsidiary has, or has had, any equity interest or
which it in any manner controls or controlled (a "Controlled Entity") received,
any actual or Threatened order, notice, or other communication from (i) any
governmental body or private citizen acting in the public interest, or (ii) the
current or prior owner or operator of any Facilities, of any actual or potential
violation or failure of the Company, any Subsidiary, or any Controlled Entity to
comply with any Environmental Law, or of any actual or Threatened obligation of
the Company, any Subsidiary, or any Controlled Entity to undertake or bear the
cost of any Environmental, Health, and Safety Liabilities with respect to any of
the Facilities or any other properties or assets (whether real, personal, or
mixed) in which the Company, any Subsidiary, or any Controlled Entity has or had
an ownership or leasehold interest, or with respect to any property or Facility
at or to which Hazardous Materials were generated, manufactured, refined,
transferred, imported, used, or processed by the Company, any Subsidiary, or any
Controlled Entity, or from which Hazardous Materials have been transported,
treated, stored, handled, transferred, disposed, recycled, or received by the
Company, any Subsidiary, or any Controlled Entity.
(b) There are no pending or, to the Knowledge of the Company,
Threatened claims, charges, or other restrictions of any nature, resulting from
any Environmental, Health, and Safety Liabilities or arising under or pursuant
to any Environmental Law, with respect to or affecting any of the Facilities or
any other properties and assets (whether real, personal, or mixed) in which the
Company, any Subsidiary, or any Controlled Entity has or had an ownership or
leasehold interest.
(c) The Company has no basis to expect, nor has the Company or any
Subsidiary received, any citation, directive, inquiry, notice, order, summons,
warning, or other similar communication that relates to Hazardous Activity,
Hazardous Materials, or any alleged, actual, or potential violation or failure
of the Company, any Subsidiary, or any Controlled Entity to comply with any
Environmental Law, or of any alleged, actual, or potential obligation of the
Company, any Subsidiary, or any Controlled Entity to undertake or bear the cost
of any Environmental, Health, and Safety Liabilities with respect to any of the
Facilities or any other properties or assets (whether real, personal, or mixed)
in which the Company, any Subsidiary, or any Controlled Entity had an interest,
or with respect to any property or facility to which Hazardous Materials
generated, manufactured, refined, transferred, imported, used, or processed by
the Company, any Subsidiary, or any Controlled Entity have been transported,
treated, stored, handled, transferred, disposed, recycled, or received.
6
<PAGE>
(d) Neither the Company, any Subsidiary, nor any Controlled Entity has
any Environmental, Health, and Safety Liabilities resulting from the acts or
omissions of the Company, any Subsidiary, or any Controlled Entity with respect
to the Facilities or, to the Knowledge of the Company, with respect to any other
properties and assets (whether real, personal, or mixed) in which the Company,
any Subsidiary, or any Controlled Entity has or had an ownership or leasehold
interest, or, to the Knowledge of the Company, at any property immediately
adjoining the Facilities.
(e) There are no Hazardous Materials present at the Facilities or in
the Environment thereof or, to the Knowledge of the Company, at any immediately
adjoining property, including any Hazardous Materials contained in barrels,
above or underground storage tanks, landfills, land deposits, dumps, equipment
(whether moveable or fixed) or other containers, either temporary or permanent,
or incorporated into any structure therein or thereon to such an extent that is
required to be currently reported, removed, or remediated under any
Environmental Law that has not been reported, removed, or remediated as so
required. Neither the Company, any Subsidiary, or to the Knowledge of the
Company, any other Person, has permitted knowingly or conducted, or is aware of,
any Hazardous Activity conducted with respect to the Facilities or any other
properties or assets (whether real, personal, or mixed) in which the Company,
any Subsidiary, or any Controlled Entity has or had an interest except in full
compliance with all applicable Environmental Laws.
(f) Except as allowed under Environmental Law, there has been no
Release or, to the Knowledge of the Company, Threat of Release, of any Hazardous
Materials at or from the Facilities or, to the Knowledge of the Company, at any
other locations where any Hazardous Materials were generated, manufactured,
refined, transferred, produced, imported, used, or processed from or by the
Facilities, or any other properties and assets (whether real, personal, or
mixed) in which the Company, any Subsidiary or any Controlled Entity has or, to
the knowledge of the Company, had an ownership or leasehold interest, whether by
the Company or any other Person. To the Knowledge of the Company, there has
been no Release or Threat of Release of any Hazardous Materials except as
allowed under Environmental Law on any property immediately adjoining the
Facilities.
3.10 Condition and Sufficiency of Properties. The buildings, plants,
---------------------------------------
structures, and equipment of the Company and the Subsidiaries are structurally
sound, are in good operating condition and repair, and are adequate for the uses
to which they are being put, and none of such buildings, plants, structures, or
equipment is in need of maintenance or repairs except for ordinary, routine
maintenance and repairs that are not material in nature or cost. The building,
plants, structures, and equipment of the Company are sufficient for the
continued conduct of the Company's business after the Closing in substantially
the same manner as conducted prior to the Closing.
7
<PAGE>
3.11 Financial Statements.
--------------------
(a) The Company has delivered to Purchasers (i) the consolidated
balance sheet of the Company as at June 30, in each of the years 1996, 1997, and
1998, and the related consolidated statements of income, stockholders' equity,
and cash flow for the year then ended together with the report thereon of BDO
Seidman, LLP, and, (ii) an unaudited consolidated balance sheet of the Company
as at March 31, 1999, and the related unaudited statements of income,
stockholders' equity, and cash flow for the nine-month period then ended. The
foregoing financial statements and notes thereto fairly present the financial
condition and results of operations of the Company and its Subsidiaries at such
dates and the results of operations and stockholder's equity and cash flows for
the years then ended in accordance with generally accepted accounting principles
(subject in the case of interim financial statements, to normal recurring year-
end adjustments, the effect of which will not be materially adverse, and the
absence of notes) applied on a consistent basis and each of the foregoing
balance sheets shows all material liabilities, absolute or contingent, as at the
date thereof which are required by generally accepted accounting principles to
be reflected thereon. The foregoing consolidated financial statements of the
Company are hereinafter referred to collectively, as the "Financials"; the
balance sheet as at March 31, 1999, is hereinafter referred to as the "Balance
Sheet"; and March 31, 1999, is hereinafter referred to as the "Balance Sheet
Date."
(b) Since the Balance Sheet Date, the Company and each Subsidiary has
conducted its business in the ordinary course of business, and there has not
been any event or condition of any character that has resulted in or might be
expected to result in a change in the assets, liabilities, financial condition,
operating results, or business of the Company and its Subsidiaries from that
reflected in the Financials, except changes in the ordinary course of business
that could not reasonably be expected, in the aggregate, to have a Material
Adverse Effect.
(c) Except as disclosed on Section 3.11 of the Disclosure Memorandum
or in the Financial Statements, neither the Company nor a Subsidiary has any
material liabilities or obligations, absolute or contingent, except (i)
obligations and liabilities incurred in the ordinary course of business since
the Balance Sheet Date that are consistent in nature and amount with liabilities
incurred during the nine-month period ended March 31, 1999, or (ii) obligations
under contracts made in the ordinary course of business prior to the Balance
Sheet Date that are not required to be reflected in the Financial Statements
under generally accepted accounting principles.
3.12 Accounts Receivable. All accounts receivable of the Company and
-------------------
its Subsidiaries that are reflected on the Balance Sheet or on the accounting
records of the Company as of the Closing Date (collectively, the "Accounts
Receivable") represent or will represent valid obligations arising from sales
actually made or services actually performed in the ordinary course of business.
Unless paid prior to the Closing Date, the Accounts
8
<PAGE>
Receivable are or will be as of the Closing Date collectible net of the
respective reserves shown on the Balance Sheet or on the accounting records of
the Company as of the Closing Date (which reserves are adequate and calculated
consistent with past practice and, in the case of the reserve as of the Closing
Date, will not represent a materially greater percentage of the Accounts
Receivable as of the Closing Date than the reserve reflected in the Balance
Sheet represented of the Accounts Receivable reflected therein and will not
represent a material adverse change in the composition of such Accounts
Receivable in terms of aging). Subject to such reserves and except as disclosed
in Section 3.12 of the Disclosure Memorandum, each of the Accounts Receivable
either has been or will be collected on a time basis consistent with past
practice. There is no contest, claim, or right of set-off, other than returns in
the Ordinary Course of Business, under any contract with any obligor of any
material Account Receivable relating to the amount or validity of such Account
Receivable.
3.13 Inventory. All inventory of the Company and its Subsidiaries,
---------
whether or not reflected in the Balance Sheet, consists of a quality and
quantity usable and salable in the ordinary course of business, except for
obsolete items and items of below-standard quality, all of which have been
written off or written down to net realizable value in the Balance Sheet or on
the accounting records of the Company as of the Closing Date. There has been no
material write offs or write downs since the Balance Sheet Date. All inventories
not written off have been priced at the lower of cost or market in accordance
with generally acceptable accounting principles consistently applied. The
quantities of each item of inventory (whether raw materials, work-in-process, or
finished goods) are not excessive, but are reasonable in the present
circumstances of the Company.
3.14 Warranty Claims. The aggregate liability of the Company and its
---------------
Subsidiaries with respect to products sold or services rendered prior to the
date of this Agreement, whether by reason of express or implied warranties,
negligent production or provision, strict legal liability, or otherwise, will
not exceed the amount reserved therefor on the Balance Sheet.
3.15 SEC Reports. The Company has filed on a timely basis all forms,
-----------
reports, and documents (including exhibits) required to be filed by it with the
Securities and Exchange Commission (the "Commission") (collectively with all
registration statements filed by the Company under the Securities Act, the "SEC
Reports"). The SEC Reports (i) at the time filed, complied in form and substance
in all material respects with the applicable requirements of the Securities Act
of 1933 ("Securities Act") and the Securities Exchange Act, as the case may be,
and (ii) did not at the time filed (or if amended or superseded by a filing
prior to the date of this Agreement, then on the date of such filing) contain
any untrue statement of a material fact or omit to state a material fact
required to be stated in such SEC Reports or necessary in order to make the
statements in such SEC Reports, in the light of the
9
<PAGE>
circumstances under which they were made, not misleading. None of the
Subsidiaries is required to file any forms, reports, or other documents with the
Commission.
3.16 Permits. Each of the Company and its Subsidiaries has all
-------
franchises, permits, licenses, authorizations, approvals, and any similar
authority ("Permits") necessary for the conduct of their business as now being
conducted and believes it can obtain, without undue burden or expense, any
similar authority for the conduct of its business as planned to be conducted.
Neither the Company nor any Subsidiary is in violation in any material respect
of, or in default in any material respect under, any Permit.
3.17 Intellectual Property. The Company and each Subsidiary owns or
---------------------
possesses adequate licenses or other rights to use all patents, patent
applications, trademarks, trademark applications, service marks, service mark
applications, trade names, copyrights, manufacturing processes, formulae, trade
secrets, customer lists, and know-how (collectively, "Intellectual Property")
for which the failure to so own or possess would have a Material Adverse Effect
and no claim is pending or, to the Knowledge of the Company, threatened to the
effect that the operations of the Company or such Subsidiary, as applicable,
infringe upon or conflict with the asserted rights of any other person under any
Intellectual Property. No claim is pending or, to the Knowledge of the Company
threatened, to the effect that any such Intellectual Property owned or licensed
by the Company or any Subsidiary, or which the Company or any Subsidiary
otherwise has the right to use, is invalid or unenforceable by the Company or
such Subsidiary, as applicable. All technical information developed by and
belonging to the Company or any Subsidiary which is material to the business of
the Company and which has not been patented has been kept confidential. Except
as set forth in Section 3.17 of the Disclosure Memorandum, neither the Company
nor any Subsidiary has granted or assigned to any other person or entity any
right to manufacture, have manufactured, assemble, or sell the current or
proposed products or to provide the current or proposed services of the Company
or any Subsidiary.
3.18 Material Contracts.
------------------
(a) Except as set forth in Section 3.18 of the Disclosure Memorandum,
all Material Contracts are valid, binding, and in full force and effect, without
any breach by the Company or, to the best of the Company's knowledge, any other
party thereto. "Material Contracts" shall mean each existing agreement and
commitment of the Company or any Subsidiary that (i) has been filed, or is or
will be required to be filed, with the Commission under Regulation S-K of the
Commission, (ii) that involves performance of services or delivery of products
by or to the Company or any Subsidiary of an amount or value in excess of
$100,000, or (iii) involves capital expenditures by the Company or any
Subsidiary in excess of $100,000.
(b) All contracts relating to the sale, design, manufacture, or
provision of products or services by the Company or any Subsidiary have been
entered into without the commission of any act by the Company or any Subsidiary
alone or in concert with any other
10
<PAGE>
Person, or any consideration having been paid or promised, that is or would be
in violation of any law or, to the Knowledge of the Company, the policies of any
customer.
(c) To the Knowledge of the Company, no sales agreement, purchase
order, or other obligation of the Company or any Subsidiary relating to the
sale, design, manufacture, or provision of products or services by the Company
or any Subsidiary is likely to result in a material loss to the Company or any
Subsidiary upon completion of performance.
3.19 Compliance with Laws and Other Instruments. Neither the Company
------------------------------------------
nor any Subsidiary is in violation or breach of any term of its articles or
certificate of incorporation or bylaws (each as amended through the date
hereof), or of any judgment or decree. To the Knowledge of the Company, neither
the Company nor any subsidiary is in violation of any order, statute, rule, or
regulation (collectively, "Laws") applicable to the Company or such Subsidiary
the violation of which could have a Material Adverse Effect. The execution,
delivery, and performance of, and compliance with this Agreement and the
Ancillary Agreements, the issuance and sale of the Preferred Shares, and the
consummation of the transactions contemplated hereby and thereby, have not and
will not (i) violate, conflict with or result in a breach of any provision of or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in a creation of any liens,
claims or encumbrances upon any of the assets, properties or business of the
Company or any Subsidiary under, any of the terms, conditions or provisions of
(x) the articles or certificate of incorporation or the by-laws of the Company
or such Subsidiary, as applicable, or (y) any Material Contract; or (ii) violate
any judgment, ruling, order, writ, injunction, award, decree, or law of any
court or foreign, federal, state, county, or local government or any other
governmental, regulatory, or administrative agency or authority which is
applicable to the Company or such Subsidiary, as applicable, or any of its
assets, properties or businesses; or (iii) result in the suspension, revocation,
impairment, forfeiture, or non-renewal of any franchise, permit, license,
authorization, or approval material to the Company or any Subsidiary.
3.20 Litigation. Except as set forth in Section 3.20 of the
----------
Disclosure Memorandum, there are no actions, suits, proceedings, or
investigations pending or, to the Knowledge of the Company, threatened against
the Company or any Subsidiary or any of their properties before any court or
governmental agency (nor, to the Knowledge of the Company, is there any
reasonable basis for any such action, suit, proceeding, or investigation).
Neither the Company nor any Subsidiary is a party to, or to the Knowledge of the
Company, named in any order, writ, injunction, judgment, or decree of any court,
government agency, or instrumentality.
3.21 Governmental Consent. No consent, approval, or authorization of,
--------------------
or designation, declaration, notification, or filing with any governmental
authority on the part of the Company or any Subsidiary is required in connection
with the valid execution, delivery, and performance of this Agreement or any of
the Ancillary Agreements, the offer, issuance,
11
<PAGE>
sale, or conversion of the Preferred Shares, or the consummation of any other
transaction contemplated hereby or by the Ancillary Agreements except the (i)
filing of the Certificate of Designation with the Secretary of State of Nevada
and (ii) qualification (or the taking of such action as may be necessary to
secure an exemption from qualification, if available) of the offer and sale of
the Preferred Shares under applicable blue sky laws, which filings and
qualifications, if required, will be accomplished in a timely manner.
3.22 Employees. To the Knowledge of the Company, no officer of the
---------
Company or any Subsidiary is or will be in violation of any judgment, decree, or
order, or any term of any employment contract, patent disclosure agreement,
confidentiality agreement, or other contract or agreement relating to the
relationship of any such officer with the Company or such Subsidiary, as
applicable, or any other party because of the nature of the business conducted
or proposed to be conducted by the Company or such Subsidiary, as applicable, or
the use by the employee of his best efforts with respect to such business.
Except as set forth in Section 3.22 of the Disclosure Memorandum, neither the
Company nor any Subsidiary is a party to or bound by any currently effective
employment contract, deferred compensation agreement, bonus plan, incentive
plan, profit sharing plan, retirement plan or agreement, or other employee
compensation agreement. To the Knowledge of the Company, no officer or key
employee, or any group of key employees, intends to terminate his or their
employment with the Company or a Subsidiary, as applicable, nor does the Company
or any Subsidiary have a present intention to terminate the employment of any of
the foregoing. Subject to the employment agreements set forth in Section 3.22 of
the Disclosure Memorandum, and general principles related to wrongful
termination of employees, the employment of each officer and employee of the
Company and each Subsidiary is terminable at the will of the Company or such
Subsidiary, as applicable. Except as set forth in Section 3.22 of the Disclosure
Memorandum, no contract exists between the Company or any Subsidiary and a union
representing any employees of the Company or any Subsidiary, as applicable, and,
to the Knowledge of the Company, no union has attempted to organize or represent
the labor force of the Company or any Subsidiary. Except as set forth in Section
3.22 of the Disclosure Memorandum, to the Knowledge of the Company, no person
(including, but not limited to, any foreign, federal, state, county, or local
government or other governmental, regulatory, or administrative agency or
authority) has any claim or basis for any suit, action, claim, proceeding, or
investigation against the Company or any Subsidiary arising out of any statute,
law, ordinance, code, rule, or regulation relating to discrimination in
employment or employment practices or occupational safety and health standards
(including, without limitation, The Fair Labor Standards Act, as amended, Title
VII of the Civil Rights Act of 1964, as amended, the Rehabilitation Act of 1973,
as amended, the Age Discrimination in Employment Act of 1967, as amended, or the
Americans with Disabilities Act of 1990) which, in each case, if upheld, would
have a Material Adverse Effect.
3.23 Employee Benefit Plans. Except as set forth in Section 3.23 of
----------------------
the Disclosure Memorandum (a) none of the Company or a Subsidiary has since
inception, nor
12
<PAGE>
does it currently sponsor, maintain, contribute to, or participate in a
multiemployer plan or a "defined benefit plan" within the meaning of Section
3(35) of ERISA covering employees of the Company or a Subsidiary; (b) except as
set forth on Section 3.23 of the Disclosure Memorandum, none of the Employee
Benefit Plans is an "employee pension benefit plan," or an "employee welfare
benefit plan," within the meaning of Section 3(3) of ERISA; (c) there are no
pending or, to the Company's knowledge, threatened claims, lawsuits, or
arbitrations against any Employee Benefit Plan or any fiduciary thereof; (d)
each Employee Benefit Plan is, and has been, operated in compliance in all
material respects with the applicable provisions of federal and state law and
all filings required with respect thereto have been made on a timely basis and
are accurate in all material respects; (e) each of the Company and the
Subsidiaries has, or prior to the Closing Date will have, paid in full all
insurance premiums or otherwise meet all other funding obligations now due with
regard to all Employee Benefit Plans for policy years or other applicable policy
funding periods ending on or before the Closing Date; and (f) upon termination
of employment of any employee, neither the Company nor a Subsidiary will incur
any liability for any obligation relating to severance or termination pay,
pension, profit-sharing, or other post-retirement benefit, including but not
limited to life, health, and welfare benefits, or other similar payment, except
as set forth on Section 3.23 of the Disclosure Memorandum. For purposes of this
representation, "Employee Benefit Plans" shall mean bonus, pension, benefit,
welfare, profit-sharing, retirement, disability, insurance, incentive, deferred
compensation, and other similar fringe or employee benefit plans, funds,
programs, or arrangements, and any employment contracts or executive
compensation agreements, written or oral, in each of the foregoing cases, which
cover or covered, are or were maintained for the benefit of, or relate or
related to, any or all current or former employees of the Company or a
Subsidiary.
3.24 Tax Matters. Each of the Company and the Subsidiaries has filed
-----------
all federal, state, local, and foreign income, payroll, sales, use, excise,
property, payroll, withholding, and other tax returns, if any, that are required
to be filed (collectively, the "Tax Returns"). All Tax Returns filed have been
accurately prepared. The Company or a Subsidiary has paid, or made provision for
the payment of, all taxes that have become due pursuant to the Tax Returns or
pursuant to any assessment that has been received from any taxing authority for
tax periods ended prior to the Closing. The Tax Returns are true and complete
in all material respects. There are no outstanding agreements by the Company or
a Subsidiary for the extension of time for the payment or assessment of any tax.
Except as set forth in Section 3.24 of the Disclosure Memorandum, since December
31, 1996, the Tax Returns of the Company and the Subsidiaries have not been
audited by the IRS or any state taxing authority, as the case may be, and
neither the Company nor a Subsidiary has been advised that any of such Tax
Returns will be so audited, and there are no waivers in effect of the applicable
statute of limitations for any period. Except as set forth in Section 3.24 of
the Disclosure Memorandum, no deficiency assessment, or proposed adjustment of
the United States income tax or state or local taxes (including payroll taxes)
of the Company or a Subsidiary is pending, and the Company has no Knowledge of
any proposed liability for any
13
<PAGE>
tax to be imposed upon the properties or assets of the Company or a Subsidiary
or for any payroll tax for which there is not an adequate reserve reflected in
the Financial Statements.
3.25 Brokers or Finders. Neither the Company nor any Subsidiary has
------------------
incurred, and will not incur, directly or indirectly, as a result of any action
taken by the Company or any Subsidiary, any liability for brokerage or finders'
fees or agents' commissions or any similar charges in connection with this
Agreement or any transaction contemplated hereby.
3.26 Securities Act. Subject to the accuracy of the Purchasers'
--------------
representations in Article 4 the offer, sale, and issuance of the Preferred
Shares in conformity with the terms of this Agreement constitute transactions
exempt from the registration requirements of Section 5 of the Securities Act.
3.27 Insurance. The Company and each Subsidiary have in full force
---------
and effect fire and casualty insurance policies, with extended coverage
sufficient in amount (subject to reasonable deductibles) to replace any
properties that might be damaged or destroyed, and such other policies of
insurance, and in such amounts as in the best judgment of the Company after
advice from its insurance broker, is acceptable for the nature and extent of the
business of the Company or such Subsidiary, as applicable, as currently being
conducted, and as currently proposed to be conducted.
3.28 Proprietary Information of Third Parties. To the Knowledge of
----------------------------------------
the Company, no third party has claimed or has reason to claim that any person
employed or engaged by the Company or any Subsidiary has (a) violated or may be
violating any of the terms or conditions of his employment, non-competition, or
non-disclosure agreement with such third party, (b) disclosed or may be
disclosing or utilized or may be utilizing any trade secret or proprietary
information or documentation of such third party or (c) interfered or may be
interfering in the employment relationship between such third party and any of
its present or former employees. No third party has requested information from
the Company or any Subsidiary which suggests that such a claim might be
contemplated. To the Knowledge of the Company, no person employed by or
affiliated with the Company or any Subsidiary has employed or proposes to employ
any trade secret or any information or documentation proprietary to any former
employer, and to the Knowledge of the Company, no person employed by or
affiliated with the Company or any Subsidiary has violated any confidential
relationship which such person may have had with any third party, in connection
with the development, manufacture or sale of any product or proposed product or
the development or sale of any service or proposed service of the Company or any
Subsidiary, and neither the Company nor such Subsidiary has reason to believe
there will be any such employment or violation.
3.29 Use of Proceeds. The Company shall use the funds from the
---------------
purchase of Preferred Shares by the Purchasers to acquire Lockwood Sign Group,
Inc. and for general corporate purposes.
14
<PAGE>
3.30 Year 2000 Compliance.
--------------------
(a) All computer software currently used by the Company or a
Subsidiary or to be in use by December 31, 1999 or included in any of the
products of the Company or a Subsidiary (including, but not limited to, embedded
software) will accurately receive, provide, and process date/time data
(including, but not limited to, calculating, comparing, sequencing) from, into,
and between the twentieth and twenty-first centuries, including the years 1999
and 2000, and leap year calculations and will not malfunction, cease to
function, or provide invalid or incorrect results as a result of date/time data,
to the extent that other information technology used in combination with such
software property exchanges date/time data with it.
(b) Neither the Company nor any Subsidiary has any material
liability for warranty claims, product liability claims, or similar claims with
respect to software embedded or contained in products sold or provided by it to
customers as a result of the failure of any such software to meet the criteria
specified in paragraph (a) above.
3.31 Disclosure.
----------
(a) Neither this Agreement, the Disclosure Memorandum, the
Financials, nor any Exhibit to this Agreement contains an untrue statement of a
material fact or omits a material fact necessary to make the statements
contained herein or therein not misleading. None of the Ancillary Agreements or
certificates prepared or supplied by the Company with respect to the
transactions contemplated hereby or thereby contains an untrue statement of a
material fact or omits a material fact necessary to make the statements
contained therein not misleading. There is no fact which the Company has not
disclosed to the Purchasers and their counsel in writing and of which the
Company is aware which materially and adversely affects or would materially and
adversely affect the consolidated business, financial condition, operations or
property of the Company and its Subsidiaries or trading price of the Common
Stock.
(b) The financial projections and other estimates delivered to the
Purchasers at Closing including fourth quarter 1999 and fiscal year 2000 were
prepared by the Company based on the Company's experience in the industry and on
assumptions of fact and opinion as to future events which the Company, at the
date of the issuance of such projections, believed to be reasonable. As of the
date hereof no facts have come to the attention of the Company which would, in
its opinion, require the Company to revise the assumptions underlying such
projections and other estimates or the conclusions derived therefrom.
15
<PAGE>
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
------------------------------------------------
Each Purchaser hereby severally (and not jointly) represents and
warrants to the Company with respect to the purchase of the Preferred Shares and
the Warrants as follows:
4.1 Experience. Such Purchaser has substantial experience in
----------
evaluating and investing in private placements of securities in companies
similar to the Company and is capable of evaluating the merits and risks of its
investment in the Company and has the capacity to protect its own interests.
Such Purchaser is aware that the purchase of Preferred Shares and Warrants
involves substantial risk and that its financial condition and investments are
such that it is in a financial position to hold such securities for an
indefinite period of time and to bear the economic risk of and withstand a
complete loss of such investment.
4.2 Investment. Such Purchaser is acquiring the Preferred Shares and
----------
Warrants for investment for its own account, not as a nominee or agent, and not
with the view to, or for resale in connection with, any distribution thereof.
Such Purchaser understands that the Preferred Shares and Warrants have not been,
and will not be, registered under the Securities Act or the securities laws of
any state by reason of exemptions from the registration provisions of the
Securities Act and such laws which depend upon, among other things, the bona
fide nature of the investment intent and the accuracy of such Purchaser's
representations as expressed herein.
4.3 Access to Data. Such Purchaser has also had an opportunity to ask
--------------
questions of the management of the Company concerning the Company and its
business and to conduct its own independent due diligence investigation of the
Company.
4.4 Authorization. This Agreement and the Ancillary Agreements, when
-------------
executed and delivered by such Purchaser, will constitute valid and legally
binding obligations of such Purchaser, enforceable in accordance with their
respective terms, subject to (i) laws of general application relating to
bankruptcy, insolvency, and the relief of debtors, and (ii) rules of law
governing specific performance, injunctive relief, or other equitable remedies.
Such Purchaser has full corporate or partnership, as the case may be, power and
authority to enter into and to perform its obligations under this Agreement and
the Ancillary Agreements in accordance with their respective terms. Such
Purchaser represents that it has not been organized, reorganized, or
recapitalized specifically for the purpose of investing in the Company.
16
<PAGE>
4.5 Brokers or Finders. Neither the Purchaser nor the Company has
------------------
incurred, or will incur, directly, or indirectly, as a result of any action
taken by such Purchaser, any liability for brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement or any
transaction contemplated hereby.
4.6 Accredited Investor. Each Purchaser is an accredited investor,
-------------------
as such term is defined in Rule 501(a) of Regulation D promulgated under the
Securities Act.
ARTICLE 5. CONDITIONS TO THE OBLIGATIONS OF THE PURCHASERS
-----------------------------------------------
The obligations of each Purchaser to purchase the Preferred Shares and
the Warrants at the Closing is, at the option of each Purchaser, subject to the
fulfillment on or prior to the Closing Date of the following conditions:
5.1 Representations and Warranties. The representations and
------------------------------
warranties made by the Company in Article 3 of this Agreement shall have been
true and correct when made, and shall be true and correct in all material
respects as of the Closing Date.
5.2 Covenants. All covenants, agreements, and conditions contained in
---------
this Agreement to be performed by the Company on or prior to the Closing shall
have been fully performed or complied with in all respects.
5.3 Compliance Certificate. The Company shall have delivered to the
----------------------
Purchasers (i) a Compliance Certificate in substantially the form attached
hereto as Exhibit "E", executed by an executive officer of the Company, dated
the Closing Date, and certifying to the fulfillment of the conditions specified
in Sections 5.1, 5.2, 5.4 and 5.8, (ii) certified copies of the resolutions
adopted by the Company's board of directors authorizing the execution, delivery,
and performance of the transactions contemplated by this Agreement and the
Ancillary Agreements, (iii) certified copies of the Company's Articles and
bylaws as in effect at the Closing, and (iv) a certificate of incumbency
identifying and showing the signature of each officer of the Company as of the
Closing.
5.4 Consents. The Company shall have obtained, or shall obtain
--------
within the time periods required by applicable law, all necessary blue sky law
permits and qualifications, or secured exemptions therefrom, required by any
state for the offer and sale of the Preferred Shares and the Warrants at the
Closing and shall have obtained all other consents, permits, and waivers
necessary to consummate the transactions contemplated by
17
<PAGE>
this Agreement and the Ancillary Agreements, and any consents required under any
agreements, licenses, leases, or commitments of the Company.
5.5 Certificate of Designation. The Certificate of Designation shall
--------------------------
have been filed with the Secretary of State of the State of Nevada, and shall be
in full force and effect on the Closing Date.
5.6 Reservation of Stock. The Conversion Shares and the Warrant
--------------------
Shares shall have been duly authorized and reserved for issuance only upon the
conversion of the Preferred Shares and the exercise of the Warrants.
5.7 Proceedings and Documents. All corporate and other proceedings
-------------------------
in connection with the transactions contemplated hereby and all documents and
instruments incident to such transactions shall be reasonably satisfactory in
substance and form to counsel for the Purchasers and they shall have received
all such counterpart originals or certified or other copies of such documents as
they may reasonably request.
5.8 No Litigation. No action, suit, or other proceeding shall be
-------------
pending or threatened before any court, tribunal, or governmental authority
seeking or overtly threatening to restrain or prohibit the consummation of the
transactions contemplated hereby, or seeking to obtain substantial damages in
respect thereof, or which would otherwise materially and adversely affect the
Company, its Subsidiaries, or their respective business, assets, prospects, or
financial condition.
5.9 Investors' Rights Agreement. The Company and each Purchaser
---------------------------
shall have entered into the Investors' Rights Agreement.
5.10 Opinion of Counsel. The Purchasers shall have received from
------------------
Marshall S. Harris, counsel for the Company, an opinion, dated the Closing Date,
satisfactory in form and substance to the Purchasers and their counsel, and
which shall be substantially in the form of Exhibit "F" attached hereto.
5.11 Expenses. At the Closing, the Company shall have paid the fees,
--------
costs, and expenses incurred by the Purchasers with respect to this Agreement
and the transactions contemplated hereby (including legal fees and out-of-pocket
expenses), subject to the limitations set forth in Section 8.14 hereof.
18
<PAGE>
5.12 Due Diligence. The Purchasers shall have completed, to their
-------------
sole satisfaction, their due diligence review of the accounting, legal, and
financial condition of the Company and its Subsidiaries.
5.13 Purchase by Other Purchasers. Each other Purchaser shall have
----------------------------
simultaneously purchased the Preferred Shares and the Warrants allocated to it
on the Schedule of Purchasers.
5.14 Renaissance Anti-Dilution Waiver. Renaissance Capital Growth &
--------------------------------
Income Fund III, Inc., Renaissance US Growth & Income Trust PLC, Renaissance
Capital Group, Inc. and any affiliates shall have waived any anti-dilution
rights with respect to the issuance of the Preferred Shares and Warrants and the
conversion or exercise thereof.
ARTICLE 6. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY
--------------------------------------------
The Company's obligation to issue and sell the Preferred Shares and
the Warrants at the Closing is, at the option of the Company, subject to the
fulfillment on or prior to the Closing Date of the following conditions:
6.1 Representations and Warranties. The representations and
------------------------------
warranties made by each Purchaser in Article 4 of this Agreement shall have been
true and correct when made, and shall be true and correct in all material
respects as of the Closing Date.
6.2 Covenants. All covenants, agreements, and conditions contained
---------
in this Agreement to be performed by the Purchasers on or prior to the Closing
shall have been fully performed or complied with in all respects.
6.3 No Litigation. No action suit or other proceeding shall be
-------------
pending or threatened before any court, tribunal, or governmental authority
seeking or threatening to restrain or prohibit the consummation of the
transactions contemplated hereby, or seeking to obtain substantial damages in
respect thereof or which would otherwise materially and adversely affect the
Company, its business, assets, prospects, or financial condition.
6.4 Investors' Rights Agreement. The Company and each Purchaser shall
---------------------------
have entered into the Investors' Rights Agreement.
ARTICLE 7. INDEMNIFICATIONS
----------------
7.1 Indemnification by the Company. The Company shall indemnify and
------------------------------
hold harmless Purchasers, their officers, directors, agents, and affiliates at
all times after the date hereof from and against any and all loss, damage,
diminution in value, liability, cost, and expense, including but not limited to
reasonable attorneys' fees, suffered or incurred by any such party, as and when
incurred, by reason of, or arising out of any misrepresentation, breach of
19
<PAGE>
warranty, or breach or non-fulfillment of any agreement of the Company contained
in this Agreement, any Ancillary Agreement, or in any other certificate,
agreement, or document executed and delivered in connection with this Agreement.
The foregoing rights with respect to indemnification are cumulative and without
prejudice to any other remedies which Purchasers may have against the Company
under applicable law.
7.2 Indemnification by Purchasers. Purchasers shall indemnify and
-----------------------------
hold harmless the Company at all times after the date hereof from and against
any and all loss, damage, liability, cost, and expense, including but not
limited to reasonable attorneys' fees, suffered or incurred by the Company, as
and when incurred, by reason of, or arising out of any misrepresentation, breach
of warranty, or breach or non-fulfillment of any agreement of Purchasers
contained in this Agreement, any Ancillary Agreement, or in other certificate,
agreement, document executed and delivered in connection with this Agreement.
The foregoing rights with respect to indemnification are cumulative and without
prejudice to any other remedies which the Company may have against Purchasers
under applicable law.
ARTICLE 8. GENERAL PROVISIONS
------------------
8.1 Governing Law. All or part of this Agreement and the legal
-------------
relations between the parties hereto has been negotiated in the State of Florida
and will be enforced under the laws of the State of Florida without regard to
its conflicts of laws provisions.
8.2 Successors and Assigns; Third Party Beneficiaries. Except as
-------------------------------------------------
otherwise expressly limited herein, the provisions hereof shall inure to the
benefit of, and be binding upon, the successors, assigns, heirs, executors, and
administrators of the parties hereto. Nothing in this Agreement, expressed or
implied, is intended to confer upon any party other than the parties hereto and
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement.
8.3 Entire Agreement; Amendment and Waiver. This Agreement and the
--------------------------------------
Ancillary Agreements constitute the full and entire understanding and agreement
between the parties with regard to the subject matter hereof and thereof and
supersede all prior agreements among the parties, including but not by way of
limitation, a letter of intent dated June 22, 1999. All prior negotiations and
agreements shall be merged into this Agreement. Any term of this Agreement may
be amended, and the observance of any term hereof may be waived (either
generally or in a particular instance) only with the written consent of the
Purchasers and the Company.
8.4 Survival. The representations, warranties, covenants, and
--------
agreements made herein shall survive any investigation made by the Purchasers
and the closing of the transactions contemplated hereby.
8.5 Notices, etc. All notices and other communications required or
------------
permitted hereunder shall be in writing and shall be (i) mailed by registered or
certified mail,
20
<PAGE>
postage prepaid, (ii) delivered by reliable overnight courier service, or (iii)
otherwise delivered by hand, by messenger, or by telecopier, addressed (A) if to
a Purchaser, to such Purchaser's address set forth on the Schedule of
Purchasers, or at such other address as such Purchaser shall have furnished to
the Company in writing, with a copy to Kilpatrick Stockton LLP, 1100 Peachtree
Street, Suite 2800, Atlanta, Georgia 30309, Attention: Larry D. Ledbetter,
Telecopier No. 404-815-6555, or (B) if to the Company at 5029 Edgewater Drive,
Orlando, Florida 32810, Attention: J. William Brandner, Telecopier No. (407)
521-8767.
8.6 Delays or Omissions. No delay or omission to exercise any right,
-------------------
power, or remedy accruing to any party upon any breach or default under this
Agreement, shall be deemed a waiver of any other breach or default theretofore
or thereafter occurring. Any waiver, permit, consent, or approval of any kind or
character on the part of any party of any breach or default under this
Agreement, or any waiver on the part of any party of any provisions or
conditions of this Agreement, must be in writing and shall be effective only to
the extent specifically set forth in such writing. All remedies, either under
this Agreement or by law or otherwise afforded to any of the parties, shall be
cumulative and not alternative.
8.7 References. Unless the context otherwise requires, any reference
----------
to a "Section" refers to a section of this Agreement. Any reference to "this
Section" refers to the whole number section in which such reference is
contained.
8.8 Severability. If any provision of this Agreement is held to be
------------
unenforceable under applicable law, then such provision shall be excluded from
this Agreement and the balance of this Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms. The court in its discretion may substitute for the excluded provision an
enforceable provision which in economic substance reasonably approximates the
excluded provision.
8.9 Pronouns. All pronouns and any variations thereof refer to the
--------
masculine, feminine, or neuter, singular or plural, as the identity of the
person or persons may require.
8.10 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original and enforceable against
the parties actually executing such counterpart, and all of which, when taken
together, shall constitute one instrument.
8.11 Remedies. The parties to this Agreement acknowledge and agree
--------
that a breach of any of the covenants of the Company or the Purchasers set forth
in this Agreement may not be compensable by payment of money damages and,
therefore, that the covenants of the foregoing parties set forth in this
Agreement may be enforced in equity by a decree requiring specific performance.
21
<PAGE>
8.12 Certain Definitions. As used in this Agreement, the following
-------------------
terms shall have the following meanings unless the context otherwise required:
(i) "Affiliate" shall mean a person that, directly or
---------
indirectly, controls or is controlled by, or is under common control with, any
Person.
(ii) "Control" (including, with correlative meaning, the terms
-------
"controlled by" and "under common control with") as used with respect to any
person, means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such person, whether
through ownership of voting securities or by contract or otherwise.
(iii) "Environment" shall mean soil, land surface or subsurface
-----------
strata, surface waters (including navigable waters, ocean waters, streams,
ponds, drainage basins, and wetlands), groundwaters, drinking water supply,
stream sediments, ambient air (including indoor air), plant and animal life, and
any other environmental medium or natural resource.
(iv) "Environmental, Health, and Safety Liabilities" shall mean
---------------------------------------------
any cost, damages, expense, liability, obligation, or other responsibility
arising from or under Environmental Law or Occupational Safety and Health Law
and consisting of or relating to:
(a) any environmental, health, or safety matters or conditions
(including on-site or off-site contamination, occupational safety and
health, and regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and response,
investigative, remedial, or inspection costs and expenses arising under
Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law or
Occupational Safety and Health Law for cleanup costs or corrective action,
including any investigation, cleanup, removal, containment, or other
remediation or response actions ("Cleanup") required by applicable
Environmental Law or Occupational Safety and Health Law (whether or not
such Cleanup has been required or requested by any Governmental Body or any
other Person) and for any natural resource damages; or
(d) any other compliance, corrective, investigative, or
remedial measures required under Environmental Law or Occupational Safety
and Health Law.
The terms "removal," "remedial," and "response action," include the types
of activities covered by the United States Comprehensive Environmental
Response,
22
<PAGE>
Compensation, and Liability Act, 42 U.S.C. (S) 9601 et seq., as amended
("CERCLA").
(v) "Environmental Law" shall mean any legal requirement in
-----------------
effect on the date hereof that requires or relates to:
(a) advising appropriate authorities, employees, and the
public of intended or actual releases of pollutants or hazardous substances
or materials, violations of discharge limits, or other prohibitions and of
the commencements of activities, such as resource extraction or
construction, that could have significant impact on the Environment;
(b) preventing or reducing to acceptable levels the release
of pollutants or hazardous substances or materials into the Environment;
(c) reducing the quantities, preventing the release, or
minimizing the hazardous characteristics of wastes that are generated;
(d) assuring that products are designed, formulated,
packaged, and used so that they do not present unreasonable risks to human
health or the Environment when used or disposed of;
(e) protecting resources, species, or ecological amenities;
(f) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil, or other
potentially harmful substances;
(g) cleaning up pollutants that have been released,
preventing the threat of release, or paying the costs of such clean up or
prevention; or
(h) making responsible parties pay private parties, or groups
of them, for damages done to their health or the Environment, or permitting
self-appointed representatives of the public interest to recover for
injuries done to public assets.
(vi) "Facilities" shall mean any real property, leaseholds, or
----------
other interests in real property currently or formerly owned or operated by the
Company or any Subsidiary and any buildings, plants, structures, or equipment
(including motor vehicles, tank cars, and rolling stock) currently or formerly
owned or operated by the Company or any Subsidiary.
(vii) "Hazardous Activity" shall mean the distribution,
------------------
generation, handling, importing, management, manufacturing, processing,
production, refinement, Release, storage, transfer, transportation, treatment,
or use (including any withdrawal or other
23
<PAGE>
use of groundwater) of Hazardous Materials by the Company or any Subsidiary in,
on, under, about, or from the Facilities or any part thereof into the
Environment, and any other act, business or operation of the Company or any
Subsidiary that increases the danger, or risk of danger, or poses an
unreasonable risk of harm to persons or property on or off the Facilities, or
that may affect the value of the Facilities or the Company.
(viii) "Hazardous Materials" shall include any (i) "hazardous
-------------------
substance," "pollutants," or "contaminant" (as defined in Sections 101(14) and
(33) of CERCLA or the regulations issued pursuant to Section 102 of CERCLA and
found at 40 C.F.R. (S) 302), including any element, compound, mixture, solution,
or substance that is or may be designated pursuant to Section 102 of CERCLA;
(ii) substance that is or may be designated pursuant to Section 311(b)(2)(A) of
the Federal Water Pollution Control Act, as amended (33 U.S.C. (S)(S) 1251,
1321(b)(2)(A)) ("FWPCA"); (iii) hazardous waste having the characteristics
identified under or listed pursuant to Section 3001 of the Resource Conservation
and Recovery Act, as amended (42 U.S.C. (S)(S) 6901, 6921) ("RCRA") or having
characteristics that may subsequently be considered under RCRA to constitute a
hazardous waste; (iv) substance containing petroleum, as that term is defined in
Section 9001(8) of RCRA; (v) toxic pollutant that is or may be listed under
Section 307(a) of FWPCA; (vi) hazardous air pollutant that is or may be listed
under Section 112 of the Clean Air Act, as amended (42 U.S.C. (S)(S) 7401,
7412); (vii) imminently hazardous chemical substance or mixture with respect to
which action has been or may be taken pursuant to Section 7 of the Toxic
Substances Control Act, as amended (15 U.S.C. (S)(S) 2601, 2606); (viii) source,
special nuclear, or by-product material as defined by the Atomic Energy Act of
1954, as amended (42 U.S.C. (S) 2011 et seq.); (ix) asbestos, asbestos-
containing material, or urea formaldehyde or material that contains it; (x)
waste oil and other petroleum products; and (xii) any other toxic materials,
contaminants, or hazardous substances or wastes defined as such pursuant to any
Environmental Law.
(ix) "Knowledge" shall mean an individual will be deemed to
---------
have "Knowledge" of a particular fact or other matter if:
(a) such individual is actually aware of such fact or other
matter; or
(b) a prudent individual reasonably could be expected to
discover or otherwise become aware of such fact or other matter in the
course of conducting a reasonable investigation concerning the existence of
such fact or other matter.
The Company will be deemed to have "Knowledge" of a particular fact or
other matter if any individual who is serving as a director, officer, partner,
executor, or trustee of the Company or any Subsidiary (or in any similar
capacity) has, or at any time had, Knowledge of such fact or other matter.
(x) "Occupational Safety and Health Law" shall mean any legal
----------------------------------
requirement designed to provide safe and healthful working conditions and to
reduce
24
<PAGE>
occupational safety and health hazards, and any program, whether governmental or
private (including those promulgated or sponsored by industry associations and
insurance companies), designed to provide safe and healthful working conditions.
(xi) "Person" means any individual, corporation, general or
------
limited partnership, limited liability company, firm, joint venture,
association, enterprise, joint stock company, trust, unincorporated organization
or other entity.
(xii) "Release" shall mean any spilling, leaking, emitting,
-------
discharging, depositing, escaping, leaching, dumping, or other releasing into
the Environment, whether intentional or unintentional.
(xiii) "Threat of Release" shall mean a substantial likelihood of
-----------------
a Release that may require action in order to prevent or mitigate damage to the
Environment that may result from such Release.
(xiv) "Threatened" shall mean a claim, Proceeding, dispute,
----------
action, or other matter will be deemed to have been "Threatened" if any demand
or statement has been made (orally or in writing) or any notice has been given
(orally or in writing), or if any other event has occurred or any other
circumstances exist, that would lead a prudent Person to conclude that such a
claim, proceeding, dispute, action, or other matter is likely to be asserted,
commenced, taken, or otherwise pursued in the future.
8.13 Publicity. Neither party shall issue any press release,
---------
announcement, or other public disclosure (including SEC Reports) concerning this
Agreement or the transactions contemplated hereby without first providing the
other parties hereto a copy of the proposed disclosure and affording them the
opportunity to comment thereon.
8.14 Fees and Expenses. The Company shall pay the legal fees and out-
-----------------
of-pocket expenses incurred by the Purchasers in connection with this Agreement
and the transactions contemplated hereby up to $50,000.
8.15 Exculpation Among Purchasers. Each Purchaser acknowledges that it
----------------------------
is not relying upon any other Purchaser or any other Person, other than the
Company and its management, in making its investment or decision to invest in
the Company. Each Purchaser agrees that no other Purchaser nor the respective
controlling persons, officers, directors, partners, agents, or employees of any
other Purchaser shall be liable for any action heretofore or hereafter taken or
omitted to be taken by any of them in connection with the execution of this
Agreement and the consummation of the transactions contemplated hereby.
[Remainder of page intentionally left blank]
25
<PAGE>
Executed effective as of the date first set forth above.
THE COMPANY:
DISPLAY TECHNOLOGIES, INC.
By:____________________________________
J. William Brandner, President
PURCHASERS:
RAYMOND JAMES CAPITAL
PARTNERS, L.P.,
a Delaware limited partnership
By: RJC PARTNERS, L.P., a Delaware limited
partnership, its General Partner
By: RJC PARTNERS, INC.
a Delaware corporation, its General Partner
By:____________________________________
Gary A. Downing, President
RENAISSANCE CAPITAL GROWTH &
INCOME FUND III, INC.
By:____________________________________
Russell Cleveland, President
RENAISSANCE US GROWTH & INCOME
TRUST PLC
By: RENAISSANCE CAPITAL GROUP, INC., its
Investment Manager
By:____________________________________
Russell Cleveland, President
26
<PAGE>
Exhibit 10.137
LOAN AND SECURITY AGREEMENT
THIS AGREEMENT made this 2nd day of June, 1999, between DISPLAY
TECHNOLOGIES, INC., a Nevada corporation ("Parent"), and its wholly-owned
subsidiaries (collectively, "Borrower"), and SOUTHTRUST BANK, NATIONAL
ASSOCIATION, with its principal office in Birmingham, Alabama ("Bank").
R E C I T A L S:
- - - - - - - -
Borrower requested that Bank make available to Borrower a revolving line of
credit of up to $10,000,000 and a term loan facility of $1,000,000 for its
working capital and to refinance existing credit facilities. Borrower has also
requested that Bank issue a standby letter of credit in the amount of up to
$2,546,028 to secure $2,500,000 of Borrower's Variable/Fixed Rate Credit
Enhanced Notes being newly issued pursuant to a Trust Indenture dated as of June
2, 1999, between Borrower and Bank, as trustee. Bank previously issued a letter
of credit dated August 28, 1997, to secure a different series consisting of
$2,500,000 of Variable/Fixed Rate Credit Enhanced Notes issued pursuant to a
Trust Indenture dated as of August 1, 1997, between Borrower and Bank, as
trustee. The 1997 Letter of Credit was issued pursuant to a Credit and Security
Agreement dated as of August 1, 1997, between Bank and Borrower, which is being
amended and supplemented by this Agreement. The Parent and its Subsidiaries
(defined below) share an identity of interest as members of a consolidated group
of companies. Parent provides centralized financial, accounting and management
services to its Subsidiaries by virtue of intercompany advances and loans such
that the financial accommodations to the Parent under this Agreement will
directly and materially benefit its Subsidiaries. Bank is willing to make these
credit facilities available to Borrower on the terms and conditions set forth in
this Agreement.
NOW, THEREFORE, Bank and Borrower agree as follows:
1. Defined Terms. As used in this Loan and Security Agreement, the
-------------
following terms shall have the following meanings:
1.1 Account Debtor -- any Person who is or may become obligated
--------------
under or on account of an Account, Chattel Paper, General Intangible, or
Instrument (as defined in the Code).
1.2 Accounts -- all accounts, accounts receivable, chattel paper,
--------
leases, instruments, documents, promissory notes, contracts for receipt of
money, conditional sales contracts, and evidences of Debt of or owing to or
acquired by Borrower whether now existing or hereafter arising, whether or not
it has been earned by performance, and whether or not it has been billed,
including (i) all accounts and other rights to payment of money which arise or
result from Borrower's selling, leasing, or other disposition of Borrower's
goods or the providing of services by Borrower, (ii) the proceeds of any
insurance covering the Collateral, and (iii) the return of unearned insurance
premiums.
<PAGE>
1.3 Affiliate -- any director or officer of Borrower or any
---------
Subsidiary or any Person who directly, indirectly or beneficially, owns 5% or
more of the capital stock of Borrower or any Subsidiary, or 5% of the voting
stock or rights of Borrower or any Subsidiary, or any member of the immediate
family of any such officer, director, or stockholder, or any corporation or
other entity which is controlled by, controls, or is under common control with,
Borrower.
1.4 Aggregate Loan Values -- the lesser of (i) the sum of
---------------------
$10,000,000, or (ii) the sum of the Loan Value of Accounts and the Loan Value of
Inventory.
1.5 Agreement -- this Loan and Security Agreement.
---------
1.6 Applicable Margin -- with respect to the Revolving Loan, while
-----------------
the Revolving Loan is a Base Rate Loan, 75 basis points (0.75%) and (b) while
the Revolving Loan is a LIBOR Loan, 325 basis points (3.25%). The Applicable
Margin will be subject to adjustment annually based on Borrower's performance
under certain financial measures, commencing with the fiscal year ended June 30,
2000, as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Financial Ratio Applicable Margin
--------------- -----------------
- --------------------------------------------------------------------------------------------------------
<S> <C>
Funded Debt divided by EBITDA is greater than 3.0.
- - and - Base Rate: LIBOR Rate:
One percent (1%) Three and one-half
EBIDA divided by CMLTD + CMCL + percent (3.5%)
Interest + Distributions less than 1.25
- --------------------------------------------------------------------------------------------------------
Funded Debt divided by EBITDA is less than 3.0.
- - and - Base Rate: LIBOR Rate:
Three-quarter Three and one-quarter
EBIDA divided by CMLTD + CMCL + percent (3/4%) percent (3.25%)
Interest + Distributions greater than 1.25
- --------------------------------------------------------------------------------------------------------
Funded Debt divided by EBITDA is less than 2.5.
- - and - Base Rate: LIBOR Rate:
One-half percent (1/2%) Three percent (3%)
EBIDA divided by CMLTD + CMCL +
Interest + Distributions greater than 1.50
- --------------------------------------------------------------------------------------------------------
Funded Debt divided by EBITDA is less than 2.0
- - and - Base Rate: LIBOR Rate:
one-quarter Two and three-quarters
EBIDA divided by CMLTD + CMCL + percent (1/4%) percent (2.75%)
Interest + Distributions greater than 1.75
- --------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
- -----------------------------------------------------------------------------------------------
Funded Debt divided by EBITDA is less than 1.5
percent (3.25%)
- - and - Base Rate: LIBOR Rate:
Zero percent (0%) Two and one-half
EBIDA divided by CMLTD + CMCL + percent (2.50%)
Interest + Distributions greater than 2.0
- -----------------------------------------------------------------------------------------------
</TABLE>
"CMLTD" means current maturities of long term debt of Parent and its
Subsidiaries on a consolidated basis.
"CMCL" means current maturities of capital leases of Parent and its Subsidiaries
on a consolidated basis.
"EBIDA" means earnings before interest, depreciation, and amortization of Parent
and its Subsidiaries on a consolidated basis.
1.7 Bank -- SouthTrust Bank, National Association, and its successors
----
and assigns, a party to this Agreement.
1.8 Base Rate -- the rate of interest designated by Bank periodically
---------
as its Base Rate. The Base Rate is not necessarily the lowest interest rate
charged by Bank.
1.9 Borrower -- Display Technologies, Inc., a Nevada corporation, and
--------
its wholly-owned subsidiaries, including Ad Art Electronic Sign Corporation, a
Florida corporation, Certified Maintenance Service, Inc., a Florida corporation,
Don Bell Industries, Inc., a Florida corporation, J. M. Stewart Manufacturing,
Inc., a Florida corporation, La-Man Corporation, a Nevada corporation, J. M.
Stewart Corporation, a Florida corporation, J. M. Stewart Industries, Inc., a
Florida corporation, and Vision Trust Marketing, Inc., a Florida corporation,
each a party to this Agreement, and any other corporation that from time to time
joins in this Agreement as a Borrower.
1.10 Cash Capital Expenditures -- expenditures made from cash or from
-------------------------
proceeds of the Revolving Loan (but not from the proceeds of a term loan or
purchase money financing) for the acquisition of any fixed assets or
improvements, replacements, substitutions, or additions thereto which have a
useful life of more than one year, including the direct or indirect acquisition
of such assets by way of increased product or service charges, offset items, or
otherwise.
1.11 Capitalized Lease Obligations -- any Debt represented by
-----------------------------
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP, and the amount of such Debt shall be
the capitalized amount of such obligations determined in accordance with GAAP.
1.12 Chattel Paper -- all writing or writings which evidence both a
-------------
monetary obligation and a security interest in or the lease of specific goods,
together with any guarantees, letters of credit, and other security therefor.
1.13 Code -- the Uniform Commercial Code, as in effect in Florida from
----
time to time.
3
<PAGE>
1.14 Collateral -- collectively, Borrower's Accounts, Documents,
----------
Instruments, Equipment, Real Estate, Chattel Paper, General Intangibles, and
Inventory, the other property and interests described in Section 8.1 ("Security
Interest") and elsewhere in the Loan Documents, wherever located and whether now
owned by Borrower or hereafter acquired, and the parts, proceeds, products,
profits, replacements, and substitutions of each, as the case may be.
1.15 Contingent Obligations -- means any obligation, contingent or
----------------------
otherwise, of any Person directly or indirectly guaranteeing any Debt of any
Person and any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Debt of such Person (whether arising by virtue of agreements to
keep well, to purchase assets, goods, securities or services, to take-or-pay, or
to maintain financial statement conditions or otherwise) or (ii) entered into
for the purpose of assuring in any other manner the obligee of such Debt of the
payment thereof or to protect such obligee against loss in respect thereof (in
whole or in part). Excludes any contingent obligation to issue stock under an
acquisition agreement.
1.16 Contractual Obligation -- any provision of any security issued by
----------------------
a Person or of any agreement, instrument, or undertaking to which such Person is
a party or by which it or any of its property is bound.
1.17 Debt -- the sum of (i) indebtedness for borrowed money or for the
----
deferred purchase price of property or services, (ii) Capitalized Lease
Obligations, and (iii) all other items which in accordance with GAAP would be
included in determining total liabilities as shown on a balance sheet of a
Person as at the date as of which Debt is to be determined.
1.18 Debt Service Coverage -- a ratio in which the numerator is the
---------------------
sum of the net income (after provision for federal and state taxes and excluding
any extraordinary income) of Borrower calculated based upon the 12-month period
preceding the applicable date, plus the interest expenses of Borrower for said
period, plus the sum of non-cash expenses or allowances for Borrower for such
period (including amortization or write-down of intangible assets, depreciation,
depletion, and deferred taxes and expenses), and the denominator is the sum of
the current portion of the long-term debt and current portion of Capitalized
Lease Obligations of Borrower as of the applicable date, plus the interest
expenses of Borrower plus any payments by Borrower as cash dividends on any
shares of its capital stock for the 12-month period preceding the applicable
date.
1.19 Default Rate -- the highest lawful rate of interest per annum
------------
specified in any Note to apply after a default under such Note or, if no such
rate is specified, a rate equal to the lesser of (a) two percent over the
interest rate specified to be the applicable contract interest rate in this
Agreement or (b) the highest rate of interest allowed by law.
1.20 Document -- means any paper that is treated in the regular course
--------
of business as adequate evidence that the person in possession of the paper is
entitled to receive, hold, and dispose of the goods the paper covers, and
includes warehouse receipts, bills of lading, certificates of title, and
applications for certificates of title.
4
<PAGE>
1.21 EBITDA -- Borrower's net income for an applicable period, before
------
deduction of interest expense, taxes, depreciation and amortization expense for
the period.
1.22 Eligible Account -- an Account arising in the ordinary course of
----------------
Borrower's business from the sale of goods or rendition of services which Bank,
in its sole credit judgment, deems to be an Eligible Account. Without limiting
the generality of the foregoing, no Account shall be an Eligible Account if:
(i) it arises out of a sale made by Borrower to a Subsidiary or to an Affiliate
of Borrower or to a Person controlled by an Affiliate or Subsidiary of Borrower;
or (ii) it is unpaid for more than 30 days after the original due date shown on
the invoice if the due date is 60 days or more after invoice date, or (iii) if
the terms are less than 60 days, it is due or unpaid more than ninety (90) days
after the original invoice date; or (iv) fifty percent (50%) or more of the
Accounts from the Account Debtor are not deemed Eligible Accounts hereunder; or
(v) the total unpaid Accounts of the Account Debtor exceed twenty five percent
(25%) of the net amount of all Accounts, to the extent of such excess; or (vi)
any covenant, representation or warranty contained in this Agreement with
respect to such Account has been breached; or (vii) the Account Debtor is also
Borrower's or an Affiliate's creditor or supplier, or has disputed liability
with respect to such Account, or has made any claim with respect to any other
Account due from such Account Debtor to Borrower or an Affiliate, or the Account
otherwise is or may become subject to any right of setoff by the Account Debtor
or an affiliate of the Account Debtor; or (viii) the Account Debtor has
commenced a voluntary case under the federal bankruptcy laws, as now constituted
or hereafter amended, or made an assignment for the benefit of creditors, or a
decree or order for relief under the federal bankruptcy laws has been filed
against the Account Debtor, or if the Account Debtor has failed, suspended
business, ceased to be Solvent, or consented to or suffered a receiver, trustee,
liquidator or custodian to be appointed of it or for all or a significant
portion of its assets or affairs; or (ix) it arises from a sale to an Account
Debtor outside the United States or Canada, unless credit insured by a surety
acceptable to Bank or backed by a letter of credit issued in Borrower's favor;
or (x) it arises from a sale to the Account Debtor on a bill-and-hold,
guaranteed sale, sale-or-return, sale-on-approval, consignment, or any other
repurchase or return basis; or (xi) Bank believes, in its sole reasonable
judgment, that collection of such Account is insecure or that payment thereof is
doubtful or will be delayed by reason of the Account Debtor's financial
condition; or (xii) the Account Debtor is the United States of America or any
department, agency or instrumentality thereof, unless Borrower assigns its right
to payment of such Account to Bank, in form and substance satisfactory to Bank,
so as to comply with the Assignment of Claims Act of 1940, as amended; or (xiii)
the Account Debtor is located in any state that requires the filing of a
Business Activities Report, including the State of New Jersey or the State of
Minnesota, unless Borrower has filed a Notice of Business Activities Report with
the appropriate officials for the then current year; or (xiv) the Account is
subject to a Lien; or (xv) the goods giving rise to such Account have not been
delivered to and accepted by the Account Debtor or the services giving rise to
such Account have not been performed by Borrower in all material respects and
accepted by the Account Debtor or the Account otherwise does not represent a
final sale (including accounts arising from Borrower's maintenance contracts, to
the extent not earned by services); or (xvi) the total unpaid Accounts of the
Account Debtor exceed a credit limit determined by Bank, in its sole discretion,
to the extent such Account exceeds such limit; or (xvii) the Account is
evidenced by Chattel Paper, a note, or an instrument of any kind, or has been
reduced to judgment; or (xviii) Borrower has made any
5
<PAGE>
agreement with the Account Debtor for any deduction therefrom, except for
discounts or allowances which are made in the ordinary course of business for
prompt payment and which discounts or allowances are reflected in the
calculation of the face value of each invoice related to such Account; or (xix)
Borrower has made an agreement with the Account Debtor to extend the time of
payment thereof; or (xx) the Account arises from a retail sale of goods to a
Person who is purchasing same primarily for personal, family, or household
purposes; or (xxi) the Account arises out of a shipment of Inventory, goods, or
products to an address other than an address in the United States, unless credit
insured by a surety acceptable to Bank or backed by a letter of credit issued in
Borrower's favor; or (xxii) the Account Debtor is not a resident citizen of the
United States or a corporate entity or partnership formed and existing under the
laws of the United States or a political subdivision thereof, unless credit
insured by a surety acceptable to Bank or backed by a letter of credit issued in
Borrower's favor; or (xxiii) the Account consists of uncollected progress
billings under contracts that are not complete in all material respects; or
(xxiv) the Account consists of contractual retainage; or (xxv) the Account is
deemed ineligible by Bank in its sole reasonable judgment and discretion.
1.23 Environmental Regulations -- all federal, state, and local laws,
-------------------------
rules, regulations, ordinances, programs, permits, guidances, orders, and
consent decrees relating to the environment or to public health, safety, and
environmental matters, including the Resource Conservation and Recovery Act, the
Comprehensive Environmental Response Compensation and Liability Act of 1980, the
Toxic Substances Control Act, the Clean Water Act, the Clean Air Act, the River
and Harbor Act, the Water Pollution Control Act, the Marine Protection Research
and Sanctuaries Act, the Deep-Water Port Act, the Safe Drinking Water Act, the
Superfund Amendments and Reauthorization Act of 1986, the Federal Insecticide,
Fungicide and Rodenticide Act, the Mineral Lands and Leasing Act, the Surface
Mining Control and Reclamation Act, the Oil Pollution Act of 1990, state and
federal super lien and environmental cleanup programs and laws, U.S. Department
of Transportation regulations and laws regulating hazardous, radioactive and
toxic materials and underground petroleum products storage tanks, and all
similar state, federal, and local laws and regulations.
1.24 Equipment -- all machinery, equipment, fixtures, and other
---------
property used in or purchased for Borrower's business, together with all
increases, parts, fittings, accessories, repair, equipment, and special tools
now or later affixed to or used in connection with the foregoing property, all
transferable rights of Borrower to the licenses and warrantees (express or
implied) received from the sellers and manufacturers of the foregoing property,
all related claims, credits, setoffs, and other rights of recovery.
1.25 ERISA -- the Employee Retirement Income Security Act of 1974 and
-----
all rules and regulations promulgated thereunder.
1.26 Eurocurrency Reserve Percentage. The term "Eurocurrency Reserve
-------------------------------
Percentage" shall mean, with respect to each Interest Period, a percentage
(expressed as a decimal) equal to the percentage in effect three (3) Business
Days prior to the first day of such Interest Period, as prescribed by the Board
of Governors of the Federal Reserve System (or any successor) for determining
reserve requirements applicable to any "Eurocurrency Liabilities" pursuant to
6
<PAGE>
Regulation D or any other applicable regulation of the Board of Governors which
prescribes reserve requirements applicable to "Eurocurrency Liabilities" as
presently defined in Regulation D for purposes of this definition.
1.27 Event of Default -- any one of the events enumerated in Article
----------------
10 ("Events of Default").
1.28 Financial Statements -- notwithstanding anything contained herein
--------------------
to the contrary, all references contained in this Agreement to the defined terms
"Debt Services Coverage," "Fixed Charge Coverage," "EBITDA," "Funded Debt" and
"Tangible Net Worth" or to the financial statements of Borrower or to financial
covenants set forth in Section 6.23 which must be satisfied by Borrower, shall
be deemed to refer to the consolidated financial statements and consolidated
financial position of Display Technologies, Inc., a Nevada corporation, and all
of its Subsidiaries, whether or not Borrowers.
1.29 Fixed Charge Coverage -- a ratio in which the numerator is the
---------------------
sum of the net income of Borrower (after provision for federal and state taxes)
for the 12-month period preceding the applicable date, plus the interest, lease,
and rental expenses of Borrower for said period, plus the sum of non-cash
expenses or allowances for such period (including amortization or write-down of
intangible assets, the net addition or net decrease in the loan loss reserves
for customer Accounts, depreciation, depletion, and deferred taxes and expenses)
and the denominator is the sum of Cash Capital Expenditures, plus the current
portion of the long term debt of Borrower as of the applicable date, plus the
current portion of Capitalized Lease Obligations of Borrower as of the
applicable date, plus any payments made by Borrower of dividends on any shares
of its capital stock and cash expenditures of Borrower made for the redemption
of any class of its capital stock during the 12-month period preceding the
applicable date, plus the interest, lease, and rental expenses for the 12-month
period preceding the applicable date.
1.30 Funded Debt -- any liability or obligation for borrowed money
-----------
that under GAAP is required to be shown on the balance sheet as a liability. It
is agreed that Funded Debt specifically includes, without duplication, the
following: (i) indebtedness that is secured by any security interest on
property owned or in effect owned by the Borrower or any Subsidiary (such as
capitalized leases, asset securitization vehicles, conditional sales contracts
and similar title retention arrangements), irrespective of whether or not the
indebtedness secured thereby shall have been assumed by the Borrower or
Subsidiary; (ii) obligations under any contract providing for the making of the
loans, advances, or capital contributions to any person in order to enable such
person primarily to maintain working capital, net worth, or any other balance
sheet condition or to pay debts, dividends or expenses; and (iii) obligations
under any contract which, in economic effect, is substantially equivalent to a
guaranty, as determined in accordance with GAAP. Attached as Exhibit "I" to
-----------
this Agreement is a current schedule of Borrower's Funded Debt.
1.31 GAAP -- generally accepted accounting principles in the United
----
States of America as defined by the Financial Accounting Standards Board or its
successor, as in effect from time to time consistently applied.
7
<PAGE>
1.32 General Intangibles -- all general intangibles of Borrower of any
-------------------
kind, whether now owned or hereafter acquired, including all intangible personal
property other than Accounts, Documents, Instruments, and Chattel Paper, and
includes money, contract rights, choses in action, causes of action, corporate
or other business records, deposit accounts, inventions, designs, formulas,
patents, patent applications and/or continuation applications now pending before
the United States Patent Office, trademarks and associated goodwill, trademarks
for which "statements-of-use" have been filed with the Trademark Office, but
specifically excluding "intent-to-use" trademark applications, trade names,
trade secrets, engineering drawings, goodwill, rights to prepaid expenses,
copyrights, registrations, licenses, franchises, customer lists, tax refund
claims, computer programs and other software, royalty, licensing, and product
rights, all claims under guaranties, security interests or other security held
by or granted to Borrower to secure payment of any of the Accounts by an Account
Debtor, all rights to indemnification, and rights to retrieval from third
parties of electronically processed and recorded data pertaining to any
Collateral, things in action, items, checks, drafts, and orders in transit to or
from Borrower, credits or deposits of Borrower (whether general or special) that
are held by Bank, and all other intangible property of every kind and nature.
1.33 Governmental Authority -- means any nation or government, any
----------------------
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions
pertaining to government.
1.34 Instrument -- means every instrument of any kind, as that term is
----------
used in the UCC, and includes every promissory note, negotiable instrument,
certificated security, or other writing that evidences a right to payment of
money, that is not a lease or security agreement, and that is transferred in the
ordinary course of business by delivery with any necessary assignment or
indorsement.
1.35 Interest Period -- for the Revolving Loan during the period in
---------------
which it is a LIBOR Loan, the period beginning on the first day that the
Revolving Loan is a LIBOR Loan and ending 90 days thereafter, and each
successive period of 90 days as Borrower requests, commencing on the expiration
date of the immediately preceding Interest Period. Determination of Interest
Periods will be subject to the following provisions: (i) each Interest Period
occurring after the initial Interest Period will commence on the day on which
the preceding Interest Period expires, (ii) if any Interest Period would
otherwise commence or expire on a day that is not a business day, the Interest
Period will commence or expire, as the case may be, in the next succeeding
business day, and (iii) no Interest Period will extend beyond the maturity date
of the Revolving Loan. The interest rate for the day on which an Interest
Period expires and the succeeding Interest Period commences will be the rate for
the preceding Interest Period.
1.36 Intellectual Property -- has the meaning set forth in Section
---------------------
5.18.
1.37 Inventory -- all inventory of whatever kind or nature of
---------
Borrower, now owned or hereafter acquired by Borrower, and wherever located,
including all goods held for sale or lease or furnished or to be furnished under
a contract for services, and supplies, packaging, raw materials, goods in
transit, work in process, materials used or consumed or to be used or consumed
8
<PAGE>
in Borrower's business or in the processing, packaging, or shipping of same, all
finished goods, and all property, the sale or lease of which has given rise to
Accounts, Chattel Paper, or Instruments, and that has been returned to Borrower
or repossessed by Borrower or stopped in transit, and all warranties and related
claims, credits, setoffs, and other rights of recovery with respect to any of
the foregoing.
1.38 LIBOR Loan -- the Revolving Loan, during the periods that the
----------
Loan bears an interest rate calculated based on the LIBOR Rate.
1.39 LIBOR Rate -- with respect to each day during each Interest
----------
Period, a rate per annum determined for such day in accordance with the
following formula (rounded upward, if necessary, to the nearest 1/100 of 1%):
LIBOR Unadjusted Rate
---------------------
1.00 - Euro Currency Reserve Requirements
1.40 LIBOR Unadjusted Rate -- for any Interest Period, at Bank's
---------------------
option, either (a) the rate per annum quoted in the Wall Street Journal as the
-------------------
"London Interbank Offered Rates" ("LIBOR") or (b) the rate per annum, as
determined by Bank (rounded up, if necessary, to the nearest 1/16 of 1%), at
which deposits in U.S. Dollars are available to Bank in the London Interbank
Eurodollar market at or about 11:00 A.M., local time, in London, England, two
Business Days prior to the first day of the applicable Interest Period, for a
period equal to such Interest Period and in an amount equal or comparable to the
amount of the Revolving Loan for the Interest Period.
1.41 Lien -- any interest in property (real, personal, or mixed, and
----
tangible or intangible) securing an obligation owed to, or a claim by, a Person
other than the owner of the property, whether such interest is based on the
common law, statute or contract, and including a security interest, security
title or Lien arising from a security agreement, mortgage, deed of trust, deed
to secure debt, encumbrance, pledge, conditional sale or trust receipt or a
lease, consignment or bailment for security purposes. The term "Lien" shall
include covenants, conditions, restrictions, leases, and other encumbrances
affecting any property, except real property covenants running with the land.
For the purpose of this Agreement, Borrower shall be deemed to be the owner of
any property which it has acquired or holds subject to a conditional sale
agreement or other arrangement pursuant to which title to the Property has been
retained by or vested in some other Person for security purposes.
1.42 Loan or Loans -- the revolving line of credit in the principal
-------------
amount of up to $10,000,000 advanced by Bank to Borrower from time to time
evidenced by the Note described in Section 2.1 ("Revolving Loan") (and any
substitutions therefor, extensions thereof or renewals thereof), the term loan
facility in the principal amount of $1,000,000 evidenced by the Note described
in Section 2.2 ("Term Loan") (and any substitutions therefor, extensions thereof
or renewals thereof) and the two standby letters of credit in the respective
amounts of $2,457,000 and $2,500,000 evidenced by the standby letters of credit
described in Section 2.3 ("Standby Letters of Credit").
9
<PAGE>
1.43 Loan Account -- The loan account established on the books of Bank
------------
pursuant to Section 2.2 ("Loan Account").
1.44 Loan Documents -- this Agreement, and each and every mortgage,
--------------
deed of trust, note, indenture, security agreement, financing statement or other
instrument executed and delivered to evidence the Loans or any other Obligation,
to constitute collateral for the Loans or any other Obligation, or to evidence
security for the Loans or any other Obligation, and any and all other
agreements, instruments, and documents heretofore, now or hereafter, executed by
Borrower and delivered to Bank in respect to the transactions contemplated by
this Agreement. Includes the Financing Documents, as that term is defined in
the Indentures.
1.45 Loan Value of Accounts -- at any time, an amount which is not
----------------------
more than 80% of the aggregate Eligible Accounts of Borrower. The Loan Value of
Accounts will be reduced by the aggregate amount of deposits from customers held
by Borrower.
1.46 Loan Value of Inventory -- an amount which is not more than 50%
-----------------------
of Borrower's Inventory valued at the lesser of cost or current market value,
less a reserve of $500,000. The Inventory must, at any given time, be (a) not
damaged or defective in any way; (b) not sold or segregated for sale and
reflected as an Account of Borrower; (c) not consigned Inventory; (d) not
located in a place other than at the locations listed in Exhibit "E" or in
-----------
another location of which Bank is notified, has UCC-1 Financing Statements on
record and, if applicable, has received a vendor lien waiver in form and
substance satisfactory to Bank; (e) not Inventory evidenced by negotiable
warehouse receipts or by non-negotiable warehouse receipts or documents of title
which have not been issued in the name of Bank; (f) not packaging Inventory; (g)
not Inventory acquired in an acquisition of another company or business, unless
Bank has approved in writing the Inventory as eligible Inventory; and (h) not
Inventory deemed ineligible by Bank in its sole discretion; provided, however,
the Loan Value of Inventory shall not at any time exceed the lesser of
$3,000,000 or one-half (1/2) of the aggregate availability under the Revolving
Loan, unless otherwise agreed in writing by Bank at any time in its sole
discretion. Borrower may supplement its Exhibit "E" from time to time with more
-----------
locations of which it has notified Bank and where Bank has filed a UCC-1
Financing Statement.
1.47 Material Adverse Effect -- with respect to a Person, a material
-----------------------
adverse effect on its business, assets, properties, prospects, results of
operation, or condition (financial or other).
1.48 Mortgages -- the Mortgages executed by Borrower granting to Bank
---------
a first lien on the parcels of Real Estate to secure repayment of the Loans.
Includes that certain Real Estate Mortgage and Security Agreement among La-Man
Corporation and Don Bell Industries, Inc. and SouthTrust Bank, National
Association, recorded on September 2, 1997, in Official Records Book 4230, Page
4153, on September 2, 1997, in Volusia County, Florida.
1.49 Multiemployer Plan -- has the meaning set forth in Section
------------------
4001(a)(3) of ERISA.
10
<PAGE>
1.50 Note(s) -- each promissory note executed and delivered by
-------
Borrower to Bank evidencing all or part of the Loans, as further described
hereinafter.
1.51 Obligations -- all Loans and all other advances, debts,
-----------
liabilities, obligations, covenants, and duties owing, arising, due or payable
from Borrower to Bank of any kind or nature, present or future whether or not
evidenced by any note, guaranty or other instrument, whether arising under this
Agreement or any of the other Loan Documents or otherwise, whether direct or
indirect (including those acquired by assignment), absolute or contingent,
primary or secondary, due or to become due, now existing or hereafter arising
and however evidenced or acquired. The term includes, without limitation, all
interest, charges, expenses, fees, attorneys' fees and any other sums chargeable
to Borrower under any of the Loan Documents and all rights Bank may at any time
or times have to reimbursement in connection with any letter of credit or
guaranty issued for Borrower's benefit.
1.52 Permitted Liens -- any Lien of a kind specified as permitted in
---------------
Section 7.2 ("Liens and Security Interests").
1.53 Parent --- Display Technologies, Inc., a Nevada corporation.
------
1.54 Person -- an individual, partnership, corporation, joint stock
------
company, firm, land trust, business trust, unincorporated organization, limited
liability company, or other business entity, or a government or agency or
political subdivision thereof.
1.55 Plan -- an employee benefit plan now or hereafter maintained for
----
employees of Borrower that is covered by Title IV of ERISA.
1.56 Prohibited Transaction -- any transaction set forth in Section
----------------------
406 of ERISA or Section 4975 of the Internal Revenue Code of 1986.
1.57 Real Estate -- the parcels of improved real property located in
-----------
Port Orange, Florida, and Stockton, California, and on which Borrower shall
grant Mortgages to secure repayment of the Loans.
1.58 Reportable Event -- any of the events set forth in Section
----------------
4043(b) of ERISA.
1.59 Requirement of Law -- as to any Person, the articles of
------------------
incorporation and bylaws or other organizational or governing documents of the
Person, and any law, treaty, rule or regulation, or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding on the Person or any of its property or to which the Person or any
of its property is subject.
1.60 Revolving Loan - has the meaning set forth in Section 2.1.
--------------
1.61 Revolving Note - has the meaning set forth in Section 2.1.
--------------
11
<PAGE>
1.62 Solvent -- as to any Person, means such Person (i) owns property,
-------
real, personal, and mixed, whose aggregate fair saleable value is greater than
the amount required to pay all of such Person's Debt and Contingent Obligations,
and (ii) is able to pay all of its Debt as such Debt matures, and (iii) has
capital sufficient to carry on its business and transactions and all business
and transactions in which it is about to engage.
1.63 Special Collection Account -- one or more bank accounts
--------------------------
established by Borrower pursuant to Section 4.2 ("Special Collection Accounts"),
from which Bank has the exclusive right to withdraw or debit funds, and into
which Borrower shall deposit on receipt all checks, drafts, cash, and other
remittances in payment or on account of the Accounts.
1.64 Standby Letters of Credit -- has the meaning set forth in Section
-------------------------
2.3.
1.65 Subordinated Debt -- the Debt of Borrower which is fully
-----------------
subordinated to the Loans (including principal, interest, and agreed charges) in
a manner satisfactory to Bank (which may be either according to its terms or by
separate agreement) and which debt arises from Borrower's actual receipt of cash
loans and not from "in kind" or non-cash consideration or purchase money
financing sources, including Debt of Borrower owed to the Subordinate Lenders.
1.66 Subordinate Lenders --- collectively, Renaissance Capital
-------------------
Growth and Income Fund III, Inc., Renaissance U.S. Growth and Income Trust PLC,
and Worrell Enterprises, Inc.
1.67 Subsidiary -- any corporate entity or partnership, or other
----------
business entity which constitutes a subsidiary for purposes of GAAP. Includes
all Borrowers except Parent.
1.68 Tangible Net Worth -- the aggregate of the (a) par or stated
------------------
value of all outstanding capital stock; (b) capital surplus; (c) retained
earnings; and (d) Subordinated Debt, less (t) amounts due from Affiliates; (u)
any surplus resulting from any write-up of assets subsequent to the date of this
Agreement; (v) deferred assets (including deferred development costs) other than
prepaid insurance and prepaid taxes; (w) goodwill or other amounts representing
the excess of the purchase price of assets or stock over the value assigned to
them on the books of such Person; (x) the book value of any patents, trademarks,
trade names, copyrights, noncompete agreements, franchises, experimental
expenses, and other intangible assets; (y) the amount paid for any treasury
stock that is not already reflected as a reduction of the capital surplus or
retained earnings accounts; and (z) any other amounts classified as intangible
assets under GAAP.
1.69 Term Loan -- has the meaning set forth in Section 2.2.
---------
1.70 Term Note -- has the meaning set forth in Section 2.2.
---------
1.71 Certain Other Words -- all accounting terms used herein have the
-------------------
respective meanings attributed to them under, and shall be construed in
accordance with, GAAP. The terms "herein," "hereof," and "hereunder," and other
words of similar import refer to this Agreement as a
12
<PAGE>
whole and not to any particular section, paragraph or subdivision. Any pronouns
used shall be deemed to cover all genders. As used in this Agreement, (a) the
word "including" is always without limitation; (b) words in the singular number
include words of the plural number and vice versa; (c) the word "costs" includes
all internal out-of-pocket expenses, fees, costs, and expenses of experts and
collection agents, supersedeas bonds, and all attorneys' fees, costs, and
expenses, whether incurred before, during, or after demand or litigation, and
whether pursuant to trial, appellate, arbitration, bankruptcy, or judgment-
execution proceedings; and (d) the word "property" includes both tangible and
intangible property, unless the context otherwise requires. All references to
statutes and related regulations shall include any amendments of same and any
successor statutes and regulations. All references to any instruments or
agreements, including references to any of the Loan Documents, shall include any
and all modifications or amendments thereto and any and all extensions or
renewals thereof. All other terms contained in this Agreement shall, unless
otherwise defined herein or unless the context otherwise indicates, have the
meanings provided for by the Uniform Commercial Code of the State of Florida.
1.72 Directly and Indirectly -- when any provision of this Agreement
-----------------------
or any Loan Document requires or prohibits action to be taken by a Person, the
provision applies regardless of whether the action is taken directly or
indirectly by the Person.
2. The Loans.
---------
2.1 Revolving Loan.
--------------
(a) Subject to the terms and conditions of this Agreement,
provided no Event of Default exists, Bank shall loan to Borrower, when requested
by Borrower, Revolving Loans aggregating up to the lesser of (i) $10,000,000 or
(ii) the Aggregate Loan Values as determined by Bank from the periodic reports
submitted by Borrower to Bank. Notwithstanding any other provision of this
Agreement, the Loan Value of Inventory shall not at any time exceed the lesser
of $3,000,000 or one-half (1/2) of the aggregate availability under the Loan.
Within these limits, Borrower may borrow, make payments, and reborrow under this
Agreement.
(b) Borrower may, at its option, increase by $500,000 the
limitation on Aggregate Loan Values, provided any resulting overadvance is
repaid to Bank during one 90 consecutive day period in each calendar year.
(c) The Revolving Loan will be subject to the $40,000 reserve
described in Article 11. Bank will also reserve from the amount available to
be drawn under the Revolving Loan the sum of $175,000 to secure satisfaction of
Borrower's obligations for the improvements being constructed on the parcel of
Florida Real Estate located at 710 Glades Court, Port Orange, Florida
(the"Premises"). The reserve shall be released subject to the following
conditions which are to take place on or prior to December 31, 1999: (i)
Borrower will complete the improvements; (ii) Borrower will deliver all lien
waivers and lien satisfactions to Bank; (iii) Borrower will record a Notice of
Termination terminating the Notice of Commencement recorded in Official Records
Book 4399, Page 3700 in Volusia County, Florida; and (iv) Borrower will deliver
to Bank a current
13
<PAGE>
endorsement to the Bank's title insurance policy indicating the removal of the
Notice of Commencement and reflecting no matters adversely affecting title to
the Premises have been filed of record.
(d) Borrower shall execute and deliver to Bank one promissory
note (the "Revolving Note") in the face amount of the Revolving Loan, payable to
the order of Bank and evidencing Borrower's obligation to repay the Revolving
Loan. The principal amount of the Revolving Loan may be a Base Rate Loan or a
LIBOR Loan as requested by Borrower pursuant to the terms below. The outstanding
principal balance of the Revolving Loan shall bear interest until paid in full
at a rate per annum equal to (i) while the Revolving Loan is a LIBOR Loan, the
LIBOR Rate plus the Applicable Margin, and (ii) while the Revolving Loan is a
Base Rate Loan, the Base Rate plus the Applicable Margin. Interest shall be paid
to Bank on the amount of the Revolving Loan outstanding and shall be payable
monthly in arrears on the first day of each month beginning with June 1, 1999,
and continuing on the same day of each month thereafter until the unpaid
principal balance of the Revolving Loan has been repaid in full. The Base Rate
on the date of this Agreement is 7.75 percent. The LIBOR Rate on the date of
this Agreement is 5.0975 percent. Interest shall be calculated based on a 360
day year.
(e) Borrower shall submit a Borrower's Report in the form
attached hereto as Exhibit "A" (or in such other form as may be furnished by
-----------
Bank from time to time) on the date of this Agreement and at least weekly
thereafter during the term of this Agreement. Each such Borrower's Report shall
be signed by an officer or employee of Borrower authorized by the Board of
Directors of that corporation to execute such reports, whose name(s) shall be
included in a certified resolution furnished to Bank. Bank shall make
disbursements under the Revolving Loan on an automatic basis by funding checks
drawn on a controlled disbursement account to be established by Borrower with
Bank. Bank shall make any disbursements under the Revolving Loan only if the
terms and provisions of this Agreement have been satisfied, including the
absence of an Event of Default.
(f) If the outstanding principal amount of the Revolving Loan at
any time exceeds the lesser of $10,000,000 or the Aggregate Loan Values as
reflected on Borrower's Report (increased by $500,000 from time to time as
provided in subsection (b)), Borrower shall immediately pay Bank such excess as
a reduction of the principal amount of the Revolving Loan. Borrower may request
and Bank may be willing in its sole and absolute discretion to make advances in
excess of such maximum principal amounts. Bank shall enter any such advances as
debits in the Loan Account. All advances in excess of the maximum principal
amount shall be payable on demand, secured by the Collateral, and bear interest
as provided in this Agreement for Revolving Loans generally.
(g) Borrower shall pay to Bank on June 30, 2002, all outstanding
principal and accrued interest with respect to the Revolving Loan not previously
repaid.
(h) From the date of this Agreement to and including the
maturity date of the Revolving Loan, the outstanding principal balance of the
Revolving Loan shall, at Borrower's
14
<PAGE>
election, bear interest until paid in full at a rate per annum equal to either
(i) the LIBOR Rate plus the Applicable Margin or (ii) the Base Rate plus the
Applicable Margin. During any period in which Borrower has not made an effective
election, the Revolving Loan will be a Base Rate Loan.
(i) Borrower shall notify Bank at least two business days before
the end of each Interest Period whether Borrower desires for the Revolving Loan
to bear interest at the LIBOR Rate or the Base Rate. Any such notice will be
irrevocable and binding on Borrowers on its receipt by Bank and will apply to
the entire balance of the Revolving Loan then outstanding. The Revolving Loan
will bear interest at the applicable LIBOR Rate on a fixed basis during the
entire Interest Period. The applicable interest rate on a Base Rate Loan will
change as and when the Base Rate changes from time to time.
(j) With respect to LIBOR Loans, (i) Borrower shall not request
and Bank will not be required to consider requests that the Revolving Loan bear
interest at the LIBOR Rate if an Event of Default has occurred and is
continuing; (ii) no Interest Period for the LIBOR Loan may extend beyond the
maturity date of the Revolving Loan; and (iii) as soon as possible after
Borrower's election of a LIBOR Rate, Bank shall determine the LIBOR Rate
applicable to the Revolving Loan for the Interest Period and promptly notify
Borrower.
(k) Borrower may continue the Revolving Loan as another LIBOR
Loan on the expiration of the Interest Period by notifying Bank of its intention
to do so in accordance with this section, at least two Business Days before
expiration of the Interest Period, provided no Event of Default has occurred and
is continuing. If an Event of Default has occurred and is continuing, the LIBOR
Loan will be automatically converted to a Base Rate Loan as of the first day
following the expiration of the Interest Period pursuant to part (l) below.
(l) If Borrower does not timely notify Bank of its intention to
continue the Revolving Loan as another LIBOR Loan in accordance with part (k)
above, the LIBOR Loan will be automatically converted to a Base Rate Loan as of
the first day following the expiration of the Interest Period applicable to the
LIBOR Loan and remain as such for the balance of the calendar month. If the last
day of an Interest Period with respect to a LIBOR Loan that is to be converted
to a Base Rate Loan is not a business day, the conversion will be made on the
next succeeding business day, and during the period from such last day of an
Interest Period to such succeeding business day, the Loan will bear interest as
if it were a Base Rate Loan.
(m) Subject to the terms of this Agreement, Borrower may as of
the first day of any calendar month, convert the Revolving Loan from a Base Rate
Loan to a LIBOR Loan by notifying Bank of its intention to do so in accordance
with this section. Borrower's right to convert the Revolving Loan from a Base
Rate Loan to a LIBOR Loan will be subject to the following terms: (i) a Base
Rate Loan may not be converted to a LIBOR Loan if an Event of Default has
occurred and is continuing and (ii) each conversion must occur as of the first
day of the calendar month.
2.2 Term Loan.
---------
15
<PAGE>
(a) Subject to the terms and conditions of this Agreement, Bank
agrees to loan to Borrower a term loan in the amount equal to $1,000,000 (the
"Term Loan").
(b) Borrower shall execute and deliver to Bank one promissory
note (the "Term Note") in the face amount of the Term Loan, payable to the order
of Bank and evidencing Borrower's obligation to repay the Term Loan.
(c) Borrower shall make thirty-six (36) equal monthly principal
installments of $27,777.78 during the period of the Term Loan on the first day
of each month from July 1, 1999 through June 1, 2002. Borrower shall also pay
accrued interest at the per annum rate of one and three-quarters percent (1.75%)
in excess of the Base Rate on the first day of each month and continuing on the
same day of each month thereafter until the full balance of the Term Loan is
paid. The applicable interest rate on the Term Loan shall change as and when
the Base Rate changes from time to time. Borrower shall pay to Bank all
outstanding principal and interest on the Term Loan and a final payment on or
before June 30, 2002, or on any earlier date on which the Revolving Loan becomes
due and payable.
2.3 Terms Governing All Loans.
-------------------------
(a) Borrower shall make all payments of interest and principal
under the Notes without setoff or counterclaim, and in such coin or currency of
the United States of America that at the time of payment is legal tender for the
payment of public and private debt.
(b) Each borrowing under a Loan shall be effected by crediting
the amount thereof to the regular checking account of Borrower maintained with
Bank or with another bank approved by Bank.
(c) Any payments not made as and when due with respect to any
Loan (whether at stated maturity, by acceleration, or otherwise) shall bear
interest at the Default Rate from the date due until paid, payable on demand.
2.4 Loan Account. Amounts due under the Notes and otherwise under
------------
this Agreement and under the Loan Documents shall be reflected in the Loan
Account. Bank shall enter disbursements hereunder or under the Notes as debits
to the Loan Account and shall also record in the Loan Account all payments made
by Borrower and all proceeds of Collateral which are finally paid to Bank, and
may record therein, in accordance with customary accounting practice, all
charges and expenses properly chargeable to Borrower hereunder.
2.5 Prepayment. Subject to the provisions hereof (including the
----------
provisions regarding a termination fee set forth in Section 2.7 ("Term"),
Borrower shall have the right at any time and from time to time to prepay the
Loans, in whole or in part, without premium or penalty but with accrued interest
to the date of such prepayment on the amounts prepaid. Such prepayments shall
be made to Bank in immediately available funds and, shall be applied to the last
of the
16
<PAGE>
installment(s) to mature. Any such prepayment shall not affect or vary the
obligation of Borrower to pay any installment when due.
2.6 Use of Proceeds. Borrower shall use the proceeds of the Loans to
---------------
support its working capital needs and to refinance the following existing debt
(a) revolving line of credit from Bank in the approximate amount of $1,500,000,
(b) revolving line of credit from Coast Business Credit in the approximate
amount of $4,300,000, (c) real estate mortgage financing from Wells Fargo in the
approximate amount of $890,000, and (d) real estate mortgage financing from
Marion H. Papais in the approximate amount of $250,000. Borrower shall use the
Letters of Credit as credit support for the Demand Notes, as described in
Article 2A of this Agreement.
2.7 Term. This Agreement shall remain in force and effect until the
----
Loans, and any renewals or extensions, and all interest thereon and costs
provided for herein with regard to either of them have been indefeasibly paid or
satisfied in full and until Bank has no further obligation to advance funds to
Borrower hereunder. Borrower may terminate the Loan facilities at any time
before the scheduled maturity date by paying the Loans and all other
Obligations, provided Borrower pays a termination fee in the amount of two
percent (2%) of the total committed amounts if the prepayment occurs before the
first anniversary of this Agreement, one percent (1%) of the total commitment
amounts if the prepayment occurs between the first and second anniversary of
this Agreement, and one-half percent (1/2%) of the total committed amounts if
the prepayment occurs between the second and third anniversary of this
Agreement. These penalties will not apply with respect to any prepayment
effected from the proceeds of an equity offering or Borrower's internal cash
flow. The indemnities provided for in Article 11 ("Indemnification") shall
survive the payment in full of the Loans and the other Obligations and the
termination of this Agreement.
2.8 Payments. All sums paid to Bank by Borrower hereunder shall be
--------
paid directly to Bank in immediately available funds. Bank shall send Borrower
statements of all amounts due hereunder, which statements shall be considered
correct and conclusively binding on Borrower unless Borrower notifies Bank to
the contrary within ten (10) days of its receipt of any statement which it deems
to be incorrect. Bank may, in its sole discretion (a) charge against any
deposit account of Borrower all or any part of any amount due hereunder and (b)
advance to Borrower, and charge to the Revolving Loan, a sum sufficient each
month to pay all interest accrued on the Revolving Loan and fees due under this
Agreement during or for the immediately preceding month. Borrower shall be
deemed to have requested an advance under the Revolving Loan upon the occurrence
of an overdraft in any of Borrower's checking accounts maintained with Bank or
another bank owned by SouthTrust Corporation.
2.9 Fees. Borrower shall pay to Bank a one-time closing fee in the
----
amount of $50,000, earned and payable on the Closing Date. An
administrative/servicing fee of $500 will be assessed monthly throughout the
term of the Loans. Borrower shall also pay to Bank monthly in arrears a
commitment fee of one-eight percent (1/8%) per annum on the average daily unused
portion of the Revolving Loan. Borrower shall also pay a one percent (1%) per
annum fee, payable monthly, in arrears on the amounts drawn under the Revolving
Loan in excess of the Aggregate Loan Values,
17
<PAGE>
pursuant to Section 2.1(b). Borrower shall also pay the fees due with respect to
the Letters of Credit, as provided in Section 2A.4.
2.10 Limitation on Interest Charges. Bank and Borrower intend to
------------------------------
comply strictly with applicable law regulating the maximum allowable rate or
amount of interest that Bank may charge and collect on the Loans to Borrower
pursuant to this Agreement. Accordingly, and notwithstanding anything in any
Note or in this Agreement to the contrary, the maximum, aggregate amount of
interest and other charges constituting interest under applicable law that are
payable, chargeable, or receivable under any Note and this Agreement shall not
exceed the maximum amount of interest now allowed by applicable law or any
greater amount of interest allowed because of a future amendment to existing
law. Borrower is not liable for any interest in excess of the maximum lawful
amount, and any excess interest charged or collected by Bank will constitute an
inadvertent mistake and, if charged but not paid, will be canceled
automatically, or, if paid, will be either refunded to Borrower or credited
against the outstanding principal balance of the applicable Note, at the
election of Borrower.
2A. Letters of Credit
-----------------
2A.1 Definitions.
-----------
As used in this Article 2A, the following terms have the following
meanings:
A Drawing --- means a drawing under a Letter of Credit to pay the
---------
principal of the Demand Notes due to maturity, redemption, or acceleration.
Actual/360 Basis --- a method of computing interest or other charges
----------------
hereunder on the basis of an assumed year of 360 days for the actual number of
days elapsed, meaning that interest or other charges accrued for each day will
be computed by multiplying the rate applicable on that day by the unpaid
principal balance (or other relevant sum) on that day and dividing the result by
360.
B Drawing --- a drawing under a Letter of Credit to pay interest on
---------
the Demand Notes.
C Drawing --- a drawing under a Letter of Credit to pay the purchase
---------
price of Tendered Notes.
Demand Notes --- collectively, the 1997 Notes and the 1999 Notes.
------------
Indentures --- collectively, the 1997 Indenture and the 1999
----------
Indenture.
1997 Indenture --- the Trust Indenture dated as of August 1, 1997,
--------------
between La-Man Corporation (now Borrower) and Bank, for the 1997 Notes.
18
<PAGE>
1999 Indenture --- the Trust Indenture between Bank and Borrower for
--------------
the 1999 Notes.
1997 Letter of Credit --- the letter of credit dated August 28, 1997,
---------------------
issued by Bank in favor of the Trustee under the 1997 Indenture, as security for
the 1997 Notes.
1999 Letter of Credit --- the letter of credit to be issued by Bank in
---------------------
favor of the Trustee under the 1999 Indenture, as security for the 1999 Notes.
1997 Notes --- the Variable/Fixed Rate Credit Enhanced Notes in the
----------
initial principal amount of $2,500,000 issued by Borrower pursuant to the 1997
Indenture.
1999 Notes --- the Variable/Fixed Rate Notes in the initial principal
----------
amount of $2,500,000.
Pledged Notes --- Demand Notes purchased pursuant to the Optional or
-------------
Mandatory Tender provisions of the Indenture with money drawn under the Letter
of Credit.
Tendered Notes --- Demand Notes tendered (or Demand tendered) for
--------------
purchase pursuant to the Optional or Mandatory Tender provisions of the
Indenture.
Termination Date --- the Stated Expiration Date, or such earlier date
----------------
on which the Letter of Credit terminates in accordance with its terms.
In addition, other capitalized terms in this Article 2A that are not
defined in this Agreement have the meanings set forth in the Indentures.
2A.2 Issuance of Letters of Credit.
-----------------------------
(a) Bank has issued the 1997 Letter of Credit to the Trustee as
credit support for the 1997 Notes, in accordance with the terms of the 1997
Indenture, and shall maintain the 1997 Letter of Credit in accordance with its
terms.
(b) Borrower requests and instructs Bank to issue the 1999 Letter of
Credit substantially in the form provided in Exhibit "H". Bank shall issue the
-----------
1999 Letter of Credit, subject to the terms and conditions of this Agreement,
and upon satisfaction of the conditions precedent set forth in Section 2A.12.
(c) The 1999 Letter of Credit shall be issued to the Trustee on the
date of delivery of the 1999 Notes, as provided in the 1999 Indenture.
(d) The initial term of each Letter of Credit will expire, subject
to earlier termination, as provided in the respective Letter of Credit.
19
<PAGE>
(e) Bank may determine in its sole discretion to extend the term of
a Letter of Credit, but no course of dealing or other circumstance shall require
Bank to extend the term of a Letter of Credit.
2A.3 Reimbursement of Amounts Drawn Under a Letter of Credit.
-------------------------------------------------------
(a) On each date that Bank honors any A Drawing or B Drawing under a
Letter of Credit, Borrower shall immediately reimburse Bank for the amount of
such draw.
(b) Borrower shall reimburse Bank for the amount of any C Drawing
within 90 days after the date such C Drawing is honored (or, if sooner, on the
Termination Date). In addition, Borrower shall pay to Bank interest on the
unreimbursed amount of each C Drawing at a variable per annum rate equal to the
Base Rate per annum plus the Applicable Margin from the date such C Drawing is
paid by Bank until the amount of such C Drawing is reimbursed in full to Bank.
Such interest shall be payable in arrears on the first day of each month
following such C Drawing and on the date that such C Drawing is reimbursed in
full to Bank.
(c) No interest shall be payable with respect to a C Drawing if Bank
is reimbursed in full after such C Drawing is honored by 2:00 p.m. (Birmingham,
Alabama time) on the same date that such C Drawing is paid by Bank.
(d) All amounts received by Bank in respect of principal, premium or
interest on Pledged Notes shall be credited first against interest payable on
the unreimbursed amount of the C Drawing with respect to such Pledged Notes and
the balance, if any, shall be credited against the amount of such C Drawing.
(e) Anything herein to the contrary notwithstanding, Borrower will
not reimburse Bank for any A Drawing, B Drawing, or C Drawing until the same has
been honored in full by Bank, and no such reimbursement need be prepaid.
2A.4 Letter of Credit Commissions and Fees.
-------------------------------------
(a) As consideration for the issuance of the Letters of Credit,
Borrower shall pay to Bank commissions at the rate of one percent (1%) per annum
on the daily average of the Credit Amount available under each Letter of Credit
for (1) the period beginning on the date of issuance of the Letter of Credit and
ending on the first anniversary of its issuance and (2) each succeeding period
thereafter. Such commissions shall be payable in advance on the date of
issuance of the Letter of Credit and thereafter on each anniversary of the
issuance date during said period (or, if sooner, the Letter of Credit
Termination Date).
(b) The commission payable on each due date specified in this
subsection shall be calculated on the assumption that the Credit Amount
available on such due date will be available for the entire period for which
such commission is payable. At the end of such period the commission shall be
recalculated based on the actual daily average of the Credit Amount for such
20
<PAGE>
period and the difference, if any, shall be added to or subtracted from, as the
case may be, the commission payable for the next ensuing period or, if no
commission is payable for the ensuing period, shall be paid to the party
entitled thereto within 10 days. If a Substitute Letter of Credit is obtained
by Borrower, no refund of commissions already paid shall be allowed for the
period after the cancellation of the Letter of Credit unless Bank has notified
Borrower (after such commission was paid) that increased costs will be payable
pursuant to Section 2A.5.
(c) On each date that a Letter of Credit is transferred in
accordance with its terms, Borrower shall pay to Bank such amount as shall at
the time of such transfer then be the charge which the Bank is customarily
making for transfers of similar letters of credit.
(d) Borrower shall pay to Bank its normal fee for each draw under a
Letter of Credit, on the date that reimbursement for the amount of such draw is
made pursuant to Section 2A.3.
2A.5 Increased Costs.
---------------
(a) Additional Payments. If any change in any law or regulation or
--------------------
in the interpretation thereof by any court or administrative or governmental
authority charged with the administration thereof, or in GAAP, shall either (i)
impose, modify or deem applicable any reserve, special deposit or similar
requirement against letters of credit issued by Bank or (ii) impose on Bank any
other condition relating, directly or indirectly, to this Agreement or a Letter
of Credit, and the result of any event referred to in the preceding clause (i)
or (ii) shall be to increase the cost to Bank of issuing or maintaining the
Letter of Credit, then, upon demand by Bank, Borrower shall pay promptly to
Bank, from time to time as specified by Bank, such additional amounts as shall
be sufficient to compensate Bank for such increased cost. A certificate of Bank
claiming compensation under this subsection and setting forth the additional
amount or amounts to be paid to it hereunder shall be conclusive absent manifest
error. In determining any such amount, Bank may use any reasonable averaging and
attribution methods.
(b) Capital Adequacy. If, after the date of this Agreement, Bank
-----------------
shall have determined that the adoption or implementation of any applicable law,
rule or regulation regarding capital adequacy, or any change therein, or any
change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by Bank with any request or directive
regarding capital adequacy (whether or not having the force of law) of any such
authority, central bank or comparable agency, has or would have the effect of
reducing the rate of return on Bank's capital, on this credit facility or
otherwise, as a consequence of its obligations hereunder and under a Letter of
Credit to a level below that which Bank could have achieved but for such
adoption, change or compliance (taking into consideration Bank's policies with
respect to capital adequacy) by an amount determined by Bank to be material,
then from time to time, promptly upon demand by Bank, Borrower shall pay Bank
such additional amount or amounts as will compensate Bank for such reduction. A
certificate of Bank claiming compensation under this subsection and setting
forth the additional amount or
21
<PAGE>
amounts to be paid to it hereunder shall be conclusive absent manifest error. In
determining any such amount, Bank may use any reasonable averaging and
attribution methods.
2A.6 Place and Time of Payments.
--------------------------
(a) All payments by Borrower to Bank hereunder shall be made in
lawful currency of the United States of America and in immediately available
funds to Bank at its address set forth herein or at such other address within
the continental United States as shall be specified by Bank by notice to
Borrower; provided, nothing herein shall be construed to require payment of any
amount in advance of its due date.
(b) All amounts payable by Borrower to Bank hereunder for which a
payment date is expressly set forth herein (including payments due pursuant to
Sections 2A.4 and 2A.5) shall be payable without notice or written demand by
Bank. All amounts payable by Borrower to Bank hereunder for which no payment
date is expressly set forth herein shall be payable on written demand by Bank to
Borrower.
(c) Bank may, at its option, send written notice to Borrower of
amounts payable pursuant to sections 2A.4 and 2A.5, but the failure to send such
notice will not affect or excuse Bank's obligation to pay the amounts required
by such sections on the due date specified in such sections.
(d) Payments which are due on a day which is not a business day
shall be payable on the next succeeding Business Day, and any interest payable
thereon shall be payable for such extended time at the specified rate.
2A.7 Late Charges and Interest on Overdue Amounts.
--------------------------------------------
With respect to all amounts payable to the Bank by Borrower pursuant to
this article which are not paid on the due date, in the case of amounts payable
on a specified date, or which are not paid within ten days of written notice to
the Borrower, in the case of amounts payable on demand, Borrower agrees to pay
to Bank on demand (i) a late charge of five percent (5%) of any such amount or
amounts which shall not have been paid within 10 days of the due date as
specified above and (ii) interest on such amounts or amounts at a variable per
annum rate equal to the Base Rate, plus the Applicable Margin, plus 2% for each
day from the specified date of payment, or the date of written demand for
payment, as the case may be, to the date such payment is made.
2A.8 Computation of Charges.
----------------------
The interest and charges provided for in this Agreement payable in arrears
based upon annual rates shall be computed on an Actual/360 Basis. All interest
rates based upon the Base Rate shall change when and as the Base Rate shall
change, effective on the opening of business on the date of any such change,
unless such change is announced after the close of regular banking hours, in
which case such change shall be effective on the following day.
22
<PAGE>
2A.9 Statements of Account.
---------------------
Upon receipt of the written request of Borrower, Bank shall account to
Borrower annually with a statement of charges and payments made pursuant to this
Agreement.
2A.10 Pledged Notes.
-------------
(a) As additional security for the performance of the Obligations,
Borrower pledges, assigns, hypothecates and transfers to Bank all its right,
title and interest in the Pledged Notes, and grants to Bank a security interest
in the Pledged Notes and all amounts payable thereon and the proceeds thereof.
(b) If Bank is reimbursed for the purchase price of less than all
Pledged Notes with respect to which a C Drawing has been made, the Pledged Notes
with respect to which Bank has been reimbursed shall, upon reinstatement of the
Letter of Credit in the manner therein described and if no Event of Default
exists, be released from the pledge and delivered to Borrower.
(c) All payments of principal of and interest on Pledged Notes shall
be made directly to Bank. If, while Bank or its designated agent or the Tender
Agent holds Pledged Notes, Borrower shall receive any interest or principal
payment in respect of such Pledged Notes, Borrower shall accept the same as
agent for Bank and hold the same in trust on behalf of Bank and to deliver the
same forthwith to Bank. All sums of money so paid in respect of principal,
premium or interest on such Pledged Notes which are received by Borrower and
paid to Bank, or which are received directly by Bank from the Trustee, shall be
credited against the reimbursement obligation of Borrower as provided in Section
2A.2(d).
(d) If an Event of Default exists, Bank may, without notice,
exercise all rights, privileges or options pertaining to any Pledged Notes as if
it were the absolute owner thereof, upon such terms and conditions as it may
determine, all without liability except to account to Borrower for property
actually received by it. In addition to the rights and remedies granted to it in
this Agreement, Bank or its designated agent shall have the authority to
exercise all rights and remedies of a secured party under the Florida Uniform
Commercial Code. Borrower shall be liable for the deficiency if the proceeds of
any sale or other disposition of the Pledged Notes and the Collateral are
insufficient to pay all amounts to which the Bank is entitled. The Bank has no
duty to exercise any of such rights, privileges or options, and shall not be
responsible for any failure to do so or any delay in so doing.
(e) Except as contemplated herein, without the prior written consent
of Bank, Borrower shall not sell, assign, transfer, exchange, or otherwise
dispose of, or grant any option with respect to, the Pledged Notes, nor will it
create, incur or permit to exist any pledge, lien, mortgage, hypothecation,
security interest, charge, option or any other encumbrance with respect to any
of the Pledged Notes, or any interest therein, or any proceeds thereof, except
for the lien and security interest provided for by this Agreement.
23
<PAGE>
(f) Borrower shall do or cause to be done all such other reasonable
acts and things as may be necessary to make any disposition or sale of any
portion or all of the Pledged Notes permitted by this Agreement valid and
binding and in compliance with any and all applicable laws, regulations, orders,
writs, injunctions, decrees or awards of any and all courts or governmental
authorities having jurisdiction over any such disposition or sales, all at
Borrower's expense.
2A.11 Participations.
--------------
Borrower understands that Bank may, in accordance with this section, from
time to time enter into a participation agreement or agreements with one or more
persons (the "Participants"), pursuant to which the Participants shall be given
------------
participations in a Letter of Credit and that the Participants may from time to
time similarly grant to one or more other persons (also included in the term
"Participants") subparticipations in a Letter of Credit. Borrower grants to
------------
each Participant (in addition to any other rights which such Participant may
have) a continuing security interest in any money, securities and other real or
personal property of Borrower which are in the possession of such Participant.
Borrower further agrees that any Participant may exercise any and all rights of
banker's lien or set-off with respect to Borrower as fully as if such
Participant had made a loan directly to Borrower in the amount of the
participation or subparticipation given to such Participant in the Letter of
Credit under the conditions herein permitting exercise of the same. For the
purposes of this Section only, Borrower shall be deemed to be directly obligated
to each Participant in the amount of its participating interest in the amount of
principal of, and interest on, the Letter of Credit; provided, however, that
nothing contained in this section shall affect Bank's right of set-off (under
this Section or applicable law) with respect to the entire amount of any of such
credit facilities, notwithstanding any such participation or subparticipation.
Bank may divulge to any Participant all information, reports, financial
statements, certificates and documents obtained by it from Borrower or any other
person under any provision of this Agreement or otherwise.
2A.12 Conditions Precedent to Issuance of 1999 Letter of Credit.
----------------------------------------------------------
The obligation of Bank to issue the 1999 Letter of Credit is subject to the
satisfaction by Borrower of each of the following conditions precedent, as well
as the conditions precedent set forth in Section 3.1, as of the business day on
which the 1999 Letter of Credit is to be issued:
(a) The representations and warranties made by Borrower in the
Loan Documents shall be true and correct.
(b) Borrower shall have performed or observed all agreements,
covenants, and conditions required by Bank to be performed or observed by
Borrower.
(c) Any proceedings taken in connection with the performance
and observance of the provisions of this Agreement shall be reasonably
satisfactory to Bank and Bank shall have received, in form and substance
satisfactory to Bank and its counsel:
24
<PAGE>
(1) Financing Documents. An executed counterpart of each of the
-------------------
Financing Documents.
(2) Issuance of Notes. Evidence that the 1999 Notes have been
-----------------
executed, authorized, sold, and are available for delivery
simultaneously with the 1999 Letter of Credit.
(3) Official Statement. A copy of the Official Statement
------------------
distributed in connection with the offering and sale of the 1999
Notes, executed or certified on behalf of Parent.
(4) Opinion of Note Counsel. An opinion of Note counsel in form
-----------------------
and of content satisfactory to Bank.
(5) Opinion of Counsel for Borrower. An opinion of counsel for
-------------------------------
the Borrower in form and of content satisfactory to Bank.
(6) Organization of Borrower and Approvals. A certified copy of
--------------------------------------
(i) the incorporation and organization papers of Borrower and (ii) all
corporate action taken by Borrower approving the Financing Documents
and the consummation of the transactions contemplated thereby
(including, without limitation, a certificate or proceedings setting
forth the resolutions of the board of directors and, if required by
law or charter, the resolution of the shareholders of Borrower for
such purpose).
(7) Certificate of Borrower. A certificate by Borrower to the
-----------------------
effect that, as of the date of delivery of the 1999 Letter of Credit:
(i) no Event of Default shall have occurred and be continuing; (ii) no
event shall have occurred and be continuing which, with notice or
lapse of time or both, would constitute an Event of Default under this
Agreement, and (iii) the representations and warranties made by
Borrower in this Agreement shall be true on and as of such date with
the same force and effect as if made on and as of such date.
(8) Additional Evidence. Such additional legal opinions,
-------------------
certificates, proceedings, instruments and other documents as Bank or
its counsel may reasonably request to evidence (i) compliance by
Borrower with legal requirements, (ii) the truth and accuracy, as of
the date of delivery of the Letter of Credit, of the representations
of Borrower contained in the Financing Documents, and (iii) the due
performance or satisfaction by Borrower, and Borrower, at or prior to
the date of delivery of the Letter of Credit, of all agreements then
required to be performed and all conditions then required to be
satisfied by Borrower pursuant to the Financing Documents.
25
<PAGE>
2A.13 Special Remedies with Respect to Letters of Credit.
--------------------------------------------------
(a) If any Event of Default shall have occurred and be continuing,
in addition to the remedies described in Article 10, Bank may exercise any one
or more of the following remedies:
(1) it may, pursuant to and in accordance with the applicable
section of an Indenture, give written notice of such Event of Default to
the Trustee and direct the Trustee to effect a Mandatory Tender of the
Demand Notes in accordance with the terms thereof and the Indenture and to
make a draw under the Letter of Credit to pay the purchase price of the
applicable Demand Notes due on the Mandatory Tender Date therefor; or
(2) it may give written notice of such Event of Default to the
Trustee and direct the Trustee to declare the applicable Demand Notes to be
immediately due and payable under the applicable section of the Indenture,
whereupon an event of default shall occur under the Indenture and the
Trustee shall declare the Demand Notes immediately due and payable under
the applicable section of the Indenture and shall make a draw under the
applicable Letter of Credit to pay the principal of the applicable Demand
Notes and the interest accrued thereon to the date of such declaration; or
(3) it may, upon notice to Borrower, declare the entire unpaid
amount of the Obligations immediately due under this Agreement to be, and
all such amounts shall thereupon become, due and payable to Bank, without
presentment, demand, protest, or other notice of any kind, all of which are
expressly waived, anything in this Agreement to the contrary
notwithstanding; or
(4) it may exercise its banker's lien of right of set-off; or
(5) it may proceed to protect its rights by suit in equity, action
at law or other appropriate proceedings, whether for the specific
performance of any covenant or agreement of Borrower herein contained or in
aid of the exercise of any power or remedy granted to Bank under any of the
other Financing Documents.
(b) Bank may proceed directly against Borrower hereunder without
resorting to any other remedies which it may have and without proceeding against
any other security held by Bank.
2A.14 Special Remedies Regarding Letters of Credit Upon an Event of
-------------------------------------------------------------
Default.
- -------
(a) If any Event of Default shall have occurred and be continuing,
and the maturity of the Demand Notes shall not have been accelerated, Bank may
make demand upon Borrower to, and forthwith upon such demand Borrower shall, pay
to Bank in immediately available funds at Bank's office designated in such
demand, for deposit by Bank in a special noninterest bearing cash collateral
account (the "Cash Collateral Account") to be maintained at such office of Bank
-----------------------
as may be designated by Bank, an amount equal to the maximum amount then
available to be
26
<PAGE>
drawn under each Letter of Credit (assuming compliance with all conditions for
drawing thereunder). The Cash Collateral Account shall be in the name of
Borrower (as a cash collateral account), but under the sole dominion and control
of Bank and subject to the terms of this Agreement.
(b) If requested by Borrower and subject to the right of Bank to
withdraw funds from the Cash Collateral Account as provided below, Bank shall
from time to time invest funds on deposit in the Cash Collateral Account in
investments satisfactory to Lender, reinvest proceeds of any such investments
which may mature or be sold, and invest interest or other income received from
any such investments, in each case as Borrower may elect and notify to Bank.
(c) If at any time Bank determines that any funds held in the Cash
Collateral Account are subject to any right or claim of any person or entity
other than Bank and the Trustee or that the total amount of such funds is less
than the maximum amount at such time available to be drawn under the Letters of
Credit, Borrower will, forthwith upon demand by Bank, pay to Bank, as additional
funds to be deposited and held in the Cash Collateral Account, an amount equal
to the excess of (i) such maximum amount at such time available to be drawn
under the Letters of Credit over (ii) the total amount of funds, if any, then
held in the Cash Collateral Account which Bank determines to be free and clear
of any such right and claim.
(d) Borrower hereby pledges, and grants to Bank a security interest
in, all funds held in the Cash Collateral Account (including Collateral
Securities) from time to time and all proceeds thereof, as security for the
payment of all amounts due and to become due from the Borrower to Bank under
this Agreement.
(e) Bank may, at any time or from time to time after funds are
deposited in the Cash Collateral Account or invested in Collateral Securities,
after selling, if necessary, any Collateral Securities, apply funds then held in
the Cash Collateral Account to the payment of any amounts, in such order as Bank
may elect, as shall have become or shall become due and payable by the Borrower
to Bank under this Agreement. Borrower agrees that, to the extent notice of
sale of any Collateral Securities shall be required by law, at least five days'
notice to Borrower of the time and place of any public sale or the time after
which any private sale is to be made shall constitute reasonable notification.
Bank may adjourn any public or private sale from time to time by announcement at
the time and place fixed therefor, and such sale may, without further notice, be
made at the time and place to which it was so adjourned.
(f) Neither Borrower nor any Person claiming on behalf of or through
Borrower shall have any right to withdraw any of the funds held in the Cash
Collateral Account, except as otherwise provided in subsection (g) below and
except that after the termination of the Letter of Credit in accordance with its
terms and the payment of all amounts payable by Borrower to Bank under this
Agreement, any funds remaining in the Cash Collateral Account shall be returned
by Bank to Borrower or paid to whomever may be legally entitled thereto.
(g) So long as any Notes shall remain outstanding, Bank will release
to Borrower or at its order (i) interest or other income received on Collateral
Securities and (ii) at the written
27
<PAGE>
request of Borrower, funds held in the Cash Collateral Account in an amount up
to but not exceeding the excess, if any (immediately prior to the release of any
such funds), of (x) the total amount of funds held in the Cash Collateral
Account over (y) the maximum amount available to be drawn under the Letters of
Credit.
(h) Borrower agrees that it will not (i) sell or otherwise dispose
of any interest in the Cash Collateral Account or any funds held therein, or
(ii) create or permit to exist any lien, security interest or other charge or
encumbrance upon or with respect to the Cash Collateral Account or any funds
held therein, except as provided in or contemplated by this Agreement.
(i) Bank shall exercise reasonable care in the custody and
preservation of any funds held in the Cash Collateral Account and shall be
deemed to have exercised such care if such funds are accorded treatment
substantially equivalent to that which Bank accords its own property, it being
understood that Bank shall not have any responsibility for taking any necessary
steps to preserve rights against any parties with respect to any such funds.
2A.15 Special Indemnity for Letters of Credit. Borrower indemnifies
---------------------------------------
and holds Bank harmless from and against any and all claims, damages, losses,
liabilities, costs or expenses which Bank may incur or which may be claimed
against Bank by any person or entity by reason of or in connection with the
execution and delivery or transfer of, or payment or failure to make lawful
payment under, a Letter of Credit; provided, however, that Borrower shall not be
required to indemnify Bank pursuant to this section for any claims, damages,
losses, liabilities, costs or expenses to the extent caused by (1) Bank's
willful misconduct or gross negligence in determining whether documents
presented under the Letter of Credit comply with the terms of the Letter of
Credit or (2) Bank's willful failure to make lawful payment under the Letter of
Credit after the presentation to it by the Trustee or a successor trustee under
the Indenture of a draft and certificate strictly complying with the terms and
conditions of the Letter of Credit. Nothing in this section limits the
Borrower's obligations contained in this Agreement. Without prejudice to the
survival of any other obligation of Borrower hereunder, the indemnities and
obligations of Borrower contained in this section shall survive the payment in
full of amounts payable pursuant herein and the termination of the Letter of
Credit.
2A.16 Obligations of Borrower Absolute.
--------------------------------
(a) The obligations, covenants and agreements of Borrower under this
Agreement shall be absolute, unconditional and irrevocable, and Borrower
separately covenants and agrees to timely pay in full in strict accordance
herewith all amounts which may become due and owing hereunder and to timely
observe and perform all other agreements and covenants to be observed and
performed by Borrower hereunder, such payment, observance and performance to be
made hereunder under all circumstances whatsoever, including, the following:
(1) any lack of validity or enforceability of any Financing
Documents;
28
<PAGE>
(2) any amendment or waiver of or any consent to departure from all
or any of the Financing Documents;
(3) the existence of any claim, set-off, defense or other rights
which Borrower may have at any time against any Person, whether in
connection with this Agreement, the Letter of Credit, the Demand Notes or
any of the other Financing Documents, or any unrelated transaction;
(4) any statement or any other document presented under a Letter of
Credit proves to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein proves to be untrue or inaccurate in any
respect whatsoever;
(5) payment by Bank under a Letter of Credit against presentation of
a draft or certificate which does not comply with the terms of the Letter
of Credit, provided such payment shall not have constituted gross
negligence or willful misconduct by Bank; and
(6) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing, provided the same does not constitute
gross negligence or willful misconduct by Bank.
(b) No act of commission or omission of any kind at any time on the
part of Bank in respect of any matter whatsoever shall in any way affect or
impair any right, power or benefit of Bank under this Agreement and, to the
extent permitted by applicable law, no setoff, claim, reduction, diminution of
any obligation, or any defense of any kind or nature which Borrower may have
against Bank shall be available against Bank in any suit or action brought by
Bank to enforce any right, power or benefit under this Agreement.
2A.17 Liability of the Bank. Neither Bank nor any of its officers or
----------------------
directors shall be liable or responsible for: (i) the use which may be made of a
Letter of Credit or for any acts or omissions of the Trustee and any transferee
in connection therewith; (ii) the validity, sufficiency or genuineness of
documents, or of any endorsement(s) thereon, even if such documents should in
fact prove to be in any or all respects invalid, insufficient, fraudulent or
forged; (iii) payment by Bank against presentment of documents which do not
strictly comply with the terms of a Letter of Credit, including but not limited
to, failure of any documents to bear any reference or adequate reference to a
Letter of Credit; or (iv) any other circumstances whatsoever in making or
failing to make payment under a Letter of Credit, except only that Borrower
shall have a claim against Bank, and Bank shall be liable to the Borrower, to
the extent, but only to the extent, of any direct, as opposed to consequential,
damages suffered by the Borrower which the Borrower proves were caused by (A)
Bank's willful misconduct or gross negligence in determining whether documents
presented under a Letter of Credit comply with the terms of a Letter of Credit
or (B) Bank's willful or grossly negligent failure to pay under a Letter of
Credit after the presentation to it by the Trustee of a draft and certificate
strictly complying with the terms and conditions of a Letter of Credit. In
furtherance and not in limitation of the foregoing, Bank may accept documents
that appear on their
29
<PAGE>
face to be in order, without responsibility for further investigation,
regardless of any notice or information to the contrary.
3. Conditions of Lending.
---------------------
3.1 Conditions Precedent to Initial Advance. In addition to any
---------------------------------------
other requirements set forth in this Agreement, Bank shall not be obligated to
make the any of the Loans, or any advance under any Loan, or issue the Letters
of Credit, unless at the time thereof the following conditions shall have been
met:
(a) Corporate Proceedings. All proper corporate proceedings
---------------------
shall have been taken by Borrower to authorize this Agreement and the
transactions contemplated hereby.
(b) Documentation. All instruments and proceedings in connection
-------------
with the transactions contemplated by this Agreement shall be satisfactory in
form and substance to Bank, and Bank shall have received on the date of this
Agreement copies of all documents including records of corporate proceedings,
which it may have requested in connection therewith, including certified copies
of resolutions adopted by the Board of Directors of Borrower, certificates of
good standing, and certified copies of the Articles of Incorporation and Bylaws,
and all amendments thereto, of Borrower.
(c) Loan Documents. Bank shall have received executed copies of
--------------
all instruments evidencing security for the Loans and copies of the insurance
policies and related certificates of insurance referred to in Sections 6.1
("Insurance") and 9.5 ("Insurance").
(d) No Default. No event shall have occurred or be continuing
----------
which constitutes an Event of Default or which would constitute an Event of
Default with the giving of notice or the lapse of time or both.
(e) Perfection of Liens. UCC-1 financing statements, collateral
-------------------
assignments, trademark and patent assignments, and, if applicable, certificates
of title covering the Collateral executed by Borrower shall have been duly
recorded or filed in the manner and places required by law to establish,
preserve, protect, and perfect the interests and rights created or intended to
be created by this Agreement and any other security agreement.
(f) Reports; Third Quarter Financial Statements. Bank shall have
-------------------------------------------
received all reports and information from Borrower called for under the
Agreement as and when due. Bank shall have received the financial statements for
Borrower's third quarter ended March 31, 1999.
(g) Opinion of Counsel. Bank shall have received on the date of
------------------
this Agreement an opinion from counsel to Borrower satisfactory to Bank which is
in the form of Exhibit "B" hereto and with respect to such other matters
-----------
relating to the transactions contemplated hereby as Bank may reasonably request.
30
<PAGE>
(h) Incumbency Certificate. Bank shall have received an
----------------------
incumbency certificate, dated as of the date of this Agreement, executed by the
Secretary or Assistant Secretary of Borrower, which shall identify by name and
title and bear the signature of the officer of such Borrower authorized to sign
this Agreement and the Notes on behalf of Borrower. Bank shall be entitled to
rely upon such incumbency certificate in completing the transactions
contemplated herein or in any Loan Document.
(i) Consents. Bank shall have received consents and agreements of
--------
the landlords of each of the premises leased by Borrower on which the Collateral
is located as provided in Section 4.1 ("Security"), all in form satisfactory to
Bank.
(j) Real Estate Mortgages. Except for the mortgage under that
---------------------
certain Real Estate Mortgage and Security Agreement among La-Man Corporation and
Don Bell Industries, Inc. and SouthTrust Bank, National Association, recorded on
September 2, 1997, in Official Records Book 4230, Page 4153, in Volusia County,
Florida, which are already outstanding. Bank shall have received and recorded
the Mortgages duly executed by the applicable Borrower granting to Bank a first
lien on each parcel of the Real Estate.
(k) Title Insurance. Except for the Real Estate subject to the
---------------
Real Estate Mortgage and Security Agreement among La-Man Corporation and Don
Bell Industries, Inc. and SouthTrust Bank, National Association, recorded on
September 2, 1997, in Official Records Book 4230, Page 4153, in Volusia County,
Florida, Bank shall have received commitments for the issuance of a standard
ALTA mortgagee title insurance policy from a company approved by Bank. The
commitments for title insurance shall provide coverage of not less than
$2,600,000, insuring the Mortgage as valid first liens on the California Real
Estate, and of not less than $345,000, insuring the Mortgage on the Florida Real
Estate, subject only to exceptions approved by Bank. The commitments shall
specify such affirmative coverages and endorsements as Bank or Bank's counsel
reasonably deems appropriate and specify Bank, as well as its successors and/or
assigns, as the insured party.
(l) Surveys. Except for the Real Estate subject to the Real
-------
Estate Mortgage and Security Agreement among La-Man Corporation and Don Bell
Industries, Inc. and SouthTrust Bank, National Association, recorded on
September 2, 1997, in Official Records Book 4230, Page 4153, on September 2,
1997, in Volusia County, Florida, Bank shall have received two sealed copies of
a current survey of each parcel of the Real Estate, prepared and certified
within sixty (60) days of the closing date by a registered surveyor or a
licensed professional engineer, which complies with all requirements set forth
in the loan commitment and as otherwise in form and substance satisfactory to
Bank and its counsel.
(m) Appraisals and Environmental Assessments. Bank shall have
----------------------------------------
received current appraisals of the Equipment and the Real Estate located in
Stockton, California expressing an opinion of the Equipment's orderly
liquidation value and the Real Estate's fair market value on an as-built basis
in each case reasonably satisfactory to Bank. Bank shall also have received a
Phase I Environmental Assessment Report concerning each parcel of the Real
Estate that
31
<PAGE>
will be subject to a new Mortgage and a Phase II Environmental Assessment Report
concerning the Stockton, California property, in each case satisfactory in form,
scope and substance to Bank and Bank's counsel providing evidence satisfactory
to Bank and Bank's counsel and that the Real Estate does not contain asbestos or
any other material or substance that is regulated or prohibited by the
Environmental Regulations, except those materials or substances that are
disclosed in writing to, and approved in writing by, Bank. The environmental
consultant's reports shall have been ordered directly by Bank at Borrower's sole
cost. Bank acknowledges that it has received and is satisfied with the
assessment report for Stockton, California, subject to Borrower's taking the
remedial actions described in Article 11 of this Agreement within the specified
time period.
(n) Lien Search. Bank shall have received a report from the
-----------
Florida Department of State and any other jurisdiction in which any of the
Collateral is located or in which Borrower is located indicating that there are
no Liens against that portion of the Collateral constituting personal property,
except the Liens permitted by Section 7.2 ("Liens and Security Interests").
(o) No Adverse Change. There shall have been no material adverse
-----------------
change in the condition, financial or other, of Borrower, from such condition as
it existed on the date of the most recent financial statements of such Person
delivered before the date of this Agreement.
(p) Fees and Expenses. Bank shall have received all amounts
-----------------
required to be paid by Borrower or another Person pursuant to the commitment
letter delivered by Bank to Borrower in connection with the Revolving Loan.
(q) Subordination Agreement. Bank shall have received a
-----------------------
subordination agreement from each Subordinated Lender.
(r) Life Insurance. Bank shall have received the original copy of
--------------
a life insurance policy on the life of J. William Brandner in the face amount of
$1,000,000 issued by an insurance underwriter acceptable to Bank, together with
instruments indicating that said policy has not been assigned to any other
entity and that said policy is assignable to Bank as collateral for the Loans,
and such assignments, pledge agreements, and instruments as Bank shall require
evidencing assignment of said policy to Bank as collateral for the Loans.
(s) Certificates of Title. Borrower shall have delivered
---------------------
Certificates of Title for any vehicles constituting part of the Equipment as
shown on Exhibit "J" within 90 days of this Agreement.
----------
(t) Unfunded Availability. Borrower has excess unfunded
---------------------
availability on the Revolving Loan of at least $500,000 as of the Closing Date.
(u) Variable Demand Notes. Bank must have received from
---------------------
SouthTrust Securities, Inc. confirmation of the marketability of the 1999 Notes.
Borrower and SouthTrust Securities, Inc. must have agreed on mutually-acceptable
terms for those Demand Notes and the
32
<PAGE>
placement agent and remarketing fees for the 1999 Notes. Bank and Borrower must
have executed the documentation for the 1999 Notes, including the 1999
Indenture.
(v) Additional Documents. Bank shall have received such
--------------------
additional legal opinions, certificates, proceedings, instruments, and other
documents as Bank or its counsel may reasonably request to evidence (i)
compliance by Borrower with legal requirements, (ii) the truth and accuracy, as
of the date of this Agreement, of the representations of Borrower contained
herein, and (iii) the due performance or satisfaction by Borrower, at or prior
to the date hereof, of all agreements required to be performed and all
conditions required to be satisfied by Borrower pursuant hereto.
3.2 Conditions Precedent to Each Advance. The following conditions,
------------------------------------
in addition to any other requirements set forth in this Agreement, must have
been met or performed before each advance under any Loan:
(a) Borrower's Report. To the extent required by Bank, Borrower
-----------------
has delivered to Bank a Borrower's Report.
(b) Supplementary Corporate Proceedings. Any supplementary
-----------------------------------
corporate proceedings necessary to authorize the transaction have been taken by
Borrower.
(c) Accuracy of Representations. All representations and
---------------------------
warranties made by Borrower in this Agreement or otherwise in writing in
connection with this Agreement are true and correct as if made on and as of the
proposed date of the advance of Loan proceeds, and to the extent requested by
Bank, Borrower has so certified in writing.
(d) No Default. No Event of Default has occurred and is
----------
continuing, and to the extent requested by Bank, Borrower has so certified in
writing.
(e) Further Assurances. Borrower shall have delivered such
------------------
further documentation or assurances that Bank reasonably requires.
4. Security for Obligations and Special Collection Accounts.
--------------------------------------------------------
4.1 Security. The Loans, each Note, the reimbursement obligations
--------
under this Agreement and all other Obligations shall be secured by each of the
following:
(a) A first-priority security interest in Borrower's Accounts,
Documents, Instruments, Chattel Paper, General Intangibles, Equipment, and
Inventory, and other properties and interests as provided for in Article 8
("Grant of Security Interest").
(b) A first priority mortgage lien on each parcel of the Real
Estate pursuant to the Mortgages; and
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(c) The assignment of a life insurance policy in the face amount
of at least $1,000,000 on the life of J. William Brandner referred to in Section
3.1 ("Life Insurance").
Borrower agrees to execute and deliver, or cause the execution
and delivery of, such security agreements, deeds of trust, mortgages,
assignments, guaranties, consents, subordination agreements, and financing
statements as may be required by Bank to evidence such security, all in form
satisfactory to Bank, as well as such consents and agreements of the landlords
of each of the premises leased by Borrower on which the Collateral is located,
all in form satisfactory to Bank.
4.2 Special Collection Accounts. Borrower represents that Borrower
---------------------------
has opened with Bank special collection accounts bearing account numbers
67986451 (Display Technologies, Inc. - Master Special Collection Account),
67986638 (Display Technologies, Inc. - Corporate Special Collection Account),
67986484 (La-Man Corporation - Subsidiary Special Collection Account), 67986495
(J.M. Stewart Manufacturing, Inc. - Subsidiary Special Collection Account),
67986506 (Don Bell Industries, Inc. - Subsidiary Special Collection Account),
67986517 (J.M. Stewart Corporation - Subsidiary Special Collection Account),
67986440 (J.M. Stewart Industries, Inc. - Subsidiary Special Collection
Account), and 78385499 (Ad Art Electronic Sign Corp. -Subsidiary Special
Collection Account) (collectively, the "Special Collection Accounts"), in which
all funds received by Borrower from sales of Inventory, all refunds of taxes,
all remittances by Borrower's Account Debtors, and all other proceeds of
Collateral, shall be deposited no later than the next regular banking day
following receipt. All returned checks shall be charged to account number
___________. Bank shall pay all fees for the Special Collection Accounts and
expenses or adjustments for collected funds. Under no circumstances will Bank
be charged for them. Borrower shall pay normal and customary fees to Bank for
its maintenance of the Special Collection Accounts. Bank shall have the
exclusive right to withdraw or debit funds from the Special Collection Accounts,
which may be accomplished by any directive signed by any two authorized
employees of Bank. At least weekly and more often if Bank so elects, the
collected balances in the Special Collection Accounts shall be swept into a
concentration account and withdrawn by Bank and applied to the Revolving Loan.
If any report by Borrower required by this Agreement shall show insufficient
Aggregate Loan Values to entitle Borrower to maintain the then-current balance
owing under the Revolving Loan after applying thereto the collected balance of
the Special Collection Accounts, then Borrower shall immediately deposit into
one of the Special Collection Accounts sufficient immediately available funds
from which Bank may draw in order to reduce the principal balance of the
Revolving Loan to the amount allowable under the provisions of this Agreement.
At the request of Bank, Borrower shall execute documents provided by Bank to
allow officers of Bank to sign checks drawn on accounts of Borrower maintained
in other banks for the purpose of transferring funds to an account or accounts
of Borrower maintained with Bank or another bank owned by SouthTrust
Corporation, including, without limitation, the Special Collection Accounts.
5. Representations, Warranties, and General Covenants. Borrower
--------------------------------------------------
represents, warrants, and covenants to and with Bank, which representations,
warranties, and covenants shall survive until the Obligations are indefeasibly
satisfied in full, that:
34
<PAGE>
5.1 Organization and Qualification. Each Borrower and each of its
------------------------------
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its respective state of incorporation; has the
corporate power to own its properties and to carry on its business as now being
conducted; and is duly qualified to do business and is in good standing in every
jurisdiction in which the character of the properties owned by it or in which
the transaction of its business makes its qualification necessary.
5.2 Corporate Power and Authorization; Compliance with Law. Borrower
------------------------------------------------------
has full power and authority to enter into this Agreement, to borrow hereunder,
to execute and deliver the Notes and the other Loan Documents, and to incur the
obligations provided for herein, all of which have been authorized by all proper
and necessary corporate action. Borrower and each of its Subsidiaries further
(x) is in compliance with all Requirements of Law applicable to it and (y)
possesses all governmental franchises, licenses, and permits that are necessary
to own or lease its assets and to carry on its business as now conducted.
5.3 Enforceability; No Legal Bar. This Agreement has been, and each
----------------------------
other Loan Document to which it is a party will be, duly executed and delivered
to Bank on behalf of Borrower. This Agreement and each of the other Loan
Documents constitute, and each Note when executed and delivered for value
received will constitute, a valid and legally binding obligation of Borrower
enforceable in accordance with their respective terms. The execution, delivery,
and performance by Borrower of this Agreement and the other Loan Documents to
which it is a party, Borrower's borrowings pursuant to this Agreement, and use
of the loan proceeds, will not violate any Requirement of Law applicable to
Borrower or any of its Subsidiaries or constitute a breach or violation of, a
default under, or require any consent under, any of its Contractual Obligations,
and will not result in a breach or violation of, or require the creation or
imposition of any Lien on any of its properties or revenues pursuant to any
Requirement of Law or Contractual Obligation.
5.4 Pending Actions. No action or investigation is pending or, so
---------------
far as Parent's officers and directors know, threatened before or by any court
or administrative agency against Borrower or against any of its Subsidiaries,
businesses, properties or revenues (a) with respect to any of the Loan Documents
or any of the transactions contemplated by them, or (b) which might result in
any Material Adverse Effect on Borrower on a consolidated basis.
5.5 Financial Statements. The financial statements of Parent and its
--------------------
Subsidiaries dated June 30, 1998 and March 31, 1999 (the "Financial Statement
Date"), delivered to Bank, and all other financial statements and reports
furnished by Parent to Bank are complete and correct and fairly present the
financial condition of Parent and its Subsidiaries on a consolidated and
consolidating basis and the results of their operations and transactions as of
the dates and for the periods to which they refer. The Parent's June 30, 1998
financial statements have been prepared in accordance with GAAP. There are no
liabilities, direct or indirect, fixed or contingent, of Parent and its
Subsidiaries as of the date of such financial statements which are not reflected
therein or in the notes thereto. Neither said financial statements nor any
other financial statements, reports, and information furnished by Parent to Bank
contains any untrue statement of a material fact or omits a material fact
necessary to make the statements contained therein or herein not misleading.
There
35
<PAGE>
is no fact which Parent has failed to disclose to Bank in writing which
materially affects adversely or, so far as Parent can now foresee, will
materially affect adversely the Collateral, business, prospects, profits, or
condition (financial or otherwise) of Borrower or the ability of Borrower to
perform this Agreement.
5.6 No Change. Since the Financial Statement Date there has not
---------
been: (i) any material adverse change in the assets, liabilities, business, or
condition (financial or other) of Parent and its Subsidiaries on a consolidated
basis; (ii) any loss, damage, or destruction, whether or not covered by
insurance, that materially adversely affected the assets or property of Parent
and its Subsidiaries on a consolidated basis; (iii) any distribution by Parent
to its shareholders in cash, securities, or other property, except a five
percent (5%) stock dividend paid to shareholders in November 1998; (iv) any
change in any of Parent's accounting methods, practices, or principles or
depreciation and amortization rates or policies, except as required by law or to
conform with GAAP; or (v) except in the usual and ordinary course of business,
any of the following: (A) any breach, execution, extension, modification, or
termination by Borrower of any Contractual Obligation; (B) any disposition by
Borrower of, or the imposition of a Lien on, any asset of Borrower, except for a
Lien permitted under Section 5.7 ("Title to Properties"); (C) any cancellation
of a debt owed to, or a claim held by, Borrower; or (vi) since the closing of
the Loan, any Event of Default. No Contractual Obligation of Borrower or any of
its Subsidiaries and no Requirement of Law materially adversely affects, or to
the extent that Borrower can reasonably foresee might have a Material Adverse
Effect on Borrower.
5.7 Title to Properties. Borrower and its Subsidiaries have good and
-------------------
marketable title to all of their assets, subject to no Lien, except inchoate
Liens arising by operation of law for obligations which are not yet due and
except for the Liens and security interests described on Exhibit "C" to this
-----------
Agreement. Borrower and its Subsidiaries enjoy peaceable and undisturbed
possession under all leases under which they are operating, and none of such
leases contain any provisions which may materially and adversely affect or
impair the operations of Borrower, and all of such leases are valid and
subsisting and in full force and effect.
5.8 Benefit Plans. Except as set forth on Exhibit "D" to this
------------- -----------
Agreement, neither Borrower nor any of its Subsidiaries has established or is a
party to any Plan or to any stock option or deferred compensation plan or
contract for the benefit of its employees or officers, any pension, profit
sharing or retirement plan, stock redemption agreement, or any other agreement
or arrangement with any officer, director, or stockholder, members of their
families, or trusts for their benefit. Borrower and its Subsidiaries are in
compliance with all applicable provisions of ERISA. Neither Borrower nor any of
its Subsidiaries has received any notice to the effect that it is not in full
compliance with any of the requirements of ERISA and the regulations promulgated
thereunder. No fact or situation that could result in a material adverse change
in the financial condition of Borrower, including, but not limited to, any
Reportable Event or Prohibited Transaction, exists in connection with any Plan.
Neither Borrower nor any of its Subsidiaries has any withdrawal liability in
connection with a Multiemployer Plan.
36
<PAGE>
5.9 Taxes. Borrower and its Subsidiaries have filed all federal,
-----
state, and local tax returns which are required to be filed and have paid, or
made adequate provision for the payment of, all taxes which have or may become
due pursuant to said returns or to assessments received by them. Borrower and
its Subsidiaries have paid all withholding, FICA and other payments required by
federal, state or local governments with respect to any wages paid to employees.
5.10 Collateral. The security interests granted to Bank herein and
----------
pursuant to any other security agreement (a) constitute and, as to subsequently
acquired property included in the Collateral covered by the security agreement,
will constitute, a security interest under the Code entitled to all of the
rights, benefits and priorities provided by the Code and (b) are, and as to such
subsequently acquired Collateral will be, fully perfected, superior, and prior
to the rights of all third persons, now existing or hereafter arising, subject
only to Liens permitted pursuant to this Agreement. All of the Collateral is
intended for use solely in Borrower's business. Borrower shall defend the
Collateral against all claims and demands of all other parties who at any time
claim any interest in the Collateral.
5.11 Labor Law Matters. No goods or services have been or will be
-----------------
produced by Borrower or any of its Subsidiaries in violation of any applicable
labor laws or regulations or any collective bargaining agreement or other labor
agreements or in violation of any minimum wage, wage-and-hour, or other similar
laws or regulations. Except for Ad Art Electronic Sign Corporation, no
collective bargaining agreement concerning any employees of Borrower exists or
is being negotiated.
5.12 Judgment Liens. None of Borrower, its Subsidiaries, or their
--------------
assets are subject to more than $10,000 in the aggregate of unpaid judgments
(whether or not stayed) or judgment liens in any jurisdiction.
5.13 Place of Business. Parent's chief executive office is located at
-----------------
5029 Edgewater Drive, Orlando, Florida, and it has not changed the location of
its chief executive office from a location in a different state within the last
five (5) years. The Inventory is and shall be located only at the locations
listed on Exhibit "E" to this Agreement, or on locations of which Bank is
-----------
notified pursuant to Section 6.14, except for inventory on customer locations
being supplied under contracts with an aggregate value of less than $50,000.
Except as indicated on said exhibit, the real estate constituting each said
location is owned by Borrower. With respect to locations not owned by Borrower,
said exhibit sets forth the name and address of each landlord, vendor or
customer, the location of the property, and the remaining term of the lease or
purchase agreement. Borrower has separately furnished to Bank true and correct
copies of the lease agreements or purchase agreements for each said parcel.
5.14 Full Disclosure. All information furnished by Parent to Bank
---------------
concerning Borrower, its Subsidiaries, its financial condition, the Collateral,
or otherwise for the purpose of obtaining credit or an extension of credit, is,
or will be at the time the same is furnished, accurate and correct in all
material respects and complete insofar as completeness may be necessary to give
Bank a true and accurate knowledge of the subject matter. The books of account,
minute books, and stock
37
<PAGE>
record books of Borrower and its Subsidiaries are complete and correct and have
been maintained in accordance with good business practices, and there have been
no transactions adversely affecting the business of Borrower or its Subsidiaries
that should have been set forth therein and have not been so set forth.
5.15 Borrower's Name. Except for the change in Parent's name from La-
---------------
Man Corporation to its current name, Borrower has not changed its name or been
known by any other name within the last five (5) years, nor has it been the
surviving corporation in a merger effected within the last five (5) years,
except for a transaction involving Ad Art Electronic Sign Corporation.
5.16 Existing Debt. Neither Borrower nor any of its Subsidiaries is
-------------
in default with respect to any of its existing Debt or with respect to any
Contractual Obligation to which it is a party. Neither Borrower nor any of its
Subsidiaries is subject to any federal, state or local tax Liens, nor has such
Person received any notice of deficiency or other official notice to pay any
taxes. Borrower and its Subsidiaries have paid all sales and excise taxes
payable by them.
5.17 Insolvency. Parent and each of its Subsidiaries are now and,
----------
after giving effect to the transactions contemplated hereby, at all times will
be, Solvent.
5.18 Intellectual Property. Borrower and each of its Subsidiaries
---------------------
owns or is licensed to use, all patents, trademarks, trade names, copyrights,
technology, know-how, and processes necessary for the conduct of their business
as currently conducted (the "Intellectual Property") all of which is described
in Exhibit "G" to this Agreement. Any material licenses of the Intellectual
-----------
Property are set forth in Exhibit "G" to this Agreement. No claim has been
-----------
asserted and is pending by any Person with respect to the use of any such
Intellectual Property, or challenging or questioning the validity or
effectiveness of any such Intellectual Property and Borrower does not know of
any valid basis for any such claim. The use of the Intellectual Property by
Borrower and each of its Subsidiaries does not infringe on the rights of any
Person.
5.19 Subsidiaries. Borrower has no Subsidiaries, except as indicated
------------
on Exhibit "F" to this Agreement. Parent represents and warrants that the
-----------
following Subsidiaries are shell corporations and have tangible assets of less
than $25,000: (i) E.S.C. of Nevada, Inc., (ii) Don Bell Industries of Nevada,
Inc., and (iii) Nevada Semco, Inc.
5.20 Environmental Matters. Borrower is in compliance with all
---------------------
Environmental Regulations and with all other federal, state, and local laws and
regulations relating to the environment and pollution, including such laws and
regulations regulating hazardous, radioactive and toxic materials and
underground petroleum products storage tanks. No assessment, notice of (primary
or secondary) liability or notice of financial responsibility, or the amount
thereof, or to impose civil penalties has been received by Borrower, and there
are no facts, conditions, or circumstances known to Borrower which could result
in any investigation or inquiry if all such facts, conditions, and
circumstances, if any, were fully disclosed to the applicable governmental
authority. Borrower has paid any environmental excise taxes due and payable,
including without limitation, those imposed pursuant to Sections 4611, 4661, or
4681 of the Internal Revenue Code of 1986, as
38
<PAGE>
amended from time to time. Borrower represents and warrants that Borrower has
not obtained and is not required to obtain any permits, licenses, or similar
authorizations to construct, occupy, operate, or use any buildings,
improvements, fixtures, or equipment in connection with its business by reason
of any Environmental Regulations. Borrower represents and warrants that no oil,
toxic or hazardous substances, or solid wastes have been disposed of or released
by Borrower in connection with the operation of its business and that Borrower
will not dispose of or release oil, toxic or hazardous substances, or solid
wastes at any time in its operation of its business (the terms "hazardous
substance" and "release" shall have the meanings specified in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA"), and the terms "solid waste" and "disposal," "dispose," or "disposed"
shall have the meanings specified in the Resource Conservation and Recovery Act
of 1976, as amended ("RCRA"), except that if such acts are amended to broaden
the meanings thereof, the broader meaning shall apply herein). Each of the
foregoing representations is also accurate with respect to any Subsidiary that
is not a Borrower.
5.21 Ownership. Parent is a public company. All issued and
---------
outstanding capital stock of each other Borrower is owned by Parent. Except as
set forth in the annual fiscal year-end audited financial statements of Parent
as of June 30, 1998, there are not outstanding any warrants, options, or rights
to purchase any shares of capital stock of any Subsidiary, nor does any Person
have a Lien upon any of the capital stock of any Subsidiary, except for the Lien
held by Subordinate Lenders.
5.22 Inventory. All Inventory is marketable in the ordinary course of
---------
business. All Inventory has been produced, and during the term hereof will be
produced, in compliance with the requirements of the Federal Fair Labor
Standards Act. No Inventory is now, nor shall any Inventory at any time or times
hereafter be, stored with a bailee, warehouseman or similar party without Bank's
prior written consent and, if Bank gives such consent, Borrower will
concurrently therewith cause any such bailee, warehouseman, or similar party to
issue and deliver to Bank, in form and substance acceptable to Bank, warehouse
receipts therefor in Bank's name. No Inventory is or will be consigned to any
Person without Bank's prior written consent, and, if such consent is given,
Borrower shall, prior to the delivery of any Inventory on consignment, (i)
provide Bank with all consignment agreements to be used in connection with such
consignment, all of which shall be acceptable to Bank, (ii) prepare, execute,
and file appropriate financing statements with respect to any consigned
Inventory, showing Bank as assignee, (iii) conduct a search of all filings made
against the consignee in all jurisdictions in which any consigned Inventory is
to be located and deliver to Bank copies of the results of all such searches,
and (iv) notify, in writing, all the creditors of the consignee which are or may
be holders of Liens in the Inventory to be consigned that Borrower expects to
deliver certain Inventory to the consignee, all of which Inventory shall be
described in such notice by item or type.
5.23 SEC Filings. Borrower previously has furnished or made available
-----------
to Bank accurate and complete copies of forms, reports, and documents filed by
Borrower with the Securities and Exchange Commission ("SEC") since January 1,
1998 (the "SEC Documents"), which include all reports, schedules, proxy
statements, and registration statements filed or required to be filed by
Borrower with the SEC since January 1, 1998. As of their respective dates, the
SEC Documents did
39
<PAGE>
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated in those documents are necessary to make the
statements in those documents not misleading, in light of the circumstances in
which they were made.
5.24 Year 2000 Compliance.
--------------------
(a) Definition. For purposes of this representation, "Year
----------
2000 compliant" means, with respect to any entity, that all hardware, software,
embedded microchip technology, and other processing capabilities used by and
material to its business operations or financial condition will: (i) regardless
of the date input, consistently and correctly interpret and manipulate data for
all calendar dates, without causing any abnormal ending scenario, including
accepting date input, providing date output, and performing calculations on
dates or portions of dates, whether before, on, or after January 1, 2000, or
from, into and between the years 1999 and 2000, and whether or not the dates are
affected by leap years; (ii) function accurately and without interruption
before, during, and after January 1, 2000, and without any change in operations
associated with the advent of the new century; (iii) respond to date data,
including, two-digit year-date input, in ways that resolve any ambiguity as to
century in a consistent, defined, and documented manner; and (iv) store and
provide output of date information in ways that are unambiguous as to century.
(b) Borrower's Year 2000 Compliance. Borrower has: (a)
-------------------------------
undertaken a detailed inventory, review, and assessment of its business and
operations that could be adversely affected by its failure to be Year 2000
compliant on a timely basis; (b) developed a detailed plan and time line for
becoming Year 2000 compliant on a timely basis; and (c) implemented that plan in
accordance with the timetable with sufficient funds, personnel and other
resources. The portion of Borrower's plan to be accomplished during the current
year has been fully accounted for in its current fiscal year budget. Borrower
shall fully budget the remaining amount necessary to implement the Year 2000
plan for its next fiscal year. Borrower will be Year 2000 compliant before
January 1, 2000.
(c) Certain Third Parties. Based on its inquiry made by
---------------------
Borrower to Borrower's material suppliers, vendors, service providers, and
customers, Borrower's management believes that before January 1, 2000, all such
material suppliers, vendors, service providers and customers will be Year 2000
compliant and any interface or exchange of data or other information between
Borrower and each of the material suppliers, vendors, service providers and
customers will operate or function in a Year 2000 compliant manner, without any
adverse impact on any of the hardware, software, embedded microchip technology,
or other processing capabilities used by and material to Borrower's business
operations or financial condition. To the extent necessary to ensure the
foregoing, Borrower has articulated or will articulate functional interface
standards to each of the material suppliers, vendors, service providers, and
customers and engage in testing and implementation of those standards. For
purposes of this Agreement, "material suppliers, vendors, service providers and
customers" refer to those suppliers, vendors, service providers, and customers
of Borrower whose business failure would, with reasonable probability, result in
a Material Adverse Effect on the Borrower.
40
<PAGE>
(d) Further Assurances. At Bank's request, Borrower shall
------------------
promptly disclose to Bank its Year 2000 Compliance plans, periodically update
the Bank on the progress of its Year 2000 Compliance program, provide Bank with
copies of any third party assessment of its Year 2000 Compliance efforts,
complete any questionnaire, survey, or worksheet or furnish any other
information or documentation regarding Borrower's Year 2000 Compliance efforts.
Borrower's failure to furnish this information or otherwise satisfy that
Borrower and its material suppliers, vendors, service providers, and customers
will be Year 2000 compliant by January 1, 2000, and that any interface or
exchange of data or other information between Borrower and each of its material
suppliers, vendors, service providers, and customers will be Year 2000 compliant
without Material Adverse Effect on Borrower, will constitute an Event of
Default.
(e) Other Loan Documents. Each of the foregoing representations,
--------------------
warranties and agreements are incorporated and made a part of every other Loan
Document.
5.2 Representations True. No representation or warranty by Borrower
--------------------
contained herein or in any certificate or other document furnished by Borrower
pursuant hereto contains any untrue statement of material fact or omits to state
a material fact necessary to make such representation or warranty not misleading
in light of the circumstances under which it was made.
6. Affirmative Covenants. Borrower agrees and covenants that until the
---------------------
Obligations have been indefeasibly paid in full and until Bank has no further
obligation to make advances under the Loans, each Borrower shall:
6.1 Insurance. For itself and every Subsidiary (whether or not a
---------
Borrower), maintain insurance with insurance companies satisfactory to Bank on
such of its properties, in such amounts and against such risks as is customarily
maintained in similar businesses operating in the same vicinity, and shall file
with Bank upon request, from time to time, a detailed list of the insurance then
in effect, stating the names of the insurance companies, the amounts and rates
of the insurance, dates of expiration thereof, and the properties and risks
covered thereby, and, within 10 days after notice in writing from Bank, shall
obtain such additional insurance as Bank may reasonably request. All such
policies shall name Bank as a named insured and provide that any losses payable
thereunder shall (pursuant to loss payable clauses, in form and content
acceptable to Bank, to be attached to each policy) be payable to Bank, and
provide that the insurance provided thereby, as to the interest of Bank, shall
not be invalidated by any act or neglect of Borrower, nor by the commencing of
any proceedings by or against Borrower in bankruptcy, insolvency, receivership,
or any other proceedings for the relief of a debtor, nor by any foreclosure,
repossession, or other proceedings relating to the property insured, nor by any
occupation of such property or the use of such property for purposes more
hazardous than permitted in the policy. Borrower hereby assigns to Bank all
right to receive proceeds, directs any insurer to pay all proceeds directly to
Bank, and authorizes Bank to endorse any check or draft for such proceeds and
apply the same toward satisfaction of the Obligations. Borrower shall furnish
to Bank insurance certificates, in form and substance satisfactory to Bank,
evidencing compliance by it with the terms of this Section and, upon the request
of Bank at any time, Borrower shall furnish Bank with photostatic copies of the
policies required by the terms of this Section. Borrower will cause each
insurer under each of the policies
41
<PAGE>
to agree (either by endorsement upon such policy or by letter addressed to Bank)
to give Bank at least 30 days' prior written notice of the cancellation of such
policies in whole or in part or the lapse of any coverage thereunder. Borrower
agrees that it will not take any action or fail to take any action which action
or inaction would result in the invalidation of any insurance policy required
hereunder. At least 10 days prior to the date the premiums on each such policy
or policies shall become due and payable, Borrower shall furnish to Bank
evidence of the payment of such premiums. Borrower shall furnish to Bank such
evidence of insurance as Bank may require.
6.2 Corporate Existence; Qualification. For itself and every
----------------------------------
Subsidiary (whether or not a Borrower), maintain its corporate existence and, in
each jurisdiction in which the character of the property owned by it or in which
the transaction of its business makes its qualification necessary, maintain good
standing.
6.3 Taxes. For itself and every Subsidiary (whether or not a
-----
Borrower), during its fiscal year, accrue all current tax liabilities of all
kinds, all required withholding of income taxes of employees, all required old
age and unemployment contributions, all required payments to employee benefit
plans, and pay the same when they become due.
6.4 Compliance with Laws. For itself and every Subsidiary (whether
--------------------
or not a Borrower), comply with all Requirements of Law, including Environmental
Regulations, and pay all taxes, assessments, charges, claims for labor,
supplies, rent, and other obligations which, if unpaid, might give rise to a
Lien against property of Borrower (or the Subsidiary), except claims being
contested in good faith by appropriate proceedings (provided Borrower promptly
notifies Bank in writing of such contest), and against which reserves deemed
adequate by Bank have been set up. Specifically, Borrower (and each Subsidiary)
shall pay when due all taxes and assessments upon the Collateral, this
Agreement, the Notes, or any Loan Document, including, without limitation, any
stamp taxes or intangibles taxes imposed by virtue of the transactions outlined
herein.
6.5 Annual Financial Statements. Within 90 days after the close of
---------------------------
each fiscal year, Parent shall furnish Bank with annual audited financial
statements of Parent and its Subsidiaries on a consolidated basis, with
supplemental unaudited consolidating financial statements consisting of balance
sheets, operating statements and such other statements as Bank may reasonably
request, for the period(s) involved, prepared in accordance with GAAP
consistently applied for the period involved and for the preceding fiscal year
and certified as correct by independent certified public accountants acceptable
to Bank.
6.6 Interim Financial Statements. Within 45 days after the close of
----------------------------
each calendar month, Parent shall furnish Bank with unaudited monthly and year-
to-date financial statements of Parent and its Subsidiaries on a consolidated
and consolidating basis, consisting of balance sheets and operating statements
and a listing of all contingent liabilities of Parent and its Subsidiaries for
the periods involved and such other statements as Bank may request, consistently
prepared with the monthly financial statement(s) previously furnished to Bank,
taken from the books and records of Parent and its Subsidiaries, and certified
as correct by the Chief Financial Officer of Parent.
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6.7 Certificates; Other Information. Parent shall furnish to Bank:
-------------------------------
(a) concurrently with the delivery of the financial statements
referred to in Sections 6.5 and 6.6, a certificate from the President and Chief
Financial Officer of Parent (i) containing computations confirming Borrower's
compliance with Section 6.23 ("Financial Covenants"); (ii) stating that after
diligent investigation, they have determined that Borrower during the period has
observed or performed all of its covenants in this Agreement and in the other
Loan Documents, and (iii) stating that the officers do not know of any default
or Event of Default by Borrower under this Agreement or the other Loan
Documents; and
(b) all other information regarding the affairs of Borrower and
its Subsidiaries that Bank from time to time reasonably requests.
6.8 Collateral Reports. Furnish to Bank at least monthly before the
------------------
30th day of the month (and more frequently if requested by Bank) a detailed
accounts receivable aging report as of the last day of the previous month, a
detailed accounts payable aging report, and an inventory report, all in form and
substance, and containing such detail and information as Bank shall request, and
furnish to Bank copies of all physical inventory listings when prepared by
Parent.
6.9 SEC Filings. (i) As soon as available and in any event within 95
-----------
days following the end of each of Parent's fiscal years, a copy of its Annual
Report on Form 10-K as filed with the SEC; (ii) as soon as available and in any
event within 50 days following the end of each of Parent's first three fiscal
quarters of each year, a copy of its Quarterly Report on Form 10-Q; and (iii)
promptly on becoming available, any other report or statement that Parent files
with the SEC or mails to its shareholders.
6.10 Visits and Inspections. For itself and every Subsidiary (whether
----------------------
or not a Borrower), (a) give agents and representatives of Bank full and
unrestricted access from time to time during normal business hours to its
business premises, offices, properties, books, records, and information; (b)
permit agents and representatives of Bank to make such audit and examination
thereof, and conduct such other investigation, as they consider appropriate to
determine and verify its business properties, operation, or condition (financial
or other) and to consummate the transactions contemplated by this Agreement; and
(c) furnish to Bank and its agents and representatives such additional
information with respect to its business and affairs as Bank or they reasonably
request from time to time. Borrower shall bear the costs of such audits,
reports, and inspections.
Borrower shall keep true books, records, and accounts that completely,
accurately, and fairly reflect all dealings and transactions relating to its and
its Subsidiaries' assets, business, and activities and shall record all
transactions in such manner as is necessary to permit preparation of its
financial statements in accordance with GAAP.
6.11 Payments on Notes. Duly and punctually pay the principal and
-----------------
interest on the Notes, in accordance with the terms of this Agreement and of the
Notes, and pay all other Debt
43
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of Borrower or any Subsidiary reflected on the financial statements delivered to
Bank and referred to in Section 5.5 ("Financial Statements") and all other Debt
incurred after the date hereof in accordance with the terms of such Debt.
6.12 Conduct of Business. For itself and every Subsidiary (whether or
-------------------
not a Borrower), conduct its business as now conducted and do all things
necessary to preserve, renew, and keep in full force and effect its rights,
patents, permits, licenses, franchises, and trade names necessary to continue
its business. Borrower shall and shall cause each of its Subsidiaries to comply
with all Contractual Obligations applicable to it and its business and
properties.
6.13 Maintenance of Properties. For itself and every Subsidiary
-------------------------
(whether or not a Borrower), keep its properties in good repair, working order
and condition, reasonable wear and tear excepted, and from time to time make all
needed and proper repairs, renewals, replacements, additions, and improvements
thereto and comply with the provisions of all leases to which it is a party or
under which it occupies property so as to prevent any loss or forfeiture thereof
or thereunder.
6.14 Location of Collateral. Notify Bank on a monthly basis within
----------------------
thirty (30) days of a change in a location at which Collateral is maintained,
except for Inventory that is (i) shipped to customers and vendors, (ii) shipped
between locations listed on Exhibit "E" or (iii) Inventory stored at customers'
-----------
premises for those contracts involving an aggregate sale price of less than
$50,000.
6.15 Additional Documents. Join Bank in executing any security
--------------------
agreements, assignments, consents, financing statements or other instruments, in
form satisfactory to Bank, as Bank may from time to time request in connection
with the Collateral and the other security for the Loans.
6.16 Notice to Bank. Promptly notify Bank of: (a) any default or
--------------
Event of Default, (b) the acceleration of the maturity of any Debt or
Contractual Obligation; (c) a default in the performance of, or compliance with,
any Requirement of Law, Environmental Regulation, or Contractual Obligation of
Borrower or any of its Subsidiaries; (d) any litigation, dispute, or proceeding
that is pending or known by Borrower's officers to be threatened against
Borrower or any of its Subsidiaries and that might involve a claim for damages
or a request for injunctive, enforcement, or other relief that, if granted,
might reasonably be expected to have a Material Adverse Effect on Borrower; (e)
a change in either the name or the principal place of business of Borrower or
the office where its books and records are kept; (f) any change in its
accounting methods, policies, or practices for financial reporting purposes or
any material change in its accounting methods, policies, or practices for tax
reporting purposes; and (g) a material adverse change in the business,
operations, assets, property, or condition (financial or other) of Borrower.
Borrower shall provide with each notice pursuant to this section a statement of
an officer of Borrower setting forth details of the occurrence referred to in
the notice and stating what action Borrower proposes to take with respect to it.
Borrower shall also promptly notify Bank of any agreement to acquire another
company, including in the notice a copy of the acquisition agreement and
financial information regarding the acquired company.
44
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6.17 Subordination of Debt. Provide Bank with a debt subordination
---------------------
agreement, in form and substance satisfactory to Bank, executed by Borrower and
each Subordinate Lender, and a debt and subordination agreement, in form and
substance satisfactory to Bank, executed by Borrower and any Person who is an
officer, director, shareholder or Affiliate of Borrower to whom Borrower is or
hereafter becomes indebted, subordinating in right of payment and claim all of
such Debt and any future advances thereon to the full and final payment of the
Obligations.
6.18 Collection of Accounts. Diligently pursue collection of all
----------------------
Accounts and other amounts due Borrower from others, including Affiliates of
Borrower.
6.19 Landlord and Storage Agreements. Provide Bank with copies of all
-------------------------------
agreements between Borrower and any landlord or warehouseman which owns any
premises at which any Inventory or other Collateral may, from time to time, be
kept.
6.20 Auditors' Letters. Furnish Bank with a copy of each finally
-----------------
issued letter written to Parent by its independent certified public accountant
concerning internal controls and management review immediately upon receipt of
same.
6.21 ERISA Compliance.
----------------
(a) At all times make prompt payment of contributions required
to meet the minimum funding standards set forth in ERISA with respect to each
Plan;
(b) Promptly after the filing thereof, furnish to Bank copies of
an annual report required to be filed pursuant to ERISA in connection with each
Plan and any other employee benefit plan of it and its Affiliates;
(c) Notify Bank as soon as practicable of any Reportable Event
and of any additional act or condition arising in connection with any Plan which
Borrower believes might constitute grounds for the termination thereof by the
Pension Benefit Guaranty Corporation or for the appointment by the appropriate
United States District Court of a trustee to administer the Plan; and
(d) Furnish to Bank, promptly upon Bank's request therefor,
such additional information concerning any Plan or any other such employee
benefit plan as may be reasonably requested.
6.22 Life Insurance Policy. Pay all premiums due with respect to the
---------------------
life insurance policy referred to in Section 3.1 ("Life Insurance") and do all
such other things as shall be necessary to maintain said life insurance, and the
pledge thereof to Bank, in full force and effect.
6.23 Financial Covenants. Maintain at all times that this Agreement
-------------------
is in effect: (a) total Tangible Net Worth of not less than $10,000,000; (b) a
ratio of Debt to Tangible Net Worth of not more than 4.0 to 1.0; (c) Fixed
Charge Coverage of not less than 1.1 to 1.0; (d) Funded Debt to EBITDA of not
more than 4.0 to 1.0; and (e) total Contingent Obligations of not more than
45
<PAGE>
$5,000,000. Borrower's compliance with the foregoing covenants will be measured
quarterly. Borrower's compliance with the covenants in subsections (c) and (d)
will be measured quarterly on a rolling four quarters basis.
6.24 Physical Inventory. Borrower shall at least one time during each
------------------
fiscal year conduct a physical inventory of all of its Inventory and shall
promptly certify to Bank the results of such inventory in detail satisfactory to
Bank.
6.25 Completed Improvements on California Real Property. Borrower
--------------------------------------------------
shall have completed improvements on the real property located in Stockton,
California and complied with the following conditions as of June 1, 2000: (i)
deliver to Bank a copy of the A.I.A. Certificate of Substantial Completion from
Borrower's architect or engineer accompanied by one or more contractor's
affidavits stating that the improvements have been completed in accordance with
the approved plans and are certified as being free of any structural defects;
(ii) deliver to Bank copies of waivers, releases or satisfactions of liens in
form and substance reasonably satisfactory to Bank, and other evidence as Bank
may reasonably request showing that all outstanding claims for construction
costs, including claims of contractors, subcontractors, laborers and
materialmen, have been paid to date and that there are no liens outstanding on
the property; (iii) a current dated copy of an as-built survey, showing the
location of the improvements on the property evidencing that the same are in
compliance with any restrictions of record or ordinances relating to the
locations thereof; (iv) deliver to Bank general contractor's warranties and all
other warranties of structural or major components (i.e., HVAC, roof, etc.); (v)
deliver to Bank a copy of the final and unconditional certificate of occupancy
for the improvements made on the property, a copy of any required approval by
any other appropriate governmental authority or a letter from the appropriate
governmental authority to the effect that no such certificate or other approval
is issued by it, accompanied by Borrower's certificate that no notice of any
claimed violations of ordinances have been served upon Borrower; (vi) deliver to
Bank a final as-built appraisal confirming that the Stockton, California Real
Estate, as approved, has a value of at least $3,400,000; (vii) deliver to Bank a
current endorsement to the property's title insurance policy (A) changing the
effective date as of the issuance of the certificate of occupancy, (B)
increasing the aggregate amount of the policy by an amount equal to the as-built
appraisal, (C) reflecting no matters adversely affecting title to the property
have been filed of record, and (D) confirming the lien of the California
Mortgage remains a valid first-priority lien on the property; and (viii) deliver
to Bank such other instruments, documents and certificates as Bank may
reasonably request.
6.26 Completed Improvements on Florida Real Property. Borrower shall
-----------------------------------------------
have completed improvements on the parcel of Florida Real Estate located at 710
Glades Court, Port Orange, Florida (the"Premises") and complied with the
following conditions as of December 31, 1999: (i) Borrower will deliver all lien
waivers and lien satisfactions to Bank; (ii) Borrower will record a Notice of
Termination terminating the Notice of Commencement recorded in Official Records
Book 4399, Page 3700 in Volusia County, Florida; and (iii) Borrower will deliver
to Bank a current endorsement to the Bank's title insurance policy indicating
the removal of the Notice of Commencement and reflecting no matters adversely
affecting title to the Premises have been filed of record.
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<PAGE>
7. Negative Covenants. Until the Obligations have been indefeasibly
------------------
repaid in full and until Bank has no further obligation to make advances under
the Loans, without the prior written consent of Bank, Borrower shall not:
7.1 Indebtedness. Except as permitted or contemplated by this
------------
Agreement and unless Borrower is in compliance with all of its financial
covenants, create, incur, assume, or suffer to exist any Debt or obligation for
money borrowed, or guarantee, or endorse, or otherwise be or become contingently
liable in connection with the obligations of any person, firm, or corporation
(including any Affiliate), except:
7.1.1 Indebtedness for taxes not at the time due and payable or
which are being actively contested in good faith by appropriate proceedings and
against which reserves deemed adequate by Bank have been established by
Borrower, but only if the non-payment of such taxes does not result in a Lien
upon any property of Borrower that has priority over the Lien held by Bank;
7.1.2 Contingent liabilities arising out of the endorsement of
negotiable instruments in the ordinary course of collection or similar
transactions in the ordinary course of business;
7.1.3 Debt, other than for borrowed money, incurred in the
ordinary course of business, including that evidenced by trade promissory notes
with a maturity of less than one year;
7.1.4 Debt to third parties for purchase money borrowing
incurred in connection with the purchase of capital assets and/or capital lease
obligations used in the business of Borrower, as long as this Debt does not
cause an Event of Default;
7.1.5 Debt for money borrowed from Bank; and
7.1.6 Debt incurred prior to the date of this Agreement and
reflected on the financial statements referred to in Section 5.5 ("Financial
Statements") which is not to be repaid with the proceeds of the Loans.
7.2 Liens and Security Interests. Create, incur, assume, or suffer
----------------------------
to exist any mortgage, security deed, deed of trust, security interest, pledge,
encumbrance, Lien or charge of any kind (including charges on property purchased
under conditional sales or other title-retention agreements) on any of its
property or assets, now owned or hereafter acquired, except:
7.2.1 Liens for taxes not yet due or which are being contested in
good faith by appropriate proceeding and against which reserves deemed adequate
by Bank have been set up (excluding any Lien imposed pursuant to any of the
provisions of ERISA), but only if the non-payment of such taxes does not result
in a Lien upon any property of Borrower that has priority over the Lien held by
Bank;
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<PAGE>
7.2.2 Other Liens incidental to the conduct of its business or
the ownership of its property and assets and created by operation of law so long
as the obligations secured thereby are not past due;
7.2.3 Purchase money Liens created to secure the indebtedness
permitted by Section 7.1.4;
7.2.4 Liens in favor of Bank; and
7.2.5 Liens reflected on Exhibit "C" to this Agreement.
-----------
7.3 Dividends and Distributions. Declare any dividends on any shares
---------------------------
of any class of its capital stock, or apply any of its property or assets to the
purchase, redemption or other retirement of, or set apart any sum for the
payment of any dividends on, or for the purchase, retirement of, or make any
other distribution by reduction of capital or otherwise in respect of, any
shares of any class of capital stock of Borrower, unless after any of the
foregoing payments, Borrower remains in compliance with all of its financial
covenants.
7.4 Affiliate Transactions. Purchase, acquire, or lease property
----------------------
from, or sell, transfer or lease property to, any Affiliate of Borrower, except
for (i) the exercise of stock options and (ii) arms-length transactions at fair
market value that are between Borrowers only. Engage in any other transaction
or arrangement with a Subsidiary that is not a Borrower that involves loans,
advances, or transfers of cash or property to the non-Borrower Subsidiary,
except for such transactions involving the proceeds of equity or Subordinated
Debt offerings.
7.5 Financing Statements. Permit any financing statement (except
--------------------
Bank's financing statements) to be on file with respect to the Collateral,
except for those filed to perfect Permitted Liens.
7.6 Name Change/Location of Chief Executive Office. Change the name,
----------------------------------------------
identity or corporate structure of Borrower, or change the location of its chief
executive office, unless notice has been given to Bank in advance of the move.
7.7 Destruction of Collateral. Waste or destroy the Collateral or
-------------------------
use it in violation of any statute or ordinance.
7.8 Liquidation, Merger or Consolidation. (a) Liquidate, wind up, or
------------------------------------
dissolve itself (or suffer any liquidation or dissolution); or (b) enter into
any merger or consolidation of which it is not the surviving corporation or
otherwise suffer a "Change in Control" in Parent, as defined below; or (c) sell,
lease, or otherwise dispose of any of its assets in an aggregate amount
exceeding $100,000 during any fiscal year, except sales of obsolete or worn-out
equipment and sales of Inventory in the ordinary course of its business.
For purposes of this Agreement, the term "Change in Control" means (a) any
"person" or "group" of persons (within the meaning of Section 13(d) of the
Securities Exchange Act of 1934, as
48
<PAGE>
amended) have acquired beneficial ownership, direct or indirect, or shall have
entered into a contract or arrangement that, upon consummation, will result in
its or their acquisition of, control over 30% or more of the votes attributable
to the voting stock of Parent; or (b) individuals who at the beginning of any
period of 24 consecutive calendar months were directors of Parent (together with
any new directors whose election to the board of directors of Parent or whose
nomination for election by the shareholders of Parent was approved by a vote of
at least two-thirds of the directors then still in office who either were
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the board of directors of Parent then in office.
7.9 Loans or Advances. Make loans or advances or pay any management
-----------------
or similar fees to any Affiliate or officer of Borrower or any Subsidiary,
except advances or payment of management or similar fees made in the ordinary
course of business, but under no circumstances to a non-Borrower Subsidiary.
Borrower may advance to its non-Borrower Subsidiaries the proceeds of an equity
or Subordinated Debt offering.
7.10 Cash Capital Expenditures. Make or commit to make any Cash
-------------------------
Capital Expenditures in any fiscal year exceeding a total of $1,000,000,
excluding any Cash Capital Expenditures made with respect to construction on the
Stockton, California Real Estate.
7.11 Acquisitions. Purchase or acquire the obligations or stock of or
------------
any other interest in any Person, unless the transaction does not result in an
Event of Default. Borrower acknowledges that Bank will need to complete its due
diligence investigation before approving the addition of acquired assets as more
eligible Inventory and Eligible Accounts for borrowing base purposes.
7.12. Prepayment of Debt. Prepay any Debt, except (i) Debt to Bank,
------------------
(ii) permitted payments with respect to Subordinated Debt described in Section
7.17 ("Subordinated Debt"), and (iii) accounts payable arising in the ordinary
course of business; provided, however, Borrower may pay accounts payable and
take ordinary trade discounts on purchases made in the ordinary course of
business.
7.13 Lease Transactions. Enter into any sale and lease-back
------------------
arrangement, except in the ordinary course of business.
7.14 Amendments. Amend any instrument evidencing a Lien listed on
----------
Exhibit "C" hereto.
- -----------
7.15 Deposit of Funds. Deposit proceeds of the Collateral into any
----------------
account other than the Special Collection Accounts.
7.16 Subordinated Debt. Make any cash payment (principal or interest)
with respect to Subordinated Debt, or with respect to any Debt that would be
Subordinated Debt but for the absence of a subordination agreement in effect
with respect thereto, except that Borrower shall be entitled to make payments
with respect to such Debt to the extent expressly permitted in any
49
<PAGE>
subordination agreement in effect with respect thereto, but only during such
time as no default or Event of Default exists hereunder.
7.17 Change in Business. Enter into any business which is
------------------
substantially different from the business or businesses in which it is presently
engaged, if the business in which Borrower is presently engaged fails to account
for at least fifty percent (50%) of Borrower's annual revenues on an ongoing
basis.
7.18 Accounts. Sell, assign, or discount any of its Accounts,
--------
Instruments, Chattel Paper, or any promissory notes held by it other than
discount of such Accounts, Chattel Paper, or notes in the ordinary course of
business for collection. Borrower shall notify Bank promptly in writing with
any discount, offset, or other deductions not shown on the face of an Account
invoice and any dispute over an Account, and any information relating to an
adverse change in any Account Debtor's financial condition or ability to pay its
obligations.
7.19 Margin Stock. Use any proceeds of the Loans to purchase or carry
------------
any margin stock (within the meaning of Regulation U of the Board of Governors
of the Federal Reserve System) or extend credit to others for the purpose of
purchasing or carrying any margin stock.
7.20 Subsidiaries. Dispose of any Subsidiaries, or permit any
------------
Subsidiary to issue capital stock, except to its Parent. Parent shall maintain
at least the percentage ownership of each Subsidiary shown on the attached
Exhibit "F". Newly formed or acquired Subsidiaries with tangible assets of more
- -----------
than $100,000 will join this Agreement and each Note and become a Borrower
within sixty (60) days after the acquisition or formation of the Subsidiary,
unless the following conditions are satisfied: (a) any new Contingent
Obligations incurred by Borrower in connection with the acquisition are less
than $2 million, (b) the acquisition transaction does not involve cash
expenditures by Borrower, except to the extent those cash expenditures are
funded from proceeds of an equity or Subordinated Debt offering, (c) the
acquisition transaction does not cause Borrower's Contingent Obligations to
exceed the amount specified in Section 6.23 or otherwise cause an Event of
Default, and (d) the terms of the acquired Subsidiary's Funded Debt preclude the
acquired Subsidiary from becoming a Borrower. Borrower will not be required to
cause the acquired or formed Subsidiary to join this Agreement and each Note as
a Borrower if the joinder would cause an Event of Default because of a resulting
breach of a representation or warranty unless Bank waives compliance with the
respresentation or warranty with respect to that breach. Borrower shall not
sell, transfer or lease any property to E.S.C. of Nevada, Inc., Don Bell
Industries of Nevada, Inc. Nevada Services, Inc., or any newly formed or
acquired Subsidiary with tangible assets of less than $100,000, except for
sales, transfers, and leases in the ordinary course of business that do not
exceed $100,000 in the aggregate during the term of the Loans.
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8. Grant of Security Interest.
--------------------------
8.1 Security Interest. As security for the payment of the Loans and
-----------------
all other Obligations, now existing or in the future incurred, and including any
extensions or renewals or changes in form of the Loans, any over-advances, and
any other Obligations, and all costs and expenses of collection thereof,
including, without limitation, attorneys' fees, Borrower hereby assigns to Bank
and grants to Bank a security interest in and Lien upon the following:
(a) All of Borrower's Accounts;
(b) All of Borrower's Documents;
(c) All of Borrower's Instruments;
(d) All of Borrower's General Intangibles;
(e) All of Borrower's Chattel Paper;
(f) All of Borrower's Inventory;
(g) All of Borrower's Equipment;
(h) All of proceeds, products, and profits as the case may be,
of Borrower's Accounts, Documents, Instruments, Chattel Paper, General
Intangibles, Equipment, and Inventory;
(i) All monies and other property of any kind, real, personal,
or mixed, and tangible or intangible, now or at any time or times hereafter, in
the possession or under the control of Bank or a bailee of Bank;
(j) All accessions to, substitutions for and all replacements,
products, profits, income, and cash and non-cash proceeds of (a) through (g)
above, including, without limitation, proceeds of and unearned premiums with
respect to insurance policies insuring any of the Collateral; and
(k) All books and records (including, without limitation,
customer lists, credit files, magnetic, digital and laser tapes and disks,
electronic and computer storage media, computer programs, print-outs, and other
computer materials and records) of Borrower pertaining to any of (a) through (h)
above.
51
<PAGE>
In addition, the applicable Borrower shall execute and deliver to Bank the
Mortgages, granting to Bank a first lien on the Real Estate and assignment of
the life insurance policy in the amount of $1,000,000 on the life of J. William
Brandner. The new Mortgage on the Port Orange, Florida Real Estate will secure
only the Term Loan and recovery under this Mortgage will be limited to $345,000.
The Mortgage on the Stockton, California Real Estate will secure all
Obligations. As Borrower obtains more trademarks or patents, Borrower shall
execute appropriate instruments granting to Bank a security interest in those
assets.
8.2 Sale of Inventory. Until the occurrence of an Event of Default,
-----------------
Borrower may use and dispose of the Inventory in the ordinary course of business
where such is not inconsistent with this Agreement, provided that the ordinary
course of business does not include a transfer in partial or total satisfaction
of Debt nor a transfer (other than a sale on terms and conditions which would
apply if disinterested parties were involved) to an Affiliate of Borrower.
8.3 Notice to Account Debtors. If an Event of Default exists
-------------------------
hereunder, Bank may notify the Account Debtors obligated on any or all of the
Accounts to make payment thereof directly to Bank and to take control of all
proceeds of any such Accounts. Any such notice by Bank to such Account Debtors
shall be given by an officer of Bank. Borrower, if requested by Bank, shall
stamp or cause to be stamped on each Account item in legible letters "Pledged to
SouthTrust Bank, National Association" and shall turn over physical possession
of the Accounts to Bank. Borrower authorizes Bank to sign and endorse
Borrower's name upon any check, draft, money order, or other form of payment of
any Account item and to sign and endorse satisfactions and releases of Account
items in Borrower's name. Until such time as Bank elects to exercise such right
by mailing to Borrower written notice thereof, Borrower is authorized, as agent
of Bank, to collect and enforce said Accounts in Borrower's name. The costs of
such collection and enforcement, including attorneys' fees and out-of-pocket
expenses and all other expenses and liabilities resulting therefrom, shall be
borne solely by Borrower whether the same are incurred by Bank or Borrower. At
the request of Bank, Borrower shall upon receipt of all checks, drafts, cash,
and other remittances in payment or on account of the Accounts deposit the same
in the Special Collection Accounts referred to in Section 4.2 ("Special
Collection Accounts"). The funds in the Special Collection Accounts shall be
held by Bank as security for all obligations secured hereby. Said proceeds
shall be deposited in precisely the form received, except for the endorsement of
Borrower where necessary to permit collection of items, which endorsement
Borrower agrees to make, and which Bank is also hereby authorized to make on
Borrower's behalf. Pending such deposit, Borrower agrees that it will not
commingle any such checks, drafts, cash, and other remittances with any of
Borrower's funds or property, but will hold them separate and apart therefrom
and upon an express trust for Bank until deposit thereof is made in the Special
Collection Accounts. Bank may, in accordance with the provisions of this
Agreement, apply the whole or any part of the collected funds on deposit in the
Special Collection Accounts against the principal and/or interest of the Loans
or other Obligations secured hereby, the order and method of such application to
be at the discretion of Bank. Any portion of said funds on deposit in the
Special Collection Accounts which Bank elects not to so apply may, at Bank's
election, be paid over by Bank to Borrower; provided, however, that if at any
time Bank grants to Borrower the right to retain the proceeds of the Accounts
for Borrower's use, or if at any time Bank elects to pay funds on deposit in the
Special Collection Accounts to Borrower,
52
<PAGE>
such right to retain and use proceeds or payment from the Special Collection
Accounts shall be deemed to be continuing new value for the security interest
attaching hereunder on all after-acquired property.
8.4 Verification of Accounts. Whether or not an Event of Default has
------------------------
occurred, any of Bank's officers, employees, or agents shall have the right, at
any time or times hereafter, in the name of Bank, or any designee of Bank or
Borrower, to verify the validity, amount, or any other matter relating to any
Accounts by mail, telephone, telegraph, or otherwise. Borrower shall cooperate
fully with Bank in an effort to facilitate and promptly conclude any such
verification process.
8.5 Post Office Box. If an Event of Default has occurred or is
---------------
continuing, Borrower agrees to acquire at its expense a post office box in the
place designated by Bank, to which Bank and its designees alone shall have
access. (Borrower acknowledges that Ad Art will be subject to a lockbox
arrangement, even in the absence of an Event of Default.) Borrower agrees to
give notice to all of its Account Debtors to mail payments due to Borrower to
such post office box. Borrower agrees that Bank, or its designees, may open such
post office box, may receive, open, and dispose of all mail addressed to
Borrower at such post office box, and may deposit any payments contained in such
mail in a Special Collection Account referred to in Section 4.2 ("Special
Collection Accounts"). Borrower agrees to give all required instructions to the
U.S. Postal Service authorities to enable Bank or its designees to attain access
to such post office box of Borrower, agrees that it will not attempt to remove
any mail from such post office box, and agrees to execute such additional
agreements as Bank may reasonably require in connection with such post office
box.
8.6 Governmental Accounts. If any of Borrower's Accounts in excess
---------------------
of $10,000 arise out of contracts with the United States or any department,
agency, or instrumentality thereof, Borrower will immediately notify Bank
thereof in writing and execute any instruments and take any steps required by
Bank in order that all monies due and to become due under such Account shall be
assigned to Bank and notice thereof given to the Government under the Federal
Assignment of Claims Act.
8.7 Accounts Evidenced by Instruments. If any of Borrower's Accounts
---------------------------------
are or should become evidenced by promissory notes, trade acceptances, chattel
paper, chattel mortgages, conditional sales contracts, or other instruments,
Borrower will immediately deliver same to Bank, endorsed or assigned with
recourse to Bank's order and, regardless of the form of such endorsement or
assignment, Borrower hereby waives presentment, demand, notice of dishonor,
protest and notice of protest, and all other notices with respect thereto.
8.8 Lease of Records. Borrower hereby leases to Bank, and Bank hires
----------------
from Borrower, for a term which shall be effective so long as the Loans or other
Obligations secured hereby are owing to Bank by Borrower and until Bank has no
further obligation under the Agreement, all of Borrower's present and future
books of Accounts, computer printouts, magnetic, digital and laser tapes and
disks, computer and electronic storage media, computer software programs, trial
balance records, ledgers and cabinets in which they are located, reflected or
53
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maintained, in any way relating to the Collateral, and all present and future
supporting evidence and documents relating thereto in the form of written
applications, credit information, account cards, payment records, trial
balances, correspondence, delivery receipts, certificates and the like, as well
as the past and current information stored in computer software programs for and
on Borrower's behalf by third parties. Borrower, if requested by Bank, agrees to
legend all of the foregoing to indicate the lease thereof to Bank. If an Event
of Default occurs, then, in addition to all of the other rights and remedies of
Bank herein, Bank will have the right forthwith or at any time thereafter to
remove from Borrower's premises all of the foregoing and keep and retain the
same in Bank's possession until the Loans and other Obligations secured hereby
shall have been fully paid and discharged and Bank has no further obligation
under the Agreement. The provisions of this section shall not be deemed to
diminish or contravene the security interest of Bank in Borrower's General
Intangibles or in the property, materials, and interests described in this
section, but shall be deemed to be in addition to any rights Bank may have with
respect to Borrower's grant of a security interest in its General Intangibles to
Bank.
8.9 License of Rights. Bank is hereby granted a license or other
-----------------
right to use, without charge, Borrower's labels, patents, copyrights, rights of
use of any name, trade secrets, trade names, trademarks, and advertising matter
or any property of a similar nature as it pertains to the Collateral, in
advertising for sale and in selling any Collateral, and Borrower's rights under
all licenses and all franchise agreements shall inure to Bank's benefit.
8.10 Attorney-in-Fact. Borrower hereby irrevocably designates, makes,
----------------
constitutes, and appoints Bank (and all Persons designated by Bank) as
Borrower's true and lawful attorney (and agent-in-fact) and Bank, or Bank's
agent, may, without notice to Borrower and in either Borrower's or Bank's name,
but at the cost and expense of Borrower:
8.10.1 At such time or times hereafter as Bank or said agent,
in its sole discretion, may determine, endorse Borrower's name on any checks,
notes, acceptances, drafts, money orders, or any other evidence of payment or
proceeds of the Collateral which come into the possession of Bank or under
Bank's control; and
8.10.2 If an Event of Default exists, Bank may: (i) demand
payment of the Accounts from the Account Debtors, enforce payment of the
Accounts by legal proceedings or otherwise, and generally exercise all of
Borrower's rights and remedies with respect to the collection of the Accounts;
(ii) settle, adjust, compromise, discharge, or release any of the Accounts or
other Collateral; (iii) sell or collect any of the Accounts or other Collateral
upon such terms, and for such amounts and at such time or times as Bank deems
advisable; (iv) take possession, in any manner, of any item of payment or
proceeds relating to any Collateral and apply the same to the Obligations; (v)
prepare, file, and sign Borrower's name to a proof of claim in bankruptcy or
similar document against any Account Debtor or to any notice of lien,
assignment, or satisfaction of lien or similar document in connection with any
of the Collateral; (vi) receive, open, and dispose of all mail addressed to
Borrower and to notify postal authorities to change the address for delivery
thereof to such address as Bank may designate; (vii) endorse the name of
Borrower upon any of the items of payment or proceeds relating to any Collateral
and deposit the same to the account of Bank or any
54
<PAGE>
other bank on account of the Obligations; (viii) endorse the name of Borrower
upon any Chattel Paper, document, instrument, invoice, freight bill, bill of
lading, or similar document or agreement relating to the Accounts, Inventory,
and any other Collateral; (ix) use Borrower's stationery and sign the name of
Borrower to verifications of the Accounts and notices thereof to Account
Debtors; (x) use the information recorded on or contained in any data processing
equipment and computer hardware and software relating to the Accounts,
Inventory, and any other Collateral and to which Borrower has access; (xi) make
and adjust claims under policies of insurance; and (xii) for and in the name of
Borrower to give instructions and direct any bank or financial institution in
which proceeds of the Collateral are deposited to turn over said proceeds to
Bank; and (xiii) do all other acts and things necessary, in Bank's
determination, to fulfill Borrower's obligations under this Agreement.
9. Additional Representations, Covenants, and Agreements Relating to
-----------------------------------------------------------------
Collateral.
- ----------
9.1 Reliance on Statements Pertaining to Accounts. With respect to
---------------------------------------------
all Accounts, Borrower represents and warrants to Bank that Bank may rely, in
determining which Accounts are Eligible Accounts, on all statements and
representations made by Borrower with respect to any Account or Accounts, and
unless otherwise indicated in writing to Bank, that with respect to each
Account:
9.1.1 It is genuine and in all respects what it purports to be,
and it is not evidenced by a judgment;
9.1.2 It arises out of a completed, bona fide sale and delivery
of goods or rendition of services by Borrower in the ordinary course of its
business and in accordance with the terms and conditions of all purchase orders,
contracts, or other documents relating thereto and forming a part of the
contract between Borrower and the Account Debtor;
9.1.3 It is for a liquidated amount maturing as stated in the
duplicate invoice covering such sale or rendition of services, a copy of which
has been furnished or is available to Bank;
9.1.4 Such Account, and Bank's security interest therein, is
not, and will not be in the future, subject to any offset, Lien, deduction,
defense, dispute, counterclaim, or any other adverse condition, except for
disputes resulting in returned goods where the amount in controversy is deemed
by Bank to be immaterial, and each such Account is absolutely owing to Borrower
and the obligation to pay is not contingent in any respect or for any reason;
9.1.5 Borrower has made no agreement with any Account Debtor
thereunder for any deduction therefrom, except discounts or allowances which are
granted by Borrower in the ordinary course of its business for prompt payment
and which are reflected in the calculation of the net amount of each respective
invoice related thereto;
55
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9.1.6 There are no facts, events, or occurrences which in any
way impair the validity or enforceability thereof or tend to reduce the amount
payable thereunder from the face amount of the invoice and statements delivered
to Bank with respect thereto;
9.1.7 To the best of Borrower's knowledge, the Account Debtor
thereunder (i) has the capacity to contract at the time any contract or other
document giving rise to the Account was executed and (ii) such Account Debtor is
Solvent;
9.1.8 Borrower has no knowledge of any fact or circumstance
which would impair the validity or collectability of the Account, and to the
best of Borrower's knowledge there are no proceedings or actions which are
threatened or pending against any Account Debtor thereunder which might result
in any material adverse change in such Account Debtor's financial condition or
the collectability of such Account.
9.2 Affirmation of Representations. Each request for a loan or
------------------------------
advance made by Borrower pursuant to this Agreement or any of the other Loan
Documents shall constitute (i) an automatic representation and warranty by
Borrower to Bank that there does not then exist any default or Event of Default
and (ii) a reaffirmation as of the date of said request that all of the
representations and warranties of Borrower contained in this Agreement and the
other Loan Documents are true in all material respects, except for any changes
in the nature of Borrower's business or operations that would render the
information contained in any exhibit attached hereto either inaccurate or
incomplete, so long as Bank has consented to such changes or such changes are
expressly permitted by this Agreement.
9.3 Waivers. Borrower hereby releases and waives any and all
-------
actions, causes of action, demands and suits which it may ever have against Bank
as a result of any possession, collection, settlement, compromise, or sale by
Bank of any of the Accounts upon the occurrence of an Event of Default
hereunder, notwithstanding the effect of such possession, collection,
settlement, compromise, or sale upon the business of Borrower. Said waiver
shall include all causes of action and claims which may result from the exercise
of the power of attorney conferred upon Bank in Section 8.10 ("Attorney-in-
Fact").
9.4 Discharge of Taxes and Liens. At its option, Bank may discharge
----------------------------
taxes, Liens, security interests, or other encumbrances at any time levied or
placed on the Collateral and may pay for the maintenance and preservation of the
Collateral. Borrower agrees to reimburse Bank, on demand, for any payment made
or expense incurred by Bank pursuant to the foregoing authorization, including,
without limitation, attorneys' fees.
9.5 Insurance. Without limiting any other provision hereof, Borrower
---------
shall keep the Collateral insured in amounts equal to its full insurable value,
with companies, and against such risks as may be satisfactory to Bank. Borrower
will pay the costs of all such insurance and deliver policies evidencing such
insurance to Bank with mortgagee loss payable clauses in favor of Bank. Borrower
hereby assigns to Bank all right to receive proceeds, directs any insurer to pay
all proceeds
56
<PAGE>
directly to Bank, and authorizes Bank to endorse any check or draft for such
proceeds and apply the same toward satisfaction of the Loans and other
Obligations secured hereby.
9.6 Complete Records. Borrower will at all times keep accurate and
----------------
complete records of the Collateral, and Bank or its agents shall have the right
to call at Borrower's place or places of business at intervals to be determined
by Bank, upon reasonable notice and during Borrower's regular business hours,
and without hindrance or delay, to inspect and examine the Inventory and to
inspect, audit, check, and make abstracts from the books, records, journals,
orders, receipts, computer printouts, correspondence, and other data relating to
the Collateral or to any other transactions between the parties hereto. If
requested by Bank, Borrower agrees to make its books, records, journals, orders,
receipts, computer printouts, correspondence, and other data relating to the
Collateral available for inspection, audit, and checking by Bank or its agents.
9.7 Uniform Commercial Code Financing Statement. Borrower agrees
-------------------------------------------
that a carbon, photographic, or other reproduction of this Agreement or of a
signed financing statement with respect to the Collateral shall be sufficient as
a financing statement and may be filed as such by Bank.
10. Events of Default. The occurrence of any one or more of the following
-----------------
events shall constitute an Event of Default (unless and except to the extent
that the same is cured to the satisfaction of Bank within the applicable cure
period, if any, or, at the sole discretion of Bank, at any time thereafter):
10.1 Payment Default. If Borrower shall fail to make any payment of
---------------
any installment of principal or interest on any Note within 10 days after the
same becomes due and payable, whether at stated maturity, by declaration, upon
acceleration, or otherwise; or
10.2 Fees and Expenses. If Borrower shall fail to pay when due any
-----------------
expense, fee or charge provided for in this Agreement within 10 days after the
same becomes due and payable; or
10.3 Certain Agreement. If Borrower defaults in the observance or
-----------------
performance of any agreement contained in Article 7 of this Agreement ("Negative
Covenants") or in the observance or performance of the agreements set forth in
Section 4.2 ("Special Collection Accounts"), 6.1 ("Insurance"), 6.2 ("Corporate
Existence; Qualification") (with respect to existence only), 6.10 ("Visits and
Inspections"), 6.15 ("Additional Documents"), 6.16 ("Notice to Bank") (with
respect to parts (a) and (b) only), 6.17 ("Subordination of Debt"), 6.18
("Collection of Accounts"), or 6.23 ("Financial Covenants"); or
10.4 Other Defaults. If Borrower or any other party (except Bank)
--------------
shall fail to perform, keep or observe any covenant, agreement or provision of
the Note(s) or of this Agreement (other than those set forth in Sections 10.1
through 10.3 and Sections 10.5 through 10.19) or of any other Loan Documents and
such failure shall continue uncured for a period of thirty (30) days after such
performance or observance is required hereunder or thereunder; or
57
<PAGE>
10.5 Representations False. If any warranty, representation, or other
---------------------
statement made or furnished to Bank by or on behalf of Borrower or in any of the
Loan Documents proves to be false or misleading in any respect when made or
furnished if not cured within 30 days from the time Borrower has notice of the
breach (but the foregoing cure period will not apply unless Borrower is
reasonably capable of curing the breach within the 30-day cure period); or
10.6 Financial Difficulties. If Borrower or any of its Subsidiaries
----------------------
shall be involved in financial difficulties as evidenced:
(a) by its admission in writing of its inability to pay its
debts generally as they become due or of its ceasing to be Solvent;
(b) by its commencing a voluntary case under the United States
Bankruptcy Code or any similar law regarding debtor's rights and remedies or an
admission seeking the relief therein provided;
(c) by its making a general assignment for the benefit of its
creditors; or
(d) by its voluntarily liquidating or terminating operations or
applying for or consenting to the appointment of, or the taking of possession
by, a receiver, custodian, trustee or liquidator of such Person or of all or of
a substantial part of its assets; or
10.7 Involuntary Proceedings. If without its application, approval,
-----------------------
or consent, a proceeding shall be commenced, in any court of competent
jurisdiction, seeking in respect of Borrower or any of its Subsidiaries any
remedy under the federal Bankruptcy Code, the liquidation, reorganization,
dissolution, winding-up, or composition or readjustment of debt, the appointment
of a trustee, receiver, liquidator or the like of such Person, or of all or any
substantial part of the assets of such Person, or other like relief under any
law relating to bankruptcy, insolvency, reorganization, winding-up, or
composition or adjustment of debts, which results in the entry of an order for
relief or such adjudication or appointment remains undismissed or undischarged
for a period of 30 days; or
10.8 ERISA. If a Reportable Event shall occur which Bank, in its
-----
sole discretion, shall determine in good faith constitutes grounds for the
termination by the Pension Benefit Guaranty Corporation of any Plan or for the
appointment by the appropriate United States district court of a trustee for any
Plan, or if any Plan shall be terminated or any such trustee shall be requested
or appointed, or if Borrower is in "default" (as defined in Section 4219(c)(5)
of ERISA) with respect to payments to a Multiemployer Plan resulting from
Borrower's complete or partial withdrawal from such Plan; or
10.9 Default on Other Obligations. If Borrower or any Subsidiary
----------------------------
shall default under any of the Subordinated Debt or in the payment of more than
$100,000 due on any Debt of Borrower or any Subsidiary to any others; or
58
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10.10 Put Option Event. An event occurs that would entitle a
----------------
Subordinated Lender to exercise a put option under any of the Subordinated Debt.
10.11 Judgments. If a final judgment for the payment of money in
---------
excess of $100,000 shall be rendered against Borrower and the same shall remain
undischarged for a period of 30 days during which execution shall not be
effectively stayed, unless such judgment is fully covered by collectible
insurance; or
10.12 Actions. If Borrower shall be criminally indicted or convicted
-------
under any law; or
10.13 Collateral. If a creditor of Borrower shall obtain possession
----------
of any of the Collateral by any legal means; or
10.14 Change in Control. If there occurs a Change in Control of
-----------------
Parent (as that term is defined in Section 7.8), or if J. William Brandner
should die, resign or be removed or demoted, unless the Parent appoints a
successor acceptable to Bank within ninety (90) days of such occurrence; or
10.15 Life Insurance Policy. If the premiums are not paid on the life
---------------------
insurance policy referred to in Section 3.1 ("Life Insurance") or such life
insurance policy is otherwise canceled or terminated or if the assignment
thereof to Bank is terminated in any manner; or
10.16 Subordination Agreements. If a breach or default shall occur
------------------------
with respect to any subordination agreement executed by any creditor of Borrower
(including any Affiliate), or if any said agreement shall otherwise terminate or
cease to have legal effect; or
10.17 Priority of Security Interest. If any security interest or Lien
-----------------------------
of Bank hereunder or under any other Security Agreement shall not constitute a
perfected security interest of first priority in the Collateral thereby
encumbered, subject only to Permitted Liens; or
10.18 Loss of Collateral. If there shall occur any material loss,
------------------
theft, damage or destruction of any of the Collateral, which loss is not fully
insured; or
10.19 Material Adverse Change. If Borrower or any Subsidiary suffers
-----------------------
a material adverse change in its business, assets, properties, prospects,
results of operation, or condition (financial or other).
On the occurrence of any Event of Default, Bank or the holder of the Notes
may at its option proceed to protect and enforce its rights by suit in equity,
action at law and/or the appropriate proceeding either for specific performance
of any covenant or condition contained in the Notes or in any Loan Document,
and/or declare the unpaid balance of the Loans and Note together with all
accrued interest to be forthwith due and payable, and thereupon such balance
shall become so due
59
<PAGE>
and payable without presentation, protest or further demand or notice of any
kind, all of which are hereby expressly waived.
Borrower agrees that default under any Loan Document shall constitute
default with respect to all Loan Documents.
Without limiting the foregoing, upon the occurrence of any Event of
Default, and at any time thereafter, Bank shall have the rights and remedies of
a secured party under the Code (and the Uniform Commercial Code of any other
applicable jurisdiction) in addition to the rights and remedies provided herein
or in any other instrument or paper executed by Borrower. Bank may require
Borrower to assemble the Inventory and make the same available to Bank at a
place to be designated by Bank which is reasonably convenient to both parties.
Unless the Collateral is perishable or threatens to decline speedily in value,
or is a style customarily sold on a recognized market, Bank will give Borrower
reasonable notice of the time after which any private sale or other intended
disposition thereof is to be made. The requirement of reasonable notice shall
be met if such notice is mailed postage prepaid to Borrower at least five (5)
days before the time of such sale or disposition. Borrower shall pay Bank on
demand any and all expenses, including legal expenses and reasonable attorneys'
fees, incurred or paid by Bank in protecting or enforcing the Loans and all
other Obligations secured hereby and other rights of Bank hereunder, including
its right to take possession of the Collateral.
Bank shall not be liable for failure to collect the Accounts or to enforce
any contract rights or for any action or omission on the part of Bank, its
officers, agents and employees, except willful misconduct. No remedy herein
conferred upon, or reserved to, Bank is intended to be exclusive of any other
remedy or remedies, including those of any note or other evidence of Debt held
by Bank, and each and every remedy shall be cumulative and shall be in addition
to every other remedy given hereunder or now or hereafter existing in law or in
equity. Exercise or omission to exercise any right of Bank shall not affect any
subsequent right of Bank to exercise the same.
Borrower waives notice prior to Bank's taking possession or control of any
of the Collateral or any bond or security that might be required by any court
prior to allowing Bank to exercise any of Bank's remedies, including the
issuance of an immediate writ of possession.
In addition to any other remedy available to it, Bank shall have the right
to the extent provided by law, upon the occurrence of an Event of Default, to
seek and obtain the appointment of a receiver to take possession of and operate
and/or dispose of the business and assets of Borrower and any costs and expenses
incurred by Bank in connection with such receivership shall bear interest at the
Default Rate.
11. Environmental Provisions; Indemnification.
------------------------ ---------------
11.1 Contamination. Borrower acknowledges that certain soil and
-------------
groundwater in the parcel of Real Estate owned by Ad Art Electronic Sign
Corporation, a Borrower, and having a street address of 3133 Ad Art Road ("Area
One"), may have been impacted by contaminant substances (collectively, the
"Contamination"). Borrower further acknowledges that, as of the date
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<PAGE>
of this Agreement, Bank's knowledge concerning the Contamination is limited to
the information set forth in the Phase I Environmental Update issued on April 9,
1999 by National Assessment Corporation (the "Report"). Without limiting the
generality of Borrower's obligation under this Agreement to maintain the Real
Estate in compliance with applicable Environmental Regulations, Borrower
specifically agrees to conduct such assessment and remediation work as may be
necessary to bring Area One into compliance with applicable Environmental
Regulations and otherwise satisfy the requirements of the Governmental
Authorities with jurisdiction regarding the environmental condition of the Real
Estate.
11.2 Environmental Assessment and Remediation Obligation of Borrower.
---------------------------------------------------------------
Borrower shall promptly undertake and diligently proceed with assessment and
remediation of the Contamination at their sole cost and expense. Borrower shall
select and utilize only qualified engineers, contractors, and consultants
(collectively, the "Consultants") to conduct the assessment and remediation
required under this Agreement. All Consultants must be approved in writing by
Bank before they initiate work in connection with the Contamination. For
purposes of this Agreement, the term "assessment" means the identification of
the types and concentrations of contaminants present in the soil and
groundwater, the delineation of the horizontal and vertical extent of those
contaminants, and the evaluation of the appropriate remedial action necessary to
bring Area One, as well as any other property impacted by the Contamination,
into compliance with applicable Environmental Regulations or comply with the
requirements of the Governmental Authorities with jurisdiction. For purposes of
this Agreement, the term "remediation" shall mean any response, removal, or
other remedial action required by or initiated pursuant to the mandate of any
Environmental Regulation or Governmental Authorities. Borrower shall initiate a
Contamination assessment within 30 days of the date of this Agreement and shall
diligently and continuously pursue those assessment efforts and any required
remediation in good faith to completion in accordance with this section.
Borrower shall keep Bank fully apprised at all times of the status of the
assessment and remediation of the Contamination. Without limiting the generality
of the foregoing, Borrower shall provide to Bank within ten days after the
receipt copies of all reports and testing data generated by or on behalf of
Borrower or the Consultants with respect to the assessment and remediation of
the Contamination. Additionally, Borrower shall submit monthly written reports
to Bank, in form and substance satisfactory to Bank, apprising Bank of the
status of those activities and all material developments relating to the
Contamination. Bank reserves the right to have an independent environmental
consultant and/or Bank's legal counsel review such reports and data and Borrower
agrees to pay the reasonable cost of that review. Borrower further agrees to
allow Bank's consultant and other Bank representatives access to the Real Estate
for purposes of conducting site inspections and verifications. For purposes of
this Agreement, Borrower shall be deemed to have completed all required
assessment and remediation efforts with respect to the Contamination when all
regulatory mandates with respect to the assessment and remediation have been
satisfied as evidenced by the delivery to Bank of (1) a written certification
issued by Borrower's Consultants in form and substance acceptable to Bank, and
its independent consultant and legal counsel, that all required assessment or
remediation has been completed with respect to the Contamination, or (2) a "No
Further Action Letter" issued by the appropriate Regulatory Agency, as
determined by Bank and its independent consultant and legal counsel. Borrower
shall complete required remediation efforts with respect to the Contamination
within one year from the date of this Agreement.
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11.3 Escrow for Assessment and Remediation Costs. At closing, Bank
-------------------------------------------
will reserve from the amount available to be drawn under the Revolving Loan the
sum of $40,000 to secure the satisfaction of Borrower's assessment and
remediation obligations under this Agreement.
11.4 Environmental Management of Mortgaged Property Facility. The
-------------------------------------------------------
parties to this Agreement acknowledge that, as of the date of this Agreement,
Bank has not participated in the operation or management of the Real Estate or
any facilities located on it and has not otherwise been in a position to
influence financial management, environmental remediation, hazardous waste
disposal, or hazardous material treatment affecting or relating to the Real
Estate. Moreover, the parties acknowledge that nothing contained in this
Agreement would grant to Bank the right or ability to meaningfully direct,
influence, or control future decisions regarding environmental remediation on
the Real Estate, the disposal or treatment of hazardous waste delivered to or
otherwise represent on the Real Estate, or the financial management of the Real
Estate. The parties also acknowledge that the obligations of Borrower and the
limited rights of Bank under this Agreement with respect to the assessment and
remediation of the Contamination are intended only to protect the value of the
Collateral securing Bank's Loans.
11.5 Indemnification. Borrower shall defend, indemnify and hold
---------------
harmless Bank, its directors, officers, employees, accountants, attorneys, and
agents (the "Indemnitees") from and against any and all claims, demands,
judgments, damages, actions, causes of action, injuries, orders, penalties,
costs and expenses (including attorneys' fees and costs of court) of any kind
whatsoever arising out of or relating to any breach or default by Borrower or
any other Person under this Agreement or any Loan Document or the failure of
Borrower to observe, perform or discharge Borrower's duties hereunder or
thereunder. Without limiting the generality of the foregoing, Borrower's
obligation to indemnify Bank shall include indemnity from any and all claims,
demands, judgments, damages, actions, causes of action, injuries, orders,
penalties, costs, and expenses arising out of or in connection with the
activities of Borrower, its predecessors in interest, third parties who have
trespassed on Borrower's property, or parties in a contractual relationship with
Borrower, whether or not occasioned wholly or in part by any condition, accident
or event caused by an act or omission of the Indemnitees, which: (a) arise out
of the actual, alleged or threatened discharge, dispersal, release, storage,
treatment, generation, disposal, or escape of radioactive materials,
radioactivity, pollutants or other toxic or hazardous substances, including any
solid, liquid, gaseous, or thermal irritant or contaminant, including smoke,
vapor, soot, fumes, acids, alkalis, chemicals, and waste (including materials to
be recycled, reconditioned or reclaimed); or (b) actually or allegedly arise out
of the use, specification, or inclusion of any product, material, or process
containing chemicals or radioactive material, the failure to detect the
existence or proportion of chemicals or radioactive material in the soil, air,
surface water or groundwater, or the performance or failure to perform the
abatement of any pollution source or the replacement or removal of any soil,
water, surface water, or groundwater containing chemicals or radioactive
material; or (c) arises out of or relates to breach by Borrower of any of the
provisions of Section 5.22 ("Environmental Matters"); or (d) arise out of the
Contamination, the breach of any of Borrower's obligations under this Agreement
relating to the Contamination or the assessment or remediation of the
Contamination, including all costs of remediation or "clean-up" of the
Contamination, costs of determining whether the Real Estate is in compliance
with applicable Environmental Regulations, and all of Bank's attorney's fees,
consultants' fees, and court costs associated with the existence, assessment, or
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remediation of the Contamination. The obligations of Borrower under this section
shall survive any termination of this Agreement.
12. Miscellaneous.
-------------
12.1 Costs and Expenses. Borrower shall bear all expenses of Banks
------------------
(including fees and expenses of its counsel) in connection with the preparation
of this Agreement and the Loan Documents, and the issuance and delivery of the
Notes to Bank and also in connection with any amendment or modification thereto.
Borrower agrees to indemnify and save Bank harmless against all broker's and
finder's fees, if any. If, at any time or times hereafter, whether before or
after the occurrence of an Event of Default, Bank employs counsel to advise or
provide other representation with respect to this Agreement or the other Loan
Documents, or to collect the balance of the Loans or other obligations, or to
take any action in or with respect to any suit or proceeding relating to this
Agreement or any of the Loan Documents, or to protect, collect, or liquidate the
Collateral or to attempt to enforce any security interest or Lien granted to
Bank by Borrower; then in any such events, all of the reasonable attorneys' fees
arising from such services and any expenses, costs and charges relating thereto
shall constitute additional obligations of Borrower payable on demand of Bank.
Without limiting the foregoing, Borrower shall pay or reimburse Bank for all
recording and filing fees, intangibles taxes, documentary and revenue stamps,
other taxes or other expenses and charges payable in connection with this
Agreement, the Notes or any Loan Document, or the filing of any Loan Document,
financing statements or other instruments required by Bank in connection with
the Loans.
12.2 Waivers of Provisions. All amendments of this Agreement and
---------------------
all waivers and suspensions by Bank of any provision of this Agreement or of the
Loan Documents and all waivers and suspensions by Bank of any default or Event
of Default hereunder shall be effective only if (i) in writing and signed by a
duly authorized representative of Bank and (ii) accompanied by such fees and
charges as may be imposed by Bank in connection with the amendment. The fees may
include out-of-pocket expenses incurred by Bank in administration of the Loan or
in evaluation of the proposed waiver, amendment or suspension, as well as
additional facility fees and administrative fees that may be required by Bank in
connection with Borrower's request. The fees may include additional compensation
to Bank for the extension of the credit facilities represented by the Loan. Any
such amendment, waiver, or suspension may be granted only in the sole discretion
of Bank.
12.3 Actions Not Constituting a Waiver. Neither (i) the failure
---------------------------------
at any time or times hereafter to require strict performance by Borrower of any
of its provisions, warranties, terms and conditions contained in this Agreement
or any other agreement, document or instrument now or hereafter executed by
Borrower, and delivered to Bank, nor (ii) the failure of Bank to take action or
to exercise its remedies with respect to any default or Event of Default
hereunder, nor (iii) any delay or omission of Bank to exercise any right,
remedy, power, or privilege hereunder after the occurrence of a default or Event
of Default, shall act to waive, affect, or diminish any right of Bank to demand
strict compliance with the terms of this Agreement or to exercise remedies with
respect to any default or Event of Default.
63
<PAGE>
12.4 Headings; Exhibits. Except for the definitions set forth in
------------------
Article 1, the headings of the articles, sections, paragraphs and subdivisions
of this Agreement are for convenience of reference only, are not to be
considered a part hereof, and shall not limit or otherwise affect any of the
terms hereof. Unless otherwise expressly indicated, all references in this
Agreement to a section or an exhibit are to a section or an exhibit of this
Agreement. All exhibits referred to in this Agreement are an integral part of it
and are incorporated by reference in it.
12.5 Right of Setoff. Upon and after the occurrence of any Event of
---------------
Default, Bank may, and is hereby authorized by Borrower, at any time and from
time to time, to the fullest extent permitted by applicable laws, and without
advance notice to Borrower (any such notice being expressly waived by Borrower),
setoff and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and any other indebtedness at any time
owing by Bank to, or for the credit or the account of, Borrower against any or
all of the Obligations of Borrower now or hereafter existing whether or not such
Obligations have matured and irrespective of whether Bank has exercised any
other rights that it has or may have with respect to such Obligations,
including, without limitation, any acceleration rights. The aforesaid right of
setoff may be exercised by Bank against Borrower or against any trustee in
bankruptcy, debtor in possession, assignee for the benefit of the creditors,
receiver, or execution, judgment or attachment creditor of Borrower, or such
trustee in bankruptcy, debtor in possession, assignee for the benefit of
creditors, receiver, or execution, judgment or attachment creditor,
notwithstanding the fact that such right of setoff shall not have been exercised
by Bank prior to the making, filing or issuance, or service upon Bank of, or of
notice of, any such petition; assignment for the benefit of creditors;
appointment or application for the appointment of a receiver; or issuance of
execution, subpoena, order or warrant. Bank agrees to notify Borrower after any
such setoff and application, provided that the failure to give such notice shall
not affect the validity of such setoff and application. The rights of Bank under
this Section are in addition to the other rights and remedies (including,
without limitation, other rights of setoff) which Bank may have.
12.6 Survival of Covenants. All covenants, agreements,
---------------------
representations and warranties made herein and in certificates or reports
delivered pursuant hereto shall be deemed to have been material and relied on by
Bank, notwithstanding any investigation made by or on behalf of Bank, and shall
survive the execution and delivery to Bank of any Note or Loan Document. All
provisions in this Agreement for indemnification of Bank or payment of its costs
and expenses survive any termination of this Agreement.
12.7 Addresses. Any notice or demand which by any provision of
---------
this Agreement is required or provided to be given shall be deemed to have been
sufficiently given or served for all purposes by being delivered in person or by
facsimile to the party to whom the notice or demand is directed or by being sent
as first class mail, postage prepaid, to the following address: If to Borrower,
Display Technologies, Inc., 5029 Edgewater Drive, Orlando, Florida 32810,
Attention: J. William Brandner and with a copy to: Marshall S. Harris, General
--------------
Counsel, 5029 Edgewater Drive, Orlando, Florida 32810; or if any other address
shall at any time be designated by Borrower in writing to the holders of record
of the Note at the time of such designation to such other address; and if to
Bank, P. O. Box 2554, Birmingham, Alabama 35290, Attention: Asset-Based Lending
64
<PAGE>
Department (telecopy no. 205-254-4369), and with a copy to: SouthTrust Bank,
--------------
National Association, 1060 West International Speedway Boulevard, Daytona Beach,
Florida 32114, Attention: Commercial Banking Manager (telecopy no. (904)756-
6092); or if any other address shall at any time be designated in writing to
Borrower, to such other address.
12.8 Venue and Jurisdiction. Borrower agrees that any legal
----------------------
action brought by Bank to collect the Loans or any Obligation or to assert any
claim against Borrower under any Loan Document, or any part thereof, may be
brought in any court in the State of Florida having subject matter jurisdiction
and that any such court will have non-exclusive jurisdiction, waives its right
to object to any such action on grounds it is brought in the improper venue, and
irrevocably consents that any legal action or proceeding against it under,
arising out of, or in any manner relating to the Loans, the Obligations, or any
Loan Document may be brought in the Circuit Court of Hillsborough County,
Florida, or in any other Circuit Court of the State of Florida or in the U.S.
District Court for the Middle District of Florida. Any judicial proceeding by
Borrower against Bank under any Loan Document shall be brought only in one of
the foregoing courts in Florida. Borrower, by the execution of this Agreement,
expressly and irrevocably assents and submits to the non-exclusive personal
jurisdiction of any such court in any such action or proceeding. Borrower
consents to the service of process relating to any such action or proceeding by
mail to the address set forth in this Agreement.
12.9 Benefits. All of the terms and provisions of this Agreement
--------
shall bind and inure to the benefit of the parties hereto and their respective
successors and assigns. Borrower may not assign any of its rights or obligations
hereunder without the prior written consent of Bank.
12.10 Controlling Law. This Agreement shall be governed by and
---------------
construed in accordance with the laws of the State of Florida; provided,
however, that if any of the Collateral shall be located in any jurisdiction
other than Florida, the laws of such jurisdiction shall govern the method,
manner and procedure for foreclosure of Bank's lien upon such Collateral and the
enforcement of Bank's other remedies in respect of such Collateral to the extent
that the laws of such jurisdiction are different from or inconsistent with the
laws of Florida.
12.11 Participation. Borrower acknowledges that Bank may, at its
-------------
option, sell participation interests in the Loans to participating banks. The
amounts of any such participations shall be determined solely by Bank. Borrower
agrees with each present and future participant in the Loans, the names and
addresses of which will be furnished to Borrower, that if an Event of Default
should occur, each present and future participant shall have all of the rights
and remedies of Bank with respect to any deposit due from any participant to
Borrower. The execution by a participant of a participation agreement with Bank,
and the execution by Borrower of this Agreement, regardless of the order of
execution, shall evidence an agreement between Borrower and said participant in
accordance with the terms of this Section.
12.12 Miscellaneous. Time is of the essence with respect to this
-------------
Agreement. This Agreement and the instruments and agreements referred to herein
or called for hereby supersede and incorporate all representations, promises,
and statements, oral or written, made by Bank in
65
<PAGE>
connection with the Loans. This Agreement may not be varied, altered, or amended
except by a written instrument executed by an authorized officer of Bank. In the
event of a conflict between this Agreement and any other Loan Document, the
terms of this Agreement will control. This Agreement may be executed in any
number of counterparts, each of which, when executed and delivered, shall be an
original, but such counterparts shall together constitute one and the same
instrument. Any provision in this Agreement which may be unenforceable or
invalid under any law shall be ineffective to the extent of such
unenforceability or invalidity without affecting the enforceability or validity
of any other provisions hereof.
12.13 Joint and Several Liability. All obligations of each Person
---------------------------
named as Borrower shall be joint and several obligations of all such Persons.
12.14 Limitation of Grant. Nothing in this Agreement, whether
-------------------
express or implied, is intended or should be construed to confer upon, or to
grant to, any person, except Bank and Borrower, any right, remedy, or claim
under or because of either this Agreement or any provision of it. The rights,
duties, and obligations of Borrower under this Agreement are not assignable or
delegable.
12.15 Amendment and Supplement to 1997 Agreement. This Agreement
------------------------------------------
amends and supplements the Credit and Security Agreement dated as of August 1,
1997, between Bank and Borrower, executed in connection with issuance of the
1997 Letter of Intent.
12.16 WAIVER OF RIGHT TO TRIAL BY JURY. BORROWER AND BANK HEREBY
--------------------------------
WAIVE ANY RIGHT TO TRIAL BY JURY ON ANY CLAIM, COUNTERCLAIM, SETOFF, DEMAND,
ACTION OR CAUSE OF ACTION (A) ARISING OUT OF OR IN ANY WAY PERTAINING OR
RELATING TO THIS AGREEMENT, THE NOTES, THE LOAN DOCUMENTS, OR ANY OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION WITH THIS
AGREEMENT OR (B) IN ANY WAY CONNECTED WITH OR PERTAINING OR RELATED TO OR
INCIDENTAL TO ANY DEALINGS OF THE PARTIES HERETO WITH RESPECT TO THIS AGREEMENT,
THE NOTES, THE LOAN DOCUMENTS, OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR IN CONNECTION WITH THE
TRANSACTIONS RELATED THERETO OR CONTEMPLATED THEREBY OR THE EXERCISE OF EITHER
PARTY'S RIGHTS AND REMEDIES THEREUNDER, IN ALL OF THE FOREGOING CASES WHETHER
NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT, TORT OR
OTHERWISE. BORROWER AND BANK AGREE THAT EITHER OR BOTH OF THEM MAY FILE A COPY
OF THIS PARAGRAPH WITH ANY COURT AS WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY
AND BARGAINED AGREEMENT BETWEEN THE PARTIES IRREVOCABLY TO WAIVE TRIAL BY JURY,
AND THAT ANY DISPUTE OR CONTROVERSY WHATSOEVER BETWEEN THEM SHALL INSTEAD BE
TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.
[Remaining page intentionally left blank.]
66
<PAGE>
IN WITNESS WHEREOF, each of Borrower and Bank has caused this instrument to
be executed by its duly authorized officer.
BORROWER:
DISPLAY TECHNOLOGIES, INC., a Nevada corporation
By:/s/ J. William Brander
-----------------------------------------------
J. William Brandner,
President/Chief Executive Officer
AD ART ELECTRONIC SIGN CORPORATION, a Florida
corporation
By:/s/ J. William Brandner
-----------------------------------------------
J. William Brandner, Chairman
CERTIFIED MAINTENANCE SERVICE, INC., a Florida
corporation
By:/s/ J. William Brandner
-----------------------------------------------
J. William Brandner, Chairman
DON BELL INDUSTRIES, INC., a Florida corporation
By:/s/ J. William Brandner
-----------------------------------------------
J. William Brandner, Chairman
J. M. STEWART MANUFACTURING, INC., a Florida
corporation
By:/s/ J. William Brandner
-----------------------------------------------
J. William Brandner, Chairman
LA-MAN CORPORATION, a Nevada corporation
By:/s/ J. William Brandner
-----------------------------------------------
J. William Brandner, Chairman
<PAGE>
J. M. STEWART CORPORATION, a Florida corporation
By:/s/ J. William Brandner
-----------------------------------------------
J. William Brandner, Vice President
J. M. STEWART INDUSTRIES, INC., a Florida
corporation
By:/s/ J. William Brandner
-----------------------------------------------
J. William Brandner, Vice President
VISION TRUST MARKETING, INC., a Florida
corporation
By:/s/ J. William Brandner
-----------------------------------------------
J. William Brandner, President
BANK:
SOUTHTRUST BANK, NATIONAL
ASSOCIATION
By:/s/ Sie Kamide
-----------------------------------------------
Name: SIE KAMIDE
-------------------------------------
Its: GROUP VICE PRESIDENT
--------------------------------------
<PAGE>
Exhibit 10.138
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of July
30, 1999, between and among LOCKWOOD ACQUISITIONS CORP., a Florida corporation
(the "Company"), DISPLAY TECHNOLOGIES, INC., a Nevada corporation ("DTEK"), and
LARRY L. JOHNSON ("Employee").
RECITALS:
---------
The Employee presently serves as the President (chief executive officer) of
the Company, a wholly-owned subsidiary of DTEK;
The Company desires that the Employee continue to serve in an employment
capacity as the President of the Company, and the Employee desires to continue
to serve in such employment capacity, pursuant to a new employment agreement;
NOW, THEREFORE, the Company and the Employee, in consideration of the
mutual covenants herein contained and intending to be legally bound hereby,
agree as follows:
1. DEFINITIONS. In addition to other terms defined herein, for purposes of
this Agreement, the following terms shall have the meanings specified in this
Section unless the context clearly requires otherwise:
1.01 "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended (the "Exchange Act").
1.02 "Base Salary" shall mean the total annual cash salary, excluding
bonuses and incentive compensation, earned by the Employee in all capacities
with the Company.
1.03 "Cause" shall mean: (a) the repeated failure of the Employee to
observe or perform any of the material terms or provisions of this Agreement,
which failure continues after written notice to the Employee and remains uncured
for a period of 10 days following such written notice, except that there shall
be no cure period with respect to any violation of Section 7 or Section 8
hereof; (b) misappropriation of funds, or willful dishonesty towards, fraud
upon, or willful misconduct of a material nature to the injury of, the Company
or its Affiliates; (c) commission of
<PAGE>
a felony or other crime involving moral turpitude; or (d) habitual insobriety or
abuse of controlled substances.
1.04 "Notice of Termination" means a written notice which (a) indicates the
specific termination provision in this Agreement relied upon, (b) briefly
summarizes the facts and circumstances deemed to provide a basis for termination
of the Employee's employment under the provision so indicated and (c) specifies
the Termination Date. The Termination Date so specified shall be (i) a date not
less than 60 days from the delivery of such Notice of Termination to the
Employee (in the case of termination by the Company other than for Cause), (ii)
a date not more than 30 days after the delivery of such Notice of Termination to
the Company (in the case of termination by the Employee) or (iii) the date of
receipt of such Notice of Termination by the Employee (in the case of
termination by the Company for Cause).
1.05 "Person" shall mean any individual, firm, corporation, partnership or
other entity.
1.06 "Termination Date" shall mean the date required to be specified in the
Notice of Termination, or the last day of the Employment Term (as hereinafter
defined) if the employment of the Employee by the Company does not continue
thereafter.
1.07 "Termination of Employment" shall mean the termination of the
Employee's actual employment relationship with the Company whether pursuant to
Section 10 hereof or upon expiration of the Employment Term.
2. EMPLOYMENT TERM.
2.01 Employment Term. The employment term under this Agreement shall
---------------
commence as of the date hereof (the "Effective Date"), and shall continue until
July 30, 2000. Thereafter, such employment term shall be renewed for successive
one-year terms unless and until either the Company or the Employee elects not to
renew by delivery of written notice to the other not later than 90 days prior to
the expiration of the initial one-year term or any annual renewal term (the
"Employment Term"). Notwithstanding any provisions to the contrary contained
herein, nothing in this Agreement shall be deemed to create any obligation on
the part of either party to renew this Agreement at any time.
2.02 Termination. The Employment Term may be terminated only in accordance
-----------
with Section 10 hereof.
3. DUTIES AND RESPONSIBILITIES; ELECTIONS.
3.01 Duties and Responsibilities. Unless modified by mutual written
---------------------------
consent, the Employee shall perform such services and discharge such duties and
responsibilities of a senior executive nature as may be prescribed from time to
time by the Board of Directors of the Company ("Board") or such other persons as
may be designated by the Board; provided, however, that the
2
<PAGE>
services performed by, and the duties and responsibilities of, the Employee
shall be consistent with those usually associated with the position of President
as chief executive officer. The Employee shall serve in the capacities, titles
and positions with respect to the Company, and perform all duties and accept all
responsibilities incidental to any such capacities, titles and positions, as the
Board may reasonably direct in conformity with the foregoing sentence.
3.02 Elections. During the Employment Term, DTEK and the Company shall use
---------
their best efforts to cause the Employee to be nominated and elected and to
continue to serve as President of the Company and to be elected to the Board of
Directors of the Company and DTEK.
4. EXTENT OF SERVICE. The Employee shall devote his best efforts to the
business of the Company and shall devote his full time, attention and energy to
the performance of his services and the discharge of his duties and
responsibilities hereunder. During the existence of the employment relationship
hereunder, the Employee shall not work, on either a part-time, full-time or
independent contracting basis, for any other business or enterprise without the
Company's prior written consent.
5. COMPENSATION.
5.01 Annual Salary. For all the services to be performed by the Employee
-------------
hereunder, the Company shall pay the Employee a Base Salary at the annual rate
of $165,000, less withholding required by law. Such Base Salary shall be
payable in installments at such times as the Company customarily pays its other
senior executives (but in any event not less frequently than monthly).
5.02 Incentive Compensation. In addition to his annual Base Salary, the
----------------------
Employee shall be designated a "Participant" under, and shall participate in,
DTEK's Senior Management Incentive Plan, commencing with the fiscal year ending
June 30, 2001. For the 12-month period ending June 30, 2000, the Employee shall
be entitled to incentive compensation in an amount equal to 6% of the Company's
annual net income in excess of $625,000 for such 12-month period, as determined
in accordance with generally accepted accounting principles consistently
applied; provided, however, that such incentive compensation for such 12-month
period shall not exceed 50% of Employee's Base Salary. In the event the
Employee is employed hereunder for any partial fiscal year, any incentive
compensation payable under this Section 5.02 shall be prorated accordingly.
6. BUSINESS EXPENSES; OTHER BENEFITS.
6.01 Company Auto. At Employee's option, the Company will supply Employee
------------
with a leased Lincoln Town Car or equivalent vehicle, or a $500 per month auto
expense allowance.
6.02 Business Expenses. The Company will reimburse the Employee for
-----------------
Company auto operating expenses and for all other ordinary, necessary and
reasonable out-of-pocket business expenses incurred by Employee in connection
with his performance of services hereunder in accordance with the Company's
expense approval procedures in effect from time to time.
3
<PAGE>
6.03 Other Benefits. The Company will provide the Employee with such
--------------
individual and dependant group medical insurance coverage, if any, and other
employment benefits as are or may in the future be provided by DTEK to its
officer employees in accordance with DTEK's policies.
7. CONFIDENTIAL INFORMATION. The Employee acknowledges that, by reason of his
employment by and service to the Company, he will have access to confidential
information of the Company and its Affiliates, including, without limitation,
information and knowledge pertaining to products, developments, improvements,
methods of operation, sales and profit figures, customer and client lists and
relationships between the Company and its Affiliates and their agents,
customers, clients, suppliers and others who have business dealings with them
(collectively, "Confidential Information"). The Employee acknowledges that such
Confidential Information is a valuable and unique asset of the Company and its
Affiliates and, in consideration of the benefits specified in this Agreement,
covenants that, both during and after the termination of the employment
relationship between the parties hereto, he will not use any Confidential
Information or disclose any Confidential Information to any Person (except as
his duties as an employee of the Company or any Affiliate may require) without
the prior written authorization of the Board. The obligation of confidentiality
imposed by this Section shall not apply to information which becomes generally
known in the industry through no act of the Employee in breach of this Agreement
or to information which the Employee is legally compelled to disclose pursuant
to subpoena, civil investigative demand or similar process (in such event, the
Employee promptly shall provide the Company with written notice thereof in order
to allow the Company to seek a protective order or other appropriate remedy).
8. NON-COMPETITION. The Employee acknowledges that he will acquire
specialized knowledge and experience in the business of the Company and its
Affiliates and that if his knowledge, experience, reputation or contacts are
used by or on behalf of the Employee to compete with the Company or its
Affiliates or to solicit employees or agents away from the Company or its
Affiliates, serious harm to the Company and its Affiliates may result. In
consideration of the benefits specified in this Agreement, the Employee agrees
that during the Employee's employment by the Company and for a period of one (1)
year thereafter, subject to the performance by the Company of its obligations
under Section 10 hereof upon a Termination of Employment (whether prior to, or
as the result of, expiration of the Employment Term), the Employee shall not,
unless acting pursuant hereto or with the prior written consent of the Board,
directly or indirectly, render any services of a business, commercial, or
professional nature to any Person, whether for compensation or otherwise, within
the United States or elsewhere in competition with the Company or its Affiliates
or which is in conflict with the Company's or its Affiliates' interests, or
solicit for employment or in any other fashion hire any of the employees or
agents of the Company or its Affiliates or, with respect to the two (2) year
period referred to above, any person who was an employee or agent of the Company
or its Affiliates at any time within six months prior to the termination of
employment hereunder; provided, however, that this provision shall terminate in
the event the employment of the Employee is terminated by the Company in
violation of Section 10 hereof. For the purpose of this Section 8, the phrases
"in competition with" and "in conflict with" shall not be deemed to apply to any
Person whose activities do not involve similar lines of business now or
hereafter undertaken by the Company or any Affiliate. In the event that the
provisions of this
4
<PAGE>
Section should ever be adjudicated to exceed the time, geographic, service or
product limitations permitted by applicable law in any jurisdiction, then such
provisions shall be deemed reformed in such jurisdiction to the maximum time,
geographic, service or product limitations permitted by applicable law.
9. EQUITABLE RELIEF. Notwithstanding the provisions of Section 14 hereof: the
Employee acknowledges that the restrictions contained in Sections 7 and 8 hereof
are, in view of the nature of the business of the Company and its Affiliates,
reasonable and necessary to protect the legitimate interests of the Company, and
that any violation of any provisions of those Sections will result in
irreparable injury to the Company; the Employee also acknowledges that the
Company shall be entitled to temporary and permanent injunctive relief, without
the necessity of proving actual damages, and to an equitable accounting of all
earnings, profits and other benefits arising from any such violation, which
rights shall be cumulative and in addition to any other rights or remedies to
which the Company may be entitled; in the event of any such violation, the
Company shall be entitled to commence an action for temporary and permanent
injunctive relief and other equitable relief in any court of competent
jurisdiction and Employee further irrevocably submits to the jurisdiction of any
Florida court or Federal court sitting in the Middle District of Florida over
any suit, action or proceeding arising out of or relating to this Section 9.
The Employee hereby waives, to the fullest extent permitted by law, any
objection that he may now or hereafter have to such jurisdiction or to the
venue of any such suit, action or proceeding brought in such a court and any
claim that such suit, action or proceeding has been brought in any inconvenient
forum; and effective service of process may be made upon the Employee by mail
under the notice provisions contained in Section 13 hereof.
10. TERMINATION.
10.01 Termination Without Cause. The Company shall have the right to
-------------------------
terminate the employment of the Employee prior to expiration of the Employment
Term only as follows:
(a) As the result of partial or total disability as provided in
Section 10.02 hereof;
(b) Upon death of the Employee as provided in Section 10.03 hereof;
(c) For Cause as provided in Section 10.04 hereof;
(d) Upon breach by the Employee of his obligations under Section 7 or
Section 8 hereof; or
(e) For any other, or for no, reason, provided that on or as soon as
practicable following the Termination Date, the Company pays to the Employee as
severance, less withholding
5
<PAGE>
required by law, in a single lump sum or, at the Company's option, in equal
installments corresponding to what would have been the Employee's regular pay
dates and amounts, an amount equal to the greater of (i) 66-2/3% of the
----------
Employee's Base Salary or (ii) the Base Salary that would have otherwise have
been payable to the Employee for the remainder of the Employment Term. Any
severance payment pursuant to this subpart (e) shall be in addition to, and not
in lieu of, any unpaid salary, incentive compensation, stock options and other
benefits earned or accrued prior to the Termination Date.
The Employee acknowledges and agrees that the Company shall have no obligation
to pay any severance or other compensation to the Employee upon termination by
the Company for Cause or in the event the Employee elects to terminate such
employment other than as the result of the failure of the Company to perform its
obligations under this Section 10.
10.02 Partial or Total Disability. In the event that the Employee is
---------------------------
unable to perform his duties and responsibilities hereunder to the full extent
required hereunder by reason of illness, injury or incapacity for six
consecutive months (herein defined as a "Disability") (during which time, if
during the Employment Term, he shall be entitled to receive payments of the
difference between the Employee's Base Salary and incentive compensation during
such time, or portion thereof, and the payments to which the Employee is
entitled pursuant to any applicable disability insurance policy (less
withholding required by law), each such payment calculated and payable at the
times corresponding to what would have been the Employee's regular pay dates
during such time), the Employment Term may be terminated by the Company and the
Company shall have no further liability or obligation hereunder to the Employee
except for unpaid salary, incentive compensation and benefits accrued through
the date of termination. The Employee agrees, in the event of any dispute under
this Section 10.02, to submit to a physical examination by a licensed physician
selected by the Company, the cost of such examination to be paid by the Company.
10.03 Death. In the event that the Employee dies, the Employment Term
-----
shall terminate and thereafter the Company shall have no liability or obligation
to the Employee, his executors, administrators, heirs, assigns or any other
person claiming under or through him except for unpaid salary, incentive
compensation and benefits accrued to the date of his death. Such payments shall
be made to the Employee's surviving spouse, or if none, to the Employee's
surviving children, and the surviving issue of deceased children, in equal
shares per stirpes, or if none, to the Employee's estate.
10.04 Cause. Nothing in this Employment Agreement shall be construed to
-----
prevent the termination of the Employment Term by the Company at any time for
Cause. The termination of the Employee's employment hereunder for Cause shall
not be effective until delivery to the Employee of a written decision of the
Board (after notice in writing to the Employee (as provided in Section 1.03) of
the basis for such termination and an opportunity for the Employee, together
with his counsel, to be heard before the Board), finding that in the good faith
opinion of the Board the Employee committed conduct constituting Cause and
specifying the particulars thereof in conformity with the requirements for a
Notice of Termination.
6
<PAGE>
10.05 Effect of Termination. In the event of a Termination of Employment,
---------------------
upon the satisfaction and performance by the Company of its obligations under
Section 10 hereof, the Company and its Affiliates and their respective
shareholders, directors, officers, and employees, shall be deemed fully released
by the Employee, and that if Employee agrees that such satisfaction and
performance by the Company of its obligations under this Section 10 shall
constitute a full release and discharge from any and all claims, rights,
demands, actions, obligations, and causes of action of any and all kind, nature,
and character, known or unknown, which the Employee may now have or may have had
against the Company or any predecessor to the termination of employment,
including, but not limited to, any claims to any federal or state agencies, or
lawsuits in federal or state courts against the Company alleging discrimination
(including, but not limited to, claims arising under the Civil Rights Act of
1866, as amended, the Civil Rights Act of 1964, as amended, the Florida Fair
Employment and Housing Act, as amended, the Age Discrimination in Employment Act
of 1967, the Americans with Disabilities Act of 1990, and the Civil Rights Act
of 1991), workers' compensation claims, any claim related to employment
contracts, express or implied, or any other claims related to Employee's
employment or association with the Company or the circumstances surrounding
Employee's employment or association with the Company, or the termination
thereof.
10.06 Return of Company Property. Promptly following any Termination of
--------------------------
Employment, the Employee shall turn over and surrender to the Company all
property of the Company then in his possession, including without limitation
Company automobiles, automobile keys and office keys, credit cards, debit cards,
telephone calling cards, and all business and financial records, statements,
memoranda, notebooks, correspondence and other documentation, and the Employee
shall not retain in his actual or constructive possession copies or
reproductions of any of said items of property or information without the prior
written approval of the Company, the Employee hereby acknowledging that all of
said items are and shall remain the sole and exclusive property of the Company
and that following any Termination of Employment the Employee shall not have any
ownership interest in or right to use, either for his personal benefit or the
benefit of others, any of such items of property or information.
11. SURVIVAL. Notwithstanding the termination of the employment relationship
between the parties hereto, the obligations of the Employee under Sections 7, 8,
9, 10.05 and 10.06 hereof shall survive and remain in full force and effect and
the Company shall be entitled to equitable relief against the Employee pursuant
to the provisions of Section 9 hereof. In addition to and not in limitation of
the provisions of the preceding sentence, notwithstanding any such termination
of the employment relationship between the parties hereto, obligations of the
Company under this Agreement that are intended pursuant to the terms hereof to
survive any such termination shall survive and remain in full force and effect
and such obligations shall be enforceable by the Employee in accordance with the
provisions of this Agreement.
12. NOTICE. Any notice or other communication required or permitted hereunder
shall be in writing and shall be delivered personally, telegraphed, telexed,
sent by facsimile transmission (provided acknowledgment of receipt thereof is
delivered to the sender) or sent by certified,
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registered or express mail, postage prepaid. Any such notice shall be deemed
given when so delivered personally, telegraphed, telexed or sent by facsimile
transmission or, if mailed, three days after the date of deposit in the United
States mails as follows:
If to Employee, to:
Larry L. Johnson
Lockwood Sign Group, Inc.
10850-M Hanna Street
Beltsville, MD 20705
If to the Company, to:
Lockwood Acquisitions Corp.
5029 Edgewater drive
Orlando, FL 32810
Attention: J. William Brandner
Chairman
with a copy to:
Marshall S. Harris, General Counsel
5029 Edgewater Drive
Orlando, FL 32810
If to DTEK to:
Display Technologies, Inc.
5029 Edgewater Drive
Orlando, FL 32810
Attention: J. William Brandner
President and Chief Executive Officer
with a copy to:
Marshall S. Harris, General Counsel
5029 Edgewater Drive
Orlando, FL 32810
or to such other names or addresses as the Company, DTEK or the Employee, as the
case may be, shall designate by notice to the other parties hereto in the manner
specified in this section.
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13. REVIEW. The Employee represents and acknowledges that (a) he has been
advised by the Company to consult his own legal counsel with respect to this
Agreement and (b) he has had full opportunity, prior to execution of this
Agreement, to review thoroughly this Agreement with his counsel.
14. GOVERNING LAW; VENUE; ARBITRATION. This Agreement shall be construed in
accordance with, and governed in all respects by, the internal laws of the State
of Florida, without giving effect to principles of conflicts of laws. Any
dispute, controversy or claim arising out of, relating to or in connection with
this Agreement including, without limitation, disputes relating to the breach of
this Agreement, shall be finally settled by arbitration conducted in accordance
with this Section 14. The arbitration shall be conducted in accordance with the
rules of the American Arbitration Association (the "AAA") in effect at the time
of the arbitration, except as they may be modified herein or by mutual agreement
of the parties. The arbitration shall be conducted at a mutually agreed
location. If the parties are unable to agree on the location of the arbitration
within ten (10) days after the date of delivery of the Request of arbitration,
the arbitration shall be conducted in Orlando, Florida. Each party hereby
irrevocably submits to the jurisdiction of the arbitrator in Orlando, Florida,
and waives any defense in an arbitration based on any claim that such party is
not subject personally to the jurisdiction of such arbitrator, that such
arbitration is brought in an inconvenient forum or that such venue is improper.
The arbitration shall be conducted by three arbitrators, at least two of whom
are attorneys with at least seven years of experience in the fields of
securities law and business transactions. The party initiating the arbitration
(the "Claimant") shall appoint its arbitrator in its request for arbitration
(the "Request"). The other party (the "Respondent") shall appoint its
arbitrator within twenty (20) days of receipt of the Request and shall notify
the Claimant of such appointment in writing. If the Respondent fails to appoint
an arbitrator within such twenty day period, the arbitrator named in the Request
shall decide the controversy or claim as a sole arbitrator. Otherwise, the two
arbitrators appointed by the parties shall appoint a third arbitrator within ten
(10) days after the Respondent has notified Claimant of the appointment of the
Respondent's arbitrator. If the two arbitrators appointed by the parties fail
or are unable to appoint a third arbitrator, the appointment of the third
arbitrator shall be made by the AAA. The third arbitrator shall act as chair of
the panel. The arbitration award shall be in writing and shall be final and
binding on the parties. The award may include an award of costs, including
reasonable attorneys' fees and disbursements; except upon a finding of actual
fraud, intentional or knowing misrepresentation, willful and knowing omissions
of material fact or willful misconduct, no award shall include punitive damages.
Judgment upon the award may be entered by any court having jurisdiction thereof
or having jurisdiction over the parties or their assets.
15. CONTENTS OF AGREEMENT; AMENDMENT AND ASSIGNMENT. This Agreement sets forth
the entire understanding between the parties hereto with respect to the subject
matter hereof and supersedes any and all other employment agreements or
arrangements between the parties hereto, including without limitation any prior
or existing employment or consulting agreements between the Company and the
Employee, and the Employee hereby releases and forever discharges the Company,
DTEK and all of their respective Affiliates, shareholders, directors, officers,
employees and agents from any and all claims for additional fixed or incentive
9
<PAGE>
compensation or other benefits, or other claims or causes of action of any
nature whatsoever arising out of or in connection with or under any and all such
other agreements, express or implied it being the mutual intent of the Company,
DTEK and the Employee that any and all such agreements are superseded in their
entirety by this Agreement. This Agreement cannot be changed, modified or
terminated except upon written amendment duly executed by the parties hereto.
All of the terms and provisions of this Agreement shall be binding upon and
inure to the benefit of and be enforceable by the respective heirs,
representatives, successors and assigns of the parties hereto, except that the
duties and responsibilities of the Employee hereunder are of a personal nature
and shall not be assignable in whole or in part by the Employee. The Employee
acknowledges that, from time to time, the Company may establish, maintain and
distribute employee manuals or handbooks or personnel policy manuals, and
officers or other representatives of the Company may make written or oral
statements relating to personnel policies and procedures. Such manuals,
handbooks and statements are intended only for general guidance. No policies,
procedures or statements of any nature by or on behalf of the Company (whether
written or oral, and whether or not contained in any employee manual or handbook
or personnel policy manual), and no acts or practices of any nature, shall be
construed to modify this Agreement.
16. SEVERABILITY. If any provision of this Agreement or application thereof to
anyone or under any circumstances is adjudicated to be invalid or unenforceable
in any jurisdiction, such invalidity or unenforceability shall not affect any
other provisions or applications of this Agreement which can be given effect
without the invalid or unenforceable provision or application and shall not
invalidate or render unenforceable such provision in any other jurisdiction.
17. ENFORCEMENT; NO MITIGATION; NON-EXCLUSIVITY.
17.01 Any party to this Agreement that is required to incur any expenses
associated with the enforcement of such party's rights under this Agreement,
whether by arbitration, litigation, other legal action or otherwise, shall be
entitled, upon successfully enforcing any such rights, to recover from the party
against whom such rights were successfully enforced all such costs and expenses
(including all reasonable attorneys' fees and expenses). For purposes of this
Section 17.01, "successfully enforcing" shall mean the attainment of a final and
binding determination pursuant to any arbitration, litigation, or other legal
action awarding damages, equitable relief or other relief for the enforcement of
the rights of any party hereunder.
17.02 This Agreement negates and supersedes in their entirety any and all
other employment agreements between Employee and the Company; notwithstanding
the foregoing, nothing in this Agreement shall prevent or limit the Employee's
continuing or future participation in or rights under any benefit, bonus,
incentive or other plan or program provided by the Company or any present or
future Subsidiary or Affiliate and for which the Employee may qualify.
18. REMEDIES CUMULATIVE; NO WAIVER. Subject to the provisions of Section 14
hereof: no remedy conferred by this Agreement is intended to be exclusive of any
other remedy, and each and every such remedy shall be cumulative and shall be in
addition to any other remedy given
10
<PAGE>
hereunder or now or hereafter existing at law or in equity; and no delay or
omission in exercising any right, remedy or power hereunder or existing at law
or in equity shall be construed as a waiver thereof, and any such right, remedy
or power may be exercised from time to time and as often as may be deemed
expedient or necessary.
19. HEADINGS. All section headings contained in this Agreement are for
convenience of reference only, do not form a part of this Agreement and shall
not affect in any way the meaning or interpretation of this Agreement.
11
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed or caused to be executed
this Agreement as of the date first above written.
LOCKWOOD ACQUISITIONS CORP.
By:________________________________________
J. William Brandner, President
DISPLAY TECHNOLOGIES, INC.
By:________________________________________
J. William Brandner, President
___________________________________________
LARRY L. JOHNSON
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<PAGE>
Exhibit 10.139
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of July
30th, 1999, between and among LOCKWOOD ACQUISITIONS CORP., a Florida corporation
(the "Company"), DISPLAY TECHNOLOGIES, INC., a Nevada corporation ("DTEK"), and
KURT R. JOHNSON ("Employee").
RECITALS:
---------
The Employee presently serves as the Executive Vice President (chief
operating officer) of the Company, a wholly-owned subsidiary of DTEK;
The Company desires that the Employee continue to serve in an employment
capacity as the Executive Vice President of the Company, and the Employee
desires to continue to serve in such employment capacity, pursuant to a new
employment agreement;
NOW, THEREFORE, the Company and the Employee, in consideration of the
mutual covenants herein contained and intending to be legally bound hereby,
agree as follows:
1. DEFINITIONS. In addition to other terms defined herein, for purposes of
this Agreement, the following terms shall have the meanings specified in this
Section unless the context clearly requires otherwise:
1.01 "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended (the "Exchange Act").
1.02 "Base Salary" shall mean the total annual cash salary, excluding
bonuses and incentive compensation, earned by the Employee in all capacities
with the Company.
1.03 "Cause" shall mean: (a) the repeated failure of the Employee to
observe or perform any of the material terms or provisions of this Agreement,
which failure continues after written notice to the Employee and remains uncured
for a period of 10 days following such written notice, except that there shall
be no cure period with respect to any violation of Section 7 or Section 8
hereof; (b) misappropriation of funds, or willful dishonesty towards, fraud
upon, or willful misconduct of a material nature to the injury of, the Company
or its Affiliates; (c) commission of a felony or other crime involving moral
turpitude; or (d) habitual insobriety or abuse of controlled substances.
<PAGE>
1.04 "Notice of Termination" means a written notice which (a) indicates the
specific termination provision in this Agreement relied upon, (b) briefly
summarizes the facts and circumstances deemed to provide a basis for termination
of the Employee's employment under the provision so indicated and (c) specifies
the Termination Date. The Termination Date so specified shall be (i) a date not
less than 60 days from the delivery of such Notice of Termination to the
Employee (in the case of termination by the Company other than for Cause), (ii)
a date not more than 30 days after the delivery of such Notice of Termination to
the Company (in the case of termination by the Employee) or (iii) the date of
receipt of such Notice of Termination by the Employee (in the case of
termination by the Company for Cause).
1.05 "Person" shall mean any individual, firm, corporation, partnership or
other entity.
1.06 "Termination Date" shall mean the date required to be specified in the
Notice of Termination, or the last day of the Employment Term (as hereinafter
defined) if the employment of the Employee by the Company does not continue
thereafter.
1.07 "Termination of Employment" shall mean the termination of the
Employee's actual employment relationship with the Company whether pursuant to
Section 10 hereof or upon expiration of the Employment Term.
2. EMPLOYMENT TERM.
2.01 Employment Term. The employment term under this Agreement shall
---------------
commence as of the date hereof (the "Effective Date"), and shall continue until
July 30, 2000. Thereafter, such employment term shall be renewed for successive
one-year terms unless and until either the Company or the Employee elects not to
renew by delivery of written notice to the other not later than 90 days prior to
the expiration of the initial one-year term or any annual renewal term (the
"Employment Term"). Notwithstanding any provisions to the contrary contained
herein, nothing in this Agreement shall be deemed to create any obligation on
the part of either party to renew this Agreement at any time.
2.02 Termination. The Employment Term may be terminated only in accordance
-----------
with Section 10 hereof.
3. DUTIES AND RESPONSIBILITIES. Unless modified by mutual written consent,
the Employee shall perform such services and discharge such duties and
responsibilities of a senior executive nature as may be prescribed from time to
time by the Board of Directors of the Company ("Board") or such other persons as
may be designated by the Board; provided, however, that the services performed
by, and the duties and responsibilities of, the Employee shall be consistent
with those usually associated with the position of Executive Vice President as
chief operating officer. The Employee shall serve in the capacities, titles and
positions with respect to the Company, and perform all duties and accept all
responsibilities incidental to any such capacities, titles and positions, as the
Board may reasonably direct in conformity with the foregoing sentence.
2
<PAGE>
4. EXTENT OF SERVICE. The Employee shall devote his best efforts to the
business of the Company and shall devote his full time, attention and energy to
the performance of his services and the discharge of his duties and
responsibilities hereunder. During the existence of the employment relationship
hereunder, the Employee shall not work, on either a part-time, full-time or
independent contracting basis, for any other business or enterprise without the
Company's prior written consent.
5. COMPENSATION.
5.01 Annual Salary. For all the services to be performed by the Employee
-------------
hereunder, the Company shall pay the Employee a Base Salary at the annual rate
of $115,000, less withholding required by law. Such Base Salary shall be payable
in installments at such times as the Company customarily pays its other senior
executives (but in any event not less frequently than monthly).
5.02 Incentive Compensation. In addition to his annual Base Salary, the
----------------------
Employee shall be designated a "Participant" under, and shall participate in,
DTEK's Senior Management Incentive Plan, commencing with the fiscal year ending
June 30, 2001. For the 12-month period ending June 30, 2000, the Employee shall
be entitled to incentive compensation in an amount equal to 4% of the Company's
annual net income in excess of $625,000 for such 12-month period, as determined
in accordance with generally accepted accounting principles consistently
applied; provided, however, that such incentive compensation for such 12-month
period shall not exceed 50% of Employee's Base Salary. In the event the Employee
is employed hereunder for any partial fiscal year, any incentive compensation
payable under this Section 5.02 shall be prorated accordingly.
6. BUSINESS EXPENSES; OTHER BENEFITS.
6.01 Company Auto. At Employee's option, the Company will supply Employee
------------
with a leased Lincoln Town Car or equivalent vehicle, or a $500 per month auto
expense allowance.
6.02 Business Expenses. The Company will reimburse the Employee for
-----------------
Company auto operating expenses and for all other ordinary, necessary and
reasonable out-of-pocket business expenses incurred by Employee in connection
with his performance of services hereunder in accordance with the Company's
expense approval procedures in effect from time to time.
6.03 Other Benefits. The Company will provide the Employee with such
--------------
individual and dependant group medical insurance coverage, if any, and other
employment benefits as are or may in the future be provided by DTEK to its
officer employees in accordance with DTEK's policies.
7. CONFIDENTIAL INFORMATION. The Employee acknowledges that, by reason of his
employment by and service to the Company, he will have access to confidential
information of the Company and its Affiliates, including, without limitation,
information and knowledge pertaining to products, developments, improvements,
methods of operation, sales and profit figures, customer and client lists and
relationships between the Company and its Affiliates and their agents,
customers, clients, suppliers and others who have business dealings with them
(collectively, "Confidential Information"). The Employee acknowledges that such
Confidential Information is a valuable and
3
<PAGE>
unique asset of the Company and its Affiliates and, in consideration of the
benefits specified in this Agreement, covenants that, both during and after the
termination of the employment relationship between the parties hereto, he will
not use any Confidential Information or disclose any Confidential Information to
any Person (except as his duties as an employee of the Company or any Affiliate
may require) without the prior written authorization of the Board. The
obligation of confidentiality imposed by this Section shall not apply to
information which becomes generally known in the industry through no act of the
Employee in breach of this Agreement or to information which the Employee is
legally compelled to disclose pursuant to subpoena, civil investigative demand
or similar process (in such event, the Employee promptly shall provide the
Company with written notice thereof in order to allow the Company to seek a
protective order or other appropriate remedy).
8. NON-COMPETITION. The Employee acknowledges that he will acquire
specialized knowledge and experience in the business of the Company and its
Affiliates and that if his knowledge, experience, reputation or contacts are
used by or on behalf of the Employee to compete with the Company or its
Affiliates or to solicit employees or agents away from the Company or its
Affiliates, serious harm to the Company and its Affiliates may result. In
consideration of the benefits specified in this Agreement, the Employee agrees
that during the Employee's employment by the Company and for a period of one (1)
year thereafter, subject to the performance by the Company of its obligations
under Section 10 hereof upon a Termination of Employment (whether prior to, or
as the result of, expiration of the Employment Term), the Employee shall not,
unless acting pursuant hereto or with the prior written consent of the Board,
directly or indirectly, render any services of a business, commercial, or
professional nature to any Person, whether for compensation or otherwise, within
the United States or elsewhere in competition with the Company or its Affiliates
or which is in conflict with the Company's or its Affiliates' interests, or
solicit for employment or in any other fashion hire any of the employees or
agents of the Company or its Affiliates or, with respect to the two (2) year
period referred to above, any person who was an employee or agent of the Company
or its Affiliates at any time within six months prior to the termination of
employment hereunder; provided, however, that this provision shall terminate in
the event the employment of the Employee is terminated by the Company in
violation of Section 10 hereof. For the purpose of this Section 8, the phrases
"in competition with" and "in conflict with" shall not be deemed to apply to any
Person whose activities do not involve similar lines of business now or
hereafter undertaken by the Company or any Affiliate. In the event that the
provisions of this Section should ever be adjudicated to exceed the time,
geographic, service or product limitations permitted by applicable law in any
jurisdiction, then such provisions shall be deemed reformed in such jurisdiction
to the maximum time, geographic, service or product limitations permitted by
applicable law.
9. EQUITABLE RELIEF. Notwithstanding the provisions of Section 14 hereof: the
Employee acknowledges that the restrictions contained in Sections 7 and 8 hereof
are, in view of the nature of the business of the Company and its Affiliates,
reasonable and necessary to protect the legitimate interests of the Company, and
that any violation of any provisions of those Sections will result in
irreparable injury to the Company; the Employee also acknowledges that the
Company shall be entitled to temporary and permanent injunctive relief, without
the necessity of proving actual damages, and to an equitable accounting of all
earnings, profits and other benefits arising from any such violation, which
rights shall be cumulative and in addition to any other rights or remedies to
4
<PAGE>
which the Company may be entitled; in the event of any such violation, the
Company shall be entitled to commence an action for temporary and permanent
injunctive relief and other equitable relief in any court of competent
jurisdiction and Employee further irrevocably submits to the jurisdiction of any
Florida court or Federal court sitting in the Middle District of Florida over
any suit, action or proceeding arising out of or relating to this Section 9. The
Employee hereby waives, to the fullest extent permitted by law, any objection
that he may now or hereafter have to such jurisdiction or to the venue of any
such suit, action or proceeding brought in such a court and any claim that such
suit, action or proceeding has been brought in any inconvenient forum; and
effective service of process may be made upon the Employee by mail under the
notice provisions contained in Section 13 hereof.
10. TERMINATION.
10.01 Termination Without Cause. The Company shall have the right to
-------------------------
terminate the employment of the Employee prior to expiration of the Employment
Term only as follows:
(a) As the result of partial or total disability as provided in
Section 10.02 hereof;
(b) Upon death of the Employee as provided in Section 10.03 hereof;
(c) For Cause as provided in Section 10.04 hereof;
(d) Upon breach by the Employee of his obligations under Section 7 or
Section 8 hereof; or
(e) For any other, or for no, reason, provided that on or as soon as
practicable following the Termination Date, the Company pays to the Employee as
severance, less withholding required by law, in a single lump sum or, at the
Company's option, in equal installments corresponding to what would have been
the Employee's regular pay dates and amounts, an amount equal to the greater of
----------
(i) 66-2/3% of the Employee's Base Salary or (ii) the Base Salary that would
have otherwise have been payable to the Employee for the remainder of the
Employment Term. Any severance payment pursuant to this subpart (e) shall be in
addition to, and not in lieu of, any unpaid salary, incentive compensation,
stock options and other benefits earned or accrued prior to the Termination
Date.
The Employee acknowledges and agrees that the Company shall have no obligation
to pay any severance or other compensation to the Employee upon termination by
the Company for Cause or in the event the Employee elects to terminate such
employment other than as the result of the failure of the Company to perform its
obligations under this Section 10.
10.02 Partial or Total Disability. In the event that the Employee is
---------------------------
unable to perform his duties and responsibilities hereunder to the full extent
required hereunder by reason of illness, injury or incapacity for six
consecutive months (herein defined as a "Disability") (during which time, if
during the Employment Term, he shall be entitled to receive payments of the
difference between the Employee's Base Salary and incentive compensation during
such time, or portion thereof, and the
5
<PAGE>
payments to which the Employee is entitled pursuant to any applicable disability
insurance policy (less withholding required by law), each such payment
calculated and payable at the times corresponding to what would have been the
Employee's regular pay dates during such time), the Employment Term may be
terminated by the Company and the Company shall have no further liability or
obligation hereunder to the Employee except for unpaid salary, incentive
compensation and benefits accrued through the date of termination. The Employee
agrees, in the event of any dispute under this Section 10.02, to submit to a
physical examination by a licensed physician selected by the Company, the cost
of such examination to be paid by the Company.
10.03 Death. In the event that the Employee dies, the Employment Term
-----
shall terminate and thereafter the Company shall have no liability or obligation
to the Employee, his executors, administrators, heirs, assigns or any other
person claiming under or through him except for unpaid salary, incentive
compensation and benefits accrued to the date of his death. Such payments shall
be made to the Employee's surviving spouse, or if none, to the Employee's
surviving children, and the surviving issue of deceased children, in equal
shares per stirpes, or if none, to the Employee's estate.
10.04 Cause. Nothing in this Employment Agreement shall be construed to
-----
prevent the termination of the Employment Term by the Company at any time for
Cause. The termination of the Employee's employment hereunder for Cause shall
not be effective until delivery to the Employee of a written decision of the
Board (after notice in writing to the Employee (as provided in Section 1.03) of
the basis for such termination and an opportunity for the Employee, together
with his counsel, to be heard before the Board), finding that in the good faith
opinion of the Board the Employee committed conduct constituting Cause and
specifying the particulars thereof in conformity with the requirements for a
Notice of Termination.
10.05 Effect of Termination. In the event of a Termination of Employment,
---------------------
upon the satisfaction and performance by the Company of its obligations under
Section 10 hereof, the Company and its Affiliates and their respective
shareholders, directors, officers, and employees, shall be deemed fully released
by the Employee, and that if Employee agrees that such satisfaction and
performance by the Company of its obligations under this Section 10 shall
constitute a full release and discharge from any and all claims, rights,
demands, actions, obligations, and causes of action of any and all kind, nature,
and character, known or unknown, which the Employee may now have or may have had
against the Company or any predecessor to the termination of employment,
including, but not limited to, any claims to any federal or state agencies, or
lawsuits in federal or state courts against the Company alleging discrimination
(including, but not limited to, claims arising under the Civil Rights Act of
1866, as amended, the Civil Rights Act of 1964, as amended, the California Fair
Employment and Housing Act, as amended, the Age Discrimination in Employment Act
of 1967, the Americans with Disabilities Act of 1990, and the Civil Rights Act
of 1991), workers' compensation claims, any claim related to employment
contracts, express or implied, or any other claims related to Employee's
employment or association with the Company or the circumstances surrounding
Employee's employment or association with the Company, or the termination
thereof.
6
<PAGE>
10.06 Return of Company Property. Promptly following any Termination
--------------------------
of Employment, the Employee shall turn over and surrender to the Company all
property of the Company then in his possession, including without limitation
Company automobiles, automobile keys and office keys, credit cards, debit cards,
telephone calling cards, and all business and financial records, statements,
memoranda, notebooks, correspondence and other documentation, and the Employee
shall not retain in his actual or constructive possession copies or
reproductions of any of said items of property or information without the prior
written approval of the Company, the Employee hereby acknowledging that all of
said items are and shall remain the sole and exclusive property of the Company
and that following any Termination of Employment the Employee shall not have any
ownership interest in or right to use, either for his personal benefit or the
benefit of others, any of such items of property or information.
11. SURVIVAL. Notwithstanding the termination of the employment relationship
between the parties hereto, the obligations of the Employee under Sections 7, 8,
9, 10.05 and 10.06 hereof shall survive and remain in full force and effect and
the Company shall be entitled to equitable relief against the Employee pursuant
to the provisions of Section 9 hereof. In addition to and not in limitation of
the provisions of the preceding sentence, notwithstanding any such termination
of the employment relationship between the parties hereto, obligations of the
Company under this Agreement that are intended pursuant to the terms hereof to
survive any such termination shall survive and remain in full force and effect
and such obligations shall be enforceable by the Employee in accordance with the
provisions of this Agreement.
12. NOTICE. Any notice or other communication required or permitted hereunder
shall be in writing and shall be delivered personally, telegraphed, telexed,
sent by facsimile transmission (provided acknowledgment of receipt thereof is
delivered to the sender) or sent by certified, registered or express mail,
postage prepaid. Any such notice shall be deemed given when so delivered
personally, telegraphed, telexed or sent by facsimile transmission or, if
mailed, three days after the date of deposit in the United States mails as
follows:
If to Employee, to:
Kurt R. Johnson
829 Pickens Industrial Drive, Suite 5
Marietta, GA 30062
If to the Company, to:
Lockwood Acquisitions Corp.
5029 Edgewater drive
Orlando, FL 32810
Attention: J. William Brandner
Chairman
7
<PAGE>
with a copy to:
Marshall S. Harris, General Counsel
5029 Edgewater Drive
Orlando, FL 32810
If to DTEK to:
Display Technologies, Inc.
5029 Edgewater Drive
Orlando, FL 32810
Attention: J. William Brandner
President and Chief Executive Officer
with a copy to:
Marshall S. Harris, General Counsel
5029 Edgewater Drive
Orlando, FL 32810
or to such other names or addresses as the Company, DTEK or the Employee, as the
case may be, shall designate by notice to the other parties hereto in the manner
specified in this section.
13. REVIEW. The Employee represents and acknowledges that (a) he has been
advised by the Company to consult his own legal counsel with respect to this
Agreement and (b) he has had full opportunity, prior to execution of this
Agreement, to review thoroughly this Agreement with his counsel.
14. GOVERNING LAW; VENUE; ARBITRATION. This Agreement shall be construed in
accordance with, and governed in all respects by, the internal laws of the State
of Florida, without giving effect to principles of conflicts of laws. Any
dispute, controversy or claim arising out of, relating to or in connection with
this Agreement including, without limitation, disputes relating to the breach of
this Agreement, shall be finally settled by arbitration conducted in accordance
with this Section 14. The arbitration shall be conducted in accordance with the
rules of the American Arbitration Association (the "AAA") in effect at the time
of the arbitration, except as they may be modified herein or by mutual agreement
of the parties. The arbitration shall be conducted at a mutually agreed
location. If the parties are unable to agree on the location of the arbitration
within ten (10) days after the date of delivery of the Request of arbitration,
the arbitration shall be conducted in Orlando, Florida. Each party hereby
irrevocably submits to the jurisdiction of the arbitrator in Orlando, Florida,
and waives any defense in an arbitration based on any claim that such party is
not subject personally to the jurisdiction of such arbitrator, that such
arbitration is brought in an inconvenient forum or that such venue is improper.
The arbitration shall be conducted by three arbitrators, at least two of whom
are attorneys with at least seven years of experience in the fields of
securities law and business transactions. The party initiating the arbitration
(the "Claimant") shall
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appoint its arbitrator in its request for arbitration (the "Request"). The other
party (the "Respondent") shall appoint its arbitrator within twenty (20) days of
receipt of the Request and shall notify the Claimant of such appointment in
writing. If the Respondent fails to appoint an arbitrator within such twenty day
period, the arbitrator named in the Request shall decide the controversy or
claim as a sole arbitrator. Otherwise, the two arbitrators appointed by the
parties shall appoint a third arbitrator within ten (10) days after the
Respondent has notified Claimant of the appointment of the Respondent's
arbitrator. If the two arbitrators appointed by the parties fail or are unable
to appoint a third arbitrator, the appointment of the third arbitrator shall be
made by the AAA. The third arbitrator shall act as chair of the panel. The
arbitration award shall be in writing and shall be final and binding on the
parties. The award may include an award of costs, including reasonable
attorneys' fees and disbursements; except upon a finding of actual fraud,
intentional or knowing misrepresentation, willful and knowing omissions of
material fact or willful misconduct, no award shall include punitive damages.
Judgment upon the award may be entered by any court having jurisdiction thereof
or having jurisdiction over the parties or their assets.
15. CONTENTS OF AGREEMENT; AMENDMENT AND ASSIGNMENT. This Agreement sets forth
the entire understanding between the parties hereto with respect to the subject
matter hereof and supersedes any and all other employment agreements or
arrangements between the parties hereto, including without limitation any prior
or existing employment or consulting agreements between the Company and the
Employee, and the Employee hereby releases and forever discharges the Company,
DTEK and all of their respective Affiliates, shareholders, directors, officers,
employees and agents from any and all claims for additional fixed or incentive
compensation or other benefits, or other claims or causes of action of any
nature whatsoever arising out of or in connection with or under any and all such
other agreements, express or implied it being the mutual intent of the Company,
DTEK and the Employee that any and all such agreements are superseded in their
entirety by this Agreement. This Agreement cannot be changed, modified or
terminated except upon written amendment duly executed by the parties hereto.
All of the terms and provisions of this Agreement shall be binding upon and
inure to the benefit of and be enforceable by the respective heirs,
representatives, successors and assigns of the parties hereto, except that the
duties and responsibilities of the Employee hereunder are of a personal nature
and shall not be assignable in whole or in part by the Employee. The Employee
acknowledges that, from time to time, the Company may establish, maintain and
distribute employee manuals or handbooks or personnel policy manuals, and
officers or other representatives of the Company may make written or oral
statements relating to personnel policies and procedures. Such manuals,
handbooks and statements are intended only for general guidance. No policies,
procedures or statements of any nature by or on behalf of the Company (whether
written or oral, and whether or not contained in any employee manual or handbook
or personnel policy manual), and no acts or practices of any nature, shall be
construed to modify this Agreement.
16. SEVERABILITY. If any provision of this Agreement or application thereof to
anyone or under any circumstances is adjudicated to be invalid or unenforceable
in any jurisdiction, such invalidity or unenforceability shall not affect any
other provisions or applications of this Agreement which can be given effect
without the invalid or unenforceable provision or application and shall not
invalidate or render unenforceable such provision in any other jurisdiction.
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17. ENFORCEMENT; NO MITIGATION; NON-EXCLUSIVITY.
17.01 Any party to this Agreement that is required to incur any expenses
associated with the enforcement of such party's rights under this Agreement,
whether by arbitration, litigation, other legal action or otherwise, shall be
entitled, upon successfully enforcing any such rights, to recover from the party
against whom such rights were successfully enforced all such costs and expenses
(including all reasonable attorneys' fees and expenses). For purposes of this
Section 17.01, "successfully enforcing" shall mean the attainment of a final and
binding determination pursuant to any arbitration, litigation, or other legal
action awarding damages, equitable relief or other relief for the enforcement of
the rights of any party hereunder.
17.02 This Agreement negates and supersedes in their entirety any and all
other employment agreements between Employee and the Company; notwithstanding
the foregoing, nothing in this Agreement shall prevent or limit the Employee's
continuing or future participation in or rights under any benefit, bonus,
incentive or other plan or program provided by the Company or any present or
future Subsidiary or Affiliate and for which the Employee may qualify.
18. REMEDIES CUMULATIVE; NO WAIVER. Subject to the provisions of Section 14
hereof: no remedy conferred by this Agreement is intended to be exclusive of any
other remedy, and each and every such remedy shall be cumulative and shall be in
addition to any other remedy given hereunder or now or hereafter existing at law
or in equity; and no delay or omission in exercising any right, remedy or power
hereunder or existing at law or in equity shall be construed as a waiver
thereof, and any such right, remedy or power may be exercised from time to time
and as often as may be deemed expedient or necessary.
19. HEADINGS. All section headings contained in this Agreement are for
convenience of reference only, do not form a part of this Agreement and shall
not affect in any way the meaning or interpretation of this Agreement.
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IN WITNESS WHEREOF, the undersigned have executed or caused to be executed
this Agreement as of the date first above written.
LOCKWOOD ACQUISITIONS CORP.
By:_________________________________________
J. William Brandner, President
DISPLAY TECHNOLOGIES, INC.
By:_________________________________________
J. William Brandner, President
____________________________________________
KURT R. JOHNSON
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Exhibit 21
DISPLAY TECHNOLOGIES, INC.
(f/k/a La-Man Corporation)
SUBSIDIARIES
DISPLAY TECHNOLOGIES, INC.(Nevada)
Ad Art Electronic Sign Corporation (Florida)
E.S.C. of Nevada, Inc. (Nevada)
Certified Maintenance Service, Inc. (Florida)
Don Bell Industries, Inc. (Florida)
Don Bell Industries of Nevada, Inc. (Nevada)
J.M. Stewart Manufacturing, Inc. (Florida)
La-Man Corporation (Nevada)
Lockwood Sign Group, Inc. (Florida)
Nevada SEMCO, Inc. (Nevada)
J.M. Stewart Corporation (Florida)
J.M. Stewart Industries, Inc. (Florida)
Vision Trust Marketing, Inc. (Florida)
