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UNITED STATES BANKRUPTCY COURT
DISTRICT OF CONNECTICUT
BRIDGEPORT DIVISION
IN RE:
CHAPTER 11
)
POWER DESIGNS, INC. AND ) CASE NOS. 98-50117
PDIXF ACQUISITION CORPORATION ) 98-50118
) JOINTLY ADMINISTERED
)
DEBTORS-IN-POSSESSION ) AUGUST 21, 2000
SECOND AMENDED PLAN OF REORGANIZATION FOR
POWER DESIGNS, INC. AND PDIXF ACQUISITION CORPORATION
1. INTRODUCTION
This Plan is the proposal of PDI and PDIXF to their Creditors and the
holders of Equity Interests. The Plan is the product of discussions with the
Debtors' senior secured creditor, Inverness, and with the PDI and PDIXF
creditor's committees, all of which have agreed to support the Plan. The Plan
undertakes to resolve all secured claims, administrative claims, priority
claims, unsecured claims and equity interests. The Debtors believe that the
distributions to be made, pursuant to the terms of this Plan, will produce for
Creditors not less than they would receive if the Debtors' cases were converted
to cases under Chapter 7 of the Code, the Debtors' assets liquidated and
appropriate distributions therein were made as required by the Code.
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2. DEFINITIONS
The following terms, when used in this Plan shall, unless the context
otherwise requires, have the following meanings:
2.1 ADMINISTRATIVE CLAIM. Means a claim for payment of an administrative
expense of a kind specified in Section 503(b) of the Code and referred to in
Section 507(a)(1) of the Code, including, without limitation, the actual and
necessary costs and expenses incurred after the commencement of the Chapter 11
cases of preserving the estate and operating the business of the Debtors,
including wages, salaries or commissions for services, compensation for legal
and other services and reimbursement of expenses awarded under Section 330(a) or
331 of the Code, and all fees and charges assessed against the estates under
Chapter 123 of Title 28, United States Code.
2.2 ALLOWED. When used in connection with any type of "Claim" or "Equity
Interest", means: (a) a Claim or Equity Interest, proof of which was timely
filed pursuant to the Orders of the Bankruptcy Court establishing the applicable
"bar dates" for the filing of Claims against the Debtors, and, as to which no
timely objection to allowance has been interposed within the applicable period
of limitation fixed by the Plan, the Bankruptcy Code, the Bankruptcy Rules or
the Bankruptcy Court, or as to any such timely objection a Final Order of
allowance has been entered; (b) a Claim or Equity Interest allowed by a Final
Order; (c) a Claim or Equity Interest listed in either of the Debtor's Schedules
filed in connection with the Chapter 11 Cases and not identified as contingent,
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unliquidated or disputed; (d) a Claim or Equity Interest which is fixed and
agreed to in amount in writing between the Debtors and any Claimant and allowed
by a Final Order or (e) any Claim which is deemed an Allowed Claim pursuant to
the provisions of this Plan.
2.3 ALLOWED EMPLOYEE PRIORITY CLAIMS. Means an Allowed Claim of a current
or former employee of either of the Debtors which is entitled to the priority in
payment under Section 507(a)(3) and (4) of the Code. Any Allowed Claim of a
current or former employee not entitled to priority in payment under Section
507(a)(3) and (4) of the Code shall be considered an Allowed Unsecured Claim.
2.4 ALLOWED SECURED CLAIM OF INVERNESS. Means the Allowed Secured
Claim of Inverness in the amount of $1,800,000.
2.5 ALLOWED SECURED CLAIM. Means an Allowed Claim arising on or before the
Petition Date (January 22, 1998) that is secured by a valid Lien on property of
either of the Debtors which is not void or voidable under any state or federal
law, including any provision of the Code or an Allowed Claim for which the
holder asserts a setoff under Section 553 of the Code, to the extent of the
value (which is either agreed to by either of the Debtor pursuant to this Plan,
or in the absence of an agreement, has been determined in accordance with
Section 506(a) or 1111(b) of the Code) of the interest of the holder of such
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Allowed Claim in either of the Debtors property, or an Allowed Claim that is
treated as an Allowed Secured Claim pursuant to this Plan. That portion of such
Allowed Claim exceeding the value of security held therefor shall be an Allowed
Unsecured Claim.
2.6 ALLOWED UNSECURED CLAIM. Means an Allowed Claim which is not an
Allowed Secured Claim, an Allowed Employee Priority Claim or a Priority Tax
Claim.
2.7 BANKRUPTCY COURT. Means the United States Bankruptcy Court for the
District of Connecticut, or such other Court as may hereafter have jurisdiction
over the Debtors' pending bankruptcy cases.
2.8 BRIDGE NOTEHOLDERS means the holders of the Subordinated Bridge Notes,
including Raymond Joslin ($200,000), David Hale Smith II Charitable Remainder
Trust ($50,000), Interim Advantage Fund ($50,000), Bruce MacDonald ($300,000),
Ian R. Kahn ($25,000), Dr. Justin Wernick ($40,000), Edward Benjamin MD Money
Purchase Pension Plan ($67,000), Dr. Edward Benjamin ($246,500), Alan N. Parnes
($50,000), Lee H. Silverstein ($25,000), Tri Ventures ($50,000), Alan Napack
($50,000), Michael Zuckerman and Hillary Davis ($50,000), Crescent Capital
Company LLC ($50,000), Steven Grapstein ($100,000), Ray Ingleby ($100,000),
Marshall Manley ($100,000), Curran Partners ($100,000), John D. Shepherd
($100,000), and Phyllis and Howard Silverman ($200,000) or their respective
assignees.
2.9 CASH. Means currency of the United States of America, or checks
payable in immediately available funds of such currency.
2.10 CLAIM. Has the meaning set forth in Section 101(5) of the Code.
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2.11 CLASS. Means Claims or Equity Interests which are substantially
similar to the other Claims or Equity Interests in such Class as classified
pursuant to the Plan.
2.12 CODE. Means the United States Bankruptcy Code, 11 U.S.C. ss.ss. 101
ET SEQ., and all amendments thereto which are applicable to the case.
2.13 CONFIRMATION. Means the entry by the Bankruptcy Court of an order
confirming the Plan in accordance with Chapter 11 of the Code.
2.14 CONFIRMATION ORDER. Means the order entered by the Bankruptcy Court
confirming the Plan in accordance with Chapter 11 of the Code.
2.15 CONSOLIDATION MOTION means the motion for substantive consolidation
of PDI and PDIXF filed by the Debtors and the Official Committee of Unsecured
Creditors for PDI on or about April 20, 1998.
2.16 CONSUMMATION. Means the accomplishments of all things provided for in
this Plan to occur on the Effective Date.
2.17 DEBTORS OR DEBTORS IN POSSESSION. Means PDI and its wholly-owned
subsidiary, PDIXF.
2.18 DIRECTOR LOANHOLDERS. Means the loans made by certain PDI directors
or related companies during October and December, 1997, including Equitas
($50,000), Robert Sparacino ($213,000), Bril Profit Sharing Plan ($25,000), and
Bril Money Purchase Plan ($25,000).
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2.19 DISALLOWED CLAIM. Means any Claim or portion thereof:
(a) which is scheduled or proof of which is filed and an objection
thereto has been sustained by a Final Order; or
(b) which is scheduled as disputed, contingent or unliquidated and
as to which either (i) no proof of claim has been timely filed,
or (ii) proof of which has been timely filed and an objection
thereto has been sustained by a Final Order.
2.20 DISPUTED CLAIM. Means any Claim which is scheduled or proof of which
is filed and against which an objection to the allowance thereof has been
interposed, which objection has not been determined by a Final Order, except for
any Claim which is deemed an Allowed Claim by the provisions of this Plan.
2.21 EFFECTIVE DATE. Means the first business day occurring after the 20th
day after the entry of the Confirmation Order or as such other date that the
Bankruptcy Court shall set forth in the Confirmation Order.
2.22 EQUITY INTEREST(S). Means the issued and outstanding common stock of
PDI and any warrants, options or other contract to purchase or acquire such
common stock as of the Petition Date.
2.23 FINAL ORDER. Means an order or judgment of the Bankruptcy Court which
has not been reversed or stayed as modified or amended, as to which no appeal is
pending, and as to which the time to appeal and to seek to appeal has expired.
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2.24 HAYES. Means Hayes Corporation f/k/a Access Beyond, Inc. as successor
in interest to Access Beyond, Inc., RDCAN Corp. (formerly Technipower, Inc.) and
Intist (formerly Constant Power, Inc.), which holds a Disputed Claim against the
Debtor that is unsecured within the meaning of Code Section 506.
2.25 INVERNESS PERCENTAGE. Means that percentage equal to 49.9%.
2.26 INVERNESS SECURED NOTE. Means that certain Secured Promissory Note in
the original principal amount equal to $1,800,000.00. The Inverness Secured Note
shall have a two year term commencing with the Effective Date and shall provide
for monthly payments of interest only at the rate of 10% per annum for each
month during the term thereof with payment in full on the second anniversary of
the Effective Date. The Inverness Secured Note shall be secured by Lien upon all
of the assets of Reorganized PDI provided such Lien shall be junior and
subordinate only to the Lien authorized herein to secure the Working Capital
Note.
2.27 LIEN. Means any charge against or interest in property to secure
payment of a debt or performance of an obligation and includes, without
limitation, any judicial lien, security interest, mortgage, deed of trust and
statutory lien as defined in Section 101 of the Code.
2.28 NOTEHOLDERS. Means the holders of the Subordinated Notes including
Equitas L.P. ($700,000), Lois Horn ($140,000), Antoinette Rose ($160,000),
Thomas O'Grady ($29,215.38), Davis H. Smith, II ($29,215.38), Dennis and Terri
Nesta ($16,000), and Bruce MacDonald
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($12,984.62) or their respective assignees.
2.29 PDI. Means Power Designs, Inc., a Delaware corporation and the debtor
in Case No. 98-50117.
2.30 PDIXF. Means PDIXF Acquisition Corporation, a New York corporation
and the debtor in Case No. 98-50118.
2.31 PETITION DATE. Means January 22, 1998, the date on which the Debtors
filed their petitions commencing their respective Chapter 11 cases.
2.32 PLAN. Means this Plan of Reorganization for Power Designs, Inc. and
PDIXF Acquisition Corporation, as may be amended from time to time.
2.33 PRIORITY TAX CLAIM. Means an Allowed Claim which is entitled to
priority pursuant to Section 507(a)(8) of the Code.
2.34 PRO RATA SHARE. Means the proportion that an Allowed Claim in a
particular Class bears to the aggregate amount of all Allowed Claims in such
Class, calculated in accordance with the provisions of this Plan.
2.35 REORGANIZED PDI. Means Power Designs, Inc., a Delaware corporation on
and after the Effective Date.
2.36 REORGANIZED PDI COMMON STOCK. Means 2,000,000 shares of the common
stock of Reorganized PDI to be issued pursuant to this Plan.
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2.37 SUBORDINATED BRIDGE NOTES. Means those certain Subordinated
Promissory Notes of PDI in the allowed aggregate original principal amount of
$1,953,500.00 and bearing interest at the rate of 10% per annum, as listed in
Section 2.8 hereof.
2.38 SUBORDINATED NOTES. Means those certain Subordinated Promissory Notes
of PDI dated October 9, 1996 in the allowed aggregate original principal amount
of $1,087,415.38 as listed in Section 2.28 hereof.
2.40 WORKING CAPITAL NOTE. Means that certain Revolving Credit Agreement
in the original principal amount of up to $800,000. The Working Capital Note
shall bear interest at the best rate available to Reorganized PDI on the
Effective Date. The Working Capital Note may be secured by a first Lien on all
of Reorganized PDI's assets.
3. ADMINISTRATIVE AND TAX PRIORITY CLAIMS
3.1 ADMINISTRATIVE CLAIMS. All post-petition payables and other ordinary
course expenses will be paid in the ordinary course of business as agreed
between the respective vendors and the Debtors and/or Reorganized PDI. All other
Administrative Claims, which have not been paid prior to the Effective Date
shall be paid in full in Cash on the Effective Date (or, if later, the date on
which any such Administrative Claim is allowed by a Final Order of the
Bankruptcy Court), or upon such terms as otherwise agreed between the Debtors
and the holder of such Administrative Claim.
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Administrative Claims include claims of professionals employed by order of the
Bankruptcy Court, all post-petition financing of the Debtors approved by the
Court prior to Confirmation (with all accrued interest), certain post-petition
employee claims and any unpaid fees due under 28 U.S.C. ss. 1930. Professionals
employed pursuant to Sections 327 and 1102 of the Bankruptcy Code, and any other
person who may be entitled to reimbursement of expenses or allowance of fees
pursuant to Sections 503(b)(2) through 503(b)(6) of the Code, shall file final
applications for allowance and payment of compensation and expenses not later
than twenty (20) days after the Effective Date. Each such professional or person
shall be paid, in Cash, the full amount awarded to such professional or person
by the Bankruptcy Court after notice and a hearing, within 10 days after the
date on which an Order allowing such claims, fees and/or disbursements becomes a
Final Order.
3.2 PRIORITY TAX CLAIMS. The Allowed Priority Tax Claim of the Internal
Revenue Service shall be paid in the amount and manner provided in Exhibit 3.2
and shall be governed by the terms and conditions set forth in Exhibit 3.2,
which is attached hereto and made a part hereof and which is incorporated herein
by reference as if set forth in full in this Section 3.2. All other Allowed
Priority Tax Claims, if any, shall be paid by Reorganized PDI in its sole
discretion in Cash and in full on the Effective Date or in equal quarterly
payments beginning on April 1, 2000 and continuing thereafter for twenty (20)
additional quarters (payments shall be made on January 1, April 1, July 1 and
October 1). The deferred payments on such Allowed Priority Tax Claims shall bear
interest at
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the rate of seven (7%) percent per annum. The Debtors are not aware of any
significant Allowed Priority Tax Claims other than the Allowed Priority Tax
Claim of the Internal Revenue Service. Other than the Claim of the Internal
Revenue Service, Claims asserted by various taxing authorities for periods prior
to PDI's first bankruptcy proceeding are not considered Allowed Priority Tax
Claims but shall, upon Confirmation, be conclusively deemed Allowed Unsecured
Claims and will be treated as Allowed Unsecured Claims.
4. DESIGNATION OF CLASSES OF CLAIMS AND EQUITY INTERESTS
All Claims against and Equity Interests in the Debtor, of whatever nature,
whether or not scheduled, liquidated or unliquidated, absolute or contingent,
including all Claims arising from transactions with either of the Debtors and
all equity interests arising from the ownership of the stock of either of the
Debtors, whether resulting in an Allowed Claim or not, shall be bound by the
provisions of this Plan. The Claims and Equity Interests are classified as
follows:
4.1 CLASS 1. The Allowed Secured Claims of Inverness.
CLASS 1A. Allowed Secured Claim of Inverness against PDI.
CLASS 1B. Allowed Secured Claim of Inverness against PDIXF.
4.2 CLASS 2. The Allowed Claims of Hayes.
CLASS 2A. The Allowed Claim of Hayes against PDI.
CLASS 2B. The Allowed Claim of Hayes against PDIXF.
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4.3 CLASS 3. Allowed Employee Priority Claims.
4.4 CLASS 4. Allowed Unsecured Claims.
CLASS 4A. Allowed Unsecured Claims against PDI.
CLASS 4B. Allowed Unsecured Claims against PDIXF
4.5 CLASS 5. Allowed Equity Interests in PDI.
4.6 CLASS 6. Allowed Equity Interest in PDIXF.
5. IDENTIFICATION OF IMPAIRED CLASSES OF CLAIMS AND EQUITY INTERESTS
5.1 IMPAIRED CLASSES OF CLAIMS. All Classes of Claims are impaired under
the Plan.
5.2 IMPAIRED CLASSES OF EQUITY INTERESTS. All Classes of Equity Interests
are impaired.
5.3 IMPAIRMENT CONTROVERSIES. If a controversy arises as to whether any
Claim or Equity Interest, or any Class of Claims or of Equity Interests, are
impaired under the Plan, the Bankruptcy Court shall, after notice and a hearing,
determine such controversies.
5.4 SPECIAL NOTE CONCERNING VOTING ON PLAN. If the Consolidation Motion is
granted prior to Confirmation voting on the Plan will be conducted by combining
the subclasses within each class. For example, Class 1A and Class 1B will be
considered a single Class: Class 1. On the other hand, if the Consolidation
Motion is not granted prior to Confirmation, each subclass will be considered a
separate class for voting purposes. For example, Class 4A and Class 4B will be
considered separate and distinct classes for voting purposes.
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6. TREATMENT OF CLAIMS AND EQUITY INTERESTS UNDER THE PLAN
6.1 CLASS 1 (INCLUDING CLASS 1A AND CLASS 1B). On the Effective Date,
Inverness shall receive in satisfaction of its Allowed Secured Claims the
following:
a) the Inverness Secured Note; and
b) that number of shares of Reorganized PDI Common Stock equal to
2,000,000 x .499.
6.2 CLASS 2 (INCLUDING CLASS 2A AND 2B). On the Effective Date, all claims
of Hayes shall be deemed settled, compromised and allowed in the amount of
$150,000.00 and Hayes shall receive in satisfaction of its claims the following:
(a) the Hayes Unsecured Note in a principal amount of $150,000, with a two year
term, with interest-only payable until maturity at an interest rate of 10% per
annum, which shall be subordinate to the Working Capital Note and the Inverness
Secured Note, and (b) shares of Reorganized PDI Common Stock, the number of said
Shares to be determined by the inclusion of Hayes in Class 4A, with an imputed
Allowed Claim in said Class of $150,000, solely for purposes of determining the
number of shares but not for purposes of the conditional payment referred to in
Section 6.4 of the Plan.
6.3 CLASS 3. Except as set forth hereinafter in this Section 6.3, holders
of Allowed Employee Priority Claims shall receive the full amount of their
Allowed Employee Priority Claims in eight (8) equal monthly payments, together
with interest at the rate of seven (7%) percent per annum. The Allowed Employee
Priority Claim filed by the Commissioner of Labor of the State of
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Connecticut in the amount of $18,040.93 shall be paid in cash in full within ten
(10) days after the Effective Date to the extent, if any, not already paid. The
other Allowed Employee Priority Claim filed by the Commissioner of Labor of the
State of Connecticut, in the amount of $4,799.21, shall bear interest at a rate
of 7% per annum from the Effective Date and shall be paid in full in equal
monthly installments of principal and interest, commencing one month following
the Effective Date and continuing in one-month intervals, such that each payment
is made one month after the immediately preceding payment, until November, 2003.
6.4 CLASS 4 (INCLUDING CLASS 4A AND CLASS 4B). Subject to Section 10.2 of
the Plan, on the Effective Date, (i) the holders of Allowed Claims in Class 4A
shall receive their Pro Rata Share of that number of shares of Reorganized PDI
Common Stock equal to 50.1% of 2,000,000 and, except with respect to Hayes, an
annual conditional payment equal to 10% of one-half of the face amount of their
Allowed Claims, payable (without interest) only to the extent that Reorganized
PDI's free cash flow (net income, plus depreciation, plus amortization, less
capital expenses) is greater than $400,000.00 in any fiscal
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year unless there is a payment default on the Inverness Secured Note, in which
event the conditional payment may not be made until the default is cured. For
purposes hereof, "capital expenses" shall not be deemed to include the purchase
of any equipment that involves either lease or other purchase financing for
which the Company's cash flow is only reduced by future monthly payments. If
Reorganized PDI's free cash flow in excess of $400,000 in any fiscal year is
insufficient to make the conditional payment, then such conditional payment
shall be accrued. No conditional payment or accrual, however, shall occur within
six months after the Effective Date, nor shall a conditional payment amount ever
be accrued which exceeds 20% of one-half of the face amount of such Allowed
Claims. To the extent that the accrued conditional payment would exceed 20% of
one-half of the face amount of such Allowed Claims, entitlement to such amount
shall be waived. The terms and conditions of the conditional payment and its
termination events are more fully set forth on EXHIBIT 6.4A, attached hereto and
made a part hereof ("Conditional Distribution Agreement"); and ii) on the
Effective Date, the holders of Allowed Claims in Class 4B shall receive 5% of
the amount of their Allowed Claims in complete and full satisfaction of their
claims.
Confirmation of this Plan and the issuance of Class 4A Stock to holders of
Allowed Claims in Class 4A as provided herein shall be deemed consent to the
terms and conditions of the Conditional Distribution Agreement attached hereto,
which Conditional Distribution Agreement shall immediately become effective upon
the Effective Date hereof without the need for execution thereof by any or all
of the parties thereto and without the need for any further action with respect
thereto.
6.5 CLASS 5. All Equity Interests in Power Design, Inc. shall be deemed
cancelled as of the Effective Date and holders of such Equity Interests shall
not receive any distribution on account of such Equity Interests.
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6.6 CLASS 6. All Equity Interests in PDIXF Acquisition Corporation shall
be deemed cancelled as of the Effective Date and holders of such Equity
Interests shall not receive any distribution on account of such Equity
Interests.
7. PROVISIONS RELATING TO CORPORATE STRUCTURE OF REORGANIZED PDI
7.1 MERGER. On the Effective Date, PDIXF shall be authorized to merge, and
shall merge, into PDI which shall be the corporation surviving the merger
("MERGER"). The name of the surviving corporation shall be Power Designs Inc.,
or such other name as may be selected by the Debtors on or before the
Confirmation Date. The Merger shall be in accordance with the applicable laws of
the States of New York and Delaware (except as may be affected by this Plan or
by bankruptcy law), this Plan and that certain Plan and Agreement of Merger
substantially attached hereto as EXHIBIT 7.1 and made a part hereof.
Confirmation of this Plan shall be deemed consent by all parties to the Plan and
Agreement of Merger to the terms thereof without necessitating any further
action with respect to same.
7.2 PROHIBITION AGAINST THE ISSUANCE OF NON-VOTING EQUITY SECURITIES. On
the Effective Date, the Certificate of Incorporation of Reorganized PDI will be
amended to include, among other things, provisions prohibiting the issuance of
non-voting equity securities, increasing the number of authorized shares and
authorizing the Board to issue shares and to designate classes of preferred
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stock with such rights and privileges as the Board may determine ("Amended
Certificate"). The Amended Certificate shall be in form substantially as
attached hereto as EXHIBIT 7.2 and made a part hereof.
7.3 NEW BOARD OF DIRECTORS. On the Effective Date, all directors of PDI
then remaining in office shall be deemed to have resigned. The new Board
thereupon will be reconstituted to consist of seven members and shall consist,
upon the effectiveness of the Merger, of the designees set forth below. The fact
that any designee has or has had a business relationship with the PDI shall not,
in and of itself, disqualify the selection of that person to be a member of the
initial board. Notwithstanding anything to the contrary in the Certificate of
Incorporation or By-laws or Delaware law, but subject to the terms of that
certain Shareholders Agreement defined below, the initial board of directors of
Reorganized PDI shall serve for a period of not more than two years following
the Effective Date. Any vacancies arising on the board prior to the expiration
of two years following the Effective Date, shall be filled by the same designee
group that initially appointed the board member whose position was being
vacated, all in accordance with the Shareholders Agreement. Thereafter, the
board of directors of Reorganized PDI shall be elected in accordance with the
Amended Certificate and Delaware law, provided, however, that during the term of
the Shareholders Agreement, the number of directors can only be increased upon
the unanimous consent of all directors.
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MANAGEMENT DESIGNEE.
(1) Initially, Melvin Becker Vice President of Operations until a Chief
Executive Officer ("CEO") is retained by Reorganized PDI and
thereafter the CEO shall be the Management Designee.
INVERNESS DESIGNEES.
(2) Two persons designated by Inverness.
NOTEHOLDERS' DESIGNEE.
(1) Shannon LeRoy.
BRIDGE NOTEHOLDERS' DESIGNEES.
(2) Raymond E. Joslin and Robert Dorfman.
DIRECTOR LOANHOLDERS' DESIGNEE.
(1) Robert Sparacino.
A shareholders voting agreement in form as set forth on EXHIBIT 7.3
attached hereto and made a part hereof ("Shareholders Agreement") will require
each to vote their shares to elect as a director the designee(s) of each party
to the Shareholders Agreement. Confirmation of the Plan shall be deemed consent
to the terms of the Shareholders Agreement attached hereto and such Shareholders
Agreement shall immediately become effective upon the Effective Date hereof
without the need for execution thereof by any or all of the parties thereto and
without the need for any further
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action with respect thereto.
7.4 POST CONFIRMATION MANAGEMENT. Anthony Intino serving as Chief
Financial Officer & General Manager and Melvin Becker as Vice President of
Operation and Secretary shall continue to serve as the senior management of
Reorganized PDI until such time as the Board retains a permanent Chief Executive
or Operating Officer and a Chief Financial Officer.
7.5 REORGANIZED PDI COMMON STOCK. The Reorganized PDI Common Stock will be
issued as of the Effective Date. As of the Effective Date, there shall be
2,000,000 issued and outstanding shares of Reorganized Common Stock, $0.01 par
value per share. Each share of Reorganized PDI Common Stock shall be entitled to
one vote with respect to all elections and matters.
7.6 DIVIDENDS; LIQUIDATION. All shares of Reorganized PDI Common Stock
will be entitled: (a) to share equally in dividends from funds legally available
therefor when, as, and if declared by the Board; and (b) to share equally in the
assets available for distribution to shareholders upon liquidation or
dissolution of Reorganized PDI, whether voluntary or involuntary. Holders of the
Reorganized PDI Common Stock shall have no preemptive rights to acquire shares
of Reorganized PDI Common Stock except as set forth in the Shareholders
Agreement. Shares of the Reorganized PDI Common Stock, when issued, will be
deemed duly and validly issued, fully-paid and nonassessable.
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7.7 EXEMPTION FROM REGISTRATION. Pursuant to Section 1145 of the Code, all
Reorganized PDI Common Stock issued under the Plan will be exempt from state and
federal laws requiring registration of securities. Except with respect to a
person that is an "underwriter" within the meaning of Section 1145 of the
Bankruptcy Code, the distribution of Reorganized PDI Common Stock will be deemed
to be a "public offering" which is not subject to the registration or prospectus
delivery requirements contained in Section 5 of the Securities Act of 1933, as
amended ("SECURITIES ACT").
7.8 RESTRICTIONS ON TRANSFER OF REORGANIZED PDI COMMON STOCK. The
Reorganized PDI Certificate of Incorporation will be amended to reflect certain
restrictions on the transfer of Reorganized PDI Common Stock. The Amended
Certificate of Incorporation will provide that no person or entity may acquire
any shares of capital stock of Reorganized PDI, other than pursuant to this
Plan, if, at the date of such acquisition, such person or entity is, or would be
after giving effect to any such proposed acquisition, either directly,
indirectly or by attribution, either (a) one of the 10 largest holders of
Reorganized PDI capital stock, or (b) a holder of five percent or more of
Reorganized PDI issued and outstanding capital stock. The restrictions imposed
with regard to the right of certain stockholders to acquire capital stock shall
be effective until the first business day following the second anniversary of
the Effective Date. All certificates representing Reorganized PDI Common Stock
will bear the legend described in Section 7.10 below.
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7.9 REVIEW OF PROPOSED TRANSACTIONS. The restrictions on the
transferability are intended to prevent any acquisition which could result in
the disallowance or limitation of Reorganized PDI's federal income tax net
operating loss carryovers and other tax attributes, unless such acquisition is
approved by the Board upon review of the proposed transaction. Any such review
will be at the sole cost and expense of the proposed transferor regardless of
whether the Board approves the proposed transfer. Any purported transfer not
approved by the Board will be void and ineffective.
7.10 REQUIRED LEGEND. All certificates evidencing ownership of shares of
Reorganized PDI Common Stock, shall bear a conspicuous legend substantially as
follows:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and are
issued pursuant to an exemption provided by 11 U.S.C. ss. 1145 under
an order confirming the Amended Plan of Reorganization for Power
Designs, Inc. and PDIXF Acquisition Corporation ("Plan") in cases
entitled IN RE POWER DESIGNS INC., DEBTOR, Case No. 98-50117, and IN
RE PDIXF ACQUISITION CORPORATION, DEBTOR, Case No. 98-50118, jointly
administered, in the United States Bankruptcy Court for District of
Connecticut. These securities are subject to certain provisions of
the company's Certificate of Incorporation which provide, INTER ALIA,
restrictions (a) limiting the transferability of, and (b) affecting
the voting rights relating to, such securities. Photocopies of such
Plan and Certificate of Incorporation have been deposited with the
company at its principal office, and the company will furnish a copy
thereof to the record holder of these securities without charge upon
written request to the company at its principal place of business.
The holder of this certificate is also referred to 11 U.S.C.
Sections 1145(b) and (c) for guidance as to the sale of these
securities."
8. MEANS FOR FUNDING OF THE PLAN
8.1 FUNDING OF PAYMENTS REQUIRED UNDER THE PLAN. The payments required
under the Plan
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will be made from Cash accumulated by Debtors from the Petition Date to the
Effective Date and the proceeds available under the Working Capital Note.
9. TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES
9.1 GENERAL TREATMENT. All executory contracts and unexpired leases of PDI
or PDIXF shall be assumed by Reorganized PDI upon entry of the Confirmation
Order unless specifically rejected by order entered on or prior to the
Confirmation Date or unless a motion to reject any such executory contract or
unexpired lease is pending before the Bankruptcy Court on the Confirmation Date.
9.2 BAR TO REJECTION DAMAGES. If the rejection of an executory contract or
unexpired lease by either of the Debtors results in damages to the other party
or parties to such contract or lease, a Claim for such damages, if not
previously evidenced by a filed proof of Claim or barred by a Final Order, shall
be forever barred and shall not be enforceable against the Debtors or
Reorganized PDI, or their properties or agents, successors, or assigns, unless a
proof of Claim relating thereto is filed with the Bankruptcy Court within thirty
(30) days after the later of (i) the entry of a Final Order authorizing such
rejection and (ii) the Confirmation Date, or within such shorter period as may
be ordered by the Bankruptcy Court.
9.3 CURE OF DEFAULTS FOR EXECUTORY CONTRACTS AND UNEXPIRED LEASES. Each
executory contract and unexpired lease to be assumed pursuant to the Plan shall
be reinstated and rendered
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unimpaired in accordance with sections 1124(2) and 365(b)(1) of the Code. In
connection therewith, Reorganized PDI obligated on each such contract and lease
to be assumed pursuant to the Plan shall cure or provide adequate assurance that
it will cure any monetary default (other than of the kind specified in section
365(b)(2) of the Bankruptcy Code), by payment of the default amount in Cash on
the Effective Date or on such other terms as the parties to such executory
contract or unexpired lease may otherwise agree, compensate, or provide adequate
assurance that the Reorganized PDI will promptly compensate, parties to such
contract or lease for any actual pecuniary loss to such parties resulting from
such default and provide adequate assurance of future performance under such
contract or lease. In the event of a dispute regarding: (i) the amount of any
cure payments, (ii) the ability of Reorganized PDI or any of its assignees to
provide "adequate assurance of future performance" (within the meaning of
section 365 of the Bankruptcy Code) under the contract or lease to be assumed,
or (iii) any other matter pertaining to assumption, the cure payments or
performance required by section 365(b)(1) of the Bankruptcy Code shall be made
following the entry of a Final Order resolving the dispute and approving the
assumption.
10. PROVISIONS GOVERNING DISTRIBUTIONS
10.1 PAYMENTS. Except as otherwise provided in this Plan or ordered by the
Court, all payments required under the Plan to Creditors in all Classes will be
made on Effective Date of Plan.
10.2 ENFORCEMENT OR WAIVER OF CONTRACTUAL SUBORDINATION RIGHTS. The
Subordinated Notes
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and the Subordinated Bridge Notes are contractually either fully or partially
subordinate to Claims held by Inverness. Pursuant to Section 510(b) of the Code,
contractual subordination agreements are enforceable in a bankruptcy proceeding.
Nonetheless, Inverness has agreed to waive enforcement of its rights of
subordination as to the holder of any Claim that is contractually subordinated
to Inverness PROVIDED that the class of which such holder is a member votes to
accept this Plan.
10.3 FRACTIONAL SHARES. Fractional shares of Reorganized PDI Common Stock
shall not be issued or distributed. If the holder of an Allowed Claim would
receive a fraction of a share of Reorganized PDI Common Stock, the Stock
Transfer Agent shall attempt to round the number of shares issued to all such
holders up or down to the nearest whole number; PROVIDED, that the Stock
Transfer Agent shall in no event deliver certificates representing more than
2,000,000 shares of Reorganized PDI Common Stock. Any shares of Reorganized PDI
Common Stock which remain unissued as a result of such rounding shall become the
property of Reorganized PDI and shall be cancelled.
10.4 UNCLAIMED DISTRIBUTIONS.
a. ESCHEAT TO DEBTOR. Monies sent by checks issued by or on behalf of
the Debtors or Reorganized PDI, or stock certificates or documents evidencing
equity interests in the Reorganized PDI, sent to holders of Allowed Claims or
other parties in interest pursuant to this Plan shall permanently and
irrevocably escheat to Reorganized PDI and shall not be honored if (i) such
checks
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are NOT negotiated within ninety (90) days after issuance by the Debtors or
Reorganized PDI or (ii) stock certificate(s) or other documents evidencing
equity interests in the Reorganized PDI are returned as undeliverable. Upon the
expiration of such ninety day period, the Debtors' and Reorganized PDI's
obligation and liability to any holder of an Allowed Claim or other party in
interest whose check from the Debtors or Reorganized PDI is not negotiated
during such period or whose stock certificate(s) or other documents evidencing
equity interests in the Reorganized PDI are returned as undeliverable, shall be
deemed satisfied in full and the Debtors and Reorganized PDI and their
respective attorneys, agents, employees, directors and officers shall be forever
released and discharged from any liability or obligation whatsoever to that
creditor or party in interest. For purposes of this section, a check, stock
certificate or other document evidencing an equity interest in the Reorganized
PDI shall be conclusively deemed appropriately delivered to a creditor or party
in interest if it is sent by first class, postage prepaid, mail to the address
of that creditor or party in interest as set forth on the Debtors' schedules,
the proof of claim register in the above-captioned cases, or the Debtors' books
and records.
b. AFTER DISTRIBUTIONS BECOME UNDELIVERABLE. Undeliverable cash and stock
in Reorganized PDI shall not be entitled to any interest, dividends or other
accruals of any kind. In such cases, any property held for distribution on
account of such claims until the expiration of the ninety (90) day period set
forth herein shall be property of the Reorganized PDI, free and clear of any
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restrictions thereon. The Reorganized PDI shall not be required to attempt to
locate any holder of an Allowed Claim.
11. PROCEDURES FOR RESOLVING AND TREATING CONTESTED AND CONTINGENT CLAIMS AND
EQUITY INTERESTS
11.1 ALLOWANCE OF INVERNESS CLAIMS. Pursuant to Section 1123(b)(3)(A) and
Rule 9019 of the Rules of Bankruptcy Procedure, this Plan shall constitute a
compromise and settlement of all claims of or on behalf of the Debtors against
Inverness and all persons acting on its behalf. Inverness shall be deemed to
have an Allowed Claim of $7,259,019.02 as of the Petition. A portion of
Inverness' Allowed Claim will be considered an Allowed Secured Claim. The
balance of Inverness' Allowed Claim not treated as an Allowed Secured Claim will
be deemed an Allowed Unsecured Claim, but shall not be treated in Class 4.
11.2 OBJECTION DEADLINE. As soon as practicable, but in no event later
than thirty days after the Confirmation Date, objections to Disputed Claims
shall be filed with the Bankruptcy Court and served upon the Holders of each of
the Disputed Claims.
11.3 RESPONSIBILITY FOR OBJECTION TO DISPUTED CLAIMS AND PROSECUTION OF
OBJECTIONS. Reorganized PDI shall have the exclusive responsibility for
objecting to Claims following the Confirmation Date. On and after the
Confirmation Date, except as the Bankruptcy Court may otherwise order, the
filing, litigation, settlement, or withdrawal of all objections to Disputed
Claims shall be the responsibility of Reorganized PDI.
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11.4 NO DISTRIBUTIONS PENDING ALLOWANCE. Notwithstanding any other
provision of the Plan, no payments or distributions shall be made with respect
to a Disputed Claim unless and until all objections to such Disputed Claim have
been determined by Final Order.
11.5 DISTRIBUTION AFTER ALLOWANCE. Payments and distributions from
Reorganized PDI to each Holder of a Disputed Claim, to the extent that it
ultimately becomes an Allowed Claim, shall be made in accordance with the
provisions of the Plan governing the Class of Claims to which the Disputed Claim
belongs. As soon as practicable after the date the order of judgment of the
Bankruptcy Court allowing such Claim becomes a Final Order, but in no event
later than thirty (30) days after such Claim becomes an Allowed Claim, any Cash
or other consideration that would have been distributed in respect of the
Disputed Claim had it been an Allowed Claim at the Effective Date shall be
distributed, without interest, to the Holder of such Claim.
11.6 TREATMENT OF CONTINGENT CLAIMS. Until such time as a Contingent
Claim becomes fixed and absolute, such Claim shall be treated as a Disputed
Claim for purposes related to estimations, allocations, and distributions
under the Plan.
12. RELEASE, INDEMNIFICATION AND EXCULPATION
12.1 RELEASE AND INJUNCTION. Upon Confirmation, The Debtor, the Creditors'
Committees, Inverness Corp., and Venture Partners, Ltd. and their respective
present and former officers, directors, employees, professionals,
representatives, shareholders and agents and such persons' or
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entities' heirs, representatives, administrators, successors and assigns
(hereinafter, collectively, the "Releasees") shall, without the execution or
delivery of any further documents, be absolutely, unconditionally and fully
released from any and all claims, debts, demands, damages, costs, offsets,
expenses, obligations, liabilities, losses, actions, causes of actions, and/or
suits of whatever kind, nature or type, arising at law or equity, by statute or
otherwise, whether known or unknown, choate or inchoate, suspected or
unsuspected, or whether having arisen, accrued or matured or hereafter to arise,
accrue or mature, which any person or entity or any one or more of them ever
had, now has, claims to have, or hereafter can, shall or may for any reason have
or assert against the Releasees, or any one or more of them, arising out of any
matter or event at or prior to such time and relating in any way to the Debtors,
the Debtors' businesses, the Debtors' liabilities, loans to the Debtors, or the
Chapter 11 Cases, or the actions, failure to act, omission, conduct, duties,
responsibilities, decisions, receipt of money, conduct or behavior of any one or
more of the Releasees in connection with the Chapter 11 Cases, the Debtors, the
Debtors' businesses, the Debtors' liabilities, or loans to the Debtors. The
filing, assertion, prosecution, or continuation of prosecution of any such
matter against any one or more of the Releasees shall, without any further order
of the Court, be prohibited and enjoined upon Confirmation. This Section 12.1
does not apply to the Pension Benefit Guaranty Corporation with respect to
obligations owed by Inverness Corp. under the two promissory notes made by
Inverness Corp. dated October 1, 1996, and March 10, 1997, and held by the
Pension
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Benefit Guaranty Corporation.
12.2 INDEMNIFICATION. The Debtors' officers, directors, employees,
professionals, shareholders, representatives and other agents shall be entitled
to be exonerated and indemnified from time to time by the Debtors and/or the
Estates against any and all losses, claims, causes, liabilities, and reasonable
and necessary expenses relating thereto, arising out of or in connection with
the Debtors', the Debtors' businesses, loans to the Debtors, the Debtors'
liabilities, property of the Estates, the affairs of the Estates, or their
performance of duties hereunder, whether before or after the Petition Date or
before or after Confirmation, except those resulting from their own gross
negligence or willful misconduct.
12.3 EXCULPATION. Neither the Debtors nor any of their respective
officers, directors, employees, professionals, representatives or other agents
shall have or incur any liabilities to the Estates, to Claimants or to any other
person or entity for any act or omission in connection with or arising out of
the administration, implementation or consummation of the Plan or the cash or
other property, including securities, to be distributed under the Plan except
for willful misconduct or gross negligence. Such persons and entities shall in
all respects be entitled to rely upon the advice of counsel, accountants and/or
other professional persons with respect to their rights, duties and
responsibilities but shall not be liable for their failure to seek such advice.
In no event shall the Debtors or their officers, directors, employees,
professionals, representatives or other agents bear any
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liability or responsibility for the acts or omissions of any Disburses.
13. JURISDICTION
13.1 CONTINUING JURISDICTION. The Bankruptcy Court shall retain and have
exclusive jurisdiction over the Debtors' Chapter 11 cases for purposes (a)
through (i) below:
(a) To determine any and all objections to and proceedings involving
the allowance, estimation, classification, and subordination of Claims or Equity
Interests;
(b) To determine any and all applications for allowances of
compensation and reimbursement of expenses and any other fees and expenses
authorized to be paid or reimbursed under the Code or the Plan;
(c) To determine any application pending on the Effective Date for
the rejection or assumption of executory contracts or unexpired leases or for
the assumption and assignment, as the case may be, of executory contracts or
unexpired leases to which either of the Debtors' is a party or with respect to
which either of the Debtors' may be liable, and to hear and determine, and if
need be, to liquidate, any and all claims arising therefrom;
(d) To determine any and all applications, adversary proceedings, and
contested or litigated matters that may be pending on the Effective Date;
(e) To consider any modifications of the Plan, remedy any defect or
omission or reconcile any inconsistency on any Order of the Bankruptcy Court,
including the Confirmation
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Order, to the extent authorized by the Code;
(f) To determine all controversies, suits, and disputes that may
arise in connection with the interpretation, enforcement, or consummation of the
Plan or obligations arising thereunder;
(g) To consider and act on the compromise and settlement of any Claim
against or cause of action by or against either of the Debtors' bankruptcy
estate;
(h) To issue such orders in aid of execution of the Plan to the
extent authorized by Section 1142 of the Code; and
(i) To determine such other matters as may be set forth in the
Confirmation Order or which may arise in connection with the Plan or the
Confirmation Order.
14. MODIFICATION.
14.1 MODIFICATION OF PLAN. The Plan may be modified at any time after
Confirmation and before its substantial Consummation, provided that the Plan, as
modified, meets the requirements of Sections 1122 and 1123 of the Code, and the
Bankruptcy Court, after notice and a hearing, confirms the Plan, as modified,
under Section 1129 of the Code. A holder of a Claim or Equity Interest that has
accepted or rejected the Plan shall be deemed to have accepted or rejected, as
the case may be, such Plan as modified, unless, within the time fixed by the
Bankruptcy Court, such holder changes its previous acceptance or rejection by a
writing filed with the Bankruptcy Court.
15. DISCHARGE.
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15.1 DISCHARGE AND REVERSION OF PROPERTY.
(a) Pursuant to Section 1141(b) of the Code and, except as otherwise
dealt with in this Plan, Confirmation of the Plan vests all of the property of
each of the Debtors' estates in Reorganized PDI.
(b) Pursuant to Section 1141(c) of the Code, on the Effective Date of
the Plan, the property dealt with by the Plan shall become free and clear of all
liens, claims, encumbrances, and interests of creditors, except as otherwise
provided for in the Plan or the Confirmation Order.
15.2 DISCHARGE OF THE DEBTORS. Except as otherwise provided in the
Plan, all consideration distributed under the Plan shall be in exchange for and
in complete satisfaction, discharge, and release of all claims of any nature
whatsoever against either of the Debtors; and except as otherwise provided
herein, upon the Effective Date, each of the Debtors shall be deemed discharged
and released (but only to the extent permitted by Section 1141 of the Code,
including specifically Section 1141(d)(3)) from any and all claims, including
but not limited to, demands and liabilities that arose before the Effective
Date, and all debts of the kind specified in Sections 502(g), 502(h), or 502(i)
of the Code, whether or not (a) a proof of claim based upon such debt is filed
or deemed filed under Section 501 of the Code; (b) a claim based upon such debt
is allowed under Section 502 of the Code; or (c) the holder of a claim based
upon such debt has accepted the Plan.
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Except as provided herein, the Confirmation Order shall be a judicial
determination of discharge of all liabilities of each of the Debtors. As
provided in Section 524 of the Code, such discharge shall void any judgment
against either of the Debtors at any time obtained to the extent it relates to a
claim discharged, and operate as an injunction against the prosecution of any
action against either of the Debtors or its property to the extent it relates to
a claim discharged.
15.3 DISCHARGE OF CLAIMS. Except as otherwise provided herein or in the
Confirmation Order, (a) the rights afforded in this Plan and the payments and
distributions to be made hereunder shall be in complete exchange for, and in
full satisfaction, discharge and release of all existing debts and claims of any
kind, nature or description whatsoever against either of the Debtors or against
its bankruptcy estate, assets or properties, (b) all existing claims against
either of the Debtors shall be deemed to be satisfied, discharged, and released
in full upon the Effective Date, and (c) all holders of claims shall be forever
barred and precluded from asserting against Reorganized PDI or its assets or
properties based upon any act or omission.
16. PROVISIONS TO INVOKE CRAMDOWN PROCEEDINGS AND/OR SECTION 506 HEARING, IF
NECESSARY
16.1 CRAMDOWN. If all of the applicable requirements of Section 1129(a) of
the Code, other than subparagraph 8, are found to have been met with respect to
the Plan, the Debtors will seek Confirmation pursuant to Section 1129(b) of the
Code. For purposes of seeking Confirmation under the cramdown provisions of the
Code, the Debtors reserve the right to modify or vary the treatment
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of the claims of any rejecting Class so as to comply with the requirements of
Section 1129(b) of the Code.
17. GENERAL PROVISIONS
17.1 POST-CONFIRMATION ACTIONS. Nothing herein contained shall prevent the
Debtors from taking such action as may be necessary to enforce any rights or
prosecute any cause of action existing on its behalf, which may not have been
heretofore enforced or prosecuted.
17.2 RULES OF CONSTRUCTION. Unless otherwise specified, all references to
the single shall include the plural and vice versa. The headings in the Plan are
for convenience of reference only and shall not limit or otherwise effect the
provisions of the Plan. Words and terms defined in Section 101 of the Code shall
have the same meaning when used in the Plan, unless a different definition is
given in the Plan. The Rules of Construction contained in Section 102 of the
Code shall apply to the construction of the Plan.
17.3 GOVERNING LAW. Unless an applicable rule of law or procedure is
supplied by federal law (including the Bankruptcy Code and the Bankruptcy Rules)
or the Delaware General Corporation Law, the internal laws of the State of
Connecticut shall govern the construction and implementation of the Plan and any
agreements, documents, and instruments executed in connection with the Plan,
except as may otherwise be provided in such agreements, documents, and
instruments.
17.4 FILING OF ADDITIONAL DOCUMENTS. On or before the conclusion of the
Confirmation
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Hearing, the Debtors shall file with the Bankruptcy Court such agreements and
other documents as may be necessary or appropriate to effectuate and further
evidence the terms and conditions of the Plan.
17.5 SEVERABILITY. Should any provision in the Plan be determined to be
unenforceable, such determination shall in no way limit or affect the
enforceability and operative effect of any other provisions of the Plan.
17.6 NOTICES. All notices, requests, or demands for payments provided for
in the Plan shall be in writing and shall be deemed to have been given when
personally delivered by hand, or deposited in any general or branch post office
of the United States postal service, or received by telex or telecopier;
notices, requests and demands for payments shall be addressed and sent, postage
prepaid, or delivered as follows:
(a) in the case of notices, requests, or demands for payments to the
Debtors or the Reorganized PDI, at 14 Commerce Drive, Danbury,
Connecticut, Attn: Chief Financial Officer, and at any other address
designated by the Debtors by notice to each Holder of an Allowed Claim.
(b) in the case of notices to Holders of Claims or Equity Interests,
at the last known address according to Reorganized PDI books and records,
or at any other address designated by a Holder of a Claim or Interest, by
notice to Reorganized PDI; PROVIDED, HOWEVER, any
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notice of change of address shall be effective only upon receipt.
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Respectfully this 22nd day of August 2000
POWER DESIGNS, INC. and
PDIXF ACQUISITION CORPORATION
By: /s/ James Berman
----------------------------------------
James Berman (ct06027)
Zeisler & Zeisler, P.C.
558 Clinton Avenue
Bridgeport, CT 06605-0186
(203) 368-4234
Their Attorney
<PAGE>
DRAFT
EXHIBIT A
AMENDED AND RESTATED BY-LAWS
OF
POWER DESIGNS, INC.
(AS AMENDED THROUGH NOVEMBER _____, 1999)
******************************
ARTICLE I
OFFICES
The principal office of POWER DESIGNS, INC. (the "Corporation") shall
be located at such places within or without the State of Delaware as the Board
of Directors from time to time determine. The registered office of the
Corporation is c/o The Corporation Trust Company, 1209 Orange Street,
Wilmington, Delaware 19801. Pursuant to the terms of that certain Amended Plan
the Corporation and the shareholders of the Corporation are party to a certain
Shareholders Voting Agreement dated __________ (the "Shareholders Agreement"),
which contains provisions which may be inconsistent with certain provisions of
these By-Laws. The Corporation is also a party to a certain Conditional
Distribution Agreement dated _____________ (the "Distribution Agreement"). The
Corporation hereby confirms its obligation to adhere to the applicable
provisions of the Shareholders Agreement as amended from time to time, and the
Distribution Agreement to the extent such provisions may be inconsistent with or
may supplement these By-Laws for the term of such Shareholders Agreement, and
these By-Laws shall be subject to the applicable provisions of such Shareholders
Agreement and the Distribution Agreement.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. PLACE OF MEETINGS. Except as otherwise provided in these
By-Laws, all meetings of the shareholders shall be held on such dates and at
such times and places, within or without the State of Delaware, as shall be
determined by the Board and as shall be stated in the notice of the meeting or
in waivers of notice thereof. If the place of any meeting is not so fixed, it
shall be held at the registered office of the Corporation in the State of
Delaware.
Section 2. ANNUAL MEETING. The annual meeting of shareholders for the
election of directors and the transaction of such other proper business as may
be brought before the meeting shall be held on such date after the close of the
Corporation's fiscal year, and at such time, as the Board may from time to time
determine.
<PAGE>
Section 3. SPECIAL MEETINGS. Special meetings of the shareholders, for
any purpose or purposes, may be called by the Chief Executive Officer of the
Board, and shall be called by the Chief Executive Officer of the Board upon the
written request of not less than three directors. The request shall state the
date, time, place and purpose or purposes of the proposed meeting.
Section 4. NOTICE OF MEETINGS. Except as otherwise required by law,
whenever the shareholders are required or permitted to take any action at a
meeting, written notice thereof shall be given, stating the place, date and time
of the meeting and, unless it is the annual meeting, by or at whose direction it
is being issued. The notice also shall designate the place where the
shareholders' list is available for examination unless the list is kept at the
place where the meeting is to be held. Notice of a special meeting also shall
state the purpose or purposes for which the meeting is called. A copy of the
notice of any meeting shall be delivered personally or shall be mailed, not less
than ten (10) nor more than sixty (60) days before the date of the meeting, to
each shareholder of record entitled to vote at the meeting. If mailed, the
notice shall be given when deposited in the United States mail, postage prepaid,
and shall be directed to each shareholder at his or her address as it appears on
the record of shareholders of the Corporation, or to such other address which
such shareholder may have filed by written request with the secretary of the
Corporation. Notice of any meeting of shareholders shall be deemed waived by any
shareholder who attends the meeting, except when the shareholder attends the
meeting for the express purpose of objecting at the beginning thereof to the
transaction of any business because the meeting is not lawfully called or
convened, or by any shareholder who submits, either before or after the meeting,
a signed waiver of notice. Unless the Board, after the adjournment of a meeting,
shall fix a new record date for the adjourned meeting or unless the adjournment
is for more than thirty (30) days, notice of an adjourned meeting need not be
given if the place, date and time to which the meeting shall be adjourned are
announced at the meeting at which the adjournment is taken.
Section 5. QUORUM. Except as otherwise provided by law or, by the
Certificate of Incorporation of the Corporation, at all meetings of
shareholders, the holders of a majority of the outstanding shares of the
Corporation entitled to vote at the meeting shall he present in person or
represented by proxy in order to constitute a quorum for the transaction of
business.
Section 6. VOTING. Except as otherwise provided by law or by the
Certificate of Incorporation of the Corporation, at any meeting of the
shareholders every shareholder of record having the right to vote thereat shall
be entitled to one vote for every share of stock standing in his or her name as
of the record date and entitling him or her to so vote. A shareholder may vote
in person or by proxy. Except as otherwise provided by law or by the Certificate
of Incorporation of the Corporation, any corporate action taken by a vote of the
shareholders, other than the election of directors, shall be authorized by not
less than a majority of the votes cast at a meeting by the shareholders present
in person or by proxy and entitled to vote thereon. Directors shall be elected
as provided in Section 3 of Article III of these By-Laws. Written ballots shall
not be required for voting on any matter unless ordered by the Secretary of the
meeting.
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Section 7. PROXIES. Every proxy shall be executed in writing by the
shareholder or by his or her attorney in-fact, or otherwise as provided in the
General Corporation Law of the State of Delaware (the "General Corporation
Law").
Section 8. LIST OF SHAREHOLDERS. At least ten (10) days before every
meeting of shareholders, a list of the shareholders (including their addresses)
entitled to vote at the meeting and their record holdings as of the record date
shall be open for examination by any shareholder, for any purpose germane to the
meeting, during ordinary business hours at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list also shall be kept at and throughout the meeting, and may be inspected
by any shareholder who is present.
Section 9. CONDUCT OF MEETINGS. At each meeting of the shareholders,
the Chief Executive Officer of the Board or, in his or her absence, a director
chosen by a majority of the directors then in office shall act as Chief
Executive Officer of the meeting. The Secretary or, in his or her absence, any
person appointed by the Chief Executive Officer of the meeting shall act as
secretary of the meeting and shall keep the minutes thereof. Except as otherwise
provided by law, at any annual or special meeting of shareholders, only such
business shall be conducted as shall have been properly brought before the
meeting. Except as may be required by the Certificate of Incorporation or by
law, no business shall be brought before any meeting of shareholders of the
Corporation otherwise than as provided in this Section 9.
ARTICLE III
BOARD
Section l. NUMBER OF BOARD MEMBERS. The business, property and affairs
of the Corporation shall be managed under the direction of the Board, which
shall initially consist of seven directors. Directors need not be shareholders
of the Corporation. The initial Board shall consist of seven members elected in
accordance with that certain Shareholders Voting Agreement of even date hereof
("Shareholders Agreement") which Shareholder's Agreement provides that said
Board shall be as follows ("Initial Board"):
a. the President of the Company or, if there is no President, the then
most senior executive officer of the Company;
b. two designees of Inverness;
c. one designee of the Original Noteholders, who initially shall be
Shannon LeRoy;
d. two designees of the Bridge Noteholders, who initially shall be
Raymond E. Joslin and Robert Dorfman; and
e. one designee of the Director Loanholders, who initially shall be
Robert Sparacino;
all of which persons or designees shall hold office, subject to their earlier
removal in accordance with the Shareholders Agreement, the By-laws or applicable
corporate law, until their respective
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successors shall have been elected and shall have qualified. The number of
directors may be reduced or increased from time to time by action of the Board,
but no decrease may shorten the term of an incumbent director. When used in
these By-Laws, the phrase "entire Board" means the total number of directors
which the Corporation would have if there were no vacancies.
Section 2. NOMINATION. Except as otherwise set forth in the
Shareholders Agreement, as further delineated in Article III Section 1 above
only persons who are nominated in accordance with the procedures set forth in
these By-Laws shall be eligible to serve as directors the Corporation. Upon
expiration of the Shareholders Agreement, nominations of persons for election to
the Board may be made at a meeting of shareholders by or at the direction of the
Board.
Section 3. ELECTION AND TERM. Except as otherwise provided by law, by
the Certificate of Incorporation of the Corporation, these By-Laws or by the
Shareholders Agreement, the directors of the Initial Board shall be designated
by the applicable Shareholder Group, as defined in the Shareholders Agreement in
accordance with the terms of the Shareholder Agreement. The initial board shall
serve, in accordance with the Shareholders Agreement until their respective
successors shall have been elected and shall have been qualified, but in no
event longer than the term of the Shareholders Agreement (which Shareholders
Agreement shall terminate no later than three (3) years from the effective date
of the Plan (as defined therein). Directors shall be elected at the annual
meeting of the shareholders and the persons receiving a plurality of the votes
cast shall be so elected. Subject to a director's earlier death, resignation or
removal as provided in Sections 4 and 5 of this Article III, each director shall
hold office until his or her successor shall have been duly elected and shall
have qualified.
Section 4. REMOVAL. While the Shareholder Agreement remains in effect,
the removal from the Board (with or without cause) of any director (other than
the President) designated by the Shareholder Group entitled to make such
designation hereunder, upon written notice to the President (or his designee)
from such Shareholder Group requiring the removal of said director, but only
upon such written notice; provided that no director may be removed by any
persons not entitled to designate such director hereunder; and a director may be
removed at any time, with or without cause, by the holders of a majority of the
outstanding shares of the Corporation entitled to vote at an election of
directors.
Section 5. RESIGNATIONS. Any director may resign at any time by giving
written notice of his or her resignation to the Corporation. A resignation shall
take effect at the time specified therein or, if the time when it shall become
effective shall not be specified therein, immediately upon its receipt, and,
unless otherwise specified therein, the acceptance of a resignation shall not be
necessary to make it effective.
Section 6. VACANCIES. While the Shareholders Agreement remains in
effect, upon any vacancy in the Initial Board as a result of any individual
designated or otherwise serving as provided in the Shareholders Agreement
ceasing to be a member of the Board, whether by resignation or otherwise, the
election to the Board of an individual designated by the Shareholder Group that,
pursuant hereto, designated the individual who shall have so ceased to be a
member of
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the Board or in the case of the President and CEO, such officer's successor upon
termination of the Shareholders Agreement, except as otherwise provided by the
Certificate of Incorporation of the Corporation, any vacancy in the Board
arising from an increase in the number of directors or otherwise shall be filled
by the vote of a majority of the directors then in office. Subject to his or her
earlier death, removal or resignation as provided in Sections 4 and 5 of this
Article III, each director so elected shall hold office until his successor
shall have been duly elected and shall have qualified.
Section 7. PLACE OF MEETINGS. Except as otherwise provided in these
By-Laws, all meetings of the Board shall be held at such places, within or
without the State of Delaware, as the Board determines from time to time.
Section 8. ANNUAL MEETING. The annual meeting of the Board shall be
held either (a) without notice immediately after the annual meeting of
shareholders and in the same place, or (b) as soon as practicable after the
annual meeting of shareholders on such date and at such time and place as the
Board determines.
Section 9. REGULAR MEETINGS. Regular meetings of the Board shall be
held on such dates and at such places and times as the Board determines. Notice
of regular meetings need not be given, except as otherwise required by law.
Section 10. SPECIAL MEETINGS. Special meetings of the Board may be
called by the Chief Executive Officer and shall be called by the Chief Executive
Officer or the Secretary upon the written request of not less than three
directors. The request shall state the date, time, place and purpose or purposes
of the proposed meeting.
Section 11. NOTICE OF MEETINGS. Notice of each special meeting of the
Board (and of each annual meeting held pursuant to subdivision (b) of section 8
of this Article III) shall be given, not later than 24 hours before the meeting
is scheduled to commence, by the Chief Executive Officer or the secretary and
shall state the place, date and time of the meeting. Notice of each meeting may
be delivered to a director by hand or given to a director orally (whether by
telephone or in person) or mailed or telecopied to a director at his or her
residence or usual place of business, provided, however, that if notice of less
than 72 hours is given it may not be mailed. If mailed, the notice shall be
deemed to have been given when deposited in the United States mail, postage
prepaid, and if telecopied, the notice shall be deemed to have been given when
oral confirmation of receipt is given. Notice of any meeting need not be given
to any director who shall submit, either before or after the meeting, a signed
waiver of notice or who shall attend the meeting, except if such director shall
attend for the express purpose of objecting at the beginning thereof to the
transaction of any business because the meeting is not lawfully called or
convened. Notice of any adjourned meeting, including the place, date and time of
the new meeting, shall be given to all directors not present at the time of the
adjournment, as well as to the other directors unless the place, date and time
of the new meeting is announced at the adjourned meeting.
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Section 12. QUORUM. Except as otherwise provided by law or these
By-Laws, at all meetings of the Board a majority of the entire Board shall
constitute a quorum for the transaction of business, and the vote of a majority
of the directors present at a meeting at which a quorum is present shall be the
act of the Board. A majority of the directors present, whether or not a quorum
is present, may adjourn any meeting to another place, date and time.
Section 13. CONDUCT OF MEETINGS. At each meeting of the Board, the
secretary of the Board or, in his or her absence, a director chosen by a
majority of the directors present shall act as secretary of the meeting. The
secretary or, in his or her absence, any person appointed by the secretary of
the meeting shall act as secretary of the meeting and keep the minutes thereof.
The order of business at all meetings of the Board shall be as determined by the
secretary of the meeting.
Section 14. COMMITTEES OF THE BOARD. The Board, by resolution adopted
by a majority of the entire Board, may designate an audit committee,
compensation committee, executive committee and other committees, each
consisting of one (1) or more directors. Each committee (including the members
thereof) shall serve at the pleasure of the Board and shall keep minutes of its
meetings and report the same to the Board. The Board may designate one or more
directors as alternate members of any committee. Alternate members may replace
any absent or disqualified member or members at any meeting of a committee.
Except as limited by law, each committee, to the extent provided in the
resolution establishing it, shall have and may exercise all the powers and
authority of the Board with respect to all matters.
Section 15. OPERATION OF COMMITTEES. A majority of all of the members
of a committee shall constitute a quorum for the transaction of business, and
the vote of a majority of all the members of a committee present at a meeting at
which a quorum is present shall be the act of the committee. Each committee
shall adopt whatever other rules of procedure it determines for the conduct of
its activities.
Section 16. WRITTEN CONSENT TO ACTION IN LIEU OF A MEETING. If any
action required or permitted to be taken at any meeting of the Board or any
committee may be taken without a meeting if any members of the Board or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board or committee.
Section 17. MEETINGS HELD OTHER THAN IN PERSON. Members of the Board or
any committee may participate in a meeting of the Board or committee, as the
case may be, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
and speak with each other, and such participation shall constitute presence in
person at the meeting.
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ARTICLE IV
OFFICERS
Section 1. EXECUTIVE OFFICERS, ETC. The executive officers of the
Corporation shall be a Chief Executive Officer, President, Secretary and
Treasurer. The Board also may elect or appoint one or more Vice Presidents (any
of whom may be designated as Executive Vice Presidents, Senior Vice Presidents
or otherwise), and any other officers (including one or more Assistant
Treasurers and one or more Assistant Secretaries) it deems necessary or
desirable for the conduct of the business of the Corporation, each of whom shall
have such powers and duties as the Board determines. Any two or more offices may
be held by the same person, and no officer except the Chief Executive Officer
need be a director. Any officer may devote less than one hundred percent (100%)
of his working time to the activities as such if the Board so approves.
Section 2. DUTIES.
(a) THE CHIEF EXECUTIVE OFFICER . The Chief Executive Officer
shall be a member of the Board, the chief executive offier of the Corporation
and, if present, shall preside at all meetings of the shareholders and the
Board. The Chief Executive Officer shall have general management of the business
and affairs of the Corporation, subject to the control of the Board, and shall
perform such other duties as may from time to time be assigned to him or her by
the Board.
(b) PRESIDENT. The President shall, in the absence of the
Chief Executive Officer of the Board preside at all meetings of the shareholders
and the Board. The President shall report to the Chief Executive Officer of the
Board, and shall have such powers and duties as the Board or the Chief Executive
Officer assigns to him or her, and shall, in the absence or disability of the
Chief Executive Officer, perform the duties and exercise the power of the Chief
Executive Officer.
(c) VICE PRESIDENT. The Vice President or, if there shall be
more than one, the Vice Presidents, if any, in the order of their seniority or
in any other order determined by the Board, shall perform, in the absence or
disability of the President, the duties and exercise the powers of the President
and shall have such other powers and duties as the Board or the Chief Executive
Officer assigns to him or to her or to them.
(d) SECRETARY. Except as otherwise provided in these By-Laws
or as directed by the Board, the Secretary shall attend all meetings of the
shareholders and the Board; shall record the minutes of all proceedings in books
to be kept for that purpose; shall give notice of all meetings of the
shareholders and special meetings of the Board; and shall keep in safe custody
the seal of the Corporation and, when authorized by the Board, shall affix the
same to any corporate instrument. The Secretary shall have such other powers and
duties as the Board or the Chief Executive Officer assigns to him or her.
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(e) TREASURER. Subject to the control of the Board, the
Treasurer shall have the care and custody of the corporate funds and the books
relating thereto; shall perform all other duties incident to the office of
treasurer; and shall have such other powers and duties as the Board or the Chief
Executive Officer assigns to him or her.
Section 3. ELECTION; REMOVAL. Subject to his or her earlier death,
resignation or removal, as hereinafter provided, each officer shall hold his or
her office until his or her successor shall have been duly elected and shall
have qualified. Any officer may be removed at any time, with or without cause,
by the Board.
Section 4. RESIGNATIONS. Any officer may resign at any time by giving
written notice of his or her resignation to the Corporation. A resignation shall
take effect at the time specified therein or, if the time when it shall become
effective shall not be specified therein, immediately upon its receipt, and,
unless otherwise specified therein, the acceptance of a resignation shall not be
necessary to make it effective.
Section 5. VACANCIES. If an office becomes vacant for any reason, the
Board or the shareholders may fill the vacancy, and each officer so elected
shall serve for the remainder of his or her predecessor's term and until his or
her successor shall have been elected or appointed and shall have qualified.
ARTICLE V
PROVISIONS RELATING TO STOCK CERTIFICATES AND SHAREHOLDERS
Section 1. CERTIFICATES. Certificates for the Corporation's capital
stock shall be in such form as required by law and as approved by the Board.
Each certificate shall be signed in the name of the Corporation by the Chief
Executive Officer or the President or any Vice President and by the Secretary,
the Treasurer or any Assistant Secretary or any Assistant Treasurer and shall
bear the seal of the Corporation or a facsimile thereof. If any certificate is
countersigned by a transfer agent or registered by a registrar, other than the
Corporation or its employees, the signature of any officer of the Corporation
may be a facsimile signature. In case any officer, transfer agent or registrar
who shall have signed or whose facsimile signature is placed on any certificate
shall have ceased to be such officer, transfer agent or registrar before the
certificate shall be issued, it may nevertheless be issued by the Corporation
with the same effect as if he or she were such officer, transfer agent or
registrar at the date of the issue.
Section 2. LOST CERTIFICATES, ETC. The Corporation may issue a new
certificate for shares in place of any certificate theretofor issued by it,
alleged to have been lost, mutilated, stolen or destroyed, and the Board may
require the owner of the lost, mutilated, stolen or destroyed certificate, or
his or her legal representatives, to make an affidavit of that fact and to give
the Corporation a bond in such sum as it may direct as indemnity against any
claim that may be made against the Corporation on account of the alleged loss,
mutilation, theft or destruction of the certificate or the issuance of a new
certificate.
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Section 3. TRANSFERS OF SHARES. Transfers of shares shall be registered
on the books of the Corporation maintained for that purpose after due
presentation of the stock certificates therefor appropriately endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer.
Section 4. RECORD DATE. For the purpose of determining the shareholders
entitled to notice of or to vote at any meeting of shareholders or an
adjournment thereof, or for the purpose of determining shareholders entitled to
receive payment of any dividend or other distribution or the allotment of any
rights, or for the purpose of any other action, the Board may fix a record date,
which record date shall not precede the date upon which the resolution fixing
the record date is adopted by the Board, and which record date shall not be more
than 60 nor less than 10 days before the date of any such meeting and shall not
be more than 60 days prior to any other action.
ARTICLE VI
INDEMNIFICATION
Section 1. INDEMNIFICATION. The Corporation shall, to the fullest
extent permitted by the General Corporation Law (including, without limitation,
Section 145 thereof) or other provisions, of the laws of Delaware relating to
indemnification of directors, officers, employees and agents, as the same may be
amended and supplemented from time to time, indemnify any and all such persons
whom it shall have power to indemnify under the General Corporation Law or such
other provisions of law.
Section 2. STATUTORY INDEMNIFICATION. Without limiting the generality
of Section 1 of this Article VI, to the fullest extent permitted, and subject to
the conditions imposed by law, and pursuant to Section 145 of the General
Corporation Law unless otherwise determined by the Board of Directors:
(a) the Corporation shall indemnify any person who was or is a
party or is threatened to be made a party, to any threatened, pending or
completed action, suit or proceeding whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that such person is or was a director, officer, employee or
agent of the of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against reasonable
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding, if such person acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful; and
(b) the Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that such person is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the
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request of the Corporation as director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
reasonable expenses (including attorneys' fees) actually and reasonably incurred
by him in connection with the defense or settlement of such action or suit if
such person acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Corporation, except as otherwise
provided by law.
Section 3. INDEMNIFICATION BY RESOLUTION OF SHAREHOLDERS OR DIRECTORS
OR AGREEMENT. To the fullest extent permitted by law, indemnification may be
granted, and expenses may be advanced, to the persons described in Section 145
of the General Corporation Law or other provisions of the laws of Delaware
relating to indemnification and advancement of expenses, as from time to time
may be in effect, by (a) a resolution of shareholders, (b) a resolution of the
Board, or (c) an agreement providing for such indemnification and advancement of
expenses; provided that the person being indemnified provides to the Corporation
an undertaking to repay the amount of any advancement of expenses if it shall be
ultimately determined that such person is not entitled to be indemnified by the
Corporation; provided, further, that no indemnification may be made to or on
behalf of any person if a judgment or other final adjudication adverse to the
person establishes that such person's acts were committed in bad faith or were
the result of active and deliberate dishonesty and were material to the cause of
action so adjudicated, or that such person personally gained in fact a financial
profit or other advantage to which such person was not legally entitled.
Section 4. GENERAL. It is the intent of this Article VI to require the
Corporation to indemnify the persons referred to herein for judgments, fines,
penalties, amounts paid in settlement and expenses (including attorneys' fees),
and to advance expenses to such persons, in each and every circumstance in which
such indemnification and such advancement of expenses could lawfully be
permitted by express provision of By-Laws, and the indemnification and expense
advancement provided by this Article VI shall not be limited by the absence of
an express recital of such circumstances. The indemnification and advancement of
expenses provided by, or granted pursuant to, these By-Laws shall not be deemed
exclusive of any other rights to which a person seeking indemnification or
advancement of expenses may be entitled, whether as a matter of law, under any
provision of the Certificate of Incorporation of the Corporation or these
By-Laws, by agreement, by vote of shareholders or disinterested directors of the
Corporation or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office.
Section 5. INDEMNIFICATION BENEFITS. Indemnification pursuant to these
By-Laws shall inure to the benefit of the heirs, executors, administrators and
personal representatives of those entitled to indemnification.
ARTICLE VII
GENERAL PROVISIONS
Section 1. DIVIDENDS, ETC. To the extent permitted by law, the Board
shall have full power and discretion, subject to the provisions of the
Certificate of Incorporation of the Corporation and the terms of any other
corporate document or instrument binding upon the Corporation, to determine
what, if any, dividends or distributions shall be declared and paid or made.
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Section 2. SEAL. The Corporation's seal shall be in such form as is
required by law and as shall be approved by the Board.
Section 3. FISCAL YEAR. The fiscal year of the Corporation shall be
determined by the Board.
Section 4. VOTING SHARES IN OTHER CORPORATIONS. Unless otherwise
directed by the board, shares in other corporations which are held by the
Corporation shall be represented and voted only by the Chief Executive Officer
of the Board or by a proxy or proxies appointed by him or her.
ARTICLE VIII
AMENDMENT
By-Laws may be made, altered or repealed by the Board, subject to the
right of shareholders to alter or repeal any By-Laws made by the Board.
<PAGE>
EXHIBIT 6.4A
CONDITIONAL DISTRIBUTION AGREEMENT
THIS CONDITIONAL DISTRIBUTION AGREEMENT ("Agreement") is made effective
as of the Effective Date of the Plan (as defined below) by and among RAYMOND
JOSLIN, DAVID HALE SMITH II CHARITABLE REMAINDER TRUST, INTERIM ADVANTAGE FUND,
IAN R. KAHN, JUSTIN WERNICK, EDWARD BENJAMIN, EDWARD BENJAMIN M.D. MONEY
PURCHASE PENSION PLAN, ALAN N. PARNES, LEE H. SILVERSTEIN, TRI VENTURES, ALAN
NAPACK, MICHAEL ZUCKERMAN AND HILLARY DAVIS, CRESCENT CAPITAL COMPANY LLC,
STEVEN GRASTEIN, RAY INGLEBY, MARSHALL MANLEY, CURRAN PARTNERS, JOHN D. SHEPERD
AND PHYLLIS AND HOWARD SILVERMAN, ROBERT SPARACINO, EQUITAS L.P., BRIL PROFIT
SHARING PLAN, AND BRIL MONEY PURCHASE PLAN, LOIS HORN, ANTOINETTE ROSE, THOMAS
O'GRADY, DAVIS H. SMITH II, DENNIS AND TERRI NESTA AND BRUCE MACDONALD
(collectively, the "Class 4A Shareholders" and individually a "Class 4A
Shareholder") and POWER DESIGNS, INC., a Delaware corporation with its principal
place of business at 14 Commerce Drive , Danbury, CT 06813 ("Company").
PREMISES. The Company is a public company and the survivor of a merger
by and between Power Designs, Inc. and PDIXF Acquisition Corporation ("Merger")
accomplished pursuant to that certain Amended Plan of Reorganization for Power
Design, Inc. and PDIXF Acquisition Corporation dated November 23, 1999 ("Plan"),
as confirmed by order of the United States Bankruptcy Court for the District of
Connecticut ("Bankruptcy Court") in IN RE: POWER DESIGNS, INC. AND PDIXF
ACQUISITION CORPORATION (Case Nos. 98-50117 and 98-50118, jointly administered)
pending in the Bankruptcy Court ("Bankruptcy Action"). In settlement of their
Allowed Claims, the Class 4A Shareholders have received or shall receive
pursuant to the Plan common stock of the Company to be issued post-merger,
("Class 4A Stock"), pursuant to the Plan and the terms hereof and conditional
distributions of the Excess Net Cash Flow of the Company as provided herein.
NOW, THEREFORE, in consideration of the foregoing, the parties hereto
hereby agree as follows:
1. CONDITIONAL DISTRIBUTION. In addition to the one time pro rata
distribution of Class 4A Stock as further set forth in the Plan, each Class 4A
Shareholder shall be entitled, subject to the conditions set forth herein, to an
annual distribution equal to ten (10%) percent of one-half of their Unsecured
Allowed Claims (as defined in the Plan) from the Excess Net Cash Flow of the
Company for each fiscal year of the Company ("Conditional Distribution"). For
purposes hereof, the "Net Cash Flow" for a fiscal year shall be equal to the
Company's net after-tax income plus depreciation and amortization, less capital
expenses for said year, calculated on a basis consistent with prior fiscal years
and in accordance with general accepted accounting principles, and "Excess Net
Cash Flow" shall be that portion of Net Cash Flow for any fiscal year in excess
of Four Hundred Thousand ($400,000) Dollars. For
<PAGE>
purposes hereof "capital expenses" shall not include the purchase of any
equipment that involves lease or other purchase financing for which the
Company's cash flow is only reduced by future monthly payments.
2. TERM. The Conditional Distributions shall be made within three (3)
months from the close of each fiscal year commencing with the end of fiscal year
2001 and shall continue until termination of this Agreement in accordance with
Section 7 hereof. Notwithstanding the foregoing, no Conditional Distributions or
accruals therefor shall occur for the six (6) month period commencing with the
Effective Date of the Plan (as defined therein).
3. ACCRUAL OF DISTRIBUTION. Subject to the limitations set forth
herein, to the extent that there is insufficient Excess Net Cash Flow in any
given fiscal year to pay all or any part of a Class 4A Shareholder's Conditional
Distribution for that year, any amount not paid shall carry over to the next
fiscal year and, if still unpaid, to each subsequent fiscal year thereafter
during the term hereof, until paid in full, provided, however, that the total
amount of Conditional Distributions due a Class 4A Shareholder shall never
exceed, at any one time, in the aggregate, twenty (20%) percent of one half of
that Shareholder's Allowed Claims. Any portion of the Conditional Distributions
due in any fiscal year, whether arising during that year or accruing from prior
fiscal years, in excess of twenty (20%) percent of one half of a Class 4A
Shareholder's Allowed Claims shall be deemed permanently waived by said
Shareholder with the Company thereafter having no obligation for payment thereof
and the Shareholder having no right with respect thereto ("Waived
Distribution"). No interest shall accrue on any payments or accrued payments
hereunder.
4. FURTHER CONDITIONS TO DISTRIBUTION. Payment of Conditional
Distributions shall be further conditioned upon there existing no payment
defaults under the Inverness Secured Note (as defined in the Plan). In the event
of any such payment default, the Conditional Distributions then due shall carry
over to the next fiscal year (or thereafter while such default exists) in
accordance with Paragraph 3 hereof except to the extent (a) said payment default
is deemed cured or is otherwise expressly waived by Inverness whereupon the
Conditional Distributions shall be made in accordance herewith (to the extent of
the Excess Net Cash Flow), or (b) Inverness accelerates the obligations
evidenced by the Inverness Secured Note with respect thereto whereupon no
Conditional Distributions or portions thereof shall be made until Inverness has
been repaid in full.
5. LIQUIDATION OF COMPANY. If, during the term hereof, the Company
liquidates its assets for any reason whatsoever, the following events shall
occur:
(a) The Class 4A Shareholders shall each receive distributions of the
Net Liquidation Proceeds of the Company, in an amount equal to up to
one half of the value of that Shareholder's Allowed Claim ("Liquidation
Payment"). For purposes hereof, "Net Liquidation Proceeds" shall
consist of the proceeds arising upon the liquidation of the Company
after payment (i) of all post confirmation secured and unsecured
creditors, including Inverness on account of the Inverness Secured
Note, (ii) all costs normally associated with said liquidation, but
prior to any payments to equity holders in the
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Company based upon their equity interest therein and (iii) all
outstanding and accrued Conditional Distributions (less any Waived
Distribution);
(b) Immediately upon receipt of said Liquidation Payment, each Class 4A
Shareholder's equity position in the Company shall be reduced by the
percentage of that Class 4A Shareholder's total Allowed Claim repaid
from the Net Liquidation Proceeds. To effectuate the terms hereof, the
Articles of Incorporation of the Company have been amended to provide,
among other things, that upon a Liquidation Payment to a Class 4A
Shareholder in accordance herewith, the percentage of Class 4A Stock
issued to that Shareholder equal to the percentage of the Allowed Claim
repaid shall be automatically cancelled, said Class 4A Shareholder
hereby agreeing to cooperate with the Company in the reduction of its
Class 4A Stock including, but not limited to, surrendering its stock
certificate to be cancelled by the Company and replaced by a new stock
certificate representing the reduced number of shares; and
(c) The Net Liquidation Proceeds remaining after payment in accordance
with Section 5(a) hereof shall then be distributed, pro rata, to all
equity holders, based upon each equity holder's percentage of the total
number of issued and outstanding stock (whether Common or Class 4A) in
the Company and after taking into consideration the cancellation of a
portion of Class 4A Stock in accordance with Section 5(b) above.
6. TERMINATION OF AGREEMENT. Notwithstanding anything herein to the
contrary, this Agreement shall be null and void and of no further force and
effect upon the earlier to occur of (a) the Company raising gross equity
(whether public or private) equal to or in excess of Five Million ($5,000,000)
Dollars; (b) the merger of the Company with or into another entity, provided,
however, that a majority of the Class 4A Shareholders vote in favor of the
mergers; or (c) the liquidation of the Company and distribution pursuant thereto
as set forth in Paragraph 5 hereof.
7. SALE OF STOCK. Each Class 4A Shareholder hereby acknowledges and
agrees that it will not and cannot trade, convey, sell or transfer (other than
by devise) shares of Class 4A Stock until such time as this Agreement terminates
pursuant to Section 7 hereof.
8. CONSTRUCTION. The provisions of this Agreement shall be in addition
to those of the Plan, both of which shall be construed as complementary to each
other. To the greatest extent possible, the provisions of this Agreement shall
be construed as being in addition to and not in lieu of the provisions thereof.
9. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware.
10. PRIOR AGREEMENT SUPERSEDED. This Agreement and the Plan, together
with all other instruments, documents and agreements contemplated hereby or
related hereto, constitute the entire understanding agreement between the
parties hereto pertaining to the subject matter hereof and completely and fully
supersede all prior and contemporaneous understandings or agreements, both
written and oral.
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11. AMENDMENT. No amendment, modification, waiver or termination of the
terms of this Agreement shall be valid unless made in writing and signed by the
Company and by Class 4A Shareholders representing a majority of the issued and
outstanding Class 4A Stock. Any amendment agreed upon by a majority of the
issued and outstanding Class 4A Shareholders shall be binding upon and
enforceable against all Class 4A Shareholders.
12. ADDITIONAL DOCUMENTS. The parties hereto agree to execute such
further documents or instruments as are necessary to effectuate this Agreement.
13. BINDING EFFECT. This Agreement is binding and inures to the benefit
of each of the parties hereto and their heirs, successors and assigns.
14. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, but in such event each counterpart shall constitute an original
and all of such counterparts shall constitute but one and the same agreement.
15. NOTICE. Notices required by this Agreement to be sent to each party
shall be sufficient when sent by fax, the next business day if sent by overnight
courier or three days after being sent if by registered or certified mail to the
addresses set forth on Schedule A attached hereto and made a part hereof (unless
otherwise changed in accordance with this paragraph).
16. INTERPRETATION. The term "Class 4A Shareholder" and any pronoun
referring thereto as used herein shall be construed in the masculine, feminine
or neuter as the context may require. The singular includes the plural and the
plural includes the singular. "Any" means any and all.
17. DEEMED EFFECTIVE. This Agreement is incorporated by reference into
and made a part of the Plan and is binding upon all parties hereto, their heirs,
successors and assigns, without need for the execution hereof by any said
parties and without requiring any further action to be taken with respect
hereto.
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EXHIBIT 7.1
PLAN AND AGREEMENT OF MERGER
BETWEEN
POWER DESIGNS, INCORPORATED
("SURVIVING CORPORATION")
AND
PDIXF ACQUISITION CORPORATION
("TERMINATING CORPORATION")
---------------------
THIS PLAN AND AGREEMENT OF MERGER, dated as of the _____ day of
________________, __________ (hereinafter referred to as the "Agreement of
Merger") is by and between POWER DESIGNS, INCORPORATED a corporation organized
and existing under the laws of the State of Delaware ("Surviving Corporation")
and PDIXF ACQUISITION CORPORATION, a corporation organized and existing under
the laws of the State of New York ("Terminating Corporation").
W I T N E S S E T H:
WHEREAS, the Terminating Corporation is the wholly-owned subsidiary of
the Surviving Corporation, organized and existing under the laws of the State of
New York, and the Surviving Corporation is a corporation organized and existing
under the laws of the State of Delaware, and the Business Corporation Act of the
State of Delaware as amended (hereinafter the "Delaware Act") and the New York
Business Corporation Law as amended (hereinafter the "New York Act") both permit
a merger of such corporations in the manner herein contemplated; and
WHEREAS, both the Terminating Corporation and the Surviving Corporation
have filed for bankruptcy protection under Chapter 11 of the United States
Bankruptcy Code, as amended in the United States Bankruptcy Court District of
Connecticut, Bridgeport Division (IN RE: POWER DESIGNS, INCORPORATED AND PDIXF
ACQUISITION CORPORATION (Case Nos. 98-50117 and 98-50118, jointly administered)
(collectively, "Bankruptcy Action"); and
WHEREAS, pursuant to said Amended Plan of Reorganization for Power
Designs, Incorporated and PDIXF Acquisition Corporation dated November 23, 1999
as confirmed by order of the Bankruptcy Court ("Bankruptcy Plan"), the
Terminating Corporation is to be merged with and into the Surviving Corporation
("Merger"), the Certificate of Incorporation and Bylaws of the Surviving
Corporation are to be amended, the stock certificates of both corporations
cancelled and new shares in the Surviving Corporation issued, all in accordance
with the Plan; and
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WHEREAS, the Merger is being effectuated pursuant to the Bankruptcy
Action and the Bankruptcy Plan (a copy of which is on file with the Surviving
Corporation at its principal place of business) and pursuant thereto, the
respective Boards of Directors of the Surviving Corporation and the Terminating
Corporation are deemed to have consented thereto;
NOW THEREFORE, the Surviving Corporation and the Terminating
Corporation (hereinafter collectively referred to as the "Constituent
Corporations"), acting herein by the duly authorized officers of the Constituent
Corporations, have agreed and do hereby agree with each other as follows:
Section 1. The Terminating Corporation shall be and it hereby is merged
with and into the Surviving Corporation ("Merger"), which Surviving Corporation
shall survive such Merger and shall continue to be governed by the laws of the
State of Delaware. In connection therewith, the Terminating Corporation shall,
as and when requested by the Surviving Corporation, execute and deliver or cause
to be executed and delivered all such deeds and other instruments, and shall
take or cause to be taken all such further action, as the Surviving Corporation
or its successors and assigns may deem necessary or desirable in order to vest
in and confirm to the Surviving Corporation, its successors and assigns, title
to and possession of all the property, rights, privileges, powers and franchises
to which it is entitled by virtue of this Merger. The separate existence of the
Terminating Corporation shall cease as of the Merger Effective Date (as defined
below). The Surviving Corporation shall thereupon and thereafter possess all of
the rights, privileges, immunities and franchises, of a public and private
nature, of the Surviving Corporation and the Terminating Corporation; and all
property, real, personal and mixed, and all debts due on whatever account, and
all other choices in action, and all and every other interest, shall be taken
and transferred to and vested in the Surviving Corporation without further act
or deed.
Section 2. The Merger shall become effective on the later to occur of
the close of business on the date upon which the filing of a Certificate of
Merger with the offices of the Secretary of State of Delaware and New York in
accordance with the Acts is completed and is herein referred to as the "Merger
Effective Date". This Merger shall be in accordance with and pursuant to the
Acts and the terms of the Bankruptcy Plan. The Effective Date of the Plan shall
be as defined therein.
Section 3. There shall be two (2) classes of authorized capital stock
of the Surviving Corporation following the Merger Effective Date totaling
14,000,000 and designated, respectively, as the "Common Stock" and the
"Preferred Stock". The authorized Common Stock shall be 10,000,000 shares at
$.01 par value per share and the authorized Preferred Stock shall be 4,000,000
shares at $.01 par value per share, all unless and until the same shall be
changed in accordance with the laws of the State of Delaware.
Section 4. The name of the Surviving Corporation shall remain "POWER
DESIGNS, INCORPORATED" and the Certificate of Incorporation of the Surviving
Corporation, as in effect immediately prior to the Merger Effective Date shall
be and hereby is amended as of said Merger Effective Date, in accordance with
the Bylaws, and Certificate of Incorporation of the
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Surviving Corporation and the Delaware Act, in the manner set forth as EXHIBIT
7.2 of the Bankruptcy Plan ("Amended Certificate") which Amended Certificate is
incorporated herein by reference and which, as so amended, shall be and continue
to be the Certificate of Incorporation of the Surviving Corporation until
otherwise further amended.
Section 5. The Bylaws of the Surviving Corporation in effect
immediately prior to the Merger Effective Date shall be and hereby are amended
as of the Merger Effective Date, in accordance with the provisions of such
Bylaws, the Act and the Certificate of Incorporation of the Surviving
Corporation, in the manner attached hereto as EXHIBIT A ("Amended Bylaws") which
Amended Bylaws are incorporated herein by reference and which, as so amended,
shall be and continue to be the Bylaws of the Surviving Corporation until
otherwise further amended.
Section 6. The directors of the Surviving Corporation as of the Merger
Effective Date shall be as set forth in the Bankruptcy Plan, all of whom shall
hold their directorships until their respective terms, as set forth in that
certain Shareholders Voting Agreement of even date herewith ("Shareholders
Agreement") have expired and their respective successors have been elected or
qualified or until their tenure is otherwise terminated in accordance with the
Shareholders Agreement or the Amended Bylaws. The officers of the Surviving
Corporation after the Merger Effective Date shall be as determined by the
directors in accordance with the Amended Bylaws, all of whom shall hold office
until their respective successors have been elected or qualified or until their
tenure is otherwise terminated in accordance with the Shareholders Agreement or
the Amended Bylaws. In addition, the directors and officers of the Terminating
Corporation upon the Merger Effective Date, shall deemed to have resigned
therefrom.
Section 7. The Terminating Corporation and the Surviving Corporation
hereby agree that they will cause to be executed and filed and/or recorded any
document or documents prescribed by the laws of the States of New York and
Delaware and that they will cause to be performed all acts necessary to
effectuate the Merger.
Section 8. Notwithstanding the foregoing, this Agreement of Merger may
be terminated at any time prior to the Merger Effective Date by the Board of
Directors of either of the Constituent Corporations unless otherwise prohibited
by the Bankruptcy Plan.
Section 9. The issued and outstanding capital stock of the Surviving
Corporation immediately following the Merger Effective Date is 1,999,999 shares
of common stock at $.01 which shall be issued as provided in the Bankruptcy
Plan. All previously issued and outstanding shares of capital stock and all
rights of any kind to acquire capital stock prior to the Merger Effective Date
shall be null and void and of no further force or effect.
Section 10. Upon the Merger Effective Date the Terminating Corporation
shall cease and no shares of capital stock thereof shall remain issued.
Section 11. The parties hereto agree that they shall cause to be
executed and filed, with the Delaware Secretary of State and the New York
Secretary of State, Certificates of Merger ("Certificate of Merger") in such
form and containing such information as is required by the
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respective Acts. The parties hereto further agree that they shall cause to be
executed and, if necessary, filed, any other agreements or documents prescribed
by the laws of the State of Delaware or New York or otherwise, as are deemed
necessary to effectuate the Merger and that they will cause to be performed all
acts deemed necessary to effectuate the Merger.
Section 12. At and after the Merger Effective Date, the Surviving
Corporation shall succeed to and possess, without further act or deed, all of
the estate, rights, privileges, power, and franchises, both public and private,
and all of the property, real, personal, and mixed, of each of the parties
hereto; all debts due to the Terminating Corporation or whatever account shall
be vested in the Surviving Corporation; all claims, demands, property, rights,
privileges, powers and franchises and every other interest of either of the
parties hereto shall be as effectively the property of the Surviving Corporation
as they were of the respective parties hereto; the title to any real estate
vested by deed or otherwise in the Terminating Corporation shall not revert or
be in any way impaired by reason of the Merger, but shall be vested in the
Surviving Corporation; subject to the limitations imposed by the Bankruptcy
Action and the Bankruptcy Plan, all rights of creditors and all liens upon any
property of either of the parties hereto shall be preserved unimpaired, limited
in lien to the property affected by such lien at the effective time of the
merger; in accordance with the terms of the Bankruptcy Plan; subject to the
limitations imposed by the Bankruptcy Action and the Bankruptcy Plan, all debts,
liabilities, and duties of the respective parties hereto shall thenceforth
attach to the Surviving Corporation and may be enforced against it to the same
extent as if such debts, liabilities, and duties had been incurred or contracted
by it; and subject to the limitations imposed by the Bankruptcy Action and the
Bankruptcy Plan, the Surviving Corporation shall indemnify and hold harmless the
officers and directors of each of the parties hereto against all such debts,
liabilities and duties and against all claims and demands arising out of the
merger. The Surviving Corporation agrees that it may be served with process in
the State of New York in any proceeding for enforcement of any obligation of the
Terminating Corporation arising from the Merger.
Section 13. This Agreement of Merger is incorporated by reference into
and made a part of the Bankruptcy Plan and is binding upon all parties hereto
without need for execution hereof by any said parties and without requiring any
further action to be taken with respect thereto.
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EXHIBIT 7.2
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
POWER DESIGNS, INCORPORATED
(a Delaware corporation)
The undersigned, a natural person and the President of POWER DESIGNS
INCORPORATED, for the purpose of amending and restating that certain Certificate
of Incorporation for said corporation originally filed with the State of
Delaware on April 12, 1995 and pursuant to the provisions and subject to the
requirements of the laws of the State of Delaware (particularly Chapter 1, Title
8 of the Delaware Code and the acts amendatory thereof and supplemental thereto,
and known, identified and referred to as the "General Corporation Law of the
State of Delaware"), hereby certifies that:
FIRST: The name of this corporation (hereinafter, the "Company") is:
POWER DESIGNS, INCORPORATED
SECOND: The address of the registered office of the corporation in the State of
Delaware is 1209 Orange Street, City of Wilmington, County of New Castle, and
the name of its registered agent at that address is the Corporation Trust
Company.
THIRD: The purpose of this corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
FOURTH: The Company is to have perpetual existence.
FIFTH:
A. The Company is authorized, at the discretion of the Board of
Directors, to issue two classes of stock to be designated, respectively, "Common
Stock" and "Preferred Stock." The total number of shares which the Company is
authorized to issue is Fourteen Million (14,000,000) shares, of which Ten
Million (10,000,000) shares may be issued as Common Stock having a par value of
One Cent ($.01) per share (the "Common Stock") and Four Million (4,000,000) may
be issued as Preferred Stock (the "Preferred Stock" having a par value of One
Center ($.01) per share.
B. The Common Stock and the Preferred Stock may be issued from time to
time in one or more series at the discretion of the Board of Directors. Except
as provided in this Article FIFTH , the Board of Directors is hereby authorized
to fix or alter the dividend rights, dividend rate, conversion rights, voting
rights, rights and terms of redemption (including sinking fund
<PAGE>
provisions), the redemption price or prices, the liquidation preferences of any
wholly unissued series of Common Stock or of Preferred Stock, and the number of
shares constituting any such series and the designation thereof, of any of them;
and to increase or decrease the number of shares of any series subsequent to the
issue of shares of that series, but not below the number of shares of such
series then outstanding. In case the number of shares of any series shall be so
decreased, the shares constituting such decrease shall resume the status which
they had prior to the adoption of the resolution originally fixing the number of
shares of such series.
C. The rights, preferences, privileges, restrictions and other matters
relating to the Common Stock are as follows:
1. DIVIDEND RIGHTS.
Holders of Common Stock shall be entitled to receive cash dividends,
when, as and if declared by the Company's Board of Directors (the "Board"), but
only out of funds that are legally available therefor, at the rate set by the
Board. Dividends if declared must be declared and paid on all of the Common
Stock, and if so declared on any of the Common Stock, then any payment with
respect to such dividends shall be made ratably among the holders of the Common
Stock, in proportion to the dividend that each holder would have been entitled
to receive.
2. VOTING RIGHTS.
Except as otherwise provided by law or by this Certificate of
Incorporation, the holders of the Common Stock and the Preferred Stock shall
vote together as a class on all matters to be voted on by the stockholders of
the Company. Except as provided otherwise by this Certificate of Incorporation,
each holder of Common Stock shall be entitled to one vote per share held. All
matters submitted to the stockholders for approval may be approved by the vote
of the holders of a majority of the shares of the capital stock of the Company
entitled to vote thereon, or, if class voting is required by law, by the vote of
the holders of a majority of each class of the Company's capital stock. No
outstanding share of any class of stock which is denied voting power under the
provisions of the Certificate of Incorporation shall entitle the holder thereof
to the right to vote at any meeting of stockholders, except as the provisions of
paragraph (c)(2) of Section 242 of the General Corporation Law of the State of
Delaware shall otherwise require.
3. OTHER RIGHTS.
(a) Other rights shall be determined by the Board of Directors of the
Company as provided in Article FIFTH : B. hereof. The Company shall not create
class voting rights for the holders of different series of Common Stock and the
rights and preferences established by the Board of Directors shall be void and
unenforceable to the extent they may create by law class voting rights for any
said series.
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(b) The Company shall not and does not intend to issue any shares of
non-voting stock.
(c) Subject to Article SIXTH hereof, holders of Common Stock shall be
entitled to share in the assets available for distribution to stockholders upon
the dissolution or liquidation of the Company, ratably in proportion to the
number of shares in the Company held by each such holder.
SIXTH: Upon payment of the Liquidation Payment (as defined in that certain
Conditional Distribution Agreement of even date herewith) to a stockholder, in
accordance therewith, the percentage of stock issued to that stockholder equal
to the percentage of that stockholder's Allowed Claim (as defined in the
Conditional Distribution Agreement), is hereby automatically deemed canceled
immediately upon said payment, without any further action required by the
Company, with the then existing stock certificate to be cancelled on the books
of the Company and new certificate(s) representing the reduced number of shares
to be issued and to be delivered to said stockholder upon its surrender of the
prior certificate.
SEVENTH: The management of the business and the conduct of the affairs of the
Corporation shall be vested in its Board of Directors. The number of directors
which shall constitute the whole Board of Directors shall be fixed by, or in the
manner provided in, the Amended and Restated Bylaws. The phrase "whole Board"
and the phrase "total number of directors" shall be deemed to have the same
meaning, to wit, the total number of directors which the Corporation would have
if there were no vacancies.
EIGHTH: Elections of directors need not be by written ballot unless required by
the bylaws of the Corporation.
NINTH: The Board of Directors shall have the power to adopt, amend and repeal
the bylaws of the Corporation.
TENTH: No director shall be personally liable to the Company or its stockholders
for monetary damages for breach of fiduciary duty as a director, provided that
this provision shall not eliminate or limit the liability of a director (i) for
any breach of the director's duty of loyalty to the Company or its stockholders;
(ii) for acts or omissions not in good faith or which involve international
misconduct or a knowing violation of law; (iii) under Section 174 of the General
Corporation Law of the State of Delaware, as the same may be amended from time
to time; or (iv) for any transaction from which the director derived an improper
personal benefit. Any repeal or modification of this Article TENTH shall be
prospective only and shall not adversely affect any elimination or limitation of
the personal liability of a director of the Company existing at the time of such
repeal or modification.
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TENTH:
(A) The Company shall, indemnify any person who was or is a party or is
threatened to be made a party to, or testifies in, any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative in nature, his or her heirs, executors or assigns, by reason of
the fact that such person is or was, at any time prior to or during which this
Article TENTH is in effect, a director or officer of the Company, (or, if the
Company determines to indemnify, an employee or agent), or is or was, at any
time prior to or during which this Article TENTH is in effect, serving at the
request of the Company as a director, officer, employee or agent or in any
similar capacity of any other company, partnership, joint venture, employee
benefit plan, trust or other enterprise, against expenses (including attorney's
fees), judgments, fines, penalties, amounts paid in settlement and other
liabilities actually and reasonably incurred by such person in connection with
such action, suit or proceeding to the full extent permitted by law, and the
Company may adopt Bylaws or enter into agreements with any such person for the
purpose of providing for such indemnification.
(B) Expenses (including attorney's fees) incurred by a director or
officer in appearing at, participating in or defending any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, shall be paid by the Company at reasonable intervals in
advance of the final disposition of such action, suit or proceeding, upon
receipt by the Company of a written undertaking by or on behalf of the director
or officer to repay such amount if it ultimately shall be determined that such
person is not entitled to be indemnified by the Company as provided herein. Such
expenses (including attorney's fees) incurred by other employees and agents
shall be paid upon such terms and conditions as the Board of Directors deems
appropriate.
(C) It is the intent of the Company to indemnify the persons referred
to in this Article ELEVENTH to the fullest extent permitted by law with respect
to any action, suit or proceeding arising from events that occur prior to or
during the time in which this Article ELEVENTH is in effect. The indemnification
provided by this Article ELEVENTH shall not be deemed exclusive of any other
rights to which those seeking indemnification may be or become entitled under
any law, bylaw, agreement, vote of stockholders or disinterested directors, or
otherwise, or under any policy or policies of insurance purchased and maintained
by the Company on behalf of any such director, officer, employee or agent, both
as to action in such person's official capacity and as to action in another
capacity while holding office, and shall continue as to a person who has ceased
to be a director, officer, employee or agent and shall inure to the benefit of
the heirs, executors and administrators of such director, officer, employee or
agent.
(D) The indemnification provided by this Article ELEVENTH shall be
subject to all valid and applicable laws, and, in the event that this Article
ELEVENTH or any of the provisions hereof or the indemnification contemplated
hereby are found to be inconsistent with or contrary to any such valid laws, the
latter shall be deemed to control and this Article ELEVENTH shall be regarded as
modified accordingly, and, as so modified, shall continue in full force and
effect.
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TWELFTH: Each certificate representing shares of stock in the Company now or
hereafter issued by the Company shall have endorsed thereon the following
legend:
"The securities represented by this Certificate have not been
registered under the Securities Act of 1933, as amended, and are issued
pursuant to an exemption provided by 11 U.S.C. ss. 1145 under an order
confirming the Amended Plan of Reorganization for Power Designs,
Incorporated and PDIXF Acquisition Corporation ("Plan") in cases
entitled IN RE: POWER DESIGNS INCORPORATED, DEBTOR, AND PDIXF
ACQUISITION CORPORATION, DEBTOR, Case No. 98-50117, and Case No.
98-50118, jointly administered, in the United States Bankruptcy Court
for District of Connecticut. These securities are subject to certain
provisions of the Company's Certificate of Incorporation which provide,
INTER ALIA, restrictions (a) limiting the transferability of, and (b)
affecting the voting rights relating to, such securities. Photocopies
of such Plan and Certificate of Incorporation have been deposited with
the Company at its principal office, and the Company will furnish a
copy thereof to the record holder of these securities without charge
upon written request to the Company at its principal place of business.
The holder of this Certificate is also referred to 11 U.S.C. ss.ss.
1145 (b) and (c) for guidance as to the sale of these securities."
THIRTEENTH: For a period of two (2) years from the Effective Date of the Plan
(as defined below) no person or entity may acquire any shares of Common Stock of
the Company other than pursuant to that Plan if, as of the date of such
acquisition, such person or entity is or would be, after giving effect to any
such proposed acquisition, either directly, indirectly or by attribution, (a)
one of the ten (10) largest holders of Common Stock of the Company or (b) a
holder of five (5%) percent or more of the issued and outstanding Common Stock
of the Company. For purposes hereof, the "Plan" is the Amended Plan of
Reorganization For Power Designs, Incorporated and PDIXF Acquisition Corporation
("Plan") as confirmed by United States Bankruptcy Court for the District of
Connecticut ("Court") in cases entitled IN RE: POWER DESIGNS INCORPORATED,
DEBTOR AND PDIXF ACQUISITION CORPORATION, DEBTOR, Case No. 98-50117 and Case No.
98-50118, jointly administered in the Court, and the Effective Date is as
defined therein. A copy of said Plan is on file with the Company at its
principal place of business.
FOURTEENTH: From time to time any of the provisions of this Amended and Restated
Certificate of Incorporation may be further amended, altered or repealed, and
other provisions authorized by the laws of the State of Delaware at the time in
force may be added or inserted in the manner and at the time prescribed by said
laws, and all rights at any time conferred by this Amended and Restated
Certificate of Incorporation are granted subject to the provisions of this
Article FOURTEENTH.
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Dated and executed at __________________, Connecticut, this ____ day of
_________________, 2000.
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EXHIBIT 7.3
SHAREHOLDERS VOTING AGREEMENT
THIS SHAREHOLDERS VOTING AGREEMENT is made effective as of the
Effective Date of the Plan (as defined below) by and among RAYMOND JOSLIN, DAVID
HALE SMITH II CHARITABLE REMAINDER TRUST, INTERIM ADVANTAGE FUND, IAN R. KAHN,
JUSTIN WERNICK, EDWARD BENJAMIN, EDWARD BENJAMIN M.D. MONEY PURCHASE PENSION
PLAN, BRUCE MACDONALD, ALAN N. PARNES, LEE H. SILVERSTEIN, TRI VENTURES, ALAN
NAPACK, MICHAEL ZUCKERMAN AND HILLARY DAVIS, CRESCENT CAPITAL COMPANY LLC,
STEVEN GRASTEIN, RAY INGLEBY, MARSHALL MANLEY, CURRAN PARTNERS, JOHN D. SHEPERD
AND PHYLLIS AND HOWARD SILVERMAN (collectively The "Bridge Noteholders"), ROBERT
SPARACINO, EQUITAS L.P., BRIL PROFIT SHARING PLAN, AND BRIL MONEY PURCHASE PLAN
(collectively The "Director Loanholders"), LOIS HORN, ANTOINETTE ROSE, THOMAS
O'GRADY, DAVIS H. SMITH II, DENNIS AND TERRI NESTA AND BRUCE MACDONALD
(collectively, with Equitas, L.P., the "Original Noteholders"), INVERNESS
CORPORATION, a Connecticut corporation (hereinafter refereed to as "Inverness")
and POWER DESIGNS, INC. a Delaware corporation with its principal place of
business at 14 Commerce Drive, Danbury, Connecticut 06813 ("Company"). The
Bridge Noteholders, Director Loanholders, Original Noteholders and Inverness are
hereinafter each a "Shareholder Group" and collectively the "Shareholders", with
each member thereof individually a "Shareholder".
PREMISES. The Shareholders are the sole owners of all issued and
outstanding capital stock of the Company ("Stock") pursuant to (a) that certain
Amended Plan of Reorganization for Power Design, Inc. and PDIXF Acquisition
Corporation dated November 1999 ("Plan") as confirmed by the United States
Bankruptcy Court of the District of Connecticut ("Bankruptcy Court") in cases
entitled IN RE: POWER DESIGNS, INC. AND PDIXF ACQUISITION CORPORATION (Case Nos.
98-50117 and 98-50118, jointly administered) pending in the Bankruptcy Court
("Bankruptcy Action") and (b) the merger of PDIXF Acquisition Corporation with
and into Power Designs, Inc. as required by the Plan and as effectuated in
accordance with the New York and Delaware law pursuant to that certain Plan and
Agreement of Merger dated as of the date hereof and those Certificates of Merger
also dated as of the date hereof ("Merger").
To further effectuate the terms of the Plan, and ensure harmonious
management of the Company, the Shareholders desire to impose, among other
things, certain voting restrictions all as set forth herein.
NOW THEREFORE, in consideration of the mutual undertakings contained
herein, the parties hereto hereby agree as follows:
<PAGE>
1. ELECTION OF BOARD OF DIRECTORS; NUMBER OF DIRECTORS.
a. Each Shareholder hereby irrevocably appoints the Company's
President, or his designee, as its proxy and attorney-in-fact and hereby confers
on the President (or his designee) the right and power to vote each of that
Shareholder's shares of Stock, whether now owned or hereafter acquired, and
whether (1) at any annual or special shareholders' meeting called for such
purpose, or (2) the Shareholders of the Company act by written consent, in favor
of, and the Company shall take all necessary and desirable action within its
control to effect, the following actions:
i. the establishment and setting of the authorized number of directors
on the Board of Directors of the Company ("the Board") at seven (7) directors
except as provided otherwise in subsection iii. of this Section 1.a;
ii. the election of members of the Board designated as follows:
A. the President of the Company or, if there is no President, the
then most senior executive officer of the Company;
B. two designees of Inverness;
C. one designee of the Original Noteholders, who initially shall
be Shannon LeRoy;
D. two designees of the Bridge Noteholders, who initially shall
be Raymond E. Joslin and Robert Dorfman; and
E. one designee of the Director Loanholders, who initially shall
be Robert Sparacino;
all of which persons or designees shall hold office, subject to their earlier
removal in accordance with subsection iii below, the By-laws of the Company or
applicable corporate law, until their respective successors shall have been
elected and shall have qualified provided, however, that if the most senior
executive officer of the Company is other than the President and Chief Executive
Officer ("CEO"), said senior officer shall serve on the Board until appointment
of the President and CEO (which shall be one and the same) or until earlier
removed pursuant hereto;
iii. the removal from the Board (with or without cause) of any director
(other than the President) designated by the Shareholder Group entitled to make
such designation hereunder, upon written notice to the President (or his
designee) from such Shareholder Group requiring the removal of said director;
provided, however, that no director may be removed by an persons not entitled to
designate such director hereunder; and
iv. upon any vacancy in the Board as a result of any individual
designated or otherwise serving as provided in subsection (ii) above ceasing to
be a member of the Board, whether by resignation or otherwise, the election to
the Board of an individual designated by the Shareholder Group that, pursuant
hereto, designated the individual who shall have so ceased to be a member of the
Board, or, in the case of the President and CEO, such officer's
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successor.
b. THE APPOINTMENT OF PROXY AND POWER OF ATTORNEY CONTAINED IN SECTION
1.a. IS IRREVOCABLE AND IS COUPLED WITH AN INTEREST AND IS BEING MADE PURSUANT
TO SECTION 212 OF THE DELAWARE CORPORATIONS LAWS. All authority herein conferred
or agreed to be conferred shall survive the death or incapacity of such
Shareholder, and any obligation of such Shareholder under this Agreement shall
be binding upon the heirs, personal representatives, successors and assigns of
such Shareholder. These provisions shall expire on the last date permitted by
law.
2. TERMINATION. The voting agreement set forth in Section 1 of this
Agreement shall expire upon the earlier to occur of (a) the Company raising
gross equity (public or private) equal to or in excess of $5,000,000; (b) the
merger of the Company with or into another entity (provided, however, said
merger has been approved by a majority of Class 4A Shareholders (as that term is
defined in the Plan)); (c) three (3) years from the Effective Date of the Plan
(as defined therein); or (d) the written consent of the Shareholders
representing two-thirds (2/3) of the Stock (the "Initial Period").
3. AMENDMENT TO BYLAWS. The Shareholders hereby acknowledge and agree
that the Bylaws of the Company be amended to provide, among other things, (a)
for the establishment of the Initial Board as set forth in Paragraph 1 hereof,
(b) that, during the Initial Period, there be no deviation in the number of the
members of the Board of Directors from the seven (7) set forth above and (c)
that, upon termination of the Initial Period and at any time thereafter, any
change in the number of Directors of the Company may be made only upon the
majority vote of all members of the Board of Directors then in office.
4. PRE-EMPTIVE RIGHTS. Each Shareholder hereby acknowledges and agrees
that, pursuant to the terms of the Amended Bylaws, all shareholders holding
common stock in the Company as of the effective date hereof shall have
pre-emptive or preferential rights to purchase or subscribe to such additional
shares of stock of the Company hereafter authorized and issued pursuant to the
Initial Capital Offering (as defined below) as may be necessary to maintain
their proportionate share of equity interest in the Company. Thereafter, a
Shareholder retains its pre-emptive rights as to each capital offering IF AND
ONLY IF it has exercised those right in all prior offerings. Failure to exercise
pre-emptive rights at any capital offering shall be deemed a forfeiture of those
rights with respect to all future offerings. For purposes hereof, the "Initial
Capital Offering" shall be the first capital offering made by the Company after
the effective date hereof that is not a public offering. Notwithstanding the
foregoing, no Shareholder shall have any pre-emptive or preferential rights with
respect to any public offering or as to any offering at any time thereafter.
Except as set forth above, no Shareholder, unless otherwise granted by the Board
of Directors of the Company, in their sole discretion, shall have any
pre-emptive or preferential rights to purchase or subscribe to any shares of any
class of capital stock of the Company authorized or issued after the Initial
Capital Offering regardless of whether the issuance of shares would adversely
affect any rights or privileges of such Shareholder.
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<PAGE>
5. STOCK LEGEND. Each certificate representing shares of stock in the
Company now or hereafter issued by the Company shall have endorsed thereon the
following legend:
"The securities represented by this Certificate have not been
registered under the Securities Act of 1933, as amended, and are issued
pursuant to an exemption provided by 11 U.S.C. ss. 1145 under an order
confirming the Plan of Reorganization for Power Designs, Inc. and PDIXF
Acquisition Corporation ("Plan") in cases entitled IN RE: POWER
DESIGNS, INC., DEBTOR, Case No. 98-50117, and In RE: PDIXF ACQUISITION
CORPORATION, DEBTOR, Case No. 98-50118, jointly administered, in the
United States Bankruptcy Court for District of Connecticut. These
securities are subject to certain provisions of the Company's
Certificate of Incorporation which provide, INTER ALIA, restrictions
(a) limiting the transferability of, and (b) affecting the voting
rights relating to, such securities. Photocopies of such Plan and
Certificate of Incorporation have been deposited with the Company at
its principal office, and the Company will furnish a copy thereof to
the record holder of these securities without charge upon written
request to the Company at its principal place of business. The holder
of this Certificate is also referred to 11 U.S.C. ss.ss. 1145(b) and
(c) for guidance as to the sale of these securities."
6. NOTICE. Any and all notices, designations, consents, offers,
acceptances, and other communication provided herein shall be in writing and
shall been deemed to have been duly given if hand delivered or mailed postage
prepaid, registered or certified mail to the parties hereto at the addresses as
set forth on SCHEDULE A attached hereto and made a part hereof, or to such other
addresses as any party hereto shall designate, in writing in accordance with
this Section 5.
7. INVALID PROVISIONS. The invalidity or unenforceability of any
provision of this Agreement shall not effect the other provisions hereof which
shall remain in full force and effect, and the Agreement shall be construed in
all respects as if such invalid or unenforceable provision was omitted.
8. AMENDMENT OR MODIFICATION. This Agreement shall not be terminated,
extended, amended, modified or otherwise altered, nor shall any of the terms and
conditions hereof be waived, unless consented to, in writing, by Shareholders
representing two-thirds (2/3) of the Stock. Any amendment agreed upon by
Shareholders representing two-thirds (2/3) of the Stock shall be binding and
enforceable against all Shareholders.
9. EFFECT. This Agreement, together with the Plan, constitutes the
entire understanding and agreement between the parties hereto pertaining to the
subject matter hereof and supersedes all prior and contemporaneous
understandings, commitments or agreements of the parties in connection with such
subject matter.
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10. BINDING EFFECT. This Agreement shall be binding upon and
enforceable by all of the parties hereto and their respective successors,
assigns, heirs, executors, administrators or other legal representatives, as the
case may be, and shall be binding upon all transferees of the Shareholders
except as otherwise provided herein. Any transferee of a Shareholder shall, as a
condition precedent to the registration of Stock in such transferee's name, have
agreed to be bound by all the terms and conditions of this Agreement as though
such transferee had been an original signatory hereto.
11. COUNTERPARTS. This Agreement may be executed in several identical
counterparts, each of which shall be deemed an original instrument, but all of
such counterparts shall constitute but one and the same agreement.
12. CAPTIONS. The headings or captions of the various sections of this
Agreement are intended for convenient reference only and do not form a part
hereof nor are to be relied upon in any way to interpret, change or restrict any
of the provisions of this Agreement.
13. APPLICABLE LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware.
14. ACTION BY SHAREHOLDER GROUPS. The Original Noteholders, the Bridge
Noteholders and the Director Loanholders shall act by a majority vote of the
shares of Stock owned by the members of each such Shareholder Group. Action by a
Shareholders Group may be taken (a) at a meeting of the Shareholder Group
(whether in person or by telephone and/or electronic means) following written
notice of the proposed action and a vote therefor by a majority of the shares of
Stock owned by members of the Shareholder Group or (b) written consent by a
majority of the shares of Stock owned by members of such Shareholder Group. Upon
such majority vote or consent, all of the members of such Shareholder Group
shall be bound by the action. All members of the Shareholder Group shall be
promptly notified in writing of any such action. Each Shareholder Group shall
utilize this majority vote procedure with respect to any and all actions related
to the Company, including, but not limited to the amendment of this Agreement,
the Conditional Distribution Agreement executed simultaneously herewith, or any
other action affecting the relationship of the Shareholders with the Company.
Communications to and from each Shareholder Group by the Company with respect to
the matters related to this Agreement and/or the Conditional Distribution
Agreement shall be addressed to the representative designated below (the
"Representative") with a copy to the members of each Shareholder Group,
respectively. The Company may rely upon a communication to the Company from such
Representatives for all purposes under this Agreement and the Conditional
Distribution Agreement. A successor Representative for a Shareholder Group may
be appointed by the Shareholders representing a majority of the Stock held by
the members of that Shareholders Group. The initial Representatives are as
follows:
(a) Bridge Noteholders: Robert Dorfman
(b) Original Noteholders: Shannon LeRoy
(c) Director Loanholders: Robert Sparacino
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15. DEEMED EFFECTIVE. This Agreement is incorporated by reference into
and made a part of the Plan and is binding upon all parties hereto, their heirs,
successors and assigns, without need for the execution hereof by any said
parties and without requiring any further action to be taken with respect
hereto.
<PAGE>
[U.S. Department of Justice Letterhead Logo]
August 4, 2000
James Berman, Esq.
Zeisler & Zeisler, P.C.
558 Clinton Avenue
Bridgeport, CT 06604
Re: IN RE: POWER DESIGN, INC.
CHAPTER 11 CASE NUMBER 98-50117 (AHWS)
--------------------------------------
Dear Jim:
As we discussed, the Internal Revenue Service ("IRS") would agree to
withdraw its objection to confirmation of the debtor's plan of reorganization
if certain modifications to the treatment of the IRS claim are made and if
certain conditions are met. Those modifications and conditions include the
following:
1. At confirmation, all postpetition taxes (since the filing of the
latest chapter 11 petition) which are due shall be paid in full and
all tax returns, including all 940 and 941 returns, shall be filed.
2. The IRS requires, as additional conditions to its acceptance of the
plan, that the following affirmative statements be added to the plan
to be confirmed by the Court:
PRIORITY CLAIM
A. The Debtor does not dispute the IRS priority claim in the amount
of $147,552.43 or the IRS unsecured claim in the amount of
$28,691.40.
B. The IRS's allowed priority claim in the amount of $147,552.43
shall be
<PAGE>
Page 2
Letter to James Berman
August 4, 2000
paid in seventy-two (72) equal monthly installments of principal
and interest, with interest accruing at a rate of seven and
one-half (7.5%) percent per annum. The debtor shall make payments
of $2,551.20 commencing on the thirtieth (30th) day after the
effective date of this plan and continuing on every thirtieth day
thereafter. Payments shall include a notation of the debtor's
social security number and shall be mailed to the following
address (unless the IRS requests in writing that such payments be
mailed to a different address):
Internal Revenue Service
Special Procedures Function
135 High Street
Hartford, CT 06103
C. In the event of default in any payment required under this Plan
or in the event the reorganized debtor shall fail to make any
post-confirmation tax payment within ten (10) days of when such
payment is due or to file any tax return when due, as more fully
described below, the IRS shall be permitted to immediately filed
notices of tax lien respecting any tax obligation, whether
prepetition or postpetition, to enforce its liens under the
Internal Revenue Code or judicially, and to collect payment of
amounts due to it without the requirement that the IRS apply to
this or any other Court for relief from the automatic stay of
Section 362(a) of the Bankruptcy Code.
D. The plan should include a provision that notwithstanding any
applicable statute of limitations, the debtor agrees that the IRS
may commence a collection or enforcement action for a period of
one year from the date the debtor was to have completed payment
of IRS taxes under the plan (or eighty-four (84) months after the
effective date).
Please call me if we need to discuss these comments.
Very truly yours,
STEPHEN C. ROBINSON
UNITED STATES ATTORNEY
/s/ Ann M. Nevins
ANN M. NEVINS
ASSISTANT UNITED STATES ATTORNEY
cc: Mr. Wayne Falk
