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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-KSB
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
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SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended SEPTEMBER 30, 1996
[__] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______________________
Commission File No.0-15891
GDC GROUP,
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(Exact name of registrant as specified in its charter)
COLORADO 84-0891674
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1580 LINCOLN STREET, SUITE 1125, DENVER, COLORADO 80203
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (303) 863-1869
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
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NONE NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.02 PAR VALUE
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(Title of Class)
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES ___ NO X
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [ X ].
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The aggregate market value of the voting stock held by non-affiliates of the
registrant as of May 30, 1997(based on shares held and the closing bid price as
reported by National Quotation Bureau) was $6,614,703.
Number of shares outstanding of registrant's Common Stock as of May 30, 1997:
7,559,661.
Documents incorporated by reference herein: None
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PART I
ITEM 1. BUSINESS
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OVERVIEW
GDC Group, Inc. ("GDC"), through its subsidiaries, Walsh Remedial
Construction Services, Inc. ("WRCS"), GDC Enviro-Solutions, Inc. ("GDC
Solutions"), TVIES, Inc. ("TVIES") and EnviroScope Inc. ("EnviroScope") provides
technology-based, on-site hazardous and non-hazardous waste remediation
services, volume reduction, resource recyclying and recovery, and general
environmental services. Each of the subsidiaries is wholly-owned by GDC Holdings
Corporation ("GDC Holdings"), which is a wholly-owned subsidiary of GDC. GDC and
its subsidiaries are collectively referred to herein as the "Company. "
The Company's operations commenced in 1980 with the formation of GDC
Solutions as a geotechnical and environmental drilling company. The Company
later transitioned itself for the surging environmental market in the mid-1980's
by shifting its focus from drilling to the development of thermal technology for
waste processing, reduction and elimination. In 1992, the founder and past
chief executive officer of the Company died in an accident after which time the
Company experienced several years of management turmoil and operating
difficulties. In January 1995, through a new management team, the Company
developed a growth strategy of development, through horizontal acquisitions, of
a full service environmental company with single source responsibility to a
broad range of clients.
Through the fiscal year ended September 30, 1996 the principal services of
the Company included (a) engineering, consulting in geotechnical and
hydrogeological site assessments, remedial investigation and feasibility
studies, permitting assistance, design of remediation plans and oversight
project management, and (b) on-site treatment and remediation employing various
technologies such as dewatering and volume reduction, stabilization, material
handling and processing, soil washing, resource recovery, carbon absorption and
biological water treatment, and thermal treatment. In terms of resources and
revenues, the bulk of the Company's effort during the fiscal year ended
September 30, 1996 related to the on-site processing of hazardous waste on a
planned (not an emergency) basis.
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On May 31, 1996, the Company (then comprised of GDC Holdings and its
wholly-owned subsidiary GDC Solutions), consummated a business combination with
DK Industries, Inc., a Colorado corporation, ("DK"), a public company with no
significant assets and no business operations, pursuant to which a newly-formed
DK subsidiary merged with and into GDC Holdings (the "Merger"). Following the
Merger, (i) DK (renamed GDC Group, Inc. in November 1996) became the sole
stockholder of GDC Holdings, (and GDC Holdings continued to be the parent
company of GDC Solutions) and (ii) each common share of GDC Holdings issued and
outstanding immediately prior to the Merger, converted into one common share of
DK. At the Effective Time of the Merger, the stockholders of GDC Holdings were
issued 1,773,720 common shares of DK, comprising approximately 75% of the issued
and outstanding common shares of DK at the time of issuance. Although DK
acquired all of the issued and outstanding common shares of GDC Holdings in the
Merger, the Merger is accounted for as a reverse acquisition, that is, as if GDC
Holdings had acquired DK. Therefore, the historic financial information set
forth in this Report for periods prior to the Merger is that of GDC Holdings (on
a consolidated basis with GDC Solutions) and not DK. Following the Merger, DK
changed its name to GDC Group, Inc., which was approved at a Special Meeting of
Shareholders held on November 14, 1996.
The scope and emphasis of the Company's operations changed significantly in
December 1996 with its acquisition of Walsh Remedial Construction Services, LLC,
a Colorado limited liability company, which reorganized in March 1997 to become
a Delaware corporation named Walsh Remedial Construction Services, Inc.
("WRCS"). WRCS conducts and provides environmental remediation and land
restoration services and general environmental services, principally related to
dredging and material stabilization projects in and around New York/New Jersey
Harbor. The Company believes that during the fiscal year ending September 30,
1997, WRCS will be the most significant contributor to the Company's revenues,
cash flow and earnings. See "--Acquisitions-Walsh Remedial Construction
Services, Inc.", "--Environmental Remediation Services" and "--Clients; Status
of Material Projects."
ACQUISITIONS
The Company intends to expand its operations with additional services and
technologies that will result in single-source solutions for its clients.
Management intends to continue this
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growth strategy principally through acquisitions of environmental companies
which have services and technologies that complement the Company's existing
business. This strategy includes the acquisition of companies with proven
technologies, strong performance records and high quality management that will
significantly expand the range of resources available to solve environmental
waste problems of the Company's clients. Management intends to acquire and
operate each acquired entity through separate subsidiaries of the Company and
will likely retain senior management of acquired companies if important to their
continuing operations after the acquisition.
The Company intends to effect such acquisitions and expansion plans
primarily through the issuance of securities (e.g., common stock) and, to a
lesser extent, cash consideration. In the event the Company has insufficient
cash available for acquisitions, it may be required to obtain additional capital
through external financings. There can be no assurance that such financings
will be available if and when needed or on terms acceptable to the Company.
There can be no assurance that suitable acquisitions can be identified,
consummated or successfully operated or that the Company's goals will otherwise
be achieved.
The Company consummated the following acquisitions from and after September
30, 1996:
TVIES, INC. On September 30, 1996, the Company, through GDC Holdings,
acquired all of the issued and outstanding stock of TVIES, Inc. ("TVIES") from
Mr. Haraldur Karlsson, the sole stockholder, director and president of TVIES.
Consideration for the acquisition was 33,333 shares of GDC Common Stock. TVIES
provides hazardous and non-hazardous waste treatment and volume reduction
services through the use of a proprietary soil washing process for a varied
scope of organic and metal contaminated materials. TVIES' services primarily
apply to remediation of land, or reclamation and development of industrial
sites. Its technology was utilized by the Company in the Cape Fear remediation
project. See "--Clients; Status of Material Projects-OHM Remediation Services
Corp." Although TVIES has technology that the Company believes will enable it
to expand its base of operations and increase its revenues and profitability,
there can be no assurance that it will be successful in that regard. In fact,
during the twelve months ended September 30, 1996 (prior to TVIES' acquisition
by the Company) TVIES suffered a net loss of
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approximately $76,000 on revenues of $90,000. In April 1997, the Company
(through TVIES) entered into a contract for a 1,000 ton demonstration test on
low radioactive waste materials by Envirocare of Utah, Inc. ("Envirocare"). If
TVIES achieves satisfactory results on the demonstration test, which is
anticipated to commence by June 1997, the Company believes Envirocare may retain
TVIES on more substantial projects in the future. No assurance can be given,
however, that the TVIES technology will provide satisfactory results or that
even if such results are achieved, that the Company will be awarded additional
contracts by Envirocare. Furthermore, based on the Company's current working
capital deficiency and immediate cash needs, there can be no assurance that the
Company will have sufficient funds to finance the project costs. See
"Management's Discussion and Analysis of Financial Conditions and Results of
Operations - Liquidity."
WALSH REMEDIAL CONSTRUCTION SERVICES, INC. On December 13, 1996, the
Company acquired 100% of the membership interests of Walsh Remedial Construction
Services, LLC, which reorganized in March 1997 as a Delaware corporation named
Walsh Remedial Construction Services, Inc. ("WRCS"). The membership interests
were acquired from James P. Walsh & Associates, Inc., a Colorado corporation,
and from William T. Spear, one of WRCS's managers. The consideration for the
acquisition was (i) the payment of certain obligations of WRCS and its members
aggregating approximately $1,975,000, (ii) an agreement to make certain
conditional royalty payments aggregating approximately $1,250,000 based upon
project revenues, to Bank One, Boulder, Colorado, to be credited to a debt co-
signed by Walsh Environmental Engineers, Inc. (WRCS's former parent company) to
the bank, and (iii) the assumption of WRCS' liabilities (aggregating
approximately $2,600,000) and other obligations. WRCS' principal physical assets
are the equipment used in material handling for its dredging and amendment
projects. Following the acquisition, Mr. Spear, one of the selling members, was
engaged to serve as President and Chief Executive Officer of WRCS. He is also a
guarantor of a portion ($375,000) of the Bank One obligation described above.
The acquisition of WRCS was funded by loans from two private party lenders,
in the total amount of $3,000,000, described under "Management's Discussion and
Analysis of Financial Conditions and Results of Operations - Liquidity." The
loans are secured by all of the issued and outstanding common stock of WRCS.
The loan agreements provide for significant fees in the event of late
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payments by the Company, restrict WRCS' ability to incur indebtedness or finance
its operations without the lenders' consent, and require mandatory prepayments
from account receivable financings of WRCS, "excess" cash flow (as defined) of
WRCS, and securities offerings of GDC. These restrictions and requirements may
have a material adverse effect on WRCS and the Company as a whole. The Company
is currently in default of the acquisition loans. See "Management's Discussion
and Analysis of Financial Conditions and Results of Operations - Liquidity."
During the nine-month period ended September 30, 1996 and the period from
inception, March 1, 1995, through December 31, 1995(prior to WRCS's acquisition
by the Company), WRCS had revenues of approximately $1,823,000 and $3,764,000,
respectively, and net income (loss) of approximately ($3,988,000) and
($167,000), respectively. Although WRCS operated at a significant operating
loss during the nine months preceding the Company's acquisition of WRCS, the
Company has instituted changes to WRCS' project management and operations that
have significantly improved its results of operations, particularly after March
31, 1997. In addition, the Company has expanded the marketing efforts of WRCS
since the acquisition on both dredging and non-dredging projects. The Company
(through WRCS) has recently entered into contracts or reached agreements in
principle on several significant new projects. Although no assurance can be
given that any of the agreements in principle will result in definitive
contracts or as to the scope or profitability of WRCS' operations in the future,
the Company believes that WRCS will be the most significant contributor to the
Company's revenues, cash flow and earnings during fiscal 1997.
ENVIROSCOPE, INC. In March 1997, the Company, through GDC Holdings,
acquired all of the issued and outstanding stock of JWS Consulting, Inc., which
thereafter changed its name to EnviroScope, Inc. ("EnviroScope"), from Julie A.
Spear, its sole stockholder. The purchase price for EnviroScope was the
assumption and payment of certain obligations totalling approximately $75,000,
and subsequent advances made to EnviroScope by GDC Group. EnviroScope provides
management of the environmental permitting process for projects being developed
on sites requiring environmental action or closure. The scope of work includes
the conducting of background investigations, obtaining information, and
preparation of permit applications for activities at project sites in accordance
with applicable regulations. During the course of permit review, EnviroScope
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will manage the contacts and negotiations with subcontractors, various
regulatory agencies, and other parties. In addition, EnviroScope prepares all
materials and studies associated with each permit application. EnviroScope is
currently engaged to manage the environmental permitting process of a
significant waterfront development project in Bayonne, New Jersey that is
estimated to require the dredging of up to 15 million yards of material from New
York/New Jersey Harbor (the "Bayonne Project"). There can be no assurance that
EnviroScope will be successful in this or any future projects. In connection
with the acquisition, EnviroScope entered into a three-year employment agreement
with Julie A. Spear as its President and Chief Executive Officer.
ENVIRONMENTAL REMEDIATION SERVICES
DREDGING AND AMENDMENT SERVICES
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Since the acquisition of WRCS in December 1996, the most significant
operations of the Company have been conducted through WRCS. WRCS' principal
projects involve serving as a partner and project manager of Enviro-Dredge,
which consists of various corporations, partnerships and companies ("Enviro-
Dredge") engaged in dredging and remediation services. Enviro-Dredge was formed
for the purpose of providing such services to both public and private sector
entities owning, controlling or otherwise responsible for sites in and around
New York/New Jersey Harbor, principally on the New Jersey coastline.
The dredging services are designed to deepen shipping channels in New
York/New Jersey Harbor, which has been necessitated by the massive accumulation
of silt in the Harbor. The remediation services generally involve (i) the
treatment of the dredged mud to stabilize and encapsulate the contaminants
therein to meet applicable regulatory and contractual requirements, (ii) the
amendment of the dredged mud to create a composition useable as structural fill,
and (iii) the placement of the amended material as structural fill on the site
of the planned Metro Mall project in Elizabeth, New Jersey (the "Metro Mall").
The Metro Mall site is owned and will be developed by OENJ Corporation ("OENJ"),
one of the partners of the Partnerships.
Customers and potential customers of Enviro-Dredge include the Port
Authority of New York and New Jersey, entities that use shipping lanes or other
portions of New York/New Jersey Harbor (such as tour boat operators), and
terminal operators and other
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parties known as "potentially responsible parties" ("PRPs"), who are responsible
for the clean-up of specified coastal areas due to their release of toxic
materials into the Harbor.
As project manager, WRCS is generally responsible for planning,
coordinating and implementing projects as a whole and for managing and
supervising projects on a day-to-day basis. In addition, WRCS is responsible for
(i) operating and maintaining the pipelines that deliver dredged material from
an off-shore barge to the Company's in-land processing site, (ii) amendment of
the dredge material at the processing site to meet contractual specifications,
(iii) placement of the amended material at the Metro Mall Site, including
compaction of the amended material and (iv) obtaining all federal, state and
local permits, licenses and approvals for transportation of the material.
Most recently, WRCS served as project manager of Enviro Dredge, LLP, a New
Jersey partnership ("Enviro I") that completed a demonstration project for the
Port Authority of New York and New Jersey (the "Port Authority") that involved
harbor dredging, amending and stabilizing contaminated materials, and placing
the amended material as structural fill on the Metro Mall site.
In December 1996, three of the four partners of Enviro I, WRCS, OENJ, and
Great Lakes Dredge and Dock Company ("Great Lakes"), an entity specializing in
dredging and scow handling, formed a New Jersey limited liability partnership
under the name Enviro-Dredge II, LLP ("Enviro II") for the purpose of performing
additional contracts with the Port Authority, PRPs and other users of New
York/New Jersey Harbor. Enviro II is currently performing a contract with a
major New York tour boat company that involves dredging New York/New Jersey
Harbor in the vicinity of the Statue of Liberty. Several additional contracts
are currently being negotiated with PRPs and other potential customers.
To date, all of the material dredged from New York/New Jersey Harbor by
Enviro-Dredge has been delivered, processed, and placed at the Metro Mall site,
which has a capacity of approximately 1.3 million cubic yards of amended
material. Once that site has reached its full capacity, anticipated to occur
within the next 9 months, Enviro-Dredge intends to place amended material on
other sites along the New Jersey coastline. The most significant proposed
location is a site in Bayonne, New Jersey that is owned by OENJ. The Company
(through EnviroScope) has filed applications for the numerous permits and
licenses required
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for the in-land receipt, processing and placement of dredged material.
The harbor dredging, amendment and placement projects of WRCS are capital
intensive, requiring significant expenditures for equipment, labor and
materials. The Company has past-due obligations to vendors on the Port Authority
demonstration project (some of which relates to purchases of equipment that will
be used on additional WRCS port projects) which, as of May 31, 1997, were
approximately $1.8 million. In addition, certain revenues from the projects will
be used to satisfy a contingent royalty obligation to Bank One described above
under "-- Acquisitions -- Walsh Remedial Construction Services, LLC."
The operations of WRCS related to projects in New York/New Jersey Harbor
are heavily reliant on WRCS's two business partners, Great Lakes and OENJ, who
are critical to the success of the projects. In addition, OENJ has recently
advised WRCS that its agreement to work with OENJ on certain material future
projects including the proposed Bayonne Project, is subject to several material
conditions, including the payment by WRCS of past-due amounts to its vendors
(approximately $1.8 million), and adequate funding of WRCS to purchase equipment
and mobilize on the new projects (estimated at approximately $5.5 million).
WRCS will not be able to achieve these conditions without obtaining significant
cash proceeds from debt or equity financings of the Company. However, there can
be no assurance that the Company will be able to raise adequate net proceeds.
If the proceeds are not raised and either or both of Great Lakes and OENJ elect
not to perform future contracts with WRCS, the business of WRCS, and the Company
as a whole, would be materially adversely affected and would likely be forced to
scale back its operations or consider other alternatives including the sale of
the business.
Pursuant to the terms of the Enviro II Partnership Agreement, if the
Partnership fails to produce at least 100,000 cubic yards of amended material
each month, commencing January 15, 1997, the Partnership may be terminated. In
addition, commencing April 1, 1997, if the Partnership produces less than
144,444 cubic yards of amended material each month, OENJ has the right to obtain
material for use on the Metro Mall site from alternate sources. The Company has
experienced significant problems in achieving these results due to, among other
things, (i) metal scraps and other oversized materials in the dredged material,
which clogs the pipeline and damages various equipment, (ii) insufficient flow
of dredged material being pumped through the pipe system to the in-land
processing facility, thereby
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requiring additional pumps, (iii) insufficient cash resources to adequately
address the foregoing two problems, and (iv) lack of coordination between water-
based dredging operations and land-based material stabilization operations. The
Company has been addressing these problems principally through the development
of improved design technologies, purchase of additional pumping and other
equipment using funds obtained from operations and the sale of debt securities,
and hiring of additional project managers, and has thereby steadily improved the
throughput of dredged and amended material. However, the Company requires
additional equipment to satisfy its requirements. The Company is currently
seeking financing to purchase such equipment. However, there can be no assurance
that the Company will obtain such financing. Furthermore, there can be no
assurance that the Company's equipment will perform according to specification
and in a manner anticipated to satisfactorily complete its projects.
Furthermore, due to the complex nature of the dredging projects, there can be no
assurance that WRCS and its joint venture partners will satisfy their
obligations on the projects or fulfill the contracts in a profitable manner.
Given the Company's current liquidity problems and significant overall cash
needs, there can be no assurance that the Company will have the necessary
resources to properly fund WRCS. See "Managements' Discussion and Analysis of
Financial Condition and Results of Operations-Liquidity."
ADDITIONAL REMEDIATION SERVICES
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In addition to providing services on dredging/amendment projects, the
Company provides comprehensive on-site treatment of hazardous and non-hazardous
materials. By applying a broad range of biological, chemical, physical, and
thermal treatment technologies, the Company performs on-site treatment and
remediation services for the control, destruction, decontamination, and volume
reduction of hazardous and non-hazardous material. Accordingly, the Company has
designed a wide range of waste treatment technologies and systems, including
modular mobil treatment equipment, all of which can be used on-site, either
independently or in a system, for removing, destroying, reducing the volume of,
or stabilizing contaminants. This equipment includes thermal desorption units,
dewatering presses, separators, cyclones, centrifuges, and mobil process
equipment which apply various technologies to remediate contaminated waste. The
Company has also provided remediation services at hazardous waste contaminated
sites, the two most
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significant of which are described below under the heading "--Clients; Status of
Material Projects."
The Company has adopted a number of business practices and risk management
policies designed to limit the significant risks and potential liabilities
involved in environmental remediation projects due to the presence of hazardous
substances. In particular, the Company performs its services and treatments on-
site at the customer's location. The Company does not own or operate any
hazardous waste disposal sites or other off-site waste treatment or disposal
facilities. The Company generally coordinates through licensed subcontractors
the transportation and disposal of any hazardous waste which is not remediated
on site.
Risk management policies include the requirement of entrance physicals and
periodic medical evaluations for all professionals and field and laboratory
personnel, and drug and alcohol screening as a prerequisite for employment. The
Company also engages in special employee training, including 40 hour OSHA
training, and health and safety monitoring programs. The Company has published
an in-house Health and Safety Plan and Quality Assurance/Quality Control Plan,
which are made site-specific for every major project. A Health and Safety
Officer of the Company supervises health and safety coordination assigned to
remediation projects and reports directly to senior management. The Company
also has a random drug testing program. The Company believes that its continued
emphasis on its overall health and safety program will result in continued
improvements in its safety record.
TREATMENT TECHNOLOGIES
Designing, developing and implementing solutions to environmental hazards
requires an interdisciplinary approach combining practical field experience with
remediation processes and technical skills in fields such as chemistry,
microbiology, hydrogeology, fluid mechanics, thermodynamics, and geotechnical,
biochemical process engineering. The Company employs scientific and engineering
professionals in the environmental services field who enhance the Company's
ability to effectively participate in larger, more technically complex
remediation projects.
The Company is becoming increasingly experienced in the commercialization
and practical field application of existing technologies. In the performance of
on-site treatment and
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remediation, the Company employs a variety of technologies. These include
pozzlonic stabilization, dewatering and volume reduction, stabilization and
specialized material handling and processing, resource recovery, water and
groundwater treatment, air stripping, biological treatment, thermal treatment
and condensation, and incineration.
Since the acquisition of WRCS, a principal technology utilized by the
Company on the harbor dredging projects is pozzlonic stabilization, which is
used in remediation of dredged material. Using this process, the Company
stabilizes and encapsulates the contaminants in the material to meet applicable
federal and state environmental regulations and standards imposed by regulatory
agencies, such as the New Jersey Department of Environmental Protection, which
oversees the Company's New York/New Jersey Harbor dredging projects. Together
with the pozzlonic stabilization process, the dredged material is amended,
through chemical treatment, to create a cement-like substance that can be used
for structural fill.
The Company, through the acquisition of TVIES, now has particular expertise
in providing hazardous and industrial waste treatment and volume reduction
services through the use of a proprietary soil washing process. This process is
effective for a varied scope of contaminated soils, ranging from low level
radioactive material to hyrodocarbon and metal contaminated soils, and can be
applied to remediation of land, or reclamation and development of industrial
sites.
In terms of revenues and resources, the principal technology utilized by
the Company has historically been on-site thermal treatment, particularly
thermal desorption and rotary kiln incineration. Thermal desorption is a
thermal treatment technology which uses heat to remove volatile compounds from a
waste without oxidation of the compounds. Rotary kiln incineration is the
traditional incineration process for destroying organic hazardous waste
constituents in a refractory lined rotating kiln. However, as a result of (i)
the Company's acquisition of WRCS (which focuses on other technologies), (ii)
the expiration of certain material contracts with chemical and petrochemical
companies that utilized the Company's thermal treatment technology, and (iii)
the Company's proposed sale of certain thermal treatment equipment and licensing
of related technology for use at the Shell Oil site and other locations in the
United States, the Company is changing its strategy for on-site thermal
treatment technologies, as described below. See "--Clients; Status of Material
Projects-Shell Oil Company."
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The Company has recently entered into a letter of intent regarding a
transaction under which the Company will sell its desorption equipment and
license the related technology to a third party for use at the Shell Oil site
and other future sites. In consideration for the assets and the license, the
Company will be paid a fixed fee plus license fees, computed on a formula basis,
based on factors including the level of pre-tax profits at the sites, the amount
of waste delivered by the Company's efforts, and the amount of additional
services provided by the Company. If the Company consummates the sale of such
equipment and licensing of such technology, it will be precluded from using the
thermal desorption technology in refineries, petrochemical and chemical plants
under the terms of the proposed agreement. However, the Company will be allowed
to utilize such technology at Superfund sites and other remediation sites. The
Company believes that the third party is better equipped to exploit the
Company's thermal desorption technology (which will remain the exclusive
property of the Company) due to the third party's greater marketing resources
and capital to fund the expanded marketing effort. However, the transaction
contemplated under the letter of intent is subject to various conditions,
including the execution of a definitive written agreement. Therefore, there can
be no assurance that such transaction will be consummated.
In addition, based on the problems experienced by the Company on its
principal incineration project with IT Corporation described below, the Company
intends to phase out the marketing of its rotary kiln incineration technology.
See "--Clients; Status of Material Projects-IT Corporation."
CLIENTS; STATUS OF MATERIAL PROJECTS
During fiscal 1996, revenues from the Company's top three clients, IT
Corporation ("IT"), Shell Oil Company ("Shell Oil") and Murphy Oil USA, Inc.
("Murphy Oil") collectively accounted for approximately 92% of contract
revenues. Each of those clients individually accounted for more than 10% of the
Company's revenues during fiscal 1996 as well as during the six months ended
March 31, 1997. The Company's contract with IT has been terminated by IT due to
alleged deficiencies in the Company's performance thereunder described below.
The Company's contracts with Shell Oil and Murphy Oil, which resulted in
revenues of approximately $1.0 million and $2.3 million, respectively, during
fiscal 1996 terminated in accordance with their terms in August 1996 and
November 1996, respectively. As discussed below, the
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Company is continuing to provide services to both Shell Oil and Murphy Oil,
although, in the case of Murphy Oil, on a reduced basis. The inability of the
Company to generate additional revenue to replace the lost revenue from IT and
Murphy Oil could have a material adverse effect on the Company.
A general description and status report of the Company's principal
contracts during fiscal 1996 and thereafter are as follows:
PORT AUTHORITY OF NEW YORK AND NEW JERSEY. The Company (through WRCS) is a
partner, and serves as Project Manager of, Enviro-Dredge, LLP, which recently
completed a demonstration dredging project for the New York and New Jersey Port
Authority. The project involved harbor dredging, amending and stabilizing
contaminated materials from a portion of the Elizabeth, New Jersey harbor, and
placing the amended material as structural fill on the site of the planned Metro
Mall project in Elizabeth, New Jersey. The Company had revenues of
approximately $1.8 million from the demonstration project.
CIRCLE LINE STATUE OF LIBERTY FERRY, INC. The Company (through WRCS) is a
partner, and serves as Project Manager of Enviro-Dredge II, LLP, which is
performing a dredging project in the vicinity of the Statue of Liberty for a
major tour boat operator. The project, which is similar to the Port Authority
project described above, is anticipated to generate revenues of approximately
$2.6 million to WRCS during fiscal 1997.
ENVIROCARE OF UTAH, INC. In January 1997, the Company (through TVIES) was
awarded a $285,000 contract for a 1,000 ton demonstration test on low
radioactive waste materials by Envirocare of Utah, Inc. ("Envirocare"). The
Company will be required to expend additional funds on equipment and
mobilization costs for the project, which coupled with other project costs, are
estimated to be approximately the same amount as the contract revenues from the
project ($285,000). However, if TVIES provides satisfactory results on the
demonstration test, which is anticipated to be performed in Summer 1997 and end
approximately 60 days thereafter, it believes Envirocare may retain TVIES on
more substantial projects in the future. No assurance can be given, however,
that the TVIES technology will provide satisfactory results or that even if such
results are achieved, that TVIES will be awarded additional contracts by
Envirocare. Furthermore, based on the Company's current working capital
deficiency and immediate cash needs, there can be no assurance
-15-
<PAGE>
that the Company will have sufficient funds to finance the project costs. See
"Management's Discussion and Analysis of Financial Conditions and Results of
Operations -Liquidity."
SHELL OIL COMPANY. The Company (through GDC Solutions) provides waste
processing services to Shell Oil utilizing its on-site thermal desorption
technology. Although the Company's contract with Shell Oil expired in August
1996, the Company has been continuing to provide services pursuant to a purchase
order. The services being provided by the Company at Shell Oil's facility have
been expanded by Shell Oil and the Department of Environmental Quality of
Louisiana permitting the Company to process waste of third parties transported
to the Shell Oil facility, in addition to the continued processing of Shell Oil
waste. The Company has negotiated the terms and conditions of a new agreement
with Shell, subject to entering into a definitive written agreement. The new
agreement is subject to consummation of the transaction contemplated under the
letter of intent described above under "--Treatment Technologies," pursuant to
which the Company will sell its desorption equipment and license the related
technology to a third party for use at the Shell Oil site and other future
sites. Following consummation of the proposed transaction, the Company will
generate revenues from the Shell Oil site pursuant to its third party license
agreement, rather than from Shell Oil directly. The Company generated revenues
of approximately $1.0 million from Shell Oil during the fiscal year ended
September 30, 1996.
MURPHY OIL USA, INC. The Company (through GDC Solutions) generated
revenues of approximately $2.3 million from Murphy Oil during fiscal 1996,
representing approximately 36% of the Company's total revenues during the fiscal
year. The revenues were generated pursuant to a contract under which the
Company provided waste processing services utilizing its on-site thermal
desorption technology. However, the contract expired in November 1996. Since
that time, the Company has been performing services for Murphy Oil (different
than those provided under the expired contract) for which it anticipates
revenues of at least $400,000 during fiscal 1997. The decrease in revenues from
Murphy Oil has had an adverse effect on the Company's cash flow, working capital
and earnings and there can be no assurance that the Company will continue to
earn revenues from Murphy Oil in the future.
IT CORPORATION. The Company (through GDC Solutions) entered into a
Subcontract Agreement with IT in March 1996 related to a hazardous waste site
located in Winnfield, Louisiana (the "IT
-16-
<PAGE>
Subcontract"). The Company earned revenues of approximately $2.7 million under
the IT Subcontract during fiscal 1996, which accounted for approximately 42% of
the Company's total contract revenues during fiscal 1996. As indicated below,
the Company has received a notice from IT terminating the IT Subcontract.
On January 13, 1997, the Company received a notice from IT asserting, among
other things, that the Company had failed to maintain a rate of progress
necessary to complete the project within the time specified, to comply with
environmental regulations, and to pay all costs of contract performance when
due. Under the terms of the IT Subcontract, upon failure by the Company to make
a good faith effort to cure the stated deficiencies within twenty days, then IT,
at its option, has the right to terminate the Company's right to proceed with
the project. The Company submitted its plan to cure the alleged defaults and
had numerous meetings, discussions with, and correspondence to, IT in an effort
to resolve the dispute. The Company believes that delays in the project were
not material and, for the most part, were caused by IT (generally due to IT's
failure to deliver acceptable material to the Company's processing unit and
other operating restraints imposed on the Company by IT), and that the Company's
progress on the project demonstrated its ability to complete the project in a
timely manner. The Company further believes that it was generally in full
compliance with environmental regulations and that IT's claim on that issue is
without merit. However, the Company acknowledges that certain of its vendors on
the project, were owed in excess of $850,000, and had not been paid in a timely
manner.
On February 28, 1997, the Company notified IT that it would not proceed
with the project on the terms demanded by IT. On March 3, 1997, the Company
received a notice from IT rejecting the Company's plan to cure the alleged
deficiencies and giving notice that IT was exercising its option to terminate
the Company's right to proceed with the Project, for cause. The termination of
the IT Subcontract could have a material adverse effect on the Company. The
Company believes that it is due payments of approximately $766,000 for services
rendered on the project. However, pursuant to the terms of the IT Subcontract,
upon termination of GDC's right to proceed with the project, if IT's cost of
completing the project is in excess of the amount payable to GDC under the
Subcontract, then GDC may be responsible to IT for such amounts. There is no
way for the Company to estimate IT's eventual cost to complete the project. The
Company believes it has various claims against IT in relation to this
-17-
<PAGE>
matter which would possibly offset the alleged claims of IT against the Company.
OHM REMEDIATION SERVICES CORP. In May 1996, the Company (through GDC
Solutions) agreed to assume the obligations of TVIES, Inc. ("TVIES") under
TVIES' subcontract with OHM Remediation Services Corp. ("OHM") to provide
environmental remediation services at the Cape Fear Wood Preserving Superfund
Site located in Fayetteville, North Carolina. The Company utilized soil washing
technology developed by TVIES to remediate contaminated soil at the site.
Although this technology was successful in satisfying four of the five principal
cleanup goals stipulated by the Environmental Protection Agency (the "EPA"), the
cleanup goal for one contaminant was not fully met. Consequently, the EPA has
elected to abandon the use of soil washing technology at the site and has de
facto terminated the services of OHM and the Company. The inability of the soil
washing technology to achieve the requisite level of cleanup for the fifth goal,
as acknowledged in a report published by the EPA, was attributed not to the
failure of TVIES's technology, but rather to (i)materially higher concentrations
of clay and silt in the soil than anticipated,(ii) materially higher than
anticipated levels of contamination at the site, and (iii) the EPA's
underestimation of the volume of soil that has been adversely impacted at the
site. According to the report, the EPA now intends to initially use a low
thermal desorption technology to remediate the organic contamination in the soil
at the site. The Company, through GDC Solutions, believes that it has the
desorption technology required to remediate the site and contemplates bidding on
the project once the EPA publishes a request for bids. There can be no
assurance, however, that the Company will be awarded the contract if it submits
the bid or that if awarded the bid it will succeed in remediating the site.
The Company has submitted claims, based upon the differing site conditions
described above, in excess of $2.5 million for its services on the project, none
of which has been paid or reflected in the Company's financial statements. The
Company intends to vigorously pursue collection efforts, directly or through
OHM, against Bechtel Environmental, Inc. ("Bechtel"), the oversight contractor,
and any other responsible parties. There can be no assurance that the Company
will succeed in whole or in part in such efforts. In addition, although the
Company believes that it has meritorious claims, there can be no assurance that
Bechtel will not pursue counterclaims against the Company or
-18-
<PAGE>
otherwise seek to reduce its indebtedness to OHM and thereby the Company.
EMPLOYEES
As of May 31, 1997, the Company employed 91 persons, 10 of whom were
management, 66 were full-time field personnel, 4 were engineers, 3 were in sales
and marketing, and 8 were in administration.
ITEM 2. PROPERTIES
----------
The principal executive offices of the Company are located in Denver,
Colorado. The offices are comprised of 2,306 square feet of administrative
office space for a rental of $1,921.67 per month. The offices are equipped with
state-of-the-art computers, software and communications system.
The principal offices of TVIES are located in Houston, Texas in 2,000
square feet of leased space, at a monthly rental of $950.00. TVIES rents
storing space for its equipment at a monthly rate of $300.00.
The principal offices of WRCS are in Boulder, Colorado. WRCS occupies 1,490
feet of leased space, at a monthly rental of $1,950.00.
The principal offices of GDC Solutions are in Baton Rouge, Louisiana. GDC
Solutions occupies 12,000 square feet of engineering and administrative office
space and 5,000 square feet of laboratory, supporting office space, and a
mechanics shop. The offices are equipped with state-of-the-art computers,
AUTOCAD, software and communications system. The laboratory facility is
equipped for testing the physical and hydraulic (geotechnical) properties of
soils, and simulating the leachability of soils to various liquids containing or
potentially containing harmful chemical and organic compounds. The laboratory is
also equipped to determine the required chemical additives to dewater or
solidify/stabilize sludges and contaminated waste residue.
The Company has entered into an agreement with Kathleen Elnaggar, a
director and co-founder of GDC Solutions, to purchase the Baton Rouge facility
from her (and an affiliated family trust). See "Certain Relationships and
Related Transactions."
-19-
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
-----------------
The Company is not a party to any material litigation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
No matters were submitted to a vote of security holders during the fourth
fiscal quarter of fiscal 1996.
-20-
<PAGE>
PART II
-------
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS.
-------------------------------
The Common Stock of GDC trades on the OTC Bulletin Board under the symbol
"GDCG." The following table sets forth, for the periods indicated, the high and
low bid prices for the Common Stock as reported by National Quotation Bureau.
The Company has not paid any cash dividends on the Common Stock, and a
change in the policy is not presently under consideration by the Board of
Directors.
HIGH LOW
---- ---
TEN MONTHS ENDED SEPTEMBER 30, 1995
- -----------------------------------
First Quarter NO PUBLISHED TRADING
Second Quarter NO PUBLISHED TRADING
Third Quarter NO PUBLISHED TRADING
Fourth Quarter NO PUBLISHED TRADING
YEAR ENDED SEPTEMBER 30, 1996
- -------------------------------
First Quarter NO PUBLISHED TRADING
Second Quarter NO PUBLISHED TRADING
Third Quarter NO PUBLISHED TRADING
Fourth Quarter NO PUBLISHED TRADING
YEAR ENDED SEPTEMBER 30, 1997
- -------------------------------
First Quarter* $3.00 $ .50
Second Quarter $2.25 $.625
Third Quarter** $2.25 $.875
_________________________
* commencing October 21, 1996
** through May 30, 1997
The bid prices above reflect inter-dealer prices, without retail markup,
markdown or commissions and may not necessarily reflect actual transactions.
Trading in the Common Stock to date is extremely limited and sporadic.
-21-
<PAGE>
On May 30, 1997, the closing price of the Company's Common Stock was $0.875
per share and the Company had 677 record holders of Common Stock. A number of
such holders of record are brokers and other institutions holding shares of
Common Stock in "street name" for more than one beneficial owner.
ITEM 6. SELECTED FINANCIAL DATA
-----------------------
In 1995, the Company changed its fiscal year-end to September and,
accordingly, the results of operations for 1995 are for the ten months then
ended.
Prior to March 12, 1996, the Company was composed solely of GDC Solutions.
On March 12, 1996, the Company consummated the "GDC Restructuring" pursuant to
which (i) GDC Solutions became a wholly-owned subsidiary of GDC Holdings through
an exchange by the stockholders of GDC Solutions of the 3,814,160 then issued
and outstanding common shares of GDC Solutions for 1,271,387 common shares of
GDC Holdings (the "Reorganization") and (ii) $915,737 principal amount of
indebtedness of GDC Solutions, plus accrued interest of approximately $225,000,
payable to certain of its principal stockholders, was contributed to the capital
of GDC Holdings in consideration for the issuance to such stockholders of
502,333 common shares of GDC Holdings (the "Debt Contribution"). The Company
has accounted for this transaction in a manner similar to a pooling of
interests, and the exchange of stock has been retroactively applied. All
capital stock and per share data have been restated to give effect to this
exchange. Accordingly, historical financial statements of GDC Holdings and GDC
Solutions have been combined throughout all relevant periods herein. The
following selected financial data as of and for the fiscal years ended November
30, 1992, 1993 and 1994 and for the ten months ended September 30, 1995 is
derived from the financial statements of GDC Solutions.
On May 30, 1996, the Company (through GDC Solutions), entered into an
agreement with TVIES and OHM pursuant to which GDC assumed the obligations of
TVIES under a subcontract with OHM to provide environmental remediation services
at a Superfund site. All receipts and disbursements relating to this contract
subsequent to May 30, 1996 are reflected in the financial statements of the
consolidated companies. GDC Holdings subsequently purchased TVIES on September
30, 1996. See "Business-Acquisitions-TVIES, Inc."
-22-
<PAGE>
On May 31, 1996, the Company (then comprised of GDC Holdings and its
wholly-owned subsidiary GDC Solutions), consummated a business combination
with DK Industries, Inc., a Colorado corporation, ("DK"), a public company
with no significant assets and no business operations, pursuant to which a
newly-formed DK subsidiary merged with and into GDC Holdings (the
"Merger"). Following the Merger, (i) DK (now GDC Group, Inc.) became the
sole stockholder of GDC Holdings, (and GDC Holdings continued to be the
parent company of GDC Solutions) and (ii) each common share of GDC Holdings
issued and outstanding immediately prior to the Merger, converted into one
common share of DK. At the Effective Time of the Merger, the former
stockholders of GDC Holdings owned approximately 75% of the issued and
outstanding Common Stock of DK. Therefore, although DK acquired all of the
issued and outstanding common shares of GDC Holdings in the Merger, the
Merger is accounted for as a reverse acquisition, that is, as if GDC
Holdings had acquired DK. As a result, the historic financial information
set forth in this Report for periods prior to the Merger is that of GDC
Holdings consolidated with GDC Solutions and not DK.
STATEMENT OF OPERATING DATA:
(Amounts in thousands, except per share data)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Ten Months Fiscal Year
Fiscal Year Ended Ended Ended
November 30, September 30, September 30,
------------------------------- ------------- -------------
- ------------------------------------------------------------------------------------------------
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Contract revenue $13,304 $20,171 $14,833 8,628 6,584
- ------------------------------------------------------------------------------------------------
Gross profit 4,850 2,671 3,667 3,084 206
- ------------------------------------------------------------------------------------------------
Net operating
income (loss) 1,329 (436) 528 689 (3,228)
- ------------------------------------------------------------------------------------------------
Interest expense 578 853 667 563 934
- ------------------------------------------------------------------------------------------------
Income (loss)
before taxes and
cumulative effect of
change in accounting
principle 853 (1,195) (183) 50 (4,446)
- ------------------------------------------------------------------------------------------------
</TABLE>
-23-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Ten Months Fiscal Year
Fiscal Year Ended Ended Ended
November 30, September 30, September 30,
------------------------------- ------------- -------------
- ------------------------------------------------------------------------------------------------
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income tax expense 227 (345) (45) 20 (632)
(benefit)
Income (loss)
before cumulative
effect of change in
accounting principle 626 (850) (138) 30 (3,814)
- ------------------------------------------------------------------------------------------------
Cumulative effect
of change in
accounting principle - - - 299 -
Net income (loss) 626 (850) (138) 329 (3,814)
- ------------------------------------------------------------------------------------------------
Income (loss) per
common share:
Income before
cumulative effect of
change in accounting
principle $(0.12) $ 0.03 $($2.19)
- ------------------------------------------------------------------------------------------------
Cumulative effect on
prior years of change
in methods of
depreciation - 0.26 -
- ------------------------------------------------------------------------------------------------
Net income (loss)
per share $(0.12) $ 0.29 $(2.19)
======= ======= =======
- ------------------------------------------------------------------------------------------------
Proforma amounts
assuming a new depre-
ciation method is ap-
plying retroactively:
Net income (loss) $ -
=======
Income (loss) per
common share -
primarily and fully
diluted $ -
=======
- ------------------------------------------------------------------------------------------------
Number of common and
common equivalent
shares:
- ------------------------------------------------------------------------------------------------
</TABLE>
-24-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Ten Months Fiscal Year
Fiscal Year Ended Ended Ended
November 30, September 30, September 30,
------------------------------- ------------- -------------
- ------------------------------------------------------------------------------------------------
BALANCE SHEET DATA:
(Amounts in thousands)
- ------------------------------------------------------------------------------------------------
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Working capital
(deficiency) 62 327 1,597 274 (5,835)
- ------------------------------------------------------------------------------------------------
Property, plant
and equipment,
net 9,886 8,862 7,212 6,922 7,656
- ------------------------------------------------------------------------------------------------
Total assets 12,924 13,901 13,303 10,311 11,158
- ------------------------------------------------------------------------------------------------
Long-term debt,
excluding
current portion 5,196 6,336 5,017 4,012 96
- ------------------------------------------------------------------------------------------------
Stockholders'
equity 3,552 2,679 2,541 2,870 2,728
================================================================================================
</TABLE>
-25-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
At September 30, 1996, the Company had a working capital deficiency of
$5,834,755, compared with a working capital surplus of $274,350 at September 30,
1995. This decrease is primarily due to the fiscal 1996 loss as well as a
decrease in accounts receivable and an increase in accounts payable and accrued
expenses, offset somewhat by an increase in cash and cash equivalents.
Net cash provided by operating activities was $913,931 for fiscal 1996,
compared with $702,201 for the ten months ended September 30, 1995. In fiscal
1996, the increase in net cash provided by operating activities was primarily
due to the increase in accounts payable and accrued expenses in fiscal 1996 and
the decrease in accounts receivable, offset somewhat by a loss from continuing
operations and, the decrease in deferred taxes and prepaid expenses.
Net cash used in investing activities was $881,637 in fiscal 1996, compared
with net cash provided by investing activities of $2,979 during the ten months
ended September 30, 1995. This change was principally due to the purchase of
property, plant and equipment in fiscal 1996 used in connection with the
Company's projects at the Winnfield, Louisiana and Cape Fear, North Carolina
Superfund sites.
Net cash provided by financing activities was $1,150,418 in fiscal 1996,
compared with net cash used in financing activities of $726,877 during the ten
months ended September 30, 1995. This change was principally due to the
Company's sale of common stock, short term bridge debt, and long-term debt in
fiscal 1996, offset somewhat by principal payments of long-term debt and
deferred financing costs incurred in fiscal 1996.
The Company has significant immediate cash requirements resulting
principally from (i) working capital and equipment needs for remediation and
dredging projects; (ii) the assumption of significant obligations in connection
with recent acquisitions as well as significant costs incurred in consummating
such acquisitions; (iii) high start-up costs on certain new projects,
particularly with respect to equipment purchases and
-26-
<PAGE>
mobilization; (iv) significant repayment obligations on loans, including loans
in default; (v) the termination of material projects and a delay in the receipt
of payments due to the Company thereunder; (vi) the expiration of contracts with
key customers and (vii) significant financing costs, including loan origination
fees, commissions to a placement agent and professional fees. In addition, the
Company has past due payroll taxes of approximately $450,000. As a result of the
foregoing, the Company is currently in default of certain of its obligations to
lenders and vendors, and has significant short-term cash needs which it will not
be able to satisfy without raising significant funds from current private
offerings of securities as well as other proposed financings.
The Company (through GDC Solutions) has financed its operations in part
through (i) a $3.5 million equipment credit facility from FINOVA Capital
Corporation ("FINOVA"), (ii) a $2.5 million revolving credit facility from Coast
Business Credit ("Coast"), and (iii) a $400,000 equipment loan from Ally Capital
Corporation and Environmental Allies N.V. (collectively, "Ally"). As of
September 30, 1996 the Company was in default of the FINOVA facility and thereby
had certain cross-defaults with Coast and other lenders. In March 1997,
following Coast's termination of its credit facility and acceleration of the
Company's indebtedness thereunder, the Company paid the Coast facility in full
(approximately $679,000 inclusive of principal, interest and fees). As of June
30, 1997, the Company remains in default of both the FINOVA and the Ally loan
facilities, and these loans are recorded as current liabilities in the Company's
financial statements.
On September 30, 1996 and March 31, 1997, the principal balance of the
Company's indebtedness to FINOVA was approximately $3,478,000 and $3,454,000,
respectively. The loan, which bears interest at prime plus 2.5%, is payable in
monthly installments, including interest, of approximately $65,000.
The current default of the FINOVA facility relates to a monetary default of
approximately $134,000 as well as technical defaults due to the breach of
certain covenants and/or negative covenants set forth in the FINOVA loan
documents. Although the Company has not received any default notice in
connection with such breaches, there can be no assurance that FINOVA will agree
to deliver any required waivers or consents, or that FINOVA will not accelerate
the maturity date of all amounts outstanding under the loan due to the defaults
thereunder. The default of the Ally loan was due to the Company's failure to
make the required
-27-
<PAGE>
monthly installments for March - June 1997. Ally has accelerated the full amount
due under the loan, which is approximately $400,000. Acceleration of the loan
may have a material adverse effect on the Company due to the Company's working
capital deficiency and significant cash requirements for other past due and
current obligations. In addition, the FINOVA facility is guaranteed by GDC
Holdings (the sole stockholder of the Company's operating subsidiaries) and is
secured by substantially all of GDC Solutions' assets. The Ally loan is secured
by certain equipment of GDC Solutions, the personal guaranty of Kathleen J.
Elnaggar and the pledge of the assets of 3E Corporation of Louisiana, which
corporation is wholly owned by Mrs. Elnaggar, individually, and in her capacity
as Trustee. The foreclosure by FINOVA and/or Ally upon their respective security
interests would likely have a material adverse effect on the Company. The
Company is in monetary default on a Subordinated Note, payable to Louisiana Seed
Capital Fund, L.P. and Louisiana Economic Development Corporation. The default
of the Note was due to the Company's failure to make the required monthly
installments for March - June 1997. The holders have given notice of default.
The Note is guaranteed by Kathleen J. Elnaggar, personally, and secured by real
estate owned by Mrs. Elnaggar, individually, and as trustee. The remaining
balance on the note is approximately $200,000.
In addition, currently the Company has obligations to vendors aggregating
approximately $5,000,000 which are past due, principally related to the Cape
Fear project, the IT Subcontract and the WRCS Port Authority project described
above. See "Business - Clients;Status of Material Projects." Furthermore, the
Company has significant cash requirements for its current business operations
and in connection with short-term debt obligations. The net proceeds of the
Company's current offerings are being used, in part, to repay a portion of the
Company's indebtedness to lenders, vendors and other creditors, including
amounts in default and amounts currently due, as well as for additional
equipment purchases on WRCS dredging/amendment projects and working capital.
However, the Company will require significant additional financings to meet its
current and future obligations and there can be no assurance that it will be
able to raise additional funds required or that such funds will be raised on
satisfactory terms. Furthermore, the Company cannot guarantee that it will have
sufficient revenues from operations or from financings to make the principal and
interest payments on the promissory notes issued to investors in its recent
financings (described below) or in the current debt financing of GDC Solutions.
-28-
<PAGE>
Moreover, as described below under "Closing of Acquisition Loans," the
Company is also in default of promissory notes in the aggregate principal amount
of $3,000,000 held by two lenders who financed the Company's acquisition of
WRCS. The notes, on which principal of $750,000 (plus accrued interest) was
payable on April 1, 1997, are secured by the Company's ownership interest in
WRCS. As a result of the Company's default on such payment, the Company must
also pay the lenders a late payment fee of $225,000. Although the lenders may
not foreclose upon their security interests unless the Company fails to cure its
default by July 1, 1997, there can be no assurance that the Company will have
funds available to pay the April installment and late fee, as well as the next
$750,000 installment (due July 1, 1997) on or before July 1, 1997. The default
of the loan on or after July 1, 1997 and the Company's inability to obtain
waivers or extensions from the lenders related thereto, could enable the lenders
to accelerate the maturity date of the loan and foreclose upon their security
interest in WRCS to the extent necessary to recover any unpaid amount then due.
If the Company does not raise significant proceeds through debt or equity
financings within the next 30-90 days, it is likely that the Company will be
forced to scale back its operations or consider other alternatives including the
sale of one or more of its operations.
The following is a description of the Company's recent financings:
CLOSING OF PRIVATE PLACEMENT. A private placement of 800 Units of the
Company was consummated between September 30, 1996 and November 8, 1996. The
Units were comprised of an aggregate of 4,000,000 shares of Common Stock, Class
A Warrants to purchase 4,000,000 shares of Common Stock at an initial exercise
price of $2.25, and Class B Warrants to purchase 4,000,000 shares of Common
Stock at an initial exercise price of $3.75. The Warrant exercise prices are
subject to automatic downward adjustments (i) based on specified anti-dilution
provisions in the Warrants and (ii) if the Company does not satisfy certain
obligations, including, among other things, the filing within 270 days of
November 8, 1996 of a registration statement covering the shares issued in the
private placement and the shares underlying the warrants. The offering resulted
in net proceeds to the Company of approximately $3,671,000 of which
approximately $1,317,000 was used to repay indebtedness incurred in prior bridge
loan financings (inclusive of principal and interest) and
-29-
<PAGE>
approximately $715,000 was used for offering costs including the placement
agent's commission, legal fees, state filing fees, costs and expenses of the
Placement Agent, and other expenses related to the offering.
CLOSING OF ACQUISITION LOANS. In December 1996, the Company borrowed $3.0
million from two lenders to finance the Company's purchase of WRCS. See
"Business-Acquisitions-Walsh Remedial Construction Services, LLC." The lenders
are stockholders of the Company, who both beneficially own more than 5% of the
Company's Common Stock (taking account of currently exercisable warrants held by
the lenders). The loans bear interest at the rate of 14% per annum. Principal on
the loan is payable in three installments, due on April 1, 1997 ($750,000), July
1, 1997 ($750,000) and December 15, 1997 ($1,500,000). Accrued interest is
payable in four installments during the loan term. The Company is obligated to
make prepayments on the loan from (i) proceeds of securities offerings and
financings of GDC Group, Inc., (ii) account receivable financings of WRCS and
(iii) "excess" cash flow of WRCS (as defined). The lenders were paid loan
origination fees totalling $150,000 (5% of the loan amount) and issued Series AA
Warrants to purchase an aggregate of 750,000 shares of Common Stock at an
initial exercise price of $2.25 per share. The Warrant exercise price is subject
to automatic downward adjustments similar to those of the Class A and Class B
Warrants described above under the caption "--Closing of Private Placement"
(although having anti-dilution provisions more favorable to the warrantholders
than those in the Class A and B Warrants).
If the Company fails to repay the loans on the specified payment dates, it
will be charged late payment fees of $225,000 for the April installment,
$150,000 for the July installment, and $112,500 for the December installment. In
the event of a default in the April 1997 payment, the Company has until July 1,
1997 to cure the default. As of June 30, 1997, neither the April installment nor
the applicable $225,000 late payment fee has been paid. The imposition of
significant late payment fees, combined with the mandatory prepayment provisions
described above (which could hinder the ability of GDC and WRCS to raise needed
capital) could have a material adverse effect on the Company and further impair
its cash position. Any failure by the Company to repay the loans in accordance
with its terms would likely be due to a short-fall in its cash liquidity. In
addition, if the loans are not repaid in full on the final maturity date, the
lenders have the right to convert all or part of the outstanding loan balance
-30-
<PAGE>
into Common Stock of the Company at a conversion price equal to forty percent
(40%) of the average of the Market Prices (as defined) of the Common Stock. The
loans are secured by a pledge of the Company's ownership interest in WRCS.
Therefore, should the Company default on the loans, and the lenders effect all
of their rights under their security agreements, the Company could lose its
entire ownership interest in WRCS, which would have a material adverse effect on
the Company.
CLOSING OF BRIDGE LOANS. Between January 30 and May 31, 1997, GDC Solutions
borrowed an aggregate of $3,158,985 from a group of investors (the "Bridge
Financing"). Certain of the lenders are stockholders of the Company and, giving
effect to shares issuable upon exercise of warrants acquired from GDC, are the
beneficial owners of 5% or more of the Company's Common Stock. Loans in the
original principal amount of $2,308,985 bear interest at 14% per annum and loans
in the principal amount of $850,000 bear interest at the Applicable Federal
Rate. Principal and interest on the loans, which are unsecured, are payable in
full on December 15, 1997. GDC Solutions is obligated to make prepayments on the
loans in the event GDC and/or any of its subsidiaries, closes one or more public
or private offerings of debt or equity securities resulting in aggregate gross
proceeds of at least $3,500,000 (exclusive of certain financings with FINOVA).
GDC Solutions is obligated to pay the lenders loan origination fees aggregating
$255,898.50, plus Series AA Warrants to purchase an aggregate of 626,348 shares
of GDC Common Stock at an initial exercise price of $2.25 per share. The Warrant
exercise price is subject to the automatic downward adjustments described above
under the caption "--Closing of Acquisition Loans." If GDC Solutions fails to
repay the loans on or before July 1, 1997, October 1, 1997 or December 15, 1997,
it will be obligated to pay certain lenders additional fees aggregating up to
$69,580, $25,000 and $69,580, respectively, plus Series AA Warrants to purchase
an aggregate of 25,000 shares of Common Stock of GDC on each of said dates. The
imposition of such fees, combined with the mandatory prepayment provisions
described above (which could hinder the ability of the Company to raise needed
capital) could have a material adverse effect on the Company and further impair
its cash position. In addition, if the loans are not repaid in full on the final
maturity date, the lenders have the right to convert all or part of the
outstanding loan balance into Common Stock of the Company at a conversion price
equal to forty percent (40%) of the average of the Market Prices (as defined) of
the Common Stock. As described below under "Warrant exercise price reduction,"
certain lenders "converted" the sum of
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<PAGE>
$1,520,831 payable by the Company under the promissory notes issued in the
Bridge Financing to pay the exercise price of Warrants held by such lenders.
Said "converted" amount includes $1,427,378 principal amount of loans, with the
balance constituting accrued interest and unpaid loan origination fees.
WARRANT EXERCISE PRICE REDUCTION. In March 1997, the Company reduced the
exercise price of its Series A and AA Warrants from $2.25 to $1.25 per share and
its Series B Warrants from $3.75 to $1.50 per share, effective (including
extensions) during the period March 13, 1997 through May 30, 1997. The Company
gave warrantholders the right to pay the exercise price of Warrants during this
period by "converting" the amount payable under promissory notes issued in the
Bridge Financing referred to above (inclusive of interest, principal, and loan
origination fees). Through May 30, 1997, Series A, AA and B Warrants to purchase
108,000, 74,850 and 1,155,753 shares of GDC Common Stock were exercised,
resulting in net cash proceeds to the Company of $441,360 and a reduction in
indebtedness under promissory notes of $1,520,831 (inclusive of accrued
interest, principal and unpaid loan origination fees).
RESULTS OF OPERATIONS
FISCAL YEAR ENDED SEPTEMBER 30, 1996 ("FISCAL 1996") COMPARED WITH THE TEN
MONTHS ENDED SEPTEMBER 30, 1995
Revenues decreased by $2,044,657, or 23.7%, to $6,583,508 in fiscal 1996,
from $8,628,165 during the ten months ended September 30, 1995. The decrease
resulted primarily from (i) one-time contract revenues of $1,500,000 earned from
a customer during the ten months ended September 30, 1995 in connection with the
Company's agreement to deactivate and defer the customer's future performance on
a previously signed contract which was non-recurring in 1996, and (ii) a one-
time $500,000 project performed by the Company during the ten months ended
September 30, 1995.
Gross profit decreased by $2,877,832, or 93.3%, to $206,097 in fiscal 1996,
from $3,083,929 during the ten months ended September 30, 1995. The gross profit
margin as a percentage of revenues decreased to 3.1% in fiscal 1996 from 35.7%
for the ten months ended September 30, 1995. These decreases resulted primarily
from (i) high profit margins on the one-time $1,500,000 1995 contract revenues
described above and (ii) losses of approximately $2,000,000 incurred in
connection with the
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<PAGE>
Company's Cape Fear, North Carolina Superfund project in late fiscal 1996.
Selling, general and administrative expenses increased by $622,432, or
26.0%, to $3,017,197 in fiscal 1996, from $2,394,765 during the ten months ended
September 30, 1995. Such expenses as a percentage of revenues increased to 45.8%
in fiscal 1996 from 27.8% for the ten months ended September 30, 1995. The
increase in expenses related principally to costs incurred during fiscal 1996 in
connection with the merger with DK Industries and other acquisitions, as well as
the short (ten-month) 1995 fiscal year. The increase in expenses as a percentage
of revenues also relates to the decrease in revenues during fiscal 1996
described above.
In fiscal 1996, the Company had a $417,000 expense related to an investment
in a biotechnology company made in contemplation of an acquisition of such
company, which was never consummated. There was no comparable expense during the
ten months ended September 30, 1995.
Other expenses increased by $578,687, or 90.6%, to $1,217,442 in fiscal
1996 from $638,745 during the ten months ended September 30, 1995, principally
as a result of the write-off of original debt financing costs attributable to
the Company's senior lender, increased amortization due to costs associated with
the restructuring of debt and an increase of $370,843 in interest expense due to
increased borrowings.
The Company had a loss before income taxes and cumulative effect of change
in accounting principle of $4,445,532, compared with income before income taxes
and such change in accounting principle of $50,419 during the ten months ended
September 30, 1995.
The Company had an income tax benefit of $631,975 in fiscal 1996 compared
with income tax expense of $20,362 during the ten months ended September 30,
1995.
During the ten months ended September 30, 1995, the Company had income of
$298,672 resulting from a change in accounting principle related to the use of a
different depreciation method on the Company's incineration equipment systems
from 10 year straight-line to units of production. The change had the effect of
reducing depreciation expense and increasing net income in the 1995 period by
approximately $341,464.
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<PAGE>
The Company had a net loss of $3,813,567 in fiscal 1996 compared with net
income of $328,729 during the ten months ended September 30, 1995.
TEN MONTHS ENDED SEPTEMBER 30, 1995 COMPARED WITH FISCAL YEAR ENDED
NOVEMBER 30, 1994 ("FISCAL 1994")
Revenues decreased by $6,204,674, or 41.8%, to $8,628,165 during the ten
months ended September 30, 1995, from $14,832,839 during fiscal 1994. The
decrease resulted primarily from a decrease of approximately $5,500,000 in
revenues from a principal customer of the Company following the completion of
the contract with such customer in accordance with its terms as well as the
short (ten-month) 1995 fiscal year.
Gross profit decreased by $583,125, or 15.9%, to $3,083,929 during the ten
months ended September 30, 1995, from $3,667,054 during fiscal 1994. The gross
profit margin as a percentage of revenues increased to 35.7% during the ten
months ended September 30, 1995 from 24.7% in fiscal 1994. The decrease in gross
profit resulted primarily from the decrease in revenues during the 1995 fiscal
year. The increase in the gross profit margin as a percentage of revenues was
principally due to high profit margins on one-time $1,500,000 contract revenues
earned during the 1995 fiscal year.
Selling, general and administrative expenses decreased by $744,268, or
23.7%, to $2,394,765 during the ten months ended in fiscal 1995, from $3,139,033
in fiscal 1994. Such expenses as a percentage of revenues increased to 27.8% for
the ten months ended September 30, 1995 from 21.2% in fiscal 1994. The decrease
in such expenses was principally attributable to the short (10 month) 1995
fiscal year as well as overhead reductions implemented during such year. The
increase in such expenses as a percentage of revenues was principally due to the
decrease in revenues.
Other deductions from income decreased by $72,099, or 10.1%, to $638,745
during the ten months ended September 30, 1995 from $710,844 in fiscal 1994,
principally as a result of the settlement of litigation with a former employee.
The Company had income from operations before income taxes and cumulative
effect of change in accounting principle of $50,419, compared with a loss before
income taxes and such change in accounting principle of $182,823 in fiscal 1994.
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<PAGE>
During the ten months ended September 30, 1995, the Company had income of
$298,672 resulting from a change in accounting principle related to the use of a
different depreciation method on the Company's incineration equipment systems
from 10 year straight-line to units of production. The change had the effect of
reducing depreciation expense and increasing net income in the 1995 period by
approximately $341,464.
The Company had income tax expense of $20,362 during the ten months ended
September 30, 1995 compared with an income tax benefit of $44,790 in fiscal
1994.
The Company had net income of $328,729 during the ten months ended
September 30, 1995 compared with a net loss of $138,033 in fiscal 1994.
ITEM 8. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA
------------------------
See Index to Consolidated Financial Statements, which is Item 14(a), and
the Consolidated Financial Statements and schedule attached to this Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS
WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
------------------------------
Not Applicable.
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<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
--------------------------------------------------
The current directors and executive officers of GDC are as follows:
- -----------------------------------------------------------------------
Name Position
- -----------------------------------------------------------------------
Harry C. Conger Chairman, President, Chief
Executive Officer and Director
- -----------------------------------------------------------------------
James W. Muzzy Vice President, Secretary and
Director
- -----------------------------------------------------------------------
Donald L. Murphy, Jr. Treasurer
- -----------------------------------------------------------------------
Kathleen A. Elnaggar Director
=======================================================================
John E. McConnaughy, Jr. Director
=======================================================================
Mr. Conger, age 66, has served as President of GDC since consummation of
the Merger in May 1996, and as Chairman, Chief Executive Officer and a director
of GDC since June 1996. He has also served as Chief Executive Officer and a
director of GDC Solutions since January 1995. Prior to joining GDC he served as
President of Strategic Success Group, a consulting firm, from 1992-1995, and as
President of Waste Tech Services Inc., an environmental remediation firm, from
1984 to 1992. Mr. Conger has over 37 years experience in executive management,
corporate development, and ownership of full service companies in the hazardous
waste market. Mr.Conger has been CEO of a number of substantial environmental
and industrial companies, including senior executive positions with Calgon,
Merck, and Olin. He received an AMP from the Harvard University Graduate School
of Business Administration.
Mr. Muzzy, age 52, has served as Vice President and Secretary of GDC since
consummation of the Merger in May 1996, and as a director of GDC since June
1996. He has also served as Vice President, Secretary and a director of GDC
Holdings since October 1995. Since January 1995 he has served as a consultant
to GDC through a consulting firm known as Spectrum Group. Since 1983 Mr. Muzzy
has provided domestic and international corporate and client advisory services
for public and private companies,
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<PAGE>
including companies engaged in the environmental sector and recycling. Mr. Muzzy
received an MBA degree from the University of Chicago.
Mr. Murphy, age 38, has served as treasurer of GDC since June 1996 and as a
vice president and chief financial officer of GDC Solutions since May 1994.
Prior thereto, he served for approximately ten years in various capacities, most
recently as Vice President and Controller for Chemfix Technologies, Inc., a
publicly traded environmental remediation company. Mr. Murphy is a certified
public accountant.
Mrs. Elnaggar, age 52, co-founded GDC Solutions with her husband in
December 1980 and served as an administrative officer until 1992. After her
husband's death in 1992, Mrs. Elnaggar served as Chairman of the Board and
through December 31, 1994 as Chief Executive Officer of GDC Solutions. She was
appointed a director of GDC in June 1996. Mrs. Elnaggar is the stepmother of
Tarek Elnaggar, President of GDC Solutions.
Mr. McConnaughy, age 68, has served as a director of GDC since May 22,
1997. He was Chairman and Chief Executive Officer of Peabody International from
1969 to 1986 and of GEO International Corp. from 1981 (when it was spun off) to
October 1992. On October 25, 1993, GEO International Corp. filed for protection
under Chapter 11 of the U.S. Bankruptcy Code. Mr. McConnaughy currently serves
as a director of Mego Corp., Transact International, Inc., DeVlieg Bullard,
Inc., Levcor International, Inc., Riddell Sports, Inc., and Wave Systems, Inc.
He is also Chairman of the Board of the Excellence Group, Inc. He is on the
Board of Trustees and Executive Committee of the Strang Cancer Prevention Center
and is Chairman of the Board of the Harlem School of the Arts.
ADDITIONAL KEY EMPLOYEES
William T. Spear, age 44, has served as general manager of WRCS since March
1, 1995, pursuant to which he is responsible for all aspects of operations
management. Since WRCS became a corporation, he has also served as its Chief
Executive Officer. For more than five years prior thereto, he served in various
capacities at USPCI, most recently as Manager-Treatment Systems, responsible for
management of the Company's Mobile Thermal Recycling Unit. Mr. Spear has had
experience managing hazardous waste remediation projects since 1984.
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<PAGE>
Tarek Elnaggar, age 33, has served as President of Solutions since December
1992. Mr. Elnaggar has in excess of 12 years experience managing numerous
environmental engineering, remediation and thermal treatment projects. He has
held key roles in developing and implementing Solutions' technologies as well as
providing technical evaluations for innovative processes for possible
acquisition. He has authored and presented publications at over half a dozen
national conferences and several regional technical meetings. He received his
MS in Engineering from the University of California at Berkeley and is a
registered professional engineer in both Civil and Environmental Engineering in
New York and Louisiana. Mr. Elnaggar is the stepson of Kathleen Elnaggar.
ITEM 11. EXECUTIVE COMPENSATION.
----------------------
The following table sets forth, for the fiscal years ended September 30,
1996, the ten months' ended September 30, 1995, and the fiscal year ended
November 30, 1994, compensation, including salary, bonuses, stock options and
certain other compensation, paid by the Company to the Chief Executive Officer
and to the other executive officers of the Company who received more than
$100,000 in salary and bonus during fiscal 1996.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
Name Principal Position Period Salary
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Kathleen Chairman of GDC Fiscal 1996 $ 144,450
Elnaggar Solutions Fiscal 1995* $ 119,588
Fiscal 1994 $ 135,000
- ----------------------------------------------------------------------------
Harry Conger President and CEO Fiscal 1996 $ 136,667
of GDC Group, Inc. Fiscal 1995* $ 97,500**
Fiscal 1994 NA
- ----------------------------------------------------------------------------
Tarek Elnaggar President of GDC Fiscal 1996 $ 100,580
Solutions Fiscal 1995* $ 83,268
Fiscal 1994 $ 94,000
- ----------------------------------------------------------------------------
</TABLE>
______________________________
* Ten (10) months ended September 30, 1995
** Mr. Conger was employed during the last nine months of this period
Mr. Conger also was reimbursed for moving expenses and real estate
commissions in connection with his relocation to GDC's
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<PAGE>
offices in Louisiana in 1995 and his relocation back to Colorado in 1996. As of
October 1, 1996, Harry Conger, President and Chief Executive Officer of GDC and
GDC Holdings, relocated from Baton Rouge, Louisiana to Denver, Colorado, where
the Company's principal executive offices are located. In connection with such
relocation, the Company loaned Mr. Conger the sum of $64,000. The loan is
evidenced by a one-year promissory note bearing interest at the rate of 9% per
annum and is secured by a second mortgage on Mr. Conger's home in Baton Rouge.
EMPLOYMENT AGREEMENTS
Effective as of June 1, 1996, Mr. Conger and GDC entered into a three-year
employment agreement, which superseded the employment agreement between Mr.
Conger and GDC Solutions. Under the terms of the new agreement, Mr. Conger
serves as Chairman, President and Chief Executive Officer of GDC and is paid an
annual salary of $150,000. He is also eligible for an annual incentive bonus at
the discretion of Compensation Committee of the Board of Directors. The
agreement also provided for a car allowance of $500 per month and obligates GDC
to purchase a life insurance policy for Mr. Conger having a death benefit of
$225,000 and having a beneficiary designated by Mr. Conger. In the event Mr.
Conger's employment is terminated by GDC or by Mr. Conger in connection with a
change of control (as defined in the agreement), Mr. Conger will be entitled to
a severance benefit equal to two years' compensation. Under Mr. Conger's prior
agreement with GDC Solutions, Mr. Conger received an annual salary of $130,000.
In August 1995, the agreement was amended to obligate GDC Solutions to issue
131,387 common shares of GDC Solutions (as adjusted to give effect to the GDC
Solutions Reorganization). These shares were converted into an equal number of
shares of GDC Common Stock as a result of the Merger.
On June 25, 1996, Mr. Conger was granted an option under GDC's 1996 Stock
Option Plan to purchase 200,000 shares of Common Stock at a purchase price of
$1.00 per share. The option became exercisable as to 100,000 shares on the date
of grant, will become exercisable as to an additional 100,000 shares on June 25,
1997, and will expire on June 24, 2006, the tenth anniversary of the date of
grant.
On May 22, 1997, Mr. Conger was granted an option under GDC's 1996 Stock
Option Plan to purchase 500,000 shares of Common Stock at a purchase price of
$1.00 per share. The option became
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<PAGE>
exercisable immediately and will expire on May 22, 2007, the tenth anniversary
of the date of grant.
Mrs. Elnaggar is employed by GDC Solutions pursuant to an employment
agreement having a three-year term ending August 31, 1998. Under the agreement,
Mrs. Elnaggar is paid an annual salary of $150,000.
Mr. Elnaggar is employed by GDC Solutions pursuant to an employment
agreement having a two-year term ending September 13, 1997. Under the
agreement, Mr. Elnaggar is paid an annual salary of $100,580 and he may be paid
bonuses at the discretion of the Board of Directors based upon the net profits
of GDC Solutions. The agreement further provides that in the event of a change
in control of GDC after September 30, 1996, as defined in the agreement, Mr.
Elnaggar has the right to terminate the agreement and receive a cash termination
payment equal to two years' annual salary.
Effective as of June 1, 1996, Mr. Muzzy became a full time employee of GDC,
serving as Vice President and Secretary, pursuant to the terms of an employment
agreement substantially similar to the new agreement of Mr. Conger described
above. The only material differences between the two agreements are that Mr.
Muzzy's agreement provides for an annual salary of $130,000 and the life
insurance policy for Mr. Muzzy has a death benefit of $150,000.
On June 25, 1996, Mr. Muzzy was granted a ten-year option under the
Company's 1996 Stock Option Plan to purchase 200,000 shares of Common Stock at a
purchase price of $1.00 per share. The option became exercisable as to 100,000
shares on the date of grant, will become exercisable as to an additional 100,000
shares on June 25, 1997, and will expire on June 24, 2006, the tenth anniversary
of the date of grant.
On May 22, 1997, Mr. Muzzy was granted an option under GDC's 1996 Stock
Option Plan to purchase 500,000 shares of Common Stock at a purchase price of
$1.00 per share. The option became exercisable immediately and will expire on
May 22, 2007, the tenth anniversary of the date of grant.
Mr. Spear is employed by WRCS pursuant to a three-year employment agreement
that commenced on December 17, 1996. Under the terms of the agreement, Mr.
Spear serves as President and Chief Executive Officer of WRCS. He is paid an
annual base salary of $120,000 and is entitled to one-time bonus compensation
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<PAGE>
of up to $50,000 upon the satisfaction of certain specified conditions. Mr.
Spear will also be entitled to incentive compensation of $80,000 per year for
1997 and 1998 upon achievement of specified performance targets. Pursuant to his
employment agreement, Mr. Spear has been granted a ten-year option under the
Company's 1996 Stock Option Plan to purchase 60,000 shares of Common Stock, at
an exercise price of $1.00 per share contingent upon certain performance
objectives.
DIRECTOR COMPENSATION
The directors of GDC and GDC Solutions do not currently receive cash
compensation. Directors are eligible to participate in GDC's Stock Option Plan.
OPTION PLAN
On June 25, 1996, GDC adopted the 1996 Stock Option Plan (the "Plan") for
officers, employees, and consultants of the Registrant or any of its
subsidiaries. The Plan authorizes the granting of stock options to purchase an
aggregate of not more than 2,000,000 shares of the Registrant's Common Stock.
As of the date hereof, options to purchase 1,620,000 shares have been granted
under the Plan, comprised of ten-year options to purchase shares at an exercise
prices of $1.00 per share, including incentive options representing 1,570,000
shares to officers, and 50,000 non-qualified options to Directors. The Plan was
approved by the shareholders of Registrant at the November 14, 1996 Special
Meeting.
The Plan is administered by a Stock Option Committee (the "Committee"),
consisting of the Board of Directors of Registrant. The Committee will, in its
sole discretion, select the persons to whom options will be granted and will
determine, subject to the terms of the Plan, the number, the exercise period and
other provisions of such options. The options granted under the Plan will be
exercisable in such installments as may be provided in the grant.
Options granted under the Plan may be either incentive stock options under
the Internal Revenue Code of 1986, as amended ("ISOs") or non-ISOs. The
Committee will determine the exercise price, provided that in the case of ISOs,
such price may not be less than 100% (110% in the case of ISOs granted to
holders of 10% of the total combined voting power of the Registrant's Common
Stock at the date of grant.) The aggregate fair market value
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<PAGE>
(determined at the time of the option grant) of stock with respect to which ISOs
become exercisable for the first time in any year cannot exceed $100,000.
Option grants are evidenced by written agreements containing the above
terms and conditions consistent with the Plan as the Committee may impose. Each
option, unless sooner terminated, shall expire no later than 10 years (five
years in the case of ISOs granted to holders of 10% of the total combined voting
power of the Registrant's stock) from the date of grant, as the Committee may
determine. The Committee has the right to amend, suspend or terminate the Plan
at any time, provided, however, that no amendment or modification may become
effective without approval of the amendment or modification by the stockholders
if stockholder approval is required to enable the Plan to satisfy any applicable
statutory or regulatory requirements, or if GDC, on the advice of counsel,
determines that stockholder approval otherwise is necessary or desirable.
ITEM 12. SECURITY OWNERSHIP OF
BENEFICIAL OWNERS AND MANAGEMENT.
--------------------------------
The following table sets forth stock ownership information as of May 30,
1997 concerning (i) each director and proposed director of GDC, (ii) each person
(including any "group" as defined in Section 13(d)(3) of the Securities Exchange
Act of 1934) who is known by GDC to beneficially own more than five (5%) percent
of the outstanding shares of GDC's Common Stock, (iii) the Chief Executive
Officer and the other executive officers named in the Compensation Table above,
and (iv) GDC's executive officers and directors as a group:
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<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Shares of Common Shares Underlying
Stock Owned Options and Percent
Name Directly or Indirectly Warrants/*/ Total of Class
- ---- ---------------------- ----------------- ------------- --------
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Kathleen Elnaggar 981,045 0 981,045/9/ 13.0%
822 Neosho Ave.
Baton Rouge, LA 70803
- -----------------------------------------------------------------------------------------------------------------------------
Elnaggar Family Trust 485,299 0 485,299/10/ 6.4%
- -----------------------------------------------------------------------------------------------------------------------------
Tarek Elnaggar 175,990 50,000 225,990/11/ 3.0%
822 Neosho Ave.
Baton Rouge, LA 70803
- -----------------------------------------------------------------------------------------------------------------------------
Harry C. Conger 131,387 700,000 831,387 11.0%
- -----------------------------------------------------------------------------------------------------------------------------
James W. Muzzy 75,000 700,000 775,000 10.2%
- -----------------------------------------------------------------------------------------------------------------------------
Marshall Becker 0 677,970/1/ 677,970/1/ 9.0%
317 Madison Avenue
New York, NY 10017
- -----------------------------------------------------------------------------------------------------------------------------
Dr. Stanley Becker 349,883 504,751/6/ 854,634 11.3%
55 East End Avenue, #7A
New York, NY 10021
- -----------------------------------------------------------------------------------------------------------------------------
Samuel E. Benjamin 486,714 243,357 730,071 9.7%
2763 Rosecomare Rd.
Los Angeles, CA 90077
- -----------------------------------------------------------------------------------------------------------------------------
Jaimy H. Bensimon 259,521 519,042 778,563/2/ 10.3%
7913 Tennyson Court
Boca Raton, FL 33433
- -----------------------------------------------------------------------------------------------------------------------------
Rachel R. Bensimon 200,000 400,000 600,000/3/ 7.9%
7913 Tennyson Court
Boca Raton, FL 33433
- -----------------------------------------------------------------------------------------------------------------------------
25 Broadway Realty Company 778,520 962,041/4/ 1,740,561/4/ 23.0%
One State Street Plaza
29th Floor
New York, NY 10004
- -----------------------------------------------------------------------------------------------------------------------------
Paul Garrett 250,000 750,000/5/ 1,000,000/5/ 13.2%
355 No. Lantana #670
Camarillo, CA 93010
- -----------------------------------------------------------------------------------------------------------------------------
Herbard Limited 250,000 1,000,000 1,250,000 16.5%
P.O. Box 438
Tropic Isle Building
Road Town, Tontola BVI
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Shares of Common Shares Underlying
Stock Owned Options and Percent
Name Directly or Indirectly Warrants/*/ Total of Class
- ---- ---------------------- ----------------- ------------- --------
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Robert Kantor 238,000 227,000 465,000/6/ 6.1%
c/o Times Equities
55 Fifth Avenue
15th Floor
New York, NY 10003
- -----------------------------------------------------------------------------------------------------------------------------
Kenneth Levine 0 680,970/7/ 680,970/7/ 9.0%
317 Madison Avenue
New York, NY 10017
- -----------------------------------------------------------------------------------------------------------------------------
First Equity Capital Securities, Inc. 0 1,223,994/8/ 1,223,994/8/ 16.2%
317 Madison Avenue, Suite 1700
New York, NY 10017
- -----------------------------------------------------------------------------------------------------------------------------
Jack E. McConnaughy, Jr. 292,513 361,357 653,870 8.6%
1011 High Ridge Road
Stamford, CT. 06905
- -----------------------------------------------------------------------------------------------------------------------------
Rompos Ltd. 157,760 237,820 395,580 5.2%
P.O. Box 75
Normandy House
Grenville Street
St. Helier, Jersey
JE48PP, Channel Islands
- -----------------------------------------------------------------------------------------------------------------------------
Stranco Investments Ltd. 150,000 315,373 465,373 6.2%
P.O. Box 173
Road Town
Tortela, BVI
- -----------------------------------------------------------------------------------------------------------------------------
Viking Fund, Ltd. 150,000 330,600 480,600 6.4%
Charlotte House, Charlotte Street
P.O. Box N9204
Nassau, Bahamas
- -----------------------------------------------------------------------------------------------------------------------------
Wolfson Descendants 1983 Trust - 105,000 105,000 1.4%
One State Street
New York, NY 10004
- -----------------------------------------------------------------------------------------------------------------------------
All officers and directors as a group 2,141,234 1,861,357 4,002,591 42.8%
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
____________________
/*/ Represents shares issuable upon the exercise of options and warrants of GDC
Group, Inc. that are exercisable within 60 days of May 31, 1997. The
Securities and Exchange Commission deems a person to have beneficial
ownership of all shares which that person has the right to acquire within
60 days.
/1/ Includes 127,446 warrants beneficially owned by First Equity Capital
Securities, Inc. ("First Equity") of which Mr. Becker is a principal, and
3,750 warrants beneficially owned by Ken Levine under a First Equity
pension plan pursuant to which Messrs. Becker and Levine are trustees. Mr.
Becker disclaims beneficial ownership of the 3,750 warrants.
-44-
<PAGE>
/2/ Excludes 200,000 shares and warrants to purchase 400,000 shares
beneficially owned by Rachel R. Bensimon, the wife of Mr. Bensimon.
/3/ Excludes 259,521 shares and warrants to purchase 519,042 shares
beneficially owned by Jaimy H. Bensimon, the husband of Mrs. Bensimon.
/4/ Includes warrants to purchase 105,000 shares held by Wolfson Descendants
1983 Trust which has the same voting trustee as 25 Broadway Realty Company.
/5/ Includes 250,000 shares and warrants to purchase 500,000 shares held by a
trust of which Mr. Garrett is the trustee.
/6/ Includes 140,000 shares and warrants to purchase 160,000 shares held by an
entity of which Mr. Kantor is a principal.
/7/ Includes 127,446 warrants beneficially owned by First Equity of which Mr.
Levine is a principal, and 3,750 warrants beneficially owned by Marshall
Becker under a First Equity pension plan pursuant to which Messrs. Levine
and Becker are trustees. Mr. Levine disclaims beneficial ownership of the
3,750 warrants.
/8/ Includes warrants to purchase an aggregate of 1,096,548 shares beneficially
owned, directly or indirectly, by Marshall Becker and Ken Levine,
principals of First Equity.
/9/ Excludes 485,299 shares owned by the Elnaggar Family Trust, of which Mrs.
Elnaggar is the sole trustee. She disclaims beneficial ownership of the
shares. See footnote 10 below.
/10/ The Elnaggar Family Trust (the "Trust") is the record owner of these shares
and was created under a Judgment of Possession dated October 4, 1994,
pursuant to the will of Hameed Elnaggar. The sole trustee and usufructuary
(life tenant) of the shares owned by the Trust and, therefore, may be
deemed to be the dispositive power with respect to the shares owned by the
Trust, and, therefore, may be deemed to be the beneficial owner of those
shares. However, Mrs. Elnaggar disclaims beneficial ownership of the
shares. The beneficiaries of the Trust are Tarek Elnaggar, Sharif Joseph
Elnaggar, and Jeanne Marie Elnaggar. The beneficiaries may be deemed to be
the beneficial owners of the shares owned by the Trust.
/11/ Excludes 485,299 shares owned of record by the Elnaggar Family Trust, of
which Mr. Elnaggar is one of the beneficiaries. See footnote 10 above.
Mr. Elnaggar is the stepson of Kathleen Elnaggar.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
----------------------------------------------
Prior to the merger transaction with GDC Group, Inc. (DK Industries, Inc.)
GDC Holdings, as part of a Reorganization Agreement with Kathleen Elnaggar and
other shareholders of GDC Solutions, Inc., agreed to the following transactions.
GDC Holdings has entered into an agreement to acquire 3E Corporation of
Louisiana ("3E"), a corporation owned by Kathleen Elnaggar, a director and
principal stockholder of GDC (the "3E Acquisition"). 3E owns centrifuges and
related equipment used in environmental waste remediation. The Company
currently uses certain of such equipment in providing services to Shell Oil. The
purchase price for all of the issued and outstanding common stock of 3E is
shares of GDC having a value of $500,000 at the time the acquisition is
consummated, to be paid $150,000 in cash and $350,000 in GDC Group restricted
stock. The transaction has not yet been consummated.
The Company has entered into an agreement with Kathleen Elnaggar, a
director and founder of GDC Solutions, to purchase the Baton Rouge facility from
her (and an affiliated family trust) for a purchase price of $956,000. The
purchase price will include (i) the assumption by the Company of the existing
note and mortgage on the building which has a principal balance of approximately
$350,000 and (ii) a promissory note for the balance. The note will bear
interest at 10% per annum, amortize over 24 months from the closing, and be
secured by a mortgage,
-45-
<PAGE>
which will be subordinate to the lien of the mortgagee on the original mortgage.
The transaction has not yet been consummated.
In August 1995, GDC Solutions issued 131,387 common shares (as adjusted to
give effect to the GDC Reorganization to Harry Conger pursuant to the terms of
his employment agreement. These shares were converted into 131,387 shares of
GDC Stock pursuant to the Merger.
GDC Solutions was the maker of certain promissory notes in the aggregate
principal amount of $915,737, with accrued interest of approximately $225,000,
which were held directly or indirectly by Mrs. Elnaggar and affiliated parties.
The notes bore interest at the prevailing prime rate. Simultaneously with the
closing of the GDC Reorganization in March 1996, GDC Solutions and Mrs. Elnaggar
contributed the notes to the capital of GDC Solutions in exchange for the
issuance by GDC Solutions to Mrs. Elnaggar and the affiliated parties of 502,333
common shares of GDC Holdings (as adjusted to give effect to the [Solutions
Restructuring]. These shares were converted into an equal number of shares of
GDC Common Stock pursuant to the Merger.
Prior to July 26, 1996, the indebtedness of GDC Solutions to FINOVA was
guaranteed by Kathleen Elnaggar, then the principal stockholder of the Company.
The loan agreement with FINOVA contains negative covenants which restricted the
Company from accomplishing various transactions, including a proposed private
equity offering, the proposed Merger with DK and certain other transactions
contemplated in connection therewith, without the prior consent of FINOVA. The
loan was then secured by a pledge of all of the issued and outstanding shares of
GDC Solutions, (ii) a mortgage and security agreement covering all of the assets
of GDC Solutions, and (iii) the personal guarantee of Mrs. Kathleen Elnaggar, a
director and principal stockholder of the Company.
The loan agreement with FINOVA provided the lender with a three-year
option, expiring December 1997, to receive a profit participation fee from GDC
Solutions. The profit participation fee entitled FINOVA to ten (10%) percent of
the proceeds from the sale of all or substantially all of the assets of GDC
Solutions less certain debt of GDC, or 10% of the "operating cash flow multiple
value," as defined.
In connection with the private equity offering, the Merger and certain
other contemplated transactions related thereto, and in consideration of the
receipt from the Company of approximately
-46-
<PAGE>
$800,000 in payment of loan restructure and profit participation fees, FINOVA
consented to the GDC Restructuring, the offering, the Merger, and other
contemplated transactions. In addition, Finova (i) released the personal
guarantee of stockholders of GDC Solutions in exchange for a corporate guarantee
of GDC Holdings, secured by a pledge of all of the outstanding stock of GDC
Solutions held by GDC Holdings and a pledge of all of the common shares of GDC
Holdings issued in connection with the GDC Restructuring, (ii) terminated a
certain "profit participation fee" option held by FINOVA and (iii) waived the
negative covenants that would have prohibited the equity offering, the Merger
and other contemplated transactions.
-47-
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K
---------------------------------------
1. Consolidated Financial statements:
---------------------------------
(a) The following consolidated financial statements of GDC Group,
Inc. and subsidiaries are filed as part of this Annual Report on Form 10-KSB for
the fiscal year ended September 30, 1996:
(i) Report of Independent Auditors
(ii) Consolidated Balance Sheets -
September 30, 1996 and 1995
(iii) Consolidated Statements of Income - fiscal year ended
September 30, 1996, ten months ended September 30, 1995
and fiscal year ended November 30, 1994
(iv) Consolidated Statements of Shareholders' equity - fiscal
year ended September 30, 1996, ten months ended September
30, 1995 and fiscal year ended November 30, 1994
(v) Consolidated Statements of Cash Flows -fiscal year ended
September 30, 1996, ten months ended September 30, 1995
and fiscal year ended November 30, 1994
(vi) Notes to Consolidated Financial Statements
2. Consolidated Financial Statement Schedules: The following
------------------------------------------
consolidated financial statement schedules of GDC Group, Inc. and
Subsidiaries is included herein:
NONE.
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission
are not required under the related instructions or are
inapplicable, and therefore have been omitted.
-48-
<PAGE>
3. Exhibits:
--------
3(a) - Registrant's Restated Articles of Incorporation dated
January 1997.
3(b) - Registrant's By-Laws.
4(a) - Form of Registrant's Warrant Agreements.
4(b) - FINOVA Loan Documents.
4(c) - Form of Subscription Agreement with Bridge Lenders
4(d) - Form of Loan Agreement with WRCS Acquisition Lenders
10(a) - Registrant's 1996 Stock Option Plan.
10(b) - Form of Incentive Stock Option Agreement under
Registrant's 1996 Stock Option Plan.
10(c) - Form of Non-Statutory Option Agreement under Registrant's
1996 Stock Option Plan.
10(d) - 3E Acquisition Agreement.
10(e) - Agreement to Purchase Baton Rouge Office Building.
10(f) - Employment Agreement, dated as of June 1, 1996, between
the Registrant and Harry Conger.
10(g) - Employment Agreement, dated as of June 1, 1996, between
the Registrant and James Muzzy.
10(h) - Employment Agreement, dated as of December 17, 1996,
between the Registrant and William Spear.
10(i) - Employment Agreement, dated as of September 1, 1995,
between the GDC Solutions, and Kathleen Elnaggar
10(j) - Employment Agreement, dated as of September 5, 1995,
between GDC Solutions and Tarek Elnaggar.
11 - Computation of Earnings per Share Data.
-49-
<PAGE>
21 - Subsidiaries of Registrant.
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: June ___, 1997 GDC Group, Inc.
By:___________________________
Harry C. Conger,
President and Chief
Executive Officer
(Principal Executive
Officer)
By:____________________________
James W. Muzzy,
Vice President and
Secretary(Principal
Financial Officer)
By:____________________________
Donald L. Murphy, Jr.
Treasurer (Principal
Accounting Officer)
-50-
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
By:____________________________ Date: June__, 1997
Harry C. Conger, Director,
President and Chief Executive
Officer
By:____________________________ Date: June__, 1997
James W. Muzzy, Director,
Vice President
By:____________________________ Date: June__, 1997
Kathleen Elnaggar, Director
By:____________________________
John E. McConnaughy, Jr., Date: June __, 1997
Director
-51-
<PAGE>
INDEPENDENT AUDITORS' REPORT
To Board of Directors
GDC Group, Inc.:
We have audited the accompanying consolidated balance sheets of GDC Group, Inc.
and subsidiaries (formerly DK Industries, Inc.) as of September 30, 1996 and
1995, and the related consolidated statements of operations, stockholders'
equity and cash flows for the year ended September 30, 1996 and the ten month
period ended September 30, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits. The consolidated
statements of operations, stockholders' equity and cash flows for the year ended
November 30, 1994 were audited by other auditors, whose report dated
February 8, 1995 expressed an unqualified opinion on those statements.
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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of GDC Group, Inc. and
subsidiaries as of September 30, 1996 and 1995, and the results of their
operations and their cash flows for the year ended September 30, 1996 and the
ten month period ended September 30, 1995 in conformity with generally accepted
accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that GDC Group, Inc. will continue as a going concern. As discussed in Note 6 to
the financial statements, the Company was not in compliance with certain
covenants of a long-term loan agreement. The Company's difficulties in meeting
its loan agreement covenants, its recurring losses from operations, and its
negative working capital position, all discussed in Note 14, raise substantial
doubt about its ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 14. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
As discussed in Note 4, in 1995 the Company changed its method of accounting for
depreciation.
DELOITTE & TOUCHE LLP
New Orleans, Louisiana
April 29, 1997
<PAGE>
GDC GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1996 AND 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS
1996 1995
<S> <C> <C>
CURRENT ASSETS:
Cash $ 1,298,361 $ 115,919
Receivables:
Trade 412,248 1,062,872
Retainage - 600,000
Unbilled 288,500 455,500
Other 40,668 338,821
Inventory 177,234 125,883
Prepaid expenses 195,561 99,890
Other current assets 4,936 190,428
----------- -----------
Total current assets 2,417,508 2,989,313
Property, plant and equipment, net 7,655,891 6,921,803
Debt issuance cost, net 922,501 210,326
Other assets 161,675 189,428
----------- -----------
$11,157,575 $10,310,870
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt $ 241,726 $ 672,200
Current maturities of notes payable and long-term debt
(amounts to shareholders $-0- in 1996 and $915,737 in 1995) 4,254,724 1,114,775
Accounts payable - trade 2,718,932 409,454
Accrued expenses 1,036,881 518,534
----------- -----------
Total current liabilities 8,252,263 2,714,963
Long-term debt, excluding current maturities 95,552 4,011,691
Deferred income taxes 82,145 714,120
Commitment and contingencies (Note 11) - -
STOCKHOLDERS' EQUITY:
Common stock, par value $.02 a share, authorized 70,000,000 shares,
issued 5,628,412 shares in 1996 and 1,271,387 shares in 1995 112,568 25,428
Unearned compensation, restricted stock award - (157,664)
Additional paid-in capital 3,588,518 162,236
Retained earnings (deficit) (973,471) 2,840,096
----------- -----------
Total stockholders' equity 2,727,615 2,870,096
----------- -----------
$11,157,575 $10,310,870
=========== ===========
</TABLE>
See notes to consolidated financial statements.
-2-
<PAGE>
GDC GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1996, THE TEN MONTH PERIOD ENDED
SEPTEMBER 30, 1995 AND THE YEAR ENDED NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
CONTRACT REVENUE $ 6,583,508 $ 8,628,165 $14,832,839
COST OF CONTRACT REVENUE 6,377,411 5,544,236 11,165,785
----------- ----------- -----------
Gross profit 206,097 3,083,929 3,667,054
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 3,017,197 2,394,765 3,139,033
OTHER 417,000 - -
----------- ----------- -----------
3,434,197 2,394,765 3,139,033
NET OPERATING INCOME (LOSS) (3,228,100) 689,164 528,021
----------- ----------- -----------
OTHER (INCOME) EXPENSES:
Interest and amortization of debt issuance costs 934,041 563,188 667,499
Minority interest in loss of subsidiary - - (21,224)
Gain on sale of subsidiary - - (81,711)
Other, net 283,401 75,557 146,280
----------- ----------- -----------
1,217,442 638,745 710,844
----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES
AND CUMULATIVE EFFECT (4,445,542) 50,419 (182,823)
INCOME TAX EXPENSE (BENEFIT) (631,975) 20,362 (44,790)
----------- ----------- -----------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE (3,813,567) 30,057 (138,033)
CUMULATIVE EFFECT ON PRIOR YEARS OF
CHANGING TO DIFFERENT DEPRECIATION
METHOD (Note 4) - 298,672 -
----------- ----------- -----------
NET INCOME (LOSS) $(3,813,567) $ 328,729 $ (138,033)
=========== =========== ===========
PER SHARE AMOUNTS:
Income (loss) per common share - primary and fully diluted:
Income before cumulative effect of a change in $ (2.19) $ 0.03 $ (0.12)
accounting principle
Cumulative effect on prior years of change in
method of depreciation - 0.26 -
----------- ----------- -----------
Net income (loss) $ (2.19) $ 0.29 $ (0.12)
=========== =========== ===========
Proforma amounts assuming a new depreciation
method is applied retroactively:
Net income (loss) $ 467
-----------
Income (loss) per common share - primary and fully diluted: $ -
-----------
</TABLE>
See notes to consolidated financial statements.
-3-
<PAGE>
GDC GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEAR ENDED SEPTEMBER 30, 1996, THE TEN MONTH PERIOD ENDED SEPTEMBER 30, 1995 AND
THE YEAR ENDED NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Unearned
Common Additional Retained Compensation-
Stock Common Paid-in Earnings Restricted
(Shares) Stock Capital (Deficit) Stock Award Total
<S> <C> <C> <C> <C> <C> <C>
Balance at December 1, 1993 1,140,000 $ 22,800 $ 7,200 $ 2,649,400 $ $ 2,679,400
Net loss (138,033) (138,033)
---------- -------- ---------- ----------- ----------- -----------
Balance at November 30, 1994 1,140,000 22,800 7,200 2,511,367 2,541,367
Issuance of stock to employee 131,387 2,628 155,036 157,664
Unearned compensation arising from issuance of
common shares under restricted stock award (157,664) (157,664)
Net income 328,729 328,729
---------- -------- ---------- ----------- ----------- -----------
Balance at September 30, 1995 1,271,387 25,428 162,236 2,840,096 (157,664) 2,870,096
Stockholder debt converted to equity 502,333 10,047 1,053,410 1,063,457
Stock issued in connection with reverse merger 600,384 12,007 (12,007)
Sale of stock and conversion of short-term debt,
net of expenses of $470,000 3,220,975 64,419 2,352,213 2,416,632
Stock issued for acquisition of TVIES 33,333 667 32,666 33,333
Compensation charged to statement of operations 157,664 157,664
Net loss (3,813,567) (3,813,567)
---------- -------- ---------- ----------- ----------- -----------
Balance at September 30, 1996 5,628,412 $112,568 $3,588,518 $ (973,471) $ $ 2,727,615
========== ======== ========== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
-4-
<PAGE>
GDC GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED SEPTEMBER 30, 1996, THE TEN MONTH PERIOD ENDED
SEPTEMBER 30, 1995 AND THE YEAR ENDED NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(3,813,567) $ 328,729 $ (138,033)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Cumulative effect of change in accounting principles - (298,672) -
Depreciation and amortization 1,041,347 829,223 1,698,633
Loss on sale of fixed assets - 25,076 -
Deferred income taxes (631,975) 20,362 (44,790)
Minority interest in loss of subsidiary - - (21,224)
Changes in assets and liabilities, net of effects of acquisitions:
Receivables 1,715,777 2,355,708 (635,734)
Inventory (51,351) - -
Prepaid expenses (95,671) 127,387 28,331
Refundable income taxes - - 800,000
Other assets 258,900 119,271 108
Accounts payable and accrued expenses 2,490,471 (1,299,011) 135,252
Decrease in deferred revenue - (1,505,872) -
----------- ----------- ----------
Net cash provided by operating activities 913,931 702,201 1,822,543
----------- ----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of subsidiary - - 45,000
Purchase of property, plant and equipment (881,637) (20,585) (33,520)
Proceeds from sale of property, plant and equipment - 23,564 13,200
----------- ----------- ----------
Net cash provided by (used in) investing activities (881,637) 2,979 24,680
----------- ----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in deferred financing costs (1,101,590) - -
Proceeds from issuance of long-term debt 1,453,107 272,200 124,754
Principal payments on long-term debt (1,774,033) (999,077) (2,163,861)
Proceeds from bridge loan 1,310,000 - -
Proceeds from sale of common stock 1,105,000 - -
Unearned restricted stock compensation 157,664 - -
----------- ----------- ----------
Net cash provided by (used in) financing activities 1,150,148 (726,877) (2,039,107)
----------- ----------- ----------
NET INCREASE (DECREASE) IN CASH 1,182,442 (21,697) (191,884)
CASH AT BEGINNING OF PERIOD 115,919 137,616 329,500
----------- ----------- ----------
CASH AT END OF PERIOD $ 1,298,361 $ 115,919 $ 137,616
=========== =========== ==========
SUPPLEMENTAL NONCASH FINANCING ACTIVITIES:
Cash paid for interest $ 479,885 $ 306,458 $ 688,323
=========== =========== ==========
Conversion of stockholder debt and bridge loan into
common stock $ 2,380,237 $ - $ -
=========== =========== ==========
</TABLE>
See notes to consolidated financial statements.
- 5 -
<PAGE>
GDC GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996, THE TEN MONTH PERIOD ENDED SEPTEMBER 30, 1995 AND THE
YEAR ENDED NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GDC Group, Inc. (the "Company"), formerly DK Industries, Inc. is an
environmental technology firm focused on turnkey projects and solutions in
the waste management, waste cleanup and geotechnical fields. The Company
is involved in waste reduction, waste recycling, waste destruction, and
site rehabilitation in response to current environmental concerns. Its
significant accounting policies are described in the paragraphs that
follow:
Principals of Consolidation - The financial statements include the
accounts of the Company and its subsidiaries, GDC Holdings Corporation
("GDCHC"), GDC Enviro-Solutions, Inc. ("GDCES") (formerly GDC Engineering)
and TVIES, Inc. ("TVIES"). All significant intercompany balances and
transactions have been eliminated. In 1995, the Company changed its year
end to September and, accordingly, the results of operations and cash
flows for 1995 are for the ten month period then ended.
Revenue and Cost Recognition - Revenues are primarily related to waste
processing activities and are recognized on a per hour or per unit of
waste material processed. Revenue from cost plus contracts are recognized
on the basis of cost incurred during the period.
Contract costs include all direct material, labor, and equipment costs and
those indirect costs related to contract performance such as indirect
labor, supplies, tool costs and equipment depreciation. General and
administrative costs are charged to expense as incurred. Provisions for
estimated losses on uncompleted contracts are made in the period in which
such losses are determined. Changes in job performance, job conditions,
and estimated profitability, including those arising from contract penalty
provisions, and final contract settlements, may result in revisions to
costs and income and are recognized in the period in which the revisions
are determined.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
Inventories - Parts and supplies are carried at the lower of cost (FIFO)
or market.
Property, Plant and Equipment - Property, plant and equipment are stated
at cost and include expenditures for renewals and betterments which
substantially increase the useful lives of existing plant and equipment.
Depreciation is determined using the straight-line method for machinery
and equipment with estimated lives of 3 to 10 years. Incineration
equipment systems are depreciated over their useful lives by the unit of
production method.
- 6 -
<PAGE>
Debt Issuance Cost - Debt issuance cost relate to a restructured financing
agreement executed in 1996. This cost totaled $1,101,600 and is being
amortized on the interest yield method over the life of the loan. The
accumulated amortization was $205,194 at September 30, 1996. The remaining
balance of the original debt issuance cost of $210,326 was expensed at the
time of the restructuring. Debt issuance amortization amounted to $415,520
in 1996, $257,064 in 1995 and $179,160 in 1994.
Income Taxes - The Company uses the asset and liability method to account
for income taxes. Under this method, deferred tax assets and liabilities
are recognized for the future tax consequences attributable to differences
between the financial statement carrying amount of existing assets and
liabilities and their respective bases. Deferred tax assets and
liabilities are measured using tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to
be recovered or settled. The effect on deferred tax assets and liabilities
of a change in tax assets is recognized in income in the period that
includes the enactment date.
Net Income (Loss) Per Common Share - Primary and fully diluted net income
(loss) per common share is based on the weighted average number of shares
outstanding after consideration of the dilutive effect of stock warrants
(after giving effect for the reorganization referred to in Note 2). The
weighted average number of common shares used in the calculation was
1,743,612, 1,165,329 and 1,140,000 for 1996, 1995 and 1994, respectively.
Primary and fully diluted net income (loss) per common share did not
include the effect of the restricted stock awards until the condition for
their issuance was met, and the shares were released. Stock options are
not included in 1996 or 1994 as their effect is anti-dilutive.
Statements of Cash Flows - For purposes of the statements of cash flows,
the Company considers all short-term, highly liquid investments with an
original maturity of three months or less to be cash equivalents.
Concentration of Credit Risk - Financial instruments that potentially
subject the Company to concentrations of credit risk are accounts
receivables. The Company continuously evaluates the credit worthiness of
its customers' financial conditions and generally does not require
collateral. The Company's allowance for doubtful accounts, currently zero,
is based on current market conditions, and losses on uncollectible
accounts have consistently not been material.
Fair Value of Financial Statements - The carrying value of the Company's
financial instruments including cash, accounts receivable and payable, and
long-term debt classified as current approximate fair market value due to
this short-term classification. The long-term instruments are not
material. The Company has not estimated the fair value of financial
instruments in regards to default interest on the notes payable or the
ultimate realization of the assets and liabilities if the Company does not
continue in existence.
New Accounting Pronouncements - The Financial Accounting Standards Board
has issued SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of". SFAS No. 121
establishes accounting standards for recording the impairment of
long-lived assets, certain identifiable intangibles, goodwill, and assets
to be disposed. The Board has also issued SFAS No. 123, "Accounting for
Stock Based Compensation." The Company is applying, and intends to
continue to apply, the provisions of APB Opinion No. 25 and related
interpretations in accounting for stock options and will, therefore, adopt
only the disclosure requirements of SFAS No. 123. The Company has not
determined if the adoption of these statements in 1997 will have a
significant effect on its financial position, results of operations or
cash flows.
- 7 -
<PAGE>
In February 1997, the Financial Accounting Standards board issued
Statement of Financial Accounting Standards No. 128, "Earnings per Share,"
("SFAS 128") which changes the method of calculating earnings per share
("EPS"). SFAS 128 requires the presentation of "basic" EPS and "diluted"
EPS on the face of the statement of operations. Basic EPS is computed by
dividing the net income available to common shareholders by the
weighted-average shares of outstanding common stock. The calculation of
diluted EPS is similar to basic EPS except that the denominator includes
dilutive common stock equivalents such as stock options and warrants. The
statement is effective for financial statements for periods ending after
December 15, 1997. The Company will adopt SFAS 128 in fiscal 1998 as early
adoption is not permitted. When adopted, it will require restatement of
prior years' EPS.
2. REORGANIZATION
On March 12, 1996, the shareholders of GDC Enviro-Solutions approved
certain changes to its' corporate structure, including the creation of a
holding company, GDC Holdings Corporation. The shareholders retained the
same ownership interest in the holding company as prior to the
reorganization whereby 1,271,387 shares of common stock of GDC Holdings
were issued in exchange for the 3,814,160 outstanding shares of GDC
Enviro-Solutions. The Company has accounted for this transaction similar
to a pooling of interest and the exchange of stock has been retroactively
applied. All capital stock and per share data have been restated for the
effect of this exchange.
On May 31, 1996, DK Industries (now GDC Group, Inc.) completed a merger
with GDCHC, pursuant to which GDCHC became a wholly-owned subsidiary of
GDC Group. The transaction is treated for accounting purposes as a reverse
acquisition whereby GDCHC acquired DK Industries. Accordingly, the
financial statements presented herein represent the accounts of GDCHC for
all years presented and those of the acquired entity from May 31, 1996. At
the time of the transaction, DK Industries had no assets and liabilities
of approximately $46,000. Also, in connection with the reverse
acquisition, historical stockholders' equity has been retroactively
restated to record the par value of DK Industries' stock with an offset to
additional paid in capital. In connection with the merger, 1,773,220
outstanding shares of common stock of GDCHC were converted into 1,773,220
shares of DK Industries (approximately 75% of the outstanding shares of DK
Industries at completion of the merger). Warrants to purchase common stock
of GDCHC were also converted into warrants to purchase shares of DK
Industries.
3. BUSINESS COMBINATIONS
On May 30, 1996, GDCHC through its subsidiary GDC Enviro-Solutions,
entered into an agreement with TVIES and OHM Remediation Services Corp.
("OHM") pursuant to which GDC assumed the obligations of TVIES under a
subcontract with OHM to provide environmental remediation services at a
superfund site. All receipts and disbursements relating to this contract
subsequent to May 30, 1996, are reflected in the financial statements of
the consolidated companies. Prior to September 30, 1996, the contract was
terminated. At September 30, 1996, the Company accrued approximately
$400,000 of estimated costs to be incurred to deactivate and demobilize
this contract. This amount is included in accrued expenses on the balance
sheet.
On September 30, 1996, the Company, through its subsidiary GDCHC, acquired
TVIES. Under the terms of the transaction, the Company issued 33,333
shares of its common stock valued at $33,333 for all of the outstanding
common shares of TVIES. This transaction was accounted for as a purchase.
Operations of TVIES will be included in the consolidation from the date of
acquisition. The total consideration paid for TVIES approximated its net
assets of approximately $54,000, at the date of acquisition. If the
acquisition had occurred at the beginning of fiscal 1996, the net loss of
the Company would have increased by $76,126 or $.04 per share. In
connection with this acquisition, the Company will be required to make
certain payments as described in Note 11.
- 8 -
<PAGE>
4. PROPERTY AND EQUIPMENT
Property and equipment as of September 30, 1996 consist of the following:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Machinery and equipment $ 13,696,843 $ 12,285,563
Furniture and fixtures 507,100 487,145
Vehicles 257,323 257,323
Leasehold improvements 106,293 106,293
-------------- --------------
14,567,559 13,136,324
Less accumulated depreciation (6,911,668) (6,214,521)
-------------- --------------
$ 7,655,891 $ 6,921,803
============== ==============
</TABLE>
Depreciation expense amounted to $650,876 in 1996 and $751,318 in 1995.
Substantially all of the machinery and equipment is pledged to secure
long-term debt.
Effective December 1, 1994, the Company changed its method of depreciation
on its incineration equipment systems from 10 year straight-line to units
of production. This change was made to better reflect the estimated use
during periods in which such assets will remain in service. The cumulative
effect of the change on prior years of $489,625 net of income taxes of
$190,953 ($.26 per share after giving effect to the reorganization
referred to in Note 2) is included in the accompanying statement of
operations in 1995. The change had the effect of reducing depreciation
expense and increasing net income in 1995 by approximately $341,464 ($.29
per share after giving effect to the reorganization referred to in Note
2).
5. DEFERRED REVENUE
During fiscal 1994, an existing customer asked the Company to deactivate
and defer future performance on a previously signed contract. The Company
agreed to this request and further agreed that cash payments received by
the Company under the terms of this agreement, could be applied to future
contract services between the Company and this customer. As inducement for
the Company signing this agreement, the customer agreed to make cash
payments totaling $1,505,872. This total amount was deferred at November
30, 1994 to be recognized as income when the contract was canceled or when
the potential future obligation of the Company to provide contract
services had expired. In 1995, the Company collected the deferred payment
and negotiated an amendment to this agreement whereby the Company would
have no potential future obligation relating to the $1,505,872.
Accordingly, this amount has been included in contract revenue in 1995.
- 9 -
<PAGE>
6. LONG-TERM DEBT
Long-term debt as of September 30, 1996 and 1995 consist of the following:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Note payable due in monthly installments, including
interest, of approximately $65,000. Interest is at
prime plus 2.5% (11% at September 30, 1996). $ 3,477,640 $ 3,037,639
Note payable due in monthly installments, including interest, of approximately
$19,000. Interest is at prime (8.5% at September 30, 1996). 286,664 477,776
Various notes payable due in monthly installments ranging from approximately
$2,006 to $15,100. Interest at various rates ranging from 4.71% to 9.90%. All
notes mature through March 1997. 120,023 -
Various subordinated notes payable to the majority
stockholder. Interest is at prime (8.75% at
September 30, 1995). (See Note 8) - 915,738
Notes payable due in monthly installments ranging from approximately $7,200 to
$11,000, with imputed interest ranging from 16% to 17%. 465,949 695,313
Note payable under a $2,500,000 line of credit. Interest at prime plus 2.75%
(11.25% at September 30, 1996). Advances under the line are limited to 80% of
eligible accounts receivable and 80% of the cost of new equipment purchases not
to exceed $500,000 of borrowings against equipment. The note matures July 30,
1997, subject to an optional one year renewal. 241,726 -
Note payable to a bank under a $750,000 line of credit. Interest at the bank's
prime plus 2% (11% at September 30, 1995). Advances under the line are limited
to 70% of eligible accounts receivable. The note matured July 1, 1996. - 672,200
------------ -----------
4,592,002 5,798,666
Less current maturities of long-term debt 4,496,450 1,786,975
------------ -----------
$ 95,552 $ 4,011,691
============ ===========
</TABLE>
Substantially all of the Company's accounts receivable and property, plant
and equipment are pledged as security for notes payable and long-term debt.
In addition, one note is secured by a pledge of all of the outstanding
stock of GDC Solutions held by the Company.
- 10 -
<PAGE>
One of the Company's notes payable had provided the lender with a profit
participation fee. This one time option could have been exercised at any
time from December 1994 through December 1997. The profit participation
fee entitled the lender to 10% of the proceeds from the sale of all or
substantially all of the assets of the Company less certain debt of the
Company, or 10% of a multiple of operating cash flows for the preceding
twelve month period. Through September 30, 1995 the lender had not
exercised this option. However, on March 14, 1996, the Company
restructured this agreement for a fee of $300,000 and fixed the profit
participation fee at $500,000, all of which was paid in full on October 7,
1996. Under the terms of the agreement the Company was prohibited from the
payment of any dividends at September 30, 1996.
This agreement also contains various other restrictions and covenants with
which the Company must comply. At September 30, 1996 the Company was not
in compliance with certain of these covenants. The Company has not
obtained a waiver of violations from the lender as of September 30, 1996,
and, accordingly, the debt has been classified as current debt.
The aggregate maturities of notes payable and long-term debt for each of
the years subsequent to September 30, 1996, are as follows:
<TABLE>
<CAPTION>
Year Ending
September 30,
<S> <C>
1997 $4,301,975
1998 290,027
1999 -
2000 -
2001 -
----------
$4,592,002
==========
</TABLE>
7. INCOME TAXES
The Company has provided for Federal and state income taxes (benefit) as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Current $ - $ - $ -
Deferred (1,471,440) 20,362 (44,790)
Valuation allowance adjustments 839,465 - -
------------ --------- ----------
Provision (benefit) for income taxes $ (631,975) $ 20,362 $ (44,790)
============ ========= ==========
</TABLE>
- 11 -
<PAGE>
A reconciliation between the amount of reported income taxes and the
amount computed by multiplying the income (loss) before income taxes by
the statutory federal rate for periods ending 1996, 1995, and 1994, is as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Income taxes (benefit) at statutory federal
rate of 34% $(1,511,484) $ 17,142 $ (62,160)
Increase (reduction) in income taxes
resulting from:
State and local income taxes, net of
Federal income tax benefit (96,365) (1,008) (3,284)
Other, net 136,409 4,228 20,654
Increase in valuation allowance 839,465 - -
----------- --------- -----------
$ (631,975) $ 20,362 $ (44,790)
=========== ========= ===========
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
September 30, 1996 and September 30, 1995 are presented below:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Deferred tax liability -
Tax over book depreciation $(1,553,485) $(1,422,886)
Deferred tax assets:
Net operating loss carryforwards 1,744,056 288,246
Alternative minimum tax credit carryforwards 372,060 372,060
Other, net 194,689 48,460
Valuation allowance (839,465) -
----------- -----------
Total deferred tax asset 1,471,340 708,766
----------- -----------
Net deferred tax liability $ (82,145) $ (714,120)
=========== ===========
</TABLE>
For federal income tax purposes, the Company has net operating loss
carryforwards ("NOLs") of approximately $4,844,599 that, if not used, will
expire in 2006 through 2011. The Company also has $372,060 of alternative
minimum tax credit carryforwards available to offset future regular income
taxes subject to certain limitations. As a result of the changes in
ownership of the Company on May 31, 1996 and again on September 30, 1996,
the Company's NOLs available to offset future income tax liability will be
substantially limited.
As a result of the changes in ownership, the annual limitation available
for the future utilization of NOLs is approximately $75,000 which may be
adjusted for net built-in gains from the disposal of assets held on the
change date and disposed of during a five year recognition period. To the
extent that the annual limitation is not fully utilized in the first
available year, the unused portion of such limitation accumulates and may
be carried forward or utilized in a subsequent year, subject to its
expiration date.
- 12 -
<PAGE>
Under SFAS No. 109, a valuation allowance must be established to offset a
deferred tax asset if, based on the weight of available evidence, it is
more likely than not that some portion or all of the deferred tax asset
will not be realized. There was no valuation allowance for the deferred
tax assets at September 30, 1995, as the Company believed that they would
be realized through future operations and the renewal of taxable temporary
differences. During the fourth quarter of fiscal 1996, the Company
evaluated its most recent operating performance and has determined that it
is more likely than not that a portion of the deferred tax asset could not
be realized. A valuation allowance has been recorded in the financial
statements to offset credit carryforwards which the Company believes could
expire unutilized. At September 30, 1996, the Company has recorded a net
deferred tax liability of $82,145, all of which has been classified as
long-term.
8. STOCKHOLDERS' EQUITY
After giving effect to the reorganization referred to in Note 2 and the
amendment of the Articles of Incorporation referred to in Note 15, the
authorized capital stock of the Company consists of 70,000,000 shares of
$.02 par value common stock of which 5,628,412 and 1,271,387 shares were
issued and outstanding at September 30, 1996 and 1995, respectively. In
addition, 20,000,000 shares of $.10 par value preferred stock is
authorized. No preferred stock has been issued.
On March 12, 1996 approximately $1.1 million of notes and accrued interest
payable to a shareholder was exchanged for 502,333 shares of the Company's
common stock. In addition, on September 30, 1996 approximately $1,316,780
of short-term notes and accrued interest incurred during 1996 was
exchanged for 1,645,975 shares of the Company's common stock. The
conversion of these debts would have had the effect of decreasing the loss
per common share from $2.19 to $.98 if these conversions had occurred at
the beginning of the period.
During the year ended September 30, 1996, the Company sold 644.195 units
of stock with each unit consisting of 5,000 shares of common stock, 5,000
redeemable Series A Warrants and 5,000 redeemable Series B Warrants. Each
Warrant entitles the holder to purchase one share of common stock at an
exercise price of $2.25 for the Series A Warrants and $3.75 for the Series
B Warrants both subject to adjustment in certain circumstances. The
exercise price for the Series A Warrants and Series B Warrants shall be
reduced to a minimum of $1.00 and $2.00, respectively, if the Company does
not meet certain conditions relating to the registration of the Common
Stock included in the units. In addition, the Series B Warrants shall be
reduced to $.25 if certain earnings targets are not met. The Series A and
Series B Warrants expire two and three years, respectively, from the date
a Registration Statement covering these units is declared "effective" by
the Securities and Exchange Commission.
The Company has the right to redeem the Series A and Series B Warrants at
a price of $.05 per Warrant, provided the common stock is publicly traded
and the average of the closing price per share of the common stock for the
20 consecutive trading days immediately prior to the mailing of a notice
of redemption shall have exceeded 133.3% of the initial warrant exercise
price.
In accordance with the terms of a certain employee agreement, the Company
awarded 131,387 (after adjustment for the stock split) shares of
restricted common stock in 1995 in consideration of future services and
events. These restricted shares were held in custody by the Company until
the terms of the restriction was satisfied. If the terms under which the
award was granted were not satisfied, the shares would be forfeited. When
these shares were issued, unearned compensation equivalent to the current
value of the stock was charged to stockholders' equity. During the year
ended September 30, 1996, the terms of the restrictions were satisfied and
the Company has recorded compensation expense of $131,386, the estimated
market value at the date the restrictions were removed.
- 13 -
<PAGE>
In July 1995, the Company issued to two outside directors warrants to
purchase 100,000 shares of common stock at $1.20 per share - the estimated
fair market value of the Company's common stock at the date of the grant
after giving the effect for the reorganization referred to in Note 2.
9. STOCK OPTIONS
On June 25, 1996, the Company adopted a 1996 Stock Option Plan (the
"Plan") for officers, employees and consultants of the Company or any of
its subsidiaries. The Plan authorizes the granting of incentive and
non-incentive stock options to purchase an aggregate of not more than
2,000,000 shares of the Company's Common Stock. The aggregate fair market
value (determined at the time of option grants) of stock with respect to
which incentive stock options become exercisable for the first time in any
year cannot exceed $100,000. The Plan is administered by a Stock Option
Committee consisting of the Board of Directors of the Company.
The options granted under the Plan will be exercisable in such
installments as may be provided in the grant. However, each option granted
shall expire no later than 10 years from the date of grant (five years in
the case of incentive options of 10% stockholders), as the Committee may
determine.
On June 26, 1996, the Company granted to two officers options to purchase
200,000 shares each of Common Stock at a $1 per share. The options became
exercisable as to 100,000 shares for each officer on the date of grant
with the remaining 100,000 each becoming exercisable on June 25, 1997. All
options expire on June 24, 2006. The Company intends to account for
options in accordance with the provisions of APB Opinion No. 25.
Accordingly, no compensation expense has been recorded as the Company
believes that the fair market value of the stock on the date of grant did
not exceed $1 per share.
10. BUSINESS AND CREDIT CONCENTRATIONS
Most of the Company's customers are located in the Southern United States.
During fiscal 1996, 1995 and 1994, the Company had major customers each of
whose purchases exceeded 10% of total sales. Sales to these customers were
as follows:
<TABLE>
<CAPTION>
% of Sales
to Total Sales
-----------------------------------------------------------------------------------
1996 1995 1994
------------------- ------------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
Customer 1 $ - - % $2,907,000 34 % $8,362,000 57 %
Customer 2 $2,376,000 36 % $1,227,000 14 % $1,926,000 13 %
Customer 3 $ 942,000 14 % $1,939,000 22 % $3,288,000 22 %
Customer 4 $ - - % $1,468,000 17 % $ - - %
Customer 5 $2,743,000 42 % $ - - % $ - - %
</TABLE>
11. COMMITMENTS AND CONTINGENCIES
In connection with the acquisition of TVIES discussed in Note 3, the
Company is now a party relating to an Agreement expiring on August 17,
2000 to lease certain equipment and a license to use certain patents,
trademarks and service mark through August 17, 2000. Under the terms of
the Agreement, TVIES is required to make quarterly payments equal to 4% of
the gross revenue resulting from the license up to a maximum aggregate of
$1,080,000. At such time as the full amount has been paid, TVIES would
have the option to acquire all rights and title to the equipment and all
rights and title to the patents and licenses for $1.00.
- 14 -
<PAGE>
If at the end of the Agreement the amount has not been paid, TVIES may
make a final lump sum payment equal to the remaining unpaid balance. If
the unpaid balance is not paid at the expiration of the Agreement, all
equipment and rights shall be returned. No payments were required or had
been made at September 30, 1996.
The Company is involved in various legal actions arising in the ordinary
course of business. Management has assessed the range of loss, if any,
related to other pending legal matters and has concluded that the impact
of these matters will not have a material adverse effect on the Company's
consolidated financial position, results of operations or cash flows.
The Company has agreed to acquire 100% of the outstanding stock of 3E
Corporation, a corporation owned by Ms. Kathleen Elnaggar, Director, in
exchange for that number of shares of the Company's common stock that will
have an aggregate value of $500,000 on the date that the acquisition is
closed to be paid $150,000 in cash and $350,000 in GDC Group, Inc.
restricted stock. Management expects that the transaction will be closed
during the fourth quarter of fiscal 1997.
The offices of GDCES are located in Baton Rouge, Louisiana. The facility
is owned by Kathleen Elnaggar, Director and a major stockholder of the
Company, and an affiliated family trust. The Company has entered into an
agreement with Ms. Elnaggar to purchase the facility for a purchase price
of $956,000, its value at the time of the agreement based on an
independent appraisal. The purchase price will be paid by (1) the
assumption by the Company of an existing note and mortgage on the
building, and (2) a promissory note for its balance. The note will bear
interest at 10% per annum and will be amortized over 24 months from the
closing. It will be secured by a mortgage, which will be subordinated to
the lien of the mortgagee on the original mortgage.
The Company has several noncancelable operating leases, primarily for
office space described in the preceding paragraph and leased from the
majority shareholder for approximately $210,000 per year, that expire over
the next two years. In addition, the Company leases various pieces of
equipment on a month-to-month basis as the work load requires. Rental
expense for 1996, 1995, and 1994 was $1,146,000, $558,000, and $937,000,
respectively. Future minimum lease payments under noncancelable operating
leases for the years ending September 30, are as follows:
<TABLE>
<S> <C>
1997 $ 216,000
1998 216,000
---------
$ 432,000
=========
</TABLE>
On June 1, 1996, the Company entered into three year employment agreements
with two executives which provides for total annual compensation payments
of $292,000. These agreements provide for a severance benefit of two
year's compensation in the event of termination by the Company without
cause or in connection with a change of control (as defined in the
agreement). The Company has also entered into three additional employment
contracts one of which expires on August 31, 1998, and require annual
payments of $150,000 and two which expire on September 13, 1997 and
require total payments of approximately $186,000. The two agreements
expiring on September 13, 1997 provide for a termination payment equal to
two year's annual salary in the event of a change in control (as defined
in the agreements).
12. SALE OF MAJORITY OWNED SUBSIDIARY
On October 7, 1994, the Company sold its 80% interest in BCI to the
minority shareholder. In exchange for its interest, the Company received
$45,000 in cash and a note receivable of $109,000.
- 15 -
<PAGE>
13. BENEFIT PLAN
The Company has a non-contributory Profit Sharing Plan and Trust (the
"Plan") which substantially covers all employees who are at least 21 years
of age and have completed one year of service. The Company can contribute
to the Plan at its discretion and employees vest in the Company's
contribution based upon their years of service. There were no Company
contributions in fiscal year 1996, 1995 or 1994.
14. RESULTS OF OPERATIONS
The Company's consolidated financial statements for the year ended
September 30, 1996 have been prepared on a going concern basis which
contemplates the realization of assets and the anticipation of liabilities
in the normal course of business. As shown in the financial statements,
during the periods ended September 30, 1996 and 1995 and the year ended
November 30, 1994, the Company incurred a net cumulative loss of
$3,622,871 and at September 30, 1996, its current liabilities exceeded its
current assets by $5,834,755. In addition, cash flows from operations
through April 29, 1997, have not been sufficient to fund the Company's
working capital needs and debt service requirements. Management believes
that the Company's cash flow requirements will be met through the
following sources (1) raising additional bridge funds and/or common stock
equity to meet short-term requirements, (2) cash flow from projects
performed by recent acquisitions, (3) settlement of claims relating to the
Cape Fear contract as discussed in Note 15, and (4) reduction of overhead.
Although the sufficiency of these actions cannot be predicted with
absolute certainty, management is of the opinion that these measures will
sufficiently sustain the Company's ability to satisfy its working capital
and debt service requirements.
15. SUBSEQUENT EVENTS
On November 14, 1996, the stockholders voted to amend the Company's
Articles of Incorporation to increase the authorized shares of common
stock from 30 million to 70 million shares and to increase the authorized
preferred stock from 10 million to 20 million shares. In addition, the
stockholders voted to change the name of the Company to GDC Group, Inc.
On December 13, 1996, the Company acquired 100% of the membership interest
of Walsh Remedial Construction Services, LLC, which subsequently became a
Delaware corporation named Walsh Remedial Construction Services, Inc.
(WRCSI). The consideration for the acquisition was the payment of certain
obligations of WRCSI and its members, an agreement to make certain
conditional royalty payments to a bank based upon project revenues, to be
credited to a debt owed by the former parent of WRCSI to the bank, and the
assumption of WRCSI's liabilities and obligations. The acquisition will be
accounted for under the purchase method and the results of operations will
be included in the consolidation from the date of acquisition. The
purchase price will be allocated based on the estimated fair values at the
date of acquisition and will result in an excess of purchase price over
assets of approximately $4,800,000.
The acquisition was funded by loans from two lenders in the total amount
of $3,000,000. The loans bear interest at the rate of 14% per annum and
are payable in two installments of $750,000 on April 1,1997 and July 1,
1997 with a final payment of $1,500,000 on December 15, 1997. In addition,
the lenders received Series AA Warrants to purchase an aggregate of
750,000 shares of Common Stock at an initial exercise price of $2.25. The
exercise price is subject to downward adjustments similar to the Series A
and B Warrants discussed in Note 8.
- 16 -
<PAGE>
On January 20, 1997, GDCES filed a claim for equitable adjustment with OHM
Remediation Services Corporation for losses and costs incurred by GDCES
and TVIES relating to the contract discussed in Note 3 based on the fact
that the soil at the site, as characterized in the contract document and
specifications, differed materially from the soil actually encountered
on-site and which differing soil characteristics were not reasonably
foreseeable at the time of contracting. The total claim amounts to
approximately $2,500,000. Revenues relating to the claim will be recorded,
when and, if received.
On March 7, 1997, the Company acquired 100% of the stock of JWS
Consulting, Inc. and concurrently changed its name to EnviroScope, Inc.
The consideration for the acquisition was $24,500 in cash and the
discharge of a Promissory Note in the amount of $50,318 made by the
selling stockholder to a bank.
In March of 1997, the Company gave holders of the Series A, B and AA
Warrants the option through June 30, 1997 of converting such Warrants into
common shares at a reduced price of $1.25 for the Series A and AA Warrants
and $1.50 for the Series B Warrants. Warrantholders who are also lenders
may pay the exercise price by converting debt to common stock.
******
- 17 -
<PAGE>
Exhibit 3(a)
RESTATED
ARTICLES OF INCORPORATION
OF
GDC GROUP, INC.
---------------
The undersigned President and Secretary of GDC Group, Inc., a Colorado
corporation (the "Corporation"), adopt the following Restated Articles of
Incorporation, pursuant to the provisions of the Colorado Business Corporation
Act. These Restated Articles of Incorporation correctly set forth the
provisions of the Articles of Incorporation of the Corporation, as amended, and
they were duly adopted by the board of directors of the Corporation without
shareholder action. Shareholder approval of these Restated Articles of
Incorporation was not required.
The Corporation's Articles of Incorporation shall be restated in their
entirety to read as follows:
ARTICLE I
---------
NAME
----
The name of the Corporation shall be GDC Group, Inc.
ARTICLE II
----------
PERIOD OF DURATION
------------------
The Corporation shall exist in perpetuity, from and after the date of
filing these Articles of Incorporation with the Secretary of State of the State
of Colorado, unless dissolved according to law.
ARTICLE III
-----------
PURPOSES AND POWERS
-------------------
1. Purposes. Except as restricted by these Articles of Incorporation,
--------
the Corporation is organized for the purpose of transacting all lawful business
for which corporations may be incorporated pursuant to the Colorado Corporation
Code.
<PAGE>
2. General Powers. Except as restricted by these Articles of
--------------
Incorporation, the Corporation shall have and may exercise all powers and rights
which a corporation may exercise legally pursuant to the Colorado Corporation
Code.
3. Issuance of Shares. The Board of Directors of the Corporation may
------------------
divide and issue any class of stock of the Corporation in series pursuant to a
resolution properly filed with the Secretary of State of the State of Colorado.
ARTICLE IV
----------
CAPITAL STOCK
-------------
The total authorized capital stock of the Corporation shall be 90,000,000
shares, of which 70,000,000 shall be common stock and 20,000,000 shall be
preferred stock, all as described below.
1. Common Stock. The aggregate number of voting common shares which this
------------
Corporation shall have the authority to issue is seventy million (70,000,000),
each with two cents ($.02) par value, which shares shall be designated "Common
Stock". The Common Stock shall have no special powers, preferences or rights,
qualifications, limitations or restrictions. The rights of holders of shares
of Common Stock to receive dividends or share in the distribution of assets in
the event of liquidation, dissolution or winding up of the affairs of the
Corporation shall be subject to the preferences, limitations and relative rights
of the shares of Preferred Stock fixed in the resolution or resolutions which
may be adopted from time to time by the Board of Directors of the Corporation
providing for the issuance of one or more series of shares of Preferred Stock.
2. Preferred Stock. The aggregate number of preferred shares which this
---------------
Corporation shall have the authority to issue is twenty million (20,000,000)
shares, each with ten cents ($0.10) par value, which shares shall be designated
"Preferred Stock"."
A. Shares of Preferred Stock may be issued from time to time in one
or more series as the Board of Directors of the Corporation (the "Board of
Directors") may determine. The Board of Directors is hereby authorized, by
resolution or resolutions, to provide from time to time, out of the
unissued shares of Preferred Stock not then allocated to any series of
Preferred Stock, for a series of the Preferred Stock. Each such series
shall have distinctive serial designations. Before any shares of any such
series of Preferred Stock are issued,
-2-
<PAGE>
the Board of Directors shall fix and determine, and is hereby expressly
empowered to fix and determine, by resolution or resolutions, the voting
powers, full or limited, or no voting powers, and the designations,
preferences and relative, participating, optional or other special rights,
and the qualifications, limitation and restrictions thereof. The resolution
or resolutions providing for the issue of Preferred Stock from time to time
adopted by the Board of Directors shall be filed with the Secretary of the
State of Colorado as required by law.
B. Each series of Preferred Stock:
(i) may have such number of shares;
(ii) may have such voting powers, full or limited, or may be without
voting powers;
(iii) may be subject to redemption at such time or times and at such
prices;
(iv) may be entitled to receive dividends (which may be cumulative
or noncumulative) at such rate or rates, on such conditions,
from such date or dates, and at such times, and payable in
preference to, or in such relation to, the dividends payable on
any other class or classes or series of stock;
(v) may have such rights upon the dissolution of, or upon any
distribution of the assets of, the Corporation;
(vi) may be made convertible into, or exchangeable for, shares of
any other class or classes or of any other series of the same
or any other class or classes of stock of the Corporation at
such price or prices or at such rates of exchange, and with
such adjustments;
(vii) may be entitled to the benefit of a sinking fund or purchase
fund to be applied to the purchase or redemption of shares of
such series in such amount or amounts;
(viii) may be entitled to the benefit of conditions and restrictions
upon the creation of indebtedness of the Corporation or any
subsidiary, upon the issue of any additional stock (including
additional shares of such series or of any other series), and
upon the payment of dividends or the making of other
distributions on, and the purchase, redemption or other
acquisition by this Corporation or any subsidiary of any
outstanding stock of the Corporation; and
-3-
<PAGE>
(ix) may have such other relative, participating, optional or other
special rights, and qualifications, limitations or restrictions
thereof;
all as shall be stated in the resolution or resolutions of the Board of
Directors providing for the issue of such Preferred Stock. Except where
otherwise set forth in the resolution or resolutions adopted by the Board
of Directors providing for the issue of any series of Preferred Stock, the
number of shares comprising such series may be increased or decreased (but
not below the number of shares then outstanding) from time to time by like
action of the Board of Directors.
C. Shares of any series of Preferred Stock which have been redeemed
(whether through the operation of a sinking fund or otherwise) or purchased
by the Corporation, or which, if convertible or exchangeable, have been
converted into or exchanged for shares of stock of any other class or
classes shall have the status of authorized and unissued shares of
Preferred Stock and may be reissued as a part of the series of which they
were originally a part or may be reclassified and reissued as part of a new
series of Preferred Stock to be created by resolution or resolutions of the
Board of Directors or as part of any other series of Preferred Stock, all
subject to the conditions or restrictions on issuance set forth in the
resolution or resolutions adopted by the Board of Directors providing for
the issue of any series of Preferred Stock and to any filing required by
law.
3. Dividends. Subject to the rights of the holders of Preferred Stock,
---------
if any, dividends in cash, property or shares of the Corporation may be paid
upon the Common Stock, as and when declared by the Board of Directors, out of
funds of the Corporation to the extent and in the manner permitted by law.
4. Distribution in Liquidation. Upon any liquidation, dissolution or
---------------------------
winding up of the Corporation, and after paying or adequately providing for the
payment of all its obligations and amounts payable in liquidation, dissolution
or winding up and subject to the rights of the holders of Preferred Stock, if
any, the remainder of the assets of the Corporation shall be distributed, either
in cash or in kind, pro rata to the holders of the Common Stock.
5. Voting Rights; Denial of Cumulative Voting. Each outstanding share of
------------------------------------------
Common Stock shall be entitled to one vote, and each fractional share of Common
Stock shall be entitled to a corresponding fractional vote on each matter
submitted to a vote of shareholders, except that in the election of directors
shareholders shall have the right to vote their Common Stock for as many
-4-
<PAGE>
persons as there are directors being elected with a vote of the Common Stock.
Cumulative voting shall not be allowed in the election of directors of the
Corporation. One-third of the shares entitled to vote, represented in person or
by proxy, shall constitute a quorum at a meeting of shareholders. Except as
otherwise provided by these Articles of Incorporation or the Colorado
Corporation Code, if a quorum is present, the affirmative vote of a majority of
the shares represented at the meeting and entitled to vote on the subject matter
shall be the act of the shareholders. With respect to any action to be taken by
shareholders of this Corporation, when the laws of Colorado require the vote or
concurrence of the holders of two-thirds of the outstanding shares, of the
shares entitled to vote thereon, or of any class or series, such action may be
taken by the vote or concurrence of a majority of such shares or class or series
thereof.
6. Denial of Preemptive Rights. No holder of any shares of the
---------------------------
Corporation, whether now or hereafter authorized, shall have any preemptive or
preferential right to acquire any shares or securities of the Corporation,
including shares or securities held in the treasury of the Corporation.
7. Transfer Restrictions. The Corporation shall have the right to impose
---------------------
restrictions upon the transfer of any of its authorized shares or any interest
therein. The Board of Directors is hereby authorized on behalf of the
Corporation to exercise the Corporation's right to so impose such restrictions.
8. One for Twenty Reverse Stock Split. Effective as of June 14, 1991,
----------------------------------
the shareholders of the Corporation approved a one for twenty reverse stock
split of the Corporation's issued and outstanding shares of Common Stock.
Pursuant to the reverse stock split, twenty shares of the Corporation's
$.001 par value common stock issued and outstanding on June 14, 1991, shall be
changed and reclassified into one share of the Corporation's $.02 par value
common stock. The capital account of the corporation shall not be increased or
decreased by such change and reclassification. To reflect such change and
reclassification, each certificate representing shares of $.02 par value Common
Stock theretofore issued and outstanding shall be canceled, and the holder of
record of each such certificate shall be entitled to receive a new certificate
representing one share of common stock for each twenty shares represented by the
original certificates. Upon this amendment becoming effective, the records of
the Corporation shall be changed to reflect the number of shares owned by each
holder of record after the reverse stock split. New certificates reflecting
such adjusted number of shares shall be issued to holders of record upon written
request by the holder to the transfer agent, accompanied by the
-5-
<PAGE>
original stock certificate(s). If no written request is received, certificates
reflecting the adjusted number of shares shall be issued to the transferee(s)
upon transfer of such adjusted shares by the current holder of record.
ARTICLE V
---------
INITIAL BOARD OF DIRECTORS
--------------------------
The number of directors shall be fixed from time to time by or in the
manner provided in the bylaws. So long as the number of directors shall be less
than three, no shares of the Corporation may be issued and held of record by
more shareholders than there are directors. Any shares issued in violation of
this paragraph shall be null and void. So long as the number of directors shall
be less than three, this provision also shall constitute a restriction on the
transfer of shares and a legend shall be conspicuously placed on each
certificate respecting shares preventing transfer of the shares to more
shareholders than there are directors. The name and address of the persons who
initially served as directors were as follows:
NAME ADDRESS
---- -------
Kenneth A. Larson 1305 Teakwood
Fort Collins, Colorado 80525
Clarence G. Sitzman 401 Camino Real
Fort Collins, Colorado 80524
Charles R. Huddleson 215 West Oak Street
Fort Collins, Colorado 80522
ARTICLE VI
----------
TRANSACTIONS WITH INTERESTED DIRECTORS
--------------------------------------
No contract or other transaction between the Corporation and one or more of
its directors or any other corporation, firm, association, or entity in which
one or more of its directors are directors or officers or are financially
interested shall be either void or voidable solely because of such relationship
or interest or solely because such directors are present at the meeting of the
Board of
-6-
<PAGE>
Directors or a committee thereof which authorizes, approves, or ratifies such
contract or transaction or solely because their votes are counted for such
purpose if:
(a) The fact of such relationship or interest is disclosed or known
to the Board of Directors or committee which authorizes, approves, or
ratifies the contract or transaction by a vote or consent sufficient for
the purpose without counting the votes or consents of such interested
directors; or
(b) The fact of such relationship or interest is disclosed or known
to the shareholders entitled to vote and they authorize, approve, or ratify
such contract or transaction by vote or written consent; or
(c) The contract or transaction is fair and reasonable to the
Corporation.
Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or a committee
thereof which authorizes, approves, or ratifies such contract or transaction.
ARTICLE VII
-----------
CORPORATE OPPORTUNITIES
-----------------------
The officers, directors and other members of management of the Corporation
shall be subject to the doctrine of corporate opportunities only insofar as it
applies to business opportunities in which the Corporation has expressed an
interest as determined from time to time by the Corporation's Board of Directors
as evidenced by resolutions appearing in the Corporation's minutes. When such
areas of interest are delineated, all such business opportunities within such
areas of interest which come to the attention of the officers, directors and
other members of management of the Corporation shall be disclosed promptly to
the Corporation and made available to it. The Board of Directors may reject any
business opportunity presented to it and thereafter any officer, director or
other member of management may avail himself of such opportunity. Until such
time as the Corporation, through its Board of Directors, has designated an area
of interest, the officers, directors and other members of management of the
Corporation shall be free to engage in such areas of interest on their own and
the provisions hereof shall not limit the rights of any officer, directors or
other member of management of the Corporation to continue a business existing
prior to the time that such area of interest is designated by the Corporation.
This provision shall not be construed to release any
-7-
<PAGE>
employee of the Corporation (other than an officer, director or member of
management) from any duties which he may have to the Corporation.
As authorized by the Colorado Corporation Code, no Director of the company
shall be personally liable to the Company or any shareholder thereof for
monetary damages for breach of his fiduciary duty as a Director except for
liability for (i) any breach of a Director's duty of loyalty to the company or
its shareholders, (ii) acts or omissions not in good faith or which involve
intentional misconduct to or a knowing violation of law, (iii) acts in violation
of C.R.S. 7-5-114 or any successor legislation, or (iv) any transaction from
which a Director derives an improper personal benefit. This provision shall
apply to a person who has ceased to be a Director of the company with respect to
any breach of fiduciary duty which occurred when such person was serving as a
Director. This provision shall not be construed to limit or modify in any way
any Director's right to indemnification or other right whatsoever under these
Articles, the company's By-Laws or the Colorado Corporation Code. If the
Colorado Corporation Code hereafter is amended to authorize the further
elimination or limitation of the liability of Directors, then the liability of
the Company's Directors, in addition to the limitation on personal liability
provided herein, shall be limited to the fullest extent permitted by the
Colorado Corporation Code as so amended. Any repeal or modification of this
provision by the shareholders shall be prospective only and shall not adversely
affect any limitation on the personal liability of any Director existing at the
time of such repeal or modification.
ARTICLE VIII
------------
INDEMNIFICATION
---------------
The Corporation may indemnify to the full extent authorized or permitted by
the Colorado Corporation Code any person made, or threatened to be made, a party
to an action, suit or proceedings (whether civil, criminal, administrative or
investigative) by reason of the fact that he, his testator or intestate is or
was a director, officer, employee, fiduciary, or agent of the Corporation or
serves or served any other enterprise at the request of the Corporation.
-8-
<PAGE>
ARTICLE IX
----------
AMENDMENTS
----------
1. The Corporation reserves the right to amend its Articles of
Incorporation from time to time in accordance with the Colorado Corporation
Code. Any proposed amendment shall be adopted upon receiving the affirmative
vote of holders of a majority of the shares entitled to vote thereon, unless the
holders of Preferred Stock are entitled to vote thereon as a class, in which
event the proposed amendment shall be adopted upon receiving the affirmative
vote of the holders of a majority of the shares of Preferred Stock then
outstanding and a majority of the shares of Common Stock then outstanding.
2. The holders of the outstanding shares of Preferred Stock shall be
entitled to vote as a class only as required by the Colorado Corporation Code as
in effect from time to time.
ARTICLE X
---------
ADOPTION AND AMENDMENT OF BYLAWS
--------------------------------
The initial Bylaws of the Corporation shall be adopted by its Board of
Directors. The power to alter or amend or repeal the Bylaws or adopt new Bylaws
shall be vested in the Board of Directors, but the holders of Common Stock may
also alter, amend or repeal the Bylaws or adopt new Bylaws. The Bylaws may
contain any provisions for the regulation and management of the affairs of the
Corporation not inconsistent with law or these Articles of Incorporation.
ARTICLE XI
----------
REGISTERED OFFICE AND REGISTERED AGENT
--------------------------------------
The address of the initial registered office of the Corporation is 1580
Lincoln Street, Suite 1125, Denver, Colorado 80203 and the name of the initial
registered agent at such address is David Burlingame. Either the registered
office or the registered agent may be changed in the manner provided by law.
-9-
<PAGE>
ARTICLE XII
-----------
INCORPORATOR
------------
The name and address of the incorporators are as follows:
NAME ADDRESS
---- -------
Kenneth A. Larson 1305 Teakwood
Fort Collins, Colorado 80525
Clarence G. Sitzman 401 Camino Real
Fort Collins, Colorado 80524
Charles R. Huddleson 215 West Oak Street
Fort Collins, Colorado 80522
DATED the ____ day of January, 1997.
GDC GROUP, INC.
By: /s/ Harry C. Conger
----------------------------------
Name: Harry C. Conger
Title: Director, President
By: /s/ James W. Muzzy
----------------------------------
Name: James W. Muzzy
Title: Director, Secretary
-10-
<PAGE>
Exhibit 3(b)
AMENDED BYLAWS
OF
VETLINE, INC.
May 29, 1986
<PAGE>
ARTICLE I
---------
1.1 Business Office. The principal office and place of business of the
---------------
corporation shall be in the State of Colorado at 425 John Deere Road, Fort,
Collins, Denver, Colorado 80524. Other offices and places of business may be
established from time to time by resolution of the Board of Directors or as the
business of the corporation may require.
1.2 Registered Office. The registered office of the corporation, required
-----------------
by the Colorado Corporation Code to be maintained in the State of Colorado, may
be, but need not be, identical with the principal office of the Corporation in
the State of Colorado, if any, and the address of the registered office may be
changed from time to time by the Board of Directors.
ARTICLE II
----------
SHARES AND TRANSFER THEREOF
---------------------------
2.1 Regulation. The Board of Directors may make such rules and
----------
regulations as it may deem appropriate concerning the issuance, transfer and
registration of certificates for shares of the corporation, including the
appointment of transfer agents and registrars.
2.2 Certificates for Shares. Certificates representing shares of the
-----------------------
corporation shall be respectively numbered serially for each class of shares, or
series thereof, as they are issued, shall be impressed with the corporate seal
or a facsimile thereof, and shall be signed by the Chairman or Vice-Chairman of
the Board of Directors or by the President or a Vice-President and by the
Treasurer or an Assistant Treasurer or by the Secretary or an Assistant
Secretary; provided that such signatures may be a facsimile if the certificate
is countersigned by a transfer agent, or registered by a registrar other than
the corporation itself or its employee. Each certificate shall state upon the
face thereof the name of the corporation, the fact that the corporation is
organized or incorporated under the laws of the State of Colorado, the name of
the person to whom issued, the date of issue, the class (or series of any
class), the number of shares represented thereby and the par value of the shares
represented thereby or a statement that such shares are without par value. If
the corporation is authorized to issue more than one class of shares, a full
statement of the designations, preferences, qualifications, limitations,
restrictions and special or relative rights of the shares of each class (and
series thereof) shall be set forth on the face or back of the certificates which
the corporation shall issue, or in lieu thereof, the certificate may set forth
that such a statement or summary will be furnished to any shareholder upon
request without charge. Each certificate shall be otherwise in such form as may
be prescribed by the Board of Directors and as shall conform to the rules of any
stock exchange on which the shares may be listed.
The corporation shall not issue certificates representing fractional shares
and shall not be obligated to make any transfers creating a fractional interest
in a share of stock. The corporation may, but shall not be obligated to, issue
scrip in lieu of any fractional shares, such scrip to have terms and conditions
specified by the Board of Directors.
-1-
<PAGE>
2.3 Cancellation of Certificates. All certificates surrendered to the
----------------------------
corporation for transfer shall be cancelled and no new certificates shall be
issued in lieu thereof until the former certificate for a like number of shares
shall have been surrendered and cancelled, except as herein provided with
respect to lost, stolen or destroyed certificates.
2.4 Lost, Stolen or Destroyed Certificates. Any shareholder claiming
--------------------------------------
that his certificate for shares is lost, stolen or destroyed may make an
affidavit or affirmation of the fact and lodge the same with the Secretary of
the corporation, accompanied by a signed application for a new certificate.
Thereupon, and upon the giving of a satisfactory bond of indemnity to the
corporation not exceeding an amount double the value of the shares as
represented by such certificate (the necessity for such bond and the amount
required to be determined by the President and Treasurer of the corporation), a
new certificate may be issued of the same tenor and representing the same
number, class and series of shares as were represented by the certificate
alleged to be lost, stolen or destroyed.
2.5 Transfer of Shares. Subject to the terms of any shareholder agreement
------------------
relating to the transfer of shares or other transfer restrictions contained in
the Articles of Incorporation or authorized therein, shares of the corporation
shall be transferable on the books of the corporation by the holder thereof in
person or by his duly authorized attorney, upon the surrender and cancellation
of a certificate or certificates for a like number of shares. Upon presentation
and surrender of a certificate for shares properly endorsed and payment of all
taxes therefor, the transferee shall be entitled to a new certificate or
certificates in lieu thereof. As against the corporation, a transfer of shares
can be made only on the books of the corporation and in the manner hereinabove
provided, and the corporation shall be entitled to treat the holder of record of
any share as the owner thereof and shall not be bound to recognize any equitable
or other claim to or interest in such share on the part of any other person,
whether or not it shall have express or other notice thereof, save as expressly
provided by the statutes of the State of Colorado.
2.6 Transfer Agent. Unless otherwise specified by the Board of Directors
--------------
by resolution, the Secretary of the corporation shall act as transfer agent of
the certificates representing the shares of stock of the corporation. He shall
maintain a stock transfer book, the stubs in which shall set forth among other
things, the names and addresses of the holders of all issued shares of the
corporation, the number of shares held by each, the certificate numbers
representing such shares, the date of issue of the certificates representing
such shares, and whether or not such shares originate from original issue or
from transfer. Subject to Section 3.7, the names and addresses of the
shareholders as they appear on the stubs of the stock transfer book shall be
conclusive evidence as to who are the shareholders of record and as such
entitled to receive notice of the meetings of shareholders; to vote at such
meetings; to examine the list of the shareholders entitled to vote at meetings;
to receive dividends; and to own, enjoy and exercise any other property or
rights deriving from such shares against the corporation. Each shareholder
shall be responsible for notifying the Secretary in writing of any change in his
name or address and failure so to do will relieve the corporation, its
directors, officers and agents, from liability for failure to direct notices or
other documents, or pay over or transfer dividends or other property or rights,
to a name or address other than the name and address appearing on the stub of
the stock transfer book.
-2-
<PAGE>
2.7 Close of Transfer Book and Record Date. For the purpose of
--------------------------------------
determining shareholders entitled to notice of or to vote at any meeting of
shareholders, or any adjournment thereof, or entitled to receive payment of any
dividend, or in order to make a determination of shareholders for any other
proper purpose, the Board of Directors may provide that the stock transfer books
shall be closed for a stated period, but not to exceed, in any case, fifty days.
If the stock transfer books shall be closed for the purpose of determining
shareholders entitled to notice of, or to vote at a meeting of shareholders,
such books shall be closed for at least ten days immediately preceding such
meeting. In lieu of closing the stock transfer books, the Board of Directors may
fix in advance a date as the record date for any such determination of
shareholders, such date in any case to be not more than fifty days and, in case
of a meeting of shareholders, not less than ten days prior to the date on which
the particular action requiring such determination of shareholders is to be
taken. If the stock transfer books are not closed and no record date is fixed
for the determination of shareholders entitled to notice of or to vote at a
meeting of shareholders, or shareholders entitled to receive payment of a
dividend, the date on which notice of the meeting is mailed or the date on which
the resolution of the Board of Directors declaring such dividend is adopted, as
the case may be, shall be the record date for such determination of
shareholders. When a determination of shareholders entitled to vote at any
meeting of shareholders has been made as provided in this section, such
determination shall apply to any adjournment thereof.
ARTICLE III
-----------
SHAREHOLDERS AND MEETINGS THEREOF
---------------------------------
3.1 Shareholders of Record. Only shareholders of record on the books of
----------------------
the corporation shall be entitled to be treated by the corporation as holders in
fact of the shares standing in their respective names, and the corporation shall
not be bound to recognize any equitable or other claim to, or interest in, any
shares on the part of any other person, firm or corporation, whether or not it
shall have express or other notice thereof, except as expressly provided by the
laws of Colorado.
3.2 Meetings. Meetings of shareholders shall be held at the principal
--------
office of the corporation, or at such other place as specified from time to time
by the Board of~Directors. If the Board of Directors shall specify another
location such change in location shall be recorded on the notice calling such
meeting.
3.3 Annual Meeting. In the absence of a resolution of the Board of
--------------
Directors providing otherwise, the annual meeting of shareholders of the
corporation for the election of directors, and for the transaction of such other
business as may properly come before the meeting, shall be held on the first
Tuesday of the fifth month in each fiscal year, if the same be not a legal
holiday, and if a legal holiday in the State of Colorado, then on the next
succeeding business day, at 9:00 o'clock a.m. If the election of Directors
shall not be held on the day designated herein for any annual meeting of the
shareholders, the Board of Directors shall cause the election to be held at a
special meeting of the shareholders as soon thereafter as may be convenient. If
the annual meeting is not held within any thirteen month period, any court of
competent jurisdiction in the State of Colorado may, on the application of any
shareholder, summarily order a meeting to be held.
-3-
<PAGE>
3.4 Special Meetings. Special meetings of shareholders, for any
----------------
purpose or purposes, unless otherwise prescribed by statute, may be called by
the President, the Board of Directors, the holders of not less than one-tenth of
all the shares entitled to vote at the meeting, or legal counsel of the
corporation as last designated by resolution of the Board of Directors.
3.5 Notice. Written notice stating the place, day and hour of the meeting
------
and, in case of a special meeting, the purpose or purposes for which the meeting
is called, shall be delivered unless otherwise prescribed by statute not less
than ten days nor more than fifty days before the date of the meeting, either
personally or by mail, by or at the direction of the President, the Secretary,
or the officer or person calling the meeting to each shareholder of record
entitled to vote at such meeting; except that, if the authorized shares are to
be increased, at least thirty days' notice shall be given, and if the sale of
all or substantially all of the corporation's assets is to be voted upon, at
least twenty days' notice shall be given. Any shareholder may waive notice of
any meeting.
Notice to shareholders of record, if mailed, shall be deemed given as to
any shareholder of record, when deposited in the United States mail, addressed
to the shareholder at his address as it appears on the stock transfer books of
the corporation, with postage thereon prepaid, but if three successive letters
mailed to the last-known address of any shareholder of record are returned as
undeliverable, no further notices to such shareholder shall be necessary, until
another address for such shareholder is made known to the corporation.
3.6 Waiver of Notice. When any notice is required to be given to any
----------------
shareholder of the corporation under the provisions of Colorado Law or under the
provisions of the Articles of Incorporation of the corporation or these Bylaws,
a waiver thereof in writing signed by the person entitled to such notice,
whether before, at, or after the time stated therein, shall be equivalent to the
giving of such notice.
3.7 Voting Record. The officer or agent having charge of the stock
-------------
transfer books for shares of the corporation shall make, at least ten days
before such meeting of shareholders, a complete record of the shareholders
entitled to vote at each meeting of shareholders or any adjournment thereof,
arranged in alphabetical order, with the address of and the number of shares
held by each. The record, for a period of ten days prior to such meeting, shall
be kept on file at the principal office of the corporation, whether within or
without the State of Colorado, and shall be subject to inspection by any
shareholder for any purpose germane to the meeting at any time during usual
business hours. Such record shall be produced and kept open at the time and
place of the meeting and shall be subject to the inspection of any shareholder
during the whole time of the meeting for the purposes thereof.
The original stock transfer books shall be the prima facie evidence as to
who are the shareholders entitled to examine the record or transfer books or to
vote at any meeting of shareholders.
An officer or agent having charge of the stock transfer books who fails to
prepare the record
-4-
<PAGE>
of shareholders, or keep it on file for a period of ten days before the meeting
or produce and keep it open for inspection at the meeting, as provided in this
section, is liable to any shareholder suffering damage on account of such
failure to the extent of such damage.
3.8 Quorum. One-third of the outstanding shares of the corporation
------
entitled to vote, represented in person or by proxy, shall constitute a quorum
at any meeting of shareholders, except as otherwise provided by the Colorado
Corporation Code and the Articles of Incorporation. In the absence of a quorum
at any such meeting, a majority of the shares so represented may adjourn the
meeting from time to time for a period not to exceed sixty days without further
notice. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally noticed. The shareholders present at a duly organized
meeting may continue to transact business until adjournment, notwithstanding the
withdrawal of enough shareholders to leave less than a quorum.
3.9 Manner of Acting. If a quorum is present, the affirmative vote of the
----------------
majority of the shares represented at the meeting and entitled to vote on the
subject matter shall be the act of the shareholders, unless the vote of a
greater proportion or number or voting by classes is otherwise required by
statute or by the Articles of Incorporation or these Bylaws.
3.10 Proxies. At all meetings of shareholders a shareholder may vote in
-------
person or by proxy executed in writing by the shareholder or by his duly
authorized attorney-in-fact. Such proxy shall be filed with the Secretary of the
corporation before or at the time of the meeting. No proxy shall be valid after
eleven months from the date of its execution, unless otherwise provided in the
proxy.
3.11 Voting of Shares. Unless otherwise provided by these Bylaws or the
----------------
Articles of Incorporation, each outstanding share entitled to vote shall be
entitled to one vote upon each matter submitted to a vote at a meeting of
shareholders, and each fractional share shall be entitled to a corresponding
fractional vote on each such matter.
3.12 Voting of Shares by Certain Holders. Shares standing in the name of
------------------------------------
another corporation may be voted by such officer, agent or proxy as the bylaws
of such corporation may prescribe, or, in the absence of such provision, as the
Board of Directors of such other corporation may determine.
Shares standing in the name of a deceased person, a minor ward or an
incompetent person, may be voted by his administrator, executor, court appointed
guardian or conservator, either in person or by proxy without a transfer of such
shares into the name of such administrator, executor, court appointed guardian
or conservator. Shares standing in the name of a trustee may be voted by him,
either in person or by proxy, but no trustee shall be entitled to vote shares
held by him without a transfer of such shares into his name.
Shares standing in the name of a receiver may be voted by such receiver,
and shares held by or under the control of a receiver may be voted by such
receiver without the transfer thereof into his
-5-
<PAGE>
name if authority so to do be contained in an appropriate order of the court by
which such receiver was appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Neither shares of its own stock belonging to this corporation, nor shares
of its own stock held by it in a fiduciary capacity, nor shares of its own stock
held by another corporation if the majority of shares entitled to vote for the
election of directors of such corporation is held by this corporation may be
voted, directly or indirectly, at any meeting and shall not be counted in
determining the total number of outstanding shares at any given time.
Redeemable shares which have been called for redemption shall not be
entitled to vote on any matter and shall not be deemed outstanding shares on and
after the date on which written notice of redemption has been mailed to
shareholders and a sum sufficient to redeem such shares has been deposited with
a bank or trust company with irrevocable instruction and authority to pay the
redemption price to the holders of the shares upon surrender of certificates
therefor.
3.13 Informal Action by Shareholders. Any action required or permitted to
-------------------------------
be taken at a meeting of the shareholders may be taken without a meeting if a
consent in writing, setting forth the action so taken, shall be signed by all of
the shareholders entitled to vote with respect to the subject matter thereof.
3.14 Voting by Ballot. Voting on any question or in any election may be
----------------
by voice vote unless the presiding officer shall order or any shareholder shall
demand that voting be by ballot.
3.15 Cumulative Voting. No shareholder shall be permitted to cumulate his
-----------------
votes by giving one candidate as many votes as the number of such directors
multiplied by the number of his shares shall equal, or by distributing such
votes on the same principal among any number of candidates.
ARTICLE IV
----------
DIRECTORS, POWERS AND MEETINGS
------------------------------
4.1 Board of Directors. The business and affairs of the corporation
shall be managed by a board of from three (3) to nine (9) directors who need not
be shareholders of the corporation or residents of the State of Colorado and who
shall be elected at the annual meeting of shareholders or some adjournment
thereof. Directors shall hold office until the next succeeding annual meeting of
shareholders and until their successors shall have been elected and shall
qualify. The Board of Directors may increase or decrease, to not less than
three, the number of directors by resolution; except that there need only be as
many directors as there are shareholders in the event that the outstanding
shares are held of record by fewer than three shareholders.
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4.2 Regular Meetings. A regular, annual meeting of the Board of Directors
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shall be held at the same place as, and immediately after, the annual meeting of
shareholders, and no notice shall be required in connection therewith. The
annual meeting of the Board of Directors shall be for the purpose of electing
officers and the transaction of such other business as may come before the
meeting. The Board of Directors may provide, by resolution, the time and place,
either within or without the State of Colorado, for the holding of additional
regular meetings without other notice than such resolution.
4.3 Special Meetings. Special meetings of the Board of Directors may
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be called by or at the request of the President or any two directors. The
person or persons authorized to call special meetings of the Board of Directors
may fix any place, either within or without the State of Colorado, as the place
for holding any special meeting of the Board of Directors called by them.
4.4 Notice. Written notice of any special meeting of directors shall
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be given as follows:
(a) By mail to each director at his business address at least three
days prior to the meeting; or
(b) By personal delivery or telegram at least twenty-four hours prior
to the meeting to the business address of each director, or in the event such
notice is given on a Saturday, Sunday or holiday, to the residence address of
each director. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail, so addressed, with postage thereon prepaid.
If notice be given by telegram, such notice shall be deemed to be delivered when
the telegram is delivered to the telegraph company. Any director may waive
notice of any meeting. The attendance of a director at any meeting shall
constitute a waiver of notice of such meeting, except where a director attends a
meeting for the express purpose of objecting to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business to
be transacted at, nor the purpose of, any regular or special meeting of the
Board of Directors need be specified in the notice or waiver of notice of such
meeting.
4.5 Participation by Electronic Means. Except as may be otherwise
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provided by the Articles of Incorporation or Bylaws, members of the Board of
Directors or any committee designated by such Board may participate in a meeting
of the Board or committee by means of conference telephone or similar
communications equipment by which all persons participating in the meeting can
hear each other at the same time. Such participation shall constitute presence
in person at the meeting.
4.6 Quorum and Manner of Acting. A quorum at all meetings of the Board of
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Directors shall consist of a majority of the number of directors then holding
office, but a smaller number may adjourn from time to time without further
notice, until a quorum is secured. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors, unless the act of a greater number is required by the laws of the
State of Colorado or by the Articles of Incorporation or these Bylaws.
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4.7 Organization. The Board of Directors shall elect a chairman to
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preside at each meeting of the Board of Directors. The Board of Directors shall
elect a Secretary to record the discussions and resolutions of each meeting.
4.8 Presumption of Assent. A director of the corporation who is present
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at a meeting of the Board of Directors at which action on any corporate matter
is taken shall be presumed to have assented to the action taken unless his
dissent shall be entered in the minutes of the meeting or unless he shall file
his written dissent to such action with the person acting as the Secretary of
the meeting before the adjournment thereof or shall forward such dissent by
registered mail to the Secretary of the corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a director
who voted in favor of such action.
4.9 Informal Action By Directors. Any action required or permitted to be
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taken by the Board of Directors, or a committee thereof, at a meeting may be
taken without a meeting if a consent in writing, setting forth the action so
taken, shall be signed by all the directors or all the committee members
entitled to vote with respect to the subject matter thereof.
4.10 Vacancies. Any vacancy occurring in the Board of Directors may be
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filled by the affirmative vote of a majority of the remaining directors though
less than a quorum of the Board of Directors. A director elected to fill a
vacancy shall be elected for the unexpired term of his predecessor in office,
and shall hold such office until his successor is duly elected and shall
qualify. Any directorship to be filled by reason of an increase in the number of
directors shall be filled by the affirmative vote of a majority of the directors
then in office or by an election at an annual meeting, or at a special meeting
of shareholders called for that purpose. A director chosen to fill a position
resulting from an increase in the number of directors shall hold office only
until the next election of directors by the shareholders.
4.11 Compensation. By resolution of the Board of Directors and
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irrespective of any personal interest of any of the members, each director may
be paid his expenses, if any, of attendance at each meeting of the Board of
Directors, and may be paid a stated salary as director or a fixed sum for
attendance at each meeting of the Board of Directors or both. No such payment
shall preclude any director from serving the corporation in any other capacity
and receiving compensation therefor.
4.12 Removal of Directors. Any director or directors of the corporation
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may be removed at any time, with or without cause, in the manner provided in the
Colorado Corporation Code.
4.13 Resignations. A director of the corporation may resign at any time
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by giving written notice to the Board of Directors, President or Secretary of
the corporation. The resignation shall take effect upon the date of receipt of
such notice, or at any later period of time specified therein. The acceptance
of such resignation shall not be necessary to make it effective, unless the
resignation requires it to be effective as such.
4.14 General Powers. The business and affairs of the corporation shall be
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managed by the
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Board of Directors which may exercise all such powers of the corporation and do
all such lawful acts and things as are not by statute or by the Articles of
Incorporation or by these Bylaws directed or required to be exercised or done by
the shareholders. The directors shall pass upon any and all bills or claims of
officers for salaries or other compensation and, if deemed advisable, shall
contract with officers, employees, directors, attorneys, accountants, and other
persons to render services to the corporation.
ARTICLE V
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OFFICERS
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5.1 Term and Compensation. The elective officers of the corporation shall
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consist of at least a President, a Secretary and a Treasurer each of whom shall
be eighteen years or older and who shall be elected by the Board of Directors at
its annual meeting. Unless removed in accordance with procedures established by
law and these Bylaws, the said officers shall serve until the next succeeding
annual meeting of the Board of Directors and until their respective successors
are elected and shall qualify. Any two officers, but not more than two, may be
held by the same person at the same time, except that one person may not
simultaneously hold the offices of President and Secretary. The Board may elect
or appoint such other officers and agents as it may deem advisable, who shall
hold office during the pleasure of the Board.
5.2 Powers. Unless otherwise established by the Board of Directors, the
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officers of the corporation shall exercise and perform the respective powers,
duties and functions as are stated below, and as may be assigned to them by the
Board of Directors.
(a) The President shall be the chief executive officer of the
corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and officers of the
corporation. He shall preside, when present, at all meetings of the shareholders
and of the Board of Directors unless a different chairman of such meetings is
elected by the Board of Directors.
(b) In the absence or disability of the President, the Vice President
or Vice-Presidents, if any, in order of their rank as fixed by the Board of
Directors, and if not ranked, the Vice-Presidents in the order designated by the
Board of Directors, shall perform all the duties of the President, and when so
acting shall have all the powers of, and be subject to all the restrictions on
the President. Each Vice President shall have such other powers and perform
such other duties as may from time to time be assigned to him by the President
or the Board of Directors.
(c) The Secretary shall keep accurate minutes of all meetings of the
shareholders and the Board of Directors unless a different Secretary of such
meetings is elected by the Board of Directors. He shall keep, or cause to be
kept, a record of the shareholders of the corporation and shall be responsible
for the giving of notice of meetings of the shareholders or the Board of
Directors. The Secretary shall be custodian of the records and of the seal of
the corporation and shall attest the affixing of the seal of the corporation
when so authorized. The Secretary or Assistant Secretary shall sign all stock
certificates. The Secretary shall perform all duties commonly incident to his
office and
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such other duties as may from time to time be assigned to him by the President
or the Board of Directors.
(d) An Assistant Secretary may, at the request of the Secretary, or
in the absence or disability of the Secretary, perform all of the duties of the
Secretary. He shall perform such other duties as may be assigned to him by the
President or by the Secretary.
(e) The Treasurer, subject to the order of the Board of Directors,
shall have the care and custody of the money, funds, valuable papers and
documents of the corporation. He shall keep accurate books of accounts of the
corporation's transactions, which shall be the property of the corporation, and
shall render financial reports and statements of condition of the corporation
when so requested by the Board of Directors or President. The Treasurer shall
perform all duties commonly incident to his office and such other duties as may
from time to time be assigned to him by the President or the Board of Directors.
In the absence or disability of the President and Vice-President or Vice
Presidents, the Treasurer shall perform the duties of the President.
(f) An Assistant Treasurer may, at the request of the Treasurer, or
in the absence or disability of the Treasurer, perform all of the duties of the
Treasurer. He shall perform such other duties as may be assigned to him by the
President or by the Treasurer.
5.3 Compensation. All officers of the corporation may receive salaries or
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other compensation if so ordered and fixed by the Board of Directors. The board
shall have authority to fix salaries in advance for stated periods or render the
same retroactive as the Board may deem advisable.
5.4 Delegation of Duties. In the event of absence or inability of any
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officer to act, the Board of Directors may delegate the powers or duties of such
officer to any other officer, director or person whom it may select.
5.5 Bonds. If the Board of Directors by resolution shall so require,
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any officer or agent of the corporation shall give bond to the corporation in
such amount and with such surety as the Board of Directors may deem sufficient,
conditioned upon the faithful performance of their respective duties and
offices.
5.6 Removal. Any officer or agent may be removed by the Board of
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Directors or by the executive committee, if any, whenever in its judgment the
best interest of the corporation will be served thereby, but such removal shall
be without prejudice to the contract rights, if any, of the person so removed.
Election or appointment of an officer or agent shall not, of itself, create
contract rights.
ARTICLE VI
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FINANCE
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6.1 Reserve Funds. The Board of Directors, in its uncontrolled
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discretion, may set aside from time to time, out of the net profits or earned
surplus of the corporation, such sum or sums as it deems expedient as a reserve
fund to meet contingencies, for equalizing dividends, for maintaining any
property of the corporation, and for any other purpose.
6.2 Banking. The moneys of the corporation shall be deposited in the
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name of the corporation in such bank or banks or trust company or trust
companies, as the Board of Directors shall designate, and may be drawn out only
on checks signed in the name of the corporation by such person or persons as the
Board of Directors, by appropriate resolution, may direct. Notes and commercial
paper, when authorized by the Board, shall be signed in the name of the
corporation by such officer or officers or agent or agents as shall thereunto be
authorized from time to time.
ARTICLE VII
DIVIDENDS
Subject to the provisions of the Articles of Incorporation and the laws of
the State of Colorado, the Board of Directors may declare dividends whenever,
and in such amounts, as in the Board's opinion the condition of the affairs of
the corporation shall render such advisable.
ARTICLE VIII
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CONTRACTS, LOANS AND CHECKS
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8.1 Execution of Contracts. Except as otherwise provided by statute
----------------------
or by these Bylaws, the Board of Directors may authorize any officer or agent of
the corporation to enter into any contract, or execute and deliver any
instrument in the name of, and on behalf of the corporation. Such authority may
be general or confined to specific instances and, unless so authorized, no
officer, agent or employee shall have any power to bind the corporation for any
purpose, except as may be necessary to enable the corporation to carry on its
normal and ordinary course of business.
8.2 Loans. No loans shall be contracted on behalf of the corporation and
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no negotiable paper shall be issued in its name unless authorized by the Board
of Directors. When so authorized, any officer or agent of the corporation may
effect loans and advances at any time for the corporation from any bank, trust
company or institution, firm, corporation or individual. An agent so authorized
may make and deliver promissory notes or other evidence of indebtedness of the
corporation and may mortgage, pledge, hypothecate or transfer any real or
personal property held by the corporation as security for the payment of such
loans. Such authority, in the Board of Directors' discretion, may be general
or confined to specific instances.
8.3 Checks. Checks, notes, drafts and demands for money or other evidence
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of indebtedness issued in the name of the corporation shall be signed by such
person or persons as designated by the Board of Directors and in the manner the
Board of Directors prescribes.
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8.4 Deposits. All funds of the corporation not otherwise employed shall
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be deposited from time to time to the credit of the corporation in such banks,
trust companies or other depositories as the Board of Directors may select.
ARTICLE IX
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FISCAL YEAR
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The fiscal year of the corporation shall be the year adopted by resolution
of the Board of Directors.
ARTICLE X
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CORPORATE SEAL
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The Board of Directors shall provide a corporate seal which shall be
circular in form and shall have inscribed thereon the name of the corporation
and the state of incorporation and the words "CORPORATE SEAL".
ARTICLE XI
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AMENDMENTS
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Subject to repeal or change by action of the shareholders, these Bylaws may
be altered, amended or repealed and new Bylaws may be adopted by a majority of
the Directors present at any meeting of the Board of Directors of the
corporation at which a quorum is present.
ARTICLE XII
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EXECUTIVE COMMITTEE
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12.1 Appointment. The Board of Directors, by resolution adopted by a
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majority of the full Board, may designate from among its members an executive
committee. The designation of such committee and the delegation thereto of
authority shall not operate to relieve the Board of Directors, or any member
thereof, of any responsibility imposed by law.
12.2 Authority. The executive committee, when the Board of Directors is
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not in session, shall have and may exercise all of the authority of the Board of
Directors except to the extent, if any, that such authority shall be limited by
the resolution appointing the executive committee and except also that the
executive committee shall not have the authority of the Board of Directors in
reference to declaring dividends and distributions, amending the Articles of
Incorporation, adopting a plan of merger or consolidation, filling vacancies on
the Board of Directors or any committee thereof, recommending to the
shareholders the sale, lease or other disposition of all or substantially all of
the property and assets of the corporation otherwise than in the usual and
regular course of its business, recommending to the shareholders a voluntary
dissolution of the corporation or a revocation thereof, authorize or approve the
issuance or reacquisition of shares, or amending the Bylaws of the corporation.
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12.3 Tenure and Qualifications. Each member of the executive committee
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shall hold office until the next regular annual meeting of the Board of
Directors following his designation.
12.4 Meetings. Regular meetings of the executive committee may be held
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without notice at such time and places as the executive committee may fix from
time to time by resolution. Special meetings of the executive committee may be
called by any member thereof upon not less than one day's notice stating the
place, date and hour of the meeting, which notice may be written or oral, and if
mailed, shall be deemed to be delivered two days after deposited in the United
States mail addressed to the member of the executive committee at his business
address. Any member of the executive committee may waive notice of any meeting
and no notice of any meeting need be given to any member thereof who attends in
person. The notice of a meeting of the executive committee need not state the
business proposed to be transacted at the meeting.
12.5 Quorum. A majority of the members of the executive committee shall
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constitute a quorum for the transaction of business at any meeting thereof, and
action of the executive committee must be authorized by the affirmative vote of
a majority of the members present at a meeting at which a quorum is present.
12.6 Informal Action by Executive Committee. Any action required or
--------------------------------------
permitted to be taken by the executive committee at a meeting may be taken
without a meeting if a consent in writing, setting forth the action so taken,
shall be signed by all of the members of the committee entitled to vote with
respect to the subject matter thereof.
12.7 Vacancies. Any vacancy in the executive committee may be filled by a
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resolution adopted by a majority of the full Board of Directors.
12.8 Resignations and Removal. Any member of the executive committee may
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be removed at any time with or without cause by resolution adopted by a majority
of the full Board of Directors. Any member of the executive committee may resign
from the executive committee at any time by giving written notice to the
President or Secretary of the corporation, and unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
12.9 Procedure. The executive committee shall elect a presiding
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officer from its members and may fix its own rules of procedure which shall not
be inconsistent with these Bylaws. It shall keep regular minutes of its
proceedings and report the same to the Board of Directors for its information at
the meeting thereof held next after the proceedings shall have been taken.
ARTICLE XIII
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EMERGENCY BYLAWS
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The Emergency Bylaws provided in this Article shall be operative during any
emergency in the conduct of the business of the corporation resulting from an
attack on the United States or any nuclear or atomic disaster, notwithstanding
any different provision in the preceding articles of these
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Bylaws or in the Articles of Incorporation of the corporation or in the Colorado
Corporation Code. To the extent not inconsistent with the provisions of this
Article, the Bylaws provided in the preceding articles shall remain in effect
during such emergency and upon its termination the Emergency Bylaws shall cease
to be operative. During any such emergency:
(a) A meeting of the Board of Directors may be called by any officer or
director of the corporation. Notice of the time and place of 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) At any such meeting of the Board of Directors, a quorum shall consist
of the number of directors in attendance at such meeting.
(c) The Board of Directors, either before or during any such emergency,
may, effective in the emergency, change the principal office or designate
several alternative principal offices or regional offices, or authorize the
officers so to do.
(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 an emergency any or all officers or agents of the corporation shall
for any reason be rendered incapable of discharging their duties.
(e) No officer, director or employee acting in accordance with these
Emergency Bylaws shall be liable except for willful misconduct.
(f) These Emergency Bylaws shall be subject to repeal or change by further
action of the Board of Directors or by action of the shareholders, but no such
repeal or change shall modify the provisions of the next preceding paragraph
with regard to action taken prior to the time of such repeal or change. Any
amendment of these Emergency Bylaws may make any further or different provision
that may be practical and necessary for the circumstances of the emergency.
CERTIFICATE
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I hereby certify that the foregoing Amended Bylaws, consisting of 22 pages,
including this page, constitute the Bylaws of Vetline, Inc. adopted by the Board
of Directors of the corporation as of May 29, 1986.
/s/ Neil F. Baker
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Neil F. Baker, Secretary
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Exhibit 4(a)
The securities represented hereby have not been registered under the
Securities Act of 1933, as amended, or any state securities laws and
neither the securities nor any interest therein may be offered, sold,
transferred, pledged or otherwise disposed of except pursuant to an
effective registration statement under such Act and such laws or an
exemption from registration under such Act and such laws which, in the
opinion of counsel for the holder, which counsel and opinion are reasonably
satisfactory to counsel for this corporation, is available.
SERIES __ WARRANT AGREEMENT
This Agreement (the "AGREEMENT") dated as of ____________ between GDC
Group, Inc., a Colorado corporation (the "COMPANY" and the "WARRANT AGENT") and
the persons making loans to GDC Enviro-Solutions, Inc. ("GDC Solutions") during
the period January 30, 1997 through the date hereof.
W I T N E S S E T H:
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WHEREAS, GDC Solutions has entered into loan agreements during the period
January 30, 1997 through the date hereof pursuant to which GDC Solutions has
borrowed certain amounts from the lenders (the "Loan");
WHEREAS, in consideration for and as a condition to the lenders making the
Loan, GDC Solutions has agreed to cause the Company to issue to the lenders
Series __ Warrants to purchase Common Stock of the Company (the "WARRANT
SHARES");
WHEREAS, the Company desires to provide for the issuance of certificates
representing the Series __ Warrants (a "SERIES __ WARRANT CERTIFICATE" or
collectively the "SERIES __ WARRANT CERTIFICATES");
WHEREAS, the Company desires, at least initially, to act as its own warrant
agent in connection with the issuance, registration, transfer and exchange of
Series __ Warrant Certificates and the exercise of the Series __ Warrant;
NOW, THEREFORE, in consideration of the above and foregoing premises and
the mutual promises and agreements hereinafter set forth, it is agreed that:
1. SERIES __ WARRANT CERTIFICATES.
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(a) Each Series __ Warrant shall entitle the holder (the "REGISTERED
HOLDER" or in the aggregate, the "REGISTERED HOLDERS") in whose name the
certificate shall be registered on the books maintained by the Company to
purchase one (1) share of Common Stock on the exercise thereof, subject to
modification and adjustment as
<PAGE>
provided in Section 9 hereof. Series __ Warrant Certificates shall be executed
by the Company's Chairman, President or Senior Vice President and attested to by
the Company's Secretary.
(b) Subject to the provisions of Sections 3, 5, and 7 hereof, the
Company shall deliver one or more Series __ Warrant Certificates in required
whole number denominations to the Registered Holders in connection with any
transfer or exchange permitted under this Agreement. Except as provided in
Section 7 hereof, no certificates shall be issued except (i) certificates
initially issued hereunder, (ii) certificates issued on or after their initial
issuance date upon the exercise of any Warrant to evidence the unexercised
Series __ Warrants held by the exercising Registered Holder and (iii) Series __
Warrant certificates issued after their initial issuance date, upon any transfer
or exchange of certificates or replacements of lost or mutilated certificates.
2. FORM AND EXECUTION OF SERIES __ WARRANT CERTIFICATES.
----------------------------------------------------
(a) The Series __ Warrant certificates shall be dated the date of
their issuance, whether on initial transfer or exchange or in lieu of mutilated,
lost, stolen or destroyed certificates. The form of Series __ Warrant
certificate is annexed hereto as "Exhibit A."
(b) Each Series __ Warrant certificate shall be numbered serially in
accordance with the Common Stock initially attached thereto. Each Series __
Warrant certificate representing shall have set forth thereon the designation
"W__."
(c) The Series __ Warrant Certificates shall be manually signed on
behalf of the Company by a proper officer thereof and shall not be valid for any
purpose unless so signed. In the event any officer of the Company who executed
certificates shall cease to be an officer of the Company such certificates may
be issued and delivered by the Company or transferred by the Registered Holders
with the same force and effect as though the person who signed such certificate
had not ceased to be an officer of the Company; and any certificate signed on
behalf of the Company by any person, who at the actual date of the execution of
such certificate was a proper officer of the Company, shall be proper
notwithstanding that at the date of execution of this Agreement any such person
was not such an officer.
3. EXERCISE.
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(a) Subject to the provisions of Sections 5 and 9 hereof, the Series
__ Warrants, as they may be adjusted as set forth herein, may be exercised at a
price (the "WARRANT EXERCISE PRICE") of $____ per share of Common Stock subject
to adjustment, in whole or in part at any time during the period (the "WARRANT
EXERCISE PERIOD") commencing on the date hereof and terminating on the date four
years after effectiveness of the Initial Registration Statement (as defined in
the Registration Rights Agreement between the Company and the Holders of even
date herewith (the "REGISTRATION RIGHTS AGREEMENT")), unless extended by a
majority vote of the Board of Directors for such length of time as they, in
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their sole discretion, deem reasonable and necessary); provided, however, that
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if the Common Stock underlying the Warrants are not subject to an effective
registration for an aggregate of 450 days within two years from November 8, 1996
(said date being the final closing date of a certain private placement of the
Company's securities), then the remaining exercise period of the Warrants shall
be tolled until the Common Stock underlying the Warrants shall have been subject
to an effective registration for an aggregate of 450 days, and (iii) in no event
shall the Series __ Warrants terminate solely by reason of time (i.e.,
expiration) unless a registration statement covering the Warrant Shares shall
have then been in effect for 45 days prior to such termination. The termination
date of the Series __ Warrants is referred to herein as the "Warrant Expiration
Date."
(b) Each Series __ Warrant shall be deemed to have been exercised
immediately prior to the close of business on the date (each, an "EXERCISE
DATE") of the surrender for exercise of the Series __ Warrant certificate. The
exercise form shall be executed by the Warrant Holder thereof or his attorney
duly authorized in writing and shall be delivered together with payment to the
Company at its corporate offices located at 1580 Lincoln, Suite 1125, Denver,
Colorado 80203 (the "CORPORATE OFFICE"), or at any such other office or agency
as the Company may designate, in cash or by official bank or certified check, of
an amount equal to the aggregate Exercise Price, in lawful money of the United
States of America.
(c) Unless Warrant Shares may not be issued as provided herein, the
person entitled to receive the number of Warrant Shares deliverable on exercise
shall be treated for all purposes as the holder of such Warrant Shares as of the
close of business on the Exercise Date. The Company shall not be obligated to
issue any fractional share interest in Warrant Shares issuable or deliverable on
the exercise of any Series __ Warrant or scrip or cash therefore and such
fractional shares shall be of no value whatsoever.
(d) Within ten days after the Exercise Date and in any event prior to
the Warrant Expiration Date, the Company, at its own expense, shall cause to be
issued and delivered to the person or persons entitled to receive the same, a
certificate or certificates in the name requested by the Warrant holder for the
number of Warrant Shares deliverable on such exercise. No adjustment shall be
made in respect of cash dividends on Warrant Shares delivered on exercise of any
Series __ Warrant. All shares of Common Stock or other securities delivered upon
the exercise of the Series __ Warrants shall be validly issued, fully paid and
non-assessable.
(e) The Series __ Warrants shall not entitle the holder thereof to
any of the rights of shareholders or to any dividend declared on the Common
Stock unless such holder or holders shall have exercised the Series __ Warrants
prior to the record date fixed by the Board of Directors for the determination
of holders of Common Stock entitled to such dividends or other rights.
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4. REGISTRATION RIGHTS.
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The holders of Series __ Warrants shall have the registration rights
under the Securities Act of 1933, as amended (the "ACT"), and the rules and
regulations promulgated thereunder by the Securities and Exchange Commission
(the "COMMISSION"), provided for in the Registration Rights Agreement. The
Registration Rights Agreement is incorporated herein by this reference in its
entirety as if fully set forth herein.
5. RESERVATION OF SHARES AND PAYMENT OF TAXES.
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(a) The Company covenants that it shall at all times reserve and have
available from its authorized Common Stock such number of shares as shall then
be issuable on the exercise of all outstanding Series __ Warrants. The Company
covenants that all Warrant Shares shall be duly and validly issued, fully paid
and non-assessable, and shall be free from all taxes, liens and charges with
respect to the issuance thereof.
(b) No Series __ Warrants may be exercised by the Registered Holder,
nor may any Warrant Shares be issued or delivered by the Company unless on the
Exercise Date (i) there is an effective registration statement covering the
issuance of the securities being acquired under the Act and applicable "Blue
Sky" statutes; or (ii) an exemption is available from registration thereunder.
(c) The Company shall pay all documentary, stamp or similar taxes and
other government charges that may be imposed with respect of the issuance of the
Series __ Warrants, and/or the issuance, transfer or delivery of any Common
Stock constituting the Warrant Shares on the exercise or redemption of the
Series __ Warrants. In the event the Common Stock constituting the Warrant
Shares are to be delivered in a name other than the name of the Registered
Holder of the certificate, no such delivery shall be made unless the person
requesting the same has paid to the Company the amount of any such taxes,
charges, or transfer fees incident thereto.
6. REGISTRATION OF TRANSFER.
------------------------
(a) The Series __ Warrant certificates may, subject to provisions of
the Federal Securities Laws, be transferred in whole or in part. Certificates to
be exchanged shall be surrendered to the Company at its Corporate Office. The
Company shall execute, issue and deliver in exchange therefor the Series __
Warrant certificates that the holder making the transfer shall be entitled to
receive.
(b) The Company shall keep transfer books at its Corporate Office
which shall register certificates and the transfer thereof. On due presentment
for registration of transfer of any certificate at the Corporate Office, the
Company shall execute, issue and deliver to the transferee or transferees a new
certificate or certificates representing an equal aggregate number of
securities. All such certificates shall be duly endorsed or be
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accompanied by a written instrument or instruments of transfer in form
reasonably satisfactory to the Company. The established transfer fee for any
registration of transfer of certificates shall be paid by the Warrant Holder or
the person presenting the certificate for transfer.
(c) Prior to due presentment for registration or transfer thereof,
the Company may treat the Registered Holder of any certificate as the absolute
owner thereof (notwithstanding any notations of ownership or writing thereon
made by anyone), and the parties hereto shall not be affected by any notice to
the contrary.
7. LOSS OR MUTILATION.
------------------
On receipt by the Company of evidence satisfactory as to the ownership
of and the loss, theft, destruction or mutilation of any Series __ Warrant
certificate, the Company shall execute and deliver in lieu thereof a new
certificate representing an equal number of Series __ Warrants. In the case of
loss, theft or destruction of any certificate, the individual representing
reissuance of a new certificate shall be required to indemnify the Company and
also to post an open-penalty insurance or indemnity bond. In the event a
certificate is mutilated, such certificate shall be surrendered and canceled by
the Company prior to delivery of a new certificate. Applicants for a new
certificate shall also comply with such other regulations and pay such other
reasonable charges as the Company may prescribe.
8. REDEMPTION. The Series __ Warrants may not be redeemed without the
----------
written consent of the Warrant Holder.
9. ADJUSTMENT OF INITIAL EXERCISE
PRICE AND NUMBER OF SHARES PURCHASABLE.
--------------------------------------
For purposes hereof, the term "INITIAL EXERCISE PRICE" shall mean,
with respect to the Series __ Warrants, $____. The Initial Exercise Price and
the number of shares of Common Stock purchasable pursuant to the Series __
Warrants shall be subject to adjustment from time to time as hereinafter set
forth in this Section 9; provided, however, that no adjustment shall be made
-------- -------
unless by reason of the happening of any one or more of the events hereinafter
specified, the Exercise Price then in effect shall be changed by one percent or
more, but any adjustment that would otherwise be required to be made but for
this provision shall be carried forward and shall be made at the time of and
together with any subsequent adjustment which, together with any adjustment or
adjustments so carried forward, amounts to one percent or more.
(A) ADJUSTMENT TO EXERCISE PRICE; FAILURE TO REGISTER. The exercise
price of the Series __ Warrants shall be automatically and permanently reduced
by $.07 per share each if (i) the Initial Registration Statement (as defined in
the Registration Rights Agreement) has not become effective on or prior to that
date which is 270 days from November 8, 1996,(ii) the Commission shall have
issued a stop order suspending the effectiveness of the Initial Registration
Statement and the number of days stop orders have been in effect, together with
the number of days a notice under Section
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4.1(d) of the Registration Rights Agreement has been issued or required to be
issued, exceeds 180 days, or (iii) (A) the Company for the third time, notifies
or is required to notify the holders of the Warrants pursuant to Section 4.1(d)
of the Registration Rights Agreement, or (B) a notice under such Section 4.1(d)
is effective or required to be effective at a time when the aggregate number of
days for which all such notices issued or required to be issued pursuant to such
Section 4.1(d) have been, or were required to be, if effect, exceeds 180 days
(270 from November 8, 1996 in the case of clause (i), or the date the third
notice is sent or required to be sent or the date on which the 180-day limit is
exceeded in the case of clause (ii) or (iii), is each referred to herein as an
"EVENT DATE"). Additionally, the Exercise Price of each Series __ Warrant then
outstanding shall be subject to further downward adjustment in the amount of
$.07 each on the same day of each month following the initial Event Date (or, if
there is no numerically corresponding day in any such subsequent month, then on
the last day of such applicable subsequent month) until the Registration
Statement becomes effective; provided, however, that such adjustments will, in
-------- -------
each case, cease to accrue on the date which (x) the Initial Registration
Statement is declared effective, with respect to the adjustments for failure to
be declared effective by that date which is 270 days from November 8, 1996, (y)
the Initial Registration Statement is no longer subject to an order suspending
the effectiveness thereof, with respect to adjustments for the failure to remain
effective or (z) a notice issued, or required to be issued, pursuant to Section
4.1(d) is no longer effective or required to be effective, with respect to
adjustments payable pursuant to clause (iii) above. In no event shall the Series
__ Warrant exercise price be adjusted below $1.00 solely due to this provision.
(B) ADJUSTMENT OF EXERCISE PRICE IN THE EVENT OF STOCK DIVIDENDS,
STOCK SPLITS AND REVERSE STOCK SPLITS. In the case the Company shall at any
time issue Common Stock or securities convertible into Common Stock by way of
dividend or other distribution on any stock of the Company or effect a stock
split or reverse stock split of the outstanding shares of Common Stock, the
exercise price then in effect shall be proportionately decreased in the case of
such issuance (on the day following the date fixed for determining shareholders
entitled to receive such dividend or other distribution) or decreased in the
case of such stock split or increased in the case of such reverse stock split
(on the day that such stock split or reverse stock split shall become
effective), by multiplying the Exercise Price in effect immediately prior to the
stock dividend, stock split or reverse stock split by a fraction, the numerator
of which is the number of shares of Common Stock outstanding immediately prior
to such stock dividend, stock split or reverse stock split, and the denominator
of which is the number of shares of Common Stock outstanding immediately after
such stock dividend, stock split or reverse stock split.
(C) ANTI-DILUTION PROVISIONS. Subject to the terms specified herein,
in case the Company shall at any time or from time to time issue any shares of
Common Stock (other than shares issued as a stock dividend as provided in
Section 9(e) or as specified in Section 9(f)) for a consideration per share (the
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"ISSUE PRICE") less than $____ per share, then, forthwith upon such issue, the
Exercise Price at such time shall (until another such issue) be reduced by the
difference between $____ and the Issue Price (but in no event shall such amount
be reduced to a price below the par value for the Common Stock then obtaining,
calculated to the nearest cent) determined in accordance with clause 1 through 5
of this Section 9(c), if applicable, and the number of shares of Common Stock
purchasable hereunder shall be increased to a number determined by dividing (i)
the number of shares purchasable hereunder immediately prior to such issue,
multiplied by the Exercise Price hereunder in effect immediately prior to such
issue, by (ii) the Exercise Price hereunder in effect immediately after the
foregoing adjustment. For the purpose of this Section 9(c), the following
provisions shall also be applicable:
(1) In case the Company shall in any manner offer any rights to
subscribe for or to purchase shares of Common Stock or grant any options for the
purchase of such shares at a price less than the Initial Exercise Price, all
shares which the holders of such rights or options shall be entitled to
subscribe for or purchase pursuant to such rights or options shall, subject to
the provisions of clause (3) hereof, be deemed to be issued as of the date of
the offering of such rights or the granting of such options, as the case may be,
and the minimum aggregate consideration named in such rights or options for the
shares covered thereby, plus the cash consideration, if any, received by the
Company for such rights or options, shall be deemed to be the Issue Price for
the issue of such shares.
(2) In case the Company shall in any manner issue any stock or
obligations directly or indirectly convertible into or exchangeable for shares
of Common Stock and the price per share for which shares are deliverable upon
such conversion or exchange (determined by dividing (i) the total amount
received or receivable by the Company in consideration for the issue of such
stock or obligations, plus the total amount of premiums, if any, payable to the
Company upon conversion or exchange, by (ii) the total number of shares
necessary to effect the conversion or exchange of all such stock or obligations)
shall be less than $____, then such issue shall, subject to the provisions of
clause (3) hereof, be deemed to be an issue (as of the date of issue of such
stock or obligations) of the total maximum number of shares of Common Stock
necessary to effect the exchange or conversion of all such stock or obligations,
and the amount received or receivable by the Company in consideration for the
issue of such stock or obligations, plus the minimum aggregate amount of
premiums, if any, payable to the Company upon exchange or conversion, shall be
deemed to be the Issue Price (as of the date of the issue of such stock or
obligations) for the issue of such shares.
(3) On the expiration of any options or rights, or the termination of
any right to convert or exchange, in respect of which any adjustments shall have
been made pursuant to clause (1) or clause (2) of this Section 9(c), the
Exercise Price and number of shares purchasable hereunder that are in effect
immediately prior to the time of such expiration or termination shall forthwith
be adjusted to such Exercise Price and number of shares as would
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<PAGE>
have been obtained had the adjustments made upon the issue of such options,
rights, or convertible or exchangeable stock or obligations been made only upon
the exercise, if any, of such options or rights or upon the conversion or
exchange, if any, of such stock or obligations.
(4) In the case of an issue of additional shares of Common Stock for
cash, the Issue Price shall be deemed to be the cash proceeds received for such
shares, excluding cash received on account of accrued interest or accrued
dividends.
(5) The term "issue" shall be deemed to include the sale or other
disposition of shares held in the treasury of the Company.
(6) No adjustment to the Exercise Price shall be made pursuant to
this section 9(c) for Common Stock or other securities issued by the Company in
connection with any of the following: (i) acquisitions by the Company of all or
a majority of the outstanding shares or voting interests in another entity
("FUTURE ACQUISITIONS"); (ii) the exercise of any option or warrant or upon the
conversion of any securities described in the Company's Confidential Private
Placement Memorandum dated August 8, 1996, as supplemented (the "Memorandum");
(iii) the exercise or issuance of the Placement Agent's Warrants, and the Series
A Warrants, the Series B Warrants, the Series C Warrants and the Series D
Warrants, and the shares of common stock underlying the Placement Agent's
Warrants, the Series A Warrants, the Series B Warrants, the Series C Warrants
and the Series D Warrants, all of which are described in the Memorandum; (iv)
the exercise or issuance of any option issued to the Company's officers,
directors or employees pursuant to a stock option plan duly adopted by the
Company's Board of Directors and approved by the Company's shareholders; (v) the
issuance of options or other rights to acquire up to 200,000 shares (in the
aggregate) of Common Stock to any person currently serving, or person
subsequently elected, as an officer or director of the Company, excluding Harry
Conger and James Muzzy; (vi) financing by an institutional lender and (vii) the
exercise or issuance of Series __ Warrants whether currently outstanding or
outstanding in the future.
(D) RIGHT TO REDUCE EXERCISE PRICE. The Company shall have the right
to reduce the Series __ Warrant Exercise Price at any time and from time to time
that such appears in the Company's best interests to do so.
(E) INTENTIONALLY DELETED.
(F) SUBDIVISION OR COMBINATIONS. In case the Company shall at any
time change as a whole, by subdivision or combination in any manner or by the
making of a stock dividend, the number of outstanding shares of Common Stock
into a different number of shares, with or without par value, (i) the number of
shares of Common Stock which immediately prior to such change the Warrant
Holders shall have been entitled to purchase pursuant to this Agreement shall be
increased or decreased, as the case may be, in direct proportion to the increase
or decrease, respectively, in the
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<PAGE>
number of shares outstanding immediately prior to such change, and (ii) the
Exercise Price in effect immediately prior to such change shall be increased or
decreased, as the case may be, in inverse proportion to such increase or
decrease in the number of such shares outstanding immediately prior to such
change.
(G) OUTSTANDING SHARES. For the purpose of Sections 9(c) and 9(d),
the number of shares of Common Stock outstanding at any given time shall not
include shares in the treasury of the Company but shall include the aggregate
number of shares deliverable in respect of the rights and options referred to in
clause (1) of Section 9(c), or the convertible or exchangeable stock or
obligations referred to in clause (2) of Section 9(c), such number to be
determined in each case as provided therein, without giving effect to clause (6)
of Section 9(c).
(H) TERMINOLOGY OF "SHARES". Whenever reference is made in this
Section 9 to the issue or sale of shares of Common Stock, or simply shares, such
term shall mean any stock of any class of the Company other than preferred stock
with a fixed limit on dividends and a fixed amount payable in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the Company.
The shares issuable upon exercise of the Warrants shall, however, be shares of
Common Stock of the Company, with a par value of $0.02, as constituted at the
date hereof, except as otherwise provided herein.
(I) REORGANIZATION; ASSETS SALES; ETC. In case of any capital
reorganization or any reclassification of the capital stock of the Company or in
case of a non-surviving combination or a disposition of the assets of the
Company other than in the ordinary course of the Company's business, the Warrant
Holders shall thereafter be entitled to purchase (and it shall be a condition to
the consummation of any such reorganization, reclassification, non-surviving
combination or disposition that appropriate provision shall be made so that such
Warrant Holder shall thereafter be entitled to purchase) the kind and amount of
shares of stock and other securities and property receivable in such transaction
by a holder of the number of shares of Common Stock of the Company into which
this Agreement entitled the holder to purchase immediately prior to such capital
reorganization, reclassification of capital stock, non-surviving combination or
disposition; and in any such case appropriate adjustments shall be made in the
application of the provisions of this Section 9 with respect to rights and
interests thereafter or the holder to the end that the provisions of this
Section 9 shall thereafter be applicable, as near as reasonably may be, in
relation to any shares or other property thereafter purchasable upon the
exercise of a Series __ Warrant.
(J) OPTIONS; ETC. In the event the Company shall distribute to any
holder of shares of Common Stock as a class evidences of indebtedness or rights,
options or warrants or other securities exercisable or convertible into or
exchangeable for shares of Common Stock, the Warrant Holders shall receive, upon
exercise, against payment of the Exercise Price therefor, but without further
consideration, the indebtedness or securities which would be receivable in such
transaction by a holder or holders of
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<PAGE>
the number of shares of Common Stock into which the Warrant, as applicable,
entitled the holder thereof to purchase immediately prior to such distribution.
(K) ADJUSTMENT STATEMENT. Whenever the Exercise Price is adjusted as
herein provided, the Company shall forthwith deliver to each Warrant Holder a
statement signed by the President or Senior Vice President of the Company and by
its Treasurer or Secretary stating the adjusted Exercise Price and number of
shares for which such Warrant is exercisable, determined as specified herein.
The statement shall show in detail the facts requiring such adjustment,
including a statement of the consideration received by the Company for any
additional stock issued.
(L) PRIOR NOTICE TO WARRANT HOLDERS. In the event that at any time:
(1) The Company shall pay any dividend payable in stock upon its
Common Stock or make any distribution (other than cash dividends) to
the holders of its Common Stock; or
(2) The Company shall offer for subscription pro rata to the
holders of its Common Stock any additional shares of stock of any
class or any other rights; or
(3) The Company shall effect any capital reorganization or any
reclassification of or change in the outstanding capital stock of the
Company (other than a change in par value, or a change from par value
to no par value, or a change from no par value to par value, or a
change resulting solely from a subdivision or combination of
outstanding shares), or any consolidation or merger, or any sale,
transfer or other disposition of all or substantially all of its
property, assets, business and goodwill as an entirety, or the
liquidation, dissolution or winding up of the Company; or
(4) The Company shall declare a dividend upon its Common Stock
payable otherwise than out of earnings or earned surplus or otherwise
than in shares or any stock or obligations directly or indirectly
convertible into or exchangeable for shares;
then, in any such event, the Company shall cause at least thirty (30) days'
prior written notice to be mailed to each Warrant Holder at the address of such
holder shown on the books of the Company. The notice shall also specify the date
on which the books of the Company shall close or a record be taken for such
stock dividend, distribution or subscription rights, or the date on which such
reclassification, reorganization, consolidation, merger, sale, transfer,
disposition, liquidation, dissolution, winding up, or dividend, as the case may
be, shall take place, and the date of participation therein by the holders of
shares of Common Stock if
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any such date is to be fixed, and shall also set forth such facts with respect
thereto as shall be reasonably necessary to indicate the effect of such action
on the rights of the holder.
(M) DISPUTES. In the event that there is any dispute as to the
computation of the Exercise Price or the number of shares of Common Stock
required to be issued upon the exercise of the Warrants, the Company will retain
an independent and nationally recognized accounting firm to conduct an audit of
the computations pursuant to the terms hereof involved in such dispute,
including the financial statements or other information upon which such
computations were based. The determination of such nationally recognized
accounting firm shall, in the absence of manifest error, be binding. If there
shall be a dispute as to the selection of such nationally recognized accounting
firm, such firm shall be appointed by the American Institute of Certified Public
Accountants ("AICPA") if willing, otherwise the American Arbitration Association
("__A"). If the Exercise Price or number of shares of Common Stock as determined
by such accounting firm is one percent or more higher or lower than the
calculations thereof computed by the Company, the expenses of such accounting
firm and, if any, off AICPA and __A, shall be borne completely by the Company.
In all other cases, they shall be borne by the complaining Warrant Holders, as
applicable.
(N) CORPORATE ACTION. Before taking any action which would cause an
adjustment reducing the Exercise Price below the then par value of the shares of
Common Stock issuable upon exercise of the Series __ Warrants, the Company shall
take any corporate action which may, in the opinion of its counsel, be necessary
in order that the Company may validly and legally issue fully paid and non-
assessable shares of Common Stock at the adjusted Exercise Price.
10. NOTICES.
-------
All notices, demands, elections, opinions or requests (however
characterized or described) required or authorized hereunder shall be deemed
given sufficiently if in writing and sent by registered or certified mail,
return receipt requested and postage prepaid, or by confirmed telex, telegram,
facsimile transmission or cable to, in the case of the Company:
GDC Group, Inc.
1580 Lincoln, Suite 1125
Denver, Colorado 80203
Attn: James Muzzy
(303) 863-1869
and if to the Warrant Holder at the address of such holder as set forth on the
books maintained by or on behalf of the Company.
11. BINDING AGREEMENT.
-----------------
This Agreement shall be binding upon and inure to the benefit of the
Company and the Warrant Holders. Nothing in this Agreement is intended or shall
be construed to confer upon any
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other person any right, remedy or claim or to impose on any other person any
duty, liability or obligation.
12. FURTHER INSTRUMENTS.
-------------------
The parties shall execute and deliver any and all such other
instruments and take any and all other actions as may be reasonably necessary to
carry out the intention of this Agreement.
13. SEVERABILITY.
------------
If any provision of this Agreement shall be held, declared or
pronounced void, voidable, invalid, unenforceable, or inoperative for any reason
by any court of competent jurisdiction, government authority or otherwise, such
holding, declaration or pronouncement shall not affect adversely any other
provision of this Agreement, which shall otherwise remain in full force and
effect and be enforced in accordance with its terms, and the effect of such
holding, declaration or pronouncement shall be limited to the territory or
jurisdiction in which made.
14. WAIVER.
------
No delay or failure on the part of any party in the exercise of any
right or remedy arising from a breach of this Agreement shall operate as a
waiver of any subsequent right or remedy arising from a subsequent breach of
this Agreement.
15. RELEVANT MARKETS.
----------------
For the purposes of this Agreement, it is assumed that the Common
Stock is quoted on the National Association of Securities Dealers, Inc. NASDAQ
Small Cap market ("NASDAQ SMALL CAP"), however, in the event the Common Stock
is:
(a) listed on NASDAQ, NASDAQ Small Cap, a national securities
exchange or admitted to unlisted trading privileges on such exchange, the price
of the Common Stock to be determined during any applicable 30 day trading period
shall be the last reported sale price of the Common Stock on such exchange; or
(b) not quoted on the Bulletin Board listed or admitted to unlisted
trading privileges, the price of the Common Stock to be determined during any
applicable 30 day trading period shall be the high closing bid as reported on
the "pink sheets" by the National Daily Quotation Bureau, Inc.
16. AMENDMENTS AND WAIVERS.
----------------------
Except as otherwise provided herein, the provisions of this Agreement
may not be amended, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given unless the Company has
obtained the written consent of record owners of at least a majority in number
of shares of Restricted Registrable Securities then outstanding affected by such
amendment, modification, supplement, waiver or departure. Such amendment,
modification or supplement, waiver or departure, if
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consented to in writing by such majority of holders, shall thereby amend, modify
or supplement, waive or act to consent to departure from the Series __ Warrant
Agreement of all such holders of Series __ Warrants.
17. GENERAL PROVISIONS.
------------------
THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND
GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK. This Agreement may not be
modified or amended or any term or provision hereof waived or discharged except
in writing by the party against which such amendment, modification, waiver or
discharge is sought to be enforced. The headings of this Agreement are for
convenience and reference only and shall not limit or otherwise affect the
meaning hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on the date first set forth above.
GDC GROUP, INC.
By: __________________________
Harry Conger, President
[CORPORATE SEAL]
ATTEST: _______________________
James Muzzy, Secretary
WARRANT HOLDERS:
By: GDC Group, Inc., as
attorney-in-fact
By:______________________
James Muzzy, Secretary
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EXHIBIT A
---------
The securities represented hereby have not been registered under the
Securities Act of 1933, as amended, or any state securities laws and
neither the securities nor any interest therein may be offered, sold,
transferred, pledged or otherwise disposed of except pursuant to an
effective registration statement under such Act and such laws or an
exemption from registration under such Act and such laws which, in the
opinion of counsel for the holder, which counsel and opinion are reasonably
satisfactory to counsel for this corporation, is available.
SERIES __ WARRANT CERTIFICATE
GDC GROUP, INC.
Warrant No. W__- No. of Series __ Warrants:
This certifies that, for value received and subject to the terms and
conditions set forth herein, __________________ or his registered assign (the
"WARRANT HOLDER") is the registered holder of _____________________ (______)
Series __ Warrants.
1. EXERCISE. The warrants evidenced hereby ("SERIES __ WARRANTS"), as
they may be adjusted from time to time, may be exercised at a price of $____ per
Warrant to acquire one (1) share of the common stock of GDC Group, Inc. which is
with par value of $0.02 (the "COMMON STOCK" and the "COMPANY," respectively).
(The shares of Common Stock acquirable upon exercise hereof is referred to
herein as "SHARES" ) If, at the time of any exercise of this Series __ Warrant,
the Shares deliverable upon exercise of such Warrant shall not be registered
under the Securities Act, the Company may require, as a condition of allowing
such exercise, that the holder or transferee of such Warrant, furnish to the
Company an opinion of counsel of recognized standing in securities law, to the
effect that such exercise may be made without registration under the Securities
Act, provided that subject to receipt of the aforementioned opinion, the
exercise of the Warrant shall at all times be within the control of such holder
or transferee, as the case may be, and, if required by the Company, by written
representation that the Shares being acquired by the exercise of the Warrant are
being purchased for investment and not for distribution; acknowledging that such
Shares have not been registered under the Securities Act of 1933, as amended
(the "1933 ACT"); and agreeing that such Shares may not be sold or transferred
unless there is an effective Registration Statement for them under the 1933 Act,
or in the opinion of counsel to the Company such sale or transfer is not in
violation of the 1933 Act. No fractional shares may be acquired upon exercise
hereof.
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2. TERM OF WARRANT. This Series __ Warrant may be exercised at any time
and from time to time in whole or in part commencing on the date hereof and
terminating at 5:00 P.M. on the date which is four years after the effectiveness
of the Initial Registration Statement (defined in the Registration Rights
Agreement between the Company and the Warrant Holder of even date herewith).
3. ADJUSTMENT OF EXERCISE PRICE. The number of Shares purchasable upon
exercise of this Series __ Warrant is subject to adjustment if the Company
shall, prior to exercise of any Series __ Warrants, effect one or more stock
splits, stock dividends or other increases or reductions in the number of shares
of Common Stock outstanding in certain circumstances. No such anti-dilution
provisions shall apply in the event of a merger, acquisition or consolidation
should any of these events occur prior to the exercise of the Series __
Warrants; provided, however, that the price negotiated for the sale of any
Shares of Common Stock issuable upon such event is not less than $____. Further,
certain additional conditions apply which may result in the reduction of the
exercise price of the Warrants, including, but not limited to, the following: if
the Company has not succeeded in having a registration statement declared
effective prior to the date which is 270 days from November 8, 1996 (such date
being the date of the final closing of a certain private placement of the
Company's securities); then the exercise price shall be permanently and
automatically reduced by $.07 on such date and again each month thereafter until
such registration statement is declared effective; provided, however, that the
exercise may not be reduced below $1.00 solely as a result of a delay in
registration.
4. REDEMPTION. These Warrants may not be redeemed without the written
consent of the Warrant Holder.
5. RESERVATION OF COMMON STOCK. The Company agrees that the number of
Shares of Common Stock sufficient to provide for the exercise of the Series __
Warrants upon the basis set forth herein will at all times during the term of
this Series __ Warrant be reserved for the exercise hereof.
6. MANNER OF EXERCISE.
(a) Exercise may be made of all or any part of the Series __ Warrants
by surrendering this certificate, with the purchase form to be provided by the
Company, duly executed by the Warrant Holder or by the Warrant Holder's duly
authorized attorney, plus payment of the exercise price therefor in cash
(subject to subsection (b) below) at the office of the Company or its designated
assign.
(b) If at the time of exercise of this Warrant, the then current
Market Price of the Common Stock as determined under subsection (c) below
exceeds the exercise price of the Warrant on a date specified by the Warrant
Holder which shall be no more than ten (10) trading days prior to the date of
exercise of this Warrant (the "Current Market Price"), the Holder may exercise
this Warrant by surrendering it, with the purchase form to be provided by the
Company, with no cash payment. The Holder and the Company agree
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that in such event the Warrant shall have a value to be applied towards the
Exercise Price upon the Warrant's exercise equal to the amount by which the
Current Market Price of the Common Stock exceeds the exercise price of the
Warrant multiplied by the number of Shares issuable upon such exercise. The
number of Shares actually issued to the Warrant Holder upon such exercise,
before giving effect to any adjustments required under this Warrant, shall be
the number of Warrants tendered times a fraction the numerator of which is the
current Market Price of the Common Sock less the Exercise Price and the
denominator of which is the current Market Price of the Common Stock. The result
shall be rounded up or down to the nearest whole number of shares.
As used herein, the current market price ("Market Price") per share at
any date shall be:
(a) if the principal trading market for the Common Stock is NASDAQ
NMS, NASDAQ Small Cap, OTC Bulletin Board, or a national securities exchange or
admitted to unlisted trading privileges on such exchange, the last reported sale
price (or closing price if there is no last reported sale price) of the Common
Stock on such market or exchange on such measuring date; or
(b) if the Common Stock is not quoted on any of the foregoing markets
or exchanges (or admitted to unlisted trading privileges), or if there is no
reported last sale price or closing price of the Common Stock on such market or
exchange on the applicable measuring date, the high closing bid as reported on
the "pink sheets" by the National Daily Quotation Bureau, Inc., or, if
unavailable, the most recent last sale price, closing price or high bid price,
as the case may be, available prior to the measuring date.
7. ISSUANCE OF COMMON STOCK UPON EXERCISE. The Company, at its own
expense, shall cause to be issued, within ten (10) days after exercise of this
Series __ Warrant, a certificate or certificates in the name requested by the
Warrant Holder of the number of Shares of Common Stock to which the Warrant
Holder is entitled upon such exercise. All Shares of Common Stock or other
securities delivered upon the exercise of this Series __ Warrant shall be
validly issued, fully paid and non-assessable.
Irrespective of the date of issuance and delivery of any Shares of
Common Stock upon the exercise of this Series __ Warrant, each person in whose
name any such certificate is to be issued will for all purposes be deemed to
have become the holder of record of the Common Stock acquired on the date on
which a duly executed notice of exercise of this Series __ Warrant and payment
for the number of Shares exercised are received by the Company.
8. REGISTRATION RIGHTS. The Company acknowledges and agrees that the
Shares issuable upon exercise of this Warrant are subject to the terms of the
Registration Rights Agreement.
9. NO RIGHT AS STOCKHOLDER. The Warrant Holder is not, by virtue of his
ownership of this Series __ Warrant, entitled to any rights whatsoever as a
stockholder of the Company.
-17-
<PAGE>
10. ASSIGNMENT. This Series __ Warrant may not be assigned without
providing the Company an opinion satisfactory to its counsel that an exemption
from registration for the transfer exists.
11. WARRANT AGREEMENT. The actual terms and conditions of this Series __
Warrant are contained in the Warrant Agreement, the terms and conditions of
which are incorporated herein by this reference as if fully set forth herein and
made a part hereof. To the extent of any conflict herewith, the terms and
conditions of the Warrant Agreement shall apply.
IN WITNESS WHEREOF, the Company has caused this Warrant certificate to be
signed on its behalf by its President or Senior Vice President, his signature to
be attested to by its Secretary, and its corporate seal to be hereunto affixed
this __ day of ___, 1997.
GDC GROUP, INC.
on behalf of the Company
and as Warrant Agent
By: __________________________
Harry Conger, President
Attest: _______________________
James Muzzy, Secretary
-18-
<PAGE>
Exhibit 4(b)
FOURTH AMENDMENT TO LOAN INSTRUMENTS
THIS FOURTH AMENDMENT TO LOAN INSTRUMENTS (the "Fourth Amendment") is dated
as of this ____ day of December, 1994 by and among GDC ENGINEERING, INC., a
Louisiana corporation ("Borrower"), KATHLEEN J. ELNAGGAR in her capacity as
trustee (the "Trustee") of the testamentary trust for the benefit of Tarek
Elnaggar, Sharif Joseph Elnaggar and Jeanne-Marie Elnaggar (the "Trust") created
by the Last Will and Testament of Hameed Ahmed Elnaggar dated March 20, 1988
(the "Will"), which Will was probated in THE SUCCESSION OF HAMEED AHMED
ELNAGGAR, PROBATE NO. 56829, NINETEENTH JUDICIAL DISTRICT, PARISH OF EAST BATON
ROUGE, STATE OF LOUISIANA (the "Succession"), KATHLEEN JORDAN ELNAGGAR, one and
the same as Kathleen J. Elnaggar, individually and in her capacity as
usufructuary under the Will, a person of the full age of majority and a resident
of Baton Rouge Parish, Louisiana ("K. Elnaggar") (each of Borrower, the Trustee,
the Succession and K. Elnaggar are sometimes hereinafter referred to
individually as an "Obligor" and collectively as the "Obligors"), and GREYHOUND
FINANCIAL CORPORATION, a Delaware Corporation ("Lender").
WHEREAS, there is in effect a Loan Agreement dated December 30, 1992
between Borrower and Lender, as amended by Amendment to Loan Instruments dated
June 30, 1993 among Obligors and Lender, Second Amendment to Loan Instruments
dated October 26, 1993 among Obligors and Lender, Third Amendment to Loan
Instruments dated April 1, 1994 among Obligors and Lender (collectively,
together with this Fourth Amendment, the "Loan Agreement"), pursuant to which
Lender committed to loan to Borrower an amount not to exceed the principal sum
of $4,900,000 to refinance existing debt of Borrower and $4,000,000 to fund
certain capital expenditures (the "Loan");
WHEREAS, the Loan is evidenced by the Loan Agreement and a promissory note
dated December 30, 1992 from Borrower payable to Lender in the principal sum of
$8,900,000 (the "Note"), and secured by, among others, a Security Agreement and
Shareholder Pledge Agreement dated December 30, 1992 from the Succession and K.
Elnaggar in favor of Lender and a Subordination and Stand-By Agreement dated
December 30, 1992 among the Succession, K. Elnaggar, Borrower and Lender;
WHEREAS, the $4,000,000 commitment to fund certain capital expenditures
expired unused;
WHEREAS, Borrower has requested Lender's consent to the sale of all of the
Borrower BCI Capital Stock owned by Borrower to the existing BCI management;
WHEREAS, Lender has agreed to consent to the sale of all of the Borrower
BCI Capital Stock owned by Borrower to the existing BCI management, upon the
terms and conditions contained herein;
WHEREAS, the administration of the Succession has been completed and
Judgement of Possession was signed in the Succession on October 4, 1994, a copy
of which is attached hereto
<PAGE>
as Exhibit A and incorporated herein by this reference, which said Judgment of
Possession recognizes certain rights and puts the legatees under the Will in
possession of the assets of the Succession;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, Obligors and Lender,
intending to be legally bound, agree as follows:
1. Definitions. Except as otherwise defined herein, all capitalized
-----------
terms used herein shall have the meanings ascribed thereto in the Loan
Agreement.
2. Recitals. The Recitals set forth above are true and accurate and are
--------
incorporated herein by this reference.
3. Amounts Outstanding. Obligors hereby acknowledge and agree that (a)
-------------------
as of November 1, 1994, the principal amount of the Loan outstanding is
$____________ and there is no accrued and unpaid interest, and (b) as of the
date of execution hereof by Obligors, there are no defenses, claims or offsets
to payment of such principal amount and the other indebtedness evidenced by the
Note.
4. Loan Agreement Definitions. The definitions of, and references to,
--------------------------
"Assignment of Interest Hedge Contract" and "Interest Hedge Contract" in Section
1.1 of the Loan Agreement are hereby deleted in their entirety and the
definitions of "Operating Cash Flow" and "Working Capital Loan" is hereby
deleted in its entirety and the following is inserted therefor:
Operating Cash Flow: for any period, the net income of
-------------------
Borrower for such period:
(i) plus the sum of the following, to the extent
deducted in determining net income for such period:
(A) interest paid or accrued on Indebtedness,
including, without limitation, interest on Capitalized
Leases that is imputed in accordance with GAAP;
(B) Depreciation and amortization of assets; and
(C) extraordinary losses from sales or
dispositions of Property outside of the normal course
of Borrower's Business;
(ii) minus the sum of the following, to the extent
-----
included in determining net income for such period:
-2-
<PAGE>
(A) all payments made by Borrower during such
period with respect to Capital Expenditures, other than
Subsequent Advance Expenditures;
(B) extraordinary gains from sales or
dispositions of Property outside the ordinary course of
Borrower's Business; and
(C) for purposes of Excess Cash Flow payments
pursuant to Section 2.9.2 hereof only, fifty percent
(50%) of all payments received by Borrower from
Occidental Chemical Corporation or its successors or
assigns ("Oxy Chem") pursuant to that certain agreement
dated September 21 and 28, 1994 between Borrower and
Oxy Chem, a copy of which is attached hereto as EXHIBIT
2.9.2 and incorporated herein by this reference.
Working Capital Loan: shall mean a revolving loan to be made by
--------------------
Working Capital Lender to Borrower in an amount of not less than
$750,000.
5. Additional Defined Terms. Section 1.1 of the Original Loan Agreement
------------------------
is hereby amended by adding the following definitions in the appropriate
alphabetical order:
Approved BCI Sale: shall mean a sale, transfer conveyance or
-----------------
assignment of all or substantially all of the assets of BCI or
all or substantially all of the Borrower BCI Capital Stock owned
by Borrower to the existing BCI management, which is consummated
on or before December 31, 1994 and which results in the receipt
by Borrower of a net sales amount of not less than $45,000.00.
Annual Site Inspection Expenses: shall mean all costs and
-------------------------------
expenses incurred by Lender with respect to Lender's annual
inspections of the Business premises (all locations) by Lender or
a representative of Lender pursuant to Section 6.2 hereof, but
not to exceed $2,500 per year.
6. Prepayments. Subsection 2.9.2 of the Loan Agreement is hereby
-----------
amended to add the following:
(E) PROCEEDS FROM AN APPROVED BCI SALE. Upon the
----------------------------------
consummation of an Approved BCI Sale, Borrower shall pay to
Lender $45,000, which shall be applied as a prepayment of the
-3-
<PAGE>
Principal Balance of the Loan.
7. Interest Hedge Contract. Subsection 4.2.1 of the Loan Agreement is
-----------------------
hereby deleted in its entirety and the following is inserted therefor:
4.2.1 INTENTIONALLY DELETED.
8. Annual Statements. Section 6.3.3 of the Loan Agreement is hereby
-----------------
amended to add the following:
As soon as available and in any event within 120 days after the
end of each calendar year, Borrower shall cause K. Elnaggar to,
and K. Elnaggar shall, provide to Lender a personal financial
statement as of December 31 of the immediately prior calendar
year, in a form and with a certification satisfactory to Lender,
and a true, correct and complete copy of K. Elnaggar's Federal
tax return, as filed, for the immediately prior calendar year.
9. Interest Hedge Contract. Section 6.17 of the Loan Agreement is hereby
-----------------------
deleted in its entirety and the following is inserted therefor:
6.17 INTENTIONALLY DELETED.
10. Appraisal. Section 6 of the Loan Agreement is hereby amended to add
---------
the following:
6.18 APPRAISAL. On or prior to December 15, 1994,
---------
Borrower, at Borrower's sole cost and expense, shall provide
Lender with an appraisal conducted by an appraiser acceptable to
Lender, which appraisal shall reflect a net orderly liquidation
value of Borrower's environmental and remediation machinery and
equipment and a fair market value of Borrower's rotary kiln
incineration system, more particularly described as item 102 ER
on page 20 of the GDC Engineering, Inc. Appraisal dated December
7, 1992.
6.19 GUARANTY. K. Elnaggar shall execute and deliver to
--------
Lender a continuing guaranty in the form attached hereto as Exhibit
-------
6.19 and incorporated herein by this reference (the "K. Elnaggar
----
Guaranty"), together with an opinion of counsel as to the
enforceability of the K. Elnaggar Guaranty in form and substance
and from counsel satisfactory to Lender.
11. Sale or Transfer of Assets. Section 7.9 of the Loan Agreement is
--------------------------
hereby deleted in its entirety and the following is inserted therefor:
-4-
<PAGE>
7.9 Sell, lease, assign, transfer or otherwise dispose of any
Property except Borrower may dispose of (i) inventory in the
ordinary course of business, (ii) Property which is not material
to or necessary for the continued operation of Borrower's
Business, (iii) items of equipment which promptly are replaced
with new items of equipment of like function and comparable value
to those of equipment when the same were new, and (iv) the assets
or Capital Stock of BCI pursuant to an Approved BCI Sale;
provided, however, that in the event of an Approved BCI Sale,
Borrower shall pay to Lender $45,000, which Lender shall apply to
the Loan in accordance with subsection 2.9.2(e) hereof. As soon
as practicable after Lender's receipt of such funds, Lender shall
release its lien on the BCI assets more particularly described on
pages 11 and 12 of the GDC Engineering, Inc. Appraisal dated
December 7, 1992.
12. Fees. Article X of the Loan Agreement is hereby amended to add the
----
following:
10.3 Site Inspection Expense. Upon demand, Borrower agrees to
-----------------------
pay to Lender the Annual Site Inspection Expenses with respect to
inspections as provided for in Section 6.2 hereof.
13. Notices. Section 11.1 of the Loan Agreement with respect to the copy
-------
of notices to Lender is hereby deleted in its entirety and the following
inserted therefor:
Copy to: Greyhound Financial Corporation
Dial Tower/Dial Corporate Center
Phoenix, Arizona 85077
Attention: Vice President, Law
Telecopy No.: (602) 207-5036
and
Greyhound Financial Corporation
10 South LaSalle Street
Suite 2121
Chicago, Illinois 60603
Attention: Adolph G. Letke
Telecopy No.: (312) 855-1779
-5-
<PAGE>
and
Fennemore Craig
Two North Central Avenue
Suite 2200
Phoenix, Arizona 85004-2390
Attention: Jay S. Kramer
Telecopy No.: (602) 257-8527
14. Representations, Acknowledgments, and Agreements of Obligors. As
------------------------------------------------------------
material inducements to Lender to enter into this Fourth Amendment, and
acknowledging Lender's reliance upon the truth and accuracy thereof, Borrower,
with respect to subsections (a), (b), (d), (g), (j) and (n), the Trustee with
respect to subsections (c), (e), (h) and (k) and K. Elnaggar, individually and
as usufructuary under the Will, with respect to subsections (f), (i) (l) and
(n), represent, warrant and covenant that:
(a) Borrower is a corporation, duly organized, validly existing and in
good standing under the laws of the State of Louisiana.
(b) This Fourth Amendment has been duly authorized by all necessary
corporate action and has been duly executed and delivered by an authorized
officer of Borrower, and the Fourth Amendment constitutes a legal, valid and
binding agreement enforceable against Borrower in accordance with its terms;
(c) This Fourth Amendment, the K. Elnaggar Guaranty and the Pledge
Agreement have been duly authorized by all necessary action and have been duly
executed and delivered by the authorized Trustee of the Trust, and the Fourth
Amendment, the K. Elnaggar Guaranty and the Pledge Agreement constitute legal,
valid and binding agreements enforceable against the Trust in accordance with
their terms;
(d) As of the date hereof, Borrower is not the subject of a pending
bankruptcy proceeding and Borrower is not aware of any threatened bankruptcy
proceeding against Borrower nor is Borrower presently contemplating filing such
a proceeding;
(e) As of the date hereof, the Trustee is not the subject of a pending
bankruptcy proceeding and the Trustee is not aware of any threatened bankruptcy
proceeding against the Trust nor is the Trustee presently contemplating filing
such a proceeding;
(f) As of the date hereof, K. Elnaggar is not the subject of a pending
bankruptcy proceeding and K. Elnaggar is not aware of any threatened bankruptcy
proceeding against her nor is K. Elnaggar presently contemplating filing such a
proceeding;
(g) Except as disclosed to Lender in Exhibit 5.8.A hereof, there are
-------------
no lawsuits pending or threatened against Borrower, or instituted by Borrower in
which the party defendant has counterclaimed against Borrower;
-6-
<PAGE>
(h) There are no lawsuits pending or threatened against the Trust, or
instituted by the Trust in which the party defendant has counterclaimed against
the Trust;
(i) There are no lawsuits pending or threatened against K. Elnaggar,
or instituted by K. Elnaggar in which the party defendant has counterclaimed
against K. Elnaggar;
(j) The execution and delivery of this Fourth Amendment and any other
instruments executed and delivered to Lender concurrently herewith, and the full
and complete performance of the provisions hereof will not result in any breach
of, or constitute a default under, or result in the creation of any lien, charge
or encumbrance upon any property or assets of Borrower under any indenture,
mortgage, deed of trust, bank loan or credit agreement or other instrument to
which Borrower is a party or by which Borrower is bound;
(k) The execution and delivery of this Fourth Amendment and any other
instruments executed and delivered to Lender concurrently herewith, and the full
and complete performance of the provisions hereof will not result in any breach
of, or constitute a default under, or result in the creation of any lien, charge
or encumbrance upon any property or assets of the Trust under any indenture,
mortgage, deed of trust, bank loan or credit agreement or other instrument to
which the Trust is a party or by which the Trust is bound;
(l) This Fourth Amendment, the K. Elnaggar Guaranty and the Pledge
Agreement have been duly executed and delivered by K. Elnaggar, individually.
The execution and delivery of this Fourth Amendment and any other instruments
executed and delivered to Lender concurrently herewith, and the full and
complete performance of the provisions hereof will not result in any breach of,
or constitute a default under, or result in the creation of any lien, charge or
encumbrance upon any property or assets of K. Elnaggar under any indenture,
mortgage, deed of trust, bank loan or credit agreement or other instrument to
which K. Elnaggar is a party or by which K. Elnaggar is bound;
(m) This Fourth Amendment, the K. Elnaggar Guaranty and the Pledge
Agreement have been duly authorized by all necessary action and have been duly
executed and delivered by K. Elnaggar, as usufructuary under the Will, and the
Fourth Amendment, the K. Elnaggar Guaranty and the Pledge Agreement constitute
legal, valid and binding agreements enforceable against K. Elnaggar, as
usufructuary under the Will, in accordance with their terms;
(n) Borrower has all requisite corporate power and corporate authority
and all necessary licenses, governmental authorizations and permits, including,
without limitation, all licenses, authorizations and permits required for the
operation of Borrower's business under all Environmental Laws.
15. No Misrepresentation. Each Obligor respectively represents, warrants
---------------------
and covenants that no representation or warranty made by said Obligor and
contained herein or in the other Loan Instruments, and no certificate,
information or report furnished or to be furnished by said Obligor in connection
with any of the Loan Instruments or any of the transactions contemplated hereby
or thereby, contains or will contain a misstatement of material fact, or omits
or will omit to state a material fact required to be stated in order to make the
statements contained
-7-
<PAGE>
herein or therein not misleading in the light of the circumstances under which
such statements were made. There is no fact known or reasonably foreseen by said
Obligor that will materially adversely affect said Obligor or her or its
respective financial conditions, operations, Property, business, prospects,
profits or the ability of said Obligor to consummate the transactions and
perform her or its obligations pursuant to the Loan Instruments that has not
expressly been disclosed to Lender in writing.
16. Reaffirmation of Security Interest. Obligors hereby confirm and agree
----------------------------------
that Lender's Security Interests, and Lender's lien priority, in all of the
Collateral previously pledged, assigned, transferred or granted to Lender shall
continue to secure the payment and performance of Obligors' obligations
following the execution, delivery and effectiveness of this Fourth Amendment and
the documents, instruments and agreements contemplated hereby and thereby.
17. No Waiver of Defaults. This Fourth Amendment is not a waiver of any
---------------------
future default of Obligors or a release or relinquishment of any Lien, Security
Interest, rights or remedies securing payment and performance of Obligors'
obligations or the enforcement thereof. Such Liens, Security Interests, rights
and remedies are hereby ratified, confirmed, preserved, renewed and extended by
Obligors in all respects.
18. Release.
-------
(a) Each Obligor and her or its officers, directors, shareholders,
employees, predecessors, personal representatives, executors, executrixes,
heirs, successors and assigns, each hereby fully release, remise and forever
discharge Lender and all past and present officers, directors, agents,
employees, servants, partners, shareholders, attorneys and managers of Lender,
and all of their respective heirs, personal representatives, predecessors,
successors and assigns, for, from and against any and all claims, demands,
causes of action, controversies, offsets, obligations, losses, damages, and
liabilities of every kind and character whatsoever, including without limitation
any action, omission, misrepresentation or other basis of liability founded
either in tort or contract and the duties arising thereunder that said Obligor,
or any of her or its respective predecessors, successors and assigns, or any one
or more of them, has had in the past, or now has, whether known or unknown,
whether currently existing or hereafter asserted, relating in any manner to, or
arising from or in connection with, the indebtedness evidenced by the Note, any
negotiations, loan administration, exercise of rights and remedies, payment,
offset with respect to, or other matter relating to such indebtedness, any
Collateral securing payment and performance of such indebtedness, or any matter
preliminary to the execution and delivery by Obligors and Lender of this Fourth
Amendment, or any statement, action, omission or conduct of Lender or any of its
officers, directors, agents, employees, servants, partners, shareholders,
attorneys and managers relating in any manner to such indebtedness, Collateral
or this Fourth Amendment; provided, however, that the foregoing release and
discharge shall not apply to the obligations of Lender expressly set forth in
this Fourth Amendment or first arising after the date of this Fourth Amendment.
(b) Obligors acknowledge and agree that Lender's commitment to advance
the Remaining Portion has expired unused by Borrower, and Lender is not, and
shall not be, obligated in any way to continue or undertake any loan, financing
or other credit arrangement with Obligors, including, without limitation, any
renewal of the indebtedness evidenced by the
-8-
<PAGE>
Note, beyond the maturity date thereof as set forth therein.
19. Modifications. No amendment, modification, change, waiver, release or
-------------
discharge hereof or hereunder shall be effective unless evidenced by an
instrument in writing signed by the party against whom enforcement is sought.
20. Severability. If any provision hereof is invalid or unenforceable,
------------
the other provisions hereof shall remain in full force and effect and shall be
liberally construed in favor of Lender in order to effectuate the other
provisions hereof.
21. Binding Nature. The provisions of this Fourth Amendment shall be
--------------
binding upon, and inure to the benefit of, the respective successors and assigns
(including without limitation, any receiver, debtor in possession or trustee in
bankruptcy) of Lender and any of Obligors.
22. APPLICABLE LAW. THE OBLIGATIONS OF OBLIGORS HEREUNDER, UNDER THE LOAN
--------------
AGREEMENT, AS MODIFIED HEREBY, AND UNDER THE OTHER LOAN INSTRUMENTS, ARE TO BE
PERFORMED IN, AND THIS FOURTH AMENDMENT IS, AND THE LOAN AGREEMENT AND OTHER
LOAN INSTRUMENTS HAVE BEEN, EXECUTED, DELIVERED AND ACCEPTED IN, AND THIS FOURTH
AMENDMENT, THE LOAN AGREEMENT, AS MODIFIED HEREBY, AND THE OTHER LOAN
INSTRUMENTS SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE INTERNAL
LAWS AND DECISIONS OF, THE STATE OF ARIZONA (WITHOUT REGARD FOR ITS CONFLICTS OF
LAW PRINCIPLES), AND BY EXECUTION HEREOF OBLIGORS AND LENDER EACH AGREE THAT
SUCH LAWS AND DECISIONS OF THE STATE OF ARIZONA SHALL GOVERN THIS FOURTH
AMENDMENT, THE LOAN AGREEMENT, AS MODIFIED HEREBY, AND THE OTHER LOAN
INSTRUMENTS, NOTWITHSTANDING THE FACT THAT THERE MAY BE OTHER JURISDICTIONS
WHICH MAY BEAR A REASONABLE RELATIONSHIP TO THE TRANSACTIONS CONTEMPLATED
HEREBY; PROVIDED, HOWEVER, THAT WITH RESPECT TO PROCEDURAL AND SUBSTANTIVE
MATTERS RELATING ONLY TO THE CREATION, PERFECTION AND ENFORCEMENT BY LENDER OF
ITS RIGHTS AND REMEDIES AGAINST ANY REAL OR PERSONAL PROPERTY COLLATERAL LOCATED
IN ANY STATE OTHER THAN ARIZONA, SUCH MATTERS SHALL BE GOVERNED BY THE LAWS OF
THE STATE IN WHICH SUCH PROPERTY IS LOCATED.
23. JURISDICTION AND VENUE. OBLIGORS HEREBY AGREE THAT ALL ACTIONS OR
----------------------
PROCEEDINGS INITIATED BY OBLIGORS, OR ANY OF THEM, AND ARISING DIRECTLY OR
INDIRECTLY OUT OF THE LOAN INSTRUMENTS SHALL BE LITIGATED IN THE SUPERIOR COURT
OF ARIZONA, MARICOPA COUNTY DIVISION, OR THE UNITED STATES DISTRICT COURT FOR
THE DISTRICT OF ARIZONA OR, IF LENDER INITIATES SUCH ACTION, IN ADDITION TO THE
FOREGOING COURTS, ANY COURT IN WHICH LENDER SHALL INITIATE SUCH ACTION, TO THE
EXTENT SUCH COURT HAS JURISDICTION. OBLIGORS HEREBY EXPRESSLY SUBMIT AND
CONSENT IN ADVANCE TO SUCH JURISDIC-
-9-
<PAGE>
TION IN ANY ACTION OR PROCEEDING COMMENCED BY LENDER IN ANY OF SUCH COURTS, AND
HEREBY WAIVE PERSONAL SERVICE OF THE SUMMONS AND COMPLAINT, OR OTHER PROCESS OF
PAPERS ISSUED THEREIN, AND AGREE THAT SERVICE OF SUCH SUMMONS AND COMPLAINT OR
OTHER PROCESS OR PAPERS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO
OBLIGORS, OR ANY OF THEM, AT THE ADDRESS TO WHICH NOTICES ARE TO BE SENT
PURSUANT TO THE LOAN AGREEMENT. OBLIGORS EACH WAIVE ANY CLAIM THAT PHOENIX,
ARIZONA OR THE DISTRICT OF ARIZONA IS AN INCONVENIENT FORUM OR AN IMPROPER FORUM
BASED ON LACK OF VENUE. SHOULD OBLIGORS, OR ANY OF THEM, AFTER BEING SO SERVED,
FAIL TO APPEAR OR ANSWER TO ANY SUMMONS, COMPLAINT, PROCESS OR PAPERS SO SERVED
WITHIN THE NUMBER OF DAYS PRESCRIBED BY LAW AFTER THE MAILING THEREOF, SUCH
BORROWER(S) SHALL BE DEEMED IN DEFAULT AND AN ORDER AND/OR JUDGMENT MAY BE
ENTERED BY LENDER AGAINST SUCH BORROWER(S) AS DEMANDED OR PRAYED FOR IN SUCH
SUMMONS, COMPLAINT, PROCESS OR PAPERS. THE EXCLUSIVE CHOICE OF FORUM FOR
OBLIGORS SET FORTH IN THIS SECTION SHALL NOT BE DEEMED TO PRECLUDE THE
ENFORCEMENT, BY LENDER, OF ANY JUDGMENT OBTAINED IN ANY OTHER FORUM OR THE
TAKING, BY LENDER, OF ANY ACTION TO ENFORCE THE SAME IN ANY OTHER APPROPRIATE
JURISDICTION, AND OBLIGORS HEREBY WAIVE THE RIGHT TO COLLATERALLY ATTACK ANY
SUCH JUDGMENT OR ACTION.
24. WAIVER OF RIGHT TO JURY TRIAL. LENDER AND OBLIGORS ACKNOWLEDGE AND
-----------------------------
AGREE THAT ANY CONTROVERSY WHICH MAY ARISE UNDER ANY OF THE LOAN INSTRUMENTS OR
WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED THEREBY WOULD BE BASED UPON
DIFFICULT AND COMPLEX ISSUES AND, THEREFORE, THE PARTIES AGREE THAT ANY
LAWSUIT ARISING OUT OF ANY SUCH CONTROVERSY SHALL BE TRIED IN A COURT OF
COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.
25. Amendment. This Fourth Amendment and the other Loan Instruments
---------
executed prior or pursuant hereto constitute the entire agreement between the
parties hereto with respect to the transactions contemplated hereby or thereby
and supersede any prior agreements, whether written or oral, relating to the
subject matter hereof. Except as specifically amended herein, the Loan
Agreement shall remain in full force and effect. In the event of any conflict
between the terms and provisions of this Fourth Amendment and the terms and
provisions of the Loan Agreement, the terms and provisions of this Fourth
Amendment shall govern and prevail. Nothing contained in this Fourth Amendment
is intended to or shall be construed as relieving any person or entity, whether
a party to this Fourth Amendment, or not, of any of such person's or entity's
obligations to Lender.
26. All Loan Instruments. Each of the other Loan Instruments is
--------------------
amended so that any reference therein to a definition or agreement amended
hereby shall be deemed to be a reference to such definition or agreement, as
applicable, as amended hereby.
-10-
<PAGE>
27. Effectiveness. This Fourth Amendment shall not become effective unless
-------------
and until:
(a) Delivery of Documents: The applicable Obligor has delivered to
---------------------
Lender the following, each of which shall be in form and content satisfactory to
Lender:
(1) this Fourth Amendment;
(2) a corporate resolution and incumbency certificate of Borrower
authorizing the execution and delivery of this Fourth Amendment;
(3) evidence of K. Elnaggar's authority to execute and deliver
this Fourth Amendment on behalf of the Trust;
(4) the K. Elnaggar Guaranty;
(5) a Security Agreement and Shareholder Pledge Agreement (the
"Pledge Agreement"), together with assignments separate from certificate in
blank, and all certificates evidencing the shares of capital stock pledged, from
Trustee and K. Elnaggar, individually and as usufructuary under the Will;
(6) an opinion of counsel satisfactory to Lender; and
(7) such other documents and instruments as Lender may require.
(b) Payment of Fees. Borrower shall have paid or reimbursed
---------------
Lender for Lender's attorneys' fees and costs incurred in connection with this
Fourth Amendment.
[THE REMAINDER OF THIS PAGE
IS LEFT INTENTIONALLY BLANK]
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<PAGE>
IN WITNESS WHEREOF, this Fourth Amendment is executed as of the date first
above written.
LENDER:
GREYHOUND FINANCIAL
CORPORATION, a Delaware corporation
By:_______________________________________
Name: Ward B. Carr
-------------------------------------
Title: Vice President
-----------------------------------
OBLIGORS:
GDC ENGINEERING, INC., a Louisiana
corporation
By:_______________________________________
Name:_____________________________________
Title:____________________________________
__________________________________________
TRUST FOR THE BENEFIT OF TAREK ELNAGGAR,
SHARIF JOSEPH ELNAGGAR AND JEANNE-MARIE
ELNAGGAR, CREATED BY THE LAST WILL AND
TESTAMENT OF HAMEED AHMED ELNAGGAR DATED
MARCH 20, 1988, APPEARING THROUGH AND
REPRESENTED BY ITS DULY QUALIFIED TRUSTEE,
KATHLEEN J. ELNAGGAR
__________________________________________
KATHLEEN JORDAN ELNAGGAR, individually and
as Usufructuary under the Last Will and
Testament of Hameed Ahmed Elnaggar dated
March 20, 1988
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<PAGE>
EXHIBIT 5.8.A
PENDING LITIGATION
The following are all the actions, suits, arbitration proceedings or claims
pending or threatened against or maintained by Borrower in which the party
defendant has counterclaimed against Borrower:
1. R. Troy Boone, et al v. GDC Engineering, Inc., et al., Docket No.
-----------------------------------------------------
93-967-B- MS, United States District Court, Middle District of
Louisiana.
2. EEOC claim filed against Borrower by Irvin E. West, claiming violation
of the Age Discrimination Act.
3. EEOC claim filed against Borrower by Edward St. Romain, alleging
violation of the Americans With Disability Act.
4. EEOC claim filed against Borrower by Ricky LaGrange alleging racial
discrimination.
The following are all the actions, suits, arbitration proceedings or claims
pending or threatened against or maintained by the Succession in which the party
defendant has counterclaims against the Succession.
NONE.
The following are all the actions, suits, arbitration proceedings or claims
pending or threatened against or maintained by K. Elnaggar in which the party
defendant has counterclaimed against K. Elnaggar.
NONE.
<PAGE>
EXHIBIT 6.19
CONTINUING GUARANTY
THIS CONTINUING GUARANTY (the "Guaranty") is made as of December ___, 1994
by KATHLEEN J. ELNAGGAR, in her capacity as trustee of the testamentary trust
for the benefit of Tarek Elnaggar, Sharif Joseph Elnaggar and Jeanne-Marie
Elnaggar (the "Trust") created by the Last Will and Testament of Hameed Ahmed
Elnaggar dated March 20, 1988 (the "Will"), which Will was probated in The
Succession of Hameed Ahmed Elnaggar, Probate No. 56829, Nineteenth Judicial
District, Parish of East Baton Rouge, State of Louisiana, and KATHLEEN JORDAN
ELNAGGAR, one and the same as Kathleen J. Elnaggar, individually and in her
capacity as usufructuary under the Will, a person of the full age of majority
and a resident of Baton Rouge Parish, Louisiana (collectively, "Guarantor"), in
favor of GREYHOUND FINANCIAL CORPORATION, a Delaware corporation ("Lender").
WHEREAS, there is in effect a Loan Agreement dated December 30, 1992
between GDC Engineering, Inc., a Louisiana corporation ("Borrower"), and Lender,
as amended by Amendment to Loan Instruments dated June 30, 1993 among Borrower,
The Succession of Hameed Ahmed Elnaggar, Probate No. 56829, Nineteenth Judicial
District, Parish of East Baton Rouge, State of Louisiana, appearing through and
represented by its duly qualified executrix, Kathleen Jordan Elnaggar (the
"Succession"), Guarantor (each of Borrower, the Succession, the hereinafter
defined Trustee and Guarantor are sometimes hereinafter referred to individually
as an "Obligor" and collectively as the "Obligors") and Lender (the "First
Amendment"), Second Amendment to Loan Instruments dated October 26, 1993 among
Obligors and Lender (the "Second Amendment"), Third Amendment to Loan
Instruments dated April 1, 1994 among Obligors and Lender (the "Third
Amendment") and Fourth Amendment to Loan Instruments of even date herewith among
the Borrower, Guarantor,individually, as Trustee under the Last Will and
Testament of Hameed Ahmed Elnaggar dated March 20, 1988 (the "Will") and as
usufructuary under the Will, and Lender (the "Fourth Amendment and, together
with the First Amendment, Second Amendment and Third Amendment, the "Loan
Agreement"), pursuant to which Lender committed to loan to Borrower an amount
not to exceed the principal sum of $4,900,000 to refinance existing debt of
Borrower and $4,000,000 to fund certain capital expenditures (the "Loan"). All
capitalized terms used in this Guaranty but not otherwise defined herein shall
have the meanings ascribed thereto in the Loan Agreement;
WHEREAS, the Loan is evidenced by the Loan Agreement and a promissory note
dated December 30, 1992 from Borrower payable to Lender in the principal sum of
$8,900,000 (the "Note"), and secured by, among others, a Security Agreement and
Shareholder Pledge Agreement dated December 30, 1992 from the Succession and
Guarantor in favor of Lender and a Subordination and Stand-By Agreement dated
December 30, 1992 among the Succession, Guarantor, Borrower and Lender;
WHEREAS, the $4,000,000 commitment to fund certain capital expenditures
expired unused;
<PAGE>
WHEREAS, Borrower desires to sell all or substantially all of the assets or
capital stock of BCI, which sale requires the consent of Lender pursuant to the
Loan Instruments;
WHEREAS, Guarantor owns or controls 100% of the issued and outstanding
capital stock of Borrower and, accordingly, Guarantor has a direct financial
interest in inducing Lender to consent to the Approved BCI Sale (as defined in
the Fourth Amendment);
WHEREAS, one of the conditions precedent to the obligation of Lender to
consent to Approved BCI Sale is the execution by Guarantor of this Guaranty and
the performance by Guarantor of her obligations hereunder.
NOW, THEREFORE, in order to induce Lender to modify the Loan in accordance
with the terms and provisions set forth in the Fourth Amendment and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Guarantor hereby agrees as follows:
1. Definitions. Except as otherwise defined herein, all capitalized
-----------
terms used herein and in the recitals above shall have the meanings ascribed
thereto in the Loan Instruments.
2. Guaranty of Payment and Performance. Guarantor hereby unconditionally
-----------------------------------
and irrevocably guaranties to Lender the punctual payment and performance when
due, whether at stated maturity or by acceleration or otherwise, of Borrower's
Obligations (the obligations and liabilities of Guarantor hereunder and under
the Shareholder Pledge Agreement and the Shareholder Subordination Agreement and
any other instruments or agreements previously, concurrently or hereafter
executed and delivered by Guarantor in favor of Lender are sometimes hereinafter
referred to as the "Guarantor Obligations"). Guarantor agrees that this
Guaranty is a present and continuing guaranty of payment and not of
collectability, and that Lender shall not be required to prosecute collection,
enforcement or other remedies against Borrower, any other guarantor of
Borrower's Obligations or any other Person, or to enforce or resort to any of
the Collateral or other rights or remedies pertaining thereto, before calling on
Guarantor for payment. Guarantor agrees that if, for any reason, either
Borrower, any other Obligor or any other guarantor of Borrower's Obligations
shall fail or be unable to pay, punctually and fully, any of Borrower's
Obligations, Guarantor shall pay such obligations to Lender in full immediately
upon demand. Guarantor agrees that one or more successive actions may be brought
against Guarantor, as often as Lender deems advisable, until all of Guarantor's
Obligations and/or Borrower's Obligations are paid and performed in full.
Guarantor hereby further unconditionally guarantees to Lender the punctual and
faithful performance by Borrower of all duties, agreements and obligations of
Borrower contained in the Loan Instruments.
3. Continuing Guaranty. Guarantor agrees that the obligations of
-------------------
Guarantor pursuant to Section 1 above and any other provision of any of the Loan
---------
Instruments shall be primary obligations, shall not be subject to any
counterclaim, set-off, abatement, deferment or defense based upon any claim that
Guarantor may have against Lender, Borrower, any other guarantor of Borrower's
Obligations or any other Person, and shall remain in full force and effect
without regard to, and shall not be released, discharged or affected in any way
by, any circumstance or condition (whether or not Guarantor shall have any
knowledge thereof) including, without
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<PAGE>
limitation:
(a) any lack of validity or enforceability of any of the Loan
Instruments;
(b) any termination, amendment, modification or other change in any
of the Loan Instruments;
(c) any furnishing, exchange, substitution or release of any
Collateral, including, without limitation, any furnishing, exchange,
substitution or release of any Collateral which may be effected pursuant to
the terms of Section 7.9 of the Loan Agreement, or any failure to perfect
-----------
any Lien in any of the Collateral;
(d) any failure, omission or delay on the part of Borrower,
Guarantor, any other guarantor of Borrower's Obligations or Lender to
conform or comply with any term of any of the Loan Instruments or any
failure of Lender to give notice of any Incipient Default or Event of
Default;
(e) any waiver, compromise, release, settlement or extension of time
of payment or performance or observance of any of the obligations or
agreements contained in any of the Loan Instruments;
(f) any action or inaction by Lender under or in respect of any of
the Loan Instruments, any failure, lack of diligence, omission or delay on
the part of Lender to enforce, assert or exercise any right, power or
remedy conferred upon Lender in any of the Loan Instruments, or any other
action or inaction on the part of Lender;
(g) any voluntary or involuntary bankruptcy, insolvency,
reorganization, arrangement, readjustment, assignment for the benefit of
creditors, composition, receivership, liquidation, marshalling of assets
and liabilities or similar events or proceedings with respect to Borrower,
Guarantor or any other guarantor of Borrower's Obligations, as applicable,
or any of their respective Property or creditors, or any action taken by
any trustee or receiver or by any court in any such proceeding;
(h) any merger or consolidation of Borrower, Guarantor or any other
guarantor of Borrower's Obligations into or with any Person, or any sale,
lease or transfer of any of the assets of Borrower, Guarantor or any other
guarantor of Borrower's Obligations to any other Person;
(i) any change in the ownership of the capital stock of Borrower or
any other guarantor of Borrower's Obligations or any change in the
relationship between Borrower, Guarantor or any other guarantor of
Borrower's Obligations, or any termination of any such relationship;
(j) to the extent permitted by law, any release or discharge by
operation of law of Borrower, Guarantor or any other guarantor of
Borrower's Obligations from any obligation or agreement contained in any of
the Loan Instruments; or
-3-
<PAGE>
(k) to the extent permitted by law, any other occurrence,
circumstance, happening or event, whether similar or dissimilar to the
foregoing and whether foreseen or unforeseen, which otherwise might
constitute a legal or equitable defense or discharge of the liabilities of
a guarantor or surety or which otherwise might limit recourse against
Borrower or Guarantor.
4. Waivers. Guarantor unconditionally waives (i) notice of any of the
-------
matters referred to in Section 2 above, (ii) all notices which may be required
---------
by statute, rule of law or otherwise, now or hereafter in effect, to preserve
intact any rights against Guarantor, including, without limitation, any demand,
presentment and protest, proof of notice of non-payment under any of the Loan
Instruments and notice of any Incipient Default or any Event of Default or any
failure on the part of Borrower, Guarantor or any other guarantor of Borrower's
Obligations to perform or comply with any covenant, agreement, term or condition
of any of the Loan Instruments, (iii) any right to the enforcement, assertion or
exercise against Borrower, Guarantor or any other guarantor of Borrower's
Obligations of any right or remedy conferred under any of the Loan Instruments,
(iv) any requirement of diligence on the part of any Person, (v) any requirement
to exhaust any remedies or to mitigate the damages resulting from any default
under any of the Loan Instruments, (vi) any notice of any sale, transfer or
other disposition of any right, title or interest of Lender under any of the
Loan Instruments, and (vii) the benefit of all principles or provisions of law,
statutory or otherwise, which are or might be in conflict with the terms of this
Guaranty, including without limitation any right to exhaustion of any security
for the Note prior to any action hereunder or any requirement that Lender
relinquish any lien or security interest in any collateral prior to commencing
an action hereunder or after obtaining a judgment hereunder until payment and
performance of all of the obligations and liabilities under the Note and Loan
Instruments have been satisfied in full, and the provisions of Arizona Revised
Statutes, Sections 12-1566, 12-1641 et seq., 33-814, 44-142 and 16 Arizona
------
Revised Statutes, Rules of Civil Procedure, Rule 17(f), and Guarantor agrees
that its obligations shall not be affected by any circumstances, whether or not
referred to herein, which might otherwise constitute a legal or equitable
discharge of a guarantor or surety.
5. Reinstatement. The obligations of Guarantor pursuant to this Guaranty
-------------
shall continue to be effective or automatically be reinstated, as the case may
be, if at any time payment of any of Borrower's Obligations or Guarantor's
Obligations is rescinded or otherwise must be restored or returned by Lender
upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of
Guarantor, Borrower or any other guarantor of Borrower's Obligations or
otherwise, all as though such payment had not been made.
6. Successors and Assigns. This Guaranty shall inure to the benefit of
----------------------
Lender, its successors and assigns. This Guaranty shall be binding on Guarantor
and her successors and assigns, heirs and personal representatives, and shall
continue in full force and effect until all of Borrower's Obligations and
Guarantor's Obligations are paid and performed in full.
7. No Waiver of Rights. No delay or failure on the part of Lender to
-------------------
exercise any right, power or privilege under this Guaranty or any of the other
Loan Instruments shall operate as a waiver thereof, and no single or partial
exercise of any right, power or privilege shall preclude any other or
-4-
<PAGE>
further exercise thereof or the exercise of any other power or right, or be
deemed to establish a custom or course of dealing or performance between the
parties hereto. The rights and remedies provided herein are cumulative and not
exclusive of any rights or remedies provided by law. No notice to or demand on
Guarantor in any case shall entitle Guarantor to any other or further notice or
demand in the same, similar or other circumstance.
8. Modification. The terms of this Guaranty may be waived, discharged,
------------
or terminated only by an instrument in writing signed by the party against which
enforcement of the change, waiver, discharge or termination is sought. No
amendment, modification, waiver or other change of any of the terms of this
Guaranty shall be effective without the prior written consent of Lender.
9. Costs and Expenses. Guarantor agrees to pay on demand all costs and
------------------
expenses incurred by or on behalf of Lender (including, without limitation,
expenses and attorneys' fees) in enforcing Borrower's Obligations or Guarantor's
Obligations.
10. Joinder. Guarantor agrees that any action to enforce this Guaranty
-------
may be brought against Guarantor without any reimbursement or joinder of
Borrower or any other guarantor of Borrower's Obligations in such action.
11. Severability. If any provision of this Guaranty is deemed to be
------------
invalid by reason of the operation of any law, or by reason of the
interpretation placed thereon by any court or other Governmental Body, this
Guaranty shall be construed as not containing such provision and the invalidity
of such provision shall not affect the validity of any other provision hereof,
and any and all other provisions hereof which otherwise are lawful and valid
shall remain in full force and effect.
12. JURISDICTION. GUARANTOR HEREBY AGREES THAT ALL ACTIONS OR PROCEEDINGS
------------
INITIATED BY GUARANTOR AND ARISING DIRECTLY OR INDIRECTLY OUT OF THIS GUARANTY
OR ANY OR ALL OF THE OTHER LOAN INSTRUMENTS TO WHICH GUARANTOR IS A PARTY SHALL
BE LITIGATED IN THE SUPERIOR COURT OF ARIZONA, MARICOPA COUNTY DIVISION, OR THE
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA, OR, IF LENDER
INITIATES SUCH ACTION, IN ADDITION TO THE FOREGOING COURTS, ANY COURT IN WHICH
LENDER SHALL INITIATE OR REMOVE SUCH ACTION, TO THE EXTENT SUCH COURT OTHERWISE
HAS JURISDICTION. GUARANTOR HEREBY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO
SUCH JURISDICTION IN ANY ACTION OR PROCEEDING COMMENCED IN OR REMOVED BY LENDER
TO ANY OF SUCH COURTS, AND HEREBY AGREES THAT PERSONAL SERVICE OF THE SUMMONS
AND COMPLAINT, OR OTHER PROCESS OR PAPERS ISSUED THEREIN, MAY BE MADE IN THE
MANNER PROVIDED BELOW, AND AGREES THAT SERVICE OF SUCH SUMMONS AND COMPLAINT OR
OTHER PROCESS OR PAPERS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED IN
THE MANNER SET FORTH IN SECTION 17 BELOW. GUARANTOR WAIVES ANY CLAIM THAT
----------
PHOENIX, ARIZONA OR THE DISTRICT OF ARIZONA IS AN INCONVENIENT FORUM OR AN
IMPROPER FORUM BASED ON LACK OF VENUE. SHOULD GUARANTOR, AFTER BEING SO SERVED,
FAIL TO APPEAR OR ANSWER TO ANY SUMMONS, COMPLAINT, PROCESS OR PAPERS SO SERVED
WITHIN THE PERIOD OF TIME PRESCRIBED BY LAW
-5-
<PAGE>
AFTER THE MAILING THEREOF, GUARANTOR SHALL BE DEEMED IN DEFAULT AND AN ORDER
AND/OR JUDGMENT MAY BE ENTERED BY LENDER AGAINST GUARANTOR AS DEMANDED OR PRAYED
FOR IN SUCH SUMMONS, COMPLAINT, PROCESS OR PAPERS. THE EXCLUSIVE CHOICE OF FORUM
FOR GUARANTOR SET FORTH IN THIS SECTION 12 SHALL NOT BE DEEMED TO PRECLUDE THE
----------
ENFORCEMENT BY LENDER OF ANY JUDGMENT OBTAINED IN ANY OTHER FORUM OR THE TAKING
BY LENDER OF ANY ACTION TO ENFORCE THE SAME IN ANY OTHER APPROPRIATE
JURISDICTION.
______________________
GUARANTOR'S INITIALS
13. APPLICABLE LAW. THIS GUARANTY SHALL BE GOVERNED AS TO VALIDITY,
--------------
INTERPRETATION, EFFECT AND IN ALL OTHER RESPECTS BY LAWS AND DECISIONS OF THE
STATE OF ARIZONA. FOR PURPOSES OF THIS SECTION 13, THIS GUARANTY SHALL BE
-----------
DEEMED TO BE PERFORMED AND MADE IN THE STATE OF ARIZONA.
14. WAIVER OF RIGHT TO JURY TRIAL. GUARANTOR ACKNOWLEDGES AND AGREES THAT
-----------------------------
ANY CONTROVERSY WHICH MAY ARISE UNDER THIS GUARANTY WOULD BE BASED UPON
DIFFICULT AND COMPLEX ISSUES AND THEREFORE, GUARANTOR AGREES THAT ANY COURT
PROCEEDING ARISING OUT OF ANY SUCH CONTROVERSY WILL BE TRIED IN A COURT OF
COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.
______________________
GUARANTOR'S INITIALS
15. WAIVER OF RIGHTS AGAINST BORROWER. NOTWITHSTANDING ANYTHING TO THE
---------------------------------
CONTRARY WHICH MAY BE CONTAINED HEREIN, GUARANTOR HEREBY UNCONDITIONALLY AND
IRREVOCABLY AGREES THAT SHE (I) WILL NOT AT ANY TIME ASSERT AGAINST BORROWER ANY
RIGHT OR CLAIM, AT LAW OR IN EQUITY, TO INDEMNIFICATION, REIMBURSEMENT,
CONTRIBUTION, RESTITUTION OR PAYMENT FOR OR WITH RESPECT TO ANY AND ALL AMOUNTS
GUARANTOR MAY PAY OR BE OBLIGATED TO PAY TO LENDER, INCLUDING, WITHOUT
LIMITATION, BORROWER'S OBLIGATIONS, GUARANTOR'S OBLIGATIONS AND ANY AND ALL
OTHER OBLIGATIONS WHICH GUARANTOR MAY PERFORM, SATISFY OR DISCHARGE, UNDER OR
WITH RESPECT TO THIS GUARANTY, AND (II) WAIVES AND RELEASES ALL SUCH RIGHTS AND
CLAIMS, AT LAW OR IN EQUITY, TO INDEMNIFICATION, REIMBURSEMENT, CONTRIBUTION,
RESTITUTION OR PAYMENT WHICH GUARANTOR MAY HAVE NOW OR AT ANY TIME AGAINST
BORROWER. GUARANTOR FURTHER UNCONDITIONALLY AND IRREVOCABLY AGREES THAT SHE
SHALL HAVE NO RIGHT OF SUBROGATION, AND WAIVES ANY RIGHT TO ENFORCE ANY REMEDY
WHICH LENDER NOW HAS OR HEREAFTER MAY HAVE AGAINST BORROWER AND WAIVES ANY
DEFENSE BASED UPON AN ELECTION OF REMEDIES BY LENDER, WHICH DESTROYS OR
-6-
<PAGE>
OTHERWISE IMPAIRS ANY SUBROGATION RIGHTS OF GUARANTOR AND/OR THE RIGHT OF
GUARANTOR TO PROCEED AGAINST BORROWER FOR REIMBURSEMENT.
16. TIME OF THE ESSENCE. TIME FOR THE PERFORMANCE OF GUARANTOR'S
-------------------
OBLIGATIONS UNDER THIS GUARANTY IS OF THE ESSENCE.
17. Notices. All notices and writing to Guarantor under this Guaranty
-------
shall be in writing and shall be (i) delivered in person or (ii) mailed, postage
prepaid, either by registered or certified mail, return receipt requested, or by
overnight express carrier, addressed in each case as follows:
Guarantor: Kathleen A. Elnaggar
GDC Engineering Inc.
822 Neosho Avenue
Baton Rouge, Louisiana 70802
Telecopy No: (504) 383-2789
With a Copy To: John Glover
Taylor, Porter, Brooks & Phillips, L.L.P.
Premier Bank Building, 8th Floor
451 Florida Street
Baton Rouge, Louisiana 70802
Telecopy No: (504) 346-8049
or to any other address as Guarantor shall designate in a written notice to
Lender. All notices sent pursuant to the terms of this Section 18 shall be
----------
deemed received (i) if personally delivered, then on the date of delivery, (ii)
if sent by overnight, express carrier, on the next Business Day immediately
following the day sent, or (iii) if sent by registered or certified mail, on the
earlier of the fifth Business Day following the day sent or when actually
received.
18. Financial Statements. As soon as available and in any event within
--------------------
120 days after the end of each calendar year, Guarantor shall provide to Lender
a personal financial statement as of December 31 of the immediately prior
calendar year, in a form and with a certification satisfactory to Lender, and a
true, correct and complete copy of Guarantor's Federal tax return, as filed, for
the immediately prior calendar year.
-7-
<PAGE>
IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be executed as of
the date first above written.
______________________________________
TRUST FOR THE BENEFIT OF TAREK ELNAGGAR,
SHARIF JOSEPH ELNAGGAR AND JEANNE-MARIE
ELNAGGAR, CREATED BY THE LAST WILL AND
TESTAMENT OF HAMEED AHMED ELNAGGAR DATED
MARCH 20, 1988, APPEARING THROUGH AND
REPRESENTED BY ITS DULY QUALIFIED
TRUSTEE, KATHLEEN J. ELNAGGAR
______________________________________
KATHLEEN JORDAN ELNAGGAR, individually
and as Usufructuary under the Last Will
and Testament of Hameed Ahmed Elnaggar
dated March 20, 1988
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<PAGE>
CONSENT
The undersigned, the beneficiaries of the testamentary trust for the
benefit of Tarek Elnaggar, Sharif Joseph Elnaggar and Jeanne-Marie Elnaggar
created by the Last Will and Testament of Hameed Ahmed Elnaggar dated March 20,
1988, which Will was probated in The Succession of Hameed Ahmed Elnaggar,
Probate No. 56829, Nineteenth Judicial District, Parish of East Baton Rouge,
State of Louisiana, hereby consent to the execution, delivery and performance of
this Guaranty by the Trustee on behalf of the Trust and agree that the assets of
the Trust shall be liable for the obligations of the Trust, as Guarantor under
this Guaranty.
Dated: December __, 1994.
_________________________________
Sharif Joseph Elnaggar
_________________________________
Tarek Elnaggar
_________________________________
Jeanne-Marie Elnaggar
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<PAGE>
FIFTH AMENDMENT TO LOAN INSTRUMENTS
THIS FIFTH AMENDMENT TO LOAN INSTRUMENTS (the "Fifth Amendment") is dated
as of this ____ day of March, 1995 by and among GDC ENGINEERING, INC., a
Louisiana corporation ("Borrower"), KATHLEEN J. ELNAGGAR in her capacity as
trustee (the "Trustee") of the testamentary trust for the benefit of Tarek
Elnaggar, Sharif Joseph Elnaggar and Jeanne-Marie Elnaggar (the "Trust") created
by the Last Will and Testament of Hameed Ahmed Elnaggar dated March 20, 1988
(the "Will"), which Will was probated in THE SUCCESSION OF HAMEED AHMED
ELNAGGAR, PROBATE NO. 56829, NINETEENTH JUDICIAL DISTRICT, PARISH OF EAST BATON
ROUGE, STATE OF LOUISIANA (the "Succession"), KATHLEEN JORDAN ELNAGGAR, one and
the same as Kathleen J. Elnaggar, individually and in her capacity as
usufructuary under the Will, a person of the full age of majority and a resident
of Baton Rouge Parish, Louisiana ("K. Elnaggar") (each of Borrower, the Trustee,
the Succession and K. Elnaggar are sometimes hereinafter referred to
individually as an "Obligor" and collectively as the "Obligors"), and FINOVA
CAPITAL CORPORATION, a Delaware Corporation, formerly known as Greyhound
Financial Corporation ("Lender").
WHEREAS, there is in effect a Loan Agreement dated December 30, 1992
between Borrower and Lender, as amended by Amendment to Loan Instruments dated
June 30, 1993 among Obligors and Lender, Second Amendment to Loan Instruments
dated October 26, 1993 among Obligors and Lender, Third Amendment to Loan
Instruments dated April 1, 1994 among Obligors and Lender and Fourth Amendment
to Loan Instruments dated December 30, 1994 among Obligors and Lender
(collectively, together with this Fifth Amendment, the "Loan Agreement"),
pursuant to which Lender committed to loan to Borrower an amount not to exceed
the principal sum of $4,900,000 to refinance existing debt of Borrower and
$4,000,000 to fund certain capital expenditures (the "Loan");
WHEREAS, Obligors have requested that Lender modify the financial covenant
with respect to Accounts Receivable Turnover;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, Obligors and Lender,
intending to be legally bound, agree as follows:
1. Definitions. Except as otherwise defined herein, all capitalized
-----------
terms used herein shall have the meanings ascribed thereto in the Loan
Agreement.
2. Recitals. The Recitals set forth above are true and accurate and are
--------
incorporated herein by this reference.
3. Amounts Outstanding. Obligors hereby acknowledge and agree that (a)
-------------------
as of February 2, 1995, the principal amount of the Loan outstanding is
$3,445,843.55 and the accrued and unpaid interest is $1,165.40, and (b) as of
the date of execution hereof by Obligors,
<PAGE>
there are no defenses, claims or offsets to payment of such principal amount and
the other indebtedness evidenced by the Note.
4. Accounts Receivable Turnover. Section 7.20 of the Loan Agreement is
----------------------------
hereby deleted in its entirety and the following inserted therefor:
7.20 Accounts Receivable Turnover. Commencing
----------------------------
Quarter Period with the Four ending November 30, 1994,
permit the Accounts Receivable Turnover for the Four
Quarter Periods ending February 28, May 31 and August
31 to be greater than 45 days, or permit the Accounts
Receivable Turnover for the Four Quarter Period ending
November 30 to be greater than 60 days.
5. Annual Statements. Section 6.3.3 of the Loan Agreement is hereby
-----------------
amended to add the following:
Notwithstanding anything to the contrary contained
herein, the Basic Financial Statements and the
statements of Operating Cash Flow and Excess Cash Flow
for Borrower's fiscal year end November 30, 1994 only,
shall be delivered to Lender as soon as available, but
in no event later than 120 days after the close of
Borrower's fiscal year.
6. Notices. Section 11.1 of the Loan Agreement with respect to the
-------
notices to Lender is hereby deleted in its entirety and the following inserted
therefor:
FINOVA Capital Corporation
1850 North Central Avenue
P.O. Box 2209
Phoenix, Arizona 85002-2209
Attention: Vice President, Operations Management
Telecopy No.: (602) 207-6833
Copy to: FINOVA Capital Corporation
1850 North Central Avenue
P.O. Box 2209
Phoenix, Arizona 85002-2209
Attention: Vice President, Law
Telecopy No.: (602) 207-5036
and
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<PAGE>
FINOVA Capital Corporation
10 South LaSalle Street
Suite 2121
Chicago, Illinois 60603
Attention: Adolph G. Letke
Telecopy No.: (312) 855-1779
and
Fennemore Craig
Two North Central Avenue
Suite 2200
Phoenix, Arizona 85004-2390
Attention: Jay S. Kramer
Telecopy No.: (602) 257-8527
7. Release. Each Obligor and her or its officers, directors,
-------
shareholders, employees, predecessors, personal representatives, executors,
executrixes, heirs, successors and assigns, each hereby fully release, remise
and forever discharge Lender and all past and present officers, directors,
agents, employees, servants, partners, shareholders, attorneys and managers of
Lender, and all of their respective heirs, personal representatives,
predecessors, successors and assigns, for, from and against any and all claims,
demands, causes of action, controversies, offsets, obligations, losses, damages,
and liabilities of every kind and character whatsoever, including without
limitation any action, omission, misrepresentation or other basis of liability
founded either in tort or contract and the duties arising thereunder that said
Obligor, or any of her or its respective predecessors, successors and assigns,
or any one or more of them, has had in the past, or now has, whether known or
unknown, whether currently existing or hereafter asserted, relating in any
manner to, or arising from or in connection with, the indebtedness evidenced by
the Note, any negotiations, loan administration, exercise of rights and
remedies, payment, offset with respect to, or other matter relating to such
indebtedness, any Collateral securing payment and performance of such
indebtedness, or any matter preliminary to the execution and delivery by
Obligors and Lender of this Fifth Amendment, or any statement, action, omission
or conduct of Lender or any of its officers, directors, agents, employees,
servants, partners, shareholders, attorneys and managers relating in any manner
to such indebtedness, Collateral or this Fifth Amendment; provided, however,
that the foregoing release and discharge shall not apply to the obligations of
Lender expressly set forth in this Fifth Amendment or first arising after the
date of this Fifth Amendment.
8. Modifications. No amendment, modification, change, waiver, release or
-------------
discharge hereof or hereunder shall be effective unless evidenced by an
instrument in writing signed by the party against whom enforcement is sought.
9. Severability. If any provision hereof is invalid or unenforceable,
------------
the other provisions hereof shall remain in full force and effect and shall be
liberally construed in favor of Lender in order to effectuate the other
provisions hereof.
-3-
<PAGE>
10. Binding Nature. The provisions of this Fifth Amendment shall be
--------------
binding upon, and inure to the benefit of, the respective successors and assigns
(including without limitation, any receiver, debtor in possession or trustee in
bankruptcy) of Lender and any of Obligors.
11. APPLICABLE LAW. THE OBLIGATIONS OF OBLIGORS HEREUNDER, UNDER THE LOAN
--------------
AGREEMENT, AS MODIFIED HEREBY, AND UNDER THE OTHER LOAN INSTRUMENTS, ARE TO BE
PERFORMED IN, AND THIS FIFTH AMENDMENT IS, AND THE LOAN AGREEMENT AND OTHER LOAN
INSTRUMENTS HAVE BEEN, EXECUTED, DELIVERED AND ACCEPTED IN, AND THIS FIFTH
AMENDMENT, THE LOAN AGREEMENT, AS MODIFIED HEREBY, AND THE OTHER LOAN
INSTRUMENTS SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE INTERNAL
LAWS AND DECISIONS OF, THE STATE OF ARIZONA (WITHOUT REGARD FOR ITS CONFLICTS OF
LAW PRINCIPLES), AND BY EXECUTION HEREOF OBLIGORS AND LENDER EACH AGREE THAT
SUCH LAWS AND DECISIONS OF THE STATE OF ARIZONA SHALL GOVERN THIS FIFTH
AMENDMENT, THE LOAN AGREEMENT, AS MODIFIED HEREBY, AND THE OTHER LOAN
INSTRUMENTS, NOTWITHSTANDING THE FACT THAT THERE MAY BE OTHER JURISDICTIONS
WHICH MAY BEAR A REASONABLE RELATIONSHIP TO THE TRANSACTIONS CONTEMPLATED
HEREBY; PROVIDED, HOWEVER, THAT WITH RESPECT TO PROCEDURAL AND SUBSTANTIVE
MATTERS RELATING ONLY TO THE CREATION, PERFECTION AND ENFORCEMENT BY LENDER OF
ITS RIGHTS AND REMEDIES AGAINST ANY REAL OR PERSONAL PROPERTY COLLATERAL LOCATED
IN ANY STATE OTHER THAN ARIZONA, SUCH MATTERS SHALL BE GOVERNED BY THE LAWS OF
THE STATE IN WHICH SUCH PROPERTY IS LOCATED.
12. JURISDICTION AND VENUE. OBLIGORS HEREBY AGREE THAT ALL ACTIONS OR
----------------------
PROCEEDINGS INITIATED BY OBLIGORS, OR ANY OF THEM, AND ARISING DIRECTLY OR
INDIRECTLY OUT OF THE LOAN INSTRUMENTS SHALL BE LITIGATED IN THE SUPERIOR COURT
OF ARIZONA, MARICOPA COUNTY DIVISION, OR THE UNITED STATES DISTRICT COURT FOR
THE DISTRICT OF ARIZONA OR, IF LENDER INITIATES SUCH ACTION, IN ADDITION TO THE
FOREGOING COURTS, ANY COURT IN WHICH LENDER SHALL INITIATE SUCH ACTION, TO THE
EXTENT SUCH COURT HAS JURISDICTION. OBLIGORS HEREBY EXPRESSLY SUBMIT AND CONSENT
IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR PROCEEDING COMMENCED BY LENDER
IN ANY OF SUCH COURTS, AND HEREBY WAIVE PERSONAL SERVICE OF THE SUMMONS AND
COMPLAINT, OR OTHER PROCESS OF PAPERS ISSUED THEREIN, AND AGREE THAT SERVICE OF
SUCH SUMMONS AND COMPLAINT OR OTHER PROCESS OR PAPERS MAY BE MADE BY REGISTERED
OR CERTIFIED MAIL ADDRESSED TO OBLIGORS, OR ANY OF THEM, AT THE ADDRESS TO WHICH
NOTICES ARE TO BE SENT PURSUANT TO THE LOAN AGREEMENT. OBLIGORS EACH WAIVE ANY
CLAIM THAT PHOENIX, ARIZONA OR THE DISTRICT OF ARIZONA IS AN INCONVENIENT FORUM
OR AN IMPROPER FORUM BASED ON LACK OF VENUE. SHOULD OBLIGORS, OR ANY OF THEM,
AFTER BEING SO
-4-
<PAGE>
SERVED, FAIL TO APPEAR OR ANSWER TO ANY SUMMONS, COMPLAINT, PROCESS OR PAPERS SO
SERVED WITHIN THE NUMBER OF DAYS PRESCRIBED BY LAW AFTER THE MAILING THEREOF,
SUCH BORROWER(S) SHALL BE DEEMED IN DEFAULT AND AN ORDER AND/OR JUDGMENT MAY BE
ENTERED BY LENDER AGAINST SUCH BORROWER(S) AS DEMANDED OR PRAYED FOR IN SUCH
SUMMONS, COMPLAINT, PROCESS OR PAPERS. THE EXCLUSIVE CHOICE OF FORUM FOR
OBLIGORS SET FORTH IN THIS SECTION SHALL NOT BE DEEMED TO PRECLUDE THE
ENFORCEMENT, BY LENDER, OF ANY JUDGMENT OBTAINED IN ANY OTHER FORUM OR THE
TAKING, BY LENDER, OF ANY ACTION TO ENFORCE THE SAME IN ANY OTHER APPROPRIATE
JURISDICTION, AND OBLIGORS HEREBY WAIVE THE RIGHT TO COLLATERALLY ATTACK ANY
SUCH JUDGMENT OR ACTION.
13. WAIVER OF RIGHT TO JURY TRIAL. LENDER AND OBLIGORS ACKNOWLEDGE AND
-----------------------------
AGREE THAT ANY CONTROVERSY WHICH MAY ARISE UNDER ANY OF THE LOAN INSTRUMENTS OR
WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED THEREBY WOULD BE BASED UPON
DIFFICULT AND COMPLEX ISSUES AND, THEREFORE, THE PARTIES AGREE THAT ANY LAWSUIT
ARISING OUT OF ANY SUCH CONTROVERSY SHALL BE TRIED IN A COURT OF COMPETENT
JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.
14. Amendment. This Fifth Amendment and the other Loan Instruments
---------
executed prior or pursuant hereto constitute the entire agreement between the
parties hereto with respect to the transactions contemplated hereby or thereby
and supersede any prior agreements, whether written or oral, relating to the
subject matter hereof. Except as specifically amended herein, the Loan Agreement
shall remain in full force and effect. In the event of any conflict between the
terms and provisions of this Fifth Amendment and the terms and provisions of the
Loan Agreement, the terms and provisions of this Fifth Amendment shall govern
and prevail. Nothing contained in this Fifth Amendment is intended to or shall
be construed as relieving any person or entity, whether a party to this Fifth
Amendment, or not, of any of such person's or entity's obligations to Lender.
15. Effectiveness. This Fifth Amendment shall not become effective unless
-------------
and until Borrower shall have paid to the Persons entitled thereto the following
fees and expenses:
(1) Lender's attorneys' fees and costs incurred in connection
with this Fifth Amendment.
(2) an administration fee of $500 to Lender in connection with
the documentation of this Fifth Amendment.
-5-
<PAGE>
IN WITNESS WHEREOF, this Fifth Amendment is executed as of the date first
above written.
LENDER:
FINOVA CAPITAL CORPORATION, a
Delaware corporation
By:_________________________________________
Name:_______________________________________
Title:______________________________________
OBLIGORS:
GDC ENGINEERING, INC., a Louisiana
corporation
By:_________________________________________
Name:_______________________________________
Title:______________________________________
TRUST FOR THE BENEFIT OF TAREK ELNAGGAR,
SHARIF JOSEPH ELNAGGAR AND JEANNE-MARIE
ELNAGGAR, CREATED BY THE LAST WILL AND
TESTAMENT OF HAMEED AHMED ELNAGGAR DATED
MARCH 20, 1988, APPEARING THROUGH AND
REPRESENTED BY ITS DULY QUALIFIED TRUSTEE,
KATHLEEN J. ELNAGGAR
___________________________________________
KATHLEEN JORDAN ELNAGGAR,
individually and as Usufructuary under the
Last Will and Testament of Hameed Ahmed
Elnaggar dated March 20, 1988
-6-
<PAGE>
Exhibit 4(b)
SIXTH AMENDMENT TO LOAN INSTRUMENTS
THIS SIXTH AMENDMENT TO LOAN INSTRUMENTS (the "Sixth Amendment") is
dated as of this 15th day of March, 1996 by and among GDC ENVIRO-SOLUTIONS,
INC., a Louisiana corporation, f/k/a GDC Engineering Inc. ("Borrower"), KATHLEEN
J. ELNAGGAR in her capacity as trustee of the testamentary trust for the benefit
of Tarek Elnaggar, Sharif Joseph Elnaggar and Jeanne-Marie Elnaggar (the
"Trust") created by the Last Will and Testament of Hameed Ahmed Elnaggar dated
March 20, 1988, and individually (collectively, "Kathleen J. Elnaggar"), GDC
HOLDINGS CORPORATION, a Louisiana corporation ("Holdings"), and FINOVA CAPITAL
CORPORATION, a Delaware Corporation, f/k/a Greyhound Financial Corporation
("Lender").
WHEREAS, there is in effect a Loan Agreement dated December 30, 1992
between Borrower and Lender, as amended by Amendment to Loan Instruments dated
June 30, 1993 among Borrower, Kathleen J. Elnaggar and Lender, Second Amendment
to Loan Instruments dated October 26, 1993 among Borrower, Kathleen J. Elnaggar
and Lender, Third Amendment to Loan Instruments dated April 1, 1994 among
Borrower, Kathleen J. Elnaggar and Lender, Fourth Amendment to Loan Instruments
dated December 30, 1994 among Borrower, Kathleen J. Elnaggar and Lender and
Fifth Amendment to Loan Instruments dated March 10, 1995 among Borrower,
Kathleen J. Elnaggar and Lender (collectively, together with this Sixth
Amendment, the "Loan Agreement"), pursuant to which Lender committed to loan to
Borrower an amount not to exceed the principal sum of $4,900,000 to refinance
existing debt of Borrower and $4,000,000 to fund certain capital expenditures
(the "Loan");
WHEREAS, Kathleen J. Elnaggar gifted 527,969 shares of her Borrower
Capital Stock to Tarek Elnaggar and Tarek Elnaggar pledged to Lender all of the
Borrower Capital Stock now owned or hereafter acquired by Tarek Elnaggar to
secure the payment and performance of the obligations of Borrower to Lender;
WHEREAS, Borrower sold 394,160 shares of the issued Borrower Capital
Stock to Harry C. Conger and Harry C. Conger pledged to Lender all of the
Borrower Capital Stock now owned or hereafter acquired by Harry C. Conger to
secure the payment and performance of the obligations of Borrower to Lender;
WHEREAS, Borrower issued to James H. Hutchinson two (2) 1995 Class A
Warrants (Nos. 1 and 2) for the purchase of 50,000 shares each of the Borrower
Capital Stock and Borrower issued to B. Jim Porter four (4) 1995 Class A
Warrants (Nos. 3, 4, 5 and 6) for the purchase of 50,000 shares each of the
Borrower Capital Stock (collectively, the "Warrants");
WHEREAS, Kathleen J. Elnaggar, Tarek Elnaggar, Harry C. Conger, B. Jim
Porter, and James H. Hutchinson (collectively, the "Individual Pledgors")
executed and delivered to Lender that certain Security Agreement and Shareholder
Pledge Agreement dated August 21, 1995 (the "Individual Pledge Agreement") and
delivered to Lender all of the issued and outstanding Borrower Capital Stock;
<PAGE>
WHEREAS, Lender timely and properly delivered the notice of exercise of the
payment of Excess Cash Flow pursuant to Section 2.9.2 of the Loan Agreement, for
the period ending November 30, 1994;
WHEREAS, the Individual Pledgors, Borrower and Holdings desire to (a)
exchange all of the Borrower Capital Stock for all of the capital stock of
Holdings pursuant to Section 351 of the Internal Revenue Code of 1986, as
amended (the "GDC/Holdings Stock Exchange"), (b) exchange the Warrants for
warrants for the capital stock of Holdings, (c) cause Holdings to guarantee to
Lender the payment and performance of the obligations of Borrower on a limited
recourse basis (the "Holdings Guaranty") and pledge all of the Borrower Capital
Stock to secure the payment and performance of the obligations of Borrower and
Holdings (the "Holdings Pledge Agreement"), and (d) engage in certain other
transactions as more fully described herein;
WHEREAS, the GDC/Holdings Stock Exchange and such other transactions
require the consent of Lender and waiver by Lender of certain of the provisions
of the Loan Agreement and Loan Instruments;
WHEREAS, in consideration of the agreements of Lender contained herein,
Borrower will pay Lender a Profit Participation Fee of $500,000 and a
Restructure Fee of $300,000, which is based upon calculation of the Profit
Participation Fee as a Call as of August 31, 1995; and
WHEREAS, Borrower desires that Lender provide a new equipment facility in
an amount not to exceed $850,000 for acquisition of equipment in connection with
the IT Contract and any other Advance Contracts approved by Lender;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, Borrower, Kathleen J.
Elnaggar and Lender, intending to be legally bound, agree as follows:
1. Definitions. Except as otherwise defined herein, all capitalized
-----------
terms used herein and in the Recitals above shall have the meanings ascribed
thereto in the Loan Agreement.
2. Recitals. The Recitals set forth above are true and accurate and are
--------
incorporated herein by this reference.
3. Amounts Outstanding. Borrower, Holdings and Kathleen J. Elnaggar
-------------------
hereby acknowledge and agree that (a) as of, and including, February 29, 1996,
the principal amount of the Loan outstanding is $2,766,327.63 and the accrued
and unpaid interest is $25,087.06, and (b) as of the date of execution hereof by
Borrower, Holdings and Kathleen J. Elnaggar, there are no defenses, claims or
offsets to payment of such principal amount and the other indebtedness evidenced
by the Note.
4. Representations, Warranties, Acknowledgments and Agreements. As
-----------------------------------------------------------
material inducements to Lender to enter into this Sixth Amendment, and
acknowledging Lender's reliance
-2-
<PAGE>
upon the truth and accuracy thereof, Borrower with respect to subsections (a)
through (e), Holdings with respect to subsections (f) through (j), Kathleen J.
Elnaggar, as trustee with respect to subsections (k) through (n), and Kathleen
J. Elnaggar, individually, with respect to subsections (o) through (q),
represent, warrant and covenant that:
(a) Borrower is a corporation, duly organized, validly existing and
in good standing under the laws of the State of Louisiana.
(b) This Sixth Amendment has been duly authorized by all necessary
corporate action and has been duly executed and delivered by an authorized
officer of Borrower, and the Sixth Amendment constitutes a legal, valid and
binding agreement enforceable against Borrower in accordance with its terms;
(c) As of the date hereof, Borrower is not the subject of a pending
bankruptcy proceeding and Borrower is not aware of any threatened bankruptcy
proceeding against Borrower nor is Borrower presently contemplating filing such
a proceeding;
(d) Except as disclosed in EXHIBIT 5.8.A hereof, there are no
lawsuits pending or threatened against Borrower, or instituted by Borrower in
which the party defendant has counterclaimed against Borrower;
(e) The execution and delivery of this Sixth Amendment and any other
instruments executed and delivered to Lender concurrently herewith, and the full
and complete performance of the provisions hereof will not result in any breach
of, or constitute a default under, or result in the creation of any lien, charge
or encumbrance upon any property or assets of Borrower under any indenture,
mortgage, deed of trust, bank loan or credit agreement or other instrument to
which Borrower is a party or by which Borrower is bound;
(f) Holdings is a corporation, duly organized, validly existing and
in good standing under the laws of the State of Louisiana.
(g) This Sixth Amendment, the Holdings Guaranty and the Holdings
Pledge Agreement have been duly authorized by all necessary corporate action and
have been duly executed and delivered by an authorized officer of Holdings, and
the Sixth Amendment, the Holdings Guaranty and the Holding Pledge Agreement
constitute legal, valid and binding agreements enforceable against Holdings in
accordance with their terms;
(h) As of the date hereof, Holdings is not the subject of a pending
bankruptcy proceeding and Holdings is not aware of any threatened bankruptcy
proceeding against Holdings nor is Holdings presently contemplating filing such
a proceeding;
(i) There are no lawsuits pending or threatened against Holdings, or
instituted by Holdings in which the party defendant has counterclaimed against
Holdings;
(j) The execution and delivery of this Sixth Amendment and any other
instruments executed and delivered to Lender concurrently herewith, and the full
and complete
-3-
<PAGE>
performance of the provisions hereof will not result in any breach of, or
constitute a default under, or result in the creation of any lien, except as
created under the Holdings Pledge Agreement, charge or encumbrance upon any
property or assets of Holdings under any indenture, mortgage, deed of trust,
bank loan or credit agreement or other instrument to which Holdings is a party
or by which Holdings is bound;
(k) This Sixth Amendment has been duly authorized by all necessary
action and has been duly executed and delivered by the authorized trustee of the
Trust, and the Sixth Amendment constitutes a legal, valid and binding agreement
enforceable against the Trust in accordance with its terms;
(l) As of the date hereof, the trustee is not the subject of a
pending bankruptcy proceeding and the trustee is not aware of any threatened
bankruptcy proceeding against the Trust nor is the trustee presently
contemplating filing such a proceeding;
(m) There are no lawsuits pending or threatened against the Trust,
or instituted by the Trust in which the party defendant has counterclaimed
against the Trust;
(n) The execution and delivery of this Sixth Amendment and any
other instruments executed and delivered to Lender concurrently herewith, and
the full and complete performance of the provisions hereof will not result in
any breach of, or constitute a default under, or result in the creation of any
lien, charge or encumbrance upon any property or assets of the Trust under any
indenture, mortgage, deed of trust, bank loan or credit agreement or other
instrument to which the Trust is a party or by which the Trust is bound;
(o) As of the date hereof, Kathleen J. Elnaggar is not the subject of
a pending bankruptcy proceeding and Kathleen J. Elnaggar is not aware of any
threatened bankruptcy proceeding against her nor is Kathleen J. Elnaggar
presently contemplating filing such a proceeding;
(p) There are no lawsuits pending or threatened against Kathleen J.
Elnaggar, or instituted by Kathleen J. Elnaggar in which the party defendant has
counterclaimed against Kathleen J. Elnaggar;
(q) The execution and delivery of this Sixth Amendment and any other
instruments executed and delivered to Lender concurrently herewith, and the full
and complete performance of the provisions hereof will not result in any breach
of, or constitute a default under, or result in the creation of any lien, charge
or encumbrance upon any property or assets of Kathleen J. Elnaggar under any
indenture, mortgage, deed of trust, bank loan or credit agreement or other
instrument to which Kathleen J. Elnaggar is a party or by which Kathleen J.
Elnaggar is bound;
5. No Misrepresentation. Borrower, Holdings and Kathleen J. Elnaggar
---------------------
severally on its or her own behalf, and not jointly, represent, warrant and
covenant as follows: that no representation or warranty made by Borrower,
Holdings or Kathleen J. Elnaggar and contained herein or in the other Loan
Instruments, and no certificate, information or report furnished or to
-4-
<PAGE>
be furnished by Borrower, Holdings or Kathleen J. Elnaggar in connection with
any of the Loan Instruments or any of the transactions contemplated hereby or
thereby, contains or will contain a misstatement of material fact, or omits or
will omit to state a material fact required to be stated in order to make the
statements contained herein or therein not misleading in the light of the
circumstances under which such statements were made; and there is no fact known
or reasonably foreseen by Borrower, Holdings or Kathleen J. Elnaggar that will
materially adversely affect Borrower, Holdings or Kathleen J. Elnaggar or its or
their respective financial conditions, operations, Property, business,
prospects, profits or the ability of Borrower, Holdings or Kathleen J. Elnaggar
to consummate the transactions and perform its or their obligations pursuant to
the Loan Instruments that has not expressly been disclosed to Lender in writing.
Kathleen J. Elnaggar shall not be liable for any misrepresentations made by any
other Person after the release of the K. Elnaggar Guaranty.
6. Reaffirmation of Security Interest. Except for the Security Interests
----------------------------------
arising from the Individual Pledge Agreement, which was terminated immediately
prior to the execution of this Agreement, Borrower and Kathleen J. Elnaggar
hereby confirm and agree that Lender's Security Interests, and Lender's lien
priority, in all of the Collateral previously pledged, assigned, transferred or
granted to Lender shall continue to secure the payment and performance of
Borrower's obligations following the execution, delivery and effectiveness of
this Sixth Amendment and the documents, instruments and agreements contemplated
hereby and thereby.
7. Waiver of Certain Defaults; No Waiver of Other Defaults. Except as
-------------------------------------------------------
expressly provided herein, this Sixth Amendment is not a waiver of any present
or future default of Borrower or a release or relinquishment of any Lien,
Security Interest, rights or remedies securing payment and performance of
Borrower's obligations or the enforcement thereof, except as specifically
provided herein. Such Liens, Security Interests, rights and remedies are hereby
ratified, confirmed, preserved, renewed and extended by Borrower and Kathleen J.
Elnaggar in all respects, except as expressly provided herein. Notwithstanding
this Section 7, Lender hereby waives all of the events of default listed on
SCHEDULE 7 hereto (collectively, the "Permitted Defaults," and individually, a
"Permitted Default"); provided, however, this waiver shall not constitute a
waiver of any other default not known to Lender or reasonably contemplated by
Lender in connection with the transactions contemplated by this Sixth Amendment.
8. Release. Borrower, Holdings and Kathleen J. Elnaggar and its and
-------
their officers, directors, shareholders, employees, predecessors, personal
representatives, executors, executrixes, trustees, heirs, successors and
assigns, each hereby fully release, remise and forever discharge Lender and all
past and present officers, directors, agents, employees, servants, partners,
shareholders, attorneys and managers of Lender, and all of their respective
heirs, personal representatives, predecessors, successors and assigns, for, from
and against any and all claims, demands, causes of action, controversies,
offsets, obligations, losses, damages, and liabilities of every kind and
character whatsoever, including, without limitation, any action, omission,
misrepresentation or other basis of liability founded either in tort or contract
and the duties arising thereunder that Borrower, Holdings or Kathleen J.
Elnaggar, or any of its or their respective predecessors, successors and
assigns, or any one or more of them, has had in the past, or now has, whether
known or unknown, whether currently existing or hereafter asserted, relating in
any manner to, or arising from or in connection with, the indebtedness evidenced
by the Note, any negotiations, loan administration, exercise of rights and
remedies, payment, offset
-5-
<PAGE>
with respect to, or other matter relating to such indebtedness, any Collateral
securing payment and performance of such indebtedness, or any matter preliminary
to the execution and delivery by Borrower, Holdings and Kathleen J. Elnaggar and
Lender of this Sixth Amendment, or any statement, action, omission or conduct of
Lender or any of its officers, directors, agents, employees, servants, partners,
shareholders, attorneys and managers relating in any manner to such
indebtedness, Collateral or this Sixth Amendment; provided, however, that the
foregoing release and discharge shall not apply to the obligations of Lender
expressly set forth in this Sixth Amendment or first arising after the date of
this Sixth Amendment.
9. Effectiveness. This Sixth Amendment shall not become effective unless
-------------
and until Lender shall have received the following documents and instruments,
all in form and substance satisfactory to Lender and duly executed by the
Persons required to do so, and Borrower shall have paid to the Persons entitled
thereto the following fees and expenses:
(a) This Sixth Amendment.
(b) A Limited Recourse Continuing Guaranty from Holdings in the form
attached hereto as Exhibit "A" and incorporated herein by this reference (the
-----------
"Holdings Guaranty").
(c) A Security Agreement and Shareholder Pledge Agreement from
Holdings in the form attached hereto as Exhibit "B" and incorporated herein by
-----------
this reference (the "Holdings Pledge Agreement").
(d) The original stock certificates evidencing all of the issued and
outstanding capital stock of Borrower, together with assignments separate from
certificate or stock powers, executed in blank by Holdings.
(e) First Amendment to Continuing Guaranty between K. Elnaggar and
Lender.
(f) Any Uniform Commercial Code financing statements or filings or
notices required under applicable law to (i) reflect Borrower's name change and
(ii) properly perfect Lender's Security Interests arising from the Holdings
Pledge Agreement.
(g) Uniform Commercial Code financing statements or filings or
notices required under applicable law to perfect Lender's security interest in
inventory located in Mississippi and South Carolina.
(h) Evidence of Key Man Life Insurance in the amount of $1,000,000
insuring the life of Elnaggar and $500,000 insuring the life of Reed, and
Assignments of such Key Man Life Insurance to Lender, in form and substance
satisfactory to Lender, executed by Borrower and the insurance company(s).
(i) Evidence of all property and liability insurance required in
connection with the Loan Instruments.
-6-
<PAGE>
(j) A certificate from Borrower's environmental consultant that (s)he
has searched the public databases and DK Industries, Inc. has not been named as
a "Potentially Responsible Party" with respect to any federal Superfund site.
(k) Financial statements of Kathleen J. Elnaggar, individually and as
trustee of the Trust prepared as of May 31, 1995, together with a certificate
from Kathleen J. Elnaggar certifying that the financial statements fairly
present her financial position as of such date and that there have been no
material adverse changes in her financial statements or net worth since May 31,
1995.
(l) An officers' certificate and incumbency certificate from
Borrower, together with corporate resolutions of Borrower authorizing the
transactions contemplated by this Sixth Amendment.
(m) An officers' certificate and incumbency certificate from
Holdings, together with corporate resolutions of Holdings authorizing the
GDC/Holdings Stock Exchange and the execution and delivery of this Sixth
Amendment, the Holdings Guaranty and the Holdings Pledge Agreement.
(n) Attorneys' opinion letters from counsel to Borrower, Kathleen
J. Elnaggar and Holdings.
(o) Evidence satisfactory to Lender that after giving effect to any
transaction costs and other expenses in connection with this Sixth Amendment,
including, without limitation, any brokerage fees or other commissions, and all
borrowings which are outstanding thereunder, the amount which is available for
borrowing under the Working Capital Loan equals or exceeds $150,000.
(p) Consents to the Sixth Amendment from the Working Capital Lender
or Working Capital Lender Substitution, if applicable, and LSC, Louisiana Seed
Capital Fund Limited Partnership and Louisiana Economic Development Corporation.
(q) $100,000, in immediately available funds, as partial payment of
the Restructure Fee, which shall be deemed to be fully earned and non-refundable
upon execution of this Sixth Amendment.
(r) Accrued and unpaid interest on the Loan to, but not including,
March 1, 1996.
(s) Lender's attorneys' fees and costs incurred in connection with
this Sixth Amendment in immediately available funds, including, without
limitation, UCC searches and key employee background searches.
(t) A fully executed copy of the IT Contract in form and substance
satisfactory to Lender.
-7-
<PAGE>
(u) Such other documents and instruments as Lender shall reasonably
request.
10. Release of Individual Pledge Agreement. Immediately prior to the
--------------------------------------
execution of this Sixth Amendment, the Individual Pledge Agreement was
terminated, notwithstanding anything to the contrary in Section 8 of the
Individual Pledge Agreement, but subject to Section 11.3 of the Loan Agreement,
and Lender delivered to Borrower the original stock certificates evidencing the
Borrower Capital Stock issued in favor of the Individual Pledgors and any
original assignments or stock powers executed by the Individual Pledgors in
Lender's possession.
11. Loan Agreement Definitions. (a) The definitions of "Accountants",
--------------------------
"Advance Contracts", "Borrower's Obligations", "Contract Equipment", "Initial
Advance", "Interest Rate", "Key Man Life Insurance", "Obligors", "Operating Cash
Flow", "Principals", "Remaining Portion", "Shareholders", "Shareholder Pledge
Agreement" and "Subordinated Debt" in Section 1.1 of the Loan Agreement are
hereby deleted in their entirety and the following inserted therefor:
Accountants: Any so-called "Big 6" public accounting
-----------
firm,Hein & Associates or any other independent certified
public accounting firm selected by Borrower and satisfactory
to Lender.
Advance Contracts: The IT Contract and any other
-----------------
contracts requiring acquisition of Contract Equipment and
approved by Lender.
Borrower's Obligations: (i) any and all Indebtedness
----------------------
due or to become due, now existing or hereafter arising, of
Borrower to Lender pursuant to the terms of this Loan
Agreement or any other Loan Instrument, including, without
limitation, the Profit Participation Fee, the Restructure
Fee, the Maintenance Fee for the current calendar year and
all prior calendar years during the term of the Loan, and
the Termination Fee, and (ii) the performance of the
covenants of Borrower contained in the Loan Instruments.
Contract Equipment: Any equipment required in
------------------
connection with the IT Contract and any other Advance
Contracts.
Initial Advance: $4,900,000 of the proceeds of the Loan
---------------
disbursed on or about December 30, 1992, with a current
outstanding principal balance of $2,766,327.63 as of March
15, 1996.
Interest Rate: a per annum rate of interest equal to
-------------
the Base Rate, plus 250 basis points.
-8-
<PAGE>
Key Man Life Insurance: each of the policies of key man
----------------------
life insurance issued in favor of Borrower and insuring the
lives of Elnaggar and Reed, or Harry C. Conger, each of
which policies of insurance shall be (i) in an amount of (A)
$1,000,000 with respect to Elnaggar, and (B) $500,000 with
respect to Reed, or (C) $2,000,000 with respect to Harry C.
Conger, (ii) issued by an insurer and otherwise in form and
content satisfactory to Lender and (iii) assigned to Lender
pursuant to the applicable Assignment of Key Man Life
Insurance.
Obligors: Borrower and, subject to Section 3.3,
-------- -----------
Kathleen J. Elnaggar in her capacity as trustee (the
"Trustee") of the testamentary trust for the benefit of
Tarek Elnaggar, Sharif Joseph Elnaggar and Jeanne-Marie
Elnaggar (the "Trust"), and individually.
Operating Cash Flow: for any period, the net income of
-------------------
Borrower for such period:
(i) plus the sum of the following, to the extent
deducted in determining net income for such period:
(A) interest paid or accrued on
Indebtedness, including, without limitation,
interest on Capitalized Leases that is imputed in
accordance with GAAP;
(B) Depreciation and amortization of assets;
(C) extraordinary losses from sales or
dispositions of Property outside of the normal
course of Borrower's Business; and
(D) any special charges, extraordinary
charges or non-recurring charges;
(ii) minus the sum of the following, to the extent
-----
included in determining net income for such period:
(A) all payments made by Borrower during such
period with respect to Capital Expenditures, other
than Subsequent Advance Expenditures;
-9-
<PAGE>
(B) extraordinary gains from sales or
dispositions of Property outside of the normal
course of Borrower's Business and all
extraordinary non-cash gains; and
(C) dividends or distributions declared or
paid or deemed paid pursuant to Section 7.5
hereof; and
(D) for purposes of Excess Cash Flow payments
pursuant to Section 2.9.2 hereof only, fifty
percent (50%) of all cancellation/termination fees
received by Borrower from Occidental Chemical
Corporation or its successors or assigns ("Oxy
Chem") in connection with that certain agreement
dated September 21 and 28, 1994 between Borrower
and Oxy Chem, a copy of which is attached hereto
as EXHIBIT 2.9.2 and incorporated herein by this
reference.
Principals: collectively, Kathleen J. Elnaggar, Tarek
----------
Elnaggar and Harry C. Conger.
Remaining Portion: An amount not to exceed $850,000.
-----------------
Shareholder: Holdings.
-----------
Shareholder Pledge Agreement: A Security Agreement and
----------------------------
Shareholder Pledge Agreement executed by Holdings in favor
of Lender in form acceptable to Lender, pursuant to which
Lender is granted a Lien on all of the Borrower Capital
Stock.
Subordinated Debt: collectively, the LSC Indebtedness,
-----------------
the Shareholder Indebtedness and the New Subordinated
Indebtedness.
and (b) Section 1.1 of the Loan Agreement is are hereby amended to add the
following definitions:
Base Price: the invoice cost of any Contract Equipment
----------
(after adjustment for applicable discounts or allowances),
less tax, destination charges, freight, delivery charges,
set-up costs, testing costs, accessories or add-ons and any
other additional charges above the base price of the
Contract Equipment.
-10-
<PAGE>
Holdings: GDC Holdings Corporation, a Louisiana
--------
corporation, and its permitted successors and assigns.
IT Contract: That certain Subcontract Agreement dated
-----------
March 1 and 11, 1996 between Borrower and IT Corporation
with respect to the American Creosote contract.
Net Income: For any period, the net income (or loss) of
----------
Borrower for such period.
New Subordinated Indebtedness: Any Indebtedness for
-----------------------------
Borrowed Money incurred after the date of the Sixth
Amendment owing by Borrower to any Person, except for
refinancing of existing Indebtedness for Borrowed Money.
Orderly Liquidation Value: The estimated gross cash
-------------------------
dollar amount derived from the sale of the assets, given
limited time to find a purchaser or purchasers, and
considering a completed sale of all assets. No guarantees or
warranties are made as to condition, and purchasers are
responsible for removal of the purchased assets at their own
risk and expense. Orderly Liquidation Value allows only
limited time for market exposure, and also considers the
physical condition, quantity, difficulty of removal, as well
as the overall marketability of the asset group. No
consideration is given to additional value that might be
obtained because of product line, equipment in place, going
operation or other elements of value that could or might be
produced at liquidation, but could not be reasonably
assumed.
Public Company: DK Industries, Inc. or another company
--------------
satisfactory to Lender with a class of equity securities
registered under Section 12(b) or 12(g) of the 1934 Act, and
subject to the periodic reporting requirements set forth in
Section 13 of the 1934 Act.
Restructure Fee: $300,000.
---------------
Specially Manufactured Equipment: Contract Equipment
--------------------------------
(a) with a Base Price equal to or in excess of $40,000 and
(b)(i) which will not be delivered to Borrower within 28
days after the first Subsequent Advance for such Contract
Equipment or (ii) requires multiple Subsequent Advances for
such Contract Equipment.
1934 Act: The Securities Exchange Act of 1934, as
--------
amended.
-11-
<PAGE>
12. Time Periods. Section 1.2 of the Loan Agreement is hereby
------------
deleted in its entirety and the following inserted therefor:
1.2 TIME PERIODS. In this Loan Agreement and the
other Loan Instruments, in the computation of periods
of time from a specified date to a later specified
date, (i) the word "from" means "from and including,"
(ii) the words "to" and "until" each mean "to, but
excluding" and (iii) the words "through," "end of" and
"expiration" each mean "through and including." Unless
otherwise specified, all references in this Loan
Agreement and the other Loan Instruments to a (i)
"month" shall be deemed to refer to a calendar month,
(ii) "quarter" shall be deemed to refer to the period
from (A) the first day of such Person's fiscal year
through the end of the third month of such Person's
fiscal year, (B) the first day of the fourth month of
such Person's fiscal year through the last day of the
sixth month of such Person's fiscal year, (C) the first
day of the seventh month of such Person's fiscal year
through the last day of the ninth month of such
Person's fiscal year, or (D) the first day of the tenth
month of such Person's fiscal year through the last day
of such Person's fiscal year, and (iii) "year" shall be
deemed to refer to a period from the first day of such
Person's fiscal year through the last day of such
Person's fiscal year.
13. Loan. Section 2.1 of the Loan Agreement is hereby
----
deleted in its entirety and the following inserted therefor:
2.1 LOAN. The Loan shall consist of a term loan in an
----
amount not to exceed $3,616,327.63.
14. Remaining Portion - Subsequent Advances. (a) Section
---------------------------------------
2.2.2(a) of the Loan Agreement is hereby deleted in its entirety and the
following inserted therefor:
(A) PURPOSES. The proceeds of the Remaining
--------
Portion shall be utilized to acquire Contract Equipment
in connection with the IT Contract and any Advance
Contract approved by Lender.
(b) Section 2.2(b)(i), (ii), (iii) and (iv) of the Loan Agreement are hereby
deleted in their entirety and the following inserted therefor:
(I) NO DEFAULT. No Event of Default or
----------
Incipient Default shall exist or be created as a result
of the making of any such Subsequent Advance.
-12-
<PAGE>
(II) REQUEST FOR ADVANCE; INFORMATION. Not less
--------------------------------
than 7 days prior to each anticipated Subsequent
Advance, Borrower shall deliver to Lender a written
request for a Subsequent Advance, which shall be
accompanied by such documents as Lender may request and
evidence satisfactory to Lender that (A) the aggregate
amount of all Subsequent Advances (including the then
requested Subsequent Advance) do not exceed, in the
aggregate, $850,000, (B) Borrower has paid, or will
contemporaneously with the first Subsequent Advance for
each item of Contract Equipment will pay, the
difference between the contract price for the Contract
Equipment and the Base Price, (C) the amount of the
requested Subsequent Advance to acquire the Contract
Equipment (together with any prior Subsequent Advances
used to acquire such Contract Equipment) does not
exceed, in the aggregate, 80% of the Base Price of such
Contract Equipment, (D) title to all Contract Equipment
(except the Specially Manufactured Equipment) purchased
previously with Subsequent Advances is owned by
Borrower, the purchase price for all Contract Equipment
(except the Specially Manufactured Equipment) purchased
previously with Subsequent Advances has been fully
paid, and all Contract Equipment (except the Specially
Manufactured Equipment) purchased previously with
Subsequent Advances is in the possession of Borrower,
(E) with respect to Specially Manufactured Equipment,
(1) the Specially Manufactured Equipment is
identifiable collateral, (2) title to the Specially
Manufactured Equipment has been transferred to
Borrower, subject only to the vendor's purchase money
security interest for the remainder of the contract
price, (3) the vendor's secured lender(s) and the
landlord(s) of the premises where the Specially
Manufactured Equipment is manufactured, assembled or
stored have waived any lien rights with respect to the
Specially Manufactured Equipment, and (4) the vendor
has agreed to deliver the Specially Manufactured
Equipment to a location designated by Lender upon
receipt of a notice of default and payment of the
remainder of the contract price for the Specially
Manufactured Equipment, and (F) none of the Contract
Equipment is goods covered by a certificate of title or
goods which are not covered by a certificate of title
but are mobile and are of a type normally used in more
than one jurisdiction, such as motor vehicles,
trailers, rolling stock, airplanes, shipping
containers, road building and construction machinery
and commercial harvesting machinery and the like.
Notwithstanding anything to the contrary in clause (D)
----------
above, Borrower may, at any time, have requested and/or
received Subsequent Advances of up to $150,000 for
Contract Equipment (including Specially Manufactured
Equipment designated by Borrower in writing) which is
not yet titled to, and/or not yet in the
-13-
<PAGE>
possession of, the Borrower and, provided further,
Contract Equipment titled to, and in the possession of,
the Borrower, but not yet paid for in full shall be
considered perfected if the only condition to
perfection is payment of the Base Price (which, at
Lender's discretion, may be paid directly to the
vendor).
(III) AVAILABILITY; FREQUENCY. No Subsequent
-----------------------
Advance shall be made after December 31, 1996. Each
such Subsequent Advance shall be in an amount not less
than $100,000.
(IV) SATISFACTION OF LENDER. Before any Subsequent
----------------------
Advance is made there shall be delivered to Lender, and
Lender must be satisfied with (A) an analysis which
demonstrates that of each of the Advance Contracts can
be performed profitably by Borrower, (B) the
performance record, including payment history, safety
and delivery of services, of all parties to the Advance
Contracts and (C) the anticipated warranty terms
provided by each manufacturer of any portion of the
Contract Equipment. Lender waives satisfaction of
Clause (B) with respect to the IT Contract.
----------
and (c) Sections 2.2(c) and 2.2(d) of the Loan Agreement are hereby deleted in
their entirety.
15. Payment of Principal and Interest. Section 2.5 of the Loan
---------------------------------
Agreement is hereby deleted in its entirety and the following inserted therefor:
2.5 PAYMENTS OF PRINCIPAL AND INTEREST. The
----------------------------------
principal and interest of the Loan shall be repaid in
one (1) interest only installment on March 1, 1996 and
59 successive monthly installments of principal and
interest, commencing on the first business day of April
1996. The first 58 of such installments shall be in an
amount equal to (a) interest in arrears calculated at
the Interest Rate or the Default Interest Rate, as
applicable, and (b) a principal component in an amount
equal to the sum of the following: (i) the principal
portion of a seven-year level mortgage amortization
schedule, calculated upon the Interest Rate which is in
effect on February 1, 1996 and the principal balance of
the Loan which is outstanding on February 2, 1996
(after application of invoice due February 1, 1996)
plus (ii) with respect to each Subsequent Advance, the
principal portion of a seven-year level mortgage
amortization schedule, calculated upon the Interest
Rate which is in effect on the applicable Subsequent
Advance Date and the amount of such Subsequent Advance.
All remaining principal, including the principal amount
of all Subsequent Advances, and any accrued interest
and other sums which are due and owing
-14-
<PAGE>
pursuant to the Loan Instruments, shall be paid in full on the first
business day of February 2001.
16. Subsequent Advance Fee. Section 2.8.1(b) of the Loan
----------------------
Agreement is hereby deleted in its entirety.
17. Maintenance Fee. Section 2.8.2 of the Loan Agreement is hereby deleted
---------------
in its entirety and the following inserted therefor:
2.8.2 MAINTENANCE FEE. On or before December 31,
---------------
1993, December 31, 1994 and December 31, 1995, Borrower
shall pay to Lender an annual maintenance fee of $35,000. On
or before December 31, 1996 and on or before December 31 of
each year (or partial year) thereafter during which the Loan
is outstanding (or upon payment or prepayment of the Loan in
full), Borrower shall pay to Lender an annual maintenance
fee (the "Maintenance Fee") equal to $100,000. Such
Maintenance Fee shall be deemed to be earned on January 1 of
each calendar year, whether or not the Loan is paid in full
prior to December 31 of such calendar year and is not
subject to proration in the event of payment or prepayment
of the Loan in full, whether by payment of the Loan at
maturity, by optional prepayment or by acceleration after an
Event of default. Lender acknowledges receipt of the
Maintenance Fee for calendar years 1993, 1994 and 1995.
Notwithstanding the foregoing, if the Loan is timely paid at
maturity, the Maintenance Fee for the last year of the
scheduled term of the Loan shall be prorated based upon the
actual number of days the Loan is outstanding in such year
and a 360 day year.
18. Profit Participation Fee. Section 2.8.3 of the Loan Agreement is
------------------------
hereby deleted in its entirety and the following inserted therefor:
2.8.3 PROFIT PARTICIPATION FEE. As an additional
------------------------
inducement to Lender to make the Loan, Borrower agrees to
pay to Lender a profit participation fee (the "Profit
Participation Fee") of $500,000, which shall be deemed to be
fully earned upon the effectiveness of the Sixth Amendment
to Loan Instruments dated March 15, 1996 (the "Sixth
Amendment") and which shall be payable upon the earlier of
full prepayment of the Loan, whether by optional prepayment
or acceleration after an Event of default, or the following
dates:
-15-
<PAGE>
<TABLE>
<CAPTION>
Date Amount
============================================================
<S> <C>
September 30, 1996 $100,000
------------------------------------------------------------
October 31, 1996 $100,000
------------------------------------------------------------
November 30, 1996 $100,000
------------------------------------------------------------
December 15, 1996 $200,000
============================================================
</TABLE>
Borrower or Holdings shall provide Lender with a copy
of any private placement memorandum for the Private
Placement, documents evidencing or describing the Public
Company Merger given to shareholders or prospective
investors or any final prospectus in connection with any
equity offering by Public Company as soon as available. Upon
the written request of Lender, Borrower and Holdings shall
use reasonable good faith efforts to permit Lender to
convert all or any portion of the Profit Participation Fee
for stock, options and/or warrants in Holdings or the Public
Company, as the case may be, for the same price and on the
same terms and conditions as such stock, options and/or
warrants are being offered to other prospective investors or
stockholders at the time of the Private Placement and/or
equity offering, as the case may be, provided that the
aggregate amount of stock, options and/or warrants purchased
by Lender shall be less than ten percent (10%) of the issued
and outstanding stock of Holdings or Public Company (but
excluding any stock issued for unexercised options or
warrants), and, provided further, that the minimum
conversion amount for any offering shall be $100,000 and any
conversion amount in excess thereof shall be in increments
of $25,000. The cost of the stock, options and/or warrants
acquired by Lender in such conversion(s) shall be applied
against the Profit Participation Fee in the inverse order of
payment of the Profit Participation Fee.
19. Fees. Section 2.8 of the Loan Agreement is hereby amended to add the
----
following:
2.8.4 RESTRUCTURE FEE. As an additional inducement to
---------------
Lender to enter into the Sixth Amendment and in
consideration of the modifications and agreements of Lender
contained therein, Borrower agrees to pay to Lender the
Restructure Fee, which shall be deemed to be fully earned
upon the effectiveness of the Sixth Amendment and which
shall be payable upon the earlier of full prepayment of the
Loan, whether by optional prepayment or acceleration after
an Event of default, or the following dates:
-16-
<PAGE>
<TABLE>
<CAPTION>
============================================================
Date Amount
------------------------------------------------------------
<S> <C>
Upon the effectiveness of the $100,000
Sixth Amendment
------------------------------------------------------------
May 31, 1996 $100,000
------------------------------------------------------------
July 31, 1996 $100,000
============================================================
</TABLE>
2.8.5 APPLICATION OF CASH TO PROFIT PARTICIPATION FEE
-----------------------------------------------
AND RESTRUCTURE FEE. Except as otherwise provided in the
-------------------
last sentence of this Section 2.8.5, in the event that
Public Company, Borrower or Holdings receives any cash from
any source, including, without limitation, sale of stock,
debentures, options or warrants, sale of assets, and loans,
within seven (7) days thereafter, Borrower shall pay to
Lender an amount equal to twenty percent (20%) multiplied by
the amount of cash received by Public Company, Borrower
and/or Holdings to be applied toward the scheduled payments
of the Profit Participation Fee and the Restructure Fee in
the inverse order of maturity, but in no event more than the
then remaining balance of the Profit Participation Fee and
Restructure Fee. Notwithstanding anything to the contrary
contained above, cash from operations, Permitted Payments,
conversion of existing debt to equity and refinancings of
existing debt to the extent of such existing debt are
specifically excluded from the Borrower's payment obligation
above.
2.8.6 TERMINATION FEE. In consideration of the making
---------------
of the Loan by Lender to Borrower, Borrower agrees that upon
any partial or full prepayment of the Loan, whether by
optional prepayment or acceleration after an Event of
Default, in addition to the principal prepayment, all
accrued and unpaid interest on such prepayment, and upon a
full prepayment, the Maintenance Fee for the current
calendar year and all prior calendar years during the term
of the Loan, the Restructure Fee and the Profit
Participation Fee, Borrower shall pay to Lender a
termination fee (the "Termination Fee") equal to three
percent (3%) of the principal amount prepaid if such
prepayment occurs on or prior to January 1, 1998, and two
percent (2%) of the principal amount prepaid if such
prepayment occurs after January 1, 1998.
20. Excess Cash Flow Payments. Section 2.9.2(a) of the Loan Agreement is
-------------------------
hereby deleted in its entirety and the following inserted therefor:
(a) EXCESS CASH FLOW PAYMENTS. Until the Loan is paid
-------------------------
in full, for the years ending November 30, 1993 and
-17-
<PAGE>
November 30, 1994, Borrower shall pay to Lender 50% of the
Excess Cash Flow for such years, and until the Loan is paid
in full, for each year commencing with the year ending
September 30, 1995, Borrower shall pay to Lender 25% of the
Excess Cash Flow for such year, provided in each case Lender
has delivered a notice to Borrower prior to the expiration
of 30 days after the later to occur of the date (i) upon
which Borrower is required to deliver to Lender the Basic
Financial Statements for such year pursuant to subsection
6.3.3 or (ii) of actual receipt of the Basic Financial
Statements for such year pursuant to subsection 6.3.3. Any
such payment received pursuant to the provisions of this
subparagraph (a) shall be applied to Borrower's Obligations
as described in subparagraph (c) of this subsection 2.9.2.
Lender acknowledges receipt of the Excess Cash Flow payment
for the year ending November 30, 1993. Borrower acknowledges
timely and proper delivery and receipt of the notice
demanding payment of the Excess Cash Flow for the year
ending November 30, 1994. Lender and Borrower agree that the
amount of the Excess Cash Flow for the year ending November
30, 1994 is $119,735. Lender and Borrower agree that the
Excess Cash Flow payment for the year ending November 30,
1994 and, if exercised, the Excess Cash Flow payment for the
year ending September 30, 1995, shall not be due and payable
until March 31, 1997. Borrower's obligation to pay the
Excess Cash Flow payments required in this Section 2.9.2
shall terminate and be of no further force or effect (i) for
the years ending November 30, 1994, September 30, 1995
(based upon the 10-month Basic Financial Statements for the
period ending September 30, 1995) and September 30, 1996,
if, on or prior to March 31, 1997, and (ii) for all years
ending on September 30, 1997 or later, if on or before
September 30 of such year, (a) Borrower delivers to Lender a
current appraisal of the Collateral prepared by an Appraiser
satisfactory to Lender and otherwise in form and substance
satisfactory to Lender with an Orderly Liquidation Value of
the Collateral equal to or exceeding eighty percent (80%) of
the then outstanding principal balance of the Loan plus any
Subsequent Advances which Lender is committed to advance,
but has not yet disbursed (the "OLV Appraisal") and (b) at
the time of delivery of the appraisal, no monetary Event of
Default has occurred and is continuing. Any such appraisal
shall be deemed "current" for up to six (6) months after the
effective date of the appraisal. Excess cash flow payments
required to be paid by Lender shall not be subject to the
Termination Fee in Section 2.8.6 above and not be included
in calculating the debt service payments to Lender in
connection with subsequent Excess Cash Flow payment
calculations.
-18-
<PAGE>
21. Involuntary Prepayment. Section 2.9.3 of the Loan Agreement is hereby
----------------------
deleted in its entirety and the following inserted therefor:
2.9.3 INVOLUNTARY PREPAYMENT. Notwithstanding anything
----------------------
to the contrary contained herein, it is the intent of the
parties to this Agreement, that the Profit Participation
Fee, the Restructure Fee, the Maintenance Fee for the
current calendar year and all prior calendar years during
the term of the Loan, and the Termination Fee, shall be
payable upon any involuntary prepayment of the Loan,
including, without limitation, any involuntary prepayment
due to an acceleration of the Loan by Lender upon the
occurrence of an Event of Default, except for Excess Cash
Flow payments required by Lender.
22. Note and Security. Article III of the Loan Agreement is hereby amended
-----------------
to add the following:
3.3 K. ELNAGGAR GUARANTEE. Borrower's Obligations shall
---------------------
be secured by the K. Elnaggar Guarantee. The K. Elnaggar
Guarantee shall be terminated and of no further force or
effect upon the occurrence or non-occurrence of all of the
following: (a) Lender's receipt of aggregate payments of
$500,000 of the Profit Participation Fee and/or the
Restructure Fee in good funds, (b) all scheduled principal
and interest payments to the date of Lender's receipt of the
last payment required under clause (a) above have been made,
----------
(c)(i) there is no then currently effective written notice
of an Event of Default, or then currently effective written
notice of an Incipient Default, on the date of Lender's
receipt of the last payment required under clause (a) above,
----------
or (ii) if there is a then currently effective written
notice of an Event of Default, or a then currently effective
written notice of an Incipient Default, on the date of
Lender's receipt of the last payment required under clause
------
(a) above, if Lender does not accelerate the Indebtedness
---
within 30 days thereafter, and (d) the Shareholder
Indebtedness has, or will concurrently be, converted into
equity of Borrower, Holdings or Public Company. Upon the
written request of Borrower or K. Elnaggar, Lender shall
confirm in writing whether or not the K. Elnaggar Guarantee
has been terminated.
3.4 PUBLIC COMPANY GUARANTY. In the event that the
-----------------------
Public Company Merger (as defined herein) is consummated,
Public Company shall execute and deliver to Lender the
Public Company Guaranty (as defined herein). If, prior to
the execution and delivery of the Public Company Guaranty or
at any time thereafter, Borrower delivers to Lender the OLV
Appraisal and at the time of delivery of the OLV Appraisal,
no monetary Event of
-19-
<PAGE>
Default has occurred and is continuing, the obligation of
Public Company to provide the Public Company Guaranty shall
terminate or, if the Public Company Guaranty has been
delivered to Lender, the Public Company Guaranty shall be
terminated and of no further force or effect.
23. Restrictions. Section 5.3.2 of the Loan Agreement is hereby deleted in
------------
its entirety and the following inserted therefor:
5.3.2 RESTRICTIONS. (i) Except for the Holdings Pledge
-------------
Agreement and normal and customary restrictions on "change
of control" in credit facilities, Borrower is not a party
to, and has no knowledge of, any agreement restricting the
transfer of any shares of Borrower Capital Stock, and (ii)
except as described in EXHIBIT 5.3.1, has no outstanding
stock or securities convertible into or exchangeable or
exercisable for any shares of Borrower Capital Stock or
other equity interests in Borrower, or any rights to
subscribe for or to purchase, or any options for the
purchase of, or any agreements providing for the issuance
(contingent or otherwise) of, or any calls, commitments or
claims of any character relating to, any of the shares of
the Borrower Capital Stock or any securities convertible
into or exchangeable or exercisable for any shares of the
Borrower Capital Stock or other equity interests of
Borrower. Borrower is not required to file, and Borrower has
not filed, pursuant to Section 12 of the Act, a registration
statement relating to any class of debt or equity
securities.
24. Facility Sites. Section 5.5.3 of the Loan Agreement is hereby deleted
--------------
in its entirety and the following inserted therefor:
5.5.3 FACILITY SITES. There is set forth in EXHIBIT
--------------
5.5.3 the locations of all inventory, equipment, goods and
principal places of business presently used in the operation
of Borrower's Business which provide revenues to Borrower in
excess of $25,000. None of such locations shall be changed
without the prior written consent of Lender and no portion
of the Collateral having value in excess of $25,000 shall be
removed to any state other than the states of Texas,
Louisiana, New York, Mississippi and South Carolina unless,
within 30 days after the removal thereof, Borrower delivers
to Lender written notice of such removal, which notice shall
(i) describe the Collateral which has been so removed and
(ii) set forth the address to which such Collateral shall be
removed.
25. Monthly Statements. Section 6.3.1 of the Loan Agreement is hereby
------------------
deleted in its entirety and the following inserted therefor:
-20-
<PAGE>
6.3.1 MONTHLY STATEMENTS. As soon as available and in
------------------
any event within 30 days after the end of each month a (i)
copy of Borrower's (A) balance sheet as of the end of such
month and (B) statements of operations, Operating Cash Flow,
and Excess Cash Flow for such month and for the period from
the beginning of the current year through the end of such
month setting forth in each case in comparative form the
corresponding figures for the corresponding period in the
preceding year, and (ii) report on the aggregate revenues
and gross margins achieved by Borrower on each contract
pursuant to which Borrower is to provide services consisting
primarily of either environmental engineering or waste
remediation, all in reasonable detail, containing such
information as Lender may require, and certified as complete
and correct (subject to normal year-end adjustments) by the
President or Chief Financial Officer.
26. Holdings Financial Statements. Section 6.3 of the Loan Agreement is
-----------------------------
hereby amended to add the following:
6.3.13 HOLDINGS FINANCIAL STATEMENTS.
-----------------------------
(a) As soon as available and in any event within 45
days after the end of each quarter, a copy of the
consolidated and consolidating (a) balance sheet of Holdings
as of the end of such quarter and (b) statements of income
and operations, cash flow and shareholders' equity
(collectively, the "Holdings Financial Statements"), setting
forth in each case in comparative form the corresponding
figures for the preceding quarter, if any, all in reasonable
detail. Each of the Holdings Financial Statements shall be
(x) prepared by Holdings and (y) accompanied by a
certificate from the President or Chief Financial Officer of
Holdings certifying that such Holdings Financial Statements
were prepared in accordance with GAAP, fairly present the
financial position of Holdings as of the dates indicated
therein and the results of operations of Holdings for the
periods indicated therein, and there is no Event of Default
or Incipient Default that has occurred and is continuing as
of the date of such certification, or if an Event of Default
or Incipient Default has occurred and is continuing,
specifying such Event of Default or Incipient Default and
the proposed action to remedy same.
(b) As soon as available and in any event within 120
days after the close of each year, a copy of the Holdings
Financial Statements, setting forth in each case in
comparative form the corresponding figures for the preceding
year, if any, all in reasonable detail. Each of the annual
Holdings Financial
-21-
<PAGE>
Statements shall be (x) prepared by Holdings, (y)
accompanied by a certificate from the President or Chief
Financial Officer of Holdings certifying that such Holdings
Financial Statements were prepared in accordance with GAAP,
fairly present the financial position of Holdings as of the
dates indicated therein and the results of operations of
Holdings for the periods indicated therein, and there is no
Event of Default or Incipient Default that has occurred and
is continuing as of the date of such certification, or if an
Event of Default or Incipient Default has occurred and is
continuing, specifying such Event of Default or Incipient
Default and the proposed action to remedy same.
6.3.14 PUBLIC COMPANY FINANCIAL STATEMENTS.
-----------------------------------
(a) In the event that the Public Company Merger (as
defined herein) is consummated and for so long as the Public
Company Guaranty (as defined herein) is in effect, within 5
days after filing with the Securities Exchange Commission,
but in no event later than 30 days after the due date for
filing with the Securities Exchange Commission, as such due
date may be extended, cause Public Company to provide to
Lender copies of all 10-Q, 10-K and 8-K Reports filed or
required to be filed with the Securities Exchange
Commission. The annual financial statements of Public
Company (the "Public Company Financial Statements") shall be
accompanied by an opinion of the Accountants, which shall be
(I) unqualified as to going concern and scope of the audit
and (II) state that (1) the examination by the Accountants
in connection with the annual Public Company Financial
Statements has been made in accordance with generally
accepted auditing standards and, accordingly, included such
tests of the accounting records and such other procedures as
were considered necessary under the circumstances, (2) such
Public Company Financial Statements fairly present the
financial position and results of operation of Public
Company and (3) such Public Company Financial Statements
have been prepared in accordance with GAAP and that such
GAAP in accordance with which such Public Company Financial
Statements were prepared are consistent with those applied
in prior periods.
27. Insurance. Section 6.6 of the Loan Agreement is hereby amended to add
---------
the following:
As soon as practicable, but in no event later than thirty
(30) days after the effectiveness of the Sixth Amendment,
Borrower shall deliver to Lender evidence of Key Man Life
Insurance for Harry C. Conger in the amount of $2,000,000
naming Borrower as
-22-
<PAGE>
beneficiary, together with the applicable Assignment of Key
Man Life Insurance. Upon acceptance by Lender of the Key Man
Life Insurance for Harry C. Conger, together with the
applicable Assignment of Key Man Life Insurance, Borrower
may terminate the Key Man Life Insurance for Elnaggar and/or
Reed.
28. Borrowings. Section 7.1 of the Loan Agreement is hereby deleted in its
----------
entirety and the following inserted therefor:
7.1 BORROWING. Create, incur, assume or suffer to
---------
exist any liability for Indebtedness for Borrowed Money
except (i) Borrower's Obligations, (ii) the Working Capital
Debt, (iii) the Subordinated Debt and (iv) the Ally
Obligations; provided, however, the portion of the
Subordinated Debt constituting New Subordinated Indebtedness
shall not exceed $750,000 at any time, and prior to Borrower
incurring New Subordinated Indebtedness, the lender of the
New Subordinated Indebtedness shall execute and deliver to
Lender a subordination agreement in a form acceptable to
Lender, which subordination agreement shall only permit
scheduled principal and/or interest payments to the lender
on the last day of any month provided that no monetary Event
of Default has occurred and is continuing and, after giving
effect to such principal and/or interest payment, Borrower
would be in compliance with all financial covenants in this
Loan Agreement. The Shareholder Indebtedness shall be
converted to equity in Borrower, Holdings or the Public
Company as a condition precedent to Lender's release of the
K. Elnaggar Guaranty.
29. Merger and Acquisition. Section 7.3 of the Loan Agreement is hereby
----------------------
deleted in its entirety and the following inserted therefor:
7.3 Merger and Acquisition. Consolidate with or merge
----------------------
with or into any Person or acquire directly or indirectly all of
the capital stock, equity interests or Property of any Person,
except for the merger of 3E Corporation of Louisiana with and
into Borrower with Borrower being the surviving corporation or
the acquisition of all or substantially all of the assets of 3E
Corporation of Louisiana by Borrower subject to an asset purchase
agreement satisfactory to Lender.
30. Dividends and Purchase of Stock. Section 7.5 of the Loan Agreement is
-------------------------------
hereby deleted in its entirety and the following inserted therefor:
7.5 Dividends and Purchase of Stock. Declare or pay
-------------------------------
any dividends with respect to the Borrower Capital Stock or
apply any of its Property to the purchase, redemption or other
retirement
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<PAGE>
of, or set apart any sum for the payment of, or make any
distribution by reduction of capital or otherwise in respect
of, any of the shares of the Borrower Capital Stock;
provided, however, Borrower may pay dividends or make
distributions in respect of the shares of the Borrower
Capital Stock or otherwise transfer cash or other assets or
property to Holdings during Borrower's fiscal year 1996 only
(collectively, "Permitted Payments"), regardless of the form
of such Permitted Payments, if ALL of the following
conditions are satisfied: (a) the aggregate amount of such
Permitted Payments shall not exceed $200,000, (d) Permitted
Payments may not be made more frequently than once per month
and shall be made effective as of the last day of such
month, (e) Permitted Payments shall not exceed in any one
month $50,000, (f) no Event of Default shall have occurred
and be continuing pursuant to Section 8.1.1 hereof with
respect to scheduled principal and interest payments, the
Profit Participation Fee or the Restructure Fee only.
31. Investments, Loans, etc. Section 7.7 of the Loan Agreement is hereby
-----------------------
amended to add the following:
7.7.4 PERMITTED PAYMENTS TO HOLDINGS. Permitted
------------------------------
Payments satisfying all of the terms and conditions in
Section 7.5.
32. Fundamental Business Changes. Section 7.8 of the Loan
----------------------------
Agreement is hereby deleted in its entirety and the following inserted therefor:
7.8 FUNDAMENTAL BUSINESS CHANGES. (a) Engage in any
----------------------------
business other than Borrower's Business or change Borrower's
fiscal year, except, upon written notice to Lender, (i)
Borrower may change its fiscal year-end from November 30 to
September 30, (ii) subject to subsection 7.8(b) below,
Borrower may acquire the property commonly known as 822
Neosho Avenue, Baton Rouge, Louisiana (the "Headquarters
Property") "subject to" or assume the obligations and
liabilities of the mortgagor(s) under a first lien to a
Person who is not an Affiliate in an amount not to exceed
$436,500 encumbering the Headquarters Property and under the
second mortgage in favor of Kathleen J. Elnaggar encumbering
the Headquarters Property (the "Second Mortgage"), and (iii)
Borrower may engage in the development and utilization of
bioremediation techniques for treating organic and inorganic
wastes, provided that within 60 days after the consummation
of the Public Company Merger, Borrower shall assign, and
Public Company, or a subsidiary of Public Company other than
Borrower, shall assume, all right, title, interest,
obligations and liabilities of Borrower, and NBL
Technologies, Inc. ("NBL") and Jan Berkowitz shall release
Borrower from such obligations and
-24-
<PAGE>
liabilities, under that certain Facilities, Technology and
Production Lease dated July 1, 1995 between NBL and
Borrower, and the Employment Agreement dated July 1, 1995
between Borrower and Jan Berkowitz
(b) As conditions precedent to Borrower's acquisition
of the Headquarters Property, Borrower shall, or shall cause
Kathleen J. Elnaggar to, deliver to Lender the following:
(i) A Standstill Agreement executed by
Kathleen J. Elnaggar with respect to the
Second Mortgage, in form and substance
satisfactory to Lender.
(ii) A mortgage in favor of Lender
encumbering the Headquarters Property
executed and acknowledged by Borrower, in
form and substance satisfactory to Lender,
together with evidence in the form of title
insurance or an attorneys' abstract and
opinion as to the validity and priority of
the mortgage, subject only to monetary liens
for current taxes and governmental
assessments, a first lien to a Person who is
not an Affiliate in an amount not to exceed
$436,500 and the Second Mortgage in an amount
not to exceed $450,000.
(iii) A copy of the promissory note
secured by the Second Mortgage and the Second
Mortgage, certified as a true, complete and
correct copy of the original documents by
Kathleen J. Elnaggar and Borrower.
(iii) A copy of the promissory note
secured by the first lien mortgage and the
first lien mortgage, certified as a true,
complete and correct copy of the original
documents by Kathleen J. Elnaggar and
Borrower.
(iv) A current (no earlier than six
months prior to the conveyance date) phase 1
environmental site assessment prepared by
Borrower's environmental consultant in
accordance with the Standard Practice for
Environmental Site Assessments: Phase 1
Environmental Site Assessment Process
(Designation: E 1527 - 93), as
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<PAGE>
approved by the American Society for Testing
and Materials on March 15, 1993, with respect
to the Headquarters Property, concluding that
the assessment has revealed no evidence of
recognized environmental conditions in
connection with the Headquarters Property or
otherwise satisfactory to Lender.
33. Capital Expenditures. Section 7.14 of the Loan Agreement is hereby
--------------------
deleted in its entirety and the following inserted therefor:
7.14 CAPITAL EXPENDITURES. Make or incur obligations
--------------------
for Capital Expenditures during any year, including, without
limitation, expenditures with respect to Permitted Senior
Indebtedness, of the aggregate amount thereof, individually
or in the aggregate, would exceed $350,000 in any such year
(including the portion of the cost of any Contract Equipment
not paid from Subsequent Advance Expenditures), except that
during the period from the Closing Date through December 31,
1996, the limitation set forth in this Section 7.15 shall be
in addition to any Subsequent Advance Expenditures.
Notwithstanding anything to the contrary contained herein,
during the period from the effectiveness of the Sixth
Amendment until the one year anniversary of the
effectiveness of the Sixth Amendment, Borrower may make or
incur obligations for Capital Expenditures (which are fully
paid within such one year period) in an amount equal to the
amount of Subordinated Debt actually incurred after the
effectiveness of the Sixth Amendment (excluding Subordinated
Debt incurred to refinance existing Subordinated Debt and
any portion of the New Subordinated Debt paid to Lender
pursuant to Section 2.8.5), provided that the holder of such
-------------
Subordinated Debt executes and delivers a subordination
agreement in form and substance satisfactory to Lender and
which includes a subordination of any purchase money
security interest in the Collateral. The Shareholder
Indebtedness may not be refinanced.
34. Transactions with Affiliates. Section 7.15 of the Loan Agreement is
----------------------------
hereby deleted in its entirety and the following inserted therefor:
7.15 TRANSACTIONS WITH AFFILIATES. Unless Lender has a
----------------------------
currently effective Public Company Guaranty, sell, lease,
assign, transfer or otherwise dispose of any Property to any
Affiliate of Borrower, any Principal or any Shareholder,
lease Property, render or receive services or purchase
assets from any such Affiliate, Principal or Shareholder or
otherwise enter into any contractual relationship with any
Affiliate of Borrower, any Principal or any Shareholder,
-26-
<PAGE>
except Borrower may consummate the transactions specifically
contemplated by this Agreement and the Sixth Amendment and
otherwise lease Property, render or receive services or
purchase assets from any such Affiliate, Principal or
Shareholder provided each such transaction is on terms and
conditions no less favorable to Borrower than those terms
and conditions which would have been obtained in an arm's
length transaction consummated with a Person who is not an
Affiliate, Principal or Shareholder. Any payments or other
remuneration in any form made by Borrower to or for the
benefit of Holdings during Borrower's fiscal year 1996 and
on or after the date of the Sixth Amendment shall be a
Permitted Payment and shall be subject to the terms and
conditions in Section 7.5. Notwithstanding anything to the
contrary contained herein, Borrower may only pay to Kathleen
J. Elnaggar the first two (2) installment payments, in the
aggregate amount not to exceed $50,000, under the promissory
note or other evidence of indebtedness of Borrower to
Kathleen J. Elnaggar secured by the Headquarters Property.
Nothing in this Section is intended to modify the existing
obligations of Borrower under the lease of the Headquarters
Property.
35. Minimum Operating Cash Flow. Section 7.18 of the Loan Agreement is
---------------------------
hereby deleted in its entirety and the following inserted therefor:
7.18 MINIMUM OPERATING CASH FLOW. Permit Operating Cash
---------------------------
Flow for the Four Quarter Period ending on the last day of
each fiscal quarter of Borrower beginning with the fiscal
quarter ending June 30, 1996 to be less than the product of
(A) the Senior Debt Service for the applicable Four Quarter
Period multiplied by (B) 1.1 for the Four Quarter Period
ending June 30, 1996; 1.25 for the Four Quarter Period
ending September 30, 1996; and 1.4 for the Four Quarter
Period ending December 31, 1996 and for each Four Quarter
Period thereafter.
36. Accounts Receivable Turnover. Section 7.20 of the Loan Agreement is
----------------------------
hereby deleted in its entirety and the following inserted therefor:
7.20 ACCOUNTS RECEIVABLE TURNOVER. Permit the Accounts
----------------------------
Receivable Turnover (excluding Accounts Receivable arising
from the IT Contract) for the Four Quarter Periods ending on
the last day of each of the first 3 fiscal quarters of
Borrower's fiscal year to be greater than 45 days, permit
the Accounts Receivable Turnover for the Accounts Receivable
arising from the IT Contract only for the Four Quarter
Periods ending on the last day of each of the first 3 fiscal
quarters of Borrower's fiscal year to be greater than 60
days, or permit the Accounts Receivable
-27-
<PAGE>
Turnover for the Four Quarter Period ending on the last day
of Borrower's fiscal year to be greater than 60 days
(including Accounts Receivable arising from the IT
Contract).
37. Total Debt Service. Section 7.22 of the Loan Agreement is hereby
------------------
deleted in its entirety and the following inserted therefor:
7.22 TOTAL DEBT SERVICE. Permit Operating Cash Flow for the Four
------------------
Quarter Period ending on the last day of each fiscal quarter
of Borrower beginning with the fiscal quarter ending June
30, 1996 to be less than the product of (A) Total Debt
Service the for applicable Four Quarter Period, multiplied
by (B) 1.0 for the Four Quarter Period ending June 30, 1996;
1.1 for the Four Quarter Period ending September 30, 1996;
and 1.15 for the Four Quarter Period ending December 31,
1996 and for each Four Quarter Period thereafter.
38. Availability - Working Capital Loan. Section 7.23 of the Loan
-----------------------------------
Agreement is hereby deleted in its entirety and the following inserted therefor:
7.23 WORKING CAPITAL LOAN. At any time, permit total
--------------------
Working Capital Debt to exceed 90% of Eligible Accounts
Receivable, without regard to the maximum amount of Working
Capital Debt.
39. Limitations on Business Activities of Holdings. Section 7 of the Loan
----------------------------------------------
Agreement is hereby amended to add the following:
7.24 LIMITATIONS ON BUSINESS ACTIVITIES OF HOLDINGS.
----------------------------------------------
Permit Holdings to undertake, and Holdings shall not
undertake, any business operations except those business
operations necessary and normally associated with a holding
company, and Holdings shall not consolidate with or merge
with or into any Person, or acquire directly or indirectly
all or substantially all of the capital stock, equity
interests or Property of another Person, except Holdings may
(a) consummate a private placement for a minimum of $500,000
pursuant to a private placement memorandum (the "Private
Placement"), (b) consummate the transactions described in
that certain letter of intent dated September 7, 1995
between Holdings and DK Industries, Inc., as amended by
First Amendment to Letter of Intent dated October 5, 1995
and proposed amendment described in letter dated October 7,
1995 from Robert Wiegand to Jeffrey A. Bartholomew (the
"Public Company Merger"), provided that DK Industries, Inc.
or its successor executes and delivers to Lender a
Continuing Guaranty substantially in the form attached
hereto as EXHIBIT
-28-
<PAGE>
7.24 and incorporated herein by this reference (the "Public
Company Guaranty"), (c) consummate the transactions
described in that certain Option Agreement for Purchase of
Stock dated September 25, 1995 between Jan Berkowitz and
Holdings, (d) consummate the transactions described in that
certain GDC/3E Acquisition Agreement dated August 21, 1995
between 3E Corporation of Louisiana and Holdings, (e)
consummate the transactions described in that certain
Agreement to Purchase and Sell dated October 16, 1995
between Kathleen J. Elnaggar and Holdings, (f) consummate
the transactions described in that certain GDC Holdings
Corporation Debt Acquisition Agreement dated October 8, 1995
among Kathleen J. Elnaggar, Borrower and Holdings, provided
that Holdings immediately thereafter contributes the
Subordinated Indebtedness to Borrower for cancellation, (g)
obtain funds to make and make loans constituting New
Subordinated Indebtedness to Borrower upon the terms and
conditions contained in this Loan Agreement, and (h)
guarantee obligations of Borrower (collectively, the
"Permitted Holdings Transactions"). The Permitted Holdings
Transactions are permitted by Lender on the express
condition that such Permitted Holdings Transactions are
consummated substantially in accordance with the terms,
conditions and provisions described in the referenced
agreements. Any material modification, amendment or waiver
of the terms, conditions or provisions of any such agreement
shall require the prior written consent of Lender.
40. Bankruptcy, etc.. Section 8.1.5 of the Loan Agreement is hereby
----------------
delated in its entirety and the following inserted therefor:
8.1.5 BANKRUPTCY, ETC.
----------------
(a) If Borrower or Holdings shall (i) file, or
consent by answer or otherwise, to the filing against
Borrower or Holdings of a petition for relief or
reorganization or arrangement or any other petition in
bankruptcy or insolvency under the laws of any jurisdiction,
(ii) make an assignment for the benefit of creditors, (iii)
consent to the appointment of a custodian, receiver, trustee
or other officer with similar powers for Borrower or
Holdings, or for any substantial part of the Property owned
by Borrower or Holdings, or (iv) be adjudicated insolvent.
(b) If any Governmental Body of competent
jurisdiction shall enter an order appointing, without
consent of Borrower or Holdings, a custodian, receiver,
trustee or other officer with similar powers with respect to
Borrower or Holdings, or with respect to any substantial
part of the Property belonging to
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<PAGE>
Borrower or Holdings, or if an order for relief shall be
entered in any case or proceeding for liquidation or
reorganization or otherwise to take advantage of any
bankruptcy or insolvency law of any jurisdiction, or
ordering the dissolution, winding-up or liquidation of
Borrower or Holdings, or if any petition for any such relief
shall be filed against Borrower or Holdings and such
petition shall not be dismissed or stayed within 30 days.
41. Notices. Section 11.1 of the Loan Agreement with respect to the
-------
notices to Borrower is hereby deleted in its entirety and the following inserted
therefor:
GDC Enviro-Solutions, Inc.
822 Neosho Avenue
Baton Rouge, Louisiana 70802
Attn: Mr. Harry C. Conger, CEO
Attn: Mr. Donald L. Murphy, Secretary
Telecopy No: (504) 383-2789
With a Copy To: Martha S. Nachman, Esq.
Bearman, Talesnick & Clowdus, P.C.
1200 Seventeenth Street, Suite 2600
Denver, CO 80202-5826
Telecopy No: (303) 572-6511
42. Exhibits. EXHIBITS 1.1(D), 1.1(E), 5.3.1, 5.5.3, 5.8.A AND 7.6 to the
--------
Loan Agreement are hereby deleted in their entirety and replaced by EXHIBITS
1.1(D), 1.1(E) 5.3.1, 5.5.3, 5.8.A AND 7.6 attached hereto, which are
incorporated in the Loan Agreement by this reference.
43. Modifications. No amendment, modification, change, waiver, release or
-------------
discharge hereof or hereunder shall be effective unless evidenced by an
instrument in writing signed by the party against whom enforcement is sought.
44. Severability. If any provision hereof is invalid or unenforceable,
------------
the other provisions hereof shall remain in full force and effect and shall be
liberally construed in favor of Lender in order to effectuate the other
provisions hereof.
45. Counterparts. This Sixth Amendment may be executed in one or more
------------
counterparts, each of which shall be deemed an original instrument and all of
which combined shall constitute one and the same instrument.
46. Binding Nature. The provisions of this Sixth Amendment shall be
--------------
binding upon, and inure to the benefit of, the respective successors and assigns
(including without limitation, any receiver, debtor in possession or trustee in
bankruptcy) of Lender, Borrower and Kathleen J. Elnaggar.
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<PAGE>
47. Fraudulent Conveyance and Preference. In the event there is a final,
------------------------------------
non-appealable action in any bankruptcy or insolvency proceeding ordering
recovery, or compelling the return, of all or a portion of the Restructure Fee
or the Profit Participation Fee, whether by fraudulent transfer, preference
action or otherwise, the deferral and contingent waiver or the waiver of the
Excess Cash Flow payments and the modification of the Profit Participation Fee
provision in Section 2.8.3 of the Loan Agreement, shall, immediately and without
notice or the taking of any other action, be null and void, and without effect,
and to the extent necessary, all rights of Lender shall be restored and
reinstated and may be immediately enforced and pursued as if the revisions to
Sections 2.8.3 and 2.9.2(a) of the Agreement had not been made. Notwithstanding
the foregoing, upon compliance with the provisions of Section 3.3 hereof, the
release of the K. Elnaggar Guarantee shall be final and not subject to
restoration or reinstatement.
48. APPLICABLE LAW. THE OBLIGATIONS OF BORROWER AND KATHLEEN J. ELNAGGAR
--------------
HEREUNDER, UNDER THE LOAN AGREEMENT, AS MODIFIED HEREBY, AND UNDER THE OTHER
LOAN INSTRUMENTS, ARE TO BE PERFORMED IN, AND THIS SIXTH AMENDMENT IS, AND THE
LOAN AGREEMENT AND OTHER LOAN INSTRUMENTS HAVE BEEN, EXECUTED, DELIVERED AND
ACCEPTED IN, AND THIS SIXTH AMENDMENT, THE LOAN AGREEMENT, AS MODIFIED HEREBY,
AND THE OTHER LOAN INSTRUMENTS SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE INTERNAL LAWS AND DECISIONS OF, THE STATE OF ARIZONA (WITHOUT
REGARD FOR ITS CONFLICTS OF LAW PRINCIPLES), AND BY EXECUTION HEREOF BORROWER
AND KATHLEEN J. ELNAGGAR AND LENDER EACH AGREE THAT SUCH LAWS AND DECISIONS OF
THE STATE OF ARIZONA SHALL GOVERN THIS SIXTH AMENDMENT, THE LOAN AGREEMENT, AS
MODIFIED HEREBY, AND THE OTHER LOAN INSTRUMENTS, NOTWITHSTANDING THE FACT THAT
THERE MAY BE OTHER JURISDICTIONS WHICH MAY BEAR A REASONABLE RELATIONSHIP TO THE
TRANSACTIONS CONTEMPLATED HEREBY; PROVIDED, HOWEVER, THAT WITH RESPECT TO
PROCEDURAL AND SUBSTANTIVE MATTERS RELATING ONLY TO THE CREATION, PERFECTION AND
ENFORCEMENT BY LENDER OF ITS RIGHTS AND REMEDIES AGAINST ANY REAL OR PERSONAL
PROPERTY COLLATERAL LOCATED IN ANY STATE OTHER THAN ARIZONA, SUCH MATTERS SHALL
BE GOVERNED BY THE LAWS OF THE STATE IN WHICH SUCH PROPERTY IS LOCATED.
_____________ _______________ ___________ ____________
initial initial initial initial
49. JURISDICTION AND VENUE. BORROWER AND KATHLEEN J. ELNAGGAR HEREBY
----------------------
AGREE THAT ALL ACTIONS OR PROCEEDINGS INITIATED BY BORROWER OR KATHLEEN J.
ELNAGGAR, OR ANY OF THEM, AND ARISING DIRECTLY OR INDIRECTLY OUT OF THE LOAN
INSTRUMENTS SHALL BE LITIGATED IN THE SUPERIOR COURT OF ARIZONA, MARICOPA COUNTY
DIVISION, OR THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF
-31-
<PAGE>
ARIZONA OR, IF LENDER INITIATES SUCH ACTION, IN ADDITION TO THE FOREGOING
COURTS, ANY COURT IN WHICH LENDER SHALL INITIATE SUCH ACTION, TO THE EXTENT SUCH
COURT HAS JURISDICTION. BORROWER AND KATHLEEN J. ELNAGGAR HEREBY EXPRESSLY
SUBMIT AND CONSENT IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR PROCEEDING
COMMENCED BY LENDER IN ANY OF SUCH COURTS, AND HEREBY WAIVE PERSONAL SERVICE OF
THE SUMMONS AND COMPLAINT, OR OTHER PROCESS OF PAPERS ISSUED THEREIN, AND AGREE
THAT SERVICE OF SUCH SUMMONS AND COMPLAINT OR OTHER PROCESS OR PAPERS MAY BE
MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO BORROWER OR KATHLEEN J.
ELNAGGAR AT THE ADDRESS TO WHICH NOTICES ARE TO BE SENT TO BORROWER PURSUANT TO
THE LOAN AGREEMENT. BORROWER AND KATHLEEN J. ELNAGGAR EACH WAIVE ANY CLAIM THAT
PHOENIX, ARIZONA OR THE DISTRICT OF ARIZONA IS AN INCONVENIENT FORUM OR AN
IMPROPER FORUM BASED ON LACK OF VENUE. SHOULD BORROWER OR KATHLEEN J. ELNAGGAR,
OR ANY OF THEM, AFTER BEING SO SERVED, FAIL TO APPEAR OR ANSWER TO ANY SUMMONS,
COMPLAINT, PROCESS OR PAPERS SO SERVED WITHIN THE NUMBER OF DAYS PRESCRIBED BY
LAW AFTER THE MAILING THEREOF, SUCH BORROWER(S) SHALL BE DEEMED IN DEFAULT AND
AN ORDER AND/OR JUDGMENT MAY BE ENTERED BY LENDER AGAINST SUCH BORROWER(S) AS
DEMANDED OR PRAYED FOR IN SUCH SUMMONS, COMPLAINT, PROCESS OR PAPERS. THE
EXCLUSIVE CHOICE OF FORUM FOR BORROWER AND KATHLEEN J. ELNAGGAR SET FORTH IN
THIS SECTION SHALL NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT, BY LENDER, OF ANY
JUDGMENT OBTAINED IN ANY OTHER FORUM OR THE TAKING, BY LENDER, OF ANY ACTION TO
ENFORCE THE SAME IN ANY OTHER APPROPRIATE JURISDICTION, AND BORROWER AND
KATHLEEN J. ELNAGGAR HEREBY WAIVE THE RIGHT TO COLLATERALLY ATTACK ANY SUCH
JUDGMENT OR ACTION.
___________ ___________ ____________ ______________
initial initial initial initial
50. WAIVER OF RIGHT TO JURY TRIAL. LENDER, BORROWER AND KATHLEEN J.
-----------------------------
ELNAGGAR ACKNOWLEDGE AND AGREE THAT ANY CONTROVERSY WHICH MAY ARISE UNDER ANY OF
THE LOAN INSTRUMENTS OR WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED THEREBY
WOULD BE BASED UPON DIFFICULT AND COMPLEX ISSUES AND, THEREFORE, THE PARTIES
AGREE THAT ANY LAWSUIT ARISING OUT OF ANY SUCH CONTROVERSY SHALL BE TRIED IN A
COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.
_____________ ______________ ___________ ______________
initial initial initial initial
-32-
<PAGE>
51. Amendment. This Sixth Amendment and the other Loan Instruments
---------
executed prior or pursuant hereto constitute the entire agreement between the
parties hereto with respect to the transactions contemplated hereby or thereby
and supersede any prior agreements, whether written or oral, relating to the
subject matter hereof. Except as specifically amended herein, the Loan Agreement
shall remain in full force and effect. In the event of any conflict between the
terms and provisions of this Sixth Amendment and the terms and provisions of the
Loan Agreement, the terms and provisions of this Sixth Amendment shall govern
and prevail. Nothing contained in this Sixth Amendment is intended to or shall
be construed as relieving any person or entity, whether a party to this Sixth
Amendment, or not, of any of such person's or entity's obligations to Lender.
52. All Loan Instruments. Each of the other Loan Instruments is amended
--------------------
so that any reference therein to a definition or agreement amended hereby shall
be deemed to be a reference to such definition or agreement, as applicable, as
amended hereby.
[THE REMAINDER OF THIS PAGE
IS LEFT INTENTIONALLY BLANK]
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<PAGE>
IN WITNESS WHEREOF, this Sixth Amendment is executed as of the date first
above written.
LENDER:
FINOVA CAPITAL CORPORATION, a
Delaware corporation
By:_________________________________________
Name:_______________________________________
Title:______________________________________
BORROWER:
GDC ENVIRO-SOLUTIONS, INC., a
Louisiana corporation
By:_________________________________________
Name:_______________________________________
Title:______________________________________
____________________________________________
KATHLEEN J. ELNAGGAR, AS TRUSTEE FOR THE
BENEFIT OF TAREK ELNAGGAR, SHARIF JOSEPH
ELNAGGAR AND JEANNE-MARIE ELNAGGAR, CREATED
BY THE LAST WILL AND TESTAMENT OF HAMEED
AHMED ELNAGGAR DATED MARCH 20, 1988
____________________________________________
KATHLEEN JORDAN ELNAGGAR,
individually
HOLDINGS:
GDC HOLDINGS CORPORATION, a
Louisiana corporation
By:_________________________________________
Name:_______________________________________
Title:______________________________________
-34-
<PAGE>
SIXTH AMENDMENT TO LOAN INSTRUMENTS
GDC ENVIRO-SOLUTIONS, INC., BORROWER
FINOVA CAPITAL CORPORATION, LENDER
EXHIBIT 1.1(D)
GDC ENVIRO-SOLUTIONS, INC. - LIST OF SHAREHOLDERS
GDC Holdings Corporation 3,814,160 shares
<PAGE>
SIXTH AMENDMENT TO LOAN INSTRUMENTS
GDC ENVIRO-SOLUTIONS, INC., BORROWER
FINOVA CAPITAL CORPORATION, LENDER
EXHIBIT 1.1(E)
DESCRIPTION OF SHAREHOLDER INDEBTEDNESS
BEFORE GDC/HOLDINGS STOCK EXCHANGE:
<TABLE>
<CAPTION>
Principal Amount* Date Holder
- ---------------- ---- ------
<C> <S> <C>
$ 700 April 23, 1991 Kathleen Elnaggar, as Trustee
676,825 June 19, 1991 Kathleen Elnaggar, as Trustee
72,000 August 14, 1991 Kathleen Elnaggar, as Trustee
21,000 November 14, 1991 Kathleen Elnaggar, as Trustee
137,212 December 18, 1992 Kathleen Elnaggar, Individually
8,000 September 16, 1991 Kathleen Elnaggar, As Trustee
- --------
$915,737
</TABLE>
*plus accrued interest
AFTER GDC/HOLDINGS STOCK EXCHANGE:
NONE
<PAGE>
SIXTH AMENDMENT TO LOAN INSTRUMENTS
GDC ENVIRO-SOLUTIONS, INC., BORROWER
FINOVA CAPITAL CORPORATION, LENDER
EXHIBIT 5.3.1
DESCRIPTION OF CAPITALIZATION OF BORROWER
Authorized Shares - 5,000,000 shares no par value common stock
BEFORE GDC/HOLDINGS STOCK EXCHANGE:
No. of Shares Issued Holder
-------------------- ------
2,111,874 K. Elnaggar
780,157 Elnaggar Trust
527,969 Tarek Elnaggar
394,160 Harry C. Conger
-----------
Total 3,814,160
No. of Warrants Issued
----------------------
200,000 B. Jim Porter
100,000 James M. Hutchinson
-----------
Total 300,000
NOTE: IN CONNECTION WITH THE GDC/HOLDINGS STOCK EXCHANGE, THE SHAREHOLDER
INDEBTEDNESS WILL BE CONVERTED TO 932,512 WARRANTS FOR THE BORROWER CAPITAL
STOCK AND 574,488 SHARES OF THE BORROWER CAPITAL STOCK, WHICH WILL THEN BE
CONVERTED TO WARRANTS AND/OR STOCK OF HOLDINGS.
AFTER GDC/HOLDINGS STOCK EXCHANGE:
No. of Shares Issued Holder
-------------------- ------
3,814,160 GDC Holdings Corporation
No. of Warrants Issued
----------------------
None N/A
<PAGE>
SIXTH AMENDMENT TO LOAN INSTRUMENTS
GDC ENVIRO-SOLUTIONS, INC., BORROWER
FINOVA CAPITAL CORPORATION, LENDER
EXHIBIT 5.5.3
BORROWER'S CHIEF EXECUTIVE OFFICE AND OTHER PLACES OF BUSINESS
(EXCLUDING JOB SITES)
CHIEF EXECUTIVE OFFICE:
GDC Enviro-Solutions, Inc.
822 Neosho Avenue
Baton Rouge, Louisiana 70802
OTHER OFFICE:
Sales Office (Ronald Reed)
4418 Autumn Lane
Lewiston, New York 10492
STATES IN WHICH QUALIFIED TO DO BUSINESS:
Louisiana (state of incorporation)
Mississippi
New York
Texas
South Carolina
<PAGE>
SIXTH AMENDMENT TO LOAN INSTRUMENTS
GDC ENVIRO-SOLUTIONS, INC., BORROWER
FINOVA CAPITAL CORPORATION, LENDER
EXHIBIT 5.8.A
PENDING OR THREATENED LITIGATION
The following are all the actions, suits, arbitration proceedings or claims
pending or threatened against GDC:
1.R. Troy Boone, et al v. GDC Engineering, Inc., et al, Docket No. 93-967-
B-MS, United States District Court, Middle District of Louisiana,
alleging personal injury of an employee of BCI Environmental
Construction, Inc.
2.EEOC claim filed against GDC Engineering, Inc. by Ricky LaGrange alleging
racial discrimination.
3.Ollie Lynn Turbeville, et al v. Rubicon, Inc., GDC Engineering, Inc., et
al. Docket No. 54,657, 23rd Judicial District Court, Parish of
Ascension, State of Louisiana, alleging damages, including punitive
damages for personal injury to an employee of GDC Engineering Inc.
4.George Arab, et al v. Thermal Process Systems, Inc., Docket No. 54,450,
23rd Judicial District Court, Parish of Ascension, State of Louisiana,
alleging damages for personal injury to an employee of GDC
Engineering, Inc.
5.EEOC Claim filed against GDC by Johnny Manual alleging age and gender
discrimination.
6.Ronald O. Clesi v. Pala Interstate, Inc., ABC Insurance Co., Shell Oil,
and GDC Engineering Inc. Docket No. 44,340-C, 29th Judicial District
Court, Parish of St. Charles, State of Louisiana, alleging damages,
including punitive damages, for personal injury while employed by GDC
Engineering, Inc.
<PAGE>
SIXTH AMENDMENT TO LOAN INSTRUMENTS
GDC ENVIRO-SOLUTIONS, INC., BORROWER
FINOVA CAPITAL CORPORATION, LENDER
EXHIBIT 7.6
DESCRIPTION OF PERMITTED COMPENSATION
<TABLE>
<CAPTION>
DATE OF
EMPLOYMENT
OFFICERS AGREEMENT ANNUAL SALARY
- -------- --------- -------------
<S> <C> <C>
Kathleen J. Elnaggar September 1, 1995 $150,000
Tarek Elnaggar September 14, 1994 $100,580
Harry C. Conger December 16, 1994 $130,000
Amended July 15, 1995
and August 21, 1995
Donald L. Murphy, Jr. September 14, 1995 $ 85,580
Ron Reed March 4, 1993 $ 104,418 increased
by COLA annually
</TABLE>
(1) Does not include value of other benefits which are described in the
Employment Agreements, copies of which have been provided to Lender.
<PAGE>
SIXTH AMENDMENT TO LOAN INSTRUMENTS
GDC ENVIRO-SOLUTIONS, INC., BORROWER
FINOVA CAPITAL CORPORATION, LENDER
SCHEDULE 7
COVENANT WAIVERS
1. Change of name to GDC Enviro-Solutions, Inc and Amendment to Bylaws to
create office of Chief Executive Officer (Section 7.11).
2. Execution and performance of Employment Agreements listed in Exhibit 7.6 of
Sixth Amendment (Sections 7.6 and 7.15).
3. Execution and performance of Agreement listed in Sections 32 and 39 of
Sixth Amendment (Sections 7.7, 7.8, 7.12 and 7.15).
4. Amendment or termination of any Shareholders' Agreements and Issuance of
shares to Kathleen J. Elnaggar and Harry C. Conger, transfer of shares to
Tarek Elnaggar, issuance of Warrants (but not shares) to Kathleen J.
Elnaggar, B. Jim Porter and James M. Hutchinson, and execution of
Subscription Agreement for GDC/Holdings Stock Exchange and any changes of
control relating thereto or from the Private Placement or the Public
Company Merger (Sections 7.13 and 7.16 and Pledge Agreement).
5. Execution of Spectrum Consulting Agreement and amendments (Sections 7.4,
7.8 and 7.12). The Spectrum Consulting Agreement was subsequently
terminated.
6. Execution of the Facilities, Technology and Production Lease dated July 1,
1995 between NBL and Borrower, and the Employment Agreement dated July 1,
1995 between Borrower and Jan Berkowitz, and the performance of the
obligations of Borrower thereunder (Sections 7.4, 7.7, 7.8, and 7.12).
7. Execution of Letter of Intent with DK Industries, Inc. (Section 7.3).
8. Voting of shares by Existing GDC Shareholders after any Incipient Default
or Event Of Default has occurred (Pledge Agreement).
9. Failure to provide Notices of Defaults and Adverse Events (Section 6.3.8(b)
and (c)).
10. Non-monetary defaults under agreements with Working Capital Lender (Section
6.16).
11. Delay in payment of Excess Cash Flow for year ended November 30, 1994
pending amendment of Loan Agreement (Section 6.13).
<PAGE>
12. Late submission of Financial Statements and other information (Section
6.3).
13. Non-monetary defaults under agreements with LSC and Ally (Section 6.5).
14. Late Certifications regarding environmental matters (Section 6.9).
15. Temporary advance to officer of Borrower (subsequently repaid) (Section
7.7.3)
16. Failure to comply with financial standards and have required minimum
availability (Sections 7.18, 7.19, 7.20, 7.21, 7.22 and 7.23).
17. Extension of Lease for additional 5 years if acquisition does not occur
(Sections 7.15 and 7.16).
18. Failure to deliver financial statements of Kathleen J. Elnaggar (Guaranty
and Loan Amendment).
19. Liens existing on February 16, 1996 (Section 7.2).
20. Possible failure to comply with Excess Cash Flow limitation with respect to
monthly payments to Louisiana Seed Capital Fund Limited Partnership and
Louisiana Economic Development Corporation (LSC Intercreditor Agreement,
Section 3.2(a)).
21. Breach of any representation or warranty relating to any matter listed
above or otherwise expressly waived in the Sixth Amendment (Section 8.1.3).
NOTE: Unless otherwise noted, references in parentheses are to Section numbers
of existing Loan Agreement with FINOVA Capital Corporation.
-2-
<PAGE>
EXHIBIT 4(c)
GDC Enviro-Solutions, Inc.
822 Neosho Avenue
Baton Rouge, Louisiana 70802
___________, 1997
Re: Loan to GDC Enviro-Solutions, Inc.
----------------------------------
Gentlemen:
This letter agreement (the "Agreement") will confirm our understanding
and agreement with respect to the loan (the "Loan") in the principal amount of
$_________________ to be made by you (the "Lender") to the undersigned, GDC
Enviro-Solutions, Inc., a Louisiana corporation (the "Company"), and is entered
into in order to induce you to make the Loan. In consideration therefor, we
agree as follows:
1. The Loan will be evidenced by a promissory note of the Company,
dated the date hereof (the "Note") payable to the order of the Lender, in the
principal amount of $_______________, bearing interest at the rate of fourteen
(14%) percent per annum. Principal and accrued interest on the Note shall be
payable in full on December 15, 1997 (the "Maturity Date"). If this Note is not
paid in full on or before the Maturity Date, interest on such Note shall accrue
at the rate of eighteen (18%) percent per annum until paid in full.
2. The Loan will be disbursed in immediately available funds by wire
transfer to the Company or its designees at the account(s) specified in writing
by the Company or its attorneys.
3. (a) In consideration for and as a condition to the Lender making
the Loan hereunder, the Company agrees to pay and issue to the Lender (i) a loan
origination fee in the amount of $_______________ (10% of the principal amount
of the loan), payable on the Maturity Date (or sooner pursuant to Section 7(b))
and (ii) Series AA Warrants, issuable at the closing of the Loan, to acquire
___________ shares of the Company's Common Stock (15,000 shares per $100,000
principal amount of Loan) at an exercise price of $2.25 per share.
<PAGE>
(b) In the event the Loan is not paid in full on or before the
date specified below, the Company shall pay to the Lender on the Maturity Date
(or sooner pursuant to Section 7(b) below), the following fees as reasonable
compensation to Lender:
Date Fee
---- ---
July 1, 1997 _______ (5% of loan amt)
December 15, 1997 _______ (5% of loan amt)
4. In the event the Company fails to pay the Note in full on or before
the Maturity Date, the Lender shall have the right to convert the principal
amount in default, as well as any accrued interest thereon, into common stock of
the GDC Group, Inc. ("Common Stock"). Such conversion, which shall be in lieu of
the Lender's right to seek repayment of any amount converted, shall be at a
conversion price equal to forty percent (40%) of the average of the Market
Prices (as hereinafter defined) of the Common Stock during the thirty (30)
business days immediately preceding the date of Lender's written notice to the
Company exercising its conversion option hereunder; provided, however, that in
no event may the conversion price be less than $1.00 per share.
As used herein, the market price per share ("Market Price") at any
date shall be the price of the Common Stock on such date which shall be:
(a) if the principal trading market for the Common Stock is NASDAQ
NMS, NASDAQ Small Cap, OTC Bulletin Board, or a national securities exchange or
admitted to unlisted trading privileges on such exchange, the last reported sale
price (or closing price if there is no last reported sale price) of the Common
Stock on such market or exchange on the measuring date; or
(b) if the Common Stock is not quoted on any of the foregoing
markets or exchanges (or admitted to unlisted trading privileges), or if there
is no reported last sale price or closing price of the Common Stock on such
market or exchange on the applicable measuring date, the high closing bid as
reported on the "pink sheets" by the National Daily Quotation Bureau, Inc., or,
if unavailable, the most recent last sale price, closing price, or high bid
price, as the case may be, available prior to the measuring date.
5. The Loan shall be unsecured.
6. The Lender shall have no obligation to make the Loan unless and
until all legal matters relating to the Loan shall be reasonably satisfactory to
counsel for the Lender.
-2-
<PAGE>
7. Representations, Warranties, and Covenants of the Company. The
---------------------------------------------------------
Company represents, warrants, and covenants to the Lender as follows:
(a) The Agreement and the Note have been duly executed by it, have
been duly authorized by all necessary corporate action on the part of the
Company, constitute the valid and legally binding obligations of the Company,
enforceable in accordance with their terms, and do not violate any of the terms
of the Company's articles of incorporation or by-laws. The execution, delivery
and performance of the Agreement and the Note do not and will not breach or
result in a default under any agreement, note, indenture or instrument to which
the Company is a party; provided, however, that the consent of FINOVA Capital
Corporation ("FINOVA"), the Company's senior lender, is required under the terms
of its loan agreement with the Company. The Company has disclosed to FINOVA the
Company's short-term financial needs and its plans to do bridge financings, and
intends to formally request FINOVA's consent to the Loan and the Other Loans
within thirty days after the date hereof. A portion of the proceeds of the Loan
and/or the Other Loans is being applied to pay amounts currently in default
under the FINOVA loan and, therefore, the Company anticipates that FINOVA will
deliver its consent to the Loan. However, if FINOVA fails to give its consent
(or waiver), then the making of the Loan and the Other Loans would constitute a
default under the FINOVA loan.
(b) The Company shall make a mandatory prepayment of all
outstanding principal and accrued interest on the Loan in the event GDC Group,
Inc. and/or any of its subsidiaries, closes one or more public or private
offerings of debt or equity securities resulting in aggregate gross proceeds of
at least $6,000,000 (exclusive of refinancings of the Company's existing credit
facilities with FINOVA and Coast Business Credit). The Company shall give to the
Lender prompt notice of the closing of a transaction described herein and the
prepayment obligation shall be due as soon as practicable following the closing
but in no event more than ten days following such closing. In addition, in the
event of a mandatory prepayment hereunder, the loan origination fee payable
pursuant to Section 3(a) and any amount actually due to the Lender pursuant to
Section 3(b) above (due to the failure to repay the Loan on or before the date
specified therein) shall be accelerated and due and payable together with the
mandatory prepayment hereunder. The payment shall be accompanied by the
Company's written calculation of the amount payable to the Lender hereunder.
(c) The Company and the Lender acknowledge and agree that any and
all pre-payments made hereunder shall be made on a pro-rata basis with other
loans being made concurrently herewith, aggregating (together with this Loan)
not more than
-3-
<PAGE>
$1,500,000 (the "Other Loans"). The Company shall not make any payments under
the Other Loan unless it makes a proportionate payment under the Loan hereunder
concurrently therewith.
(d) The Company will use the net proceeds of the Loan and the
Other Loans to pay costs and expenses related to the offering and amounts past
due or currently due (i) under loans to the Company and (ii) to vendors in
connection with the Company's projects.
(e) The Company will provide the Lender with management prepared
quarterly consolidated financial statements of GDC Group, Inc. within 45 days of
the end of each fiscal quarter, 90 days in the case of the fourth fiscal
quarter. In addition, the Company shall provide the Lender all information
reasonably requested regarding the Company and provide the Lender reasonable
access to all the Company's books and records in the event the Lender is
contemplating conversion of this Note.
8. Representations and Warranties of the Lender. The Lender
--------------------------------------------
represents and warrants to the Company as follows:
(a) The Lender has received, read, and understands the
Information Statement of GDC Group, Inc. and its subsidiaries dated February 5,
1997 which includes recent business developments and risk factors (the
"Information Statement"). The Lender has been advised by the Company that the
Information Statement contains important information about the Company and its
operations, which updates certain material in the Confidential Private Placement
Memorandum of GDC Group, Inc. (f/k/a DK Industries, Inc.) dated August 8, 1996,
as supplemented on September 25, 1996 and October 28, 1996 (the "Memorandum").
The Lender acknowledges (i) having received a copy of the Memorandum (in
connection with this offering or a prior offering of GDC Group, Inc.) and (ii)
having read all of the risk factors therein (as updated by the Information
Statement).
(b) The Lender has had such opportunity to ask questions of, and
to receive answers from, the Company, or an agent of the Company, concerning the
terms and conditions of the investment and the business and affairs of the
Company, and to verify such information, as the Lender considers necessary or
advisable in order to form a decision concerning an investment in the Company.
(c) The Note is being acquired for investment for the Lender's
own account and not with the view to, or for resale in connection with, any
distribution or public offering thereof. The Lender understands that neither (i)
the Note and the Common Stock issuable upon conversion of the Note nor (ii) the
Series AA Warrants and the Common Stock issuable upon conversion thereof,
-4-
<PAGE>
has been registered under the Securities Act of 1933, as amended (the
"Securities Act"), or any state securities laws by reason of the contemplated
issuance in transactions exempt from the registration requirements of the
Securities Act and applicable state securities laws and that the reliance of the
Company and others upon these exemptions is predicated in part upon this
representation by the Lender. The Lender further understands that the Note may
not be transferred or resold without the approval of the Company and its
counsel, which consent shall not be unreasonably withheld.
(d) The Lender's principal residence is located in the State of
________.
(e) The Lender is able to bear the loss of the entire investment
of the Note without any material adverse effect on the Lender's financial
position or prospects, and the Lender has such knowledge and experience of
financial and business matters to be capable of evaluating the merits and risks
of the investment to be made pursuant to the Agreement.
(f) The Lender hereby acknowledges its understanding that First
Equity Capital Securities, Inc. ("First Equity") will receive a commission on
this transaction equal to 10% of the gross proceeds, payable by the Company. The
Lender further acknowledges that principals or affiliates of First Equity have
advised the Company that they intend to invest in this offering.
(g) The Lender is (check all that apply):
____ (i) A natural person whose individual net worth (assets
less liabilities), or joint net worth with his or her
spouse, exceeds $1,000,000.
____ (ii) A natural person whose individual income was in
excess of $200,000, or whose joint income with his or
her spouse was in excess of $300,000, in each of the
two most recent years, and who has a reasonable
expectation of reaching the same income level for the
current year.
____ (iii) A bank, insurance company, registered investment
company, business development company, small business
investment company, or employee benefit plan .
-5-
<PAGE>
____ (iv) A savings and loan association, credit union, or
similar financial institution, or a registered broker
or dealer.
____ (v) A private business development company.
____ (vi) An organization described in Section 501(c) (3) of
the Internal Revenue Code with assets in excess of
$5,000,000.
____ (vii) A corporation, Massachusetts or similar business
trust, or partnership with assets in excess of
$5,000,000.
____ (viii) A trust with assets in excess of $5,000,000.
____ (ix) A director or an executive officer of the Company.
____ (x) An entity in which all of the equity owners are
accredited investors.
____ (xi) A self-directed IRA, Keogh, or similar plan of which
the individual directing the investments qualifies as
an "accredited investor" under one or more of items
(i)-(x), above. Also check which of item(s) (i)-(x)
applies to such plan.
(h) The Lender agrees to treat the Information Statement and the
other information received pursuant to Section 8(a) hereof as confidential
material and not to disseminate such information without the permission of the
Company. The Lender further acknowledges that certain of the information
provided by the Company to the Lender constitutes material non-public
information and that the Lender may not purchase or sell securities of GDC
Group, Inc. based on such information (other than in transactions with GDC
Group, Inc.)
(i) Limited Power of Attorney. The Lender does hereby make,
-------------------------
constitute and appoint Harry C. Conger, President and Chief Executive Officer of
the Company and James Muzzy, Vice President of GDC Group, Inc., and each of them
acting severally, true and lawful attorney for the Lender and in his name, place
and stead, with full power to do and perform all and every action that the
Lender may do through an attorney in fact and every proper power necessary to
carry out, but solely to carry out, the
-6-
<PAGE>
execution and delivery to GDC Group, Inc. on the Lender's behalf of the Warrant
Agreement and the Registration Rights Agreement being delivered in connection
with the Loan.
The Agreement shall be governed by and construed in accordance with
the laws of the State of Colorado, may not be amended, modified or waived except
in writing, signed by the party against whom such amendment, modification or
waiver is sought to be enforced making specific reference to the Agreement,
shall be binding upon the Company and inure to the benefit of the Lender and its
respective successors, assigns, heirs and legal representatives.
The provisions of the Agreement are severable and if any clause or
provision shall be held invalid or unenforceable in whole or in part in any
jurisdiction, then such invalidity or unenforceability shall affect only such
clause or provision, or part thereof, in such jurisdiction and shall not in any
manner affect such clause or provision in any other jurisdiction, or any other
clause or provision in the Agreement in any jurisdiction.
Each of the persons signing below represents to the Lender that he
has full power and authority to execute and deliver this Letter Agreement and
the Note on behalf of the Company.
Very truly yours,
GDC Enviro-Solutions, Inc.
By:___________________________
Harry Conger, Chief
Executive Officer
Accepted and Agreed:
LENDER:
___________________________
THE LENDER ACKNOWLEDGES BEING ADVISED OF AND READING IN THE INFORMATION
STATEMENT ABOUT RISK FACTORS AND RECENT EVENTS WHICH HAVE HAD A MATERIAL ADVERSE
EFFECT ON THE COMPANY AND COULD ADVERSELY EFFECT ITS CURRENT OPERATIONS AND
FUTURE PROSPECTS
________________________
Lender
-7-
<PAGE>
EXHIBIT 4 (D1)
GDC Group, Inc.
1580 Lincoln Street, Suite 1125
Denver, Colorado 80203
December 17, 1996
Herbard Limited
P.O. Box 438
Tropic Isle Building
Road Town, Tortola BVI
Re: Loan to GDC Group, Inc.
-----------------------
Gentlemen:
This letter agreement (the "Agreement") will confirm our understanding
and agreement with respect to the loan (the "Loan") in the principal amount of
Two Million Dollars ($2,000,000) to be made by you (the "Lender") to the
undersigned, GDC Group, Inc., a Colorado corporation (the "Company"), and is
entered into in order to induce you to make the Loan. In consideration
therefor, we agree as follows:
1. The Loan will be evidenced by three promissory notes of the
Company, dated the date hereof (the "Notes") payable to the order of the Lender,
in the aggregate principal amount of $2,0000,000, bearing interest at fourteen
(14%) percent per annum. The Notes will be comprised of (i) a note in the
principal amount of $500,000 due on April 1, 1997 (the "April Note"), (ii) a
note in the principal amount of $500,000 due on July 1, 1997 (the "July Note")
and (iii) a note in the principal amount of $1,000,000 due on December 15, 1997
(the "December Note"). The maturity date of a Note is referred to herein as the
"Maturity Date." Accrued interest on the Notes shall be payable (i) on April 1,
1997 for the April Note, (ii) on April 1, 1997 and July 1, 1997 for the July
Note, and (iii) on April 1, 1997, July 1, 1997, October 1, 1997 and December 15,
1997 for the December Note. In addition, a default on the payment of interest
or principal on any Note shall be deemed an Event of Default on the other Notes,
resulting in an acceleration of the Maturity Date of the other Notes; provided,
however, that such a default under the April Note shall not be deemed an Event
of Default of
<PAGE>
the other Notes unless the full amount due under the April Note (including
principal, interest and applicable late charges) is not paid in full on or
before July 1, 1997. Following an Event of Default on a Note resulting in the
acceleration of the Maturity Date thereof, interest on such Note shall accrue at
the rate of eighteen (18%) percent per annum until paid in full.
2. The Loan will be disbursed in immediately available funds by wire
transfer to the Company at the account(s) specified in writing by the Company or
its attorneys, less Lender's fees and costs as provided herein.
3. (a) In consideration for and as a condition to the Lender making
the Loan hereunder, the Company agrees to issue to the Lender at the closing of
the Loan, (i) a loan origination fee in the amount of $100,000 and (ii) Series
AA Warrants to acquire 500,000 shares of the Company's Common Stock at an
exercise price of $2.25 per share. In addition, the Company shall reimburse the
Lender for all reasonable expenses incurred in making the loan hereunder,
including reasonable attorney's fees. The cash amounts payable to the Lender
under this subparagraph (a) may be deducted from the Loan proceeds disbursed to
the Company under Section 2 above; provided, however, that the Lender shall
advise the Company of the estimated amount of expenses prior to the funding of
the Loan.
(b) In the event the Company shall fail to pay a Note in full on
or before the date set forth below, the Company shall immediately pay to the
Lender the following late payment fee as reasonable compensation to Lender for
the Company's default and losses incurred by the Lender as a result thereof:
<TABLE>
<CAPTION>
Note Due Date Late Payment Fee
- --------------- ----------------- ----------------
<S> <C> <C>
April Note April 1, 1997 $150,000
July Note July 1, 1997 $100,000
December Note December 15, 1997 $ 75,000
</TABLE>
4. In the event a Note is not repaid in full on or before the
Maturity Date thereof (as such date may be accelerated upon an Event of
Default), the Lender shall have the right to convert any or all of the
outstanding principal balance of such Note as well as any accrued interest into
common stock of the Company ("Common Stock"). Such conversion, which shall be
in lieu of the Lender's right to seek repayment of any amount converted, shall
be at a conversion price equal to forty percent (40%) of the average of the
Market Prices (as hereinafter defined) of the Common Stock during the thirty
(30) business days immediately preceding the date of Lender's written notice to
the Company exercising its conversion option hereunder; provided,
-2-
<PAGE>
however, that in no event may the conversion price be less than $1.00 per share.
As used herein, the market price per share ("Market Price") at any
date shall be the price of the Common Stock on such date which shall be:
(a) if the principal trading market for the Common Stock is
NASDAQ NMS, NASDAQ Small Cap, OTC Bulletin Board, or a national securities
exchange or admitted to unlisted trading privileges on such exchange, the last
reported sale price (or closing price if there is no last reported sale price)
of the Common Stock on such market or exchange on the measuring date; or
(b) if the Common Stock is not quoted on any of the foregoing
markets or exchanges (or admitted to unlisted trading privileges), or if there
is no reported last sale price or closing price of the Common Stock on such
market or exchange on the applicable measuring date, the high closing bid as
reported on the "pink sheets" by the National Daily Quotation Bureau, Inc., or,
if unavailable, the most recent last sale price, closing price, or high bid
price, as the case may be, available prior to the measuring date.
5. The Loan shall be partially secured by a Security Agreement of
even date herewith pursuant to which the Company will pledge all of its
ownership interests in and to Walsh Remedial Construction Services, L.L.C.
("WRCS").
6. The Lender shall have no obligation to make the Loan unless and
until the following conditions precedent have been satisfied in the sole
judgment of the Lender:
a. The Notes shall have been executed and delivered and all
other legal matters related to the Loan have been satisfied;
b. All legal matters relating to the Loan shall be reasonably
satisfactory to counsel for the Lender.
c. A loan to the Company in the principal amount of $1,000,000
from Mr. Paul Garrett (the "Other Loan") shall have been funded prior to or
concurrently with the Loan.
7. Representations, Warranties, and Covenants of the Company. The
---------------------------------------------------------
Company represents, warrants, and covenants to the Lender as follows:
(a) The Agreement and the Notes have been duly executed by it,
have been duly authorized by all necessary corporate action on the part of the
Company, constitute the valid
-3-
<PAGE>
and legally binding obligations of the Company, enforceable in accordance with
their terms, and do not violate any of the terms of the Company's articles of
incorporation or by-laws, and the execution, delivery and performance of the
Agreement and the Notes do not and will not breach or result in a default under
any agreement, note, indenture or instrument to which the Company is a party.
(b) The Company shall make a mandatory prepayment of all
outstanding principal and accrued interest on the Loan in the event the Company
closes (i) a public offering (other than pursuant to a Registration Statement on
Forms S-4 or S-8) under the Securities Act of 1933, as amended, or (ii) a bridge
financing in contemplation of a public offering, or (iii) a refinancing of the
Loan and/or the Other Loan incurred in connection with the Company's acquisition
of WRCS, or (iv) a financing other than an account receivable or equipment
financing; provided, however, that if the net proceeds of any such offering or
financing is less than the total outstanding balance due to the Lenders, the
amount of the prepayment shall be equal to the net proceeds of the offering or
financing. The Company shall give to the Lender prompt notice of the closing of
a transaction described herein and the prepayment obligation shall be due as
soon as practicable following the closing but in no event more than ten days
following such closing. The payment shall be accompanied by the Company's
written calculation of the amount payable to the Lender hereunder.
(c) The Company shall make a mandatory repayment(s) of outstanding
principal and accrued interest on the Loan from the proceeds of account
receivable financings of WRCS. The amount of the mandatory repayment(s) shall
be an amount equal to the net proceeds from such financings. The Company shall
give to the Lender prompt notice of the closing of a transaction described
herein and the prepayment obligation shall be due as soon as practicable
following the closing but in no event more than ten days following such closing.
(d) On or before the 10th day of each month commencing in February
1997, the Company shall deliver to the Lender a management prepared profit and
loss statement for the prior month together with a projected cash flow report
for the current month. Based on the projected cash flow report, the Company
shall make a good faith determination of whether it has "excess" cash flow
(based upon its then current cash position and anticipated expenses, including
commercially reasonable cash reserves) during the month of the report. Together
with its delivery of the statement and report, the Company shall make a
mandatory prepayment to the Lender of outstanding principal and accrued interest
on the Loan in an amount equal to the "excess" cash flow.
-4-
<PAGE>
(e) The Company agrees to acquire as soon as practicable after the
funding of the Loan, and maintain for so long as the Loan is outstanding, key
man life insurance policies on the lives of Harry Conger and James Muzzy, both
in the amount of $1.0 million. In the event of the death of either or both of
Messrs. Conger and Muzzy, the death benefits received by the Company pursuant to
such policies shall promptly be used to repay the outstanding balance of the
Loan. The insurance policy to be acquired hereunder shall be a separate and
distinct policy from any other insurance policy on the life of Mr. Conger or Mr.
Muzzy.
(f) The Company and the Lender acknowledge and agree that any and
all pre-payments made hereunder shall be made on a pro-rata basis with the
Other Loan. The Company shall not make any payments under the Other Loan unless
it makes a proportionate payment under the Loan hereunder concurrently
therewith.
(g) The Company will use the net proceeds of the Loan and the
Other Loan solely for purpose of acquiring 100% of the ownership interests in
WRCS, for paying current obligations of WRCS, and for related WRCS equipment
purchases and transaction costs and expenses.
(h) Without the prior written consent of the Lender (which
consent may be given or withheld in the Lender's sole discretion), the Company
shall not (i) admit any new members of WRCS or allow any material amendment,
modification, restatement or alteration of the Operating Agreement of WRCS, (ii)
mortgage, encumber, pledge, sell, hypothecate or otherwise transfer or dispose
all or any substantial portion of the assets of the Company or all or any part
of the Company's ownership interest in WRCS, (iii) terminate or dissolve the
Company, (iv) make any distributions of any kind, including but not limited to
capital or profits, to the members of WRCS (other than for the purpose of making
payments on the Loan pursuant to this Agreement and the Notes) , (v) merge with
or combine with any other entity, or (vi) incur or cause WRCS to incur any debts
except in the ordinary course of business;
(i) The Company will provide the Lender with management prepared
quarterly financial statements of the Company within 45 days of the end of each
fiscal quarter, 90 days in the case of the fourth fiscal quarter. In addition,
the Company shall provide the Lender all information reasonably requested
regarding the Company and provide the Lender reasonable access to all the
Company's books and records in the event the Lender is contemplating conversion
of this Note.
-5-
<PAGE>
8. Representations and Warranties of the Lender. The Lender
--------------------------------------------
represents and warrants to the Company as follows:
(a) The Lender has received, read, and understands the Company's
Confidential Private Placement Memorandum dated August 8, 1996, as supplemented
on September 25, 1996 and October 28, 1996. Further, the Lender has had such
opportunity to ask questions of, and to receive answers from, the Company, or an
agent of the Company, concerning the terms and conditions of the investment and
the business and affairs of the Company, and to verify such information, as the
Lender considers necessary or advisable in order to form a decision concerning
an investment in the Company.
(b) The Notes are being acquired for investment for the Lender's
own account and not with the view to, or for resale in connection with, any
distribution or public offering thereof. The Lender understands that none of
the securities of the Company has been registered under the Securities Act of
1933, as amended (the "Securities Act"), or any state securities laws by reason
of the contemplated issuance in transactions exempt from the registration
requirements of the Securities Act and applicable state securities laws and that
the reliance of the Company and others upon these exemptions is predicated in
part upon this representation by the Lender. The Lender further understands
that the Notes may not be transferred or resold without the approval of the
Company and its counsel.
(c) The Lender's principal residence is located in the British
Virgin Islands.
(d) The Lender is able to bear the loss of the entire investment
of the Notes without any material adverse effect on the Lender's financial
position or prospects, and the Lender has such knowledge and experience of
financial and business matters to be capable of evaluating the merits and risks
of the investment to be made pursuant to this Agreement.
(e) The Lender hereby acknowledges its understanding that First
Equity Capital Securities, Inc. will receive a commission on this transaction
payable by the Company.
(f) The Lender is (check all that apply):
____ (i) A natural person whose individual net worth (assets
less liabilities), or joint net worth with his or her
spouse, exceeds $1,000,000.
____ (ii) A natural person whose individual income was in
excess of $200,000, or
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<PAGE>
whose joint income with his or
her spouse was in excess of $300,000, in each of the
two most recent years, and who has a reasonable
expectation of reaching the same income level for the
current year.
____ (ii) A bank, insurance company, registered investment
company, business development company, small business
investment company, or employee benefit plan.
____ (iv) A savings and loan association, credit union, or
similar financial institution, or a registered broker
or dealer.
____ (v) A private business development
company.
____ (vi) An organization described in Section 501(c)(3) of the
Internal Revenue Code with assets in excess of
$5,000,000.
____ (vii) A corporation, Massachusetts or similar business
trust, or partnership with assets in excess of
$5,000,000.
____ (viii) A trust with assets in excess of $5,000,000.
____ (ix) A director or an executive officer of
the Company.
____ (x) An entity in which all of the equity
owners are accredited investors.
____ (xi) A self-directed IRA, Keogh, or similar plan of which
the individual directing the investments qualifies as
an "accredited investor" under one or more of items
(i)-(x), above. Also check which of item(s) (i)-(x)
applies to such plan.
(g) This Agreement has been duly authorized by all necessary
action on the part of the Lender, has been duly executed and delivered by the
Lender, and is a valid and binding agreement of the Lender.
-7-
<PAGE>
(h) The Lender agrees to treat the Memorandum and other
information received pursuant to Section 7(a) hereof as confidential material
and not to disseminate such information without the permission of the Company.
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York, may not be amended, modified or waived except
in writing, signed by the party against whom such amendment, modification or
waiver is sought to be enforced making specific reference to this Agreement,
shall be binding upon the Company and inure to the benefit of the Lender and its
respective successors, assigns, heirs and legal representatives.
The provisions of this Agreement are severable and if any clause or
provision shall be held invalid or unenforceable in whole or in part in any
jurisdiction, then such invalidity or unenforceability shall affect only such
clause or provision, or part thereof, in such jurisdiction and shall not in any
manner affect such clause or provision in any other jurisdiction, or any other
clause or provision in this Agreement in any jurisdiction.
Each of the persons signing below represents to the Lender that he has
full power and authority to execute and deliver this Letter Agreement and the
Notes on behalf of the Company.
Very truly yours,
GDC Group, Inc.
By:___________________________
Harry Conger, President
By:__________________________
James Muzzy, Vice President
Accepted and Agreed:
LENDER:
Herbard Limited
By:__________________________
-8-
<PAGE>
Exhibit 10(a)
DK INDUSTRIES, INC.
1996 STOCK OPTION PLAN
- --------------------------------------------------------------------------------
SECTION 1
INTRODUCTION
1.1 Establishment. DK Industries, Inc., a Colorado corporation, hereby
establishes the DK Industries, Inc. 1996 Stock Option Plan (the "Plan") for
employees, consultants and directors of the Company. DK Industries, Inc.,
together with its affiliated corporations, as defined in Section 2.1(a)
hereafter, are referred to as the "Company," except where the context otherwise
requires.
1.2 Purposes. The purposes of the Plan are to provide the employees,
consultants and directors selected for participation in the Plan with added
incentives to continue in the long-term service of the Company and to create in
such persons a more direct interest in the future success of the operations of
the Company by relating incentive compensation to increases in stockholder
value, so that the income of the employees, consultants and directors is more
closely aligned with the income of the Company's stockholders. The Plan also is
designed to attract employees, consultants and directors and to retain and
motivate such persons by providing an opportunity for investment in the Company.
SECTION 2
DEFINITIONS
2.1 Definitions. The following terms will have the meanings set forth
below:
(a) "Affiliated Corporation" means any corporation or other entity
(including, but not limited to, a partnership) that is affiliated with DK
Industries, Inc. through stock ownership or otherwise and is treated as a common
employer under the provisions of Code Sections 414(b) and (c).
(b) "Board" means the Board of Directors of DK Industries, Inc.
(c) "Code" means the Internal Revenue Code of 1986, as it may be
amended from time to time.
(d) "Effective Date" means the effective date of the Plan, which will
be June 25, 1996.
(e) "Eligible Participants" means all employees (including, without
limitation, all officers), directors and consultants of the Company.
<PAGE>
(f) "Fair Value" means the value of a Share of Stock as determined by
the Stock Option Committee acting in good faith and in its sole discretion.
Notwithstanding the above, if the Stock is actively traded in an established
market at the time an Option is granted, "Fair Value" will mean the officially
quoted closing price of the Stock on the New York Stock Exchange or any other
national exchange (a "National Exchange") on a particular date. If there are no
stock transactions on such date, the Fair Value will be determined as of the
immediately preceding date on which there were Stock transactions. If no such
prices are reported on a National Exchange, then Fair Value will mean the
officially quoted closing price of the Stock on the NASDAQ National Market
System on a particular date. If there are no stock transactions on such date,
the Fair Value will be determined as of the immediately preceding date on which
there were Stock transactions. If no such prices are reported on the NASDAQ
National Market System, then Fair Value will mean the average of the high and
low sale prices for the Stock (or if no sales prices are reported, the average
of the high and low bid prices) as reported by the principal regional stock
exchange, or if not so reported, as reported by NASDAQ or a quotation system of
general circulation to brokers and dealers.
(g) "Stock Option Committee" means the Board, as defined in Section
2.1(b).
(h) "Incentive Stock Option" means any Option designated as such and
granted under this Plan in accordance with the requirements of Code Section 422.
(i) "Non-Statutory Option" means any Option designated as such and
granted under this Plan in accordance with the requirements of Code Section 83.
(j) "Option" means a right to purchase Stock at a stated price for a
specified period of time.
(k) "Option Price" means the price at which shares of Stock subject
to an Option may be purchased, determined in accordance with Section 6.2(b).
(l) "Option Holder" means an Eligible Participant designated by the
Stock Option Committee from time to time during the term of the Plan to receive
one or more Options under the Plan.
(m) "Plan Year" means each 12-month period beginning October 1 and
ending the following September 30, except that, for the first year of the Plan,
the Plan Year will begin on the Effective Date and extend to the first September
30 following the Effective Date.
(n) "Share" or "Shares" means a share or shares of Stock.
(o) "Stock" means the common stock, par value $.02, of the Company.
2.2 Gender and Number. Except where otherwise indicated by the context,
the masculine gender also will include the feminine gender, and the definition
of any term herein in the singular also will include the plural.
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<PAGE>
SECTION 3
PLAN ADMINISTRATION
The Plan will be administered by the Stock Option Committee. In accordance
with the provisions of the Plan, the Stock Option Committee will, in its sole
discretion, select the Eligible Participants to whom Options will be granted,
the type of each Option (i.e., a Non-Statutory Option or an Incentive Stock
Option), the form of each Option, the amount of each Option, and any other terms
and conditions of each Option as the Stock Option Committee may deem necessary
or desirable and consistent with the terms of the Plan. The Stock Option
Committee will determine the form or forms of the agreements with Option
Holders. The agreements will evidence the particular provisions, terms,
conditions, rights and duties of the Company and the Option Holders with respect
to Options granted pursuant to the Plan, which provisions need not be identical
except as may be provided herein. The Stock Option Committee may from time to
time adopt such rules and regulations for carrying out the purposes of the Plan
as it may deem proper and in the best interests of the Company. The Stock
Option Committee may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or in any agreement entered into hereunder in the
manner and to the extent it will deem expedient and it will be the sole and
final judge of such expediency. No member of the Stock Option Committee will be
liable for any action or determination made in good faith, and all members of
the Committee will, in addition to their rights as directors, be fully protected
by the Company with respect to any such action, determination or interpretation.
The determinations, interpretations, and other actions of the Stock Option
Committee pursuant to the provisions of the Plan will be binding and conclusive
for all purposes and on all persons.
SECTION 4
STOCK SUBJECT TO THE PLAN
4.1 Number of Shares. 2,000,000 Shares are authorized for issuance under
the Plan in accordance with the provisions of the Plan. Shares that may be
issued upon the exercise of Options will be applied to reduce the maximum number
of Shares remaining available under the Plan. At all times during the term of
the Plan and while any Options are outstanding, the Company will retain as
authorized and unissued stock at least the number of Shares from time to time
required under the provisions of the Plans or otherwise assure itself of its
ability to perform its obligations hereunder.
4.2 Unused and Forfeited Stock. Any Shares that are subject to an Option
under this Plan that are not used because the terms and conditions of the Option
are not met, including any Shares that are subject to an Option that expires or
is terminated for any reason, any Shares that are used for full or partial
payment of the purchase price of Shares with respect to which an Option is
exercised, and any Shares retained by the Company pursuant to Section 11.2
automatically will become available for use under the Plan.
4.3 Adjustments for Stock Split, Stock Dividend, Etc. If the Company at
any time increases or decreases the number of its outstanding Shares of Stock,
or changes in any way the rights and privileges of such Shares by means of the
payment of a stock dividend or any other distribution
-11-
<PAGE>
upon such Shares payable in Stock, or through a stock split, subdivision,
consolidation, combination, reclassification or recapitalization involving the
Stock, then, in relation to the Stock that is affected by the above events, the
provisions of this Section 4.3 will apply. In such event, the numbers, rights
and privileges of the following will be increased, decreased or changed in like
manner as if such Shares had been issued and outstanding, fully paid and
nonassessable at the time of such event: (i) the shares of Stock as to which
Options may be granted under the Plan; and (ii) the Shares of Stock then
included in each outstanding Option granted hereunder.
4.4 General Adjustment Rules. If any adjustment or substitution provided
for in this Section 4 will result in the creation of a fractional Share under
any Option, the Company will, in lieu of issuing such fractional Share, pay to
the Option Holder a cash sum in an amount equal to the product of such fraction
multiplied by the Fair Value of a Share on the date the fractional Share
otherwise would have been issued.
4.5 Determination by Stock Option Committee, Etc. Adjustments under this
Section 4 will be made by the Stock Option Committee, whose determinations with
regard thereto will be final and binding upon all parties.
SECTION 5
REORGANIZATION OR LIQUIDATION
In the event that the Company is merged or consolidated with another
corporation (other than a merger or consolidation in which the Company is the
continuing corporation and that does not result in any reclassification or
change of outstanding Shares), or if all or substantially all of the assets or
more than 50% of the outstanding voting stock of the Company is acquired by any
other corporation, business entity or person (other than by a sale or conveyance
in which the Company continues as a holding company of an entity or entities
that conduct the business or businesses formerly conducted by the Company), or
in case of a reorganization (other than a reorganization under the United States
Bankruptcy Code) or liquidation of the Company, the Stock Option Committee, or
the board of directors of any corporation assuming the obligations of the
Company, will have the power and discretion to prescribe the terms and
conditions for the exercise or modification of any outstanding Options granted
hereunder. By way of illustration, and not by way of limitation, the Stock
Option Committee may provide for the complete or partial acceleration of the
dates of exercise of the Options, or may provide that such Options will be
exchanged or converted into options to acquire securities of the surviving or
acquiring corporation, or may provide for a payment or distribution in respect
of outstanding Options (or the portion thereof that currently is exercisable) in
cancellation thereof. The Stock Option Committee may provide that Options
granted hereunder must be exercised in connection with the closing of such
transaction, and that if not so exercised such Options will expire. Any such
determinations by the Stock Option Committee may be made generally with respect
to all Option Holders, or may be made on a case-by-case basis with respect to
particular Option Holders. The provisions of this Section 5 will not apply to
any transaction undertaken for the purpose of reincorporating the Company under
the laws of another jurisdiction, if such transaction does not materially affect
the beneficial ownership of the Company's capital stock.
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<PAGE>
SECTION 6
STOCK OPTIONS
6.1 Grant of Options. An Eligible Participant may be granted one or more
Options. Options granted under the Plan may be either Non-Statutory Options or
Incentive Stock Options; provided, however, that Options granted to Eligible
Participants who are not employees of the Company must be Non-Statutory Options.
6.2 Option Agreements. Each Option granted under the Plan will be
evidenced by a written stock option agreement that will be entered into by the
Company and the Eligible Participant to whom the Option is granted (the "Option
Holder"), and will contain the following terms and conditions, as well as such
other terms and conditions not inconsistent therewith, as the Stock Option
Committee may consider appropriate in each case. In the event of any
inconsistency between the provisions of the Plan and any such agreement entered
into hereunder, the provisions of the Plan will govern.
(a) Number of Shares. Each stock option agreement will state that it
covers a specified number of Shares, as determined by the Stock Option
Committee. Notwithstanding any other provision of the Plan, the aggregate fair
market value, as determined under Code Section 422 and the regulations
thereunder, of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by an Option Holder in any calendar year, under
the Plan or otherwise, will not exceed $100,000. For this purpose, the fair
market value of the Shares will be determined as of the time an Option is
granted.
(b) Price. The price at which each Share covered by an Option may be
purchased will be determined by the Stock Option Committee and set forth in the
stock option agreement. In no event will the Option Price for each Share
covered by an Incentive Stock Option be less than the fair market value of the
Stock, as determined under Code Section 422 and the regulations thereunder, on
the date the Option is granted. The Option Price for each Share covered by an
Incentive Stock Option granted to an Eligible Participant who then owns stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company must be at least 110% of the fair market value of the
Stock, as determined under Code Section 422 and the regulations thereunder,
subject to the Incentive Stock Option on the date the Option is granted.
(c) Type of Option. Each stock option agreement will state whether
the Option described in the agreement is a Non-Statutory Option or an Incentive
Stock Option.
(d) Duration of Options. Each stock option agreement will state the
period of time, determined by the Stock Option Committee, within which the
Option may be exercised by the Option Holder (the "Option Period"). The Option
Period must expire, in all cases, not more than ten years from the date an
Option is granted; provided, however, that the Option Period of an Incentive
Stock Option granted to an Eligible Participant who then owns stock possessing
more than 10% of the total combined voting power of all classes of stock of the
Company must expire not more than five years from the date such Option is
granted. Each stock option agreement also will state the
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<PAGE>
periods of time, if any, as determined by the Stock Option Committee, when
incremental portions of each Option will vest.
(e) Termination of Employment, Death, Disability, Etc. Except as
otherwise determined by the Stock Option Committee, each stock option agreement
will provide as follows with respect to the exercise of the Option upon
termination of the employment or the death of the Option Holder:
(i) If the Option Holder's employment with the Company is
terminated within the Option Period for cause, as determined by the Company in
its sole discretion, the Option thereafter will be void for all purposes. As
used in this Section, "cause" will mean a gross violation, as determined by the
Company, of the Company's established policies and procedures. The effect of
this Section will be limited to determining the consequences of a termination,
and nothing in this Section will restrict or otherwise interfere with the
Company's discretion with respect to the termination of any employee.
(ii) If the Option Holder's employment with the Company is
terminated within the Option Period because of the Option Holder's death or
disability (within the meaning of Code Section 22(e)), the Option will remain
exercisable, to the extent that it was exercisable on the date of the Option
Holder's death or disability, for a period of twelve months after such date;
provided, however, that in no event may the Option be exercised after the
expiration of the Option Period.
(iii) If the Option Holder's employment with the Company is
terminated within the Option Period for any reason other than cause, disability,
or the Option Holder's death, the Option may be exercised by the Option Holder,
to the extent that it was exercisable on the date of the termination, within
three months following the date of such termination; provided, however, that in
no event may the Option be exercised after the expiration of the Option Period.
(iv) For all purposes under this Section, an Eligible
Participant who is not an employee of the Company will be considered to have a
termination of employment under this Section if the Eligible Participant's
services to the Company terminate.
(f) Transferability of Option. Each stock option agreement will
provide that the Option granted therein is not transferable by the Option Holder
except by will or pursuant to the laws of descent and distribution, and that
such Option is exercisable during the Option Holder's lifetime only by the
Option Holder (or, in the event of the Option Holder's disability or incapacity,
by the Option Holder's legal representative).
(g) Exercise, Payments, Etc.
(i) Each stock option agreement will provide that the method
for exercising the Option granted therein will be by delivery to the Corporate
Secretary of the Company of written notice specifying the particular Option (or
portion thereof) that is being exercised and the
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<PAGE>
number of Shares with respect to which such Option is exercised, and including
payment of the Option Price. Such notice shall be in a form satisfactory to the
Stock Option Committee. The exercise of the Option will be deemed effective upon
receipt of such notice by the Corporate Secretary and payment to the Company of
the Option Price. The purchase of such Stock will take place at the principal
offices of the Company upon delivery of such notice, at which time the purchase
price of the Stock will be paid in full by any of the methods or any combination
of the methods set forth in (ii) below. A properly executed certificate or
certificates representing the Stock will be issued by the Company and delivered
to the Option Holder.
(ii) The exercise price shall be paid by any of the following
methods or any combination of the following methods:
(A) in cash;
(B) by cashier's check payable to the order of the Company;
(C) by delivery to the Company of certificates
representing the number of Shares then owned by the Option Holder, the Fair
Value of which equals the purchase price of the Stock purchased pursuant to the
Option, properly endorsed for transfer to the Company; provided, however, that
Shares used for this purpose must have been held by the Option Holder for such
minimum period of time as may be established from time to time by the Stock
Option Committee. The Fair Value of any Shares delivered in payment of the
purchase price upon exercise of the Option will be the Fair Value as of the
exercise date and the exercise date will be the day of the delivery of the
certificates for the Stock used as payment of the Option Price; or
(D) by delivery to the Company of a properly executed
notice of exercise together with irrevocable instructions to a broker to deliver
to the Company promptly the amount of the proceeds of the sale of all or a
portion of the Stock or of a loan from the broker to the Option Holder necessary
to pay the exercise price.
(iii) In the discretion of the Stock Option Committee, the
Company may guarantee a third-party loan obtained by an Option Holder to pay
part or all of the Option Price of the Shares provided that such loan or the
Company's guaranty is secured by the Shares.
(h) Date of Grant. An Option will be considered as having been
granted on the date specified in the grant resolution of the Stock Option
Committee.
6.3 Stockholder Privileges. Prior to the exercise of the Option and the
transfer of Shares to the Option Holder, an Option Holder will have no rights as
a stockholder with respect to any Shares subject to any Option granted to such
person under this Plan and, until the Option Holder becomes the holder of record
of such Stock, no adjustments, other than those described in Section 4, will be
made for dividends or other distributions or other rights as to which there is a
record date preceding the date such Option Holder becomes the holder of record
of such Stock.
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<PAGE>
SECTION 7
RIGHTS OF EMPLOYEES AND OPTION HOLDERS
7.1 Employment. Nothing contained in the Plan or in any Option will
confer upon any Eligible Participant any right with respect to the continuation
of employment by the Company, or interfere in any way with the right of the
Company, subject to the terms of any separate employment agreement to the
contrary, at any time to terminate such employment or to increase or decrease
the compensation of such Eligible Participant from the rate in existence at the
time of the grant of an Option. Whether an authorized leave of absence, or
absence in military or government service, will constitute a termination of
employment will be determined by the Stock Option Committee at the time.
7.2 Nontransferability. No right or interest of any Option Holder in an
Option granted pursuant to the Plan will be assignable or transferable during
the lifetime of the Option Holder, either voluntarily or involuntarily, or be
subjected to any lien, directly or indirectly, by operation of law, or
otherwise, including execution, levy, garnishment, attachment, pledge or
bankruptcy. In the event of an Option Holder's death, the Option Holder's
rights and interests in Options may, to the extent provided in Section 6, be
transferable by testamentary will or the laws of decent and distribution. If,
in the opinion of the Stock Option Committee, an Option Holder is disabled from
caring for his affairs because of mental condition, physical condition or age,
the Option Holder's Options may be exercised by such person's legal
representative upon furnishing the Stock Option Committee with evidence
satisfactory to the Stock Option Committee of such status.
SECTION 8
GENERAL RESTRICTIONS
8.1 Investment Representations. The Company may require any person to
whom an Option is granted, as a condition of exercising such Option or receiving
Stock under the Option, to give written assurances, in the substance and form
satisfactory to the Company and its counsel, to the effect that such person is
acquiring the Stock subject to the Option for his own account for investment and
not with any present intention of selling or otherwise distributing the same,
and to such other effects as the Company deems necessary or appropriate in order
to comply with federal and applicable state securities laws. Legends evidencing
such restrictions may be placed on the certificates evidencing the Stock.
8.2 Compliance with Securities Laws. Each Option will be subject to the
requirement that, if at any time counsel to the Company determines that the
listing, registration or qualification of the Shares subject to such Option upon
any securities exchange or under any state or federal law, or the consent or
approval of any governmental or regulatory body, is necessary as a condition of,
or in connection with, the issuance or purchase of Shares thereunder, such
Option may not be exercised in whole or in part unless such listing,
registration, qualification, consent or approval will have been effected or
obtained on conditions acceptable to the Stock Option Committee. Nothing herein
will be deemed to require the Company to apply for or to obtain such listing,
registration or qualification.
-16-
<PAGE>
SECTION 9
OTHER EMPLOYEE BENEFITS
The amount of any compensation deemed to be received by an Option Holder as
a result of the exercise of an Option will not constitute "earnings" with
respect to which any other employee benefits of such Option Holder are
determined, including without limitation benefits under any pension, profit
sharing, life insurance or salary continuation plan.
SECTION 10
PLAN AMENDMENT, MODIFICATION AND TERMINATION
The Board may at any time terminate, and from time to time may amend or
modify, the Plan; provided, however, that no amendment or modification may
become effective without approval of the amendment or modification by the
stockholders if stockholder approval is required to enable the Plan to satisfy
any applicable statutory or regulatory requirements, or if the Company, on the
advice of counsel, determines that stockholder approval otherwise is necessary
or desirable.
No amendment, modification or termination of the Plan will in any manner
adversely affect any Options theretofore granted under the Plan, without the
consent of the Option Holder holding such Options.
SECTION 11
WITHHOLDING
11.1 Withholding Requirement. The Company's obligations to deliver Shares
upon the exercise of an Option will be subject to the Option Holder's
satisfaction of all applicable federal, state and local income and other tax
withholding requirements.
11.2 Withholding With Stock. At the time an Option is granted, the Stock
Option Committee, in its sole discretion, may permit the Option Holder to pay
all such amounts of tax withholding, or any part thereof that is due upon
exercise of the Option, by transferring to the Company, or directing the Company
to withhold from Shares otherwise issuable to such Option Holder, Shares having
a value equal to the amount required to be withheld or such lesser amount as may
be determined by the Stock Option Committee at such time. The value of Shares
to be withheld will be based on the Fair Value of the Stock on the date that the
amount of tax to be withheld is to be determined.
SECTION 12
BROKERAGE ARRANGEMENTS
The Stock Option Committee, in its discretion, may enter into arrangements
with one or more banks, brokers or other financial institutions to facilitate
the disposition of shares acquired upon
-17-
<PAGE>
exercise of Stock Options, including, without limitation, arrangements for the
simultaneous exercise of Stock Options and sale of the Shares acquired upon such
exercise.
SECTION 13
NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan by the Board nor the submission of the
Plan to stockholders of the Company for approval will be construed as creating
any limitations on the power or authority of the Board to adopt such other or
additional incentive or other compensation arrangements of whatever nature as
the Board may deem necessary or desirable or preclude or limit the continuation
of any other plan, practice or arrangement for the payment of compensation or
fringe benefits to employees generally, or to any class or group of employees,
that the Company or any Affiliated Corporation now has lawfully put into effect,
including, without limitation, any retirement, pension, savings and stock
purchase plan, insurance, death and disability benefits and executive short-term
incentive plans.
SECTION 14
REQUIREMENTS OF LAW
14.1 Requirements of Law. The issuance of Stock and the payment of cash
pursuant to the Plan will be subject to all applicable laws, rules and
regulations.
14.2 Federal Securities Law Requirements. With respect to persons subject
to Section 16 of the 1934 Act, transactions under this Plan are intended to
comply with all applicable conditions of Rule 16b-3 or its successors under the
1934 Act. To the extent any provision of the Plan or action by the Stock Option
Committee fails to so comply, it will be deemed null and void, to the extent
permitted by law and deemed advisable by the Stock Option Committee.
14.3 Governing Law. The Plan and all agreements hereunder will be
construed in accordance with and governed by the laws of the State of Colorado.
SECTION 15
DURATION OF THE PLAN
The Plan will terminate at such time as may be determined by the Board, and
no Option will be granted after such termination. If not sooner terminated
under the preceding sentence, the Plan will fully cease and expire at midnight
on June 25, 2006. Options outstanding at the time of the Plan termination may
continue to be exercised in accordance with their terms.
-18-
<PAGE>
Exhibit 10(b)
GDC GROUP, INC.
FORMERLY KNOWN AS
DK INDUSTRIES, INC.
1996 STOCK OPTION PLAN
INCENTIVE STOCK OPTION AGREEMENT
THIS INCENTIVE STOCK OPTION AGREEMENT is entered into as of the ______ day
of ___________, 199__ by and between GDC GROUP, INC., formerly known as DK
Industries, Inc. (the "Company") and ___________ (the "Option Holder").
The Company desires, by affording the Option Holder an opportunity for
investment in shares of its Common Stock (the "Common Stock"), to further the
objectives of the DK Industries, Inc. 1996 Stock Option Plan, a copy of which is
attached hereto as Exhibit A (the "Plan"), by providing a special incentive to
the Option Holder to continue his or her services to the Company and to increase
his or her efforts on behalf of the Company. (Terms capitalized but not defined
herein are used as defined in the Plan.)
The parties, in consideration of the mutual covenants herein set forth,
agree as follows:
1. Option Grant. Upon the terms and subject to the conditions hereof,
------------
the Company hereby grants to the Option Holder, as a matter of separate
agreement and not in lieu of salary or any other compensation for services, the
right and option (the "Option") to purchase up to an aggregate of _________
shares of its Common Stock pursuant to the Plan. The Option is intended to
qualify as an Incentive Stock Option under Code Section 422.
2. Stock Option Price and Grant Date. The purchase price of the Optioned
---------------------------------
Shares will be $1.00 per share (the "Stock Option Price"). The date of action by
the Stock Option Committee in granting this Option was ____________ (the "Grant
Date").
3. Manner of Exercise.
-------------------
a. Vesting: Subject to the terms and conditions hereof and the terms
of the Plan, the Option will become exercisable as to the full amount of the
Grant of Optioned Shares on the Grant Date, so that the Option will be 100%
vested immediately from the Grant Date, or such other date or terms as may be
approved by the Stock Option Committee.
b. Time of Exercise of Option: Subject to the vesting provisions set
forth above, the Option may be exercised at any time and from time to time on or
before the day preceding the tenth anniversary of the Grant Date (the "Option
Period"). Notwithstanding the preceding sentence, any Incentive Stock Option
granted to an Option Holder who owns Common Stock of the Company
<PAGE>
possessing more than 10% of the total combined voting power of all classes of
stock of the Company on the Grant Date of this Option will expire on the fifth
anniversary of the Grant Date of the Incentive Stock Option.
c . Notice of Exercise: Subject to the above, the Option may be
exercised by the Option Holder by providing written notice to the Company, which
notice (a) will state the election to exercise the Option and the number of
shares as to which the Option is then being exercised; (b)will be accompanied by
payment in full of the Stock Option Price of said shares; and (c) will be signed
by the person so exercising the Option and, in the event that the Option is
being exercised by any person other than the Option Holder, will be accompanied
by appropriate proof of the right of such person to exercise the Option as
provided in the Plan. Payment of the Stock Option Price may be made in cash, by
cashier's check, or in shares of Common Stock valued at Fair Value (as defined
in the Plan) on the date of the exercise.
d. Withholding: In any event, the Company may withhold the issuance
of the Common Stock until the Option Holder provides the Company with cash equal
to the federal and state income taxes, if any, that the Company is required to
withhold in connection with the exercise of the Option. Upon timely exercise of
the Option, the Company may (but shall not be required to) permit the Option
Holder to satisfy any withholding obligation by transferring to the Company
Common Stock or by having Common Stock withheld from the Common Stock otherwise
issuable upon exercise of this Option, with a Fair Value on the date that the
amount of tax is to be withheld equal to the amount the Company is required to
withhold in connection with the exercise of the Option.
e. Subsequent Tax Liability: Federal and state income tax
liability resulting from the ultimate disposition of the stock purchased
pursuant to the Option will be the sole responsibility of the Option Holder.
f. Issuance of Stock: Within a reasonable time from the date of
receipt by the Company of the foregoing notice and all required payments and
other documentation, a certificate or certificates for the shares as to which
the Option will have been so exercised, registered in the name of the person so
exercising the Option and, if deemed necessary by counsel to the Company,
including a legend to evidence any commitments given or restrictions imposed
pursuant to paragraph 7 hereof or otherwise, will be issued by the Company and
delivered to such person. All shares issued as provided herein will be fully
paid and nonassessable.
4. Rights of Option Holder. The Option Holder will have none of the
-----------------------
rights of a stockholder with respect to any Common Stock subject to the Option
until such shares are issued to such Option Holder upon the exercise of the
Option.
5. Transferability. The Option is not transferable by the Option Holder
---------------
except by will or by the laws of descent and distribution, and the Option may be
exercised during the Option Holder's lifetime only by the Option Holder (or, in
the event of the Option Holder's disability or incapacity,
Page 2
<PAGE>
by his or her legal representative). Without limiting the generality of the
foregoing, the Option may not be assigned, transferred, pledged, or hypothecated
(whether by operation of law or otherwise) and will not be subject to execution,
attachment, or similar process. Any attempted assignment, transfer, pledge,
hypothecation, or other disposition of the Option contrary to the provisions
hereof, or the levy of any attachment or similar process upon the Option, may,
at the election of the Stock Option Committee, cause the Option to terminate
forthwith and to be thereafter null and void and of no force or effect.
6. Exercise After Termination of Employment, Death, or Disability.
--------------------------------------------------------------
a. Termination for Cause: If the Option Holder's employment with
the Company is terminated within the Option Period for cause, as determined by
the Company in its sole discretion, the Option thereafter will be void for all
purposes. As used in this Section, "cause" will mean a gross violation, as
determined by the Company, of the Company's established policies and procedures.
The effect of this Section will be limited to determining the consequences of a
termination, and nothing in this Section will restrict or otherwise interfere
with the Company's discretion with respect to the termination of any employee.
b. Death or Disability of Option Holder: If the Option Holder's
employment with the Company is terminated within the Option Period because of
the Option Holder's death or disability (within the meaning of Code Section
22(e)), the Option will remain exercisable, to the extent that it was
exercisable on the date of the Option Holder's death or disability, for a period
of twelve months after such date; provided, however, that in no event may the
Option be exercised after the expiration of the Option Period.
c. Termination for Reasons other than Cause, Death, or Disability:
If the Option Holder's employment with the Company is terminated within the
Option Period for any reason other than cause or the Option Holder's death or
disability, the Option will remain exercisable, to the extent that it was
exercisable on the date of termination, for a period of three (3) months after
such date; provided, however, that in no event may the Option be exercised after
the expiration of the Option Period.
7. Limitations Upon Issuance of Stock. Anything contained herein to the
----------------------------------
contrary notwithstanding, no Common Stock will be issued upon exercise of the
Option until the Company is satisfied that such shares may be issued in
compliance with all applicable laws and regulations, including, without
limitation, federal and applicable state securities laws, and with the
requirements of any stock exchange upon which the Common Stock is then listed.
In that connection, the Company may require the Option Holder, as a condition to
issuing such shares, to execute such covenants and certificates, containing such
agreements and representations, as the Company deems appropriate to establish
the availability of exemptions from federal and applicable state securities laws
and otherwise to effect or establish such compliance. The Company will not have
any liability with respect to any failure to issue shares as a result of the
provisions of this paragraph 7.
Page 3
<PAGE>
8. No Right of Continued Service. Nothing in this Agreement or in the
-- -------- -----------------
Plan will confer on the Option Holder any right to continue as an employee of
the Company.
9. Committee's Determination Binding. A determination by the Stock Option
----------- ------------- -------
Committee as to any question that may arise with respect to the interpretation
of the provisions of this Stock Option Agreement or the Plan will be final and
binding on the Option Holder.
10. Incorporation of Plan. This Stock Option Agreement is entered into
---------------- -----
pursuant to the Plan and all terms and provisions of the Plan are hereby
incorporated by reference. The terms of the Plan will control in the event of
any inconsistency or ambiguity between the Plan and this Stock Option Agreement.
11. Counsel. Each party has had the opportunity to obtain separate counsel
-------
of choice. The Company expressly disclaims that it is giving any tax advice to
the Option Holder with respect to the grant or exercise of the Option or to any
disposition of the Optioned Shares. The Option Holder acknowledges and accepts
this disclaimer
12. Indemnification. Each party hereby indemnifies and agrees to hold
---------------
harmless the other party from any liability, cost or expense arising from or
related to any act or failure to act of such party which is in violation of this
Agreement.
13. Governing Law. This Agreement will be construed and enforced in
--------- ---
accordance with the laws of the State of Colorado.
14. No Waiver. No waiver of any default under this Agreement will be
-- ------
considered valid unless in writing, and no such waiver will be deemed a waiver
of any subsequent default of the same or similar nature.
15. Amendment. This Agreement may be amended only by a written instrument
---------
signed by both parties to this Agreement.
16. Binding Effect. This Agreement is binding upon, and will inure to the
------- ------
benefit of, the parties and their respective personal representatives and
permitted successors and assigns.
IN WITNESS WHEREOF, the Company and the Option Holder have duly executed
this Option Agreement as of the day and year first above written.
Page 4
<PAGE>
COMPANY:
GDC GROUP, INC.
By:______________________________________
Name:
Title:
OPTION HOLDER:
By:______________________________________
Name: __________________________
Page 5
<PAGE>
Exhibit 10 (C)
GDC GROUP, INC.
FORMERLY KNOWN AS
DK INDUSTRIES, INC.
1996 STOCK OPTION PLAN
NON-STATUTORY OPTION AGREEMENT
THIS NON-STATUTORY OPTION AGREEMENT is entered into as of the ____ day of
__________, 19__, by and between GDC Group, Inc. (formerly known as DK
Industries, Inc.) (the "Company"), and _______________ ("Option Holder").
The Company desires, by affording the Option Holder an opportunity for
investment in shares of its Common Stock (the "Common Stock"), to further the
objectives of the DK Industries, Inc. 1996 Stock Option Plan, a copy of which is
attached hereto as Exhibit A (the "Plan"), by providing a special incentive to
the Option Holder to continue his or her services to the Company and to increase
his or her efforts on behalf of the Company. (Terms capitalized but not defined
herein are used as defined in the Plan.)
The parties, in consideration of the mutual covenants herein set forth,
agree as follows:
1. Option Grant. Upon the terms and subject to the conditions hereof, the
------------
Company hereby grants to the Option Holder, as a matter of separate agreement
and not in lieu of salary or any other compensation for services, the right and
option (the "Option") to purchase up to an aggregate of _______ shares of its
Common Stock pursuant to the Plan. The Option will be treated as a Non-Statutory
Option under Code Section 83.
2. Stock Option Price and Grant Date. The purchase price of the Optioned
------------ --------------- ----
Shares will be $_____ per share (the "Stock Option Price"). The date of action
by the Stock Option Committee in granting this Option was ______________ (the
"Grant Date").
3. Manner of Exercise.
--------- --------
a. Vesting: Subject to the terms and conditions hereof and the
terms of the Plan, the Option will become vested and exercisable.
b. Time of Exercise of Option: Subject to the vesting provisions
set forth above, the Option may be exercised at any time and from time to time
on or before the day preceding the tenth anniversary of the Grant Date (the
"Option Period").
c. Notice of Exercise: Subject to the above, the Option may be
exercised by the Option Holder by providing written notice to the Company, which
notice (a) will state the election to exercise the Option and the number of
shares as to which the Option is then being exercised; (b) will be accompanied
by payment in full of the Stock Option Price of said shares; and (c) will be
signed
<PAGE>
by the person so exercising the Option and in the event that the Option is being
exercised by any person other than the Option Holder, will be accompanied by
appropriate proof of the right of such person to exercise the Option as provided
in the Plan. Payment of the Stock Option Price may be made in cash, by cashier's
check, or in shares of Common Stock valued at Fair Value (as defined in the
Plan) on the date of exercise.
d. Withholding: In any event, the Company may withhold the
issuance of the Common Stock until the Option Holder provides the Company with
cash equal to the federal and state income taxes, if any, that the Company is
required to withhold in connection with the exercise of the Option. Upon timely
exercise of the Option, the Company may (but shall not be required to) permit
the Option Holder to satisfy any withholding obligation by transferring to the
Company Common Stock or by having Common Stock withheld from the Common Stock
otherwise issuable upon exercise of this Option, with a Fair Value on the date
that the amount of tax is to be withheld equal to the amount the Company is
required to withhold in connection with the exercise of the Option.
e. Subsequent Tax Liability: Federal and state income tax
liability resulting from the ultimate disposition of the stock purchased
pursuant to the Option will be the sole responsibility of the Option Holder.
f. Issuance of Stock: Within a reasonable time from the date of
receipt by the Company of the foregoing notice and all required payments and
other documentation, a certificate or certificates for the shares as to which
the Option will have been so exercised, registered in the name of the person so
exercising the Option and, if deemed necessary by counsel to the Company,
including a legend to evidence any commitments given or restrictions imposed
pursuant to paragraph 7 hereof or otherwise, will be issued by the Company and
delivered to such person. All shares issued as provided herein will be fully
paid and non-assessable.
4. Rights of Option Holder. The Option Holder will have none of the
-----------------------
rights of a stockholder with respect to any Common Stock subject to the Option
until such shares are issued to such Option Holder upon the exercise of the
Option.
5. Transferability. The Option is not transferable by the Option Holder
---------------
except by will or by the laws of descent and distribution, and the Option may be
exercised during the Option Holder's lifetime only by the Option Holder (or, in
the event of the Option Holder's disability or incapacity, by his or her legal
representative). Without limiting the generality of the foregoing, the Option
may not be assigned, transferred, pledged, or hypothecated (whether by operation
of law or otherwise) and will not be subject to execution, attachment, or
similar process. Any attempted assignment, transfer, pledge, hypothecation, or
other disposition of the Option contrary to the provisions hereof, or the levy
of any attachment or similar process upon the Option, may, at the election of
the Stock Option Committee, cause the Option to terminate forthwith and to be
thereafter null and void and of no force or effect.
<PAGE>
6. Exercise After Termination of Employment. Death, or Disability.
----------------------------- ---------------------------------
a. Termination for Cause: If the Option Holder's employment with
the Company is terminated within the Option Period for cause, as determined by
the Company in its sole discretion, the Option thereafter will be void for all
purposes. As used in this Section, "cause" will mean a gross violation, as
determined by the Company, of the Company's established policies and procedures.
The effect of this Section will be limited to determining the consequences of a
termination, and nothing in this Section will restrict or otherwise interfere
with the Company's discretion with respect to the termination of any employee.
b. Death or Disability of Option Holder: If the Option Holder's
employment with the Company is terminated within the Option Period because of
the Option Holder's death or disability (within the meaning of Code Section
22(e)), the Option will remain exercisable, to the extent that it was
exercisable on the date of the Option Holder's death or disability, for a period
of twelve months after such date; provided, however, that in no event may the
Option be exercised after the expiration of the Option Period.
c. Termination for Reasons other than Cause, Death, or Disability:
if the Option Holder's employment with the Company is terminated within the
Option Period for any reason other than cause or the Option Holder's death or
disability, the Option will remain exercisable, to the extent that it was
exercisable on the date of termination, for a period of three (3) months after
such date; provided, however, that in no event may the Option be exercised after
the expiration of the Option Period.
d. Option Holders who Are Not Employees: For purposes of this
Section, an Option Holder who is not an employee of the Company will be
considered to have a termination of employment if the Option Holder's services
to the Company terminate.
7. Limitations Upon Issuance of Stock. Anything contained herein to the
----------------------------------
contrary notwithstanding, no Common Stock will be issued upon exercise of the
Option until the Company is satisfied that such shares may be issued in
compliance with all applicable laws and regulations, including, without
limitation, federal and applicable state securities laws, and with the
requirements of any stock exchange upon which the Common Stock is then listed.
In that connection, the Company may require the Option Holder, as a condition to
issuing such shares, to execute such covenants and certificates, containing such
agreements and representations, as the Company deems appropriate to establish
the availability of exemptions from federal and applicable state securities laws
and otherwise to effect or establish such compliance. The Company will not have
any liability with respect to any failure to issue shares as a result of the
provisions of this paragraph 7.
8. No Right of Continued Service. Nothing in this Agreement or in the
-- -------- -----------------
Plan will confer on the Option Holder any right to continue as an employee,
director or consultant of the Company.
9. Committee's Determination Binding. A determination by the Stock
----------- ------------- -------
Option Committee
<PAGE>
as to any question that may arise with respect to the interpretation of the
provisions of this Non-Statutory Stock Option Agreement or the Plan will be
final and binding on the Option Holder.
10. Incorporation of Plan by Reference. This Non-Statutory Stock Option
------------- -- ---- -- ---------
Agreement is entered into pursuant to the Plan and all terms and provisions of
the Plan hereby are incorporated by reference. The terms of the Plan will
control in the event of any inconsistency or ambiguity between the Plan and this
Non-Statutory Stock Option Agreement.
11. Counsel. Each party has had the opportunity to obtain separate counsel
-------
of choice. The Company expressly disclaims that it is giving any tax advice to
the Option Holder with respect to the grant or exercise of the Option or to any
disposition of the Optioned Shares. The Option Holder acknowledges and accepts
this disclaimer.
12. Indemnification. Each party hereby indemnifies and agrees to hold
---------------
harmless the other party from any liability, cost or expense arising from or
related to any act or failure to act of such party which is in violation of this
Agreement.
13. Governing Law. This Agreement will be construed and enforced in
--------- ---
accordance with the laws of the State of Colorado.
14. No Waiver. No waiver of any default under this Agreement will be
---------
considered valid unless in writing, and no such waiver will be deemed a waiver
of any subsequent default of the same or similar nature.
15. Amendment. This Agreement may be amended only by a written instrument
---------
signed by both parties to this Agreement.
16. Binding Effect. This Agreement is binding upon, and will inure to
--------------
the benefit of; the parties and their respective personal representatives and
permitted successors and assigns.
<PAGE>
IN WITNESS WHEREOF, the Company and the Option Holder have duly executed
this Option Agreement as of the day and year first above written.
COMPANY:
GDC Group, Inc.
By:________________________________________
Name: _____________________________________
Title: ____________________________________
OPTION HOLDER:
By:________________________________________
Name: _____________________________________
Date:_________________
<PAGE>
Exhibit 10(d)
GDC / 3E ACQUISITION AGREEMENT
Monday, 21 August 1995
I. REPRESENTATIONS AND WARRANTIES
1.1. GDC HOLDINGS, INC. (HOLDINGS) is a Louisiana corporation, recently-formed
pursuant to the Reorganization Plan adopted by GDC Enviro-Solutions, Inc.
1.2. 3E CORPORATION OF LOUISIANA (3E) is a Louisiana corporation in good
standing, which owns certain equipment (including centrifuges and related
equipment) used by GDC exclusively. The equipment comprises substantially all of
the assets of the corporation, and there are no material obligations of the
corporation. An appraisal dated 1 June 1995 of 3E indicates a market value of
approximately $713,000; however, the assets are fully-depreciated.
1.3. 3E has 100 shares issued and outstanding. 23 shares are owned by Mrs.
Elnaggar as usufructuary, with the naked owner being Mrs. Elnaggar as Trustee of
the Testamentary Trust of Hameed Ahmed Elnaggar. 77 shares are owned by Mrs.
Elnaggar as sole owner. Mrs. Kathleen J. Elnaggar, a/k/a Kathleen Jordan
Elnaggar. a/k/a Kathleen A. Elnaggar, (Mrs. Elnaggar) is a U.S. resident
unmarried adult.
II. ACQUISITION AGREEMENT
2.1. HOLDINGS will acquire all of the issued and outstanding shares of 3E in
an exchange qualifying as a reorganization under Internal Revenue Code
368(a)(1)(B).
2.2. In exchange for all of the issued and outstanding shares of 3E, HOLDINGS
will issue shares having a value of $600,000. The shares to be issued are to be
shares of HOLDINGS unless at the time of the acquisition HOLDINGS has been
merged with a subsidiary of a publicly-traded corporation, in which event the
shares of the publicly-traded corporation controlling HOLDING are to be issued.
2.3. The value of the shares, if of the publicly-traded controlling
corporation, will be determined by the average daily "asked" price of the stock
over the ninety (90) days immediately prior to the day of closing of this
agreement.
2.4. HOLDINGS must tender shares of its publicly-traded controlling
corporation within 3 months of the formation of the control relationship. If the
control relationship with a publicly-traded corporation is not completed within
one year from the date of this agreement, HOLDINGS must tender its own shares at
a base price of $2.25 per share; at a base price of $2.25 per share however,
should the shares tendered by HOLDINGS not be shares of a publicly-traded
company, Mrs. Elnaggar will have the option to withdraw from the agreement
without penalty.
2.5 If the acquisition by HOLDINGS is not effected on or before 31 January
1996, HOLDINGS must pay to the 3E shareholders a total of Twenty Five Thousand
Dollars ($25,000). If the acquisition by HOLDINGS is not effected on or before
29 February 1996, HOLDINGS must pay to the 3E shareholders a total of Five
Thousand dollars ($5,000). If the acquisition by HOLDINGS is not effected on or
before 31 March 1996, HOLDINGS must pay to the 3E shareholders a total of Five
Thousand Dollars ($5,000) and an additional Five Thousand Dollars ($5,000) for
every month that the acquisition is not completed. After 31 March 1995, this
acquisition agreement may be terminated in the discretion of either party,
<PAGE>
provided that if this agreement is terminated by HOLDINGS, all equipment must be
returned to the possession and control of 3E in as good order as when originally
received, with no exceptions.
III. CONDITIONS PRECEDENT
3.1. This agreement is subject to the condition precedent that HOLDINGS must
have been formed and capitalized substantially in accordance with the
Reorganization Plan adopted by GDC Enviro-Solutions, Inc. on 21 August 1995.
Mrs. Elnaggar may waive this condition.
3.2. This agreement is subject to the condition precedent that counsel for
Mrs. Elnaggar deliver to her an opinion that the transaction is a reorganization
under Internal Revenue Code section 368. Mrs. Elnaggar may waive this condition.
3.3. This agreement is subject to the condition precedent that Mrs. Elnaggar
reaffirm in writing her representations and warranties set out in sections 1.2
and 1.3 as of the date of closing and that such representations and warranties
be true. HOLDINGS may waive this condition.
IV. ADMINISTRATIVE PROVISIONS
4.1. NOTICES. Any notices required or permitted to be given under this
-------
contract are to be in writing and sent to the last known residence of an
individual or to the principal office of an other person, as the case may be.
All notices are sufficient if sent to the parties at their addresses provided to
the others for this purpose. A notice is effective upon placing it, prepaid and
properly addressed, in the U.S. Mail, registered or certified with return
receipt, or upon the sending of a telegram, cablegram, or mailgram or upon
sending it by telefax. A Notice in any other manner is effective upon receipt.
4.2. TIME. Time is of the essence of this contract and each and all of its
----
provisions.
4.3. INTEGRATION. This agreement is intended to integrate prior discussions,
-----------
writings, and other communications.
4.4. SUCCESSORS. This contract is to be binding upon and inure to the benefit
----------
of the heirs, successors, assigns, and legal representatives of the parties
hereto.
4.5. CHOICE OF LAW. The validity of this contract is to be determined under,
-------------
and the provisions of this contract are to be construed in accordance with, the
laws of the State of Louisiana. Any dispute is to be resolved in Baton Rouge,
Louisiana.
4.6. AMENDMENT. This agreement is not to be amended except in writing signed
---------
by the party against whom enforcement of any waiver, change, modification,
extension, or discharge is addressed.
4.7. LIABILITY AND LIMITATIONS THEREOF.
---------------------------------
(a) Except as provided in paragraph 2.5, Neither party is to be liable
for any delay due to causes beyond the reasonable control of such party. In the
event of such cause, the party delayed is to notify the other promptly of the
cause of the delay and of the expected length of the delay.
<PAGE>
(b) Neither party will be liable to the other under or related to this
contract for any special, indirect, or consequential damages, including, but not
limited to lost profits, even if the parties or any of them have knowledge of
the possibility of such damages.
4.8. ARBITRATION. If any controversy or claim arising out of this contract
-----------
cannot be settled by the parties, the controversy or claim must be submitted to
mediation under the Mediation Rules of the American Arbitration Association
(AAA). Should the mediation not be successful in resolving the issue, the
matter will be submitted to arbitration in accordance with the rules of the AAA
then in effect (as modified herein). The discovery rules, including sanctions,
of the Federal Rules of Civil Procedure are to be applied in any such
arbitration, modified as may be necessary in the opinion of the arbitrator(s) to
give effect to the AAA rules governing timeliness.
This Acquisition Agreement is entered into this 21 day of August, 1995.
GDC Holdings, Inc.
/s/ Harry C. Conger /s/ Kathleen J. Elnaggar
- ----------------------- -------------------------------------
Harry C. Conger, Kathleen J. Elnaggar, personally
Chief Executive Officer
/s/ Kathleen J. Elnaggar /s/ Kathleen J. Elnaggar
- ------------------------ -------------------------------------
Kathleen J. Elnaggar, Kathleen J. Elnaggar, Trustee of the
as usufructuary Testamentary Trust of Hameed Ahmed
Elnaggar, Naked Owner
<PAGE>
Exhibit 10(e)
AGREEMENT TO PURCHASE AND SELL
BATON ROUGE, LA OCTOBER 16 , 1995
--
GDC HOLDINGS CORPORATION (PURCHASER) agrees to purchase and Kathleen J.
Elnaggar, individually (as usufructuary) and as trustee of the Hameed Ahmed
Elnaggar testamentary trust (as naked owner) (SELLER) agrees to sell the
property at 822 Neosho Avenue, Baton Rouge, LA more particularly described in
the attached "PROPERTY DESCRIPTION" including land and all improvements thereon,
together with fences, outside TV antennas, all permanently installed and built-
in appliances and fixtures (including attached electrical and plumbing fixtures,
air conditioning window units, and bathroom mirrors).
The property will be purchased subject to title and zoning restrictions,
servitude of record, and laws or ordinances for the sum of Nine Hundred Fifty
Six Thousand Dollars ($956,000).
This purchase is conditioned upon the PURCHASER's being able to assume the
existing note and first mortgage in the approximate amount of Five Hundred Fifty
Six Thousand Dollars ($556,000). The balance of the purchase price will be paid
in a purchase money note bearing interest at the annual rate of ten percent
(10%) and amortized over twenty-four (24) months from the date of the Act of
Sale. The purchase money note will be secured by a mortgage on the property,
which will be subordinate to the lien of the City National Bank or a replacement
lender (principal not to exceed City National Bank note principal and accrued
interest at the date of the Act of Sale) and any lien or pledge of other
existing creditors.
It is acknowledged that the property is subject to a collateral mortgage in
favor of Louisiana Seed Capital Fund Limited Partnership (in the second position
after the note and mortgage referred to in the preceding paragraph) in the face
amount of Eight Hundred Thousand Dollars ($800,000), of which loan the PURCHASER
is the maker and principal obligor. SELLER is not responsible for any part of
this loan. This encumbrance does not affect merchantability of title insofar as
it relates to this agreement.
Occupancy is to be granted at time of the Act of Sale, subject to the existing
lease of the entire premises to GDC Enviro-Solutions, Inc.
All improvement liens and assessments of any kind bearing against the property
at time of the Act of Sale are to be paid by the SELLER.
Real estate taxes and rentals are to be prorated to date of the Act of Sale.
Security Deposits, keys, and rental agreements are to be transferred to
PURCHASER at Act of Sale. All costs and fees for necessary SELLER'S certificates
and SELLER's closing fees are to be paid by SELLER. Cost of survey and/or title
insurance, if required or requested, is to be paid by PURCHASER.
Upon ratification of this agreement by the board of directors of PURCHASER,
SELLER and PURCHASER will be bound by all of its terms and conditions, and
PURCHASER becomes obligated to deposit immediately with SELLER's attorney One
Thousand Dollars ($1,000) and failure to do so will be considered a breach of
this agreement. This deposit is to be non-interest bearing and is to be placed
in any federally insured banking or savings and loan institution without
responsibility on the part of the attorney in case of failure or suspension of
such institution.
<PAGE>
In the event the parties fail to execute the Act of Sale by the date specified
herein or a dispute exists as to ownership or entitlement to the deposit or
funds held in escrow, the attorney will abide by the Rules and Regulations set
forth by the Louisiana Real Estate Commission governing such matters, which
instruct the attorney to deposit the funds into the registry of any court of
proper jurisdiction and venue.
SELLER must deliver to PURCHASER merchantable title; and SELLER's inability to
deliver such title, within the time stipulated herein, will render this
agreement null and void, reserving unto PURCHASER the right to demand the return
of the deposit and to recover from SELLER actual costs incurred in processing of
sale.
In the event SELLER fails to comply with this agreement for any reason other
than inability to deliver a merchantable title, within the time specified,
PURCHASER will have the right to demand specific performance or, at PURCHASER's
option, to demand the return of its deposit in full plus and equal amount to be
paid as penalty by SELLER. In either event, PURCHASER will have the right to
recover any actual costs and fees (including reasonable attorney's fees)
incurred as a result of the breach of this agreement.
In the event PURCHASER fails to comply with this agreement within the time
specified, SELLER will have the right to demand specific performance or, at
SELLER's option, to re-offer the property for sale and may declare the deposit
ipso facto forfeited without formality beyond tender of title to PURCHASER. In
either event SELLER will have the right to recover any actual costs and fees
(including reasonable attorney's fees) incurred as a result of the breach of
this agreement.
PURCHASER acknowledges that the price of the property was negotiated based upon
the property's present condition. Accordingly, SELLER is not obligated to make
repairs to the property and the PURCHASER has no right to demand any repairs,
including repairs demanded by lender. SELLER is responsible for maintaining the
property in substantially the same or better condition as it was when this
agreement was fully executed.
The Act of Sale must take place within three (3) months of the completion of the
proposed reorganization of PURCHASER with a public company. Should the said
reorganization not take place by 12 September 1995, PURCHASER must be prepared
to proceed with the Act of Sale; however, SELLER at its option may rescind this
agreement and refund all deposits, without penalty to any party.
This agreement is dated this 16/th/day of October, 1995.
PURCHASER: SELLER:
GDC HOLDINGS CORPORATION
/s/ HARRY C. CONGER /s/ KATHLEEN J. ELNAGGAR
- --------------------------- --------------------------------------
Harry C. Conger, President Kathleen J. Elnaggar, individually (as
usufructuary) and as trustee of the Hameed Ahmed
Elnaggar testamentary trust (as naked owner)
<PAGE>
Exhibit 10(f)
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement is made and entered into effective as of the 1st
day of June, 1996, by and between DK Industries, Inc., a Colorado corporation
(the "Company"), and Harry C. Conger, an individual ("Executive").
RECITALS
A. The Company desires to be assured of the association and services of
Executive for the Company.
B. Executive is willing and desires to be employed by the Company, and
the Company is willing to employ Executive, upon the terms, covenants and
conditions hereinafter set forth.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual terms, covenants and
conditions hereinafter set forth, the parties hereto do hereby agree as follows:
1. Employment. The Company hereby employs Executive as President of the
----------
Company, subject to the supervision and direction of the Company's Board of
Directors.
2. Term. The term of this Agreement shall be for a period of three (3)
----
years commencing on the effective date hereof, unless terminated earlier
pursuant to Section 6 below; provided, however, that Executive's obligations in
Section 5 below shall continue in effect after such termination.
3. Compensation; Reimbursement.
---------------------------
3.1 Base Salary. For all services rendered by Executive under this
-----------
Agreement, the Company shall pay Executive a base salary of One Hundred Fifty
Thousand Dollars ($150,000.00) per annum, payable monthly in equal installments
(the "Base Salary"). The amount of the Base Salary may be increased at any time
and from time to time by the Board of Directors of the Company. No such change
shall in any way abrogate, alter, terminate or otherwise affect the other terms
of this Agreement. Notwithstanding any other provision hereof, however, prior
to the Company's consummation of the "Private Placement Financing" (as hereafter
defined), Executive's Base Salary shall be payable by the Company at the rate of
$130,000 per annum. Immediately following the consummation of such Private
Placement Financing, Executive shall receive a lump sum salary payment equal to
the difference between the Base Salary provided for under the first sentence of
this Section 3.1 from the effective date hereof to the date of the consummation
of the Private Placement Financing and the portion of the Base Salary actually
paid to Executive for such period under the provisions of the immediately
preceding sentence. Following the consummation of the Private Placement
Financing, Executive shall be entitled to receive the Base Salary in accordance
with the provisions of the first sentence of this Section 3.1. For purposes
hereof, the term "Private Placement
<PAGE>
Financing" shall mean an offering of the stock, and/or warrants of the Company
not requiring registration under the Securities Act of 1933, as amended, that
provides the Company with proceeds (including any debt conversions) in an amount
of at least $3,000,000.
3.2 Incentive Bonus. In addition to the Base Salary, Executive shall
---------------
be eligible for an incentive bonus ("Incentive Bonus") each year. The Incentive
Bonus shall be determined by, and at the sole discretion of, the Compensation
Committee of the Company's Board of Directors, and Executive shall have no
specific right to receive any Incentive Bonus.
3.3 Additional Benefits. In addition to the Base Salary and the
-------------------
Incentive Bonus, Executive shall be entitled to all other benefits of employment
(including without limitation health and dental benefits), provided to the
employees of GDC Enviro Solutions, Inc., an indirectly owned subsidiary of the
Company. Executive also shall be entitled to obtain, at the Company's expense,
an annual health physical examination from a physician chosen by employee;
provided, that such physician must be qualified for the provision of such
services under the existing health insurance plan that applies to Executive in
accordance with the preceding sentence. Both the Company and Executive shall be
entitled to receive the results of any such physical examination. Executive
also shall be entitled to six weeks' paid vacation time during each year of the
term hereof; provided, that unused vacation time shall only accrue and
accumulate at the rate of two-thirds of the days not utilized by Executive in a
given year. In addition, the Company shall be required to procure and maintain
a term life insurance policy on the life of Executive with a face value death
benefit of at least $225,000. Executive shall have sole discretion to designate
the beneficiary or beneficiaries of such term life insurance policy.
3.4 Moving Expenses. The Company shall pay all reasonable moving
---------------
expenses incurred by the Executive in moving from his present address in Baton
Rouge, Louisiana, to the Denver, Colorado, area.
3.5 Reimbursement. Executive shall be reimbursed for all reasonable
-------------
"out-of-pocket" business expenses for business travel and business entertainment
incurred in connection with the performance of his duties under this Agreement
(1) so long as such expenses constitute business deductions from taxable income
for the Company and are excludable from taxable income to the Executive under
the governing laws and regulations of the Internal Revenue Code (provided,
however, that Executive shall be entitled to full reimbursement in any case
where the Internal Revenue Service may, under Section 274(n) of the Internal
Revenue Code (or any successor provision), disallow to the Company any
percentage of meals and entertainment expenses); and (2) to the extent such
expenses do not exceed the amounts allocable for such expenses in budgets that
are approved from time to time by the Company. The reimbursement of Executive's
business expenses shall be upon monthly presentation to and approval by the
Company of valid receipts and other appropriate documentation for such expenses.
In addition, Executive shall be entitled to receive a non-accountable automobile
reimbursement expense of $500.00 per month for the use of his personal vehicle.
2
<PAGE>
3.6 Stock Options. Executive shall be entitled to, and has been
-------------
granted, incentive stock options to acquire 200,000 shares of the Company's
Common Stock under the Company's 1996 Stock Option Plan (the "Plan") and as more
particularly evidenced by a Stock Option Agreement by and between the Company
and Executive dated as of July 10, 1996. Executive shall continue to be
eligible for additional grants of stock options under the Plan; provided, that
such grants shall be at the discretion of the Stock Option Committee as provided
in the Plan.
3.7 Tax Deferral. Executive shall be entitled to elect the deferral
------------
of up to 50% of any Base Salary payments or other cash payments due to Executive
under this Section 3 for tax planning purposes; provided, that any such election
must be accomplished in accordance with applicable laws and regulations and must
be evidenced by a written instrument executed by both Executive and the Company.
4. Scope of Duties.
---------------
4.1 Assignment of Duties. Executive shall have such duties as may be
--------------------
assigned to him from time to time by the Company's Board of Directors
commensurate with his experience and responsibilities in the position for which
he is employed pursuant to Section 1 above. Such duties shall be exercised
subject to the control and supervision of the Board of Directors of the Company.
4.2 Executive's Devotion of Time. Executive hereby agrees to devote
----------------------------
the majority of his time, abilities and energy to the faithful performance of
the duties assigned to him and to the promotion and forwarding of the business
affairs of the Company, and not to divert any business opportunities from the
Company to himself or to any other person or business entity.
4.3 Conflicting Activities.
----------------------
(a) Executive shall not, during the term of this Agreement, be
engaged in any other business activity without the prior consent of the Board of
Directors of the Company; provided, however, that this restriction shall not be
construed as preventing Executive from investing his personal assets in passive
investments in business entities which are not in competition with the Company
or its affiliates, or from pursuing business opportunities as permitted by
paragraph 4.3(b).
(b) Executive hereby agrees to promote and develop all business
opportunities that come to his attention relating to current or anticipated
future business of the Company, in a manner consistent with the best interests
of the Company and with his duties under this Agreement. Should Executive
discover a business opportunity that does not relate to the current or
anticipated future business of the Company, he shall first offer such
opportunity to the Company. Should the Board of Directors of the Company not
exercise its right to pursue this business opportunity within a reasonable
period of time, not to exceed sixty (60) days, then Executive may develop the
business opportunity for himself; provided, however, that such development may
in no way conflict or interfere with the duties owed by Executive to the Company
under this Agreement. Further, Executive may develop such business opportunities
only on his own time, and may not use
3
<PAGE>
any service, personnel, equipment, supplies, facility, or trade secrets of the
Company in their development. As used herein, the term "business opportunity"
shall not include business opportunities involving investment in publicly traded
stocks, bonds or other securities, or other investments of a personal nature.
5. Confidentiality of Trade Secrets and Other Materials.
----------------------------------------------------
5.1 Trade Secrets. Other than in the performance of his duties
-------------
hereunder, Executive agrees not to disclose, either during the term of his
employment by the Company or at any time thereafter, to any person, firm or
corporation any information concerning the business affairs, the trade secrets
or the customer lists or similar information of the Company. Any technique,
method, process or technology used by the Company shall be considered a "trade
secret" for the purposes of this Agreement.
5.2 Ownership of Trade Secrets; Assignment of Rights. Executive
------------------------------------------------
hereby agrees that all know-how, documents, reports, plans, proposals, marketing
and sales plans, client lists, client files and materials made by him or by the
Company are the property of the Company and shall not be used by him in any way
adverse to the Company's interests. Executive shall not (except in the normal
and usual performance of his duties) deliver, reproduce or in any way allow such
documents or things to be delivered or used by any third party without specific
direction or consent of the Board of Directors of the Company. Executive hereby
assigns to the Company any rights which he or she may have in any such trade
secret or proprietary information.
6. Termination and Severance.
-------------------------
6.1 Bases for Termination.
---------------------
(a) Executive's employment hereunder may be terminated at any
time by mutual agreement of the parties.
(b) This Agreement shall automatically terminate on the last day
of the month in which Executive dies or becomes permanently incapacitated.
"Permanent incapacity" as used herein shall mean mental or physical incapacity,
or both, reasonably determined by the Company's Board of Directors based upon a
certification of such incapacity by, in the discretion of the Company's Board of
Directors, either Executive's regularly attending physician or a duly licensed
physician selected by the Company's Board of Directors, rendering Executive
unable to perform substantially all of his duties hereunder and which appears
reasonably certain to continue for at least six consecutive months without
substantial improvement. Executive shall be deemed to have "become permanently
incapacitated" on the date the Company's Board of Directors has determined that
Executive is permanently incapacitated and so notifies Executive.
4
<PAGE>
(c) Executive's employment may be terminated by the Company
"with cause," effective upon delivery of written notice to Executive given at
any time (without any necessity for prior notice) if any of the following shall
occur:
(i) failure to perform duties as prescribed by paragraph
4.1 hereof or refusal to obey written direction or instruction of the Company's
Board of Directors;
(ii) any material breach of Executive's obligations under
the provisions of this Agreement; or
(iii) any material acts or events which inhibit Executive
from fully performing his responsibilities to the Company in good faith, or
which discredit the Company, its management, products or services, such as (i) a
felony criminal conviction; (ii) any other criminal conviction involving
Executive's lack of honesty or Executive's moral turpitude; (iii) drug or
alcohol abuse; or (iv) acts of dishonesty, gross carelessness or gross
misconduct.
6.2 Payment Upon Termination.
------------------------
(a) Upon termination under paragraph 6.1, the Company shall pay
to Executive within 10 days after termination an amount equal to the sum of (1)
Executive's Base Salary accrued to the date of termination; and (2) unreimbursed
expenses accrued to the date of termination. After any such termination, the
Company shall not be obligated to compensate Executive, his estate or
representatives except for the foregoing compensation then due and owing, nor
provide the benefits to Executive described in Section 3 (except as provided by
law).
(b) In the event of termination by the Company of Executive
during the term hereof for any reason or reasons other than those set forth
under paragraph 6.1 above, Executive (i) shall be entitled to continue to
receive from the Company, for a two-year period commencing on the date of such
termination (and regardless of whether the term hereof expires prior to the end
of such two-year period), Executive's Base Salary as set forth in paragraph 3.1
above payable at the times and in the manner specified in paragraph 3.1, and
---
(ii) shall be paid within 10 days after termination an amount equal to the sum
of unreimbursed expenses accrued to the date of termination. After any such
termination, the Company shall not be obligated to compensate Executive, his
estate or representative except for the foregoing compensation, nor provide the
benefits to Executive described in Paragraph 3 (except as provided by law).
6.3 Change in Control Payments.
--------------------------
(a) The Company agrees that if there is a "change in control" of
the Company (as defined below) and the Executive leaves the employment of the
Company within six months following the date of such change in control (but
during the term hereof) for any reason other
5
<PAGE>
than any of the reasons set forth in paragraph 6.1 above or 6.3 below, then
Executive shall receive, in a lump sum, a cash payment in an amount equal to
Executive's then effective annual Base Salary under paragraph 3.1 above.
(b) The Company agrees that if there is a "change in control" of
the Company (as defined below) and the Executive, within six months of the date
of such change in control (but during the term hereof), terminates his
employment by the Company for "good reason" (as hereinafter defined) or is
terminated by the Company for any reason or reasons other than those reasons set
forth in paragraph 6.1 above, then Executive shall receive, in a lump sum, a
cash payment in an amount equal to twice the amount of Executive's then
effective annual Base Salary under paragraph 3.1 above. For purposes hereof,
"good reason" shall mean any of the following:
(1) a change in the Executive's status, title, position
or responsibilities (including reporting responsibilities) which, in
the Executive's reasonable judgment does not represent a promotion
from his status, title, position or responsibilities as in effect
immediately prior thereto; the assignment to the Executive of any
duties or responsibilities which, in the Executive's reasonable
judgment, are inconsistent with such status, title, position or
responsibilities; or any removal of the Executive from or failure to
reappoint or reelect him to any of such positions;
(2) a reduction by the Company in the Executive's Base
Salary as in effect on the date hereof or as the same may be increased
from time to time;
(3) the relocation of the Company's principal
executive offices to a location outside a thirty-mile radius of
Denver, Colorado or the Company's requiring the Executive to be based
at any place other than the Denver, Colorado area, except for
reasonably required travel on the Company's business which is not
materially greater than such travel requirements prior to the change
in control;
(4) the adverse and substantial alteration in the
nature and quality of the office space within which the Executive
performs his duties, including the size and location thereof, as well
as the secretarial and administrative support provided to the
Executive;
(5) the failure by the Company to continue to provide
the Executive with compensation and benefits provided for under this
Agreement or benefits substantially similar to those provided to him
under any of the employee benefit plans in which the Executive becomes
a participant, or the taking of any action by the Company which would
directly or indirectly materially reduce any of such benefits or
deprive the Executive of any material fringe benefit enjoyed by him at
the time of the change in control;
6
<PAGE>
(6) any material breach by the Company of any
provision of this Agreement; and
(7) the failure of the Company to obtain a
satisfactory agreement from any successor or assign of the Company to
assume and agree to perform this Agreement.
(c) As used herein, the term "change in control" shall mean
either:
(1) the acquisition of ownership (whether direct or
indirect) of shares in excess of 30 percent of the outstanding shares
of common stock of the Company by a person or group of persons that
theretofore did not own such 30% position, or
(2) the occurrence of any transaction relating to the
Company required to be described pursuant to the requirements of item
6(e) of schedule 14A of regulation 14A of the Securities and Exchange
Commission under the Securities and Exchange Act of 1934, or
(3) any change in the composition of the board of
directors of the Company resulting in a majority of the present
directors of the Company not constituting a majority; provided, that
in making such determination directors who were elected by, or on the
recommendation of, such present majority (or such present majority as
extended under this subparagraph 6.3(c)(3)), shall be excluded.
(d) Any amounts payable under this paragraph 6.3 shall be considered
severance pay in consideration for past services rendered and in consideration
of Executive's continued service from the date hereof to his entitlement to
those payments. If Executive receives payment under this paragraph 6.3 he shall
not be entitled to any payment under paragraph 6.2; provided, that Executive
shall be promptly paid for all Base Salary amounts and unreimbursed expenses
accrued prior to the date of termination. The Executive shall have no duty to
mitigate his damages by seeking other employment (in regard to either this
paragraph 6.3 or paragraph 6.2(b) above). Should the executive actually receive
other payments from any such other employment, the payments called for under
this paragraph 6.3 or paragraph 6.2(b) shall not be reduced or offset by any
such future earnings.
7. Injunctive Relief. The Company and Executive hereby acknowledge and
-----------------
agree that any default under Section 5 above will cause damage to the Company in
an amount difficult to ascertain. Accordingly, in addition to any other relief
to which the Company may be entitled, the Company shall be entitled to such
injunctive relief as may be ordered by any court of competent jurisdiction
including, but not limited to, an injunction restraining any violation of
Section 5 above and without the proof of actual damages.
7
<PAGE>
8. Miscellaneous.
-------------
8.1 Transfer and Assignment. This Agreement is personal as to
-----------------------
Executive and shall not be assigned or transferred by Executive without the
prior written consent of the Company. This Agreement shall be binding upon and
inure to the benefit of all of the parties hereto and their respective permitted
heirs, personal representatives, successors and assigns.
8.2 Severability. Nothing contained herein shall be construed to
------------
require the commission of any act contrary to law. Should there be any conflict
between any provisions hereof and any present or future statute, law, ordinance,
regulation, or other pronouncement having the force of law, the latter shall
prevail, but the provision of this Agreement affected thereby shall be curtailed
and limited only to the extent necessary to bring it within the requirements of
the law, and the remaining provisions of this Agreement shall remain in full
force and effect.
8.3 Governing Law. This Agreement is made under and shall be
-------------
construed pursuant to the laws of the State of Colorado.
8.4 Counterparts. This Agreement may be executed in several
------------
counterparts and all documents so executed shall constitute one agreement,
binding on all of the parties hereto, notwithstanding that all of the parties
did not sign the original or the same counterparts.
8.5 Entire Agreement. This Agreement constitutes the entire
----------------
agreement and understanding of the parties with respect to the subject matter
hereof and supersedes all prior oral or written agreements, arrangements, and
understandings with respect thereto, including without limitation that Contract
of Employment between the Executive and GDC Engineering, Inc. (an indirect
subsidiary of the Company that has subsequently changed its name to GDC Enviro
Solutions, Inc.) dated December 16, 1996, and all amendments thereof.
Notwithstanding the foregoing, it is recognized that Executive is serving as an
officer and a director of various directly and indirectly owned subsidiaries of
the Company, and it is anticipated that he shall continue such service, at the
discretion of the Company, during the term of this Agreement. No
representation, promise, inducement, statement or intention has been made by any
party hereto that is not embodied herein, and no party shall be bound by or
liable for any alleged representation, promise, inducement, or statement not so
set forth herein.
8.6 Modification. This Agreement may be modified, amended,
------------
superseded, or canceled, and any of the terms, covenants, representations,
warranties or conditions hereof may be waived, only by a written instrument
executed by the party or parties to be bound by any such modification,
amendment, supersession, cancellation, or waiver.
8.7 Attorneys' Fees and Costs. In the event of any dispute arising
-------------------------
out of the subject matter of this Agreement, the prevailing party shall recover,
in addition to any other damages assessed, its attorneys' fees and court costs
incurred in litigating or otherwise settling or resolving such dispute whether
or not an action is brought or prosecuted to judgment. In construing this
8
<PAGE>
Agreement, none of the parties hereto shall have any term or provision construed
against such party solely by reason of such party having drafted the same.
8.8 Waiver. The waiver by either of the parties, express or implied,
------
of any right under this Agreement or any failure to perform under this Agreement
by the other party, shall not constitute or be deemed as a waiver of any other
right under this Agreement or of any other failure to perform under this
Agreement by the other party, whether of a similar or dissimilar nature.
8.9 Cumulative Remedies. Each and all of the several rights and
-------------------
remedies provided in this Agreement, or by law or in equity, shall be
cumulative, and no one of them shall be exclusive of any other right or remedy,
and the exercise of any one of such rights or remedies shall not be deemed a
waiver of, or an election to exercise, any other such right or remedy.
8.1 Headings. The section and other headings contained in this
--------
Agreement are for reference purposes only and shall not in any way affect the
meaning and interpretation of this Agreement.
8.1 Notices. Any notice under this Agreement must be in writing, may
-------
be telecopied, sent by express 24-hour guaranteed courier, or hand-delivered, or
may be served by depositing the same in the United States mail, addressed to the
party to be notified, postage-prepaid and registered or certified with a return
receipt requested. The addresses of the parties for the receipt of notice shall
be as follows:
If to the Company:
DK Industries, Inc.
1580 Lincoln Street, Suite 900
Denver, Colorado 80203
If to the Executive:
Harry C. Conger
1580 Lincoln Street, Suite 900
Denver, Colorado 80203
Each notice given by registered or certified mail shall be deemed delivered and
effective on the date of delivery as shown on the return receipt, and each
notice delivered in any other manner shall be deemed to be effective as of the
time of actual delivery thereof. Each party may change its address for notice
by giving notice thereof in the manner provided above.
8.12 Survival. Any provision of this Agreement which imposes an
--------
obligation after termination or expiration of this Agreement shall survive the
termination or expiration of this Agreement and be binding on Executive and the
Company.
9
<PAGE>
8.13 Right of Set-Off. Upon termination or expiration of this
----------------
Agreement, the Company shall have the right to set-off against the amounts due
Executive hereunder the amount of any outstanding loan or advance from the
Company to Executive.
8.14 Effective Date. This Agreement shall become effective as of the
--------------
date set forth on page 1 when signed by Executive and the Company.
IN WITNESS WHEREOF, the parties hereto have caused this Employment
Agreement to be executed as of the date first set forth above.
EXECUTIVE:
By:/s/ Harry C. Conger
---------------------------------
Name: Harry C. Conger
COMPANY:
DK INDUSTRIES, INC.
By: /s/ James W. Muzzy
---------------------------------
Name: James W. Muzzy
----------------------------
Title: Vice President
---------------------------
AGREED TO AND ACCEPTED AS
TO SECTION 8.5 ABOVE:
GDC ENVIRO SOLUTIONS, INC.
By: /s/ Harry C. Conger
-----------------------------
Name : Harry C. Conger
-------------------------
Title: _________________________
10
<PAGE>
Exhibit 10(g)
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement is made and entered into effective as of the 1st
day of June, 1996, by and between DK Industries, Inc., a Colorado corporation
(the "Company"), and James W. Muzzy, an individual ("Executive").
RECITALS
A. The Company desires to be assured of the association and services of
Executive for the Company.
B. Executive is willing and desires to be employed by the Company, and
the Company is willing to employ Executive, upon the terms, covenants and
conditions hereinafter set forth.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual terms, covenants and
conditions hereinafter set forth, the parties hereto do hereby agree as follows:
1. Employment. The Company hereby employs Executive as Vice President
----------
and Secretary of the Company, subject to the supervision and direction of the
Company's President and Board of Directors.
2. Term. The term of this Agreement shall be for a period of three (3)
----
years commencing on the effective date hereof, unless terminated earlier
pursuant to Section 6 below; provided, however, that Executive's obligations in
Section 5 below shall continue in effect after such termination.
3. Compensation; Reimbursement.
---------------------------
3.1 Base Salary. For all services rendered by Executive under this
-----------
Agreement, the Company shall pay Executive a base salary of One Hundred Thirty
Thousand Dollars ($130,000.00) per annum, payable monthly in equal installments
(the "Base Salary"). The amount of the Base Salary may be increased at any time
and from time to time by the Board of Directors of the Company. No such change
shall in any way abrogate, alter, terminate or otherwise affect the other terms
of this Agreement. Notwithstanding any other provision hereof, however, prior
to the Company's consummation of the "Private Placement Financing" (as hereafter
defined), Executive's Base Salary shall be payable by the Company in the form of
consulting fees at the rate of $6,000 per month. Immediately following the
consummation of such Private Placement Financing, Executive shall receive a lump
sum consulting fee payment equal to the difference between the Base Salary
provided for under the first sentence of this Section 3.1 from the effective
date hereof to the date of the consummation of the Private Placement Financing
and the aggregate consulting fees actually paid to Executive for such period
under the provisions of the immediately preceding sentence. Following the
consummation of the Private Placement Financing, Executive shall be entitled to
receive the Base
<PAGE>
Salary in accordance with the provisions of the first sentence of this Section
3.1. For purposes hereof, the term "Private Placement Financing" shall mean an
offering of the stock, and/or warrants of the Company not requiring registration
under the Securities Act of 1933, as amended, that provides the Company with
proceeds (including any debt conversions) in an amount of at least $3,000,000.
3.2 Incentive Bonus. In addition to the Base Salary, Executive shall
---------------
be eligible for an incentive bonus ("Incentive Bonus") each year. The Incentive
Bonus shall be determined by, and at the sole discretion of, the Compensation
Committee of the Company's Board of Directors, and Executive shall have no
specific right to receive any Incentive Bonus.
3.3 Additional Benefits. In addition to the Base Salary and the
-------------------
Incentive Bonus, Executive shall be entitled to all other benefits of employment
(including without limitation health and dental benefits), provided to the
employees of GDC Enviro Solutions, Inc., an indirectly owned subsidiary of the
Company. Executive also shall be entitled to obtain, at the Company's expense,
an annual health physical examination from a physician chosen by employee;
provided, that such physician must be qualified for the provision of such
services under the existing health insurance plan that applies to Executive in
accordance with the preceding sentence. Both the Company and Executive shall be
entitled to receive the results of any such physical examination. Executive also
shall be entitled to four weeks paid vacation time during each year of the term
hereof; provided, that unused vacation time shall only accrue and accumulate at
the rate of two-thirds of the days not utilized by Executive in a given year. In
addition, the Company shall be required to procure and maintain a term life
insurance policy on the life of Executive with a face value death benefit of at
least $150,000. Executive shall have sole discretion to designate the
beneficiary or beneficiaries of such term life insurance policy.
3.4 Reimbursement. Executive shall be reimbursed for all reasonable
-------------
"out-of-pocket" business expenses for business travel and business entertainment
incurred in connection with the performance of his duties under this Agreement
(1) so long as such expenses constitute business deductions from taxable income
for the Company and are excludable from taxable income to the Executive under
the governing laws and regulations of the Internal Revenue Code (provided,
however, that Executive shall be entitled to full reimbursement in any case
where the Internal Revenue Service may, under Section 274(n) of the Internal
Revenue Code (or any successor provision), disallow to the Company any
percentage of meals and entertainment expenses); and (2) to the extent such
expenses do not exceed the amounts allocable for such expenses in budgets that
are approved from time to time by the Company. The reimbursement of Executive's
business expenses shall be upon monthly presentation to and approval by the
Company of valid receipts and other appropriate documentation for such expenses.
In addition, Executive shall be entitled to receive a non-accountable automobile
reimbursement expense of $500.00 per month for the use of his personal vehicle.
3.5 Stock Options. Executive shall be entitled to, and has been
-------------
granted, incentive stock options to acquire 200,000 shares of the Company's
Common Stock under the Company's 1996 Stock Option Plan (the "Plan") and as more
particularly evidenced by a Stock Option
2
<PAGE>
Agreement by and between the Company and Executive dated as of July 10, 1996.
Executive shall continue to be eligible for additional grants of stock options
under the Plan; provided, that such grants shall be at the discretion of the
Stock Option Committee as provided in the Plan.
3.6 Tax Deferral. Executive shall be entitled to elect the deferral
------------
of up to 50% of any Base Salary payments or other cash payments due to Executive
under this Section 3 for tax planning purposes; provided, that any such election
must be accomplished in accordance with applicable laws and regulations and must
be evidenced by a written instrument executed by both Executive and the Company.
4. Scope of Duties.
---------------
4.1 Assignment of Duties. Executive shall have such duties as may be
--------------------
assigned to him from time to time by the Company's President and Board of
Directors commensurate with his experience and responsibilities in the positions
for which he is employed pursuant to Section 1 above. Such duties shall be
exercised subject to the control and supervision of the Board of Directors of
the Company.
4.2 Executive's Devotion of Time. Executive hereby agrees to devote
----------------------------
the majority of his time, abilities and energy to the faithful performance of
the duties assigned to him and to the promotion and forwarding of the business
affairs of the Company, and not to divert any business opportunities from the
Company to himself or to any other person or business entity.
4.3 Conflicting Activities.
----------------------
(a) Executive shall not, during the term of this Agreement, be
engaged in any other business activity without the prior consent of the Board of
Directors of the Company; provided, however, that this restriction shall not be
construed as preventing Executive from investing his personal assets in passive
investments in business entities which are not in competition with the Company
or its affiliates, or from pursuing business opportunities as permitted by
paragraph 4.3(b).
(b) Executive hereby agrees to promote and develop all business
opportunities that come to his attention relating to current or anticipated
future business of the Company, in a manner consistent with the best interests
of the Company and with his duties under this Agreement. Should Executive
discover a business opportunity that does not relate to the current or
anticipated future business of the Company, he shall first offer such
opportunity to the Company. Should the Board of Directors of the Company not
exercise its right to pursue this business opportunity within a reasonable
period of time, not to exceed sixty (60) days, then Executive may develop the
business opportunity for himself; provided, however, that such development may
in no way conflict or interfere with the duties owed by Executive to the Company
under this Agreement. Further, Executive may develop such business opportunities
only on his own time, and may not use any service, personnel, equipment,
supplies, facility, or trade secrets of the Company in their development. As
used herein, the term "business opportunity" shall not include business
3
<PAGE>
opportunities involving investment in publicly traded stocks, bonds or other
securities, or other investments of a personal nature.
5. Confidentiality of Trade Secrets and Other Materials.
----------------------------------------------------
5.1 Trade Secrets. Other than in the performance of his duties
-------------
hereunder, Executive agrees not to disclose, either during the term of his
employment by the Company or at any time thereafter, to any person, firm or
corporation any information concerning the business affairs, the trade secrets
or the customer lists or similar information of the Company. Any technique,
method, process or technology used by the Company shall be considered a "trade
secret" for the purposes of this Agreement.
5.2 Ownership of Trade Secrets; Assignment of Rights. Executive
------------------------------------------------
hereby agrees that all know-how, documents, reports, plans, proposals, marketing
and sales plans, client lists, client files and materials made by him or by the
Company are the property of the Company and shall not be used by him in any way
adverse to the Company's interests. Executive shall not (except in the normal
and usual performance of his duties) deliver, reproduce or in any way allow such
documents or things to be delivered or used by any third party without specific
direction or consent of the Board of Directors of the Company. Executive hereby
assigns to the Company any rights which he or she may have in any such trade
secret or proprietary information.
6. Termination and Severance.
-------------------------
6.1 Bases for Termination.
---------------------
(a) Executive's employment hereunder may be terminated at any
time by mutual agreement of the parties.
(b) This Agreement shall automatically terminate on the last day
of the month in which Executive dies or becomes permanently incapacitated.
"Permanent incapacity" as used herein shall mean mental or physical incapacity,
or both, reasonably determined by the Company's Board of Directors based upon a
certification of such incapacity by, in the discretion of the Company's Board of
Directors, either Executive's regularly attending physician or a duly licensed
physician selected by the Company's Board of Directors, rendering Executive
unable to perform substantially all of his duties hereunder and which appears
reasonably certain to continue for at least six consecutive months without
substantial improvement. Executive shall be deemed to have "become permanently
incapacitated" on the date the Company's Board of Directors has determined that
Executive is permanently incapacitated and so notifies Executive.
(c) Executive's employment may be terminated by the Company
"with cause," effective upon delivery of written notice to Executive given at
any time (without any necessity for prior notice) if any of the following shall
occur:
4
<PAGE>
(1) failure to perform duties as prescribed by paragraph 4.1
hereof or refusal to obey written direction or instruction of the Company's
Board of Directors;
(2) any material breach of Executive's obligations under the
provisions of this Agreement; or
(3) any material acts or events which inhibit Executive from
fully performing his responsibilities to the Company in good faith, or
which discredit the Company, its management, products or services, such as
(i) a felony criminal conviction; (ii) any other criminal conviction
involving Executive's lack of honesty or Executive's moral turpitude; (iii)
drug or alcohol abuse; or (iv) acts of dishonesty, gross carelessness or
gross misconduct.
6.2 Payment Upon Termination.
------------------------
(a) Upon termination under paragraph 6.1, the Company shall pay
to Executive within 10 days after termination an amount equal to the sum of (1)
Executive's Base Salary accrued to the date of termination; and (2) unreimbursed
expenses accrued to the date of termination. After any such termination, the
Company shall not be obligated to compensate Executive, his estate or
representatives except for the foregoing compensation then due and owing, nor
provide the benefits to Executive described in Section 3 (except as provided by
law).
(b) In the event of termination by the Company of Executive
during the term hereof for any reason or reasons other than those set forth
under paragraph 6.1 above, Executive (i) shall be entitled to continue to
receive from the Company, for a two-year period commencing on the date of such
termination (and regardless of whether the term hereof expires prior to the end
of such two-year period), Executive's then effective Base Salary as set forth in
paragraph 3.1 above payable at the times and in the manner specified in
paragraph 3.1, and (ii) shall be paid within 10 days after termination an amount
---
equal to the sum of unreimbursed expenses accrued to the date of termination.
After any such termination, the Company shall not be obligated to compensate
Executive, his estate or representative except for the foregoing compensation,
nor provide the benefits to Executive described in Paragraph 3 (except as
provided by law).
6.3 Change in Control Payments.
--------------------------
(a) The Company agrees that if there is a "change in control" of
the Company (as defined below) and the Executive leaves the employment of the
Company within six months following the date of such change in control (but
during the term hereof) for any reason other than any of the reasons set forth
in paragraph 6.1 above or 6.3 below, then Executive shall receive, in a lump
sum, a cash payment in an amount equal to Executive's then effective annual Base
Salary under paragraph 3.1 above.
5
<PAGE>
(b) The Company agrees that if there is a "change in control" of
the Company (as defined below) and the Executive, within six months of the date
of such change in control (but during the term hereof), terminates his
employment by the Company for "good reason" (as hereinafter defined) or is
terminated by the Company for any reason or reasons other than those reasons set
forth in paragraph 6.1 above, then Executive shall receive, in a lump sum, a
cash payment in an amount equal to twice the amount of Executive's then
effective annual Base Salary under paragraph 3.1 above. For purposes hereof,
"good reason" shall mean any of the following:
(1) a change in the Executive's status, title, position or
responsibilities (including reporting responsibilities) which, in the
Executive's reasonable judgment does not represent a promotion from his
status, title, position or responsibilities as in effect immediately prior
thereto; the assignment to the Executive of any duties or responsibilities
which, in the Executive's reasonable judgment, are inconsistent with such
status, title, position or responsibilities; or any removal of the
Executive from or failure to reappoint or reelect him to any of such
positions;
(2) a reduction by the Company in the Executive's Base
Salary as in effect on the date hereof or as the same may be increased from
time to time;
(3) the relocation of the Company's principal executive
offices to a location outside a thirty-mile radius of Denver, Colorado or
the Company's requiring the Executive to be based at any place other than
the Denver, Colorado area, except for reasonably required travel on the
Company's business which is not materially greater than such travel
requirements prior to the change in control;
(4) the adverse and substantial alteration in the nature
and quality of the office space within which the Executive performs his
duties, including the size and location thereof, as well as the secretarial
and administrative support provided to the Executive;
(5) the failure by the Company to continue to provide the
Executive with compensation and benefits provided for under this Agreement
or benefits substantially similar to those provided to him under any of the
employee benefit plans in which the Executive becomes a participant, or the
taking of any action by the Company which would directly or indirectly
materially reduce any of such benefits or deprive the Executive of any
material fringe benefit enjoyed by him at the time of the change in
control;
(6) any material breach by the Company of any provision of
this Agreement; and
6
<PAGE>
(7) the failure of the Company to obtain a satisfactory
agreement from any successor or assign of the Company to assume and agree
to perform this Agreement.
(c) As used herein, the term "change in control" shall mean
either:
(1) the acquisition of ownership (whether direct or
indirect) of shares in excess of 30 percent of the outstanding shares of
common stock of the Company by a person or group of persons that
theretofore did not own such 30% position, or
(2) the occurrence of any transaction relating to the
Company required to be described pursuant to the requirements of item 6(e)
of schedule 14A of regulation 14A of the Securities and Exchange Commission
under the Securities and Exchange Act of 1934, or
(3) any change in the composition of the board of directors
of the Company resulting in a majority of the present directors of the
Company not constituting a majority; provided, that in making such
determination directors who were elected by, or on the recommendation of,
such present majority (or such present majority as extended under this
subparagraph 6.3(c)(3)), shall be excluded.
(d) Any amounts payable under this paragraph 6.3 shall be
considered severance pay in consideration for past services rendered and in
consideration of Executive's continued service from the date hereof to his
entitlement to those payments. If Executive receives payment under this
paragraph 6.3 he shall not be entitled to any payment under paragraph 6.2;
provided, that Executive shall be promptly paid for all Base Salary amounts and
unreimbursed expenses accrued prior to the date of termination. The Executive
shall have no duty to mitigate his damages by seeking other employment (in
regard to either this paragraph 6.3 or paragraph 6.2(b) above). Should the
executive actually receive other payments from any such other employment, the
payments called for under this paragraph 6.3 or paragraph 6.2(b) shall not be
reduced or offset by any such future earnings.
7. Injunctive Relief. The Company and Executive hereby acknowledge and
-----------------
agree that any default under Section 5 above will cause damage to the Company in
an amount difficult to ascertain. Accordingly, in addition to any other relief
to which the Company may be entitled, the Company shall be entitled to such
injunctive relief as may be ordered by any court of competent jurisdiction
including, but not limited to, an injunction restraining any violation of
Section 5 above and without the proof of actual damages.
8. Miscellaneous.
-------------
7
<PAGE>
8.1 Transfer and Assignment. This Agreement is personal as to
-----------------------
Executive and shall not be assigned or transferred by Executive without the
prior written consent of the Company. This Agreement shall be binding upon and
inure to the benefit of all of the parties hereto and their respective permitted
heirs, personal representatives, successors and assigns.
8.2 Severability. Nothing contained herein shall be construed to
------------
require the commission of any act contrary to law. Should there be any conflict
between any provisions hereof and any present or future statute, law, ordinance,
regulation, or other pronouncement having the force of law, the latter shall
prevail, but the provision of this Agreement affected thereby shall be curtailed
and limited only to the extent necessary to bring it within the requirements of
the law, and the remaining provisions of this Agreement shall remain in full
force and effect.
8.3 Governing Law. This Agreement is made under and shall be
-------------
construed pursuant to the laws of the State of Colorado.
8.4 Counterparts. This Agreement may be executed in several
------------
counterparts and all documents so executed shall constitute one agreement,
binding on all of the parties hereto, notwithstanding that all of the parties
did not sign the original or the same counterparts.
8.5 Entire Agreement. This Agreement constitutes the entire
----------------
agreement and understanding of the parties with respect to the subject matter
hereof and supersedes all prior oral or written agreements, arrangements, and
understandings with respect thereto. Notwithstanding the foregoing, it is
recognized that Executive is serving as an officer and a director of various
directly and indirectly owned subsidiaries of the Company, and it is anticipated
that he shall continue such service, at the discretion of the Company, during
the term of this Agreement. No representation, promise, inducement, statement
or intention has been made by any party hereto that is not embodied herein, and
no party shall be bound by or liable for any alleged representation, promise,
inducement, or statement not so set forth herein.
8.6 Modification. This Agreement may be modified, amended,
------------
superseded, or canceled, and any of the terms, covenants, representations,
warranties or conditions hereof may be waived, only by a written instrument
executed by the party or parties to be bound by any such modification,
amendment, supersession, cancellation, or waiver.
8.7 Attorneys' Fees and Costs. In the event of any dispute arising
-------------------------
out of the subject matter of this Agreement, the prevailing party shall recover,
in addition to any other damages assessed, its attorneys' fees and court costs
incurred in litigating or otherwise settling or resolving such dispute whether
or not an action is brought or prosecuted to judgment. In construing this
Agreement, none of the parties hereto shall have any term or provision construed
against such party solely by reason of such party having drafted the same.
8.8 Waiver. The waiver by either of the parties, express or implied,
------
of any right under this Agreement or any failure to perform under this Agreement
by the other party, shall not
8
<PAGE>
constitute or be deemed as a waiver of any other right under this Agreement or
of any other failure to perform under this Agreement by the other party, whether
of a similar or dissimilar nature.
8.9 Cumulative Remedies. Each and all of the several rights and
-------------------
remedies provided in this Agreement, or by law or in equity, shall be
cumulative, and no one of them shall be exclusive of any other right or remedy,
and the exercise of any one of such rights or remedies shall not be deemed a
waiver of, or an election to exercise, any other such right or remedy.
8.1 Headings. The section and other headings contained in this
--------
Agreement are for reference purposes only and shall not in any way affect the
meaning and interpretation of this Agreement.
8.1 Notices. Any notice under this Agreement must be in writing, may
-------
be telecopied, sent by express 24-hour guaranteed courier, or hand-delivered, or
may be served by depositing the same in the United States mail, addressed to the
party to be notified, postage-prepaid and registered or certified with a return
receipt requested. The addresses of the parties for the receipt of notice shall
be as follows:
If to the Company:
DK Industries, Inc.
1580 Lincoln Street, Suite 900
Denver, Colorado 80203
If to the Executive:
James W. Muzzy
11479 South Pine Drive
Parker, Colorado 80134
Each notice given by registered or certified mail shall be deemed delivered and
effective on the date of delivery as shown on the return receipt, and each
notice delivered in any other manner shall be deemed to be effective as of the
time of actual delivery thereof. Each party may change its address for notice
by giving notice thereof in the manner provided above.
8.12 Survival. Any provision of this Agreement which imposes an
--------
obligation after termination or expiration of this Agreement shall survive the
termination or expiration of this Agreement and be binding on Executive and the
Company.
8.13 Right of Set-Off. Upon termination or expiration of this
----------------
Agreement, the Company shall have the right to set-off against the amounts due
Executive hereunder the amount of any outstanding loan or advance from the
Company to Executive.
9
<PAGE>
8.1 Effective Date. This Agreement shall become effective as of the
--------------
date set forth on page 1 when signed by Executive and the Company.
IN WITNESS WHEREOF, the parties hereto have caused this Employment
Agreement to be executed as of the date first set forth above.
EXECUTIVE:
By: /s/ James W. Muzzy
-----------------------------------
Name: James W. Muzzy
COMPANY:
DK INDUSTRIES, INC.
By: /s/ Harry C. Conger
-----------------------------------
Name: Harry C. Conger
------------------------------
Title: President
-----------------------------
10
<PAGE>
Exhibit 10(h)
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement is made and entered into effective as of the 17th
day of December, 1996, by and between Walsh Remedial Construction Services, LLC,
a Colorado limited liability company (the "Company"), and William T. Spear, an
individual ("Executive").
RECITALS
A. The Company desires to be assured of the association and services of
Executive for the Company.
B. Executive is willing and desires to be employed by the Company, and
the Company is willing to employ Executive, upon the terms, covenants and
conditions hereinafter set forth.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual terms, covenants and
conditions hereinafter set forth, the parties hereto do hereby agree as follows:
1. Employment. The Company hereby employs Executive as the Chief
----------
Executive Officer of the Company, subject to the supervision and direction of
the Managers of the Company (provided, that at such time as the Company is
converted or merged into a corporation Executive shall become the President and
Chief Executive Officer of the Company and shall be subject to the supervision
and direction of the Company's Board of Directors).
2. Term. The term of this Agreement shall be for a period of three (3)
----
years commencing on the effective date hereof, unless terminated earlier
pursuant to Section 6 below; provided, however, that Executive's obligations in
Section 5 below shall continue in effect after such termination.
3. Compensation; Reimbursement.
---------------------------
3.1 Base Salary. For all services rendered by Executive under this
-----------
Agreement, the Company shall pay Executive a base salary of One Hundred Twenty
Thousand Dollars ($120,000.00) per annum, payable monthly in equal installments
(the "Base Salary"). The amount of the Base Salary may be increased at any time
and from time to time by the Managers of the Company (or the Board of Directors
of the Company, as applicable). No such change shall in any way abrogate,
alter, terminate or otherwise affect the other terms of this Agreement.
3.2 Bonus Compensation. Executive shall be entitled to receive
------------------
$50,000 in bonus compensation payable as follows: (i) $25,000 payable upon
completion by Enviro-Dredge, LLP, a New Jersey general partnership of which the
Company is a Partner (the "Venture"), of the 100,000
1
<PAGE>
cubic yard dredging demonstration project under the Venture's contract (the
"Dredging Contract") with the Port Authority of New York and New Jersey (the
"Port Authority") designated Contract #MFP-204; and (ii) $25,000 payable upon
the Port Authority's final permission to the Venture to proceed under the
extension of the Dredging Contract (the "Extension") for an additional 700,000
to 1,300,000 cubic yards of materials; provided, that such final permission
includes a firm commitment (the "Firm Commitment") for at least 700,000
additional cubic yards of material to be dredged and processed by the Venture.
3.3 Incentive Compensation. In order to provide incentive to
----------------------
executive to procure the Firm Commitment and complete the processing under the
Extension, Executive shall be entitled to the following incentive payments: (i)
$80,000 payable on December 1, 1997, if the Company has received the Firm
Commitment on or before March 15, 1997; (ii) $80,000 payable on December 1,
1998, if the Company has processed at least an aggregate of 700,000 cubic yards
of material under the Extension on or before such date, and (iii) $80,000
payable on December 1, 1999, if the Company has processed at least 600,000
additional cubic yards (in addition to the first 700,000 cubic yards processed
under the Extension) of material under the Extension as of such date.
3.4 Stock Options. Executive shall be granted incentive stock
-------------
options to acquire 60,000 shares of the Common Stock of GDC Group under GDC
Group's 1996 Stock Option Plan (the "Plan") for an exercise price of $1.00 per
share and with an option exercise period of five years from the date of grant;
provided, that such option shall not be exercisable until after such time as the
Venture has received the Firm Commitment. GDC Group and Executive shall execute
a standard Stock Option Agreement under the Plan evidencing the described
option. Executive shall continue to be eligible for additional grants of stock
options under the Plan; provided, that such grants shall be at the discretion of
the Stock Option Committee as provided in the Plan.
3.5 WRCS Management Profit Sharing Pool. The Company intends to
-----------------------------------
establish a bonus plan and profit sharing program. When such a plan and program
is established and duly approved, Executive shall be entitled to participate in
such plan and program as delineated in the plan and program.
3.6 Cancellation of Promissory Note. Upon execution of this
-------------------------------
Agreement, the Company hereby agrees to waive, forgive and cancel all
outstanding indebtedness of the Executive to the Company under the Promissory
Note in the principal amount of $4,000 dated March 13, 1995 and executed by the
Executive in favor of the Company.
3.7 Additional Benefits. In addition to the Base Salary and the
-------------------
Incentive Bonus, Executive shall be entitled to all other benefits of employment
(including without limitation health and dental benefits), provided to the
employees of GDC Group, Inc., a Colorado corporation that is the indirect parent
corporation of the Company ("GDC Group"). Executive also shall be entitled to
obtain, at the Company's expense, an annual health physical examination from a
physician chosen by
2
<PAGE>
employee; provided, that such physician must be qualified for the provision of
such services under the existing health insurance plan that applies to Executive
in accordance with the preceding sentence. Both the Company and Executive shall
be entitled to receive the results of any such physical examination. Executive
also shall be entitled to 3 weeks paid vacation time during each year of the
term hereof; provided, that unused vacation time shall only accrue and
accumulate at the rate of two-thirds of the days not utilized by Executive in a
given year. In addition, the Company shall be required to procure and maintain a
term life insurance policy on the life of Executive with a face value death
benefit of at least $100,000. Executive shall have sole discretion to designate
the beneficiary or beneficiaries of such term life insurance policy.
3.8 Reimbursement. Executive shall be reimbursed for all reasonable
-------------
"out-of-pocket" business expenses for business travel and business entertainment
incurred in connection with the performance of his duties under this Agreement
(1) so long as such expenses constitute business deductions from taxable income
for the Company and are excludable from taxable income to the Executive under
the governing laws and regulations of the Internal Revenue Code (provided,
however, that Executive shall be entitled to full reimbursement in any case
where the Internal Revenue Service may, under Section 274(n) of the Internal
Revenue Code (or any successor provision), disallow to the Company any
percentage of meals and entertainment expenses); and (2) to the extent such
expenses do not exceed the amounts allocable for such expenses in budgets that
are approved from time to time by the Company. The reimbursement of Executive's
business expenses shall be upon monthly presentation to and approval by the
Company of valid receipts and other appropriate documentation for such expenses.
In addition, Executive shall be entitled to receive a non-accountable automobile
reimbursement expense of $500.00 per month for the use of his personal vehicle.
3.9 Tax Deferral. Executive shall be entitled to elect the deferral
------------
of up to 50% of any Base Salary payments or other cash payments due to Executive
under this Section 3 for tax planning purposes; provided, that any such election
must be accomplished in accordance with applicable laws and regulations and must
be evidenced by a written instrument executed by both Executive and the Company.
4. Scope of Duties.
---------------
4.1 Assignment of Duties. Executive shall have such duties as may be
--------------------
assigned to him from time to time by the Company's Managers (or Board of
Directors, as applicable) commensurate with his experience and responsibilities
in the position for which he is employed pursuant to Section 1 above. Such
duties shall be exercised subject to the control and supervision of the
Company's Managers (or Board of Directors, as applicable).
4.2 Executive's Devotion of Time. Executive hereby agrees to devote
----------------------------
all of his business time, abilities and energy to the faithful performance of
the duties assigned to him and to the
3
<PAGE>
promotion and forwarding of the business affairs of the Company, and not to
divert any business opportunities from the Company to himself or to any other
person or business entity.
4.3 Conflicting Activities.
----------------------
(a) Executive shall not, during the term of this Agreement, be
engaged in any other business activity without the prior consent of the
Company's Managers (or Board of Directors, as applicable); provided, however,
that this restriction shall not be construed as preventing Executive from
investing his personal assets in passive investments in business entities which
are not in competition with the Company or its affiliates, or from pursuing
business opportunities as permitted by paragraph 4.3(b).
(b) Executive hereby agrees to promote and develop all business
opportunities that come to his attention relating to current or anticipated
future business of the Company, in a manner consistent with the best interests
of the Company and with his duties under this Agreement. Should Executive
discover a business opportunity that does not relate to the current or
anticipated future business of the Company, he shall first offer such
opportunity to the Company. Should the Company's Managers (or Board of
Directors, as applicable) not exercise its right to pursue this business
opportunity within a reasonable period of time, not to exceed sixty (60) days,
then Executive may develop the business opportunity for himself; provided,
however, that such development may in no way conflict or interfere with the
duties owed by Executive to the Company under this Agreement. Further,
Executive may develop such business opportunities only on his own time, and may
not use any service, personnel, equipment, supplies, facility, or trade secrets
of the Company in their development. As used herein, the term "business
opportunity" shall not include business opportunities involving investment in
publicly traded stocks, bonds or other securities, or other investments of a
personal nature.
5. Confidentiality of Trade Secrets and Other Materials.
----------------------------------------------------
5.1 Trade Secrets. Other than in the performance of his duties
-------------
hereunder, Executive agrees not to disclose, either during the term of his
employment by the Company or at any time thereafter, to any person, firm or
corporation any information concerning the business affairs, the trade secrets
or the customer lists or similar information of the Company. Any technique,
method, process or technology used by the Company shall be considered a "trade
secret" for the purposes of this Agreement.
5.2 Ownership of Trade Secrets; Assignment of Rights. Executive
------------------------------------------------
hereby agrees that all know-how, documents, reports, plans, proposals, marketing
and sales plans, client lists, client files and materials made by him or by the
Company are the property of the Company and shall not be used by him in any way
adverse to the Company's interests. Executive shall not (except in the normal
and usual performance of his duties) deliver, reproduce or in any way allow such
documents
4
<PAGE>
or things to be delivered or used by any third party without specific direction
or consent of the Board of Directors of the Company. Executive hereby assigns to
the Company any rights which he or she may have in any such trade secret or
proprietary information.
6. Termination and Severance.
-------------------------
6.1 Bases for Termination.
---------------------
(a) Executive's employment hereunder may be terminated at any
time by mutual agreement of the parties.
(b) This Agreement shall automatically terminate on the last day
of the month in which Executive dies or becomes permanently incapacitated.
"Permanent incapacity" as used herein shall mean mental or physical incapacity,
or both, reasonably determined by the Company's Managers (or Board of Directors,
as applicable) based upon a certification of such incapacity by, in the
discretion of the Company's Managers (or Board of Directors, as applicable),
either Executive's regularly attending physician or a duly licensed physician
selected by the Company's Managers (or Board of Directors, as applicable),
rendering Executive unable to perform substantially all of his duties hereunder
and which appears reasonably certain to continue for at least six consecutive
months without substantial improvement. Executive shall be deemed to have
"become permanently incapacitated" on the date the Company's Managers (or Board
of Directors, as applicable) has determined that Executive is permanently
incapacitated and so notifies Executive.
(c) Executive's employment may be terminated by the Company
"with cause," effective upon delivery of written notice to Executive given at
any time (without any necessity for prior notice) if any of the following shall
occur:
(i) failure to perform duties as prescribed by paragraph
4.1 hereof or refusal to obey written direction or instruction of the Company's
Managers (or Board of Directors, as applicable);
(ii) any material breach of Executive's obligations under
the provisions of this Agreement; or
(ii) any material acts or events which inhibit Executive
from fully performing his responsibilities to the Company in good faith, or
which discredit the Company, its management, products or services, such as (i) a
felony criminal conviction; (ii) any other criminal conviction involving
Executive's lack of honesty or Executive's moral turpitude; (iii) drug or
alcohol abuse; or (iv) acts of dishonesty, gross carelessness or gross
misconduct.
6.2 Payment Upon Termination.
------------------------
5
<PAGE>
(a) Upon termination under paragraph 6.1, the Company shall pay
to Executive within 30 days after termination an amount equal to the sum of (1)
Executive's Base Salary accrued to the date of termination; and (2) unreimbursed
expenses accrued to the date of termination. After any such termination, the
Company shall not be obligated to compensate Executive, his estate or
representatives except for the foregoing compensation then due and owing, nor
provide the benefits to Executive described in Section 3 (except as provided by
law).
(b) In the event of termination by the Company of Executive
during the term hereof for any reason or reasons other than those set forth
under paragraph 6.1 above, Executive (i) shall be entitled to continue to
receive from the Company, for a one-year period commencing on the date of such
termination (and regardless of whether the term hereof expires prior to the end
of such one-year period), Executive's Base Salary as set forth in paragraph 3.1
above payable at the times and in the manner specified in paragraph 3.1, and
(ii) shall be paid within 10 days after termination an amount equal to the sum
of unreimbursed expenses accrued to the date of termination. After any such
termination, the Company shall not be obligated to compensate Executive, his
estate or representative except for the foregoing compensation, nor provide the
benefits to Executive described in Paragraph 3 (except as provided by law).
7. Disclosure. The parties each acknowledge that this Employment
----------
Agreement is being entered into in connection with the acquisition of the
Company by GDC Group, Inc. ("GDC") under the Limited Liability Company
Acquisition Agreement (the "Acquisition Agreement") between GDC, James P. Walsh
& Associates, Inc. and Executive dated December 13, 1996. Executive hereby
represents and warrants to the Company that the disclosure material provided to
GDC by the Company in connection with the Acquisition Agreement does not contain
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements contained therein not misleading. Executive
agrees to indemnify the Company for any cost, damage or liability arising from a
breach of the foregoing representation and warranty.
8. Injunctive Relief. The Company and Executive hereby acknowledge and
-----------------
agree that any default under Section 5 above will cause damage to the Company in
an amount difficult to ascertain. Accordingly, in addition to any other relief
to which the Company may be entitled, the Company shall be entitled to such
injunctive relief as may be ordered by any court of competent jurisdiction
including, but not limited to, an injunction restraining any violation of
Section 5 above and without the proof of actual damages.
9. Miscellaneous.
-------------
9.1 Transfer and Assignment. This Agreement is personal as to
-----------------------
Executive and shall not be assigned or transferred by Executive without the
prior written consent of the Company.
6
<PAGE>
This Agreement shall be binding upon and inure to the benefit of all of the
parties hereto and their respective permitted heirs, personal representatives,
successors and assigns.
9.2 Severability. Nothing contained herein shall be construed to
------------
require the commission of any act contrary to law. Should there be any conflict
between any provisions hereof and any present or future statute, law, ordinance,
regulation, or other pronouncement having the force of law, the latter shall
prevail, but the provision of this Agreement affected thereby shall be curtailed
and limited only to the extent necessary to bring it within the requirements of
the law, and the remaining provisions of this Agreement shall remain in full
force and effect.
9.3 Governing Law. This Agreement is made under and shall be
-------------
construed pursuant to the laws of the State of Colorado.
9.4 Counterparts. This Agreement may be executed in several
------------
counterparts and all documents so executed shall constitute one agreement,
binding on all of the parties hereto, notwithstanding that all of the parties
did not sign the original or the same counterparts.
9.5 Entire Agreement. This Agreement constitutes the entire
----------------
agreement and understanding of the parties with respect to the subject matter
hereof and supersedes all prior oral or written agreements, arrangements, and
understandings with respect thereto. No representation, promise, inducement,
statement or intention has been made by any party hereto that is not embodied
herein, and no party shall be bound by or liable for any alleged representation,
promise, inducement, or statement not so set forth herein.
9.6 Modification. This Agreement may be modified, amended,
------------
superseded, or canceled, and any of the terms, covenants, representations,
warranties or conditions hereof may be waived, only by a written instrument
executed by the party or parties to be bound by any such modification,
amendment, supersession, cancellation, or waiver.
9.7 Attorneys' Fees and Costs. In the event of any dispute arising
-------------------------
out of the subject matter of this Agreement, the prevailing party shall recover,
in addition to any other damages assessed, its attorneys' fees and court costs
incurred in litigating or otherwise settling or resolving such dispute whether
or not an action is brought or prosecuted to judgment. In construing this
Agreement, none of the parties hereto shall have any term or provision construed
against such party solely by reason of such party having drafted the same.
9.8 Waiver. The waiver by either of the parties, express or implied,
------
of any right under this Agreement or any failure to perform under this Agreement
by the other party, shall not constitute or be deemed as a waiver of any other
right under this Agreement or of any other failure to perform under this
Agreement by the other party, whether of a similar or dissimilar nature.
7
<PAGE>
9.9 Cumulative Remedies. Each and all of the several rights and
-------------------
remedies provided in this Agreement, or by law or in equity, shall be
cumulative, and no one of them shall be exclusive of any other right or remedy,
and the exercise of any one of such rights or remedies shall not be deemed a
waiver of, or an election to exercise, any other such right or remedy.
9.10 Headings. The section and other headings contained in this
--------
Agreement are for reference purposes only and shall not in any way affect the
meaning and interpretation of this Agreement.
9.11 Notices. Any notice under this Agreement must be in writing, may
-------
be telecopied, sent by express 24-hour guaranteed courier, or hand-delivered, or
may be served by depositing the same in the United States mail, addressed to the
party to be notified, postage-prepaid and registered or certified with a return
receipt requested. The addresses of the parties for the receipt of notice shall
be as follows:
If to the Company:
Walsh Remedial Construction Services, LLC
6550 Gunpark Drive, Suite 200
Boulder, Colorado 80301
If to the Executive:
William T. Spear
2412 Iris Avenue
Boulder, Colorado 80304
Each notice given by registered or certified mail shall be deemed delivered and
effective on the date of delivery as shown on the return receipt, and each
notice delivered in any other manner shall be deemed to be effective as of the
time of actual delivery thereof. Each party may change its address for notice
by giving notice thereof in the manner provided above.
9.12 Survival. Any provision of this Agreement which imposes an
--------
obligation after termination or expiration of this Agreement shall survive the
termination or expiration of this Agreement and be binding on Executive and the
Company.
9.13 Right of Set-Off. Upon termination or expiration of this
----------------
Agreement, the Company shall have the right to set-off against the amounts due
Executive hereunder the amount of any outstanding loan or advance from the
Company to Executive.
9.14 Effective Date. This Agreement shall become effective as of the
--------------
date set forth on page 1 when signed by Executive and the Company.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Employment
Agreement to be executed as of the date first set forth above.
EXECUTIVE:
By: /s/ William T. Spear
----------------------------------------------
Name: William T. Spear
COMPANY:
WALSH REMEDIAL
CONSTRUCTION SERVICES, LLC
By:
-----------------------------------------------
Name:
------------------------------------------
Title:
----------------------------------------
9
<PAGE>
Exhibit 10(i)
GDC ENVIRO-SOLUTIONS, INC.
EMPLOYMENT AGREEMENT
KATHLEEN J. ELNAGGAR
THIS AGREEMENT is made as of 1 September 1995 by and between GDC ENVIRO-
SOLUTIONS, INC., a Louisiana corporation, hereinafter called "Company," and
KATHLEEN J. ELNAGGAR hereinafter called "Employee." GDC HOLDINGS, INC., upon
formation, will guarantee the obligations of Company.
1. NATURE AND PURPOSE OF AGREEMENT. Employee desires to perform
executive and managerial services as an employee of the Company. The board of
directors of the Company (Board) has determined what reasonable compensation
will be paid to Employee and has offered employment for such compensation and
any of the other benefits discussed below. Employee is willing to accept
employment with Company on such terms. This Agreement is a personal services
agreement and cannot be assigned other than as provided in section 15, nor can
any of Employee's duties be subcontracted to others.
2. EMPLOYMENT. Company hereby employs Employee. Employee hereby accepts
employment from Company upon the terms and conditions set forth in this
Agreement.
3. TERM. The term of employment under this Agreement is for a period of
three (3) years, commencing on the date above first written and terminating on
the last day of the 31 August 1998, unless otherwise terminated as provided in
this Agreement.
4. COMPENSATION. For all services rendered by this Agreement, Company
will pay Employee an annual salary of One Hundred Fifty Thousand Dollars
($150,000), such salary to be paid in equal amounts on or before the fifteenth
(15th) and last day of each month.
5. INSURANCE. The current life, disability, and health insurance
provided by the Company for the Employee will be continued during the term of
this Agreement at the Company's expense.
6. EXECUTORY RIGHTS UNDER CERTAIN PLAN OR PLANS. Company agrees that
nothing contained herein is intended, or will be deemed to be granted to
Employee in lieu of any rights or privileges to which Employee may be entitled
as an Employee of Company under any retirement, pension, profit sharing,
insurance, hospitalization, health, or other plan or plans which may now be in
effect or which may be adopted hereafter.
7. TERMINATION BY DEATH. In the event of Employee's death during the term
of employment under this Agreement, Employee's legal representative will be
entitled to receive the compensation due Employee through the last day of the
calendar month in which Employee's death shall have occurred. Within sixty (60)
days after the date of Employee's death, Company will pay to Employee's estate a
death benefit of Five Thousand Dollars ($5,000.00).
Page 1 of 5 pages
<PAGE>
8. TERMINATION OTHER THAN BY DEATH. Employee may terminate employment
under this Agreement upon not less than fifteen (15) days' written notice by
Employee to the Company. The Company has no right to terminate employment under
this agreement. Should the Company, its successors, affiliates, or assigns no
longer require the personal services of Employee, the Company will nonetheless
be obligated to pay the compensation set forth in Paragraph 4 for the remainder
of the term.
9. RIGHTS UPON TERMINATION. In the event employment under this Agreement
is terminated by Employee pursuant to the terms of clause 8, above the Company
will pay Employee that pro rata portion of Employee's annual salary up to and
--------
including the date of termination of employment. For all purposes of this
section 9, the term "salary" will include accrued and un-forfeited but unpaid
vacation, but exclude unused sick leave.
10. EMPLOYEE'S DUTIES. Employee must devote all of his/her time and
effort to the performance of her/his duties as an executive of Company and to
perform such other lawful duties as are assigned from time to time by the Board.
The job responsibilities are expected to focus on, but not be limited to, public
and customer relations.
11. OWNERSHIP OF DISCOVERIES. All inventions, discoveries, or
improvements which are directly related to the Company's principal trade or
business (e.g., environmental engineering) conceived or first reduced to
practice (Discoveries), either alone or jointly with others, from the date of
employment with Company and for a period of one year after termination of
employment will belong to Company. The Company's ownership is to be absolute no
matter where the Discovery is made, whether or not the Discovery is patentable
or protectable as a trade secrets, or whether or not it is related in any way to
any product, process, or other Discovery owned by the Company. Employee must
sign any and all documents reasonably necessary to effectuate the complete
ownership in all jurisdictions of the Discovery by Company. Employee must
promptly disclose to Company any Discovery. All expenses of filing or
prosecuting any claims are to be the sole responsibility of Company. Company may
only abandon its right to Employee by a written assignment.
12. DUTY OF LOYALTY.
a. During employment, Employee will have access to trade secrets and
other confidential or proprietary information, some of which may be produced by
Employee (collectively, Confidential Information). Any information produced by
Employee during employment will belong to Company.
b. During the term of employment under this Agreement and
thereafter,Employee will neither disclose any Confidential Information nor at
any time remove or retain without Company's express consent any figures,
calculations, letters, papers, or other Confidential Information of any type or
description.
c. Employee also warrants and covenants that, without the prior
----
written permission of Company, (s)he will not disclose, reveal, divulge, or make
known to any person (outside the Company), firm, corporation, or entity, nor
will (s)he use for any purpose outside Company's business: (i) the Company's
clientele lists, (ii) the contents of any process, (iii) any data, (iv) any
samples or materials, (v) any consulting information, (vi) any methods or office
procedures, (vii) any filing systems, (viii) any computer software systems,
subsystems, routines,
<PAGE>
and subroutines, (ix) any proprietary rights or work product developed for or on
behalf of Company (except information within the public domain), (x) any
information regarding any trade secrets or confidential information reposed in
him by Company, or (xi) any information regarding the transactions of Company
with its clients or the state of the accounts of the individuals, firms,
corporation, or others with whom Company does business.
d. No obligation of confidentiality will exist as to information and
material that:
(i) at the time of disclosure is public knowledge or, after
disclosure become public knowledge in a manner unrelated to the
disclosure and through no act or omission of Employee or
(ii) was known to Employee as evidenced by written records prior
to his initial affiliation with the Company or
(iii) is received from a third party who did not, directly or
indirectly, obtain the information or material from the Company or
(iv) is required to be disclosed by a Court (including an
established form of alternative dispute resolution) or government
agency, provided that Company is given reasonable notice and
opportunity to contest the required disclosure.
e. Further, Employee during the term of employment under this
Agreement and for a period of two (2) years after termination of employment
(whether such termination occurs during or after the term of employment under
this Agreement), warrants and covenants not to compete with the Company, whether
as an owner or employee, directly or indirectly, within the boundaries of the
following parishes in the State of Louisiana: Ascension, East Baton Rouge, West
Baton Rouge, Iberville, Rapides, St. Bernard, St. James, and St. John the
Baptist and within the boundaries of the municipalities of (and counties
encompassing) Freeport, Texas, Paterson, New Jersey, and Niagara Falls, New
York. For the purposes hereof, cooperation with any person in a legal proceeding
against the Company or against a client of the Company will be deemed a
violation of this covenant not to compete. Furthermore, soliciting the
employment of any employee of Company will be deemed a violation of this
covenant not to compete. Should any Court or other legal authority determine
that the non-competition area set out is too large to be enforceable, then such
authority is to redefine the area to the maximum that can be enforced, and the
non-competition clause, as so amended is to be fully enforced.
f. Upon proper proof, Company will be entitled to obtain an
injunction requiring compliance with the terms of this Section 12
notwithstanding any provision herein for the payment of liquidated damages.
Furthermore, Employee acknowledges that it is not possible to measure adequately
the cost to the Company for any breach of this Section 12; accordingly, Employee
agrees to pay as liquidated damages: () the amount of Five Thousand Dollars
($5,000) for each and every breach of the confidentiality provisions of
paragraphs 12.a or 12.b, and () the amount of Five Thousand Dollars ($5,000) for
each week or part of a week that Employee breaches the non-competition agreement
provision of paragraph 12.c.
13. NOTICES. Any notices required or permitted to be given under this
Agreement will be sufficient if in writing and if sent by registered mail to the
last known residence of Employee or to the principal office of the Company, as
the case may be. Other means that provide for actual delivery of a written
notice are also effective.
<PAGE>
14. WAIVER OF BREACH. Waiver by either party of a breach of any provision
of this Agreement by the other will not operate, or be construed, as a waiver of
any subsequent breach.
15. ASSIGNMENT. In the event of sale, assignment, or other transfer of
the Company's business or a substantial part of its assets or of the Company's
merger into or consolidation with another corporation, the rights and benefits
of the Company under this Agreement will be transferable; however, the Company's
obligations and liabilities will continue in force unless and until the
transferee, in writing, assumes the full performance on the Company's behalf of
all the terms and provisions hereof to be performed following the date of such
assignment, with the same force and effect as if such transferee originally had
been a party to this Agreement.
16. INTEGRATION. This agreement constitutes the final expression by the
parties of their agreement with respect to the subject matter hereof. This
replaces all prior discussions, writings, and other communications.
17. AMENDMENT. This agreement is not to be amended except in writing
signed by the party against whom enforcement of any waiver, change,
modification, extension, or discharge is addressed.
18. GENDER AND PLURALITY. Wherever applicable, the pronouns designating
the masculine or neuter will equally apply to the feminine, neuter, or masculine
genders. Furthermore, wherever applicable within this contract, the singular
will include the plural and vice versa.
19. CAPTIONS. Article, section, and paragraph captions and headnotes are
for reference purposes only and will not be considered to affect context.
20. SEVERABILITY. Should any part of this agreement be found by a Court
of competent jurisdiction to be void or against public policy, such part is to
be deleted; but the contract, as so amended, is to remain in full force and
effect.
21. LIABILITY AND LIMITATIONS THEREOF.
a. Any party is entitled to a decree of specific performance of the
terms hereof or an injunction restraining violation of this contract, said right
to be in addition to any of the remedies otherwise available.
b. Neither party is to be liable for any delay due to causes beyond
the reasonable control of such party. In the event of such cause, the party
delayed is to notify the other promptly of the cause of the delay and of the
expected length of the delay.
c. Neither party will be liable to the other under or related to
this contract for any special, indirect, or consequential damages, including,
but not limited to lost profits, even if the parties or any of them have
knowledge of the possibility of such damages.
22. CHOICE OF LAW. This Agreement is to be governed by the laws of the
State of Louisiana.
23. LEGAL PROCEEDINGS AND VENUE. Should there be any legal proceedings,
all parties consent to jurisdiction and venue for legal proceedings with respect
to any claim or dispute
<PAGE>
hereunder or in any way related to the employment in the Nineteenth Judicial
District Court in and for the Parish of East Baton Rouge, Louisiana.
24. GUARANTOR. GDC HOLDINGS, INC. (HOLDINGS) intervenes herein to affirm
and to consent to the mutual covenants and conditions set forth in this
Agreement. HOLDINGS guarantees the obligations of the Company. HOLDINGS will
perform Company's obligations, including but not limited to, the obligation to
continue Employee's compensation as set forth in paragraph 4 during the entire
term of this Agreement, in the event that Company should fail to perform.
HOLDINGS guarantee will continue in full force and effect notwithstanding the
valid transfer of any rights pursuant to paragraph 15.
SIGNED by the parties hereto on the day and year first above written as the
free act and deed of the signatory.
COMPANY:
GDC Enviro-Solutions, Inc.
(SEAL)
/s/ Donald L. Murphy By: /s/ Harry C. Conger
- ---------------------------- -------------------------
Secretary Chief Executive Officer
EMPLOYEE:
/s/ Kathleen J. Elnaggar
-------------------------
KATHLEEN J. ELNAGGAR
GUARANTOR:
GDC Holdings, Inc.
(SEAL)
/s/ James W. Muzzy By: /s/ Harry C. Conger
- ---------------------------- -------------------------
Secretary Chief Executive Officer
<PAGE>
Exhibit 10(J)
GDC ENVIRO-SOLUTIONS, INC.
EMPLOYMENT AGREEMENT
TAREK ELNAGGAR
THIS AGREEMENT made this ___ day,1997 September, 1995, by and between
GDC ENVIRO-SOLUTIONS, INC., a Louisiana corporation, hereinafter called
"Company," and TAREK ELNAGGAR hereinafter called "Employee,"
WITNESSETH:
1. NATURE AND PURPOSE OF AGREEMENT. Employee desires to perform
executive and managerial services as an employee of the Company in the capacity
of its President . The board of directors of the Company (Board) has determined
what reasonable compensation will be paid to Employee and has offered employment
for such compensation and any of the other benefits discussed below. Employee is
willing to accept employment with Company on such terms. This Agreement is a
personal services agreement and cannot be assigned other than as provided in
section 20, nor can any of Employee's duties be subcontracted to others.
2. EMPLOYMENT. Company hereby employs Employee as President of Company.
Employee hereby accepts employment from Company upon the terms and conditions
set forth in this Agreement. Although Company may not and does not legally bind
itself that Employee shall have the title of President, the Board which has
authorized this Agreement has elected him to that office to serve in accordance
with the Company's Bylaws, and it is the present intention of the Board to
retain and continue him in that position.
3. TERM.
a. The original term of employment under this Agreement is for a
period of approximately two (2) years, commencing on the date above first
written and terminating on the last day of the twenty-fourth (24th) calendar
month following commencement, unless otherwise terminated as provided in this
Agreement.
b. Company shall have the option to extend the term for an
additional two years on the same terms and conditions, including salary. Such
extended term will commence on the first day of the twenty-fifth (25th) calendar
month following commencement. The option will be exercised by Company giving
written notice to Employee on or before the last day of the twenty-first (21st)
calendar month following commencement. Employee must accept the offer in writing
by the end of the twenty-second (22nd) calendar month following commencement.
4. COMPENSATION. For all services rendered by this Agreement, Company
will pay Employee an annual salary of One Hundred Thousand Five Hundred Eighty
Dollars ($100,580), such salary to be paid in equal amounts on or before the
fifteenth (15th) and last day of each month. This salary may be adjusted from
time to time by mutual agreement on the basis of the value of Employee's
services to Company and for unusual absences from duty because of illness,
<PAGE>
accident, or time spent in other activities on leaves of absence; and any such
adjustments may increase or decrease said annual salary.
5. BONUSES. In addition to the basic compensation described in
paragraph 4, above, Company, in the sole judgment and discretion of the Board,
may pay to Employee an additional sum during each year of employment as a bonus
based on the net profits of the Company. It is understood and agreed that such a
bonus is not a part of the consideration of this Agreement and need not be paid
at all to Employee.
6. INSURANCE. The Company, in its discretion, may apply for and procure
in its own name and for its own benefit insurance of any kind and in any amount
or amounts considered advisable; and Employee may have no right, title, or
interest therein. Employee must submit to any medical or other examination and
to execute and deliver any application or other instrument in writing as may be
reasonably necessary to effectuate such insurance.
7. EXPENSES. During the term of this Employment Agreement the Company
will pay, within the budget established by the Board, all reasonable and
necessary expenses incurred by Employee in furtherance of, or in connection
with, the promotion of the business of Company, including expenses for
entertainment, travel, and contributions; any such expenses which are paid in
the first instance by Employee will be reimbursed to Employee by Company during
the month following the month in which said expenses are incurred, provided that
Employee promptly submits vouchers for such expenses. Failure to submit the
vouchers within one month of the expense being incurred may result in the
forfeiture of the right of reimbursement.
8. DUES AND FEES. Company will pay, within the budget established by
the Board, all dues and fees of business, civic, social, and professional
societies and organizations, the expenses of attending business and professional
meetings, conventions, and institutes, all premiums on life insurance owned by
Company, if any, all premiums on other policies of insurance provided for herein
or in any corporate plan of insurance, and the cost of all business and
professional books and periodicals.
9. EXECUTORY RIGHTS UNDER CERTAIN PLAN OR PLANS. Company agrees that
nothing contained herein is intended, or will be deemed to be granted to
Employee in lieu of any rights or privileges to which Employee may be entitled
as an Employee of Company under any retirement, pension, profit sharing,
insurance, hospitalization, health, or other plan or plans which may now be in
effect or which may be adopted hereafter.
10. OTHER BENEFITS. To the extent not provided for specifically
elsewhere herein, insurance (medical, dental, accident, and life), leave
(maternity, sick, and vacation), participation in ERISA employee benefit plans,
and company automobile, cellular telephone, and credit card will be provided in
accordance with and pursuant to Company policy, as it may be amended from time
to time.
<PAGE>
11. REIMBURSEMENT OF DISALLOWED COMPENSATION AND EXPENSES. In the event
any compensation, expenses, or any reimbursement of expenses paid to Employee
shall, upon audit or other examination of the income tax returns of Company, be
determined not to be an allowable deduction from the gross income of Company and
such determination be acceded to by Company, or such determination be made final
by the appropriate state or federal taxing authority or a final judgment of a
court of competent jurisdiction, then Employee will repay to Company the amount
of such disallowed compensation or expenses or both. Such repayment may not be
waived by Company.
12. TERMINATION BY DEATH. In the event of Employee's death during the
term of employment under this Agreement, Employee's legal representative will be
entitled to receive the compensation due Employee through the last day of the
calendar month in which Employee's death shall have occurred. Within sixty (60)
days after the date of Employee's death, Company will pay to Employee's spouse a
death benefit of Five Thousand Dollars ($5,000.00) if such spouse is living at
the time of Employee's death. If Employee's spouse is not living at the time of
Employee's death, said death benefit will be paid to Employee's estate.
13. TERMINATION OTHER THAN BY DEATH.
a. Employment under this Agreement will terminate for reasons other
than death of Employee upon the first of the following events to occur:
(i) upon not less than sixty (60) days' written notice by
either party to the other party or
(ii) upon not less than five (5) days' written notice by
Company to Employee upon Employee's being out on sick leave (whether
paid or unpaid) for a total of thirty (30) work days within any
twenty-four (24) month period or
(iii) upon not less than three (3) days' written notice by the
non-breaching party to the other party upon any breach of any of the
obligations provided herein or
(iv) upon not less than three (3) days' written notice by
Employee pursuant to paragraph 20.b.
b. For purposes of clause 13.a.(iii),
(i) breach by Employee will include, but not be limited to:
failure to perform duties or refusal to obey legal direction or
instruction of the Board, substance abuse (including any use of an
illegal substance), dishonesty, acts of moral turpitude, fraud,
defalcation, illegal acts, and gross negligence causing damage to
Company and
(ii) breach by Company will include, but not be limited to:
failure to elect Employee to the office named, failure to pay Employee
as agreed, and knowingly issuing illegal instructions or directions to
Employee.
14. RIGHTS UPON TERMINATION.
a. In the event employment under this Agreement is terminated:
<PAGE>
(i) by the Company pursuant to the terms of clause 13.a.(i) or
by Employee pursuant to clause 13.a.(iii), the Company will pay
Employee as liquidated damages that pro rata portion remaining under
--- ----
this Agreement based on Employee's annual salary as set out herein or
(ii) by Employee pursuant to the terms of clause 13.a.(i) or by
the Company pursuant to clause 13.a.(ii) or 13.a.(iii), above, the
Company will pay Employee that pro rata portion of Employee's annual
--- ----
salary up to and including the date of termination of employment or
(iii) by Employee pursuant to clause 13.a.(iv) the Company will
pay Employee as liquidated damages a sum equal to two (2) years annual
salary as set out herein.
b. For all purposes of this section 14, the term "salary" will
include accrued and un-forfeited but unpaid vacation, but exclude unused sick
leave. In any event, reimbursable expenses will be paid up through the date of
termination in accordance with the provisions of paragraph 7, above.
c. In the circumstances of clause 14.a.(i), all incentive
compensation and bonus compensation established by a written plan is to continue
through the full term of employment under this Agreement. In the circumstances
of clause 14.a.(ii), all incentive and bonus compensation is to terminate as of
the first day of the month following the date of termination.
d. In the circumstances of clause 14.a.(i) within the original term
of employment under this Agreement, the non-competition provisions of paragraph
17.e are to be void and of no effect. After the original term of employment
under this Agreement, the provisions of paragraph 17.e are to be effective
regardless of the means of termination of employment.
15. EMPLOYEE'S DUTIES. Employee must devote all of his/her time and
effort to the performance of her/his duties as an executive of Company and to
perform such other lawful duties as are assigned from time to time by the Board.
16. OWNERSHIP OF DISCOVERIES. All inventions, discoveries, or
improvements conceived or first reduced to practice (Discoveries), either alone
or jointly with others, from the date of employment with Company and for a
period of one year after termination of employment will belong to Company. The
Company's ownership is to be absolute no matter where the Discovery is made,
whether or not the Discovery is patentable or protectable as a trade secrets, or
whether or not it is related in any way to any product, process, or other
Discovery owned by the Company. Employee must sign any and all documents
reasonably necessary to effectuate the complete ownership in all jurisdictions
of the Discovery by Company. Employee must promptly disclose to Company any
Discovery. All expenses of filing or prosecuting any claims are to be the sole
responsibility of Company. Company may only abandon its right to Employee by a
written assignment.
<PAGE>
17. DUTY OF LOYALTY.
a. During employment, Employee will have access to trade secrets and
other confidential or proprietary information, some of which may be produced by
Employee (collectively, Confidential Information). Any information produced by
Employee during employment will belong to Company.
b. During the term of employment under this Agreement and
thereafter, Employee will neither disclose any Confidential Information nor at
any time remove or retain without Company's express consent any figures,
calculations, letters, papers, or other Confidential Information of any type or
description.
c. Employee also warrants and covenants that, without the prior
----
written permission of Company, (s)he will not disclose, reveal, divulge, or make
known to any person (outside the Company), firm, corporation, or entity, nor
will (s)he use for any purpose outside Company's business: (i) the Company's
clientele lists, (ii) the contents of any process, (iii) any data, (iv) any
samples or materials, (v) any consulting information, (vi) any methods or office
procedures, (vii) any filing systems, (viii) any computer software systems,
subsystems, routines, and subroutines, (ix) any proprietary rights or work
product developed for or on behalf of Company (except information within the
public domain), (x) any information regarding any trade secrets or confidential
information reposed in him by Company, or (xi) any information regarding the
transactions of Company with its clients or the state of the accounts of the
individuals, firms, corporation, or others with whom Company does business.
d. No obligation of confidentiality will exist as to information and
material that:
(i) at the time of disclosure is public knowledge or, after
disclosure become public knowledge in a manner unrelated to the
disclosure and through no act or omission of Employee or
(ii) was known to Employee as evidenced by written records
prior to his initial affiliation with the Company or
(iii) is received from a third party who did not, directly or
indirectly, obtain the information or material from the Company or
(iv) is required to be disclosed by a Court (including an
established form of alternative dispute resolution) or government
agency, provided that Company is given reasonable notice and
opportunity to contest the required disclosure.
e. Further, Employee during the term of employment under this
Agreement and for a period of two (2) years after termination of employment
(whether such termination occurs during or after the term of employment under
this Agreement), warrants and covenants not to compete with the Company, whether
as an owner or employee, directly or indirectly, within the boundaries of the
following parishes in the
<PAGE>
State of Louisiana: Ascension, East Baton Rouge, West Baton Rouge, Iberville,
Rapides, St. Bernard, St. James, and St. John the Baptist and within the
boundaries of the municipalities of (and counties encompassing) Freeport, Texas,
Paterson, Jew Jersey, and Niagara Falls, New York. For the purposes hereof,
cooperation with any person in a legal proceeding against the Company or against
a client of the Company will be deemed a violation of this covenant not to
compete. Furthermore, soliciting the employment of any employee of Company will
be deemed a violation of this covenant not to compete. Should any Court or other
legal authority determine that the non-competition area set out is too large to
be enforceable, then such authority is to redefine the area to the maximum that
can be enforced, and the non-competition clause, as amended is to be fully
enforced.
f. Company will be entitled to obtain an injunction requiring
compliance with the terms of this Section 17 notwithstanding any provision
herein for the payment of liquidated damages. Furthermore, Employee acknowledges
that it is not possible to measure adequately the cost to the Company for any
breach of this Section 17; accordingly, Employee agrees to pay as liquidated
damages: (i) the amount of Five Thousand Dollars ($5,000) for each and every
breach of the confidentiality provisions of paragraphs 17.a or 17.b, and (ii)
the amount of Five Thousand Dollars ($5,000) for each week or part of a week
that Employee breaches the non-competition agreement provision of paragraph
17.c.
18. NOTICES. Any notices required or permitted to be given under this
Agreement will be sufficient if in writing and if sent by registered mail to the
last known residence of Employee or to the principal office of the Company, as
the case may be. Other means that provide for actual delivery of a written
notice are also effective.
19. WAIVER OF BREACH. Waiver by either party of a breach of any
provision of this Agreement by the other will not operate, or be construed, as a
waiver of any subsequent breach.
20. ASSIGNMENT.
a. In the event of sale, assignment, or other transfer of the
Company's business or a substantial part of its assets or of the Company's
merger into or consolidation with another corporation, the rights and benefits
of the Company under this Agreement will be transferable and all obligation and
liability of the Company will thereafter cease and terminate; provided that the
transferee, in writing, assumes the full performance on the Company's behalf of
all the terms and provisions hereof to be performed following the date of such
assignment, with the same force and effect as if such transferee originally had
been a party to this Agreement.
b. Provided, however, that, should any transfer effected after 30
September 1996 result in a change in control, Employee will have three (3)
months within which to determine, in his/her sole discretion, if the change in
control will materially adversely affect Employee's ability to work with the new
control group. A change in
<PAGE>
control means circumstances where those shareholders currently controlling
Company are no longer in effective control of the election of directors;
provided that one or more sales in the open market of shares by a controlling
shareholder cannot result in a change in control for these purposes, even if
such sale(s) result in loss of effective control. Should Employee determine, in
her/his sole discretion that there is a material adverse effect on his/her
ability to work with the new control group, then Employee can terminate this
agreement as provided in clause 13.a.(iv). The notice must be in writing,
delivered within the three (3) months of the change in control.
21. INTEGRATION. This agreement constitutes the final expression by the
parties of their agreement with respect to the subject matter hereof. This
replaces all prior discussions, writings, and other communications. This
agreement is not to be amended except in writing signed by the party against
whom enforcement of any waiver, change, modification, extension, or discharge is
addressed.
22. AMENDMENT. This agreement may not be modified or amended except in a
writing executed by all parties.
23. GENDER AND PLURALITY. Wherever applicable, the pronouns designating
the masculine or neuter will equally apply to the feminine, neuter, or masculine
genders. Furthermore, wherever applicable within this contract, the singular
will include the plural and vice versa.
24. CAPTIONS. Article, section, and paragraph captions and headnotes are
for reference purposes only and will not be considered to affect context.
25. SEVERABILITY. Should any part of this agreement be found by a Court
of competent jurisdiction to be void or against public policy, such part is to
be deleted; but the contract, as so amended, is to remain in full force and
effect.
26. LIABILITY AND LIMITATIONS THEREOF.
a. Any party is entitled to a decree of specific performance of the
terms hereof or an injunction restraining violation of this contract, said right
to be in addition to any of the remedies otherwise available.
b. Neither party is to be liable for any delay due to causes beyond
the reasonable control of such party. In the event of such cause, the party
delayed is to notify the other promptly of the cause of the delay and of the
expected length of the delay.
c. Neither party will be liable to the other under or related to
this contract for any special, indirect, or consequential damages, including,
but not limited to lost profits, even if the parties or any of them have
knowledge of the possibility of such damages.
<PAGE>
27. CHOICE OF LAW. This Agreement is to be governed by the laws of the
State of Louisiana.
28. ARBITRATION. If any controversy or claim arising out of this
contract cannot be settled by the parties, the controversy or claim must be
submitted to mediation under the Mediation Rules of the American Arbitration
Association (AAA). Should the mediation not be successful in resolving the
issue, the matter will be submitted to arbitration in accordance with the rules
of the AAA then in effect (as modified herein). The discovery rules, including
sanctions, of the Federal Rules of Civil Procedure are to be applied in any such
arbitration, modified as may be necessary in the opinion of the arbitrator(s) to
give effect to the AAA rules governing timeliness.
29. LEGAL PROCEEDINGS AND VENUE. Should there be any legal proceedings
in spite of the foregoing arbitration clause, all parties waive the right to a
jury trial and consent to jurisdiction and venue for legal proceedings with
respect to any claim or dispute hereunder or in any way related to the
employment in the Nineteenth Judicial District Court in and for the Parish of
East Baton Rouge, Louisiana.
SIGNED by the parties hereto on the day and year first above written as the
free act and deed of the signatory.
COMPANY:
GDC Enviro-Solutions, Inc.
(SEAL)
/s/ Donald L. Murphy, Jr. By:/s/ Harry C. Conger
- ------------------------- ------------------------------
Secretary President
EMPLOYEE:
/s/ Tarek Elnaggar
---------------------------------
TAREK ELNAGGAR
<PAGE>
EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE DATA
Net Income (Loss) Per Common Share - Primary and fully diluted net income
(loss) per common share is based on the weighted average number of shares
outstanding after consideration of the dilutive effect of stock warrants
(after giving effect for the reorganization). The weighted average number
of common shares used in the calculation was 1,743,612, 1,165,329 and
1,140,000 for 1996, 1995 and 1994, respectively. Primary and fully diluted
net income (loss) per common share did not include the effect of the
restricted stock awards until the condition for their issuance was met,
and the shares were released. Stock options are not included in 1996 or
1994 as their effect is anti-dilutive.
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF REGISTRANT
Company Type of Organization
------- --------------------
GDC Holdings Corporation Louisiana Corporation
GDC Enviro-Solutions, Inc. Louisiana Corporation
Walsh Remedial Construction Services, Inc. Delaware Corporation
Enviro-Dredge, Inc. Delaware Corporation
TVIES, Inc. Texas Corporation
EnviroScope, Inc. Colorado Corporation
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE YEAR ENDED SEPTEMBER 30, 1996,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> SEP-30-1996 SEP-30-1995
<PERIOD-START> OCT-01-1995 OCT-01-1994
<PERIOD-END> SEP-30-1996 SEP-30-1995
<CASH> 1,298,361 115,919
<SECURITIES> 0 0
<RECEIVABLES> 741,416 2,457,193
<ALLOWANCES> 0 0
<INVENTORY> 177,234 125,883
<CURRENT-ASSETS> 2,417,508 2,989,313
<PP&E> 14,567,559 13,136,324
<DEPRECIATION> (6,911,668) (6,214,521)
<TOTAL-ASSETS> 11,157,575 10,310,870
<CURRENT-LIABILITIES> 8,252,263 2,714,963
<BONDS> 0 0
0 0
0 0
<COMMON> 3,701,086 187,664
<OTHER-SE> (973,471) 2,682,432
<TOTAL-LIABILITY-AND-EQUITY> 11,157,575 10,310,870
<SALES> 6,583,508 8,628,165
<TOTAL-REVENUES> 6,583,508 8,628,165
<CGS> 6,337,411 5,544,236
<TOTAL-COSTS> 6,377,411 5,544,236
<OTHER-EXPENSES> 3,717,598 2,470,322
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 934,041 563,188
<INCOME-PRETAX> (4,445,542) 50,419
<INCOME-TAX> (631,975) 20,362
<INCOME-CONTINUING> (3,813,567) 30,057
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 298,672
<NET-INCOME> (3,813,567) 328,729
<EPS-PRIMARY> (2.19) 0.29
<EPS-DILUTED> (2.19) 0.29
</TABLE>
