<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 6, 1997
REGISTRATION NO. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------------
DISCAS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
DELAWARE 3087 06-1175400
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employee
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
567-1 SOUTH LEONARD STREET
WATERBURY, CT 06708
(203) 753-5147
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
MR. PATRICK A. DEPAOLO
DISCAS, INC.
567-1 SOUTH LEONARD STREET
WATERBURY, CT 06708
(203) 753-5147
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
COPIES TO:
-----------------
JOSEPH A. SMITH, ESQ. ALEXANDER BIENENSTOCK, ESQ.
Epstein Becker & Green, P.C. Gusrae, Kaplan & Bruno
250 Park Avenue 120 Wall Street
New York, New York 10177 New York, New York 10005
(212) 351-4924 (212) 269-1400
-----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, please check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
-----------------
CALCULATION OF REGISTRATION FEE
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
AMOUNT TO OFFERING PRICE AGGREGATE
TITLE OF EACH CLASS OF BE PER SHARE OR OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) WARRANT(1) PRICE(1) REGISTRATION FEE
- ------------------------------------------------------- -------------- --------------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Common Stock, $.0001 par value(2)....................... 920,000 $5.00 $4,600,000 $1,393.94
- ------------------------------------------------------- -------------- --------------------- ---------------- ----------------
Warrants to purchase one share of Common Stock (3)(4) . 920,000 $ .10 $ 92,000 $ 27.87
- ------------------------------------------------------- -------------- --------------------- ---------------- ----------------
Common Stock, $.0001 par value (5)...................... 920,000 $5.00 $4,600,000 $1,393.94
- ------------------------------------------------------- -------------- --------------------- ---------------- ----------------
Selling Securityholder Warrants to purchase Common
Stock, $.0001 par value (6)............................ 800,000 $ .10 $ 80,000 $ 24.24
- ------------------------------------------------------- -------------- --------------------- ---------------- ----------------
Common Stock, $.0001 par value, issuable upon exercise
of the Selling Securityholder Warrants(6).............. 800,000 $5.00 $4,000,000 $1,212.12
- ------------------------------------------------------- -------------- --------------------- ---------------- ----------------
Representative's Warrants to purchase one share of
Common Stock, $.0001 par value, and one Warrant to
purchase one share of Common Stock .................... 80,000 $ 10 (9)
- ------------------------------------------------------- -------------- --------------------- ---------------- ----------------
Common Stock, $.0001 par value, issuable upon exercise
of Representative's Warrants .......................... 80,000 $6.75 $ 540,000 $ 163.64
- ------------------------------------------------------- -------------- --------------------- ---------------- ----------------
Warrants to purchase one share of Common Stock (7) ..... 80,000 $ .14 11,200 $ 33.94
- ------------------------------------------------------- -------------- --------------------- ---------------- ----------------
Common Stock, $.0001 par value (8)...................... 80,000 $5.00 $ 400,000 $ 121.21
- ------------------------------------------------------- -------------- --------------------- ---------------- ----------------
Total .............................................. $4,370.90
- ------------------------------------------------------- -------------- --------------------- ---------------- ----------------
</TABLE>
- -----------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(b).
(2) Includes 120,000 shares of Common Stock which the Underwriters have the
option to purchase to cover over-allotments.
(3) Includes 120,000 Warrants to purchase one share of Common Stock which
the Underwriters have the option to purchase to cover over-allotments.
(4) Together with such indeterminate number of additional securities as may
be issued pursuant to the anti-dilution provisions of the Warrants
pursuant to Rule 416(a).
(5) Issuable upon exercise of the Warrants.
(6) Together with such indeterminate number of additional securities as may
be issued pursuant to the anti-dilution provisions of the Selling
Securityholder Warrants pursuant to Rule 416(a).
(7) Together with such indeterminate number of additional securities as may
be issued pursuant to the anti-dilution provisions of the
Representative's Warrants pursuant to rule 416(a).
(8) Issuable upon exercise of the Warrants issuable upon exercise of the
Representative's Warrants.
(9) No registration fee required pursuant to Rule 457(g).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
<PAGE>
<TABLE>
<CAPTION>
ITEM NUMBER
IN FORM SB-2 ITEM CAPTION IN FORM SB-2 CAPTION IN PROSPECTUS
- ---------------- --------------------------------------------------------- ---------------------------------------------
<S> <C> <C>
1.00 Front of the Registration Statement and Outside Front
Cover Page of Prospectus..................................Front Cover Page
2. Inside Front and Outside Back Cover Pages of Prospectus .Inside Front Cover Page; Back Cover Page
3. Summary Information and Risk Factors......................Prospectus Summary; Risk Factors
4. Use of Proceeds...........................................Use of Proceeds
5. Determination of Offering Price ..........................Front Cover Page; Risk Factors;
Underwriting
6. Dilution .................................................Dilution
7. Selling Security Holders .................................Concurrent Offering
8. Plan of Distribution .....................................Front Cover Page; Underwriting
9. Legal Proceedings ........................................Business
10. Directors, Executive Officers, Promoters, and
Control Persons ..........................................Management; Certain Transactions
11. Security Ownership of Certain Beneficial Owners
and Management ...........................................Principal Stockholders
12. Description of Securities ................................Description of Securities
13. Interests of Named Experts and Counsel....................Experts, Legal Matters
14. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities ..........Inapplicable
15. Organization Within Last Five Years ......................Inapplicable
16. Description of Business ..................................Front Cover Page; Prospectus Summary; Use of
Proceeds; Capitalization; Management's
Discussion and Analysis of Financial Condition
and Results of Operations; Business; Management;
Principal
Stockholders; Description of Securities;
Financial Statements
17. Management's Discussion and Analysis or Plan
of Operation .............................................Management's Discussion and Analysis of Financial
Condition and Results of Operations
18. Description of Property...................................Business
19. Certain Relationships and Related Transactions ...........Certain Transactions
20. Market for Common Equity and Related Stockholder Matters .Risk Factors; Description of Securities; Shares
Eligible for Future Sale; Dividend Policy
21. Executive Compensation ...................................Management
22. Financial Statements......................................Financial Statements
23. Changes In and Disagreements With Accountants on
Accounting and Financial Disclosure ......................Inapplicable
</TABLE>
<PAGE>
EXPLANATORY NOTE
This Registration Statement contains two forms of prospectus: one to be
used in connection with an offering of 800,000 shares of Common Stock and
800,000 Redeemable Common Stock Purchase Warrants (the "Offering
Prospectus"), and one to be used in connection with the sale of 800,000
Selling Securityholder Warrants by certain securityholders of the Company
(the "Selling Securityholders' Prospectus"). The Offering Prospectus and the
Selling Securityholders' Prospectus will be identical in all respects except
for the alternate pages for the Selling Securityholders' Prospectus and
conforming grammatical changes. The Selling Securityholders' Prospectus will
be filed by pre-effective amendment to this Registration Statement.
<PAGE>
This Preliminary Prospectus and the information contained herein are
subject to completion or amendment without notice. These securities may not
be sold nor may offers to buy them be accepted, prior to the time the
Prospectus is delivered in final form. Under no circumstances shall this
Preliminary Prospectus constitute an offer to sell or a solicitation of an
offer to buy, nor shall there be any sale of, these securities in any
jurisdiction in which such offer, solicitation or sale would be unlawful
prior to registration, qualification or filing under the securities laws of
any such jurisdiction.
SUBJECT TO COMPLETION, DATED MAY 6, 1997
DISCAS, INC.
800,000 SHARES OF COMMON STOCK AND
800,000 REDEEMABLE COMMON STOCK PURCHASE WARRANTS
---------------------
Discas, Inc., a Delaware corporation (the "Company"), hereby offers
800,000 shares of common stock (the "Common Stock"), par value $.0001 per
share (the "Shares"), and 800,000 Redeemable Common Stock Purchase Warrants
("Warrants"). The Shares and Warrants are being offered and sold separately
and will be separately transferable immediately upon issuance. Each Warrant
entitles the registered holder thereof to purchase, at any time over a
four-year period commencing 13 months from the date of this Prospectus, one
share of Common Stock at a price of $5.00 (the "Warrant Exercise Price"). The
Warrant Exercise Price is subject to anti-dilution adjustments under certain
circumstances. The Warrants are subject to redemption by the Company at $.10
per Warrant on 30 days' written notice commencing 13 months after the date of
this Prospectus, provided that the average closing bid price of the Common
Stock for 20 consecutive trading days, ending not more than fifteen days
prior to the date on which the Company gives notice, exceeds 150% ($7.50 per
share) of the current Warrant Exercise Price.
Prior to this offering, there has been no public market for the Common
Stock or the Warrants, and there can be no assurance that such a market will
develop after the completion of this offering, or if developed, that it will
be sustained. For information regarding the factors considered in determining
the initial public offering price of the Common Stock, see "Risk Factors" and
"Underwriting." The initial public offering price is estimated to be $5.00
per share of Common Stock and $.10 per Warrant. The Company anticipates that
the Common Stock and the Warrants will be quoted on The NASDAQ SmallCap
Market under the symbols "DSCS" and "DSCSW," respectively and on the Boston
Stock Exchange under the symbols " " and " ," respectively.
---------------------
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND IMMEDIATE SUBSTANTIAL
DILUTION AND SHOULD BE PURCHASED ONLY BY PERSONS WHO CAN AFFORD THE LOSS OF
THEIR ENTIRE INVESTMENT. SEE "RISK FACTORS" (PAGE 6) AND "DILUTION" (PAGE 16)
FOR CERTAIN INFORMATION THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNT AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)(3)
------------ -------------- -------------
<S> <C> <C> <C>
Common Stock .. $ 5.00 $ 0.50 $ 4.50
Warrant ....... $ .10 $ .01 $ .09
Total(3) ...... $4,080,000 $408,080 $3,671,920
</TABLE>
- ------------
(1) In addition, the Company has agreed to pay Roan Capital Partners L.P.,
as representative of the several underwriters (the "Representative") a
non-accountable expense allowance equal to 3% of the gross proceeds of
this offering, and 80,000 Representative's Warrants to purchase 80,000
shares of Common Stock and 80,000 Warrants, exercisable for a price of
$6.75 per share of Common Stock and $.14 per Warrant. The Company has
agreed to indemnify the Underwriters against certain liabilities,
including liabilities under the Securities Act of 1933, as amended. For
indemnification arrangements with the Representative and additional
compensation payable to the Representative, see "Underwriting."
(2) Before deducting estimated offering expenses of $558,000, including the
Representative's 3% non-accountable expense allowance of $122,400 and
Representative's consulting fee of $85,300, payable by the Company.
(3) The Company has granted the Representative an option, exercisable
within 45 days after the date of this Prospectus, to purchase up to an
aggregate of 120,000 additional shares of Common Stock and 120,000
additional Warrants upon the same terms and conditions set forth above,
solely to cover over-allotments, if any (the "Over-allotment Option").
If such Over-allotment Option is exercised in full, the total Price to
Public, Underwriting Discount and Proceeds to the Company will be
$4,692,000, $469,200 and $4,222,800, respectively.
<PAGE>
The shares of Common Stock and the Warrants are being offered by the
several Underwriters, subject to prior sale, when, as and if accepted by
them, and subject to certain conditions. It is expected that certificates for
the shares of Common Stock and the Warrants offered hereby will be available
for delivery on or about , 1997 at the offices of Roan Capital
Partners L.P., 40 East 52nd Street, Tenth Floor, New York, New York 10022.
---------------------
ROAN CAPITAL PARTNERS L.P.
The date of this Prospectus is , 1997
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE SHARES OF
COMMON STOCK OR THE WARRANTS OFFERED HEREBY, INCLUDING PURCHASES OF THE
SHARES OF COMMON STOCK OR THE WARRANTS TO STABILIZE THEIR MARKET PRICES OR
PURCHASES OF THE COMMON STOCK OR THE WARRANTS TO COVER SOME OR ALL OF A SHORT
POSITION IN THE COMMON STOCK OR WARRANTS MAINTAINED BY THE UNDERWRITERS. FOR
A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
The registration statement of which this Prospectus is a part also covers
the offering for resale by certain securityholders (the "Selling
Securityholders") of 800,000 bridge warrants (the "Selling Securityholder
Warrants"), which are identical to the Warrants being offered by the Company
herein, and the Common Stock issuable upon the exercise of the Selling
Securityholder Warrants. See "Concurrent Offering." The Selling
Securityholder Warrants and the Common Stock underlying such Selling
Securityholder Warrants are sometimes collectively referred to as the
"Selling Securityholder Securities." The Selling Securityholder Warrants are
issuable to the Selling Securityholders upon the closing of this offering
upon the automatic conversion of warrants (the "Bridge Warrants") acquired by
them in the Company's private placement in April 1997 (the "Bridge
Financing"). See "Use of Proceeds." Sales of the Selling Securityholder
Warrants or the underlying Common Stock, or the potential of such sales, may
have an adverse effect on the market price of the securities offered hereby.
<PAGE>
PROSPECTUS SUMMARY
The following is a summary of certain information contained in this
Prospectus and is qualified in its entirety by the more detailed information
and financial statements (including the notes thereto) appearing elsewhere in
this Prospectus. Except as otherwise noted, all information in this
Prospectus reflects a 1.35-for-1 split of the Common Stock of the Company
effected on December 31, 1996, and assumes no exercise of the Underwriters'
Over-Allotment Option to purchase an additional 120,000 shares of Common
Stock and 120,000 Warrants from the Company. Investors should consider
carefully the information set forth in this Prospectus under the heading
"Risk Factors."
THE COMPANY
Discas, Inc. ("Discas" or the "Company"), based in Waterbury, Connecticut,
produces proprietary plastic and rubber compounds using a variety of recycled
and prime, or virgin, materials. The Company has extensive expertise in
polymer technology, and has commercialized proprietary formulations used in
the manufacturing of products in the footwear, aeronautic, military,
automotive and consumer products sectors. In November 1996, the Company
acquired a manufacturer of plastic containers in New Jersey as part of its
strategy to vertically integrate its operations from raw material supply
through end product manufacturing. See "Business -- Expansion Strategy."
Historically, the Company's core business focused on the development and
marketing of niche synthetic rubber compounds such as thermoplastic
elastomers ("TPE"). In addition, Discas provides contract testing and
research services for industrial accounts, which has resulted in the
development of new materials and market applications. In recent years, Discas
has extended this technology to industrial-source scrap polymer feedstock to
produce marketable value-added plastic compounds, and management is now
focused on increasing growth in plastics through market penetration and
acquisitions. See "Business -- Expansion Strategy."
Discas is currently using industrial scrap material to manufacture high
quality recycled polypropylene-based compounds that are used by manufacturers
in place of more expensive virgin plastics. The Company secures its feedstock
from industrial waste streams as well as limited amounts of feedstock from
post-consumer waste streams and works closely with several regional firms
that collect and process industrial scrap material for reuse. Discas has the
technological capability to modify this feedstock into higher-value material
and management believes that it can lead an industry consolidation by
continuing to build on established supplier and customer relationships.
The Company was organized under the laws of Delaware on December 11, 1985.
Its principal business address is 567-1 South Leonard Street, Waterbury,
Connecticut 06708 and its telephone number is (203) 753-5147.
THE OFFERING
Securities being Offered ...... 800,000 shares of Common Stock, par value
$.0001 per share, and 800,000 redeemable
common stock purchase warrants ("Warrants").
Each Warrant entitles the holder thereof to
purchase one share of Common Stock of the
Company at a Warrant Exercise Price of $5.00
per share at any time over a four year
period commencing 13 months from the date of
this Prospectus. The Warrants may be
redeemed by the Company commencing 13 months
from the date of this Prospectus at a price
of $.10 per Warrant on 30 days' written
notice, provided the average closing bid
price of the Common Stock for 20 consecutive
trading days, ending not more than 15 days
prior to the date on which the Company gives
notice, exceeds 150%
3
<PAGE>
($7.50 per share) of the current Warrant
Exercise Price. The Shares and the Warrants
are being offered and sold separately and
will be separately transferable immediately
upon issuance. See "Description of
Securities."
Securities Offered Concurrently
By Selling Securityholders ... 800,000 Selling Securityholder Warrants and
800,000 shares of Common Stock issuable upon
the exercise of the Selling Securityholder
Warrants. See "Concurrent Offering."
Common Stock outstanding before
the offering ................. 2,254,500 shares of Common Stock(1)
Common Stock to be outstanding
after offering ............... 3,214,500 shares of Common Stock(2)
Use of Proceeds ............... The Company intends to utilize the net
proceeds from this offering, estimated at
approximately $3,114,000, for capital
expenditures, working capital, repayment of
$370,000 in Bridge Financing debt, future
acquisitions and general corporate purposes
including sales and marketing. See "Use of
Proceeds."
Risk Factors .................. The securities offered hereby involve a high
degree of risk and immediate substantial
dilution. See "Risk Factors" and "Dilution."
Proposed NASDAQ SmallCap
Market Symbols ............... Common Stock "DSCS"
Warrants "DSCSW"
Proposed Boston Stock
Exchange Market Symbols ...... Common Stock " "
Warrants " "
- ------------
(1) Does not include (i) shares issuable upon exercise of outstanding
warrants held by Mr. Patrick A. DePaolo and Mantis V, L.L.C. to
purchase 50,000 and 85,000 shares of Common Stock, respectively, at a
price per share equal to $2.25, (ii) shares issuable upon exercise of
outstanding Selling Securityholder Warrants to purchase an aggregate of
800,000 shares of Common Stock at a price per share equal to $5.00 or
(iii) 160,000 shares of Common Stock into which a $1,000,000 note
payable to Christie Enterprises, Inc. is automatically convertible upon
the closing of this offering.
(2) Does not include (i) shares issuable upon exercise of outstanding
warrants held by Mr. Patrick A. DePaolo and Mantis V, L.L.C. to
purchase 50,000 and 85,000 shares of Common Stock, respectively, at a
price per share equal to $2.25, (ii) shares issuable upon exercise of
outstanding Selling Securityholder Warrants to purchase an aggregate of
800,000 shares of Common Stock at a price per share equal to $5.00 or
(iii) up to an additional 240,000 shares issuable upon exercise of the
Underwriters' Over-allotment Option and underlying Warrants. Also does
not include up to 160,000 shares of Common Stock issuable upon exercise
of the Representative's Warrants and underlying Warrants. Includes
160,000 shares of Common Stock into which a $1,000,000 note payable to
Christie Enterprises, Inc. is automatically convertible upon the
closing of this offering. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations", "Underwriting" and
"Description of Securities -- Representative's Warrants."
4
<PAGE>
SUMMARY FINANCIAL DATA
The following summary financial data should be read in conjunction with
the consolidated financial statements of the Company and of Christie
Enterprises, Inc. and related notes thereto appearing elsewhere in this
Prospectus. The Company purchased substantially all of the assets of Christie
Enterprises, Inc. in November 1996. The audited financial statements of
Christie Enterprises, Inc. are included in "Financial Statements" elsewhere
in this Prospectus. The unaudited Consolidated Statement of Operations Data
for the Company for the nine months ended January 31, 1997 reflects the
operations of the Company including the former Christie Enterprises, Inc.
lines of business from the date of acquisition, and the unaudited
Consolidated Balance Sheet Data at January 31, 1997 includes the purchased
assets. All other periods shown reflect only the operations of the Company.
See the pro forma financial statements of the Company and of Christie
Enterprises, Inc. included in "Financial Statements."
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
APRIL 30, JANUARY 31,
--------------------------- --------------------------
1995 1996 1996 1997
------------ -------------- ------------ -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Sales ........................................ $3,749,564 $3,858,205 $3,283,040 $3,550,394
Cost of Sales ................................ 2,928,067 3,012,125 2,543,122 2,744,642
------------ -------------- ------------ -------------
Gross Profit ................................. 821,497 846,080 739,918 805,752
Selling general and administrative expenses .. 642,401 698,946 612,128 739,162
------------ -------------- ------------ -------------
Income from Operations ....................... 179,096 147,134 127,790 66,590
Net other income (expense) ................... (40,912) (49,363) (41,480) (58,511)
Minority interest ............................ 23,155 23,841 2,207 36,705
------------ -------------- ------------ -------------
Earnings before income taxes ................. 161,339 121,612 88,517 44,784
Income tax expense ........................... 44,155 -- 21,600 --
------------ -------------- ------------ -------------
Net income ................................... $ 117,184 $ 121,612 $ 66,917 $ 44,784
============ ============== ============ =============
Pro forma net income per share(1) ............ $.054 $.020
-------------- -------------
Pro forma average number of common and common
equivalent shares outstanding ............... 2,254,500(1) 2,254,500(1)
</TABLE>
<TABLE>
<CAPTION>
JANUARY 31, 1997
--------------------------
ACTUAL(2) AS ADJUSTED(3)
----------- --------------
(UNAUDITED)
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital.................. $ 131,145 $3,245,145
Total assets .................... 4,259,419 7,037,032
Total liabilities ............... 3,736,953 2,736,953
Stockholders' equity............. 522,466 4,372,637
</TABLE>
- ------------
(1) Does not include (i) outstanding warrants held by Mr. Patrick A.
DePaolo and Mantis V, L.L.C. to purchase 50,000 and 85,000 shares of
Common Stock, respectively, at a price per share equal to $2.25 or (ii)
160,000 shares of Common Stock into which a $1,000,000 note payable to
Christie Enterprises, Inc. is convertible upon the closing of this
offering.
(2) Does not include (i) $360,000 principal amount of 11% promissory notes
which were issued in April 1997 in connection with the Bridge
Financing, (ii) outstanding warrants held by Mr. Patrick A. DePaolo and
Mantis V, L.L.C. to purchase 50,000 and 85,000 shares of Common Stock,
respectively, at a price per share equal to $2.25, or (iii) 160,000
shares of Common Stock into which a $1,000,000 note payable to Christie
Enterprises, Inc. is convertible upon the closing of this offering.
(3) Includes 160,000 shares of Common Stock into which a $1,000,000 note
payable to Christie Enterprises, Inc. is convertible upon closing of
this offering, and the estimated net proceeds from this offering, but
does not include (i) outstanding warrants held by Mr. Patrick A.
DePaolo and Mantis V, L.L.C. to purchase 50,000 and 85,000 shares of
Common Stock, respectively, at a price per share equal to $2.25 or (ii)
outstanding Selling Securityholder Warrants to purchase an aggregate of
800,000 shares of Common Stock at a price per share equal to $5.00.
5
<PAGE>
RISK FACTORS
The securities offered hereby involve a high degree of risk, including,
but not limited to, the several factors described below. These securities
should be purchased only by persons who can afford a loss of their entire
investment. Investors should consider carefully the following risk factors
inherent in and affecting the business of the Company and this offering in
evaluating an investment in the securities offered hereby.
POSSIBLE NEED FOR ADDITIONAL FINANCING.
The Company is dependent on and intends to use the proceeds of this
offering to implement its plans for further growth and expansion of the
Company's business. Based on currently proposed plans and assumptions
relating to its operations, the Company anticipates that the proceeds of this
offering, together with projected cash flow from operations and available
cash resources, including its anticipated bank financing, will be sufficient
to satisfy its contemplated cash requirements for at least twelve months
following the consummation of this offering. In the event that the Company's
assumptions change or prove to be inaccurate or if the proceeds of this
offering, cash flow and available cash resources prove to be insufficient to
fund operations (due to unanticipated expenses, difficulties, problems or
otherwise including failure to obtain replacement bank financing), the
Company may be required to seek additional financing or curtail its expansion
activities. The Company may in the future, depending upon the opportunities
available to it, determine to seek additional debt or equity financing to
fund the cost of continuing expansion. To the extent that the Company obtains
equity financing or finances an acquisition with equity securities, any such
issuance of equity securities could result in dilution to the interests of
the Company's stockholders. Additionally, to the extent that the Company
incurs additional indebtedness or issues debt securities in connection with
an acquisition, the Company will be subject to risks associated with
incurring substantial additional indebtedness including the possibility that
cash flow may be insufficient to pay principal and interest on any such
indebtedness. There can be no assurance that additional financing will be
available to the Company on acceptable terms, or at all. See "Use of
Proceeds."
EXPANSION STRATEGY.
Management believes that future net sales and profit growth is
substantially dependent upon its ability to expand beyond its existing
supplier and customer base by obtaining additional sources of supply and
customers, through a combination of acquisitions, capital investment in
additional processing machinery, developing additional facilities in new
market areas and marketing within its existing service areas. This strategy
entails the risks inherent in assessing the value, strengths, weaknesses and
potential profitability of acquisition candidates and of new facilities as
well as integrating the operations of acquired companies and newly opened
facilities. There can be no assurance that acquisition opportunities will
continue to be available, that the Company will have access to the capital
required to finance potential acquisitions or open new facilities, that the
Company will continue to acquire businesses or that any business acquired or
new facilities opened will be integrated successfully into the Company's
operations or prove profitable. The Company may finance future acquisitions
by using shares of the Company's Common Stock for all or a portion of the
consideration to be paid. If the Company does not have sufficient cash
resources, its growth could be limited, unless it is able to obtain
additional capital through subsequent debt or equity financings. There can be
no assurance that the Company will be able to obtain such financing or that,
if available, such financing will be on terms acceptable to the Company. As a
result, there can be no assurance that the Company will be able to
successfully implement its acquisition strategy. See "Business -- Expansion
Strategy."
NO LONG-TERM AGREEMENTS WITH SUPPLIERS OR CUSTOMERS.
The Company is dependent on third party relationships with several
suppliers of scrap polymer feedstocks, the raw materials necessary to the
business of the Company. The Company does not presently have any long term
agreements with these suppliers and does not anticipate the execution of any
long term agreements in the future. The two largest suppliers, Ash-Kourt
Industries, Inc. and Borden, Inc.,
6
<PAGE>
currently provide approximately 60% of the Company's feedstock. The Company's
existing operations and plans for future growth anticipate the continued
existence of these relationships. There can be no assurance, however, that
these relationships will be preserved. The Company believes that it has
alternative sources of supply available to it in the event that its
requirements change or its current suppliers are unable or unwilling to
fulfill the Company's needs. Nevertheless, there can be no assurance that
alternative suppliers will be available upon terms comparable to the
Company's existing arrangements.
The Company also does not presently have any long term agreements with its
customers and does not anticipate the execution of any long term agreements
in the future. Although the Company's two largest customers accounted for
approximately 66% of the Company's sales in fiscal 1996, the Company has
subsequently diversified its customer base such that for the nine months
ended January 31, 1997, the Company's five largest customers accounted for
approximately 58% of sales. The Company's existing operations and plans for
future growth anticipate the continued existence of relationships with its
current customers. There can be no assurance, however, that these
relationships will be preserved.
COMPETITION.
The compounding of polymers is a highly competitive industry. The
Company's prime and recycled products compete with a variety of polymer
materials from other companies, many of which are larger, better financed
manufacturers of prime compounds. The Company must competitively price its
products against both prime and recycled compounds if it is to successfully
build its sales volume. While the Company believes that its technical
expertise, modern facility and advanced quality control are attractive
features to potential customers, there can be no assurance that the Company
can capture adequate competitive contracts to sustain profitability, or that
other companies will not provide superior products in both price and quality.
RAW MATERIALS AVAILABILITY AND COMMODITY PRICING.
The scrap and prime, or virgin, polymer feedstocks used by the Company as
a raw material are subject to substantial price fluctuations. Prices for
scrap feedstocks generally conform to fluctuations in prices for virgin
material, but usually remain below virgin material prices. While the Company
expects that there will continue to be an abundance of industrial scrap
polymer feedstock for use in the production of its compounds, there can be no
assurance that adequate quantities will be available or that prices the
Company may be required to pay for raw materials will allow the Company to
operate at a profit. The Company does not have any long-term contracts with
either suppliers or customers.
RELIANCE ON TRADE SECRETS, EVOLVING TECHNOLOGY AND COMPETITION.
The Company holds no patents to its processes, although it attempts to
keep proprietary the processes and formulations it uses through
confidentiality agreements with employees and third parties. However, there
can be no assurance that competitors will not develop processes or products
of comparable efficiency and quality. Furthermore, rapid technological
development may result in the Company's processes or systems becoming
obsolete. Technological competition from other companies is expected to
increase, and many of these potential competitors have substantially greater
capital resources, research and development capabilities and marketing
resources than the Company. The Company has registered trademarks for certain
of its products, but in the opinion of management, such trademarks are not
material to the Company's business as a whole.
SUBSTANTIAL PORTION OF PROCEEDS ALLOCATED FOR REPAYMENT OF INDEBTEDNESS AND
GENERAL CORPORATE AND WORKING CAPITAL PURPOSES.
Approximately 12% ($370,000) of the estimated net proceeds from the sale
of the Common Stock and the Warrants has been allocated for repayment of
principal and accrued interest on the Bridge Financing subordinated notes to
the lenders of the Bridge Financing, approximately 22% ($700,000) of the
estimated net proceeds from the sale of the Common Stock and the Warrants has
been allocated to capital
7
<PAGE>
expenditures, and approximately 66% ($2,044,000) of the estimated net
proceeds from the sale of the Common Stock and the Warrants has been
allocated to general corporate and working capital purposes, including
inventory purchases, acquisitions, sales and marketing. Proceeds allocated to
general corporate and working capital purposes may be utilized in the
discretion of the Board of Directors. As a result, investors will not know in
advance how such net proceeds will be utilized by the Company. See "Use of
Proceeds." Additionally, in the event the Underwriters' over-allotment option
is exercised or to the extent the Warrants are exercised, the Company will
realize additional net proceeds, which will be added to working capital.
Notwithstanding its plan to develop its business as described in this
Prospectus, future events, including the problems, expenses, difficulties,
complications and delays frequently encountered by businesses, as well as
changes in the economic climate or changes in government regulations, may
make the reallocation of funds necessary or desirable. Any such reallocation
will be at the discretion of the Board of Directors. See "Use of Proceeds."
DEPENDENCE UPON KEY PERSONNEL.
The success of the Company is substantially dependent upon the efforts of
its founder, Chairman of the Board, Chief Executive Officer and President,
Mr. Patrick A. DePaolo, Sr. The loss of the services of Mr. DePaolo, or the
inability to attract and retain other qualified personnel, may adversely
affect the Company's business. There is no assurance that the Company will
successfully recruit or retain personnel of the requisite caliber or in
adequate numbers to enable it to execute its business growth strategy. The
Company has a five year employment agreement with Mr. DePaolo. The Company
has a $500,000 key man life insurance policy on Mr. DePaolo which is
currently pledged to the Company's senior commercial lender. See
"Management."
ENVIRONMENTAL REGULATION.
Federal, state and local environmental laws and regulations apply to the
activities of the Company and to the products it intends to produce.
Violations of statutes, regulations or environmental permit requirements,
even if unintentional, can result in significant fines, costs, revocation of
required licenses or permits or requirements for remedial work. The Company's
present and planned activities are, or may become, subject to regulation
under various federal, state and local environmental laws and regulations,
including laws and regulations that may be adopted in the future. Such
regulations may materially adversely affect the Company's existing or planned
operations. Any failure of the Company to comply with the requirements of
these environmental laws and regulations, even if unintentional, could give
rise to liabilities, penalties or fines which could have a material adverse
effect on the business or financial condition of the Company. See "Business
- -- Environmental Regulation."
CONTROL BY OFFICERS, DIRECTORS AND PRINCIPAL STOCKHOLDERS.
The election of directors of the Company is controlled solely by the
Company's founder, Chairman of the Board, Chief Executive Officer and
President, Mr. Patrick A. DePaolo, Sr., who owns or has voting rights with
respect to 93.9% of the outstanding voting stock prior to this offering and
will continue to beneficially own or vote 66.3% of the outstanding voting
stock following completion of this offering. See "Principal Stockholders."
LIMITED EXPERIENCE OF UNDERWRITER.
The Representative, including its predecessor, has been in existence since
1993 and is principally engaged in retail brokerage, market making activities
and various corporate finance projects. Although certain officers of the
Representative have corporate finance experience from previous employment,
the Representative has not acted as an underwriter or placement agent of any
public offerings of securities to date. No assurance can be given that the
Representative's lack of experience as an underwriter will not adversely
affect this offering and the subsequent development of a liquid public
trading market in the Common Stock. See "Risk Factors -- No Assurance of
Public Market; Arbitrary Determination of Offering Price; Lack of Public
Market for Securities."
8
<PAGE>
GENERAL ECONOMIC CONDITIONS.
The operations of the Company are subject to general economic conditions,
particularly relating to the ability of recycled products to compete with
virgin materials in price, quality and volume. The Company may not have
sufficient capitalization to survive lack of market acceptance of its
products and economic exigencies in general.
PRODUCTS LIABILITY AND OTHER CLAIMS.
The Company may be subject to substantial products liability costs if
claims arise out of problems associated with the products of the Company. The
Company will seek to maintain the products liability coverage it currently
has in place for the benefit of the Company to protect the Company against
such liabilities, but there can be no assurance that such arrangements can be
made, or if made, will be effective to insulate the assets of the Company
from such claims. The Company will attempt to maintain insurance against such
contingencies, in scope and amount which it believes to be adequate. However,
there can be no assurance that such product liability insurance will continue
to be available, or if available, that it will adequately insure against such
claim.
POSSIBLE DELISTING OF SECURITIES FROM NASDAQ SYSTEM.
The Company has applied for listing of its Common Stock and Warrants on
the NASDAQ SmallCap Market and such securities are expected to be listed on
such market upon completion of this offering. In order to continue to qualify
for listing on the NASDAQ SmallCap Market, however, a company must have,
among other things, at least $2,000,000 in total assets, $1,000,000 in
capital and surplus and a minimum bid price for its common stock of $1.00 per
share. NASDAQ has recently proposed new maintenance criteria which, if
implemented, would eliminate certain market capitalization exceptions to the
$1.00 per share minimum bid price and require, among other things (i) either
at least $2,000,000 in net tangible assets, a $35,000,000 market
capitalization or net income of at least $500,000 in two of the three prior
years, (ii) at least 500,000 shares in the public float valued at $1,000,000
or more, (iii) at least two active market makers, (iv) at least 300 holders
of the Company's Common Stock and (v) adherence to certain corporate
governance provisions. However, upon completion of the offering, if the
Company is thereafter unable to continue to satisfy the listing criteria
under the NASDAQ rules, any listed security will be subject to delisting. In
such an event, the Common Stock and the Warrants may not be eligible for
continued listing on the NASDAQ SmallCap Market. As a result of delisting,
trading, if any, in the securities would be conducted on the Boston Stock
Exchange if the Company's securities are then listed thereon, or on the
over-the-counter market in what are commonly referred to as the "pink
sheets," or in the "OTC Bulletin Board." If such result occurs, an investor
may find it more difficult to dispose of, or to obtain accurate quotations as
to the prices of, the Common Stock and Warrants.
In addition, if the Company's securities are not listed on the NASDAQ
SmallCap Market or on the Boston Stock Exchange, they are subject to Rule
15g-9 under the Exchange Act that imposes additional sales practice
requirements on broker-dealers which sell such securities to persons other
than established customers and accredited investors (generally persons with
net assets in excess of $1,000,000 or annual income exceeding $200,000, or
$300,000 together with their spouse). If the Common Stock were delisted from
the NASDAQ SmallCap Market and the Boston Stock Exchange, and the Company's
stock price should fall below $5.00 per share and no other exclusion from the
definition of "penny stock" under the Securties Exchange Act of 1934, as
amended (the "Exchange Act") were available, then the Company's Common Stock
and Warrants would be deemed "penny stock" and transactions in the Common
Stock and Warrants would be subject to the penny stock regulations which
impose significant sales practice requirements on broker-dealers, including
(a) delivering to customers the Commission's standardized disclosure
statement about "penny stocks", (b) providing to customers current bid and
ask prices for the stock, (c) disclosing to customers the broker-dealer's and
sales representative's compensation with respect to trades in the stock, and
(d) providing to customers monthly account statements reflecting the stock's
then current price. For transactions covered by this rule, the broker-dealer
must make a special suitability determination for the purchaser and have
received the purchaser's written consent to the transaction prior to
purchase. Consequently, the rule may restrict the ability of broker-dealers
to sell the Company's
9
<PAGE>
securities and may affect the ability of stockholders to sell their
securities in the secondary market. The loss of continued listing on the
NASDAQ SmallCap Market may also cause a decline in share price, loss of news
coverage of the Company and difficulty in obtaining subsequent financing. The
foregoing penny stock restrictions will not apply to the Company's securities
if such securities are listed on the Nasdaq SmallCap Stock Market or on a
national securities exchange such as the Boston Stock Exchange.
POTENTIAL ADVERSE IMPACT OF PREFERRED STOCK ON RIGHTS OF HOLDERS OF COMMON
STOCK.
The Company is currently authorized to issue up to a total of 20,000,000
shares of Common Stock and 5,000,000 shares of preferred stock. There are
currently 2,254,500 shares of Common Stock outstanding and no preferred stock
outstanding.
The Company's Board of Directors is authorized to issue preferred stock in
one or more series and to fix the voting powers and the designations,
preferences and relative, participating, optional or other rights and
restrictions thereof. Accordingly, the Company may issue series of preferred
stock in the future that will have preference over the Common Stock with
respect to the payment of dividends and proceeds from the Company's
liquidation, dissolution or winding up or have voting or conversion rights
which could adversely effect the voting power and percentage ownership of the
holders of the Common Stock. The Company has no plans, arrangements,
understandings or commitments to issue any preferred stock. However, the
ability of the Company to issue such additional shares and the possible
exercise of the Warrants, the Selling Securityholder Warrants and the
Representative's Warrants may prove to be a hindrance to future financings by
the Company since the holders of such warrants may be expected to exercise
them at times when the Company would otherwise be able to obtain additional
equity capital on terms more favorable to the Company. Also, rights granted
to future holders of preferred stock could be used to restrict the Company's
ability to merge with, or sell its assets to, a third party, and the ability
of the Board of Directors to issue preferred stock could discourage, delay or
prevent a takeover of the Company, thereby preserving control of the Company
by the current stockholders. See "Description of Securities -- Preferred
Stock."
SHARES ELIGIBLE FOR FUTURE SALE.
Upon the completion of this offering, the Company will have 3,214,500
shares of Common Stock outstanding. Of these shares, the 800,000 shares sold
by the Company in this offering will be freely-tradeable without restriction
or further registration under the Securities Act, except for any shares
purchased by an "affiliate" of the Company (as defined in the Securities Act
and the rules and regulations thereunder) which will be subject to the
limitations of Rule 144 promulgated under the Securities Act. Of the
remaining 2,414,500 shares, subject to the holders compliance with the
provisions of Rule 144, (i) 34,504 shares beneficially owned by four
non-affiliates of the Company will become tradeable in August 1997, (ii)
364,500 shares beneficially owned by Mantis V, L.L.C., an affiliate of the
Company, will become tradeable in September 1997, (iii) 160,000 shares of
Common Stock issuable upon conversion of a note in the principal amount of
$1,000,000 payable to Christie Enterprises, Inc. upon the closing of this
offering will become tradeable in November 1997 and (iv) 1,848,646 shares
beneficially owned by Patrick A. DePaolo, Sr., Steven DePaolo and a DePaolo
family limited liability company, all affiliates of the Company, are
tradeable as of the date of this Prospectus, although all of the
aforementioned shares with the exception of those set forth in (iii) will not
be freely tradeable for two years from the date of this Prospectus without
the prior written consent of the Representative pursuant to "lock-up"
agreements each shareholder will have entered into with the Representative
prior to the closing of this offering. These securities were deemed to be
"restricted securities" at the time they were purchased, as that term is
defined under Rule 144 promulgated under the Securities Act, as such shares
were issued in private transactions not involving a public offering.
In general, under Rule 144 as recently modified (which modifications
became effective April 29, 1997), subject to the satisfaction of certain
other conditions, a person, including an affiliate of the Company (or persons
whose shares are aggregated), who has beneficially owned the restricted
shares of Common Stock to be sold for at least one year is entitled to sell,
within any three-month period, a number of shares that does not exceed the
greater of 1% of the total number of outstanding shares of the same
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<PAGE>
class or, if the Common Stock is quoted on an exchange or NASDAQ, the average
weekly trading volume during the four calendar weeks preceding the sale. A
person who has not been an affiliate of the Company for at least the three
months immediately preceding the sale and who has beneficially owned the
shares of Common Stock to be sold for at least two years is entitled to sell
such shares under Rule 144 without regard to any of the limitations described
above.
No prediction can be made as to the effect, if any, that sales of shares
of Common Stock or the availability of shares for sale will have on the
market prices prevailing from time to time. The possibility that substantial
amounts of Common Stock may be sold in the public market in the future may
adversely affect prevailing market prices for the Common Stock and could
impair the Company's ability to raise capital through the sale of its equity
securities. See "Shares Eligible for Future Sale."
NO ASSURANCE OF PUBLIC MARKET; ARBITRARY DETERMINATION OF OFFERING PRICE;
LACK OF PUBLIC MARKET FOR SECURITIES.
Prior to this offering, there has been no public market for the shares of
Common Stock or the Warrants. The initial public offering price of the
Warrants and Shares and the exercise price and other terms of the Warrants
were established by negotiations between the Company and the Representative
and bear no relationship to such established valuation criteria such as
assets, book value or prospective earnings.
IMMEDIATE SUBSTANTIAL DILUTION; DISPARITY OF CONSIDERATION.
This offering involves an immediate and substantial dilution of $3.72 per
share between the pro forma net tangible book value per share after the
offering of $1.28 and the offering price of $5.00 per share of Common Stock.
The existing stockholders of the Company, including an affiliate of certain
of its executive officers and directors, acquired their shares of Common
Stock at prices substantially lower than the initial public offering price
and, accordingly, new investors will bear substantially all of the risks
inherent in an investment in the Company. See "Dilution."
ANTI-TAKEOVER PROVISIONS.
Certain provisions of Delaware law, the Certificate of Incorporation and
the Company's By-laws, as amended (the "By-laws"), could have the effect of
making it more difficult for a third party to acquire, or of discouraging a
third party from attempting to acquire, control of the Company. These
provisions and the prohibition against certain business combinations could
have the effect of delaying, deferring or preventing a change in control or
the removal of existing management of the Company. See "Description of
Securities."
LIMITED LIABILITY OF DIRECTORS.
As permitted by the Delaware Corporation Law, the Company's Amended and
Restated Certificate of Incorporation eliminates personal liability of a
director to the Company and its stockholders for monetary damages for breach
of fiduciary duty as a director except under certain circumstances.
Accordingly, except in certain circumstances, the Company's directors will
not be liable to the Company or its stockholders for breach of such duty. See
"Management -- Indemnification and Exculpation Provisions."
REPRESENTATIVE'S WARRANTS.
The Company has agreed to sell to the Representative, at a price of $10,
the right to purchase up to 80,000 shares of Common Stock and up to 80,000
Warrants (the "Representative's Warrants"). Such Warrants will be exercisable
for a four-year period commencing one year from the date of this Prospectus,
at exercise prices equal to 135% of the initial public offering prices of the
Common Stock and Warrants set forth on the cover page of this Prospectus.
For the life of the Representative's Warrants, the holders thereof are
given the opportunity to profit from a rise in the market price of the Common
Stock and Warrants, which may result in a dilution of the
11
<PAGE>
interests of other stockholders. As a result, the Company may find it more
difficult to raise additional equity capital if it should be needed for its
business while such Warrants are outstanding. See "Underwriting."
POSSIBLE RESTRICTIONS ON MARKET-MAKING ACTIVITIES IN THE COMPANY'S
SECURITIES.
The Representative has advised the Company that it intends to make a
market in the Company's securities. Regulation M, which was recently adopted
to replace Rule 10b-6 and certain other rules promulgated under the Exchange
Act, may prohibit the Representative from engaging in any market-making
activities regarding the Company's securities for a period from five days (or
such applicable period as Regulation M may provide) prior to any solicitation
by the Representative of the exercise of the Warrants until the later of the
termination of such solicitation activity or the termination (by waiver or
otherwise) of any right that the Representative may have to receive a fee for
the exercise of Warrants following such solicitation. As a result, the
Representative may be unable to provide a market for the Company's securities
during certain periods while the Warrants are exercisable. In addition, under
applicable rules and regulations under the Exchange Act, any person engaged
in the distribution of the Selling Securityholders' Securities may not
simultaneously engage in market-making activities with respect to any
securities of the Company for the applicable "cooling off" period prior to
the commencement of such distribution. Accordingly, in the event the
Representative is engaged in a distribution of the Selling Securityholders'
Securities, it will not be able to make a market in the Company's securities
during the applicable restrictive period. Any temporary cessation of such
market-making activities could have an adverse effect on the market price of
the Company's securities. See "Underwriting."
POTENTIAL ADVERSE EFFECT OF REDEMPTION OF WARRANTS.
The Warrants may be redeemed by the Company commencing 13 months from the
date of this Prospectus, at a redemption price of $.10 per Warrant upon not
less than 30 days' prior written notice provided the average closing bid
price of the Common Stock on Nasdaq (or the last sales price if traded on a
national securities exchange) for 20 consecutive trading days, ending not
more than 30 days prior to the date of the notice of redemption, exceeds 150%
of the current Warrant Exercise Price, subject to adjustment. Redemption of
the Warrants could force the holders to exercise the Warrants and pay the
exercise price at a time when it may be disadvantageous for the holders to do
so, sell the Warrants at the then current market price when they might
otherwise wish to hold the Warrants, or to accept the redemption price, which
is likely to be substantially less than the market value of the Warrants at
the time of redemption. See "Description of Securities -- Warrants."
RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS INCLUDED IN THIS PROSPECTUS.
This Prospectus contains certain forward-looking statements regarding the
plans and objectives of management for future operations, including plans and
objectives relating to the development of the Company. The forward-looking
statements included herein are based on current expectations that involve
numerous risks and uncertainties. The Company's plans and objectives are
based on a successful execution of the Company's expansion strategy and
assumptions that the Company will be profitable, that the industry will not
change materially or adversely, and that there will be no unanticipated
material adverse change in the Company's operations or business. Assumptions
relating to the foregoing involve judgments with respect to, among other
things, future economic, competitive and market conditions and future
business decisions, all of which are difficult or impossible to predict
accurately and many of which are beyond the control of the Company. Although
the Company believes that its assumptions underlying the forward-looking
statements are reasonable, any of the assumptions could prove inaccurate and,
therefore, there can be no assurance that the forward-looking statements
included in this Prospectus will prove to be accurate. In light of the
significant uncertainties inherent in the forward-looking statements included
herein, particularly in view of the Company's recent and planned expansion,
the inclusion of such information should not be regarded as a representation
by the Company or any other person that the objectives and plans of the
Company will be achieved.
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<PAGE>
DIVIDENDS.
The Company has never paid cash dividends and it does not anticipate that
it will pay cash dividends on its Common Stock or alter its dividend policy
in the foreseeable future. The payment of dividends on the Common Stock by
the Company will depend on its earnings and financial condition and such
other factors as the Board of Directors of the Company may consider relevant.
The Company currently intends to retain its earnings to assist in financing
the development of its business. In addition, the Company's current senior
credit agreement prohibits the payment of cash dividends and the Company
expects that any new senior lender will similarly prohibit the payment of
cash dividends. Investors who anticipate the need for dividends on their
investments should refrain from purchasing any of the shares of Common Stock
and the Warrants offered hereby.
FOR ALL OF THE FOREGOING REASONS AND OTHERS SET FORTH IN THIS PROSPECTUS,
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. ANY PERSON
CONSIDERING AN INVESTMENT IN THE SECURITIES OFFERED HEREBY SHOULD BE AWARE OF
THESE AND OTHER FACTORS SET FORTH IN THIS PROSPECTUS. THESE SECURITIES SHOULD
BE PURCHASED ONLY BY PERSONS WHO CAN AFFORD A TOTAL LOSS OF THEIR INVESTMENT
IN THE COMPANY.
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<PAGE>
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the shares
of Common Stock and the Warrants offered hereby, after deducting offering
expenses payable by the Company, are estimated at approximately $3,114,000.
The Company presently intends to use the net proceeds over the 12 month
period following this offering as follows:
<TABLE>
<CAPTION>
APPROXIMATE
DOLLAR
APPLICATION OF PROCEEDS AMOUNT
- -------------------------------------------- -------------
<S> <C>
Repayment of Bridge Financing (1)............ $ 370,000
Capital Expenditures (2) .................... 700,000
Working Capital (including acquisitions)(3) . 2,044,000
-------------
Total ..................................... $3,114,000
=============
</TABLE>
- ------------
(1) Repayment of 21 unsecured promissory notes totalling $360,000 issued to
Bridge Financing investors, plus accrued interest at the rate of 11%
per annum. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity, Capital Resources and
Other Matters."
(2) Includes extruders, densifiers, mixers and materials handling
equipment.
(3) The Company purchases raw materials on an opportunistic basis and will
from time to time use a portion of the proceeds to purchase quantities
of feedstock materials. The Company has no agreement in principle with
any potential acquisition candidate and therefore cannot at this time
accurately state what percentage of the proceeds will be allocated to
acquisitions. See "Risk Factors -- Expansion Strategy." A portion of
working capital will be used to self-finance accounts receivable, and a
further portion will be utilized for additional sales and marketing
efforts, including the addition of sales personnel.
The allocation of the net proceeds of the offering set forth above
represents the Company's best estimate based upon its present plans. If any
of these plans change, the Company may find it necessary or advisable to
reallocate some of the proceeds within the above-described categories or to
other purposes.
Pending expenditure of the proceeds from the offering, the Company may
make temporary investments in insured interest bearing savings accounts,
insured certificates of deposit, or short term United States government
obligations. In the opinion of management, the above proceeds should be
sufficient for the Company's operations for at least the next 12 months from
the date of this offering.
DIVIDEND POLICY
The Company has never declared or paid any dividends on its Common Stock.
The present policy of its Board of Directors is to retain earnings, if any,
for use in business operations, and the Company, therefore, does not
anticipate paying any cash dividends on its Common Stock in the foreseeable
future. Further, the Company's current senior credit agreement prohibits the
payment of cash dividends and management of the Company expects that any new
lender will prohibit the payment of cash dividends.
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<PAGE>
CAPITALIZATION
The following table sets forth the unaudited capitalization of the Company
as of January 31, 1997 and as adjusted on a pro forma basis to reflect: (i)
the conversion of the $1,000,000 convertible promissory note payable to
Christie Enterprises, Inc. into 160,000 shares of the Company's Common Stock
and (ii) the offering and the application of the net proceeds therefrom as
described under "Use of Proceeds." This table should be read in conjunction
with the historical and pro forma financial statements of the Company,
including the notes thereto, and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
JANUARY 31, 1997
JANUARY 31, 1997 PRO FORMA
---------------- ----------------
ACTUAL AS ADJUSTED
(UNAUDITED) (UNAUDITED)
---------------- ----------------
<S> <C> <C>
Short-term debt, including current portion of Long-term debt .... $ 705,833 $ 705,833
================ ================
Long-term debt, excluding current portion(1) .................... 463,327 463,327
Notes payable to related parties(2).............................. 1,471,184 471,184
Stockholders' equity:
Common Stock, $.0001 par value, 12,000,000 authorized,
2,254,500 shares issued and outstanding and 20,000,000
authorized and 3,214,500 shares issued and outstanding proforma
as adjusted (3)(4)(5) .......................................... 225 321
Additional paid in capital ...................................... 76,049 3,926,124
Retained earnings ............................................... 446,192 446,192
---------------- ----------------
Total stockholders' equity ...................................... 522,466 4,372,637
---------------- ----------------
Total capitalization ............................................ $2,456,977 $5,307,148
================ ================
</TABLE>
- ------------
(1) For a description of the Company's long-term debt, see Note 8 to the
Company's consolidated financial statements.
(2) $1,000,000 in convertible promissory note payable will be converted
into 160,000 shares of common stock upon closing of the offering.
(3) Assumes no exercise of the Underwriters' Over-allotment Option. If the
Underwriters' Over-Allotment Option is exercised in full, the adjusted
capitalization of the Company would be: Common Stock $333; Additional
paid in capital $4,458,552; Total stockholders' equity $4,905,077;
Total capitalization $5,839,586.
(4) Excludes shares issuable upon exercise of (i) the Representative's
Warrants to acquire up to 80,000 shares of Common Stock at an exercise
price of $6.75 per share, and 80,000 Warrants at any exercise price of
$.14, (ii) the Underwriters' Over-Allotment Option to purchase up to
120,000 additional shares of Common Stock and 120,000 additional
Warrants, (iii) outstanding warrants held by Mr. Patrick A. DePaolo,
Sr. and Mantis V, L.L.C. to purchase 50,000 and 85,000 shares of Common
Stock, respectively, at a price per share equal to $2.25 and (iv)
outstanding Selling Securityholder Warrants granting holders the right
to purchase an aggregate of 800,000 shares of Common Stock at a price
per share equal to $5.00. See "Management", "Certain Transactions" and
"Underwriting."
(5) Excludes Common Stock reserved for issuance upon the exercise of
outstanding warrants or the Representative's Warrants. See
"Underwriting."
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<PAGE>
DILUTION
The difference between the initial public offering price per share of
Common Stock and the pro forma net tangible book value per share after the
offering constitutes the dilution to investors in the offering. Pro forma net
tangible book value (after giving effect to pro forma adjustments) is
determined by dividing the pro forma net tangible book value of the Company
(total pro forma tangible assets less total liabilities) by the number of
outstanding shares of Common Stock.
The net tangible book value of the Company (total assets less total
liabilities and intangible assets) on January 31, 1997 of the outstanding
2,254,500 shares of the Company's Common Stock was ($11,732) or ($.01) per
share. After (i) conversion of the $1,000,000 convertible promissory note
payable to Christie Enterprises, Inc. and after giving effect to (ii) the
anticipated expenses of the offering, the adjusted net tangible book value of
the Company at January 31, 1997 would have been $4,102,268 or $1.28 per share
(i.e., $4,102,268 divided by 3,214,500), representing an immediate increase
in net tangible book value of $1.29 to existing stockholders and an immediate
dilution of $3.72 to the purchasers of Common Stock of the offering. The
following table illustrates the per share dilution to investors in the
offering:
<TABLE>
<CAPTION>
<S> <C> <C>
Initial public offering price per share (1) ........................... $5.00
Net tangible book value per share before the offering ................ (.01)
Increase per share attributable to conversion of convertible
promissory note payable ............................................. .41
Increase per share attributable to the sale of Common Stock in the
offering (2) ........................................................ .88
-------
Net tangible book value per share (2) ................................ 1.28
------
Dilution to new investors ............................................ $3.72
=======
</TABLE>
- ------------
(1) Before deductions of underwriting discounts and estimated offering
expenses payable by the Company.
(2) After deduction of underwriting discounts and estimated offering
expenses payable by the Company, estimated at $966,000.
The following table sets forth as of January 31, 1997, the number of
shares of Common Stock issued by the Company, the total consideration to the
Company (without deduction of selling discounts and commissions or offering
expenses and assuming a value of $.10 per Warrant) and the average price per
share paid by existing stockholders and by the investors in the offering:
<TABLE>
<CAPTION>
SHARES ACQUIRED TOTAL CONSIDERATION AVERAGE
---------------------- --------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
----------- --------- ------------ --------- -----------
<S> <C> <C> <C> <C> <C>
Existing stockholders (1) 2,414,500 75.1% $1,076,000 21.2% $ .45
-----------
Investors in offering .... 800,000 24.9 4,000,000 78.8 $5.00
----------- --------- ------------ --------- -----------
Total ................... 3,214,500 100.0% $5,076,000 100.0%
=========== ========= ============ =========
</TABLE>
- ------------
(1) Total consideration from existing stockholders represents the total
amounts paid after conversion of the convertible promissory note
payable but before the offering and the Concurrent Offering.
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The Company produces proprietary plastic and rubber compounds using a
variety of recycled and prime, or virgin, materials. The Company has
extensive experience in polymer technology, and has commericalized
proprietary formulations used in the manufacturing of plastics in the
footwear, aeronautic, military, automotive and consumer products sectors.
Historically, Discas focused on the development of marketing synthetic
rubber compounds, but during 1994 the Company began to manufacture plastic
compounds from industrial scrap plastic feed stocks. Sales increased
significantly in 1995, primarily from increased plastic compound sales to a
small number of customers. In 1996, Discas expanded product development and
marketing activities, increased its customer base, and currently, the
Company's compounds are being used by more than 50 customers in dozens of
applications. See "Business -- Product Lines and Customers."
On November 1, 1996, the Company acquired substantially all of the assets
of Christie Enterprises, Inc. (the "Christie Acquisition"), a plastic
container manufacturer in New Jersey, which was a customer of the Company.
The purpose of the purchase was to initiate the implementation of a strategy
to integrate into businesses where the Company believes it can increase its
margins.
RESULTS OF OPERATIONS
Nine Months Ended January 31, 1997 and 1996
Sales increased by $267,354 or approximately 8%, to $3,550,394 for the
nine months ended January 31, 1997, as compared to $3,283,040 for the nine
months ended January 31, 1996. Sales for the fiscal 1997 period include the
impact of the November 1, 1996 Christie Acquisition.
Cost of goods sold increased by $201,520, or approximately 8%, to
$2,744,642 for the nine months ended January 31, 1997, compared to $2,543,122
for the nine months ended January 31, 1996. The increase in cost of goods was
attributable to increased sales volume; cost of goods as a percentage of
sales decreased from 78% to 77% for the nine month period ended January 31,
1996 as compared to the nine month period ended January 31 1997.
Gross profit increased by $65,834, or approximately 9%, to $805,752 for
the nine months ended January 31, 1997 as compared to $739,918 for the nine
months ended January 31, 1996. The increase was primarily attributable to the
increase in sales volume.
Selling, general and administrative costs increased by $127,034, or
approximately 21%, to $739,162 for the nine months ended January 31 1997 as
compared to $612,128 for the nine months ended January 31, 1996. The increase
is primarily attributable to the impact of the Christie Acquisition and the
hiring of additional personnel. There have also been additional costs
associated with new product approvals and the development of a larger and
more diversified customer base.
Operating income decreased by $61,200, or approximately 48%, to $66,590
for the nine months ended January 31, 1997 as compared to $127,790 for the
nine months ended January 30, 1996. The decrease was primarily attributed to
the additional personnel and the associated costs incurred to provide for the
anticipated sales growth of the Company.
Minority interest credit increased by $34,498 for the nine months ended
January 31, 1997 as compared to $2,207 for the nine months ended January 31,
1996. The increase was attributed to the increase in net loss of the
Company's 69% owned subsidiary, Discas Recycled Products Corporation
("DRPC"). On August 31, 1996, the minority shareholders of DRPC exchanged all
of their stock for stock of the Company.
As a result of the foregoing, net income decreased by $22,133, or
approximately 33%, to $44,784, for the nine months ended January 31, 1997 as
compared to $66,917 for the nine months ended January 31, 1996.
17
<PAGE>
Years Ended April 30, 1996 and 1995
Sales increased by $108,641, or approximately 3%, to $3,858,205 for the
year ended April 30, 1996 as compared to $3,749,564 for the year ended April
30, 1995.
Cost of goods sold increased by $84,058 or approximately 3%, to $3,012,125
for the year ended April 30, 1996, as compared to $2,928,067 for the year
ended April 30, 1995. The increase in cost of goods sold was attributable to
increased volume. Cost of goods sold as a percentage of sales was 78% for
each of the years ended April 30, 1996 and 1995.
Gross profit increased by $24,583, or approximately 3%, to $846,080 for
the year ended April 30, 1996, as compared to $821,497 for the year ended
April 30, 1995. The increase was primarily attributable to the increase in
sales volume.
Selling, general and administrative costs increased by $56,545, or
approximately 8.9%, to $698,946 for the year ended April 30, 1996 as compared
to $642,401 for the year ended April 30, 1995. The increase is primarily
attributable to the hiring of additional personnel and associated costs as
the Company started to implement its strategy for growth.
Operating income decreased by $31,962, or approximately 18%, to $147,134
for the year ended April 30, 1996 as compared to $179,096 for the year ended
April 30, 1995. The decrease was primarily attributable to the additional
personnel and associated costs incurred to commence the implementation of the
growth strategy of the Company.
Income tax expenses decreased by $44,155 for the year ended April 30, 1996
as compared to the year ended April 30, 1995. The 1995 income tax expense of
$44,415 includes a net deferred tax charge of $36,000 related to the impact
of tax depreciation charges in excess of those taken for financial reporting
purposes and an alternative minimum tax charge of $8,155. There was no change
in the net deferred tax liability for the year ended April 30, 1996 and no
current tax provision required because of other tax deductions available for
income tax purposes.
As a result of the foregoing, net income increased by $4,428, or
approximately 4%, to $121,612 for the year ended April 30, 1996 as compared
to $117,184 for the year ended April 30, 1995.
LIQUIDITY, CAPITAL RESOURCES AND OTHER MATTERS
The Company's primary source of liquidity has been cash flow from
operations, supplemented by borrowings under its bank credit facilities.
Additional sources of liquidity have been equipment lease financing,
borrowing from stockholders and the issuance of a convertible promissory note
in connection with the Christie Acquisition.
The Company raised gross proceeds of $400,000 (net proceeds of $318,000)
in a private placement of units in April 1997. The units sold consisted of
$360,000 11% unsecured subordinated promissory notes, all of which will be
repaid from the proceeds of this offering, and 800,000 Bridge Warrants. See
"Concurrent Offering."
Cash flow. Net cash provided (used) by operations was ($88,597) for the
first nine months of fiscal 1997, $125,634 for fiscal 1996 and ($106,234) for
fiscal 1995. Net cash used for the direct purchase of fixed assets was
$84,573 for the first nine months of fiscal 1997, $41,450 for fiscal 1996 and
$26,574 for fiscal 1995. In the first nine months of fiscal 1997, the Company
financed the $1,500,000 cost of the Christie Acquisition by a combination of
borrowing $500,000 from Textron Financial (described below) and by the
issuance to the seller of a $1,000,000 convertible promissory note payable.
In fiscal 1995, the Company acquired $88,000 of equipment under capital
leases. Net short-term bank borrowing provided funds of $170,000 for fiscal
1996 and $110,000 for fiscal 1995.
Bank credit facilities. The Company has borrowing arrangements with a
commercial bank. Currently, the arrangements provide for a credit line of up
to $500,000 collateralized by 70% of eligible accounts receivable and 25% of
eligible inventory. The credit line bears interest at the bank's prime rate
plus 1.75%. The Company also has a term loan with the bank with a principal
balance of $238,129 at March 31, 1997 which calls for monthly payments of
$6,173 plus interest at the bank's prime rate plus 2%. Such line of
18
<PAGE>
credit and term loan are due June 30, 1997. The Company is in the process of
obtaining new bank credit facilities that are expected to increase the credit
availability up to at least $1,500,000 and that will also provide term loans
for the purpose of retiring the existing bank term loan and the acquisition
of machinery and equipment. Interest rates pursuant to the anticipated new
facility are expected to approximate current rates. If the Company
successfully concludes these negotiations, it is expected that such new
facilities, the proceeds from this offering and cash flow from operations
will provide sufficient funds for the Company to meet its working capital,
capital expenditure and debt service requirement needs for the foreseeable
future. Additional funds may be required if the Company is successful in
expanding its business through internal growth and/or acquisitions of
businesses in related industries.
The current credit facilities contain covenants which require the Company
to maintain certain tangible net worth and debt service coverage ratios. The
credit facilities are secured by substantially all of the assets of the
Company and the personal guarantee of its President, Chief Executive Officer
and principal stockholder, Patrick A. DePaolo, Sr. The new credit facilities
currently being discussed are expected to have similar financial covenants;
however, subsequent to the consummation of the offering, the personal
guarantee of Mr. DePaolo is expected to be canceled.
In connection with the Christie Acquisition, the Company borrowed $500,000
from Textron Financial. This loan is secured by the machinery and equipment
of Christie and carries interest of 9.75% per annum and requires monthly
payments of principal and interest of $12,600 through November 2000.
The Company also has a note payable to the Connecticut Development
Authority with a principal balance $104,110 at March 31, 1997. Such note
bears interest at 6% per annum and requires monthly payments of principal and
interest of $2,610 through September 2000. The Company expects this
obligation to remain in place following refinancing of its bank facility.
Working Capital. The Company's working capital decreased from $512,934 at
April 30, 1996 to $131,145 at January 31, 1997, a decrease of $381,789. The
decrease relates to the due date of its bank term loan being amended to June
1997, the current portion of the note payable to Textron Financial and
working capital used to finance a portion of the costs associated with this
offering. The consummation of this offering and the execution of new
commercial bank credit facilities will significantly improve the working
capital position of the Company.
19
<PAGE>
BUSINESS
Discas, Inc., based in Waterbury, Connecticut, produces proprietary
plastic and rubber compounds using a variety of recycled and prime, or
virgin, materials. The Company has extensive expertise in polymer technology,
and has commercialized proprietary formulations used in the manufacturing of
products in the footwear, aeronautic, military, automotive and consumer
products sectors. In November 1996, the Company acquired a plastic container
manufacturer in New Jersey as part of its strategy to vertically integrate
its operations from raw material supply through end product manufacturing.
See "--Expansion Strategy."
Historically, the Company's core business focused on the development and
marketing of niche synthetic rubber compounds such as thermoplastic
elastomers ("TPE"). In addition, Discas provides contract testing and
research services for industrial accounts, which has resulted in the
development of new materials and market applications. In recent years, Discas
has extended this technology to industrial-source scrap polymer feedstock to
produce marketable value-added plastic compounds, and management is now
focused on increasing growth in plastics through market penetration and
acquisitions. See "--Expansion Strategy."
Discas is currently using industrial scrap material to manufacture high
quality recycled polypropylene-based compounds that are used by manufacturers
in place of more expensive virgin plastics. The Company secures its feedstock
from industrial waste streams as well as limited amounts of feedstock from
post-consumer waste streams and works closely with several regional firms
that collect and process industrial scrap material for reuse. Discas has the
technological capability to modify this feedstock into higher-value material
and management believes that it can lead an industry consolidation by
continuing to build on established supplier and customer relationships.
THE RECYCLED PLASTICS INDUSTRY
The use of materials recycled from industrial and commercial waste streams
has begun to expand in recent years. Increasingly restrictive regulatory
requirements and higher disposal costs have focused efforts on reclaiming
scrap materials. The availability of recycled raw materials has catalyzed the
development of technology to cost-effectively incorporate their use in
existing markets alongside or in place of virgin materials. This
market-driven use of recycled materials is established within the steel,
paper and aluminum industries and, for certain polymers, is now developing
into a commercially viable sector of the plastics industry.
The market potential for compounds using recycled polymers is large.
Reclaimed plastic accounts for a small fraction of the estimated annual 70
billion pound United States plastics market, although recent trends are
toward increasingly greater market demand, according to The Society of the
Plastics Industry, Inc. Most of the existing recycled plastic is derived from
the municipal solid waste stream which yields Polyethylene Terephthalate
("PET") and High Density Polyethylene ("HDPE") plastics from curbside and
drop off collection programs. Companies such as Wellman Inc., Eaglebrook
Industries and Pure-Tech Plastics, Inc. developed by focusing on the
processing of these post-consumer plastics into reusable commodity virgin
resin substitutes.
In addition to the reuse of PET and HDPE, certain polymer compounders
including Discas have succeeded in converting scrap feedstocks such as
polypropylene, polystyrene, nylon, ground tires and other polymers into
hybrid value-added proprietary compounds. In North America, polypropylene
alone is estimated by Crain's Plastics News (Crain's International), December
30, 1996, to be a $4 billion annual industry using primarily virgin resins.
These virgin grades are typically priced between $.35 and $.55 per pound,
ranging from commodity grades to more sophisticated custom compounds.
Discas believes there is a major opportunity in polypropylene-based
recycled materials and has developed a wide range of product lines to compete
with virgin resins offered by major polypropylene producers. Much of the raw
material used in the Discas formulations is based on polypropylene industrial
scrap that until recently had little perceived value. The waste materials
used by Discas are generated in
20
<PAGE>
large volumes during various manufacturing processes and can be reprocessed
for reuse or further enhanced to produce higher value compounds for other
manufacturers. Industries generating large quantities of scrap material
include the textile, carpet, molded products and packaging sectors.
Discas has the technology and materials expertise to blend industrial
scrap feedstocks, prime material, and a variety of additives and enhancers to
produce value-added compounds for product manufacturers.
COMPANY HISTORY
In 1974, Mr. Patrick A. DePaolo, Sr. the founder, Chairman, Chief
Executive Officer, President and controlling stockholder of the Company, left
Uniroyal Chemical Corp. and established Prolastomer, Inc. ("Prolastomer") to
develop TPE custom compounds for the footwear, sporting goods, appliance and
automotive industries. Production was sub-contracted to toll compounders
until 1980 when Prolastomer purchased large scale compounding equipment and
became a processor of proprietary TPE compounds. Due to market and financial
constraints, Prolastomer entered the toll processing business in 1985 with a
large footwear contract from Shell Chemical Company. Mr. DePaolo established
Discas, Inc. at that time to separate the TPE technology and marketing
activities from Prolastomer's toll business with Shell Chemical Company.
Prolastomer exited the toll manufacturing business in 1988 and is no longer
in operation.
Focused on new product development and marketing, Discas established the
REPAR Division in 1988 to apply its compounding technology to in-house and
contract research to find commercial uses for low cost scrap feedstocks.
During this period Discas expanded marketing programs and won a contract from
British Petroleum Corp. to distribute TPE. Within two years Discas increased
sales 100% and earned honors as the 128th fastest growing company in the INC
500 survey. British Petroleum Corp. subsequently sold the division purchasing
Company product to Monsanto Company, and the contract was terminated at that
time.
In early 1990, the Company signed a joint venture agreement with a major
international diaper manufacturer to develop technology to convert factory
polymer and cellulose diaper scrap into reusable plastic compounds. This
corporation was searching for an economically viable alternative to its
costly solid waste disposal of millions of pounds of scrap. Discas provided
the technical and manufacturing expertise for this program which included
joint investment in formulation, production process development and test
marketing. The initial marketing program was successful and resulted in the
commercialization of several compounds for applications such as containers,
VHS cassettes, footwear components, fast food trays and other consumer items.
This arrangement was completed in March 1993 and the Company exercised its
option to manufacture and market compounds using raw materials from such
corporation as well as from other suppliers.
Discas has developed an extensive program to source a wide variety of
polymer waste feedstocks from post-consumer and post-industrial scrap
suppliers, and has formulated a broad range of high quality, competitively
priced recycled plastics and prime and recycled thermoplastic elastomers
using these materials.
21
<PAGE>
PRODUCT LINES, CUSTOMERS AND SUPPLIERS
The recent addition of new polymer sources, and increased formulation and
compounding process development has enabled Discas to expand its product
lines. The following product types give Discas a broad recycled product line
with margins that reflect the use of lower cost feedstocks in several premium
quality/higher priced applications:
-- Standard Polypropylene Grades including a range of grades for
serving trays and injection molded products.
-- Impact Modified Polypropylene, including rubber alloys and
polymer blends designed for applications such as automotive parts
and rigid packaging.
-- Custom Compounds, including color matched pre-colored and
made-to-order compounds.
-- Filled and Reinforced Polypropylenes, from scrap feedstocks
containing mineral fillers and cellulose and glass reinforcing
fibers for automotive and furniture applications.
-- Standard Precolored Polypropylene, including black, white, and
standardized colors available from scrap feedstocks.
-- Thermoplastic Elastomers, including compounds from recycled
polypropylene and polystyrene, ground tires, scrap TPE (e.g.,
footwear, auto bumpers) and other industrial waste feedstocks.
Product line applications include footwear, automotive and
consumer/industrial products. The Company also produces a
substantial quantity of proprietary formulations for the footwear
industry from prime TPE feedstocks.
Discas has also developed several proprietary compounds based on recycled
scrap tires and other vulcanized rubber waste materials which can be used by
footwear manufacturers and in industrial applications. Additional product
lines currently under development include other polyolefin based compounds
such as low, linear and high density polyethylene and styrene based compounds
from recycled expanded polystyrene, engineered plastics such as Acrylonitrile
Butadiene Styrene ("ABS") and other high performance plastics for industrial
applications.
Discas has developed compounds that have been used in a range of products
representing a large number of industries. Current applications and
industrial development programs include:
VHS cassettes Writing instruments
Agriculture containers Furniture
Fast food serving trays Shelving
Color concentrates Footwear
Coat hangers Electrical connectors
Caster wheels Office products
Disposable medical products Handles and grips
Automotive components Personal care products
Flashlights Machine housings
Discas is the primary supplier of recycled material to one of the largest
manufacturers of polypropylene VHS cassettes in the world. Continued pricing
pressure from competitive Asian manufacturers of polystyrene cassettes is
forcing other North American cassette producers to consider converting to
lower cost technologies, including the use of recycled polypropylene
feedstocks. Other market driven applications include the supply of precolored
recycled polypropylene for a new line of nationally marketed writing
instruments and proprietary precolored compounds developed for the major
plastics molders supplying serving trays to McDonald's Corp. and other
fast-food chains. Recently, a Discas compound was approved by a "Big Three"
automotive company and this successful application has led to additional
opportunities for qualification of Discas materials for other automotive
interior and exterior parts. As is customary in the industry, in the
experience of management, Discas does not have ongoing supply contracts with
any of its customers. All sales made by Discas are initiated by a purchase
order at the request of a customer.
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<PAGE>
Management of Discas believes that its focus on quality and innovation
provides one of its primary competitive advantages. Discas incorporates extra
blending steps in its manufacturing process and performs numerous sample
testings, enabling it to ensure product consistency and homogeneity. Discas
is also able, through the technical expertise and creative ability of its
management, to create and manufacture products tailored to its customers'
unique specifications, providing the highest level of flexibility and
service.
Resulting from this reputation for quality and innovation, Discas
currently has development and testing programs in place with several leading
manufacturers of consumer products, industrial products, medical products,
footwear and automobiles in the United States. These corporations fund
research and development by Discas to create and produce materials used in
the manufacture of consumer products using their industrial waste which has
been previously unrecyclable and sent to landfills. Such relationships will
enable Discas to obtain reliable sources of supply and raw materials at a
relatively low cost while maintaining rights to the new technology created,
and affording the suppliers an opportunity to earn revenue from the sale of
their waste material rather than paying for its disposal.
The Company currently depends on third party relationships with several
suppliers of scrap polymer feedstocks, the raw materials necessary to the
business of the Company. The Company does not presently have any long term
agreements with these suppliers and does not anticipate the execution of any
long term agreements in the future. The two largest suppliers, Ash-Kourt
Fabrics, Inc. and Borden, Inc., currently provide approximately 60% of the
Company's feedstock. The Company believes that it has alternative sources of
supply available to it in the event that its requirements change or its
current suppliers are unable or unwilling to fulfill the Company's needs. The
Company does not have any material backlog of orders for product.
COMPETITION
The compounding of polymers is a highly competitive industry. The
Company's prime and recycled products compete with a variety of polymer
materials from other companies, many of which are larger, better financed
manufacturers of prime compounds, including many of the major multinational
chemical manufacturers. The Company must competitively price its products
against both prime and recycled compounds if it is to successfully build its
sales volume. While the Company believes that its technical expertise, modern
facility and advanced quality control are attractive features to potential
customers, there can be no assurance that the Company can capture adequate
competitive contracts to sustain profitability, or that other companies will
not provide superior products in both price and quality.
EXPANSION STRATEGY
In the past year, the Company has commercialized new compounds from scrap
feedstocks, increased production capacity and diversified its customer base.
Management believes that Discas can best continue its growth by expanding
capacity at existing facilities and through acquisitions. With its Waterbury,
Connecticut facility approaching full capacity, Discas has begun expanding
and upgrading its equipment to increase production and efficiency. A portion
of the proceeds from this offering will be used to purchase capital
equipment.
With a view towards building the Company's capabilities in the area of
acquisitions, the Company added two directors to its board in November 1996,
Mr. Alan Milton and Mr. Asher Bernstein, both representatives of Mantis V,
L.L.C. ("Mantis"). Mantis is an investment vehicle for Mantis Holdings, Inc.,
which is an investment and business advisory firm specializing in the
environmental and recycling industries. See "Management." The principals of
Mantis, experienced in acquisitions in the recovered materials industries,
have worked with the Company for approximately two years helping to establish
the Company's growth strategy. In June 1996, Mantis agreed to have its
representatives join the Board of Directors and provide the Company with a
loan to cover its working capital needs in connection with the Christie
Acquisition and initiation of the joint venture with Ash-Kourt Fabrics, Inc.
described below. Over the months following the agreement, the Company drew
down $375,000 from Mantis pursuant to 8% subordinated notes due July 1998.
Mantis also received 364,500 shares of Common Stock then valued at
23
<PAGE>
$27,000 and three year warrants to purchase 85,000 shares of Common Stock at
$2.25 per share valued at $1,000, prior to completion of the AKD joint
venture and the Christie Acquisition.
In recent months, consistent with this consolidation strategy, management
began pursuing feedstock suppliers, processors and end-users regarding joint
venture and merger opportunities. In July 1996, the Company established AKD,
L.L.C., a recycled feedstock sourcing joint venture with Ash-Kourt Fabrics,
Inc., a North Carolina-based processor of recycled polypropylene, with a view
to further increase efficiencies by means of joint sourcing of a wider
variety of grades of scrap feedstock to lower overall purchase prices and
performing preliminary reprocessing in Statesville, North Carolina to lower
transportation costs. The two companies are currently continuing negotiations
on the operational structure of such venture, which is currently operating as
an arm's-length supplier of raw materials to the Company.
In early November 1996, Discas acquired substantially all of the business
assets of Christie, a manufacturer of high-end plastic containers and
products primarily for the wholesale plant nursery industry, located in
Kenilworth, New Jersey, for a purchase price of $1,630,000 ($130,000 of which
was consideration for a consulting agreement with Frank Criscitiello, former
president of Christie), of which $1,000,000 is payable by Discas' convertible
promissory note, dated October 30, 1996. This note will be converted into
160,000 shares of the common stock of Discas based upon a conversion price of
125% of the initial public offering price per share of the common stock of
Discas (the "Conversion Price") upon the closing of this offering, or the
greater of the then fair value of a share of the common stock of Discas and
$6.00, in the event this offering is not consummated by October 1, 1997. Some
of Christie's products are molded using recycled plastic compounds that
Discas has developed, and the Company plans on expanding the use of its
formulations in other product lines.
Discas management believes that further consolidation opportunities exist
and is in early stages of discussions with several suitable acquisition
candidates. The Company is particularly interested in entrepreneurial owners
who would be willing to work for the Company in key management positions
following an acquisition. Discas envisions using Common Stock as part of the
purchase price for such acquisitions, as well as for performance based
incentive compensation to attract strong management.
PROPERTY
Discas leases approximately 55,000 square feet of industrial and office
space in Waterbury, Connecticut pursuant to three triple-net leases expiring
between 1998 and 2000, all of which are extendible until 2005 at the option
of the Company. Annual base rental is currently approximately $170,000,
escalating approximately three percent annually through 2005. Offices total
approximately 4,000 square feet with adequate space to increase office
personnel as required.
The Company also owns or leases its operating equipment, including two
densifiers, two guillotines, four compounding extruder lines, six dry
blending machines ranging in capacity from 100 pounds to 6,000 pounds, five
silos including two post-blending silos, several mid-size choppers, a
complete compound development laboratory, fabrication equipment, an extensive
physical testing laboratory which has been approved by the American Council
of Independent Labs, and large capacity material handling equipment including
forktrucks, blowers, augers and transfer bins. Certain of this equipment is
leased from Mr. DePaolo or his affiliates. See "Certain Transactions."
Discas utilizes custom database software for its polymer technology
programs, including formulation development and scrap material analysis.
Computer systems are in place to support financial controls and
sourcing/purchasing.
The Company's New Jersey facility occupies a building with 24,000 sq. ft.
of warehouse and office space. The facility is leased from an affiliate of
the former owner of Christie at rates which management believes are
consistent with current market rates through October 1997, with an option to
renew for an additional two years. Annual rental is $120,000. Equipment
includes ten injection molding machines with capacities from 200 tons to 700
tons. Support equipment includes loader control units, a 75 ton water
24
<PAGE>
chiller, raw material silos and other material handling equipment, as well as
a modern diesel truck for local deliveries. The Company's inventory of molds
is extensive and suitable for the production of a wide variety of nursery
products and other items. A complete machine shop is located on the site.
ENVIRONMENTAL REGULATION
Discas is subject to federal, state and local government requirements
regarding its operations and products. Discas does not generate, store,
transport or dispose of any material amounts of hazardous waste. Most permits
required in the operations of Discas relate to fire codes and other local
ordinances. Management of Discas believes that it is in compliance with all
material regulations relating to the operation of its business. None of
Discas' products is regarded as hazardous material by the applicable
regulations.
EMPLOYEES
As of March 31, 1997, Discas employed approximately 61 persons, of whom
approximately 11 employees are management, sales and administration and the
balance of whom are involved in the manufacturing process. None of Discas'
employees are covered by a collective bargaining agreement. Discas believes
it has a good relationship with its employees.
LEGAL PROCEEDINGS
Discas is not presently involved in any material legal proceedings.
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<PAGE>
MANAGEMENT
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------- ----- --------------------------------------
<S> <C> <C>
Patrick A. DePaolo, Sr. 55 Chairman of the Board of Directors,
Chief Executive Officer and President
Thomas R. Tomaszek 45 Vice President, Marketing and Business
Development and Director
Ron Pettirossi 54 Chief Financial Officer
Al Moreno 44 Vice President, Manufacturing
Stephen P. DePaolo 32 Vice President, Materials Sourcing,
Distribution and Planning
John Carroll 51 Director
Asher Bernstein 53 Director
Alan Milton 42 Director
</TABLE>
PATRICK A. DEPAOLO, SR., CHAIRMAN OF THE BOARD OF DIRECTORS, PRESIDENT AND
CEO. Prior to founding Discas in 1985, Mr. DePaolo worked at Uniroyal
Chemical Corp. for 11 years where he had overall responsibility for the
development and marketing of thermoplastic elastomers. In 1974, he
established Prolastomer, Inc. ("Prolastomer") to develop compounds for
footwear, sporting goods and automotive applications. Mr. DePaolo has
extensive management experience in the field of plastics compounding and
processing and is considered a leading technical expert in developing new
applications for scrap polymers. He has degrees in Chemical Engineering
(B.S.) from the University of Massachusetts at Amherst and Polymer Chemistry
(M.S.) from Southern Connecticut State University and has published articles
and text book chapters in the field of polymer chemistry. Mr. DePaolo has
extensive business experience and has founded or been a partner in several
plastics companies including J-Von Group, L.L.C., Bailey III Inc.,
Prolastomer, and NexVal Plastics.
THOMAS R. TOMASZEK, VICE PRESIDENT, MARKETING AND BUSINESS DEVELOPMENT AND
DIRECTOR. Mr. Tomaszek has over 20 years management experience in plastics
recycling equipment, design, and operations. In addition to his experience in
equipment and facility development, Mr. Tomaszek has held senior marketing
positions with three plastics manufacturing firms. He was also the manager of
manufacturing operations of a Genpak and Mobil Corporation joint venture
polystyrene recycling facility and, more recently, from 1990 to 1993, founder
and President of North American Plastics Recycling Corp., the nation's first
post-consumer polyethylene film and plastic bottle recycling plant. From 1993
to 1996 he was Vice President and General Manager of operations at SBU
Operations, a recycling equipment manufacturing subsidiary of DelCorp., Inc.
Mr. Tomaszek joined Discas in April 1996.
RON PETTIROSSI, CHIEF FINANCIAL OFFICER. Mr. Pettirossi became Chief
Financial Officer of the Company in February 1997. Mr. Pettirossi had been
acting Chief Financial Officer of the Company since July 1996. Mr. Pettirossi
was an audit partner for Ernst & Young L.L.P. until 1995 where he held a
variety of positions during a 31 year public accounting career. As an audit
partner, he served numerous public and privately owned companies, including
ADVO, Inc., ESPN, Inc., Reflexite Corporation, Magellan Petroleum
Corporation, the Spencer Turbine Company and Earthgro, Inc. Mr. Pettirossi
worked with senior management on a number of consulting engagements including
strategic planning, management information systems, inventory management,
cost control systems and tax planning. He graduated from the University of
Massachusetts with a B.B.A. in 1964 and is a member of the AICPA and the
Connecticut Society of Certified Public Accountants.
AL MORENO, VICE PRESIDENT, MANUFACTURING. Mr. Moreno has been the Vice
President of the Company since early 1997. Mr. Moreno worked as Plant
Manager/Purchasing/Sourcing at Converse, Inc.
26
<PAGE>
from 1994 until joining the Company, and, prior to that time, he worked for
10 years as Quality Assurance Manager and Assistant Vice President of
Manufacturing at Lowell Shoe Company. Mr. Moreno has also held management
positions with Hampshire Manufacturing and Servus Rubber Company. Mr. Moreno
attended Daniel Webster College and studied computer programming.
STEPHEN P. DEPAOLO, VICE PRESIDENT, MATERIALS SOURCING, DISTRIBUTION AND
PLANNING. Mr. DePaolo has worked at Discas in production, marketing and
purchasing since 1985 and currently manages feedstock sourcing and markets.
He has developed advertising and publicity programs covering Discas
materials, and has established approvals as suppliers to Wal-Mart Stores Inc.
and McDonald's Corp. Mr. DePaolo gained a dual B.A. degree from Northeastern
University in Business Administration and Marketing. Stephen DePaolo is the
son of Patrick A. DePaolo.
JOHN CARROLL, DIRECTOR. Mr. Carroll became a director of the Company in
November 1996. Mr. Carroll is the founder, Chairman of the Board and Chief
Executive Officer of Newgrange Co., a holding company created in 1990, which
controls various commercial entities, several of which are in the polymer
industry. Prior to founding Newgrange Co., Mr. Carroll served as Chief
Financial Officer of Leach and Garner Manufacturing Co., and worked at Arthur
D. Little for 12 years as a consultant. Mr. Carroll received an M.B.A. from
the Graduate School of Business of Columbia University. Mr. Carroll is
currently a managing member of J-Von Group, L.L.C., and a director of
Chesterton Co., Leach and Garner Manufacturing Co. and ATP, Inc. See "Certain
Transactions."
ASHER BERNSTEIN, DIRECTOR. Mr. Bernstein is President and principal of
Bernstein Real Estate, a 70 year old company that owns or manages more than
40 commercial buildings in New York City. The firm's residential rental
division specializes in the rental of luxury apartments in Manhattan. Mr.
Bernstein also serves as a Director of AFA Protection Systems, Inc., Director
and Treasurer of the Midtown Realty Owners Association, Director of the
Fashion District Business Improvement District (BID) and as a Director of the
Avenue of the Americas Association. He received a B.A. from New York
University and an M.B.A. from the Graduate School of Business of Columbia
University. Mr. Bernstein is a member of Mantis V, L.L.C., an investor in the
Company, and became a director of the Company in November 1996.
ALAN MILTON, DIRECTOR. Mr. Milton is a founder and Managing Director of
Mantis Holdings, Inc., a private environmental industry investment and
business advisory company focusing on manufacturers in the waste
minimization and recycling sectors. Mr. Milton has worked in the energy
and environmental industries for over 17 years with experience in project
development, regulatory compliance and pollution control technology. He
currently serves as a Director of Quadrax Corporation, Composite Particles,
Inc. and Industrial Flexible Materials, Inc. He received his M.A. degree in
Environmental Affairs from Clark University, after completing his
undergraduate work in Geology and Ecology at Clark University. Mr. Milton is
a member of Mantis V, L.L.C., an investor in the Company, and became a
director of the Company in November 1996.
EMPLOYMENT AGREEMENTS
Mr. DePaolo serves as Chairman of the Board, Chief Executive Officer and
President of the Company pursuant to a five year Employment Agreement ending
on April 1, 2002. Pursuant to the Agreement, Mr. DePaolo will receive a
salary of $175,000 per year during the first three years, with scheduled
raises thereafter. The Agreement contains a noncompetition provision and
provides for payment of a bonus in amounts to be determined by the Board of
Directors based upon specified performance criteria. The agreement further
provides for such other fringe benefits as are customary for a Chief
Executive Officer in the industry in which the Company operates.
It will be the Company's policy to obtain confidentiality and
nondisclosure agreements from its key employees prior to completion of the
offering.
EXECUTIVE COMPENSATION
No employee of the Company has ever received cash compensation in excess
of $100,000 per year. The following Summary Compensation Table sets forth the
compensation earned by Patrick A. DePaolo, Sr., the Company's President,
Chief Executive Officer and Chairman of the Board of Directors.
27
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------------ OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION
- ------------------------------------------------------ ------ --------- ------- ------------
<S> <C> <C> <C> <C>
Patrick A. DePaolo, President, Chief Executive Officer
and Chairman of the Board of Directors................ 1996 $50,402 0 $2,234(1)
1995 $82,288 0 0
1994 $68,652 0 0
</TABLE>
(1) Deferred compensation.
STOCK OPTION PLAN
The Company's 1997 Stock Option Plan (the "Plan") was approved by the
Company's Board of Directors and stockholders in February 1997. Options
granted under the Plan may include those qualified as incentive stock options
under Section 422 of the Internal Revenue Code of 1986, as amended, as well
as non-qualified options. Employees as well as other individuals, such as
outside directors, who provide necessary services to the Company are eligible
to participate in the Plan. Non-employees and part-time employees may receive
only non-qualified stock options. The maximum number of shares of Common
Stock for which options may be granted under the Plan is 450,000 shares.
Following the closing of this offering, the Company will issue Mr. DePaolo an
option to purchase 150,000 shares which will expire no later than April 30,
2002, exercisable at $7.50 per share only at such time as the Company's
audited financial statements show after tax net income equal to or exceeding
$0.15 per share.
The Plan is administered by a Compensation Committee of the Board of
Directors (the "Committee") which may consist of the entire Board of
Directors or a subcommittee thereof. Messrs. DePaolo and Milton are the
current members. The Committee has wide latitude in determining the
recipients of options and numerous other terms and conditions of the options.
However, prior to the issuance of any option, the Company must provide to
the Representative (i) an opinion of a reputable investment banking firm
acceptable to the Representative stating that the consideration being paid
for the acquisition of securities is fair from a financial point of view if
such option is issued with an exercise price below the current market price,
and (ii) a signed lock-up agreement pursuant to which the intended recipient
agrees not to publicly sell any shares owned by them for a period of the
latter of two years from the date of this Prospectus and six months from
issuance.
The exercise price for shares purchased upon the exercise of non-qualified
options granted under the Plan is determined by the Committee. The exercise
price of an incentive stock option must be at least equal to the fair market
value of the Common Stock on the date such option is granted (110% of the
fair market value for stockholders who, at the time the option is granted,
own more than 10% of the total combined classes of stock of the Company or
any subsidiary). No employees may be granted incentive stock options in any
year for shares having a fair market value, determined as of the date of
grant, in excess of $100,000.
No option may have a term of more than ten years (five years for 10% or
greater stockholders). Options generally may be exercised only if the option
holder remains continuously associated with the Company or a subsidiary from
the date of grant to the date of exercise. However, options may be exercised
upon termination of employment or upon the death or disability of any
employee within certain specified periods.
INDEMNIFICATION AND EXCULPATION PROVISIONS
The Company's Amended and Restated Certificate of Incorporation limit the
liability of its directors to the fullest extent permitted by the Delaware
Business Corporation Law. Specifically, directors of the Company will not be
personally liable for monetary damages for breach of fiduciary duty as
directors, except for liability for (i) any breach of the duty of loyalty to
the Company or its stockholders, (ii) acts or omissions not in good faith or
that involve intentional misconduct or a knowing violation of law, (iii) acts
falling under Section 174 of the General Corporation Law of the State of
Delaware or (iv) any transaction from which the director derives an improper
personal benefit. Liability under federal securities law is not limited by
the Restated Certificate.
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<PAGE>
The Delaware Business Corporation Law states that the Company may
indemnify any director, officer or employee made or threatened to be made a
party to a proceeding, by reason of the former or present official capacity
of the person, against judgments, penalties, fines, settlements and
reasonable expenses incurred by the person in connection with the proceeding
if certain statutory standards are met. "Proceeding" means a threatened,
pending or completed civil, criminal, administrative, arbitration or
investigative proceeding, including a derivative action in the name of the
Company. Reference is made to the detailed terms of the Delaware
indemnification statute for a complete statement of such indemnification
rights. The Company's Restated Bylaws require the Company to provide
indemnification to the fullest extent allowed in the indemnification statute.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling the
Company pursuant to the foregoing provisions, the Company is aware that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.
CERTAIN TRANSACTIONS
The Company is indebted to Patrick A. DePaolo, the Chairman, Chief
Executive Officer, President and controlling stockholder in the amount of
$121,184 for working capital and equipment purchase loans made in 1993 and
1995. Such loans are accruing interest at rates between 6.00% to 8.00%. While
such loans are payable upon demand by their respective terms, actual payment
of principal and interest is prohibited by the terms of the Company's senior
commercial loan agreement until such bank loan is paid in full. In addition,
Mr. DePaolo has agreed with the Representative not to repay any of such loans
out of the proceeds of this offering or prior to July 31, 1998 without the
prior consent of the Representative.
Pastanch L.L.C. ("Pastanch"), which is owned by members of the DePaolo
family, has provided financing in the forms of leases and the purchase of
certain processing equipment used by the Company. One lease is for a period
of two years ending April 30, 1998 and provides for a monthly rental of
$2,200. The Company has an option to purchase the equipment at the end of the
term at its then fair market value. This equipment was purchased by Pastanch
and leased to the Company in order to maintain compliance by the Company with
certain bank loan covenants restricting capital expenditures. In addition,
Pastanch has purchased other processing equipment needed by the Company to
meet current production and sampling requirements and has agreed to sell this
equipment at its total cost of $80,000 for cash to be paid following the
closing of this offering. Pastanch may from time to time offer additional
equipment to Discas at fair market prices in conjunction with Pastanch's
business as an investor/dealer in capital equipment.
Patrick A. DePaolo owns 8% of J-Von Group, L.L.C. ("J-Von"), a compounder
of thermoplastic elastomers, primarily for the footwear industry, to which
the Company sold $128,000 of feedstocks in fiscal 1996 and $213,000 in fiscal
1995, and from which the Company purchased approximately $650,000 of finished
goods in fiscal 1996 and $1,054,000 in fiscal 1995. The Company has a
non-competition agreement with J-Von pursuant to which the Company and J-Von
have each agreed not to make sales of virgin styrenic SBS and SEBS
thermoplastic elastomers to certain principal customers of the other. The
business of J-Von may be considered to be competitive with the TPE product
lines of the Company. Mr. DePaolo is a director of, but does not have a
management function with, J-Von, which is privately held. John Carroll, a
director of the Company, is a managing member of J-Von.
The Company borrowed $375,000 from Mantis V, L.L.C. in 1996 and early 1997
pursuant to three notes bearing interest at 8% due July 1998. Such loans were
used to fund the Company's working capital needs subsequent to the Christie
Acquisition. In conjunction with the funding of such loans, Messrs. Asher
Bernstein and Alan Milton, who are members of Mantis V, L.L.C., were elected
to the Board of Directors of the Company. The Company intends to prepay such
loan at such time as it completes a refinancing of its commercial bank debt
with a total loan availability of at least $1,000,000 and in no event may the
Company repay such loan prior to 110 days following the date of this
Prospectus. The Company also pays Mantis Holdings, Inc., the managing member
of Mantis V, L.L.C., a monthly
29
<PAGE>
consulting fee of $3,500 for financial and management consulting and advisory
services pursuant to a two-year agreement. The Company paid Mantis Holdings,
Inc. an engagement fee of $15,000 at inception of the agreement. Mantis
Holdings, Inc. waived its monthly fees for the first three months of the
agreement.
The Company believes that all of the transactions set forth above were
made on terms no less favorable to the Company than could have been obtained
from unaffiliated third parties. The Company has adopted a policy that all
future transactions, including loans between the Company and its officers,
directors, principal stockholders and their affiliates will be approved by a
majority of the Board of Directors, including a majority of the independent
and disinterested outside directors on the Board of Directors, and will
continue to be on terms no less favorable to the Company than could be
obtained from unaffiliated third parties and be made for bona fide business
purposes.
PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to the beneficial
ownership of the Common Stock as of the date of this Prospectus, as adjusted
to reflect the sale of the Common Stock by the Company pursuant to this
offering, and by (i) each person known by the Company to own beneficially
more than 5% of the outstanding Common Stock; (ii) each director of the
Company, and (iii) all officers and directors as a group. Except as otherwise
indicated below, each of the entities or persons named in the table has sole
voting and investment powers with respect to all shares of Common Stock
beneficially owned by it or him as set forth opposite its or his name.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY PERCENT OWNED PERCENT OWNED
NAME AND ADDRESS (3) OWNED (1)(2) PRIOR TO OFFERING AFTER OFFERING
- -------------------------------------------------- -------------- ----------------- --------------
<S> <C> <C> <C>
Patrick A. DePaolo, Sr.(4) ........................ 2,164,981 93.9% 66.3%
Mantis V, L.L.C.(5)
c/o Mantis Holdings, Inc.
250 Park Avenue
New York, New York 10177 ......................... 449,500 19.2% 13.6%
Alan Milton(5)
c/o Mantis Holdings, Inc.
250 Park Avenue
New York, New York 10177 ......................... 449,500 19.2% 13.6%
Asher Bernstein(5)
380 Lexington Avenue
New York, NY...................................... 449,500 19.2% 13.6%
Christie Enterprises, Inc.(6)
80 Market Street
Kenilworth, New Jersey 07033 ..................... 160,000 6.6% 4.7%
Stephen P. DePaolo................................. 30,969 1.4% *
Thomas R. Thomaszek ............................... -0- -0- -0-
John Carroll ...................................... -0- -0- -0-
Ron Pettirossi .................................... -0- -0- -0-
Al Moreno ......................................... -0- -0- -0-
All officers and directors as a group (7 persons) 2,297,200 96.1% 68.5%
</TABLE>
- ------------
(1) Except as otherwise noted, the persons named have sole voting and
investment power with respect to all shares beneficially owned by them.
(2) For purposes of this table, a person or group of persons is deemed to
have "beneficial ownership" of any shares that such person or group has
the right to acquire within 60 days after such date and for purposes of
computing the percentage of outstanding shares held by each person or
group on a given date, such shares are deemed to be outstanding.
30
<PAGE>
(3) Unless as otherwise indicated, the address of each beneficial owner is
c/o Discas, Inc., 567-1 South Leonard Street, Waterbury, CT 06708.
(4) This amount includes 1,546,392 shares held in Patrick A. DePaolo's
name, 271,285 shares held in a family limited liability company,
warrants to purchase 50,000 shares of Common Stock at $2.25 per share,
263,250 shares of the 364,500 shares owned by Mantis V, L.L.C. and
34,054 shares owned by four other stockholders which Mr. DePaolo has
the right to vote pursuant to a voting trust for a period of five
years.
(5) Alan Milton and Asher Bernstein, directors of the Company, have a
beneficial interest in Mantis V, L.L.C. The number of shares includes
warrants to purchase 85,000 shares of Common Stock at $2.25 per share.
263,250 of the 364,500 shares owned by Mantis V, L.L.C. are held in a
voting trust, granting voting rights to Patrick A. DePaolo for a period
of five years.
(6) Issuable upon conversion of a note in the principal amount of
$1,000,000 convertible into 160,000 shares of Common Stock upon closing
of this offering.
CONCURRENT OFFERING
The registration statement of which this Prospectus forms a part also
includes a prospectus with respect to an offering by the Selling
Securityholders of 800,000 Selling Securityholder Warrants, which are
identical to Warrants being offered by the Company herein, and the Common
Stock issuable upon exercise of the Selling Securityholder Warrants. The
Selling Securityholder Warrants are being issued to the Selling
Securityholders as of the date of this Prospectus upon the automatic
conversion of all of the Company's outstanding Bridge Warrants. These Selling
Securityholder Warrants are identical to the Warrants offered hereby. All of
the Selling Securityholder Warrants issued upon conversion of the Bridge
Warrants and the Common Stock issuable upon the exercise of the Warrants will
be registered, at the Company's expense, under the Securities Act, and are
expected to become tradeable without further registration following the
expiration or termination of the "lock -up" agreement described below.
The Selling Securityholder Warrants are subject to two contractual
restrictions which state that (i) the Selling Securityholder Warrants may not
be exercised until 13 months from the date of this Prospectus and (ii) the
Selling Securityholder Warrants or the Common Stock issuable upon exercise of
the Selling Securityholder Warrants may not be sold, assigned, pledged,
hypothecated or otherwise disposed of until 24 months after the closing of
the offering without the prior written consent of the Representative. After
the 24 month period following the closing of the offering, the Selling
Securityholders may sell the Selling Securityholder Warrants or the Common
Stock issuable upon exercise of the Selling Securityholder Warrants without
restriction if a current prospectus relating to such Selling Securityholder
Warrants and the Common Stock issuable upon exercise of the Selling
Securityholder Warrants is in effect and the securities are qualified for
sale under any applicable state laws. The Company will not receive any
proceeds from the sale of the Selling Securityholder Warrants. Sales of
Selling Securityholder Warrants issued upon conversion of Bridge Warrants or
the securities underlying such Selling Securityholder Warrants or even the
potential of such sales could have an adverse effect on the market prices of
the Common Stock and the Warrants.
There are no material relationships between any of the Selling
Securityholders and the Company, nor have any such material relationships
existed within the past three years. The Company has been informed by the
Representative that there no agreements between the Representative and any
Selling Securityholder regarding the distribution of the Selling
Securityholder Warrants or the underlying securities.
The sale of the securities by the Selling Securityholders may be effected
from time to time in transactions (which may include block transactions by or
for the account of the Selling Securityholders) in the over-the-counter
market or in negotiated transactions, a combination of such methods of sale
or otherwise. Sales may be made at fixed prices which may be changed, at
market prices in negotiated transactions, a combination of such methods of
sale or otherwise.
Selling Securityholders may effect such transactions by selling their
securities directly to purchasers, through broker-dealers acting as agents
for the Selling Securityholders or to broker-dealers who may purchase shares
as principals and thereafter to sell the securities from time to time in the
over-the-counter
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<PAGE>
market, in negotiated transactions or otherwise. Such broker-dealers, if any,
may receive compensation in the form of discounts, concessions or commissions
from the Selling Securityholders and/or the purchasers for whom such
broker-dealer may act as agent or to whom they may sell as principals or
otherwise (which compensation as to a particular broker-dealer may exceed
customary commissions).
The Company has agreed not to solicit Warrant exercises other than through
the Representative, unless the Representative declines to make such
solicitation. The Company will not be obligated to compensate the
Representative for Warrants which are exercised within the twelve months
following the date of this Prospectus. Upon any exercise of the Warrants
after the first anniversary of the date of this Prospectus, the Company will
pay the Representative a fee of seven percent (7%) of the aggregate exercise
price of the Warrants. No commission will be paid to the Representative
unless such payment is permissible under the guidelines imposed by the
National Association of Securities Dealers, Inc.
The SEC adopted Regulation M on March 4, 1997 which replaced Rule 10b-6
and certain other rules and regulations under the Exchange Act. Regulation M
prohibits any person engaged in the distribution of the Selling
Securityholders Warrants from simultaneously engaging in market-making
activities with respect to any securities of the Company during the
applicable "cooling-off" period (one to five business days) prior to the
commencement of such distribution. Accordingly, in the event the
Representative is engaged in a distribution of the Selling Securityholder
Warrants, such firm will not be able to make a market in the Company's
securities during the applicable restrictive period. However, the
Representative has not agreed to and is not obligated to act as broker-dealer
in the sale of the Selling Securityholder Warrants and the Selling
Securityholders may be required, in the event the Representative is a
market-maker, to sell such securities through another broker-dealer. In
addition, each Selling Securityholder desiring to sell Selling Securityholder
Warrants will be subject to the applicable provisions of the Exchange Act and
the rules and regulations thereunder, which provisions may limit the timing
of the purchases and sales of the Company's securities by a Selling
Securityholder.
The holders and broker-dealers, if any, acting in connection with such
sales might be deemed to be "underwriters" within the meaning of Section
2(11) of the Securities Act and any commission received by them and any
profit on the resale of the securities might be deemed to be underwriting
discount and commissions under the Securities Act.
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<PAGE>
DESCRIPTION OF SECURITIES
COMMON STOCK
The Company is authorized to issue 20,000,000 shares of Common Stock,
$.0001 par value per share. As of the date of this Prospectus, 2,254,500
shares of Common Stock are outstanding. There are also outstanding warrants
to purchase 135,000 shares of Common Stock at $2.25 per share and outstanding
Bridge Warrants to purchase 800,000 shares of Common Stock at $5.00 per
share. There is a convertible promissory note payable to Christie
Enterprises, Inc. currently outstanding which will be converted into 160,000
shares of Common Stock upon closing of this offering. In addition, the
Company has reserved an aggregate of 450,000 shares to be issued pursuant to
its 1997 Stock Option Plan. The Board of Directors has authorized the
reservation of a sufficient number of shares of Common Stock for issuance in
connection with the exercise of the Warrants being issued in this offering
and the Concurrent Offering.
Each holder of Common Stock is entitled to one vote for each share of
Common Stock owned of record on all matters to be voted on by stockholders,
including the election of directors. Because the Common Stock is not subject
to cumulative voting, the holders of more than 50% of the outstanding shares
of Common Stock could generally elect the entire membership of the Board of
Directors. The holders of shares of Common Stock are, subject to the prior
liquidation rights of any outstanding shares of preferred stock of the
Company (the "Preferred Stock"), entitled upon dissolution of the Company, to
receive pro rata all assets remaining available for distribution to
stockholders. The Common Stock has no pre-emptive or other subscription
rights, and there are no conversion rights or redemption provisions with
respect to such shares. All outstanding shares of Common Stock are and all
Common Stock to be issued upon the exercise of the Warrants will be validly
issued, fully paid and non-assessable.
The holders of Common Stock are entitled to receive such dividends, if
any, as may be declared from time to time by the Board of Directors, in its
discretion, from funds legally available therefor. The Company has never paid
dividends on its Common Stock and it currently intends to retain all earnings
for use in its operations and does not expect to pay dividends on its Common
Stock in the foreseeable future. Further, the Company's current senior credit
agreement prohibits the payment of cash dividends.
PREFERRED STOCK
The Company is authorized to issue 5,000,000 shares of Preferred Stock,
$0.01 par value per share, in series and with rights, preferences, privileges
and limitations established solely by the Board of Directors. No shares of
Preferred Stock are currently outstanding. The issuance of Preferred Stock in
the future could materially dilute the interests of the holders of the Common
Stock, including limitations on voting rights, dividends, and distributions
on liquidation of the Company, all without any further vote or other action
by the holders of the Common Stock.
WARRANTS
Upon issuance, each Warrant and each Selling Securityholder Warrant will
entitle the registered holder thereof to purchase one share of Common Stock
at a price of $5.00 per share, subject to adjustment in certain
circumstances. The Warrants will be initially exercisable thirteen months
from the date of this Prospectus and shall expire four years from the date it
becomes exercisable.
The Company may call the Warrants for redemption, at the option of the
Company, at a price of $.10 per Warrant at any time following 13 months from
the date of this Prospectus after the Common Stock of the Company trades at a
price equal to 150% of the exercise price of the Warrants for 20 consecutive
trading days, upon not less than 30 days' prior written notice. The
warrantholders shall have exercise rights until the close of business on the
date fixed for redemption.
The exercise price and number of shares of Common Stock issuable on
exercise of the Warrants are subject to adjustments under certain
circumstances, including in the event of a stock dividend, recapitalization,
reorganization, merger or consolidation of the Company. However, the Warrants
are not subject to adjustment for issuances of Common Stock at a price below
the Warrants' exercise price.
33
<PAGE>
The Company has the right, in its sole discretion, to decrease the
exercise price of the Warrants or to extend the expiration date of the
Warrants on five business days' prior written notice to the warrantholders.
The Warrants may be exercised upon surrender of the Warrant certificate on
or prior to the expiration date of the Warrants at the offices of the warrant
agent, with the exercise form on the reverse side of the Warrant certificate
completed and executed as indicated, accompanied by full payment of the
exercise price (by certified check or other good funds, payable to the
warrant agent) to the warrant agent for the number of Warrants being
exercised. The warrantholders do not have the rights or privileges of holders
of Common Stock, including, without limitation, the right to vote on any
matter presented to stockholders for approval.
No fractional shares will be issued upon exercise of the Warrants. However
the Company will pay to such warrantholder, in lieu of the issuance of any
fractional share which is otherwise issuable to such warrantholder, an amount
in cash based on the market value of the Common Stock on the last trading day
prior to the exercise date.
DELAWARE ANTI-TAKEOVER LAW
Certain provisions of the Company's Certificate of Incorporation and
Bylaws, as amended, may have the effect of preventing, discouraging or
delaying any change in the control of the Company and may maintain the
incumbency of the Board of Directors and management. The authorization of
undesignated preferred stock makes it possible for the Board of Directors to
issue preferred stock with voting or other rights or preferences that could
impede the success of any attempt to change control of the Company.
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law (the "Antitakeover Law") regulating corporate
takeovers. The Antitakeover Law prevents certain Delaware corporations,
including those whose securities are authorized for quotation on The NASDAQ
Stock Market (which includes the NASDAQ SmallCap Market), from engaging,
under certain circumstances, in a "business combination" (which includes a
merger or sale of more than 10% of the corporation's assets) with any
"interested stockholder" (a stockholder who acquired 15% or more of the
corporation's outstanding voting stock without the prior approval of the
corporation's Board of Directors) for three years following the date that
such stockholder became an "interested stockholder." A Delaware corporation
may "opt out" of the Antitakeover Law with an express provision in its
original certificate of incorporation or an express provision in its
certificate of incorporation or bylaws resulting from a stockholders'
amendment approved by at least a majority of the outstanding voting shares.
The Company has not "opted out" of the application of the Antitakeover Law.
TRANSFER AGENT, REGISTRAR AND WARRANT AGENT
The transfer agent and registrar for the Common Stock and the warrant
agent for the Warrants, the Selling Securityholder Warrants and the
Representative's Warrants is American Stock Transfer & Trust Company.
SHARES ELIGIBLE FOR FUTURE SALE
Upon the completion of this offering, the Company will have 3,214,500
shares of Common Stock outstanding. Of these shares, the 800,000 shares sold
by the Company in this offering will be freely-tradeable without restriction
or further registration under the Securities Act, except for any shares
purchased by an "affiliate" of the Company (as defined in the Securities Act
and the rules and regulations thereunder) which will be subject to the
limitations of Rule 144 promulgated under the Securities Act. Of the
remaining 2,414,500 shares, subject to the holders compliance with the
provisions of Rule 144, (i) 34,504 shares beneficially owned by four
non-affiliates of the Company will become tradeable in August 1997, (ii)
364,500 shares beneficially owned by Mantis V, L.L.C., an affiliate of the
Company, will become tradeable in September 1997, (iii) 160,000 shares of
Common Stock issuable upon conversion of a note in the principal amount of
$1,000,000 payable to Christie Enterprises, Inc. upon the closing of this
offering will become tradeable in November 1997 and (iv) 1,848,646 shares
beneficially owned by Patrick A.
34
<PAGE>
DePaolo, Sr., Steven DePaolo and a DePaolo family limited liability company,
all affiliates of the Company, are tradeable as of the date of this
Prospectus, although all of the aforementioned shares with the exception of
those set forth in (iii) will not be freely tradeable for two years from the
date of this Prospectus without the prior written consent of the
Representative pursuant to "lock-up" agreements each shareholder will have
entered into with the Representative prior to the closing of this offering.
These securities were deemed to be "restricted securities" at the time they
were purchased, as that term is defined under Rule 144 promulgated under the
Securities Act, as such shares were issued in private transactions not
involving a public offering.
In general, under Rule 144 as recently modified (which modifications
became effective April 29, 1997), subject to the satisfaction of certain
other conditions, a person, including an affiliate of the Company (or persons
whose shares are aggregated), who has beneficially owned the restricted
shares of Common Stock to be sold for at least one year is entitled to sell,
within any three-month period, a number of shares that does not exceed the
greater of 1% of the total number of outstanding shares of the same class or,
if the Common Stock is quoted on an exchange or NASDAQ, the average weekly
trading volume during the four calendar weeks preceding the sale. A person
who has not been an affiliate of the Company for at least the three months
immediately preceding the sale and who has beneficially owned the shares of
Common Stock to be sold for at least two years is entitled to sell such
shares under Rule 144 without regard to any of the limitations described
above.
Prior to this offering, there has been no market for the Common Stock, and
no prediction can be made as to the effect, if any, that market sales of
restricted shares of Common Stock or the availability of such shares for sale
will have on the market prices prevailing from time to time. Nevertheless,
the possibility that substantial amounts of Common Stock may be sold in the
public market would likely adversely affect prevailing market prices for the
Common Stock and could impair the Company's ability to raise capital through
the sale of its equity securities.
UNDERWRITING
Under to the terms and conditions contained in the Underwriting Agreement,
the Company has agreed to sell to each of the Underwriters named below, for
whom Roan Capital Partners L.P. is acting as the Representative, and each of
the Underwriters has severally agreed to purchase from the Company the
respective number of shares of Common Stock and Warrants set forth opposite
its name below.
<TABLE>
<CAPTION>
NUMBER OF
SHARES AND
UNDERWRITER WARRANTS
- --------------------------- ------------
<S> <C>
Roan Capital Partners L.P.
------------
Total ...................... 800,000
============
</TABLE>
The Underwriters are committed to purchase and pay for all of the shares
of Common Stock and all of the Warrants offered hereby if any such shares of
Common Stock or Warrants are purchased. The shares of Common Stock and
Warrants are being offered by the Underwriters subject to prior sale, when,
as and if delivered to and accepted by the Underwriters, and subject to
approval of certain legal matters by counsel and certain other conditions.
All stockholders of the Company as of the date of this Prospectus
(including Patrick A. DePaolo, Sr. and the investors in the Bridge Financing)
will have entered into "lock-up" agreements with the Representative prior to
the closing of this offering, pursuant to which the stockholders will not
sell or transfer any of the Company's securities without the prior written
consent of the Representative for a 24 month period.
The Underwriters have advised the Company that they propose to offer the
shares of Common Stock and the Warrants to the public at the initial public
offering price set forth on the cover page of this Prospectus. The
Underwriters may allow to certain dealers who are members of the National
Association of Securities Dealers, Inc. (the "NASD") concessions, not in
excess of $. per share of Common Stock and $. per Warrant, of which not in
excess of $. per share of Common Stock and $. per Warrant may be reallowed to
other dealers which are members of the NASD.
35
<PAGE>
The Company has granted to the Underwriters an option, exercisable for 45
days from the date of this Prospectus, to purchase up to an aggregate of
120,000 additional shares of Common Stock and 120,000 additional Warrants at
the initial public offering price set forth on the cover page hereof less
underwriting discounts and commissions. The Underwriters may exercise such
option in whole or, from time to time, in part, solely for the purpose of
cover over-allotments, if any, made in connection with the sale of the shares
of Common Stock and the Warrants offered hereby.
The Company has agreed to pay the Representative a nonaccountable expense
allowance of three percent (3%) of the gross proceeds of this offering, of
which $40,000 has been paid to date. The Company has also agreed to pay all
expenses in connection with qualifying the shares of Common Stock and the
Warrants offered hereby for sale under the laws of such states as the
Underwriters may designate, including expenses of counsel retained for such
purpose by the Underwriters.
The Company has agreed to sell to the Representative or its designees, for
aggregate consideration of $10, warrants (the "Representative's Warrants") to
purchase up to 80,000 shares of Common Stock at an exercise price of $6.75
per share and 80,000 Warrants at an exercise price of $.14 per Warrant. The
Representative's Warrants may not be exercised for one year from the date of
this Prospectus, and will then be exercisable for a period of four years and
will expire five years from the date of this Prospectus (the "Warrant
Exercise Term"). During the Warrant Exercise Term, the holders of the
Representative's Warrants are given, at nominal cost, the opportunity to
profit from a rise in the market price of the Company's Common Stock. The
Company has agreed that for three years following the date of this
Prospectus, the Company will not merge, reorganize or take any other action
which would terminate the Representative's Warrants without first making
adequate provisions for the Warrants. The Representative's Warrants may not
be redeemed by the Company at the Company's option. To the extent that the
Representative's Warrants are exercised, dilution to the interests of the
Company's stockholders may occur. Further, the terms upon which the Company
will be able to obtain additional equity capital will be adversely affected
since the holders of the Representative's Warrants can be expected to
exercise them at a time when the Company would, in all likelihood, be able to
obtain any needed capital on terms more favorable to the Company than those
provided in the Representative's Warrants. The Company has agreed that upon
written request of the then holders of at least a majority of the
Representative's Warrants made at any time within the period commencing one
year and ending five years after the date of this Prospectus, it will file a
registration or offering statement on Form SB-2 or other appropriate form
under the Securities Act registering the securities underlying the
Representative's Warrants.
The Company has also agreed to indemnify the Underwriters against certain
civil liabilities, including liabilities under the Securities Act.
At the closing of this offering, the Company will enter into a consulting
agreement with the Representative retaining them as management and financial
consultants to the Company for a two-year period commencing as of December
17, 1996 at a fee equal to $3,558.33 per month, or $85,300, which will be
paid up on the Closing of this offering.
The Company has also agreed that, upon completion of this offering, it
will for a period of three years if requested by the Representative (i)
engage a designee of the Representative as an advisor of its Board of
Directors or (ii) elect one of the Representative's designees to its Board of
Directors.
The Company has also granted the Representative a right of first refusal
for a period of three years from the date of this Prospectus for any public
or private offering of securities to raise capital and sale of securities to
be made by the Company, except for offerings which will provide the Company
with proceeds in excess of $20,000,000.
Upon the exercise of the Warrants commencing one year from the date of
this Prospectus, the Company will pay the Representative a fee of 7% of the
aggregate exercise price if (i) the market price of its Common Stock on the
date the Warrant is exercised is greater than the then exercise price of the
Warrants; (ii) the exercise of the Warrant was solicited by a member of the
NASD and the customer states in writing that the transaction was solicited
and designates in writing the broker-dealer to receive
36
<PAGE>
compensation for the exercise; (iii) the Warrant is not held in a
discretionary account; (iv) disclosure of compensation arrangements was made
both at the time of the offering and at the time of the exercise of the
Warrants; and (v) the solicitation of exercise of the Warrant was not in
violation of Regulation M promulgated under the Exchange Act.
In connection with this offering, the Representative and its affiliates
may engage in transactions that stabilize, maintain or otherwise affect the
market price of the Common Stock or the Warrants. Such transactions may
include stabilization transactions effected in accordance with Rule 104 of
Regulation M, pursuant to which such persons may bid or purchase Common Stock
or Warrants for the purpose of stabilizing its market price. The
Representative may also create a short position for the account of the
Representative by selling more Common Stock and Warrants in connection with
the offering than they are committed to purchase from the Company, and in
such case may purchase Common Stock or Warrants in the open market following
completion of the offering to cover all or a portion of such short position.
The Representative may also cover all or a portion of such short position, up
to 120,000 shares of Common Stock and 120,000 Warrants, by exercising the
over-allotment option referred to herein. Any of the transactions described
in this paragraph may result in the maintenance of the price of the Common
Stock and the price of the Warrants at a level above that which might
otherwise prevail in the open market. None of the transactions described in
this paragraph is required, and, if they are undertaken, they may be
discontinued at any time.
Regulation M may prohibit the Representative or any other soliciting
broker-dealer from engaging in market-making activities with regard to the
Company's securities for the period from five business days prior to any
solicitation by the Representative of the exercise of Warrants until the
later of the termination of such solicitation activity or the termination (by
waiver or otherwise) of any right that the Representative may have to receive
a fee for the exercise of the Warrants following such solicitation. As a
result, the Representative may be unable to provide a market for the
Company's securities during certain periods while the Warrants are
exercisable.
Prior to this offering, there has been no public trading market for the
Common Stock or the Warrants. Consequently, the initial public offering price
of the Common Stock and the Warrants have been determined by negotiations
between the Company and the Representative. Among the factors considered in
determining the initial public offering price were the Company's financial
condition and prospects, market prices of similar securities of comparable
publicly traded companies, certain financial and operating information of
companies engaged in activities similar to those of the Company and the
general conditions of the securities market.
LEGAL MATTERS
Epstein Becker & Green, P.C., 250 Park Avenue, New York, New York has
acted as counsel to the Company in connection with this offering. Gusrae,
Kaplan & Bruno, 120 Wall Street, New York, New York has acted as counsel for
the Underwriters in connection with this offering. Richard L. Campbell,
special counsel to Epstein Becker & Green, P.C., is an affiliate of Mantis V,
L.L.C., which is the owner of 364,500 shares of the Company's Common Stock
and of warrants to purchase 85,000 shares of the Company's Common Stock at
$2.25 per share.
EXPERTS
The consolidated financial statements of Discas, Inc. and of Christie
Enterprises, Inc. included in this Prospectus have been audited by Jump,
Green, Holman and Company, independent certified public accountants, to the
extent and for the periods set forth in their reports appearing elsewhere
herein, and are included in reliance upon such reports given upon the
authority of said firm as experts in auditing and accounting. Jump, Green,
Holman and Company have not examined or expressed any view whatsoever on the
unaudited consolidated financial statements of the Company appearing
elsewhere herein.
37
<PAGE>
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (the "Registration Statement") under
the Securities Act with respect to the securities offered hereby. This
Prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. For further information with
respect to the Company and this offering, reference is made to the
Registration Statement, including the exhibits and schedules filed therewith.
A copy of the Registration Statement may be inspected without charge at the
Commission's principal office in Washington, D.C., and copies of all or any
part of the Registration Statement may be obtained from the Public Reference
Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549,
upon payment of certain fees prescribed by the Commission. In addition, the
Commission maintains a Web site (http://www.sec.gov) that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission through the Electronic Data
Gathering, Analysis and Retrieval System ("EDGAR"). The Registration
Statement of which this Prospectus forms a part has been filed electronically
through EDGAR and may be retrieved through the Commission's Web site on the
Internet. Descriptions contained in this Prospectus as to the contents of any
agreement or other documents filed as an exhibit to the Registration
Statement are not necessarily complete and each such description is qualified
by reference to such agreement or document.
Upon consummation of this offering, the Company will become subject to the
reporting requirements of the Exchange Act and in accordance therewith will
file reports, proxy statements and other information with the Commission. The
Company intends to furnish its stockholders with annual reports containing
audited financial statements and such other reports as the Company deems
appropriate or as may be required by law.
38
<PAGE>
DISCAS, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
NUMBER
----------
<S> <C>
INDEPENDENT AUDITOR'S REPORT--DISCAS, INC. AND SUBSIDIARY ......... F-2
CONSOLIDATED BALANCE SHEETS AS OF APRIL 30, 1996 AND AS OF JANUARY
31, 1997 (UNAUDITED).............................................. F-3
CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS
ENDED APRIL 30, 1995 AND 1996, AND FOR THE NINE MONTHS ENDED
JANUARY 31, 1996 AND 1997 ........................................ F-4
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE
YEARS ENDED APRIL 30, 1995 AND 1996, AND FOR THE NINE MONTHS
ENDED JANUARY 31, 1997 (UNAUDITED)................................ F-5
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS
ENDED APRIL 30, 1995 AND 1996, AND FOR THE NINE MONTHS ENDED
JANUARY 31, 1996 AND 1997 (UNAUDITED)............................. F-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS......................... F-8
INDEPENDENT AUDITOR'S REPORT--CHRISTIE ENTERPRISES, INC. .......... F-16
BALANCE SHEET AS OF OCTOBER 31, 1996............................... F-17
STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1995 AND
FOR THE TEN MONTHS ENDED OCTOBER 31, 1996......................... F-18
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY FOR
THE YEAR ENDED DECEMBER 31, 1995 AND THE TEN MONTHS ENDED OCTOBER
31, 1996.......................................................... F-19
STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED
DECEMBER 31, 1995 AND FOR THE TEN MONTHS ENDED OCTOBER 31, 1996 .. F-20
NOTES TO FINANCIAL STATEMENTS...................................... F-22
DISCAS INC. AND SUBSIDIARIES PRO FORMA CONDENSED COMBINED BALANCE
SHEET AS OF APRIL 30, 1996 (UNAUDITED)............................ F-26
DISCAS INC. AND SUBSIDIARIES PRO FORMA CONDENSED COMBINED
STATEMENTS OF INCOME FOR THE YEAR ENDED APRIL 30, 1996
(UNAUDITED) AND THE NINE MONTHS ENDED JANUARY 31, 1997
(UNAUDITED)....................................................... F-27
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS .... F-28
</TABLE>
F-1
<PAGE>
[JUMP, GREEN, HOLMAN AND COMPANY LETTERHEAD]
INDEPENDENT AUDITOR'S REPORT
The Stockholders
Discas Inc. and Subsidiary:
We have audited the accompanying consolidated balance sheet of Discas Inc.
and Subsidiary as of April 30, 1996 and related consolidated statements of
income, changes in stockholders' equity and cash flows for the two years
ended April 30, 1995 and 1996. These financial statements are the
responsibility of Discas, Inc. and Subsidiary's management. Our
responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatements. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Discas, Inc. and
Subsidiary as of April 30, 1996 and the results of their operations and its
cash flows for the two years ended April 30, 1995 and 1996 in conformity with
generally accepted accounting principles.
JUMP, GREEN, HOLMAN AND COMPANY
January 17, 1997
Toms River, NJ
F-2
<PAGE>
DISCAS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
APRIL 30, JANUARY 31,
1996 1997
------------ -------------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash.................................................................. $ 183,546 32,609
Accounts receivable................................................... 490,118 969,954
Inventory............................................................. 547,675 879,405
Prepaid expenses...................................................... 12,722 5,619
Deferred taxes........................................................ 5,000 5,000
------------ -------------
Total current assets................................................. 1,239,061 1,892,587
------------ -------------
Property and equipment (net)........................................... 417,105 1,722,274
------------ -------------
Other assets........................................................... 94,062 644,558
------------ -------------
$1,750,228 4,259,419
============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable...................................................... 280,486 997,949
Accrued expenses...................................................... 27,470 57,660
Income taxes payable.................................................. -- --
Line of credit........................................................ 280,000 280,000
Current portion of capital leases .................................... 20,755 21,000
Current portion of long-term debt..................................... 117,416 404,833
------------ -------------
Total current liabilities............................................ 726,127 1,761,442
------------ -------------
Capital leases, excluding current portion.............................. 12,757 7,646
Long-term debt, excluding current portion.............................. 362,773 1,805,681
Officer loan........................................................... 121,184 121,184
Deferred taxes......................................................... 41,000 41,000
Minority interest...................................................... 82,979 --
Stockholders' equity:
Common stock, $.0001 par value, 12,000,000 shares authorized,
1,813,377 shares issued and outstanding (2,254,500 at January 31,
1997)................................................................ 189 225
Additional paid in capital............................................ 1,811 76,049
Retained earnings..................................................... 401,408 446,192
------------ -------------
Total stockholders' equity........................................... 403,408 522,466
------------ -------------
$1,750,228 4,259,419
============ =============
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
DISCAS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED APRIL 30, JANUARY 31,
1995 1996 1996 1997
------------ ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Sales........................ $3,749,564 3,858,205 3,283,040 3,550,394
Cost of sales................ 2,928,067 3,012,125 2,543,122 2,744,642
------------ ----------- ----------- -----------
Gross profit................ 821,497 846,080 739,918 805,752
Selling, general and
administrative expenses .... 642,401 698,946 612,128 739,162
------------ ----------- ----------- -----------
Income from operations ..... 179,096 147,134 127,790 66,590
------------ ----------- ----------- -----------
Other income (expense):
Other income................ 25,028 30,929 22,998 15,279
Interest.................... (65,940) (80,292) (64,478) (73,790)
------------ ----------- ----------- -----------
Net other expense........... (40,912) (49,363) (41,480) (58,511)
------------ ----------- ----------- -----------
Minority interest............ 23,155 23,841 2,207 36,705
------------ ----------- ----------- -----------
Earnings before income
taxes...................... 161,339 121,612 88,517 44,784
Income tax expense........... 44,155 0 21,600 0
------------ ----------- ----------- -----------
Net income.................. $ 117,184 121,612 66,917 44,784
============ =========== =========== ===========
Net income per share:
Primary..................... $ 0.05 0.05 0.03 0.03
============ =========== =========== ===========
Fully diluted............... $ 0.05 0.05 0.03 0.02
============ =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
DISCAS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED APRIL 30, 1996 AND 1995
AND THE NINE MONTHS ENDED JANUARY 31, 1997
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID IN RETAINED STOCKHOLDERS'
STOCK CAPITAL EARNINGS EQUITY
-------- ------------ ---------- ---------------
<S> <C> <C> <C> <C>
Balances, April 30, 1994.............. $181 1,819 162,612 164,612
Net income for the year ended
April 30, 1995....................... -- -- 117,184 117,184
-------- ------------ ---------- ---------------
Balances, April 30, 1995.............. 181 1,819 279,796 281,796
Net income for the year ended
April 30, 1996....................... -- -- 121,612 121,612
-------- ------------ ---------- ---------------
Balances, April 30, 1996.............. 181 1,819 401,408 403,408
Issuance of common stock.............. 36 27,964 -- 28,000
Contributions of minority interest ... 8 46,266 -- 46,274
Net income for the nine months ended
January 31, 1997..................... -- -- 44,784 44,784
-------- ------------ ---------- ---------------
Balances, January 31,1997
(unaudited).......................... $225 76,049 446,192 522,466
======== ============ ========== ===============
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
DISCAS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED JANUARY
YEAR ENDED APRIL 30, 31,
1995 1996 1996 1997
------------- ------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash Flows from Operating Activities:
Cash received from customers ............ $ 3,429,895 4,092,786 3,527,468 3,085,837
Cash paid to suppliers and employees .... (3,469,089) (3,872,155) (3,351,701) (3,100,644)
Interest paid............................ (65,940) (77,742) (64,478) (73,790)
Income taxes paid........................ (1,100) (17,255) (28,655) --
------------- ------------- ------------- -------------
Net cash provided (used) by operating
activities............................ (106,234) 125,634 82,634 (88,597)
------------- ------------- ------------- -------------
Cash Flows from Investing Activities:
Purchases of fixed assets................ (26,574) (41,450) (41,450) (84,573)
------------- ------------- ------------- -------------
Net cash used by investing activities . (26,574) (41,450) (41,450) (84,573)
------------- ------------- ------------- -------------
Cash Flows from Financing Activities:
Principal payments on long-term debt .... (134,819) (115,631) (48,460) (108,641)
Proceeds from long-term debt............. -- 47,171 -- 350,000
Advances from shareholder................ 41,656 -- -- --
Principal payments on capital leases .... (4,237) (39,217) (31,217) (15,900)
Proceeds from credit line................ 110,000 170,000 170,000 --
Deferred financing costs................. -- -- -- (203,226)
------------- ------------- ------------- -------------
Net cash provided by financing
activities............................ 12,600 62,323 90,323 22,233
------------- ------------- ------------- -------------
Net increase (decrease) in cash ....... (120,208) 146,507 131,507 (150,937)
Cash at beginning of period .............. 157,247 37,039 37,039 183,546
------------- ------------- ------------- -------------
Cash at end of period..................... $ 37,039 183,546 168,546 32,609
============= ============= ============= =============
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE>
DISCAS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED APRIL 30, JANUARY 31,
1995 1996 1996 1997
------------ ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Reconciliation of net income to cash provided
(used) by operating activities:
Net income................................... $ 117,184 121,612 66,917 44,784
Items which did not (provide) use cash:
Depreciation................................. 127,860 129,754 97,316 106,404
Amortization................................. 12,142 12,144 9,108 4,780
Bad debt expense (recovery).................. 20,823 (1,000) -- --
Minority interest............................ (23,155) (23,841) (2,207) (36,705)
Working capital changes which provided (used)
cash:
Accounts receivable.......................... (344,697) 207,430 221,430 (479,836)
Inventory.................................... (188,151) (6,920) 3,080 (331,730)
Other assets................................. (1,640) (47,366) (14,705) (85,029)
Prepaid expenses............................. 15,902 (6,442) 2,258 (3,918)
Accounts payable............................. 84,585 (247,001) (292,827) 717,463
Accrued expenses............................. 29,858 (5,681) (681) (24,810)
Income tax payable........................... 7,055 (7,055) (7,055) --
Non-current changes which provided cash:
Deferred taxes............................... 36,000 -- -- --
------------ ----------- ----------- -----------
Net cash provided (used) by operating
activities................................ $(106,234) 125,634 82,634 (88,597)
============ =========== =========== ===========
Schedule of non-cash investing and financing
activities:
Financed acquisitions........................ $ 88,000 -- -- 1,500,000
============ =========== =========== ===========
Debt issue costs............................. $ -- -- -- 28,000
============ =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-7
<PAGE>
DISCAS INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INFORMATION WITH RESPECT TO THE NINE MONTHS ENDED
JANUARY 31, 1997 IS UNAUDITED
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. ORGANIZATION
The accompanying consolidated financial statements of Discas, Inc. and
Subsidiary ("the Company") present the accounts of Discas, Inc. and its
68.81% subsidiary, Discas Recycled Products Corporation (DRPC). Intercompany
transactions have been eliminated in the consolidation.
Discas, Inc. produces proprietary plastics and rubber compounds using a
variety of recycled and prime materials. DRPC uses industrial scrap material
to manufacture high quality recycled polypropylene based compounds.
The Company performs ongoing credit evaluations of its customers'
financial condition and generally, requires no collateral from its customers.
The Company believes the allowance for doubtful accounts is adequate to
absorb estimated losses as of April 30, 1996.
B. CASH AND CASH EQUIVALENTS
Cash and cash equivalents includes all cash balances and highly liquid
investments with a maturity of three months or less. The Company places its
temporary cash investments with high credit quality financial institutions.
At times such investments may be in excess of the FDIC insurance limits.
C. PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and are depreciated over their
useful lives of 7 years. Depreciation is computed by using the straight-line
method for financial reporting purposes and straight line and accelerated
methods for income tax purposes. Maintenance and repairs are charged to
expense as incurred. Expenditures for major renewals and betterments that
extend the useful lives of the assets are capitalized. The cost and related
accumulated depreciation of property and equipment retired or disposed of are
removed from the accounts and the resulting gains or losses are reflected in
income.
D. INCOME TAXES
Income taxes are provided for the tax effects of transactions reported in
the financial statements and consist of taxes currently due plus deferred
taxes. Deferred taxes are recognized for differences between the basis of
assets and liabilities for financial statement and income tax purposes.
Deferred tax assets and liabilities represent future tax return consequences
of those differences, which will either be taxable or deductible when the
assets or liabilities are recovered or settled. Deferred taxes are also
recognized for operating losses and tax credits that are available to offset
future taxable income.
E. ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
period. Actual results could differ from these estimates.
F. FAIR VALUE OF FINANCIAL INSTRUMENTS
As of April 30, 1996, the carrying values of the Company's financial
instruments which are all held for non-trading purposes, approximated their
fair value.
F-8
<PAGE>
DISCAS INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
INFORMATION WITH RESPECT TO THE NINE MONTHS ENDED
JANUARY 31, 1997 IS UNAUDITED
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
G. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
Effective May 1, 1996 and January 1, 1997, the Company will be required to
adopt SFAS No. 121, "Accounting for the Impairment of Long Lived Assets and
for Long Lived Assets to be Disposed Of" and SFAS No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities". The Company believes that the adoption of these statements will
not have a material effect on the Company's financial position.
Effective May 1, 1996, the Company will be required to adopt SFAS No. 123,
"Accounting for Stock Based Compensation." The statement requires at a
minimum, new disclosures regarding employee and non-employee stock based
compensation plans. The Company has not yet determined whether it will
implement the fair value based accounting method or continue accounting for
stock options under APB Opinion No. 25.
H. INVENTORY
Inventory is stated at the lower of cost or market as determined by the
average cost method.
I. ECONOMIC DEPENDENCY
The Company sells a substantial portion of its product to two customers.
For the years ended April 30, 1996 and 1995, sales to those customers were
approximately $2,837,000 and $2,241,000, respectively. ($1,210,000 for the
nine months ended January 31, 1997.)
As of April 30, 1996 and January 31, 1997, accounts receivable from these
customers totaled $118,000 and $147,000, respectively.
J. ORGANIZATIONAL COSTS
The Company's policy is to capitalize business start-up costs which are
recoverable in future periods. Amortization is computed on a straight line
basis over a period of five years.
K. DEFERRED FINANCING COSTS
Professional fees and other expenses associated with the acquisition of
financing are capitalized and will be amortized over the life of such
agreement or expensed in the period such financing is abandoned.
L. NET INCOME PER SHARE
The weighted average number of common stock and common stock equivalents
was determined by including all shares issued in 1996 as if they had been
issued at the beginning of fiscal 1995. Warrants were also deemed exercised
at the beginning of fiscal 1995 using the treasury stock method. Primary net
income per share included the conversion of the note as of the conversion
date. Fully diluted net income per share did not include the conversion of
the note.
F-9
<PAGE>
DISCAS INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
INFORMATION WITH RESPECT TO THE NINE MONTHS ENDED
JANUARY 31, 1997 IS UNAUDITED
2. PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost and consist of the following:
<TABLE>
<CAPTION>
APRIL 30, JANUARY 31,
1996 1997
----------- -------------
<S> <C> <C>
Machinery and equipment......... $814,376 2,217,602
Leasehold improvements.......... 56,190 59,857
Office equipment................ 55,280 55,706
Vehicles........................ 57,642 58,206
Furniture and fixtures.......... 14,817 18,507
----------- -------------
Total property and equipment .. 998,305 2,409,878
Less: accumulated
depreciation................... 581,200 687,604
----------- -------------
Net property and equipment .... $417,105 1,722,274
=========== =============
</TABLE>
3. ACCOUNTS RECEIVABLE
Accounts receivable at April 30, 1996 and January 31, 1997 are shown net
of an allowance for doubtful accounts of $14,000.
4. INVENTORY
Inventories at April 30, 1996 and January 31, 1997 consist of:
<TABLE>
<CAPTION>
APRIL 30, JANUARY 31,
1996 1997
----------- -------------
<S> <C> <C>
Finished goods . $187,152 298,998
Raw materials .. 345,523 570,407
Work in
process........ 15,000 10,000
----------- -------------
$547,675 879,405
=========== =============
</TABLE>
5. OTHER ASSETS
Other assets at April 30, 1996 and January 31, 1997 consist of the
following:
<TABLE>
<CAPTION>
APRIL 30, JANUARY 31,
1996 1997
----------- -------------
<S> <C> <C>
Organizational costs, net of accumulated amortization of
$32,379 and $34,276, respectively.............................. $29,591 27,694
Security deposits............................................... 31,810 64,795
Deferred financing costs........................................ 32,661 336,387
Goodwill net of $2,883, of accumulated amortization ............ -- 170,117
Other........................................................... -- 45,565
----------- -------------
$94,062 644,558
=========== =============
</TABLE>
6. INCOME TAXES
The Company's effective income tax rate is lower than would be expected if
the Federal statutory rate were applied to earnings from operations,
primarily because of depreciation and the utilization of net operating
losses.
F-10
<PAGE>
DISCAS INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
INFORMATION WITH RESPECT TO THE NINE MONTHS ENDED
JANUARY 31, 1997 IS UNAUDITED
6. INCOME TAXES (Continued)
The components of income tax (expense) benefit for the years ended April
30, 1995 and 1996 were:
<TABLE>
<CAPTION>
1995 FEDERAL STATE TOTAL
- ----------- ----------- --------- ----------
<S> <C> <C> <C>
Current.... $ (8,155) -- (8,155)
Deferred .. (26,500) (9,500) (36,000)
----------- --------- ----------
$(34,655) (9,500) (44,155)
=========== ========= ==========
</TABLE>
<TABLE>
<CAPTION>
1996 FEDERAL STATE TOTAL
- ----------- ---------- ------- -------
<S> <C> <C> <C>
Current.... $ -- -- --
Deferred .. (1,000) 1,000 --
---------- ------- -------
$(1,000) 1,000 --
========== ======= =======
</TABLE>
The following is a summary of the components of the Company's Federal and
State deferred tax assets and liabilities:
<TABLE>
<CAPTION>
APRIL 30, JANUARY 31,
1996 1997
----------- -------------
<S> <C> <C>
CURRENT
Deferred tax assets:
Allowance for doubtful accounts . $ 5,000 5,000
=========== =============
NON-CURRENT
Deferred tax assets:
Net operating loss
carryforwards.................... 6,000 9,000
Deferred tax liabilities:
Depreciation..................... (47,000) (50,000)
----------- -------------
Net deferred tax liability ..... $(41,000) (41,000)
=========== =============
</TABLE>
The Company has net operating loss carryforwards of approximately $13,000
(Federal) and $6,000 (State) which will begin to expire in 2011.
7. LINE OF CREDIT
The Company has an available line of credit with a bank which it can
borrow up to $500,000. Interest is due in monthly installments at prime plus
1 3/4% percent. The line of credit is secured by accounts receivable and
inventory and matures in July, 1997.
At April 30, 1996 and January 31, 1997, outstanding borrowings on this
line amounted to $280,000, respectively.
F-11
<PAGE>
DISCAS INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
INFORMATION WITH RESPECT TO THE NINE MONTHS ENDED
JANUARY 31, 1997 IS UNAUDITED
8. LONG-TERM DEBT
<TABLE>
<CAPTION>
APRIL 30, JANUARY 31,
1996 1997
----------- -------------
<S> <C> <C>
Note payable to a bank in monthly principal payments of $6,173
plus interest at "prime" plus two percent. The loan matures in
June, 1997 and is secured by machinery and equipment and the
personal guarantee of the president of the Company............... $308,642 239,724
Note payable to the Department of Economic Development, payable
in monthly installments of $2,610, including interest at 6%,
maturing in September, 2000 and secured by a lien on all
business assets and the personal guarantee of the president of
the Company...................................................... 119,247 106,920
Equipment loan payable to a finance company with monthly
payments of $1,572 including interest of 13% per annum. The loan
matures in July 1998, and is secured by equipment with a net
book value of $43,000............................................ 36,942 26,788
Equipment loan payable to a finance company with monthly
payments of $423 including interest at 13% per annum. The loan
matures in February, 2000, and is secured by equipment with a
net book value of $16,000........................................ 15,358 12,903
Loan payable to a company in monthly interest only payments
computed at 8% per annum. The note is unsecured and due in full
in November 1998. As partial consideration for the loan, the
company was issued 270,000 shares of common stock of Discas at
an exercise price of $2.25. The value of common stock and common
stock warrants was $27,000 and $1,000, respectively and is
included in deferred financing costs as further described in
note 5........................................................... -- 350,000
Loan payable to a finance company in monthly payments of $12,600
including interest at 9.75%. The loan matures in November 2000
and is secured by equipment...................................... -- 474,179
Loan payable to the shareholder of Christie Enterprises, Inc. in
connection with the asset purchase agreement described in note
14. The note is interest free until April 30, 1997 at prime plus
1% along with fixed monthly principle payments of $16,667. The
note matures in April, 2002 and is secured by machinery and
equipment of the seller. The holder for this note may also
convert the outstanding principal balance into common shares of
Discas, Inc. at a price which is also described in note 14. ..... -- 1,000,000
----------- -------------
Total long-term debt........................................... 480,189 2,210,514
Less: current portion.......................................... 117,416 404,833
----------- -------------
Long-term debt, excluding current portion...................... $362,773 1,805,681
=========== =============
</TABLE>
F-12
<PAGE>
DISCAS INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
INFORMATION WITH RESPECT TO THE NINE MONTHS ENDED
JANUARY 31, 1997 IS UNAUDITED
8. LONG-TERM DEBT (Continued)
Maturities of long term debt over the next several years are as follows:
<TABLE>
<CAPTION>
<S> <C>
January 31,
1997............ $ 425,000
1998............. 654,000
1999............. 440,000
2000............. 220,000
2001............. 66,681
-----------
$1,805,681
===========
</TABLE>
9. CAPITAL LEASES
The Company is lessee of certain equipment under capital leases expiring
in various years through 1999. The assets and liabilities under capital
leases are recorded at the lower of the present value of the minimum lease
payments or the fair value of the asset. The assets are depreciated over the
lower of their lease terms or their estimated productive lives.
Minimum future lease payments under capital leases as of April 30, 1996 is
as follows:
<TABLE>
<CAPTION>
<S> <C>
April 30, 1997................................. $25,194
1998................................ 21,769
1999................................ 3,889
---------
Total minimum lease payments................... 50,852
Less: amounts representing interest............ 17,340
---------
Present value of future minimum lease
payments...................................... 33,512
Less: current portion.......................... 20,755
---------
Capital leases, net of current portion ........ $12,757
=========
</TABLE>
As of April 30, 1996 and January 31, 1997, machinery and equipment held
under the aforementioned capital leases amounted to $68,420 and depreciation
expense for the year ended April 30, 1996 and for the nine months ended
January 31, 1997 approximated $10,000 and $7,500, respectively.
10. RELATED PARTY ACTIVITY
The president of the Company has made various loans to the company bearing
interest at rates between 6% and 8%. Interest only is due monthly and the
principal is unsecured, subordinated to the Company's bank debt and has no
specific repayment terms.
The president of the Company is a member in a limited partnership which
does business with the Company. For the years ended April 30, 1995 and 1996
sales to the limited partnership amounted to approximately $213,000 and
$129,000, and purchases from the limited partnership amounted to
approximately $1,054,000 and $650,000, respectively.
Included in selling, general and administrative expenses for the year
ended April 30, 1996 is approximately $23,000 paid to a related company for
the rent of machinery and equipment. The lease is classified as an operating
lease and provides for minimum rentals of $26,400 through April 30, 1998.
F-13
<PAGE>
DISCAS INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
INFORMATION WITH RESPECT TO THE NINE MONTHS ENDED
JANUARY 31, 1997 IS UNAUDITED
11. COMMITMENTS AND CONTINGENCIES
The Company conducts their operations in leased facilities classified as
operating leases which expire in various years through 2000. The Company also
has an option to extend the leases through 2005.
In addition to annual base rental, the leases require additional payments
for maintenance and taxes. The following is a schedule approximating the
future minimum rental payments required under the above operating leases as
of:
<TABLE>
<CAPTION>
<S> <C>
April 30, 1997.......... $177,459
1998.......... 184,203
1999.......... 188,011
2000.......... 194,516
2001.......... 201,439
</TABLE>
Rent expense under the aforementioned leases for the years ended April 30,
1995 and 1996 amounted to $114,706 and $143,443, respectively.
12. AGREEMENT OF MERGER
On August 27, 1996, Discas Recycled Products Corporation merged into
Discas, Inc., pursuant to Section 251 of the General Corporation Law of the
State of Delaware. Each minority shareholder of DRPC shall be retired and the
holder thereof shall receive 22.56 shares (76,623 shares in total) of the
voting stock of Discas, Inc., having a par value of $.0001 per share.
Prior to the merger, the Board of Directors of Discas, Inc. authorized a 1
for 8.718477 reverse stock split of common stock to the stockholders of
record on August 27, 1996. As a result, 1,400,000 common shares were issued
and outstanding. The Company has elected to retroactively restate this
occurrence to be reflected in the financial statements for the years ended
April 30, 1995 and 1996.
13. FORMATION OF A SUBSIDIARY
On October 3, 1996, Christie Products, Inc. (CPI), a wholly owned
subsidiary of Discas, Inc., was incorporated in the state of Delaware. CPI
operates out of New Jersey with the authority to manufacture and market
nursery growing pots and other plastic products.
CPI is authorized to issue 3,000 shares of no par value common stock. As
of the date of this financial statement, 100 shares are issued and
outstanding.
14. ASSET PURCHASE AGREEMENT
On October 30, 1996, Christie Products, Inc. (CPI), entered into an
agreement with Christie Enterprises, Inc., to purchase substantially all of
their business assets. The purchase price of $1,500,000 exceeded the fair
market value of the assets purchased by $173,000, which will be amortized on
the straight line basis over 15 years. CPI and Discas, Inc. as consideration,
paid Christie Enterprises, Inc., $500,000 in cash and issued a convertible
promissory note in the amount of $1,000,000. The note is interest free until
April 30, 1997, at which time interest will be paid at prime plus 1% along
with fixed monthly principal payments of $16,667. The note matures on April
30, 2002 and is secured by the molds, machinery and equipment of the seller.
The holder of this note may also convert the outstanding principal balance
into common shares of Discas, Inc. The number of shares into which this note
may be converted shall be determined by dividing the aggregate outstanding
principal amount of the note by 125% of the initial
F-14
<PAGE>
DISCAS INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
INFORMATION WITH RESPECT TO THE NINE MONTHS ENDED
JANUARY 31, 1997 IS UNAUDITED
14. ASSET PURCHASE AGREEMENT (Continued)
public offering price per share of common stock of Discas, Inc., provided
that if Discas, Inc. has not completed an initial public offering of its
common stock by October 1, 1997, then the conversion price shall be the
greater of $6.00 per share or 125% of the then fair market value of the
common stock of Discas, Inc. on a per share basis.
15. INTENT OF PUBLIC OFFERING
On November 25, 1996, Discas, Inc. received a letter of intent from an
underwriter to enter into a definitive agreement with respect to a public
offering of common stock and common stock purchase warrants of Discas, Inc.
Terms of the agreement have not been finalized as of the date of this
financial statement.
In connection with the proposed public offering, Discas, Inc. has
authorized a 1.35 for 1 stock split of common stock to the stockholders of
record prior to the offering date. The Company has elected to retroactively
restate this occurrence to be reflected in the financial statements for the
years ended April 30, 1995 and 1996.
F-15
<PAGE>
[LETTERHEAD OF JUMP, GREEN, HOLMAN AND COMPANY]
INDEPENDENT AUDITOR'S REPORT
To the Stockholders' of
Christie Enterprises, Inc.
Kenilworth, New Jersey:
We have audited the balance sheet of Christie Enterprises, Inc. as of
October 31, 1996 and the related statements of operations, changes in
stockholders' equity and cash flows for the year ended December 31, 1995 and
the ten months ended October 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Christie Enterprises,
Inc. as of October 31, 1996 and the results of its operations and its cash
flows for the year ended December 31, 1995 and the ten months ended October
31, 1996 in conformity with generally accepted accounting principles.
JUMP, GREEN, HOLMAN AND COMPANY
January 20, 1997
Toms River, New Jersey
F-16
<PAGE>
CHRISTIE ENTERPRISES, INC.
BALANCE SHEET
OCTOBER 31, 1996
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current Assets:
Cash and cash equivalents.............................................. $ 30,841
Accounts receivable.................................................... 619,421
Inventory.............................................................. 202,948
Prepaid expenses and other receivables................................. 14,357
-------------
Total Current Assets................................................... 867,567
-------------
Property and Equipment--Net.............................................. 251,816
-------------
Other Assets............................................................. 20,287
-------------
$ 1,139,670
=============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable....................................................... 1,090,401
Accrued expenses....................................................... 46,830
Current portion of long-term debt...................................... 495,000
-------------
Total Current Liabilities.............................................. 1,632,231
-------------
Related party loans payable.............................................. 63,000
Stockholders' Equity (Deficit):
Common stock, no par value, 1000 shares authorized, 100 shares issued
and outstanding ...................................................... 140,450
Additional paid in capital............................................. 414,658
Accumulated deficit.................................................... (1,110,669)
-------------
Total Stockholders' Equity (Deficit)................................... (555,561)
-------------
$ 1,139,670
=============
</TABLE>
See accompanying notes to financial statements.
F-17
<PAGE>
CHRISTIE ENTERPRISES, INC.
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
AND THE TEN MONTHS ENDED OCTOBER 31, 1996
<TABLE>
<CAPTION>
1995 1996
------------ -----------
<S> <C> <C>
Sales........................................ $2,922,733 2,521,784
Cost of sales................................ 2,667,940 2,297,517
------------ -----------
Gross Profit................................. 254,793 224,267
------------ -----------
Selling, general and administrative
expenses.................................... 469,571 386,833
------------ -----------
Loss from Operations......................... (214,778) (162,566)
------------ -----------
Other Expenses:
Interest expense............................ 75,354 42,291
------------ -----------
Net loss..................................... $ (290,132) (204,857)
============ ===========
PRO FORMA INFORMATION
Historical loss before income taxes ........ (290,132) (204,857)
Pro forma income tax benefit................ -- 82,000
------------ -----------
Pro forma net loss......................... $ (290,132) (122,857)
============ ===========
Pro forma net loss per share............... $ (2,901) (1,229)
============ ===========
</TABLE>
See accompanying notes to financial statements.
F-18
<PAGE>
CHRISTIE ENTERPRISES, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1995
AND THE TEN MONTHS ENDED OCTOBER 31, 1996
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID IN ACCUMULATED STOCKHOLDERS'
STOCK CAPITAL DEFICIT EQUITY
---------- ------------ ------------- ---------------
<S> <C> <C> <C> <C>
Balances December 31, 1994 .............. $140,450 388,214 (615,680) (87,016)
Capital contributions ................... -- 26,444 -- 26,444
Net loss for the year ended December 31,
1995 ................................... -- -- (290,132) (290,132)
---------- ------------ ------------- ---------------
Balances December 31, 1995 .............. 140,450 414,658 (905,812) (350,704)
Net Loss for the ten months ended
October 31, 1996 ....................... -- -- (204,857) (204,857)
---------- ------------ ------------- ---------------
Balances October 31, 1996 ............... $140,450 414,658 (1,110,669) (555,561)
========== ============ ============= ===============
</TABLE>
See accompany notes to financial statements.
F-19
<PAGE>
CHRISTIE ENTERPRISES, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31,1995 AND
THE TEN MONTHS ENDED OCTOBER 31, 1996
<TABLE>
<CAPTION>
1995 1996
------------- -------------
<S> <C> <C>
Cash Flows From Operating Activities:
Cash received from customers.................... $ 3,038,796 2,223,531
Cash paid to suppliers and employees............ (2,845,586) (2,179,113)
Interest paid................................... (75,354) (42,291)
------------- -------------
Net Cash Provided By Operating Activities ....... 117,856 2,127
------------- -------------
Cash Flows from Investing Activities: ...........
Capital expenditures............................ (15,927) (16,038)
Proceeds from affiliates........................ -- 59,103
------------- -------------
Net Cash Provided (Used) By Investing
Activities...................................... (15,927) 43,065
------------- -------------
Cash Flows From Financing Activities:
Capital Contributions........................... 26,444 --
Principal payments on long-term debt............ (151,187) (33,260)
------------- -------------
Net Cash Used by Financing Activities............ (124,743) (33,260)
------------- -------------
Net Increase (Decrease) in Cash.................. (22,814) 11,932
Beginning cash................................... 41,723 18,909
------------- -------------
Ending cash...................................... $ 18,909 30,841
============= =============
</TABLE>
See accompanying notes to financial statements.
F-20
<PAGE>
CHRISTIE ENTERPRISES, INC.
STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31,1995 AND
THE TEN MONTHS ENDED OCTOBER 31, 1996
<TABLE>
<CAPTION>
1995 1996
------------ -----------
<S> <C> <C>
Reconciliation of Net Loss to Net Cash
Provided by Operating Activities:
Net Loss.............................................. $(290,132) (204,857)
Adjustments to Reconcile Net Loss to Net Cash Provided
by Operating Activities:
Depreciation and Amortization......................... 158,437 103,361
Provision for bad debts............................... 101,431 136,107
(Increase) decrease in:
Accounts receivable................................... 14,233 (298,283)
Prepaid expenses and other receivables................ 75 3,730
Inventory............................................. 18,144 47,054
Increase (decrease) in:
Accounts payable...................................... 116,035 199,422
Accrued expenses ..................................... (367) 15,593
------------ -----------
Net Cash Provided by Operating Activities................ $ 117,856 2,127
============ ===========
</TABLE>
See accompanying notes to financial statements.
F-21
<PAGE>
CHRISTIE ENTERPRISES, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. ORGANIZATION
Christie Enterprises, Inc., located in Kenilworth, New Jersey,
manufactures plastic containers and products, primarily for the wholesale
plant nursery industry.
B. ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
period. Actual results could differ from these estimates.
C. FAIR VALUE OF FINANCIAL INSTRUMENTS
As of October 31, 1996, the carrying values of the Company's financial
instruments which are all held for non-trading purposes, approximated their
fair value.
D. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
Effective January 1, 1997, the Company will be required to adopt SFAS No.
125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities". The Company believes that the adoption of
this statement will not have a material effect on the Company's financial
position.
E. INVENTORIES
Inventories have been recorded at the lower of cost or market. The cost of
finished products includes manufacturing, labor and overhead.
F. ACCOUNTS RECEIVABLE
The Company performs ongoing credit evaluations of its customers'
financial condition and generally, requires no collateral from its customers.
The Company believes the allowance for doubtful accounts of $50,000 is
adequate to absorb estimated losses as of October 31, 1996.
G. PROPERTY AND EQUIPMENT
Property and Equipment is stated at cost when placed in service. Repairs
and maintenance which do not appreciably extend the useful lives of the
related assets are charged to expense as incurred; major renewals or
betterments are capitalized. Depreciation is computed using the straight line
method over the estimated useful lives of the assets ranging from five to ten
years.
H. INCOME TAXES
The Company, with the consent of its shareholders, has elected under the
Internal Revenue Code to be an S Corporation. In lieu of corporation income
taxes, the shareholders of an S Corporation are taxed on their proportionate
share of the Company's taxable income. Therefore, no provisions or liability
for federal income taxes has been included in the financial statements. The
Company continues to pay state tax.
F-22
<PAGE>
CHRISTIE ENTERPRISES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
I. CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all
highly liquid instruments purchased with a maturity of three months or less
to be cash equivalents.
NOTE 2 -- INVENTORIES
Inventory at October 31, 1996 consisted of the following:
<TABLE>
<CAPTION>
<S> <C>
Raw materials . $140,840
Finished
goods......... 62,108
----------
Total........ $202,948
==========
</TABLE>
NOTE 3 -- PROPERTY AND EQUIPMENT
Property and equipment consists of the following components as of October
31, 1996:
<TABLE>
<CAPTION>
<S> <C>
Machinery and equipment........ $1,618,820
Molds.......................... 1,371,186
Automobiles.................... 63,177
Furniture and fixtures......... 14,785
Leasehold improvements......... 28,793
------------
3,096,761
Less: Accumulated
Depreciation.................. 2,844,945
------------
Total.......................... $ 251,816
============
</TABLE>
NOTE 4 -- LONG-TERM DEBT
Following is a summary of long-term debt as of October 31, 1996:
<TABLE>
<CAPTION>
<S> <C>
Loan payable to Constellation Bank, bearing interest at 11.25%,
maturing February 28, 1996............................................. $320,000
Loan payable to United Counties Trust Company, bearing interest at 8.0%
due on demand.......................................................... 175,000
----------
Total long-term debt.................................................... 495,000
Less current portion.................................................... 495,000
----------
Long-term debt, excluding current portion............................... $ --
==========
</TABLE>
Interest expense related to notes payable for the year ended December 31,
1995 and the ten months ended October 31, 1996 amounted to $75,354 and
$42,291, respectively.
NOTE 5 -- PENSION PLAN
The Company has a 401k plan covering substantially all of its employees.
Provisions are funded currently. Expenses charged to operations for the year
ended December 31, 1995 and the ten months ended October 31, 1996 are $2,550
and $-0-, respectively.
NOTE 6 -- RELATED PARTY TRANSACTIONS
At October 31, 1996, amounts due to related companies have been included
in the accompanying financial statements as related party loans payable.
These loans do not bear interest and have no specific repayment terms.
F-23
<PAGE>
CHRISTIE ENTERPRISES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 6 -- RELATED PARTY TRANSACTIONS (Continued)
The shareholders control five related entities which share certain
administrative costs including payroll, with the Company. The Company pays
the costs and is periodically reimbursed by the related entities.
The Company also leases its facilities from an entity owned by a
shareholder. Rental payments for the year ended December 31, 1995 and the ten
months ended October 31, 1996 were $120,000 and $100,000, respectively.
NOTE 7 -- PRO FORMA INCOME TAXES
As discussed in the summary of significant accounting policies, the
Company elected to be taxed under subchapter "S" of the Internal Revenue Code
and accordingly recognize no Federal current or deferred income taxes. The
pro forma adjustments reflect a provision for income taxes, in accordance
with Statement of Financial Accounting Standards No. 109, at an effective
rate of 40% for each year had the Company been a "C" corporation.
Given the historical net losses incurred by the Company and the tax rates
and jurisdictions in which the Company operates, the Company would incur no
income tax benefit as a "C" corporation in 1995; therefore pro forma net loss
and pro forma net loss per share would be equivalent to results as reported
in the income statement. The Company's net operating losses and certain other
items would result in a deferred tax asset and income tax benefit, but the
Company would record a valuation allowance in an equivalent amount to reduce
the deferred tax asset and income tax benefit to zero; accordingly, the
statement of financial position and results of operations would not be
impacted by the Company's pro forma taxation as a "C" corporation in 1995.
However, due to the sale of the Company's business assets on November 1,
1996, a gain of approximately 1.25 million dollars will be recorded by the
Company which can be offset by the Company's prior losses and therefore an
income tax benefit is applicable for 1996.
Deferred income taxes in 1996 reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
The tax effects of significant items comprising the Company's deferred tax
assets are as follows:
<TABLE>
<CAPTION>
<S> <C>
Net operating loss
carryforwards................... $ 240,000
Less: valuation allowance........ (158,000)
-----------
Net deferred tax asset.......... $ 82,000
===========
</TABLE>
Pro forma net loss per share is based upon 100 shares issued and
outstanding for the year ended December 31, 1995 and the ten months ended
October 31, 1996.
NOTE 8 -- SUBSEQUENT EVENTS
On November 1, 1996, Christie Products, Inc. (CPI), a wholly owned
subsidiary of Discas, Inc., entered into an agreement with Christie
Enterprises, Inc., to purchase substantially all of their business assets.
The sale price of $1,500,000 exceeded the fair market value of the assets
sold by $173,000. CPI and Discas, Inc. as consideration, paid Christie
Enterprises, Inc., $500,000 in cash and issued a convertible promissory note
in the amount of $1,000,000. The note is interest free until April 30, 1997,
at which time interest will be paid at prime plus 1% along with fixed monthly
principal payments of $16,667. The note
F-24
<PAGE>
CHRISTIE ENTERPRISES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 8 -- SUBSEQUENT EVENTS (Continued)
matures on April 30, 2002 and is secured by the molds, machinery and
equipment of the seller. The holder of this note must convert at least one
half of the outstanding principal balance into common shares of Discas, Inc.
The number of shares into which this note may be converted shall be
determined by dividing the aggregate outstanding principal amount of the note
by 125% of the initial public offering price per share of common stock of
Discas, Inc., provided that if Discas, Inc. has not completed an initial
public offering of its common stock by October 1, 1997, then the conversion
price shall be the greater of $6.00 per share or 125% of the then fair market
value of the common stock of Discas, Inc. on a per share basis.
As of November 1, 1996, Christie Enterprises, Inc. ceased substantially
all business operations.
F-25
<PAGE>
DISCAS INC. AND SUBSIDIARY
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
The following pro forma condensed combined balance sheet as of April 30,
1996 and the pro forma condensed combined statements of income for the nine
months ended January 31, 1997 and the year ended April 30, 1996 give effect
to the acquisition of Christie Enterprises Inc. under the purchase method of
Accounting and the assumptions and adjustments in the accompanying notes to
the pro forma financial statements.
The pro forma statements have been prepared by the management of Discas
Inc. and Subsidiary based upon the financial statements of Discas and Christie
included elsewhere herein. These pro forma statements may not be indicative of
the results that actually would have occurred if the combination had been in
effect on the dates indicated or which may be obtained in the future. The pro
forma financial statements should be read in conjunction with the audited
financial statements and notes of Discas Inc. and Subsidiary and Christie
Enterprises, Inc. contained elsewhere herein.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
APRIL 30, 1996
<TABLE>
<CAPTION>
HISTORICAL
CHRISTIE PRO FORMA
DISCAS INC. ENTERPRISES PRO FORMA COMBINED
------------- -------------- ----------- -----------
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash..................................... $ 183,546 51,065 (a) (51,065) 183,546
Accounts Receivable...................... 490,118 592,927 (a) (592,927) 490,118
Inventory................................ 547,675 192,796 (a) (192,796) 547,675
Other current assets..................... 17,722 40,893 (a) (40,893) 17,722
------------- -------------- ----------- -----------
Total current assets.................... 1,239,061 877,681 (877,681) 1,239,061
Property and equipment (net).............. 417,105 298,730 (a) 1,028,270 1,744,105
Other assets.............................. 94,062 18,000 (a) 155,000 267,062
------------- -------------- ----------- -----------
Total assets............................ $1,750,228 1,194,411 305,589 3,250,228
============= ============== =========== ===========
Liabilities and stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses ... 307,956 903,810 (a) (903,810) 307,956
Line of credit........................... 280,000 -- 280,000
Current portion of capital leases ....... 20,755 -- 20,755
Current portion of long term debt ....... 117,416 290,000 (a) (80,334) 327,082
------------- -------------- ----------- -----------
Total current liabilities............... 726,127 1,193,810 (984,144) 935,793
Capital leases, excluding current
portion.................................. 12,757 -- 12,757
Long term debt, excluding current
portion.................................. 362,773 233,591 (a) 1,056,743 1,653,107
Related party loans ...................... 121,184 91,304 (a) (91,304) 121,184
Deferred taxes............................ 41,000 -- 41,000
Minority interests........................ 82,979 -- 82,979
Stockholders' Equity......................
Common Stock............................. 189 140,450 (a) (140,450) 189
Additional Paid in Capital............... 1,811 503,474 (a) (503,474) 1,811
Retained earnings (deficit).............. 401,408 (968,218) (a) 968,218 401,408
------------- -------------- ----------- -----------
403,408 (324,294) 324,294 403,408
------------- -------------- ----------- -----------
Total liabilities and stockholders'
equity................................. $1,750,228 $1,194,411 $ 305,589 $3,250,228
============= ============== =========== ===========
</TABLE>
See notes to Pro Forma Condensed Combined Financial statements.
F-26
<PAGE>
DISCAS INC. AND SUBSIDIARY
PRO FORMA STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED JANUARY 31, 1997
(UNAUDITED)
HISTORICAL PRO FORMA PRO FORMA
CHRISTIE
DISCAS INC. ENTERPRISES ADJUSTMENTS COMBINED
------------- -------------- ------------- -----------
<S> <C> <C> <C> <C>
Sales........................................ $3,550,394 1,756,710 (b) (350,000) 4,957,104
Cost of Sales................................ 2,744,642 1,592,231 (c) 342 3,987,215
(b) (350,000)
Selling, General and Administrative
Expenses.................................... 739,162 301,216(c) 2,843 1,043,221
Other income................................. 15,279 -- 15,279
Interest expense............................. (73,790) (27,388)(d) (18,162) (119,340)
Minority interest............................ 36,705 -- 36,705
------------- -------------- -----------
Earnings (loss) before income taxes.......... 44,784 (164,125) (140,688)
Income tax expense .......................... -- -- --
------------- -------------- -----------
Net Income (loss)............................ $ 44,784 (164,125) (140,688)
============= ============== ===========
Net income (loss) per share
Primary..................................... $ 0.03 $ (0.05)
============= ===========
Fully diluted............................... $ 0.02 $ (0.06)
============= ===========
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED APRIL 30, 1996
(UNAUDITED)
<S> <C> <C> <C> <C>
Sales................................ $3,858,205 2,833,282 6,691,487
Cost of Sales........................ 3,012,125 2,585,544 (c) (21,125) 5,576,544
Selling, General and Admin.
Expenses............................ 698,946 444,009 (c) 4,469 1,147,424
Other income......................... 30,929 -- 30,929
Interest expense..................... (80,292) (51,688)(d) (39,412) (171,392)
Minority interest.................... 23,841 -- 23,841
------------ -------------- -----------
Earnings (loss) before income taxes . 121,612 (247,959) (149,103)
Income tax expense .................. -- -- --
------------ -------------- -----------
Net Income (loss).................... $ 121,612 (247,959) (149,103)
============ ============== ===========
Net income (loss) per share
Primary............................. $ 0.05 $ (0.06)
============ ===========
Fully diluted....................... $ 0.05 $ (0.06)
============ ===========
</TABLE>
See notes to Pro Forma Condensed Combined Financial Statements.
F-27
<PAGE>
DISCAS INC. AND SUBSIDIARY
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
On November 1, 1996, Discas acquired substantially all of the business
assets of Christie Enterprises Inc. for a purchase price of $1,500,000. To
finance the acquisition, the company borrowed $500,000 and issued a note
payable to the former owner of Christie Enterprises, Inc. for $1,000,000. The
note is convertible into shares of Discas at a conversion price of 125% of
the Initial Public Offering price per share of the common stock of Discas, or
the greater of the then fair value of a share of the common stock of Discas
and $6.00 in the event an Initial Public Offering is not consumated by
October 31, 1997. The pro forma financial statements combine the assets and
liabilities of the two companies at April 30, 1996 and their results of
operations for the year ended April 30, 1996 and the nine months ended
January 31, 1997. Christie Enterprises ceased operations October 31, 1996,
therefore the historical nine months ended January 31, 1997 represents only
six months of Christie activity, however the last three months of this period
includes operations of both entities. In combining the two entities the
following pro forma adjustments have been made.
(a) Reflects the purchase of Property and equipment adjusted to fair value
and the recording of debt.
<TABLE>
<CAPTION>
<S> <C>
Total Purchase price...................... $1,500,000
============
Purchase of assets:
Machinery and equipment.................. 912,000
Molds.................................... 415,000
------------
Total................................... 1,327,000
Less book value of machinery and
equipment............................... (298,730)
------------
Net adjustment........................... $1,028,270
============
Goodwill................................. 173,000
Less book value of other assets.......... (18,000)
------------
Net adjustment........................... $ 155,000
============
Recording of debt:
Note payable............................. 500,000
Convertible note payable................. 1,000,000
------------
1,500,000
============
Current portion.......................... 209,666
Less Christie debt not assumed........... (290,000)
------------
Net adjustment........................... $ (80,334)
============
Long term debt excluding current
portion................................. 1,290,334
Less Christie debt not assumed........... (233,591)
------------
Net adjustment........................... 1,056,743
============
</TABLE>
The remaining adjustments eliminates assets and liabilities not included
in the purchase.
F-28
<PAGE>
DISCAS INC. AND SUBSIDIARY
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(b) Discas had sales to Christie of approximately $350, 000 from May 1,
1996 to October 31, 1996.
(c) Depreciation of property and equipment and amortization of goodwill
was adjusted as follows:
<TABLE>
<CAPTION>
JANUARY 31
APRIL 30 1997
1996 (SIX MONTHS)
----------- ------------
<S> <C> <C>
Life
10 years Depreciation of machinery and equipment ..... $ 91,200 $ 45,600
15 years Depreciation of molds........................ 27,700 13,850
15 years Amortization of Goodwill..................... 11,504 5,752
----------- ------------
$ 130,404 $ 65,202
=========== ============
Total in Cost of Sales................................ 118,900 59,450
Less historical depreciation.......................... (140,025) (59,108)
----------- ------------
Net adjustment...................................... $ 21,125 $ 342
=========== ============
Total in Selling , general and administrative
expenses............................................. 11,504 5,752
Less historical depreciation.......................... (7,035) (2,909)
=========== ============
Net adjustment...................................... $ 4,469 $ 2,843
=========== ============
</TABLE>
(d) Interest on the debt incurred for the acquisition less interest on
historical Christie is as follows:
<TABLE>
<CAPTION>
JANUARY 31
APRIL 30 1997
1996 (SIX MONTHS)
---------- ------------
<S> <C> <C>
Interest on new borrowings .... $ 91,100 $ 45,550
less interest on historical
debt.......................... (51,688) (27,388)
---------- ------------
$ 39,412 $ 18,162
========== ============
</TABLE>
F-29
<PAGE>
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MAY
NOT BE RELIED ON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY OF THE
UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR
AN OFFER OR SOLICITATION TO ANY PERSON IN ANY JURISDICTION WHERE SUCH AN
OFFER OR SOLICITATION WOULD BE UNLAWFUL.
-----------------------
TABLE OF CONTENTS
-----------------------
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Prospectus Summary ......................... 3
Risk Factors ............................... 6
Use of Proceeds ............................ 14
Dividend Policy ............................ 14
Capitalization ............................. 15
Dilution ................................... 16
Management's Discussion and Analysis of
Financial Condition and Results of
Operations ................................ 17
Business ................................... 20
Management ................................. 26
Certain Transactions ....................... 29
Principal Stockholders ..................... 30
Concurrent Offering ........................ 31
Description of Securities .................. 33
Shares Eligible for Future Sale ............ 34
Underwriting ............................... 35
Legal Matters .............................. 37
Experts .................................... 37
Additional Information ..................... 38
Index to Financial Statements .............. F-1
</TABLE>
UNTIL 25 DAYS AFTER THE DATE OF THIS PROSPECTUS, ALL DEALERS EFFECTING
TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN
THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITER AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
1
<PAGE>
DISCAS, INC.
800,000 SHARES OF COMMON STOCK
AND 800,000 REDEEMABLE COMMON STOCK PURCHASE WARRANTS
------------
PROSPECTUS
------------
ROAN CAPITAL PARTNERS L.P.
, 1997
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Discas, Inc. (the "Company") is incorporated in Delaware. Under Section
145 of the General Corporation Law of the State of Delaware, a Delaware
corporation has the power, under specified circumstances, to indemnify its
directors, officers, employees and agents in connection with actions, suits
or proceedings brought against them by a third party or in the right of the
corporation, by reason of the fact that they were or are such directors,
officers, employees or agents, against expenses incurred in any action, suit
or proceeding. Article Tenth of the Certificate of Incorporation and Article
III of the Bylaws of the Company provide for indemnification of directors and
officers to the fullest extent permitted by the General Corporation Law of
the State of Delaware. Reference is made to the Amended and Restated
Certificate of Incorporation of the Company, filed as Exhibit 3.1 hereto.
Section 102(b)(7) of the General Corporation Law of the State of Delaware
provides that a certificate of incorporation may contain a provision
eliminating or limiting the personal liability of a director to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director provided that such provision shall not eliminate or limit
the liability of a director (i) for any breach of the director's duty of
loyalty to the corporation or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 (relating to liability for
unauthorized acquisitions or redemptions of, or dividends on, capital stock)
of the General Corporation Law of the State of Delaware, or (iv) for any
transaction from which the director derived an improper personal benefit.
Article Ninth of the Company's Certificate of Incorporation contains such a
provision.
The Underwriting Agreement filed herewith as Exhibit 1.2 contains
provisions by which each Underwriter severally agrees to indemnify the
Company, any person controlling the Company within the meaning of Section 15
of the Securities Act of 1933 or Section 20 of the Securities Exchange Act of
1934, each director of the Company, and each officer of the Company who signs
this Registration Statement with respect to information relating to such
Underwriter furnished in writing by or on behalf of such Underwriter
expressly for use in the Registration Statement.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses in connection with
this Registration Statement.
<TABLE>
<CAPTION>
<S> <C>
Filing Fee--Securities and Exchange Commission .............$ 4,370.90
Filing Fee--National Association of Securities Dealers,
Inc. ...................................................... 1,932.28
Filing Fee-NASDAQ SmallCap Market .......................... 9,854.00
Filing Fee--Boston Stock Exchange .......................... 7,500.00
Fees and Expenses of Accountants ........................... 95,000.00
Fees and Expenses of Counsel ............................... 120,000.00
Printing and Engraving Expenses ............................ 25,000.00
Blue Sky Fees and Expenses ................................. 40,000.00
Representative's Non-accountable expenses .................. 122,400.00
Transfer and Warrant Agent fees ............................ 5,000.00
Representative's Consulting Fee ............................ 85,300.00
Miscellaneous Expenses ..................................... 41,642.82
------------
Total ...................................................... $558,000.00
============
</TABLE>
II-1
<PAGE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
In August 1996, Discas Recycled Products Corporation ("DRPC") was merged
with and into Discas, Inc. As a result of this transaction, the Company
issued an aggregate of 56,758 shares of Common Stock to four unaffiliated
stockholders of DRPC in exchange for each party's shares of DRCP. There were
no commissions paid in association with this exchange. The transaction was
made in reliance on the exemption provided by Section 4(2) under the Act. In
September 1996, the Company issued 270,000 shares of Common Stock to Mantis
V, L.L.C. for cash consideration of $27,000. No commissions were paid in
association with the transaction, which was made in reliance on the exemption
provided by Section 4(2) under the Act. Effective December 31, 1996, the
Corporation declared a Common Stock split of 1.35 shares to 1, which
increased the 56,758 shares issued to the DRPC stockholders to 76,623 and the
shares sold to Mantis V, L.L.C. to 364,500. In April 1997, the Company sold
40 Units, each comprised of one $9,000 11% unsecured subordinated note and
warrants to purchase 20,000 shares of Common Stock for aggregate cash
consideration of $400,000 to 21 investors (the "Bridge Financing".) All of
the investors in the Bridge Financing, as well as Mantis V, L.L.C.,
represented to the Company that they were "accredited investors" as such term
is defined in Regulation D promulgated by the Act. Roan Capital Partners L.P.
acted as placement agent for the Bridge Financing for a commission of 10% of
the gross proceeds. Such placement was made in reliance on Rule 506 of
Regulation D under the Act.
ITEM 27. EXHIBITS.
<TABLE>
<CAPTION>
<S> <C> <C>
1.1 -- Form of Agreement among Underwriters.
1.2 -- Form of Underwriting Agreement.
1.3 -- Form of Selected Dealer Agreement.
2.1 -- Asset Purchase Agreement--Christie Enterprises, Inc.
3.1 -- Amended and Restated Certificate of Incorporation.
3.2 -- Amended Bylaws of the Company.
4.1 -- Form of Common Stock Certificate.
4.2 -- Form of Warrant Agreement between the Company and American Stock Transfer & Trust
Company.
4.3 -- Form of Common Stock Purchase Warrant (included in Exhibit 4.2.)
4.4 -- Form of Representative's Warrant
*5.1 -- Opinion of Epstein Becker & Green, P.C.
9.1 -- Voting Trust Agreement--Mantis Partners III, L.P.
9.2 -- Voting Trust Agreement--Mantis Partners IV, L.P.
9.3 -- Voting Trust Agreement--Ramona H. Lainas and Telemahos G. Lainas.
9.4 -- Voting Trust Agreement--Jack Milgrom.
9.5 -- Voting Trust Agreement--Sheftel Family Irrevocable Trust.
9.6 -- Voting Trust Agreement--Pimbyco, Inc.
10.1 -- Form of Employment Agreement between the Company and Patrick A. DePaolo, Sr.
10.2 -- 1997 Stock Option Plan
10.3 -- Credit Agreement--Bank of Boston Connecticut
10.4 -- Promissory Note (February 23, 1995)--Bank of Boston Connecticut.
II-2
<PAGE>
10.5 -- Business Loan Agreement (November 8, 1995)--Bank of Boston Connecticut.
10.6 -- Change in Terms Agreement (October 6, 1995)--Bank of Boston Connecticut.
10.7 -- Change in Terms Agreement #2 (November 8, 1995)--Bank of Boston Connecticut.
10.8 -- Change in Terms Agreement #3 (October 31, 1996)--Bank of Boston Connecticut.
10.9 -- Amendment to Credit Agreement--Bank of Boston Connecticut.
10.10 -- Lease (3,728 Sq. Feet)--Industrial Development Group.
10.11 -- Amendment to Lease (3,728 Sq. Feet)--Industrial Development Group.
10.12 -- Lease (26,018 Sq. Feet)--Industrial Development Group.
10.13 -- Amendment to Lease (26,018 Sq. Feet)--Industrial Development Group.
10.14 -- Lease (23,966 Sq. Feet)--Industrial Development Group.
10.15 -- Restated Lease Indenture--Plaza Realty Partnership.
10.16 -- Mantis V, L.L.C. Financing Agreement.
10.17 -- Mantis V, L.L.C. Promissory Notes totalling $375,000.
10.18 -- Convertible Promissory Note--Christie Enterprises, Inc.
10.19 -- Non-Competition Agreement--J-Von, L.L.C.
10.20 -- Textron Installment Note.
10.21 -- Form of Consulting Agreement between the Company and Roan Capital Partners L.P.
21.1 -- List of Subsidiaries
23.1 -- Consent of Jump, Green, Holman & Company (Included at page II-8).
23.2 -- Consent of Epstein Becker & Green, P.C. (Included in Exhibit 5).
24 -- Power of Attorney (Included at page II-7).
27 -- Financial Data Schedule
</TABLE>
- ------------
* To be filed by Amendment.
28. UNDERTAKINGS.
The undersigned small business issuer hereby undertakes:
(a)(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
(2) For determining liability under the Securities Act, treat each
post-effective amendment as new registration statement of the securities
offered, and the offering of the securities at that time to be the initial
bona fide offering.
II-3
<PAGE>
(3) To file a post-effective amendment to remove from registration
any of the securities that remain unsold at the end of an offering.
(d) The undersigned small business issuer hereby undertakes to provide to
the underwriters at the closing specified in the placement agreements,
certificates in such denominations and registered in such names as
required by the underwriters to permit prompt delivery to each purchaser.
(e) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(f) The undersigned registrant hereby undertakes that:
(i) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed
as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be
deemed to be part of this registration statement as of the time it was
declared effective.
(ii) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements of filing this Form SB-2 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Waterbury, State of Connecticut, on the 5th day of
May 1997.
DISCAS, INC.
By: /s/ Patrick A. DePaolo, Sr.
-------------------------------
PATRICK A. DEPAOLO, SR.
President & Chief Executive
Officer
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------- ---------------------------------- ---------------
<S> <C> <C>
/S/ Patrick A. Depaolo, Sr. Chairman of the Board May 5, 1997
------------------------------- President, Principal Executive
Patrick A. Depaolo, Sr. Officer
/s/ Ron Pettirossi Chief Accounting Officer May 5, 1997
-------------------------------
Ron Pettirossi
/s/ Thomas R. Tomaszek Director May 5, 1997
-------------------------------
Thomas R. Tomaszek
Director May , 1997
-------------------------------
John Carroll
/s/ Alan Milton Director May 5, 1997
-------------------------------
Alan Milton
Director May , 1997
-------------------------------
Asher Bernstein
</TABLE>
II-5
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each of Ron Pettirossi, Thomas R.
Tomaszek, John Carroll, Alan Milton and Asher Bernstein constitutes and
appoints Patrick A. DePaolo, Sr. his true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, to act, without
the other, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agents full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as full
to all intents and purposes as he might or could be in person, hereby
ratifying and confirming all that said attorney-in-fact and agents, or any of
them, their substitute or substitutes may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------- ---------------------------------- ---------------
<S> <C> <C>
/S/ Patrick A. Depaolo, Sr. Chairman Of The Board May 5, 1997
------------------------------- President, Principal Executive
Patrick A. Depaolo, Sr. Officer
/s/ Ron Pettirossi Chief Accounting Officer May 5, 1997
-------------------------------
Ron Pettirossi
/s/ Thomas R. Tomaszek Director May 5, 1997
-------------------------------
Thomas R. Tomaszek
Director May , 1997
-------------------------------
John Carroll
/s/ Alan Milton Director May 5, 1997
-------------------------------
Alan Milton
Director May , 1997
-------------------------------
Asher Bernstein
</TABLE>
II-6
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting a part of this
Registration Statement of our report dated January 17, 1997, relating to the
financial statements of Discas, Inc., which are contained in this Prospectus,
and to the reference to our firm under the caption "Experts" in the
Prospectus.
We also consent to the use in the Prospectus constituting a part of this
Registration Statement of our report dated January 20, 1997 relating to the
financial statements of Christie Enterprises, Inc., which are contained in
this Prospectus.
Toms River, New Jersey
JUMP, GREEN, HOLMAN AND COMPANY
May 5, 1997
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER EXHIBITS NUMBERED PAGES
- ----------- ------------------------------------------------------------- ------------------
<S> <C> <C>
1.1 -- Form of Agreement among Underwriters.
1.2 -- Form of Underwriting Agreement.
1.3 -- Form of Selected Dealer Agreement.
2.1 -- Asset Purchase Agreement--Christie Enterprises, Inc.
3.1 -- Amended and Restated Certificate of Incorporation.
3.2 -- Amended Bylaws of the Company.
4.1 -- Form of Common Stock Certificate.
4.2 -- Form of Warrant Agreement between the Company and American
Stock Transfer & Trust Company.
4.3 -- Form of Common Stock Purchase Warrant (included in Exhibit
4.2).
4.4 -- Form of Representative's Warrant
5.1 -- Opinion of Epstein Becker & Green, P.C.
9.1 -- Voting Trust Agreement--Mantis Partners III, L.P.
9.2 -- Voting Trust Agreement--Mantis Partners IV, L.P.
9.3 -- Voting Trust Agreement--Ramona H. Lainas and Telemahos G.
Lainas.
9.4 -- Voting Trust Agreement--Jack Milgrom.
9.5 -- Voting Trust Agreement--Sheftel Family Irrevocable Trust.
9.6 -- Voting Trust Agreement--Pimbyco, Inc.
10.1 -- Form of Employment Agreement between the Company and Patrick
A. DePaolo, Sr.
10.2 -- 1997 Stock Option Plan
10.3 -- Credit Agreement--Bank of Boston Connecticut
10.4 -- Promissory Note (February 23, 1995)--Bank of Boston
Connecticut.
10.5 -- Business Loan Agreement (November 8, 1995)--Bank of Boston
Connecticut.
10.6 -- Change in Terms Agreement (October 6, 1995)--Bank of Boston
Connecticut.
10.7 -- Change in Terms Agreement #2 (November 8, 1995)-- Bank of
Boston Connecticut.
10.8 -- Change in Terms Agreement #3 (October 31, 1996)-- Bank of
Boston Connecticut.
10.9 -- Amendment to Credit Agreement--Bank of Boston Connecticut.
<PAGE>
EXHIBIT SEQUENTIALLY
NUMBER EXHIBITS NUMBERED PAGES
- ----------- ------------------------------------------------------------- ------------------
10.10 -- Lease (3,728 Sq. Feet)--Industrial Development Group.
10.11 -- Amendment to Lease (3,728 Sq. Feet)--Industrial Development
Group.
10.12 -- Lease (26,018 Sq. Feet)--Industrial Development Group.
10.13 -- Amendment to Lease (26,018 Sq. Feet)--Industrial Development
Group.
10.14 -- Lease (23,966 Sq. Feet)--Industrial Development Group.
10.15 -- Restated Lease Indenture--Plaza Realty Partnership.
10.16 -- Mantis V, L.L.C. Financing Agreement.
10.17 -- Mantis V, L.L.C. Promissory Notes totalling $375,000.
10.18 -- Convertible Promissory Note--Christie Enterprises, Inc.
10.19 -- Non-Competition Agreement--J-Von, L.L.C.
10.20 -- Textron Installment Note.
10.21 -- Form of Consulting Agreement between the Company and Roan
Capital Partners L.P.
21.1 -- List of Subsidiaries.
23.1 -- Consent of Jump, Green, Holman and Company (Included at page
II-7).
23.2 -- Consent of Epstein Becker & Green, P.C. (Included in Exhibit
5).
24 -- Power of Attorney (Included at page II-6).
27 -- Financial Data Schedule
</TABLE>
<PAGE>
Exhibit 1.1
800,000 SHARES OF COMMON STOCK
AND
800,000 REDEEMABLE COMMON STOCK PURCHASE WARRANTS
DISCAS, INC.
AGREEMENT AMONG UNDERWRITERS
New York, New York
________ ___, 1997
Roan Capital Partners L.P.
As Representative of the Several Underwriters
40 East 52nd Street
New York, New York 10022
Dear Sirs:
1. Underwriting Agreement. We understand that DISCAS, INC., a Delaware
corporation (the "Company"), proposes to enter into an underwriting agreement
in the form attached hereto as Exhibit A (the "Underwriting Agreement") with
the underwriters named in Schedule A to the Underwriting Agreement (the
"Underwriters") acting severally and not jointly with respect to the purchase
of 800,000 shares of common stock, $.0001 par value per share ("Common Stock")
and 800,000 redeemable common stock purchase warrants ("Warrants") of the
Company (the Warrants, collectively with the Common Stock, are referred to
herein as the "Securities"). In addition, the Underwriters (or, at its option,
Roan Capital Partners L.P., the "Representative", individually) have been
granted an option to purchase up to 120,000 additional shares of Common Stock
and up to an additional 120,000 Warrants to cover over-allotments, if any,
referred to in Section 5 of the Underwriting Agreement (the "Additional
Securities").
This is to confirm that we agree to purchase, in accordance with the
terms hereof and of the Underwriting Agreement, the number of Securities set
forth opposite our name in Schedule A to the Underwriting Agreement, plus such
number of Securities, if any,
<PAGE>
which we may become obligated to purchase pursuant to Section 4 hereof ("our
Securities"). The ratio which the number of our Securities bears to the total
number of Securities purchased pursuant to the Underwriting Agreement is herein
called "our underwriting proportion".
2. Registration Statement and Prospectus. We have heretofore received
and examined a copy of the registration statement, as amended to the date
hereof, and the related prospectus in respect of the Securities, as filed with
the Securities and Exchange Commission. The registration statement, as amended
at the time it becomes effective, including financial statements and exhibits,
is hereinafter referred to as the "Registration Statement," and the prospectus
in the form first filed with the Securities and Exchange Commission pursuant to
Rule 424(b) after the Registration Statement becomes effective is referred to
as the "Prospectus."
We confirm that the information furnished to you by us for use in the
Registration Statement and in the Prospectus is correct and is not misleading
insofar as it relates to us. We consent to being named as an Underwriter in
such Registration Statement and we are willing to accept our responsibilities
under the Securities Act of 1933, as a result thereof. We confirm that we have
authorized you to advise the Company on our behalf (a) as to the statements to
be included in any Preliminary Prospectus and in the Prospectus under the
heading "Underwriting" insofar as they relate to us and (b) that there is no
other information about us required to be stated in the Registration Statement
or Prospectus. We further confirm that, upon request by you, as Representative,
we have furnished a copy of any amended preliminary prospectus to each person
to whom we have furnished a copy of any previous preliminary prospectus, and we
confirm that we have delivered, and we agree that we will deliver, all
preliminary and final prospectuses required for compliance with the provisions
of Rule 15c2-8 under the Securities Exchange Act of 1934.
3. Authority of the Representative. We authorize you, acting as
Representative, to execute and deliver on our behalf the Underwriting
Agreement, and to agree to any variation of its terms (except as to the
purchase price and the number of our Securities) which, in your judgment, is
not a variation which materially and adversely affects our rights and
obligations. We also authorize you, in your discretion and on our behalf, with
approval of counsel for the Underwriters, to approve the Prospectus and to
approve of, or object to, any further amendments to the Registration Statement,
or amendments or supplements to the Prospectus. We further
<PAGE>
authorize you to exercise all the authority and discretion vested in the
Underwriters and in you by the provisions of the Underwriting Agreement and to
take all such action as you, in your discretion, may believe desirable to carry
out the provisions of the Underwriting Agreement and of this Agreement,
including the extension of any date specified in the Underwriting Agreement,
the exercise of any right of cancellation or termination, and to determine all
matters relating to the public advertisement of the Securities; provided,
however, that, except with the consent of Underwriters who shall have agreed to
purchase in the aggregate 50% or more of the Securities, no extension of the
time by which the Registration Statement is to become effective, as provided in
Section 9(a) of the Underwriting Agreement, shall be for a period in excess of
two business days. We authorize you to take such action as in your discretion
may be necessary or desirable to effect the sale and distribution of the
Securities, including, without limiting the generality of the foregoing, the
right to determine the terms of any proposed offering, the concession to
Selected Dealers (as hereinafter defined) and the reallowance, if any, to other
dealers and the right to make the judgments provided for in Section 12 of the
Underwriting Agreement.
4. Authority of Representative as to Defaulting Underwriters. Until
the termination of this Agreement, we authorize you to arrange for the purchase
by other persons, who may include you or any of the other Underwriters, of any
Securities not taken up by any defaulting Underwriter. In the event that such
arrangements are made, the respective amounts of the Securities to be purchased
by the non-defaulting Underwriters and by such other person or persons, if any,
shall be taken as the basis for all rights and obligations hereunder; but this
shall not in any way affect the liability of any defaulting Underwriter to the
other Underwriters for damages resulting from its default, nor shall any such
default relieve any other Underwriter of any of its obligations hereunder or
under the Underwriting Agreement except as herein or therein provided.
In the event of default by one or more Underwriters in respect of
their obligations (a) under the Underwriting Agreement to purchase the
Securities, agreed to be purchased by them thereunder, or (b) under this
Agreement to take up and pay for any Securities purchased, or (c) to deliver
any Securities sold or over-allotted by you for the respective accounts of the
Underwriters pursuant to Section 9 hereof, or to bear their respective share of
expenses or liabilities pursuant to Sections 11, 13 and 14 hereof, and to the
3
<PAGE>
extent that arrangements shall not have been made by you for any persons to
assume the obligations of such defaulting Underwriter or Underwriters, we agree
to assume our proportionate share of the obligations of each defaulting
Underwriter or Underwriters (subject in the case of clause (a) above to the
limitations contained in Section 12 of the Underwriting Agreement) without
relieving any such defaulting Underwriter or Underwriters of its liability
therefor.
5. Offering of Securities. We understand that you will notify us when
the initial public offering of the Securities is to be made and of the initial
public offering price. We hereby authorize you, in your sole discretion, after
the initial public offering, to change the public offering price, the
concession and the reallowance. The offering price at any time in effect is
hereinafter referred to as the "public offering price". We agree that we will
not offer any of the Securities for sale at a price other than the public
offering price or allow any discount therefrom except as herein otherwise
specifically provided.
We agree that public advertisement of the offering shall be made by
you on behalf of the Underwriters on such date as you shall determine. We have
not advertised the offering and will not do so until after such date. We
understand that any advertisement we may then make will be our own
responsibility and at our own expense.
We authorize you to reserve and offer for sale to institutions and
other retail purchasers and to dealers (the "Selected Dealers") to be selected
by you (such dealers may include any Underwriter) such of our Securities as
you, in your sole discretion, shall determine. Any such offering to Selected
Dealers may be made pursuant to a Selected Dealers Agreement, in the form
attached hereto as Exhibit B, or otherwise, as you may determine. The form of
Selected Dealers Agreement attached hereto as Exhibit B is satisfactory to us.
We authorize you to make purchases and sales of the Securities from or
to any Selected Dealers or Underwriters at the public offering price, less all
or any part of the concession and, with your consent, any Underwriter may make
purchases or sales of the Securities from or to any Selected Dealer or
Underwriter at the public offering price, less all or any part of the
concession.
We understand that you will notify each Underwriter promptly
4
<PAGE>
upon the release of the Securities for public offering as to the amount of
Securities reserved for sale to Selected Dealers and retail purchasers.
Securities not so reserved may be sold by each Underwriter for its own account,
except that from time to time you may, in your discretion, add to the
Securities reserved for sale to Selected Dealers and retail purchasers any
Securities retained by an Underwriter remaining unsold. We agree to notify you,
from time to time, upon request, of the amount of our Securities retained by us
remaining unsold. If all of the Securities reserved for offering to Selected
Dealers and retail purchasers are not promptly sold by you, any Underwriter
may, from time to time, with your consent, obtain a release of all or any
Securities of such Underwriter then remaining unsold, and Securities so
released shall thereafter be deemed not to have been reserved. Securities of
any Underwriter so reserved which remain unsold, or, if sold, have not been
paid for at any time prior to the termination of this Agreement may, in your
discretion or upon the request of such Underwriter, be delivered to such
Underwriter for carrying purposes only, but such Securities shall remain
subject to redelivery to you upon demand for disposition by you until this
Agreement is terminated.
We agree that in connection with sales and offers to sell the
Securities, if any, made by us outside the United States or its territories or
possessions, (a) we will furnish to each person to whom any such offer or sale
is made such prospectus, advertisement or other offering document containing
information relating to the Securities or the Company, as may be required under
the laws of the jurisdiction in which such offer or sale is made and (b) we
will furnish to each person to whom any such offer is made a copy of the then
current preliminary prospectus, and to each person to whom any such sale is
made, a copy of the Prospectus referred to in the Underwriting Agreement (as
then amended or supplemented if the Company shall have furnished any amendments
or supplements thereto). Any prospectus, advertisement or other offering
document (other than any such preliminary prospectus or Prospectus) furnished
by us to any person in accordance with the preceding sentence and all such
additional offering material, if any, as we may furnish to any person (i) shall
comply in all respects with the laws of the jurisdiction in which it is so
furnished, (ii) shall be prepared and so furnished at our sole risk and
expense, and (iii) shall not contain information relating to the Securities or
the Company which is inconsistent in any respect with information contained in
the then current preliminary prospectus or in the Prospectus (as then amended
or supplemented if the Company shall
5
<PAGE>
have furnished any amendments or supplements thereto), as the case may be.
We recognize the importance of a broad distribution of the Securities
among bona fide investors and we agree to use our best efforts to obtain such
broad distribution and, to that end, to the extent we deem practicable, to give
priority to small orders.
We agree that we will not sell to any account over which we exercise
discretionary authority any of the Securities which we have agreed to purchase
pursuant to the Underwriting Agreement.
6. Compensation to Representative. We authorize you to charge to our
account, as compensation for your services as Representative in connection with
this offering, including the purchase from the Company of the Securities and
the management of the offering, an amount equal to $. per share of Common Stock
and $.___ per Warrant in respect to each of our Securities.
7. Payment and Delivery. At or before 9:00 a.m., New York City time,
on the Closing Date as defined in the Underwriting Agreement, we agree to
deliver to you at your office a certified or official bank check payable in New
York Clearing House funds to your order, in an amount equal to the initial
public offering price, less the concession to the Selected Dealers in respect
of that portion of our Securities which has been retained by or released to us
for direct sales.
In the event that our funds are not received by you when required, you
are authorized, in your discretion, but shall not be obligated, to make payment
for our account pursuant to the Underwriting Agreement by advancing your own
funds. Any such payment by you shall not relieve us from any of our obligations
hereunder or under the Underwriting Agreement.
We authorize you to hold and deliver against payment any of our
Securities which have been sold or reserved for sale to Selected Dealers or
retail purchasers. Any of our Securities not sold or reserved by you as
aforesaid will be available for delivery to us at your office as soon as
practicable after such Securities have been delivered to you.
Upon the termination of this Agreement, or prior thereto at your
discretion, you will deliver to us any of our Securities reserved by you for
sale to Selected Dealers or retail purchasers,
6
<PAGE>
but not sold and paid for against payment by us of an amount equal to the
initial public offering price of such Securities, less the concession to the
Selected Dealers in respect thereof.
8. Authority to Borrow. We authorize you to arrange loans for our
account and to execute and deliver any notes or other instruments in connection
therewith, and to pledge as security therefor all or any part of our
Securities, as you may deem necessary or advisable to carry out the purchase,
carrying and distribution of the Securities, and to advance your own funds,
charging current interest rates.
9. Over-allotment; Stabilization. We authorize you, for the account of
each Underwriter, prior to the termination of this Agreement, and for such
longer period as may be necessary to cover any short position incurred for the
accounts of the several Underwriters pursuant to this Agreement, (a) to
over-allot in arranging for sales of Securities to Selected Dealers and others
and, if necessary, to purchase Securities (whether pursuant to exercise of the
option set forth in Section 5 of the Underwriting Agreement or otherwise) at
such prices as you may determine for the purpose of covering such
over-allotments, and (b) for the purpose of stabilizing the market in the
Securities, to make purchases and sales of Securities on the open market or
otherwise, for long or short account, on a when-issued basis or otherwise, at
such prices, in such amounts and in such manner as you may determine; provided,
however, that at no time shall our net commitment, either for long or short
account, under this Section 9 exceed 15% of the amount of our Securities. Such
purchases, sales and over-allotments shall be made for the respective accounts
of the several Underwriters as nearly as practicable to their respective
underwriting proportions. We agree to take up on demand at cost any Securities
so purchased for our account and deliver on demand any Securities so sold or
over-allotted for our account. We authorize you to sell for the account of the
Underwriters any Securities purchased pursuant to this Section 9, upon such
terms as you may deem advisable, and any Underwriter, including yourselves, may
purchase such Securities. You are authorized to charge the respective accounts
of the Underwriters with broker's commissions or dealer's mark-up on purchases
and sales effected by you.
If pursuant to the provision of the preceding paragraph and prior to
the termination of this Agreement (or prior to such earlier date as you may
have determined) you purchase or contract to
7
<PAGE>
purchase for the account of any Underwriter in the open market or otherwise any
Securities which were retained by, or released to, us for direct sale, or any
Securities which may have been issued in exchange for such Securities, we
authorize you either to charge our account with an amount equal to the
concession to Selected Dealers with respect thereto, which amount shall be
credited against the cost of such Securities, or to require us to repurchase
such Securities at a price equal to the total cost of such purchase, including
transfer taxes and broker's commissions or dealer's mark-up, if any. In lieu of
such action you may, in your discretion, sell for our account the Securities so
purchased and debit or credit our account for the loss or profit resulting from
such sale.
You will notify us promptly if and when you engage in any
stabilization transaction pursuant to this Section 9 or otherwise and will
notify us of the date of termination of stabilization. We agree to file with
you any reports required of us including "Not as Manager" reports pursuant to
Rule 17a-2 under the Securities Exchange Act of 1934 not later than five
business days following the day upon which such stabilization transaction was
terminated, and we authorize you to file on our behalf with the Securities and
Exchange Commission any reports required by such Rule.
10. Limitation on Transactions by Underwriters. Except as permitted by
you, we will not, during the term of this Agreement, bid for, purchase, sell or
attempt to induce others to purchase or sell, directly or indirectly, any
Securities other than (i) as provided in the Underwriting Agreement and in this
agreement, (ii) purchases from or sales to dealers of the Securities at the
public offering price, less all or any part of the reallowance to dealers, or
(iii) purchases or sales by us of any Securities as broker or unsolicited
orders for the account of others.
We represent that we have not participated in any transaction
prohibited by the preceding paragraph and that we have at all times complied
with the provisions of Regulation M of the Securities and Exchange Commission
applicable to this offering.
We may, with your prior consent, make purchases of the Securities from
and sales to other Underwriters at the public offering price, less all or any
part of the concession to dealers.
11. Allocation and Payment of Expenses. We understand that all
expenses of a general nature incurred by you, as
8
<PAGE>
Representative, in connection with the purchase, carrying, marketing and sale
of the Securities shall be become by the Underwriters in accordance with their
respective share of the underwriting obligations. We authorize you to charge
our account with our share, based on our underwriting obligation, of the
aforesaid expenses, including all transfer taxes paid on our behalf on sales or
transfers made for our account.
As promptly as possible after the termination of this Agreement, the
accounts arising pursuant hereto shall be settled and paid. Your ascertainment
of all expenses and the apportionment thereof shall be conclusive.
Notwithstanding any settlement or settlements hereunder, we will remain liable
for our share of all expenses and liabilities which may be incurred by or for
the accounts of the Underwriters, including any expenses and liabilities
referred to in Sections 13 and 14(b) hereof, which shall be determined as
provided in this Section 11.
12. Termination. Unless this Agreement or any provision hereof is
earlier terminated by you, and except for provisions herein that contemplate
obligations surviving the termination hereof as noted in the next paragraph,
this Agreement will terminate at the close of business on the 30th day after
the date hereof, but in your discretion, may be extended by you for a further
period not exceeding 30 days with the consent of the Underwriters who have
agreed to purchase in the aggregate 50% or more of the Securities. No
termination or suspension pursuant to this Section shall affect your authority
under Section 9 to cover any short position under this Agreement.
Upon termination of this Agreement, all authorizations, rights and
obligations hereunder shall cease, except (i) the mutual obligations to settle
accounts under Section 11, (ii) our obligation to pay any transfer taxes which
may be assessed and paid on account of any sales hereunder for our account,
(iii) our obligation with respect to purchases which may be made by you from
time to time thereafter to cover any short position incurred under this
Agreement, (iv) the provisions of Sections 13 and 14, and (v) the obligations
of any defaulting Underwriter, all of which shall continue until fully
discharged.
13. Liability of Representative and Underwriters. Neither as
Representative nor individually shall you be under any liability whatsoever to
any other Underwriter, nor shall you be under any liability in respect of any
matters connected herewith or action
9
<PAGE>
taken by you pursuant hereto, except for the obligations expressly assumed by
you in this Agreement. You shall be under no liability for or in respect of the
value of the Securities or the validity of the form thereof, the Registration
Statement, the Prospectus, or agreements or other instruments executed by the
Company or others; or for or in respect of the delivery of the Securities; or
for the performance by the Company or others of any agreement on its or their
part.
Nothing herein contained shall constitute the several Underwriters an
association, or partners with us or with each other, or, except as herein
expressly provided, render any Underwriter liable for the obligation of any
other Underwriter. The rights, obligations and liabilities of each of the
Underwriters are several, in accordance with their respective obligations, and
not joint. Notwithstanding any settlement of accounts under this Agreement, we
agree to pay our underwriting proportion of the amount of any claim, demand or
liability which may be asserted against and discharged by the Underwriters or
any of them, based on the claim that the Underwriters constitute an
association, unincorporated business or other entity, and also to pay our
underwriting proportion of expenses approved by you incurred by the
Underwriters, or any of them, in contesting any such claims, demands or
liabilities. If the Underwriters shall be deemed to constitute a partnership
for income tax purposes, it is the intent of each Underwriter to be excluded
from the application of Sub-chapter K, Chapter 1, Subtitle A of the Internal
Revenue Code of 1954, as amended. Each Underwriter elects to be so excluded and
agrees not to take any position inconsistent with such election. Each
Underwriter authorizes you, in your discretion, to execute and file on behalf
of the Underwriters such evidence of election as may be required by the
Internal Revenue Service.
14. Indemnification and Future Claims.
(a) We agree to indemnify and hold harmless you and each other
Underwriter, and each person, if any, who controls you and such other
Underwriter within the meaning of Section 15 of the Securities Act of 1933, and
to reimburse their expenses, to the extent and upon the terms that we agree to
indemnify and hold harmless the Company and to reimburse expenses as set forth
in the Underwriting Agreement. Our indemnity agreement set forth in this
Section 14 shall remain in full force and effect regardless of any
10
<PAGE>
investigation made by or on behalf of such other Underwriter or controlling
person and shall survive the delivery of and payment for the Units and the
termination of this Agreement.
(b) In the event that any time any claim or claims shall be
asserted against you, as Representative, or otherwise involving the
Underwriters generally, relating to the Registration Statement or any
preliminary prospectus or the Prospectus, as such may be from time to time
amended or supplemented, the public offering of the Units or any of the
transactions contemplated by this Agreement, we authorize you to take such
other action as you shall deem necessary or desirable under the circumstances,
including settlement of any such claim or claims if such course of action shall
be recommended by counsel retained by you. We agree to pay to you on request,
our underwriting proportion of all expenses incurred by you (including, but not
limited to, disbursements and fees of counsel so retained) in investigating and
defending against such claim or claims and our underwriting proportion of any
liability incurred by you in respect of such claim or claims, whether such
liability shall be the result of a judgment or as a result of any such
settlement.
15. Title to Securities. The Securities purchased by, or on behalf of,
the respective Underwriters shall remain the property of such Underwriters
until sold, and title to any such Securities shall not in any event pass to the
Representative by virtue of any of the provisions of this Agreement.
16. Blue Sky Matters. It is understood that you assume no
responsibility with respect to the right of any Underwriter or other person to
offer or to sell Securities in any jurisdiction, notwithstanding any
information which you may furnish as to the jurisdictions under the securities
laws of which it is believed the Securities may be sold.
17. Applicable Law. This Agreement will be governed by and construed
in accordance with the laws of the State of New York.
18. Capital Requirements. We confirm that the incurrence by us of our
obligation under this Agreement and under the Underwriting Agreement will not
place us in violation of the net capital requirements of Rule 15c3-1 under the
Securities Exchange Act of 1934 or of any applicable rules relating to capital
requirements of any securities exchange to which we are subject.
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<PAGE>
19. Miscellaneous. Any notice from you to us shall be deemed to have
been duly given if mailed, telephoned or telegraphed to us at the address set
forth in the Underwriters Questionnaire furnished by us to you. Any notice from
us to you shall be deemed to have been duly given if mailed, telephoned or
telegraphed to you at 40 East 52nd Street, New York, New York 10022.
We understand that you are a member in good standing of the NASD. We
hereby confirm that we are actually engaged in the investment banking or
securities business and are either (i) a member in good standing of the NASD or
(ii) a dealer with its principal place of business located outside the United
States, its territories and its possessions, and not registered as a broker or
dealer under the 1934 Act? who agrees not to make any sales within the United
States, its territories or its possessions, or to persons who are nationals
thereof or residents therein (except that we may participate in sales to
Selected Dealers and others under Section 5 of this Agreement). We hereby agree
to comply with the provisions of Section 24 of Article III of the Rules of Fair
Practice of the NASD, and if we are a foreign dealer and not a member of the
NASD, we also hereby agree to comply with the NASD's interpretation with
respect to free-riding and withholding and to comply, as though it were a
member of the NASD, with the provisions of Sections 8 and 36 of Article III of
such Rules of Fair Practice, and to comply with Section 25 of Article III
thereof as that Section applies to a non-member foreign dealer. In connection
with sales and offers to sell Units made by us outside the United States, its
territories and possessions (i) we will either furnish to each person to whom
any such sale or offer is made a copy of the then current Preliminary
Prospectus or the Prospectus, as the case may be, or inform such person that
such Preliminary Prospectus or Prospectus will be available upon request, and
(ii) we will furnish to each person to whom any such sale or offer is made such
prospectus, advertisement or other offering document containing information
relating to the Units or the Company as may be required under the law of the
jurisdiction in which such sale or offer is made. Any prospectus, advertisement
or other offering document furnished by us to any person in accordance with the
preceding sentence and any such additional offering material as we may furnish
to any person (x) shall comply in all respects with the law of the jurisdiction
in which it is so furnished, (y) shall be prepared and so furnished at our sole
risk and expense and (z) shall not contain information relating to the Units or
the Company which is inconsistent in any respect with the information contained
in the then current Preliminary Prospectus or in the Prospectus, as
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<PAGE>
the case may be.
We understand that, in consideration of your services in connection
with the public offering of the Securities, the Company has agreed with you
individually and not as Representative of the Underwriters (a) to sell to you
the Representative's Warrant referred to in Section 1(b) of the Underwriting
Agreement for the sum of $10, (b) to pay to you a non-accountable expense
allowance referred to in Section 8(b) of the Underwriting Agreement, (c) to
enter into the Consulting Agreement described in Section 3(v) of the
Underwriting Agreement and (d) to grant you a right of first refusal to act as
underwriter or agent of the Company for future public or private offerings of
the securities of the Company as described in Section 3(aa) of the Underwriting
Agreement. In addition, you may, at your sole discretion, elect to exercise the
over-allotment option described in Section 5, individually. We confirm to you
that we shall make no claim to the Representative's Warrant, any rights related
thereto, the Company's securities underlying the Representative's Warrants, the
non-accountable expense allowance, or, to the over-allotment option, to the
extent you elect to exercise such option individually. You confirm to us that
we shall have no obligations or liabilities with respect to the purchase of the
Representative's Warrant, the exercise thereof, the Company's securities
underlying the Representative's Warrant, or the non-accountable expense
allowance, or, to the over-allotment option, to the extent you elect to
exercise such option individually.
Please confirm that the foregoing correctly states the understanding
between us by signing and returning to us a counterpart hereof.
Very truly yours,
-----------------------------------
By:
--------------------------------
<PAGE>
(Attorney-in-fact for each of
the several Underwriters named
in Schedule A to the attached
Underwriting Agreement.)
Confirmed as of the date
first above written:
ROAN CAPITAL PARTNERS L.P.
as Representative
By:
-------------------------------
14
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Exhibit 1.2
DISCAS, INC.
800,000 Shares of Common Stock
and
800,000 Redeemable Common Stock Purchase Warrants
UNDERWRITING AGREEMENT
___________ __, 1997
Roan Capital Partners L.P.
As Representative of the several Underwriters
40 East 52nd Street
New York, New York 10022
Dear Sirs:
Discas, Inc., a Delaware corporation (the "Company"), hereby confirms
its agreement with the Underwriters named in Schedule A of this Underwriting
Agreement (the "Agreement") (the "Underwriters"), for whom you are acting as
representative (the "Representative"), as follows:
1. Description of the Securities.
The Company proposes to issue and sell to the Underwriters an
aggregate of 800,000 shares of common stock, $.0001 par value per share (the
"Common Stock"), and 800,000 redeemable common stock purchase warrants of the
Company (the "Warrants," and collectively with the Common Stock, the
"Securities") in the amounts set forth on Schedule A hereto. Each Warrant shall
entitle the holder to purchase one share of Common Stock for $5.00, subject to
adjustment. The Company proposes to grant to the Underwriters (or to the
Representative, individually) an option to purchase up to 120,000 additional
shares of Common Stock and up to an additional 120,000 Warrants (the
"Additional Securities"). The offering of Securities and Additional Securities
contemplated hereby may sometimes be referred to as the "Offering."
(a) The Warrants.
The Warrants are exercisable beginning thirteen (13) months from the
effective date of the Registration Statement, as defined
<PAGE>
in Paragraph 2(a) (the "Effective Date"), and expire five years and one month
after the Effective Date, subject to prior redemption by the Company. The
shares of Common Stock issuable upon the exercise of the Warrants are
hereinafter referred to as the "Warrant Shares."
The Warrants will be redeemable at a price of $.10 per Warrant,
commencing thirteen (13) months after the Effective Date upon at least 30 days
prior written notice provided that the closing bid price of the Common Stock
(or closing sales price if listed on an exchange or on a reporting system that
provides last sales prices) for 20 consecutive trading days ending on the
fifteenth day immediately prior to the date on which notice of redemption is
given shall exceed 150% ($7.50 per share) of the current Warrant exercise price
(subject to adjustment), subject to the right of the holder to exercise his
purchase rights thereunder until redemption.
(b) Representative's Warrants.
The Company will sell to the Representative, for $10, a warrant to
purchase one share of Common Stock and one Warrant for each ten shares of
Common Stock and ten Warrants sold in this Offering excluding the Additional
Securities (a maximum of 800,000 shares of Common Stock and 800,000 Warrants)
at a price equal to $6.75 per share of Common Stock and $.14 per Warrant (the
"Representative's Warrants," and collectively with the Securities underlying
the Representative's Warrants, the "Representative's Securities"). The Warrants
underlying the Representative's Warrants shall be exercisable at a price of
$5.00 per Warrant. The Representative's Warrants shall be non-transferable
(other than to (i) officers of the Underwriters, and (ii) members of the
selling group and their officers or partners) for a period of 12 months
following the Effective Date. Thereafter, they are transferable for a period of
four years. If the Warrants underwriting the Representative's Warrants are not
exercised during their term, they shall, by their terms, automatically expire.
The Representative's Securities shall be registered for sale to the public and
shall be included in the Registration Statement filed in connection with the
Offering.
2. Representations and Warranties of the Company.
The Company represents and warrants to the Underwriters that:
2
<PAGE>
(a) The Company has filed with the Securities and Exchange
Commission (the "Commission"), a registration statement on Form SB-2 (File No.
333-______), including any related preliminary prospectus ("Preliminary
Prospectus"), for the registration of the Securities under the Securities Act
of 1933 (the "Act"). The Company will file further amendments to said
registration statement in the form to be delivered to you and will not, before
the registration statement becomes effective, file any other amendment thereto
to which you shall have objected in writing after having been furnished with a
copy thereof. Except as the context may otherwise require, such registration
statement, as amended, on file with the Commission at the time the registration
statement becomes effective (including the prospectus, financial statements,
exhibits and all other documents filed as a part thereof or incorporated
therein), is hereinafter called the "Registration Statement", and the
prospectus, in the form filed with the Commission pursuant to Rule 424(b) of
the General Rules and Regulations of the Commission under the Act (the "
Regulations") or, if no such filing is made, the definitive prospectus used in
the Offering, is hereinafter called the "Prospectus". The Company has delivered
to you copies of each Preliminary Prospectus as filed with the Commission and
has consented to the use of such copies for purposes permitted by the Act.
(b) The Commission has not issued any orders preventing or
suspending the use of any Preliminary Prospectus, and each Preliminary
Prospectus has conformed in all material respects with the requirements of the
Act and has not included any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, subject to the provisions set forth below and except as such
untrue statement or omission has been cured in the a subsequent preliminary
prospectus or in the final prospectus.
(c) When the Registration Statement becomes effective under the Act
and at all times subsequent thereto including the Closing Date (hereinafter
defined) and the Option Closing Date (hereinafter defined) and for such longer
periods as in the opinion of counsel for the Underwriters, a Prospectus is
required to be delivered in connection with the sale of the Securities by the
Underwriters, the Registration Statement and Prospectus, and any
3
<PAGE>
amendment thereof or supplement thereto, will contain all material statements
which are required to be stated therein in accordance with the Act and the
Regulations, and will in all material respects conform to the requirements of
the Act and the Regulations, and neither the Registration Statement nor the
Prospectus, nor any amendment or supplement thereto, will contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that this representation and warranty does not apply to statements or omissions
made in reliance upon and in conformity with written information furnished to
the Company by you, for use in connection with the preparation of the
Registration Statement or Prospectus, or in any amendment thereof or supplement
thereto. It is understood that the statements set forth under the heading
"Underwriting" in the Prospectus with respect to (i) the amounts of the selling
concession and reallowance; (ii) the identity of counsel to the Underwriters
under the heading "Legal Matters"; and (iii) the information concerning the
NASD affiliation of the Underwriters constitute for purposes of this Section
the only information furnished in writing by or on behalf of the Underwriters
for inclusion in the Registration Statement and Prospectus, as the case may be.
(d) The Company and each of its subsidiaries (each a "Subsidiary")
are, and at the Closing Date and the Option Closing Date will be, corporations
duly organized, validly existing and in good standing under the laws of the
jurisdiction of their incorporation. The Company and each of its Subsidiaries
are duly qualified or licensed and in good standing as foreign corporations in
each jurisdiction in which their ownership or leasing of any properties or the
character of their operations requires such qualification or licensing, except
those jurisdictions in which the failure to so qualify would not have a
material adverse effect. The Company and each of its Subsidiaries have all
requisite corporate powers and authority, and, except as set forth in the
Registration Statement, the Company and each of its Subsidiaries and their
employees' have all material and necessary authorizations, approvals, orders,
licenses, certificates and permits of and from all governmental regulatory
officials and bodies to own or lease their properties and conduct their
businesses as described in the Prospectus, and the Company and each of its
Subsidiaries are doing business and have been doing business during the period
described in the Registration Statement in compliance with all such material
4
<PAGE>
authorizations, approvals, orders, licenses, certificates and permits and all
material federal, state and local laws, rules and regulations concerning the
businesses in which the Company or its Subsidiaries are engaged. The
disclosures in the Registration Statement concerning the effects of federal,
state and local regulation on the Company's or its Subsidiaries' businesses as
currently conducted and as contemplated are correct in all material respects
and do not omit to state a material fact. The Company has all corporate power
and authority to enter into this Agreement and carry out the provisions and
conditions hereof, and all consents, authorizations, approvals and orders
required in connection therewith have been obtained or will have been obtained
prior to the Closing Date.
(e) This Agreement has been duly and validly authorized and
executed by the Company. The Securities (including the Common Stock and the
Warrants), the Warrant Shares, the Representative's Warrants to be issued and
sold by the Company pursuant to this Agreement, the Securities issuable upon
exercise of the Representative's Warrants and payment therefor, and the Common
Stock and Warrant Shares underlying such Representative's Warrants, have been
duly authorized (and, in the case of the Common Stock and the Warrant Shares,
have been duly reserved for issuance) and, when issued and paid for in
accordance with this Agreement (and, in the case of the Warrant Shares, upon
exercise of the Warrants and payment to the Company of the exercise price
therefor), the Common Stock and Warrant Shares will be validly issued, fully
paid and non-assessable; the Common Stock, Warrants, Warrant Shares,
Representative's Warrants, Additional Securities and Representative's Warrants
Shares are not and will not be subject to the preemptive rights of any
stockholder of the Company and conform and at all times up to and including
their issuance will conform in all material respects to all statements with
regard thereto contained in the Registration Statement and Prospectus; and all
corporate action required to be taken for the authorization, issuance and sale
of the Common Stock, Warrants, Warrant Shares and Representative's Warrants has
been taken, and this Agreement constitutes a valid and binding obligation of
the Company, enforceable in accordance with its terms, to issue and sell, upon
exercise in accordance with the terms thereof, the number and kind of
securities called for thereby.
(f) The consummation of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof will not
5
<PAGE>
result in a breach or violation of any of the terms or provisions of, or
constitute a default under, the Certificate of Incorporation, as amended, or
Bylaws of the Company or any of its Subsidiaries or of any evidence of
indebtedness, lease, contract or other agreement or instrument to which the
Company or any of its Subsidiaries is a party or by which the Company or any of
its Subsidiaries or any of their properties is bound, or under any applicable
law, rule, regulation, judgment, order or decree of any government,
professional advisory body, administrative agency or court, domestic or
foreign, having jurisdiction over the Company or any of its Subsidiaries or
their properties, or result in the creation or imposition of any lien, charge
or encumbrance upon any of the properties or assets of the Company or any of
its Subsidiaries; and no consent, approval, authorization or order of any court
or governmental or other regulatory agency or body is required for the
consummation by the Company or any of its Subsidiaries of the transactions on
their part herein contemplated, except such as may be required under the Act or
under state securities or blue sky laws, except where a breach, violation or
failure to obtain such consent would not have a material adverse effect upon
the business or operation of the Company or its Subsidiaries.
(g) Subsequent to the date hereof, and prior to the Closing Date
and the Option Closing Date, the Company will not issue or acquire any equity
securities except that the Company may make short-term investments as
contemplated in the "Use of Proceeds" section of the Prospectus. Except as
described in the Registration Statement, the Company does not have, and at the
Closing Date and at the Option Closing Date will not have, outstanding any
options to purchase or rights or warrants to subscribe for, or any securities
or obligations convertible into, or any contracts or commitments to issue or
sell shares of its Preferred Stock, Common Stock or any such options, warrants,
convertible securities or obligations.
(h) The financial statements and notes thereto included in the
Registration Statement and the Prospectus fairly present the financial position
and the results of operations of the Company at the respective dates and for
the respective periods to which they apply; and such financial statements have
been prepared in conformity with generally accepted accounting principles,
consistently applied throughout the periods involved.
6
<PAGE>
(i) Except as set forth in the Registration Statement, the Company
and each Subsidiary are not, and at the Closing Date and at the Option Closing
Date will not be, in violation or breach of, or default in, the due performance
and observance of any term, covenant or condition of any indenture, mortgage,
deed of trust, note, loan or credit agreement, or any other agreement or
instrument evidencing an obligation for borrowed money, or any other agreement
or instrument to which the Company or any of its Subsidiaries are a party or by
which the Company or any of its Subsidiaries may be bound or to which any of
the property or assets of the Company or any of its Subsidiaries are subject,
which violations, breaches, default or defaults, singularly or in the
aggregate, would have a material adverse effect on the Company or any of its
Subsidiaries. The Company and each of its Subsidiaries have not and will not
have taken any action in material violation of the provisions of the
Certificate of Incorporation, as amended, or the Bylaws of the Company or its
Subsidiaries or any statute or any order, rule or regulation of any court or
regulatory authority or governmental body having jurisdiction over or
application to the Company or its Subsidiaries, their businesses or properties.
(j) The Company and each of its Subsidiaries have, and at the
Closing Date and at the Option Closing Date will have, good and marketable
title to all properties and assets described in the Prospectus as owned by
them, free and clear of all liens, charges, encumbrances, claims, security
interests, restrictions and defects of any material nature whatsoever, except
such as are described or referred to in the Prospectus and liens for taxes not
yet due and payable. All of the material leases and subleases under which the
Company or any of its Subsidiaries are the lessor or sublessor of properties or
assets or under which the Company or any of its Subsidiaries hold properties or
assets as lessee as described in the Prospectus are, and will on the Closing
Date and the Option Closing Date be, in full force and effect, and except as
described in the Prospectus, the Company and its Subsidiaries are not and will
not be in default in respect to any of the terms or provisions of any of such
leases or subleases (which would have a material adverse effect on the
business, business prospects or operations of the Company or any of its
Subsidiaries taken as a whole), and no claim has been asserted by anyone
adverse to rights of the Company or any of its Subsidiaries as lessor,
sublessor, lessee or
7
<PAGE>
sublessee under any of the leases or subleases mentioned above, or affecting or
questioning the right of the Company or any of its Subsidiaries to continue
possession of the leased or subleased premises or assets under any such lease
or sublease except as described or referred to in the Prospectus, and the
Company and each of its Subsidiaries owns or leases all such properties as are
necessary to its operations as now conducted and, except as otherwise stated in
the Prospectus, as proposed to be conducted set forth in the Prospectus (which
would have a material adverse effect on the business, business prospects or
operations of the Company or any of its Subsidiaries taken as a whole).
(k) The authorized, issued and outstanding capital stock
of the Company as of , 1997 and as of the date of the Prospectus is as set
forth in the Prospectus under "Capitalization"; the shares of issued and
outstanding capital stock of the Company set forth thereunder have been duly
authorized, validly issued and are fully paid and non-assessable; except as set
forth in the Prospectus, no options, warrants or other rights to purchase,
agreements or other obligations to issue, or agreements or other rights to
convert any obligation into, any shares of capital stock of the Company have
been granted or entered into by the Company; and the Common Stock, the Warrants
and all such options and warrants conform in all material respects, to all
statements relating thereto contained in the Registration Statement and
Prospectus.
(l) Except as described in the Prospectus, the Company does not own
or control any capital stock or securities of, or have any proprietary interest
in, or otherwise participate in any other corporation, partnership, joint
venture, firm, association or business organization; provided, however, that
this provision shall not be applicable to the investment, if any, of the net
proceeds from the sale of the Securities sold by the Company in certificates of
deposits, savings deposits, short-term obligations of the United States
Government, money market instruments or other short-term investments.
(m) Jump, Green, Holman & Company, who have given their reports on
certain financial statements filed and to be filed with the Commission as a
part of the Registration Statement, which are incorporated in the Prospectus,
are with respect to the Company, independent public accountants as required by
the Act and the Rules and Regulations.
(n) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, and except as may otherwise
be indicated or contemplated herein or therein, the Company has not (i) issued
any securities or incurred
8
<PAGE>
any liability or obligation, direct or contingent, for borrowed money; or (ii)
entered into any transaction other than in the ordinary course of business; or
(iii) declared or paid any dividend or made any other distribution on or in
respect to its capital stock.
(o) There is no litigation or governmental proceeding pending or to
the knowledge of the Company or any Subsidiary threatened against, or involving
the properties or business of the Company or any Subsidiary which might
materially adversely affect the value, assets or the operation of the
properties or the business of the Company or any Subsidiary, except as referred
to in the Prospectus. Further, except as referred to in the Prospectus, there
are no pending actions, suits or proceedings related to environmental matters
or related to discrimination on the basis of age, sex, religion or race, nor is
the Company or any Subsidiary charged with or, to its knowledge, under
investigation with respect to any violation of any statutes or regulations of
any regulatory authority having jurisdiction over its business or operations,
and no labor disturbances by the employees of the Company or any Subsidiary
exist or, to the knowledge of the Company or any Subsidiary, have been
threatened.
(p) The Company has, and at the Closing Date and at the Option
Closing Date will have, filed all necessary federal, state and foreign income
and franchise tax returns or has requested extensions thereof (except in any
case where the failure to so file would not have a material adverse effect on
the Company), and has paid all taxes which it believes in good faith were
required to be paid by it except for any such tax that currently is being
contested in good faith or as described in the Prospectus.
(q) The Company has not at any time (i) made any contribution to
any candidate for political office, or failed to disclose fully any such
contribution, in violation of law, or (ii) made any payment to any state,
federal, foreign governmental or professional regulatory agency, officer or
official or other person charged with similar public, quasi-public or
professional regulatory duties, other than payments or contributions required
or allowed by applicable law.
(r) Except as set forth in the Registration Statement, to the
knowledge of the Company, neither the Company nor any of officer, director,
employee or agent of the Company has made any
9
<PAGE>
payment or transfer of any funds or assets of the Company or conferred any
personal benefit by use of the Company's assets or received any funds, assets
or personal benefit in violation of any law, rule or regulation, which is
required to be stated in the Registration Statement or necessary to make the
statements therein not misleading.
(s) On the Closing Date and on the Option Closing Date, all
transfer or other taxes, if any (other than income tax) which are required to
be paid, and are due and payable, in connection with the sale and transfer of
the Securities by the Company to the Underwriters will have been fully paid or
provided for by the Company as the case may be, and all laws imposing such
taxes will have been fully complied with in all material respects.
(t) There are no contracts or other documents of the Company which
are of a character required to be described in the Registration Statement or
Prospectus or filed as exhibits to the Registration Statement which have not
been so described or filed.
(u) The Company will apply the net proceeds from the sale of the
Securities sold by it for the purposes and in the manner set forth in the
Registration Statement and Prospectus under the heading "Use of Proceeds."
(v) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (1) transactions are executed
in accordance with management's general or specified authorizations; (2)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (3) access to assets is permitted only in
accordance with management's general or specific authorizations; and (4) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(w) Except as set forth in the Prospectus, no holder of any
securities of the Company has the right to require registration of any
securities because of the filing or effectiveness of the Registration
Statement.
(x) The Company has not taken and at the Closing Date will not have
taken, directly or indirectly, any action designed to cause or result in, or
which has constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of the Common Stock or the Warrants
to facilitate the sale or resale of such securities.
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(y) To the Company's knowledge, there are no claims for services in
the nature of a finder's origination fee with respect to the sale of the
Securities hereunder, except as set forth in the Prospectus.
(z) Other than the right of first refusal granted by the Company to
the Representative (as set forth in Section 3(aa) hereof), no right of first
refusal exists with respect to any sale of securities by the Company.
(aa) No statement, representation, warranty or covenant made by the
Company in this Agreement or made in any certificate or document required by
this Agreement to be delivered to Underwriters was, when made, or as of the
Closing Date or as of the Option Closing Date will be materially inaccurate,
untrue or incorrect.
3. Covenants of the Company.
The Company covenants and agrees that:
(a) It will deliver to the Representative, without charge, two
conformed copies of each Registration Statement and of each amendment or
supplement thereto, including all financial statements and exhibits.
(b) The Company has delivered to each of the Underwriters, and each
of the Selected Dealers (as hereinafter defined) without charge, as many copies
as have been requested of each Preliminary Prospectus heretofore filed with the
Commission in accordance with and pursuant to the Commission's Rule 430 under
the Act and will deliver to the Underwriters and to others whose names and
addresses are furnished by the Underwriters or a Selected Dealer, without
charge, on the Effective Date of the Registration Statement, and thereafter
from time to time during such reasonable period as you may request if, in the
opinion of counsel for the Underwriters, the Prospectus is required by law to
be delivered in connection with sales by the Underwriters or a dealer, as many
copies of the Prospectus (and, in the event of any amendment of or supplement
to the Prospectus, of such amended or supplemented Prospectus) as the
Underwriters may request for the purposes contemplated by the Act. The Company
will take all necessary actions to furnish to whomever directed by the
Underwriters, when and as requested by the Underwriters, all necessary
documents, exhibits, information, applications, instruments and papers as may
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be reasonably required or, in the opinion of counsel to the Underwriters
desirable, in order to permit or facilitate the sale of the Securities.
(c) The Company has authorized the Underwriters to use, and make
available for use by prospective dealers, the Preliminary Prospectus, and
authorizes the Underwriters, all dealers selected by you in connection with the
distribution of the Securities (the "Selected Dealers") to be purchased by the
Underwriters and all dealers to whom any of such Securities may be sold by the
Underwriters or by any Selected Dealer, to use the Prospectus, as from time to
time amended or supplemented, in connection with the sale of the Securities in
accordance with the applicable provisions of the Act, the applicable
Regulations and applicable state law, until completion of the distribution of
the Securities and for such longer period as you may request if the Prospectus
is required under the Act, the applicable Regulations or applicable state law
to be delivered in connection with sales of the Securities by the Underwriters
or the Selected Dealers.
(d) The Company will use its best efforts to cause the Registration
Statement to become effective and will notify the Representative immediately,
and confirm the notice in writing: (i) when the Registration Statement or any
post-effective amendment thereto becomes effective; (ii) of the issuance by the
Commission of any stop order or of the initiation, or to the best of the
Company's knowledge, the threatening, of any proceedings for that purpose;
(iii) the suspension of the qualification of the Securities and the
Representative's Warrants, or underlying securities, for offering or sale in
any jurisdiction or of the initiating, or to the best of the Company's
knowledge the threatening, of any proceeding for that purpose; and (iv) of the
receipt of any comments from the Commission. If the Commission shall enter a
stop order at any time, the Company will make every reasonable effort to obtain
the lifting of such order at the earliest possible moment.
(e) During the time when a prospectus is required to be
delivered under the Act, the Company will comply with all requirements imposed
upon it by the Act and the Securities Exchange Act of 1934 (the "Exchange
Act"), as now and hereafter amended and by the Regulations, as from time to
time in force, as necessary to permit the continuance of sales of or dealings
in the Securities in accordance with the provisions hereof and the Prospectus.
If at any
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time when a prospectus relating to the Securities is required to be delivered
under the Act, any event shall have occurred as a result of which, in the
opinion of counsel for the Company or counsel for the Underwriters, the
Prospectus as then amended or supplemented includes an untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, or if it is necessary at any time
to amend the Prospectus to comply with the Act, the Company will notify you
promptly and prepare and file with the Commission an appropriate amendment or
supplement in accordance with Section 10 of the Act and will furnish to you
copies thereof.
(f) The Company will endeavor in good faith, in cooperation with
you, at or prior to the time the Registration Statement becomes effective, to
qualify the Securities for offering and sale under the securities laws or blue
sky laws of such jurisdictions as you may reasonably designate. In each
jurisdiction where such qualification shall be effected, the Company will,
unless you agree that such action is not at the time necessary or advisable,
file and make such statements or reports at such times as are or may reasonably
be required by the laws of such jurisdiction.
(g) The Company will make generally available to its security
holders, as soon as practicable, but in no event later than the first day of
the fifteenth full calendar month following the Effective Date of the
Registration Statement, an earnings statement of the Company, which will be in
reasonable detail but which need not be audited, covering a period of at least
twelve months beginning after the Effective Date of the Registration Statement,
which earnings statements shall satisfy the requirements of Section 11(a) of
the Act and the Regulations as then in effect. The Company may discharge this
obligation in accordance with Rule 158 of the Regulations.
(h) During the period of five years commencing on the Effective
Date of the Registration Statement, the Company will furnish to its
stockholders an annual report (including financial statements audited by its
independent public accountants), in reasonable detail, and, at its expense,
furnish each of the Underwriters (i) within 90 days after the end of each
fiscal year of the Company, a consolidated balance sheet of the Company and its
consolidated subsidiaries and a separate balance sheet of each
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subsidiary of the Company the accounts of which are not included in such
consolidated balance sheet as of the end of such fiscal year, and consolidated
statements of operations, stockholders' equity and cash flows of the Company
and its consolidated subsidiaries and separate statements of operations,
stockholders' equity and cash flows of each of the subsidiaries of the Company
the accounts of which are not included in such consolidated statements, for the
fiscal year then ended all in reasonable detail and all certified by
independent accountants (within the meaning of the Act and the Regulations),
(ii) within 45 days after the end of each of the first three fiscal quarters of
each fiscal year, similar balance sheets as of the end of such fiscal quarter
and similar statements of operations, stockholders' equity and cash flows for
the fiscal quarter then ended, all in reasonable detail, and subject to year
end adjustment, all certified by the Company's principal financial officer or
the Company's principal accounting officer as having been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis, (iii) as soon as available, each report furnished to or filed
with the Commission or any securities exchange and each report and financial
statement furnished to the Company's shareholders generally and (iv) as soon as
available, such other material as the Representative may from time to time
reasonably request regarding the financial condition and operations of the
Company.
(i) For a period of eighteen months from the Closing Date, the
Company, at its expense, shall cause its regularly engaged independent
certified public accountants to review (but not audit), the Company's financial
statements for each of the first three quarters prior to the announcement of
quarterly financial information, the filing of the Company's 10-Q quarterly
report and the mailing of quarterly financial information to stockholders.
(j) Prior to the Closing Date or the Option Closing Date, the
Company will not issue, directly or indirectly, without your prior written
consent and that of counsel for the Representative, any press release or other
public announcement or hold any press conference with respect to the Company or
its activities with respect to this Offering.
(k) The Company will deliver to you prior to filing, any amendment
or supplement to the Registration Statement or Prospectus proposed to be filed
after the Effective Date of the Registration Statement and will not file any
such amendment or supplement to
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<PAGE>
which you shall reasonably object after being furnished such copy.
(l) During the period of 120 days commencing on the date hereof,
the Company will not at any time take, directly or indirectly, any action
designed to, or which will constitute or which might reasonably be expected to
cause or result in stabilization or manipulation of the price of the Securities
to facilitate the sale or resale of any of the Securities.
(m) The Company will apply the net proceeds from the Offering
received by it in the manner set forth under "Use of Proceeds" in the
Prospectus.
(n) Counsel for the Company, the Company's accountants, and the
officers and directors of the Company will, respectively, furnish the opinions,
the letters and the certificates referred to in subsections of Paragraph 9
hereof, and, in the event that the Company shall file any amendment to the
Registration Statement relating to the offering of the Securities or any
amendment or supplement to the Prospectus relating to the offering of the
Securities subsequent to the Effective Date of the Registration Statement, such
counsel, such accountants, such officers and directors, respectively, will, at
the time of such filing or at such subsequent time as you shall specify, so
long as securities being registered by such amendment or supplement are being
underwritten by the Underwriters, furnish to you such opinions, letters and
certificates, each dated the date of its delivery, of the same nature as the
opinions, the letters and the certificates referred to in said Paragraph 9, as
you may reasonably request, or, if any such opinion or letter or certificate
cannot be furnished by reason of the fact that such counsel or such accountants
or any such officer or director believes that the same would be inaccurate,
such counsel or such accountants or such officer or director will furnish an
accurate opinion or letter or certificate with respect to the same subject
matter.
(o) The Company will comply with all of the provisions of any
undertakings contained in the Registration Statement in all material respects.
(p) The Company will reserve and keep available for issuance that
maximum number of its authorized but unissued shares of Common Stock which are
issuable upon exercise of the Warrants and issuable upon exercise of the
Representative's Warrants
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(including the underlying securities) outstanding from time to time.
(q) Following the Effective Date and from time to time thereafter,
so long as the Warrants are outstanding, the Company will timely prepare and
file at its sole cost and expense one or more post-effective amendments to the
Registration Statement or a new registration statement as required by law as
will permit Warrant holders to be furnished with a current prospectus in the
event Warrants are exercised, and to use its best efforts and due diligence to
have same be declared effective. The Company will deliver a draft of each such
post-effective amendment or new registration statement to the Underwriter at
least ten days prior to the filing of such post-effective amendment or
registration statement.
(r) Following the Effective Date and from time to time thereafter
so long as any of the Warrants remain outstanding, the Company will timely
deliver and supply to its warrant agent sufficient copies of the Company's
current Prospectus, as will enable such Warrant Agent to deliver a copy of such
Prospectus to any Warrant or other holder where such Prospectus delivery is by
law required to be made.
(s) So long as any of the Warrants remain outstanding, the Company
shall continue to employ the services of a firm of independent certified public
accountants reasonably acceptable to the Representative in connection with the
preparation of the financial statements to be included in any registration
statement to be filed by the Company hereunder, or any amendment or supplement
thereto (it being understood that Jump,Green, Holman and Company is acceptable
to the Representative). During the same period, the Company shall employ the
services of a law firm(s) acceptable to the Representative in connection with
all legal work of the Company, including the preparation of a registration
statement to be filed by the Company hereunder, or any amendment or supplement
thereto.
(t) So long as any of the Warrants remain outstanding, the Company
shall continue to appoint a Warrant Agent for the Warrants, who shall be
reasonably acceptable to the Representative.
(u) The Company agrees that it will, upon the Closing Date, for a
period of no less than three (3) years, engage a designee of the Representative
as an advisor (the "Advisor") to its
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<PAGE>
Board of Directors where such Advisor shall attend meetings of the Board,
receive all notices and other correspondence and communications sent by the
Company to members of its Board of Directors and shall be entitled to receive
compensation therefor equal to the entitlement of all non-employee directors.
Such Advisor shall also be entitled to receive reimbursement for all reasonable
costs incurred in attending such meetings including, but not limited to, food,
lodging, and transportation. The Company further agrees that during said three
(3) year period, it shall schedule no less than four (4) formal and "in person"
meetings of its Board of Directors in each such year and thirty (30) days
advance notice of such meetings shall be given to the Advisor. Further, during
such five (5) year period, the Company shall give notice to the Representative
with respect to any proposed acquisitions, mergers, reorganizations or other
similar transactions. In lieu of the Representative's right to designate an
Advisor, the Representative shall have the right during such five-year period,
in its sole discretion, to designate one person for election as a Director of
the Company and the Company will utilize its best efforts to obtain the
election of such person who shall be entitled to receive the same compensation,
expense reimbursements and other benefits set forth above.
The Company agrees to indemnify and hold the Underwriters and such
Advisor or Director harmless against any and all claims, actions, damages,
costs and expenses, and judgments arising solely out of the attendance and
participation of your designee at any such meeting described herein. In the
event the Company maintains a liability insurance policy affording coverage for
the acts of its of officers and directors, it agrees, if possible, to include
the Representative's designee as an insured under such policy.
(v) Upon the Closing Date, the Company shall have entered into a
two year agreement with the Representative in form reasonably satisfactory to
the Representative (the "Consulting Agreement"), pursuant to which the
Representative will be retained as a management and financial consultant and
will be paid an aggregate fee of $85,400 all of which shall be paid upon the
Closing Date.
(w) The Company's Common Stock and Warrants shall be listed on the
Nasdaq SmallCap Market ("Nasdaq"), and on the Boston Stock Exchange ("BSE"),
not later than the Effective Date. Prior to the Effective Date, the Company
will make all filings required,
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<PAGE>
including registration under the Exchange Act, to obtain the listing of the
Common Stock and Warrants on Nasdaq and the BSE, and will effect and use its
best efforts to maintain such listings (unless the Company is acquired) for at
least five years from the date of this Agreement.
(x) The Company will apply for listing in Standard and Poors
Corporation Reports or Moodys OTC Guide and shall use its best efforts to have
the Company included in such publications for at least five years from the
Closing Date.
(y) For a period of twenty-four (24) months from the Closing Date,
no officer, director or holder of any securities of the Company prior to the
Offering will, directly or indirectly, offer, sell (including any short sale),
grant any option for the sale of, acquire any option to dispose of, or
otherwise dispose of any shares of Common Stock, including shares of Common
Stock issuable upon exercise of options, warrants or any convertible securities
of the Company, without the prior written consent of the Representative, other
than as set forth in the Registration Statement. In order to enforce this
covenant, the Company shall impose stop-transfer instructions with respect to
the securities owned by every stockholder prior to the Offering until the end
of such period (subject to any exceptions to such limitation on transferability
set forth in the Registration Statement). If necessary to comply with any
applicable Blue-sky Law, the shares held by such stockholders will be escrowed
with counsel for the Company or otherwise as required.
(z) Except for the issuance of shares of capital stock by the
Company in connection with a dividend, recapitalization, reorganization or
similar transactions or as result of the exercise of warrants or options
disclosed in or issued or granted pursuant to plans disclosed in the
Registration Statement, the Company shall not, for a period of twenty-four (24)
months following the Closing Date, directly or indirectly, offer, sell, issue
or transfer any shares of its capital stock, or any security exchangeable or
exercisable for, or convertible into, shares of the capital stock or register
any of its capital stock (under any form of registration statement, including
Form S-8), without the prior written consent of the Representative. Options
granted pursuant to plans must be exercisable at the fair market value on the
date of grant.
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(aa) During the three-year period from the Effective Date, Roan
Capital Partners, L.P., individually, and not as Representative of the
Underwriters, shall have a right of first refusal to act as underwriter or
agent of any and all public or private offerings of the securities of the
Company, or any successor to or subsidiary of the Company or any other entity
in which the Company has an equity interest (collectively referred to herein as
the "Company"), by the Company or any secondary offering of the Company's
securities by any of its officers, directors and 5% or greater stockholders
("Principal Stockholders"). The Company has caused such Principal Stockholders
to deliver to the Representative on or before the date of this Agreement, an
agreement to this effect, as it relates to any proposed secondary offering by
such Principal Stockholders, in form and substance satisfactory to the
Representative and to counsel for the Representative.
(bb) For so long as any of the Warrants remain outstanding, the
Company shall maintain key person life insurance payable to the Company on the
life of Patrick A. DePaolo, its Chief Executive, in the amount of $1,000,000,
unless his employment with the Company is earlier terminated. In such event,
the Company will obtain a comparable policy on the life of his successor for
the balance of such period.
(cc) The Company will use its best efforts to obtain, as soon after
the Closing Date as is reasonably possible, liability insurance covering its
officers and directors.
(dd) The Company agrees that any conflict of interest arising
between a member of the Company's Board of Directors and the Company in
connection with such Director's dealing with, or obligations to, the Company,
shall be resolved by a vote of the majority of the independent members of the
Board of Directors.
(ee) The Company agrees that it will employ the services of a
financial public relations firm acceptable to the Representative for a period
of at least twelve months following the Effective Date.
4. Sale, Purchase and Delivery of Securities: Closing Date.
(a) The Company agrees to sell to the Underwriters, and the
Underwriters, on the basis of the warranties, representations
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<PAGE>
and agreements of the Company herein, and subject to the terms and conditions
herein, agree to purchase the Securities from the Company at a price of $5.00
per share of Common Stock and $.10 per Warrant, less an underwriting discount
of ten percent (10%) of the offering price for each security. The Underwriters
may allow a concession not exceeding $ per share of Common Stock and
$ per Warrant to Selected Dealers who are members of the National
Association of Securities Dealers, Inc ("NASD"), and to certain foreign
dealers, and such dealers may reallow to NASD members and to certain foreign
dealers a concession not exceeding $ per share of Common Stock and
$ per Warrant.
(b) Delivery of the Securities and payment therefor shall be made
at 10:00 A.M., New York time on the Closing Date, as hereinafter defined, at
the offices of the Representative or such other location as may be agreed upon
by you and the Company. Delivery of certificates for the Common Stock and
Warrants (in definitive form and registered in such names and in such
denominations as you shall request by written notice to the Company delivered
at least two business days' prior to the Closing Date), shall be made to you
for the account of the Underwriters against payment of the purchase price
therefor by certified or bank check or wire transfer payable in New York
Clearing House funds to the order of the Company. The Company will make such
certificates available for inspection at least two business days prior to the
Closing Date at such place as you shall designate.
(c) The "Closing Date" shall be , 1997, or such other date not
later than the sixth business day following the effective date of the
Registration Statement as you shall determine and advise the Company by at
least three full business days' notice, confirmed in writing.
(d) The cost of original issue tax stamps, if any, in connection
with the issuance and delivery of the Securities by the Company to the
Underwriters shall be borne by the Company. The Company will pay and hold the
Underwriters, and any subsequent holder of the Securities, harmless from any
and all liabilities with respect to or resulting from any failure or delay in
paying federal and state stamp taxes, if any, which may be payable or
determined to be payable in connection with the original issuance
20
<PAGE>
or sale to the Underwriters of the Securities or any portions thereof.
5. Sale Purchase and Delivery of Additional Securities: Option
Closing Date.
(a) The Company agrees to sell to the Underwriters, and upon the
basis of the representations, warranties and agreements of the Company herein
contained, subject to the satisfaction of all the terms and conditions of this
Agreement, the Underwriters shall have the option (the "Option") to purchase
the Additional Securities from the Company, at the same price per Security as
set forth in Paragraph 4(a) above. Additional Securities may be purchased
solely for the purpose of covering over-allotments made in connection with the
distribution and sale of the Securities.
(b) The Option to purchase all or part of the Additional Securities
covered thereby is exercisable by you at any time and from time to time before
the expiration of a period of 45 calendar days from the date of the Effective
Date of the Registration Statement (the "Option Period") by written notice to
the Company setting forth the number of Additional Securities for which the
Option is being exercised, the name or names in which the certificates for such
Additional Securities are to be registered and the denominations of such
certificates. Upon each exercise of the Option, the Company shall sell to the
Underwriters the aggregate number of Additional Securities specified in the
notice exercising such Option.
(c) Delivery of the Additional Securities with respect to which
Options shall have been exercised and payment therefor shall be made at 10:00
A.M., New York time on the Option Closing Date, as hereinafter defined, at the
offices of the Representative or at such other locations as may be agreed upon
by you and the Company. Delivery of certificates for Additional Securities
shall be made to you for the account of the Underwriters against payment of the
purchase price therefor by certified or bank check or wire transfer in New York
Clearing House Funds to the order of the Company. The Company will make
certificates for Additional Securities to be purchased at the Option Closing
Date available for inspection at least two business days prior to such Option
Closing Date at such place as you shall designate.
(d) The "Option Closing Date" shall be the date not
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<PAGE>
later than five business days after the end of the Option Period as you shall
determine and advise the Company by at lease three full business days' notice,
unless some other time is agreed upon between you and the Company.
(e) The obligations of the Underwriters to purchase and pay for
Additional Securities at such Option Closing Date shall be subject to
compliance as of such date with all the conditions specified in Paragraph 2
herein and the delivery to you of opinions, certificates and letters, each
dated such Option Closing Date, substantially similar in scope to those
specified in Paragraph 9 herein.
(f) The cost of original issue tax stamps, if any, in connection
with the issuance and delivery of the Additional Securities by the Company to
the Underwriters shall be borne by the Company. The Company will pay and hold
the Underwriters, and any subsequent holder of Additional Securities, harmless
from any and all liabilities with respect to or resulting from any failure or
delay in paying federal and state stamp taxes, if any, which may be payable or
determined to be payable in connection with the original issuance or sale to
the Underwriters of the Additional Securities or any portion thereof.
6. Warrant Solicitation Fee.
The Company agrees to pay Roan Capital Partners L.P. ("Roan"), in its
individual capacity and not as representative of the underwriters, a fee of
seven percent (7%) of the aggregate exercise price of the Warrants if: (i) the
market price of the Common Stock is greater than the exercise price of the
Warrants on the date of exercise; (ii) the exercise of the Warrants are
solicited by a member of the NASD; (iii) the Warrants are not held in a
discretionary account; (iv) the disclosure of compensation arrangements was
made both at the tie of the Offering and at the time of the exercise of the
Warrant; and (v) the solicitation of the Warrant is not in violation of
Regulation M promulgated under the Exchange Act. The Company agrees not to
solicit the exercise of any Warrants other than through Roan and will not
authorize any other dealer to engage in such solicitation without the prior
written consent of the Representative which will not be unreasonably withheld.
The Warrant solicitation fee will not be paid in a non-solicited transaction.
No Warrant solicitation by Roan will occur prior to one year from the Effective
Date.
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7. Representations and Warranties of the Underwriters.
The Underwriters represent and warrant to the Company that:
(a) The Underwriters are each members in good standing of the
National Association of Securities Dealers, Inc., and have complied with all
NASD requirements concerning net capital and compensation to be received in
connection with the Offering.
(b) To the Underwriters' knowledge, there are no claims for
services in the nature of a finder's origination fee with respect to the sale
of the Securities hereunder to which the Company is, or may become, obligated
to pay.
8. Payment of Expenses.
(a) The Company will pay and bear all costs, fees, taxes and
expenses incident to and in connection with: (i) the issuance, offer, sale and
delivery of the Securities, including all expenses and fees incident to the
preparation, printing, filing and mailing (including the payment of postage
with respect to such mailing) of the Registration Statement (including all
exhibits thereto), each Preliminary Prospectus, the Prospectus, and amendments
and post-effective amendments thereof and supplements thereto, and this
Agreement and related documents, Preliminary and Final Blue Sky Memoranda,
including the cost of preparing and copying all copies thereof in quantities
deemed necessary by the Underwriters; (ii) the costs of preparing and printing
all "Tombstone" and other appropriate advertisements; (iii) the printing,
engraving, issuance and delivery of the Common Stock, Warrants, Warrant Shares,
Additional Securities, Underwriters' Warrants and the securities underlying the
Underwriters' Warrant, including any transfer or other taxes payable thereon in
connection with the original issuance thereof; (iv) the qualification of the
Common Stock and Warrants under the state or foreign securities or "Blue Sky"
laws selected by the Underwriters and the Company, and disbursements and
reasonable fees of counsel for the Underwriters in connection therewith (not to
exceed $35,000) plus the filing fees for such states; (v) fees and
disbursements of counsel and accountants for the Company; (vi) other expenses
and disbursements incurred on behalf of the Company (vii) the filing fees
payable to the Commission and the National Association of Securities Dealers,
Inc. ("NASD"); (viii) any listing of the Common Stock and Warrants on a
securities exchange or on NASDAQ.
(b) In addition to the expenses to be paid and borne by the Company
referred to in Paragraph 8(a) above, the Company shall reimburse you at closing
for expenses incurred by you in connection with the Offering (for which you
need not make any accounting), in
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the amount of 3% of the price to the public of the Securities and Additional
Securities sold in the Offering. This 3% non-accountable expense allowance
shall cover the fees of your legal counsel, but shall not include any expenses
for which the Company is responsible under Paragraph 8(a) above, including the
reasonable fees and disbursements of your legal counsel with respect to Blue
Sky matters. As of the date hereof, $ _________ has been advanced by the
Company to the Underwriters with respect to such non-accountable expense
allowance.
(c) In the event that the Company does not or cannot, for any
reason whatsoever other than a default by the Underwriters, expeditiously
proceed with the Offering, or if any of the representations, warranties or
covenants contained in this Agreement are not materially correct or cannot be
complied with by the Company, or business prospects or obligations of the
Company are adversely affected and the Company does not commence or continue
with the Offering at any time or terminates the proposed transaction prior to
the Closing Date, the Company shall reimburse the Underwriters on an
accountable basis for all out-of-pocket expenses actually incurred in
connection with the Underwriting, this Agreement and all of the transactions
hereby contemplated, including, without limitation, your legal fees and
expenses, up to an aggregate total of $100,000 less such sums which have
already been paid.
9. Conditions of Underwriters' Obligations.
The obligations of the Underwriters to consummate the transactions
contemplated by this Agreement shall be subject to the continuing accuracy of
the representations and warranties of the Company contained herein as of the
date hereof and as of the Closing Date, the accuracy of the statements of the
Company and its officers and directors made pursuant to the provisions hereof,
and to the performance by the Company of its covenants and agreements hereunder
and under each certificate, opinion and document contemplated hereunder and to
the following additional conditions:
(a) The Registration Statement shall have become effective not
later than 5:00 p.m., New York time, on the date following the date of this
Agreement, or such later date and time as shall be consented to in writing by
you and, on or prior to the Closing Date, no stop order suspending the
effectiveness of the Registration Statement or the qualification or
registration of the
24
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Securities under the securities laws of any jurisdiction shall have been issued
and no proceedings for that purpose shall have been instituted or shall be
pending or to your knowledge or the knowledge of the Company, shall be
contemplated by the Commission or any such authorities of any jurisdiction and
any request on the part of the Commission or any such authorities for
additional information shall have been complied with to the reasonable
satisfaction of the Commission or such authorities and counsel to the
Underwriters and after the date hereof no amendment or supplement shall have
been filed to the Registration Statement or Prospectus without your prior
consent.
(b) The Registration Statement or the Prospectus or any amendment
thereof or supplement thereto shall not contain an untrue statement of a fact
which is material, or omit to state a fact which is material and is required to
be stated therein or is necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
(c) Between the time of the execution and delivery of this
Agreement and the Closing Date, there shall be no litigation instituted against
the Company or any of its officers or directors and between such dates there
shall be no proceeding instituted or, to the Company's knowledge, threatened
against the Company or any of its officers or directors before or by any
federal, state or county commission, regulatory body, administrative agency or
other governmental body, domestic or foreign, in which litigation or proceeding
an unfavorable ruling, decision or finding would have a material adverse effect
on the Company or its business, business prospects or properties, or have a
material adverse effect on the financial condition or results of operation of
the Company.
(d) Each of the representations and warranties of the Company
contained herein and each certificate and document contemplated under this
Agreement to be delivered to you shall be true and correct at the Closing Date
as if made at the Closing Date, and all covenants and agreements contained
herein and in each such certificate and document to be performed on the part of
the Company, and all conditions contained herein and in each such certificate
and document to be fulfilled or complied with by the Company at or prior to the
Closing Date shall be fulfilled or complied with.
(e) At the Closing Date, you shall have received the
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opinion of Epstein Becker & Green, P.C., counsel to the Company, dated as of
such Closing Date, addressed to the Underwriters and in form and substance
satisfactory to counsel to the Underwriters, to the effect that:
(i) The Company and each of its Subsidiaries are corporations
duly organized, validly existing and in good standing under the laws of the
jurisdiction of their incorporation with full corporate power and authority,
and all licenses, permits, certifications, registrations, approvals, consents
and franchises to own or lease and operate their properties and to conduct
their businesses as described in the Registration Statement. The Company and
each of its Subsidiaries are duly qualified to do business as foreign
corporations and are in good standing in all jurisdictions wherein such
qualification is necessary and failure so to qualify could have a material
adverse effect on the financial condition, results of operations, business or
properties of the Company and each of its Subsidiaries;
(ii) The Company has full corporate power and authority to
execute, deliver and perform the Underwriting Agreement, the Consulting
Agreement, the Warrant Agreement and the Representative's Warrants and to
consummate the transactions contemplated thereby. The execution, delivery and
performance of the Underwriting Agreement, the Consulting Agreement, the
Warrant Agreement and the Representative's Warrants by the Company, the
consummation by the Company of the transactions therein contemplated and the
compliance by the Company with the terms of the Underwriting Agreement, the
Consulting Agreement, the Warrant Agreement and the Representative's Warrants
have been duly authorized by all necessary corporate action, and each of the
Underwriting Agreement, the Consulting Agreement, the Warrant Agreement and the
Representative's Warrants have been duly executed and delivered by the Company.
Each of the Underwriting Agreement, the Consulting Agreement, the Warrant
Agreement and the Representative's Warrants is a valid and binding obligation
of the Company, enforceable in accordance with their respective terms, subject,
as to enforcement of remedies, to applicable bankruptcy, insolvency,
reorganization, moratorium and other laws affecting the rights of creditors
generally and the discretion of courts in granting equitable remedies and
except that enforceability of the indemnification provisions and the
contribution provisions set forth in the Underwriting Agreement may be limited
by the federal securities laws or public policy underlying such laws;
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<PAGE>
(iii) The execution, delivery and performance of the
Underwriting Agreement, the Consulting Agreement, the Warrant Agreement and the
Representative's Warrants by the Company, the consummation by the Company of
the transactions therein contemplated and the compliance by the Company with
the terms of the Underwriting Agreement, the Consulting Agreement, the Warrant
Agreement and the Representative's Warrants do not, and will not, with or
without the giving of notice or the lapse of time, or both, (A) result in a
violation of the Certificate of Incorporation, as the same may be amended, or
Bylaws of the Company or any of its Subsidiaries, (B) to the best of our
knowledge, result in a breach of, or conflict with, any terms or provisions of
or constitute a default under, or result in the modification or termination of,
or result in the creation or imposition of any lien, security interest, charge
or encumbrance upon any of the properties or assets of the Company or any of
its Subsidiaries pursuant to, any indenture, mortgage, note, contract,
commitment or other material agreement or instrument to which the Company or
any of its Subsidiaries are a party or by which the Company or any of its
Subsidiaries or any of their properties or assets are or may be bound or
affected, except where any of the foregoing would not result in a material
adverse effect upon the Company's or any Subsidiaries business or operations;
(C) to the best of our knowledge, violate any existing applicable law, rule or
regulation or judgment, order or decree known to us of any governmental agency
or court, domestic or foreign, having jurisdiction over the Company or any of
its Subsidiaries or any of their properties or businesses; or (D) to the best
of our knowledge, have any effect on any permit, certification, registration,
approval, consent, license or franchise necessary for the Company or any of its
Subsidiaries to own or lease and operate their properties and to conduct their
business or the ability of the Company or any of its Subsidiaries to make use
thereof;
(iv) To the best of our knowledge, no authorization, approval,
consent, order, registration, license or permit of any court or governmental
agency or body (other than under the Act, the Regulations and applicable state
securities or Blue Sky laws) is required for the valid authorization, issuance,
sale and delivery of the Securities, the Additional Securities, the Common
Stock, the Warrants, the Warrant Shares, or the Representative's Warrants, and
the consummation by the Company of the transactions contemplated by the
Underwriting Agreement, the Consulting Agreement, the Warrant Agreement or the
Representative's
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<PAGE>
Warrants;
(v) The Registration Statement was declared effective under the
Act on __________ __, 1997; to the best of our knowledge, no stop order
suspending the effectiveness of the Registration Statement has been issued, and
no proceedings for that purpose have been instituted or are pending, threatened
or contemplated under the Act or applicable state securities laws;
(vi) The Registration Statement and the Prospectus, as of the
Effective Date (except for the financial statements and other financial data
included therein or omitted therefrom, as to which we express no opinion),
comply as to form in all material respects with the requirements of the Act and
Regulations and the conditions for use of a registration statement on Form SB-2
have been satisfied by the Company;
(vii) The description in the Registration Statement and the
Prospectus of statutes, regulations, contracts and other documents have been
reviewed by us, and, based upon such review, are accurate in all material
respects and present fairly the information required to be disclosed, and to
the best of our knowledge, there are no material statutes or regulations, or,
to the best of our knowledge, material contracts or documents, of a character
required to be described in the Registration Statement or the Prospectus or to
be filed as exhibits to the Registration Statement, which are not so described
or filed as required.
To the best of our knowledge, none of the material provisions
of the contracts or instruments described above violates any existing
applicable law, rule or regulation or judgment, order or decree known to us of
any United States governmental agency or court having jurisdiction over the
Company or any of its assets or businesses;
(viii) The outstanding Common Stock and Warrants have been duly
authorized and validly issued. The outstanding Common stock is fully paid an
nonassessable. To the best of our knowledge, none of the outstanding Common
Stock has been issued in violation of the preemptive rights of any stockholder
of the Company. None of the holders of the outstanding Common Stock is subject
to personal liability solely by reason of being such a holder. The authorized
Common Stock conforms to the description thereof contained in the Registration
Statement and Prospectus. To
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<PAGE>
the best of our knowledge, except as set forth in the Prospectus, no holders of
any of the Company's securities has any rights, "demand," "piggyback" or
otherwise, to have such securities registered under the Act;
(ix) The issuance and sale of the Securities, the Additional
Securities, the Common Stock, the Warrants, the Warrant Shares and the
Representative's Warrants have been duly authorized and when issued will be
validly issued, fully paid and nonassessable, and the holders thereof will not
be subject to personal liability solely by reason of being such holders.
Neither the Securities, the Additional Securities, nor the Common Stock are
subject to preemptive rights of any stockholder of the Company. The
certificates representing the Securities are in proper legal form;
(x) The issuance and sale of the Warrant Shares and the
Representative's Warrants have been duly authorized and, when paid for, issued
and delivered pursuant to the terms of the Underwriters' Agreement or the
Representative's Warrants, as the case may be, the Warrants, the Warrant Shares
and the Representative's Warrants will constitute the valid and binding
obligations of the Company, enforceable in accordance with their terms, to
issue and sell the Warrants, the Warrant Shares and/or Representative's
Warrants. All corporate action required to be taken for the authorization,
issuance and sale of the securities has been duly, validly and sufficiently
taken. The Common Stock and the Warrants have been duly authorized by the
Company to be offered in the form of the Securities. The Warrants, the Warrant
Shares and the Representative's Warrants conform to the descriptions thereof
contained in the Registration Statement and Prospectus;
(xi) The Underwriters have acquired good title to the
Securities, free and clear of all liens, encumbrances, equities, security
interests and claims, provided that the Underwriters are bona fide purchasers
as defined in ss.8-302 of the Uniform Commercial Code;
(xii) Assuming that the Underwriters exercise the
over-allotment option to purchase the Additional Securities and make payments
therefor in accordance with the terms of the Underwriting Agreement, upon
delivery of the Additional Securities to the Underwriters thereunder, the
Underwriters will acquire good title to the Additional Securities, free and
clear of any liens, encumbrances, equities, security interests and claims,
provided
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<PAGE>
that the Underwriters are bona fide purchasers as defined in ss.8-302 of the
Uniform Commercial Code;
(xiii) To the best of our knowledge, there are no claims,
actions, suits, proceedings, arbitrations, investigations or inquiries before
any governmental agency, court or tribunal, foreign or domestic, or before any
private arbitration tribunal, pending or threatened against the Company or any
of its Subsidiaries or involving their properties or businesses, other than as
described in the Prospectus, such description being accurate, and other than
litigation incident to the kind of business conducted by the Company or any of
its Subsidiaries which, individually and in the aggregate, is not material,
and, except as otherwise disclosed in the Prospectus and the Registration
Statement, the Company and its Subsidiaries have complied with all federal and
state laws, statutes and regulations concerning its business;
(xiv) We have participated in reviews and discussions in
connection with the preparation of the Registration Statement and the
Prospectus. Although we are not passing upon and do not assume responsibility
for the accuracy, completeness or fairness of the statements contained in the
Registration Statement, no facts came to our attention which lead us to believe
that (A) the Registration Statement (except as to the financial statements and
other financial data contained therein, as to which we express no opinion), on
the Effective Date, contained any untrue statement of a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, or that (B) the
Prospectus (except as to the financial statements and other financial data
contained therein, as to which we express no opinion) contains any untrue
statement or a material fact or omits to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading;
(f) On or prior to the Closing Date, counsel for the Underwriters
shall have been furnished such documents, certificates and opinions as they may
reasonably require for the purpose of enabling them to review the matters
referred to in subparagraph (e) of this Paragraph 9, or in order to evidence
the accuracy, completeness or satisfaction of any of the representations,
warranties or conditions herein contained.
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<PAGE>
(g) Prior to the Closing Date:
(i) There shall have been no material adverse change in the
condition or prospects or the business activities, financial or otherwise, of
the Company from the latest dates as of which such condition is set forth in
the Registration Statement and Prospectus;
(ii) There shall have been no transaction, outside the ordinary
course of business, entered into by the Company from the latest date as of
which the financial condition of the Company is set forth in the Registration
Statement and Prospectus which is material to the Company, which is either (x)
required to be disclosed in the Prospectus or Registration Statement and is not
so disclosed, or (y) likely to have material adverse effect on the Company's
business or financial condition;
(iii) The Company shall not be in default under any material
provision of any instrument relating to any outstanding indebtedness, except as
described in the Prospectus;
(iv) No material amount of the assets of the Company shall have
been pledged, mortgaged or otherwise encumbered, except as set forth in the
Registration Statement and Prospectus;
(v) No action, suit or proceeding, at law or in equity, shall
have been pending or to its knowledge threatened against the Company or
affecting any of its properties or businesses before or by any court or federal
or state commission, board or other administrative agency wherein an
unfavorable decision, ruling or finding would materially and adversely affect
the business, operations, prospects or financial condition or income of the
Company, taken as a whole, except as set forth in the Registration Statement
and Prospectus; and
(vi) No stop order shall have been issued under the Act and no
proceedings therefor shall have been initiated or, to the Company's knowledge,
threatened by the Commission.
(vii) Each of the representations and warranties of the Company
contained in this Agreement and in each certificate and document contemplated
under this Agreement to be delivered to you was, when originally made and is at
the time such certificate is dated, true and correct.
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<PAGE>
(h) Concurrently with the execution and delivery of this Agreement
and at the Closing Date, you shall have received a certificate of the Company
signed by the Chief Executive Officer of the Company and the principal
financial officer of the Company, dated as of the Closing Date, to the effect
that the conditions set forth in subparagraph (h) above have been satisfied and
that, as of the Closing Date, the representations and warranties of the Company
set forth in Paragraph 2 herein and the statements in the Registration
Statement and Prospectus were and are true and correct. Any certificate signed
by any of officer of the Company and delivered to you or for counsel for the
Underwriters shall be deemed a representation and warranty by the Company to
the Underwriters as to the statements made therein.
(i) At the time this Agreement is executed, and at the Closing
Date, you shall have received a letter, addressed to the Underwriters and in
form and substance satisfactory in all respects to you and counsel for the
Underwriters, and including estimates of the Company's revenues and results of
operations for the period ending at the and of the month immediately preceding
the Effective Date and results of the comparable period during the prior fiscal
year, from Jump, Green, Holman and Company, dated as of the date of this
Agreement and as of the Closing Date.
(j) All proceedings taken in connection with the authorization,
issuance or sale of the Common Stock, Warrants, Warrant Shares, Additional
Securities, the Representative's Warrants and the Representative's Warrant
Shares as herein contemplated shall be satisfactory in form and substance to
you and to counsel to the Underwriters, and the Underwriters shall have
received from such counsel an opinion, dated as the Closing Date with respect
to such of these proceedings as you may reasonably require.
(k) The Company shall have furnished to you such certificates,
additional to those specifically mentioned herein, as you may have reasonably
requested in a timely manner as to the accuracy and completeness, at the
Closing Date, of any statement in the Registration Statement or the Prospectus,
as to the accuracy, at the Closing Date, of the representations and warranties
of the
32
<PAGE>
Company herein and in each certificate and document contemplated under this
Agreement to be delivered to you, as to the performance by the Company of its
obligations hereunder and under each such certificate and document or as to the
fulfillment of the conditions concurrent and precedent to your obligations
hereunder.
(l) The obligation of the Underwriters to purchase Additional
Securities hereunder is subject to the accuracy of the representations and
warranties of the Company contained herein on and as of the Option Closing Date
and to the satisfaction on and as of the Option Closing Date of the conditions
set forth herein.
(m) On the Closing Date there shall have been duly tendered to you
for your account the appropriate number of shares of Common Stock and Warrants
constituting the Securities.
10. Indemnification and Contribution.
(a) Subject to the conditions set forth below, the Company agrees
to indemnify and hold harmless the Underwriters and each person, if any, who
controls the Underwriters ("controlling person") within the meaning of either
Section 15 of the Act or Section 20 of the Exchange Act, against any and all
losses, liabilities, claims, damages, actions and expenses or liability, joint
or several, whatsoever (including but not limited to any and all expense
whatsoever reasonably incurred in investigating, preparing or defending against
any litigation, commenced or threatened, or any claim whatsoever), joint or
several, to which it or such controlling persons may become subject under the
Act, the Exchange Act or under any other statute or at common law or otherwise
or under the laws of foreign countries, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or any Preliminary Prospectus or the Prospectus (as from
time to time amended and supplemented); in any post-effective amendment or
amendments or any new registration statement and prospectus in which is
included the Warrant Shares of the Company issued or issuable upon exercise of
the Warrants, or Underwriters' Warrant Shares upon exercise of the
Underwriters' Warrants; or in any application or other document or written
communication (in this Paragraph 10 collectively called "application") executed
by the Company or based upon written information furnished by the Company filed
in any jurisdiction in order to qualify the Common Stock, Warrants, Warrant
Shares, Additional Securities, Underwriters'
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<PAGE>
Warrants and Underwriters' Warrant Shares (including the Shares issuable upon
exercise of the Warrants underlying the Underwriters' Warrants) under the
securities laws thereof or filed with the Commission or any securities
exchange; or the omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the statements therein not
misleading (in the case of the Prospectus, in the light of the circumstances
under which they were made), unless such statement or omission was made in
reliance upon or in conformity with written information furnished to the
Company with respect to the Underwriters by or on behalf of the Underwriters
expressly for use in any Preliminary Prospectus, the Registration Statement or
Prospectus, or any amendment or supplement thereof, or in application, as the
case may be. Notwithstanding the foregoing, the Company shall have no
liability under this Paragraph 10(a) if any such untrue statement or omission
made in a Preliminary Prospectus, is cured in the Prospectus and the
Underwriters failed to deliver to the person or persons alleging the liability
upon which indemnification is being sought, at or prior to the written
confirmation of such sale, a copy of the Prospectus. This indemnity will be in
addition to any liability which the Company may otherwise have.
(b) The Underwriters agree to indemnify and hold harmless the
Company and each of the officers and directors of the Company who have signed
the Registration Statement and each other person, if any, who controls the
Company within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, to the same extent as the foregoing indemnity from the Company to
the Underwriters in Paragraph 10(a), but only with respect to any untrue
statement or alleged untrue statement of any material fact contained in or any
omission or alleged omission to state a material fact required to be stated in
any Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment or supplement thereof or necessary to make the statements therein not
misleading or in any application made solely in reliance upon, and in
conformity with, written information furnished to the Company by you
specifically expressly for use in the preparation of such Preliminary
Prospectus, the Registration Statement or Prospectus directly relating to the
transactions effected by the Underwriters in connection with this Offering.
This indemnity agreement will be in addition to any liability which the
Underwriters may otherwise
34
<PAGE>
have. Notwithstanding the foregoing, the Underwriters shall have no liability
under this Paragraph 10(b) if any such untrue statement or omission made in a
Preliminary Prospectus is cured in the Prospectus, and the Prospectus is
delivered to the person or persons alleging the liability upon which
indemnification is being sought.
(c) If any action is brought against any indemnified party (the
"Indemnitee") in respect of which indemnity may be sought against another party
pursuant to the foregoing (the "Indemnitor"), the Indemnitor shall assume the
defense of the action, including the employment and fees of counsel (reasonably
satisfactory to the Indemnitee) and payment of expenses. Any Indemnitee shall
have the right to employ its or their own counsel in any such case, but the
fees and expenses of such counsel shall be at the expense of such Indemnitee
unless the employment of such counsel shall have been authorized in writing by
the Indemnitor in connection with the defense of such action. If the Indemnitor
shall have employed counsel to have charge of the defense or shall previously
have assumed the defense of any such action or claim, the Indemnitor shall not
thereafter be liable to any Indemnitee in investigating, preparing or defending
any such action or claim. Each Indemnitee shall promptly notify the Indemnitor
of the commencement of any litigation or proceedings against the Indemnitee in
connection with the issue and sale of the Common Stock, Warrants, Warrants
Shares, Additional Securities, Underwriters' Securities or in connection with
the Registration Statement or Prospectus.
(d) In order to provide for just and equitable contribution under
the Act in any case in which: (i) the Underwriters make a claim for
indemnification pursuant to Paragraph 10 hereof, but it is judicially
determined (by the entry of a final judgment or decree by a court of competent
jurisdiction and the time to appeal has expired or the last right of appeal has
been denied) that such indemnification may not be enforced in such case
notwithstanding the fact that this Paragraph 10 provides for indemnification of
such case; or (ii) contribution under the Act may be required on the part of
the Underwriters in circumstances for which indemnification is provided under
this Paragraph 10, then, and in each such case, the Company and the
Underwriters shall
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<PAGE>
contribute to the aggregate losses, claims, damages or liabilities to which
they may be subject (after any contribution from others) in such proportion so
that the Underwriters are responsible for the portion represented by dividing
the total compensation received by the Underwriters herein by the total
purchase price of all Securities sold in the public offering and the Company is
responsible for the remaining portion; provided, that in any such case, no
person guilty of a fraudulent misrepresentation (within the meaning of Section
11 (f) of the Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
The foregoing contribution agreement shall in no way affect the
contribution liabilities of any persons having liability under Section 11 of
the Act other than the Company and the Underwriters. As used in this Paragraph
10, the term "Underwriters" includes any officer, director, or other person who
controls the Underwriters within the meaning of Section 15 of the Act, and the
word "Company" includes any of officer, director or person who controls the
Company within the meaning of Section 15 of the Act. If the full amount of the
contribution specified in this paragraph is not permitted by law, then the
Underwriters and each person who controls the Underwriters shall be entitled to
contribution from the Company to the full extent permitted by law. No
contribution shall be requested with regard to the settlement of any matter
from any party who did not consent to the settlement.
(e) Within fifteen (15) days after receipt by any party to this
Agreement (or its representative) of notice of the commencement of any action,
suit or proceeding, such party will, if a claim for contribution in respect
thereof is made against another party (the "contributing party"), notify the
contributing party of the commencement thereof, but the omission so to notify
the contributing party will not relieve it from any liability it may have to
any other party other than for contribution hereunder.
In case any such action, suit or proceeding is brought against any
party, and such party notifies a contributing party or his or its
representative of the commencement thereof within the aforesaid fifteen (15)
days, the contributing party will be entitled to participate therein with the
notifying party and any other contributing party similarly notified. Any such
contributing party shall not be liable to any party seeking contribution on
account of any settlement of any claim, action or proceeding effected by such
party seeking contribution without the written consent of such contributing
party. The indemnification provisions contained in this Paragraph 10 are in
addition to any other rights
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<PAGE>
or remedies which either party hereto may have with respect to the other or
hereunder.
11. Representations Warranties Agreements to Survive Delivery.
The respective indemnity and contribution agreements by the
Underwriters and the Company contained in Paragraph 10 hereof, and the
covenants, representations and warranties of the Company and the Underwriters
set forth in this Agreement, shall remain operative and in full force and
effect regardless of (i) any investigation made by the Underwriters or on its
behalf or by or on behalf of any person who controls the Underwriters, or by
the Company or any controlling person of the Company or any director or any of
officer of the Company, (ii) acceptance of any of the Securities and payment
therefor, or (iii) any termination of this Agreement, and shall survive the
delivery of the Securities and any successor of the Underwriters or the
Company, or of any person who controls you or the Company or any other
indemnified party, as the case may be, shall be entitled to the benefit of such
respective indemnity and contribution agreements. The respective indemnity and
contribution agreements by the Underwriters and the Company contained in this
Paragraph 11 shall be in addition to any liability which the Underwriters and
the Company may otherwise have.
12. Effective Date of This Agreement and Termination Thereof.
(a) This Agreement shall become effective at 10:00 A.M., New York
time, on the first full business day following the day on which you and the
Company receive notification that the Registration Statement became effective.
(b) This Agreement may be terminated by the Representative by
notifying the Company at any time on or before the Closing Date, if any
domestic or international event or act or occurrence has materially disrupted,
or in your opinion will in the immediate future materially disrupt, securities
markets; or if trading on the New York Stock Exchange, the American Stock
Exchange, or in the over-the-counter market shall have been suspended, or
minimum or maximum prices for trading shall have been fixed, or maximum ranges
for prices for securities shall have been required on the over-the-counter
market by the NASD or NASDAQ or by order of the Commission or any other
governmental authority having
37
<PAGE>
jurisdiction; or if a moratorium in foreign exchange trading by major
international banks or persons has been declared; or if the Company shall have
sustained a loss material or substantial to the Company taken as a whole by
fire, flood, accident, hurricane, earthquake, theft, sabotage or other calamity
or malicious act which, whether or not such loss shall have been insured, will,
in your opinion, make it inadvisable to proceed with the delivery of the
Securities; or if there shall have been a material adverse change in the
conditions of the securities market in general, as in your reasonable judgment
would make it inadvisable to proceed with the offering, sale and delivery of
the Securities; or if there shall have been a material adverse change in the
financial or securities markets, particularly in the over-the-counter market,
in the United States having occurred since the date of this Agreement.
(c) If you elect to prevent this Agreement from becoming effective
or to terminate this Agreement as provided in this Paragraph 12, the Company
shall be notified promptly by you by telephone or facsimile, confirmed by
letter.
(d) If this Agreement shall not become effective by reason of an
election of the Representative pursuant to this Paragraph 12 or if this
Agreement shall not be carried out within the time specified herein by reason
of any failure on the part of the Company to perform any undertaking, or to
satisfy any condition of this Agreement by it to be performed or satisfied, the
sole liability of the Company to the Underwriters, in addition to the
obligations assumed by the Company pursuant to Paragraph 8 herein, will be to
reimburse the Underwriters for the following: (i) Blue Sky counsel fees and
expenses to the extent set forth in Paragraph 8(a)(iv); (ii) Blue Sky filing
fees; and (iii) such reasonable out-of-pocket expenses of the Underwriters (
including the fees and disbursements of their counsel), to the extent set forth
in Paragraph 8(c), in connection with this Agreement and the proposed offering
of the Securities, but in no event to exceed the sum of $100,000 less such
amounts already paid.
Notwithstanding any contrary provision contained in this Agreement,
any election hereunder or any termination of this Agreement, and whether or not
this Agreement is otherwise carried out, the provisions of Paragraph 8 and 10
hereof shall not be in any way affected by such election or termination or
failure to
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carry out the terms of this Agreement or any part hereof.
13. Notices.
All communications hereunder, except as herein otherwise specifically
provided, shall be in writing and, if sent to the Underwriters, shall be
mailed, delivered or telegraphed and confirmed to the Representative at Roan
Capital Partners L.P., 40 East 52nd Street, New York, New York 10022,
Attention: Timothy Ryan, with a copy thereof to Alexander Bienenstock, Esq.,
Gusrae Kaplan & Bruno, 120 Wall Street, New York, New York 10005, and, if sent
to the Company, shall be mailed, delivered or telegraphed and confirmed to the
Company at 567-1 South Leonard Street, Waterbury, Connecticut 06708, Attention:
Patrick A. DePaolo, President, with a copy thereof to Epstein Becker & Green,
P.C., 250 Park Avenue, New York, New York 10177, Attention: Joseph A. Smith,
Esq.
14. Parties.
This Agreement shall inure solely to the benefit of and shall be
binding upon, the Underwriters, the Company and the controlling persons,
directors and officers referred to in Paragraph 10 hereof, and their respective
successors, legal representatives and assigns, and no other person shall have
or be construed to have any legal or equitable right, remedy or claim under or
in respect of or by virtue of this Agreement or any provision herein contained.
15. Construction.
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York and shall supersede any
agreement or understanding, oral or in writing, express or implied, between the
Company and you relating to the sale of any of the Securities.
16. Jurisdiction and Venue.
The Company agrees that the courts of the State of New York shall have
jurisdiction over any litigation arising from this Agreement, and venue shall
be proper in the Southern District of New York.
17. Counterparts.
This agreement may be executed in counterparts.
If the foregoing correctly sets forth the under-
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<PAGE>
standing between you, the Selling Stockholders and the Company, please so
indicate in the space provided below for that purpose, whereupon this letter
shall constitute a binding agreement between us.
Very truly yours,
DISCAS, INC.
By:
-------------------------------
Patrick A. DePaolo, President
Accepted as of the date first
above written:
ROAN CAPITAL PARTNERS L.P.
By:
-------------------------------
<PAGE>
SCHEDULE A
Number of Shares Number of
of Common Stock Warrants to
to be Purchased to be Purchased
--------------- ---------------
Underwriter
- -----------
Roan Capital Partners L.P.
------- -------
Total: 800,000 800,000
======= =======
<PAGE>
Exhibit 1.3
DISCAS, INC.
800,000 shares and of Common Stock
and
800,000 Redeemable Common Stock Purchase Warrants
SELECTED DEALERS AGREEMENT
____________ __, 1997
Dear Sirs:
Roan Capital Partners L.P. is the representative (the
"Representative") of the several underwriters, (collectively with the
Representative, the "Underwriters") named in the Prospectus dated , 1997. The
Underwriters have agreed to purchase, subject to the terms and conditions set
forth in the Underwriting Agreement referred to in the Prospectus, an aggregate
of 800,000 shares of common stock, par value $.0001 per share (the "Common
Stock"), and 800,000 redeemable common stock purchase warrants (the "Warrants")
of Discas, Inc. (the "Company"), and up to 120,000 additional shares of Common
Stock and 120,000 additional Warrants (the "Additional Securities"), pursuant
to an option for the purpose of covering over-allotments (said 800,000 shares
of Common Stock and 800,000 Warrants plus any of said Additional Securities
purchased upon exercise of the option being herein collectively called the
"Securities"). The Securities and the terms upon which they are to be offered
for sale by the Underwriters are more particularly described in the Prospectus.
1. The Securities are to be offered to the public by the Underwriters
at a price of $5.00 per share of Common Stock and $.10 per Warrant (herein
called the "Public Offering Price") and in accordance with the terms of the
offering set forth in the Prospectus.
2. The Underwriters are offering, subject to the terms and conditions
hereof, a portion of the Securities for sale to certain dealers which are
members of the National Association of Securities Dealers, Inc. and agree to
comply with the provisions of Section 24 of Article III of the Rules of Fair
Practice of such Association
<PAGE>
and to foreign dealers or institutions ineligible for membership in said
Association which agree (a) not to resell Securities (i) to purchasers located
in, or to persons who are nationals of, the United States of America or (ii)
when there is a public demand for the Securities to persons specified as those
to whom members of said Association participating in a distribution may not
sell; and (b) to comply, as though such foreign dealer or institution were a
member of such Association, with Sections 8, 24, 25 (to the extent applicable
to foreign nonmember brokers or dealers) and Section 36 of such Rules (such
dealers and institutions agreeing to purchase Common Stock and/or Warrants
hereunder being hereinafter referred to as "Selected Dealers") at the Public
Offering Price less a selling concession of $. per share of Common Stock and $.
per Warrant, payable as hereinafter provided, out of which concession an amount
not exceeding $. per share of Common Stock and $. per Warrant may be reallowed
by Selected Dealers to members of the National Association of Securities
Dealers, Inc. or to foreign dealers or institutions ineligible for membership
therein which agree as aforesaid. The Underwriters may be included among the
Selected Dealers.
3. The Representative shall act as your representative under this
Agreement and shall have full authority to take such action as the
Representative may deem advisable in respect to all matters pertaining to the
public offering of the Securities.
4. If you desire to purchase any of the Securities, your application
should reach us promptly by telephone or facsimile at the office of the
Representative, and we will use our best efforts to fill the same. We reserve
the right to reject all subscriptions in whole or in part, to make allotments
and to close the subscription books at any time without notice. The shares of
Common Stock and the Warrants allotted to you will be confirmed, subject to the
terms and conditions of this Agreement.
5. The privilege of purchasing the shares of Common Stock and the
Warrants is extended to you by the Representative only if they may lawfully
sell the Securities to dealers in your state.
6. Any of the shares of Common Stock and Warrants purchased by you
under the terms of this Agreement may be immediately reoffered to the public in
accordance with the terms of the offering set forth herein and in the
Prospectus, subject to the securities laws of the various states. Neither you
nor any other person is or has been authorized to give any information or to
make any representations in connection with the sale of Securities other
<PAGE>
than as contained in the Prospectus.
7. This Agreement will terminate when we shall have determined that
the public offering of the Securities has been completed and upon telegraphic
notice to you of such termination, but, if not previously terminated, this
Agreement will terminate at the close of business on the 20th full business day
after the date hereof; provided, however, that we shall have the right to
extend this Agreement for an additional period or periods not exceeding 20 full
business days in the aggregate upon telegraphic notice to you. Promptly after
the termination of this Agreement there shall become payable to you the selling
concession on all shares of Common Stock and Warrants which you shall have
purchased hereunder and which shall not have been purchased or contracted for
(including certificates issued upon transfer) by us, in the open market or
otherwise (except pursuant to Section 10 hereof), during the terms of this
Agreement for the account of the Underwriters.
8. For the purpose of stabilizing the market in the Common Stock and
Warrants of the Company, we have been authorized to make purchases and sales
thereof, in the open market or otherwise, and, in arranging for sale of the
Securities, to over-allot.
9. You agree to advise us from time to time, upon request, prior to
the termination of this Agreement, of the number of Securities purchased by you
hereunder and remaining unsold at the time of such request, and, if in our
opinion any such Securities shall be needed to make delivery of the Securities
sold or over-allotted for the account of the Underwriters, you will, forthwith
upon our request, grant to us, or such party as we determine for, our account
the right, exercisable promptly after receipt of notice from you that such
right has been granted, to purchase, at the Public Offering Price less the
selling concession as we shall determine, such number of Securities owned by
you as shall have been specified in our request.
10. On becoming a Selected Dealer and in offering and selling the
Securities, you agree to comply with all applicable requirements of the
Securities Act of 1933, the Securities Exchange Act of 1934 and the NASD Rules
of Fair Practice.
11. Upon application, you will be informed as to the jurisdictions in
which we have been advised that the Securities have been qualified for sale
under the respective securities or blue sky laws of such jurisdictions, but we
assume no obligation or responsibility as to the right of any Selected Dealer
to sell the
<PAGE>
Securities in any jurisdiction or as to any sale therein.
12. Additional copies of the Prospectus will be supplied to you in
reasonable quantities upon request.
13. It is expected that public advertisement of the Securities will be
made on the first day after the effective date of the Registration Statement.
Twenty-four hours after such advertisement shall have appeared but not before,
you will be free to advertise at your own expense, over your own name, subject
to any restrictions of local laws, but your advertisement must conform in all
respects to the requirements ofthe Securities Act of 1933, and we will not be
under any obligation or liability in respect of your advertisement.
14. No Selected Dealer is authorized to act as our agent or to make
any representation as to the existence of an agency relationship otherwise to
act on our behalf in offering or selling the Securities to the public or
otherwise.
15. We shall not be under any liability for or in respect of the
value, validity or form of the certificates for the shares of Common Stock and
Warrants, or delivery of the certificates for the Common Stock or Warrants, or
the performance by anyone of any agreement on his part, or the qualification of
the Securities for sale under the laws of any jurisdiction, or for or in
respect of any matter connected with this Agreement, except for lack of good
faith and for obligations expressly assumed by us in this Agreement. The
foregoing provisions shall be deemed a waiver of any liability imposed under
the Securities Act of 1933.
16. Payment for the Securities sold to you hereunder is to be made at
the Public Offering Price, on or about , 1997, or such later date as we may
advise, by certified or official bank check payable to the order of Roan
Capital Partners, L.P., in current New York Clearing House funds at such place
as we shall specify on one day's notice to you against delivery of certificates
for the Common Stock and Warrants.
17. Notice to us should be addressed to us at the office of Roan
Capital Partners, L.P., 40 East 52nd Street, New York, New York 10022. Notices
to you shall be deemed to have been duly given if telefaxed or mailed to you at
the address to which this letter is addressed.
<PAGE>
18. If you desire to purchase any of the Securities, please confirm
your application by signing and returning to us your confirmation on the
duplicate copy of this letter enclosed herewith even though you have previously
advised us thereof by telephone or facsimile.
Dated: , 1997
------------- --
ROAN CAPITAL PARTNERS, L.P.
By:
---------------------------------
Accepted and agreed:
as to shares of Common Stock
and Warrants this day
of , 1997.
By:
---------------------------------
<PAGE>
Exhibit 2.1
ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT ("Agreement"), effective as of this 30th
day of October, 1996, by and between CHRISTIE ENTERPRISES, INC. ("Seller"), a
corporation organized under the laws of the State of New Jersey, with a
principal business in Kenilworth, New Jersey, and CHRISTIE PRODUCTS, INC.
("Buyer"), a corporation organized under the laws of the State of Delaware,
with a principal place of business in Waterbury, Connecticut.
W I T N E S S E T H:
--------------------
WHEREAS, Seller is in the business of molding and manufacturing
plastic and plastic based products, such business being conducted at a
manufacturing facility located at 80 Market Street, Kenilworth, New Jersey (the
"Facility"); and
WHEREAS, Buyer desires to purchase from Seller and Seller desires to
sell to Buyer, upon the terms and subject to the conditions contained herein,
all of Seller's right, title and interest in and to the business and
substantially all of the operating assets of Seller, including, without
limitation, those listed or described in Section 1.1 of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises hereinafter
set forth and other good and valuable consideration had and received, the
parties hereto, upon the terms and subject to the conditions contained herein,
hereby agree as follows:
ARTICLE I
---------
PURCHASE AND SALE OF ASSETS
---------------------------
1.1 Assets to be Purchased. Upon the terms and subject to the
conditions contained herein, Seller shall sell, transfer and deliver (or cause
to be sold, transferred and delivered) to Buyer,
1
<PAGE>
and Buyer shall purchase and acquire from Seller, at the Closing (as defined in
Section 5.1 hereof) for the consideration hereinafter set forth in Section
2.01(A), the business of Seller and all of Seller's right, title and interest
in and to the following assets, wherever situated, by Warranty Bill of Sale, in
the form of Exhibit 1.1 attached hereto, except the assets described as
Retained Assets in Section 1.2 hereof (such business and assets to be acquired
are hereinafter sometimes collectively referred to as the "Acquired Assets")
and subject to no liabilities of any nature:
(a) All machinery, equipment, molds and furniture including those
items shown on Exhibit 1.1(a), attached hereto;
(b) All corporate and business records, customer lists, supplier
lists, promotional material and technical data;
(c) 1985 Ford Series Model R802 with 26' aluminum van body (VIN.
1FDXR8OUOFVZ12260);
(d) Any trademarks, trade names, logos, copyrights, patents and
applications for any of the foregoing and rights therein and all inventions,
discoveries, business methods, and trade secrets pertaining to Seller's
Business, including those items shown on Exhibit 1.1(d), attached hereto;
(e) All of the rights under contracts, agreements, options,
commitments, understandings, and undertakings, whether oral or written,
inclusive of all employment agreements and other such agreements related to the
internal affairs of Seller, and all orders, requests, inquiries, and
expressions of interest made by or to Seller for the sale or furnishing of
inventory, products, goods, services, materials, or supplies ("Contracts"), to
which Seller is a party;
(f) All licenses, permits, approvals, and the like issued to Seller by
any governmental
2
<PAGE>
entity;
(g) All leasehold improvements to the Facility; and
(h) All of the other assets of Seller, including, but not limited to,
the business and goodwill as a going concern of Seller, the right to use the
corporate name "Christie Enterprises, Inc." and telephone numbers.
1.2 Retained Assets. Notwithstanding anything contained in Section 1.1
hereof to the contrary, Seller shall not sell, transfer, or deliver, and Buyer
shall not purchase or acquire from Seller Finished Good Inventory, Raw Material
Inventory, cash or accounts receivable. At the time of closing, Seller shall
submit to Buyer a list of its outstanding and uncollected accounts receivable,
to be attached hereto as Exhibit 1.2. Buyer shall assume no responsibility to
collect Seller's accounts receivable. The parties agree to consult with each
other with respect to any accounts receivable as to which there is any customer
dispute. After closing, in the event that Buyer receives payment for or on
account of any obligation owed to Seller prior to the closing of title, the
funds so received shall be accepted in trust for the benefit of Seller and
shall be remitted in kind to Seller within twenty-four (24) hours of the
receipt of same. This representation shall expressly survive the closing.
1.3 No Liabilities to be Assumed. Buyer shall not assume any
liabilities of Seller, except that it shall be the responsibility of Seller to
pay for outstanding trade debt owed by Seller from the proceeds of this sale,
in the sum of approximately ONE HUNDRED TWENTY-FIVE THOUSAND DOLLARS
($125,000.00).
ARTICLE II
----------
PURCHASE PRICE AND RELATED MATTERS
----------------------------------
2.1 Purchase Price for Acquired Assets. In full consideration for the
Acquired Assets,
3
<PAGE>
and upon the terms and subject to the conditions set forth in this Agreement,
Buyer shall pay to Seller ONE MILLION FIVE HUNDRED THOUSAND DOLLARS
($1,500,000.00) plus or minus any adjustments pursuant to Section 2.3 of this
Agreement (the "Purchase Price").
2.2 Payment of Purchase Price/Security. The Purchase Price shall be
payable to Seller as follows:
(a) FIVE HUNDRED THOUSAND DOLLARS ($500,000.00), minus any amounts
then owed by Seller to DISCAS, INC. for sixty (60) or more days at the time of
closing, in cash, certified or good and sufficient check at the time of
closing; and
(b) ONE MILLION DOLLARS ($1,000,000.00) by Buyer's and Discas, Inc.'s
Convertible Promissory Note in the form of Exhibit 2.2.1, attached hereto,
which Note shall be secured by: (i) a first position security interest in the
molds of Seller being purchased by Buyer; and by (ii) a second position
security interest in the machinery and equipment of Seller being purchased by
Buyer (Exhibit 1.1(a)). The Security Agreement shall be in the form of Exhibit
2.2.2, attached hereto.
2.3 Adjustments. Personal property taxes, deposits as agreed, and
prepaid items as agreed shall be adjusted and paid at the closing.
2.4 Allocation of Purchase Price. The Purchase Price shall be
allocated among the Acquired Assets in accordance with their relative fair
market value as described in a Exhibit to be prepared by the accountants for
the parties and attached hereto as Exhibit 2.4.
Seller and Buyer agree that each will report the purchase and sale of
the Acquired Assets in accordance with the allocations set forth in Exhibit 2.4
for all federal, state and local tax purposes. Seller and Buyer also agree to
indemnify and hold harmless the other party from and against any and
4
<PAGE>
all losses, liabilities, and expenses, including, without limitation,
additional income taxes and fees and disbursements of counsel incurred by the
indemnified party as a result of the failure of the indemnifying party to so
report the purchase and sale of the Acquired Assets.
ARTICLE III
-----------
REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
Seller and Frank Criscitiello represent and warrant to Buyer and its
Stockholders, that:
3.1 Organization, Standing, Power and Authority. Seller is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of New Jersey. Seller has all requisite power and authority
to own, lease, and operate the Acquired Assets and to conduct its business as
it has been and is now conducted
3.2 Capital of Seller. Frank Criscitiello, Ann Criscitiello, Gary
Criscitiello and Gregory Criscitiello are the sole owners of all of the issued
and outstanding capital stock of Seller, all of which stock has been duly
authorized and validly issued and is fully paid and non-assessable. Seller has
no other equity securities, of any class, issued, reserved for issuance, or
outstanding. There are no outstanding options, warrants, agreements, or rights
to subscribe for or to purchase, or commitments to issue, equity securities of
Seller.
3.3 Authorization, Execution and Delivery of Agreements. Seller has
all requisite power and authority to enter into this Agreement and to perform
the obligations to be performed by it hereunder. This Agreement has been duly
authorized, executed and delivered by and constitutes the valid and legally
binding obligation of Seller. Upon delivery of the assets to Buyer at the
Closing as herein contemplated, Buyer shall have lawful record and good and
marketable title to all of the Acquired Assets, free and clear of any material
liens, charges, encumbrances, restrictions, or adverse
5
<PAGE>
claims.
3.4 Non-Violation of Laws, Orders and Agreements. The execution and
delivery of this Agreement by Seller and the performance of all of its
obligations hereunder are not in violation or breach of, do not conflict with
or constitute a default under, and will not accelerate or permit the
acceleration of the performance required by any of the terms or provisions of
the Articles of Incorporation or By-Laws of Seller or of any note, debt
instrument, security agreement, or mortgage, or any other contract or
agreement, written or oral, to which Seller is a party or by which Seller is
bound, and will not be an event which, after notice or lapse of time or both,
will result in any such violation, breach, conflict, default, or acceleration.
The execution and delivery of this Agreement by Seller and the performance of
its obligations hereunder will not, to the best of its knowledge, violate any
law, judgment, decree, order, rule, or regulation of any governmental authority
or court, whether federal, state, or local, at law or in equity, applicable to
Seller and will not result in the creation or imposition of any material lien,
possibility of a material lien, encumbrance, equity, restriction, or claim in
favor of any third person upon any of the Acquired Assets.
3.5 Consent and Approvals. To the best of the knowledge of Seller
there is no requirement for any consent, approval, or authorization of or
filing with any court, governmental authority, or regulatory agency, except the
New Jersey Department of Environmental Protection, for the validity of the
execution and delivery of this Agreement and the performance by Seller hereof
which has not been fulfilled.
3.6 Absence of Default. Seller is not in default (i) under any of the
terms or provisions of any note, debt instrument, security agreement, or
mortgage or under any other commitment, contract, agreement, license, lease, or
other instrument, whether written or oral, to which Seller is
6
<PAGE>
a party or by which Seller or any of its properties or assets is bound or (ii)
with the exception of matters contested in good faith by Seller of which Seller
has advised Buyer in writing, in the payment of any of its monetary obligations
or debts, and there exists no condition or event which, after notice or lapse
of time or both, would constitute a default in connection with any of the
foregoing.
3.7 Actions by Seller. Except as disclosed on Exhibit 3.7, attached
hereto, since December 31, 1995, Seller has not:
(a) issued any stocks, bonds, notes, or other corporate securities;
(b) incurred any liability or obligation other than in the ordinary
and normal course of its business;
(c) discharged or satisfied any lien or encumbrance or paid any
obligation or liability (absolute or contingent) other than current liabilities
in the ordinary and normal course of its business;
(d) declared or made any payment or distribution to shareholders
(including, without limitation, stock splits and stock dividends) or purchased
or redeemed any shares;
(e) mortgaged, pledged, or subjected to lien, charge, or any other
encumbrance (except for the lien for current taxes not delinquent) any of its
assets, tangible or intangible;
(f) sold, transferred, assigned, or licensed any of its intangible
assets;
(g) canceled any debts or claims or waived any rights of substantial
value;
(h) entered into any transaction other than in the ordinary and normal
course of business except for a reorganization under 368(a)(1)(F) of the
Internal Revenue Code of 1986, as amended; or
7
<PAGE>
(i) suffered any material changes in its condition (financial or
other), business, net worth, assets, properties, obligations, or liabilities,
which in the aggregate or severally have had or may have a material and adverse
effect on the business, properties, financial condition, or operations of
Seller or suffered any occurrence, circumstance, or combination thereof which
might reasonably be expected to result in any material and adverse effect
before or after the Closing.
3.8 Taxes. Seller has accurately prepared in good faith and duly filed
with the appropriate federal, state, county and local governmental agencies all
income, payroll, sales and use and other tax returns and reports required to be
filed by it and paid all taxes as shown to be due thereon and any interest or
penalty relative to same.
3.9 Title to Assets; Qualifications Needed. The Acquired Assets
constitute all the personal property, tangible and intangible (other than
finished goods inventory, raw material inventory, cash and accounts
receivable), necessary for the conduct by Seller of its business. To the best
of the knowledge of Seller, all of the Acquired Assets in regular use by Seller
are in good operational condition, free from any material defects. Seller has
lawful record and good and marketable title to all of the Acquired Assets, free
and clear of any material liens, charges, encumbrances, restrictions, or
adverse claims.
3.10 Intellectual Property. Seller uses no patents, trademarks, trade
names, trade secrets, logos, or copyrights, except as set forth on Exhibit
1.1(d). Seller owns or possesses adequate rights to use all proprietary
information used in its business, and the same are sufficient to conduct its
business as now conducted. Seller is not required to pay any royalty, license
fee, or similar type of compensation in connection with the conduct of its
business as it is now or heretofore has been conducted. No one has asserted
that Seller's operations infringe, and to the best of the knowledge
8
<PAGE>
of Seller, Seller's operations do not infringe, on the patents, patent
applications, trademarks, trade secrets, formulae, or other rights of anyone.
3.11 Real Estate. To the best of the knowledge of Seller, none of the
operations of Seller at the Facility violates (i) any applicable zoning
classifications or pollution control ordinances or statutes relating to the
particular property or to such operation, except as disclosed in Exhibit 3.11,
attached hereto, or (ii) any other laws, regulations, or orders applicable to
the operation of the business of Seller.
3.12 Employee Benefit Plans. Except for those listed in Exhibit 3.12,
attached hereto ("Plans"), Seller does not have an employee benefit plan, as
defined in the Employee Retirement Income Security Act of 1974 ("ERISA"), nor
does it have any other welfare or deferred compensation plan or arrangement,
formal or informal, covering any employee or former employee.
3.13 Contracts. Seller has no Contracts or Purchase Orders which have
been made other than in the ordinary course of business and which are
cancelable by Seller in thirty (30) days or less or which involve a
consideration of FIVE THOUSAND AND NO/100 DOLLARS ($5,000.00) or more, except
as shown on Exhibit 3.13, attached hereto.
3.14 Certificate of Incorporation and By-Laws. Buyer has received a
Certificate of Good Standing issued by the State of New Jersey and has examined
the By-Laws and Certificate of Incorporation of Seller and is satisfied
therewith.
3.15 Litigation; Product Liability. There is no litigation, suit,
proceeding, action, claim, or investigation, at law or in equity, pending, or,
to the best of the knowledge of Seller, threatened, against or affecting Seller
or involving any of its properties, assets, or capital stock before any court,
agency, or authority, and there are no facts known to Seller that might result
in such litigation, suit,
9
<PAGE>
proceeding, claim or investigation. Seller is not subject to nor in default
with respect to any notice, order, writ, injunction, or decree of any court,
agency or authority.
3.16 Compliance with Laws, Regulations and Orders. To the best of the
knowledge of Seller, Seller is not in default under and has complied (and
presently is in compliance) with all laws, regulations, rules, orders,
judgments, decrees, and other requirements imposed by any governmental
authority or court applicable to Seller or any of its operations, properties,
or assets, including, without limitation, laws, regulations and orders relating
to health, deferred compensation benefits, equal employment or safety of
employees or to pollution of the atmosphere and rivers, streams and lakes, and
Seller has received no notice of any alleged violation thereof.
3.17 Insurance Policies. Seller has in full force and effect, with all
premiums due thereon paid or accrued, the policies of insurance, or renewals
thereof, in the amounts set forth in Exhibit 3.17 attached hereto, which
Exhibit constitutes a full and complete list of all policies of insurance to
which Seller is a party. Seller has delivered to Buyer true, correct and
complete copies of each such insurance policy.
3.18 Licenses. Except for licenses by Seller in connection with its
motor vehicle, there are no registrations, licenses, permits, approvals,
qualifications, or the like issued or to be issued to Seller by any government
or any governmental unit, agency, body, or instrumentality whether federal,
state, local or other. To the best of the knowledge of Seller, no other
registrations, licenses, permits, approvals, qualifications, or the like are
necessary to conduct the business of Seller as it is now being conducted. No
registration with, approval by, clearance from, or pre-notification to any
governmental agency is required in connection with the execution and
performance of this Agreement by Seller, except for a continuation of the
existing Certificate of Occupancy and
10
<PAGE>
compliance with NJSA ss.13:1K-6, et seq.
3.19 Broker, Finder or Agent. Seller have not expressly or implied,
engage any broker, finder, or agent with respect to any transactions
contemplated by this Agreement.
ARTICLE IV
----------
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer represents and warrants to Seller that:
4.1 Organization and Standing of Buyer. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware.
4.2 Power and Authority of Buyer; Execution of Agreement. Buyer has
all requisite corporate power and authority to enter into this Agreement and to
perform the obligations to be performed by it hereunder. This Agreement has
been duly authorized, executed and delivered by and constitutes the valid and
legally binding obligation of Buyer.
4.3 Broker, Finder or Agent. Buyer has not expressly or implied
engaged any broker, finder, or agent with respect to any transaction
contemplated by this Agreement.
4.4 Litigation. There is no litigation, action, suit, investigation,
claim or proceeding at law or in equity before any federal, state, local or
other governmental authority or any arbitration panel pending or to the best of
its knowledge, threatened against Buyer which, if adversely decided, would
affect the ability of Buyer to carry out its obligations under this Agreement.
4.5 Buyer's Solvency. Buyer warrants that it has paid fair
consideration for the assets purchased, that after the purchase of the assets
and delivery of the Note and Security Agreement, Buyer will be solvent and able
to pay its debts as they mature.
ARTICLE V
---------
11
<PAGE>
CONTINGENCIES TO CLOSING
------------------------
5.1 Contingencies. The following are contingencies to the closing of
the transactions contemplated by this Agreement:
(a) CONDITION PRECEDENT. Prior to closing, the Buyer shall conduct due
diligence. The Buyer shall satisfy itself that the Seller's business conforms
in material respects with the presentations and representation previously made
by the Seller.
(b) REPRESENTATIONS AND WARRANTIES: The Seller's and Buyer's
representations and warranties set forth in Articles III and IV shall be and
remain true, accurate and complete.
(c) PURCHASE PRICE ALLOCATION: The Buyer and the Seller shall agree to
the allocation of the purchase price;
(d) FINANCING: The Buyer shall negotiate and secure appropriate
financing commitments on terms satisfactory to Buyer. The proposed transactions
are conditioned, however, on the Buyer obtaining financing on terms
satisfactory to the Buyer;
(e) ENVIRONMENT: The Buyer and Seller agree that prior to closing,
Seller shall comply with NJSA ss.13:1K-6, et seq.;
(f) APPROVALS: All necessary governmental approvals shall be obtained.
(g) TITLE: the Seller shall have good and marketable title to all of
the Acquired Assets;
(h) CORPORATE AUTHORITY: That all corporate authorities necessary to
sell and purchase the Seller's assets have been obtained;
(i) CONTRACTS: All material contracts to which the Seller is a party
are in full force and effect and may be properly enforced;
(j) CONDITION OF ACQUIRED ASSETS: All Acquired Assets are in
conditions suitable for
12
<PAGE>
their intended use;
(k) COMPLIANCE: The Seller is in compliance with all governmental
requirements and environmental regulations; and
(l) MATERIAL ADVERSE CHANGE: No material adverse change in the
business or financial condition of the Seller exists at the time of closing.
5.2 Closing Defined. The "Closing" means the time at which Seller
consummates the sale of the Acquired Assets to Buyer by delivery of the
documents referred to in Section 5.2 below, against delivery by Buyer at the
Closing as provided for in Section 2.1. The Closing shall take place in the
offices of Seller at 10:00 a.m. on October 30, 1996 (the "Closing Date"), or at
such other time or location as shall be mutually agreed upon in writing by the
parties hereto.
5.3 Actions by Seller at Closing. At the Closing, in addition to any
other documents specifically required to be delivered to Buyer by this
Agreement, Seller shall deliver or cause to be delivered to Buyer, in form and
substance satisfactory to Buyer and its counsel:
(a) Certified copies of the resolutions of the Directors and
Stockholders of Seller authorizing and approving this Agreement and the
transactions contemplated hereby;
(b) Good standing certificates for Seller from the Secretary of State
of the State of New Jersey, dated not more than fifteen (15) days prior to the
Closing;
(c) Tax clearance certificate for Seller from the appropriate tax
authority of the State of New Jersey, dated not more than fifteen (15) days
prior to the Closing;
(d) Lease Agreement by and between Plaza Realty Partnership and Buyer
for the Facility in the form attached hereto as Exhibit 5.2(d);
(e) Bill of Sale for the conveyance of all personal property and such
other good and
13
<PAGE>
sufficient instruments of transfer and conveyance (the "Transfer Documents") as
shall be required to vest effectively in Buyer all Seller's right, title and
interest in and to the Acquired Assets. As of the Closing Date or immediately
thereafter, Seller and Buyer shall have made arrangements to file for record
such of the foregoing Transfer Documents as requested by Buyer; and
(f) All corporate and other proceedings to be taken in connection with
this Agreement and the transactions contemplated hereby and all documents
incident thereto.
5.4 Actions by Buyer at Closing. At the Closing, in addition to any
other documents specifically required to be delivered pursuant to this
Agreement, Buyer shall deliver or cause to be delivered to Seller, in form and
substance satisfactory to Seller and its counsel:
(a) Payment of the Purchase Price in accordance with Section 2.2; and
(b) All corporate and other proceedings to be taken in connection with
the transactions contemplated by this Agreement, and all documents incident
thereto.
ARTICLE VI
----------
INDEMNIFICATION AND CERTAIN AGREEMENTS
--------------------------------------
AFTER CLOSING
-------------
6.1 Indemnification. (a) In accordance with the procedures set forth
in Section 6.2 (if applicable), Seller shall indemnify Buyer against and hold
it harmless from any loss, claim, damage or liability and any and all costs and
expenses (including reasonable legal and accounting fees) related thereto
resulting from or arising out of any inaccuracy in or breach of any
representation or warranty made by Seller in this Agreement or pursuant hereto,
or from any non-fulfillment or breach or breach or default in the performance
by Seller of any of the covenants or agreements made by Seller herein.
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(b) In accordance with the procedures set forth in Section 6.2 (if
applicable), Buyer shall indemnify Seller against and hold it harmless from any
loss, claim, damage or inability and any and all costs and expenses (including
reasonable legal and accounting fees) relating thereto resulting from or
arising out of: (i) any inaccuracy in or breach of any representation or
warranty made by Buyer in this Agreement or pursuant hereto, or from any
non-fulfillment or breach or default in the performance by Buyer of any of the
covenants or agreements made by Buyer herein; and (ii) the ownership of the
Acquired Assets or conduct of Buyer's business after the Closing Date, except
as and to the extent responsibility therefor is otherwise allocated to Seller
pursuant to the terms of this Agreement.
6.2 Notice of Claim; Defense of Action. Each party agrees to give the
other prompt written notice of any event, or any claim or assertion by a third
party, of which it obtains knowledge, which could give rise to any damage,
liability, loss, cost or expense as to which it may request indemnification
under this Agreement, and, in the case of such third-party claims or
assertions, each party will cooperate with the other in determining the
validity of any such claim or assertion. The indemnifying party hereunder
shall, upon written acknowledgment, given to the other party, of its full
obligation to indemnify the other party (unless released from its indemnity
obligation with respect thereto by the indemnified party) have the right to
choose counsel (which must be reasonably satisfactory to the indemnified party)
and to control and defend (and compromise or settle) any third-party suits or
proceedings arising from claims or assertions for which indemnification will be
had, and the party seeking indemnification (having the right, at its own
expense, to employ additional counsel to assist counsel for the indemnifying
party in the defense) shall cooperate fully in all respects with the party from
whom indemnification will be forthcoming in any such defense,
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compromise or settlement, including, without limitation, by making available to
the party from whom such indemnification is sought all pertinent information
under the control of the party seeking indemnification. The party seeking
indemnification will not compromise or settle any claim or assertion, or any
action, suit or proceeding arising therefrom without prior written notice of
such proposed settlement given to the party from whom indemnification is
sought.
6.3 Access to Properties and Records. Seller shall afford to the
officers, attorneys, accountants, or other authorized representatives of Buyer
free and full access to all of the assets, properties, books, and records of
Seller in order to afford Buyer full opportunity of such review, examination,
and investigation as Buyer shall desire to make of the affairs of Seller, and
Buyer shall be permitted to make extracts from, or take copies of, such books,
records (including the stock record and minute books), or other documentation
or to obtain temporary possession of any thereof as may be reasonably
necessary; and Seller shall furnish or cause to be furnished to Buyer such
reasonable financial and operating data and other information as to its
business, properties, and assets as Buyer or any of its directors, officers,
attorneys, accountants, or other authorized representatives may request.
6.4 Cooperation. Seller and Buyer each will cooperate and will use all
reasonable efforts to have their agents and employees cooperate with each
other, at Seller's or Buyer's reasonable request, as the case may be, on and
after the Closing Date, in furnishing information, evidence, testimony and
other assistance in connection with any actions, proceedings, arrangements, or
disputes involving the business of Seller or based upon contracts,
understandings or acts of Seller which were in effect or occurred on, after, or
prior to the Closing Date. Buyer will cooperate in good faith with Seller (at
Seller's expense) in connection with the defense of any lawsuit or claim
arising
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from liabilities not assumed by Buyer hereunder.
6.5 Remediation. Seller shall complete any remediation requirements
and provide a negative declaration or a no further action letter in accordance
with NJSA ss.13:1K-6, et seq.
ARTICLE VII
-----------
SURVIVAL OF REPRESENTATIONS,
----------------------------
WARRANTIES AND COVENANTS AND MISCELLANEOUS
------------------------------------------
7.1 Survival of Representations, Warranties and Covenants. All
representations and warranties made by Seller in Article III hereof and by
Buyer in Article IV hereof and the covenants contained in Articles II and VII
hereof shall survive the Closing for three (3) years.
7.2 Severability of Agreement. Each Article, section, subsection and
lesser section of this Agreement constitutes a separate and distinct
undertaking, covenants and/or provision hereof. In the event that any provision
of this Agreement shall be determined to be unlawful, such provision shall be
severed from this Agreement, but every other provision of this Agreement shall
remain in full force and effect.
7.3 Notices. Service of all notices under this Agreement must be in
writing and shall be sufficient if given personally or mailed via First Class
Certified or Registered Mail, Return Receipt Requested, Postage Prepaid, or if
given by commercial overnight courier delivery service, charges prepaid to the
party involved at its respective address hereinafter set forth, or at such
other address as such party may provide in writing from time to time in
accordance with the provisions hereof. Any such notice mailed to such address
shall be effective (1) if by mail, when deposited in the United States mail,
duly addressed, provided the postmark thereon is applied by the United States
Postal Service, otherwise upon receipt, or (2) if by overnight courier, one (1)
day after being delivered to a commercial overnight delivery service, for the
next day delivery, or the first business
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day after delivery to the commercial overnight delivery service, whichever is
later, or (3) in all other cases, upon receipt.
If to Seller: 80 Market Street
Kenilworth, New Jersey 07033
Attention: Frank Criscitiello
If to Buyer: 567-1 South Leonard Street
Waterbury, Connecticut 06708
Attention: Patrick A. DePaolo, Sr.
7.4 Limitation of Rights and Remedies Under the Agreement. Nothing
expressed or implied in this Agreement is intended, or shall be construed, to
confer upon or give any person, firm, or corporation, other than Buyer and
Seller, any rights or remedies under or by reason of this Agreement.
7.5 Change of Name. At the time of Closing, Seller shall amend its
Articles of Incorporation to change its name to a name dissimilar to "Christie
Enterprises, Inc." and shall provide a fully executed Amendment for filing with
the Secretary of State of Connecticut together with the filing fees.
7.6 Non-Competition. Frank Criscitiello agrees that he will not,
during the above term of his employment and for a period of three (3) years
thereafter, within the United States of America, Canada, Mexico or Puerto Rico,
directly or indirectly, individually or as an officer, director, partner,
stockholder, proprietor, consultant or in any other capacity, engage in any
business in competition with the business of Buyer or solicit the customers of
Buyer for any purpose other than on behalf of Buyer. Frank Criscitiello further
acknowledges, without limiting the right of Buyer to monetary damages for
breach of this paragraph, that any such monetary damages would be inadequate
and that Buyer shall in any proceeding be entitled to equitable relief,
including an injunction. In
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consideration for such covenant, Buyer agrees to pay Frank Criscitiello the sum
of TEN THOUSAND DOLLARS ($10,000.00) payable in two (2) consecutive equal
monthly payments of FIVE THOUSAND DOLLARS ($5,000.00) each commencing six (6)
months from the date of closing until fully paid.
7.7 Consulting. Buyer agrees to engage the services of Frank
Criscitiello as a self-engaged business consultant, pursuant to the terms and
provisions of the Consulting Agreement attached hereto as Exhibit 7.7.
7.8 Lease of Premises. The obligations of Buyer hereunder are
contingent upon the execution of the Lease set forth as Exhibit 5.3(d), hereto
by and between Buyer and the owner of the premises described therein. Buyer
hereby agrees that Seller may store finished goods inventory and raw material
inventory on the leased premises for a period of three (3) months after the
effective date of the Lease without charge.
7.9 Accrued Holiday and Vacation Pay. Seller agrees to pay accruals of
holiday and vacation pay.
7.10 Consolidated Federal Income Tax Return/Issuance of Share. Discas,
Inc. and Buyer agree to file consolidated federal income tax returns so long as
the Promissory Note to Seller remains unpaid or unsatisfied. Discas, Inc.
represents and warrants to Seller that it is authorized to issue twelve million
(12,000,000) shares of voting common stock of a par value of $.0001, of which
one million six hundred seventy thousand (1,670,000) shares are presently
issued and outstanding together with warrants to purchase another one hundred
thousand (100,000) of such shares. Discas, Inc. covenants and agrees that until
the Promissory Note is paid or satisfied in full, that it will not issue
additional shares of its common stock to the present holders thereof, except
pursuant to the
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outstanding warrants, without fair and adequate consideration being paid
therefor.
7.11 Headings. The headings in this Agreement are intended solely for
convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
7.12 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute the same agreement.
7.13 Entire Agreement. Except as herein expressly set forth or in an
instrument in writing signed by the party to be bound thereby which makes
reference to this Agreement, this Agreement and the Exhibits attached hereto
embody the entire agreement in relation to the subject matter hereof, and no
other representations, warranties, covenants, understandings, or agreements, or
otherwise, in relation thereto exist between the parties hereto.
7.14 Governing Law. This Agreement shall be construed and enforced in
accordance with and governed by the internal substantive laws of the State of
New Jersey and of the United States of America.
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7.15 Exhibits. The Exhibits attached hereto and referred to in this
Agreement are a part of this Agreement for all purposes.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers as of the day and year first above
written.
SELLER: CHRISTIE ENTERPRISES, INC.
By /s/ Frank Criscitiello
----------------------
Frank Criscitiello
Its President
Duly Authorized
BUYER: CHRISTIE PRODUCTS, INC..
By /s/ Patrick A. DePaolo, Sr.
---------------------------
Patrick A. DePaolo, Sr.
Its President
Duly Authorized
Read and Agreed:
/s/ Frank Criscitiello
- ----------------------
Frank Criscitiello
Dated: 10/30/96
--------
Read and Agreed:
DISCAS, INC.
By /s/ Patrick A. DePaolo, Sr.
---------------------------
Patrick A. DePaolo, Sr.
Its President
Duly Authorized
Dated: 10/30/96
--------
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Exhibit 3.1
AMENDED AND RESTATED CERTIFICATE
OF
INCORPORATION
OF
DISCAS, INC.
The undersigned, being the president of Discas, Inc. (The
"Corporation") hereby certifies as follows:
1. The Certificate of Incorporation of the Corporation as originally
filed with the Secretary of State on the 11th day of December, 1985 is amended
and restated pursuant to Sections 242 and 245 of the Delaware General
Corporation Law to read as follows:
FIRST: The name of the Corporation is Discas, Inc.
SECOND: The Certificate of Incorporation was originally filed with
the Secretary of State on the 11th day of December, 1985. The address of the
Corporation's registered office in the State of Delaware is 410 South State
Street, Dover, County of Kent, Delaware. The registered agent in charge thereof
is Corporate Filing Service, Inc.
THIRD: The purpose of the Corporation is to engage in any lawful
act or activity for which corporations may be organized under the General
Corporation Law of Delaware.
FOURTH: The total number of shares that this Corporation shall have
authority to issue is (i) 20,000,000 shares of Common Stock, $.0001 par value
per share ("Common Stock"), and (ii) 5,000,000 shares of Preferred Stock, $.01
par value per share ("Preferred Stock").
There shall be no preemptive rights with respect to the
Corporation's shares of stock. The following is a further statement of the
designations and the powers, preferences and rights, and the relative
participating, optional or other special rights, and the qualifications,
limitations and restrictions granted to or imposed upon the respective classes
of shares of capital stock of the Corporation or the holders thereof.
COMMON STOCK
1. General. The voting, dividend and liquidation rights of the holders
of the Common Stock are subject to and qualified by the
<PAGE>
rights of the holders of the Preferred Stock of any series as maybe designated
by the Board of Directors upon any issuance of the Preferred Stock of any
series.
2. Voting. The holders of Common Stock are entitled to one vote for
each share held at all meetings of stockholders (and written actions in lieu of
meetings). There shall be no cumulative voting.
3. Dividends. Dividends may be declared and paid on the Common Stock
from funds lawfully available therefor as and when determined by the Board of
Directors and subject to any preferential dividend rights or restrictions of
any then outstanding Preferred Stock.
4. Liquidation. Upon the dissolution or liquidation of the
Corporation, whether voluntary or involuntary, holders of Common Stock will be
entitled to receive all assets of the Corporation available for distribution to
its stockholders after payment of creditors and subject to any preferential
rights of any then outstanding Preferred Stock.
PREFERRED STOCK.
Preferred Stock may be issued from time to time in one or more series,
each of such series to have such terms as stated or expressed herein and in the
resolution or resolutions providing for the issue of such series adopted by the
Board of Directors of the Corporation as hereinafter provided. Any shares of
Preferred Stock which may be redeemed, purchased or acquired by the Corporation
may be reissued except as otherwise provided herein or by law. Different series
of Preferred Stock shall not be construed to constitute different classes of
shares for the purposes of voting by classes unless expressly provided for
herein or by law.
Authority is hereby expressly granted to the Board of Directors from
time to time to issue the Preferred Stock in one or more series, and in
connection with the creation of any such series, by resolution or resolutions
providing for the issuance of the shares thereof, to determine and fix such
voting powers, full or limited, or no voting powers, and such designations,
preferences and relative participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, including without
limitation thereof, dividend rights, conversion rights, redemption privileges
and liquidation preferences, as shall be stated and expressed in such
resolutions, all to the full extent now or hereafter permitted by the General
Corporation Law of the State of Delaware. Without
3
<PAGE>
limiting the generality of the foregoing, the resolutions providing for
issuance of any series of Preferred Stock may provide that such series shall be
superior or rank equally or be junior to the Preferred Stock of any other
series to the extent permitted by law.
FIFTH: The Corporation is to have perpetual existence.
SIXTH: The number of directors which shall constitute the entire
Board of Directors shall be as set forth in the by-laws of the Corporation. The
board of directors is expressly authorized to adopt, amend or repeal the
by-laws of the Corporation.
SEVENTH: Whenever a compromise or arrangement is proposed between
this Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers
appointed for this Corporation under the provisions of Section 279 of Title 8
of the Delaware Code order a meeting of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of this Corporation, as the
case may be, to be summoned in such manner as the said court directs. If a
majority in number representing three-fourths in value of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which said application has been made, be
binding on all the creditors or class of creditors, and/or on all of the
stockholders or class of stockholders of this Corporation, as the case may be,
and also on this Corporation.
EIGHTH: The Corporation reserves the right to amend, alter, change
or repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
NINTH: No director of the Corporation shall be liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or
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its stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174
of the General Corporation Law of the State of Delaware, or (iv) for any
transaction from which the director derived an improper personal benefit.
TENTH: The Corporation shall have authority to indemnify its
officers, directors, agents and such other parties to the full extent permitted
by Delaware law.
2. The foregoing Amended and Restated Certificate of Incorporation of
the Corporation have been duly approved and adopted by the board of directors
and the shareholders of the Corporation in accordance with Section 242 of the
General Corporation Law.
IN WITNESS WHEREOF, I hereunto set my hand this 1st day of February,
1997 and I affirm that the foregoing certificate is my act and deed and that
the facts stated therein as true.
/s/ Patrick A. DePaolo
----------------------
Patrick A. DePaolo, President
5
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Exhibit 3.2
BY-LAWS OF
DISCAS, INC.
(A Delaware Corporation)
ARTICLE I
Offices
SECTION l. Registered Office. The registered office of the Corporation
within the State of Delaware shall be in the City of Dover, County of Kent.
SECTION 2. Other Offices. The Corporation may also have any office or
offices other than said registered office at such place or places, either
within or without the State of Delaware, as the Board of Directors shall from
time to time determine or the business of the Corporation may require.
ARTICLE II
Meetings of Stockholders
SECTION l. Place of Meetings. All meetings of the stockholders for the
election of directors or for any other purpose shall be held at any such place,
either within or without the State of Delaware, as shall be designated from
time to time by the Board of Directors and stated in the notice of meeting or
in a duly executed waiver thereof.
SECTION 2. Annual Meeting. The annual meeting of stockholders,
commencing with the year l997, shall be held at l0:00 A.M. on the second
Tuesday of June, in each year if not a legal holiday, and if a legal holiday,
then on the next succeeding day not a legal holiday, at l0:00 A.M., or at such
other date and time as shall be designated from time to time by the Board of
Directors and stated in the notice of meeting or in a duly executed waiver
thereof. At such annual meeting, the stockholders shall elect, by a plurality
vote, a Board of Directors and transact such other business as may properly be
brought before the meeting.
SECTION 3. Special Meetings. Special meetings of stockholders, unless
otherwise prescribed by statute, may be called at any time by the Board of
Directors or the Chairman of the Board, if one shall have been elected, or the
Chief Executive Officer.
SECTION 4. Notice of Meetings. Except as otherwise
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expressly required by statute, written notice of each annual and special
meeting of stockholders stating the date, place and hour of the meeting, and,
in the case of a special meeting, the purpose or purposes for which the meeting
is called, shall be given to each stockholder of record entitled to vote
thereat not less than ten nor more than sixty days before the date of the
meeting. Business transacted at any special meeting of stockholders shall be
limited to the purposes stated in the notice. Notice shall be given personally
or by mail and, if by mail, shall be sent in a postage prepaid envelope,
addressed to the stockholder at his address as it appears on the records of the
Corporation. Notice by mail shall be deemed given three (3) days after the same
shall be deposited in the United States mail, postage prepaid. Notice of any
meeting shall not be required to be given to any person who attends such
meeting, except when such person attends the meeting in person or by proxy for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened, or who, either before or after the meeting, shall submit a signed
written waiver of notice, in person or by proxy. Neither the business to be
transacted at, nor the purpose of, an annual or special meeting of stockholders
need be specified in any written waiver of notice.
SECTION 5. List of Stockholders. The officer who has charge of the
stock ledger of the Corporation shall prepare and make, at least ten days
before each meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order, showing the
address of and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at
least ten days prior to the meeting, either at a place within the city, town or
village where the meeting is to be held, which place shall be specified in the
notice of meeting, or, if not specified, at the place where the meeting is to
be held. The list shall be produced and kept at the time and place of the
meeting during the whole time thereof, and may be inspected by any stockholder
who is present.
SECTION 6. Quorum, Adjournments. The holders of a majority of the
voting power of the issued and outstanding stock of the Corporation entitled to
vote thereat, present in person or represented by proxy, shall constitute a
quorum for the transaction of business at all meetings of stockholders, except
as otherwise provided by statute or by the Certificate of Incorporation. If,
however, such quorum shall not be present or represented by proxy at any
meeting of stockholders, the stockholders entitled to vote thereat, present in
person or represented by proxy, shall have the power to adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
a quorum shall be present or represented by proxy. At such adjourned meeting at
which a quorum shall be present or represented by proxy, any
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<PAGE>
business may be transacted which might have been transacted at the meeting as
originally called. If the adjournment is for more than thirty days, or, if
after adjournment a new record date is set, a notice of the adjourned meeting
shall be given to each stockholder of record entitled to vote at the meeting.
SECTION 7. Organization. At each meeting of stockholders, the Chairman
of the Board, if one shall have been elected, or, in his absence or if one
shall not have been elected, the President shall act as chairman of the
meeting. The Secretary or, in his absence or inability to act, the person whom
the chairman of the meeting shall appoint secretary of the meeting shall act as
secretary of the meeting and keep the minutes thereof.
SECTION 8. Order of Business. The order of business at all meetings of
the stockholders shall be as determined by the chairman of the meeting.
SECTION 9. Voting. Except as otherwise provided by statute or the
Certificate of Incorporation, each stockholder of the Corporation shall be
entitled at each meeting of stockholders to one vote for each share of capital
stock of the Corporation standing in his name on the record of stockholders of
the Corporation:
(a) on the date fixed pursuant to the provisions of Section 7 of
Article V of these By-Laws as the record date for the determination of the
stockholders who shall be entitled to notice of and to vote at such
meeting; or
(b) if no such record date shall have been so fixed, then at the close
of business on the day next preceding the day on which notice thereof shall
be given, or, if notice is waived, at the close of business on the date
next preceding the day on which the meeting is held.
Each stockholder entitled to vote at any meeting of stockholders may authorize
another person or persons to act for him by a proxy signed by such stockholder
or his attorney-in-fact, but no proxy shall be voted after three years from its
date, unless the proxy provides for a longer period. Any such proxy shall be
delivered to the secretary of the meeting at or prior to the time designated in
the order of business for so delivering such proxies. When a quorum is present
at any meeting, the vote of the holders of a majority of the voting power of
the issued and outstanding stock of the Corporation entitled to vote thereon,
present in person or represented by proxy, shall decide any question brought
before such meeting, unless the question is one upon which by express provision
of statute or of the Certificate of Incorporation or of these By-Laws, a
different vote is required, in which case such express provision shall govern
and control the decision of such question.
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Unless required by statute, or determined by the chairman of the meeting to be
advisable, the vote on any question need not be by ballot. On a vote by ballot,
each ballot shall be signed by the stockholder voting, or by his proxy, if
there by such proxy, and shall state the number of shares voted.
SECTION l0. Inspectors. The Board of Directors may, in advance of any
meeting of stockholders, appoint one or more inspectors to act at such meeting
or any adjournment thereof. If any of the inspectors so appointed shall fail to
appear or act, the chairman of the meeting shall, or if inspectors shall not
have been appointed, the chairman of the meeting may, appoint one or more
inspectors. Each inspector, before entering upon the discharge of his duties,
shall take and sign an oath faithfully to execute the duties of inspector at
such meeting with strict impartiality and according to the best of his ability.
The inspectors shall determine the number of shares of capital stock of the
Corporation outstanding and the voting power of each, the number of shares
represented at the meeting, the existence of a quorum, the validity and effect
of proxies, and shall receive votes, ballots or consents, hear and determine
all challenges and questions arising in connection with the right to vote,
count and tabulate all votes, ballots or consents, determine the results, and
do such acts as are proper to conduct the election or vote with fairness to all
stockholders. On request of the chairman of the meeting, the inspectors shall
make a report in writing of any challenge, request or matter determined by them
and shall execute a certificate of any fact found by them. No director or
candidate for the office of director shall act as an inspector of an election
of directors. Inspectors need not be stockholders.
SECTION ll. Action by Consent. Whenever the vote of stockholders at a
meeting thereof is required or permitted to be taken for or in connection with
any corporate action, by any provision of statute or of the Certificate of
Incorporation or of these By-Laws, the meeting and vote of stockholders may be
dispensed with, and the action taken without such meeting and vote, if a
consent in writing, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares of stock of the Corporation entitled to vote thereon were present
and voted.
ARTICLE III
Board of Directors
SECTION l. General Powers. The business and affairs of the Corporation
shall be managed by or under the direction of the Board of Directors. The Board
of Directors may exercise all such authority and powers of the Corporation and
do all such lawful
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<PAGE>
acts and things as are not by statute or the Certificate of Incorporation
directed or required to be exercised or done by the stockholders.
SECTION 2. Number, Qualifications, Election and Term of Office. The
number of directors constituting the initial Board of Directors shall be not
less than one (1) nor more than ten (10). Thereafter, the number of directors
may be fixed, from time to time, by the affirmative vote of a majority of the
entire Board of Directors or by action of the stockholders of the Corporation.
Any decrease in the number of directors shall be effective at the time of the
next succeeding annual meeting of stockholders unless there shall be vacancies
in the Board of Directors, in which case such decrease may become effective at
any time prior to the next succeeding annual meeting to the extent of the
number of such vacancies. Directors need not be stockholders. Except as
otherwise provided by statute or these By-Laws, the directors (other than
members of the initial Board of Directors) shall be elected at the annual
meeting of stockholders. Each director shall hold office until his successor
shall have been elected and qualified, or until his death, or until he shall
have resigned, or have been removed, as hereinafter provided in these By-Laws.
SECTION 3. Place of Meetings. Meetings of the Board of Directors shall
be held at such place or places, within or without the State of Delaware, as
the Board of Directors may from time to time determine or as shall be specified
in the notice of any such meeting.
SECTION 4. Annual Meeting. The Board of Directors shall meet for the
purpose of organization, the election of officers and the transaction of other
business, as soon as practicable after each annual meeting of stockholders, on
the same day and at the same place where such annual meeting shall be held.
Notice of such meeting need not be given. In the event such annual meeting is
not so held, the annual meeting of the Board of Directors may be held at such
other time or place (within or without the State of Delaware) as shall be
specified in a notice thereof given as hereinafter provided in Section 7 of
this Article III.
SECTION 5. Regular Meetings. Regular meetings of the Board of
Directors shall be held at such time and place as the Board of Directors may
fix. If any day fixed for a regular meeting shall be a legal holiday at the
place where the meeting is to be held, then the meeting which would otherwise
be held on that day shall be held at the same hour on the next succeeding
business day. Notice of regular meetings of the Board of Directors need not be
given except as otherwise required by statute or these By-Laws.
SECTION 6. Special Meetings. Special meetings of the Board of
Directors may be called by the Chairman of the Board, if
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one shall have been elected, or by two or more directors of the Corporation or
by the Chief Executive Officer.
SECTION 7. Notice of Meetings. Notice of each special meeting of the
Board of Directors (and of each regular meeting for which notice shall be
required) shall be given by the Secretary as hereinafter provided in this
Section 7, in which notice shall be stated the time and place of the meeting.
Except as otherwise required by these By-Laws, such notice need not state the
purposes of such meeting. Notice of each such meeting shall be mailed, postage
prepaid, to each director, addressed to him at his residence or usual place of
business, by first class mail, at least two days before the day on which such
meeting is to be held, or shall be sent addressed to him at such place by
telegraph, cable, telex, telecopier or other similar means, or be delivered to
him personally or be given to him by telephone or other similar means, at least
twenty-four hours before the time at which such meeting is to be held. Notice
of any such meeting need not be given to any director who shall attend such
meeting, except when he shall attend for the express purpose of objecting, at
the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened.
SECTION 8. Quorum and Manner of Action. A majority of the entire Board
of Directors shall constitute a quorum for the transaction of business at any
meeting of the Board of Directors, and, except as otherwise expressly required
by statute or the Certificate of Incorporation or these By-Laws, the act of a
majority of the directors present at any meeting at which a quorum is present
shall be the act of the Board of Directors. In the absence of a quorum at any
meeting of the Board of Directors, a majority of the directors present thereat
may adjourn such meeting to another time and place. Notice of the time and
place of any such adjourned meeting shall be given to all of the directors
unless such time and place were announced at the meeting at which the
adjournment was taken, in which case such notice shall only be given to the
directors who were not present thereat. At any adjourned meeting at which a
quorum is present, any business may be transacted which might have been
transacted at the meeting as originally called. The directors shall act only as
a Board and the individual directors shall have no power as such.
SECTION 9. Organization. At each meeting of the Board of Directors,
the Chairman of the Board, if one shall have been elected, or, in the absence
of the Chairman of the Board or if one shall not have been elected, the
President (or, in his absence, another director chosen by a majority of the
directors present) shall act as chairman of the meeting and preside thereat.
The Secretary or, in his absence, any person appointed by the chairman shall
act as secretary of the meeting and keep the minutes thereof.
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SECTION l0. Resignations. Any director of the Corporation may resign
at any time by giving written notice of his resignation to the Corporation. Any
such resignation shall take effect at the time specified therein or, if the
time when it shall become effective shall not be specified therein, immediately
upon its receipt. Unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
SECTION ll. Vacancies. Any vacancy in the Board of Directors, whether
arising from death, resignation, removal (with or without cause), an increase
in the number of directors or any other cause, may be filled by the vote of a
majority of the directors then in office, though less than a quorum, or by the
sole remaining director or by the stockholders at the next annual meeting
thereof or at a special meeting thereof. Each director so elected shall hold
office until his successor shall have been elected and qualified.
SECTION l2. Removal of Directors. Any director may be removed, either
with or without cause, at any time, by the holders of a majority of the voting
power of the issued and outstanding capital stock of the Corporation entitled
to vote at an election of directors. The Board of Directors may remove a
Director for cause.
SECTION l3. Compensation. The Board of Directors shall have authority
to fix the compensation, including fees and reimbursement of expenses, of
directors for services to the Corporation in their capacity as directors or
otherwise.
SECTION l4. Committees. The Board of Directors may, by resolution
passed by a majority of the entire Board of Directors, designate one or more
committees, including an executive committee, each committee to consist of one
or more of the directors of the Corporation. The Board of Directors may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. In
addition, in the absence or disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member.
Except to the extent restricted by statute or the Certificate of
Incorporation, each such committee, to the extent provided in the resolution
creating it, shall have and may exercise all the powers and authority of the
Board of Directors and may authorize the seal of the Corporation to be affixed
to all papers which require it. Each such committee shall serve at the pleasure
of the Board of Directors and have such name as may be determined from time to
time by resolution adopted by the Board of
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Directors. Each committee shall keep regular minutes of its meetings and report
the same to the Board of Directors.
SECTION l5. Action by Consent. Unless restricted by the Certificate of
Incorporation, any action required or permitted to be taken by the Board of
Directors or any committee thereof may be taken without a meeting if all
members of the Board of Directors or such committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of the proceedings of the Board of Directors or such committee, as the
case may be.
SECTION l6. Telephonic Meeting. Unless restricted by the Certificate
of Incorporation, any one or more members of the Board of Directors or any
committee thereof may participate in a meeting of the Board of Directors or
such committee by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other. Participation by such means shall constitute presence in person at
a meeting.
SECTION 17. Contracts and Transactions Involving Directors. No
contract or transaction between the Corporation and one or more of its
directors or officers, or between the Corporation and any other corporation,
partnership, association, or other organization in which one or more of its
directors or officers are directors or officers, or have a financial interest,
shall be void or voidable solely for this reason, or solely because the
director or officer is present at or participates in the meeting of the Board
of Directors or committee thereof which authorizes the contract or transaction,
or solely because his, her or their votes are counted for such purpose, if: (1)
the material facts as to his or her relationship or interest and as to the
contract or transaction are disclosed or are known to the Board of directors or
the committee, and the Board or committee in good faith authorize the contract
or transaction by the affirmative votes of a majority of the disinterested
directors, even though the disinterested directors be less than a quorum; or
(2) the material facts as to his or her relationship or interest and as to the
contract or transaction are disclosed or are known transaction is specifically
approved in good faith by vote of the stockholders; or (3) the contract or
transaction is fair as to their Corporation as of the time it is authorized,
approved or ratified, by the Board of Directors, a committee thereof, or the
stockholders. Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
which authorizes the contract or transaction.
ARTICLE IV
Officers
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SECTION l. Number and Qualifications. The officers of the Corporation
shall be elected by the Board of Directors or the stockholders and shall
include the Chief Executive Officer, the President, one or more Executive,
Senior, or other Vice-Presidents, the Secretary and the Treasurer. If the Board
of Directors or the stockholders wish, either may also elect as an officer of
the Corporation a Chairman of the Board and may elect other officers (including
one or more Assistant Treasurers and one or more Assistant Secretaries) as may
be necessary or desirable for the business of the Corporation. Any two or more
offices may be held by the same person, and no officer except the Chairman of
the Board need be a director. Each officer shall hold office until his
successor shall have been duly elected and shall have qualified, or until his
death, or until he shall have resigned or have been removed, as hereinafter
provided in these By-Laws.
SECTION 2. Resignations. Any officer of the Corporation may resign at
any time by giving written notice of his resignation to the Corporation. Any
such resignation shall take effect at the time specified therein or, if the
time when it shall become effective shall not be specified therein, immediately
upon receipt. Unless otherwise specified therein, the acceptance of any such
resignation shall not be necessary to make it effective.
SECTION 3. Removal. Any officer of the Corporation may be removed,
either with or without cause, at any time, by the Board of Directors at any
meeting thereof. Such removal shall be without prejudice to a person's contract
rights, if any, but the election as an officer of the corporation shall not of
itself create contract rights.
SECTION 4. Chairman of the Board. The Chairman of the Board, if one
shall have been elected, shall be a member of the Board, an officer of the
Corporation and, if present, shall preside at each meeting of the Board of
Directors or the stockholders. He shall advise and counsel with the Chief
Executive Officer and/or President, and in either of their absence with other
executives of the Corporation, and shall perform such other duties as may from
time to time be assigned to him by the Board of Directors.
SECTION 5. The Chief Executive Officer. The Chief Executive Officer
shall perform such duties as from time to time may be assigned to him by the
Board of Directors of the Corporation. He shall, in the absence of the Chairman
of the Board or if a Chairman of the Board shall not have been elected, preside
at each meeting of the Board of Directors or the stockholders. He shall perform
all duties incident to the office of the Chief Executive Officer.
SECTION 6. The President. Unless otherwise provided by the Board of
Directors of the Corporation, the President shall
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be the chief operating officer of the Corporation. He shall, in the absence of
the Chairman of the Board and the Chief Executive Officer, or if a Chairman of
the Board shall not have been elected and there shall at that time not be a
Chief Executive Officer, preside at each meeting of the Board of Directors or
the stockholders. He shall perform all duties incident to the office of
President and chief operating officer and such other duties as may from time to
time be assigned to him by the Board of Directors.
SECTION 7. Vice-Presidents. Each Executive, Senior, or other
Vice-President shall perform all such duties as from time to time may be
assigned to him by the Board of Directors, the Chief Executive Officer, or the
President. At the request of the President or in his absence or in the event of
his inability or refusal to act, the Vice-President, or if there shall be more
than one, the Vice-Presidents in the order determined by the Board of Directors
(or if there be no such determination, then the Vice-Presidents in the order of
their election), shall perform the duties of the President, and, when so
acting, shall have the powers of and be subject to the restrictions placed upon
the President in respect of the performance of such duties.
SECTION 8. Treasurer. The Treasurer shall:
(a) have charge and custody of, and be responsible for, all the funds
and securities of the Corporation;
(b) keep full and accurate accounts of receipts and disbursements in
books belonging to the Corporation;
(c) deposit all moneys and other valuables to the credit of the
Corporation in such depositaries as may be designated by the Board of
Directors or pursuant to its direction;
(d) receive, and give receipts for, moneys due and payable to the
Corporation from any source whatsoever;
(e) disburse the funds of the Corporation and supervise the
investments of its funds, taking proper vouchers therefor;
(f) render to the Board of Directors, whenever the Board of Directors
may require, an account of the financial condition of the Corporation; and
(g) in general, perform all duties incident to the office of Treasurer
and such other duties as from time to time may be assigned to him by the
Board of Directors.
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SECTION 9. Secretary. The Secretary shall:
(a) keep or cause to be kept in one or more books provided for the
purpose, the minutes of all meetings of the Board of Directors, the
committees of the Board of Directors and the stockholders;
(b) see that all notices are duly given in accordance with the
provisions of these By-Laws and as required by law;
(c) be custodian of the records and the seal of the Corporation and
affix and attest the seal to all certificates for shares of the Corporation
(unless the seal of the Corporation on such certificates shall be a
facsimile, as hereinafter provided) and affix and attest the seal to all
other documents to be executed on behalf of the Corporation under its seal;
(d) see that the books, reports, statements, certificates and other
documents and records required by law to be kept and filed are properly
kept and filed; and
(e) in general, perform all duties incident to the office of Secretary
and such other duties as from time to time may be assigned to him by the
Board of Directors.
SECTION 10. The Assistant Treasurer. The Assistant Treasurer, or if
there shall be more than one, the Assistant Treasurers in the order determined
by the Board of Directors (or if there be no such determination, then in the
order of their election), shall, in the absence of the Treasurer or in the
event of his inability or refusal to act, perform the duties and exercise the
powers of the Treasurer and shall perform such other duties as from time to
time may be assigned by the Board of Directors.
SECTION 11. The Assistant Secretary. The Assistant Secretary, or if
there be more than one, the Assistant Secretaries in the order determined by
the Board of Directors (or if there be no such determination, then in the order
of their election), shall, in the absence of the Secretary or in the event of
his inability or refusal to act, perform the duties and exercise the powers of
the Secretary and shall perform such other duties as from time to time may be
assigned by the Board of Directors.
SECTION 12. Delegation of Duties. In case of the absence of any
officer of the Corporation, or for any other reason that the Board of Directors
may deem sufficient, the Board of Directors may confer for the time being the
powers or duties, or any of them, of such officer upon any other officer or
upon any directors.
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SECTION l3. Officers' Bonds or Other Security. If required by the
Board of Directors, any officer of the Corporation shall give a bond or other
security for the faithful performance of his duties, in such amount and with
such surety as the Board of Directors may require.
SECTION l4. Compensation. The compensation of the officers of the
Corporation for their services as such officers shall be fixed from time to
time by the Board of Directors. An officer of the Corporation shall not be
prevented from receiving compensation by reason of the fact that he is also a
director of the Corporation.
SECTION 15. Loans to officers and employees; Guaranty of Obligations
of Officers and Employees. The Corporation may lend money to, or guarantee any
obligation of, or otherwise assist any officer or other employee of the
Corporation or any subsidiary, including any officer or employee who is a
director of the Corporation or any subsidiary, whenever, in the judgment of the
directors, such loan, guaranty or other assistance may reasonably be expected
to benefit the Corporation. The loan, guaranty or other assistance may be with
or without interest, and may be unsecured, or secured in such manner as the
Board of Directors shall approve, including, without limitation, a pledge of
shares of stock of the Corporation.
ARTICLE V
Stock Certificates and Their Transfer
SECTION l. Stock Certificates. Every holder of stock in the
Corporation shall be entitled to have a certificate, signed by, or in the name
of the Corporation by, the Chairman of the Board or the President or a
Vice-President and by the Treasurer or an Assistant Treasurer or the Secretary
or an Assistant Secretary of the Corporation, certifying the number of shares
owned by him in the Corporation. If the Corporation shall be authorized to
issue more than one class of stock or more than one series of any class, the
designations, preferences and relative, participating, optional or other
special rights of each class of stock or series thereof and the qualifications,
limitations or restriction of such preferences and/or rights shall be set forth
in full or summarized on the face or back of the certificate which the
Corporation shall issue to represent such class or series of stock, as well as
a statement that the Corporation will furnish without charge to each
stockholder who so requests the designations, preferences and relative,
participating, optional or other special rights of each class of stock or
series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.
SECTION 2. Facsimile Signatures. Any of or all the
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signatures on a certificate may be a facsimile. In case any officer, transfer
agent or registrar who has signed or whose facsimile signature has been placed
upon a certificate shall have ceased to be such officer, transfer agent or
registrar before such certificate is issued, it may be issued by the
Corporation with the same effect as if he were such officer, transfer agent or
registrar at the date of issue.
SECTION 3. Lost Certificates. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen, or destroyed. When authorizing such issue of a new certificate or
certificates, the Board of Directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen, or
destroyed certificate or certificates, or his legal representative, to give the
Corporation a bond in such sum as it may direct sufficient to indemnify it
against any claim that may be made against the Corporation on account of the
alleged loss, theft or destruction of any such certificate or the issuance of
such new certificate.
SECTION 4. Transfers of Stock. Upon surrender to the Corporation or
the transfer agent of the Corporation of a certificate for shares duly endorsed
or accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its records; provided, however, that the Corporation shall be
entitled to recognize and enforce any lawful restriction on transfer. Whenever
any transfer of stock shall be made for collateral security, and not
absolutely, it shall be so expressed in the entry of transfer if, when the
certificates are presented to the Corporation for transfer, both the transfer
and the transferee request the Corporation to do so.
SECTION 5. Transfer Agents and Registrars. The Board of Directors may
appoint, or authorize any officer or officers to appoint, one or more transfer
agents and one or more registrars.
SECTION 6. Regulations. The Board of Directors may make such
additional rules and regulations, not inconsistent with these By-Laws, as it
may deem expedient concerning the issue, transfer and registration of
certificates for shares of stock of the Corporation.
SECTION 7. Fixing the Record Date. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise
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any rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may fix, in advance,
a record date, which shall not be more than sixty nor less than ten days before
the date of such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for
the adjourned meeting.
SECTION 8. Registered Stockholders. The Corporation shall be entitled
to recognize the exclusive right of a person registered on its records as the
owner of shares of stock to receive dividends and to vote as such owner, shall
be entitled to hold liable for calls and assessments a person registered on its
records as the owner of shares of stock, and shall not be bound to recognize
any equitable or other claim to or interest in such share or shares of stock on
the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of Delaware.
ARTICLE VI
Indemnification of Directors and Officers
SECTION l. General. 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, criminal, administrative
or investigative (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 expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of solo contendere or its equivalent, shall not, or
itself, create a presumption that the person did not act in good faith and in a
manner which 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, had reasonable cause to believe that his conduct was unlawful.
SECTION 2. Derivative Actions. The Corporation shall
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indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit 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, 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) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation and 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 for gross negligence or willful misconduct in
the performance of his duty to the Corporation unless and only to the extent
that the Court of Chancery of the State of Delaware or the court in which such
action or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.
SECTION 3. Indemnification in Certain Cases. To the extent that a
director, officer, employee or agent of the Corporation has been successful on
the merits or otherwise in defense of any action, suit or proceeding referred
to in Sections l and 2 of this Article VI, or in defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith.
SECTION 4. Procedure. Any indemnification under Sections l and 2 of
this Article VI (unless ordered 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
in such Sections l and 2. Such determination shall be made (a) by the Board of
Directors by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding, or (b) if such a quorum is not
obtainable, or, even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (c) by the
stockholders.
SECTION 5. Advances for Expenses. Expenses incurred in defending a
civil or criminal action, suit or proceeding may be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding as
authorized by the Board of Directors in the specific case upon receipt of an
undertaking by or on behalf of the director, officer, employee or agent to
repay such amount
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unless it shall be ultimately determined that he is entitled to be indemnified
by the Corporation as authorized in this Article VI.
SECTION 6. Rights Not Exclusive. The indemnification provided by this
Article VI shall not be deemed exclusive of any other rights to which those
seeking indemnification may be entitled under any by-law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall insure to the benefit of the heirs,
executors and administrators of such a person.
SECTION 7. Insurance. The Corporation shall have power to purchase and
maintain insurance on behalf of any person who 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 any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the Corporation would have
the power to indemnify him against such liability under the provisions of this
Article VI.
SECTION 8. Definition of Corporation. For the purposes of this Article
VI, references to "the Corporation" include all constituent corporations
absorbed in a consolidation or merger as well as the resulting or surviving
corporation so that any person who is or was a director, officer, employee or
agent of such a constituent corporation or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
shall stand in the same position under the provisions of this Article VI with
respect to the resulting or surviving corporation as he would if he had served
the resulting or surviving corporation in the same capacity.
SECTION 9. Definitions. For purposes of this Article VI, references to
"other enterprises" shall include employee benefit plans; references to "fines"
shall include any excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the corporation"
shall include any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such director,
officer, employee, or agent with respect to an employee benefit plan, its
participants, or beneficiaries; and a person who acted in good faith and in a
manner he reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the corporation" as referred to in
this Article VI.
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ARTICLE VII
General Provisions
SECTION l. Dividends. Subject to the provisions of statute and the
Certificate of Incorporation, dividends upon the shares of capital stock of the
Corporation may be declared by the Board of Directors at any regular or special
meeting. Dividends may be paid in cash, in property or in shares of stock of
the Corporation, unless otherwise provided by statute or the Certificate of
Incorporation.
SECTION 2. Reserves. Before payment of any dividend, there may be set
aside out of any funds of the Corporation available for dividends such sum or
sums as the Board of Directors may, from time to time, in its absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
Corporation or for such other purpose as the Board of Directors may think
conducive to the interests of the Corporation. The Board of Directors may
modify or abolish any such reserves in the manner in which it was created.
SECTION 3. Seal. The seal of the Corporation shall be in such form as
shall be approved by the Board of Directors.
SECTION 4. Fiscal Year. The fiscal year of the Corporation shall be
fixed, and once fixed, may thereafter be changed, by resolution of the Board of
Directors.
SECTION 5. Checks, Notes, Drafts, Etc. All checks, notes, drafts or
other orders for the payment of money of the Corporation shall be signed,
endorsed or accepted in the name of the Corporation by such officer, officers,
person or persons as from time to time may be designated by the Board of
Directors or by an officer or officers authorized by the Board of Directors to
make such designation.
SECTION 6. Execution of Contracts, Deeds, Etc. The Board of Directors
may authorize any officer or officers, agent or agents, in the name and on
behalf of the Corporation, to enter into or execute and deliver any and all
deeds, bonds, mortgages, contracts and other obligations or instruments, and
such authority may be general or confined to specific instances.
SECTION 7. Voting of Stock in Other Corporations. Unless otherwise
provided by resolution of the Board of Directors, the Chairman of the Board or
the President or the Secretary, from time to time, may (or may appoint one or
more attorneys or agents to) cast the votes which the Corporation may be
entitled to cast as a shareholder or otherwise in any other corporation, any of
whose
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shares or securities may be held by the Corporation, at meetings of the holders
of the shares or other securities of such other corporation. In the event one
or more attorneys or agents are appointed, the Chairman of the Board or the
President or the Secretary may instruct the person or persons so appointed as
to the manner of casting such votes or giving such consent. The Chairman of the
Board or the President or the Secretary may, or may instruct the attorneys or
agents appointed to, execute or cause to be executed in the name and on behalf
of the Corporation and under its seal or otherwise, such written proxies,
consents, waivers or other instruments as may be necessary or proper in the
circumstances.
ARTICLE VIII
Amendments
These By-Laws may be amended or repealed or new by-laws adopted (a) by
action of the stockholders entitled to vote thereon at any annual or special
meeting of stockholders or (b) unless the Certificate of Incorporation provides
that only the shareholders may amend the by-laws, by action of the Board of
Directors at a regular or special meeting thereof. Any by-law made by the Board
of Directors may be amended or repealed by action of the stockholders at any
annual or special meeting of stockholders.
ARTICLE XI
Emergency By-Laws
SECTION 11.1. Emergency By-Laws. The emergency By-Laws provided in
this Section 11.1 shall be operative during any emergency in the conduct of the
business of the corporation resulting form an attack on the United States or on
a locality to which the corporation conducts its business or customarily holds
meeting of its Board of Directors or its stockholders, or during any nuclear or
atomic disaster, or during the existence of any catastrophe, or their similar
emergency condition, as a result of which a quorum of the Board of Directors or
a standing committee thereof cannot readily be convened for action
notwithstanding any different provision in the preceding By-Laws or in the
Certificate of Incorporation or in the law. To the extent not inconsistent with
the provisions of this Section, the By-Laws of the Corporation shall remain in
effect during any emergency and upon its termination the Emergency By-Laws
shall cease to be operative. Any amendments of these Emergency By-Laws may make
any further or different provision that may be practical and necessary for the
circumstances of the emergency.
During any such emergency: (A) A meeting of the Board of Directors or
a committee thereof may be called by any officer or
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director of the Corporation. Notice of the time and place or the meeting shall
be given by the person calling the meeting to such of the directors as it may
be feasible to reach by any available means of communication. Such notice shall
be given at such time in advance of the meeting as circumstances permit in the
judgment of the person calling the meeting; (B) The director or directors in
attendance at the meeting shall constitute a quorum; (C) The officers or other
persons designated on a list approved by the Board of Directors before the
emergency, all in such order of priority and subject to such conditions and for
such period of time (not longer than reasonably necessary after the termination
of the emergency) as may be provided in the resolution approving the list,
shall, to the extent required to provide a quorum at any meeting of the Board
of Directors, be deemed directors for such meeting; (D) The Board of Directors,
either before or during any such emergency, may provide, and from time to time
modify, lines of succession in the event that during such emergency any or all
officers or agents of the corporation shall for any reason be rendered
incapable of discharging their duties; (E) The Board of Directors, either
before or during any such emergency, amy, effective in the emergency, change
the head office or designate several alternative head offices or regional
extent required to constitute a quorum at any meeting of the Board of Directors
during such an emergency, the officers of the corporation who are present shall
be deemed, in order of rank and within the same rank in order of seniority,
directors for such meeting.
No officer, director or employee acting in accordance with any
Emergency By-Laws shall be liable except for willful misconduct.
These Emergency By-Laws shall be subject to repeal or change by
further action of the Board of Directors or by action of the stockholders.
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<PAGE>
Exhibit 4.1
DISCAS, INC.
Common Stock
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
C-
- ----- -----
CUSIP
----------
This is to Certify that
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, PAR VALUE
$.0001, OF
DISCAS, INC.
a corporation incorporated under the laws of the State of Delaware. The shares
evidenced by this certificate are transferable only on the stock transfer books
of Discas, Inc. by the holder hereof, in person or by attorney, upon surrender
of this certificate properly endorsed.
IN WITNESS WHEREOF, DISCAS, INC. has caused this certificate to be
executed by the signatures of its duly authorized officers and has
caused its facsimile seal to be hereunto affixed.
Dated:
- ---------------------------------- ----------------------------------
Secretary President
Countersigned and Registered:
American Stock Transfer & Trust Company,
Transfer Agent and Registrar
By:
------------------------------------
<PAGE>
DISCAS, INC.
For value received, hereby sells, assigns and transfers
unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING ZIP CODE OF
ASSIGNEE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Shares
represented by the within Certificate, and so hereby irrevocably constitutes
and appoints Attorney to transfer the said Shares on the books of the within
named corporation with full power of substitution in the premises.
Dated:
---------------------------------
Signature guaranteed:
----------------------------------------
NOTE: THE ABOVE SIGNATURE SHOULD CORRESPOND EXACTLY WITH THE NAME ON
THE FACE OF THIS STOCKHOLDERS(S) CERTIFICATE AND MUST BE GUARANTEED BY
AN ELIGIBLE GUARANTOR INSTITUTION WITH MEMBERSHIP IN AN APPROVED
SIGNATURE MEDALLION PROGRAM.
<PAGE>
Exhibit 4.2
DISCAS, INC.
A DELAWARE CORPORATION
AMERICAN STOCK TRANSFER & TRUST COMPANY
WARRANT AGENT
AND
ROAN CAPITAL PARTNERS L.P.
WARRANT AGREEMENT
<PAGE>
TABLE OF CONTENTS
Section Page
1. Appointment of Warrant Agent.......................................... 1
2. Form of Warrant....................................................... 1
3. Countersignature and Registration..................................... 2
4. Transfers and Exchanges............................................... 2
5. Exercise of Warrants; Payment of Warrant Solicitation Fee............. 2
6. Payment of Taxes...................................................... 4
7. Mutilated or Missing Warrants......................................... 5
8. Reservation of Common Stock........................................... 5
9. Warrant Price: Adjustments............................................ 6
10. Fractional Interests.................................................. 11
11. Notices to Warrantholders............................................. 11
12. Disposition of Proceeds on Exercise of Warrants....................... 12
13. Redemption of Warrants................................................ 12
14. Merger or Consolidation or Change of Name of Warrant Agent............ 13
15. Duties of Warrant Agent............................................... 13
16. Change of Warrant Agent............................................... 15
17. Identity of Transfer Agent............................................ 16
18. Notices............................................................... 16
19. Supplements and Amendments............................................ 17
20. New York Contract..................................................... 17
<PAGE>
21. Benefits of this Agreement............................................ 17
22. Successors............................................................ 17
<PAGE>
WARRANT AGREEMENT, dated as of __________ __, 1997, by and among
DISCAS, INC., a Delaware corporation (the "Company"), AMERICAN STOCK TRANSFER &
TRUST COMPANY, as warrant agent (hereinafter called the "Warrant Agent"), and
ROAN CAPITAL PARTNERS L.P., the representative (the "Representative") of the
several Underwriters (the "Underwriters").
WHEREAS, the Company proposes to issue and sell, through an initial
public offering by the Underwriters pursuant to an Underwriting Agreement dated
__________ __, 1997, an aggregate of up to 920,000 shares of common stock,
$.0001 par value per share (the "Common Stock"), and up to 920,000 Common Stock
Purchase Warrants (the "Warrants") of the Company; and in connection with such
offering the Company has agreed to issue to the Representative or its designees
an option to purchase 80,000 shares of Common Stock and 80,000 Warrants (the
"Representative's Warrant") and the Company will issue an additional 800,000
Warrants upon the automatic conversion of 800,000 currently existing and
outstanding warrants upon closing of the initial public offering of the
Warrants and the Common Stock;
WHEREAS, each Warrant will entitle the holder to purchase one share of
Common Stock;
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing to so act in connection with the
issuance, registration, transfer, exchange and exercise of the Warrants;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto agree as follows:
Section 1. Appointment of Warrant Agent. The Company hereby appoints
the Warrant Agent to act as Warrant Agent for the Company in accordance with
the instructions hereinafter set forth in this Agreement, and the Warrant Agent
hereby accepts such appointment.
Section 2. Form of Warrant. The text of the Warrants and of the form
of election to purchase Common Stock to be printed on the reverse thereof shall
be substantially as set forth in Exhibit A attached hereto. Each Warrant shall
entitle the registered holder thereof to purchase one share of Common Stock at
a purchase price
1
<PAGE>
of $5.00, at any time commencing thirteen (13) months from the effective date
of the prospectus of the public offering (__________ __, 1997) ("Effective
Date") until 5:00 p.m. Eastern time, on __________ __, 2002. The warrant
exercise price and the number of shares of Common Stock issuable upon exercise
of the Warrants are subject to adjustment upon the occurrence of certain
events, all as hereinafter provided. The Warrants shall be executed on behalf
of the Company by the manual or facsimile signature of the present or any
future President or Vice President of the Company, and attested to by the
manual or facsimile signature of the present or any future Secretary or
Assistant Secretary of the Company.
Warrants shall be dated as of the issuance by the Warrant Agent either
upon initial issuance or upon transfer or exchange.
In the event the aforesaid expiration dates of the Warrants fall on a
Saturday or Sunday, or on a legal holiday on which the New York Stock Exchange
is closed, then the Warrants shall expire at 5:00 p.m. Eastern time on the next
succeeding business day.
Section 3. Countersignature and Registration. The Warrant Agent shall
maintain books for the transfer and registration of the Warrants. Upon the
initial issuance of the Warrants, the Warrant Agent shall issue and register
the Warrants in the names of the respective holders thereof. The Warrants shall
be countersigned manually or by facsimile by the Warrant Agent (or by any
successor to the Warrant Agent then acting as warrant agent under this
Agreement) and shall not be valid for any purpose unless so countersigned. The
Warrants may, however, be so countersigned by the Warrant Agent (or by its
successor as Warrant Agent) and be delivered by the Warrant Agent,
notwithstanding that the persons whose manual or facsimile signatures appear
thereon as proper officers of the Company shall have ceased to be such officers
at the time of such countersignature or delivery.
Section 4. Transfers and Exchanges. The Warrant Agent shall transfer,
from time to time, any outstanding Warrants upon the books to be maintained by
the Warrant Agent for that purpose, upon surrender thereof for transfer
properly endorsed or accompanied by appropriate instructions for transfer. Upon
any such transfer, a new Warrant shall be issued to the transferee and the
surrendered Warrant shall be cancelled by the Warrant Agent. Warrants so
cancelled shall be delivered by the Warrant Agent to the Company
2
<PAGE>
from time to time upon request. Warrants may be exchanged at the option of the
holder thereof, when surrendered at the office of the Warrant Agent, for
another Warrant, or other Warrants of different denominations of like tenor and
representing in the aggregate the right to purchase a like number of shares of
Common Stock.
Section 5. Exercise of Warrants; Payment of Warrant Solicitation Fee.
Subject to the provisions of this Agreement, each registered holder of Warrants
shall have the right, which may be exercised commencing at the opening of the
business on ___________ __, 1998, to purchase from the Company (and the Company
shall issue and sell to such registered holder of Warrants) the number of fully
paid and non-assessable shares of Common Stock specified in such Warrants upon
surrender of such Warrants to the Company at the office of the Warrant Agent,
with the form of election to purchase on the reverse thereof duly filled in and
signed, and upon payment to the Company of the warrant price, determined in
accordance with the provisions of Sections 9 and 10 of this Agreement, for the
number of shares of Common Stock in respect of which such Warrants are then
exercised. Payment of such warrant price shall be made in cash or by certified
check or bank draft to the order of the Company. Subject to Section 6, upon
such surrender of Warrants and payment of the warrant price, the Company shall
issue and cause to be delivered with all reasonable dispatch to or upon the
written order of the registered holder of such Warrants and in such name or
names as such registered holder may designate, a certificate or certificates
for the number of full shares of Common Stock so purchased upon the exercise of
such Warrants. Such certificate or certificates shall be deemed to have been
issued and any person so designated to be named therein shall be deemed to have
become a holder of record of such shares of Common Stock as of the date of the
surrender of such Warrants and payment of the warrant price as aforesaid. The
rights of purchase represented by the Warrants shall be exercisable, at the
election of the registered holders thereof, either as an entirety or from time
to time for a portion of the shares specified therein and, in the event that
any Warrant is exercised in respect of less than all of the shares of Common
Stock specified therein at any time prior to the date of expiration of the
Warrants, a new Warrant or Warrants will be issued to the registered holder for
the remaining number of shares of Common Stock specified in the Warrant so
surrendered, and the Warrant Agent is hereby irrevocably authorized to
countersign and to deliver the required new Warrants pursuant to the provisions
of this Section and of Section 3 of this Agreement and the Company,
3
<PAGE>
whenever requested by the Warrant Agent, will supply the Warrant Agent with
Warrants duly executed on behalf of the Company for such purpose. Anything in
the foregoing to the contrary notwithstanding, no Warrant will be exercisable
unless at the time of exercise the Company has filed with the Securities and
Exchange Commission a registration statement under the Securities Act of 1933
(the "Act") covering the shares of Common Stock issuable upon exercise of such
Warrant and such registration statement shall have been declared effective,
such shares have been so registered or qualified or deemed to be exempt under
the securities laws of the state of residence of the holder of such Warrant.
The Company shall use its best efforts to have all shares so registered or
qualified on or before the date on which the Warrants become exercisable.
(a) If at the time of exercise of any Warrant after __________ __,
1998 (i) the market price of the Company's Common Stock is equal to or greater
than the then exercise price of the Warrant, (ii) the exercise of the Warrant
is solicited by the Underwriter at such time as it is a member of the National
Association of Securities Dealers, Inc. ("NASD"), (iii) the Warrant is not held
in a discretionary account, (iv) disclosure of the compensation arrangement is
made in documents provided to the
4
<PAGE>
holders of the Warrants, (v) the Underwriter is designated in writing as the
soliciting broker and (vi) the solicitation of the exercise of the Warrant is
not in violation of Regulation M (as such rule or any successor rule may be in
effect as of such time of exercise) promulgated under the Securities Exchange
Act of 1934, then the Underwriter soliciting such Warrant shall be entitled to
receive from the Company upon exercise of each of the Warrants so exercised a
fee of seven percent (7%) of the aggregate price of the Warrants so exercised
(the "Exercise Fee"). The procedures for payment of the warrant solicitation
fee are set forth in Section 5(b) below.
(b) (1) Within five (5) days of the last day of each month
commencing with __________ __, 1998, the Warrant Agent will notify the
Representative of each Warrant Certificate which has been properly completed
for exercise by holders of Warrants during the last month. The Company and
Warrant Agent shall determine, in their sole and absolute discretion, whether a
Warrant Certificate has been properly completed. The Warrant Agent will provide
the Representative with such information, in connection with the exercise of
each Warrant, as the Representative shall reasonably request.
(2) The Company hereby authorizes and instructs the Warrant
Agent to deliver to the soliciting Underwriter the Exercise Fee promptly after
receipt by the Warrant Agent from the Company of a check payable to the order
of the soliciting Underwriter in the amount of the Exercise Fee. In the event
that an Exercise Fee is paid to the Underwriter with respect to a Warrant which
the Company or the Warrant Agent determines is not properly completed for
exercise or in respect of which the Underwriter is not entitled to an Exercise
Fee, the soliciting Underwriter will return such Exercise Fee to the Warrant
Agent which shall forthwith return such fee to the Company.
The Representative and the Company may at any time after __________
__, 1998, and during business hours, examine the records of the Warrant Agent,
including its ledger of original Warrant certificates returned to the Warrant
Agent upon exercise of Warrants. Notwithstanding any provision to the contrary,
the provisions of paragraph 5(a) and 5(b) may not be modified, amended or
deleted without the prior written consent of the Representative.
5
<PAGE>
Section 6. Payment of Taxes. The Company will pay any documentary
stamp taxes attributable to the initial issuance of Common Stock issuable upon
the exercise of Warrants; provided, however, that the Company shall not be
required to pay any tax which may be payable in respect of any transfer
involved in the issuance or delivery of any certificates of shares of Common
Stock in a name other than that of the registered holder of Warrants in respect
of which such shares are issued, and in such case neither the Company nor the
Warrant Agent shall be required to issue or deliver any certificate for shares
of Common Stock or any Warrant until the person requesting the same has paid to
the Company the amount of such tax or has established to the Company's
satisfaction that such tax has been paid.
Section 7. Mutilated or Missing Warrants. In case any of the Warrants
shall be mutilated, lost, stolen or destroyed, the Company may, in its
discretion, issue and the Warrant Agent shall countersign and deliver in
exchange and substitution for and upon cancellation of the mutilated Warrant,
or in lieu of and in substitution for the Warrant lost, stolen or destroyed, a
new Warrant of like tenor and representing an equivalent right or interest, but
only upon receipt of evidence satisfactory to the Company and the Warrant Agent
of such loss, theft or destruction and, in case of a lost, stolen or destroyed
Warrant, indemnity, if requested, also satisfactory to them. Applicants for
such substitute Warrants shall also comply with such other reasonable
regulations and pay such reasonable charges as the Company or the Warrant Agent
may prescribe.
Section 8. Reservation of Common Stock. There have been reserved, and
the Company shall at all times keep reserved, out of the authorized and
unissued shares of Common Stock, a number of shares of Common Stock sufficient
to provide for the exercise of the rights of purchase represented by the
Warrants, and the transfer agent for the shares of Common Stock and every
subsequent transfer agent for any shares of the Company's Common Stock issuable
upon the exercise of any of the rights of purchase aforesaid are irrevocably
authorized and directed at all times to reserve such number of authorized and
unissued shares of Common Stock as shall be required for such purpose. The
Company agrees that all shares of Common Stock issued upon
6
<PAGE>
exercise of the Warrants shall be, at the time of delivery of the certificates
of such shares, validly issued and outstanding, fully paid and nonassessable
and listed on any national securities exchange upon which the other shares of
Common Stock are then listed. So long as any unexpired Warrants remain
outstanding, the Company will file such post-effective amendments to the
registration statement (Form SB-2, Registration No. 333 - ______) (the
"Registration Statement") filed pursuant to the Act with respect to the
Warrants (or other appropriate registration statements or post-effective
amendment or supplements) as may be necessary to permit it to deliver to each
person exercising a Warrant, a prospectus meeting the requirements of Section
10(a)(3) of the Act and otherwise complying therewith, and will deliver such
prospectus to each such person. To the extent that during any period it is not
reasonably likely that the Warrants will be exercised, due to market price or
otherwise, the Company need not file such a post-effective amendment during
such period. The Company will keep a copy of this Agreement on file with the
transfer agent for the shares of Common Stock and with every subsequent
transfer agent for any shares of the Company's Common Stock issuable upon the
exercise of the rights of purchase represented by the Warrants. The Warrant
Agent is irrevocably authorized to requisition from time to time from such
transfer agent stock certificates required to honor outstanding Warrants. The
Company will supply such transfer agent with duly executed stock certificates
for that purpose. All Warrants surrendered in the exercise of the rights
thereby evidenced shall be cancelled by the Warrant Agent and shall thereafter
be delivered to the Company, and such cancelled Warrants shall constitute
sufficient evidence of the number of shares of Common Stock which have been
issued upon the exercise of such Warrants. Promptly after the date of
expiration of the Warrants, the Warrant Agent shall certify to the Company the
total aggregate amount of Warrants then outstanding, and thereafter no shares
of Common Stock shall be subject to reservation in respect of such Warrants
which shall have expired.
Section 9. Warrant Price: Adjustments.
(a) The warrant price at which Common Stock shall be purchasable
upon the exercise of the Warrants shall be $5.00 at any time from __________
__, 1998 until 5:00 Eastern time on __________ __, 2002 or after adjustment, as
provided in this Section, shall be such price as so adjusted (the "Warrant
Price").
(b) The Warrant Price shall be subject to adjustment from time to
time as follows:
7
<PAGE>
(i) In case the Company shall at any time after the date hereof
pay a dividend in shares of Common Stock or make a distribution in shares of
Common Stock, then upon such dividend or distribution the Warrant Price in
effect immediately prior to such dividend or distribution shall forthwith be
reduced to a price determined by dividing:
(A) an amount equal to the total number of shares of Common
Stock outstanding immediately prior to such dividend or distribution multiplied
by the Warrant Price in effect immediately prior to such dividend or
distribution, by
(B) the total number of shares of Common Stock outstanding
immediately after such issuance or sale.
For the purposes of any computation to be made in accordance with the
provisions of this clause:
(i) The following provisions shall be applicable: Common Stock
issuable by way of dividend or other distribution on any stock of the Company
shall be deemed to have been issued immediately after the opening of business
on the date following the date fixed for the determination of stockholders
entitled to receive such dividend or other distribution.
(ii) In case the Company shall at any time subdivide or combine
the outstanding Common Stock, the Warrant Price shall forthwith be
proportionately decreased in the case of subdivision or increased in the case
of combination to the nearest one cent. Any such adjustment shall become
effective at the time such subdivision or combination shall become effective.
(iii) Within a reasonable time after the close of each
quarterly fiscal period of the Company during which the Warrant Price has been
adjusted as herein provided, the Company shall:
(A) File with the Warrant Agent a certificate signed by the
President or Vice President of the Company and by the Treasurer or Assistant
Treasurer or the Secretary or an Assistant Secretary of the Company, showing in
detail the facts requiring all such adjustments occurring during such period
and the Warrant Price after each such adjustment; and
8
<PAGE>
(B) The Warrant Agent shall have no duty with respect to
any such certificate filed with it except to keep the same on file and
available for inspection by holders of Warrants during reasonable business
hours, and the Warrant Agent may conclusively rely upon the latest certificate
furnished to it hereunder. The Warrant Agent shall not at any time be under any
duty or responsibility to any holder of a Warrant to determine whether any
facts exist which may require any adjustment of the Warrant Price, or with
respect to the nature or extent of any adjustment of the Warrant Price when
made, or with respect to the method employed in making any such adjustment, or
with respect to the nature or extent of the property or securities deliverable
hereunder. In the absence of a certificate having been furnished, the Warrant
Agent may conclusively rely upon the provisions of the Warrants with respect to
the Common Stock deliverable upon the exercise of the Warrants and the
applicable Warrant Price thereof.
(C) Notwithstanding anything contained herein to the
contrary, no adjustment of the Warrant Price shall be made if the amount of
such adjustment shall be less than $.05, but in such case any adjustment that
would otherwise be required then to be made shall be carried forward and shall
be made at the time and together with the next subsequent adjustment which,
together with any adjustment so carried forward, shall amount to not less than
$.05.
(c) In the event that the number of outstanding shares of Common
Stock is increased by a stock dividend payable in Common Stock or by a
subdivision of the outstanding Common Stock, then, from and after the time at
which the adjusted Warrant Price becomes effective pursuant to Subsection (b)
of this Section by reason of such dividend or subdivision, the number of shares
of Common Stock issuable upon the exercise of each Warrant shall be increased
in proportion to such increase in outstanding shares. In the event that the
number of shares of Common Stock outstanding is decreased by a combination of
the outstanding Common Stock, then, from and after the time at which the
adjusted Warrant Price becomes effective pursuant to Subsection (b) of this
Section by reason of such combination, the number of shares of Common Stock
issuable upon the exercise of each Warrant shall be decreased in proportion to
such decrease in the outstanding shares of Common Stock.
(d) In case of any reorganization or reclassification of the
outstanding Common Stock (other than a change in par value, or
9
<PAGE>
from par value to no par value, or as a result of a subdivision or
combination), or in case of any consolidation of the Company with, or merger of
the Company into, another corporation (other than a consolidation or merger in
which the Company is the continuing corporation and which does not result in
any reclassification of the outstanding Common Stock), or in case of any sale
or conveyance to another corporation of the property of the Company as an
entirety or substantially as an entirety, the holder of each Warrant then
outstanding shall thereafter have the right to purchase the kind and amount of
shares of Common Stock and/or other securities and property receivable upon
such reorganization, reclassification, consolidation, merger, sale or
conveyance by a holder of the number of shares of Common Stock which the holder
of such Warrant shall then be entitled to purchase; such adjustments shall
apply with respect to all such changes occurring between the date of this
Warrant Agreement and the date of exercise of such Warrant.
(e) Subject to the provisions of this Section 9, in case the
Company shall, at any time prior to the exercise of the Warrants, make any
distribution of its assets to holders of its Common Stock as a liquidating or a
partial liquidating dividend, then the holder of Warrants who exercises his
Warrants after the record date for the determination of those holders of Common
Stock entitled to such distribution of assets as a liquidating or partial
liquidating dividend shall be entitled to receive for the Warrant Price per
Warrant, in addition to each share of Common Stock, the amount of such
distribution (or, at the option of the Company, a sum equal to the value of any
such assets at the time of such distribution as determined by the Board of
Directors of the Company in good faith), which would have been payable to such
holder had he been the holder of record of the Common Stock receivable upon
exercise of his Warrant on the record date for the determination of those
entitled to such distribution.
(f) In case of the dissolution, liquidation or winding-up of the
Company, all rights under the Warrants shall terminate on a date fixed by the
Company, such date to be no earlier than ten (10) days prior to the
effectiveness of such dissolution, liquidation or winding-up and not later than
five (5) days prior to such effectiveness. Notice of such termination of
purchase rights shall be given to the last registered holder of the Warrants,
as the same shall appear on the books of the Company
10
<PAGE>
maintained by the Warrant Agent, by registered mail at least thirty (30) days
prior to such termination date.
(g) In case the Company shall, at any time prior to the expiration
of the Warrants and prior to the exercise thereof, offer to the holders of its
Common Stock any rights to subscribe for additional shares of any class of the
Company, then the Company shall give written notice thereof to the last
registered holder thereof not less than thirty (30) days prior to the date on
which the books of the Company are closed or a record date is fixed for the
determination of the stockholders entitled to such subscription rights. Such
notice shall specify the date as to which the books shall be closed or record
date fixed with respect to such offer of subscription and the right of the
holder thereof to participate in such offer of subscription shall terminate if
the Warrant shall not be exercised on or before the date of such closing of the
books or such record date.
(h) Any adjustment pursuant to the aforesaid provisions shall be
made on the basis of the number of shares of Common Stock which the holder
thereof would have been entitled to acquire by the exercise of the Warrant
immediately prior to the event giving rise to such adjustment.
(i) Irrespective of any adjustments in the Warrant Price or the
number or kind of shares purchasable upon exercise of the Warrants, Warrants
previously or thereafter issued may continue to express the same price and
number and kind of shares as are stated in the similar Warrants initially
issuable pursuant to this Warrant Agreement.
(j) The Company may retain a firm of independent public accountants
(who may be any such firm regularly employed by the Company) to make any
computation required under this Section, and any certificate setting forth such
computation signed by such firm shall be conclusive evidence of the correctness
of any computation made under this Section.
(k) If at any time, as a result of an adjustment made pursuant to
paragraph (d) above, the holders of a Warrant or Warrants shall become entitled
to purchase any securities other than shares of Common Stock, thereafter the
number of such securities so purchasable upon exercise of each Warrant and the
Warrant Price for such shares shall be subject to adjustment from
11
<PAGE>
time to time in a manner and on terms as nearly equivalent as practicable to
the provisions with respect to the Common Stock contained in paragraphs (b) and
(c).
(l) No adjustment to the Purchase Price of the Warrants or to the
number of shares of Common Stock purchasable upon the exercise of such Warrants
will be made, however under the following circumstances:
(i) upon the grant or exercise of any of the options presently
outstanding (or options which may hereafter be granted and/or exercised) under
the Company's 1997 Stock Option Plan for officers, directors and/or employees,
consultants and similar situated parties of the Company; or
(ii) upon the sale or exercise of the Warrants; or
(iii) upon exercise of the Representative's Warrant as
otherwise described in the Company's Prospectus dated __________ __, 1997; or
(iv) upon exercise or sale of the Warrants issuable upon
exercise of the Representative's Warrant; or
(v) upon any amendment to or change in the term of any rights
or warrants to subscribe for or purchase, or options for the purchase of Common
Stock or convertible securities, including, but not limited to, any extension
of any expiration date of any such right, warrant or option, any change in any
exercise or purchase price provided for in any such right, warrant or option,
any extension of any date through which any convertible securities are
convertible into or exchangeable for Common Stock or any change in the rate at
which any convertible securities are convertible into or exchangeable for
Common Stock.
Section 10. Fractional Interests. The Warrants may only be exercised
to purchase full shares of Common Stock and the Company shall not be required
to issue fractions of shares of Common Stock on the exercise of Warrants.
However, if a Warrantholder exercises all Warrants then owned of record by him
and such exercise would result in the issuance of a fractional share, the
Company will pay to such Warrantholder, in lieu of the issuance of any
fractional share otherwise issuable, an amount of cash based on the market
12
<PAGE>
value of the Common Stock of the Company on the last trading day prior to the
exercise date.
Section 11. Notices to Warrantholders.
(a) Upon any adjustment of the Warrant Price and the number of
shares of Common Stock issuable upon exercise of a Warrant, then and in each
such case, the Company shall give written notice thereof to the Warrant Agent,
which notice shall state the Warrant Price resulting from such adjustment and
the increase or decrease, if any, in the number of shares purchasable at such
price upon the exercise of a Warrant, setting forth in reasonable detail the
method of calculation and the facts upon which such calculation is based. The
Company shall also mail such notice to the holders of the Warrants at their
respective addresses appearing in the Warrant register. Failure to give or mail
such notice, or any defect therein, shall not affect the validity of the
adjustments.
(b) In case at any time:
(i) the Company shall pay dividends payable in stock upon its
Common Stock or make any distribution (other than regular cash dividends) to
the holders of its Common Stock; or
(ii) the Company shall offer for subscription pro rata to all
of the holders of its Common Stock any additional shares of stock of any class
or other rights; or
(iii) there shall be any capital reorganization or
reclassification of the capital stock of the Company, or consolidation or
merger of the Company with, or sale of substantially all of its assets to
another corporation; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company; then in any one or more of such
cases, the Company shall give written notice in the manner set forth in Section
1 l(a) of the date on which (A) a record shall be taken for such dividend,
distribution or subscription rights, or (B) such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up shall take place, as the case may be. Such notice shall also specify
the date as of which the holders of Common Stock of record shall participate in
such dividend, distribution or subscription
13
<PAGE>
rights, or shall be entitled to exchange their Common Stock for securities or
other property deliverable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up as the case
may be. Such notice shall be given at least thirty (30) days prior to the
action in question and not less than thirty (30) days prior to the record date
in respect thereof. Failure to give such notice, or any defect therein, shall
not affect the legality or validity of any of the matters set forth in this
Section 11(b).
(c) The Company shall cause copies of all financial statements and
reports, proxy statements and other documents that are sent to its stockholders
to be sent by first-class mail, postage prepaid, on the date of mailing to such
stockholders, to each registered holder of Warrants at his address appearing in
the Warrant register as of the record date for the determination of the
stockholders entitled to such documents.
Section 12. Disposition of Proceeds on Exercise of Warrants.
(a) The Warrant Agent shall promptly forward to the Company all
monies received by the Warrant Agent for the purchase of shares of Common Stock
through the exercise of such Warrants.
(b) The Warrant Agent shall keep copies of this Agreement available
for inspection by holders of Warrants during normal business hours.
Section 13. Redemption of Warrants. The Warrants are redeemable by the
Company commencing on __________ __, 1998, and prior to their expiration on
__________ __, 2002, in whole or in part, on not less than thirty (30) days'
prior written notice at a redemption price of $.10 per Warrant at any time;
provided that the closing bid price per share on the Nasdaq SmallCap Market, or
the last sale price, if listed on the Nasdaq National Market or a national
exchange (the "Market Place"), of the Common Stock for a period of twenty (20)
consecutive trading days ending within fifteen (15) days prior to the date of
any redemption notice, exceeds 150% of the current Warrant exercise price. Any
redemption in part shall be made pro rata to all Warrant holders. The
redemption notice shall be mailed to the holders of the Warrants at their
respective addresses appearing in the Warrant register. Holders of the Warrants
will have exercise rights until the close of business on the date fixed for
redemption.
14
<PAGE>
The Warrants underlying the Representative's Warrant shall not be
subject to redemption by the Company until they have been exercised and the
underlying Warrants are outstanding.
Section 14. Merger or Consolidation or Change of Name of Warrant Agent.
Any corporation or company which may succeed to the corporate trust business of
the Warrant Agent by any merger or consolidation or otherwise shall be the
successor to the Warrant Agent hereunder without the execution or filing of any
paper or any further act on the part of any of the parties hereto, provided
that such corporation would be eligible for appointment as a successor Warrant
Agent under t he provisions of Section 16 of this Agreement. In case at the
time such successor to the Warrant Agent shall succeed to the agency created by
this Agreement, any of the Warrants shall have been countersigned but not
delivered, any such successor to the Warrant Agent may adopt the
countersignature of the original Warrant Agent and deliver such Warrants so
countersigned.
In case at any time the name of the Warrant Agent shall be changed and
at such time any of the Warrants shall have been countersigned but not
delivered, the Warrant Agent may adopt the countersignature under its prior
name and deliver Warrants so countersigned. In all such cases such Warrants
shall have the full force provided in the Warrants and in the Agreement.
Section 15. Duties of Warrant Agent. The Warrant Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Warrants, by their
acceptance thereof, shall be bound:
(a) The statements of fact and recitals contained herein and in the
Warrants shall be taken as statements of the Company, and the Warrant Agent
assumes no responsibility for the correctness of any of the same except as such
describe the Warrant Agent or action taken or to be taken by it. The Warrant
Agent assumes no responsibility with respect to the distribution of the
Warrants except as herein expressly provided.
(b) The Warrant Agent shall not be responsible for any failure of
the Company to comply with any of the covenants in this Agreement or in the
Warrants to be complied with by the Company.
15
<PAGE>
(c) The Warrant Agent may consult at any time with counsel
satisfactory to it (who may be counsel for the Company) and the Warrant Agent
shall incur no liability or responsibility to the Company or to any holder of
any Warrant in respect of any action taken, suffered or omitted by it hereunder
in good faith and in accordance with the opinion or the advice of such counsel.
(d) The Warrant Agent shall incur no liability or responsibility to
the Company or to any holder of any Warrant for any action taken in reliance on
any notice, resolution, waiver, consent, order, certificate or other instrument
believed by it to be genuine and to have been signed, sent or presented by the
proper party or parties.
(e) The Company agrees to pay to the Warrant Agent reasonable
compensation for all services rendered by the Warrant Agent in the execution of
this Agreement, to reimburse the Warrant Agent for all expenses, taxes and
governmental charges and other charges incurred by the Warrant Agent in the
execution of this Agreement and to indemnify the Warrant Agent and save it
harmless against any and all liabilities, including judgments, costs and
reasonable counsel fees, for anything done or omitted by the Warrant Agent in
the execution of this Agreement except as a result of the Warrant Agent's
negligence, willful misconduct or bad faith.
(f) The Warrant Agent shall be under no obligation to institute any
action, suit or legal proceeding or to take any other action likely to involve
expenses unless the Company or one or more registered holders of Warrants shall
furnish the Warrant Agent with reasonable security and indemnity for any costs
and expenses which may be incurred (for which there is no obligation of the
Company to do so, except as provided herein) but this provision shall not
affect the power of the Warrant Agent to take such action as the Warrant Agent
may consider proper, whether with or without any such security or indemnity.
All rights of action under this Agreement or under any of the Warrants may be
enforced by the Warrant Agent without the possession of any of the Warrants or
the production thereof at any trial or other proceeding, and any such action,
suit or proceeding instituted by the Warrant Agent shall be brought in its name
as Warrant Agent, and any recovery of judgment shall be for the ratable benefit
of the registered holders of the Warrants, as their respective rights and
interests may appear.
(g) The Warrant Agent and any stockholder, director, officer,
partner or employee of the Warrant Agent may buy, sell or
16
<PAGE>
deal in any of the Warrants or other securities of the Company or become
pecuniarily interested in any transaction in which the Company may be
interested, or contract with or lend money to or otherwise act as fully and
freely as though it were not the Warrant Agent under this Agreement. Nothing
herein shall preclude the Warrant Agent from acting in any other capacity for
the Company or for any other legal entity.
(h) The Warrant Agent shall act hereunder solely as agent and its
duties shall be determined solely by the provisions hereof.
(i) The Warrant Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys, agents or employees, and the Warrant Agent shall not be
answerable or accountable for any such attorneys, agents or employees or for
any loss to the Company, provided reasonable care had been exercised in the
selection and continued employment thereof.
(j) Any request, direction, election, order or demand of the
Company shall be sufficiently evidenced by an instrument signed in the name of
the Company by its President or a Vice President or its Secretary or an
Assistant Secretary or its Treasurer or an Assistant Treasurer (unless other
evidence in respect thereof be herein specifically prescribed); and any
resolution of the Board of Directors may be evidenced to the Warrant Agent by a
copy thereof certified by the Secretary or an Assistant Secretary of the
Company.
Section 16. Change of Warrant Agent. The Warrant Agent may resign and
be discharged from its duties under this Agreement by giving to the Company
notice in writing, and to the holders of the Warrants notice by mailing such
notice to the holders at their respective addresses appearing on the Warrant
register, of such resignation, specifying a date when such resignation shall
take effect. The Warrant Agent may be removed by like notice to the Warrant
Agent from the Company and the like mailing of notice to the holders of the
Warrants. If the Warrant Agent shall resign or be removed or shall otherwise
become incapable of action, the Company shall appoint a successor to the
Warrant Agent. If the Company shall fail to make such appointment within a
period of thirty (30) days after such removal or after it has been notified in
writing of such resignation or
17
<PAGE>
incapacity by the resigning or incapacitated Warrant Agent or after the Company
has received such notice from a registered holder of a Warrant (who shall, with
such notice, submit his Warrant for inspection by the Company), then the
registered holder of any Warrant may apply to any court of competent
jurisdiction for the appointment of a successor to the Warrant Agent. Any
successor Warrant Agent, whether appointed by the Company or by such a court,
shall be a bank or trust company, in good standing, incorporated under any
state or federal law. After appointment, the successor Warrant Agent shall be
vested with the same powers, rights, duties and responsibility as if it had
been originally named as Warrant Agent without further act or deed and the
former Warrant Agent shall deliver and transfer to the successor Warrant Agent
all cancelled Warrants, records and property at the time held by it hereunder,
and execute and deliver any further assurance or conveyance necessary for the
purpose. Failure to file or mail any notice provided for in this Section,
however, or any defect therein, shall not affect the validity of the
resignation or removal of the Warrant Agent or the appointment of the successor
Warrant Agent, as the case may be.
Section 17. Identity of Transfer Agent. Forthwith upon the appointment
of any transfer agent for the shares of Common Stock or of any subsequent
transfer agent for the shares of Common Stock or other shares of the Company's
Common Stock issuable upon the exercise of the` rights of purchase represented
by the Warrants, the Company will file with the Warrant Agent a statement
setting forth the name and address of such transfer agent.
Section 18. Notices. Any notice pursuant to this Agreement to be given
by the Warrant Agent, or by the registered holder of any Warrant to the
Company, shall be sufficiently given if sent by first-class mail, postage
prepaid, addressed (until another is filed in writing by the Company with the
Warrant Agent) as follows:
Discas, Inc.
567-1 South Leonard Street
Waterbury, Connecticut 06708
Attention: Mr. Patrick A. DePaolo, President
and a copy thereof to:
Epstein Becker & Green, P.C.
250 Park Avenue
New York, New York 10177
Attention: Joseph A. Smith, Esq.
18
<PAGE>
Any notice pursuant to this Agreement to be given by the Company or by
the registered holder of any Warrant to the Warrant Agent shall be sufficiently
given if sent by first-class mail, postage prepaid, addressed (until another
address is filed in writing by the Warrant Agent with the Company) as follows:
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
Attention: Mr. George Karfunkel
Any notice pursuant to this Agreement to be given to the Warrant Agent
or by the Company to the Representative shall be sufficiently given if sent by
first-class mail, postage prepaid, addressed (until another address if filed in
writing with the Warrant Agent) as follows:
Roan Capital Partners L.P.
40 East 52nd Street
New York, New York 10022
Attention: Mr. Timothy Ryan
and a copy thereof to:
Gusrae, Kaplan & Bruno
120 Wall Street
New York, New York 10005
Attention: Alexander Bienenstock, Esq.
Section 19. Supplements and Amendments. The Company, the Warrant Agent
and the Representative may from time to time supplement or amend this Agreement
in order to cure any ambiguity or to correct or supplement any provision
contained herein which may be defective or inconsistent with any other
provision herein, or to make any other provisions in regard to matters or
questions arising hereunder which the Company and the Warrant Agent and the
Representative may deem necessary or desirable and which shall not be
inconsistent with the provisions of the Warrants and which shall not adversely
affect the interest of the holders of Warrants.
Section 20. New York Contract. This Agreement and each Warrant issued
hereunder shall be deemed to be a contract made under the laws of the State of
New York and shall be construed in accordance with the laws of New York
applicable to agreements to be performed wholly within New York.
Section 21. Benefits of this Agreement. Nothing in this Agreement
shall be construed to give to any person or corporation other than the
Representative, the Company and the Warrant Agent and the registered holders of
the Warrants any legal or equitable
<PAGE>
right, remedy or claim under this Agreement; but this Agreement shall be for
the sole and exclusive benefit of the Company, the Warrant Agent and the
registered holders of the Warrants.
Section 22. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company, the Representative or the
Warrant Agent shall bind and inure to the benefit of their respective
successors and assigns hereunder.
IN WITNESS WHEREOF, the parties have entered into this Agreement on
the date first above written.
DISCAS, INC.
By:
-------------------------------------
Patrick A. DePaolo, President
AMERICAN STOCK TRANSFER & TRUST COMPANY
By:
-------------------------------------
Name:
Title:
ROAN CAPITAL PARTNERS L.P.
By:
-------------------------------------
Name:
Title:
20
<PAGE>
EXHIBIT A
[Form of Face of Warrant Certificate]
No. W Warrants
VOID AFTER ________ ___,2002
WARRANT CERTIFICATE FOR PURCHASE OF COMMON STOCK
DISCAS, INC.
THIS CERTIFIES THAT FOR VALUE RECEIVED ________________________________________
_______________________________________________________________________________
or registered assigns (the "Registered Holder") is the owner of the number of
Redeemable Common Stock Purchase Warrants ("Warrants") specified above. Each
Warrant initially entitles the Registered Holder to purchase, subject to the
terms and conditions set forth in this Certificate and the Warrant Agreement
(as hereinafter defined), one fully paid and nonassessable share of Common
Stock, $.0001 par value per share ("Common Stock"), of DISCAS, INC., a Delaware
corporation (the "Company"), at any time between the Initial Warrant Exercise
Date and the Expiration Date (as hereinafter defined), upon the presentation
and surrender of this Warrant Certificate with the Subscription Form on the
reverse hereof duly executed, at the corporate office of AMERICAN STOCK
TRANSFER & TRUST COMPANY as Warrant Agent, or its successor (the "Warrant
Agent"), accompanied by payment of $5.00 (the "Purchase Price") in lawful money
of the United States of America in cash or by official bank or certified check
made payable to Discas, Inc.
This Warrant Certificate and each Warrant represented hereby are
issued pursuant to and are subject in all respects to the terms and conditions
set forth in the Warrant Agreement (the "Warrant Agreement") dated __________
__, 1997, by and between the Company and the Warrant Agent.
In the event of certain contingencies provided for in the Warrant
Agreement, the Purchase Price or the number of shares of Common Stock subject
to purchase upon the exercise of each Warrant represented hereby are subject to
modifications or adjustment.
Each Warrant represented hereby is exercisable at the option of the
Registered Holder, but no fractional shares of Common Stock will be issued. In
the case of the exercise of less than all the Warrants represented hereby, the
Company shall cancel this Warrant Certificate upon the surrender hereof and
shall execute and deliver a new Warrant Certificate or Warrant Certificates of
like tenor, which the Warrant Agent shall countersign, for the balance of such
Warrants.
A-1
<PAGE>
The term "Initial Warrant Exercise Date" shall mean __________ __,
1998.
The term "Expiration Date" shall mean 5:00 p.m. New York time) on
__________ __, 2002, or such earlier date as the Warrants shall be redeemed. If
such date shall in the State of New York be a holiday or a day on which the
banks are authorized to close, then the Expiration Date shall mean 5:00 p.m.
(New York time) the next following day which in the State of New York is not a
holiday or a day on which banks are authorized to close.
The Company shall not be obligated to deliver any securities pursuant
to the exercise of this Warrant unless a registration statement under the
Securities Act of 1933, as amended, with respect to such securities is then
effective. This Warrant shall not be exercisable by a Registered Holder in any
state where such exercise would be unlawful.
This Warrant Certificate is exchangeable, upon the surrender hereof by
the Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Warrants, each of such new Warrant Certificates to
represent such number of Warrants as shall be designated by such Registered
Holder at the time of such surrender. Upon due presentment with any transfer
fee in addition to any tax or other governmental charge imposed in connection
therewith, for registration of transfer of this Warrant Certificate at such
office, a new Warrant Certificate or Warrant Certificates representing an equal
aggregate number of Warrants will be issued to the transferee in exchange
therefor, subject to the limitations provided in the Warrant Agreement.
Prior to the exercise of any Warrant represented hereby, the
Registered Holder shall not be entitled to any rights of a stockholder of the
Company, including, without limitation, the right to vote or to receive
dividends or other distributions, and shall not be entitled to receive any
notice of any proceedings of the Company, except as provided in the Warrant
Agreement.
This Warrant may be redeemed at the option of the Company, at a
redemption price of $.10 per Warrant any time after _________ __, 1998,
provided the per share Market Price (as defined in the Warrant Agreement) for
the securities issuable upon exercise of such Warrant shall exceed 150% of the
current Warrant exercise price on each of the twenty (20) consecutive trading
days during a period ending within fifteen (15) days prior to the date on which
notice of redemption is given. Notice of redemption shall be given
A-2
<PAGE>
not later than the thirtieth day before the date fixed for redemption, all as
provided in the Warrant Agreement. On and after the date fixed for redemption,
the Registered Holder shall have no rights with respect to this Warrant except
to receive the $.10 per Warrant upon surrender of this Certificate.
Prior to due presentment for registration of transfer hereof, the
Company and the Warrant Agent may deem and treat the Registered Holder as the
absolute owner hereof and of each Warrant represented hereby (notwithstanding
any notations of ownership or writing hereon made by anyone other than a duly
authorized officer of the Company or the Warrant Agent) for all purposes and
shall not be affected by any notice to the contrary.
The Company has agreed to pay a fee of 7% of the Purchase Price upon
certain conditions as specified in the Warrant Agreement upon the exercise of
any Warrants represented hereby.
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of New York.
This Warrant Certificate is not valid unless countersigned by the
Warrant Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed, manually or in facsimile by two of its officers thereunto
duly authorized and a facsimile of its corporate seal to be imprinted hereon.
DISCAS, INC.
By:
-----------------------------------
By:
-----------------------------------
Dated:
-----------------------
[Seal]
COUNTERSIGNED:
AMERICAN STOCK TRANSFER & TRUST COMPANY,
as Warrant Agent
By:
-----------------------------------------
Authorized Officer
A-3
<PAGE>
[Form of Reverse of Warrant Certificate]
NOTICE OF ELECTION TO EXERCISE
To Be Executed by the Registered Holder
in Order to Exercise Warrants
THE UNDERSIGNED REGISTERED HOLDER hereby irrevocably elects to
exercise _______________ Warrants represented by this Warrant Certificate, and
to purchase the securities issuable upon the exercise of such Warrants, and
requests that certificates for such securities shall be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER and be
delivered to:
---------------------------------------
---------------------------------------
---------------------------------------
---------------------------------------
(please print or type name and address)
and if such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, that a new Warrant Certificate for the balance of such
Warrants be registered in the name of, and delivered to, the Registered Holder
at the address stated below.
The undersigned represents that the exercise of the Warrants evidenced
hereby was solicited by a member of the National Association of Securities
Dealers, Inc. ("NASD"), whose name appears in the space below. If not solicited
by an NASD member, please write "unsolicited" in the space below. Unless
otherwise indicated, it will be assumed that the exercise was solicited by Roan
Capital Partners L.P.
----------------------------------------
(Name of NASD Member, if other than
Roan Capital Partners L.P., or
"unsolicited")
----------------------------------------
Dated:
------------------ ----------------------------------------
----------------------------------------
Address
----------------------------------------
Taxpayer Identification Number
----------------------------------------
Signature Guaranteed
----------------------------------------
A-4
<PAGE>
ASSIGNMENT
To Be Executed by the Registered Holder in Order to Assign Warrants
FOR VALUE RECEIVED, __________________________________ hereby sells,
assigns, and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF TRANSFEREE
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
(please print or type name and address)
__________ of the Warrants represented by this Warrant Certificate, and hereby
irrevocably constitutes and appoints _________________________ Attorney to
transfer this Warrant Certificate on the books of the Company, with full power
of substitution in the premises.
Dated:
------------------ ----------------------------------
Signature Guaranteed:
----------------------------------
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE
GUARANTEED BY AN ELIGIBLE INSTITUTION (AS DEFINED IN RULE 17Ad-15 UNDER THE
SECURITIES AND EXCHANGE ACT OF 1934) WHICH MAY INCLUDE A COMMERCIAL BANK OR
TRUST COMPANY, SAVINGS ASSOCIATION, CREDIT UNION OR A MEMBER FIRM OF THE
AMERICAN STOCK EXCHANGE, NEW YORK STOCK EXCHANGE, PACIFIC STOCK EXCHANGE OR
MIDWEST STOCK EXCHANGE.
A-5
<PAGE>
Exhibit 4.4
NO SALE OR TRANSFER OF THIS WARRANT OR THE SECURITIES
UNDERLYING THIS WARRANT MAY BE MADE UNTIL
THE EFFECTIVENESS OF A REGISTRATION STATEMENT
OR OF A POST-EFFECTIVE AMENDMENT THERETO
UNDER THE SECURITIES ACT OF 1933 (THE "ACT"),
COVERING THIS WARRANT OR THE SECURITIES UNDERLYING
THIS WARRANT, OR UNTIL THE COMPANY IS IN RECEIPT OF AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM
THE REGISTRATION REQUIREMENTS OF THE ACT. TRANSFER OF
THIS WARRANT IS RESTRICTED UNDER PARAGRAPH 2 BELOW.
REPRESENTATIVE'S WARRANT TO PURCHASE
COMMON STOCK AND/OR REDEEMABLE WARRANTS
DISCAS, INC.
(a Delaware corporation)
Dated:______________ ___, 1997
<PAGE>
THIS CERTIFIES THAT Roan Capital Partners L.P. (the representative of
the Underwriters (the "Representative"), and together with its assigns, the
"Holder") is entitled to purchase from Discas, Inc., a Delaware corporation
(the "Company"), for an aggregate price of $10, an option ("Purchase Option"),
during the period as hereinafter specified, for up to 80,000 shares of the
Company's common stock, $.0001 par value per share (the "Common Stock"), and
80,000 redeemable warrants (the "Warrants" and collectively with the Common
Stock, the "Securities"), at a purchase price of $6.75 per share of Common
Stock and $.14 per Warrant which Warrant is exercisable at $5.00 per share of
Common Stock (the "Exercise Price") (the "Representative's Warrant").
This Representative's Warrant is issued pursuant to an Underwriting
Agreement dated , 1997, between the Company and the Representative in
connection with a public offering through the Representative (the "Public
Offering") of 800,000
shares of Common Stock and 800,000 Warrants.
1. Exercise of the Representative's Warrant.
(a) The rights represented by this Representative's Warrant
shall be exercised at the prices and during the periods as follows: (i) During
the period from __________, __ 1997 to , 1998, inclusive, the Holder shall
have no right to purchase any Securities hereunder.
(ii) Between __________, __ 1998 and __________, __ 2002,
inclusive, the Holder shall have the option to purchase shares of Common Stock
and Warrants hereunder at a price of $6.75 and $.14, respectively, the
purchase price of the Common Stock and the Warrant being 135% of the public
offering price for the Securities set forth in the Prospectus forming a part
of the registration statement on Form SB-2 (File No. 333-_______) of the
Company, as amended (the "Registration Statement").
(iii) After ________ __, 2002, the Holder shall have no
right to purchase any Securities hereunder and this Representative's Warrant
shall expire effective at 5:00 p.m., New York time.
(b) The rights represented by this Representative's Warrant
may be exercised at any time within the period above specified, in whole or in
part, by (i) the surrender of this Representative's Warrant (with the purchase
form at the end hereof properly executed) at the principal executive of office
of the Company (or such other of office or agency of the Company as it may
designate by notice in writing to the Holder at the address of the
<PAGE>
Holder appearing on the books of the Company); (ii) payment to the
Company of the Exercise Price then in effect for the number of shares of
Common Stock and Warrants specified in the above-mentioned purchase form
together with applicable stock transfer taxes, if any; and (iii) delivery to
the Company of a duly executed agreement signed by the person(s) designated in
the purchase form to the effect that such person(s) agree(s) to be bound by
the provisions of Paragraph 5 and subparagraphs (b), (c) and (d) of Paragraph
6 hereof. This Representative's Warrant shall be deemed to have been
exercised, in whole or in part to the extent specified, immediately prior to
the close of business on the date this Representative's Warrant is surrendered
and payment is made in accordance with the foregoing provisions of this
Paragraph 1, and the person or persons in whose name or names the certificates
for the Securities shall be issuable upon such exercise shall become the
Holder or Holders of record of such Common Stock and Warrants at that time and
date. The Common Stock and Warrants so purchased shall be delivered to the
Holder within a reasonable time, not exceeding ten (10) business days, after
the rights represented by this Representative's Warrant shall have been so
exercised.
2. Restrictions on Transfer.
This Representative's Warrant shall not be transferred,
sold, assigned, or hypothecated for a period of one year commencing _______
__, 1997, except that it may be transferred to successors of the Holder, and
may be assigned in whole or in part to any person who is an of officer of the
Representative or an officer or partner of any other member of the
underwriting syndicate or selling group member during such period; and after
such one-year period, such a transfer may occur providing the Representative's
Warrant is exercised immediately upon transfer, and if not exercised
immediately on transfer, the Representative's Warrant shall lapse. Any such
assignment shall be effected by the Holder by (i) completing and executing the
form of assignment at the end hereof and (ii) surrendering this
Representative's Warrant with such duly completed and executed assignment form
for cancellation, accompanied by funds sufficient to pay any transfer tax, at
the office or agency of the Company referred to in Paragraph 1 hereof,
accompanied by a certificate (signed by a duly authorized representative of
the Holder), stating that each transferee is a permitted transferee under this
Paragraph 2 hereof; whereupon the Company shall issue, in the name or names
specified by the Holder (including the Holder) a new Representative's Warrant
or Representative's Warrants of like tenor and representing in the aggregate
rights to purchase the same number of Securities as are then purchasable
hereunder.
3. Covenants of the Company.
(a) The Company covenants and agrees that all Common Stock
and Common Stock issuable upon exercise of the Warrants will,
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upon issuance, be duly and validly issued, fully paid and nonassessable and no
personal liability will attach to the holder thereof by reason of being such a
holder, other than as set forth herein.
(b) The Company covenants and agrees that during the period
within which this Representative's Warrant may be exercised, the Company will
at all times have authorized and reserved a sufficient number of shares of
Common Stock to provide for the exercise of this Representative's Warrant and
the Warrants included therein.
(c) The Company covenants and agrees that for so long as the
Securities shall be outstanding, the Company shall use its best efforts to
cause all shares of Common Stock issuable upon the exercise of the
Representative's Warrant and the Warrants contained therein, to be listed on
or quoted by the Nasdaq National Market System or on the Nasdaq SmallCap
Market.
4. No Rights of Stockholder.
This Representative's Warrant shall not entitle the Holder
to any voting rights or other rights as a stockholder of the Company, either
at law or in equity, and the rights of the Holder are limited to those
expressed in this Representative's Warrant and are not enforceable against the
Company except to the extent set forth herein.
5. Registration Rights.
(a) The Company shall advise the Holder or its transferee,
whether the Holder holds this Representative's Warrant or has exercised this
Representative's Warrant and holds Common Stock and Warrants, or Common Stock
underlying the Warrants (the "Warrant Shares"), by written notice at least 30
days prior to the filing of any post-effective amendment to the Registration
Statement or of any new registration statement or post-effective amendment
thereto under the Act, covering any securities of the Company, for its own
account or for the account of others, and will for a period of four years from
, 1998 upon the request of the Holder, include in any such post-effective
amendment or registration statement such information as may be required to
permit a public offering of any of the Common Stock or Warrants issuable
hereunder, and/or the Warrant Shares (the "Registerable Securities"), provided
however that this Section 5(a) is not applicable to any registration statement
by the Company on Forms S-4 or S-8 (including any Form S-3 related to such
Form S-8) or any other comparable form. The Company shall supply prospectuses
in order to facilitate the public sale or other disposition of the
Registerable Securities, use its best efforts to register and
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qualify any of the Registerable Securities for sale in such states as such
Holder reasonably designates, provided such qualification is not solely for
the purpose of subjecting the Company to jurisdiction in that state or is not
unduly burdensome, and do any and all other acts and things which may be
necessary to enable such Holder to consummate the public sale of the
Registerable Securities, and furnish indemnification in the manner provided in
Paragraph 6 hereof. The Holder shall furnish information reasonably requested
by the Company in accordance with such post-effective amendments or
registration statements, including its intentions with respect thereto, and
shall furnish indemnification as set forth in Paragraph 6. The Company shall
continue to advise the Holders of the Registerable Securities of its intention
to file a registration statement or amendment pursuant to this Paragraph 5(a)
until the earlier of (i) __________, __ 2002; or (ii) such time as all of the
Registerable Securities have been registered and sold under the Act.
(b) If any fifty-one (51 %) percent holder (as defined
below) shall give notice to the Company at any time during the four (4) year
period beginning one (1) year from , 1997 to the effect that such holder
desires to register under the Act any Registerable Securities, under such
circumstances that a public distribution (within the meaning of the Act) of
any such Registerable Securities will be involved, then the Company will as
promptly as practicable after receipt of such notice, but not later than
thirty (30) days after receipt of such notice, file a post effective amendment
to the current Registration Statement or a new registration statement pursuant
to the Act to the end that the Registerable Securities may be publicly sold
under the Act as promptly as practicable thereafter and the Company will use
its best efforts to cause such registration to become and remain effective as
provided herein (including the taking of such steps as are necessary to obtain
the removal of any stop order); provided, that such fifty-one (51%) percent
holder shall furnish the Company with appropriate information in connection
therewith as the Company may reasonably request; and provided, further, that
the Company shall not be required to file such a post effective amendment or
registration statement on more than one occasion at its expense. The Company
will maintain such registration statement or post-effective amendment current
under the Act for a period of at least six (6) months from the effective date
thereof. The Company shall supply prospectuses in order to facilitate the
public sale of the Registerable Securities, use its best efforts to register
and qualify any of the Registerable Securities for sale in such states as such
holder reasonably designates, provided such qualification is not solely for
the purpose of subjecting the Company to jurisdiction in that state or is not
unduly burdensome, and furnish indemnification in the manner provided in
Paragraph 6 hereof.
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(c) The Holder may, in accordance with Paragraphs 5(a) or
(b), at his or its option, and subject to the limitations set forth in
Paragraph 1(a) hereof, request the registration of any of the Registerable
Securities in a filing made by the Company prior to the acquisition of the
Securities upon exercise of this Representative's Warrant. The Holder may
thereafter exercise the Warrants at any time or from time to time subsequent
to the effectiveness under the Act of the registration statement in which the
Common Stock underlying the Representative's Warrants and Warrants were
included.
(d) The term "51% holder," as used in this Paragraph 5,
shall include any owner or combination of owners of Representative's Warrants
or Registerable Securities if the aggregate number of Common Shares and
Warrant Shares included in and underlying the Representative's Warrants and
Registerable Securities held of record by it or them, would constitute a
majority of the aggregate of such Common Shares and Warrant Shares.
(e) The following provisions of this Paragraph 5 shall
also be applicable:
(i) Within ten (10) days after receiving any notice pursuant
to Paragraph 5(b), the Company shall give notice to the other Holders of
Representative's Warrants or Registerable Securities, advising that the
Company is proceeding with such post-effective amendment or registration and
offering to include therein the Registerable Securities of such other Holders,
provided that they shall furnish the Company with all information in
connection therewith as shall be necessary or appropriate and as the Company
shall reasonably request in writing. Following the effective date of such
post-effective amendment or registration, the Company shall, upon the request
of any Holder of Registerable Securities, forthwith supply such number of
prospectuses meeting the requirements of the Act, as shall be reasonably
requested by such Holder. The Company shall use its best efforts to qualify
the Registerable Securities for sale in such states as the 51% holder shall
designate, provided such qualification is not solely for the purpose of
subjecting the Company to jurisdiction in that state or is not unduly
burdensome, at such times as the registration statement is effective under the
Act.
(ii) The Company shall bear the entire cost and expense of
any registration of securities initiated by it under Paragraph 5(a) hereof
notwithstanding that the Registerable Securities subject to this
Representative's Warrant may be included in any such registration. The Company
shall also comply with one request for registration made by the 51% holder
pursuant to Paragraph 5(b) hereof at the Company's own expense and without
charge to any holder of the Registerable Securities, and with one request at
the
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expense of the Holders thereof. Notwithstanding the foregoing, any Holder
whose Registerable Securities are included in any such registration statement
pursuant to this Paragraph 5 shall, however, bear the fees of any counsel
retained by him and any transfer taxes or underwriting discounts or
commissions applicable to the Registerable Securities sold by him pursuant
thereto and, in the case of a registration pursuant to Paragraph 5(a) hereof,
any additional registration fees attributable to the registration of such
Holder's Registerable Securities.
(iii) If the managing underwriter in any such underwritten
offering shall advise the Company that it declines to include a portion or all
of the Registerable Securities requested by the Holders to be included in the
registration statement, then distribution of all or a specified portion of the
Registerable Securities shall be excluded from such registration statement (in
case of an exclusion as to a portion of such Registerable Securities, such
portion to be allocated among such Holders in proportion to the respective
numbers of Registerable Securities requested to be registered by each such
Holder). In such event the Company shall give the Holder prompt notice of the
number of Registerable Securities excluded. Further, in such event the
Company shall, within six (6) months of the completion of such subsequent
offering, file and use its best efforts to have declared effective, at its
sole expense, a registration statement relating to such excluded securities.
6. Indemnification.
(a) Whenever pursuant to Paragraph 5, a registration
statement relating to any Registerable Securities is filed under the Act,
amended or supplemented, the Company will indemnify and hold harmless each
Holder of the Registerable Securities covered by such registration statement,
amendment or supplement (such holder hereinafter referred to as the
"Distributing Holder"), each person, if any, who controls (within the meaning
of the Act) the Distributing Holder, and each officer, employee, partner or
agent of the Distributing Holder, if the Distributing Holder is a broker or
dealer, against any losses, claims, damages or liabilities, joint or several,
to which the Distributing Holder may become subject under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in any such
registration statement or any preliminary prospectus or final prospectus
constituting a part thereof or any amendment or supplement thereto, or arise
out of or are based upon the omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading; and will reimburse the Distributing Holder for any legal or other
expenses reasonably incurred by the
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<PAGE>
Distributing Holder, in connection with investigating or defending any such
loss, claim, damage, liability or action; provided, however, that the Company
will not be liable in any such case (i) to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission made in said
registration statement, said preliminary prospectus, said final prospectus or
said amendment or supplement in reliance upon and in conformity with written
information furnished by such Distributing Holder, any other Distributing
Holder or any such underwriter for use in the preparation thereof, and (ii)
such losses, claims, damages or liabilities arise out of or are based upon any
actual or alleged untrue statement or omission made in or from any preliminary
prospectus, but corrected in the final prospectus, as amended or supplemented.
(b) Whenever pursuant to Paragraph 5 a registration
statement relating to the Registerable Securities is filed under
the Act, or is amended or supplemented, the Distributing Holder will indemnify
and hold harmless the Company, each of its directors, each of its of officers
who have signed said registration statement and such amendments and
supplements thereto, and each person, if any, who controls the Company (within
the meaning of the Act) against any losses, claims, damages or liabilities to
which the Company or any such director, officer or controlling person may
become subject under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon any untrue or alleged untrue statement of any material fact
contained in any such registration statement or any preliminary prospectus or
final prospectus constituting a part thereof, or any amendment or supplement
thereto, or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent that such untrue statement or alleged untrue
statement or omission was made in said registration statement, said
preliminary prospectus, said final prospectus or said amendment or supplement
in reliance upon and in conformity with written information furnished by such
Distributing Holder for use in the preparation thereof; and will reimburse the
Company or any such director, officer or controlling person for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action.
(c) Promptly after receipt by an indemnified party under
this Paragraph 6 of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against any
indemnifying party, give the indemnifying party notice of the commencement
thereof; but the omission to so notify the
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<PAGE>
indemnifying party will not relieve it from any liability which it may have to
any indemnified party otherwise than under this Paragraph 6.
(d) In case any such action is brought against any
indemnified party, and it notifies an indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate in, and, to
the extent that it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof with counsel reasonably
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election to so assume the defense
thereof, the indemnifying party will not be liable to such indemnified party
under this Paragraph 6 for any legal or other expenses subsequently incurred
by such indemnified party in connection with the defense thereof other than
reasonable costs of investigation.
7. Adjustments of Exercise Price and Number of Securities.
(a) The Warrant Price shall be subject to adjustment from
time to time as follows:
(1) In case the Company shall at any time after the date
hereof pay a dividend in shares of Common Stock or make a distribution in
shares of Common Stock, then upon such dividend or distribution the Warrant
Price in effect immediately prior to such dividend or distribution shall
forthwith be reduced to a price determined by dividing:
(a) an amount equal to the total number of shares
of Common Stock outstanding immediately prior to such dividend or distribution
multiplied by the Warrant Price in effect immediately prior to such dividend
or distribution, by
(b) the total number of shares of Common Stock
outstanding immediately after such issuance or sale.
For the purposes of any computation to be made in accordance with the
provisions of this clause (i), the following provisions shall be applicable:
Common Stock issuable by way of dividend or other distribution on any stock of
the Company shall he deemed to have been issued immediately after the opening
of business on the date following the date fixed for the determination of
stockholders entitled to receive such dividend or other distribution.
(2) In case the Company shall at any time subdivide or
combine the outstanding Common Stock, the Warrant Price shall forthwith be
proportionately decreased in the case of subdivision or increased in the case
of combination to the nearest one cent.
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Any such adjustment shall become effective at the time such subdivision or
combination shall become effective.
(3) Within a reasonable time after the close of each
quarterly fiscal period of the Company during which the Warrant Price has been
adjusted as herein provided, the Company shall:
(a) Deliver to the Representative a certificate
signed by the President or Vice President of the Company and by the
Treasurer or Assistant Treasurer or the Secretary or an Assistant
Secretary of the Company, showing in detail the facts requiring all such
adjustments occurring during such period and the Warrant Price after each such
adjustment.
(b) Notwithstanding anything contained herein to
the contrary, no adjustment of the Warrant Price shall be made if the amount
of such adjustment shall be less than $.05, but in such case any adjustment
that would otherwise be required then to be made shall be carried forward and
shall be made at the time and together with the next subsequent adjustment
which, together with any adjustment so carried forward, shall amount to not
less than $.05.
(b) In the event that the number of outstanding shares of
Common Stock is increased by a stock dividend payable in Common Stock or by a
subdivision of the outstanding Common Stock, then, from and after the time at
which the adjusted Warrant Price becomes effective pursuant to Subsection (b)
of this Section by reason of such dividend or subdivision, the number of
shares of Common Stock issuable upon the exercise of each Warrant shall be
increased in proportion to such increase in outstanding shares. In the event
that the number of shares of Common Stock outstanding is decreased by a
combination of the outstanding Common Stock, then, from and after the time at
which the adjusted Warrant Price becomes effective pursuant to Subsection (b)
of this Section by reason of such combination, the number of shares of Common
Stock issuable upon the exercise of each Warrant shall be decreased in
proportion to such decrease in the outstanding shares of Common Stock.
(c) In case of any reorganization or reclassification of the
outstanding Common Stock (other than a change in par value, or from par value
to no par value, or as a result of a subdivision or combination), or in case
of any consolidation of the Company with, or merger of the Company into,
another corporation (other than a consolidation or merger in which the Company
is the continuing corporation and which does not result in any
reclassification of the outstanding Common Stock), or in case of any sale or
conveyance to another corporation of the property of the Company as an
entirety or substantially as an entirety, the holder of each
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Warrant then outstanding shall thereafter have the right to purchase the kind
and amount of shares of Common Stock and/or other securities and property
receivable upon such reorganization, reclassification, consolidation, merger,
sale or conveyance by a holder of the number of shares of Common Stock which
the holder of such Warrant shall then be entitled to purchase; such
adjustments shall apply with respect to all such changes occurring between the
date of this Warrant Agreement and the date of exercise of such Warrant.
(d) Subject to the provisions of this Section, in case the
Company shall, at any time prior to the exercise of the Warrants, make any
distribution of its assets to holders of its Common Stock as a liquidating or
a partial liquidating dividend, then the holder of Warrants who exercises his
Warrants after the record date for the determination of those holders of
Common Stock entitled to such distribution of assets as a liquidating or
partial liquidating dividend shall be entitled to receive for the Warrant
Price per Warrant, in addition to each share of Common Stock, the amount of
such distribution (or, at the option of the Company, a sum equal to the value
of any such assets at the time of such distribution as determined by the Board
of Directors of the Company in good faith), which would have been payable to
such holder had he been the holder of record of the Common Stock receivable
upon exercise of his Warrant on the record date for the determination of those
entitled to such distribution.
(e) In case of the dissolution, liquidation or winding-up of
the Company, all rights under the Warrants shall terminate on a date fixed by
the Company, such date to be no earlier than ten (10) days prior to the
effectiveness of such dissolution, liquidation or winding-up and not later
than five (5) days prior to such effectiveness. Notice of such termination of
purchase rights shall be given to the last registered holder of the Warrants,
as the same shall appear on the books of the Company maintained by the Warrant
Agent, by registered mail at least thirty (30) days prior to such termination
date.
(f) In case the Company shall, at any time prior to the
expiration of the Warrants and prior to the exercise thereof, offer to the
holders of its Common Stock any rights to subscribe for additional shares of
any class of the Company, then the Company shall give written notice thereof
to the last registered holder thereof not less than thirty (30) days prior to
the date on which the books of the Company are closed or a record date is
fixed for the determination of the stockholders entitled to such subscription
rights. Such notice shall specify the date as to which the books shall be
closed or record date fixed with respect to such offer of subscription and the
right of the holder thereof to participate in
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such offer of subscription shall terminate if the Warrant shall not be
exercised on or before the date of such closing of the books or such record
date.
(g) Any adjustment pursuant to the aforesaid provisions
shall be made on the basis of the number of shares of Common Stock which the
holder thereof would have been entitled to acquire by the exercise of the
Warrant immediately prior to the event giving rise to such adjustment.
(h) Irrespective of any adjustments in the Warrant Price or
the number or kind of shares purchasable upon exercise of the Warrants,
Warrants previously or thereafter issued may continue to express the same
price and number and kind of shares as are stated in the similar Warrants
initially issuable pursuant to this Warrant Agreement.
(i) The Company may retain a firm of independent public
accountants (who may be any such firm regularly employed by the Company) to
make any computation required under this Section, and any certificate setting
forth such computation signed by such firm shall be conclusive evidence of the
correctness of any computation made under this Section.
(j) If at any time, as a result of an adjustment made
pursuant to paragraph (d) above, the holders of a Warrant or Warrants shall
become entitled to purchase any securities other than shares of Common Stock,
thereafter the number of such securities so purchasable upon exercise of each
Warrant and the Warrant Price for such shares shall be subject to adjustment
from time to time in a manner and on terms as nearly equivalent as practicable
to the provisions with respect to the Common Stock contained in paragraphs (b)
and (c).
(k) No adjustment to the Warrant Price or to the number of
shares of Common Stock purchasable upon the exercise of such Warrants will be
made, however under the following circumstances:
(i) upon the grant or exercise of any of the options
presently outstanding (or options which may hereafter be granted and/or
exercised) under the Company's 1997 Stock Option Plan for officers, directors
and/or employees, consultants and similar situated parties of the Company; or
(ii) upon the sale or exercise of the Warrants issued to
the public pursuant to the ________ __, 1997 Prospectus; or
(iii) upon exercise of this Warrant; or
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(iv) upon exercise or sale of the Warrants issuable upon
exercise of the Representative's Warrant; or
(v) upon any amendment to or change in the term of any rights or
warrants to subscribe for or purchase, or options for the purchase of Common
Stock or convertible securities, including, but not limited to, any extension
of any expiration date of any such right, warrant or option, any change in any
exercise or purchase price provided for in any such right, warrant or option,
any extension of any date through which any convertible securities are
convertible into or exchangeable for Common Stock or any change in the rate at
which any convertible securities are convertible into or exchangeable for
Common Stock (other than rights, warrants, options or convertible securities
issued or sold after the close of business on the date of the original issue
of the Common Stock, (i) for presently outstanding securities, or (ii) for
which an adjustment in the Warrant Price then in effect was theretofore made
or required to be made, upon issuance or sale thereof).
8. Fractional Shares.
(a) The Company shall not be required to issue fractions of
shares of Common Shares on the exercise of the Warrants subject to this
Representative's Warrant. The Company shall not be obligated to issue any
fractional share interests or fractional warrant interests upon the exercise
of any Warrant or Warrants, nor shall it be obligated to issue scrip or pay
cash in lieu of fractional interests, provided, however, that if a holder
exercises all the Warrants held of record by such holder, the fractional
interests shall be eliminated by rounding any fraction up to the nearest whole
number of shares.
(b) The Holder of this Representative's Warrant, by
acceptance hereof, expressly waives his right to receive any fractional share
of Common Stock upon exercise of the Warrants subject to this Underwriter's
Warrant.
9. Redemption of Warrants underlying the Representative's
Warrant.
The Warrants underlying the Representative's Warrant shall not be
subject to redemption by the Company until they have been exercised and the
underlying Warrants are outstanding.
10. Miscellaneous.
(a) This Representative's Warrant shall be governed by and
in accordance with the laws of the State of New York.
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(b) All notices, requests, consents and other communications
hereunder shall be made in writing and shall be deemed to have been duly made
when delivered, or mailed by registered or certified mail, return receipt
requested: (i) if to a Holder, to the address of such Holder as shown on the
books of the Company, or (ii) if to the Company, 567-1 South Leonard Street,
Waterbury, Connecticut 06708.
(c) The Company and the Representative may from time to time
supplement or amend this Representative's Warrant without the approval of any
other Holders in order to cure any ambiguity, to correct or supplement any
provision contained herein which may be defective or inconsistent with any
provisions herein, or to make any other provisions in regard to matters or
questions arising hereunder which the Company and the Representative may deem
necessary or desirable and which the Company and the Representative deem not
to adversely affect the interest of the Holders.
(d) All the covenants and provisions of this
Representative's Warrant by or for the benefit of the Company and the Holders
inure to the benefit of their respective successors and assigns hereunder.
(e) Nothing in this Underwriter's Warrant shall be construed
to give to any person or corporation other than the Company and the
Representative and any other registered Holder or Holders, any legal or
equitable right and that any such right is for the sole and exclusive benefit
of the Company and the Underwriter and any other Holder or Holders.
(f) This Representative's Warrant may be executed in any
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and such counterparts shall together constitute but
one and the same instrument.
IN WITNESS WHEREOF, Discas, Inc. has caused this
Representative's Warrant to be signed by its duly authorized
officer and this Representative's Warrant to be dated __________, __
1997.
DISCAS, INC.
By:___________________________
Patrick A. DePaolo, President
<PAGE>
PURCHASE FORM
(To be signed only upon exercise of the Representative's Warrant)
The undersigned, the Holder of the foregoing Representative's
Warrant, hereby irrevocably elects to exercise the purchase rights represented
by such Representative's Warrant for, and to purchase thereunder, ________
shares of Common Stock and/or ___ Warrants of Discas, Inc. and herewith makes
payment of $______ thereof, and requests that the certificates for Common
Stock/or Warrants be issued in the name(s) of, and delivered to ____________
whose address(es) is (are) ___________________________
Dated: __________________
_________________________
_________________________
Address
<PAGE>
TRANSFER FORM
(To be signed only upon transfer of the Representative's Warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto _______________________ the right to purchase shares of Common
Stock and/or Warrants of Discas, Inc. represented by the foregoing
Representative's Warrant to the extent of _____________ shares of Common Stock
and/or ____ Warrants, and appoints ______________, attorney to transfer such
rights on the books of Discas, Inc., with full power of substitution in the
premises.
Dated:__________________
________________________
(name of holder)
________________________
Address
________________________
In the presence of:
________________________
________________________
<PAGE>
Exhibit 9.1
VOTING TRUST AGREEMENT
AGREEMENT made as the 4th day of September, 1996, by and between
PATRICK DEPAOLO, SR. ("DePaolo"), an individual currently residing at 300
Argyle Road, Cheshire, CT and MANTIS PARTNERS III, L.P.("Mantis"), an
individual with offices at 250 Park Avenues 12th Floor, New York, New York
10177.
W I T N E S S E T H:
WHEREAS, Mantis owns indirectly though Mantis V. L.L.C. 95,000 shares
of Common Stock of Discas, Inc., a Delaware corporation (the "Voting Stock")
and desires to vest the voting rights with respect to the Voting Stock in
DePaolo, as Trustee, in the manner and upon the terms and conditions set forth
in this Agreement; and
WHEREAS, Mantis and Mantis Partners IV, L.P. are the founding members
of Mantis V, L.L.C., responsible for conducting the affairs of Mantis V,
L.L.C., and consequently along with Mantis Partners IV, L.P., Mantis is in a
position to exercise voting control over the Voting Stock, whether held by
Mantis V, L.L.C. or Mantis.
NOW, THEREFORE, in consideration of good and valuable consideration,
the receipt of which is hereby acknowledged, the parties hereby agree as
follows:
APPOINTMENT OF TRUSTEE. Mantis hereby irrevocably appoints
<PAGE>
DePaolo as trustee for purposes of this Agreement, and DePaolo hereby accepts
such appointment and trusts created herein. During the term of this Agreement,
DePaolo shall be entitled to exercise all voting rights of every kind and
nature, including the right to vote in person or by proxy, or execute and
deliver written shareholder consents, in any respect, in and to any shares of
Voting Stock. Mantis or its assigns shall be entitled to receive payments of
all dividends, including pro rata distributions of additional voting shares of
the Company by way of stock dividends or partial liquidations, if any, declared
by the Company with respect to the shares of Voting Stock. Any such share
distributions shall be subject to the terms of this Agreement.
1. LEGEND ON VOTING STOCK CERTIFICATES. The certificates representing
the Voting Stock shall bear a legend to reflect the existence of this
Agreement.
2. TERM OF AGREEMENT. This Agreement shall be effective and remain in
force among the parties hereto for a term which shall commence on the date
hereof and shall end upon the earlier of five years from the date hereof or the
date on which Mantis sells or otherwise disposes of the Voting Shares to a
non-affiliated person or entity.
3. TERMINATION OF VOTING TRUST AGREEMENT. Upon the termination of this
Agreement, the certificates representing the Voting Stock shall be delivered to
the Company and new certificates reissued without a legend referencing this
Agreement.
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4. DUTY OF CARE. In voting on all matters which may come before any
meeting of shareholders, DePaolo shall exercise his best judgment, but it is
understood that DePaolo will incur no responsibility or liability to Mantis by
reason of any error of law or by any matter or thing done or omitted under this
Agreement.
5. TRANSFERS AND RIGHT OF FIRST REFUSAL. Mantis shall not be
prohibited from transferring, pledging, selling or otherwise disposing of the
Voting Stock. However, at the time of any transfer of Voting Stock to an
affiliate, the Holders shall cause the affiliate to deliver to DePaolo a Voting
Trust Agreement covering the subject shares of Voting Stock in form
substantially identical to this Agreement. An affiliate shall be defined as any
family members of Alan Milton and any corporation or other entity owned or
controlled by Alan Milton, either directly or indirectly. In the case of Voting
Stock pledged by the holder, or in other transactions where beneficial
ownership of the shares is retained by Mantis, DePaolo shall continue to
exercise his right with respect to such shares in accordance with the terms of
this Agreement. During the term of this Agreement Mantis shall give DePaolo no
less than three (3) business days notice of its intention to sell any Voting
Stock and DePaolo shall have the right to purchase the Shares proposed to be
sold on the identical terms and conditions as those proposed for a period of
three (3) business days after sending of such notice (time being of the
essence); provided however, this right shall not apply to any sales made by
Mantis pursuant to Rule 144 or similar securities rules or
- 3 -
<PAGE>
regulations.
6. GENERAL PROVISIONS.
(a) All of the covenants and agreements contained in this Agreement
shall be binding upon, and enure to the benefit of, the respective parties and
their successors, assigns, heirs, executors, administrators and other legal
representatives, as the case may be.
(b) This Agreement, and the rights of the parties hereto, shall be
governed by and construed in accordance with the laws of Delaware.
(c) This Agreement may be executed in one or more counterparts,
each of which will be deemed an original but all of which together shall
constitute one and the same instrument.
(d) If any provision of this Agreement shall be declared void or
unenforceable by any court or administrative board of competent jurisdiction,
such provision shall be deemed to have been severed from the remainder of this
Agreement and this Agreement shall continue in all respect to be valid and
enforceable.
(e) Each of the parties confirms that damages at law may be an
inadequate remedy for any breach or threatened breach of this Agreement and
agrees that, in the event of a breach or a threatened breach of any provision
hereof, the respective rights and obligations hereunder shall be enforceable by
specific performance, injunction or other equitable remedy. Nothing herein
contained is intended to, nor shall it, limit or affect any rights at law or by
statute or otherwise which any party aggrieved has against the
- 4 -
<PAGE>
other for breach or threatened breach of any provision hereof, it being the
intention of this paragraph to make clear the agreement of the parties that the
respective rights and obligations of each of them hereunder shall be
enforceable in equity as well as at law or otherwise.
IN WITNESS WHEREOF, each of the parties have hereunto set their
respective hands as of the date first above written.
/S/ ALAN MILTON
----------------------------------
MANTIS PARTNERS III, L.P.
BY ALAN MILTON, ITS GENERAL
PARTNER
/S/ PATRICK A. DEPAOLO, SR.
----------------------------------
PATRICK DEPAOLO, SR.
- 5 -
<PAGE>
Exhibit 9.2
VOTING TRUST AGREEMENT
AGREEMENT made as the 4th day of September, 1996, by and between
PATRICK DEPAOLO, SR. ("DePaolo"), an individual currently residing at 300
Argyle Road, Cheshire, CT and MANTIS PARTNERS IV, L.P.("Mantis"), an individual
with offices at 407 E. Grand River, Brighton, Michigan 48116.
W I T N E S S E T H:
WHEREAS, Mantis owns indirectly though Mantis V. L.L.C. 95,000 shares
of Common Stock of Discas, Inc., a Delaware corporation (the "Voting Stock")
and desires to vest the voting rights with respect to the Voting Stock in
DePaolo, as Trustee, in the manner and upon the terms and conditions set forth
in this Agreement; and
WHEREAS, Mantis and Mantis Partners III, L.P. are the founding members
of Mantis V, L.L.C., responsible for conducting the affairs of Mantis V,
L.L.C., and consequently along with Mantis Partners III, L.P., Mantis is in a
position to exercise voting control over the Voting Stock, whether held by
Mantis V, L.L.C. or Mantis.
NOW, THEREFORE, in consideration of good and valuable consideration,
the receipt of which is hereby acknowledged, the parties hereby agree as
follows:
<PAGE>
APPOINTMENT OF TRUSTEE. Mantis hereby irrevocably appoints DePaolo as
trustee for purposes of this Agreement, and DePaolo hereby accepts such
appointment and trusts created herein. During the term of this Agreement,
DePaolo shall be entitled to exercise all voting rights of every kind and
nature, including the right to vote in person or by proxy, or execute and
deliver written shareholder consents, in any respect, in and to any shares of
Voting Stock. Mantis or its assigns shall be entitled to receive payments of
all dividends, including pro rata distributions of additional voting shares of
the Company by way of stock dividends or partial liquidations, if any, declared
by the Company with respect to the shares of Voting Stock. Any such share
distributions shall be subject to the terms of this Agreement.
1. LEGEND ON VOTING STOCK CERTIFICATES. The certificates representing
the Voting Stock shall bear a legend to reflect the existence of this
Agreement.
2. TERM OF AGREEMENT. This Agreement shall be effective and remain in
force among the parties hereto for a term which shall commence on the date
hereof and shall end upon the earlier of five years from the date hereof or the
date on which Mantis sells or otherwise disposes of the Voting Shares to a
non-affiliated person or entity.
3. TERMINATION OF VOTING TRUST AGREEMENT. Upon the termination of this
Agreement, the certificates representing the
- 2 -
<PAGE>
Voting Stock shall be delivered to the Company and new certificates reissued
without a legend referencing this Agreement.
4. DUTY OF CARE. In voting on all matters which may come before any
meeting of shareholders, DePaolo shall exercise his best judgment, but it is
understood that DePaolo will incur no responsibility or liability to Mantis by
reason of any error of law or by any matter or thing done or omitted under this
Agreement.
5. TRANSFERS AND RIGHT OF FIRST REFUSAL. Mantis shall not be
prohibited from transferring, pledging, selling or otherwise disposing of the
Voting Stock. However, at the time of any transfer of Voting Stock to an
affiliate, the Holders shall cause the affiliate to deliver to DePaolo a Voting
Trust Agreement covering the subject shares of Voting Stock in form
substantially identical to this Agreement. An affiliate shall be defined as any
family members of Richard Campbell and any corporation or other entity owned or
controlled by Richard Campbell, either directly or indirectly. In the case of
Voting Stock pledged by the holder, or in other transactions where beneficial
ownership of the shares is retained by Mantis, DePaolo shall continue to
exercise his right with respect to such shares in accordance with the terms of
this Agreement. During the term of this Agreement Mantis shall give DePaolo no
less than three (3) business days notice of its intention to sell any Voting
Stock and DePaolo shall have the right to purchase the Shares proposed to be
sold on the identical terms and conditions as those proposed for a period of
three (3) business days after the sending of such notice (time being of the
essence);
- 3 -
<PAGE>
provided however, this right shall not apply to any sales made by Mantis
pursuant to Rule 144 or similar securities rules or regulations.
6. GENERAL PROVISIONS.
(a) All of the covenants and agreements contained in this Agreement
shall be binding upon, and enure to the benefit of, the respective parties and
their successors, assigns, heirs, executors, administrators and other legal
representatives, as the case may be.
(b) This Agreement, and the rights of the parties hereto, shall be
governed by and construed in accordance with the laws of Delaware.
(c) This Agreement may be executed in one or more counterparts,
each of which will be deemed an original but all of which together shall
constitute one and the same instrument.
(d) If any provision of this Agreement shall be declared void or
unenforceable by any court or administrative board of competent jurisdiction,
such provision shall be deemed to have been severed from the remainder of this
Agreement and this Agreement shall continue in all respect to be valid and
enforceable.
(e) Each of the parties confirms that damages at law may be an
inadequate remedy for any breach or threatened breach of this Agreement and
agrees that, in the event of a breach or a threatened breach of any provision
hereof, the respective rights and obligations hereunder shall be enforceable by
specific performance, injunction or other equitable remedy. Nothing herein
contained is
- 4 -
<PAGE>
intended to, nor shall it, limit or affect any rights at law or by statute or
otherwise which any party aggrieved has against the other for breach or
threatened breach of any provision hereof, it being the intention of this
paragraph to make clear the agreement of the parties that the respective rights
and obligations of each of them hereunder shall be enforceable in equity as
well as at law or otherwise.
IN WITNESS WHEREOF, each of the parties have hereunto set their
respective hands as of the date first above written.
/S/ RICHARD L. CAMPBELL
----------------------------------
MANTIS PARTNERS IV, L.P.
BY:RICHARD L.CAMPBELL,
ITS GENERAL PARTNER
/S/ PATRICK A. DEPAOLO, SR.
----------------------------------
PATRICK DEPAOLO, SR.
- 5 -
<PAGE>
Exhibit 9.3
VOTING TRUST AGREEMENT
----------------------
THIS VOTING TRUST AGREEMENT ("Agreement"), made as of the 31 day of
January, 1997, or later, by and between PATRICK A. DEPAOLO, SR., an individual
residing at 300 Argyle Road, Cheshire, Connecticut 06410 (hereinafter referred
to as "DePaolo") and RAMONA H. LAINAS and TELEMAHOS G. LAINAS, individuals
residing at 99 Cottage Grove Lane, Waterbury, Connecticut 06706 (hereinafter
collectively referred to as "Lainas").
W I T N E S S E T H:
--------------------
WHEREAS, Lainas owns shares of Common Stock (hereinafter referred to
as the Voting Stock") of Discas, Inc., a Delaware corporation (hereinafter
referred to as the "Company") and desires to vest the voting rights with
respect to the Voting Stock in DePaolo, as Trustee, in the manner and upon the
terms and conditions set forth in this Agreement; and
NOW, THEREFORE, in consideration of good and valuable consideration,
the receipt of which is hereby acknowledged, the parties hereby agree as
follows:
1. APPOINTMENT OF TRUSTEE. Lainas hereby irrevocably appoints DePaolo
as Trustee for purposes of this Agreement, and DePaolo hereby accepts such
appointment and trusts created herein. During the term of this Agreement,
DePaolo shall be entitled to exercise all voting rights of every kind and
nature, including the right to vote in person or by proxy, or execute and
deliver written shareholder consents, in any respect, in and to any shares of
Voting Stock. Lainas or their assigns shall be entitled to receive payments of
all dividends, including pro rata distributions of additional voting shares of
the Company by way of stock dividends or partial liquidations, if any,
1
<PAGE>
declared by the Company with respect to the shares of Voting Stock. Any such
share distributions shall be subject to the terms of this Agreement.
2. LEGEND ON VOTING STOCK CERTIFICATES. The certificates representing
the Voting Stock shall bear a legend to reflect the existence of this
Agreement.
3. TERM OF AGREEMENT. This Agreement shall be effective and remain in
force among the parties hereto for a term which shall commence on the date
hereof and shall end upon the earlier of two (2) years from the date hereof or
the date on which Lainas sells or otherwise disposes of the Voting Stock to a
non-affiliated person or entity.
4. TERMINATION OF VOTING TRUST AGREEMENT. Upon the termination of this
Agreement, the certificates representing the Voting Stock shall be delivered to
the Company and new certificates reissued without a legend referencing this
Agreement.
5. DUTY OF CARE. In voting on all matters which may come before any
meeting of shareholders, DePaolo shall exercise his best judgment, but it is
understood that DePaolo will incur no responsibility or liability to Lainas by
reason of any error of law or by any matter or thing done or omitted under this
Agreement. An affiliate shall be defined as any family member of Lainas and any
corporation or other entity owned or controlled by Lainas, either directly or
indirectly. In the case of Voting Stock pledged by the holder, or in other
transactions where beneficial ownership of the shares is retained by Lainas,
DePaolo shall continue to exercise his right with respect to such shares in
accordance with the terms of this Agreement. During the term of this Agreement
Lainas shall give DePaolo not less than 5 days nor more than 10 days notice of
their intention to sell any Voting Stock at asking price of stock and DePaolo
shall have the right to purchase the shares proposed to be sold on the
identical terms and paid in full within 10 days and conditions as those
2
<PAGE>
proposed within ten (10) business days of delivery of such notice (time being
of the essence); provided, however, this right shall not apply to any sales
made by Lainas pursuant to Rule 144 or similar securities rules or regulations.
6. GENERAL PROVISIONS.
(a) All of the covenants and agreements contained in this Agreement
shall be binding upon, and inure to the benefit of, the respective parties and
their successors, assigns, heirs, executors, administrators and other legal
representatives, as the case may be.
(b) This Agreement, and the rights of the parties hereto, shall be
governed by and construed in accordance with the laws of Delaware.
(c) This Agreement may be executed in one or more counterparts, each
of which will be deemed an original but all of which together shall constitute
one and the same instrument.
(d) If any provision of this Agreement shall be declared void or
unenforceable by any court or administrative board of competent jurisdiction,
such provision shall be deemed to have been severed from the remainder of this
Agreement and this Agreement shall continue in all respect to be valid and
enforceable.
(e) Each of the parties confirms that damages at law may be an
inadequate remedy for any breach or threatened breach of this Agreement and
agrees that, in the event of a breach or a threatened breach of any provision
hereof, the respective rights and obligations hereunder shall be enforceable by
specific performance, injunction or other equitable remedy. Nothing herein
contained is intended to, nor shall it, limit or affect any rights at law or by
statute or otherwise which any party aggrieved has against the other for breach
or threatened breach of any provision
3
<PAGE>
hereof, it being the intention of this paragraph to make clear the agreement of
the parties that the respective rights and obligations of each of them
hereunder shall be enforceable in equity as well as at law or otherwise.
IN WITNESS WHEREOF, each of the parties have hereunto set their
respective hands as of the date first above written.
/s/ Patrick A. DePaolo, Sr.
---------------------------
Patrick A. DePaolo, Sr.
/s/ Ramona H. Lainas
--------------------
Ramona H. Lainas
/s/ Telemahos G. Lainas
-----------------------
Telemahos G. Lainas
4
<PAGE>
Exhibit 9.4
VOTING TRUST AGREEMENT
----------------------
THIS VOTING TRUST AGREEMENT ("Agreement"), made as of the 25th day of
February, 1997, by and between PATRICK A. DEPAOLO, SR., an individual residing
at 300 Argyle Road, Cheshire, Connecticut 06410 (hereinafter referred to as
"DePaolo") and JACK MILGROM, an individual residing at 160 Overlook Avenue,
Apt. 5D, Hackensack, New Jersey 07601 (hereinafter referred to as "Milgrom").
W I T N E S S E T H:
--------------------
WHEREAS, Milgrom owns shares of Common Stock (hereinafter referred to
as the Voting Stock") of Discas, Inc., a Delaware corporation (hereinafter
referred to as the "Company") and desires to vest the voting rights with
respect to the Voting Stock in DePaolo, as Trustee, in the manner and upon the
terms and conditions set forth in this Agreement; and
NOW, THEREFORE, in consideration of good and valuable consideration,
the receipt of which is hereby acknowledged, the parties hereby agree as
follows:
1. APPOINTMENT OF TRUSTEE. Milgrom hereby irrevocably appoints DePaolo
as Trustee for purposes of this Agreement, and DePaolo hereby accepts such
appointment and trusts created herein. During the term of this Agreement,
DePaolo shall be entitled to exercise all voting rights of every kind and
nature, including the right to vote in person or by proxy, or execute and
deliver written shareholder consents, in any respect, in and to any shares of
Voting Stock. Milgrom or their assigns shall be entitled to receive payments of
all dividends, including pro rata distributions of additional voting shares of
the Company by way of stock dividends or partial liquidations, if any,
1
<PAGE>
declared by the Company with respect to the shares of Voting Stock. Any such
share distributions shall be subject to the terms of this Agreement.
2. LEGEND ON VOTING STOCK CERTIFICATES. The certificates representing
the Voting Stock shall bear a legend to reflect the existence of this
Agreement.
3. TERM OF AGREEMENT. This Agreement shall be effective and remain in
force among the parties hereto for a term which shall commence on the date
hereof and shall end upon the earlier of five (5) years from the date hereof or
the date on which Milgrom sells or otherwise disposes of the Voting Stock to a
non-affiliated person or entity.
4. TERMINATION OF VOTING TRUST AGREEMENT. Upon the termination of this
Agreement, the certificates representing the Voting Stock shall be delivered to
the Company and new certificates reissued without a legend referencing this
Agreement.
5. DUTY OF CARE. In voting on all matters which may come before any
meeting of shareholders, DePaolo shall exercise his best judgment, but it is
understood that DePaolo will incur no responsibility or liability to Milgrom by
reason of any error of law or by any matter or thing done or omitted under this
Agreement. An affiliate shall be defined as any family member of Milgrom and
any corporation or other entity owned or controlled by Milgrom, either directly
or indirectly. In the case of Voting Stock pledged by the holder, or in other
transactions where beneficial ownership of the shares is retained by Milgrom,
DePaolo shall continue to exercise his right with respect to such shares in
accordance with the terms of this Agreement. During the term of this Agreement
Milgrom shall give DePaolo not less than fifteen (15) business days notice of
their intention to sell any Voting Stock and DePaolo shall have the right to
purchase the shares proposed to be sold on the identical terms and conditions
as those proposed within fifteen (15) business days
2
<PAGE>
of delivery of such notice (time being of the essence); provided, however, this
right shall not apply to any sales made by Milgrom pursuant to Rule 144 or
similar securities rules or regulations.
6. GENERAL PROVISIONS.
(a) All of the covenants and agreements contained in this Agreement
shall be binding upon, and inure to the benefit of, the respective parties and
their successors, assigns, heirs, executors, administrators and other legal
representatives, as the case may be.
(b) This Agreement, and the rights of the parties hereto, shall be
governed by and construed in accordance with the laws of Delaware.
(c) This Agreement may be executed in one or more counterparts, each
of which will be deemed an original but all of which together shall constitute
one and the same instrument.
(d) If any provision of this Agreement shall be declared void or
unenforceable by any court or administrative board of competent jurisdiction,
such provision shall be deemed to have been severed from the remainder of this
Agreement and this Agreement shall continue in all respect to be valid and
enforceable.
(e) Each of the parties confirms that damages at law may be an
inadequate remedy for any breach or threatened breach of this Agreement and
agrees that, in the event of a breach or a threatened breach of any provision
hereof, the respective rights and obligations hereunder shall be enforceable by
specific performance, injunction or other equitable remedy. Nothing herein
contained is intended to, nor shall it, limit or affect any rights at law or by
statute or otherwise which any party aggrieved has against the other for breach
or threatened breach of any provision
3
<PAGE>
hereof, it being the intention of this paragraph to make clear the agreement of
the parties that the respective rights and obligations of each of them
hereunder shall be enforceable in equity as well as at law or otherwise.
IN WITNESS WHEREOF, each of the parties have hereunto set their
respective hands as of the date first above written.
/s/ Patrick A. DePaolo, Sr.
---------------------------
Patrick A. DePaolo, Jr.
/s/ Jack Milgrom
----------------
Jack Milgrom
4
<PAGE>
Exhibit 9.5
VOTING TRUST AGREEMENT
----------------------
THIS VOTING TRUST AGREEMENT ("Agreement"), made as of the 25 day of
February 1997, by and between PATRICK A. DEPAOLO, SR., an individual residing
at 300 Argyle Road, Cheshire, Connecticut 06410 (hereinafter referred to as
"DePaolo") and the SHEFTEL FAMILY IRREVOCABLE TRUST, acting herein by Lawrence
Sheftel, with a mailing address of 485 Ward Street, Newton Centre,
Massachusetts 02159 (hereinafter referred to as "Sheftel").
W I T N E S S E T H:
--------------------
WHEREAS, Sheftel owns shares of Common Stock (hereinafter referred to
as the Voting Stock") of Discas, Inc., a Delaware corporation (hereinafter
referred to as the "Company") and desires to vest the voting rights with
respect to the Voting Stock in DePaolo, as Trustee, in the manner and upon the
terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of good and valuable consideration,
the receipt of which is hereby acknowledged, the parties hereby agree as
follows:
1. APPOINTMENT OF TRUSTEE. Sheftel hereby irrevocably appoints DePaolo
as Trustee for purposes of this Agreement, and DePaolo hereby accepts such
appointment and trusts created herein. During the term of this Agreement,
DePaolo shall be entitled to exercise all voting rights of every kind and
nature, including the right to vote in person or by proxy, or execute and
deliver written shareholder consents, in any respect, in and to any shares of
Voting Stock. Sheftel or their assigns shall be entitled to receive payments of
all dividends, including pro rata distributions of additional voting shares of
the Company by way of stock dividends or partial liquidations, if any,
1
<PAGE>
declared by the Company with respect to the shares of Voting Stock. Any such
share distributions shall be subject to the terms of this Agreement.
2. LEGEND ON VOTING STOCK CERTIFICATES. The certificates representing
the Voting Stock shall bear a legend to reflect the existence of this
Agreement.
3. TERM OF AGREEMENT. This Agreement shall be effective and remain in
force among the parties hereto for a term which shall commence on the date
hereof and shall end upon the earlier of five (5) years from the date hereof or
the date on which Sheftel sells or otherwise disposes of the Voting Stock to a
non-affiliated person or entity.
4. TERMINATION OF VOTING TRUST AGREEMENT. Upon the termination of this
Agreement, the certificates representing the Voting Stock shall be delivered to
the Company and new certificates reissued without a legend referencing this
Agreement.
5. DUTY OF CARE. In voting on all matters which may come before any
meeting of shareholders, DePaolo shall exercise his best judgment, but it is
understood that DePaolo will incur no responsibility or liability to Sheftel by
reason of any error of law or by any matter or thing done or omitted under this
Agreement. An affiliate shall be defined as any family member of Sheftel and
any corporation or other entity owned or controlled by Sheftel, either directly
or indirectly. In the case of Voting Stock pledged by the holder, or in other
transactions where beneficial ownership of the shares is retained by Sheftel,
DePaolo shall continue to exercise his right with respect to such shares in
accordance with the terms of this Agreement. During the term of this Agreement
Sheftel shall give DePaolo not less than fifteen (15) business days notice of
their intention to sell any Voting Stock and DePaolo shall have the right to
purchase the shares proposed to be sold on the identical terms and conditions
as those proposed within fifteen (15) business days of delivery of such notice
2
<PAGE>
(time being of the essence); provided, however, this right shall not apply to
any sales made by Sheftel pursuant to Rule 144 or similar securities rules or
regulations.
6. GENERAL PROVISIONS.
(a) All of the covenants and agreements contained in this Agreement
shall be binding upon, and inure to the benefit of, the respective parties and
their successors, assigns, heirs, executors, administrators and other legal
representatives, as the case may be.
(b) This Agreement, and the rights of the parties hereto, shall be
governed by and construed in accordance with the laws of Delaware.
(c) This Agreement may be executed in one or more counterparts, each
of which will be deemed an original but all of which together shall constitute
one and the same instrument.
(d) If any provision of this Agreement shall be declared void or
unenforceable by any court or administrative board of competent jurisdiction,
such provision shall be deemed to have been severed from the remainder of this
Agreement and this Agreement shall continue in all respect to be valid and
enforceable.
(e) Each of the parties confirms that damages at law may be an
inadequate remedy for any breach or threatened breach of this Agreement and
agrees that, in the event of a breach or a threatened breach of any provision
hereof, the respective rights and obligations hereunder shall be enforceable by
specific performance, injunction or other equitable remedy. Nothing herein
contained is intended to, nor shall it, limit or affect any rights at law or by
statute or otherwise which any party aggrieved has against the other for breach
or threatened breach of any provision
3
<PAGE>
hereof, it being the intention of this paragraph to make clear the agreement of
the parties that the respective rights and obligations of each of them
hereunder shall be enforceable in equity as well as at law or otherwise.
IN WITNESS WHEREOF, each of the parties have hereunto set their
respective hands as of the date first above written.
/s/ Patrick A. DePaolo, Sr.
---------------------------
Patrick A. DePaolo, Sr.
SHEFTEL FAMILY IRREVOCABLE TRUST
By /s/ Lawrence Sheftel
--------------------
Lawrence Sheftel
A Trustee
Duly Authorized
4
<PAGE>
Exhibit 9.6
VOTING TRUST AGREEMENT
----------------------
THIS VOTING TRUST AGREEMENT ("Agreement"), made as of the 25th day of
February, 1997, by and between PATRICK A. DEPAOLO, SR., an individual residing
at 300 Argyle Road, Cheshire, Connecticut 06410 (hereinafter referred to as
"DePaolo") and PIMBYCO, INC., a corporation acting herein by Andrew Benson,
with a mailing address of 136 Titicus Road, P.O. Box 240, Purdys, New York
10578 (hereinafter referred to as "Pimbyco").
W I T N E S S E T H:
--------------------
WHEREAS, Pimbyco owns shares of Common Stock (hereinafter referred to
as the Voting Stock") of Discas, Inc., a Delaware corporation (hereinafter
referred to as the "Company") and desires to vest the voting rights with
respect to the Voting Stock in DePaolo, as Trustee, in the manner and upon the
terms and conditions set forth in this Agreement; and
NOW, THEREFORE, in consideration of good and valuable consideration,
the receipt of which is hereby acknowledged, the parties hereby agree as
follows:
1. APPOINTMENT OF TRUSTEE. Pimbyco hereby irrevocably appoints DePaolo
as Trustee for purposes of this Agreement, and DePaolo hereby accepts such
appointment and trusts created herein. During the term of this Agreement,
DePaolo shall be entitled to exercise all voting rights of every kind and
nature, including the right to vote in person or by proxy, or execute and
deliver written shareholder consents, in any respect, in and to any shares of
Voting Stock. Pimbyco or their assigns shall be entitled to receive payments of
all dividends, including pro rata distributions of additional voting shares of
the Company by way of stock dividends or partial liquidations, if any, declared
by the Company with respect to the shares of Voting Stock. Any such share
distributions
1
<PAGE>
shall be subject to the terms of this Agreement.
2. LEGEND ON VOTING STOCK CERTIFICATES. The certificates representing
the Voting Stock shall bear a legend to reflect the existence of this
Agreement.
3. TERM OF AGREEMENT. This Agreement shall be effective and remain in
force among the parties hereto for a term which shall commence on the date
hereof and shall end upon the earlier of five (5) years from the date hereof or
the date on which Pimbyco sells or otherwise disposes of the Voting Stock to a
non-affiliated person or entity.
4. TERMINATION OF VOTING TRUST AGREEMENT. Upon the termination of this
Agreement, the certificates representing the Voting Stock shall be delivered to
the Company and new certificates reissued without a legend referencing this
Agreement.
5. DUTY OF CARE. In voting on all matters which may come before any
meeting of shareholders, DePaolo shall exercise his best judgment, but it is
understood that DePaolo will incur no responsibility or liability to Pimbyco by
reason of any error of law or by any matter or thing done or omitted under this
Agreement. An affiliate shall be defined as any family member of Pimbyco and
any corporation or other entity owned or controlled by Pimbyco, either directly
or indirectly. In the case of Voting Stock pledged by the holder, or in other
transactions where beneficial ownership of the shares is retained by Pimbyco,
DePaolo shall continue to exercise his right with respect to such shares in
accordance with the terms of this Agreement. During the term of this Agreement
Pimbyco shall give DePaolo not less than fifteen (15) business days notice of
their intention to sell any Voting Stock and DePaolo shall have the right to
purchase the shares proposed to be sold on the identical terms and conditions
as those proposed within fifteen (15) business days of delivery of such notice
(time being of the essence); provided, however, this right shall not apply
2
<PAGE>
to any sales made by Pimbyco pursuant to Rule 144 or similar securities rules
or regulations.
6. GENERAL PROVISIONS.
(a) All of the covenants and agreements contained in this Agreement
shall be binding upon, and inure to the benefit of, the respective parties and
their successors, assigns, heirs, executors, administrators and other legal
representatives, as the case may be.
(b) This Agreement, and the rights of the parties hereto, shall be
governed by and construed in accordance with the laws of Delaware.
(c) This Agreement may be executed in one or more counterparts, each
of which will be deemed an original but all of which together shall constitute
one and the same instrument.
(d) If any provision of this Agreement shall be declared void or
unenforceable by any court or administrative board of competent jurisdiction,
such provision shall be deemed to have been severed from the remainder of this
Agreement and this Agreement shall continue in all respect to be valid and
enforceable.
(e) Each of the parties confirms that damages at law may be an
inadequate remedy for any breach or threatened breach of this Agreement and
agrees that, in the event of a breach or a threatened breach of any provision
hereof, the respective rights and obligations hereunder shall be enforceable by
specific performance, injunction or other equitable remedy. Nothing herein
contained is intended to, nor shall it, limit or affect any rights at law or by
statute or otherwise which any party aggrieved has against the other for breach
or threatened breach of any provision
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hereof, it being the intention of this paragraph to make clear the agreement of
the parties that the respective rights and obligations of each of them
hereunder shall be enforceable in equity as well as at law or otherwise.
IN WITNESS WHEREOF, each of the parties have hereunto set their
respective hands as of the date first above written.
/s/ Patrick A. DePaolo, Sr.
---------------------------
Patrick A. DePaolo, Sr.
PIMBYCO, INC.
By /s/ Andrew Benson
-----------------
Andrew Benson
Its President
Duly Authorized
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Exhibit 10.1
EMPLOYMENT AGREEMENT
Agreement, dated as of April 30, 1997, by and between DISCAS, INC., a
Delaware corporation with offices at 567-1 South Leonard Street, Waterbury, CT
06708, and Patrick A. DePaolo, Sr., an individual residing at 300 Argyle Road,
Cheshire, CT 06410,(hereinafter referred to as the "Employee").
W I T N E S S E T H:
WHEREAS, the Company and the Employee mutually desire to enter into
an Employment Agreement with respect to the Employee's employment by the
Company;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and for other good and valuable consideration the receipt of which
is hereby acknowledged, the Company and the Employee hereby agree as follows:
1. Term and Position.
The Company agrees to employ the Employee as its President and Chief
Executive Officer for the period (the "Employment Period") commencing on the
date hereof and terminating April 30, 2002. The Employee accepts such
employment, agrees to perform the functions and duties incident to such
position, and further agrees to perform such other services consistent with
his position as shall from time to time be assigned to him by, or pursuant to
authorization of, the Board of Directors of the Company and agrees to devote
substantially all of his business time, skill and attention to such services.
All future employment of family members by the Company made in your capacity
as Chief Executive Officer shall be subject to the prior approval of the Board
of Directors.
2. Directorship.
The Company agrees that the Employee shall be named by its Board of
Directors as one of the nominees to its Board of Directors at each meeting of
the stockholders of the Company during the Employment Period at which
directors are to be elected. The Employee shall act as a director of the
Company and/or any of its subsidiaries or affiliates without any additional
compensation except as otherwise provided by the Board of Directors of the
Company or such subsidiary or affiliate.
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3. Compensation and Benefits.
a. The Company shall pay to the Employee, and the Employee
shall accept from the Company, for the Employee's services hereunder during
the Employment Period, (i) base compensation at the rate of $175,000 per
annum, payable in accordance with the customary payroll policy of the Company
and subject to such payroll deductions as required by law, and in addition to
the items set forth below; and (ii) such cash bonus each year as shall be
determined by the Board of Directors of the Company or any appropriate
committee thereof. The sum of base compensation and cash bonus provided for
herein and paid to Employee shall not exceed $175,000 per annum during the
first three years of the Employment Period, except for bonuses determined by
the Board of Directors which are based upon the Company's achievement of
specific targets for revenues, net income and/or common stock share prices.
The base compensation for the fourth year of this agreement shall be $227,500
and for the fifth year of this agreement shall be $250,000. The Board of
Directors may also provide for the grant of stock options under the Company's
stock option plan and for deferred compensation arrangements in the Board's
sole discretion. Employee shall not participate in any Board meetings which
concern his compensation.
b. The Company agrees to reimburse the Employee for all reasonable
business expenses incurred by him during the Employment Period in connection
with the performance of his services hereunder, including expenses incurred in
connection with activities associated with promoting the business of the
Company that are authorized from time to time by the Board of Directors, upon
presentation by Employee of an accounting of such expenses in such detail as
may be required by then-applicable tax laws.
c. The Employee shall participate at the Company's expense on the
same basis, subject to the same qualifications, as other senior executives of
the Company in any pension, savings, life insurance, health insurance,
hospitalization, long-term disability, and other fringe benefit plans and
vacation policies (the "Fringe Benefits") in effect from time to time with
respect to senior executives of the Company. The Company agrees that each of
the Fringe Benefits in effect on the date hereof or at any time during the
Employment Period shall not be terminated or modified in any manner which
reduces the benefits of the Employee without the written consent of the
Employee. In addition, the Company agrees to provide the Employee with a car
allowance of up to $700 monthly, and to the extent that it obtains key man
life insurance on the life of Employee, to use its best efforts to provide
that such policy be assignable to Employee upon termination of this Agreement.
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4. Termination.
a. For Cause.
This Agreement may be terminated immediately by the Company
for cause, which shall constitute and be limited to the occurrence of any of
the following events: (i) the death of Employee; (ii) Employee's loss of legal
capacity for any reason; (iii) willful breach of this Agreement or his duties
hereunder by Employee; (iv) any act committed by the Employee against the
Company, its subsidiaries or divisions constituting (A) fraud, (B)
misappropriation of corporate opportunity, (C) self-dealing without the
express prior approval of the Board of Directors of the Company, (D)
embezzlement of funds, or (E) felony conviction for conduct involving moral
turpitude or other criminal conduct materially and adversely affecting the
operations of the Company, its subsidiaries or divisions; (v) the breach or
default by Employee in the performance of any material covenant on the part of
the Employee to be performed under this Agreement, which breach or default
shall continue for a period of fourteen (14) days after receipt of written
notice from the Company; (vi) chronic alcoholism or any other form of drug
addiction which impairs the Employee's ability to perform his duties
hereunder; or (vii) disability of Employee, which prevents Employee from
performing any material amount of his duties hereunder, and such disability is
expected, in the opinion of a physician engaged by the Company for such
purpose, to continue in excess of 120 days. In the event of disability,
Employee shall be entitled to cause his own physician to make an examination
of Employee, and if such personal physician disagrees with the opinion of the
Company's doctor, then the two doctors shall together appoint a third
physician to examine Employee, and the determination of such third physician
shall be final. The fees of such third physician shall be paid by the Company.
b. Without Cause.
This Agreement may be terminated by the Company at any time
without cause, subject to the payments set forth in subsection 4.c below. In
the event that this Agreement is terminated by the Company at any time
following a change in control of the Company (as defined in Section 203 of the
Delaware General Corporation Law), it shall be rebuttably presumed that
termination has been without cause.
c. Compensation Upon Termination.
In the event that Employee is terminated with cause, as set
forth in Section 4.a above, then the obligation of the Company to compensate
Employee shall cease with the payment of all amounts accrued (including
reimbursement of expenses properly incurred by Employee prior to termination)
as of such date. In the event that
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Employee is terminated without cause, as set forth in Section 4.b above, then
the Company shall be obligated to pay Employee his regular salary and benefits
(but not including any discretionary bonuses in the event termination occurs
prior to the seventh month of any contract year) through the normal term of
this Agreement, without setoff for new employment by Employee.
5. Breach, Notice.
The Company and the Employee agree that neither party shall have the
right to terminate this Employment Agreement by reason of any breach by the
other party of the provisions hereof unless written notice specifying such
breach shall have been given to the other party and unless the other party
shall continue such breach for at least fourteen days after the receipt of
such notice.
6. Non-Competition.
a. During the period of Employee's employment by the
Company, whether or not this Agreement or the Employment Period provided
hereunder has expired or terminated, (such period hereinafter the
"Non-Competition Period"), except if Employee discontinues his employment as a
result of a change in control of the Company subsequent to the date of this
Agreement (as defined in Section 203 of the Delaware General Corporation Law),
Employee agrees that he will not, anywhere in the United States, directly or
indirectly enter into or participate (whether as owner, partner, shareholder,
officer, director, salesman, consultant, employee or otherwise) in any
business which designs, develops, manufactures, markets, distributes and/or
otherwise sells any Products (as defined below) or which is otherwise in
competition with any substantial business conducted by the Company during any
period in which the Employee is employed by the Company, without first having
obtained the consent of the Company, in writing; provided, that the Employee
may own up to five (5%) percent of the outstanding equity securities of any
entity that is subject to the public reporting requirements of the Securities
Exchange Act of 1934. As used herein, the term "Products" means any and all
goods and/or products of the type at any time sold by the Company, including
but not limited to a broad range of plastic and rubber compounds and goods
manufactured therefrom using a variety of recycled and prime materials, and
any functionally similar goods and/or products.
b. During the Non-Competition Period, the Employee shall
not, without the prior written consent of the Company, directly or indirectly
(i) solicit, request, cause or induce any person who is at the time, or three
months prior thereto had been, an employee of or a consultant to the Company,
to leave the employ of or terminate his relationship with the Company, (ii)
employ, hire, engage or be associated with, or endeavor to entice away from
the Company, any such person or (iii) induce any customers of the 4
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Company to discontinue doing business with the Company.
7. Non-Disclosure of Confidential Information.
a. The Employee acknowledges that it is the policy of the
Company to maintain as secret and confidential all valuable and unique
information heretofore or hereafter acquired, developed or used by the Company
relating to the business, operations employees and customers of the Company,
which information gives the Company a competitive advantage in its industry,
and which information includes technical knowledge, know-how or trade secrets
and information concerning the operations, sales, personnel, suppliers,
customers, costs, profits, markets, pricing policies, "Confidential Material"
(as hereinafter defined), and the results of any investigations or experiments
of the Company (as such information is hereinafter referred to as
"Confidential Information"). The Employee recognizes that the services to be
performed by the Employee are special and unique, and that by reason of his
duties he will acquire Confidential Information. The Employee recognizes that
all such Confidential Information is the sole and exclusive property of the
Company. In consideration of the Company's entering into this Agreement, the
Employee agrees that:
i. he shall never for so long as such information
is valuable and unique (but in no case for longer than five years following
the termination of Employee's employment by the Company), directly or
indirectly, use, publish, disseminate or otherwise disclose any Confidential
Information obtained during his employment by the Company without the prior
written consent of the Company's Board of Directors, it being understood that
this subparagraph shall survive the term of this Agreement;
ii. the parties hereto agree that the Employee,
during the course of his employment, may be directed to perform services for
the benefit of a customer of the Company, such customer shall be deemed a
third party beneficiary of the provisions of this Agreement and, in addition
to the proscriptions contained in subparagraph (i) above, shall not disclose
any "confidential information" which relates to the customer (defined with
respect to such customer in the same manner as for the Company) to any person,
firm or enterprise without the prior written consent of the Company and such
customer;
iii. during the term of his employment by the
Company, he shall exercise all due and diligent precautions to protect the
integrity of the Company's customer lists, mailing lists and sources thereof,
statistical data and compilations, Agreements, contracts, manuals or other
documents and any and all other materials embodying any Confidential
Information (the "Confidential Materials") and, upon termination of his
employment
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hereunder, or at such earlier time as the Company may so request, he shall
immediately return to the Company all such Confidential Materials (and copies
thereof) then in his possession or control;
iv. the Employee agrees that he will at all times
comply with all security regulations (a) in effect from time to time at the
Company's or its customers' premises and (b) in effect for materials belonging
to the Company or its customers; and
v. the Employee agrees that the provisions of this
subsection (a) are reasonably necessary to protect the proprietary rights of
the Company in the Confidential Information and its trade secrets, goodwill
and reputation.
b. The Employee acknowledges that any breach of the
provisions of this Section 7 can cause irreparable harm to the Company for
which the Company would have no adequate remedy at law. In the event of a
breach or threatened breach by the Employee of any of such provisions, in
addition to any and all other rights and remedies it may have under this
Agreement or otherwise, the Company may immediately seek any judicial action
deemed necessary, including, without limitation, temporary and preliminary
injunctive relief.
8. Arbitration.
Any controversy or claim arising out of or in connection
with this Employment Agreement or any breach of this Employment Agreement or
any default under this Employment Agreement shall be settled by arbitration in
the State of Connecticut in accordance with the rules of the American
Arbitration Association and judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction.
9. Successors and Assigns.
This Employment Agreement shall be binding upon and inure to
the benefit of the parties hereto, their respective heirs, administrators,
executors, successors and assigns; provided, however, that this Employment
Agreement may not be assigned by either party hereto.
10. Governing Law.
This Employment Agreement shall be governed by, and construed in
accordance with, the laws of the State of Connecticut.
11. Notice.
Any notice required hereunder shall be delivered by hand, sent by
telecopy, or sent by registered or certified mail, addressed to
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the other party hereto at its address set forth above or at such other address
as notice thereof shall have been given in accordance with the provisions of
this Section 11. Any such notice shall become effective (a) when mailed, three
days after having been deposited in the mails, postage prepaid, and (b) in the
case of delivery by hand or telecopy, upon delivery.
12. Agreement; Amendment.
This Agreement supersedes any prior Agreements or understandings,
oral or written, between the parties hereto and represents their entire
understanding and Agreement with respect to the subject matter hereof, and
this Agreement can be amended, supplemented or changed, and any provision
hereof can be waived, only by written instrument making specific reference to
this Agreement which is signed by the party against whom enforcement of any
such amendment, supplement, modification or waiver is sought.
13. Severability.
In the event of the invalidity or unenforceability of any one or more
provisions of this Agreement, such illegality or unenforceability shall not
affect the validity or enforceability of the other provisions hereof and such
other provisions shall be deemed to remain in full force and effect. The
Employee specifically acknowledges and agrees that the provisions of Sections
6 and 7 hereof are reasonable and valid in all respects. If any tribunal
having jurisdiction determines that any of the provisions of either Section 6
or Section 7 or any part or parts thereof, is invalid or unenforceable because
of the duration or scope of such provision, such tribunal shall have the power
to reduce the duration or scope of such provision, and in its reduced form,
such provision shall then be enforceable.
IN WITNESS WHEREOF, each of the parties hereto has executed this
Employment Agreement the day and year first above written.
DISCAS, INC.
By:
-----------------------
Ron Pettirossi, Chief
Financial Officer and
Secretary
EMPLOYEE:
---------------------------
Patrick A. DePaolo, Sr.
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Exhibit 10.2
1997 INCENTIVE AND NON-INCENTIVE
STOCK OPTION PLAN
OF
DISCAS, INC.
1. Purpose of Plan.
The purpose of this Incentive and Non-Incentive Stock Option Plan
("Plan") is to further the growth and development of Discas, Inc. (the
"Company") and any subsidiaries thereof by encouraging selected employees,
directors and other persons who contribute and are expected to contribute
materially to the Company's success to obtain a proprietary interest in the
Company through the ownership of stock, thereby providing such persons with an
added incentive to promote the best interests of the Company and affording the
Company a means of attracting to its service persons of outstanding ability.
2. Stock Subject to the Plan.
An aggregate of 450,000 shares of the Company's Common Stock,
$.0001 par value ("Common Stock") subject, however, to adjustment or change
pursuant to paragraph 12 hereof, shall be reserved for issuance upon the
exercise of options which may be granted from time to time in accordance with
the Plan ("Options"). Such shares may be, in whole or in part, as the committee
appointed by the Board of Directors to administer the Plan (hereinafter, the
"Committee") shall from time to time determine, authorized but unissued shares
or issued shares which have been reacquired by the Company. If, for any reason,
an Option shall lapse, expire or terminate without having been exercised in
full, the unpurchased shares covered thereby shall again be available for
purposes of the Plan.
3. Administration.
(a) The Board of Directors shall appoint the Committee from among
its members. Such Committee shall be composed of two or more Directors who
shall be "non-employee directors" as defined by Regulation 240.16b-3 under the
Securities Exchange Act of 1934, as amended, and "outside directors" as defined
in regulations under Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"). Such Committee shall have and may exercise any and all of
the powers relating to the administration of the Plan and the grant of Options
thereunder as are set forth in subparagraph 3(b) hereof as the Board of
Directors shall
<PAGE>
confer and delegate. The Board of Directors shall have power at any time to
fill vacancies in, to change the membership of, or to discharge such Committee.
The Committee shall select one of its members as its chairman and shall hold
its meetings at such time and at such places as it shall deem advisable. A
majority of such Committee shall constitute a quorum and such majority shall
determine its action. Any action may be taken without a meeting by written
consent of all the members of the Committee. The Committee shall keep minutes
of its proceedings and shall report the same to the Board of Directors at the
meeting next succeeding.
(b) The Committee shall administer the Plan and, subject to the
provisions of the Plan, shall have sole authority in its discretion to
determine the persons to whom, and the time or times at which, Options shall be
granted, the number of shares to be subject to each such Option, the provisions
regarding exercisability of each Option, the expiration date of each Option,
whether the Option shall contain a "cashless exercise" provision, whether all
or any portion of the Options shall be incentive stock options ("Incentive
Options") qualifying under Section 422A of the Code or stock options which do
not so qualify ("Non-Incentive Options") and, for Non-Incentive Options,
whether the Non-Incentive Option shall have limited transferability as
permitted under the Plan. Both Incentive Options and Non-Incentive Options may
be granted to the same person at the same time provided each type of Option is
clearly designated. In making such determinations, the Committee may take into
account the nature of the services rendered by such persons, their present and
potential contribution to the Company's success and such other factors as the
Committee in its sole discretion may deem relevant. Subject to the express
provisions of the Plan, the Committee shall also have authority to interpret
the Plan, to prescribe, amend and rescind rules and regulations relating
thereto, to determine the terms and provisions of the respective Option
Agreements, which shall be substantially in the forms attached hereto as
Exhibit A and Exhibit B, to amend the provisions of outstanding Options to
provide for accelerated exercisability or the extension of the expiration date
of such Options, and to make all other determinations necessary or advisable
for the administration of the Plan, all of which determinations shall be
conclusive and not subject to review.
(c) The Board of Directors, in its discretion, may grant the
authority to the Company's President and Chief Executive Officer and/or its
Chief Financial Officer to grant, and determine the terms of, a limited number
of options under the Plan each year to employees or consultants of the Company
or its subsidiaries who are neither executive officers nor directors of the
Company. In addition, the Board of Directors may administer the Plan, in lieu
of and with the same powers as the Committee, with respect to any Options
granted or to be granted under the Plan, provided that such administration is
consistent with the provisions of Section 162(m) of the Code.
4. Eligibility for Receipt of Options.
(a) Incentive Options. Incentive Options may be granted only to
employees (including officers) of the Company and/or any of its subsidiaries. A
director of the Company or any subsidiary who is not an employee of the Company
or of one of its subsidiaries is not eligible
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to receive Incentive Options under the Plan. Further, Incentive Options may not
be granted to any person who, at the time the Incentive Option is granted, owns
(or is considered as owning within the meaning of Section 425(d) of the Code)
stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company or any subsidiary (10% Owner), unless at the
time the Incentive Option is granted to the 10% Owner, the option price is at
least 110% of the fair market value of the Common Stock subject thereto and
such Incentive Option by its terms is not exercisable subsequent to five years
from the date of grant.
(b) Non-Incentive Options. Non-Incentive Options may be granted to
any employees (including employees who have been granted Incentive Options),
directors, consultants, agents, independent contractors and other persons whom
the Board of Directors (or Committee) determines will contribute to the
Company's success.
5. Option Price.
The purchase price of the shares of Common Stock under each Option
shall be determined by the Committee, which determination shall be conclusive
and not subject to review, but in no event shall the purchase price be less
than 100% of the fair market value of the Common Stock on the date of grant in
the case of Incentive Options (110% of fair market value in the case of
Incentive Options granted to a 10% Owner) and 80% of the fair market value of
the Common Stock on the date of the grant in the case of Non Incentive Options.
For purposes of the Plan, unless the Committee determines
otherwise, the "fair market value" of a share of Common Stock as of a certain
date shall be the closing sale price of the Common Stock on The Nasdaq Stock
Market or, if the Common Stock is not then traded on The Nasdaq Stock Market,
such exchange as the Common Stock is then traded, on the trading date
immediately preceding the date fair market value is being determined. The
Committee may make such other determination of fair market value, based on
other factors, as it shall deem appropriate.
For purposes of the Plan, the date of grant of an Option shall be
the date on which the Committee shall by resolution duly authorize such Option.
6. Term of Options.
The term of each Option shall be such number of years as the
Committee shall determine, subject to earlier termination as herein provided,
but in no event more than ten years from the date such Option is granted (five
years for 10% Owners).
7. Exercise of Options.
(a) Each Option shall be exercisable to the extent determined by
the Committee, but in no event shall an Option be exercisable until at least
six months from the date of grant, and the aggregate fair market value
(determined as of the time an Option is granted) of the shares of
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the Company's Common Stock purchasable upon exercise of the Option by an
employee during any calendar year may not exceed $100,000.
(b) An Option may not be exercised for fractional shares of the
Company's Common Stock.
(c) Except as provided in paragraphs 9, 10 and 11 hereof, no Option
shall be exercisable unless the holder thereof shall have been an employee,
director, consultant, agent, independent contractor or other person employed by
or engaged in performing services for the Company and/or a subsidiary
continuously from the date of grant to the date of exercise.
(d) The exercise of an Option shall be contingent upon receipt from
the holder thereof of a written representation that at the time of such
exercise it is the optionee's then present intention to acquire the Option
shares for investment and not with a view to the distribution or resale thereof
(unless a Registration Statement covering the shares purchasable upon exercise
of the Options shall have been declared effective by the Securities and
Exchange Commission) and upon receipt by the Company of cash, or a check to its
order, for the full purchase price of such shares. The Committee may, in its
discretion, include a "cashless exercise" provision in the applicable Option
Agreement, in which event the optionee will be permitted (i) to deliver
previously owned shares of Common Stock with a fair market value equal to the
exercise price in payment of the full purchase price of such shares, or (ii) to
request that the Company withhold shares of Common Stock issuable upon exercise
of such Option with a fair market value equal to the exercise price of the
shares being purchased under the Option (thereby reducing the number of shares
issuable upon exercise of the Option).
(e) The holder of an Option shall have none of the rights of a
stockholder with respect to the shares purchasable upon exercise of the Option
until a certificate for such shares shall have been issued to the holder upon
due exercise of the Option.
(f) The proceeds received by the Company upon exercise of an Option
shall be added to the Company's working capital and be available for general
corporate purposes.
8. Transferability of Options.
No Option granted pursuant to the Plan shall be transferable
otherwise than by will or the laws of descent or distribution and an Option may
be exercised during the lifetime of the holder only by such holder, provided,
however, that the Committee may provide for transferability of a Non-Incentive
Option to an optionee's family members or family trusts.
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9. Termination of Employment or Engagement.
In the event the employment of the holder of an Option shall be
terminated by the Company or a subsidiary for any reason other than by reason
of death or disability, or the engagement of a non-employee holder of a
Non-Incentive Option shall be terminated by the Company or a subsidiary for any
reason, such holder may, within three months from the date of such termination,
exercise such Option to the extent such Option was exercisable by such holder
at the date of such termination. Notwithstanding the foregoing, no Option may
be exercised subsequent to the date of its expiration. Absence on leave
approved by the employer corporation shall not be considered an interruption of
employment for any purpose under the Plan. In addition, at the discretion of
the Committee, the exercisability of an outstanding Non-Incentive Option may be
extended to a date determined by the Committee but not beyond ten years from
the date of grant.
Nothing in the Plan or in any Option Agreement granted hereunder
shall confer upon any Optionholder any right to continue in the employ of the
Company or any subsidiary or obligate the Company or any subsidiary to continue
the engagement of any Optionholder or interfere in any way with the right of
the Company or any such subsidiary to terminate such Optionholder's employment
or engagement at any time.
10. Disability of Holder of Option.
If the employment of the holder of an Option shall be terminated by
reason of such holder's disability, such holder may, within twelve months from
the date of such termination, exercise such option to the extent such Option
was exercisable by such holder at the date of such termination. Notwithstanding
the foregoing, no Option may be exercised subsequent to the date of its
expiration.
11. Death of Holder of Option.
If the holder of any Option shall die while in the employ of, or
while performing services for, the Company or one or more of its subsidiaries
(or within six months following termination of employment due to disability),
the Option theretofore granted to such person may be exercised, but only to the
extent such Option was exercisable by the holder at the date of death (or, with
respect to employees, the date of termination of employment due to disability)
by the legatee or legatees of such person under such person's Last Will, or by
such person's personal representative or distributees, within twelve months
from the date of death but in no event subsequent to the expiration date of the
Option.
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12. Adjustments Upon Changes in Capitalization.
If at any time after the date of grant of an Option, the Company
shall by stock dividend, split-up, combination, reclassification or exchange,
or through merger or consolidation or otherwise, change its shares of Common
Stock into a different number or kind or class of shares or other securities or
property, then the number of shares covered by such Option and the price per
share thereof shall be proportionately adjusted for any such change by the
Committee whose determination thereon shall be conclusive.
13. Acceleration of Exercisability Upon Change in Control.
Upon the occurrence of a "change in control" of the Company (as
defined below), all outstanding Options shall become immediately fully
exercisable. For purposes of the Plan, a "change in control" of the Company
shall mean (i) the acquisition at any time by a "person" or "group" (as such
terms are used Sections 13(d) and 14(d)(2) of the Exchange Act of beneficial
ownership (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities representing 50% or more of the combined voting power
in the election of directors of the then outstanding securities of the Company
or any successor or the Company; (ii) the termination of service of directors,
for any reason other than death, disability or retirement from the Board of
Directors, during any period of two consecutive years or less, of individuals
who at the beginning of such period constituted a majority of the Board of
Directors, unless the election of or nomination for election of each new
director during such period was approved by a vote of at least two-thirds of
the directors still in office who were directors at the beginning of the
period; (iii) approval by the stockholders of the Company of any merger,
consolidation, or statutory share exchange as a result of which the Common
Stock shall be changed, converted or exchanged (other than a merger,
consolidation or share exchange with a wholly-owned Subsidiary) or liquidation
of the Company or any sale or disposition of 80% or more of the assets or
earning power or the Company; or (iv) approval by the stockholders of the
Company of any merger, consolidation, or statutory share exchange to which the
Company is a party as a result of which the persons who were stockholders
immediately prior to the effective date of the merger, consolidation or share
exchange shall have beneficial ownership of less than 50% of the combined
voting power in the election of directors of the surviving corporation;
provided, however, that no change in control shall be deemed to have occurred
if, prior to such time as a change in control would otherwise be deemed to have
occurred, the Company's Board of Directors deems otherwise.
14. Vesting of Rights Under Options.
Neither anything contained in the Plan nor in any resolution
adopted or to be adopted by the Committee, the Board of Directors or the
stockholders of the Company shall constitute the vesting of any rights under
any Option. The vesting of such rights shall take place only when a written
Option Agreement, substantially in the form of the Incentive Stock Option
Agreement attached hereto as Exhibit A or the Non-Incentive Stock Option
Agreement attached
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<PAGE>
hereto as Exhibit B, shall be duly executed and delivered by and on behalf of
the Company and the person to whom the Option shall be granted.
15. Termination and Amendment.
The Plan, which was adopted by the Board of Directors on February
22, 1997 is subject to stockholder approval, and shall terminate on February
22, 2007 and no Option shall be granted under the Plan after such date. The
Board of Directors may at any time prior to such date terminate the Plan or
make such modifications or amendments thereto as it shall deem advisable,
provided, however, that shareholder approval shall be required:
i) to increase the number of shares reserved for issuance under the
Plan;
ii) to materially increase the benefits accruing to participants
under the Plan;
iii) to materially modify the requirements of eligibility for
participation in the Plan; or
iv) if otherwise required to comply with the incentive stock option
provisions of Section 162(m) of the Code or the listed company
requirements of The Nasdaq Stock Market or of a national
securities exchange on which the Common Stock is then traded,
and, provided, further, that no modification or amendment shall adversely
affect the rights of a holder of an Option previously granted under the Plan
without such holder's written consent.
16. Lock-Up.
To the extent requested by the managing underwriter in respect of a
proposed offering of securities of the Company, the holder of any securities,
or options to purchase securities, of the Company shall refrain from selling or
offering to sell any securities of the Company within the latter of two years
after the effective date of the registration statement covering such securities
of the Company and six months from issuance, or such lesser period as may be
requested by the managing underwriter.
7
<PAGE>
EXHIBIT A
DISCAS, INC.
INCENTIVE STOCK OPTION AGREEMENT
----------------------
To:
We are pleased to notify you that by the determination of the Stock
Option Committee (hereinafter the "Committee") an incentive stock option to
purchase ____ shares of the Common Stock of Discas, Inc. (herein called the
"Company") at a price of $ _____ per share has this ____ day of __________ been
granted to you under the Company's 1997 Incentive and Non-Incentive Stock
Option Plan (herein called the "Plan"). This option may be exercised only upon
the terms and conditions set forth below.
1. Purpose of Option.
The purpose of the Plan under which this incentive stock option has
been granted is to further the growth and development of the Company and its
subsidiaries by encouraging key employees, directors, consultants, agents,
independent contractors and other persons who contribute and are expected to
contribute materially to the Company's success to obtain a proprietary interest
in the Company through the ownership of stock, thereby providing such persons
with an added incentive to promote the best interests of the Company, and
affording the Company a means of attracting to its service persons of
outstanding ability.
2. Acceptance of Option Agreement.
Your execution of this incentive stock option agreement will indicate
your acceptance of and your willingness to be bound by its terms; it imposes no
obligation upon you to purchase any of the shares subject to this option. Your
obligation to purchase shares can arise only upon your exercise of the option
in the manner set forth in paragraph 4 hereof.
3. When Option May Be Exercised.
(a) The option granted you hereunder may not be exercised for a period
of six months from the date of its grant by the Committee as set forth above.
Thereafter, this option shall be exercisable as follows:
<PAGE>
(i) at the end of one year from the date of grant, up to 25% of
the total shares subject to the option;
(ii) at the end of the second year from the date of grant, up to
50%;
(iii) at the end of the third year from the date of grant, up to
75%;
(iv) at the end of the fourth year from the date of grant, up to
100%.
This option may not be exercised for less than ten shares at any one time (or
the remaining shares then purchasable if less than ten) and expires at the end
of ten years from the date of grant whether or not it has been duly exercised
(hereinafter, the "Option Expiration Date"), unless sooner terminated as
provided in paragraphs 5, 6 or 7 hereof.
4. How Option May Be Exercised.
This option is exercisable by a written notice signed by you and
delivered to the Company at its executive offices, signifying your election to
exercise the option. The notice must state the number of shares of Common Stock
as to which your option is being exercised, must contain a statement by you (in
a form acceptable to the Company) that such shares are being acquired by you
for investment and not with a view to their distribution or resale (unless a
Registration Statement covering the shares purchasable has been declared
effective by the Securities and Exchange Commission) and must be accompanied by
cash or a check to the order of the Company for the full purchase price of the
shares being purchased, unless exercised pursuant to the following "cash
exercise" provision.
In lieu of paying for the shares purchasable under this option by cash
or check, you may (i) deliver previously owned shares of Common Stock with a
fair market value equal to the full purchase price of the shares being
purchased under this option, or (ii) request that the Company withhold shares
of Common Stock issuable upon exercise of this option with a fair market value
equal to the full purchase price of the shares being purchased under this
option (thereby reducing the number of shares issuable upon exercise of this
option). For purposes of this option, unless the Committee determines
otherwise, the "fair market value" of a share of Common Stock as of a certain
date shall be the closing sale price of the Common Stock on The Nasdaq Stock
Market or, if the Common Stock is not then traded on The Nasdaq Stock Market,
such exchange as the Common Stock is then traded, on the trading date
immediately preceding the date fair market value is being determined. The
Committee may make such other determination of fair market value, based on
other factors, as it shall deem appropriate.
2
<PAGE>
If notice of the exercise of this option is given by a person or
persons other than you, the Company may require, as a condition to the exercise
of this option, the submission to the Company of appropriate proof of the right
of such person or persons to exercise this option.
Certificates for shares of the Common Stock so purchased will be
issued as soon as practicable. The Company, however, shall not be required to
issue or deliver a certificate for any shares until it has complied with all
requirements of the Securities Act of 1933, the Securities Exchange Act of
1934, any stock exchange on which the Company's Common Stock may then be listed
and all applicable state laws in connection with the issuance or sale of such
shares or the listing of such shares on said exchange. Until the issuance of
the certification for such shares, you or such other person as may be entitled
to exercise this option shall have none of the rights of a stockholder with
respect to shares subject to this option.
5. Termination of Employment.
If your employment with the Company (or a subsidiary thereof) is
terminated for any reason other than by death or disability, you may exercise,
within three months from the date of such termination, that portion of the
option which was exercisable by you at the date of such termination, provided,
however, that such exercise occurs no later than the Option Expiration Date.
6. Disability.
If your employment with the Company (or a subsidiary thereof) is
terminated by reason of your disability, you may exercise, within twelve months
from the date of such termination, that portion of this option which was
exercisable by you at the date of such termination, provided, however, that
such exercise occurs no later than the Option Expiration Date.
7. Death.
If you die while employed by the Company (or a subsidiary thereof) or
within six months after termination of your employment due to disability, that
portion of this option which was exercisable by you at the date of your death
may be exercised by your legatee or legatees under your Will, or by your
personal representatives or distributees, within twelve months from the date of
your death, but in no event after the Option Expiration Date.
8. Non-Transferability of Option.
This option shall not be transferable except by Will or the laws of
descent and distribution, and may be exercised during your lifetime only by
you.
9. Adjustments upon Changes in Capitalization.
3
<PAGE>
If at any time after the date of grant of this option, the Company
shall, by stock dividend, split-up, combination, reclassification or exchange,
or through merger or consolidation, or otherwise, change its shares of Common
Stock into a different number or kind or class of shares or other securities or
property, then the number of shares covered by this option and the price of
each such share shall be proportionately adjusted for any such change by the
Committee, whose determination shall be conclusive.
10. Acceleration of Exercisability Upon Change in Control.
Upon the occurrence of a "change in control" of the Company (as
defined below), this option shall become immediately fully exercisable. For
purposes of this option, a "change in control" of the Company shall mean (i)
the acquisition at any time by a "person" or "group" (as such terms are used
Sections 13(d) and 14(d)(2) of the Exchange Act of beneficial ownership (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities representing 50% or more of the combined voting power in the
election of directors of the then outstanding securities of the Company or any
successor or the Company; (ii) the termination of service of directors, for any
reason other than death, disability or retirement from the Board of Directors,
during any period of two consecutive years or less, of individuals who at the
beginning of such period constituted a majority of the Board of Directors,
unless the election of or nomination for election of each new director during
such period was approved by a vote of at least two-thirds of the directors
still in office who were directors at the beginning of the period; (iii)
approval by the stockholders of the Company of any merger, consolidation, or
statutory share exchange as a result of which the Common Stock shall be
changed, converted or exchanged (other than a merger, consolidation or share
exchange with a wholly-owned Subsidiary) or liquidation of the Company or any
sale or disposition of 80% or more of the assets or earning power or the
Company; or (iv) approval by the stockholders of the Company of any merger,
consolidation, or statutory share exchange to which the Company is a party as a
result of which the persons who were stockholders immediately prior to the
effective date of the merger, consolidation or share exchange shall have
beneficial ownership of less than 50% of the combined voting power in the
election of directors of the surviving corporation; provided, however, that no
change in control shall be deemed to have occurred if, prior to such time as a
change in control would otherwise be deemed to have occurred, the Company's
Board of Directors deems otherwise.
11. Lock-Up.
To the extent requested by the managing underwriter in respect of a
proposed offering of securities of the Company, you shall refrain from selling
or offering to sell any securities of the Company within the latter of two
years after the effective date of the registration statement covering such
securities of the Company and six months from issuance, or such lesser period
as may be so requested by the managing underwriter.
4
<PAGE>
12. Subject to Terms of the Plan.
This incentive stock option agreement shall be subject in all
respects to the terms and conditions of the Plan and in the event of any
question or controversy relating to the terms of the Plan, the decision of the
Committee shall be conclusive.
Sincerely yours,
DISCAS, INC.
By:
---------------------------
President
Agreed to and accepted this
____ day of __________ , .
- ----------------------------------
Signature of Optionee
5
<PAGE>
EXHIBIT B
DISCAS, INC.
NON-INCENTIVE STOCK OPTION AGREEMENT
----------------------
To:
We are pleased to notify you that by the determination of the Stock
Option Plan Committee (herein called the "Committee") a non-incentive stock
option to purchase ____ shares of the Common Stock of Discas, Inc. (herein
called the "Company") at a price of $ _____ per share has this day of ________
been granted to you under the Company's 1997 Incentive and Non-Incentive Stock
Option Plan (herein called the "Plan"). This option may be exercised only upon
the terms and conditions set forth below.
1. Purpose of Option.
The purpose of the Plan under which this non-incentive stock option
has been granted is to further the growth and development of the Company and
its subsidiaries by encouraging key employees, directors, consultants, agents,
independent contractors and other persons who contribute and are expected to
contribute materially to the Company's success to obtain a proprietary interest
in the Company through the ownership of stock, thereby providing such persons
with an added incentive to promote the best interests of the Company, and
affording the Company a means of attracting to its service persons of
outstanding ability.
2. Acceptance of Option Agreement.
Your execution of this non-incentive stock option agreement will
indicate your acceptance of and your willingness to be bound by its terms; it
imposes no obligation upon you to purchase any of the shares subject to this
option. Your obligation to purchase shares can arise only upon your exercise of
the option in the manner set forth in paragraph 4 hereof.
3. When Option May Be Exercised.
The option granted you hereunder may not be exercised for a period of
six months from the date of its grant by the Committee as set forth above.
Thereafter, this option shall be exercisable as follows:
(i) at the end of one year from the date of grant, up to 25% of
the total shares subject to the option;
(ii) at the end of the second year from the date of grant, up to
50%;
<PAGE>
(iii) at the end of the third year from the date of grant, up to
75%;
(iv) at the end of the fourth year from the date of grant, up to
100%.
This option may not be exercised for less than ten shares at any one
time (or the remaining shares then purchasable if less than ten) and expires at
the end of five years from the date of grant whether or not it has been duly
exercised (hereinafter, the "Option Expiration Date"), unless sooner terminated
as provided in paragraphs 5, 6 or 7 hereof.
4. How Option May Be Exercised.
This option is exercisable by a written notice signed by you and
delivered to the Company at its executive offices, signifying your election to
exercise the option. The notice must state the number of shares of Common Stock
as to which your option is being exercised, must contain a statement by you (in
a form acceptable to the Company) that such shares are being acquired by you
for investment and not with a view to their distribution or resale (unless a
Registration Statement covering the shares purchased has been declared
effective by the Securities and Exchange Commission) and must be accompanied by
cash or a check to the order of the Company for the full purchase price of the
shares being purchased, plus such amount, if any, as is required for
withholding taxes. Notwithstanding the foregoing, this option may also be
exercised pursuant to the following "cashless exercise" provision.
Insert the following "cashless exercise" provision, if granted by the
Committee:] [In lieu of paying for the shares purchasable under this option by
cash or check, you may (i) deliver previously owned shares of Common Stock with
a fair market value equal to the full purchase price of the shares being
purchased under this option, or (ii) request that the Company withhold shares
of Common Stock issuable upon exercise of this option with a fair market value
equal to the full purchase price of the shares being purchased under this
option (thereby reducing the number of shares issuable upon exercise of this
option). For purposes of this option, unless the Committee determines
otherwise, the "fair market value" of a share of Common Stock as of a certain
date shall be the closing sale price of the Common Stock on The Nasdaq Stock
Market or, if the Common Stock is not then traded on The Nasdaq Stock Market,
such exchange as the Common Stock is then traded, on the trading date
immediately preceding the date fair market value is being determined. The
Committee may make such other determination of fair market value, based on
other factors, as it shall deem appropriate.
If notice of the exercise of this option is given by a person or
persons other than you, the Company may require, as a condition to the exercise
of this option, the submission to the Company of appropriate proof of the right
of such person or persons to exercise this option.
2
<PAGE>
Certificates for shares of the Common Stock so purchased will be
issued as soon as practicable. The Company, however, shall not be required to
issue or deliver a certificate for any shares until it has complied with all
requirements of the Securities Act of 1933, the Securities Exchange Act of
1934, any stock exchange on which the Company's Common Stock may then be listed
and all applicable state laws in connection with the issuance or sale of such
shares or the listing of such shares on said exchange. Until the issuance of
the certificate for such shares, you or such other person as may be entitled to
exercise this option shall have none of the rights of a stockholder with
respect to shares subject to this option.
5. Termination of Employment or Engagement.
If your employment with the Company (or a subsidiary thereof) is
terminated for any reason other than by death or disability, or if a you are
not an employee of the Company and your engagement by the Company (or a
subsidiary) is terminated for any reason, you may exercise, within three months
from the date of such termination, that portion of this option which was
exercisable by you at the date of such termination, provided, however, that
such exercise occurs prior to the Option Expiration Date.
6. Disability.
If your employment with the Company (or a subsidiary thereof) is
terminated by reason of your disability, you may exercise, within twelve months
from the date of such termination, that portion of this option which was
exercisable by you at the date of such termination, provided, however, that
such exercise occurs prior to the Option Expiration Date.
7. Death.
If you die while employed by the Company (or a subsidiary thereof) or
within six months after termination of your employment due to disability, that
portion of this option which was exercisable by you at the date of your death
may be exercised by your legatee or legatees under your Will, or by your
personal representatives or distributees, within twelve months from the date of
your death, but in no event after the Option Expiration Date.
8. Non-Transferability of Option.
This option shall not be transferable except by Will or the laws of
descent and distribution, and may be exercised during your lifetime only by
you.
9. Adjustments upon Changes in Capitalization.
If at any time after the date of grant of this option, the Company
shall, by stock dividend, split-up, combination, reclassification or exchange,
or through merger or consolidation, or otherwise, change its shares of Common
Stock into a different number or kind or class of shares
3
<PAGE>
or other securities or property, then the number of shares covered by this
option and the price of each such share shall be proportionately adjusted for
any such change by the Committee, whose determination shall be conclusive.
10. Acceleration of Exercisability Upon Change in Control.
Upon the occurrence of a "change in control" of the Company (as
defined below), this option shall become immediately fully exercisable. For
purposes of this option, a "change in control" of the Company shall mean (i)
the acquisition at any time by a "person" or "group" (as such terms are used
Sections 13(d) and 14(d)(2) of the Exchange Act of beneficial ownership (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities representing 50% or more of the combined voting power in the
election of directors of the then outstanding securities of the Company or any
successor or the Company; (ii) the termination of service of directors, for any
reason other than death, disability or retirement from the Board of Directors,
during any period of two consecutive years or less, of individuals who at the
beginning of such period constituted a majority of the Board of Directors,
unless the election of or nomination for election of each new director during
such period was approved by a vote of at least two-thirds of the directors
still in office who were directors at the beginning of the period; (iii)
approval by the stockholders of the Company of any merger, consolidation, or
statutory share exchange as a result of which the Common Stock shall be
changed, converted or exchanged (other than a merger, consolidation or share
exchange with a wholly-owned Subsidiary) or liquidation of the Company or any
sale or disposition of 80% or more of the assets or earning power or the
Company; or (iv) approval by the stockholders of the Company of any merger,
consolidation, or statutory share exchange to which the Company is a party as a
result of which the persons who were stockholders immediately prior to the
effective date of the merger, consolidation or share exchange shall have
beneficial ownership of less than 50% of the combined voting power in the
election of directors of the surviving corporation; provided, however, that no
change in control shall be deemed to have occurred if, prior to such time as a
change in control would otherwise be deemed to have occurred, the Company's
Board of Directors deems otherwise.
11. Lock-Up.
To the extent requested by the managing underwriter in respect of a
proposed offering of securities of the Company, you shall refrain from selling
or offering to sell any securities of the Company within the latter of two
years after the effective date of the registration statement covering such
securities of the Company and six months form issuance, or such lesser period
as may be so requested by the managing underwriter.
12. Subject to Terms of the Plan.
This non-incentive stock option agreement shall be subject in all
respects to the terms and conditions of the Plan and in the event of any
question or controversy relating to the terms of the Plan, the decision of the
Committee shall be conclusive.
4
<PAGE>
13. Tax Status.
This option does not qualify as an "incentive stock option" under
the provisions of Section 422A of the Internal Revenue Code of 1986, as
amended, and the income tax implications of your receipt of a non-incentive
stock option and your exercise of such an option should be discussed with your
tax counsel.
Sincerely yours,
DISCAS, INC.
By:
---------------------------
President
Agreed to and accepted this
____ day of __________ , 199 .
- ----------------------------------
Signature of Optionee
5
<PAGE>
Exhibit 10.3
CREDIT AGREEMENT
BY AND AMONG
DISCAS RECYCLED PRODUCTS CORPORATION,
DISCAS, INC.
(COLLECTIVELY, THE "BORROWERS")
AND
BANK OF BOSTON CONNECTICUT
(THE "BANK")
DATED AS OF
JUNE 25, 1993
<PAGE>
TABLE OF CONTENTS
-----------------
Section Page
- ------- ----
Preamble
ss.1. Definitions........................................................ 1
ss.2. The Loans.......................................................... 5
ss.3. Provisions Relating to Joint and Several Liability of
Borrowers.......................................................... 6
ss.4. Interest........................................................... 9
ss.5. Changes in Circumstances........................................... 9
ss.6. Closing Fees and Payments.......................................... 9
ss.7. Representations and Warranties..................................... 10
ss.8. Conditions Precedent............................................... 11
ss.9. Covenants.......................................................... 11
ss.10. Events of Default; Acceleration.................................... 14
ss.11. Setoff............................................................. 15
ss.12. Miscellaneous...................................................... 16
ss.13. Prejudgment Remedy Waiver.......................................... 17
<PAGE>
CREDIT AGREEMENT
This CREDIT AGREEMENT (this "AGREEMENT") is made as of June 25, 1993,
by and among DISCAS RECYCLED PRODUCTS CORPORATION and DISCAS, INC., both
Delaware corporations (collectively, the "BORROWERS"), both having their
principal place of business at 56 Eagle Street, Waterbury, Connecticut 06708,
and BANK OF BOSTON CONNECTICUT (the "BANK"), a Connecticut banking corporation
with its head office at 81 West Main Street, Waterbury, Connecticut 06720.
ss.1. DEFINITIONS: Certain capitalized terms are defined
below:
Accounts: All rights of the Borrowers to any payment of money for
goods sold, leased or otherwise marketed in the ordinary course of business,
whether evidenced by or under or in respect of a contract or instrument, and to
all proceeds in respect thereof.
Base Rate: The annual rate of interest announced from time to time by
The First National Bank of Boston at its head office in Boston, Massachusetts
as its "base rate, which may not be the best or lowest interest rate offered to
borrowers by the Bank in commercial transactions."
Business Day: Any day on which banks in Waterbury, Connecticut are
open for business generally.
CDA: The Connecticut Development Authority
CDA Guarantee Agreement: The Master Guarantee Agreement dated as of
November 3, 1992 between the Bank and the CDA, as amended from time to time.
CDA Guarantee Certificate: The Guarantee Certificate of even date
herewith executed and delivered by the CDA to the Bank pursuant to the terms of
the CDA Guarantee Agreement, as amended from time to time.
CDA Letter Agreement: The Letter Agreement of even date herewith by
and among the Bank and the Borrowers, as amended from time to time.
Charter Documents: In respect of any entity, the certificate or
articles of incorporation or organization and the by-laws of such entity, or
other constitutive documents of such entity.
Commitment: The obligation of the Bank to make loans to Borrowers up
to an aggregate outstanding principal amount not to exceed $500,000.
Commitment Termination Date. October 31, 1993.
<PAGE>
-2-
Consent: In respect of any person or entity, any permit, license or
exemption from, approval, consent of, registration or filing with any local,
state or federal governmental or regulatory agency or authority, required under
applicable law.
Consolidated Financial Obligations: For any period, an amount equal to
the sum of all payments on Indebtedness that become due and payable or that are
to become due and payable during such period pursuant to any agreement or
instrument to which either of the Borrowers is a party relating to the
borrowing of money or the obtaining of credit or in respect of capitalized
leases. Demand obligations shall be deemed to be due and payable during any
period during which such obligations are outstanding.
Consolidated Net Income (or Deficit): The net income (or deficit) of
the Borrowers and their Subsidiaries, after deduction of all expenses, taxes,
and other proper charges determined in accordance with generally accepted
accounting principles.
Consolidated Operating Cash Flow: For any period, the amount equal to
(a) the sum of (i) the earnings (or loss) from the operations of the Borrowers
for such period, after payment or provision for all expenses and other proper
charges, but before payment or provision for any income taxes or interest
expense, plus (ii) depreciation, amortization and other non-cash charges for
such period, minus (b) cash payments for all taxes paid during such period,
minus (c) capital expenditures made during such period to the extent permitted
hereunder.
Consolidated Tangible Net Worth: The excess of (a) all assets of the
Borrowers and their Subsidiaries determined in accordance with GAAP, over (b)
all liabilities of the Borrowers and their Subsidiaries determined in
accordance with GAAP, minus (c) the sum of (i) the book value all intangibles
determined in accordance with GAAP, including good will and intellectual
property, (ii) any write-up in the book value of assets since the most recent
audited Financials in existence on the date hereof, and (iii) without
duplication, any subscriptions receivable.
DED: Department of Economic Development.
DED Subordination Agreement: The Subordination Agreement to be
executed and delivered by the Bank, DED and the Borrowers that is in form and
substance satisfactory to the Bank.
Default: An event or act which with the giving of notice and/or the
lapse of time, would become an Event of Default.
Environmental Laws: All laws pertaining to environmental matters,
including without limitation, the Resource Conservation and Recovery Act, the
Comprehensive Environmental Response Compensation and Liability Act of 1980,
the Superfund Amendments and Reauthorization Act of 1986, the Federal Clean
Water Act, the
<PAGE>
-3-
Federal Clean Air Act, the Toxic Substances Control Act, in each case as
amended, and all rules, regulations, judgments, decrees, orders and licenses
arising under all such laws.
ERISA: The Employee Retirement Income Security Act of 1974, as
amended, and all rules, regulations, judgments, decrees, and orders arising
thereunder.
Event of Default: Any of the events listed in Section 10 hereof.
Financials: In respect of any period, the balance sheet of any person
or entity as at the end of such period, and the related statement of income and
statement of cash flow for such period, each setting forth in comparative form
the figures for the previous comparable fiscal period, all in reasonable detail
and prepared in accordance with GAAP.
GAAP. Generally accepted accounting principles consistent with those
adopted by the Financial Accounting Standards Board and its predecessor, (a)
generally, as in effect from time to time, and (b) for purposes of determining
compliance by the Borrowers with its financial covenants set forth herein, as
in effect for the fiscal year therein reported in the most recent Financials
submitted to the Bank prior to execution of this Agreement.
Guarantor: Patrick A. DePaolo, Sr., an individual residing at 300
Argyle Road, Cheshire, Connecticut 06410.
Guarantor Subordination Agreement: The Subordination Agreement to be
executed and delivered by the Guarantor and the Borrower to the Bank that is in
form and substance satisfactory to the Bank.
Guaranty: The Guaranty of even date herewith from the Guarantor to the
Bank.
Indebtedness: In respect of any entity, all obligations, contingent
and otherwise, that in accordance with GAAP should be classified as
liabilities, including without limitation (a) all debt obligations, (b) all
liabilities secured by Liens, (c) all guarantees and (d) all liabilities in
respect of bankers' acceptances or letters of credit.
Inventory: All goods, merchandise and other personal property, now
owned or hereafter acquired by the Borrowers which are held for sale or leased,
or furnished under a contract for service, or are raw materials, work in
process, or materials used in the Borrowers' business.
<PAGE>
-4-
Liens: Any encumbrance, mortgage, pledge, hypothecation, charge,
restriction or other security interest of any kind securing any obligation of
any entity or person.
Loans: See Section 2.
Loan Documents: This Agreement, the Note, the Subordination Agreements
and the Security Documents in each case as from time to time amended or
supplemented.
Materially Adverse Effect: Any materially adverse effect on the
financial condition or business operations of either of the Borrowers or any of
their Subsidiaries or material impairment of the ability of either of the
Borrowers to perform their joint and several obligations hereunder or under any
of the other Loan Documents.
Maturity Date: June 1, 2000 or such earlier date on which the Loans
may become due and payable pursuant to the terms hereof.
Note: See Section 2(a).
Obligations: All indebtedness, obligations and liabilities of the
Borrowers to the Bank, existing on the date of this Agreement or arising
thereafter, direct or indirect, joint or several, absolute or contingent,
matured or unmatured, liquidated or unliquidated, secured or unsecured, arising
by contract, operation of law or otherwise, arising or incurred under this
Agreement or any other Loan Document or in respect of the Loan or the Note or
other instruments at any time evidencing any thereof.
Parent Security Agreement: The Parent Security Agreement dated of even
date herewith between the Bank and Discas, Inc.
Requirement of Law: In respect of any person or entity, any law,
treaty, rule, regulation or determination of an arbitrator, court, or other
governmental authority, in each case applicable to or binding upon such person
or entity or affecting any of its property.
Security Agreements. The Parent Security Agreement and the Subsidiary
Security Agreement.
Security Documents: The Guaranty, the CDA Guarantee Agreement, the CDA
Guarantee Certificate, the CDA Letter Agreement, the Trademark Security
Agreement, the Security Agreements and any and all other documents, agreements
and instruments executed in connection herewith or therewith.
Subordinated Debt: Indebtedness of the Borrowers or any of their
Subsidiaries to the Subordinated Debt Holders that is expressly subordinated
and made junior to the payment and
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performance in full of the Obligations pursuant to the Subordination Agreements
or by another written instrument containing subordination provisions that have
been approved by the Bank in writing.
Subordinated Debt Holders: Collectively, DED and the Guarantor.
Subordination Agreements: The Guarantor Subordination Agreement and
the DED Subordination Agreement.
Subsidiary: In respect of the Borrowers, any business entity of which
the Borrowers at any time owns or controls directly or indirectly more than
fifty percent (50%) of the outstanding shares of stock having voting power,
regardless of whether such right to vote depends upon the occurrence of a
contingency.
Subsidiary Security Agreement: The Subsidiary Security Agreement of
even date herewith between the Bank and Discas Recycled Products Company.
Trademark Security Agreement: The Trademark Security Agreement of even
date herewith between the Bank and Discas Recycled Products Corporation.
ss.2. THE LOANS. (a) Upon the terms and subject to the conditions of
this Agreement, the Bank agrees to lend to the Borrower such sums
(collectively, the "LOANS") that the Borrower may request, from the date hereof
until but not including the Commitment Termination Date; provided that the
principal amount of any Loan shall not exceed one hundred percent (100%) of the
lower of the fair market value or cost of the machinery and equipment
Collateral (including the cost of installation of such machinery and equipment
Collateral) purchased with the proceeds of such Loan; and, provided, further,
that the outstanding aggregate principal amount of the Loans shall not exceed
$153,000 unless and until the Bank shall have received (i) evidence
satisfactory to the Bank that the DED has made subordinated loans in an
aggregate amount equal to $135,000 and grants in an aggregate amount equal to
$135,000 to the Borrowers on terms and conditions satisfactory to the Bank, and
(ii) a fully executed copy of the DED Subordination Agreement. Loans shall be
in the minimum aggregate amount of $25,000 or an integral multiple thereof. The
Borrower shall notify the Bank in writing or telephonically not later than 2:00
p.m. Waterbury time on the proposed Drawdown Date of the Loan being requested,
of such Drawdown Date (which must be a Business Day) and the principal amount
of such Loan. Subject to the foregoing, so long as the Commitment is then in
effect and the conditions set forth in Section 8 hereof have been met, the Bank
shall advance the amount requested to the Borrower's bank account at the Bank
in immediately available funds not later than the close of business on such
Drawdown Date. The obligation of the Borrower to repay to the Bank the
principal of the Loans and interest accrued thereon shall be
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evidenced by a promissory note in the aggregate principal amount of $500,000
executed and delivered by the Borrower and payable to the order of the Bank, in
form and substance satisfactory to the Bank (the "NOTE").
(b) The Borrower shall pay the outstanding aggregate principal amount
of the Loans in seventy-eight (78) consecutive equal monthly installments, with
such installments due and payable on the first day of each calendar month
commencing on December 1, 1993; provided, that the aggregate principal balance
of all Loans, together with all interest accrued thereon and all fees and
expenses incurred by the Bank in connection therewith, shall be due and payable
in full in cash on the Maturity Date. The amount of each monthly installment
referred to above shall be equal to one and twenty-eight one hundredths percent
(1.28%) of the aggregate principal amount of the Loans outstanding on the
Commitment Termination Date.
(c) The Borrower shall have the right at any time to prepay
voluntarily the outstanding aggregate principal amount of the Loans, as a whole
or in part, without premium or penalty upon written notice to the Bank, given
by 2:00 p.m. Waterbury time on the proposed date of such prepayment, of the
amount to be prepaid and the date of such prepayment; provided, that each such
partial prepayment shall be in the principal amount of $25,000 or any integral
multiple thereof. Any partial prepayment of the outstanding aggregate principal
amount of the Loans shall be applied, prior to the Commitment Termination Date,
to the aggregate principal amount of the Loans outstanding on the date of such
prepayment and, on and after the Commitment Termination Date, to the monthly
installments (including the final installment due on the Maturity Date) of the
aggregate outstanding principal amount of the Loans due hereunder in inverse
order of maturity. No prepaid amounts may be reborrowed and any prepayment
shall be accompanied by all interest accrued to such date of prepayment on the
principal being repaid or prepaid.
ss.3. PROVISIONS RELATING TO JOINT AND SEVERAL LIABILITY OF BORROWERS;
ss.3.1. Concerning Joint and Several Liability of the Borrowers.
(a) Each of the Borrowers is accepting joint and several liability
hereunder in consideration of the financial accommodations to be provided by
the Bank under this Agreement, for the mutual benefit, directly and indirectly,
of each of the Borrowers and in consideration of the undertakings of each of
the Borrowers to accept joint and several liability for the obligations of each
of them.
(b) Each of the Borrowers, jointly and severally, hereby irrevocably
and unconditionally accepts, not merely as a
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surety but also as a co-debtor, joint and several liability with the other
Borrower, with respect to the payment and performance of all of the
Obligations, it being the intention of the parties hereto that all the
Obligations shall be the joint and several obligations of both of the Borrowers
without preferences or distinction between them.
(c) If and to the extent that either of the Borrowers shall fail to
make any payment with respect to any of the Obligations as and when due or to
perform any of such Obligations in accordance with the terms thereof, then in
each such event the other Borrower will make such payment with respect to, or
perform, such Obligation.
(d) The obligations of each Borrower under the provisions of this
ss.3.1 constitute the absolute and unconditional obligations of such Borrower
enforceable against it to the full extent permitted under the terms hereof,
irrespective of the validity, regularity or enforceability of this Agreement or
any other circumstances whatsoever.
(e) Except as otherwise expressly provided in this Agreement, each
Borrower hereby waives notice of acceptance of its joint and several liability,
notice of the Loan made under this Agreement, notice of the occurrence of any
Default or Event of Default, or of any demand for any payment under this
Agreement, notice of any action at any time taken or omitted by the Bank under
or in respect of any of the Obligations, any requirement of diligence or to
mitigate damages and, generally, all demands, notices and other formalities of
every kind in connection with this Agreement. Each Borrower hereby assents to,
and waives notice of, any extension or postponement of the time for the payment
of any of the Obligations, the acceptance of any partial payment thereon, any
waiver, consent or other action or acquiescence by the Bank at any time or
times in respect of any default by either Borrower in the performance or
satisfaction of any term, covenant, condition or provision of this Agreement,
any and all other indulgences whatsoever by the Bank in respect of any of the
obligations hereunder, and the taking, addition, substitution or release, in
whole or in part, at any time or times, of any security for any of such
obligations or the addition, substitution or release, in whole or in part, of
either Borrower. Without limiting the generality of the foregoing, each
Borrower assents to any other action or delay in acting or failure to act on
the part of the Bank including, without limitation, any failure strictly or
diligently to assert any right or to pursue any remedy or to comply fully with
applicable laws or regulations thereunder, which might, but for the provisions
of this ss.3.1, afford grounds for terminating, discharging or relieving such
Borrower, in whole or in part, from any of its Obligations under this ss.3.1,
it being the intention of each Borrower that, so long as any of the Obligations
remain unsatisfied, the Obligations of such Borrower under this ss.3.1 shall
not be discharged except by performance and then only to the extent
<PAGE>
-8-
of such performance. The joint and several liability of the Borrowers hereunder
shall continue in full force and effect notwithstanding any absorption, merger,
amalgamation or any other change whatsoever in the name, membership,
constitution or place of formation of either Borrower or the Bank. If at any
time, any payment, or any part thereof, made in respect of any of the
Obligations, is rescinded or must otherwise be restored or returned by the Bank
upon the insolvency, bankruptcy or reorganization of either Borrower, or
otherwise, the provisions of this ss.3.1 will forthwith be reinstated in
effect, as though such payment had not been made.
ss.3.2. No Marshalling. The Bank shall not be required to marshall any
present or future claims, rights, or remedies which it has or may have against
the Borrowers or either of them in respect of the Obligations (or any of them)
of the Borrowers or either of them under this Agreement, or to resort to such
claims, rights, or remedies in any particular order. To the extent that it
lawfully may, each Borrower hereby agrees that it will not invoke any law which
might cause delay in or impede the enforcement of the rights of the Bank under
this Agreement or any other Loan Document, and to the fullest extent it
lawfully may, each Borrower hereby irrevocably waives the benefits of all such
laws.
ss.3.3. Liabilities of Borrowers Not To Be Affected. The liability of
each Borrower to the Bank under this Agreement shall in no way be terminated,
affected, diminished or impaired by reason of the assertion of, or the failure
by, the Bank to assert against the other Borrower, any of the claims, rights or
remedies reserved to the Bank pursuant to the terms of this Agreement or (i)
any assignment, renewal or extension of this Agreement in honoring a request
therefor by the other Borrower, or (ii) any indulgence, waiver, extension of
time or other action, inaction or omission by the Bank under or in respect of
this Agreement in favor of the other Borrower, or (iii) any dealings or
transactions or matters occurring between the Bank and the other Borrower, or
(iv) any bankruptcy, insolvency, reorganization, arrangement, assignment for
the benefit of creditors, receivership or trusteeship affecting the other
Borrower or its successors or assigns, or (v) the release of the other Borrower
from the performance or observance of any of the terms, conditions or
provisions of this Agreement or (vi) any act or matter which might, but for
this provision of this Agreement, be deemed a legal or equitable discharge of
the other Borrower, or (vii) the invalidity, irregularity or unenforceability
against the other Borrower of this Agreement, or (viii) any other matter,
whether or not specifically mentioned herein, other than full, prompt and
unconditional payment and performance when due of all of the joint and several
obligations of the Borrowers to the Bank under this Agreement; whether or not
notice of any of the foregoing is given to either of the Borrowers. Each
Borrower hereby expressly waives and surrenders any defense to its joint and
several obligations hereunder based upon any of the foregoing acts, omissions,
things, agreements or waivers.
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ss.4. INTEREST; LATE CHARGES. So long as no Event of Default is
continuing, the Borrowers shall pay interest on the Loans at a rate per annum
which is equal to the sum of (i) the Base Rate in effect from time to time plus
(ii) two percent (2.0%), such interest to be payable in arrears on the first
day of each calendar month for the immediately preceding calendar month,
commencing on July 1, 1993. While an Event of Default is continuing, amounts
payable to the Bank under any of the Loan Documents shall bear interest
(compounded monthly and payable on demand in respect of overdue amounts) at a
rate per annum which is equal to the sum of (i) the Base Rate and (ii) five
percent (5.0%) until such amount is paid in full or (as the case may be) such
Event of Default has been cured or waived in writing by the Bank (after as well
as before judgment). In addition, in the event that any payment provided for
herein or in any other Loan Documents shall become overdue for a period in
excess of fifteen (15) days, a late charge of five (5) cents for each dollar so
overdue shall become immediately due and payable to the Bank for the purpose of
defraying the expenses incident to handling such delinquent payment.
ss.5. CHANGES IN CIRCUMSTANCES. If any change in banking law or
regulation or the administration thereof (whether or not having the force of
law) affects the amount of capital required or expected to be maintained by the
Bank or any entity controlling it, and such amount is increased by reason of
the Commitment or the Loans, the Bank may notify the Borrower thereof. The
Borrower and the Bank shall negotiate an adjustment payable to the Bank to
compensate for such increase. If no agreement is reached within thirty (30)
days, the Bank may increase the fees payable hereunder by the amount determined
by the Bank to be necessary to provide such compensation.
ss.6. CLOSING FEES AND PAYMENTS. (a) Contemporaneously with execution
and delivery of this Agreement, the Borrowers shall (i) pay to the Bank a
non-refundable closing fee in the amount of $1,750.00 and (ii) shall pay to CDA
its non-refundable first year annual guarantee fee in the amount $2,500.
(b) All payments to be made by the Borrowers hereunder shall be made
in U.S. dollars in immediately available funds at the Bank's head office at 81
West Main Street, Waterbury, Connecticut, without set-off or counterclaim and
without any withholding or deduction whatsoever. The Bank shall be entitled to
charge any account of either of the Borrowers with the Bank for any sum due and
payable by either of the Borrowers to the Bank or the CDA hereunder or under
any of the other Loan Documents. If any payment hereunder is required to be
made on a day which is not a Business Day, it shall be paid on the immediately
preceding Business Day. All computations of interest or of any fees payable
hereunder shall be made by the Bank on the basis of actual days elapsed and on
a 360-day year.
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ss.7. REPRESENTATIONS AND WARRANTIES. Each of the Borrowers represents
and warrants to the Bank on the date hereof that: (a) the Borrowers and each of
their respective Subsidiaries is duly organized, validly existing, and in good
standing under the laws of its jurisdiction of incorporation and is duly
qualified and in good standing in every other jurisdiction where it is doing
business, and the execution, delivery and performance by each of the Borrowers
and each of their respective Subsidiaries of the Loan Documents to which it is
a party (i) are within the corporate authority of the Borrowers and their
respective Subsidiaries, (ii) have been duly authorized, (iii) do not conflict
with or contravene the Charter Documents of either of the Borrowers or any of
their respective Subsidiaries; (b) upon execution and delivery thereof, each
Loan Document shall constitute the legal, valid and binding obligation of each
of the Borrowers and each of such Subsidiaries, enforceable in accordance with
its terms; (c) the Borrowers and each of their respective Subsidiaries have
good and marketable title to all their properties, subject only to Liens
permitted hereunder, and possesses all assets, including intellectual
properties, franchises and Consents, adequate for the conduct of their
respective businesses as now conducted; (d) the Borrowers have provided to the
Bank their reviewed Consolidated Financials as at April 30, 1993 and for the
period then ended, and such Financials are complete and correct and fairly
present the position of the Borrowers and their respective Subsidiaries as at
such date and for such period in accordance with GAAP consistently applied; (e)
since April 30, 1993, there has been no materially adverse change of any kind
in the Borrowers or any of their respective Subsidiaries which would have a
Materially Adverse Effect; (f) there are no legal or other proceedings or
investigations pending or threatened against either of the Borrowers or any of
their respective Subsidiaries before any court, tribunal or regulatory
authority which would, if adversely determined, alone or together, have a
Materially Adverse Effect; (g) the execution, delivery, performance of their
obligations, and exercise of their rights under the Loan Documents by each of
the Borrowers and each of their respective Subsidiaries, including borrowing
under this Agreement (i) do not require any Consents; and (ii) are not and will
not be in conflict with or prohibited or prevented by (A) any Requirement of
Law, or (B) any Charter Document, corporate minute or resolution, instrument,
agreement or provision thereof, in each case binding on either Borrower or any
of their respective Subsidiaries or affecting any of their respective
properties; (h) neither Borrower nor any of their respective Subsidiaries is in
violation of (i) any Charter Document, corporate minute or resolution, (ii) any
instrument or agreement, in each case binding on such Borrower or such
Subsidiary or affecting its property, or (iii) any Requirement of Law,
including, without limitation, all applicable federal and state tax laws, ERISA
and Environmental Laws; (i) upon execution and delivery of the Security
Documents and the filing of documents thereby required, the Bank shall have a
first-priority perfected security interest in all of the properties and assets
of each of the Borrowers, subject only to Liens
<PAGE>
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permitted hereunder and entitled to priority under applicable law, with no
financing statements, chattel mortgages, real estate mortgages or similar
filings on record anywhere which conflict with such first-priority interest;
(j) Discas, Inc. has no Subsidiaries except for Discas Recycled Products
Corporation; (k) Discas Recycled Products Corporation has no Subsidiaries; (l)
neither Borrower is a party to any partnership or joint venture; and (m) each
fiscal year of the Borrowers begins on May 1 of each calendar year and ends on
April 30 of such calendar year.
ss.8. CONDITIONS PRECEDENT. In addition to the making of the foregoing
representations and warranties and the delivery of the Loan Documents and such
other documents and the taking of such actions as the Bank may require at or
prior to the time of executing this Agreement, the obligation of the Bank to
make the Loan to the Borrowers hereunder is subject to the satisfaction of the
following further conditions precedent: (a) each of the representations and
warranties of the Borrowers to the Bank shall be true and correct in all
material respects as of the time made or claimed to have been made; (b) no
Default or Event of Default shall be continuing; (c) all proceedings in
connection with the transactions contemplated hereby shall be in form and
substance satisfactory to the Bank and the Bank shall have received all
information and documents as it may have reasonably requested; (i) the CDA
shall have guaranteed the payment of thirty percent (30%) of the Obligations on
terms and conditions satisfactory to the Bank. Without limiting the foregoing,
the obligation of the Bank to make any Loan shall be subject to, among other
things, (1) the Bank's receipt of a purchase and sale agreement with respect to
the machinery and equipment Collateral being purchase with the proceeds of such
Loan, (1) the Borrowers shall have executed and delivered to the Bank all
documents, agreements and instruments (including, without limitation, UCC-1's
and amendments to the Security Agreement) that the Bank deems necessary to
obtain a valid and perfected security interest and Lien in such machinery and
equipment Collateral and (3) the shareholders of Discas Recycled Products
Corporation shall have made an equity contribution to Discas Recycled Products
Corporation of not less than $150,000 on terms and conditions satisfactory to
the Bank.
ss.9. COVENANTS.
(a) Each of the Borrowers agrees that as long as the Commitment is in
effect or any Loan or the Note is outstanding and until the payment and
satisfaction in full of the Loans and all of the other Obligations, the
Borrowers will comply with their joint and several obligations as set forth
throughout this Agreement and to:
(i) furnish the Bank: (A) as soon as available but in any event
within one hundred twenty (120) days after the close of each fiscal year of
the Borrowers, their reviewed consolidated Financials for such fiscal year,
prepared by the
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Borrowers' certified public accountants; (B) as soon as available but in any
event within thirty (30) days after the end of each fiscal quarter of the
Borrowers, its management prepared unaudited consolidated Financials for
such quarter, certified by the Borrowers' chief financial officers; (C) as
soon as available but in any event within fifteen (15) days after the end of
each fiscal month of the Borrowers an Accounts and accounts payable aging
report, certified by the Borrowers' chief financial officers; and (D)
together with the quarterly and annual Financials, a certificate of the
Borrowers setting forth computations demonstrating compliance with the
Borrowers' financial covenants set forth herein, and certifying that no
Default or Event of Default has occurred, or if a Default or an Event of
Default has occurred, the actions taken by the Borrowers with respect
thereto;
(ii) keep true and accurate books of account in accordance with
GAAP and to permit the Bank or its designated representatives, at the
expense of the Borrowers, to inspect the Borrowers' premises and to examine
and be advised as to such or other business records upon the request of the
Bank;
(iii) maintain their corporate existence, business and assets, to
keep their business and assets adequately insured, to maintain their chief
executive offices in the United States, to continue to engage in
substantially the same lines of business, and to comply with all
Requirements of Law, including ERISA and Environmental Laws;
(iv) notify the Bank promptly in writing of (A) the occurrence of
any Default or Event of Default, (B) any noncompliance with ERISA or any
Environmental Law or proceeding in respect thereof, (C) any change of
address or name of either Borrower, (D) any threatened or pending litigation
or similar proceeding affecting the Borrowers or any Subsidiary or any
material change in any such litigation or proceeding previously reported and
(E) claims against any assets or properties of the Borrowers or such
Subsidiary encumbered in favor of the Bank;
(v) use the proceeds of the Loan solely to purchase machinery and
equipment Collateral, and not for the carrying of "margin security" or
"margin stock" within the meaning of Regulations U and X of the Board of
Governors of the Federal Reserve System, 12 C.F.R. Parts 221 and 224;
(vi) cooperate with the Bank, take such action, execute such
documents, and provide such information as the Bank may from time to time
reasonably request in order further to effect the transactions contemplated
by and the purposes of the Loan Documents, including without limitation, the
delivery at the Borrower's expense of appraisals or environmental
assessments; and
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(vii) conform with CDA's affirmative action requests.
(b) Each of the Borrowers agrees that as long as the Loan or the Note
is outstanding and until the payment and satisfaction in full of the Loans and
all of the other Obligations, neither Borrower will:
(i) create, incur or assume any Indebtedness other than (A)
Indebtedness to the Bank arising under the Loan Documents, (B) Indebtedness
in respect of the acquisition of property which does not exceed $10,000 in
the aggregate amount, (C) current liabilities of the Borrowers not incurred
through the borrowing of money or the obtaining of credit except credit on
an open account customarily extended, (D) Indebtedness in respect of taxes
or other governmental charges contested in good faith and by appropriate
proceedings, (E) Subordinated Debt and (F) Indebtedness not included above
and listed on Schedule 9(b)(i) hereto;
(ii) create or incur any Liens on any of the property or assets of
either of the Borrowers except (A) Liens securing the Obligations; (B) Liens
securing taxes or other governmental charges not yet due; (C) deposits or
pledges made in connection with social security obligations; (D) Liens of
carriers, warehousemen, mechanics and materialmen, less than 120 days old as
to obligations not yet due; (E) easements, rights-of-way, zoning
restrictions and similar minor Liens which individually and in the aggregate
do not have a Materially Adverse Effect; (F) security interests securing
Subordinated Debt held by DED; and (G) other Liens existing on the date
hereof and listed on Schedule 9(b)(ii) hereto;
(iii) make any investments other than investments in (A)
marketable obligations of the United States maturing within one (1) year,
(B) certificates of deposit, bankers' acceptances and time and demand
deposits of United States banks having total assets in excess of
$1,000,000,000, or (C) such other investments as the Bank may from time to
time approve in writing;
(iv) make any distributions on or in respect of its capital of any
nature whatsoever, other than dividends payable solely in shares of common
stock or distributions by Subsidiaries to the Borrowers; or
(v) become party to a merger, or to effect any disposition of
assets other than in the ordinary course, or to purchase, lease or otherwise
acquire assets other than in the ordinary course.
(c) Each of the Borrowers agrees that as long as the Commitment is
in effect or any Loan or the Note is outstanding and
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until the payment and satisfaction in full of the Loan and all of the other
Obligations, the Borrowers will not:
(i) permit the ratio of Consolidated Operating Cash Flow to
Consolidated Financial Obligations for any fiscal quarter of the Borrowers
ending after January 1, 1994 to be less than 1.2:1.0.
(ii) permit Consolidated Net Income of the Borrowers to be less
than $0.00 for any period consisting of two (2) consecutive fiscal quarters
of the Borrowers ending after January 1, 1994.
(iii) permit Consolidated Tangible Net Worth of the Borrowers to
be less than the amounts set forth below at any time during any period set
forth below:
Period Amount
- ------ ------
May 1, 1993 through April 30, 1994 $475,000
May 1, 1994 through April 30, 1995 $525,000
May 1, 1995 through April 30, 1996 $575,000
May 1, 1996 through April 30, 1997 $625,000
May 1, 1997 through April 30, 1998 $675,000
May 1, 1998 through April 30, 1999 $725,000
May 1, 1999 through Maturity Date $775,000
ss.10. EVENTS OF DEFAULT; ACCELERATION. If any of the following events
("EVENTS OF DEFAULT") shall occur: (a) either of the Borrowers shall fail to
pay when due and payable any principal of or interest on the Loan or any other
sum due under any of the Loan Documents; (b) either of the Borrowers shall fail
to perform any term, covenant or agreement contained in Section 9 hereof; (c)
either of the Borrowers or the Guarantor shall fail to perform any other term,
covenant or agreement contained in the Loan Documents after the Bank has given
notice of such failure to the Borrowers; (d) any representation or warranty of
the Borrowers or any of their Subsidiaries or of the Guarantor in the Loan
Documents or in any certificate or notice given in connection therewith shall
have been false or misleading in any material respect at the time made or
deemed to have been made; (e) either of the Borrowers or any of their
Subsidiaries or the Guarantor shall be in default under any agreement or
agreements evidencing Indebtedness owing to (i) the Bank or any affiliates of
the Bank or (ii) any other Indebtedness to any other third party; (f) any of
the Loan Documents shall cease to be in full force and effect, (g) the
Borrowers or any of their Subsidiaries or the Guarantor (i) shall make an
assignment for the benefit of creditors, (ii) shall be adjudicated bankrupt or
insolvent, (iii) shall seek the appointment of, or be the subject of, an order
appointing, a trustee, liquidator or receiver as to all or part of its assets,
(iv) shall commence, approve or consent
<PAGE>
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to, any case or proceeding under any bankruptcy, reorganization or similar law
and, in the case of an involuntary case or proceeding, such case or proceeding
is not dismissed within sixty (60) days following the commencement thereof, or
(v) shall be the subject of an order for relief in an involuntary case under
federal bankruptcy law; (h) either of the Borrowers or any of their
Subsidiaries or the Guarantor shall be unable to pay their respective debts as
they mature; (i) there shall remain undischarged for more than thirty (30) days
any final judgment or execution action against either of the Borrowers or any
of their Subsidiaries or the Guarantor that, together with other outstanding
claims and execution actions against such Borrower or such Subsidiaries or the
Guarantor exceeds $50,000 in the aggregate; (j) the Guarantor shall cease to
own legally or beneficially one hundred percent (100%) or more of the voting
stock of Discas, Inc. on a fully diluted basis, (k) Discas, Inc. shall cease to
own legally or beneficially sixty-eight and eight-tenths percent (68.8%) or
more of the voting stock of Discas Recycled Products Corporation on a fully
diluted basis, (l) the CDA Guarantee Certificate shall have terminated or (m)
the Borrower shall fail to provide the Bank with (i) evidence satisfactory to
the Bank that DED has made subordinated loans and grants to the Borrowers in an
aggregate amount equal to or greater than $270,000 on terms and conditions
satisfactory to the Bank and (ii) a fully executed copy of the DED
Subordination Agreement, in each case on or before July 1, 1993;
THEN, or at any time thereafter:
(1) In the case of any Event of Default under clause (g) or (h), the
entire unpaid principal amount of the Loan, all interest accrued and unpaid
thereof, and all other amounts payable hereunder and under the other Loan
Documents shall automatically become forthwith due and payable, without
presentment, demand, protest or notice of any kind, all of which are hereby
expressly waived by the Borrowers; and
(2) In the case of any Event of Default other than (g) and (h), the
Bank may declare the unpaid principal amount of the Loan, all interest accrued
and unpaid thereof, and all other amounts payable hereunder and under the other
Loan Documents to be forthwith due and payable, without presentment, demand,
protest or further notice of any kind, all of which are hereby expressly waived
by the Borrowers.
No remedy herein conferred upon the Bank is intended to be exclusive
of any other remedy and each and every remedy shall be cumulative and in
addition to every other remedy hereunder, now or hereafter existing at law or
in equity or otherwise.
ss.11. SETOFF. Regardless of the adequacy of any collateral for the
Obligations, any deposits or other sums credited by or due from the Bank to
either Borrower may be applied to or set off against any principal, interest
and any other amounts due from
<PAGE>
-16-
either Borrower to the Bank at any time without notice to the Borrowers, or
compliance with any other procedure imposed by statute or otherwise, all of
which are hereby expressly waived by the Borrowers.
ss.12. MISCELLANEOUS. Each of the Borrowers jointly and severally
agrees to jointly and severally indemnify and hold harmless the Bank against
all claims and losses of every kind arising out of the Loan Documents,
including without limitation against those in respect of the application of
Environmental Laws to the Borrowers and their Subsidiaries. Each of the
Borrowers shall pay to the Bank promptly on demand all reasonable costs and
expenses (including any taxes, other than taxes on income of the Bank, and
legal and other professional fees and fees of its commercial finance examiner)
incurred by the Bank in connection with the preparation, negotiation,
execution, amendment, administration or enforcement of any of the Loan
Documents. Any communication to be made hereunder shall (i) be made in writing,
but unless otherwise stated, may be made by telex, facsimile transmission or
letter, and (ii) be made or delivered to the address of the party receiving
notice which is identified with its signature below (unless such party has by
five (5) days' written notice specified another address), and shall be deemed
made or delivered, when dispatched, left at that address, or five (5) days
after being mailed, postage prepaid, to such address. This Agreement shall be
binding upon and inure to the benefit of each party hereto and its successors
and assigns, but the Borrowers may not assign their rights or obligations
hereunder. This Agreement may not be amended or waived except by a written
instrument signed by the Borrowers and the Bank, and any such amendment or
waiver shall be effective only for the specific purpose given. No failure or
delay by the Bank to exercise any right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege preclude any other right, power or privilege. The provisions of this
Agreement are severable and if any one provision hereof shall be held invalid
or unenforceable in whole or in part in any jurisdiction, such invalidity or
unenforceability shall affect only such provision in such jurisdiction. This
Agreement, together with all Exhibits and Schedules hereto, expresses the
entire understanding of the parties with respect to the transactions
contemplated hereby. This Agreement and any amendment hereby may be executed in
several counterparts, each of which shall be an original, and all of which
shall constitute one agreement. In proving this Agreement, it shall not be
necessary to produce more than one such counterpart executed by the party to be
charged. THIS AGREEMENT AND THE NOTE ARE CONTRACTS UNDER THE LAWS OF THE STATE
OF CONNECTICUT AND SHALL BE CONSTRUED IN ACCORDANCE THEREWITH AND GOVERNED
THEREBY. EACH OF THE BORROWERS AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF ANY
OF THE LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE STATE OF CONNECTICUT
OR ANY FEDERAL COURT SITTING THEREIN. Each of the Borrowers, as an inducement
to the Bank to enter into this
<PAGE>
-17-
Agreement, hereby waives its right to a jury trial with respect to any action
arising in connection with any Loan Document.
ss.13. PREJUDGMENT REMEDY WAIVER. EACH OF THE BORROWERS ACKNOWLEDGES THAT THE
FINANCING EVIDENCED HEREBY IS A COMMERCIAL TRANSACTION WITHIN THE MEANING OF
CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES. EACH OF THE BORROWERS HEREBY
WAIVES ITS RIGHT TO NOTICE AND PRIOR COURT HEARING OR COURT ORDER UNDER
CONNECTICUT GENERAL STATUTES SECTIONS 52-278a ET. SEQ. AS AMENDED OR UNDER ANY
OTHER STATE OR FEDERAL LAW WITH RESPECT TO ANY AND ALL PREJUDGMENT REMEDIES THE
BANK MAY EMPLOY TO ENFORCE ITS RIGHTS AND REMEDIES HEREUNDER. MORE
SPECIFICALLY, EACH OF THE BORROWERS ACKNOWLEDGES THAT THE BANK'S ATTORNEY MAY,
PURSUANT TO CONN. GEN. STAT. ss.52-278f, ISSUE A WRIT FOR A PREJUDGMENT REMEDY
WITHOUT SECURING A COURT ORDER. EACH OF THE BORROWERS ACKNOWLEDGES AND RESERVES
ITS RIGHT TO NOTICE AND A HEARING SUBSEQUENT TO THE ISSUANCE OF A WRIT FOR
PREJUDGMENT REMEDY AS AFORESAID AND THE BANK ACKNOWLEDGES SUCH BORROWER'S RIGHT
TO SAID HEARING SUBSEQUENT TO THE ISSUANCE OF SAID WRIT.
<PAGE>
-18-
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed as of the date first above written.
DISCAS RECYCLED PRODUCTS
CORPORATION
By: /s/ Patrick A. DePaolo, Sr.
----------------------------
Patrick A. DePaolo, Sr.
Its President
56 Eagle Street
Waterbury, CT 06780
Tel: (203) 753-5147
Fax: (203) 755-5791
DISCAS, INC.
By: /s/ Patrick A. DePaolo, Sr.
----------------------------
Patrick A. DePaolo, Sr.
Its President
56 Eagle Street
Waterbury, CT 06780
Tel: (203) 753-5147
Fax: (203) 755-5791
BANK OF BOSTON CONNECTICUT
By: /s/ Ann P. Killnan
------------------
Ann P. Killnan
Its Vice President
81 West Main Street
Waterbury, Connecticut 06702
Tel: (203)
Fax: (203)
<PAGE>
-19-
SCHEDULE 9(b)(i)
----------------
Permitted Indebtedness
The principal amount of $34,837.38 owed by Discas, Inc. to the Guarantor.
The principal amount of $20,480.40 plus $9,085.69 of interest owed by Discas,
Inc. to Christopher DePaolo.
<PAGE>
-20-
SCHEDULE 9(b)(ii)
-----------------
Permitted Liens
UCC-1 financing statement number 942210 filed with the Connecticut Secretary of
State on October 16, 1991 against Discas, Inc. with respect to the lease of
equipment by Discas, Inc. from Center Capital Corporation.
UCC-1 financing statement number 940958 filed with the Connecticut Secretary of
State on October 4, 1991 against Discas, Inc. with respect to the lease of
equipment by Discas, Inc. from Center Capital Corporation.
<PAGE>
Exhibit 10.4
PROMISSORY NOTE
==================================
Borrower: Discas, Inc. and Discas Recycled Products Corporation
567-1 South Leonard Street
Waterbury, CT 06708
Lender: BANK OF BOSTON CONNECTICUT
100 PEARL STREET
HARTFORD, CT 06103
==================================
<TABLE>
<CAPTION>
<S> <C> <C>
Principal Amount: $300,000.00 Initial Rate: 10.750% Date of Note: February 23, 1995
</TABLE>
PROMISE TO PAY. Discas, Inc. and Discas Recycled Products Corporation
("Borrower") promises to pay to BANK OF BOSTON CONNECTICUT ("Lender"), or
order, in lawful money of the United States of America, the principal amount of
Three Hundred Thousand & 00/100 Dollars ($300,000.00) or so much as may be
outstanding, together with interest on the unpaid outstanding principal balance
of each advance. Interest shall be calculated from the date of each advance
until repayment of each advance.
PAYMENT. Borrower will pay this loan in one payment of all outstanding
principal plus all accrued unpaid interest on September 30, 1995. In addition,
Borrower will pay regular monthly payments of accrued unpaid interest beginning
April 1, 1995, and all subsequent interest payments are due on the same day of
each month after that. Interest on this Note is computed on a 365/360 simple
interest basis; that is, by applying the ratio of the annual interest rate over
a year of 360 days, multiplied by the outstanding principal balance, multiplied
by the actual number of days the principal balance is outstanding. Borrower
will pay Lender at lender's address shown above or at such other place as
Lender may designate in writing. Unless otherwise agreed or required by
applicable law, payments will be applied first to any unpaid collection costs
and any late charges, then to any unpaid interest, and any remaining amount to
principal.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change
from time to time based on changes in an index which is the rate of interest
announced from time to time by Bank of Boston Connecticut at its Head Office as
its Base Rate (the "Index"). The Index is not necessarily the lowest rate
charged by Lender on its loans and is set by Lender in its sole discretion. If
the Index becomes unavailable during the term of this loan, Lender may
designate a substitute index after notifying Borrower. Lender will tell
Borrower the current index rate upon Borrower's request. Borrower understands
that Lender may make loans based on other rates as well. The interest rate
change will not occur more often than each time the Base Rate changes. The
index currently is 9.000% per annum. The interest rate to be applied to the
unpaid principal balance of this Note will be at a rate of 1.750 percentage
points over the index, resulting in an initial rate of 10.750% per annum.
NOTICE: Under no circumstances will the interest rate on this Note be more than
the maximum rate allowed by applicable law.
PREPAYMENT. Borrower may pay all or a portion of the amount owed earlier than
it is due. Early payments will not, unless agreed to by Lender in writing,
relieve borrower of Borrower's obligation to continue to make payments of
accrued unpaid interest. Rather, they will reduce the principal balance due.
LATE CHARGE. If a payment is 10 days or more late, Borrower will be charged
5.000% of the regularly scheduled payment.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to perform promptly at the time
and strictly in the manner provided in this Note or any agreement related to
this Note, or in any other agreement or loan Borrower has with Lender. (c)
Borrower defaults under any loan, extension of credit, security agreement,
purchase or sales agreement, or any other agreement, in favor of any other
creditor or person that may
<PAGE>
materially affect any of Borrower's property or Borrower's ability to repay
this Note or perform Borrower's obligations under this Note or any of the
Related Documents. (d) Any representation or statement made or furnished to
Lender by Borrower or on Borrower's behalf is false or misleading in any
material respect. (e) Borrower becomes insolvent, a receiver is appointed for
any part of Borrower's property, Borrower makes an assignment for the benefit
of creditors, or any proceeding is commenced either by Borrower or against
Borrower under any bankruptcy or insolvency laws. (f) Any creditor tries to
take any of Borrower's property on or in which Lender has a lien or security
interest. This includes a garnishment of any of Borrower's accounts with
Lender. (g) Any of the events described in this default section occurs with
respect to any guarantor of this Note. (h) Lender in good faith deems itself
insecure.
If any default, other than a default in payment, is curable and if Borrower has
not been given a notice of a breach of the same provision of this note within
the preceding twelve (12) months, it may be cured (and not event of default
will have occurred) if Borrower, after receiving written notice from Lender
demanding cure of such default: (a) cures the default within fifteen (15) days;
or (b) if the cure requires more than fifteen (15) days, immediately initiates
steps which Lender deems in Lender's sole discretion to be sufficient to cure
the default and thereafter continues and completes all reasonable and necessary
steps sufficient to produce compliance as soon as reasonably practicable.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, without
notice, and then Borrower will pay that amount. Upon default, including failure
to pay upon final maturity, Lender, at its option, may also, if permitted under
applicable law, do one or both of the following: (a) increase the variable
interest rate on this Note to 18.000% per annum, and (b) add any unpaid accrued
interest to principal and such sum will bear interest therefrom until paid at
the rate provided in this Note (including any increased rate). The interest
rate will not exceed the maximum rate permitted by applicable law. Lender may
hire or pay someone else to help collect this Note if Borrower does not pay.
Borrower also will pay Lender that amount. This includes, subject to any limits
under applicable law, Lender's attorneys' fees and Lender's legal expenses
whether or not there is a lawsuit, including attorneys' fees and legal expenses
for bankruptcy proceedings (including efforts to modify or vacate any automatic
stay or injunction), appeals, and any anticipated post-judgment collection
services. If not prohibited by applicable law, Borrower also will pay any court
costs, in addition to all other sums provided by law. This Note has been
delivered to Lender and accepted by Lender in the State of Connecticut. Lender
and Borrower hereby waive the right to any jury trial in any action,
proceeding, or counterclaim brought by Lender or Borrower against the other.
This Note shall be governed by and construed In accordance with the laws of the
State of Connecticut.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA, Keogh, and trust
accounts. Borrower authorizes Lender, to the extent permitted by applicable
law, to charge or setoff all sums owing on this Note against any and all such
accounts.
LINE OF CREDIT. This Note evidences a revolving line of credit. Advances under
this Note, as well as directions for payment from Borrower's accounts, may be
requested orally or in writing by Borrower or by an authorized person. Lender
may, but need not, require that all oral requests be confirmed in writing. The
following party or parties are authorized to request advances under the line of
credit until Lender receives from Borrower at Lender's address shown above
written notice or revocation of their authority: Patrick A. DePaolo, Sr.,
President/Treasurer; Stephen P. DePaolo, Vice President; and Phyllis C.
DePaolo, Secretary. Borrower agrees to be liable for all sums either (a)
advanced in accordance with the instructions of an authorized person or (b)
credited to any of Borrower's accounts with Lender. The unpaid principal
balance owing on this Note at any time may be evidenced by endorsements on this
Note or by Lender's internal records, including daily computer printouts.
Lender will have no obligation to advance funds under this Note if: (a)
Borrower or any guarantor is in default under the terms of this Note or any
agreement that Borrower or any guarantor has with Lender, including any
agreement made in connection with the signing of this Note; (b) Borrower or any
guarantor ceases doing business or is insolvent; (c) any guarantor seeks,
claims or otherwise attempts to limit, modify or revoke such guarantor's
guarantee of this Note or any other loan with Lender; (d) Borrower has applied
funds provided pursuant to this Note for purposes other than those
2
<PAGE>
authorized by Lender; or (e) Lender in good faith deems itself insecure under
this Note or any other agreement between Lender and Borrower.
ADDITIONAL TERMS. Borrower agrees that: (i) if any of the default(s) as
described above occurs with respect to a Grantor of collateral pledged as
security for this Note, the Borrower shall be in default under this Note; (ii)
any default in any obligation owed to an affiliate of Lender shall constitute a
default(s) under this Note, for purposes of this Note, an affiliate shall mean
any legal entity under the control of the Lender or under common control with
Lender;, and (iii) the entries on the books and records of Lender, including
any appearing on this Note, shall be, absent manifest error, prima facie
evidence of the aggregate amount of principal and accrued interest from time to
time outstanding under this Note.
Upon any default in connection with a proceeding under any bankruptcy or
insolvency laws, the entire unpaid principal balance on this Note and all
accrued unpaid interest shall be immediately due and payable without notice and
without any declaration by Lender and shall thereafter bear interest until paid
as provided above.
Each of the undersigned agrees that it shall be jointly and severally liable
for the obligations under this Note and the Related Documents.
GENERAL PROVISIONS. Lender my delay or forego enforcing any of its rights or
remedies under this Note without losing them. Borrower and any other person who
signs, guarantees or endorses this Note, to the extent allowed by law, waive
presentment, demand for payment protest and notice of dishonor. Upon any change
in the term of this Note, and unless otherwise expressly stated in writing, no
Borrower, any guarantor, nor any grantor of any Collateral, shall be released
from liability. All such parties agree that Lender may renew or extend
(repeatedly and for any length of time) this loan, or release any party or
guarantor or collateral; or impair, fail to realize upon or perfect Lender's
security interest in the collateral; and take any other action deemed necessary
by Lender without the consent of or notice to anyone. All such parties also
agree that Lender may modify this loan without the consent of or notice to
anyone other than the party with whom the modification Is made.
WAIVER. BORROWER ACKNOWLEDGES THAT THE TRANSACTION OF WHICH THIS NOTE IS A PART
IS A COMMERCIAL TRANSACTION, AND TO THE EXTENT ALLOWED UNDER CONNECTICUT
GENERAL STATUTES SECTIONS 52-278a TO 52-278n, INCLUSIVE, OR BY OTHER APPLICABLE
LAW, BORROWER WAIVES ANY RIGHTS THAT BORROWER HAS TO NOTICE AND HEARING WITH
RESPECT TO ANY PREJUDGMENT REMEDY WHICH LENDER, OR ITS SUCCESSORS OR ASSIGNS,
MAY DESIRE TO USE.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE NOTE. BORROWER ACKNOWLEDGES THE RECEIPT OF A COMPLETED COPY OF
THIS NOTE.
BORROWER:
Discas, Inc. and Discas Recycled Products Corporation
By: /s/ Patrick A. DePaolo, Sr.
---------------------------
Patrick A. DePaolo, Sr., President/Treasurer of Discas, Inc.
By: /s/ Patrick A. DePaolo, Sr.
---------------------------
Patrick A. DePaolo, Sr., President/Treasurer of Discas Recycled Products
Corporation
3
<PAGE>
Exhibit 10.5
BUSINESS LOAN AGREEMENT
==================================
BORROWER: DISCAS, INC. AND DISCAS RECYCLED PRODUCTS CORPORATION
567-1 SOUTH LEONARD STREET
WATERBURY, CT 06708
LENDER: BANK OF BOSTON CONNECTICUT
100 PEARL STREET
HARTFORD, CT 06103
==================================
THIS BUSINESS LOAN AGREEMENT BETWEEN DISCAS RECYCLED PRODUCTS CORPORATION
("BORROWER") AND BANK OF BOSTON CONNECTICUT ("LENDER") IS MADE AND EXECUTED ON
THE FOLLOWING TERMS AND CONDITIONS. BORROWER HAS RECEIVED PRIOR COMMERCIAL
LOONS FROM LENDER OR HAS APPLIED TO LENDER FOR A COMMERCIAL LOON OR LOANS AND
OTHER FINANCIAL ACCOMMODATIONS, INCLUDING THOSE WHICH MAY BE DESCRIBED ON ANY
EXHIBIT OR SCHEDULE ATTACHED TO THIS AGREEMENT. ALL SUCH LOANS AND FINANCIAL
ACCOMMODATIONS, TOGETHER WITH ALL FUTURE LOANS AND FINANCIAL ACCOMMODATIONS
FROM LENDER TO BORROWER, ARE REFERRED TO IN THIS AGREEMENT INDIVIDUALLY AS THE
"LOAN" AND COLLECTIVELY AS THE "LOANS." BORROWER UNDERSTANDS AND AGREES THAT:
(A) IN GRANTING, RENEWING, OR EXTENDING ANY LOAN, LENDER IS RELYING UPON
BORROWER'S REPRESENTATIONS, WARRANTIES, AND AGREEMENTS, AS SET FORTH IN THIS
AGREEMENT; (B) THE GRANTING, RENEWING, OR EXTENDING OF ANY LOON BY LENDER AT
ALL TIMES SHALL BE SUBJECT TO LENDER'S SOLE JUDGMENT AND DISCRETION; AND (C)
ALL SUCH LOANS SHALL BE AND SHALL REMAIN SUBJECT TO THE FOLLOWING TERMS AND
CONDITIONS OF THIS AGREEMENT.
TERM. This Agreement shall be effective as of November 8, 1995, and shall
continue thereafter until all Indebtedness of Borrower to Lender has been
performed in full and the parties terminate this Agreement in writing.
DEFINITIONS. The following words shall have the following meanings when used in
this Agreement. Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms In the Uniform Commercial Code. All
references to dollar amounts shall mean amounts in lawful money of the United
States of America.
AGREEMENT. The word "Agreement" means this Business Loan Agreement, as
this Business Loan Agreement may be amended or modified from time to
time, together with all exhibits and schedules attached to this
Business Loan Agreement from time to time.
BORROWER. The word "Borrower" means Discas Recycled Products
Corporation. The word "Borrower" also includes, as applicable, all
subsidiaries and affiliates of Borrower as provided below in the
paragraph titled "Subsidiaries and Affiliates."
CERCLA. The word "CERCLA" means the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended.
CASH FLOW. The words "Cash Flow" mean net income after taxes, and
exclusive of extraordinary gains and income, plus depreciation and
amortization.
COLLATERAL. The word "Collateral" means and includes without
limitation all property and assets granted as collateral security for
a Loan, whether real or personal property, whether granted directly or
indirectly, whether granted now or in the future, and whether granted
in the form of a security interest, mortgage, deed
<PAGE>
of trust, assignment, pledge, chattel mortgage, chattel trust,
factor's lien, equipment trust, conditional sale, trust receipt, lien,
charge, lien or title retention contract, lease or consignment
intended as a security device, or any other security or lien interest
whatsoever, whether created by law, contract, or otherwise.
DEBT. The word "Debt" means all of Borrower's liabilities excluding
Subordinated Debt.
ERISA. The word "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
EVENT OF DEFAULT. The words "Event of Default" mean and include
without limitation any of the Events of Default set forth below in the
section titled "EVENTS OF DEFAULT."
GRANTOR. The word "Grantor" means and includes without limitation each
and all of the persons or entities granting a Security Interest in any
Collateral for the Indebtedness, including without imitation all
Borrowers granting such a Security Interest.
GUARANTOR. The word "Guarantor" means and includes without limitation
each and all of the guarantors, sureties, and accommodation parties in
connection with any Indebtedness.
INDEBTEDNESS. The word "Indebtedness" means and includes without
limitation all Loans, together with all other obligations, debts and
liabilities of Borrower to Lender, or any one or more of them, as well
as all claims by Lender against Borrower, or any one or more of them;
whether now or hereafter existing, voluntary or involuntary, due or
not due, absolute or contingent, liquidated or unliquidated; whether
Borrower may be liable individually or jointly with others; whether
Borrower may be obligated as a guarantor, surety, or otherwise;
whether recovery upon such indebtedness my be or hereafter may become
barred by any statute of limitations; and whether such Indebtedness
may be or hereafter may become otherwise unenforceable.
LENDER. The word "Lender" means BANK OF BOSTON CONNECTICUT, its
successors and assigns.
LIQUID ASSETS. The words "Liquid Assets" mean Borrower's cash on hand
plus Borrower's receivables.
LOAN. The word "Loan" or "Loans" means and includes without limitation
any and all commercial loans and financial accommodations from Lender
to Borrower, whether now or hereafter existing, and however evidenced,
including without limitation those loans and financial accommodations
described herein or described on any exhibit or schedule attached to
this Agreement from time to time.
NOTE. The word "Note" means and includes without limitation Borrower's
promissory note or notes, if any, evidencing Borrower's Loan
obligations in favor of Lender, as well as any substitute, replacement
or refinancing note or notes therefor.
PERMITTED LIENS. The words "Permitted Liens" mean: (a) liens and
security interests securing Indebtedness owed by Borrower to Lender,
(b) liens for taxes, assessments, or similar charges either not yet
due or being contested in good faith; (c) liens of materialmen,
mechanics, warehousemen, or carriers, or other like liens arising in
the ordinary course of business and securing obligations which are not
yet delinquent; (d) purchase money liens or purchase money security
interests upon or in any property acquired or held by Borrower in the
ordinary course of business to secure indebtedness outstanding on the
date of this Agreement or permitted to be incurred under the paragraph
of this Agreement titled "Indebtedness and Liens"; (e) liens and
security interests which, as of the date of this Agreement, have been
disclosed to and approved by the Lender in writing; and (f) those
liens and security interests which in the aggregate constitute an
immaterial and insignificant monetary amount with respect to the net
value of Borrower's assets.
2
<PAGE>
RELATED DOCUMNTS. The words "Related Documents" mean and include
without limitation all promissory notes, credit agreements, loan
agreements, environmental agreements, guaranties, security agreements,
mortgages, deeds of trust, and all other instruments, agreements and
documents, whether now or hereafter existing, executed in connection
with the Indebtedness.
SECURITY AGREEMENT. The words "Security Agreement" mean and include
without limitation any agreements, promises, covenants, arrangements,
understandings or other agreements, whether created by law, contract,
or otherwise, evidencing, governing, representing, or creating a
Security Interest.
SECURITY INTEREST. The words "Security Interest" mean and Include
without limitation any type of collateral security, whether in the
form of a lien, charge, mortgage, deed of trust, assignment, mortgage,
chattel mortgage, chattel trust, factor's lien, equipment trust,
conditional sale, trust receipt, lien or title retention contract,
lease or consignment intended as a security device, or any other
security or lien interest whatsoever, whether created by law,
contract, or otherwise.
SARA. The word "SARA" means the Superfund Amendments and
Reauthorization Act of 1986 as now or hereafter amended.
SUBORDINATED DEBT. The words "Subordinated Debt" mean indebtedness and
liabilities of Borrower which have been subordinated by written
agreement to indebtedness owed by Borrower to Lender in form and
substance acceptable to Lender.
TANGIBLE NET WORTH. The words "Tangible Net Worth" mean Borrower's
total assets excluding all intangible assets (i.e., goodwill,
trademarks, patents, copyrights, organizational expenses, and similar
intangible items, but including leaseholds and leasehold improvements)
less total Debt.
WORKING CAPITAL. The words "Working Capital" mean Borrower's current
assets, excluding prepaid expenses, less Borrower's current
liabilities.
CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make the initial
Loan Advance and each subsequent Loan Advance under this Agreement shall be
subject to the fulfillment to Lender's satisfaction of all of the conditions
set forth in this Agreement and in the Related Documents.
LOAN DOCUMENTS. Borrower shall provide to Lender in form satisfactory
to Lender the following documents for the Loan: (a) the Note, (b)
Security Agreements granting to Lender security interests in the
Collateral, (c) Financing Statements perfecting Lender's Security
Interests; (d) evidence of insurance as required below, and (e) any
other documents required under this Agreement or by Lender or its
counsel, including without limitation any guaranties described below.
BORROWER'S AUTHORIZATION. Borrower shall have provided in form and
substance satisfactory to Lender properly certified resolutions, duly
authorizing the execution and delay of this Agreement, the Note and
the Related Documents, and such other authorizations and other
documents and instruments as Lender or its counsel, in their sole
discretion, may require.
PAYMENT OF FEES AND EXPENSES. Borrower shall have paid to Lender all
fees, charges, and other expenses which are then due and payable as
specified in this Agreement or any Related Document.
REPRESENTATIONS AND WARRANTIES. The representations and warranties set
forth In this Agreement, in the Related Documents, and in any document
or certificate delivered to Lender under this Agreement are true and
correct.
3
<PAGE>
NO EVENT OF DEFAULT. There shall not exist at the time of any advance
a condition which would constitute an Event of Default under this
Agreement.
REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as
of the date of this Agreement, as of the date of each disbursement of Loan
proceeds, as of the date of any renewal, extension or modification of any Loan,
and at all times any Indebtedness exists:
ORGANIZATION. Borrower is a corporation which is duly organized,
validly existing, and in good standing under the laws of the State of
Delaware and is validly existing and in good standing in all states in
which Borrower is doing business. Borrower has the full power and
authority to own its properties and to transact the businesses in
which it is presently engaged or presently proposes to engage.
Borrower also is duly qualified as a foreign corporation and is in
good standing in all states in which the failure to so qualify would
have a material adverse effect on its businesses or financial
condition.
AUTHORIZATION. The execution, delivery, and performance of this
Agreement and all Related Documents by Borrower, to the extent to be
executed, delivered or performed by Borrower, have been duly
authorized by all necessary action by Borrower, do not require the
consent or approval of any other person, regulatory authority or
governments body, and do not conflict with, result in a violation of,
or constitute a default under (a) any provision of its articles of
incorporation or organization, or bylaws, or any agreement or other
instrument binding upon Borrower or (b) any law, governmental
regulation, court decree, or order applicable to Borrower.
FINANCIAL INFORMATION. Each financial statement of Borrower supplied
to Lender truly and completely disclosed Borrower's financial
condition as of the date of the statement, and there has been no
material adverse change in Borrower's financial condition subsequent
to the date of the most recent financial statement supplied to Lender.
Borrower has no material contingent obligations except as disclosed in
such financial statements.
LEGAL EFFECT. This Agreement constitutes, and any instrument or
agreement required hereunder to be given by Borrower when delivered
will constitute, legal, valid and binding obligations of Borrower
enforceable against Borrower in accordance with their respective
terms.
PROPERTIES. Except as contemplated by this Agreement or as previously
disclosed in Borrower's financial statements or in writing to Lender
and as accepted by Lender, and except for property tax liens for taxes
not presently due and payable, Borrower owns and has good title to all
of Borrower's properties free and clear of all Security Interests, and
has not executed any security documents or financing statements
relating to such properties. All of Borrower's properties are titled
in Borrower's legal name, and Borrower has not used, or filed a
financing statement under, any other name for at least the last five
(5) years.
HAZARDOUS SUBSTANCES. The terms "hazardous waste," "hazardous
substance," "disposal," "release" and "threatened release," as used in
this Agreement, shall have the same meanings as set forth in the
"CERCLA," "SARA," the Hazardous Materials Transportation Act 49 U.S.C.
Section 1801, et seq., the Resource Conservation and Recovery Act, 49
U.S.C. Section 6901, et seq., or other applicable state or Federal
laws, rules, or regulations adopted pursuant to any of the foregoing.
Except as disclosed to and acknowledged by Lender in writing, Borrower
represents and warrants that: (a) During the period of Borrower's
ownership of the properties, there has been no use, generation,
manufacture, storage, treatment, disposal, release or threatened
release of any hazardous waste or substance by any person on, under,
about or from any of the properties. (b) Borrower has no knowledge of,
or reason to believe that there has been (i) any use, generation,
manufacture, storage, treatment, disposal, release, or threatened
release of any hazardous waste or substance on, under, about or from
the properties by any prior owners or occupants of
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any of the properties, or (ii) any actual or threatened litigation or
claims of any kind by any person relating to such matters. (c) Neither
Borrower nor any tenant, contractor, agent or other authorized user of
any of the properties shall use, generate, manufacture, store, treat,
dispose of, or release any hazardous waste or substance on, under,
about or from any of the properties; and any such activity shall be
conducted in compliance with all applicable federal, state, and local
laws, regulations, and ordinances, including without limitation those
laws, regulations and ordinances described above. Borrower authorizes
Lender and its agents to enter upon the properties to make such
inspections and tests as Lender may deem appropriate to determine
compliance of the properties with this section of the Agreement. Any
inspections or tests made by Lender shall be at Borrower's expense and
for Lender's purposes only and shall not be construed to create any
responsibility or liability on the part of Lender to Borrower or to
any other person. The representations and warranties contained herein
are based on Borrower's due diligence in investigating the properties
for hazardous waste and hazardous substances. Borrower hereby (a)
releases and waives any future claims against Lender for indemnity or
contribution in the event Borrower becomes liable for cleanup or other
costs under any such laws, and (b) agrees to indemnify and hold
harmless Lender against any and all claims, losses, liabilities,
damages, penalties, and expenses which Lender may directly or
indirectly sustain or suffer resulting from a breach of this section
of the Agreement or as a consequence of any use, generation,
manufacture, storage, disposal, release or threatened release
occurring prior to Borrower's ownership or interest in the properties,
whether or not the same was or should have been known to Borrower. The
provisions of this section of the Agreement, including the obligation
to indemnify, shall survive the payment of the indebtedness and the
termination or expiration of this Agreement and shall not be affected
by Lender's acquisition of any interest in any of the properties,
whether by foreclosure or otherwise.
LITIGATION AND CLAIMS. No litigation, claim, investigation,
administrative proceeding or similar action (including those for
unpaid taxes) against Borrower is pending or threatened, and no other
event has occurred which may materially adversely affect Borrower's
financial condition or properties, other than litigation, claims, or
other events, if any, that have been disclosed to and acknowledged by
Lender in writing.
TAXES. To the best of Borrower's knowledge, all tax returns and
reports of Borrower that are or were required to be filed, have been
filed, and all taxes, assessments and other governmental charges have
been paid in full, except those presently being or to be contested by
Borrower in good faith in the ordinary course of business and for
which adequate reserves have been provided.
LIEN PRIORITY. Unless otherwise previously disclosed to Lender in
writing, Borrower has not entered into or granted any Security
Agreements, or permitted the filing or attachment of any Security
Interests on or affecting any of the Collateral directly or indirectly
securing repayment of Borrower's Loan and Note, that would be prior or
that may in any way be superior to Lender's Security Interests and
rights in and to such collateral.
BINDING EFFECT. This Agreement, the Note, all Security Agreements
directly or indirectly securing repayment of Borrower's Loan and Note
and am of the Related Documents are binding upon Borrower as well as
upon Borrower's successors, representatives and assigns, and are
legally enforceable in accordance with their respective terms.
COMMERCIAL PURPOSES. Borrower intends to use the Loan proceeds solely
for business or commercial related purposes.
EMPLOYEE BENEFIT PLANS. Each employee benefit plan as to which
Borrower may have any liability complies in all material respects with
all applicable requirements of law and regulations, and (i) no
Reportable Event nor Prohibited Transaction (as defined in ERISA) has
occurred with respect to any such plan, (ii) Borrower has not
withdrawn from any such plan or initiated steps to do so, and (iii) no
steps have been taken to
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terminate any such plan.
LOCATION OF BORROWER'S OFFICES AND RECORDS. Borrower's place of
business, or Borrower's chief executive office, if Borrower has more
than one place of business, is located at 567-1 South Leonard Street,
Waterbury, CT 06708. Unless Borrower has designated otherwise in
writing this location is also the office or offices where Borrower
keeps its records concerning the Collateral.
INFORMATION. All information heretofore or contemporaneously herewith
furnished by Borrower to Lender for the purposes of or in connection
with this Agreement or any transaction contemplated hereby is, and all
information hereafter furnished by or on behalf of Borrower to Lender
will be, true and accurate in every material respect on the date as of
which such information is dated or certified; and none of such
information is or will be incomplete by omitting to state any material
fact necessary to make such information not misleading.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Borrower understands and
agrees that Lender, without independent investigation, is relying upon
the above representations and warranties in extending Loan Advances to
Borrower. Borrower further agrees that the foregoing representations
and warranties shall be continuing in nature and shall remain in full
force and effect until such time as Borrower's indebtedness shall be
paid in full, or until this Agreement shall be terminated in the
manner provided above, whichever is the last to occur.
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, while
this Agreement is in effect, Borrower will:
LITIGATION. Promptly inform Lender in writing of (a) all material
adverse changes in Borrower's financial condition, and (b) all
existing and all threatened litigation, claims, investigations,
administrative proceedings or similar actions affecting Borrower or
any Guarantor which could materially affect the financial condition of
Borrower or the financial condition of any Guarantor.
FINANCIAL RECORDS. Maintain its books and records in accordance with
generally accepted accounting principles, applied on a consistent
basis, and permit Lender to examine and audit Borrower's books and
records at all reasonable times.
ADDITIONAL INFORMATION. Furnish such additional information and
statements, lists of assets and liabilities, agings of receivables and
payables, inventory schedules, budgets, forecasts, tax returns, and
other reports with respect to Borrower's financial condition and
business operations as Lender may request from time to time.
FINANCIAL COVENANTS AND RATIOS. Comply with the following covenants
and ratios:
CURRENT RATIO. Maintain a ratio of Current Assets to Current
Liabilities in excess of 125 to 1.00.
CASH FLOW REQUIREMENTS. Maintain Cash Flow at not less than the
following level: Notwithstanding any other definition of Cash
Flow contained in this agreement, for the latest fiscal year
maintain a ratio of EBIT (earnings before interest and taxes)
from continuing operations plus depreciation and amortization
less cash payment of taxes less subchapter S distributions (if
any) less dividends, and less non financed capital expenditures
to scheduled payments of all principal and interest on all Debt
including Subordinated Debt in such fiscal year of at least
11.25x. Except as provided above, all computations made to
determine compliance with the requirements contained in this
paragraph shall be made in accordance with generally accepted
accounting principles, applied
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on a consistent basis, and certified by Borrower as being Mm and
correct.
INSURANCE. Maintain fire and other risk insurance, public
liability insurance, and such other insurance as Lender may
require with respect to Borrower's properties and operations, in
form, amounts, coverages and with insurance companies reasonably
acceptable to Lender. Borrower, upon request of Lender, will
deliver to Lender from time to time the policies or certificates
of insurance in form satisfactory to Lender, including
stipulations that coverages will not be cancelled or diminished
without at least ton (10) days' prior written notice to Lender.
Each insurance policy also shall include an endorsement providing
that coverage in favor of Lender will not be impaired in any way
by any act, omission or default of Borrower or any other person.
in connection with all policies covering assets in which Lender
holds or is offered a security interest for the Loans, Borrower
will provide Lender with such loss payable or other endorsements
as Lender may require.
INSURANCE REPORTS. Furnish to Lender, upon request of Lender, reports on each
existing insurance policy showing such information as Lender may reasonably
request, including without limitation the following: (a) the name of the
insurer; (b) the risks insured; (c) the amount of the policy; (d) the
properties insured; (e) the then current property values on the basis of which
insurance has been obtained, and the manner of determining those values; and
(f) the expiration date of the policy. In addition, upon request of Lender
(however not more often than annually), Borrower will have an independent
appraiser satisfactory to Lender determine, as applicable, the actual cash
value or replacement cost of any Collateral. The cost of such appraisal shall
be paid by Borrower.
GUARANTIES. Prior to disbursement of any Loan proceeds, furnish executed
guaranties of the Loans in favor of the Lender, on Lender's forms, and in the
amount and by the guarantor named below:
GUARANTOR AMOUNT
-------- ------
PATRICK A. DEPAOLO, SR. UNLIMITED
OTHER AGREEMENTS. Comply with all terms and conditions of all other
agreements, whether now or hereafter existing, between Borrower and
any other party and notify Lender immediately in writing of any
default in connection with any other such agreements.
LOAN FEES AND CHARGES. In addition to all other agreed upon fees and
charges, pay the following: 1% OF THE AVERAGE UNUSED PORTION ANNUALLY
TO BE BILLED QUARTERLY.
LOAN PROCEEDS. Use all Loan proceeds solely for the following specific
purposes: GENERAL WORKING CAPITAL NEEDS.
TAXES, CHARGES AND LIENS. Pay and discharge when due all of its
indebtedness and obligations, including without limitation all
assessments, taxes, governmental charges, levies and liens, of every
kind and nature, imposed upon Borrower or its properties, income, or
profits, prior to the date on which penalties would attach and all
lawful claims that, if unpaid, might become a lien or charge upon any
of Borrower's properties, income, or profits. Provided however,
Borrower will not be required to pay and discharge any such
assessment, tax, charge, levy, lien or claim so long as (a) the
legality of the same shall be contested in good faith by appropriate
proceedings, and (b) Borrower shall have established on its books
adequate reserves with respect to such contested assessment, tax,
charge, levy, lien, or claim in accordance with general accepted
accounting practices. Borrower, upon demand of Lender, will furnish to
Lender evidence of payment of the assessments, taxes, charges, levies,
liens nd claims and will authorize the appropriate governmental
official to deliver to Lender at any time a written statement of any
assessments, taxes, charges, levies, liens and claims against
Borrower's properties, income, or profits.
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PERFORMANCE. Perform and comply with all terms, conditions, and
provisions set forth in this Agreement and in the Related Documents in
a timely manner, and promptly notify Lender if Borrower learns of the
occurrence of any event which constitutes an Event of Default under
this Agreement or under any of the Related Documents.
OPERATIONS. Maintain executive and management personnel with
substantially the same qualifications and experience as the present
executive and management personnel; provide written notice to Lender
of any change in executive and management personnel; conduct its
business affairs in a reasonable and prudent manner and in compliance
with all applicable federal, state and municipal laws, ordinances,
rules and regulations respecting its properties, charters, businesses
and operations, including without limitation, compliance with the
Americans With Disabilities Act and with all minimum funding standards
and other requirements of ErisA and other laws applicable to
Borrower's employee benefit plans.
INSPECTION. Permit employee or agents of Lender at any reasonable time
to inspect any and all Collateral for the Loan or Loans and Borrowers
other properties and to examine or audit Borrower's books, accounts,
and records and to make copies and memoranda of Borrower's books,
accounts, and records. If Borrower now or at any time hereafter
maintains any records including without limitation computer generated
records and computer software programs for the generation of such
records) in the possession of a third party, Borrower, upon request of
Lender, shall notify such party to permit Lender free access to such
records at all reasonable times and to provide Lender with copies of
any records it may request, all at Borrower's expense.
COMPLIANCE CERTIFICATE. Unless waived in writing by Lender, provide
Lender Quarterly and at the time of each disbursement of Loan proceeds
with a certificate executed by Borrower's chief financial officer, or
other officer or person acceptable to Lender, certifying that the
representations and warranties set forth in this Agreement are true
and correct as of the date of the certificate and further certifying
that, as of the date of the certificate, no Event of Default exists
under this Agreement.
ENVIRONMENTAL COMPLIANCE AND REPORTS. Borrower shall comply in all
respects with all environmental protection federal, state and local
laws, statutes, regulations and ordinances; not cause or permit to
exist, as a result of an intentional or unintentional action or
omission on its part or on the part of any third party, on property
owned and/or occupied by Borrower, any environmental activity where
damage may result to the environment, unless such environmental
activity is pursuant to and in compliance with the conditions of a
permit issued by the appropriate federal, state or local governmental
authorities; shall furnish to Lender promptly and in any event within
thirty (30) days after receipt thereof a copy of any notice, summons,
lien, citation, directive, letter or other communication from any
governmental agency or instrumentality concerning any intentional or
unintentional action or omission on Borrower's part in connection with
any environmental activity whether or not there is damage to the
environment and/or other natural resources.
ADDITIONAL ASSURANCES. Make, execute and deliver to Lender such
promissory notes, mortgages, deeds of trust, security agreements,
financing statements, instruments, documents and other agreements as
Lender or its attorneys may reasonably request to evidence and secure
the Loans and to perfect all Security interests.
RECOVERY OF ADDITIONAL COSTS. If the imposition of or any change in any law,
rule, regulation or guideline, or the interpretation or application of any
thereof by any court or administrative or governmental authority (including any
request or policy not having the force of law) shall impose, modify or make
applicable any taxes (except U.S. federal, state or local income or franchise
taxes imposed on Lender), reserve requirements, capital adequacy requirements
or other obligations which would (a) increase the cost to Lender for extending
or maintaining the credit facilities to which this Agreement relates, (b)
reduce the amounts payable to Lender under this Agreement or the Related
Documents, or (c) reduce the rate of return on Lander's capital as a
consequence of Lender's
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obligations with respect to the credit facilities to which this Agreement
relates, then Borrower agrees to pay Lender such additional amounts as will
compensate Lender therefor, within five (5) days after Lender's written demand
for such payment, which demand shall be accompanied by an explanation of such
imposition or charge and a calculation in reasonable detail of the additional
amounts payable by Borrower, which explanation and calculations shall be
conclusive in the absence of manifest error.
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent
of Lender:
INDEBTEDNESS AND LIENS. (a) Except for trade debt incurred in the
normal course of business and indebtedness to Lender contemplated by
this Agreement, create, incur or assume indebtedness for borrowed
money, including capital leases, (b) except as allowed as a Permitted
Lien, sell, transfer, mortgage, assign, pledge, lease, grant a
security interest in, or encumber any of Borrower's assets, or (c)
sell with recourse any of Borrower's accounts, except to Lender.
CONTINUITY OF OPERATIONS. (a) Engage in any business activities
substantially different than those in which Borrower is presently
engaged, (b) cease operations, liquidate, merge, transfer, acquire or
consolidate with any other entity, change ownership, change its name,
dissolve or transfer or sell Collateral out of the ordinary course of
business, (c) pay any dividends on Borrower's stock (other than
dividends payable in its stock), provided, however that
notwithstanding the foregoing, but only so long as no Event of Default
has occurred and is continuing or would result from the payment of
dividends, if Borrower is a "Subchapter S Corporation" (as defined in
the Internal Revenue Code of 1986, as amended), Borrower may pay cash
dividends on its stock to its shareholders from time to time in
amounts necessary to enable the shareholders to pay income taxes and
make estimated income tax payments to satisfy their liabilities under
federal and state law which arise solely from their status as
Shareholders of a Subchapter S Corporation because of their ownership
of shares of stock of Borrower, or (d) purchase or retire any of
Borrower's outstanding shares or after or amend Borrower's capital
structure.
LOANS, ACQUISITIONS AND GUARANTIES. (a) Loan, invest in or advance
money or assets, (b) purchase, create or acquire any interest in any
other enterprise or entity, (c) incur any obligation as surety or
guarantor other than in the ordinary course of business.
CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to
Borrower, whether under this Agreement or under any other agreement, Lender
shall have no obligation to make Loan Advances or to disburse Loan proceeds if,
(a) Borrower or any Guarantor is in default under the terms of this Agreement
or any of the Related Documents or any other agreement that Borrower or any
Guarantor has with Lender; (b) Borrower or any Guarantor becomes insolvent,
files a petition in bankruptcy or similar proceedings, or is adjudged a
bankrupt; (c) there occurs a material adverse change in Borrower's financial
condition, in the financial condition of any Guarantor, or in the value of any
Collateral securing any Loan; (d) any Guarantor seeks claims or otherwise
attempts to limit, modify or revoke such Guarantor's guaranty of the Loan or
any other loan with Lender; or (e) Lender in good faith deems itself insecure,
even though no Event of Default shall have occurred.
ADDITIONAL TERMS. Borrower authorizes Lender to release and disclose to its
affiliates, subsidiaries, servicing agents and contractors, copies of originals
of any and all financial records, including, without limitation, statements,
notices, financial and operating reports, balance sheets, financial statements,
consultants' reports and any and all other documents and information relating
to Borrower, now or hereafter provided to or generated by or for the benefit of
Lender in connection with any loan transaction now or hereafter existing.
DEBT TO TANGIBLE WORTH. Borrower will maintain a ratio of Debt to Tangible Net
Worth of less than 3.00 to 1.00.
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FINANCIAL STATEMENTS. On a consolidated basis with Discas, Inc., furnish Lender
with, as soon as available, but in no event later than one hundred twenty (120)
days after the end of each fiscal year, Borrower's balance sheet and income
statement for the year ended, reviewed by a cerfified public accountant
satisfactory to Lender, and, as soon as available, but in no event later than
forty-five (45) days after the end of each fiscal quarter, Borrower's balance
sheet and profit and loss statement for the period ended, prepared and
certified as correct to the best knowledge and belief by Borrowers chief
financial officer or other officer or person acceptable to Lender. All
financial reports required to be provided under this Agreement shall be
prepared in accordance with generally accepted accounting principles, applied
on a consistent basis, and certified by Borrower as being true and correct.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA, Keogh, trust
accounts. Borrower authorizes Lender, to the extent permitted by applicable
law, to charge or setoff all sum owing on the indebtedness against any and all
such accounts.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:
DEFAULT ON INDEBTEDNESS. Failure of Borrower to make any payment when
due on the Loans.
OTHER DEFAULTS. Failure of Borrower or any Grantor to comply with or
to perform when due any other term, obligation, covenant or condition
contained in this Agreement or in any of the Related Documents, or
failure of Borrower to comply with or to perform any other term,
obligation, covenant or condition contained in any other agreement
between Lender and Borrower.
DEFAULT IN FAVOR OF THIRD PARTIES. Should Borrower or any Grantor
default under any loan, extension of credit, security agreement,
purchase or sales agreement, or any other agreement, in favor of any
other creditor or person that may materially affect any of Borrower's
property or Borrower's or any Grantor's ability to repay the Loans or
perform their respective obligations under this Agreement or any of
the Related Documents.
FALSE STATEMENTS. Any warranty, representation or statement made or
furnished to Lender by or on behalf of Borrower or any Grantor under
this Agreement or the Related Documents is false or misleading in any
material respect at the time made or furnished, or becomes false or
misleading at any time thereafter.
DEFECTIVE COLLATERIZATION. This Agreement or any of the Related
Documents ceases to be in full force and effect (including failure of
any Security Agreement to create a valid and perfected Security
Interest) and for any reason.
INSOLVENCY. The dissolution or termination of Borrower's existence as
a going business, the insolvency of Borrower, the appointment of a
receiver for any part of Borrower's property, any assignment for the
benefit of creditors, any type of creditor workout, or the
commencement of any proceeding under any bankruptcy or insolvency laws
by or against Borrower.
CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Borrower, any
creditor of any Grantor against any collateral securing the
indebtedness, or by any governmental agency. This includes a
garnishment, attachment, or levy on or of any of Borrower's deposit
accounts with Lender. However, this Event of Default shall not apply
if there is a good faith dispute by Borrower or Grantor, as the one
may be, as to the validity or reasonableness of the claim which is the
basis of the creditor or
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forfeiture proceeding, and if Borrower or Grantor gives Lender written
notice of the creditor or forfeiture proceeding and furnishes reserves
or a surety bond for the creditor or forfeiture proceeding
satisfactory to Lender.
EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with
respect to any Guarantor of any of the indebtedness or any Guarantor
dies or becomes incompetent, or revokes or disputes the validity of,
or liability under, any Guaranty of the Indebtedness. Lender, at its
option, may, but shall not be required to, permit the Guarantor's
estate to assume unconditionally the obligations arising under the
guaranty in a manner satisfactory to Lender, and, in doing so, cure
the Event of Default.
CHANGE IN OWNERSHIP. Any change in ownership of twenty-five percent
(25%) or more of the common stock of Borrower.
ADVERSE CHANGE. A material adverse change occurs in Borrower's
financial condition, or Lender believes the prospect of payment or
performance of the indebtedness is impaired.
INSECURITY. Lender, in good faith, deems itself insecure.
RIGHT TO CURE. If any default, other than a Default on indebtedness,
is curable and if Borrower or Grantor, as the case may be, has not
been given a notice of a similar default within the preceding twelve
(12) months, it may be cured (and no Event of Default will have
occurred) if Borrower or Grantor, as the case may be, after receiving
written notice from Lender demanding cure of such default: (a) cures
the default within fifteen (15) days; or (b) if the cure requires more
than fifteen (15) days; immediately initiates steps which Lender dooms
in Lender's sole discretion to be sufficient to cure the default and
thereafter continues and completes all reasonable and necessary steps
sufficient to produce compliance as soon as reasonably practical.
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except
where otherwise provided in this Agreement or the Related Documents, all
commitments and obligations of Lender under this Agreement or the Related
Documents or any other agreement immediately will terminate including any
obligation to make Loan Advances or disbursements), and, at Lender's option,
all indebtedness immediately will become due and payable, all without notice of
any kind to Borrower, except that in the case of an Event of Default of the
type described in the "Insolvency" subsection above, such acceleration shall be
automatic and not optional. In addition, Lender shall have all to rights and
remedies provided in the Related Documents or available at law, in equity, or
otherwise available at law in equity. Except as may be prohibited by applicable
law, all of Lender's rights and remedies shall be cumulative and may be
exercised singularly or concurrently. Election by Lender to pursue any remedy
shall not exclude pursuit of any other remedy, and an election to make
expenditures or to take action to perform an obligation of Borrower or of any
Grantor shall not affect Lender's right to declare a default and to exercise
its rights and remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
AMENDMENTS. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as
to the matters set forth in this Agreement. No alteration of or
amendment to this Agreement shall be effective unless given in writing
and signed by the party or parties sought to be charged or bound by
the alteration or amendment.
APPLICABLE LAW. This Agreement has been delivered to Lender and
accepted by Lender in the State of Connecticut. Lender and Borrower
hereby waive the right to any jury trial in any action, proceeding, or
counterclaim brought by either Lender or Borrower against the other.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Connecticut.
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CAPTION HEADING. Caption headings in this Agreement are for
convenience purposes only and are not to be used to interpret or
define the provision of this Agreement.
MULTIPLE PARTIES; CORPORATE AUTHORITY. All obligations of Borrower
under this Agreement shall be joint and several, and all references to
Borrower shall mean each and every Borrower. This means that each of
the Borrowers signing below is responsible for all obligations in this
Agreement.
CONSENT TO LOAN PARTICIPATION. Borrower agrees and consents to
Lender's sale or transfer, whether now or later, of one or more
participation interests in the Loans to on or more purchasers, whether
related or unrelated to Lender. Lender may provide, without any
limitation whatsoever, to any one or more purchasers, or potential
purchasers, any information or knowledge Lender may have about
Borrower or about any other matter relating to the Loan, and Borrower
hereby waives any rights to privacy it may have with respect to such
matters. Borrower additionally waive any and all notices of sale of
participation interests, as well as all notices of any repurchase of
such participation interests. Borrower also agrees that the purchasers
of any such participation interests will be considered as the absolute
owners of such interests in the Loans and will have all the rights
granted under the participation agreement or agreements governing the
sale of such participation interests. Borrower further waives all
rights of offset or counterclaim that it may have now or later against
Lender or against any purchaser of such a participation interest and
unconditionally agrees that either Lender or such purchaser may
enforce Borrower's obligation under the Loans irrespective of the
failure or insolvency of any holder of any interest in the Loans.
Borrower further agrees that the purchaser of any such participation
interests may enforce its interests irrespective of any personal
claims or defenses that Borrower may have against Lender.
COSTS AND EXPENSES. Borrower agrees to pay upon demand all of Lender's
expenses, including without limitatIon attorneys' fees, incurred in
connection with the preparation, execution, enforcement, modification
and collection of this Agreement or in connection with the Loans made
pursuant to this Agreement. Lender may pay someone else also to help
collect the Loans and to enforce this Agreement, and Borrower will pay
that amount. This includes, subject to any limits under applicable
law, Lender's attorneys' fees and Lender's legal expenses, whether or
not there is a lawsuit, including attorneys' fees for bankruptcy
proceedings (including efforts to modify or vacate any automatic stay
or injunction), appeals, and any anticipated post-judgment collection
services. Borrower also will pay any court costs, in addition to all
other sums provided by law.
NOTICES. All notices required to be given under this Agreement shall
be given in writing, may be sent by telafacsimilie and shall be
effective when actually delivered or when deposited with a nationally
recognized overnight courier or deposited a certified or registered
mail in the United States mail, postage prepaid, addressed to this
party to whom the notice is to be given at the address shown above.
Any party may change its address for notices under this Agreement by
giving formal written notice to the other parties, specifying that the
purpose of the notice is to change the party's address. To the extent
permitted by applicable law, if there is more than one Borrower,
notice to any Borrower will constitute notice to all Borrowers. For
notice purposes, Borrower agrees to keep Lender informed at all times
of Borrower current address(es).
SEVERABILITY. If a court of competent jurisdiction finds any provision
of this Agreement to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances. If feasible,
any such offending provision shall be deemed to be modified to be
within the limits of enforceability or validity; however, if the
offending provision cannot be so modified, it shall be stricken and
all other provisions of this Agreement in all other respects shall
remain valid and enforceable.
SUBSIDIARIES AND AFFILIATES OF BORROWER. To the extent the context of
any provision of this Agreement
12
<PAGE>
makes it appropriate, including without limitation any representation,
warranty or covenant, the word "Borrower" as used herein shall include
all subsidiaries and affiliates of Borrower. Notwithstanding the
foregoing however, under no circumstances shall this Agreement be
construed to require Lender to make any Loan or other financial
accommodation to any subsidiary or affiliate of Borrower.
SUCCESSORS AND ASSIGNS. All covenants and agreements contained by or
on behalf of Borrower shall bind its successors and assigns and shall
inure to the benefit of Lender, its successors and assigns. Borrower
shall not, however, have the right to assign the rights under this
Agreement or any interest therein, without the prior written consent
of Lender.
SURVIVAL. All warranties, representations, and covenants made by
Borrower in this Agreement or in any certificate or other instrument
delivered by Borrower to Lender under this Agreement shall be
considered to have been relied upon by Lender and will survive the
making of the Loan and delivery to Lender of the Related Document,
regardless of any investigation made by Lender or on Lender's behalf.
TIME IS OF THE ESSENCE. Time is of the essence in the performance of
this Agreement.
WAIVER. Lender shall not be deemed to have waived any rights under
this Agreement unless such waiver is given in writing and signed by
Lender. No delay or omission on the part of Lender in exercising any
right shall operate as a waiver of such right or any other right. A
waiver by Lender of a provision of this Agreement shall not prejudice
or constitute a waiver of Lender's right otherwise to demand strict
compliance with that provision or any other provision of this
Agreement. No prior waiver by Lender, nor any course of dealing
between Lender and Borrower, or between Lender and any Grantor, shall
constitute a waiver of any of Lender's rights or of any obligations of
Borrower or of any Grantor as to any future transactions. Whenever the
consent of Lender is required under this Agreement, the granting of
such consent by Lender in any instance shall not constitute continuing
consent in subsequent instances where such consent is required, and in
all cases such consent may be granted or withhold in the sole
discretion of Lender.
WAIVER. BORROWER ACKNOWLEDGES THAT THE TRANSACTION OF WHICH THIS AGREEMENT IS A
PART OF A COMMERCIAL TRANSACTION, AND TO THE EXTENT ALLOWED UNDER CONNECTICUT
GENERAL STATUTES SECTIONS 52-278a TO 52-278n, INCLUSIVE, OR BY OTHER APPLICABLE
LAW, BORROWER WAIVES ANY RIGHTS THAT BORROWER HAS TO NOTICE AND HEARING WITH
RESPECT TO ANY PREJUDGMENT REMEDY WHICH LENDER, OR ITS SUCCESSORS OR ASSIGNS,
MAY DESIRE TO USE.
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN
AGREEMENT, AND BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF
NOVEMBER 8, 1995. BORROWER ACKNOWLEDGES THE RECEIPT OF A COMPLETED COPY OF
THIS AGREEMENT.
BORROWER:
DISCAS RECYCLED PRODUCTS CORPORATION
BY: /S/ PATRICK A. DEPAOLO, SR.
---------------------------
PATRICK A. DEPAOLO, ST., PRESIDENT/TREASURER
LENDER,
BANK OF BOSTON CONNECTICUT
13
<PAGE>
BY: /S/ ANTHONY CICCOMASCOLO
------------------------
AUTHORIZED OFFICER
14
<PAGE>
Exhibit 10.6
CHANGE IN TERMS AGREEMENT
==================================
Borrower: Discas, Inc. and Discas Recycled Products Corporation
567-1 South Leonard Street
Waterbury, CT 06708
Lender: BANK OF BOSTON CONNECTICUT
100 PEARL STREET
HARTFORD, CT 06103
==================================
Principal Amount: $300,000.00 Date of Agreement: October 6, 1995
DESCRIPTION OF EXISTING INDEBTEDNESS. Borrower has executed and delivered to
Lender a certain Promissory Note dated February 23, 1995 in the original
principal amount of $300,000.00 (the "Note").
DESCRIPTION OF COLLATERAL. Borrower has executed and delivered a Commercial
Security Agreement dated February 23, 1995 pursuant to which Borrower pledged
to Lender and granted to Lender a continuing lien and security interest in
certain Collateral as described in such Commercial Security Agreement.
DESCRIPTION OF CHANGE IN TERMS. Borrower and Lender have agreed to extend the
time for payment of the outstanding principal amount of the Note. Accordingly,
Borrower and Lender agree as follows:
1. In the paragraph in the Note entitled PAYMENT, delete the sentence
referring to Borrower's final payment date as September 30, 1995 and
insert the following sentence. "Borrower's final payment due on November
29, 1995 will be for all principal and accrued interest not yet paid."
2. During the extended term of the Note, Borrower will continue to make
regular monthly payments of all accrued and unpaid interest due as of each
payment date and a final payment of all outstanding principal plus all
accrued unpaid Interest on November 29, 1995.
3. Except as amended and modified above, all other terms and conditions of
the Note remain unchanged and shall be applicable to the Note as amended
and modified hereby.
4. Wherever the term "Note" shall appear in the Business Loan Agreement dated
February 23, 1995, the Commercial Security Agreement dated February 23,
1995 or any other agreement, document or instrument executed in connection
with the Note, the term "Note" shall include the amendments and
modifications to the Note set forth in this Agreement.
CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms
of the original obligation or obligations, including all agreements evidencing
or securing the obligation(s), remain unchanged and in full force and effort.
Consent by Lender to this Agreement does not waive Lender's right to strict
performance of the obligation(s) as changed, nor obligate Lender to make any
future change in terms. Nothing in this Agreement will constitute a
satisfaction of the obligation(s). It is the intention of Lender to retain as
liable parties all makers and endorsers of the original obligation(s),
including accommodation parties, unless a party is expressly released by Lender
in writing. Any maker or endorser, including accommodation makers, will not be
released by virtue of this Agreement. If any person who signed the original
obligation does not sign this Agreement below, then all persons signing below
acknowledge that this Agreement is given conditionally, based on the
representation to Lender that the non-signing party consents to the changes and
provisions of this Agreement or otherwise will not be released by it.
<PAGE>
This waiver applies not only to any initial extension, modification or release,
but also to all such subsequent actions.
RIGHTS OF LENDER. Nothing in this Agreement shall affect or waive any right of
Lender to accelerate the payment of principal and interest under this Note in
the event of a default as set forth in the Note or a default as set forth in
any agreement, document or instrument executed in connection with the Note or
to make demand if the Note is payable on demand.
FINANCIAL STATEMENTS. During the extended term of this Note and without
limiting any rights of Lender set forth in any agreement, document or
instrument in connection with the Note, Borrower agrees to provide financial
statements to Lender or any other financial information as Lender may request
from time to time.
NO DEFAULT. The effectiveness of this Agreement is conditioned on Borrower's
representation and warranty that (i) the representations and warranties made to
Lender in the Note and the other agreements executed in connection therewith or
otherwise made to Lender are true and correct as of the date hereof, and (ii)
no Event of Default under the Note or any agreement executed in connection with
the Note has occurred and is continuing.
ATTACHMENT. This Agreement shall be firmly attached to the Note by stapling or
other permanent means of attachment and shall constitute a part of the Note.
RATIFICATION. Borrower hereby ratifies and confirm the pledge, lien and grant
of security interest in the Collateral created by the Commercial Security
Agreement which secures the Note as modified and amended by this Agreement, as
well as the terms and conditions of all agreements, documents and instruments
executed in connection with the Note.
FURTHER AGREEMENTS. Borrower agrees to execute and deliver, from time to time,
such additional documents or instruments and to perform such further acts as
may be reasonably requested by Lender to assure, confirm or continue the
continuing lien and security interest in the Collateral or to keep the
Commercial Security Agreement in full force and effect.
PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE
PROVISIONS OF THIS AGREEMENT, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS.
THIS AGREEMENT IS EXECUTED UNDER SEAL. BORROWER AGREES TO THE TERMS OF THE
AGREEMENT AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE AGREEMENT.
BORROWER:
Discas, Inc. and Discas Recycled Products Corporation
By: /s/ Patrick A. DePaolo, Sr.
---------------------------
Patrick A. DePaolo, Sr.
President/Treasurer of Discas, Inc.
By: /s/ Patrick A. DePaolo, Sr.
---------------------------
Patrick A. DePaolo, Sr.
President/Treasurer of Discas Recycled Products Corporation
2
<PAGE>
Exhibit 10.7
CHANGE IN TERMS AGREEMENT # 2
==================================
BORROWER: DISCAS, INC. AND DISCAS RECYCLED PRODUCTS CORPORATION
567-1 SOUTH LEONARD STREET
WATERBURY, CT 06708
LENDER: BANK OF BOSTON CONNECTICUT
100 PEARL STREET
HARTFORD, CT 06103
==================================
Principal Amount: $500,000.00 Date of Agreement: November 8, 1995
DESCRIPTION OF EXISTING INDEBTEDNESS. Borrower has executed and delivered to
Lender a certain Promissory Note dated February 23, 1995 In the principal
amount of $300.000.00 (the "Note") and a certain Change In Terms Agreement
dated October 6, 1995 extending the time for payment of the outstanding
Principal amount to November 29, 1995 (the "Agreement" #1).
DESCRIPTION OF COLLATERAL. Borrower has executed and delivered a Commercial
Security Agreement dated February 23, 1995 pursuant to which Borrower pledged
to Lender and granted to Lender a continuing lien and security interest in
certain Collateral as described in such Commercial Security Agreement.
DESCRIPTION OF CHANGE IN TERMS. Borrower and Lender have agreed to increase the
principal amount of the Note from $300,000.00 to $500,000.00 and to extend
payment of the outstanding principal amount of the Note. Accordingly, Borrower
and Lender agree as follows:
1. On the face of the Note, delete "Principal Amount: $300,000.00"
and insert "Principal Amount: $500,000.00"
2. Delete the first full paragraph of the Note and Insert the
following:
"PROMISE TO PAY." For value received, Discas, Inc. and Discas
Recycled Products Corporation ("Borrower") promises to pay to
BANK OF BOSTON CONNECTICUT ("Lender"), or order, at the Head
Office of Lender, 100 Pearl Street, Hartford, Connecticut, in
lawful money of the United States of America, the principal
amount of FIVE HUNDRED THOUSAND AND 00/100 Dollars, ($500,000.00)
or so much as may be outstanding, together with interest on the
unpaid outstanding principal balance of each advance. Interest
shall be calculated from the date of each advance until repayment
of each advance.
3. Delete numbered paragraph 1 of the Agreement #1 and insert
the following:
"Borrower will pay this loan in one payment of all
outstanding principal plus all accrued unpaid interest on
September 30, 1996".
4. During the extended term of the Note, Borrower will continue
to make regular monthly payments of all accrued and unpaid
interest due as of each payment date and a final payment of
all outstanding principal plus all accrued interest on
September 30, 1996.
5. Except as amended and modified above, all other terms and
conditions of the Note remain unchanged and shall be
applicable to the Note as amended and modified hereby.
6. Wherever the term "Note" shall appear in the Business Loan
Agreement dated February 23, 1995 ("Loan Agreement), the
Commercial Security Agreement dated February 23, 1995 or any
other agreement, document or instrument executed in
connection with the Note, the term "Note" shall include the
amendments and modifications to the Note set forth in this
Agreement.
<PAGE>
CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms
of the original obligation or obligations, including all agreements evidencing
or securing to obligation(s), remain unchanged and in full force and effort.
Consent by Lender to this Agreement does not waive Lender's right to strict
performance of the obligation(s) as changed, nor obligate Lender to make any
future change in terms. Nothing in this Agreement will constitute a
satisfaction of the obligation(s). It is the intention of Lender to retain a
liable parties all makers and endorsers of the original obligation(s),
including accommodation parties, unless a party is expressly release by Lender
in writing. Any maker or endorser, including accommodation makers, will not be
released by virtue of this Agreement. If any person who signed the original
obligation does not sign this Agreement below, then all persons signing below
acknowledge that this Agreement is given unconditionally, based on the
representation to Lender that the non-signing party consents to the changes and
provisions of this Agreement or otherwise will not be released by it. This
waiver applies not only to any initial extension, modification or release, but
also to all such subsequent actions.
RIGHTS OF LENDER. Nothing In this Agreement shall affect or waive any right of
Lender to accelerate the payment of principal and interest under this Note in
the event of a default as set forth in the Note or a default as set forth in
any agreement, document or instrument executed in connection with the Note or
to make demand the Note is payable on demand.
FINANCIAL STATEMENTS. During the extended term of this Note and without
limiting any rights of Lender set forth in any agreement, document or
instrument in connection with the Note, Borrower agrees to provide financial
statements to Lender or any other financial information as Lender may request
from time to time.
NO DEFAULT. The effectiveness of this Agreement is conditioned on Borrower's
representation and warranty that (i) the representations and warranties made to
Lender in the Note and the other agreements executed in connection therewith or
otherwise made to Lender are true and correct as of the date hereof, and (ii)
no Event of Default under the Note or any agreement executed in connection with
the Note has occurred and is continuing.
ATTACHMENT. This Agreement shall be firmly attached to the Note and Agreement
#1 by stapling or other permanent means of attachment and shall constitute a
part of the Note.
RATIFICATION. Borrower hereby ratifies and confirms the pledge, lien and grant
of security interest in the collateral created by the Commercial Security
Agreement which secures the Note as modified and amended by this Agreement, as
well as the terms and conditions of all agreements, documents and instruments
executed in connection with the Note.
FURTHER AGREEMENTS. Borrower agrees to execute and deliver, from time to time,
such additional documents or instruments and to perform such further acts by
Lender to assure, confirm or continue the continuing lien and security interest
in the Collateral or to keep the Commercial Security Agreement in full force
and effect.
PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE
PROVISIONS OF THIS AGREEMENT, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS.
THIS AGREEMENT IS EXECUTED UNDER SEAL. BORROWER AGREES TO THE TERMS OF THE
AGREEMENT AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE AGREEMENT.
BORROWER:
Discas, Inc. and Discas Recycled Products Corporation
By: /s/ Patrick A. DePaolo, Sr.
---------------------------
Patrick A. DePaolo, Sr., President/Treasurer of Discas, Inc.
By: /s/ Patrick A. DePaolo, Sr.
---------------------------
Patrick A. DePaolo, Sr, President/Treasurer of Discas Recycled Products
Corporation
2
<PAGE>
Exhibit 10.8
CHANGE IN TERMS AGREEMENT #3
==================================
BORROWER: DISCAS, INC. AND DISCAS RECYCLED PRODUCTS CORPORATION
567-1 SOUTH LEONARD STREET
WATERBURY, CT 06708
LENDER: BANK OF BOSTON CONNECTICUT
100 PEARL STREET
HARTFORD, CT 06103
==================================
PRINCIPAL AMOUNT: $500,000.00 DATE OF AGREEMENT: OCTOBER 31, 1996
DESCRIPTION OF EXISTING INDEBTEDNESS. Borrower has executed and delivered to
Lender a certain Promissory Note dated February 23,1995 in the principal amount
of $300,000.00 (the "Note"), a certain Change in Terms Agreement dated October
6, 1995 extending the time for payment of the outstanding principal amount to
November 29, 1995 (the "Agreement" # 1) a certain Change In Terms Agreement
dated November 8, 1995 extending the time for payment of the outstanding
principal amount to September 30,1996 and increasing said principal amount from
$300,000.00 to $500,000.00 (the "Agreement" # 2).
DESCRIPTION OF COLLATERAL Borrower has executed and delivered a Commercial
Security Agreement dated February 23, 1995 pursuant to which Borrower pledged
to Lender and granted to Lender a continuing lien and security interest in
certain Collateral as described in such Commercial Security Agreement.
DESCRIPTION OF CHANGE IN TERMS. Discas, Inc. and Discas Recycled Products
Corporation, as original Borrowers under the Note, have merged. As a result of
such merger, Dicas, Inc. has become the surviving corporation as well as the
successor in interest to the rights and obligations of Dicas Recycled Products
Corporation. Accordingly, Lender has agreed that Discas, Inc. shall be the sole
Borrower under the Note and related agreements and Discas, Inc. has agreed to
assume the liability of Dicas Recycled Products Corporation under the Note and
related agreements. Borrower and Lender have agreed to extend the time for
payment of the outstanding principal amount of the Note. Accordingly, Borrower
and Lender agree as follows:
1. Delete numbered paragraph 3 of Agreement # 2 and insert the following:
"Borrower will pay this loan in one payment of all outstanding
principal plus all accrued unpaid Interest on July 1, 1997".
2. During the extended term of the Note, Borrower will continue to make
regular monthly principal payments of all accrued and unpaid interest
due as of each payment date and a final payment of all outstanding
principal plus all accrued interest on July 1, 1997.
3. Except as amended and modified above, all other terms and conditions
of the Note remain unchanged and shall be applicable to the Note as
amended and modified hereby.
4. Wherever the term "Note" shall appear in the Business Loan Agreement
dated February 23, 1995, the Commercial Security Agreement dated
February 23, 1995 or any other agreement, document or
<PAGE>
instrument executed In connection with to Note, the term "Note" shall
include the amendments and modifications to the Note set forth in this
Agreement. Wherever On term "Borrower" shall appear, that term shall
mean Discas, Inc. for itself and as successor in interest to Discas
Recycled Products Corporation.
CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms
of the original obligation or obligations, including all agreements evidencing
or securing the obligation(s), remain unchanged and in full force and affect.
Consent by Lender to this Agreement does not waive Lender's right to strict
performance of the obligation(s) as changed, nor obligate Lender to make any
future change in terms. Nothing in this Agreement will constitute a
satisfaction of the obligation(s). It is the intention of Lender to retain as
liable parties all makers and endorsers of the original obligation(s),
including accommodation parties, unless a party is expressly released by Lender
in writing. Any maker or endorser, including accommodation makers, will not be
released by virtue of this Agreement. If any person who signed the original
obligation does not sign this Agreement below, then all persons signing below
acknowledge that this Agreement is given conditionally, based on the
representation to Lender that the non-signing party consents to the changes and
provisions of this Agreement or otherwise will not be released by it. This
waiver applies not only to any initial extension, modification or release, but
also to all such subsequent actions.
RIGHTS OF LENDER. Nothing in this Agreement shall affect or waive any right of
Lender to accelerate the payment of principal and interest under this Note in
the event of a default as set forth in the Note or a default as set forth in
any agreement, document or instrument executed in connection with the Note or
to make demand if the Note is payable on demand.
FINANCIAL STATEMENTS. During the extended term of this Note and without
limiting any rights of Lender set forth in any agreement, document or
instrument in connection with the Note, Borrower agrees to provide financial
statements to Lender or any other financial information as Lender may request
from time to time.
NO DEFAULT. The effectiveness of this Agreement is conditioned on Borrower's
representation and warranty that (i) the representations and warranties made to
Lender in the Note and the other agreements executed in connection therewith or
otherwise made to Lender are true and correct as of the date hereof, and (ii)
no Event of Default under the Note or any agreement executed in connection with
the Note has occurred and is continuing.
ATTACHMENT. This Agreement shall be firmly attached to the Note, Agreement # 1
and Agreement # 2 by stapling or other permanent means of attachment and shall
constitute a part of the Note.
RATIFICATION. Borrower hereby ratifies and confirms the pledge, lien and grant
of security interest in the Collateral created by the Commercial Security
Agreement which secures the Note as modified and amended by this Agreement, as
well as the terms and conditions of all agreement, documents and instruments
executed in connection with the Note.
FURTHER AGREEMENTS. Borrower agrees to execute and deliver, from time to time,
such additional documents or instruments and to perform such further acts as
may be reasonably requested by Lender to assure, confirm or continue the
continuing lien and security interest in the Collateral or to keep the
Commercial Security Agreement in full force and effect.
2
<PAGE>
PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE
PROVISIONS OF THIS AGREEMENT, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS.
THIS AGREEMENT IS EXECUTED UNDER SEAL BORROWER AGREES TO THE TERMS OF THE
AGREEMENT AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE AGREEMENT.
BORROWER:
DISCAS, INC.
BY: /S/ PATRICK A. DEPAOLO, SR.
---------------------------
PATRICK A DEPAOLO, SR., PRESIDENT/TREASURER
3
<PAGE>
Exhibit 10.9
AMENDMENT TO CREDIT AGREEMENT
-----------------------------
THIS AMENDMENT TO CREDIT AGREEMENT ("Amendment"), made as of the 31st
day of October, 1996, by and between DISCAS, INC., a Delaware corporation
having a principal place of business at 567-1 South Leonard Street, Waterbury,
Connecticut 06708 ("Borrower"), and BANK OF BOSTON CONNECTICUT, a Connecticut
chartered savings bank having an office at 81 West Main Street, Waterbury,
Connecticut 06702 ("Bank").
W I T N E S S E T H:
--------------------
WHEREAS, Bank and Borrower have entered into a Credit Agreement dated
as of June 25, 1993 (hereinafter referred to as "Agreement"); and
WHEREAS, Borrower has requested that the Maturity Date for the Loans
be accelerated from June 1, 2000 to July 1, 1997; provided that such change
will not alter the amount of the monthly payments required under the Agreement
and will thereby result in a balloon payment on the Maturity Date; and
WHEREAS, Bank is willing to grant such change upon.the terms and
conditions set forth herein.
NOW,.THEREFORE, in consideration of the foregoing and the mutual
covenants contained herein, the parties hereto agree as follows:
1. Definitions. Unless otherwise defined herein, initially capitalized
terms used herein shall have the meanings ascribed to them in the Agreement.
2. Amendment-to Agreement. The Agreement is hereby amended by:
(a) deleting the date "June 1, 2000" in the first line of the
definition of Maturity Date in Section 1 on Page 4 of the Agreement and
inserting the date to "July 1, 1997" in its place and stead; and
(b) deleting the words "seventy-eight (78) consecutive equal" in
the second and third lines of Section 2(b) on Page 6 of the Agreement.
<PAGE>
3. Full Force and Effect. Except as modified herein, all terms,
covenants, agreements and conditions of the Agreement shall remain unchanged
and in full force and effect. Except as so modified, the rights, privileges,
duties and obligations of the parties to the Loan Documents shall remain
unchanged, and nothing herein contained shall operate to release Borrower from
its obligations under the Loan Documents.
4. Representations and Warranties. Borrower hereby represents and
warrants to Bank that (a) all representations and warranties contained in the
Loan Documents are true and correct as if made on the date hereof, provided
that (i) the representations and warranties set forth in Section 7(d) of the
Agreement shall be deemed to refer to Borrower's most recent financial
statements provided to Bank, and (ii) those representations and warranties in
Section 7(c) shall be deemed to refer to the date of such financial statements;
(b) Borrower is currently in compliance with all of the terms and conditions of
the Loan Documents; and (c) no Default or Event of Default exists.
5. Effectiveness of Amendment. This Amendment is conditioned upon the
CDA and the DED providing written consent to the terms of this Amendment.
6. Binding Effect. This Amendment shall be binding upon and inure to
the parties hereto and their respective successors and assigns. This Amendment
may be executed in counterpart.
7. Confirmation of Obligations. Discas, Inc. and Discas Recycled
Products Corporation, as original Borrowers under the Agreement, have merged.
As a result of such merger, Discas, Inc. has become the surviving corporation
as well as the successor in interest to the rights and obligations of Discas
Recycled Products Corporation. Accordingly, Discas, Inc. shall be the sole
Borrower under the Note, the Obligations and related Loan Documents and Discas,
Inc. has assumed the liability of Discas Recycled Products Corporation on
account thereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands
as of the date first set forth above.
Signed, sealed and delivered in the presence of:
/s/ Linda J. Conway DISCAS, INC.
- ----------------------------------
/s/ Charlene Gallant By: Patrick A. DePaolo, Sr.
- ---------------------------------- -----------------------
Patrick A. DePaolo, Sr.
Its President
BANK OF BOSTON
CONNECTICUT
- ----------------------------------
By:
- ---------------------------------- -----------------------
Anthony Ciccomascolo
Its Vice President
3
<PAGE>
The undersigned, having guaranteed the Obligations pursuant to a
certain Unlimited Guarantee dated as of June 25, 1993 (the "Guarantee"), and
having subordinated indebtedness of Borrower owed to him in favor of Bank of
Boston Connecticut, by virtue of a certain Subordination Agreement dated as of
June 25, 1993 (the "Subordination Agreement"), hereby consents to the terms and
conditions of this Amendment. To induce Bank of Boston Connecticut to enter
into this Amendment and in consideration of its so doing, the undersigned
hereby consents to its execution and delivery by Bank of Boston Connecticut and
agrees that the execution and delivery of this Amendment will not in any way
impair Bank of Boston Connecticut's rights or alter, diminish or otherwise
affect the undersigned's obligations to Bank of Boston Connecticut under the
Guarantee or the Subordination Agreement, respectively, and that both the
Guarantee and the Subordination Agreement shall remain in full force and effect
notwithstanding the execution and delivery by Bank of Boston Connecticut of
this Amendment.
Dated as of the 31st day of October, 1996.
/s/ Patrick A. DePaolo, Sr.
---------------------------
Patrick A. DePaolo, Sr.
4
<PAGE>
Exhibit 10.10
LEASE
3,728 Square Feet
INDUSTRIAL DEVELOPMENT GROUP
----------------------------
To
DISCAS, INC AND DISCAS RECYCLED PRODUCTS CORP.
----------------------------------------------
TABLE OF CONTENTS
-----------------
Page
----
Article I - Demised Premises 1
Article II - Term of Lease and Option to Renew 2
Article III - Rent and Security Deposit 4
Article IV - Real Estate Taxes 7
Article V - Compliance with Laws 8
Article VI - Use of Premises 11
<PAGE>
Article VII - Maintenance, Repair and Alterations 12
Article VIII - Utilities 15
Article IX - Indemnity and Insurance 15
Article X - Subordination, Attornment, Estoppel
Certificates 19
Article XI - Damage by Fire or Other Casualty 20
Article XII - Eminent Domain 21
Article XIII - Default of the Tenant 22
Article XIV - Holding Over 24
Article XV - Miscellaneous Provisions 25
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L E A S E
---------
THIS INDENTURE OF LEASE, made this 17th day of May 1993, by and
between INDUSTRIAL DEVELOPMENT GROUP, a general partnership with an office at
Mattoon Road, Waterbury, Connecticut, acting by KENNETH M. DEVINO, its partner,
hereinafter referred to as "LANDLORD", and DISCAS,INC. and DISCAS RECYCLING
PRODUCTS CORP., Delaware corporations with a principal place of business at 56
Eagle Street, Waterbury, CT. 06708, hereinafter referred to as "TENANT." The
above Tenant, if more than one, shall jointly and severally liable for all
provisions in the lease.
W I T N E S S E T H:
--------------------
ARTICLE I
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DEMISED PREMISES
----------------
1.1 That in consideration of the rents and covenants herein provided
and contained on the part of the Tenant to be paid, performed and observed, the
Landlord does hereby demise and lease unto the Tenant approximately 3,728
square feet of floor space in a commercial building containing a total of
112,203 square feet of floor space located at 567-1 South Leonard Street, in
the City of Waterbury, County of New Haven and State of Connecticut. Said
building is located on premises described in Exhibit A attached hereto and made
a part hereof and the location of the demised premises is outlined in red on
said Exhibit A. The foregoing premises are hereinafter sometimes referred to as
the "Demised Premises".
1.2 The Tenant shall have the right to use the parking areas
designated by the Landlord in common with other Tenants. Said parking areas
shall only be used for the limited purpose of parking the registered motor
vehicles of the Tenant and it's employees and customers during business hours
and shall not be used for storage of motor vehicles or any other property.
<PAGE>
1.3 a) The Tenant will not sublet the premises or any part thereof nor
will said Tenant assign this Lease or any interest herein or transfer
possession or occupancy of said premises without the prior written consent of
the Landlord. Nor shall any subletting or assignment hereof be affected by
operation of law or otherwise than by prior written consent of the Landlord,
which consent shall not be unreasonably withheld, provided, however, that the
Tenant shall at all time remain liable for the payment of the rents and the
fulfillment of the covenants of said Lease, and the premises shall not be
occupied or used or permitted to be occupied or used at any time during the
said term for purposes other than that specified in ARTICLE VI 6.1 of this
Lease.
b) If there is any assignment of this Lease by Tenant or a
subletting of the whole of the premises by Tenant at a rent which, in either
case, exceeds the rent payable hereunder by Tenant, or if there is a subletting
of a portion of the premises by Tenant, at a rent in excess of the subleased
portion's pro rata share of the rent payable hereunder by Tenant, then Tenant
shall pay Landlord, as additional rent, forthwith upon Tenant's receipt of each
installment of any such excess rent, fifty (50%) percent of any such excess
rent. The provisions of this paragraph shall apply to each and every assignment
of the Lease and each and every subsidiary or controlling corporation or any
other person, firm or entity, in each case on the terms and conditions set
forth herein. Each request by Tenant for permission to assign this lease, or to
sublet the whole or any part of the Premises shall be accompanied by a warranty
by Tenant as to the amount of rent to be paid to Tenant by proposed assignee,
or subleases. For the purposes of this section 1.3, the term "rent" shall mean
all base rent, additional rent or other payments and/or consideration payable
by one party to another for the use and occupancy of all or a portion of the
Premises.
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ARTICLE II
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TERM OF LEASE AND OPTION TO RENEW
---------------------------------
2.1. The term of this Lease shall be for a period of five (5) years
and five months, beginning on the 1st day of August, 1993 and ending on the
31th day of December, 1998.
2.2. If the premises are ready are ready for occupancy prior to August
1, 1993, the Tenant may occupy the premises prior to said date and shall pay to
the Landlord a proportionate amount of the taxes, insurance and common charges
hereinafter set forth, but shall not be required to pay for all utilities used
at the Demised Premises and the Tenant agrees to be bound by all of the other
terms of the within Lease.
2.3. If the premises is not ready for occupancy prior to August 1,
1993, then the Tenant shall be given a credit against his rent in the amount of
Fourty-Nine and 20/100 ( $49.20) Dollars per day for every day that occupancy
is delayed past August 1, 1993. Landlord shall be in no way liable to Tenant
for damages of any nature for failure to deliver occupancy by August 1, 1993,
then Tenant may, at its option, elect to terminate this Lease upon written
notice to the Landlord by certified mail, return receipt requested.
2.4. The Tenant shall have the option to renew its Lease for an
additional five (5) year period commencing January 1, 1999, and ending December
31, 2003 upon the same terms and conditions, except for basic annual rent which
shall computed as set forth in paragraph 3.1 B herein. Tenant shall exercise
said option by giving the Landlord notice of its intention to do so by
certified mail, return receipt requested, no later than July 1, 1998.
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ARTICLE III
-----------
RENT AND SECURITY DEPOSIT
-------------------------
3.1 Tenant agrees to pay Landlord at the offices of the Landlord, or
at such other place designated by Landlord, without any prior demand therefor,
and without and deduction or set-off whatsoever, an annual rental during the
term of this Lease and any option period as follows:
A. i. During the period of August 1, 1993 to December 31, 1993,
there shall be no base rent due and owing by Tenant to the Landlord. However,
Tenant shall be responsible for payment of all other charges set forth in this
Lease including, but not limited to those charges set forth in Articles IV,
VII, VIII and IX.
ii. During the period of January 1, 1994 to December 31, 1994,
an annual rental of $17,708.00, payable in equal monthly installments of
$1,475.67, in advance, on the first day of each month during said period;
iii. During the period of January 1, 1995 to December 31, 1995,
an annual rental of $17,708.00, payable in equal monthly installments of
$1,475.67, in advance, on the first day of each month during said period;
iv. During the period of January 1, 1996 to December 31, 1996,
an annual rental of $18,640.00, payable in equal monthly installments of
$1,533.33, in advance, on the first day of each month during said period;
v. During the period of January 1, 1997 to December 31, 1997,
an annual rental of $18,640.00, payable in equal monthly installments of
$1,533.33, in advance, on the first day of each month during said period;
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vi. During the period of January 1, 1998 to December 31, 1998,
an annual rental of $18,640.00, payable in equal installments of $1,533.33, in
advance, on the first day of each month during said period.
B. i. During the Option Period of January 1, 1999 to December 31,
1999, an annual rental of $19,572.00, payable in equal monthly installments of
$1,631.00, in advance, on the first day of each month during said period;
ii. During the Option Period of January 1, 2000 to December 31,
2000, an annual rental of $19,572.00, payable in equal monthly installments of
$1,633.00, in advance, on the first day of each month during said period;
iii. During the Option Period of January 1, 2001 to December
31, 2001, an annual rental of $20,504.00, payable in equal monthly installments
of $1,708.67, in advance, on the first day of each month during said period;
iv. During the Option Period of January 1, 2002 to December 31,
2002, an annual rental of $20,504.00, payable in equal monthly installments of
$1,708.67, in advance, on the first of each month during said period;
v. During the Option Period of January 1, 2003 to December 31,
2003, an annual rental of $21,436.00, payable in equal monthly installments of
$1,786.33, in advance, on the first day of each month during said period.
3.2 The Tenant shall pay as additional rent any money required to be
paid pursuant to ARTICLE IV, VII, VIII, and IX and all other sums of money or
charges required to be paid by Tenant under this Lease whether or not the same
be designated "additional rent". If such amounts or charges are not paid at the
time provided in this Lease, they shall nevertheless, if not paid when due, be
collectible as additional rent with the next installment of rent thereafter
falling due hereunder, but nothing herein contained shall be deemed to suspend
or delay the
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payment of any amount of money or change at the time the same becomes due and
payment hereunder, or limit any other remedy of the Landlord.
3.3 If Tenant shall fail to pay, when the same is due and payable or
within the ten (10) days thereafter, any rent or any additional rent, Tenant
shall pay to Landlord a late charge equal to five (5%) percent of any such late
payment plus an additional late charge of five (5%) of such late payment which
is not received by Landlord within thirty (30) days of the due date.
3.4 Tenant shall deposit the sum of One Thousand Four Hundred
Seventy-Five and 67/100 ($1,475.67) Dollars not later than July 1, 1993, and
additional sum of Onr Thousand Four Hundred Seventy-Five and 67/100 ($1,475.67)
Dollars not later than June 1, 1993, to secure the faithful performance of all
of the terms and conditions of this Lease. If the Tenant shall comply with all
the terms, conditions and obligations of this Lease, such deposit will be
returned to Tenant at the termination of this Lease, without interest. In the
event of the Tenant's default hereunder such deposit may be applied by the
Landlord, toward reduction of any damages without barring the Landlord, in any
matter whatsoever, from other to additional legal or equitable course. Such
deposit shall not be construed as constituting liquidated damages. It is
understood and agreed that the Landlord shall always have the right, at its
option, to apply said deposit, or from time to time such one or more parts or
portions thereof or part or portion thereof not previously applied, to late
charges and to the curing of any default that may then exist, without prejudice
to any other remedy or remedies which the Landlord may have on account thereof.
Tenant hereby agrees not to look to the Landlord's mortgagee, as mortgagee,
mortgagee in possession, or successor in title to property, for accountability
for any security deposit required by Landlord hereunder unless said sums have
actually been received by said mortgagee as security for Tenant's performance
of this Lease.
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ARTICLE IV
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REAL ESTATE TAXES
-----------------
4.1 The Tenant shall pay as additional rent to the Landlord a sum
equal to it's proportionate share of the real estate taxes assessed against and
attributable to the building and land constituting the premises described in
Exhibit A annexed hereto. It is agreed that the Tenant's proportionate share of
any such taxes shall be based on a fraction, the numerator of which shall be
the square footage of the Demised Premises which is agreed to be 3,728 square
feet, and the denominator of which shall be the total square footage of the
building which is agreed to be 112,203 square feet. Tenant shall also pay all
taxes assessed on improvements made in or above Demised Premises by Tenant.
Tenant shall pay to Landlord monthly, on any extension thereof, an amount equal
to 1/12 of it's share of the real estate taxes as provided above. Landlord
shall hold said funds for the benefit of the tenant and use them to pay such
taxes as they fall due. If said funds are insufficient to pay the Tenant's
share of the taxes when due, the Landlord shall bill the Tenant's for the
difference and tenant shall make payment to Landlord within thirty (30) days
after receipt of said bill. If said funds are in excess of the taxes due, then
Landlord shall return the unused portion of said funds to the Tenant within
thirty (30) days after the taxes become due, except that if Tenant is in
default in the payment of rent provided for herein, Landlord may apply said
unused funds to the payment of said rent. Tax bills shall be sufficient
evidence of the amount to be paid by the Tenant. "Real Estate Taxes" shall mean
all taxes or assessments and governmental charges whether federal, state,
county, or municipal which are levied or charged against real estate or
collecting rent and any other taxes and assessments attributable to the
premises herein leased or it's operation, excluding federal, state or other
income taxes, and federal and/or state succession or inheritance taxes.
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If any payment for taxes shall be due for any tax year which said
Lease shall be in force and effect for less than a full tax year, such payment
shall be prorated so the amount payable to Tenant shall be based on the actual
number of months that said Lease shall be in force and effect during such tax
year. It is further agreed and understood that if Tenant shall qualify for any
city and/or state real estate exemptions that may be available to
manufacturers, the benefit of said exemption shall be applied directly to the
Tenant's portion of the taxes due pursuant to this paragraph. If the Tenant
does not qualify for such exemptions, but another Tenant in the building does
so qualify, then Tenant shall receive no benefit from the reduced taxes, but
shall pay its full share as if no exemption has been granted.
ARTICLE V
---------
COMPLIANCE WITH ENVIRONMENTAL
-----------------------------
LAWS,FIRE CODES AND OTHER LAWS
------------------------------
5.1 Laws in General. The Tenant at sole expense, shall comply with all
laws, order, and regulations of federal, state, and municipal authorities, and
with any direction of any public officer, pursuant to law, which shall impose
any duty upon the Landlord or the Tenant with respect to the venting of noxious
odors and fumes, cleaniness, safety, occupation and the use of said premises
and the nature, character and manner of operation of the business conducted in
or at the Demised Premises. The Tenant, at its sole expense, shall obtain all
license or permits which may be required for the conduct of its business within
the terms of this Lease, or for the making of repairs, alterations,
improvements, or applying for all such permits or licenses.
5.2 (a) Environmental Laws. Landlord represents that as of the date
hereof, the Landlord and the property containing the Demised Premises are not
in violation of any local, state or federal rule or regulation concerning the
handling and disposal of oil or petroleum or
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chemical liquid or solid, liquid or gaseous products, or hazardous waste or
concerning air, water or noise pollution.
(b) Tenant shall comply with all local, state and federal
regulations concerning the storage, handling and disposal of oil or petroleum
or chemical liquid or solid, liquid or gaseous products, or hazardous waste and
air, water and noise pollution. Tenant hereby agrees not to handle, store, or
dispose any hazardous or toxic waste or substance upon the premises which is
prohibited by any federal, state or local statutes, ordinance, or regulations.
Tenant hereby covenants to indemnify and hold Landlord, its successors and
assigns harmless from any loss, damage, claims, cost, liabilities or cleanup
cost arising out of Tenant's use, handling, storage or disposal of any such
hazardous or toxic waste or substances on the premises, including all such
losses due to claims made by the Department of Environmental Protection of the
State of Connecticut, (DEP), Environmental Protection Agency of the Federal
Government (EPA), other government agencies, or private third parties.
(c) If Tenant intends to produce, store or create, on the Demised
Premises, any oil or petroleum or chemical liquid or solid, liquid or gaseous
products, or any other substance defined as hazardous waste by state statute
and/or the Environmental Protection of the State of Connecticut (DEP), or by
federal statute and/or the Environmental Protection of the Federal Government
(EPA), it must submit a plan to said agency or agencies and to the Landlord,
prior to occupancy, for the safe handling, storage and use and removal of any
such substance. If a permit is required by the DEP or EPA for the use, storage
and/or removal of such substance, Tenant must obtain such permit and submit a
copy to Landlord prior to occupancy.
(d) If there is a "spill", as that term is defined in Section
22a-452c of the Connecticut General Statutes, of any substance set forth in
paragraph (b) above, such "spill" shall be immediately reported by Tenant to
the Landlord and to the DEP and, if required, to the
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EPA. Tenant shall take immediate remedial action to contain and clean up such
"spill" and shall be solely responsible for all cost of remedial action
including, but not limited to, the cost of professional environmental studies
and reports, attorney's fees, clean up, soil removal, monitoring costs, fines
and penalties.
(e) If Tenant does not take immediate action to contain and clean
up such a "spill", or if Landlord is ordered by the DEP or EPA to take remedial
action to contain and clean up such spill, and Tenant shall reimburse Landlord
for all cost of professional environmental studies, attorney's fees, soil
removal, clean up, monitoring cost, fines and penalties, and interest from the
date Landlord incurs each expense until such expense is paid by Tenant at the
rate of twelve percent (12%) per annum.
(f) At the conclusion of the term of this Lease or any
modifications or extensions thereof, or upon Landlord's sale of the Demised
Premises to a third party, Tenant shall submit a Certification to Landlord
containing the same information as it required by the provisions of Connecticut
Public Act No. 87-475 or any successor statute for transfers of establishments.
Said Certification shall state that there has been no discharge, spillage,
uncontrolled loss, seepage or filtration of hazardous waste, toxic waste and/or
biochemical waste on the Premises and/or Building or the grounds or that any
such discharge, spillage, uncontrolled loss, seepage or filtration has been
cleaned and removed in accordance with procedures approved by the Commissioner
of Environmental Protection of the State of Connecticut or determined by him to
pose no threat to human health or safety or the environment which would warrant
containment and removal or other mitigation measures, and that any hazardous
waste, toxic or hazardous material, and/or biochemical waste which remains on
site is being managed in accordance with Chapter 445 and 446k of the
Connecticut General Statutes and regulations adopted thereunder, and in
accordance with any other State or Federal law or regulation which shall then
be
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applicable. Failure or inability of the Tenant to provide said Certification ,
or the presence of any waste on the Premises contravened by said Certification
shall entitle the Landlord to recover damages from the Tenant on the basis of
strict liability, without regard to fault, for all clean up and removal costs
and direct and indirect damages arising therefrom, including reasonable
attorney's fees incurred in the enforcement of this Article.
5.3 The Landlord represents that the Demised Premises is in
conformance with applicable fire codes or will be in conformance with
applicable fire codes on the date that Tenant takes occupancy. If, because of
the nature of Tenant's operations, the Landlord is required by the fire codes
to make modifications or additions to the sprinkler system, fire walls, exits,
fire escapes or any other fire prevention system then Tenant agrees to pay for
any such modification or addition as additional rent.
ARTICLE VI
----------
USE OF PREMISES
---------------
6.1 Tenant covenants and agrees that throughout the term of this
Lease the Demised Premises will be used only for polymer product manufacturing,
packaging warehousing, research and development and offices.
6.2 Tenants covenants and agrees that throughout the term of this
Lease and any extension or renewal thereof:
(a) It will not overload, damage or deface the Premises;
(b) It will conform to all reasonable rules which Landlord may
make from time to time relative to the operation and use of
the property;
(c) It will at all times fully and promptly comply with all laws,
ordinances, orders and regulations of any lawful authority
having jurisdiction of the Demised Premises, including, but
not limited to, such as related to the venting of
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noxious odors and fumes, cleanliness, safety, occupation and
use of said operation of the business conducted in or at the
Demised Premises;
(d) It will vent all noxious and hazardous odors and fumes from
its operations, maintain humidity controls, maintain noise
levels and provide safe procedures for the handling and
storage of chemicals and other hazardous materials in such a
manner so as not to affect or interfere with other tenants in
the building, or occupants of other properties adjacent to or
within close proximity of the building, and in such a manner
so as not to cause damage to the building, the building lot
upon which the building is located, and neighboring
properties. If the Tenant fails to comply with this
provision, the Landlord may install said ventilation or other
controls and charge the Tenant the reasonable costs thereof
which the Tenant agrees to pay as additional rent, or at the
Landlord's election, the Landlord may terminate this Lease
upon thirty (30) days written notice to the Tenant;
(e) It will place all of its rubbish and waste in the area
designated by the Landlord, and it shall be responsible for
the costs of the removal of said rubbish;
(f) It will not place any sign upon premises without first
submitting the design and proposed location of the sign to
the Landlord and receiving written approval from Landlord of
such design and location.
ARTICLE VII
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MAINTENCE, REPAIRS AND ALTERATIONS
----------------------------------
7.1 Tenant represents that it has examined the Demised Premises as
they now exist and the plans, if any, for the completion of said premises. The
Landlord agrees to turn the premises over to the Tenant in a "broom clean"
condition and further agrees to make the
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improvements listed on Exhibit B, if any, on or before the date of occupancy,
and Tenant accepts the premises in their present condition and the Landlord
and/or its agents makes no representations as to their present or future
condition.
7.2 Tenant may make such interior alterations or improvements in and
to the Demises Premises, at it's own cost, as it may deem desirable for its use
thereof, with the approval of Landlord. All repairs and alterations shall be of
quality at least equal to the original construction. At the termination of this
Lease, except for casualty losses insured against, or losses occasioned by
floods, earthquakes, wars, acts of God, or other losses over which Tenant has
no control, Tenant shall deliver the Demised Premises to Landlord in good
condition and repair, allowance being made for ordinary wear, tear and
obsolescence. In addition, all of said alteration or improvements shall remain
the property of the Landlord. However, should the Landlord elect that such
alterations or improvements be removed by Tenant, then Tenant agrees to remove
same at Tenant's sole expense and to restore the premises to the condition it
was in at the commencement of this Lease. If Tenant shall fail to remove same,
then Landlord shall cause same to be removed and Tenant agrees to reimburse the
Landlord for the cost of such removal, together with any and all damages which
Landlord may suffer by reason of Tenant's failure to remove same.
7.3 The Tenant agrees to maintain and repair the interior of the
Demised Premises, including, but not limited to, the interior walls and
partitions, and all of the mechanical systems including the furnaces, heating
and air conditioning, plumbing and electrical system. Tenant's liability for
repair of any one of the furnaces or heating/air conditioning systems shall be
limited to One Thousand ($1,000) Dollars per furnace or system per year,
provided that the need for such repair is not the result of the act or
negligence of Tenant or Tenant's employees or agent. Tenant shall also maintain
and repair both the interior and exterior of all doors,
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including overhead doors, located within the Demised Premises. Tenant shall
provide and maintain an adequate number of fire extinguishers in the Demised
Premises in order to comply with local fire codes. Tenant, at its sole expense,
will, throughout the term of this Lease, obtain and keep in force a maintenance
contract with a qualified service company to regularly inspect and perform
maintenance services to the heating, ventilating and air-conditioning systems
serving the Demised Premises. Tenant shall furnish Landlord with a copy of said
maintenance contract, and of renewals or replacement.
7.4 Landlord shall be responsible for exterior structural repairs
including the roof, foundation and exterior walls.
7.5 Landlord shall provide for the maintenance and repair and lighting
of the designated receiving and parking areas including, but not limited to,
lighting, repairs, removal of dirt and debris, and lawn mowing and maintenance
to lawns and shrubbery. Tenant shall pay to Landlord its proportionate share of
the cost of said maintenance and repairs based on a fraction, the numerator of
which shall be 3,728 and the denominator of which shall be 112,203. Landlord
shall present Tenant with a bill for such maintenance and repair on the first
day following the performance of such maintenance and repairs and Tenant shall
pay said bill within ten (10) days of its receipt.
Tenant shall be responsible for snow removal and sanding any walkways
or stairways which abut and/or are used for ingress and egress to the Demised
Premises.
7.6 Landlord shall be responsible for the snow plowing of the entire
paved parking area to the building and the driveways leading thereto whenever
there is an accumulation of two (2) or more inches of snow. Tenant shall pay to
Landlord its proportionate share of the cost of said snow removal based on a
fraction, the numerator of which shall be 3,728 and the denominator of which
shall be 112,203. Landlord shall present Tenant with a bill for such snow
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plowing on the first day of each month following such snow plowing and Tenant
shall pay said bill within ten (10) days of its receipt.
7.7 The Tenant further covenants and agrees to replace all broken
glass on the Demised Premises during the term of this Lease or any month to
month extension thereof at it's own expense.
8.1 (a) Tenant agrees to pay all charges for electricity, electricity
for heating, water, telephone, fire service line charges, for sprinkler alarm
monitory charges and any other utilities used by the Demised Premises.
(b) Separate meters for electricity shall be provided and
installed by Landlord. Tenant shall pay to Landlord its proportionate share of
the total water used by the entire Building based upon a fraction, the
numerator of which shall be 3,728 and the denominator of which shall be
112,203. Landlord shall present Tenant with a bill for such water charges on
the first day of the month following the receipt by Landlord of a water bill
from the city or other provider, and Tenant shall pay said bill within ten (10)
days of its receipt. Provided, however, if Landlord determines, in it's sole
discretion, that Tenant's water use, because of the nature of its operations,
exceeds the average water use of other tenants in the Building, then Landlord
reserves the right to install a meter in the Demised Premises and Tenant shall
be billed for water based on actual use.
8.2 Tenant shall maintain a temperature within the entire Demised
Premises of at least 50 degrees Fahrenheit in order to prevent freezing pipes
and plumbing located therein.
8.3 Landlord shall not be liable in damages or otherwise for any
failure to furnish or interruption of the services of heat or any utility
consumed or used in the Demised Premises, provided that such failure is beyond
the reasonable control of Landlord and not due to Landlord's negligence.
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ARTICLE IX
----------
INDEMNITY AND INSURANCE
-----------------------
9.1 The Tenant shall pay, as additional rent, its proportionate share
of the Landlord's total insurance premium on the entire building for fire,
lightning, extended coverage, all loss of a direct physical nature, loss of
rental income, and legal liability coverage as it pertains to the premises and
its appurtenance. It is agreed that the Tenant's proportionate share of such
premium shall be based on a fraction, the numerator of which shall be the
square footage of the Demised Premises which is agreed to be 3,728 square feet,
and the denominator of which shall be the total square footage of the building
which is agreed to be 112,203 square feet. Tenant shall pay to Landlord
monthly, on the first day of each month during the term of this Lease and any
extension thereof, an amount equal to 1/12 of its share of the insurance
premiums as provided above. Landlord shall hold said funds for the benefit of
the Tenant and use them to pay such insurance premium as they fall due. If said
funds are insufficient to pay the Tenant's share of the insurance premiums when
sue, then landlord shall bill the Tenant for the difference and the Tenant
shall make payment to Landlord within thirty (30) days after receipt of said
bill. If said funds are in excess of the insurance premiums due, then Landlord
shall return the unused portion of said funds to the Tenant within thirty (30)
days after the insurance premium become due, except that if the Tenant is in
default in the payment of the rent as provided for herein, Landlord may apply
said unused funds to the payment of said rent. The premium bill submitted by
Landlord's insurance company shall be sufficient evidence of the amount of
premium due and owing. Tenant further agrees that if a determination is made by
the Landlord's fire insurance carrier that the Tenant is storing materials on
the premises or performing certain manufacturing processes or procedures on the
premises which increase the risk of loss, and said insurance company thereby
increases the total insurance premium for the
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entire building over and above that premium which the Landlord would have paid
had there been no such materials stored or manufacturing procedures or
processes performed, then Tenant shall pay Landlord, in addition to his
proportionate share of said premium as aforesaid, the total amount of said
increased insurance premium. If the increased insurance premium is attributable
to more than on Tenant in the building, then the increase shall be apportioned
between said Tenant's in accordance with a formula to be supplied by the
Landlord's insurance carrier.
9.2 Tenant covenants and agrees to assume exclusive control of the
Demised Premises, and all tort liabilities incident to the control or leasing
thereof, and to save Landlord harmless from all claims or damages arising on
account of any injury or damage to any person or property on said premises, or
otherwise resulting from the use and maintenance and occupancy of the premises
or anything or facility kept or used thereon, unless such claim or damage is
caused by negligence of the Landlord or its agents, servants or employees.
Landlord shall be saved harmless by Tenant, from any liability on account of
any accident or injury to Tenant, or to any of Tenant's servants, employees,
agents, visitors, or licensees, or to any person or persons in or about the
said premises only if such accident or injury is caused by the act or
negligence of Tenant, its servants, employees, agents, visitors or licensees.
In case Landlord or Tenant shall, without fault on its part, be made a party to
any litigation commenced by or against the other party, then each party, then
each party shall pay all cost, expenses and reasonable attorney's fees incurred
or paid by the other party in connection with such litigation.
9.3 Tenant covenants and agrees that it will obtain and maintain
during the term of this Lease, at its own expense general comprehensive public
liability insurance with responsible companies qualified to do business in
Connecticut which shall insure Landlord and all persons
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in privity with Landlord, as well as Tenant, against all claims for injuries to
persons or for death occurring in or about the Demised Premises, in the amount
of at least One Million Dollars ($1,000,000.00), and against all claims for
damages to or loss of property occurring in or about the Demised Premises in
the amount of at least Five Hundred Thousand Dollars ($500,00.00). Tenant
agrees to furnish Landlord with policies or certificates of such insurance
prior to the commencement of the term hereof and each renewal policy or
certificate thereof at least ten (10) days prior to the expiration of the
policy it renews. Each such policy shall be noncancellable with respect to the
Landlord's interest without at least ten (10) days prior written notice to the
Landlord.
9.4 Landlord agrees that it will at its own cost and expense, keep its
own fixtures, merchandise and equipment adequately insured during the term
hereof against loss or damage by fire, with the usual extended coverage
endorsement.
9.5 Landlord shall not be liable for any damage to the Demised
Premises, or to any property of the Tenant or of any other person thereon, from
water, rain, snow, ice, sewage, steam gas or electricity which may leak into or
issue or flow from any part of said building of which the Demised Premises are
part, or from the bursting, breaking, obstruction, leaking or any defect of any
of the pipes or plumbing, appliances, or from electric wiring or other fixtures
in said building or from the condition of said premises or building or any part
thereof, or from the street or subsurface, except such damage or injury as may
be caused by the negligent act or omission on the part of the Landlord, its
agents, servants or employees.
9.6 Landlord and Tenant each hereby waive such causes of action either
may have or acquire against the other which are occasioned by the negligence of
either of them or their employees or agents resulting in the destruction of or
damage to real or personal property belonging to the other and located on the
premises of which the Demised Premises are a part
20
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and which are caused by fire and/or the hazards normally insured against in an
Extended Coverage Endorsement to a Standard Fire Insurance Policy approved in
the State of Connecticut. Each party to this Agreement further agrees to cause
any insurance policy covering destruction of or damage to such real or personal
property from fire and/or the hazards covered under the aforementioned extended
coverage endorsement to contain a waiver of subrogation clause or endorsement
under which the insurance company waives its right of subrogation against
either party to this Agreement in case of destruction of or damage to the
aforementioned real or personal property of either such party.
ARTICLE X
---------
SUBORDINATION, ATTORNMENT, ESTOPPEL CERTIFICATES
------------------------------------------------
10.1 Subordination. Tenant agrees that this Lease is subject and
subordination to the lien of any mortgage now on or which at any time may be
made a lien upon the Demised Premises or any part thereof. This subordination
provision shall be self-operative and no further instrument of subordination
shall be required. Tenants agrees to execute and deliver, upon request, such
further instrument or instruments confirming this subordination as shall be
desired by Landlord or by any Mortgagee or proposed mortgagee; and Tenant
hereby constitutes and constitutes and appoints Landlord as Tenant's
attorney-in-fact to execute any such instrument or instruments.
10.2 Attornment. In the event any proceedings are brought for
foreclosure of, or in the event of exercising of the power of sale under, any
mortgage deed to secure debt given by Landlord and covering the Demised
Premises, Tenant shall attorn to the purchaser upon any such foreclosure or
sale and recognize such purchaser as the owner and landlord under this Lease,
provided such owner, as landlord, shall recognize Tenant's rights to continue
to occupy the Demised Premises and exercise and enjoy all of its rights
hereunder so long as Tenant
21
<PAGE>
complies with the terms and provisions of this Lease and further provided any
such purchaser shall be deemed to assume and agree to perform the duties of the
Landlord hereunder.
10.3 Estoppel Certificates. Tenant agrees, at any time and from time
to time upon not less than five (5) days prior written notice by Landlord, to
execute, acknowledge and deliver to Landlord a statement in writing (i)
certifying that this Lease is unmodified and in full force and effect ( or if
there have been modifications the nature of same ) , (ii) stating the dates to
which the Minimum Annual Rent and Additional Rent have been paid by Tenant,
(iii) stating whether or not to the best knowledge of Tenant, Landlord is in
default in the performance of any covenant, agreement of condition contained in
this Lease, and, if so, specifying each such default of which Tenant may have
knowledge, and (iv) stating the address to which notice to Tenant should be
sent; (v) stating such other facts as Landlord's Lender or Purchaser may
require. Any such statement delivered pursuant hereto may be relied upon by an
owner of the Demised Premises, any mortgagee of the Demised Premises, any
mortgagee of the Demised Premises, or any prospective assignee of any such
mortgagee.
ARTICLE XI
----------
DAMAGE BY FIRE OR OTHER CASUALTY
--------------------------------
11.1 In the event the Demised Premises shall be destroyed or so
damaged by fire or other casualty so as to render the Demised Premises wholly
untenantable, Landlord, at its option, shall (a) restore and repair such damage
to the Demised Premises in which event the basic monthly rent shall abate on a
per diem thirty (30) day month basis during the period of restoration ; or (b)
terminate this lease or any renewal thereof by giving written notice to Tenant
thirty (30) days after such fire or casualty, and the rent shall terminate as
of the day of such fire or casualty.
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If Landlord has not elected to terminate this Lease at the end of the
thirty (30) day period as provided in (b) above, then Landlord shall have an
additional period of one hundred twenty (120) days to restore the premises. In
the event Landlord has not substantially completed such restoration at the end
of such periods, then Tenant may elect to terminate this lease by giving
written notice of such termination to Landlord by certified mail, return
receipt requested.
In the event the leased premises shall be destroyed or so damaged but
are not thereby rendered wholly untenantable, Landlord shall restore the leased
premises with reasonable dispatch, and while such damage is being repaired, the
basic monthly rent shall be reduced by an amount which bears the same ratio to
the monthly rent that the floor area rendered untenantable bears to the total
floor area of the Demised Premises.
ARTICLE XII
-----------
EMINENT DOMAIN
--------------
12.1 In the event that the whole of Demised Premises shall be taken
under the power of eminent domain, this Lease shall thereupon terminate as of
the date possession shall be so taken.
In event that a portion of the floor area of the Demised Premises
shall be taken under the power of eminent domain and the portion not so taken
will not be reasonably adequate for the operation of Tenant's business not
withstanding Tenant's performance or
23
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restoration as hereinafter provided, this Lease shall thereupon terminate as of
the date possession of said portion is taken. In the event of any taking under
the power of eminent domain which does not terminate this Lease as aforesaid,
all of the provisions of this Lease shall remain in full force and effect,
except, except that the basic rent shall be reduced in the same proportion that
the amount of floor area of the Demised Premises taken bears to the total floor
area of the Demised Premises immediately prior to such taking, and Landlord
shall at Landlord's own cost and expense, restore such part of the Demised
Premises as is not taken to as near its former condition as the circumstances
will permit and Tenant shall do likewise with respect to all exterior signs,
trade fixtures, equipment, display cases, furniture, furnishings and other
installation of Tenant.
All damages awarded for any such taking under the power of eminent
domain, whether for the whole or a part of the Demised Premises, shall belong
to and be the property of the Landlord, whether such damages shall be awarded
as compensation for diminution in value of the leasehold or for the fee of the
Demised Premises, provided, however, that Landlord shall not be entitled to any
award made to Tenant for loss of or damage to Tenant's trade fixtures and
removable personal property or for damages to improvements made by Tenant with
approval of Landlord during the term of this Lease and any extension thereof or
for damages for cessation or interruption of Tenant's business, or for damages
for the cost of moving Tenant's equipment to another location.
If this Lease is terminated as provided in this Article XII, all rent
shall be paid up to the date that possession is taken by public authority, and
Landlord shall make an equitable refund of any rent paid by Tenant in advance
and not yet earned.
A voluntary sale by Landlord to any public or quasi public body,
agency or person, corporate or otherwise, having the power of eminent domain,
either under threat of
24
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condemnation or while condemnation proceedings are pending, shall be deemed to
be a taking by eminent domain for the purpose of this Article XII.
ARTICLE XIII
------------
DEFAULT OF THE TENANT
---------------------
13.1 (a) If Tenant is in default in payment of rents for a period of
ten (10) days, or (b) if Tenant shall default in the performance or observance
of any other of the convenience, agreements, terms, provisions or conditions
contained herein and on its part to be performed or observed for thirty (30)
days after written notice from the Landlord specifying such default, or (c) if
any assignment shall be made by tenant for the benefit of creditors, or Tenant
becomes involved in any proceedings as a debtor under the bankruptcy laws of
the United States in effect at the time of default, or (d) if Tenant's
leasehold interest shall be taken on execution, or (e) if the Tenant fails to
occupy the premises for a period of fifteen (15) consecutive days (unless the
premises are untenantable due to fire or casualty), then and in any such cases,
Landlord and the agents and servants of Landlord lawfully may, in addition to
and not in derogation of any remedies for any preceding breach of covenant,
immediately or at any time thereafter and without prior demand or statutory
notice to quit, commence an action of Summary Process to evict tenant from the
premises, without prejudice to any remedies which might otherwise be used for
arrears of rent or preceding breach of covenant. Tenant hereby waives the
statutory Notice to Quit, and Tenant covenants and agrees that in the case of
such termination, or termination under statute by reason of default on Tenant's
part, Tenant will, at the election of the Landlord:
(i) pay to Landlord in equal monthly installments, in advance, sums
equal to the aggregate rent herein provided for or, if the Demised Premises
have been related, sums equal to the excess of the aggregate rent herein
provided for over the sums actually
25
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received by Landlord, such sums being payable as liquidated damages for the
unexpired term hereof; or
(ii) pay to Landlord as damaged a sum which at the time of such
termination, or at the time to which installments of liquidated damages shall
have been paid (if the Landlord has previously elected option number one above)
represents the amount by which the then rental value of the Demised Premises is
less than the aggregate rent herein provided forth residue of the term; or
(iii) indemnify Landlord against loss of the aggregate rent
herein provided for from the time of such termination or from the time to which
installments of liquidated damages shall have been paid (if the Landlord has
previously elected option number one above) to the expiration of the term
hereof as above set forth.
For the purpose of this Article, the phase "aggregate rent", as
used herein, shall include the fixed annual rent and all additional rents and
charges payable hereunder, including reasonable attorney's fees incurred by
Landlord in enforcing its rights hereunder.
In the event of a default by the Tenant as above provided, if Landlord
shall elect not to terminate this Lease, it may relate the Premises or any
parts thereof, either in the name of Landlord or Tenant, for a term or terms
which may, at Landlord's option, extend beyond the balance of the term of this
Lease, and Tenant agrees that in the event of such reletting Tenant shall pay
Landlord any deficiency between the aggregate rent hereby reserved and
covenanted to be paid and the net amount of the rents collected on such
reletting, as well as any expense incurred by Landlord in such reletting
including, but not limited to, attorney's fee; broker; and expenses of repairs
or damages to the Demised Premises, and putting the Demised Premises in
26
<PAGE>
good order and preparing the same for rerental. Such deficiency shall be paid
in monthly installments upon statements rendered by Landlord to the Tenant.
13.2 Any and all rights and remedies which Landlord may have under
this Lease and at law and in equity shall be cumulative and shall not be deemed
inconsistent with each other, and any two or more of all such rights and
remedies may be exercised at the same time insofar as permitted by law.
13.3 Landlord shall not be deemed in default in the performance of any
of its obligations hereunder unless it shall fail to perform such obligations
and such failure shall continue for a period of thirty (30) days or such
additional time as is reasonably required to correct any such default, after
written notice has been given by Tenant to Landlord specifying the nature of
Landlord's alleged default. After the aforesaid time period has passed, the
Landlord shall be responsible for the reasonable attorney's fees incurred by
Tenant in enforcing this provision of the Lease.
13.4 If either party brings an action against the other party to
enforce the terms of this agreement, the losing party shall pay the prevailing
party's attorney's fee.
ARTICLE XIV
-----------
HOLDING OVER
------------
14.1 If Tenant holds possession of the Demised Premises after the
Expiration Date of this Lease, Landlord shall have the option, exercisable in
writing thirty (30) days after the date of expiration as aforesaid, to treat
Tenant as a Tenant at Sufferance, or as a tenant by the month. If Landlord
fails to make such election, then the tenant shall be deemed a tenant by the
month, commencing with the first at after the expiration of the Lease at DOUBLE
the Basic
27
<PAGE>
Monthly Rent paid during the last month of the term, and upon all the other
terms of this Lease, including the provision of this paragraph, said holdover
term shall terminate upon thirty (30) days notice from one party to the other.
Nothing contained herein shall be construed within said thirty (30) days after
the date of Lease expiration as aforesaid as a consent by Landlord to the
occupancy or possession of the Demised Premises by Tenant after the expiration
of the lease, and Landlord, upon said expiration, if Landlord elects to treat
Tenant as a Tenant at Sufferance, shall be entitled to the benefit of all
public, general or public laws relating to the speedy recovery of the
possession of land and tenements held over by tenant, whether now or hereafter
in force and effect.
ARTICLE XV
----------
MISCELLANEOUS PROVISIONS
------------------------
15.1 Waiver. Failure of Landlord or Tenant to complain of any act or
omission on the part of the other party no matter how long the same may
continue, shall not be deemed to be a waiver by Landlord or Tenant of any of
its rights hereunder. No waiver by Landlord or Tenant at any time, express or
implied, of any breach of any provision of this Lease shall be deemed a waiver
of a breach of any other provision of this Lease or a consent to any subsequent
breach of the same of any other provision. If any action by Tenant or Landlord
shall require the other party's consent or approval, such consent to or
approval of such action on any one occasion shall not be deemed a consent to or
an approval of said action on any subsequent occasion or a consent to or
approval of any other action on the same or any subsequent occasion. No payment
by Tenant or acceptance by Landlord of a lesser amount than shall be due from
Tenant to Landlord shall be deemed to be anything but payment on account, and
the acceptance by Landlord of a check for lesser amount with an endorsement or
statement thereon or upon a letter accompanying said check that said lesser
amount is payment in full
28
<PAGE>
shall not be deemed an accord and satisfaction, and landlord may accept said
check without prejudice to receive the balance due or pursue any other remedy.
Any and all rights and remedies which either party may have under this Lease or
by operation of law., either party may have under this Lease or by operation of
law, either law or in equity, upon any breach, shall be distinct, separate and
cumulative and shall not be deemed inconsistent with each other and no one of
them, whether exercises by said party or not, shall be deemed to be in
exclusion of any other; and any two or more or all of such rights and remedies
may be exercised at the same time.
15.2 Partial Invalidity. If any term, covenant or condition of this
Lease or the application thereof to any person or circumstance shall, to any
extent, be invalid or unenforceable, the remainder of this Lease, or the
application of such term, covenant or condition to person or circumstances
other than those as to which it is held invalid or unenforceable, shall not be
affected thereby and each term, covenant or condition of this Lease shall be
valid and be enforced to the fullest extent permitted by law.
15.3 Recording. Notice of this Lease may be recorded in the Town
Clerk's Office in the City of Waterbury, County of New Haven and State of
Connecticut, in accordance with the requirements of the State of Connecticut
relating to leases. In the event this Lease is terminated, canceled, released
or assigned before the expiration of the term, the Landlord and Tenant shall,
upon the request of either party, execute and deliver a written intrument in
form for recording setting forth such termination, cancellation, release or
assignment. The parties agree at the appropriate time to execute and deliver an
instrument in record able form evidencing the commencement date of the term
hereunder
15.4 Covenant of Landlord. Upon payment by the Tenant of the rents
herein provided, and upon the observance and performance of all the covenants,
terms and conditions
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<PAGE>
on Tenant's part to be observed and performed, Tenant shall peaceably and
quietly hold and enjoy the Demised Premises for the term hereby demises without
hindrance or interruption by Landlord or any other person or persons lawfully
or equitably claiming by, through or under the Landlord, subject, nevertheless,
to the terms and conditions of this Lease.
15.5 Use of "Landlord" and "Tenant" . All the provisions hereof are to
be construed as covenants and agreements as though the words imparting such
covenants and agreements were used in each separate provision and paragraph
hereof. The words "Landlord" and "Tenant" and the pronouns referring thereto,
as used in this Lease, shall mean, where the context requires or admits, the
persons named herein as Landlord and Tenant, respectively, and their
respectively, and their respective heirs, legal representatives, successors and
assigns, irrespective of whether singular or plural, masculine, feminine or
neuter. It is agreed that the agreements and conditions in this Lease contained
on the part of Tenant to be performed and observed shall be binding upon Tenant
and its successors and assigns and shall inure to the benefit of Landlord and
its successors and assigns; and the agreements and conditions in this Lease
contained on the part of the Landlord to be performed and observed shall inure
to the benefit of Tenant and its successors and assigns. Tenant agrees that at
all times on and after the Commencement Date of this Lease the sole liability
for performance of all Landlord's obligations hereunder shall be that of the
owner from time to time of the leased premises and that such liability with
respect to each owner shall exist only for breaches of Landlord's obligations
committed during the period of his ownership.
15.6 Entire Agreement. This instrument contains the entire and only
agreement between the parties, and no oral statements or representations or
prior written matter not contained in this instrument shall have any force or
effect. This Lease shall not be modified in any way except by a writing
subscribed by both parties.
30
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15.7 Notices. All notices and other communications authorized or
required hereunder shall be in writing and shall be in writing and shall be
deemed to have been given by on the date that they are mailed by certified or
registered mail, return receipt requested, postage prepaid to the other party.
The same shall be mailed to Tenant at the Demised Premises or to such other
person or at such other address as Tenant may hereafter designate by written
notice to Landlord; and the same shall be mailed to Landlord at Mattoon Road,
P.O. Box 1910, Waterbury, Connecticut 06722, or to such other person or at such
other address as Landlord may hereafter designate by written notice to Tenant.
15.8 Access. Landlord shall have right to enter the Demised Premises
during Tenant's business hours upon reasonable notice to Tenant for the purpose
of showing the Demised Premises to a prospective purchaser or tenant, and for
the purpose of inspecting the Demised Premises to insure the compliance with
the provisions of paragraph 5.1, 5.2 and 6.2 above.
15.9 Mechanic's Liens. Tenant agrees immediately to discharge (either
by payment or by the filing of the necessary bond, or otherwise) any
mechanict's, materialmen's or other lien against the Premises and/or Landlord's
interest therein, which liens may arise out of any payment due for, or
purported to be due for, any labor, services, materials, supplies or equipment
alleged to have been furnished to or for Tenant in, upon or about the Premises.
Failure to discharge any such lien within fifteen (15) days from the date that
Tenant receives written notice of such lien from Landlord shall have all rights
upon default as are specified in Article 13 above. Tenant acknowledges that
Tenant is not an agent of the Landlord and Tenant has no authority to contract
for labor, services, material, supplies or equipment for tenant's use in the
Demised Premises as agent for Landlord.
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15.10 PREJUDGMENT REMEDY. THE PARTIES HERETO ACKNOWLEDGE THAT THIS IS
A "COMMERCIAL TRANSACTION" AS THAT TERM IS DEFINED IN CONNECTICUT GENERAL
STATUTES, CHAPTER 903a, SECTION 52-278a ( a ), AS AMENDED, AND THAT THE TENANT
HEREBY EXPRESSLY AND VOLUNTARILY WAIVES ANY AND ALL RIGHTS THAT IT MAY HAVE
UNDER SAID ACT OR OTHERWISE FOR NOTICE AND HEARING WITH RESPECT TO ANY
"PREJUDGMENT REMEDY", AS THAT TERM IS THEREIN DEFINED, AND THE TENANT HEREBY
SPECIFICALLY CONSENTS TO THE ISSUANCE OF ANY WRIT FOR SUCH "PREJUDGMENT REMEDY"
OR REMEDIES IN BEHALF OF SAID LANDLORD OR THE SUCCESSORS OR ASSIGNS OF SAID
LANDLORD, WITH RESPECT TO ANY LAWSUIT OR CAUSE OF ACTION RELATING TO THIS LEASE
AND/OR ANY CLAIMS INCIDENTAL HERETO, WITHOUT SAID LANDLORD HAVING TO FIRST
OBTAIN A COURT ORDER PERMITTING SAME, AS MIGHT OTHERWISE BE REQUIRED UNDER SAID
CHAPTER 903a.
15.11 Captions and Section Numbers. The caption, section numbers and
article numbers appearing in this Lease are inserted only as a matter of
convenience and in noway define, limit, construe or describe the scope or
intent of such sections or articles of this Lease and in this Lease nor in any
way affect this Lease.
15.12 No Offer. The delivery of an unexecuted copy of this Lease shall
not be deemed an offer. No rights are to be conferred upon any party until this
Lease has been executed and delivered to each party.
15.13 Effective Date. This Lease shall be effective only when it is
signed by both the Landlord and Tenant. The Tenant's submission of a signed
lease for review by the Landlord does not give the Tenant any interest, right,
or option in the Leased Premises.
32
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15.14 Review of Landlord's Records. The Tenant, upon five (5) days
written notice to Landlord, shall have the right to inspect and review, at the
offices of the Landlord, all invoices, statements and bills from which their
assessments for taxes, insurance and common charges are derived.
15.15 Financial Statements. If so requested by Landlord's lender, or
proposed lender, Tenant shall provide said lender with appropriate information
as to the nature of Tenant's business and Tenant's current financial condition.
IN WITNESS WHEREOF, the parties hereof have hereunto set their hands
and seals, and to a duplicate of the same tenor and date this 17th day of May,
1993. Signed sealed and delivered in the Presence of
INDUSTRIAL DEVELOPMENT GROUP
By: /s/ Roger N. Devino
----------------------------------
Roger N. Devino
Its Partner
DISCAS, INC.
By: /s/ Patrick A. DePaolo, Sr.
----------------------------------
Its President
DISCAS RECYCLED PRODUCTS CORP.
By: /s/ Patrick A. DePaolo, Sr.
----------------------------------
Its President
33
<PAGE>
STATE OF CONNECTICUT)
)ss: Waterbury
COUNTY OF NEW HAVEN)
On this the 17th day of May , 1993, before me, the undersigned
officer, personally appeared, Roger N. Devino, known to me (or satisfactorily
proven) to be the person whose name is subscribed to the within instrument and
acknowledged that he executed the same for the purposes therein contained.
IN WITNESS WHEREOF, I hereunto set my hand.
Illegible
---------
Notary Public
Commissioner, Superior CT.
Notary Public
Commissioner, Superior CT.
STATE OF CONNECTICUT )
) ss: Waterbury
COUNTY OF NEW HAVEN )
On this day the 17th day of May, 1993, before me, the undersigned
officer, personally appeared, Patrick A. DePaolo, Sr. who acknowledged himself
to be the President of Discas, Inc., a corporation, and that he as such
officer, being authorized so to do, executed the foregoing instrument for the
purposes therein contained, by signing the name of the corporation by himself
as such officer.
IN WITNESS WHEREOF, I hereunto set my hand.
illegible
---------
Notary Public
Commissioner, Superior CT.
34
<PAGE>
STATE OF CONNECTICUT )
) ss: Waterbury
COUNTY OF NEW HAVEN )
On this day the 17th day of May, 1993, before me, the undersigned
officer, personally appeared, Patrick A. DePaolo, Sr. who acknowledged himself
to be the President of Discas Recycled Products Corp., a corporation, and that
he as such officer, being authorized so to do, executed the foregoing
instrument for the purposes therein contained, by signing the name of the
corporation by himself as such officer.
IN WITNESS WHEREOF, I hereunto set my hand.
illegible
Notary Public
Commissioner, Superior CT.
35
<PAGE>
EXHIBIT B
I . IMPROVEMENTS to be provided by Landlord to Tenant at No Cost to Tenant.
1. Clean and seal concrete floor: Tenant to cooperate with Landlord by
moving Tenant's materials currently stored in premises, so that
Landlord may accomplish the cleaning and sealing at Landlord's
schedule.
2. Replace carpets in office, with Tenant's choice of carpet or vinyl
composition tile from Landlord's selection, or Landlord will credit
Tenant the amount of $11.00/sq. yd. if Tenant replaces carpet with
its own carpet/tile.
3. Check lighting, electrical outlets in walls, furnaces, HVAC system
in office, plumbing, and overhead doors to make certain all are in
good working order.
4. Install new 10' x 10' loading dock door at rear of premises.
5. Remove existing drive-in door at rear of premises: replace with new
12' w x 14' h overhead drive-in door at rear of premises.
6. Electric service. Landlord shall provide the following
improvements:
a. Provide electric power supply to location of new exterior
transformer (transformer to be supplied and installed by
C.L. & P.).
b. Install transformer mounting pad.
c. Provide sleeves from transformer to building, adequate to
accommodate 4,000 amps of electric service.
7. Upon completion of electrical installation into the demised
premises, Landlord shall credit Tenant the amount of $2,000.00.
II. IMPROVEMENT to be provided by Landlord to Tenant at Tenant's Cost.
None.
36
<PAGE>
Exhibit 10.11
AMENDMENT TO LEASE
------------------
LANDLORD : INDUSTRIAL DEVELOPMENT GROUP
TENANT : DISCAS, INC. and DISCAS RECYCLED
PRODUCTS CORP.
DATE OF LEASE : MAY 17, 1993
PREMISES : 3,728 SQUARE FEET OF SPACE AT 567-1 SOUTH
LEONARD STREET, WATERBURY,
CONNECTICUT
W I T N E S S E T H:
WHEREAS, the above-named parties are all the parties to the
above-named Lease, and
WHEREAS, Tenant desires to extend the term of the Option Period of
said Lease,
NOW THEREFORE, the parties do hereby agree that the Lease shall be
amended as follows:
Sections 2.4 and 3.1 B shall be deleted in their entirely and the
following inserted in place thereof:
2.4 The Tenant shall have the option to renew its Lease for an
additional six (6) year and ten (10) month period commencing January 1, 1999
and ending October 31, 2005 upon the same terms and conditions, except for the
basic annual rent which shall be computed as set forth in paragraph 3.1 B
herein. Tenant shall exercise said option by giving the Landlord notice of its
intention to do so by certified mail, return receipt requested, no later than
July 1, 1998.
3.1 B. i. During the Option Period of January 1, 1999 to
December 31, 1999, an annual rental of $19,572.00,
payable in monthly installments of $1,631.00, in
advance, on the first day of each month during said
period;
<PAGE>
ii. During the Option Period of January 1, 2000 to
December 31, 2000 an annual rental of $19,572.00,
payable in equal monthly installments of $1,631.00,
in advance on the first day of each month during said
period;
iii. During the Option Period of January 1, 2001 to
December 31, 2001 an annual rental of $20,504.00,
payable in equal monthly installments of $1,708.67,
in advance on the first day of each month during said
period;
iv. During the Option Period of January 1, 2002 to
December 31, 2002 an annual rental of $20,504.00,
payable in equal monthly installments of $1,708.67,
in advance on the first day of each month during said
period;
v. During the Option Period of January 1, 2003 to
December 31, 2003 an annual rental of $21,436.00,
payable in equal monthly installments of $1,786.33,
in advance on the first day of each month during said
period;
vi. During the Option Period of January 1, 2004 to
December 31, 2004 an annual rental of $21,436.00,
payable in equal monthly installments of $1,786.33,
in advance on the first day of each month during said
period;
vii. During the Option Period of January 1, 2005 to
October 31, 2005 an annual rental of $18,640.00,
payable in equal monthly installments of $1,864.00,
in advance on the first day of each month during said
period;
IN ALL OTHER RESPECTS, the terms and conditions of the Lease are
hereby ratified and
<PAGE>
affirmed.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands
and seals, and to a duplicate of the same tenor and date this 22 day of
September, 1995. Signed sealed and delivered in the presence of
INDUSTRIAL DEVELOPMENT GROUP
By: /s/ Kenneth N. Devino
-----------------------------------
Kenneth N. Devino
Its Partner
DISCAS, INC. Corp.
By: /s/ Patrick A. DePaolo, Sr.
-----------------------------------
Its President
DISCAS RECYCLED PRODUCTS CORP.
By: /s/ Patrick A. DePaolo, Sr.
-----------------------------------
Its President
STATE OF CONNECTICUT)
)ss: Waterbury
COUNTY OF NEW HAVEN)
On this the 22nd day of September, 1995, before me, the undersigned
officer, personally appeared, Kenneth M. Devino, known to me (or satisfactorily
proven) to be the person whose name is subscribed to the within instrument and
acknowledged that he executed the same for the purposes therein contained.
IN WITNESS WHEREOF, I hereunto set my hand.
illegible
-------------------------------
Notary Public
Commissioner, Superior CT.
STATE OF CONNECTICUT )
) ss: Waterbury
COUNTY OF NEW HAVEN )
On this day the 20th day of September, 1995, before me, the
undersigned officer, personally appeared, Patrick A. DePaolo, Sr. who
acknowledged himself to be the President of Discas, Inc., a
<PAGE>
corporation, and that he as such officer, being authorized so to do, executed
the foregoing instrument for the purposes therein contained, by signing the
name of the corporation by himself as such officer.
IN WITNESS WHEREOF, I hereunto set my hand.
illegible
-------------------------------
Notary Public
Commissioner, Superior CT.
STATE OF CONNECTICUT )
) ss: Waterbury
COUNTY OF NEW HAVEN )
On this day the 20th day of September, 1995, before me, the
undersigned officer, personally appeared, Patrick A. DePaolo, Sr. who
acknowledged himself to be the President of Discas Recycled Products Corp., a
corporation, and that he as such officer, being authorized so to do, executed
the foregoing instrument for the purposes therein contained, by signing the
name of the corporation by himself as such officer.
IN WITNESS WHEREOF, I hereunto set my hand.
illegible
---------
Notary Public
Commissioner, Superior CT.
<PAGE>
Exhibit 10.12
LEASE
26,018 Square Feet
INDUSTRIAL DEVELOPMENT GROUP
----------------------------
To
DISCAS, INC AND DISCAS RECYCLED PRODUCTS CORP.
----------------------------------------------
TABLE OF CONTENTS
-----------------
Page
----
Article I - Demised Premises 1
Article II - Term of Lease and Option to Renew 2
Article III - Rent and Security Deposit 4
Article IV - Real Estate Taxes 7
Article V - Compliance with Laws 8
Article VI - Use of Premises 11
Article VII - Maintenance, Repair and Alterations 12
Article VIII - Utilities 15
Article IX - Indemnity and Insurance 15
Article X - Subordination, Attornment, Estoppel
Certificates 19
Article XI - Damage by Fire or Other Casualty 20
Article XII - Eminent Domain 21
Article XIII - Default of the Tenant 22
Article XIV - Holding Over 24
Article XV - Miscellaneous Provisions 25
<PAGE>
L E A S E
---------
THIS INDENTURE OF LEASE, made this 17th day of May 1993, by and
between INDUSTRIAL DEVELOPMENT GROUP, a general partnership with an office at
Mattoon Road, Waterbury, Connecticut, acting by KENNETH M. DEVINO, its partner,
hereinafter referred to as "LANDLORD", and DISCAS, INC. and DISCAS RECYCLING
PRODUCTS CORP., Delaware corporations with a principal place of business at 56
Eagle Street, Waterbury, CT. 06708, hereinafter referred to as "TENANT". The
above Tenant, if more than one, shall jointly and severally liable for all
provisions in the lease.
W I T N E S S E T H:
--------------------
ARTICLE I
---------
DEMISED PREMISES
----------------
1.1 That in consideration of the rents and covenants herein provided
and contained on the part of the Tenant to be paid, performed and observed, the
Landlord does hereby demise and lease unto the Tenant approximately 26,018
square feet of floor space in a commercial building containing a total of
112,203 square feet of floor space located at 567-1 South Leonard Street, in
the City of Waterbury, County of New Haven and State of Connecticut. Said
building is located on premises described in Exhibit A attached hereto and made
a part hereof and the location of the demised premises is outlined in red on
said Exhibit A. The foregoing premises are hereinafter sometimes referred to as
the "Demised Premises."
1.2 The Tenant shall have the right to use the parking areas
designated by the Landlord in common with other tenants. Said parking areas
shall only be used for the limited
<PAGE>
purpose of parking the registered motor vehicles of the Tenant and its
employees and customers during business hours and shall not be used for storage
of motor vehicles or any other property.
1.3 a) The Tenant will not sublet the premises or any part thereof nor
will said Tenant assign this Lease or any interest herein or transfer
possession or occupancy of said premises without the prior written consent of
the Landlord, nor shall any subletting or assignment hereof be affected by
operation of law or otherwise than by prior written consent of the Landlord,
which consent shall not be unreasonably withheld, provided, however, that the
Tenant shall at all time remain liable for the payment of the rents and the
fulfillment of the covenants of said Lease, and the premises shall not be
occupied or used or permitted to be occupied or used at any time during the
said term for purposes other than that specified in ARTICLE VI 6.1 of this
Lease.
b) If there is any assignment of this Lease by Tenant or a
subletting of the whole of the premises by Tenant at a rent which, in either
case, exceeds the rent payable hereunder by Tenant, or if there is a subletting
of a portion of the premises by Tenant, at a rent in excess of the subleased
portion's pro rata share of the rent payable hereunder by Tenant, then Tenant
shall pay Landlord, as additional rent, forthwith upon Tenant's receipt of each
installment of any such excess rent, fifty (50%) percent of any such excess
rent. The provisions of this paragraph shall apply to each and every assignment
of the Lease and each and every subsidiary or controlling corporation or any
other person, firm or entity, in each case on the terms and conditions set
forth herein. Each request by Tenant for permission to assign this lease, or to
sublet the whole or any part of the Premises shall be accompanied by a warranty
by Tenant as to the amount of rent to be paid to Tenant by proposed assignee,
or sublessee. For the purposes of this Section 1.3, the term "rent" shall mean
all base rent,
<PAGE>
additional rent or other payments and/or consideration payable by one party to
another for the use and occupancy of all or a portion of the Premises.
ARTICLE II
----------
TERM OF LEASE AND OPTION TO RENEW
---------------------------------
2.1. The term of this Lease shall be for a period of five (5) years
and five months beginning on the 1st day of August, 1993 and ending on the 31st
day of December, 1998.
2.2 The Tenant may have limited occupancy of the Demised Premises on
June 1, 1993 during the construction of the improvements listed on Exhibit B
attached hereto. Tenant shall pay to the Landlord the sum of One Thousand Five
Hundred Twenty-Four ($1,524.00) Dollars per month for the months of June and
July, 1993 in lieu of all other monies due and owing pursuant to the terms of
the Lease including rents, taxes, insurance and common charges. During said
early occupancy, Tenant shall pay for all utilities used on the Demised
Premises and shall be bound by al of the other terms of the within Lease.
2.3 If the Premises are not ready for occupancy by August 1, 1993,
then the Tenant shall be given a credit against his rent in the amount of One
Hundred Eighty and 67/100 ($180.67) Dollars per day for every day that
occupancy is delayed past August 1, 1993. In the event Landlord, for reasons
within Landlord's control, does not deliver occupancy by August 1, 1993,
Landlord shall be in no way liable to Tenant for damages of any nature except
as follows:
(i) Tenant shall not be obligated to pay to Landlord the $14,000
cost for cleaning and sealing the concrete floor, per
document dated April 14, 1993 and attached to the Lease
hereto as Exhibit C.
(ii) Landlord shall bear the full costs associated with a)
installation of the underground electrical conduit pipe
running from the utility pole to the
4
<PAGE>
location of the new transformer vault and, b) installation of
the underground vault, and transformer pad, and c)
installation of the conduit sleeves from the transformer to
the building.
ARTICLE III
-----------
RENT AND SECURITY DEPOSIT
-------------------------
3.1 Tenant agrees to pay to Landlord at the offices of the Landlord,
or at such other place designated by Landlord, without any prior demand
therefor, and without any deduction or set-off whatsoever, an annual rental
during the term of this Lease and any option period as follows:
A. i. During the period of August 1, 1993 to July 31, 1994,
an annual rental of $65,045.00, payable in equal
monthly installments of $5,420.42, in advance, on the
first day of each month during said period;
ii. During the period of August 1, 1994 to July 31, 1995,
an annual rental of $71,549.50, payable in equal
monthly installments of $5,962.46, in advance, on the
first day of each month during said period;
iii. During the period of August 1, 1995 to July 31, 1996,
an annual rental of $78,054.00, payable in equal
monthly installments of $6,504.50, in advance, on the
first day of each month during said period;
iv. During the period of August 1, 1996 to July 31, 1997,
an annual rental of $78,054.00, payable in equal
monthly
5
<PAGE>
installments of $6,504.50, in advance, on the first
day of each month during said period;
v. During the period of August 1, 1997 to December 31,
1998, an annual rental of $84,558.50, payable in equal
monthly installments of $7,046.54, in advance, on the
first day of each month during said period.
B. i. During the Option Period of January 1, 1999 to December
31, 1999, at an annual rent of $84,558.50 payable in
equal monthly installments of $7,046.54, in advance on
the first day of each month during said period;
ii. During the period of January 1, 2000 to December 31,
2000, an annual rental of $91,063.00, payable in equal
installments of $7,588.58, in advance, on the first day
of each month during said period;
iii During the Option Period of January 1, 2001 to December
31, 2001, an annual rental of $91,063.00, payable in
equal monthly installments of $7,588.58, in advance, on
the first day of each month during said period;
iv. During the Option Period of January 1, 2002 to December
31, 2002, an annual rental of $97,567.50, payable in
equal monthly installments of $8,130.63, in advance, on
the first day of each month during said period;
6
<PAGE>
v. During the Option Period of January 1, 2003 to December
31, 2003, an annual rental of $97,567.50, payable in
equal monthly installments of $8,130.63 in advance, on
the first day of each month during said period.
3.2 The Tenant shall pay as additional rent any money required to be
paid pursuant to ARTICLE IV, VII, VIII, and IX and all other sums of money or
charges required to be paid by Tenant under this Lease, whether or not the same
be designated "additional rent". If such amounts or charges are not paid at the
time provided in this Lease, they shall nevertheless, if not paid when due, be
collectible as additional rent with the next installment of rent thereafter
falling due hereunder, but nothing herein contained shall be deemed to suspend
or delay the payment of any amount of money or change at the time the same
becomes due and payment hereunder, or limit any other remedy of the Landlord.
3.3 If Tenant shall fail to pay, when the same is due and payable or
within the ten (10) days thereafter, any rent or any additional rent, Tenant
shall pay to Landlord a late charge equal to five (5%) percent of any such late
payment which is not received by Landlord within thirty (30) days of the due
date.
3.4 Tenant shall deposit the sum of Five Thousand Four Hundred Twenty
and 42/100 ($5,420.42) Dollars not later than June 1, 1993, and additional sum
of Five Thousand Four Hundred Twenty and 42/100 ($5,420.42) Dollars not later
than June 1, 1993, to secure the faithful performance of all of the terms and
conditions of this Lease. If the Tenant shall comply with all the terms,
conditions and obligations of this Lease, such deposit will be returned to
Tenant at the termination of this Lease, without interest. In the event of the
Tenant's default hereunder such deposit may be applied by the Landlord, toward
reduction of any damages without barring the Landlord, in any matter
whatsoever, from other or additional
7
<PAGE>
legal or equitable course. Such deposit shall not be construed as constituting
liquidated damages. It is understood and agreed that the Landlord shall always
have the right, at its option, to apply said deposit, or from time to time such
one or more parts or portions thereof or part or portion thereof not previously
applied, to late charges and to the curing of any default that may then exist,
without prejudice to any other remedy or remedies which the Landlord may have
on account thereof. Tenant hereby agrees not to look to the Landlord's
mortgagee, as mortgagee, mortgagee in possession, or successor in title to
property, for accountability for any security deposit required by Landlord
hereunder unless said sums have actually been received by said mortgagee as
security for Tenant's performance of this Lease.
ARTICLE IV
----------
REAL ESTATE TAXES
-----------------
4.1 The Tenant shall pay as additional rent to the Landlord a sum
equal to it's proportionate share of the real estate taxes assessed against and
attributable to the building and land constituting the premises described in
Exhibit A annexed hereto. It is agreed that the Tenant's proportionate share of
any such taxes shall be based on a fraction, the numerator of which shall be
the square footage of the Demised Premises which is agreed to be 26,018 square
feet, and the denominator of which shall be the total square footage of the
building which is agreed to be 112,203 square feet. Tenant shall also pay all
taxes assessed on improvements made in or above Demised Premises by Tenant.
Tenant shall pay to Landlord monthly, on any extension thereof, an amount equal
to 1/12 of its share of the real estate taxes as provided above. Landlord shall
hold said funds for the benefit of the tenant and use them to pay such taxes as
they fall due. If said funds are insufficient to pay the Tenant's share of the
taxes when due, the Landlord shall bill the Tenant for the difference and
Tenant shall make payment to Landlord within thirty (30) days after receipt of
said bill. If said funds are in excess of the taxes
8
<PAGE>
due, then Landlord shall return the unused portion of said funds to the Tenant
within thirty (30) days after the taxes become due, except that if tenant is in
default in the payment of rent provided for herein, Landlord may apply said
unused funds to the payment of said rent. Tax bills shall be sufficient
evidence of the amount to be paid by the Tenant. "Real Estate Taxes" shall mean
all taxes or assessments and governmental charges whether federal, state,
county, or municipal which are levied or charged against real estate or
collecting rent and any other taxes and assessments attributable to the
premises herein leased or its operation, excluding federal, state or other
income taxes, and federal or state succession or inheritance taxes.
If any payment for taxes shall be due for any tax year which said
Lease shall be in force and effect for less than a full tax year, such payment
shall be prorated so the amount payable to Tenant shall be based on the actual
number of months that said Lease shall be in force and effect during such tax
year. It is further agreed and understood that if Tenant shall qualify for any
city and/or state real estate exemptions may be available to manufacturers, the
benefit of said exemption shall be applied directly to the Tenant's portion of
the taxes due pursuant to this paragraph. If the Tenant does not qualify for
such exemptions, but another Tenant in the building does so qualify, then
tenant shall receive no benefit from the reduced taxes, but shall pay its full
share as if no exemption has been granted.
ARTICLE V
---------
COMPLIANCE WITH ENVIRONMENTAL
-----------------------------
LAWS, FIRE CODES AND OTHER LAWS
-------------------------------
5.1 Laws in General. The Tenant at sole expense, shall comply with all
laws, order, and regulations of federal, state, and municipal authorities, and
with any direction of any public officer, pursuant to law, which shall impose
any duty upon the
9
<PAGE>
Landlord or the Tenant with respect to the venting of noxious odors and fumes,
cleanliness, safety, occupation and the use of said premises and the nature,
character and manner of operation of the business conducted in or at the
Demised Premises. The Tenant, at its sole expense, shall obtain all license or
permits which may be required for the conduct of its business within the terms
of this Lease, or for the making of repairs, alterations, improvements, or
applying for all such permits or licenses.
5.2 (a) Environmental Laws . Landlord represents that as of the date
hereof, the Landlord and the property containing the Demised Premises are not
in violation of any local, state or federal rule or regulation concerning the
handling and disposal of oil or petroleum or chemical liquid or solid, liquid
or gaseous products, or hazardous waste or concerning air, water or noise
pollution.
(b) Tenant shall comply with all local, state and federal
regulations concerning the storage, handling and disposal of oil or petroleum
or chemical liquid or solid, liquid or gaseous products, or hazardous waste and
air, water and noise pollution. Tenant hereby agrees not to handle, store, or
dispose any hazardous or toxic waste or substance upon the premises which is
prohibited by any federal, state or local statutes, ordinance, or regulations.
Tenant hereby covenants to indemnify and hold Landlord, its successors and
assigns harmless from any loss, damage, claims, cost, liabilities or cleanup
cost arising out of Tenant's use, handling, storage or disposal of any such
hazardous or toxic waste or substances on the premises, including all such
losses due to claims made by the Department of Environmental Protection of the
State
10
<PAGE>
of Connecticut, (DEP), Environmental Protection Agency of the Federal
Government (EPA), other government agencies, or private third parties.
(c) If Tenant intends to produce, store or create, on the Demised
Premises, any oil or petroleum or chemical liquid or solid, liquid or gaseous
products, or any other substance defined as hazardous waste by state statute
and/or the Environmental Protection of the State of Connecticut (DEP), or by
federal statute and/or the Environmental Protection of the Federal Government
(EPA), it must submit a plan to said agency or agencies and to the Landlord,
prior to occupancy, for the safe handling, storage and use and removal of any
such substance. If a permit is required by the DEP or EPA for the use, storage
and/or removal of such substance, Tenant must obtain such permit and submit a
copy to Landlord prior to occupancy.
(d) If there is a "spill", as that term is defined in Section
22a-452c of the Connecticut General Statutes, of any substance set forth in
paragraph (b) above, such "spill" shall be immediately reported by Tenant to
the Landlord and to the DEP and, if required, to the EPA. Tenant shall take
immediate remedial action to contain and clean up such "spill" and shall be
solely responsible for all cost of remedial action including, but not limited
to, the cost of professional environmental studies and reports, attorney's
fees, clean up, soil removal, monitoring costs, fines and penalties.
(e) If Tenant does not take immediate action to contain and clean
up such a "spill," or if Landlord is ordered by the DEP or EPA to take remedial
action to contain and clean up such "spill," and Tenant shall reimburse
Landlord for all cost of professional environmental studies, attorney's fees,
soil removal, clean up, monitoring
11
<PAGE>
cost, fines and penalties, and interest from the date Landlord incurs each
expense until such expense is paid by Tenant at the rate of twelve percent
(12%) per annum.
(f) At the conclusion of the term of this Lease or any
modifications or extensions thereof, or upon Landlord's sale of the Demised
Premises to a third party, Tenant shall submit a Certification to Landlord
containing the same information as it required by the provisions of Connecticut
Public Act No. 87-475 or any successor statute for transfers of establishments.
Said Certification shall state that there has been no discharge, spillage,
uncontrolled loss, seepage or filtration of hazardous waste, toxic waste and/or
biochemical waste on the Premises and/or Building or the grounds or that any
such discharge, spillage, uncontrolled loss, seepage or filtration has been
cleaned and removed in accordance with procedures approved by the Commissioner
of Environmental Protection of the State of Connecticut or determined by him to
pose no threat to human health or safety or the environment which would warrant
containment and removal or other mitigation measures, and that any hazardous
waste, toxic or hazardous material, and/or biochemical waste which remains on
site is being managed in accordance with Chapter 445 and 446k of the
Connecticut General Statutes and regulations adopted thereunder, and in
accordance with any other State or Federal law or regulation which shall then
be applicable. Failure or inability of the Tenant to provide said
Certification, or the presence of any waste on the Premises contravened by said
Certification shall entitle the Landlord to recover damages from the Tenant on
the basis of strict liability, without regard to fault, for all clean up and
removal costs
12
<PAGE>
and direct and indirect damages arising therefrom, including reasonable
attorney's fees incurred in the enforcement of this Article.
5.3 The Landlord represents that the Demised Premises is in
conformance with applicable fire codes or will be in conformance with
applicable fire codes on the date that Tenant takes occupancy. If, because of
the nature of Tenant's operations, the Landlord is required by the fire codes
to make modifications or additions to the sprinkler system, fire walls, exits,
fire escapes or any other fire prevention system then Tenant agrees to pay for
any such modification or addition as additional rent.
ARTICLE VI
USE OF PREMISES
6.1 Tenant covenants and agrees that throughout the term of this Lease
the Demised Premises will be used only for polymer product manufacturing,
packaging warehousing, research and development, and offices.
6.2 Tenants covenants and agrees that throughout the term of this
Lease and any extension or renewal thereof:
(a) It will not overload, damage or deface the Premises;
(b) It will conform to all reasonable rules which Landlord may make
from time to time relative to the operation and use of the
property;
(c) It will at all times fully and promptly comply with all laws,
ordinances, orders and regulations of any lawful authority having
jurisdiction of the Demised Premises, including, but not limited
to, such as related to the venting of noxious odors and fumes,
cleanliness, safety, occupation and
13
<PAGE>
use of said operation of the business conducted in or at the
Demised Premises;
(d) It will vent all noxious and hazardous odors and fumes from its
operations, maintain humidity controls, maintain noise levels and
provide safe procedures for the handling and storage of chemicals
and other hazardous materials in such a manner so as not to
affect or interfere with other tenants in the building, or
occupants of other properties adjacent to or within close
proximity of the building, and in such a manner so as not to
cause damage to the building, the building lot upon which the
building is located, and neighboring properties. If the Tenant
fails to comply with this provision, the Landlord may install
said ventilation or other controls and charge the Tenant the
reasonable costs thereof which the Tenant agrees to pay as
additional rent, or at the Landlord's election, the Landlord may
terminate this Lease upon thirty (30) days written notice to the
Tenant;
(e) It will place all of its rubbish and waste in the area designated
by the Landlord, and it shall be responsible for the costs of the
removal of said rubbish;
(f) It will not place any sign upon premises without first submitting
the design and proposed location of the sign to the Landlord and
receiving written approval from Landlord of such design and
location.
14
<PAGE>
ARTICLE VII
-----------
MAINTENANCE, REPAIRS AND ALTERATIONS
------------------------------------
7.1 Tenants represents that it has examined the Demised Premises as
they now exist and the plans, if any, for the completion of said premises. The
Landlord agrees to turn the premises over to the Tenant in a "broom clean"
condition and further agrees to make the improvements listed on Exhibit B, if
any, on or before the date of occupancy, and Tenant accepts the premises in
their present condition and the Landlord and/or its agents makes no
representations as to their present or future condition.
7.2 Tenant may make such interior alterations or improvements in and
to the Demises Premises, at it's own cost, as it may deem desirable for its use
thereof, with the approval of Landlord, which approval shall not be
unreasonably withheld. No alteration shall be made that modifies the basic
building structure or external appearance without the written approval of
Landlord. All repairs and alterations shall be of quality at least equal to the
original construction. At the termination of this Lease, except for casualty
losses insured against, or losses occasioned by floods, earthquakes, wars, acts
of God, or other losses over which Tenant has no control, Tenant shall deliver
the Demised Premises to Landlord in good condition and repair, allowance being
made for ordinary wear, tear and obsolescence. In addition, all of said
alteration or improvements shall remain the property of the Landlord, except
that if Tenant is not in default of the Lease at such termination, Tenant may
elect to remove the 4,000 amp 480 volt main disconnect switch from the Demised
Premises and simultaneously install and connect a new 480 volt main disconnect
switch in its place. However, should the
15
<PAGE>
Landlord elect that such alterations or improvements be removed by Tenant, then
Tenant agrees to remove same at Tenant's sole expense and to restore the
premises to the condition it was in at the commencement of this Lease. If
Tenant shall fail to remove same, then Landlord shall cause same to be removed
and Tenant agrees to reimburse the Landlord for the cost of such removal,
together with any and all damages which Landlord may suffer by reason of
Tenant's failure to remove same.
7.3 The Tenant agrees to maintain and repair the interior of the
Demised Premises, including, but not limited to, the interior walls and
partitions, and all of the mechanical systems including the furnaces, heating
and air conditioning, plumbing and electrical system. Tenant's liability for
repair of any one of the furnaces or heating/air conditioning systems shall be
limited to One Thousand ($1,000) Dollars per furnace or system per lease year,
provided that the need for such repair is not the result of the act or
negligence of Tenant or Tenant's employees or agent. Tenant shall also maintain
and repair both the interior and exterior of all doors, including overhead
doors, located within the Demised Premises. Tenant shall provide and maintain
an adequate number of fire extinguishers in the Demised Premises in order to
comply with local fire codes. Tenant, at its sole expense, will, throughout the
term of this Lease, obtain and keep in force a maintenance contract with a
qualified service company to regularly inspect and perform maintenance services
to the heating, ventilating and air-conditioning systems serving the Demised
Premises. Tenant shall furnish Landlord with a copy of said maintenance
contract, and of renewals or replacement.
16
<PAGE>
7.4 Landlord shall be responsible for exterior structural repairs
including the roof, foundation and exterior walls.
7.5 Landlord shall provide for the maintenance and repair and lighting
of the designated receiving and parking areas including, but not limited to,
lighting, repairs, removal of dirt and debris, and lawn mowing and maintenance
to lawns and shrubbery. Tenant shall pay to Landlord its proportionate share of
the cost of said maintenance and repairs based on a fraction, the numerator of
which shall be 26,018 and the denominator of which shall be 112,203. Landlord
shall present Tenant with a bill for such maintenance and repair on the first
day following the performance of such maintenance and repairs and Tenant shall
pay said bill within ten (10) days of its receipt.
Tenant shall be responsible for snow removal and sanding any walkways
or stairways which abut and/or are used for ingress and egress to the Demised
Premises.
7.6 Landlord shall be responsible for the snow plowing of the entire
paved parking area to the building and the driveways leading thereto whenever
there is an accumulation of two (2) or more inches of snow. Tenant shall pay to
Landlord its proportionate share of the cost of said snow removal based on a
fraction, the numerator of which shall be 26,018 and the denominator of which
shall be 112,203. Landlord shall present Tenant with a bill for such snow
plowing on the first day of each month following such snow plowing and Tenant
shall pay said bill within ten (10) days of its receipt.
17
<PAGE>
7.7 The Tenant further covenants and agrees to replace all broken
glass on the Demised Premises during the term of this Lease or any month to
month extension thereof at its own expense.
ARTICLE VIII
------------
UTILITIES
---------
8.1 (a) Tenant agrees to pay all charges for electricity, electricity
for heating, water, telephone, fire service line charges, for sprinkler alarm
monitory charges and any other utilities used by the Demised Premises.
(b) Separate meters for electricity shall be provided and
installed by Landlord. Tenant shall pay to Landlord its proportionate share of
the total water used by the entire Building based upon a fraction, the
numerator of which shall be 26,018 and the denominator of which shall be
112,203. Landlord shall present Tenant with a bill for such water charges on
the first day of the month following the receipt by Landlord of a water bill
from the city or other provider, and Tenant shall pay said bill within ten (10)
days of its receipt. Provided, however, if Landlord determines, in its sole
discretion, that Tenant's water use, because of the nature of its operations,
exceeds the average water use of other tenants in the Building, then Landlord
reserves the right to install a meter in the Demised Premises and Tenant shall
be billed for water based on actual use.
8.2 Tenant shall maintain a temperature within the entire Demised
Premises of at least 50 degrees fahrenheit in order to prevent freezing pipes
and plumbing located therein.
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8.3 Landlord shall not be liable in damages or otherwise for any
failure to furnish or interruption of the services of heat or any utility
consumed or used in the Demised Premises, provided that such failure is beyond
the reasonable control of Landlord and not due to Landlord's negligence.
ARTICLE IX
----------
INDEMNITY AND INSURANCE
-----------------------
9.1 The Tenant shall pay, as additional rent, its proportionate share
of the Landlord's total insurance premium on the entire building for fire,
lightning, extended coverage, all loss of a direct physical nature, loss of
rental income, and legal liability coverage as it pertains to the premises and
its appurtenances. It is agreed that the Tenant's proportionate share of such
premium shall be based on a fraction, the numerator of which shall be the
square footage of the Demised Premises which is agreed to be 26,018 square
feet, and the denominator of which shall be the total square footage of the
building which is agreed to be 112,203 square feet. Tenant shall pay to
Landlord monthly, on the first day of each month during the term of this Lease
and any extension thereof, an amount equal to 1/12 of its share of the
insurance premiums as provided above. Landlord shall hold said funds for the
benefit of the Tenant and use them to pay such insurance premium as they fall
due. If said funds are insufficient to pay the Tenant's share of the insurance
premiums when due, then Landlord shall bill the Tenant for the difference and
the Tenant shall make payment to Landlord within thirty (30) days after receipt
of said bill. If said funds are in excess of the insurance premiums due, then
Landlord shall return the unused portion of said funds to the
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Tenant within thirty (30) days after the insurance premium become due, except
that if the Tenant is in default in the payment of the rent as provided for
herein, Landlord may apply said unused funds to the payment of said rent. The
premium bill submitted by Landlord's insurance company shall be sufficient
evidence of the amount of premium due and owing. Tenant further agrees that if
a determination is made by the Landlord's fire insurance carrier that the
Tenant is storing materials on the premises or performing certain manufacturing
processes or procedures on the premises which increase the risk of loss, and
said insurance company thereby increases the total insurance premium for the
entire building over and above that premium which the Landlord would have paid
had there been no such materials stored or manufacturing procedures or
processes performed, then Tenant shall pay Landlord, in addition to his
proportionate share of said premium as aforesaid, the total amount of said
increased insurance premium. If the increased insurance premium is attributable
to more than on Tenant in the building, then the increase shall be apportioned
between said Tenants in accordance with a formula to be supplied by the
Landlord's insurance carrier.
9.2 Tenant covenants and agrees to assume exclusive control of the
Demised Premises, and all tort liabilities incident to the control or leasing
thereof, and to save Landlord harmless from all claims or damages arising on
account of any injury or damage to any person or property on said premises, or
otherwise resulting from the use and maintenance and occupancy of the premises
or anything or facility kept or used thereon, unless such claim or damage is
caused by negligence of the Landlord or its agents, servants or employees.
Landlord shall be saved harmless by Tenant, from any
20
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liability on account of any accident or injury to Tenant, or to any of Tenant's
servants, employees, agents, visitors, or licensees, or to any person or
persons in or about the said premises only if such accident or injury is caused
by the act or negligence of Tenant, its servants, employees, agents, visitors
or licensees. In case Landlord or Tenant shall, without fault on its part, be
made a party to any litigation commenced by or against the other party, then
each party, then each party shall pay all cost, expenses and reasonable
attorney's fees incurred or paid by the other party in connection with such
litigation.
9.3 Tenant covenants and agrees that it will obtain and maintain
during the term of this Lease, at its own expense general comprehensive public
liability insurance with responsible companies qualified to do business in
Connecticut which shall insure Landlord and all persons in privity with
Landlord, as well as Tenant, against all claims for injuries to persons or for
death occurring in or about the Demised Premises, in the amount of at least One
Million Dollars ($1,000,000.00), and against all claims for damages to or loss
of property occurring in or about the Demised Premises in the amount of at
least Five Hundred Thousand Dollars ($500,00.00). Tenant agrees to furnish
Landlord with policies or certificates of such insurance prior to the
commencement of the term hereof and each renewal policy or certificate thereof
at least ten (10) days prior to the expiration of the policy it renews. Each
such policy shall be noncancellable with respect to the Landlord's interest
without at least ten (10) days prior written notice to the Landlord.
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9.4 Landlord agrees that it will. at its own cost and expense, keep
its own fixtures, merchandise and equipment adequately insured during the term
hereof against loss or damage by fire, with the usual extended coverage
endorsements.
9.5 Landlord shall not be liable for any damage to the Demised
Premises, or to any property of the Tenant or of any other person thereon, from
water, rain, snow, ice, sewage, steam gas or electricity which may leak into or
issue or flow from any part of said building of which the Demised Premises are
part, or from the bursting, breaking, obstruction, leaking or any defect of any
of the pipes or plumbing, appliances, or from electric wiring or other fixtures
in said building or from the condition of said premises or building or any part
thereof, or from the street or subsurface, except such damage or injury as may
be caused by the negligent act or omission on the part of the Landlord, its
agents, servants or employees.
9.6 Landlord and Tenant each hereby waive such causes of action either
may have or acquire against the other which are occasioned by the negligence of
either of them or their employees or agents resulting in the destruction of or
damage to real or personal property belonging to the other and located on the
premises of which the Demised Premises are a part and which are caused by fire
and/or the hazards normally insured against in an Extended Coverage Endorsement
to a Standard Fire Insurance Policy approved in the State of Connecticut. Each
party to this agreement further agrees to cause any insurance policy covering
destruction of or damage to such real or personal property from fire and/or the
hazards covered under the aforementioned extended coverage endorsement to
contain a waiver of subrogation clause or
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<PAGE>
endorsement under which the insurance company waives its right of subrogation
against either party to this agreement in case of destruction of or damage to
the aforementioned real or personal property of either such party.
ARTICLE X
---------
SUBORDINATION, ATTORNMENT, ESTOPPEL CERTIFICATES
------------------------------------------------
10.1 Subordination. Tenant agrees that this Lease is subject and
subordination to the lien of any mortgage now on or which at any time may be
made a lien upon the Demised Premises or any part thereof. This subordination
provision shall be self-operative and no further instrument of subordination
shall be required. Tenants agrees to execute and deliver, upon request, such
further instrument or instruments confirming this subordination as shall be
desired by Landlord or by any Mortgagee or proposed mortgagee; and Tenant
hereby constitutes and appoints Landlord as Tenant's attorney-in-fact to
execute any such instrument or instruments.
10.2 Attornment. In the event any proceedings are brought for
foreclosure of, or in the event of exercising of the power of sale under, any
mortgage deed to secure debt given by Landlord and covering the Demised
Premises, Tenant shall attorn to the purchaser upon any such foreclosure or
sale and recognize such purchaser as the owner and landlord under this Lease,
provided such owner, as landlord, shall recognize Tenant's rights to continue
to occupy the Demised Premises and exercise and enjoy all of its rights
hereunder so long as Tenant complies with the terms and provisions of this
Lease and further provided any such purchaser shall be deemed to assume and
agree to perform the duties of the Landlord hereunder.
23
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10.3 Estoppel Certificates. Tenant agrees, at any time and from time
to time upon not less than five (5) days prior written notice by Landlord, to
execute, acknowledge and deliver to Landlord a statement in writing (i)
certifying that this Lease is unmodified and in full force and effect (or if
there have been modifications the nature of same), (ii) stating the dates to
which the Minimum Annual Rent and Additional Rent have been paid by Tenant,
(iii) stating whether or not to the best knowledge of Tenant, Landlord is in
default in the performance of any covenant, agreement of condition contained in
this Lease, and, if so, specifying each such default of which Tenant may have
knowledge, and (iv) stating the address to which notice to Tenant should be
sent; (v) stating such other facts as Landlord's Lender or Purchaser may
require. Any such statement delivered pursuant hereto may be relied upon by an
owner of the Demised Premises, any mortgagee of the Demised Premises, any
mortgagee of the Demised Premises, or any prospective assignee of any such
mortgagee.
ARTICLE XI
----------
DAMAGE BY FIRE OR OTHER CASUALTY
--------------------------------
11.1 In the event the Demised Premises shall be destroyed or so
damaged by fire or other casualty so as to render the Demised Premises wholly
untenantable, Landlord, at its option, shall (a) restore and repair such damage
to the Demised Premises in which event the basic monthly rent shall abate on a
per diem thirty (30) day month basis during the period of restoration ; or (b)
terminate this lease or any renewal thereof by giving written notice to Tenant
thirty (30) days after such fire or casualty, and the rent shall terminate as
of the day of such fire or casualty.
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If Landlord has not elected to terminate this Lease at the end of the
thirty (30) day period as provided in (b) above, then Landlord shall have an
additional period of one hundred twenty (120) days to restore the premises. In
the event Landlord has not substantially completed such restoration at the end
of such periods, then Tenant may elect to terminate this Lease by giving
written notice of such termination to Landlord by certified mail, return
receipt requested.
In the event the leased premises shall be destroyed or so damaged but
are not thereby rendered wholly untenantable, Landlord shall restore the leased
premises with reasonable dispatch, and while such damage is being repaired, the
basic monthly rent shall be reduced by an amount which bears the same ratio to
the monthly rent that the floor area rendered untenantable bears to the total
floor area of the Demised Premises.
ARTICLE XII
-----------
EMINENT DOMAIN
--------------
12.1 In the event that the whole of Demised Premises shall be taken
under the power of eminent domain, this lease shall thereupon terminate as of
the date possession shall be so taken.
In event that a portion of the floor area of the Demised Premises
shall be taken under the power of eminent domain and the portion not so taken
will not be reasonably adequate for the operation of Tenant's business not
withstanding Tenant's performance or restoration as hereinafter provided, this
Lease shall thereupon terminate as of the date possession of said portion is
taken. In the event of any taking under the
25
<PAGE>
power of eminent domain which does not terminate this Lease as aforesaid, all
of the provisions of this Lease shall remain in full force and effect, except,
that the basic rent shall be reduced in the same proportion that the amount of
floor area of the Demised Premises taken bears to the total floor area of the
Demised Premises immediately prior to such taking, and Landlord shall at
Landlord's own cost and expense, restore such part of the Demised Premises as
is not taken to as near its former condition as the circumstances will permit
and Tenant shall do likewise with respect to all exterior signs, trade
fixtures, equipment, display cases, furniture, furnishings and other
installation of Tenant.
All damages awarded for any such taking under the power of eminent
domain, whether for the whole or a part of the Demised Premises, shall belong
to and be the property of the Landlord, whether such damages shall be awarded
as compensation for diminution in value of the leasehold or for the fee of the
Demised Premises, provided, however, that Landlord shall not be entitled to any
award made to Tenant for loss of or damage to Tenant's trade fixtures and
removable personal property or for damages to improvements made by Tenant with
approval of Landlord during the term of this Lease and any extension thereof or
for damages for cessation or interruption of Tenant's business, or for damages
for the cost of moving Tenant's equipment to another location.
If this Lease is terminated as provided in this Article XII, all rent
shall be paid up to the date that possession is taken by public authority, and
Landlord shall make an equitable refund of any rent paid by Tenant in advance
and not yet earned.
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A voluntary sale by Landlord to any public or quasi-public body,
agency or person, corporate or otherwise, having the power of eminent domain,
either under threat of condemnation or while condemnation proceedings are
pending, shall be deemed to be a taking by eminent domain for the purpose of
this Article XII.
ARTICLE XIII
------------
DEFAULT OF THE TENANT
---------------------
13.1 (a) If Tenant is in default in payment of rents for a period of
ten (10) days, or (b) if Tenant shall default in the performance or observance
of any other of the convenience, agreements, terms, provisions or conditions
contained herein and on its part to be performed or observed for thirty (30)
days after written notice from the Landlord specifying such default, or (c) if
any assignment shall be made by Tenant for the benefit of creditors, or Tenant
becomes involved in any proceedings as a debtor under the bankruptcy laws of
the United States in effect at the time of default, or (d) if Tenant's
leasehold interest shall be taken on execution, or (e) if the Tenant fails to
occupy the premises for a period of fifteen (15) consecutive days (unless the
premises are untenantable due to fire or casualty), then and in any such cases,
Landlord and the agents and servants of Landlord lawfully may, in addition to
and not in derogation of any remedies for any preceding breach of covenant,
immediately or at any time thereafter and without prior demand or statutory
notice to quit, commence an action of Summary Process to evict Tenant from the
premises, without prejudice to any remedies which might otherwise be used for
arrears of rent or preceding breach of covenant. Tenant hereby waives the
statutory Notice to Quit, and Tenant covenants and agrees
27
<PAGE>
that in the case of such termination, or termination under statute by reason of
default on Tenant's part, Tenant will, at the election of the Landlord:
(i) pay to Landlord in equal monthly installments, in advance,
sums equal to the aggregate rent herein provided for or, if
the Demised Premises have been relet, sums equal to the
excess of the aggregate rent herein provided for over the
sums actually received by Landlord, such sums being payable
as liquidated damages for the unexpired term hereof; or
(ii) pay to Landlord as damaged a sum which at the time of such
termination, or at the time to which installments of
liquidated damages shall have been paid (if the Landlord
has previously elected option number one above) represents
the amount by which the then rental value of the Demised
Premises is less than the aggregate rent herein provided
forth residue of the term; or
(iii) indemnify Landlord against loss of the aggregate rent
herein provided for from the time of such termination or
from the time to which installments of liquidated damages
shall have been paid (if the Landlord has previously
elected option number one above) to the expiration of the
term hereof as above set forth.
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For the purpose of this Article, the phase "aggregate rent", as
used herein, shall include the fixed annual rent and all additional rents and
charges payable hereunder, including reasonable attorney's fees incurred by
Landlord in enforcing its rights hereunder.
In the event of a default by the Tenant as above provided, if Landlord
shall elect not to terminate this Lease, it may relate the Premises or any
parts thereof, either in the name of Landlord or Tenant, for a term or terms
which may, at Landlord's option, extend beyond the balance of the term of this
Lease, and Tenant agrees that in the event of such reletting Tenant shall pay
Landlord any deficiency between the aggregate rent hereby reserved and
covenanted to be paid and the net amount of the rents collected on such
reletting, as well as any expense incurred by Landlord in such reletting
including, but not limited to, attorney's fee; broker; and expenses of repairs
or damages to the Demised Premises, and putting the Demised Premises in good
order and preparing the same for rerental. Such deficiency shall be paid in
monthly installments upon statements rendered by Landlord to the Tenant.
13.2 Any and all rights and remedies which Landlord may have under
this Lease and at law and in equity shall be cumulative and shall not be deemed
inconsistent with each other, and any two or more of all such rights and
remedies may be exercised at the same time insofar as permitted by law.
13.3 Landlord shall not be deemed in default in the performance of any
of its obligations hereunder unless it shall fail to perform such obligations
and such failure shall continue for a period of thirty (30) days, or such
additional time as is reasonably
29
<PAGE>
required to correct any such default, after written notice has been given by
Tenant to Landlord specifying the nature of Landlord's alleged default. After
the aforesaid time period has passed, the Landlord shall be responsible for the
reasonable attorney's fees incurred by Tenant in enforcing this provision of
the Lease.
13.4 If either party brings an action against the other party to
enforce the terms of this agreement, the losing party shall pay the prevailing
party's attorney's fee.
ARTICLE XIV
-----------
HOLDING OVER
------------
14.1 If Tenant holds possession of the Demised Premises after the
Expiration Date of this Lease, Landlord shall have the option, exercisable in
writing thirty (30) days after the date of expiration as aforesaid, to treat
Tenant as a Tenant at Sufferance, or as a Tenant by the Month. If landlord
fails to make such election, then the tenant shall be deemed a tenant by the
moth, commencing with the first at after the expiration of the Lease at DOUBLE
the Basic Monthly Rent paid during the last month of the term, and upon all the
other terms of this Lease, including the provision of this paragraph, Said
holdover term shall terminate upon thirty (30) days notice from one party to
the other. Nothing contained herein shall be construed within said thirty (30)
days after the date of Lease expiration as aforesaid as a consent by Landlord
to the occupancy or possession of the Demised Premises by Tenant after the
expiration of the Lease, and Landlord, upon said expiration, if Landlord elects
to treat Tenant as a Tenant at Sufferance, shall be entitled to the benefit of
all public, general or public laws
30
<PAGE>
relating to the speedy recovery of the possession of land and tenements held
over by tenant, whether now or hereafter in force and effect.
ARTICLE XV
----------
MISCELLANEOUS PROVISIONS
------------------------
15.1 Waiver. Failure of Landlord or Tenant to complain of any act or
omission on the part of the other party no matter how long the same may
continue, shall not be deemed to be a waiver by Landlord or Tenant of any of
its rights hereunder. No waiver by Landlord or Tenant at any time, express or
implied, of any breach of any provision of this Lease shall be deemed a waiver
of a breach of any other provision of this Lease or a consent to any subsequent
breach of the same of any other provision. If any action by Tenant or Landlord
shall require the other party's consent or approval, such consent to or
approval of such action on any one occasion shall not be deemed a consent to or
an approval of said action on any subsequent occasion or a consent to or
approval of any other action on the same or any subsequent occasion. No payment
by Tenant or acceptance by Landlord of a lesser amount than shall be due from
Tenant to Landlord shall be deemed to be anything but payment on account, and
the acceptance by Landlord of a check for lesser amount with an endorsement or
statement thereon or upon a letter accompanying said check that said lesser
amount is payment in full shall not be deemed an accord and satisfaction, and
Landlord may accept said check without prejudice to receive the balance due or
pursue any other remedy. Any and all rights and remedies which either party may
have under this Lease or by operation of law, either party may have under this
Lease or by operation of law, either law or in equity, upon
31
<PAGE>
any breach, shall be distinct, separate and cumulative and shall not be deemed
inconsistent with each other and no one of them, whether exercises by said
party or not, shall be deemed to be in exclusion of any other; and any two or
more or all of such rights and remedies may be exercised at the same time.
15.2 Partial Invalidity. If any term, covenant or condition of this
Lease or the application thereof to any person or circumstance shall, to any
extent, be invalid or unenforceable, the remainder of this Lease, or the
application of such term, covenant or condition to person or circumstances
other than those as to which it is held invalid or unenforceable, shall not be
affected thereby and each term, covenant or condition of this Lease shall be
valid and be enforced to the fullest extent permitted by law.
15.3 Recording. Notice of this Lease may be recorded in the Town
Clerk's Office in the City of Waterbury, County of New Haven and State of
Connecticut, in accordance with the requirements of the State of Connecticut
relating to leases. In the event this Lease is terminated, canceled, released
or assigned before the expiration of the term, the landlord and Tenant shall,
upon the request of either party, execute and deliver a written instrument in
form for recording setting forth such termination, cancellation, release or
assignment. The parties agree at the appropriate time to execute and deliver an
instrument in record able form evidencing the commencement date of the term
hereunder
15.4 Covenant of Landlord. Upon payment by the Tenant of the rents
herein provided, and upon the observance and performance of all the covenants,
terms and conditions on Tenant's part to be observed and performed, Tenant
shall peaceably and
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<PAGE>
quietly hold and enjoy the Demised Premises for the term hereby demises without
hindrance or interruption by Landlord or any other person or persons lawfully
or equitably claiming by, through or under the Landlord, subject, nevertheless,
to the terms and conditions of this Lease.
15.5 Use of "Landlord" and "Tenant." All the provisions hereof are to
be construed as covenants and agreements as though the words imparting such
covenants and agreements were used in each separate provision and paragraph
hereof. The words "Landlord" and "Tenant" and the pronouns referring thereto,
as used in this Lease, shall mean, where the context requires or admits, the
persons named herein as Landlord and Tenant, respectively, and their
respectively, and their respective heirs, legal representatives, successors and
assigns, irrespective of whether singular or plural, masculine, feminine or
neuter. It is agreed that the agreements and conditions in this Lease contained
on the part of Tenant to be performed and observed shall be binding upon Tenant
and its successors and assigns and shall inure to the benefit of Landlord and
its successors and assigns; and the agreements and conditions in this Lease
contained on the part of the Landlord to be performed and observed shall inure
to the benefit of Tenant and its successors and assigns. Tenant agrees that at
all times on and after the Commencement Date of this Lease the sole liability
for performance of all Landlord's obligations hereunder shall be that of the
owner from time to time of the leased premises and that such liability with
respect to each owner shall exist only for breaches of Landlord's obligations
committed during the period of his ownership.
33
<PAGE>
15.6 Entire Agreement. This instrument contains the entire and only
agreement between the parties, and no oral statements or representations or
prior written matter not contained in this instrument shall have any force or
effect. This Lease shall not be modified in any way except by a writing
subscribed by both parties.
15.7 Notices. All notices and other communications authorized or
required hereunder shall be in writing and shall be in writing and shall be
deemed to have been given by on the date that they are mailed by certified or
registered mail, return receipt requested, postage prepaid to the other party.
The same shall be mailed to Tenant at the Demised Premises or to such other
person or at such other address as Tenant may hereafter designate by written
notice to Landlord; and the same shall be mailed to Landlord at Mattoon Road,
P.O. Box 1910, Waterbury, Connecticut 06722, or to such other person or at such
other address as Landlord may hereafter designate by written notice to Tenant.
15.8 Access. Landlord shall have right to enter the Demised Premises
during Tenant's business hours upon reasonable notice to Tenant for the purpose
of showing the Demised Premises to a prospective purchaser or tenant, and for
the purpose of inspecting the Demised Premises to insure the compliance with
the provisions of paragraph 5.1, 5.2 and 6.2 above.
15.9 Mechanic's Liens. Tenant agrees immediately to discharge ( either
by payment or by the filing of the necessary bond, or otherwise ) any
mechanic's, materialmen's or other lien against the Premises and/or Landlord's
interest therein, which liens may arise out of any payment due for, or
purported to be due for, any
34
<PAGE>
labor, services, materials, supplies or equipment alleged to have been
furnished to or for Tenant in, upon or about the Premises. Failure to discharge
any such lien within fifteen (15) days from the date that Tenant receives
written notice of such lien from Landlord shall have all rights upon default as
are specified in Article 13 above. Tenant acknowledges that Tenant is not an
agent of the Landlord and Tenant has no authority to contract for labor,
services, material, supplies or equipment for tenant's use in the Demised
Premises as agent for Landlord.
15.10 PREJUDGMENT REMEDY. THE PARTIES HERETO ACKNOWLEDGE THAT THIS IS
A "COMMERCIAL TRANSACTION" AS THAT TERM IS DEFINED IN CONNECTICUT GENERAL
STATUTES, CHAPTER 903a, SECTION 52-278a ( a ), AS AMENDED, AND THAT THE TENANT
HEREBY EXPRESSLY AND VOLUNTARILY WAIVES ANY AND ALL RIGHTS THAT IT MAY HAVE
UNDER SAID ACT OR OTHERWISE FOR NOTICE AND HEARING WITH RESPECT TO ANY
"PREJUDGMENT REMEDY", AS THAT TERM IS THEREIN DEFINED, AND THE TENANT HEREBY
SPECIFICALLY CONSENTS TO THE ISSUANCE OF ANY WRIT FOR SUCH "PREJUDGMENT REMEDY"
OR REMEDIES IN BEHALF OF SAID LANDLORD OR THE SUCCESSORS OR ASSIGNS OF SAID
LANDLORD, WITH RESPECT TO ANY LAWSUIT OR CAUSE OF ACTION RELATING TO THIS LEASE
AND/OR ANY CLAIMS INCIDENTAL HERETO, WITHOUT SAID LANDLORD HAVING TO FIRST
OBTAIN A COURT ORDER PERMITTING SAME, AS MIGHT OTHERWISE BE REQUIRED UNDER SAID
CHAPTER 903a.
35
<PAGE>
15.11 Captions and Section Numbers. The caption, section numbers and
article numbers appearing in this Lease are inserted only as a matter of
convenience and in noway define, limit, construe, or describe the scope or
intent of such sections or articles of this Lease nor in any way affect this
Lease.
15.12 No Offer. The delivery of an unexecuted copy of this Lease shall
not be deemed an offer. No rights are to be conferred upon any party until this
Lease has been executed and delivered to each party.
15.13 Effective Date. This Lease shall be effective only when it is
signed by both the Landlord and Tenant. The Tenant's submission of a signed
lease for review by the Landlord does not give the Tenant any interest, right,
or option in the Leased Premises.
15.14 Review of Landlord's Records. The Tenant, upon five ( 5 ) days
written notice to Landlord, shall have the right to inspect and review, at the
offices of the Landlord, all invoices, statements and bills from which their
assessments for taxes, insurance and common charges are derived.
15.15 Financial Statements. If so requested by Landlord's lender, or
proposed lender, Tenant shall provide said Lender with appropriate information
as to the nature of Tenant's business and Tenant's current financial condition.
36
<PAGE>
IN WITNESS WHEREOF, the parties hereof have hereunto set their hands
and seals, and to a duplicate of the same tenor and date this 17th day of May,
1993. Signed sealed and delivered in the Presence of
INDUSTRIAL DEVELOPMENT GROUP
By: /s/ Kenneth N. Devino
-----------------------------------
Kenneth N. Devino
Its Partner
DISCAS, INC.
By: /s/ Patrick A. DePaolo, Sr.
-----------------------------------
Its President
DISCAS RECYCLED PRODUCTS CORP.
By: /s/ Patrick A. DePaolo, Sr.
-----------------------------------
Its President
STATE OF CONNECTICUT)
)ss: Waterbury
COUNTY OF NEW HAVEN)
On this the 17th day of May , 1993, before me, the undersigned
officer, personally appeared, Roger N. Devino, known to me (or satisfactorily
proven) to be the person whose name is subscribed to the within instrument and
acknowledged that he executed the same for the purposes therein contained.
IN WITNESS WHEREOF, I hereunto set my hand.
illegible
---------
Notary Public
Commissioner, Superior CT.
37
<PAGE>
STATE OF CONNECTICUT )
) ss: Waterbury
COUNTY OF NEW HAVEN )
On this day the 17th day of May, 1993, before me, the undersigned
officer, personally appeared, Patrick A. DePaolo, Sr. who acknowledged himself
to be the President of Discas, Inc., a corporation, and that he as such
officer, being authorized so to do, executed the foregoing instrument for the
purposes therein contained, by signing the name of the corporation by himself
as such officer.
IN WITNESS WHEREOF, I hereunto set my hand.
illegible
---------
Notary Public
Commissioner, Superior CT.
STATE OF CONNECTICUT )
) ss: Waterbury
COUNTY OF NEW HAVEN )
On this day the 17th day of May, 1993, before me, the undersigned
officer, personally appeared, Patrick A. DePaolo, Sr. who acknowledged himself
to be the President of Discas, Inc., a corporation, and that he as such
officer, being authorized so to do, executed the foregoing instrument for the
purposes therein contained, by signing the name of the corporation by himself
as such officer.
IN WITNESS WHEREOF, I hereunto set my hand.
illegible
---------
Notary Public
Commissioner, Superior CT.
38
<PAGE>
EXHIBIT B
---------
I . IMPROVEMENTS to be provided by Landlord to Tenant at No Cost to Tenant.
1. Clean and seal concrete floor: Tenant to cooperate with Landlord by
moving Tenant's materials currently stored in premises, so that
Landlord may accomplish the cleaning and sealing at Landlord's
schedule.
2. Replace carpets in office, with Tenant's choice of carpet or vinyl
composition tile from Landlord's selection, or Landlord will credit
Tenant the amount of $11.00/sq. yd. if Tenant replaces carpet with
its own carpet/tile.
3. Check lighting, electrical outlets in walls, furnaces, HVAC system
in office, plumbing, and overhead doors to make certain all are in
good working order.
4. Install new 10' x 10' loading dock door at rear of premises.
5. Remove existing drive-in door at rear of premises: replace with new
12' w x 14' h overhead drive-in door at rear of premises.
6. Electric service. Landlord shall provide the following
improvements:
a. Provide electric power supply to location of new exterior
transformer (transformer to be supplied and installed by
C.L. & P.).
b. Install transformer mounting pad.
c. Provide sleeves from transformer to building, adequate to
accommodate 4,000 amps of electric service.
7. Upon completion of electrical installation into the demised
premises, Landlord shall credit Tenant the amount of $2,000.00.
II. IMPROVEMENT to be provided by Landlord to Tenant at Tenant's Cost.
None.
39
<PAGE>
Exhibit 10.13
AMENDMENT TO LEASE
------------------
LANDLORD : INDUSTRIAL DEVELOPMENT GROUP
TENANT : DISCAS, INC. and DISCAS RECYCLED
PRODUCTS CORP.
DATE OF LEASE : MAY 17, 1993
PREMISES : 26,018 SQUARE FEET OF SPACE AT 567-1
SOUTH LEONARD STREET, WATERBURY,
CONNECTICUT
W I T N E S S E T H:
--------------------
WHEREAS, the above-named parties are all the parties to the
above-named Lease, and
WHEREAS, Tenant desires to extend the term of the Option Period of
said Lease,
NOW THEREFORE, the parties do hereby agree that the Lease shall be
amended as follows:
Sections 2.4 and 3.1 B shall be deleted in their entirely and the
following inserted in place thereof:
2.4 The Tenant shall have the option to renew its Lease for an
additional six (6) year and ten (10) month period commencing January 1, 1999
and ending October 31, 2005 upon the same terms and conditions, except for the
basic annual rent which shall be computed as set forth in paragraph 3.1 B
herein. Tenant shall exercise said option by giving the Landlord notice of its
intention to do so by certified mail, return receipt requested, no later than
July 1, 1998.
3.1 B. i. During the Option Period of January 1, 1999 to
December 31,
<PAGE>
1999, an annual rental of $84,558.50, payable in
monthly installments of $7,046.54, in advance, on the
first day of each month during said period;
ii. During the Option Period of January 1, 2000 to December
31, 2000 an annual rental of $91,063.00, payable in
equal monthly installments of $7,588.58, in advance on
the first day of each month during said period;
iii. During the Option Period of January 1, 2001 to December
31, 2001 an annual rental of $91,063.00, payable in
equal monthly installments of $7,588.58, in advance on
the first day of each month during said period;
iv. During the Option Period of January 1, 2002 to December
31, 2002 an annual rental of $97,567.50, payable in
equal monthly installments of $8,130.63, in advance on
the first day of each month during said period;
v. During the Option Period of January 1, 2003 to December
31, 2003 an annual rental of $97,567.50, payable in
equal monthly installments of $8,130.63, in advance on
the first day of each month during said period;
vi. During the Option Period of January 1, 2004 to December
31, 2004 an annual rental of $104,072.00, payable in
equal monthly installments of $8,672.67, in advance on
the first day of each
<PAGE>
month during said period;
vii. During the Option Period of January 1, 2005 to October
31, 2005 an annual rental of $86,726.67, payable in
equal monthly installments of $8,672.67, in advance on
the first day of each month during said period;
IN ALL OTHER RESPECTS, the terms and conditions of the Lease are
hereby ratified and affirmed.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands
and seals, and to a duplicate of the same tenor and date this 22 day of
September, 1995. Signed sealed and delivered in the presence of
INDUSTRIAL DEVELOPMENT GROUP
By: /s/ Kenneth N. Devino
-------------------------------------
Kenneth N. Devino
Its Partner
DISCAS, INC.
By: /s/ Patrick A. DePaolo, Sr.
-------------------------------------
Its President
DISCAS RECYCLED PRODUCTS CORP.
By: /s/ Patrick A. DePaolo, Sr.
-------------------------------------
Its President
STATE OF CONNECTICUT)
)ss: Waterbury
COUNTY OF NEW HAVEN)
On this the 22nd day of September, 1995, before me, the undersigned
officer, personally appeared, Kenneth M. Devino, known to me (or satisfactorily
proven) to be the person whose name is subscribed to the within instrument and
acknowledged that he executed the same for the purposes therein contained.
IN WITNESS WHEREOF, I hereunto set my hand.
illegible
---------
Notary Public
Commissioner, Superior CT.
<PAGE>
STATE OF CONNECTICUT )
) ss: Waterbury
COUNTY OF NEW HAVEN )
On this day the 20th day of September, 1995, before me, the
undersigned officer, personally appeared, Patrick A. DePaolo, Sr. who
acknowledged himself to be the President of Discas, Inc., a corporation, and
that he as such officer, being authorized so to do, executed the foregoing
instrument for the purposes therein contained, by signing the name of the
corporation by himself as such officer.
IN WITNESS WHEREOF, I hereunto set my hand.
illegible
---------
Notary Public
Commissioner, Superior CT.
STATE OF CONNECTICUT )
) ss: Waterbury
COUNTY OF NEW HAVEN )
On this day the 20th day of September, 1995, before me, the
undersigned officer, personally appeared, Patrick A. DePaolo, Sr. who
acknowledged himself to be the President of Discas Recycled Products Corp., a
corporation, and that he as such officer, being authorized so to do, executed
the foregoing instrument for the purposes therein contained, by signing the
name of the corporation by himself as such officer.
IN WITNESS WHEREOF, I hereunto set my hand.
illegible
---------
Notary Public
Commissioner, Superior CT.
<PAGE>
Exhibit 10.14
LEASE
23,966 Square Feet
INDUSTRIAL DEVELOPMENT GROUP
----------------------------
To
DISCAS, INC AND DISCAS RECYCLED PRODUCTS CORP.
----------------------------------------------
TABLE OF CONTENTS
-----------------
Page
----
Article I - Demised Premises 1
Article II - Term of Lease and Option to Renew 2
Article III - Rent and Security Deposit 4
Article IV - Real Estate Taxes 7
Article V - Compliance with Laws 8
Article VI - Use of Premises 11
Article VII - Maintenance, Repair and Alterations 12
Article VIII - Utilities 15
Article IX - Indemnity and Insurance 15
<PAGE>
Article X - Subordination, Attornment, Estoppel
Certificates 19
Article XI - Damage by Fire or Other Casualty 20
Article XII - Eminent Domain 21
Article XIII - Default of the Tenant 22
Article XIV - Holding Over 24
Article XV - Miscellaneous Provisions 25
<PAGE>
L E A S E
---------
THIS INDENTURE OF LEASE, made this 17th day of May 1993, by and
between INDUSTRIAL DEVELOPMENT GROUP, a general partnership with an office at
Mattoon Road, Waterbury, Connecticut, acting by KENNETH M. DEVINO, its partner,
hereinafter referred to as "LANDLORD", and DISCAS, INC. and DISCAS RECYCLING
PRODUCTS CORP., Delaware corporations with a principal place of business at 56
Eagle Street, Waterbury, CT. 06708, hereinafter referred to as "TENANT". The
above Tenant, if more than one, shall jointly and severally liable for all
provisions in the lease.
W I T N E S S E T H:
--------------------
ARTICLE I
---------
DEMISED PREMISES
----------------
1.1 That in consideration of the rents and covenants herein provided
and contained on the part of the Tenant to be paid, performed and observed, the
Landlord does hereby demise and lease unto the Tenant approximately 23,966
square feet of floor space in a commercial building containing a total of
112,203 square feet of floor space located at 567-1 South Leonard Street, in
the City of Waterbury, County of New Haven and State of Connecticut. Said
building is located on premises described in Exhibit A attached hereto and made
a part hereof and the location of the demised premises is outlined in red on
said Exhibit A. The foregoing premises are hereinafter sometimes referred to as
the "Demised Premises".
<PAGE>
1.2 The Tenant shall have the right to use the parking areas
designated by the Landlord in common with other tenants. Said parking areas
shall only be used for the limited purpose of parking the registered motor
vehicles of the Tenant and its employees and customers during business hours
and shall not be used for storage of motor vehicles or any other property.
1.3 a) The Tenant will not sublet the premises or any part thereof nor
will said Tenant assign this Lease or any interest herein or transfer
possession or occupancy of said premises without the prior written consent of
the Landlord. Nor shall any subletting or assignment hereof be affected by
operation of law or otherwise than by prior written consent of the Landlord,
which consent shall not be unreasonably withheld, provided, however, that the
Tenant shall at all time remain liable for the payment of the rents and the
fulfillment of the covenants of said Lease, and the premises shall not be
occupied or used or permitted to be occupied or used at any time during the
said term for purposes other than that specified in ARTICLE VI 6.1 of this
Lease.
b) If there is any assignment of this Lease by Tenant or a
subletting of the whole of the premises by Tenant at a rent which, in either
case, exceeds the rent payable hereunder by Tenant, or if there is a subletting
of a portion of the premises by Tenant, at a rent in excess of the subleased
portion's pro rata share of the rent payable hereunder by Tenant, then Tenant
shall pay Landlord, as additional rent, forthwith upon Tenant's receipt of each
installment of any such excess rent, fifty (50%) percent of any such excess
rent. The provisions of this paragraph shall apply to each and every assignment
of the Lease and each and every subsidiary or controlling corporation or
<PAGE>
any other person, firm or entity, in each case on the terms and conditions set
forth herein. Each request by Tenant for permission to assign this lease, or to
sublet the whole or any part of the Premises shall be accompanied by a warranty
by Tenant as to the amount of rent to be paid to Tenant by proposed assignee,
or sublesee. For the purposes of this Section 1.3, the term "rent" shall mean
all base rent, additional rent or other payments and/or consideration payable
by one party to another for the use and occupancy of all or a portion of the
Premises.
ARTICLE II
----------
TERM OF LEASE AND OPTION TO RENEW
---------------------------------
2.1. The term of this Lease shall be for a period of five (5) years
and five months, beginning on the 1st day of October, 1995 and ending on the
31th day of October, 2000.
2.2. If the premises are ready are ready for occupancy prior to
October 1, 1995, the tenant may occupy the premises prior to said date and
shall pay to the Landlord a proportionate amount of the taxes, insurance and
common charges hereinafter set forth, but shall not be required to pay for all
utilities used at the Demised Premises and the Tenant agrees to be bound by all
of the other terms of the within Lease.
2.3. If the premises is not ready for occupancy prior to October 1,
1995, then the tenant shall be given a credit against his renting the amount of
Eighty ( $80.00) Dollars per day for every day that occupancy is delayed past
Octobert 1, 1995. Landlord shall be in no way liable to Tenant for damages of
any nature for failure to deliver occupancy by November 1, 1995, then Tenant
may, at its option, elect to
5
<PAGE>
terminate this Lease upon written notice to the Landlord by certified mail,
return receipt requested.
2.4. The Tenant shall have the option to renew its Lease for an
additional five (5) year period commencing November 1, 2000, and ending October
31, 2005 upon the same terms and conditions, except for basic annual rent which
shall computed as set forth in paragraph 3.1 B herein. Tenant shall exercise
said option by giving the Landlord notice of its intention to do so by
certified mail, return receipt requested, no later than May 1, 2000.
ARTICLE III
-----------
RENT AND SECURITY DEPOSIT
-------------------------
3.1 Tenant agrees to pay Landlord at the offices of the Landlord, or
at such other place designated by Landlord, without any prior demand therefor,
and without and deduction or set-off whatsoever, an annual rental during the
term of this Lease and any option period as follows:
A. i. During the period of October 1, 1995 to October 31, 1995,
a rental of $2,400, in advance, on the first day of each month during said
period;
ii. During the period of November 1, 1995 to October 31,
1996, an annual rental of $65,906.50, payable in equal monthly installments of
$4,992.92, in advance, on the first day of each month during said period and
5,991.50 in advance, on the first day of each month during the second six
months of said period;
6
<PAGE>
iii. During the period of November 1, 1996 to October 31,
1997, an annual rental of $71,898.00, payable in equal monthly installments of
$5,991.50, in advance, on the first day of each month during said period;
iv. During the period of November 1, 1997 to October 31,
1998, an annual rental of $80,765.42, payable in equal monthly installments of
$6,730.45, in advance, on the first day of each month during said period;
v. During the period of November 1, 1998 to October 31, 1999,
an annual rental of $81,005.08, payable in equal monthly installments of
$6,750.42, in advance, on the first day of each month during said period;
vi. During the period of November 1, 1999 to October 31,
2000, an annual rental of $83,881.00, payable in equal installments of
$6,990.08, in advance, on the first day of each month during said period.
B. i. During the Option Period of November 1, 2000 to October
31, 2001, an annual rental of $83,881.00, payable in equal monthly installments
of $6,990.08, in advance, on the first day of each month during said period;
ii. During the Option Period of November 1, 2001 to October
31, 2002, an annual rental of $89,872.50, payable in equal monthly installments
of $7,489.38, in advance, on the first day of each month during said period;
iii. During the Option Period of November 1, 2002 to October
31, 2003, an annual rental of $89,872.50, payable in equal monthly installments
of $7,489.38, in advance, on the first day of each month during said period;
7
<PAGE>
iv. During the Option Period of November 1, 2004 to October
31, 2005, an annual rental of $95,864.00, payable in equal monthly installments
of $7,988.67, in advance, on the first of each month during said period;
v. During the Option Period of November 1, 2004 to October
31, 2005, an annual rental of $95,864.00, payable in equal monthly installments
of $7,988.67, in advance, on the first day of each month during said period.
3.2 Commencing November 1, 1995, and thereafter, the Tenant shall pay
as additional rent any money required to be paid pursuant to ARTICLE IV, VII,
VIII, and IX and all other sums of money or charges required to be paid by
Tenant under this Lease, whether or not the same be designated "additional
rent." If such amounts or chares are not paid at the time provided in this
Lease, whether or not the same be designated "additional rent". If such amounts
or charges are not paid at the time provided in this Lease, they shall
nevertheless, if not paid when due, be collectible as additional rent with the
next installment of rent thereafter falling due hereunder, but nothing herein
contained shall be deemed to suspend or delay the payment of any amount of
money or change at the time the same becomes due and payment hereunder, or
limit any other remedy of the Landlord.
3.3 If Tenant shall fail to pay, when the same is due and payable or
within the ten (10) days thereafter, any rent or any additional rent, Tenant
shall pay to Landlord a late charge equal to five (5%) percent of any such late
payment which is not received by Landlord within thirty (30) days of the due
date.
8
<PAGE>
3.4 Tenant shall deposit the sum of $5,492.21 ,upon execution of this
Lease and additional sum $5,492.21 within one hundred twenty (120) days of the
execution of this Lease to secure the faithful performance of all of the terms
and conditions of this Lease. If the Tenant shall comply with all the terms,
conditions and obligations of this Lease, such deposit will be returned to
Tenant at the termination of this Lease, without interest. In the event of the
Tenant's default hereunder such deposit may be applied by the Landlord, toward
reduction of any damages without barring the Landlord, in any matter
whatsoever, from other to additional legal or equitable course. Such deposit
shall not be construed as constituting liquidated damages. It is understood and
agreed that the Landlord shall always have the right, at its option, to apply
said deposit, or from time to time such one or more parts or portions thereof
or part or portion thereof not previously applied, to late charges and to the
curing of any default that may then exist, without prejudice to any other
remedy or remedies which the Landlord may have on account thereof. Tenant
hereby agrees not to look to the Landlord's mortgagee, as mortgagee, mortgagee
in possession, or successor in title to property, for accountability for any
security deposit required by Landlord hereunder unless said sums have actually
been received by said mortgagee as security for Tenant's performance of this
Lease.
ARTICLE IV
----------
REAL ESTATE TAXES
-----------------
4.1 The Tenant shall pay as additional rent to the Landlord a sum
equal to it's proportionate share of the real estate taxes assessed against and
attributable to the
9
<PAGE>
building and land constituting the premises described in Exhibit A annexed
hereto. It is agreed that the Tenant's proportionate share of any such taxes
shall be based on a fraction, the numerator of which shall be the square
footage of the Demised Premises which is agreed to be 23,966 square feet, and
the denominator of which shall be the total square footage of the building
which is agreed to be 112,203 square feet. Tenant shall also pay all taxes
assessed on improvements made in or above Demised Premises by Tenant. Tenant
shall pay to Landlord monthly, on any extension thereof, an amount equal to
1/12 of it's share of the real estate taxes as provided above. Landlord shall
hold said funds for the benefit of the tenant and use them to pay such taxes as
they fall due. If said funds are insufficient to pay the Tenant's share of the
taxes when due, the Landlord shall bill the Tenant for the difference and
tenant shall make payment to Landlord within thirty (30) days after receipt of
said bill. If said funds are in excess of the taxes due, then Landlord shall
return the unused portion of said funds to the Tenant within thirty (30) days
after the taxes become due, except that if Tenant is in default in the payment
of rent provided for herein, Landlord may apply said unused funds to the
payment of said rent. Tax bills shall be sufficient evidence of the amount to
be paid by the Tenant. "Real Estate Taxes" shall mean all taxes or assessments
and governmental charges whether federal, state, county, or municipal which are
levied or charged against real estate or collecting rent and any other taxes
and assessments attributable to the premises herein leased or it's operation,
excluding federal, state or other income taxes, and federal and/or state
succession or inheritance taxes.
10
<PAGE>
If any payment for taxes shall be due for any tax year which said
Lease shall be in force and effect for less than a full tax year, such payment
shall be prorated so the amount payable to Tenant shall be based on the actual
number of months that said Lease shall be in force and effect during such tax
year. It is further agreed and understood that if Tenant shall qualify for any
city and/or state real estate exemptions that may be available to
manufacturers, the benefit of said exemption shall be applied directly to the
Tenant's portion of the taxes due pursuant to this paragraph. If the Tenant
does not qualify for such exemptions, but another Tenant in the building does
so qualify, then Tenant shall receive no benefit from the reduced taxes, but
shall pay its full share as if no exemption has been granted.
ARTICLE V
---------
COMPLIANCE WITH ENVIRONMENTAL
-----------------------------
LAWS,FIRE CODES AND OTHER LAWS
------------------------------
5.1 Laws in General. The Tenant at sole expense, shall comply with all
laws, order, and regulations of federal, state, and municipal authorities, and
with any direction of any public officer, pursuant to law, which shall impose
any duty upon the Landlord or the tenant with respect to the venting of noxious
odors and fumes, cleaniness, safety, occupation and the use of said premises
and the nature, character and manner of operation of the business conducted in
or at the Demised Premises. The Tenant, at its sole expense, shall obtain all
license or permits which may be required for the conduct of its business within
the terms of this Lease, or for the making of repairs, alterations,
improvements, or applying for all such permits or licenses.
11
<PAGE>
5.2 (a) Environmental Laws. Landlord represents that as of the date
hereof, the Landlord and the property containing the Demised Premises are not
in violation of any local, state or federal rule or regulation concerning the
handling and disposal of oil or petroleum or chemical liquid or solid, liquid
or gaseous products, or hazardous waste or concerning air, water or noise
pollution.
(b) Tenant shall comply with all local, state and federal
regulations concerning the storage, handling and disposal of oil or petroleum
or chemical liquid or solid, liquid or gaseous products, or hazardous waste and
air, water and noise pollution. Tenant hereby agrees not to handle, store, or
dispose any hazardous or toxic waste or substance upon the premises which is
prohibited by any federal, state or local statutes, ordinance, or regulations.
Tenant hereby covenants to indemnify and hold Landlord, its successors and
assigns harmless from any loss, damage, claims, cost, liabilities or cleanup
cost arising out of Tenant's use, handling, storage or disposal of any such
hazardous or toxic waste or substances on the premises, including all such
losses due to claims made by the Department of Environmental Protection of the
State of Connecticut, (DEP), Environmental Protection Agency of the Federal
Government (EPA), other government agencies, or private third parties.
(c) If Tenant intends to produce, store or create, on the Demised
Premises, any oil or petroleum or chemical liquid or solid, liquid or gaseous
products, or any other substance defined as hazardous waste by state statute
and/or the Environmental Protection of the State of Connecticut (DEP), or by
federal statute and/or the Environmental Protection of the Federal Government
(EPA), it must submit a plan to said agency or agencies and to the Landlord,
prior to occupancy, for the safe handling, storage and use and removal of any
such substance. If a permit is required by the DEP or EPA for the use, storage
and/or removal of such substance, Tenant must obtain such permit and submit a
copy to Landlord prior to occupancy.
12
<PAGE>
(d) If there is a "spill", as that term is defined in Section
22a-452c of the Connecticut General Statutes, of any substance set forth in
paragraph (b) above, such "spill" shall be immediately reported by Tenant to
the Landlord and to the DEP and, if required, to the EPA. Tenant shall take
immediate remedial action to contain and clean up such "spill" and shall be
solely responsible for all cost of remedial action including, but not limited
to, the cost of professional environmental studies and reports, attorney's
fees, clean up, soil removal, monitoring costs, fines and penalties.
(e) If Tenant does not take immediate action to contain and clean
up such a "spill", or if Landlord is ordered by the DEP or EPA to take remedial
action to contain and clean up such "spill", and Tenant shall reimburse
Landlord for all cost of professional environmental studies, attorney's fees,
soil removal, clean up, monitoring cost, fines and penalties, and interest from
the date Landlord incurs each expense until such expense is paid by Tenant at
the rate of twelve percent (12%) per annum.
(f) At the conclusion of the term of this Lease or any
modifications or extensions thereof, or upon Landlord's sale of the Demised
Premises to a third party, Tenant shall submit a Certification to Landlord
containing the same information as it required by the provisions of Connecticut
Public Act No. 87-475 or any successor statute for transfers of establishments.
Said Certification shall state that there has been no discharge, spillage,
uncontrolled loss, seepage or filtration of hazardous waste, toxic waste and/or
biochemical waste on the Premises and/or Building or the grounds or that any
such discharge, spillage, uncontrolled loss, seepage or filtration has been
cleaned and removed in accordance with procedures approved by the Commissioner
of Environmental Protection of the State of Connecticut or determined by him to
pose no threat to human health or safety or the environment which would warrant
containment and removal or other mitigation measures, and that any hazardous
waste, toxic or hazardous
13
<PAGE>
material, and/or biochemical waste which remains on site is being managed in
accordance with Chapter 445 and 446k of the Connecticut General Statutes and
regulations adopted thereunder, and in accordance with any other State or
Federal law or regulation which shall then be applicable. Failure or inability
of the Tenant to provide said Certification , or the presence of any waste on
the Premises contravened by said Certification shall entitle the Landlord to
recover damages from the Tenant on the basis of strict liability, without
regard to fault, for all clean up and removal costs and direct and indirect
damages arising therefrom, including reasonable attorney's fees incurred in the
enforcement of this Article.
5.3 The Landlord represents that the Demised Premises is in
conformance with applicable fire codes or will be in conformance with
applicable fire codes on the date that Tenant takes occupancy. If, because of
the nature of Tenant's operations, the Landlord is required by the fire codes
to make modifications or additions to the sprinkler system, firewalls, exits,
firescapes or any other fire prevention system, then Tenant agrees to pay for
any such modification or addition as additional rent.
ARTICLE VI
----------
USE OF PREMISES
---------------
6.1 Tenant covenants and agrees that throughout the term of this Lease
the Demised Premises will be used only for polymer product manufacturing,
packaging, warehousing, research and development, and offices.
6.2 Tenant covenants and agrees that throughout the term of this Lease
and any extension or renewal thereof:
(a) It will not overload, damage or deface the premises ;
(b) It will conform to all reasonable rules which Landlord may make
from time to time relative to the operation and use of the property;
14
<PAGE>
(c) It will at all times fully and promptly comply with all laws,
ordinances, orders and regulations of any lawful authority having jurisdiction
of the Demised Premises, including, but not limited to, such as related to the
venting of noxious odors and fumes, cleanliness, safety, occupation and use of
said operation of the business conducted in or at the Demised Premises;
(d) It will vent all noxious and hazardous odors and fumes from its
operations, maintain humidity controls, maintain noise levels and provide safe
procedures for the handling and storage of chemicals and other hazardous
materials in such a manner so as not to affect or interfere with other tenants
in the building, or occupants of other properties adjacent to or within close
proximity of the building, and in such a manner so as not to cause damage to
the building, the building lot upon which the building is located, and
neighboring properties. If the Tenant fails to comply with this provision, the
Landlord may install said ventilation or other controls and charge the Tenant
the reasonable costs thereof which the tenant agrees to pay as additional rent,
or at the Landlord's election, the Landlord may terminate this Lease upon
thirty (30) days written notice to the Tenant;
(e) It will place all of its rubbish and waste in the area designated
by the Landlord, and it shall be responsible for the costs of the removal of
said rubbish;
(f) It will not place any sign upon premises without first submitting
the design and proposed location of the sign to the Landlord and receiving
written approval from Landlord of such design and location.
ARTICLE VII
-----------
MAINTENCE, REPAIRS AND ALTERATIONS
----------------------------------
15
<PAGE>
7.1 Tenants represents that it has examined the Demised Premises as
they now exist and the plans, if any, for the completion of said premises. The
Landlord agrees to turn the premises over to the Tenant in a "broom clean"
condition and further agrees to make the improvements listed on Exhibit B, if
any, on or before the date of occupancy, and Tenant accepts the premises in
their present condition and the Landlord and/or its agents makes no
representations as to their present or future condition.
7.2 Tenant may make such interior alterations or improvements in and
to the Demises Premises, at it's own cost, as it may deem desirable for its use
thereof, with the approval of Landlord, which approval shall not be
unreasonably withheld. All repairs and alterations shall be of quality at least
equal to the original construction. At the termination of this Lease, except
for casualty losses insured against, or losses occasioned by floods,
earthquakes, wars, acts of God, or other losses over which Tenant has no
control, Tenant shall deliver the Demised Premises to Landlord in good
condition and repair, allowance being made for ordinary wear, tear and
obsolescence. In addition, all of said alteration or improvements shall remain
the property of the Landlord, which approval shall not be unreasonably
withheld. However, should the Landlord elect that such alterations or
improvements be removed by tenant, then Tenant agrees to remove same at
Tenant's sole expense and to restore the premises to the condition it was in at
the commencement of this Lease. If Tenant shall fail to remove same, then
Landlord shall cause same to be removed and Tenant agrees to reimburse the
Landlord for the cost of such removal, together with any and all damages which
Landlord may suffer by reason of Tenant's failure to remove same.
7.3 The Tenant agrees to maintain and repair the interior of the
Demised Premises, including, but not limited to, the interior walls and
partitions, and all of the mechanical systems including the furnaces, heating
and air conditioning, plumbing and electrical system. Tenant's
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liability for repair of any one of the furnaces or heating/air conditioning
systems shall be limited to One Thousand ($1,000) Dollars per furnace or system
per lease year, provided that the need for such repair is not the result of the
act or negligence of Tenant or Tenant's employees or agent. Tenant shall also
maintain and repair both the interior and exterior of all doors, including
overhead doors, located within the Demised Premises. Tenant shall provide and
maintain an adequate number of fire extinguishers in the Demised Premises in
order to comply with local fire codes. Tenant, at its sole expense, will,
throughout the term of this Lease, obtain and keep in force a maintenance
contract with a qualified service company to regularly inspect and perform
maintenance services to the heating, ventilating and air-conditioning systems
serving the Demised Premises. Tenant shall furnish Landlord with a copy of said
maintenance contract, and of renewals or replacement.
7.4 Landlord shall be responsible for exterior structural repairs
including the roof, foundation and exterior walls.
7.5 Landlord shall provide for the maintenance and repair and lighting
of the designated receiving and parking areas including, but not limited to,
lighting, repairs, removal of dirt and debris, and lawn mowing and maintenance
to lawns and shrubbery. Tenant shall pay to Landlord its proportionate share of
the cost of said maintenance and repairs based on a fraction, the numerator of
which shall be 3,728 and the denominator of which shall be 112,203. Landlord
shall present Tenant with a bill for such maintenance and repair on the first
day following the performance of such maintenance and repairs and Tenant shall
pay said bill within ten (10) days of its receipt.
Tenant shall be responsible for snow removal and sanding any walkways
or stairways which abut and/or are used for ingress and egress to the Demised
Premises.
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7.6 Landlord shall be responsible for the snow plowing of the entire
paved parking area to the building and the driveways leading thereto whenever
there is an accumulation of two (2) or more inches of snow. Tenant shall pay to
Landlord its proportionate share of the cost of said snow removal based on a
fraction, the numerator of which shall be 23,966 and the denominator of which
shall be 112,203. Landlord shall present Tenant with a bill for such snow
plowing on the first day of each month following such snow plowing and Tenant
shall pay said bill within ten (10) days of its receipt.
7.7 The Tenant further covenants and agrees to replace all broken
glass on the Demised Premises during the term of this Lease or any month to
month extension thereof at it's own expense.
ARTICLE VIII
------------
UTILITIES
---------
8.1 (a) Tenant agrees to pay all charges for electricity, electricity
for heating, water, telephone, fire service line charges, for sprinkler alarm
monitory charges and any other utilities used by the Demised Premises.
(b) Separate meters for electricity shall be provided and
installed by Landlord. Tenant shall pay to Landlord its proportionate share of
the total water used by the entire Building based upon a fraction, the
numerator of which shall be 23,966 and the denominator of which shall be
112,203. Landlord shall present Tenant with a bill for such water charges on
the first day of the month following the receipt by Landlord of a water bill
from the city or other provider, and Tenant shall pay said bill within ten (10)
days of its receipt. Provided, however, if Landlord determines, in it's sole
discretion, that Tenant's water use, because of the nature of its operations,
exceeds the average water use of other tenants in the Building, then Landlord
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reserves the right to install a meter in the Demised Premises and Tenant shall
be billed for water based on actual use.
8.2 Tenant shall maintain a temperature within the entire Demised
Premises of at least 50 degrees Fahrenheit in order to prevent freezing pipes
and plumbing located therein.
8.3 Landlord shall not be liable in damages or otherwise for any
failure to furnish or interruption of the services of heat or any utility
consumed or used in the Demised Premises, provided that such failure is beyond
the reasonable control of Landlord and not due to Landlord's negligence.
ARTICLE IX
----------
INDEMNITY AND INSURANCE
-----------------------
9.1 The Tenant shall pay, as additional rent, its proportionate share
of the Landlord's total insurance premium on the entire building for fire,
lightning, extended coverage, all loss of a direct physical nature, loss of
rental income, and legal liability coverage as it pertains to the premises and
its appurtenance. It is agreed that the Tenant's proportionate share of such
premium shall be based on a fraction, the numerator of which shall be the
square footage of the Demised Premises which is agreed to be 23,966 square
feet, and the denominator of which shall be the total square footage of the
building which is agreed to be 112,203 square feet. Tenant shall pay to
Landlord monthly, on the first day of each month during the term of this Lease
and any extension thereof, an amount equal to 1/12 of its share of the
insurance premiums as provided above. Landlord shall hold said funds for the
benefit of the Tenant and use them to pay such insurance premium as they fall
due. If said funds are insufficient to
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pay the tenant's share of the insurance premiums when sue, then Landlord shall
bill the tenant for the difference and the Tenant shall make payment to
Landlord within thirty (30) days after receipt of said bill. If said funds are
in excess of the insurance premiums due, then Landlord shall return the unused
portion of said funds to the Tenant within thirty (30) days after the insurance
premium become due, except that if the tenant is in default in the payment of
the rent as provided for herein, Landlord may apply said unused funds to the
payment of said rent. The premium bill submitted by Landlord's insurance
company shall be sufficient evidence of the amount of premium due and owing.
Tenant further agrees that if a determination is made by the Landlord's fire
insurance carrier that the Tenant is storing materials on the premises or
performing certain manufacturing processes or procedures on the premises which
increase the risk of loss, and said insurance company thereby increases the
total insurance premium for the entire building over and above that premium
which the Landlord would have paid had there been no such materials stored or
manufacturing procedures or processes performed, then Tenant shall pay
Landlord, in addition to his proportionate share of said premium as aforesaid,
the total amount of said increased insurance premium. If the increased
insurance premium is attributable to more than on tenant in the building, then
the increase shall be apportioned between said Tenant's in accordance with a
formula to be supplied by the Landlord's insurance carrier.
9.2 Tenant covenants and agrees to assume exclusive control of the
Demised Premises, and all tort liabilities incident to the control or leasing
thereof, and to save Landlord harmless from all claims or damages arising on
account of any injury or
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damage to any person or property on said premises, or otherwise resulting from
the use and maintenance and occupancy of the premises or anything or facility
kept or used thereon, unless such claim or damage is caused by negligence of
the Landlord or its agents, servants or employees. Landlord shall be saved
harmless by Tenant, from any liability on account of any accident or injury to
Tenant, or to any of Tenant's servants, employees, agents, visitors, or
licensees, or to any person or persons in or about the said premises only if
such accident or injury is caused by the act or negligence of Tenant, its
servants, employees, agents, visitors or licensees. In case Landlord or Tenant
shall, without fault on its part, be made a party to any litigation commenced
by or against the other party, then each party, then each party shall pay all
cost, expenses and reasonable attorney's fees incurred or paid by the other
party in connection with such litigation.
9.3 Tenant covenants and agrees that it will obtain and maintain
during the term of this Lease, at its own expense general comprehensive public
liability insurance with responsible companies qualified to do business in
Connecticut which shall insure Landlord and all persons in privity with
Landlord, as well as Tenant, against all claims for injuries to persons or for
death occurring in or about the Demised Premises, in the amount of at least One
Million Dollars ($1,000,000.00), and against all claims for damages to or loss
of property occurring in or about the Demised Premises in the amount of at
least Five Hundred Thousand Dollars ($500,00.00). Tenant agrees to furnish
Landlord with policies or certificates of such insurance prior to the
commencement of the term hereof and each renewal policy or certificate thereof
at least
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ten (10) days prior to the expiration of the policy it renews. Each such policy
shall be noncancellable with respect to the Landlord's interest without at
least ten (10) days prior written notice to the Landlord.
9.4 Landlord agrees that it will at its own cost and expense, keep its
own fixtures, merchandise and equipment adequately insured during the term
hereof against loss or damage by fire, with the usual extended coverage
endorsement.
9.5 Landlord shall not be liable for any damage to the Demised
Premises, or to any property of the Tenant or of any other person thereon, from
water, rain, snow, ice, sewage, steam gas or electricity which may leak into or
issue or flow from any part of said building of which the Demised Premises are
part, or from the bursting, breaking, obstruction, leaking or any defect of any
of the pipes or plumbing, appliances, or from electric wiring or other fixtures
in said building or from the condition of said premises or building or any part
thereof, or from the street or subsurface, except such damage or injury as may
be caused by the negligent act or omission on the part of the Landlord, its
agents, servants or employees.
9.6 Landlord and Tenant each hereby waive such causes of action either
may have or acquire against the other which are occasioned by the negligence of
either of them or their employees or agents resulting in the destruction of or
damage to real or personal property belonging to the other and located on the
premises of which the Demised Premises are a part and which are caused by fire
and/or the hazards normally insured against in an Extended Coverage Endorsement
to a Standard Fire Insurance Policy approved in the State of Connecticut. Each
party to this Agreement further
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agrees to cause any insurance policy covering destruction of or damage to such
real or personal property from fire and/or the hazards covered under the
aforementioned extended coverage endorsement to contain a waiver of subrogation
clause or endorsement under which the insurance company waives its right of
subrogation against either party to this Agreement in case of destruction of or
damage to the aforementioned real or personal property of either such party.
ARTICLE X
---------
SUBORDINATION, ATTORNMENT, ESTOPPEL CERTIFICATES
------------------------------------------------
10.1 Subordination. tenant agrees that this Lease is subject and
subordination to the lien of any mortgage now on or which at any time may be
made a lien upon the Demised Premises or any part thereof. This subordination
provision shall be self-operative and no further instrument of subordination
shall be required. Tenants agrees to execute and deliver, upon request, such
further instrument or instruments confirming this subordination as shall be
desired by Landlord or by any Mortgagee or proposed mortgagee; and Tenant
hereby constitutes and constitutes and appoints Landlord as Tenant's
attorney-in-fact to execute any such instrument or instruments.
10.2 Attornment. In the event any proceedings are brought for
foreclosure of, or in the event of exercising of the power of sale under, any
mortgage deed to secure debt given by Landlord and covering the Demised
Premises, Tenant shall attorn to the purchaser upon any such foreclosure or
sale and recognize such purchaser as the owner and landlord under this Lease,
provided such owner, as landlord, shall recognize
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Tenant's rights to continue to occupy the Demised Premises and exercise and
enjoy all of its rights hereunder so long as Tenant complies with the terms and
provisions of this Lease and further provided any such purchaser shall be
deemed to assume and agree to perform the duties of the Landlord hereunder.
10.3 Estoppel Certificates. Tenant agrees, at any time and from time
to time upon not less than five (5) days prior written notice by Landlord, to
execute, acknowledge and deliver to Landlord a statement in writing (i)
certifying that this Lease is unmodified and in full force and effect (or if
there have been modifications the nature of same) , (ii) stating the dates to
which the Minimum Annual Rent and Additional Rent have been paid by Tenant,
(iii) stating whether or not to the best knowledge of Tenant, Landlord is in
default in the performance of any covenant, agreement of condition contained in
this Lease, and, if so, specifying each such default of which Tenant may have
knowledge, and (iv) stating the address to which notice to Tenant should be
sent; (v) stating such other facts as Landlords Lender or Purchaser may
require. Any such statement delivered pursuant hereto may be relied upon by an
owner of the Demised Premises, any mortgagee of the Demised Premises, any
mortgagee of the Demised Premises, or any prospective assignee of any such
mortgagee.
ARTICLE XI
----------
DAMAGE BY FIRE OR OTHER CASUALTY
--------------------------------
11.1 In the event the Demised Premises shall be destroyed or so
damaged by fire or other casualty so as to render the Demised Premises wholly
untenantable, Landlord, at its option, shall (a) restore and repair such damage
to the Demised
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Premises in which event the basic monthly rent shall abate on a per diem thirty
(30) day month basis during the period of restoration; or (b) terminate this
lease or any renewal thereof by giving written notice to Tenant thirty (30)
days after such fire or casualty, and the rent shall terminate as of the day of
such fire or casualty.
If Landlord has not elected to terminate this Lease at the end of the
thirty (30) day period as provided in (b) above, then Landlord shall have an
additional period of one hundred twenty (120) days to restore the premises. In
the event Landlord has not substantially completed such restoration at the end
of such periods, then Tenant may elect to terminate this lease by giving
written notice of such termination to Landlord by certified mail, return
receipt requested.
In the event the leased premises shall be destroyed or so damaged but
are not thereby rendered wholly untenantable, Landlord shall restore the leased
premises with reasonable dispatch, and while such damage is being repaired, the
basic monthly rent shall be reduced by an amount which bears the same ratio to
the monthly rent that the floor area rendered untenantable bears to the total
floor area of the Demised Premises.
ARTICLE XII
-----------
EMINENT DOMAIN
--------------
12.1 In the event that the whole of Demised Premises shall be taken
under the power of eminent domain, this Lease shall thereupon terminate as of
the date possession shall be so taken.
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In event that a portion of the floor area of the Demised Premises
shall be taken under the power of eminent domain and the portion not so taken
will not be reasonably adequate for the operation of Tenant's business not
withstanding Tenant's performance or restoration as hereinafter provided, this
Lease shall thereupon terminate as of the date possession of said portion is
taken. In the event of any taking under the power of eminent domain which does
not terminate this Lease as aforesaid, all of the provisions of this Lease
shall remain in full force and effect, except, except that the basic rent shall
be reduced in the same proportion that the amount of floor area of the Demised
Premises taken bears to the total floor area of the Demised Premises
immediately prior to such taking, and Landlord shall at Landlord's own cost and
expense, restore such part of the Demised Premises as is not taken to as near
its former condition as the circumstances will permit and Tenant shall do
likewise with respect to all exterior signs, trade fixtures, equipment, display
cases, furniture, furnishings and other installation of Tenant.
All damages awarded for any such taking under the power of eminent
domain, whether for the whole or a part of the Demised Premises, shall belong
to and be the property of the Landlord, whether such damages shall be awarded
as compensation for diminution in value of the leasehold or for the fee of the
Demised Premises, provided, however, that Landlord shall not be entitled to any
award made to Tenant for loss of or damage to Tenant's trade fixtures and
removable personal property or for damages to improvements made by Tenant with
approval of Landlord during the term of this Lease and any extension thereof or
for damages for cessation or
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interruption of Tenant's business, or for damages for the cost of moving
Tenant's equipment to another location.
If this Lease is terminated as provided in this Article XII, all rent
shall be paid up to the date that possession is taken by public authority, and
Landlord shall make an equitable refund of any rent paid by Tenant in advance
and not yet earned.
A voluntary sale by Landlord to any public or quasi public body,
agency or person, corporate or otherwise, having the power of eminent domain,
either under threat of condemnation or while condemnation proceedings are
pending, shall be deemed to be a taking by eminent domain for the purpose of
this Article XII.
ARTICLE XIII
------------
DEFAULT OF THE TENANT
---------------------
13.1 (a) If Tenant is in default in payment of rents for a period of
ten (10) days, or (b) if Tenant shall default in the performance or observance
of any other of the convenience, agreements, terms, provisions or conditions
contained herein and on its part to be performed or observed for thirty (30)
days after written notice from the Landlord specifying such default, or (c) if
any assignment shall be made by tenant for the benefit of creditors, or Tenant
becomes involved in any proceedings as a debtor under the bankruptcy laws of
the United States in effect at the time of default, or (d) if Tenant's
leasehold interest shall be taken on execution, or (e) if the Tenant fails to
occupy the premises for a period of fifteen (15) consecutive days (unless the
premises are untenantable due to fire or casualty), then and in any such cases,
Landlord and the
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agents and servants of Landlord lawfully may, in addition to and not in
derogation of any remedies for any preceding breach of covenant, immediately or
at any time thereafter and without prior demand or statutory notice to quit,
commence an action of Summary Process to evict tenant from the premises,
without prejudice to any remedies which might otherwise be used for arrears of
rent or preceding breach of covenant. Tenant hereby waives the statutory Notice
to Quit, and Tenant covenants and agrees that in the case of such termination,
or termination under statute by reason of default on Tenant's part, Tenant
will, at the election of the Landlord:
(i) pay to Landlord in equal monthly installments, in advance, sums
equal to the aggregate rent herein provided for or, if the Demised Premises
have been relet, sums equal to the excess of the aggregate rent herein provided
for over the sums actually received by Landlord, such sums being payable as
liquidated damages for the unexpired term hereof; or
(ii) pay to Landlord as damaged a sum which at the time of such
termination, or at the time to which installments of liquidated damages shall
have been paid (if the Landlord has previously elected option number one above)
represents the amount by which the then rental value of the Demised Premises is
less than the aggregate rent herein provided forth residue of the term; or
(iii) indemnify Landlord against loss of the aggregate rent herein
provided for from the time of such termination or from the time to which
installments of liquidated damages shall have been paid (if the Landlord has
previously elected option number one above) to the expiration of the term
hereof as above set forth.
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For the purpose of this Article, the phase "aggregate rent", as used
herein, shall include the fixed annual rent and all additional rents and
charges payable hereunder, including reasonable attorney's fees incurred by
Landlord in enforcing its rights hereunder.
In the event of a default by the Tenant as above provided, if Landlord
shall elect not to terminate this Lease, it may relet the Premises or any parts
thereof, either in the name of Landlord or Tenant, for a term or terms which
may, at Landlord's option, extend beyond the balance of the term of this Lease,
and Tenant agrees that in the event of such reletting Tenant shall pay Landlord
any deficiency between the aggregate rent hereby reserved and covenanted to be
paid and the net amount of the rents collected on such reletting, as well as
any expense incurred by Landlord in such reletting including, but not limited
to, attorney's fee; broker; and expenses of repairs or damages to the Demised
Premises, and putting the Demised Premises in good order and preparing the same
for rerental. Such deficiency shall be paid in monthly installments upon
statements rendered by Landlord to the Tenant.
13.2 Any and all rights and remedies which Landlord may have under
this Lease and at law and in equity shall be cumulative and shall not be deemed
inconsistent with each other, and any two or more of all such rights and
remedies may be exercised at the same time insofar as permitted by law.
13.3 Landlord shall not be deemed in default in the performance of any
of its obligations hereunder unless it shall fail to perform such obligations
and such failure shall continue for a period of thirty (30) days or such
additional time as is reasonably
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required to correct any such default, after written notice has been given by
Tenant to Landlord specifying the nature of Landlord's alleged default. After
the aforesaid time period has passed, the Landlord shall be responsible for the
reasonable attorney's fees incurred by Tenant in enforcing this provision of
the Lease.
13.4 If either party brings an action against the other party to
enforce the terms of this agreement, the losing party shall pay the prevailing
party's attorney's fee.
ARTICLE XIV
-----------
HOLDING OVER
------------
14.1 If Tenant holds possession of the Demised Premises after the
Expiration Date of this Lease, Landlord shall have the option, exercisable in
writing thirty (30) days after the date of expiration as aforesaid, to treat
Tenant as a Tenant at Sufferance, or as a tenant by the month. If Landlord
fails to make such election, then the tenant shall be deemed a tenant by the
month, commencing with the first at after the expiration of the Lease at DOUBLE
the Basic Monthly Rent paid during the last month of the term, and upon all the
other terms of this Lease, including the provision of this paragraph, said
holdover term shall terminate upon thirty (30) days notice from one party to
the other. Nothing contained herein shall be construed within said thirty (30)
days after the date of Lease expiration as aforesaid as a consent by Landlord
to the occupancy or possession of the Demised Premises by Tenant after the
expiration of the lease, and Landlord, upon said expiration, if Landlord elects
to treat Tenant as a Tenant at Sufferance, shall be entitled to the benefit of
all public, general or public laws
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relating to the speedy recovery of the possession of land and tenements held
over by tenant, whether now or hereafter in force and effect.
ARTICLE XV
----------
MISCELLANEOUS PROVISIONS
------------------------
15.1 Waiver. Failure of Landlord or Tenant to complain of any act or
omission on the part of the other party no matter how long the same may
continue, shall not be deemed to be a waiver by Landlord or Tenant of any of
its rights hereunder. No waiver by Landlord or Tenant at any time, express or
implied, of any breach of any provision of this Lease shall be deemed a waiver
of a breach of any other provision of this Lease or a consent to any subsequent
breach of the same of any other provision. If any action by Tenant or Landlord
shall require the other party's consent or approval, such consent to or
approval of such action on any one occasion shall not be deemed a consent to or
an approval of said action on any subsequent occasion or a consent to or
approval of any other action on the same or any subsequent occasion. No payment
by Tenant or acceptance by Landlord of a lesser amount than shall be due from
Tenant to Landlord shall be deemed to be anything but payment on account, and
the acceptance by Landlord of a check for lesser amount with an endorsement or
statement thereon or upon a letter accompanying said check that said lesser
amount is payment in full shall not be deemed an accord and satisfaction, and
landlord may accept said check without prejudice to receive the balance due or
pursue any other remedy. Any and all rights and remedies which either party may
have under this Lease or by operation of law., either party may have under this
Lease or by operation of law, either law or in equity, upon
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any breach, shall be distinct, separate and cumulative and shall not be deemed
inconsistent with each other and no one of them, whether exercises by said
party or not, shall be deemed to be in exclusion of any other; and any two or
more or all of such rights and remedies may be exercised at the same time.
15.2 Partial Invalidity. If any term, covenant or condition of this
Lease or the application thereof to any person or circumstance shall, to any
extent, be invalid or unenforceable, the remainder of this Lease, or the
application of such term, covenant or condition to person or circumstances
other than those as to which it is held invalid or unenforceable, shall not be
affected thereby and each term, covenant or condition of this Lease shall be
valid and be enforced to the fullest extent permitted by law.
15.3 Recording. Notice of this Lease may be recorded in the Town
Clerk's Office in the City of Waterbury, County of New Haven and State of
Connecticut, in accordance with the requirements of the State of Connecticut
relating to leases. In the event this Lease is terminated, canceled, released
or assigned before the expiration of the term, the Landlord and Tenant shall,
upon the request of either party, execute and deliver a written intrument in
form for recording setting forth such termination, cancellation, release or
assignment. The parties agree at the appropriate time to execute and deliver an
instrument in record able form evidencing the commencement date of the term
hereunder
15.4 Covenant of Landlord. Upon payment by the Tenant of the rents
herein provided, and upon the observance and performance of all the covenants,
terms and conditions on Tenant's part to be observed and performed, Tenant
shall peaceably and
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quietly hold and enjoy the Demised Premises for the term hereby demises without
hindrance or interruption by Landlord or any other person or persons lawfully
or equitably claiming by, through or under the Landlord, subject, nevertheless,
to the terms and conditions of this Lease.
15.5 Use of "Landlord" and "Tenant" . All the provisions hereof are to
be construed as covenants and agreements as though the words imparting such
covenants and agreements were used in each separate provision and paragraph
hereof. The words "Landlord" and "Tenant" and the pronouns referring thereto,
as used in this Lease, shall mean, where the context requires or admits, the
persons named herein as Landlord and Tenant, respectively, and their
respectively, and their respective heirs, legal representatives, successors and
assigns, irrespective of whether singular or plural, masculine, feminine or
neuter. It is agreed that the agreements and conditions in this Lease contained
on the part of Tenant to be performed and observed shall be binding upon Tenant
and its successors and assigns and shall inure to the benefit of Landlord and
its successors and assigns; and the agreements and conditions in this Lease
contained on the part of the Landlord to be performed and observed shall inure
to the benefit of Tenant and its successors and assigns. Tenant agrees that at
all times on and after the Commencement Date of this Lease the sole liability
for performance of all Landlord's obligations hereunder shall be that of the
owner from time to time of the leased premises and that such liability with
respect to each owner shall exist only for breaches of Landlord's obligations
committed during the period of his ownership.
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<PAGE>
15.6 Entire Agreement. This instrument contains the entire and only
agreement between the parties, and no oral statements or representations or
prior written matter not contained in this instrument shall have any force or
effect. This Lease shall not be modified in any way except by a writing
subscribed by both parties.
15.7 Notices. All notices and other communications authorized or
required hereunder shall be in writing and shall be in writing and shall be
deemed to have been given by on the date that they are mailed by certified or
registered mail, return receipt requested, postage prepaid to the other party.
The same shall be mailed to Tenant at the Demised Premises or to such other
person or at such other address as tenant may hereafter designate by written
notice to Landlord; and the same shall be mailed to Landlord at Mattoon Road,
P.O. Box 1910, Waterbury, Connecticut 06722, or to such other person or at such
other address as Landlord may hereafter designate by written notice to Tenant.
15.8 Access. Landlord shall have right to enter the Demised Premises
during Tenant's business hours upon reasonable notice to Tenant for the purpose
of showing the Demised Premises to a prospective purchaser or tenant, and for
the purpose of inspecting the Demised Premises to insure the compliance with
the provisions of paragraph 5.1, 5.2 and 6.2 above.
15.9 Mechanic's Liens. Tenant agrees immediately to discharge ( either
by payment or by the filing of the necessary bond, or otherwise ) any
mechanic's, materialmen's or other lien against the Premises and/or Landlord's
interest therein, which liens may arise out of any payment due for, or
purported to be due for, any
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labor, services, materials, supplies or equipment alleged to have been
furnished to or for Tenant in, upon or about the Premises. Failure to discharge
any such lien within fifteen (15) days from the date that Tenant receives
written notice of such lien from Landlord shall have all rights upon default as
are specified in Article 13 above. Tenant acknowledges that Tenant is not an
agent of the Landlord and Tenant has no authority to contract for labor,
services, material, supplies or equipment for tenant's use in the Demised
Premises as agent for Landlord.
15.10 PREJUDGMENT REMEDY. THE PARTIES HERETO ACKNOWLEDGE THAT THIS IS
A "COMMERCIAL TRANSACTION" AS THAT TERM IS DEFINED IN CONNECTICUT GENERAL
STATUTES, CHAPTER 903a, SECTION 52-278a ( a ), AS AMENDED, AND THAT THE TENANT
HEREBY EXPRESSLY AND VOLUNTARILY WAIVES ANY AND ALL RIGHTS THAT IT MAY HAVE
UNDER SAID ACT OR OTHERWISE FOR NOTICE AND HEARING WITH RESPECT TO ANY "
PREJUDGMENT REMEDY ", AS THAT TERM IS THEREIN DEFINED, AND THE TENANT HEREBY
SPECIFICALLY CONSENTS TO THE ISSUANCE OF ANY WRIT FOR SUCH "PREJUDGMENT REMEDY"
OR REMEDIES IN BEHALF OF SAID LANDLORD OR THE SUCCESSORS OR ASSIGNS OF SAID
LANDLORD, WITH RESPECT TO ANY LAWSUIT OR CAUSE OF ACTION RELATING TO THIS LEASE
AND/OR ANY CLAIMS INCIDENTAL HERETO, WITHOUT SAID LANDLORD HAVING TO FIRST
OBTAIN A COURT ORDER PERMITTING SAME, AS MIGHT OTHERWISE BE REQUIRED UNDER SAID
CHAPTER 903a.
35
<PAGE>
15.11 Captions and Section Numbers. The caption, section numbers and
article numbers appearing in this Lease are inserted only as a matter of
convenience and in no way define, limit, construe, or describe the scope or
intent of such sections or articles of this Lease nor in any way affect this
Lease.
15.12 No Offer. The delivery of an unexecuted copy of this Lease shall
not be deemed an offer. No rights are to be conferred upon any party until this
Lease has been executed and delivered to each party.
15.13 Effective Date. This Lease shall be effective only when it is
signed by both the Landlord and Tenant. The Tenant's submission of a signed
lease for review by the Landlord does not give the Tenant any interest, right,
or option in the Leased Premises.
15.14 Review of Landlord's Records. The Tenant, upon five (5) days
written notice to Landlord, shall have the right to inspect and review, at the
offices of the Landlord, all invoices, statements and bills from which their
assessments for taxes, insurance and common charges are derived.
15.15 Financial Statements . If so requested by Landlord's lender, or
proposed lender, Tenant shall provide said lender with appropriate information
as to the nature of Tenant's business and Tenant's current financial condition.
36
<PAGE>
IN WITNESS WHEREOF, the parties hereof have hereunto set their hands
and seals, and to a duplicate of the same tenor and date this 22th day of
September 1995.
Signed sealed and delivered
in the Presence of
INDUSTRIAL DEVELOPMENT GROUP
By: /s/ Kenneth N. Devino
---------------------------------
Kenneth N. Devino
Its Partner
DISCAS, INC.
By: /s/ Patrick A. DePaolo, Sr.
---------------------------------
Its President
DISCAS RECYCLED PRODUCTS CORP.
By: /s/ Patrick A. DePaolo, Sr.
---------------------------------
Its President
STATE OF CONNECTICUT)
)ss: Waterbury
COUNTY OF NEW HAVEN)
On this the 17th day of May , 1993, before me, the undersigned
officer, personally appeared, Kenneth N. Devino, known to me (or satisfactorily
proven) to be the person whose name is subscribed to the within instrument and
acknowledged that he executed the same for the purposes therein contained.
IN WITNESS WHEREOF, I hereunto set my hand.
illegible
---------
Notary Public
Commissioner, Superior CT.
37
<PAGE>
STATE OF CONNECTICUT )
) ss: Waterbury
COUNTY OF NEW HAVEN )
On this day the 17th day of May, 1993, before me, the undersigned
officer, personally appeared, Patrick A. DePaolo, Sr. who acknowledged himself
to be the President of Discas, Inc., a corporation, and that he as such
officer, being authorized so to do, executed the foregoing instrument for the
purposes therein contained, by signing the name of the corporation by himself
as such officer.
IN WITNESS WHEREOF, I hereunto set my hand.
illegible
---------
Notary Public
Commissioner, Superior CT.
STATE OF CONNECTICUT )
) ss: Waterbury
COUNTY OF NEW HAVEN )
On this day the 17th day of May, 1993, before me, the undersigned
officer, personally appeared, Patrick A. DePaolo, Sr. who acknowledged himself
to be the President of Discas, Inc., a corporation, and that he as such
officer, being authorized so to do, executed the foregoing instrument for the
purposes therein contained, by signing the name of the corporation by himself
as such officer.
IN WITNESS WHEREOF, I hereunto set my hand.
illegible
---------
Notary Public
Commissioner, Superior CT.
38
<PAGE>
EXHIBIT B
---------
I . IMPROVEMENTS to be provided by Landlord to Tenant at no cost to Tenant. Due
to time constraints, some of the following improvements may not be complete
until forty five (45) days after commencement of the Lease.
A. Close two existing opening in front wall with concrete bock. See
Exhibit B, page 2.
B. Re-open two previously existing penetrations in the bock wall which
separates Demised Premises from Tenants existing space. See Exhibit B,
page 2.
C. Install gas piping, gas meter and gas-fired warm air heaters.
D. Check weather-stripping on all exterior doors.
E. Paint existing lavatories and office.
F. Upon connection of electrical circuits to Tenant's existing electric
service in adjacent Premises, at Tenant expense, Landlord will:
i. Check all lighting in plant, lavatories and office;
ii. Check hot water heater in lavatories; and
iii. Check electric dock levelers; to make certain all are in good
working order.
II. IMPROVEMENT to be provided by Landlord to Tenant at Tenant's cost None.
39
<PAGE>
Exhibit 10.15
RESTATED LEASE INDENTURE
------------------------
THIS RESTATED LEASE INDENTURE, effective as of the 30th day of
October, 1996, by and between FRANK CRISCITIELLO and ANNE CRISCITIELLO d/b/a
PLAZA REALTY PARTNERSHIP, a New Jersey general partnership with a principal
office 80 Market Street, Kenilworth, New Jersey 07033 (hereinafter called
"Lessor") and CHRISTIE PRODUCTS, INC., a Delaware corporation with a principal
place of business at 80 Market Street, Kenilworth, New Jersey 07033
(hereinafter called "Lessee").
W I T N E S S E T H:
WHEREAS, Lessor and Lessee previously entered into a Lease Indenture
of Premises located at 80 Market Street, Kennilworth, New Jersey, effective as
of October 1, 1996 providing for an initial term of one year, with Lessee
having the option to renew said Lease for two (2) additional consecutive
twelve-month renewal terms; and
WHEREAS, the parties desire to restate said Lease to change the
initial term and renewal terms.
NOW, THEREFORE, said Lease is hereby restated in its entirety as
follows:
1. PREMISES/ACCEPTANCE: Lessor, in consideration of the rents
hereinafter reserved and of the covenants, agreements and conditions
hereinafter contained, does hereby let unto Lessee, and Lessee does hereby hire
and take, those premises including all buildings and improvements located
thereon, located at 80 Market Street, Kenilworth, New Jersey, as more
particularly described in Exhibit A, attached hereto (hereinafter called the
"premises" or "demised premises"). Lessor represents that at the time of
execution of this Lease all mechanical systems located on the premises are in
good working order. Such systems shall include but are not
1
<PAGE>
Exhibit 10.15
necessarily limited to electricity, heating and plumbing systems, and lighting
systems. Lessee acknowledges that it has inspected the premises to its
satisfaction and accepts the same in there present condition "as is".
2
<PAGE>
Exhibit 10.15
2. TERM OF LEASE:
(a) INITIAL TERM. The initial term of this Lease is for thirty-six
(36) months, commencing as of the date of closing that certain Asset Purchase
Agreement between Christie Enterprises, Inc. and Lessee.
(b) RENEWAL TERM. Provided that (i) Lessee is not then in default with
respect to any of its obligations contained herein and (ii) Lessee is not then
in default of its obligations to make timely payments of rent, Lessee may renew
and extend the term of this Lease for two (2) additional consecutive twelve
(12) month renewal terms, by delivery of written notice to the Lessor not later
than ninety (90) days prior to the end of the then present term. All
obligations, covenants and conditions contained herein shall continue for the
said renewal term.
(c) DEFINITIONS. Except as otherwise provided herein, any reference in
this Lease to the "term of this Lease" or "Lease term" shall mean the initial
term and the renewal term, if any.
(d) LESSEE'S RIGHT TO TERMINATE. Notwithstanding the provisions of (a)
and (b) above, Lessee shall have the right to terminate this Lease during the
renewal term upon giving at least ninety (90) days advance written notice of
its intent to terminate as of a date certain to Lessor.
3. BASE RENT: During the initial and renewal term of this Lease, the
Lessee shall pay to the Lessor the annual base rent of ONE HUNDRED TWENTY
THOUSAND DOLLARS ($120,000.00) as follows:
(a) During the first six (6) months of the initial term, in equal
monthly installments of FIVE THOUSAND DOLLARS ($5,000.00) each, payable in
advance on the first day of each calendar month;
(b) During the next six (6) months of the initial term, in equal
monthly installments of
3
<PAGE>
Exhibit 10.15
FIFTEEN THOUSAND DOLLARS ($15,000.00) each, payable in advance on the first day
of each calendar month;
(c) During the remaining twenty-four (24) months of the initial term,
in equal monthly installments of TEN THOUSAND DOLLARS ($10,000.00) each,
payable in advance on the first day of each calendar month; and
(d) During each renewal term, if the option(s) to renew is(are)
exercised, the monthly base rent shall be TEN THOUSAND DOLLARS ($10,000.00).
4. SECURITY DEPOSIT: This Lease does not contain any provision for a
security deposit.
5. LATE CHARGES: In order to cover the extra expense involved in
handling delinquent payment, Lessee agrees to pay a "late charge" of five (5%)
percent of any installment of rent or additional rent which is paid more than
twenty (20) days after the same shall become due.
6. PUBLIC UTILITIES: The Lessee shall pay all charges for utility
services furnished, used or consumed in connection with the premises including
but not limited to heat, hot water, gas, fuel oil, water, electricity and
telephone.
7. USE: The Lessee shall use and occupy premises solely for the
purpose of operating any business permitted by local or state planning and
zoning regulations, ordinances or statutory and in connection therewith Lessee
shall procure at its expense all permits, licenses or other required
authorizations. Lessor makes no representation that the intended use by Lessee
is allowable by municipal, state or federal regulations.
The Lessee will comply with, and will cause its servants, agents,
business visitors, and invitees to comply with all laws, statutes, municipal
ordinances, rules and regulations of public
4
<PAGE>
Exhibit 10.15
authorities applicable to the use of the property and to the conduct of its
business thereon and will indemnify and save the Lessors harmless from all
loss, damage, fines, penalties, and costs for violations thereof or
non-compliance therewith.
8. ASSIGNMENT AND SUBLET: Lessee shall not sublet the premises in any
manner or otherwise assign, mortgage or encumber this Lease without the prior
written consent of the Lessor, which consent shall not be unreasonably
withheld; no such sublet, assignment, mortgage or encumbrance shall release
Lessee from the obligations to fully perform and fulfill Lessee's covenants
herein.
9. QUIET ENJOYMENT: The Lessor covenants and agrees that the Lessee,
upon paying the rent and all of the charges herein provided for, and observing
and keeping the covenants, agreements, and conditions of this Lease on its part
to be kept, shall lawfully and quietly hold, occupy and enjoy the property
during the term of this Lease without hindrance or molestation from anyone
claiming by, through, or under the Lessor, subject, however, to the matters
herein set forth.
10. SUBORDINATION: Notwithstanding any provision contained herein,
this Lease shall be subject and subordinate to the lien of any and all existing
or future mortgages affecting the premises or any future extensions,
modifications, renewals, replacements or amendments thereof and, to that
effect, the Lessee shall, upon request of the Lessor, execute and deliver in
appropriate form for recording on the land records a proper instrument
evidencing such subordination. The foreclosure of any mortgage referred to in
this paragraph shall not, by operation of law or otherwise, result in the
cancellation of this Lease or the obligations of the Lessee hereunder and
Lessee agrees to attorn to and recognize any purchaser of the mortgaged
premises in foreclosure (including the mortgagee) as Lessor hereunder in the
event that any of said parties shall succeed to Lessor's interest
5
<PAGE>
Exhibit 10.15
in the premises.
11. MAINTENANCE AND REPAIR:
(a) Lessee, at Lessee's expense, shall be responsible for the
performance of maintenance of all parking areas and sidewalks and the removal
of debris and litter of whatever kind and trash hauling or carting service to
the demised premises. The Lessee shall provide for sanding and removal of snow
and ice from all parking areas and all sidewalks and care and maintenance of
all lawn areas, shrubs and trees located on the premises. The Lessee shall keep
the premises in good condition and repair and shall, at Lessee's expense, make
all necessary repairs to the interior of the demised premises including
replacement of all damaged and/or broken glass and service of all electrical,
mechanical, plumbing, heating, air conditioning systems, and all other services
relating to the use of the premises.
(b) Lessor shall at its sole cost and expense keep and maintain in
good repair the exterior of all structures and buildings on the demised
premises, including but not limited to, the roof, walls, all exterior service
pipes and mains which service the demised premises and shall make all repairs
and replacements to the mechanical, plumbing, heating, air conditioning systems
servicing the premises.
12. ALTERATIONS/MECHANICS' LIENS: As of the effective date hereof,
Lessor represents and warrants that the demised premises are in compliance with
all applicable federal, state, and municipal statutes, regulations, and
ordinances.
The Lessee will make no interior or exterior alterations or additions
in or to the property unless it shall have first obtained the written consent
of the Lessor thereto. If any alterations or additions shall be made by the
Lessee, they will become and be the property of the Lessor and will
6
<PAGE>
Exhibit 10.15
be surrendered with the property at the termination of the Lease unless the
Lessor and the Lessee agree otherwise in writing; PROVIDED, HOWEVER, that any
movable partitions installed on the premises by the Lessee shall remain the
property of the Lessee and, unless the Lessor otherwise agrees, the Lessee will
remove such property at the termination of the Lease or surrender of the
property, and Lessee shall, at its sole expense, restore the premises to the
condition the premises were in prior to the installation of said partitions. If
because of any act or omission of Lessee, any construction lien is filed
against the premises, Lessee shall cause the same to be discharged within
thirty (30) days of the filing thereof and shall indemnify the Lessor from all
loss or liability with respect thereto.
13. INDEMNITY: The Lessee will save, hold and keep the Lessor safe,
harmless, and indemnified from and against any and all claims, demands,
actions, causes of action, penalties, judgments, court costs, reasonable
attorneys' fees, and liabilities of every kind and description for injury to
and death of persons and damage to and loss of property, whether owned by
Lessee or other persons, which are in any way caused by, arise from, or grow
out of the Lessee's use or occupancy of the property, or any act or omission of
the Lessee, its employees, agents, invitees, or licensees.
14. TAXES: Lessee shall be responsible for and pay, as additional
rent, when due, all taxes assessed by municipal, county or state authorities
against the land and buildings constituting the premises and shall promptly
discharge any lien for the same.
15. INSURANCE:
(a) PUBLIC LIABILITY. The Lessee, at Lessee's expense, shall maintain,
in full force and effect at all times during the term of this Lease, public
liability insurance with policy limits for personal injury or death of not less
than ONE MILLION DOLLARS ($1,000,000.00) per occurrence
7
<PAGE>
Exhibit 10.15
and ONE MILLION DOLLARS ($1,00,000.00) aggregate and shall indicate the Lessor
and/or any mortgagee as additional insureds as their respective interests may
appear.
(b) FIRE INSURANCE. The Lessee, at Lessee's expense, shall maintain,
in full force and effect at all times during the term of this Lease, fire and
extended coverage with an all risk endorsement, in an amount equal to the full
insurable replacement value of the buildings and improvements standing upon the
premises, but not in excess of ONE MILLION THREE HUNDRED THOUSAND DOLLARS
($1,300,000.00), with a demolition endorsement and said policies shall be made
payable to Lessor and/or any mortgagee of the premises as their respective
interests may appear or shall pay Lessor's cost thereof, as the parties may
agree.
(c) PROOF OF COVERAGE. The Lessee shall furnish to Lessor and any
mortgagee, if applicable, a certified copy of such insurance policies, or other
satisfactory proof of coverage, prior to the effective date hereof and timely
renewal certificates therefor. All policies shall provide by suitable
endorsement the following matters:
(i) that the contractual liability of the Lessee under this Paragraph
15, is covered thereby, and
(ii) that the insurance will not be canceled or substantially changed
except upon thirty (30) days prior notice to Lessor and/or
mortgagee.
16. INSPECTION: The Lessor, or its authorized agents, will have the
right to inspect the premises at any reasonable time and from time to time
including the right to exhibit the same to prospective purchasers of the
premises or future tenants of the premises. All such inspections shall be
conducted so as to not unreasonably interfere with the Lessee's normal
activities.
17. REPRESENTATIONS OF LESSEE: Lessee hereby represents and warrants
to the Lessor the following:
8
<PAGE>
Exhibit 10.15
(a) That it is a Delaware corporation and is duly authorized and
registered to conduct business within the States of Connecticut and New Jersey;
(b) The execution, delivery and performance of this Lease or any
agreement contemplated herein does not result in a breach of any term or
condition of any other contract, agreement or other obligation of the Lessee;
and
(c) The Lease is a valid and binding obligation of the Lessee in
accordance with its terms.
18. DEFAULT OF LESSEE:
(a) Upon the occurrence of any of the following events:
(i) if the installments of rent, or any of them, or any part
thereof shall not be paid promptly upon the date on which the
same become or became due and payable as herein provided, and
any such default shall continue for a period of twenty (20)
days, or
(ii) if default shall be made in the due observance or performance
of any of the other covenants and agreements herein contained
on the part of the Lessee to be kept, observed, and performed,
and any such default shall continue for a period of thirty (30)
days after written notice thereof has been given by the Lessor
to the Lessee, without the Lessee having initiated steps within
such period in good faith to cure the same and proceeding
thereafter with all due diligence to complete same, or
(iii) if the Lessee shall vacate or abandon the property in breach of
terms and conditions of this Lease, or
(iv) the failure of any representation or warranty of Lessee to be
true and accurate, the Lessor will have the option thereafter
to give the Lessee notice of the Lessor's intention to
terminate the right of the Lessee to occupy the property and to
re-enter the property on a date to be stated in such notice,
which date shall not be less than fifteen (15) days after the
giving of such notice, and on the date specified in said
notice, the right of the Lessee to occupy the property shall
end. The termination of the right of the Lessee to occupy the
property and any re-entry by the Lessor as a result of the same
shall not relieve the Lessee of its obligation to pay the rent
or to perform and observe all the terms and conditions of this
Lease to be performed and observed by the Lessee during the
term of this Lease or any renewals thereof.
(b) If the Lessee's right to occupy the property for any of the causes
aforesaid is
9
<PAGE>
Exhibit 10.15
terminated, the Lessor shall make every reasonable effort to re-let the
premises, and if the Lessor re-lets the property, the Lessee shall continue to
be and remain liable for the difference between the rent and other payments
which would have been payable by the Lessee during the balance of the term of
this Lease, as provided for herein if the Lessee had continued in possession,
and the net rent for the balance of said term realized by the Lessor upon
re-letting in good faith to other parties and for the best rent obtainable, and
the Lessee shall pay the amount of such difference to the Lessor. Such net rent
will be determined by deducting from the entire rent received or to be received
during the remainder of the Lease upon such re-letting, the expenses, if any,
incurred in good faith by the Lessor for necessary upkeep and repairs in
connection with the property and all expenses reasonably incurred in recovering
possession of the property, including all costs and commissions of such re-
letting and reasonable attorney's fees in connection with such terminating,
recovering, possession, and re-letting the property. If the Lessor re-lets the
property as authorized herein, such re-letting may be for such period of time,
even if beyond the term of this Lease, as the Lessors may find reasonably
necessary, and the Lessor may grant concessions to a Lessee in such re-letting
as may be reasonable and necessary, provided the same shall be granted in good
faith.
19. SURRENDER OF PREMISES/WAIVER OF NOTICE TO QUIT: Whenever the
Lessee's right to occupy the property terminates, whether by expiration of the
term of this Lease or otherwise, the Lessee shall peaceably quit and surrender
possession of the property and deliver up the same to Lessor in broom clean
condition, and if the Lessee does not so quit and surrender possession, the
Lessor may lawfully re-enter and repossess the property, either by summary
proceedings or otherwise, and may dispossess and remove the Lessee and its
effects therefrom without incurring any liability therefrom and may have and
possess the property as of their former
10
<PAGE>
Exhibit 10.15
estate, and without such re-entry, may recover possession thereof in the manner
prescribed by the statute relating to summary process; and no demand for rent
and no re-entry for condition broken, as at common law, will be necessary to
enable the Lessor to recover such possession pursuant to said statute, and all
right to any such demand or re-entry is hereby expressly waived by the Lessee.
20. CONDEMNATION: If any person or corporation, public or private, or
any competent authority shall, at any time during the term hereof, lawfully
condemn and acquire title to the demised premises or take the use and
occupation of the demised premises by virtue of eminent domain or by
condemnation proceedings in pursuance of any law, general, special, or
otherwise, then such condemnation and acquiring of title shall terminate this
Lease, and such termination shall take effect as of the date when the party in
whose behalf such condemnation proceedings were brought shall be entitled to
take possession of the property.
In the event of a total or partial taking, neither party hereto shall
have any claims against the other for loss or damage resulting from such
taking, it is agreed that the Lessor shall be entitled to collect from the
condemnor the entire award that may be made in any such proceeding.
Notwithstanding the foregoing, the Lessee shall be entitled to any condemnation
award specifically made to compensate the Lessee for its moving expense, loss
of business, or relocation expenses caused by condemnation.
21. SIGNS: The Lessee shall have the right, subject to the written
permission of the Lessor, to install and maintain, replace, and relocate such
signs or lighting effects and fixtures as are or may be from time to time
commonly used or adopted by the Lessee; said permission will not be
unreasonably withheld. Lessee covenants and agrees to conform in every way with
the laws, ordinances, rules and regulations of the municipality, county and
state where the premises are
11
<PAGE>
Exhibit 10.15
located, or any department of either, and to save the Lessor free and harmless
of any fine, penalties, or costs for any violation or noncompliance with the
same so far as Lessee's use of the leased premises is concerned.
Lessor may post signs indicating that the premises are "for sale" and
during the final three (3) months of the term hereof the Lessor may also post
and maintain without hindrance, signs or notices indicating that the premises
are "for rent". PROVIDED, HOWEVER that no such signs placed by the Lessor shall
unreasonably interfere with the use of the premises by Lessee.
22. INTERRUPTION OF USE: In the event of damage to or destruction of
the demised premises by fire or other casualty, rent shall abate during the
period that the premises are not usable for the business of the Lessee, and the
Lessor agrees to use reasonable best efforts to repair and restore the premises
within a reasonable period of time.
If at any time during the lease term, the demised premises are
destroyed or damaged by fire, or other casualty, to the extent of fifty (50%)
percent or more of the then value of the buildings or other improvements, or
damaged to the extent that the said premises cannot be repaired within one
hundred twenty (120) days of the date of occurrence, then either party may
terminate this Lease as of the date of such damage or destruction by giving
notice to the other party within thirty (30) days thereafter of its election to
do so.
23. NOTICES: Any notice from one party to another hereunder, shall be
in writing and shall be deemed to have been duly given if sent by United States
certified or registered mail addressed:
To Lessor at: 1080 Prospect Avenue
Mountainside, New Jersey 07092
To Lessee at: 80 Market Street
12
<PAGE>
Exhibit 10.15
Kenilworth, New Jersey 07033
24. BANKRUPTCY: If the Lessee, or its successors or assigns, at any
time during the term of this Lease or any extension or renewal thereof, shall
be declared insolvent or adjudicated a bankrupt, or in the event a receiver
shall be appointed for its business or its assets on account of insolvency, or
if they shall make an assignment for the benefit of its creditors and the
Lessee is not actively contesting or appealing said declaration, or
appointment, then the Lessor shall have the right, at its election, then or at
any time thereafter while such default or defaults shall continue, without
further demand or notice, to enter into and upon said premises and repossess
the same as of its former estate, and upon entry as herein stated, this Lease
shall, at the option of the Lessor, terminate. In the event of termination of
this Lease as in this Paragraph provided, the Lessor's right to repossess the
demised premises shall be either without process of law or through any form of
suit proceeding, and in addition, the Lessor shall have the right to sue for
and recover all rents and other sums accrued and unpaid up to the time of such
termination, including damages and costs, including attorney's fees, arising
out of any breach of this Lease on the part of the Lessee.
25. CONVEYANCE: The term "Lessor", as used herein, shall mean only the
owner in fee for the time being of the premises, so that, in the event of any
sale, transfer or conveyance of the premises, the named Lessor shall be and
hereby is entirely freed and relieved of all covenants and obligations of
Lessor hereunder, and Lessee agrees that in the event of any such sale,
transfer or conveyance of the premises, Lessee shall attorn to and recognize
such Purchaser as a successor Lessor hereunder.
26. TIME IS OF THE ESSENCE: Lessee agrees that TIME IS OF THE ESSENCE
with respect to the punctuality of performance of its covenants, agreements and
obligations
13
<PAGE>
Exhibit 10.15
hereunder.
27. AGREEMENT TO EXECUTE ADDITIONAL INSTRUMENTS: The parties agree to
execute and deliver any instruments in writing necessary to carry out any
agreement, term, condition or assurance in this Lease whenever occasion shall
arise and request for such instrument shall be made.
28. ADDITIONAL REMEDIES: All rights and remedies given to Lessor
herein are distinct and separate and no one of them shall be deemed to be in
exclusion of any other remedy provided herein or in law or equity provided.
29. WAIVER NOT FORBEARANCE: A waiver by the Lessor of the enforcement
of any of its rights hereunder shall not be construed as a continuing waiver or
as a waiver of any other right. The receipt of rent by Lessor, with the
knowledge of any breach of this Lease by Lessee or of any default on the part
of Lessee in the observance or performance of any of the terms covenants or
conditions of this Lease, shall not be deemed to be a waiver of any provision
of Lease.
30. LEGAL COUNSEL: In the event that either party hereto is required
to engage legal counsel in order to enforce its rights herein, then the
prevailing party shall be entitled to recover all reasonable attorneys fees and
other reasonable expenses incurred by such prevailing party.
31. BROKERS: Lessor and Lessee each represent that no broker, agent or
other person is entitled to any brokerage fee or commission as a result of this
transaction, of the execution or performance of this Lease Indenture or of
delivery to Lessee the possession and occupancy of the premises as provided
herein. The parties hereto agree to save and hold harmless for any loss,
liability, damage or expense, including attorneys' fees, from any claim made
for a brokerage fee or commission arising from a misrepresentation under this
Paragraph 31.
14
<PAGE>
Exhibit 10.15
32. PLEDGE OR ASSIGNMENT OF LEASE BY LESSOR: No provision of this
Lease shall be construed as prohibiting the Lessor from executing an assignment
or pledge of its rights hereunder as collateral security for a loan or other
advance.
33. SCOPE OF AGREEMENT: This Lease contains all of the representations
and agreements between the parties hereto with respect to the property and
supersedes any and all previous or other arrangements or undertakings, verbal,
or in writing, regarding the same.
34. MODIFICATIONS: No modification of any of the provisions of this
Lease shall be effective unless the same be in writing and signed by the Lessor
and the Lessee.
35. HEADINGS: The Paragraph headings inserted herein are for
convenience and reference and are not intended, and shall not be construed, to
define or limit or in any manner affect the scope or meaning of any Paragraph
or provision of this Lease, and such headings shall not be considered in any
construction of this Lease.
36. SUCCESSION: This Lease shall be binding upon and shall inure to
the benefit of the heirs, legal representatives, successors, and assigns of the
parties hereto.
37. GOVERNING LAW: This Lease shall be governed and construed in
accordance with the applicable laws of the State of Connecticut.
38. PARTIAL INVALIDITY: If any term or provision of this Lease or the
application thereof to any person or circumstances shall, to any extent be
invalid or unenforceable, the remainder of this Lease, or the application of
such term or provision to
15
<PAGE>
Exhibit 10.15
person or circumstances other than those or to which it is held invalid or
unenforceable, shall not be affected thereby, and each term and provision of
this Lease shall be valid and be enforced to the fullest extent permitted by
Law.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands
and seals, the day and year above written. LESSOR: PLAZA REALTY PARTNERSHIP
By /s/ Frank Criscitello
---------------------
Frank Criscitiello
A Partner, Duly Authorized
LESSEE: CHRISTIE PRODUCTS, INC.
By /s/ Patrick A. DePaolo, Sr.
---------------------------
Patrick A. DePaolo, Sr.
Its President, Duly Authorized
16
<PAGE>
Exhibit 10.16
FINANCING AGREEMENT
-------------------
AGREEMENT MADE THIS 3rd day of September 1996, by and between MANTIS
V, L.L.C., a Michigan limited liability company having its principal place of
business at 407 E. Grand River, Brighton, Michigan 48116 (the "Lender") and
DISCAS, INC., a [Delaware] corporation having its principal place of business
at 567-1 South Leonard Street, Waterbury, Connecticut 06708 (the "Borrower").
WITNESSETH
----------
WHEREAS, the Borrower wishes to borrow and lender wishes to lend an
amount up to $350,000.00 to be used by the Borrower to purchase certain
equipment and raw materials and for marketing expenses and working capital; and
WHEREAS, as further consideration for the financing, the Borrower will
issue certain common stock, par value $ 0.001 (the "Common Stock") and warrants
to purchase Common Stock to the Lender.
NOW, THEREFORE, the parties hereby agree as follows:
I. The Lender will provide an unsecured loan to the Borrower in the principal
amount of up to $350,000.00, bearing simple interest at the rate of 8% per
annum, until the earlier of (a) the happening of any of certain events of
acceleration set forth in a promissory note to the Lender substantially in the
form of the promissory note attached hereto as Exhibit 1 (the "Promissory
Note") (including the Borrower's obtaining long-term debt or equity financing
in an amount of at least $2,500,000) and (b) July 31, 1998. The other terms and
provisions of the loan will be as set forth herein and in the Promissory Note.
1. Borrowings under this Agreement will be evidenced by the Promissory
Note. The Borrower will execute the Promissory Note and deliver it, as so
executed, to the Lender upon the Borrower's receipt of the first amount of
funds to be advanced hereunder by the Lender.
2. The Lender will make funds available to the Borrower, subject to
the terms set forth herein and in the Promissory Note and subject to the
$350,000.00 maximum principal
<PAGE>
amount of the loan, as follows: (a) $200,000.00 upon the execution of this
Agreement and the Note, and (b) up to an additional $150,000.00 in the
aggregate, on the tenth business day subsequent to the business day on which
the Lender receives a notice, signed by the President of the Borrower and
requesting a specified sum; provided, however, that the sum requested on any
single occasion shall not be less than $25,000.00, and provided further that
the Lender shall not be required to advance additional funds unless the
Borrower is then in compliance with all of its covenants, agreements,
representations, and warranties under this Agreement and the Promissory Note.
3. As additional consideration for the loan, the Borrower will issue
to the Lender, upon the execution of this Agreement and the Note, 270,000
shares of Common Stock and warrants to purchase an additional 100,000 shares of
Common Stock. Up to 200,000 (but no less than 190,000) of the shares of Common
Stock will be governed by a voting trust substantially in the form of the
voting trust or trusts attached hereto as Exhibit 2 (the "Voting Trust"), which
shall permit Patrick A. DePaolo, Sr. the right to vote such shares and a right
of first refusal with respect to the purchase of such shares. The warrants will
be immediately exercisable, will remain exercisable for a period of three years
from the date of their issuance, and will have an exercise price of $2.25 per
share of Common Stock. A document evidencing the warrants, substantially in the
form of the warrant attached hereto as Exhibit 3, will be executed by the
Borrower and the Lender. The Borrower and the Lender agree that the $350,000.00
to be advanced to the Borrower by the Lender shall be allocated as
consideration for the Note, the 270,000 shares of Common Stock and the warrants
received by the Lender as follows:
The Note: $322,000.00
The Common Stock: $ 27,000.00
The Warrants: $ 1,000.00
-----------
Total: $350,000.00
4. The Lender represents: (a) that it is a corporation duly organized
and in good standing under the laws of the State of Delaware; (b) that it has
all the requisite corporate power and authority to enter into this Agreement
and the Promissory Note; (c) that all of the representations and warranties,
and all of the financial representations and covenants, made by the Borrower
under the terms of the Senior Debt (as such term is defined in the Promissory
Note) remain true and complete and are satisfied to date in accordance with
their terms; (d) that this Agreement and the Promissory Note do not and will
not violate the terms of the Senior Debt or any other agreement or obligation
to which the Borrower is subject; and (e) immediately prior to the issuance of
Common Stock and warrants pursuant to the terms of this Agreement, the Borrower
has outstanding only 1,400,000 shares of Common Stock; immediately after such
issuance the Borrower will have outstanding only 1,670,000 shares of Common
Stock and
2
<PAGE>
warrants to purchase 100,000 shares of Common Stock; and there are no shares,
classes of shares, warrants, rights, or equity interests of any kind in the
Borrower other than the Common Stock and the warrants to purchase Common Stock.
5. This Agreement shall terminate upon the earlier to occur of: (a)
the date specified in a written agreement signed by both of the parties hereto;
or (b) the completion of all of the transactions contemplated hereby, including
repayment of all amounts advanced by the Lender, issuance of the Common Stock,
release of all shares of Common Stock from the Voting Trust, and exercise or
expiration of the warrants to purchase Common Stock.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first set forth above.
The Lender: Mantis V, L.L.C.
By: Mantis Partners, III, L.P.
Founding Member
By: Alan Milton
-----------
Alan Milton, General Partner
The Borrower: Discas, Inc.
By: Patrick A. DePaolo, Sr.
------------------------
Patrick A. DePaolo, Sr., President
3
<PAGE>
Exhibit 10.17a
SUBORDINATED PROMISSORY NOTE
----------------------------
$200,000
September 4, 1996
DISCAS, INC., a Delaware corporation (the "Company"), for value
received, hereby promises to pay to MANTIS V, L.L.C. having an address at 250
Park Avenue, New York, New York, or permitted assigns (the "Payee" or "Holder")
the principal amount of Two Hundred Thousand Dollars ($200,000) and accrued
interest thereon as hereinafter provided.
1. PAYMENT OF PRINCIPAL AND INTEREST; METHOD OF PAYMENT.
Interest on the unpaid portion of said principal amount from time to
time outstanding shall be paid by the Company at the rate of eight percent (8%)
per annum (the "Stated Interest Rate"), said interest payable to the Payee
quarterly commencing December 31, 1996 and for each of the five consecutive
calendar quarters thereafter, followed by the payment in full of principal and
interest, with the final maturity of this Note on July 31, 1998.
Assuming no prepayments by the Company pursuant to Section 5 hereof,
the first interest installment shall be $5,688 due for the period ending
December 31, 1996, followed by six quarterly interest payments of $4,000 each,
and the last payment on July 31, 1998 of all remaining principal and interest
(each payment date hereinafter a "Payment Date" or collectively the "Payment
Dates"); provided however, if the Company receives long term capital in the
form of equity or long term debt (other than from the Bank, as hereinafter
defined) in an amount (or series of amounts) which equals or exceeds
$2,500,000, then this Note shall become immediately due and payable. If any
installment of principal or interest on this Note is not paid within ten (10)
days of the applicable Payment Date, all amounts remaining owing under this
Note shall bear interest at the rate of 15%, to the extent that payment of such
interest on overdue amounts is enforceable under applicable law, until all such
arrearages have been cured by the Company. The Company will pay or cause to be
paid all sums becoming due hereon for principal and interest by check sent to
the Holder's above address or to such other address as Holder may designate for
such purpose from time to time by written notice to the Company, without any
requirement for the presentation of this Note or making any notation thereon
except that the Holder hereof agrees to endorse hereon the amount of principal
paid hereon and the last date to which interest has been paid hereon and to
notify the Company of the name and address of any transferee.
<PAGE>
2. COVENANTS OF THE COMPANY.
The Company covenants and agrees with Holder that so long as any part
of the principal amount of this Note or any accrued interest thereon shall
remain unpaid, the Company will not, without the express prior written consent
of the Holder: (i) sell all or substantially all of its assets, (ii) liquidate
or dissolve, or (iii) pay any dividends or make any distributions on the common
stock of the Company (other than dividends or distributions payable solely in
additional shares of the common stock of the Company).
3. EVENTS OF DEFAULT.
It shall be an Event of Default with respect to this Note upon the
occurrence and continuation uncured of any of the following events:
(a) a default in the payment of the principal or interest on this
Note, when and as the same shall become due and payable, either by the terms
hereof or upon acceleration or otherwise and said default continues uncured for
a period of twenty (20) business days following written notice thereof to the
Company by the Holder; provided, that Holder shall not be required to give
written notice of such payment default more than three (3) times during the
term of this Note in order to create an Event of Default; or
(b) default in the performance, or breach, of any covenant of the
Company in this Note (other than a covenant or a default which is elsewhere
herein specifically dealt with as Event of Default), and continuance of such
default or breach uncured for a period of thirty (30) days following written
notice thereof to the Company by the Holder, unless such breach or default is
of a nature such that it cannot reasonably be cured within such thirty day
period, so long as the Company has commenced a cure of such breach or default
within such thirty day period and continues to diligently pursue such cure to
completion; or
(c) The entry of a decree or order by a court having jurisdiction
adjudging the Company a bankrupt or insolvent, or approving a petition seeking
reorganization, arrangement, adjustment or composition of or in respect of the
Company, under federal bankruptcy law, as now or hereafter constituted, or any
other applicable federal or state bankruptcy, insolvency or other similar law,
or appointing a receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Company or of any substantial part of its affairs, and
the continuance of any such decree or order unstayed and in effect for a period
of ninety (90) days; or the commencement by the Company of a voluntary case
under federal bankruptcy law, as now or hereafter constituted,
2
<PAGE>
or any other applicable Federal or state bankruptcy, insolvency, or other
similar law, or the consent by it to the institution of bankruptcy or
insolvency proceedings against it, or the filing by it of a petition or answer
or consent seeking reorganization or relief under federal bankruptcy law or any
other applicable Federal or state law, or the consent by it to the filing of
such petition or the appointment of a receiver, liquidator, assignee, trustee,
sequestrator or similar official of the Company or of any substantial part of
its property, or the making by it of an assignment for the benefit of
creditors, or the admission by it in writing of its inability to pay its debts
generally as they become due, or the taking of corporate action by the Company
in furtherance of any such action.
(d) A Senior Default (as hereinafter defined) has occurred and the
Bank as hereinafter defined) has accelerated the Senior Debt (as hereinafter
defined).
4. REMEDIES UPON DEFAULT.
4.1 Acceleration. Upon each occurrence of an Event of Default and at
any time during the continuation thereof (unless the principal of this Note
shall already have become and be due and payable), the Holder, by notice in
writing given to the Company, may declare the principal of the Note then
outstanding to be due and payable immediately, and upon any such declaration
the same shall become and be due and payable immediately, anything herein
contained to the contrary notwithstanding, provided further, that upon the
occurrence of any event of default under Section 3(c) hereof, such acceleration
shall occur automatically without any action on the part of Holder.
4.2 Proceedings and Actions. During the continuation of any one or
more Events of Default, the Holder may institute such actions or proceedings in
law or equity as it shall deem expedient for the protection of its rights and
may prosecute and enforce its claims, plus reasonable expenses of collection,
including attorneys' fees.
5. PREPAYMENT.
Subject to the provisions of Section 6, this Note may be prepaid in
whole or in part at any time upon five (5) days' notice at the option of the
Company, provided that such prepayment is accompanied by accrued interest to
the prepayment date. In the case of partial prepayment, the amount and other
details thereof shall be noted on this Note. Upon giving notice of prepayment,
the maturity date of that portion of the principal proposed to be prepaid shall
be deemed to be the prepayment date specified in the notice, and it shall be an
Event of Default under Section 3 (and
3
<PAGE>
without need for any notice of default from Holder) if payment is not in fact
made on or before such date.
6. SUBORDINATION.
Notwithstanding anything to the contrary set forth herein, any other
documents between the Holder and the Company, or under applicable law, all of
the Company's obligations and liabilities (including, without limitation,
principal, interest and any costs and fees) under this Note (the "Subordinated
Debt") are and shall be subject and subordinate to the Senior Debt. "Senior
Debt" means collectively any loans, accommodations, or extensions of credit now
or hereafter made, granted or extended by Bank of Boston Connecticut, its
affiliates or successors (the "Bank") or which the Bank is or will become
obligated to make, grant or extend to or for the account of Company and/or its
affiliate, Discas Recycled Products Corporation (collectively, "Borrowers"),
including principal of, and interest (including interest subsequent to the
commencement of a Bankruptcy Proceeding (as hereinafter defined), whether or
not payable and also including capitalized interest and default interest) on
any such loans, accommodations, or extensions of credit, and all other
indebtedness, obligations and liabilities of either Borrower to the Bank,
including, without limitation, reimbursement obligations, indemnities, fees,
costs of collection (including, without limitation, attorneys' fees) and other
expenses or amounts payable under or with respect to any agreement between the
Bank and either or both Borrowers.
Unless and until all Senior Debt shall have been indefeasibly paid in
full or cash equivalents, the Holder shall not receive, nor permit, directly or
indirectly, by redemption, purchase, or in any other manner, any payment for or
in respect of the Subordinated Debt; provided, however, that the Holder shall
be entitled to receive quarterly interest payments (but not principal payments,
including, without limitation, prepayments) in accordance with the terms of
this Note so long as no default or state of facts which by the passage of time,
the giving of notice, or both, would constitute a default (such occurrence or
circumstance being a "Senior Default"), has occurred and is continuing under
the Senior Loan Documents or would result from such interest payment. "Senior
Loan Documents" means collectively each and every document, instrument,
financing statement or agreement now or hereafter executed, delivered and, if
appropriate, filed, in connection with the Senior Debt, together with any
extensions, renewals and amendments thereof.
In the event of any distribution, division or application, partial or
complete, voluntary or involuntary, by operation of law or otherwise, of all or
any part of the property, assets or business of any Borrower, or the proceeds
thereof, to any creditor or creditors of any Borrower or upon
4
<PAGE>
any indebtedness of any Borrower, by reason of any sale, liquidation,
dissolution or other winding up of such Borrower or its business or by reason
of any Bankruptcy Proceeding, then and in any such event, any payment or
distribution of any kind or character, whether in cash, property or securities
which, but for the subordination provisions set forth herein would otherwise be
payable or deliverable upon or in respect of Subordinated Debt shall instead be
paid over or delivered to the Bank on account of the Senior Debt, until all
Senior Debt shall have been indefeasibly paid in full, for application on
account of the Senior Debt before the Holder shall be entitled to receive any
such payment or distribution or any benefit therefrom. "Bankruptcy Proceeding"
means any receivership, insolvency or bankruptcy proceedings or assignment for
the benefit of creditors or any proceeding by or against any Borrower for any
relief under any bankruptcy, reorganization or insolvency law, or any other law
relating to the relief of debtors, readjustment of indebtedness,
reorganization, composition or extension.
The Holder hereby irrevocably authorizes and empowers (without
imposing any obligation on) the Bank, after the occurrence of a Senior Default
or after the commencement of any Bankruptcy Proceeding, to collect and receive
every such payment or distribution described in this Section 6 and give
acquittance therefor and to take all such other action (including, without
limitation, making all necessary endorsements of the Holder in respect of the
Subordinated Debt), in its name or the name of the Holder or otherwise, as the
Bank may deem necessary or advisable for the enforcement of the subordination
provisions set forth in this Section 6. Under such circumstances, the Holder
shall duly and promptly take such action as may be requested at any time and
from time to time by the Bank (but at no cost to the Holder) to collect the
Subordinated Debt and to file appropriate proofs of claim in respect thereof
and to execute and deliver such powers of attorney, assignments or other
instruments as may be requested by the Bank, to enable it to collect and
receive any and all payments or distributions which may be payable or
deliverable at any time upon or in respect of the Subordinated Debt.
Should any payment or distribution or security, or the proceeds of any
thereof, be collected or received by the Holder in respect of the Subordinated
Debt prior to the indefeasible payment in full of the Senior Debt, the Holder
will forthwith deliver the same to the Bank for the account of the Senior Debt
in precisely the form received (except for the endorsement or the assignment of
such by the Holder where necessary) and, until so delivered, the same shall be
held in trust by Holder as the property of the Bank.
Any present or future liens securing payment of the Subordinated Debt
shall at all times be and remain subordinate, junior and subject to the liens
securing Senior Debt, regardless of the order or time as of which any such
liens attach to any or all of the collateral therefor, the order or time of
Uniform Commercial Code or any other filings or recordings, the order or time
of
5
<PAGE>
granting of any liens or the physical possession of any of such collateral. The
Holder acknowledges that the Bank possesses a first priority lien on all of the
tangible and intangible real and personal properties of the Borrowers. The Bank
shall not be required to marshall any assets.
The terms of subordination set forth in this Section 6 shall not be
affected by (a) any failure to receive any and all notices of renewal,
extension or accrual of the Senior Debt; (b) the fact that any demand for
payment of any Senior Debt may be rescinded in whole or in part and any Senior
Debt may be extended, modified, accelerated, compromised, sold, waived or
released; (c) the fact that any Senior Loan Document may be amended, modified,
supplemented or terminated in whole or in part, any credit facilities increased
or decreased, and any collateral security at any time held by the Bank may be
sold, exchanged, waived, surrendered or released, in each case all without
notice to or further assent by any the Holder; (d) the fact that the Bank may
exercise or refrain from exercising any right, remedy or power granted by the
Bank Documents or at law, in equity or otherwise; (e) the fact that any and all
collateral security and/or liens for the Senior Debt, and any rights or
remedies of the Bank may, from time to time, in whole or in part, be exchanged,
sold, surrendered, released, modified, waived or extended; and (f) the fact
that any balance or balances of either Borrower's funds with the Bank may, from
time to time, in whole or in part, be surrendered or released.
The foregoing subordination provisions shall apply regardless of the
legality, validity or enforceability of the Senior Debt or any Senior Loan
Document or the legality, validity, perfection or enforceability of the liens
securing such indebtedness. To the extent that the Bank receives payments on,
or proceeds of collateral for, the Senior Debt which are subsequently
invalidated, declared to be fraudulent or preferential, set aside or required
to be repaid to a trustee, receiver or any other party under the U.S.
Bankruptcy Code or any other applicable law, then, to the extent of such
payment or proceeds received, the indebtedness intended to be satisfied shall
be revived and continue in full force and effect as if such payments or
proceeds have not been received by the Bank.
7. ENFORCEMENT ACTIONS.
The Holder shall notify the Bank (at an address from time to time
furnished by the Bank) in writing, which notice shall be effective upon
receipt, (a) of the occurrence of any default in the Company's obligations
hereunder (in which case the Bank shall have a reasonable opportunity, but not
the obligation, to cure such default), and (b) at least ten (10) business days
before the Holder engages in any Enforcement. So long as no Senior Default has
occurred, the Holder shall be entitled to commence and prosecute an
Enforcement; provided that (a) such Enforcement arises out of the Company's
failure to pay an installment of interest and principal hereunder when due;
6
<PAGE>
and (b) the Holder shall suspend, for 120 days, any Enforcement after the
occurrence of any Senior Default; provided further that the Holder will suspend
any Enforcement for an additional 365 days, if during or after such initial 120
day period, the Bank exercises its rights under any Senior Loan Document or
applicable law to effect collection of the Senior Debt and diligently pursues
such action. The foregoing restriction on Enforcement shall not preclude the
filing of a proof of claim and other documents necessary to establish a claim
in a Bankruptcy Proceeding.
"Enforcement" means the Holder's exercise of any of its rights and
remedies hereunder or any other agreements with the Company, at law or in
equity, for whatever purpose, including acceleration of the indebtedness
evidenced by this Note or declaration of an Event of Default, attachment or
foreclosure of a lien and seeking the appointment of a receiver, trustee or
other person for a Bankruptcy Proceeding.
8. THIRD PARTY BENEFICIARY.
Sections 6 and 7 shall be enforceable by the Bank as a third party
beneficiary and shall be effective and may not be terminated or otherwise
revoked until after the Senior Debt has been fully and indefeasibly paid and
the Bank has no further obligation to extend credit to the Company. Section 6
and 7 shall be binding on the Holder and any other person or entity from time
to time holding any Subordinated Debt and their respective successors and
assigns. The Holder acknowledges that the Bank is relying on Sections 6 and 7
in consenting to the Company incurring the indebtedness evidenced by this Note.
Any provision of Sections 6 and/or 7 which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions thereof or affecting the validity or
enforceability of such provision in any other jurisdiction. The Holder shall
execute and deliver such further documents and to do such other acts and things
as the Bank may reasonably request in order fully to effect the purpose of
Sections 6 and 7.
9. MISCELLANEOUS.
9.1 Notices. All communications provided hereunder shall be in writing
and, if to the Company, delivered or mailed by registered or certified mail
addressed to Discas, Inc., 567-1 S. Leonard Street Waterbury, Connecticut,
06708, Attention: Patrick A. DePaolo, Sr., President, or if to the Holder at
the address shown for the Holder at the beginning of this Note.
7
<PAGE>
9.2 Governing Law. This Note shall be construed in accordance with and
governed by the laws of the State of Connecticut, without giving effect to
conflict of laws principles.
9.3 Waivers. The Company hereby waives presentment, demand, protest,
notice of protest, dishonor and any other notice or action otherwise required
to be taken or given in connection with the enforcement of this Note by Holder.
8
<PAGE>
[signature page, Discas, Inc./Mantis V, L.L.C. $200,000 Note]
IN WITNESS WHEREOF, Discas, Inc. has caused this Note to be executed
in its corporate name by its Chief Executive Officer and to be dated the day
and year first above written.
DISCAS, INC.
By: /s/ Patrick A. DePaolo, Sr.
---------------------------
Patrick A. DePaolo, Sr., President
9
<PAGE>
Exhibit 10.17b
SUBORDINATED PROMISSORY NOTE
----------------------------
$150,000
December 5, 1996
DISCAS, INC., a Delaware corporation (the "Company"), for value
received, hereby promises to pay to MANTIS V, L.L.C. having an address at 250
Park Avenue, New York, New York, or permitted assigns (the "Payee" or "Holder")
the principal amount of One Hundred and Fifty Thousand Dollars ($150,000) and
accrued interest thereon as hereinafter provided.
1. PAYMENT OF PRINCIPAL AND INTEREST; METHOD OF PAYMENT.
Interest on the unpaid portion of said principal amount from time to
time outstanding shall be paid by the Company at the rate of eight percent (8%)
per annum (the "Stated Interest Rate"), said interest payable to the Payee
quarterly commencing December 31, 1996 and for each of the six consecutive
calendar quarters thereafter, followed by the payment in full of principal and
interest, with the final maturity of this Note on July 31, 1998.
Assuming no prepayments by the Company pursuant to Section 5 hereof,
the first interest installment shall be $854.79 due for the period ending
December 31, 1996, followed by six quarterly interest payments of $3,000 each,
and the last payment on July 18, 1998 of all remaining principal and interest
(each payment date hereinafter a "Payment Date" or collectively the "Payment
Dates"); provided however, if the Company receives long term capital in the
form of equity or long term debt (other than from the Bank, as hereinafter
defined) in an amount (or series of amounts) which equals or exceeds
$2,500,000, then this Note shall become immediately due and payable. If any
installment of principal or interest on this Note is not paid within ten (10)
days of the applicable Payment Date, all amounts remaining owing under this
Note shall bear interest at the rate of 15%, to the extent that payment of such
interest on overdue amounts is enforceable under applicable law, until all such
arrearages have been cured by the Company. The Company will pay or cause to be
paid all sums becoming due hereon for principal and interest by check sent to
the Holder's above address or to such other address as Holder may designate for
such purpose from time to time by written notice to the Company, without any
requirement for the presentation of this Note or making any notation thereon
except that the Holder hereof agrees
<PAGE>
to endorse hereon the amount of principal paid hereon and the last date to
which interest has been paid hereon and to notify the Company of the name and
address of any transferee.
2. COVENANTS OF THE COMPANY.
The Company covenants and agrees with Holder that so long as any part
of the principal amount of this Note or any accrued interest thereon shall
remain unpaid, the Company will not, without the express prior written consent
of the Holder: (i) sell all or substantially all of its assets, (ii) liquidate
or dissolve, or (iii) pay any dividends or make any distributions on the common
stock of the Company (other than dividends or distributions payable solely in
additional shares of the common stock of the Company).
3. EVENTS OF DEFAULT.
It shall be an Event of Default with respect to this Note upon the
occurrence and continuation uncured of any of the following events:
(a) a default in the payment of the principal or interest on this
Note, when and as the same shall become due and payable, either by the terms
hereof or upon acceleration or otherwise and said default continues uncured for
a period of twenty (20) business days following written notice thereof to the
Company by the Holder; provided, that Holder shall not be required to give
written notice of such payment default more than three (3) times during the
term of this Note in order to create an Event of Default; or
(b) default in the performance, or breach, of any covenant of the
Company in this Note (other than a covenant or a default which is elsewhere
herein specifically dealt with as Event of Default), and continuance of such
default or breach uncured for a period of thirty (30) days following written
notice thereof to the Company by the Holder, unless such breach or default is
of a nature such that it cannot reasonably be cured within such thirty day
period, so long as the Company has commenced a cure of such breach or default
within such thirty day period and continues to diligently pursue such cure to
completion; or
(c) The entry of a decree or order by a court having jurisdiction
adjudging the Company a bankrupt or insolvent, or approving a petition seeking
reorganization, arrangement, adjustment or composition of or in respect of the
Company, under federal bankruptcy law, as now or hereafter constituted, or any
other applicable federal or state bankruptcy, insolvency or other similar law,
or appointing a receiver, liquidator, assignee, trustee, sequestrator or other
similar
2
<PAGE>
official of the Company or of any substantial part of its affairs, and the
continuance of any such decree or order unstayed and in effect for a period of
ninety (90) days; or the commencement by the Company of a voluntary case under
federal bankruptcy law, as now or hereafter constituted, or any other
applicable Federal or state bankruptcy, insolvency, or other similar law, or
the consent by it to the institution of bankruptcy or insolvency proceedings
against it, or the filing by it of a petition or answer or consent seeking
reorganization or relief under federal bankruptcy law or any other applicable
Federal or state law, or the consent by it to the filing of such petition or
the appointment of a receiver, liquidator, assignee, trustee, sequestrator or
similar official of the Company or of any substantial part of its property, or
the making by it of an assignment for the benefit of creditors, or the
admission by it in writing of its inability to pay its debts generally as they
become due, or the taking of corporate action by the Company in furtherance of
any such action.
(d) A Senior Default (as hereinafter defined) has occurred and the
Bank as hereinafter defined) has accelerated the Senior Debt (as hereinafter
defined).
4. REMEDIES UPON DEFAULT.
4.1 Acceleration. Upon each occurrence of an Event of Default and at
any time during the continuation thereof (unless the principal of this Note
shall already have become and be due and payable), the Holder, by notice in
writing given to the Company, may declare the principal of the Note then
outstanding to be due and payable immediately, and upon any such declaration
the same shall become and be due and payable immediately, anything herein
contained to the contrary notwithstanding, provided further, that upon the
occurrence of any event of default under Section 3(c) hereof, such acceleration
shall occur automatically without any action on the part of Holder.
4.2 Proceedings and Actions. During the continuation of any one or
more Events of Default, the Holder may institute such actions or proceedings in
law or equity as it shall deem expedient for the protection of its rights and
may prosecute and enforce its claims, plus reasonable expenses of collection,
including attorneys' fees.
5. PREPAYMENT.
Subject to the provisions of Section 6, this Note may be prepaid in
whole or in part at any time upon five (5) days' notice at the option of the
Company, provided that such prepayment is accompanied by accrued interest to
the prepayment date. In the case of partial prepayment, the amount and other
details thereof shall be noted on this Note. Upon giving notice of prepayment,
3
<PAGE>
the maturity date of that portion of the principal proposed to be prepaid shall
be deemed to be the prepayment date specified in the notice, and it shall be an
Event of Default under Section 3 (and without need for any notice of default
from Holder) if payment is not in fact made on or before such date.
6. SUBORDINATION.
Notwithstanding anything to the contrary set forth herein, any other
documents between the Holder and the Company, or under applicable law, all of
the Company's obligations and liabilities (including, without limitation,
principal, interest and any costs and fees) under this Note (the "Subordinated
Debt") are and shall be subject and subordinate to the Senior Debt. "Senior
Debt" means collectively any loans, accommodations, or extensions of credit now
or hereafter made, granted or extended by Bank of Boston Connecticut, its
affiliates or successors (the "Bank") or which the Bank is or will become
obligated to make, grant or extend to or for the account of Company and/or its
affiliate, Discas Recycled Products Corporation (collectively, "Borrowers"),
including principal of, and interest (including interest subsequent to the
commencement of a Bankruptcy Proceeding (as hereinafter defined), whether or
not payable and also including capitalized interest and default interest) on
any such loans, accommodations, or extensions of credit, and all other
indebtedness, obligations and liabilities of either Borrower to the Bank,
including, without limitation, reimbursement obligations, indemnities, fees,
costs of collection (including, without limitation, attorneys' fees) and other
expenses or amounts payable under or with respect to any agreement between the
Bank and either or both Borrowers.
Unless and until all Senior Debt shall have been indefeasibly paid in
full or cash equivalents, the Holder shall not receive, nor permit, directly or
indirectly, by redemption, purchase, or in any other manner, any payment for or
in respect of the Subordinated Debt; provided, however, that the Holder shall
be entitled to receive quarterly interest payments (but not principal payments,
including, without limitation, prepayments) in accordance with the terms of
this Note so long as no default or state of facts which by the passage of time,
the giving of notice, or both, would constitute a default (such occurrence or
circumstance being a "Senior Default"), has occurred and is continuing under
the Senior Loan Documents or would result from such interest payment. "Senior
Loan Documents" means collectively each and every document, instrument,
financing statement or agreement now or hereafter executed, delivered and, if
appropriate, filed, in connection with the Senior Debt, together with any
extensions, renewals and amendments thereof.
4
<PAGE>
In the event of any distribution, division or application, partial or
complete, voluntary or involuntary, by operation of law or otherwise, of all or
any part of the property, assets or business of any Borrower, or the proceeds
thereof, to any creditor or creditors of any Borrower or upon any indebtedness
of any Borrower, by reason of any sale, liquidation, dissolution or other
winding up of such Borrower or its business or by reason of any Bankruptcy
Proceeding, then and in any such event, any payment or distribution of any kind
or character, whether in cash, property or securities which, but for the
subordination provisions set forth herein would otherwise be payable or
deliverable upon or in respect of Subordinated Debt shall instead be paid over
or delivered to the Bank on account of the Senior Debt, until all Senior Debt
shall have been indefeasibly paid in full, for application on account of the
Senior Debt before the Holder shall be entitled to receive any such payment or
distribution or any benefit therefrom. "Bankruptcy Proceeding" means any
receivership, insolvency or bankruptcy proceedings or assignment for the
benefit of creditors or any proceeding by or against any Borrower for any
relief under any bankruptcy, reorganization or insolvency law, or any other law
relating to the relief of debtors, readjustment of indebtedness,
reorganization, composition or extension.
The Holder hereby irrevocably authorizes and empowers (without
imposing any obligation on) the Bank, after the occurrence of a Senior Default
or after the commencement of any Bankruptcy Proceeding, to collect and receive
every such payment or distribution described in this Section 6 and give
acquittance therefor and to take all such other action (including, without
limitation, making all necessary endorsements of the Holder in respect of the
Subordinated Debt), in its name or the name of the Holder or otherwise, as the
Bank may deem necessary or advisable for the enforcement of the subordination
provisions set forth in this Section 6. Under such circumstances, the Holder
shall duly and promptly take such action as may be requested at any time and
from time to time by the Bank (but at no cost to the Holder) to collect the
Subordinated Debt and to file appropriate proofs of claim in respect thereof
and to execute and deliver such powers of attorney, assignments or other
instruments as may be requested by the Bank, to enable it to collect and
receive any and all payments or distributions which may be payable or
deliverable at any time upon or in respect of the Subordinated Debt.
Should any payment or distribution or security, or the proceeds of any
thereof, be collected or received by the Holder in respect of the Subordinated
Debt prior to the indefeasible payment in full of the Senior Debt, the Holder
will forthwith deliver the same to the Bank for the account of the Senior Debt
in precisely the form received (except for the endorsement or the assignment of
such by the Holder where necessary) and, until so delivered, the same shall be
held in trust by Holder as the property of the Bank.
5
<PAGE>
Any present or future liens securing payment of the Subordinated Debt
shall at all times be and remain subordinate, junior and subject to the liens
securing Senior Debt, regardless of the order or time as of which any such
liens attach to any or all of the collateral therefor, the order or time of
Uniform Commercial Code or any other filings or recordings, the order or time
of granting of any liens or the physical possession of any of such collateral.
The Holder acknowledges that the Bank possesses a first priority lien on all of
the tangible and intangible real and personal properties of the Borrowers. The
Bank shall not be required to marshall any assets.
The terms of subordination set forth in this Section 6 shall not be
affected by (a) any failure to receive any and all notices of renewal,
extension or accrual of the Senior Debt; (b) the fact that any demand for
payment of any Senior Debt may be rescinded in whole or in part and any Senior
Debt may be extended, modified, accelerated, compromised, sold, waived or
released; (c) the fact that any Senior Loan Document may be amended, modified,
supplemented or terminated in whole or in part, any credit facilities increased
or decreased, and any collateral security at any time held by the Bank may be
sold, exchanged, waived, surrendered or released, in each case all without
notice to or further assent by any the Holder; (d) the fact that the Bank may
exercise or refrain from exercising any right, remedy or power granted by the
Bank Documents or at law, in equity or otherwise; (e) the fact that any and all
collateral security and/or liens for the Senior Debt, and any rights or
remedies of the Bank may, from time to time, in whole or in part, be exchanged,
sold, surrendered, released, modified, waived or extended; and (f) the fact
that any balance or balances of either Borrower's funds with the Bank may, from
time to time, in whole or in part, be surrendered or released.
The foregoing subordination provisions shall apply regardless of the
legality, validity or enforceability of the Senior Debt or any Senior Loan
Document or the legality, validity, perfection or enforceability of the liens
securing such indebtedness. To the extent that the Bank receives payments on,
or proceeds of collateral for, the Senior Debt which are subsequently
invalidated, declared to be fraudulent or preferential, set aside or required
to be repaid to a trustee, receiver or any other party under the U.S.
Bankruptcy Code or any other applicable law, then, to the extent of such
payment or proceeds received, the indebtedness intended to be satisfied shall
be revived and continue in full force and effect as if such payments or
proceeds have not been received by the Bank.
7. ENFORCEMENT ACTIONS.
The Holder shall notify the Bank (at an address from time to time
furnished by the Bank) in writing, which notice shall be effective upon
receipt, (a) of the occurrence of any default in the Company's obligations
hereunder (in which case the Bank shall have a reasonable opportunity, but
6
<PAGE>
not the obligation, to cure such default), and (b) at least ten (10) business
days before the Holder engages in any Enforcement. So long as no Senior Default
has occurred, the Holder shall be entitled to commence and prosecute an
Enforcement; provided that (a) such Enforcement arises out of the Company's
failure to pay an installment of interest and principal hereunder when due; and
(b) the Holder shall suspend, for 120 days, any Enforcement after the
occurrence of any Senior Default; provided further that the Holder will suspend
any Enforcement for an additional 365 days, if during or after such initial 120
day period, the Bank exercises its rights under any Senior Loan Document or
applicable law to effect collection of the Senior Debt and diligently pursues
such action. The foregoing restriction on Enforcement shall not preclude the
filing of a proof of claim and other documents necessary to establish a claim
in a Bankruptcy Proceeding.
"Enforcement" means the Holder's exercise of any of its rights and
remedies hereunder or any other agreements with the Company, at law or in
equity, for whatever purpose, including acceleration of the indebtedness
evidenced by this Note or declaration of an Event of Default, attachment or
foreclosure of a lien and seeking the appointment of a receiver, trustee or
other person for a Bankruptcy Proceeding.
8. THIRD PARTY BENEFICIARY.
Sections 6 and 7 shall be enforceable by the Bank as a third party
beneficiary and shall be effective and may not be terminated or otherwise
revoked until after the Senior Debt has been fully and indefeasibly paid and
the Bank has no further obligation to extend credit to the Company. Section 6
and 7 shall be binding on the Holder and any other person or entity from time
to time holding any Subordinated Debt and their respective successors and
assigns. The Holder acknowledges that the Bank is relying on Sections 6 and 7
in consenting to the Company incurring the indebtedness evidenced by this Note.
Any provision of Sections 6 and/or 7 which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions thereof or affecting the validity or
enforceability of such provision in any other jurisdiction. The Holder shall
execute and deliver such further documents and to do such other acts and things
as the Bank may reasonably request in order fully to effect the purpose of
Sections 6 and 7.
9. MISCELLANEOUS.
9.1 Notices. All communications provided hereunder shall be in writing
and, if to the Company, delivered or mailed by registered or certified mail
addressed to Discas, Inc., 567-1 S.
7
<PAGE>
Leonard Street Waterbury, Connecticut, 06708, Attention: Patrick A. DePaolo,
Sr., President, or if to the Holder at the address shown for the Holder at the
beginning of this Note.
9.2 Governing Law. This Note shall be construed in accordance with and
governed by the laws of the State of Connecticut, without giving effect to
conflict of laws principles.
9.3 Waivers. The Company hereby waives presentment, demand, protest,
notice of protest, dishonor and any other notice or action otherwise required
to be taken or given in connection with the enforcement of this Note by Holder.
8
<PAGE>
[signature page, Discas, Inc./Mantis V, L.L.C. $150,000 Note]
IN WITNESS WHEREOF, Discas, Inc. has caused this Note to be executed
in its corporate name by its Chief Executive Officer and to be dated the day
and year first above written.
DISCAS, INC.
By: /s/ Patrick A. DePaolo, Sr.
---------------------------
Patrick A. DePaolo, Sr., President
9
<PAGE>
Exhibit 10.17c
SUBORDINATED PROMISSORY NOTE
----------------------------
$25,000
February 11, 1997
DISCAS, INC., a Delaware corporation (the "Company"), for value
received, hereby promises to pay to MANTIS V, L.L.C. having an address at 250
Park Avenue, New York, New York, or permitted assigns (the "Payee" or "Holder")
the principal amount of Twenty-Five Thousand Dollars ($25,000) and accrued
interest thereon as hereinafter provided.
1. PAYMENT OF PRINCIPAL AND INTEREST; METHOD OF PAYMENT.
Interest on the unpaid portion of said principal amount from time to
time outstanding shall be paid by the Company at the rate of eight percent (8%)
per annum (the "Stated Interest Rate"), said interest payable to the Payee
quarterly commencing March 31, 1997 and for each of the five consecutive
calendar quarters thereafter, followed by the payment in full of principal and
interest, with the final maturity of this Note on July 31, 1998.
Assuming no prepayments by the Company pursuant to Section 5 hereof,
the first interest installment shall be $263.01 due for the period ending March
31, 1997, followed by five quarterly interest payments of $500 each, and the
last payment on July 31, 1998 of all remaining principal and interest (each
payment date hereinafter a "Payment Date" or collectively the "Payment Dates");
provided however, if the Company receives long term capital in the form of
equity or long term debt (other than from the Bank, as hereinafter defined) in
an amount (or series of amounts) which equals or exceeds $2,500,000, then this
Note shall become immediately due and payable. If any installment of principal
or interest on this Note is not paid within ten (10) days of the applicable
Payment Date, all amounts remaining owing under this Note shall bear interest
at the rate of 15%, to the extent that payment of such interest on overdue
amounts is enforceable under applicable law, until all such arrearages have
been cured by the Company. The Company will pay or cause to be paid all sums
becoming due hereon for principal and interest by check sent to the Holder's
above address or to such other address as Holder may designate for such purpose
from time to time by written notice to the Company, without any requirement for
the presentation of this Note or making any notation thereon except that the
Holder hereof agrees to endorse hereon
<PAGE>
the amount of principal paid hereon and the last date to which interest has
been paid hereon and to notify the Company of the name and address of any
transferee.
2. COVENANTS OF THE COMPANY.
The Company covenants and agrees with Holder that so long as any part
of the principal amount of this Note or any accrued interest thereon shall
remain unpaid, the Company will not, without the express prior written consent
of the Holder: (i) sell all or substantially all of its assets, (ii) liquidate
or dissolve, or (iii) pay any dividends or make any distributions on the common
stock of the Company (other than dividends or distributions payable solely in
additional shares of the common stock of the Company).
3. EVENTS OF DEFAULT.
It shall be an Event of Default with respect to this Note upon the
occurrence and continuation uncured of any of the following events:
(a) a default in the payment of the principal or interest on this
Note, when and as the same shall become due and payable, either by the terms
hereof or upon acceleration or otherwise and said default continues uncured for
a period of twenty (20) business days following written notice thereof to the
Company by the Holder; provided, that Holder shall not be required to give
written notice of such payment default more than three (3) times during the
term of this Note in order to create an Event of Default; or
(b) default in the performance, or breach, of any covenant of the
Company in this Note (other than a covenant or a default which is elsewhere
herein specifically dealt with as Event of Default), and continuance of such
default or breach uncured for a period of thirty (30) days following written
notice thereof to the Company by the Holder, unless such breach or default is
of a nature such that it cannot reasonably be cured within such thirty day
period, so long as the Company has commenced a cure of such breach or default
within such thirty day period and continues to diligently pursue such cure to
completion; or
(c) The entry of a decree or order by a court having jurisdiction
adjudging the Company a bankrupt or insolvent, or approving a petition seeking
reorganization, arrangement, adjustment or composition of or in respect of the
Company, under federal bankruptcy law, as now or hereafter constituted, or any
other applicable federal or state bankruptcy, insolvency or other similar law,
or appointing a receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Company or of any substantial part of its affairs, and
the continuance of any such
2
<PAGE>
decree or order unstated and in effect for a period of ninety (90) days; or the
commencement by the Company of a voluntary case under federal bankruptcy law,
as now or hereafter constituted, or any other applicable Federal or state
bankruptcy, insolvency, or other similar law, or the consent by it to the
institution of bankruptcy or insolvency proceedings against it, or the filing
by it of a petition or answer or consent seeking reorganization or relief under
federal bankruptcy law or any other applicable Federal or state law, or the
consent by it to the filing of such petition or the appointment of a receiver,
liquidator, assignee, trustee, sequestrator or similar official of the Company
or of any substantial part of its property, or the making by it of an
assignment for the benefit of creditors, or the admission by it in writing of
its inability to pay its debts generally as they become due, or the taking of
corporate action by the Company in furtherance of any such action.
(d) A Senior Default (as hereinafter defined) has occurred and the
Bank as hereinafter defined) has accelerated the Senior Debt (as hereinafter
defined).
4. REMEDIES UPON DEFAULT.
4.1 Acceleration. Upon each occurrence of an Event of Default and at
any time during the continuation thereof (unless the principal of this Note
shall already have become and be due and payable), the Holder, by notice in
writing given to the Company, may declare the principal of the Note then
outstanding to be due and payable immediately, and upon any such declaration
the same shall become and be due and payable immediately, anything herein
contained to the contrary notwithstanding, provided further, that upon the
occurrence of any event of default under Section 3(c) hereof, such acceleration
shall occur automatically without any action on the part of Holder.
4.2 Proceedings and Actions. During the continuation of any one or
more Events of Default, the Holder may institute such actions or proceedings in
law or equity as it shall deem expedient for the protection of its rights and
may prosecute and enforce its claims, plus reasonable expenses of collection,
including attorneys' fees.
5. PREPAYMENT.
Subject to the provisions of Section 6, this Note may be prepaid in
whole or in part at any time upon five (5) days' notice at the option of the
Company, provided that such prepayment is accompanied by accrued interest to
the prepayment date. In the case of partial prepayment, the amount and other
details thereof shall be noted on this Note. Upon giving notice of prepayment,
the maturity date of that portion of the principal proposed to be prepaid shall
be deemed to be the
3
<PAGE>
prepayment date specified in the notice, and it shall be an Event of Default
under Section 3 (and without need for any notice of default from Holder) if
payment is not in fact made on or before such date.
6. SUBORDINATION.
Notwithstanding anything to the contrary set forth herein, any other
documents between the Holder and the Company, or under applicable law, all of
the Company's obligations and liabilities (including, without limitation,
principal, interest and any costs and fees) under this Note (the "Subordinated
Debt") are and shall be subject and subordinate to the Senior Debt. "Senior
Debt" means collectively any loans, accommodations, or extensions of credit now
or hereafter made, granted or extended by Bank of Boston Connecticut, its
affiliates or successors (the "Bank") or which the Bank is or will become
obligated to make, grant or extend to or for the account of Company and/or its
affiliate, Discas Recycled Products Corporation (collectively, "Borrowers"),
including principal of, and interest (including interest subsequent to the
commencement of a Bankruptcy Proceeding (as hereinafter defined), whether or
not payable and also including capitalized interest and default interest) on
any such loans, accommodations, or extensions of credit, and all other
indebtedness, obligations and liabilities of either Borrower to the Bank,
including, without limitation, reimbursement obligations, indemnities, fees,
costs of collection (including, without limitation, attorneys' fees) and other
expenses or amounts payable under or with respect to any agreement between the
Bank and either or both Borrowers.
Unless and until all Senior Debt shall have been indefeasibly paid in
full or cash equivalents, the Holder shall not receive, nor permit, directly or
indirectly, by redemption, purchase, or in any other manner, any payment for or
in respect of the Subordinated Debt; provided, however, that the Holder shall
be entitled to receive quarterly interest payments (but not principal payments,
including, without limitation, prepayments) in accordance with the terms of
this Note so long as no default or state of facts which by the passage of time,
the giving of notice, or both, would constitute a default (such occurrence or
circumstance being a "Senior Default"), has occurred and is continuing under
the Senior Loan Documents or would result from such interest payment. "Senior
Loan Documents" means collectively each and every document, instrument,
financing statement or agreement now or hereafter executed, delivered and, if
appropriate, filed, in connection with the Senior Debt, together with any
extensions, renewals and amendments thereof.
4
<PAGE>
In the event of any distribution, division or application, partial or
complete, voluntary or involuntary, by operation of law or otherwise, of all or
any part of the property, assets or business of any Borrower, or the proceeds
thereof, to any creditor or creditors of any Borrower or upon any indebtedness
of any Borrower, by reason of any sale, liquidation, dissolution or other
winding up of such Borrower or its business or by reason of any Bankruptcy
Proceeding, then and in any such event, any payment or distribution of any kind
or character, whether in cash, property or securities which, but for the
subordination provisions set forth herein would otherwise be payable or
deliverable upon or in respect of Subordinated Debt shall instead be paid over
or delivered to the Bank on account of the Senior Debt, until all Senior Debt
shall have been indefeasibly paid in full, for application on account of the
Senior Debt before the Holder shall be entitled to receive any such payment or
distribution or any benefit therefrom. "Bankruptcy Proceeding" means any
receivership, insolvency or bankruptcy proceedings or assignment for the
benefit of creditors or any proceeding by or against any Borrower for any
relief under any bankruptcy, reorganization or insolvency law, or any other law
relating to the relief of debtors, readjustment of indebtedness,
reorganization, composition or extension.
The Holder hereby irrevocably authorizes and empowers (without
imposing any obligation on) the Bank, after the occurrence of a Senior Default
or after the commencement of any Bankruptcy Proceeding, to collect and receive
every such payment or distribution described in this Section 6 and give
acquittance therefor and to take all such other action (including, without
limitation, making all necessary endorsements of the Holder in respect of the
Subordinated Debt), in its name or the name of the Holder or otherwise, as the
Bank may deem necessary or advisable for the enforcement of the subordination
provisions set forth in this Section 6. Under such circumstances, the Holder
shall duly and promptly take such action as may be requested at any time and
from time to time by the Bank (but at no cost to the Holder) to collect the
Subordinated Debt and to file appropriate proofs of claim in respect thereof
and to execute and deliver such powers of attorney, assignments or other
instruments as may be requested by the Bank, to enable it to collect and
receive any and all payments or distributions which may be payable or
deliverable at any time upon or in respect of the Subordinated Debt.
Should any payment or distribution or security, or the proceeds of any
thereof, be collected or received by the Holder in respect of the Subordinated
Debt prior to the indefeasible payment in full of the Senior Debt, the Holder
will forthwith deliver the same to the Bank for the account of the Senior Debt
in precisely the form received (except for the endorsement or the assignment of
such by the Holder where necessary) and, until so delivered, the same shall be
held in trust by Holder as the property of the Bank.
5
<PAGE>
Any present or future liens securing payment of the Subordinated Debt
shall at all times be and remain subordinate, junior and subject to the liens
securing Senior Debt, regardless of the order or time as of which any such
liens attach to any or all of the collateral therefor, the order or time of
Uniform Commercial Code or any other filings or recordings, the order or time
of granting of any liens or the physical possession of any of such collateral.
The Holder acknowledges that the Bank possesses a first priority lien on all of
the tangible and intangible real and personal properties of the Borrowers. The
Bank shall not be required to marshall any assets.
The terms of subordination set forth in this Section 6 shall not be
affected by (a) any failure to receive any and all notices of renewal,
extension or accrual of the Senior Debt; (b) the fact that any demand for
payment of any Senior Debt may be rescinded in whole or in part and any Senior
Debt may be extended, modified, accelerated, compromised, sold, waived or
released; (c) the fact that any Senior Loan Document may be amended, modified,
supplemented or terminated in whole or in part, any credit facilities increased
or decreased, and any collateral security at any time held by the Bank may be
sold, exchanged, waived, surrendered or released, in each case all without
notice to or further assent by any the Holder; (d) the fact that the Bank may
exercise or refrain from exercising any right, remedy or power granted by the
Bank Documents or at law, in equity or otherwise; (e) the fact that any and all
collateral security and/or liens for the Senior Debt, and any rights or
remedies of the Bank may, from time to time, in whole or in part, be exchanged,
sold, surrendered, released, modified, waived or extended; and (f) the fact
that any balance or balances of either Borrower's funds with the Bank may, from
time to time, in whole or in part, be surrendered or released.
The foregoing subordination provisions shall apply regardless of the
legality, validity or enforceability of the Senior Debt or any Senior Loan
Document or the legality, validity, perfection or enforceability of the liens
securing such indebtedness. To the extent that the Bank receives payments on,
or proceeds of collateral for, the Senior Debt which are subsequently
invalidated, declared to be fraudulent or preferential, set aside or required
to be repaid to a trustee, receiver or any other party under the U.S.
Bankruptcy Code or any other applicable law, then, to the extent of such
payment or proceeds received, the indebtedness intended to be satisfied shall
be revived and continue in full force and effect as if such payments or
proceeds have not been received by the Bank.
7. ENFORCEMENT ACTIONS.
The Holder shall notify the Bank (at an address from time to time
furnished by the Bank) in writing, which notice shall be effective upon
receipt, (a) of the occurrence of any default in the Company's obligations
hereunder (in which case the Bank shall have a reasonable opportunity, but
6
<PAGE>
not the obligation, to cure such default), and (b) at least ten (10) business
days before the Holder engages in any Enforcement. So long as no Senior Default
has occurred, the Holder shall be entitled to commence and prosecute an
Enforcement; provided that (a) such Enforcement arises out of the Company's
failure to pay an installment of interest and principal hereunder when due; and
(b) the Holder shall suspend, for 120 days, any Enforcement after the
occurrence of any Senior Default; provided further that the Holder will suspend
any Enforcement for an additional 365 days, if during or after such initial 120
day period, the Bank exercises its rights under any Senior Loan Document or
applicable law to effect collection of the Senior Debt and diligently pursues
such action. The foregoing restriction on Enforcement shall not preclude the
filing of a proof of claim and other documents necessary to establish a claim
in a Bankruptcy Proceeding.
"Enforcement" means the Holder's exercise of any of its rights and
remedies hereunder or any other agreements with the Company, at law or in
equity, for whatever purpose, including acceleration of the indebtedness
evidenced by this Note or declaration of an Event of Default, attachment or
foreclosure of a lien and seeking the appointment of a receiver, trustee or
other person for a Bankruptcy Proceeding.
8. THIRD PARTY BENEFICIARY.
Sections 6 and 7 shall be enforceable by the Bank as a third party
beneficiary and shall be effective and may not be terminated or otherwise
revoked until after the Senior Debt has been fully and indefeasibly paid and
the Bank has no further obligation to extend credit to the Company. Section 6
and 7 shall be binding on the Holder and any other person or entity from time
to time holding any Subordinated Debt and their respective successors and
assigns. The Holder acknowledges that the Bank is relying on Sections 6 and 7
in consenting to the Company incurring the indebtedness evidenced by this Note.
Any provision of Sections 6 and/or 7 which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions thereof or affecting the validity or
enforceability of such provision in any other jurisdiction. The Holder shall
execute and deliver such further documents and to do such other acts and things
as the Bank may reasonably request in order fully to effect the purpose of
Sections 6 and 7.
9. MISCELLANEOUS.
9.1 Notices. All communications provided hereunder shall be in writing
and, if to the Company, delivered or mailed by registered or certified mail
addressed to Discas, Inc., 567-1 S.
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Leonard Street Waterbury, Connecticut, 06708, Attention: Patrick A. DePaolo,
Sr., President, or if to the Holder at the address shown for the Holder at the
beginning of this Note.
9.2 Governing Law. This Note shall be construed in accordance with and
governed by the laws of the State of Connecticut, without giving effect to
conflict of laws principles.
9.3 Waivers. The Company hereby waives presentment, demand, protest,
notice of protest, dishonor and any other notice or action otherwise required
to be taken or given in connection with the enforcement of this Note by Holder.
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[signature page, Discas, Inc./Mantis V, L.L.C. $25,000 Note]
IN WITNESS WHEREOF, Discas, Inc. has caused this Note to be executed
in its corporate name by its Chief Executive Officer and to be dated the day
and year first above written.
DISCAS, INC.
By: /s/ Patrick A. DePaolo, Sr.
---------------------------
Patrick A. DePaolo, Sr., President
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Exhibit 10.18
CONVERTIBLE PROMISSORY NOTE
---------------------------
$1,000,000
October 30, 1996
Discas, Inc., a Delaware corporation ("Discas") and Christie Products,
Inc. ("CPI") ("Discas" and "CPI" being hereinafter collectively referred to as
the "Company"), for value received, hereby promise to pay to Christie
Enterprises, Inc. having an address at 80 Market Street, Kenilworth, New Jersey
07033, or permitted assigns (the "Payee" or "Holder") the principal amount of
One Million Dollars ($1,000,000) and accrued interest thereon as hereinafter
provided.
1. PAYMENT OF PRINCIPAL AND INTEREST; METHOD OF PAYMENT.
No interest shall accrue on this Note from the date hereof through
and including April 30, 1997. Thereafter, interest on the unpaid portion of
said principal amount from time to time outstanding shall be paid by the
Company at the rate of one percent per annum over the prime rate charged from
time to time by Citibank N.A. (the "Stated Interest Rate") as of April 30, 1997
and as adjusted on the last day of each 6-month period thereafter, said
interest payable to the Payee monthly commencing June 1, 1997 and for each of
the six consecutive calendar months thereafter, followed by sixty monthly
consecutive level payments of principal and together with interest, with the
final maturity of this Note on April 30, 2002.
Assuming no prepayments by the Company pursuant to Section 10
hereof, the first six payments hereunder shall be $____________ each, and the
next sixty payments hereunder shall be $___________ each. If any installment of
principal or interest on this Note is not paid within thirty (30) days of the
applicable Payment Date, all amounts remaining owing under this Note shall bear
interest at the rate of 2% over the otherwise applicable stated Interest Rate,
to the extent that payment of such interest on overdue amounts is enforceable
under applicable law, until all such arrearages have been cured by the Company.
The Company will pay or cause to be paid all sums becoming due hereon for
principal and interest by check sent to the Holder's above address or to such
other address as Holder may designate for such purpose from time to time by
written notice to the Company, without any requirement for the presentation of
this Note or making any notation thereon except that the Holder hereof agrees
to endorse hereon the amount of principal paid hereon and the last date to
which interest has been paid hereon and to notify the Company of the name and
address of any transferee.
2. CONVERSION.
2.1 Conversion. Subject to adjustment as set forth herein, the
Holder hereof shall convert not less than 50% and, in addition thereto, may
convert any portion or all of the remaining 50% (unless the Company shall give
notice of a partial prepayment pursuant to Section 10 hereof, in which case
Holder shall be entitled to convert such lesser amount of principal proposed to
be prepaid), of the outstanding principal amount of this Note into shares of
Discas' Common Stock at
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any time prior to payment by the Company. The number of shares into which this
Note are converted shall be determined by dividing the aggregate outstanding
principal amount of the Note by 125% of the initial public offering price per
share of Common Stock of Discas, provided, that if Discas has not completed an
initial public offering of its Common Stock by October 1, 1997, then the
conversion price shall be the greater of $6.00 per share or 125% of the then
fair market value of the Common Stock of Discas on a per share basis. Upon
issuance of such shares in accordance with the terms hereof, such shares will
be fully paid and nonassessable, and the corresponding principal amount of this
Note shall be deemed paid.
2.2 Method Of Conversion. The exercise of the conversion right
hereunder shall be effected by notice thereof to Discas and, in the event of a
conversion of the then remaining principal balance of this Note, by the
surrender of the Note, together with a duly executed copy of the form of
subscription attached hereto, to Discas at its principal office.
2.3 Delivery Of Stock Certificates; Fractional Shares. As promptly
as practicable after the conversion of this Note, Discas at its expense will
issue and deliver to the Holder of this Note a certificate or certificates for
the number of full shares of Common Stock issuable upon such conversion of the
Note. In lieu of any fractional share to which Holder would otherwise be
entitled, Discas shall make a cash payment equal to the then fair market value
of such fractional share. All accrued but unpaid interest shall be paid in cash
through the date of conversion.
3. CERTAIN ADJUSTMENTS.
3.1 Adjustments Of Number Of Conversion Shares. The initial number
of shares of Common Stock issuable upon conversion of this Note shall be
subject to adjustment from time to time if, after the date hereof, Discas
should effect a split or subdivision of the outstanding shares of its Common
Stock or pay a dividend with respect to Common Stock payable in shares of
Common Stock, or make any other distribution with respect to Common Stock, or
decrease the number of its shares of Common Stock outstanding by a combination
of its outstanding shares of Common Stock. In any such case, the number of
shares of Common Stock issuable upon the conversion of this Note outstanding
immediately prior thereto shall be adjusted so that the Holder shall be
entitled to receive the number of shares of Common Stock which he would have
owned or been entitled to receive immediately following any of the events
described above had the Note been converted immediately prior to any such
event.
3.2 Mergers, Consolidations Or Sale Of Assets. If at any time there
shall be a capital reorganization of the Common Stock (other than a
combination, reclassification, exchange or subdivision of Common Stock
otherwise provided for herein), or a merger or consolidation of Discas with or
into another corporation in which Discas is not the surviving corporation, or
the sale of Discas' properties and assets as, or substantially as, an entirety
to any other person, then, as part of such reorganization, merger,
consolidation or sale, lawful provision shall be made so that the Holder shall
thereafter be entitled to receive upon conversion of this Note, during the
period specified in this Note, the number of shares of stock or other
securities or property of the successor corporation resulting from such
reorganization, merger, consolidation or sale, to which a holder of the Common
Stock deliverable upon conversion of this Note would have been entitled under
the
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provisions of the agreement in such reorganization, merger, consolidation or
sale if this Note had been converted immediately before that reorganization,
merger, consolidation or sale.
3.3 Reclassification. If Discas at any time shall by subdivision,
combination or reclassification of securities or otherwise, change any of the
Common Stock covered hereby into the same or a different number of securities
of any other class or classes, this Note shall thereafter be convertible into
such number and kind of securities as would have been issuable as a result of
such change with respect to such Common Stock immediately prior to such
subdivision, combination, reclassification or other change.
4. CERTIFICATE AS TO ADJUSTMENT.
In case of each adjustment or readjustment of the conversion price
pursuant to Section 3, Discas will promptly compute such adjustment or
readjustment in accordance with the terms hereof and cause a certificate
setting forth such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based to be delivered to the
Holder. Discas will, upon the written request at any time of the Holder,
furnish or cause to be furnished to the Holder a certificate setting forth:
(i) Such adjustments and readjustments.
(ii) The conversion price at the time in effect.
(iii) The number of shares of Common Stock and the amount,
if any, of other property at the time receivable
upon conversion of the Note.
5. RESERVATION OF COMMON STOCK.
Discas shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock, solely for the purpose of
effecting the conversion of this Note such number of its shares of Common Stock
as shall from time to time be sufficient to effect the conversion of this Note;
and if at any time the number of authorized but unissued shares of Common Stock
shall not be sufficient to effect the conversion of the Note, in addition to
such other remedies as shall be available to the Holder, Discas will use its
best efforts to take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purposes.
6. PRIVILEGES OF STOCK OWNERSHIP.
Prior to the conversion of this Note, the Holder shall not be
entitled to any rights of a stockholder of Discas, including (without
limitation) the right to vote, receive dividends or other distributions,
exercise preemptive rights or be notified of stockholder meetings, and such
Holder shall not be entitled to any notice or other communication concerning
the business or affairs of Discas, except as required by law.
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7. INVESTMENT REPRESENTATIONS. Holder represents that:
7.1 Purchase For Own Account. The shares of Common Stock to be
received upon conversion of this Note (the "Securities") are being acquired for
its own account, not as a nominee or agent and not with a view to resale or
distribution of any part thereof, and it has no present intention of selling,
granting any participation in, or otherwise distributing the same; PROVIDED,
HOWEVER, Christie Enterprises, Inc. may distribute this Note to its
Shareholders in the event of its liquidation. Holder further represents that it
does not have any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participation to any third person with
respect to the Securities.
7.2 Restricted Securities. Holder understands that the Securities
may be characterized as "restricted securities" under the federal securities
laws inasmuch as they are being acquired from Discas in transactions not
involving a public offering and that under such laws and applicable regulations
such securities may be resold without registration under the Securities Act of
1933, as amended (the "Act"), only in certain limited circumstances. In this
connection, Holder represents that it is familiar with SEC Rule 144, as
presently in effect and understands the resale limitations imposed thereby and
by the Act.
7.3 Legends. Holder understands the instruments evidencing the
Securities may bear one or all of the following legends:
(i) "These Securities have not been registered under the
Securities Act of 1933. They may not be sold, offered for
sale, pledged or hypothecated in the absence of a
registration statement in effect with respect to the
Securities under such Act or an opinion of counsel
satisfactory to the Company that such registration is not
required or unless sold pursuant to Rule 144 of such Act."
(ii) Any legend required by applicable state law.
8. EVENTS OF DEFAULT.
It shall be an Event of Default with respect to this Note upon the
occurrence and continuation uncured of any of the following events:
(a) a default in the payment of the principal or interest on this
Note, when and as the same shall become due and payable, either by the terms
hereof or upon acceleration or otherwise and said default continues uncured for
a period of fifteen (15) days; or
(b) default in the performance, or breach, of any covenant of the
Company in this Note (other than a covenant or a default which is elsewhere
herein specifically dealt with as Event of Default), or a default by CPI in
payment of its $500,000 Note of even date herewith to Textron Financial
Corporation, and continuance of such default or breach uncured for a period of
thirty (30) days following written notice thereof to the Company by the Holder,
unless such breach or default
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<PAGE>
is of a nature such that it cannot reasonably be cured within such thirty day
period, so long as the Company has commenced a cure of such breach or default
within such thirty day period and continues to diligently pursue such cure to
completion; or
(c) The entry of a decree or order by a court having jurisdiction
adjudging the Company a bankrupt or insolvent, or approving a petition seeking
reorganization, arrangement, adjustment or composition of or in respect of the
Company, under federal bankruptcy law, as now or hereafter constituted, or any
other applicable federal or state bankruptcy, insolvency or other similar law,
or appointing a receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Company or of any substantial part of its affairs, and
the continuance of any such decree or order unstayed and in effect for a period
of ninety (90) days; or the commencement by the Company of a voluntary case
under federal bankruptcy law, as now or hereafter constituted, or any other
applicable Federal or state bankruptcy, insolvency, or other similar law, or
the consent by it to the institution of bankruptcy or insolvency proceedings
against it, or the filing by it of a petition or answer or consent seeking
reorganization or relief under federal bankruptcy law or any other applicable
Federal or state law, or the consent by it to the filing of such petition or
the appointment of a receiver, liquidator, assignee, trustee, sequestrator or
similar official of the Company or of any substantial part of its property, or
the making by it of an assignment for the benefit of creditors, or the
admission by it in writing of its inability to pay its debts generally as they
become due, or the taking of corporate action by the Company in furtherance of
any such action.
(d) A Senior Default (as hereinafter defined) has occurred and the
Bank as hereinafter defined) has accelerated the Senior Debt (as hereinafter
defined).
9. REMEDIES UPON DEFAULT.
9.1 Acceleration. Upon each occurrence of an Event of Default and
at any time during the continuation thereof (unless the principal of this Note
shall already have become and be due and payable), the Holder, by notice in
writing given to the Company, may declare the principal of the Note then
outstanding to be due and payable immediately, and upon any such declaration
the same shall become and be due and payable immediately, anything herein
contained to the contrary notwithstanding, provided further, that upon the
occurrence of any event of default under Section 3(c) hereof, such acceleration
shall occur automatically without any action on the part of Holder.
9.2 Proceedings and Actions. During the continuation of any one or
more Events of Default, the Holder may institute such actions or proceedings in
law or equity as it shall deem expedient for the protection of its rights and
may prosecute and enforce its claims, plus reasonable expenses of collection,
including attorneys' fees.
10. PREPAYMENT.
There shall be no right of Prepayment during the first one hundred
twenty (120) days after the issuance of this Convertible Promissory Note;
thereafter subject to the provisions of Section 2, this Note may be prepaid in
whole or in part at any time upon twenty (20) days' notice at the option of the
Company, provided that such prepayment is accompanied by accrued interest to
the
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<PAGE>
prepayment date. In the case of partial prepayment, the amount and other
details thereof shall be noted on this Note. Upon giving notice of prepayment,
the maturity date of that portion of the principal proposed to be prepaid shall
be deemed to be the prepayment date specified in the notice, and it shall be an
Event of Default under Section 3 (and without need for any notice of default
from Holder) if payment is not in fact made on or before such date.
11. SUBORDINATION.
Notwithstanding anything to the contrary set forth herein, any
other documents between the Holder and the Company, or under applicable law,
all of Discas' obligations and liabilities (including, without limitation,
principal, interest and any costs and fees) under this Note (the "Subordinated
Debt") are and shall be subject and subordinate to the Senior Debt. "Senior
Debt" means collectively any loans, accommodations, or extensions of credit now
or hereafter made, granted or extended by Bank of Boston Connecticut, its
affiliates or successors (the "Bank") or which the Bank is or will become
obligated to make, grant or extend to or for the account of Discas and/or its
affiliate, Discas Recycled Products Corporation (collectively, "Borrowers" and
separately "Borrower"), including principal of, and interest (including
interest subsequent to the commencement of a Bankruptcy Proceeding (as
hereinafter defined), whether or not payable and also including capitalized
interest and default interest) on any such loans, accommodations, or extensions
of credit, and all other indebtedness, obligations and liabilities of either
Discas to the Bank, including, without limitation, reimbursement obligations,
indemnities, fees, costs of collection (including, without limitation,
attorneys' fees) and other expenses or amounts payable under or with respect to
any agreement between the Bank and either or both Borrowers. As used in this
Paragraph 11, the words "Borrower" and "Borrowers" shall not include Christie
Products, Inc.
Unless and until all Senior Debt shall have been indefeasibly paid
in full or cash equivalents, the Holder shall not receive, nor permit, directly
or indirectly, by redemption, purchase, or in any other manner, any payment
from Discas for or in respect of the Subordinated Debt; provided, however, that
the Holder shall be entitled to receive interest payments (but not principal
payments, including, without limitation, prepayments) in accordance with the
terms of this Note so long as no default or state of facts which by the passage
of time, the giving of notice, or both, would constitute a default (such
occurrence or circumstance being a "Senior Default"), has occurred and is
continuing under the Senior Loan Documents or would result from such interest
payment. "Senior Loan Documents" means collectively each and every document,
instrument, financing statement or agreement now or hereafter executed,
delivered and, if appropriate, filed, in connection with the Senior Debt,
together with any extensions, renewals and amendments thereof.
In the event of any distribution, division or application, partial
or complete, voluntary or involuntary, by operation of law or otherwise, of all
or any part of the property, assets or business of Discas, or the proceeds
thereof, to any creditor or creditors of any Borrower or upon any indebtedness
of any Borrower, by reason of any sale, liquidation, dissolution or other
winding up of such Borrower or its business or by reason of any Bankruptcy
Proceeding, then and in any such event, any payment or distribution of any kind
or character, whether in cash, property or securities which, but for the
subordination provisions set forth herein would otherwise be payable or
deliverable upon or in respect of Subordinated Debt shall instead be paid over
or delivered to the
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Bank on account of the Senior Debt, until all Senior Debt shall have been
indefeasibly paid in full, for application on account of the Senior Debt before
the Holder shall be entitled to receive any such payment or distribution or any
benefit therefrom. "Bankruptcy Proceeding" means any receivership, insolvency
or bankruptcy proceedings or assignment for the benefit of creditors or any
proceeding by or against any Borrower for any relief under any bankruptcy,
reorganization or insolvency law, or any other law relating to the relief of
debtors, readjustment of indebtedness, reorganization, composition or
extension.
The Holder hereby irrevocably authorizes and empowers (without
imposing any obligation on) the Bank, after the occurrence of a Senior Default
or after the commencement of any Bankruptcy Proceeding, to collect and receive
every such payment or distribution described in this Section 11 and give
acquittance therefor and to take all such other action (including, without
limitation, making all necessary endorsements of the Holder in respect of the
Subordinated Debt), in its name or the name of the Holder or otherwise, as the
Bank may deem necessary or advisable for the enforcement of the subordination
provisions set forth in this Section 11. Under such circumstances, the Holder
shall duly and promptly take such action as may be requested at any time and
from time to time by the Bank (but at no cost to the Holder) to collect the
Subordinated Debt and to file appropriate proofs of claim in respect thereof
and to execute and deliver such powers of attorney, assignments or other
instruments as may be requested by the Bank, to enable it to collect and
receive any and all payments or distributions which may be payable or
deliverable at any time upon or in respect of the Subordinated Debt.
Should any payment or distribution or security, or the proceeds of
any thereof, be collected or received by the Holder from Discas in respect of
the Subordinated Debt prior to the indefeasible payment in full of the Senior
Debt, the Holder will forthwith deliver the same to the Bank for the account of
the Senior Debt in precisely the form received (except for the endorsement or
the assignment of such by the Holder where necessary) and, until so delivered,
the same shall be held in trust by Holder as the property of the Bank.
Any present or future liens guaranteed by Discas securing payment
of the Subordinated Debt shall at all times be and remain subordinate, junior
and subject to the liens securing Senior Debt, regardless of the order or time
as of which any such liens attach to any or all of the collateral therefor, the
order or time of Uniform Commercial Code or any other filings or recordings,
the order or time of granting of any liens or the physical possession of any of
such collateral. The Holder acknowledges that the Bank possesses a first
priority lien on all of the tangible and intangible real and personal
properties of the Discas. The Bank shall not be required to marshal any assets.
The terms of subordination set forth in this Section 11 shall not
be affected by (a) any failure to receive any and all notices of renewal,
extension or accrual of the Senior Debt; (b) the fact that any demand for
payment of any Senior Debt may be rescinded in whole or in part and any Senior
Debt may be extended, modified, accelerated, compromised, sold, waived or
released; (c) the fact that any Senior Loan Document may be amended, modified,
supplemented or terminated in whole or in part, any credit facilities increased
or decreased, and any collateral security at any time held by the Bank may be
sold, exchanged, waived, surrendered or released, in each case all without
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notice to or further assent by any the Holder; (d) the fact that the Bank may
exercise or refrain from exercising any right, remedy or power granted by the
Bank Documents or at law, in equity or otherwise; (e) the fact that any and all
collateral security and/or liens for the Senior Debt, and any rights or
remedies of the Bank may, from time to time, in whole or in part, be exchanged,
sold, surrendered, released, modified, waived or extended; and (f) the fact
that any balance or balances of either Borrower's funds with the Bank may, from
time to time, in whole or in part, be surrendered or released.
The foregoing subordination provisions shall apply regardless of
the legality, validity or enforceability of the Senior Debt or any Senior Loan
Document or the legality, validity, perfection or enforceability of the liens
securing such indebtedness. To the extent that the Bank receives payments on,
or proceeds of collateral for, the Senior Debt which are subsequently
invalidated, declared to be fraudulent or preferential, set aside or required
to be repaid to a trustee, receiver or any other party under the U.S.
Bankruptcy Code or any other applicable law, then, to the extent of such
payment or proceeds received, the indebtedness intended to be satisfied shall
be revived and continue in full force and effect as if such payments or
proceeds have not been received by the Bank.
12. ENFORCEMENT ACTIONS.
The Holder shall notify the Bank (at an address from time to time
furnished by the Bank) in writing, which notice shall be effective upon
receipt, (a) of the occurrence of any default in Discas' obligations hereunder
(in which case the Bank shall have a reasonable opportunity, but not the
obligation, to cure such default), and (b) at least ten (10) business days
before the Holder engages in any Enforcement. So long as no Senior Default has
occurred, the Holder shall be entitled to commence and prosecute an
Enforcement; provided that (a) such Enforcement arises out of the Company's
failure to pay an installment of interest and principal hereunder when due; and
(b) the Holder shall suspend, for 120 days, any Enforcement after the
occurrence of any Senior Default; provided further that the Holder will suspend
any Enforcement for an additional 365 days, if during or after such initial 120
day period, the Bank exercises its rights under any Senior Loan Document or
applicable law to effect collection of the Senior Debt and diligently pursues
such action. The foregoing restriction on Enforcement shall not preclude the
filing of a proof of claim and other documents necessary to establish a claim
in a Bankruptcy Proceeding.
"Enforcement" means the Holder's exercise of any of its rights and
remedies hereunder or any other agreements with Discas, at law or in equity,
for whatever purpose, including acceleration of the indebtedness evidenced by
this Note or declaration of an Event of Default, attachment or foreclosure of a
lien and seeking the appointment of a receiver, trustee or other person for a
Bankruptcy Proceeding.
13. THIRD PARTY BENEFICIARY.
Sections 11 and 12 shall be enforceable by the Bank as a third
party beneficiary and shall be effective and may not be terminated or otherwise
revoked until after the Senior Debt has been fully and indefeasibly paid and
the Bank has no further obligation to extend credit to the
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Company. Section 6 and 7 shall be binding on the Holder and any other person or
entity from time to time holding any Subordinated Debt and their respective
successors and assigns. The Holder acknowledges that the Bank is relying on
Sections 6 and 7 in consenting to the Company incurring the indebtedness
evidenced by this Note.
Any provision of Sections 11 and/or 12 which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions thereof or affecting the validity or
enforceability of such provision in any other jurisdiction. The Holder shall
execute and deliver such further documents and to do such other acts and things
as the Bank may reasonably request in order fully to effect the purpose of
Sections 11 and 12.
14. MISCELLANEOUS.
14.1 Notices. All communications provided hereunder shall be in
writing and, if to the Company, delivered or mailed by registered or certified
mail addressed to Discas, Inc., 567-1 S. Leonard Street Waterbury, Connecticut,
06708, Attention: Patrick A. DePaolo, Sr., President, or if to the Holder at
the address shown for the Holder at the beginning of this Note.
14.2 Governing Law. This Note shall be construed in accordance with
and governed by the laws of the State of Connecticut, without giving effect to
conflict of laws principles.
14.3 Waivers. The Company hereby waives presentment, demand,
protest, notice of protest, dishonor and any other notice or action otherwise
required to be taken or given in connection with the enforcement of this Note
by Holder.
IN WITNESS WHEREOF, Discas, Inc. and Christie Products, Inc. has
caused this Note to be executed in its corporate name by its President and to
be dated the day and year first above written.
CHRISTIE PRODUCTS, INC. DISCAS, INC.
By /s/ Patrick A. DePaolo, Sr. By /s/ Patrick A. DePaolo, Sr.
--------------------------- ---------------------------
Patrick A. DePaolo, Sr. Patrick A. DePaolo, Sr.
Its President Its President
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Exhibit 10.19
J-VON GROUP LLC
25 Litchfield Street
Leominster, Massachusetts 01453
April __, 1997
Mr. Patrick A. DePaolo
300 Argyle Road
Cheshire, CT 06410
Dear Pat:
We refer to the letter dated August 30, 1991, (the "1991 Letter")
between J-VON Limited Partnership (the "LP") and you, regarding certain
agreements between the LP and you with respect to your limited partnership
interests in the LP and in 25 Litchfield Street Limited Partnership
("Litchfield"). Simultaneously herewith, you are acquiring a membership
interest in J-VON Group, LLC (the "Company").
This Letter confirms the agreement of the parties hereto that the 1991
Letter remains in full force and effect, with the exception of the second
paragraph therein which is hereby deleted. In addition, it is further agreed
that, notwithstanding any provision contained in the Company's Limited
Liability Company Agreement dated as of December 30, 1996, Discas, Inc.
("Discas") shall not be prevented from conducting its business in the areas of
compounding plastic or rubber materials, or the marketing of such materials,
with respect to recycled materials of any type, and prime materials that do not
compete directly with the Company, provided that
<PAGE>
neither you nor Discas shall, directly or indirectly, manufacture or sell
thermoplastic elastomers containing prime SBS or SEBS styrenic based compounds
other than urethane-modified SBS styrenic based compounds and other than sales
to the following entities which are existing customers of Discas with current
estimated annual sales of 20,000 pounds of material: Kendall Health Care,
Sanford/Berol, US Surgical, Storm Products, North Coast Medical and Davol
Medical. For the purposes of this letter, the term "prime" shall include
materials designated as "prime," "pencil prime," or "wide spec," and the term
"recycled" shall refer to materials containing not less than thirty three
percent (33%) recycled compounds in such material's formula.
Each of the parties hereto acknowledges that its rights hereunder are
unique and that a breach hereof may not be remediable by money damages.
Accordingly, each of the parties hereto agrees that the other shall be entitled
to specific performance and nay other appropriate equitable relief in the event
of a breach of the terms by the other.
If the foregoing is in accordance with your understanding, kindly
execute the enclosed agreement in the space provided below.
Very truly yours,
J-VON GROUP, LLC
By:
By:
---------------------------
Name:
Title:
Agreed and understood:
<PAGE>
/s/ Patrick A. DePaolo
- ----------------------
Patrick A. DePaolo, individually
and on behalf of Discas, Inc.
<PAGE>
Exhibit 10.20
TFC TEXTRON
INSTALLMENT NOTE
$500,000.00 October 7, 1996
For value received, the undersigned (jointly and severally if more
than one) promises to pay to the order of Textron Financial Corporation
("TFC"), having its principal place of business in Providence, Rhode Island
(together with any other holder of this Note, hereinafter referred to as the
"Holder"), the principal sum of Five Hundred Thousand Dollars ($500,000.00),
together with interest on the unpaid principal balance of the Note. The
obligations of the undersigned hereunder are "Obligations" secured by the
"Collateral" as defined and described in a Security Agreement between the
undersigned and the Holder dated as of October 7, 1996 (the "Security
Agreement"), and are entitled to all of the rights and privileges provided
therein, including rights of acceleration of this Note.
This Note shall be due and payable in 48 monthly installments of
principal and interest due and payable on the first day of each month and in
the amounts specified below:
1 consecutive installment(s) of $28,280.00 each beginning on November
1, 1996 and continuing each month thereafter through and including
November 1, 1996, followed by:
<PAGE>
46 consecutive installments of $12,600.00 each beginning on December
1, 1996, and continuing each month thereafter through and including
September 1, 2000, followed by:
1 consecutive installment(s) of $0.00 each beginning on October 1,
2000 and continuing each month thereafter through and including
October 1, 2000, followed by:
N/A consecutive installment(s) of SN/A each beginning on N/A, N/A and
continuing each month thereafter through and including N/A, N/A
followed by:
N/A consecutive installment(s) of SN/A each beginning on N/A, N/A and
continuing each month thereafter through and including N/A, N/A,
followed by:
[ ] Check if additional installment(s) are required as specified in
Exhibit A attached hereto and incorporated herein by this reference.
The entire remaining unpaid balance and all accrued and unpaid charges
due hereunder and under the Security Agreement shall be due and payable on
October 1, 2000 (the "Final Maturity Date").
In the event any amount due hereunder is past due by more than ten
(10) days, the undersigned agrees to pay a late payment charge equal to the
lessor of (a) five percent (5%) on and in addition tot he amount of the past
due payment, or (b) the maximum charges allowable under then applicable law.
Upon the maturity of this Note (by reason of default and acceleration or
otherwise), the undersigned agrees to pay interest ont he unpaid balance and
all accrued and unpaid amounts due hereunder and under the Security Agreement
from the maturity hereof through
2
<PAGE>
the day of payment at a rate of interest equal to the lesser of (a) the
Holder's then current default rate of interest, or (b) the maximum rate of
interest allowable under then applicable law.
The entire unpaid principal balance of this Note may be prepaid in
full (but not in part) upon five days prior written notice to the Holder
hereof, provided that any such prepayment shall be made together with (a) all
accrued interest and other charges owing hereunder or under the Security
Agreement, and (b) a prepayment fee equal to four percent (4%) of such
prepayment if made prior to the first anniversary of this Note, thereafter,
three percent (3%) of such prepayment if made prior to the second anniversary
of this Note; (thereafter, two percent (2%) of such prepayment if made prior to
the third anniversary of this Note; thereafter, one percent (1%) of such
prepayment if made prior to the fourth anniversary of this Note: thereafter,
zero percent (0%) of such prepayment if made prior to the fifth anniversary of
this Note; and thereafter, no prepayment fee shall be required. The prepayment
fee provided herein shall also be due and payable int he event of a default and
acceleration of the maturity of this Note in accordance with the terms hereof
and the Security Agreement.
Each payment hereunder shall be made in lawful money of the United
States and shall be payable to such account of address as the Holder hereof
shall from time to time direct the undersigned. All amounts received shall be
applied first, to accrued late charges and any other costs or expenses due and
owing hereunder or under the terms of the Security Agreement; second, to
accrued interest, and third, to unpaid principal. If at any time during the
term of this Note the interest rate applicable hereunder exceeds the maximum
rate of interest permitted under then
3
<PAGE>
applicable law, then the interest rate shall thereafter be deemed to be the
maximum rate permitted under then applicable law, and amounts of interest
received form the undersigned in excess of such maximum rate shall be
considered reductions to principal to the extent of any such excess.
Failure to pay this Note, or any installment hereunder promptly when
due, or default or failure int he performance or due observance of any of the
terms, conditions or obligations hereunder or under the Security Agreement or
in any other agreement or instrument between the undersigned (or any endorser,
guarantor, surety or other party liable for the undersigned's obligations
hereunder, or any other entity controlling, controlled by or under common
control with the Holder), shall entitle the Holder to accelerate the maturity
of this Note and to declare the entire unpaid principal balance and all accrued
interest and other charges hereunder and under the Security Agreement to be
immediately due and payable, and to proceed at once to exercise each and every
one of the remedies set forth in the Security Agreement or otherwise available
at law or in equity.
The undersigned and all other parties who may be liable (whether as
endorsers, guarantors, sureties or otherwise) for payment of any sum or sums or
to become due under the terms of this Note waive diligence, presentment,
demand, protest, notice of dishonor and notice of any other kind whatsoever and
agree to pay all costs incurred by the Holder in enforcing its rights under
this Note or the Security Agreement, including reasonable attorney's fees, and
they do hereby consent to any number of renewals or extensions at any time int
he payment of this Note. No extension of time for payment of this Note made by
any agreement with any person now or hereafter liable for payment of this Note
shall operate to release, discharge, modify, change or
4
<PAGE>
affect the original liability under this Note, either in whole or in part, of
the undersigned. No delay or failure by the Holder hereof in exercising any
right, power, privilege or remedy shall be deemed to be a waiver of the same or
any part thereof, nor shall any single or partial exercise thereof of any
failure to exercise the same in any instance preclude any future exercise
thereof, or exercise of any other right, power, privilege or remedy, and the
rights and remedies provided for hereunder are cumulative and not exclusive of
any other right or remedy available at law or in equity. The Holder of this
Note may proceed against all or any of the Collateral securing this Note or
against any guarantor hereof, or may proceed contemporaneously or in the first
instance against the undersigned, in such other and at such times following
default hereunder as the Holder may determine in its sole discretion. All of
the undersigned's obligations under this Note are absolute and unconditional,
and shall not be subject to any offset or deduction whatsoever. The undersigned
waives any right to assert by way of counterclaim or affirmative defense in any
action to enforce the undersigned's obligations hereunder, any claim whatsoever
against the Holder of this Note.
The provisions of this Note shall be governed by and construed in
accordance with the laws of the State of Rhode Island.
ATTEST WITNESS: MAKER:
Christie Products, Inc.
By: /s/ illegible By: /s/ Patrick A. DePaolo, Sr.
------------- ---------------------------
5
<PAGE>
Name: Name: Patrick A. DePaolo, Sr.
-----------------------
Title: President
6
<PAGE>
Exhibit 10.21
CONSULTING AGREEMENT
__________ __, 1997
Discas, Inc.
567-1 South Leonard Street
Waterbury, CT 06708
Attention: Patrick A. DePaolo, President
Gentlemen:
This will confirm the arrangements, terms and conditions pursuant to which
Roan Capital Partners L.P. (the "Consultant") has been retained to serve as a
consultant and advisor to Discas, Inc., a Delaware corporation (the "Company"),
on a non-exclusive basis for the term set forth in Section 2 below. The
undersigned hereby agrees to the following terms and conditions:
1. Duties of Consultant.
(a) Consulting Services. Consultant will provide such financial consulting
services and advice pertaining to the Company's business affairs as the Company
may from time to time reasonably request. Without limiting the generality of
the foregoing, Consultant will assist the Company in developing, studying and
evaluating financing, merger and acquisition proposals, prepare reports and
studies thereon when advisable, and assist in negotiations and discussions
pertaining thereto.
(b) Financing. Consultant will assist and represent the Company in
obtaining both short and long-term financing, when so requested by the Company.
The Consultant will be entitled to additional compensation under such terms as
may be agreed to by the parties.
(c) Wall Street Liaison. Consultant will, when appropriate, arrange
meetings between representatives of the Company and individuals and financial
institutions in the investment community,
<PAGE>
such as security analysts, portfolio managers and market makers.
The services described in this Section 1 shall be rendered by Consultant
without any direct supervision by the Company and at such time and place and in
such manner (whether by conference, telephone, letter or otherwise) as
Consultant may determine.
2. Term.
This Agreement shall continue for a period of twenty-four months from the
date hereof (the "Term").
3. Compensation.
(a) As compensation for Consultant's services hereunder, the Company shall
pay to Consultant the sum of $3,558.33 per month, or an aggregate fee of
$85,400. Consultant's fee shall be due and payable on the date hereof.
4. Relationship. Nothing herein shall constitute Consultant as an employee or
agent of the Company, except to such extent as might hereinafter be agreed upon
for a particular purpose. Except as might hereinafter be expressly agreed,
Consultant shall not have the authority to obligate or commit the Company in
any manner whatsoever.
5. Confidentiality. Except in the course of the performance of its duties
hereunder, Consultant agrees that it shall not disclose any trade secrets,
know-how, or other proprietary information not in the public domain learned as
a result of this Agreement unless and until such information becomes generally
known.
6. Assignment and Termination. This Agreement shall not be assignable by any
party except to successors to all or substantially all of the business of
either party for any reason whatsoever without the prior written consent of the
other party, which consent may be arbitrarily withheld by the party whose
consent is required.
Very truly yours,
Roan Capital Partners L.P.
<PAGE>
By:
-------------------------------
Timothy Ryan
AGREED AND ACCEPTED:
Discas, Inc.
By:
-------------------------------
Patrick A. DePaolo, President
<PAGE>
Exhibit 21
SUBSIDIARIES OF THE REGISTRANT
CHRISTIE PRODUCTS, INC. DELAWARE
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> YEAR 9-MOS
<FISCAL-YEAR-END> APR-30-1996 APR-30-1997
<PERIOD-END> APR-30-1996 JAN-31-1997
<CASH> 183,546 32,609
<SECURITIES> 0 0
<RECEIVABLES> 504,118 983,954
<ALLOWANCES> (14,000) (14,000)
<INVENTORY> 547,675 879,405
<CURRENT-ASSETS> 1,239,061 1,892,587
<PP&E> 998,305 2,409,878
<DEPRECIATION> 581,200 687,604
<TOTAL-ASSETS> 1,750,228 4,259,419
<CURRENT-LIABILITIES> 726,127 1,761,442
<BONDS> 0 0
0 0
0 0
<COMMON> 189 225
<OTHER-SE> 403,219 522,241
<TOTAL-LIABILITY-AND-EQUITY> 1,750,228 4,259,419
<SALES> 3,858,205 3,550,394
<TOTAL-REVENUES> 3,889,134 3,565,673
<CGS> 3,012,125 2,744,642
<TOTAL-COSTS> 3,711,071 3,483,804
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 80,292 73,790
<INCOME-PRETAX> 121,612 44,784
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 121,612 44,784
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 121,612 44,784
<EPS-PRIMARY> .05 .03
<EPS-DILUTED> .05 .02
</TABLE>
