<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential For Use of the
[X] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
Rule 14A-11(c) or Rule 14a-12
BOCA RATON CAPITAL CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
BOCA RATON CAPITAL CORPORATION
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
1) Title of each class of securities to which transaction applies:
Common Stock
2) Aggregate number of securities to which transaction applies:
4,501,080
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11. (set forth the
amount on which the filing fee is calculated and state how it
was determined):
$0.625(1)
4) Proposed maximum aggregate value of transaction:
$2,813,175
5) Total fee paid:
$562.64
[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement no.:
3) Filing Party:
4) Date Filed:
- --------
(1) Estimated solely for the purpose of calculating the registration fee based
upon the average of the bid and asked price as of August 4, 1997 on the OTC
Electronic Bulletin Board.
<PAGE> 2
BOCA RATON CAPITAL CORPORATION
6516 VIA ROSA
BOCA RATON, FLORIDA 33433
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
OCTOBER 9, 1997
To Our Shareholders:
Notice is hereby given that a Special Meeting of shareholders of Boca
Raton Capital Corporation, a Florida corporation ("BRCC" or the "Company") will
be held at 10:30 a.m., local time, on October 9, 1997 at The Embassy Suites
Hotel, 661 N.W. 53rd Street, Boca Raton, Florida (the "Meeting") for the
following purposes:
1. To consider and vote upon a proposal to approve the Merger
(as defined below) and the issuance (the "Issuance") of shares of
common stock of BRCC, $.001 par value per share ("the BRCC Common
Stock"), to the shareholders of Clean Room Products, Inc. ("CRP") in
connection with an Amended and Restated Agreement and Plan of Merger
and Reorganization (the "Merger Agreement"), among CRP, BRCC and CRP
Acquisition Corp., a wholly-owned subsidiary of BRCC ("Merger Sub"),
which provides for the merger of Merger Sub with and into CRP (the
"Merger").
2. To approve the adoption of new articles of incorporation of
BRCC (the "New BRCC Articles") and new by-laws of BRCC (the "New BRCC
By-Laws"), in the event the Merger is not consummated for any reason.
3. To consider and transact such other business as may
properly come before the Meeting or any adjournment or postponement
thereof.
Only holders of BRCC Common Stock of record at the close of business on
August 26, 1997 are entitled to notice of and to vote at the Meeting or any
adjournment or postponement thereof.
BY ORDER OF THE BOARD OF DIRECTORS
Franklyn B. Weichselbaum
Secretary
Dated: August 28, 1997
IN ORDER TO ASSURE THE PRESENCE OF A QUORUM AND THEREBY AVOID UNNECESSARY
EXPENSE TO ALL SHAREHOLDERS, YOU ARE REQUESTED, IF YOU WILL BE UNABLE TO ATTEND
THE MEETING IN PERSON, TO SIGN AND TO DATE THE ENCLOSED PROXY BALLOT (REGARDLESS
OF THE AMOUNT OF YOUR HOLDINGS) AND TO MAIL IT PROMPTLY IN THE ENCLOSED RETURN
ENVELOPE. IT REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF YOU ARE
PRESENT AT THE MEETING, YOU MAY VOTE IN PERSON REGARDLESS OF HAVING SENT YOUR
PROXY.
<PAGE> 3
BOCA RATON CAPITAL CORPORATION
6516 VIA ROSA
BOCA RATON, FLORIDA 33433
SPECIAL MEETING OF SHAREHOLDERS
OCTOBER 9, 1997
PROXY STATEMENT
This proxy statement (the "Proxy Statement") is furnished to the
shareholders of Boca Raton Capital Corporation, a Florida corporation ("BRCC"),
in connection with the solicitation of proxies by the Board of Directors of
BRCC, for use at the Special Meeting of shareholders (the "Meeting") to be held
at 10:30 a.m., local time, on October 9, 1997 at The Embassy Suites Hotel,
661 N.W. 53rd Street, Boca Raton, Florida, or any adjournment or postponement
thereof. The purposes of the Meeting and the matters to be acted upon are: (1)
to consider and vote upon a proposal to approve the Merger (as defined below)
and the issuance (the "Issuance") of shares of common stock of BRCC, $.001 par
value per share (the "BRCC Common Stock") to the shareholders of Clean Room
Products, Inc. ("CRP") in connection with an Amended and Restated Agreement
and Plan of Merger and Reorganization (the "Merger Agreement"), among CRP,
BRCC and CRP Acquisition Corp., a wholly owned subsidiary of BRCC ("Merger
Sub"), which provides for the merger (the "Merger") of Merger Sub with and in
to CRP which shall be the surviving corporation (the "Surviving Subsidiary");
(2) to approve the adoption of new articles of incorporation (the "New BRCC
Articles") and new by-laws (the "New BRCC By-Laws") of BRCC, in the event the
Merger is not consummated for any reason; and (3) to consider and transact
such other business as may properly come before the Meeting or any
adjournment or postponement thereof.
Abstentions will be considered as shares present and entitled to vote
at the Meeting for purposes of determining whether a quorum is present and will
be counted as votes cast at the Meeting, but will not be counted as votes cast
"for" or "against" any given matter. Broker non-votes will be treated as shares
present and entitled to vote at the Meeting for purposes of determining whether
a quorum is present. However, broker non-votes will not be considered as votes
cast at the Meeting.
A majority of outstanding shares of the BRCC Common Stock represented
in person or by proxy shall constitute a quorum at the Meeting. Shares of BRCC
Common Stock represented by a properly signed, dated and returned proxy are
considered as shares present at the Meeting for purposes of determining a
quorum.
The close of business on August 26, 1997 has been fixed as the record
date for the determination of shareholders entitled to notice of, and to vote
at, the Meeting and at any adjournment or postponement thereof. On that date,
BRCC had 1,125,270 shares of Common Stock outstanding held by 630 holders of
record. Each share will be entitled to one vote at the Meeting. The Notice of
Meeting, Proxy Statement and form of Proxy are first being mailed to
shareholders on or about August 28, 1997
The date of this Proxy Statement is August 28, 1997.
<PAGE> 4
PROPOSAL 1
APPROVAL OF ISSUANCE AND MERGER
Pursuant to Article VII of BRCC's existing Articles of Incorporation
(the "Old BRCC Articles"), if a quorum is present, an affirmative vote of (i)
the holders of at least seventy-five percent (75%) of the issued and outstanding
shares of the BRCC Common Stock and (ii) at least sixty-six and two-thirds
percent (66-2/3%) of the issued and outstanding shares of the BRCC Common Stock
Beneficially Owned (as defined on Appendix I hereto) by shareholders other than
any Interested Shareholder (as defined on Appendix I hereto), present either in
person or by Proxy at the Meeting, is required for the approval of the Issuance
and the Merger. If BRCC's shareholders vote to approve the Issuance and the
Merger (i) all issued and outstanding shares of CRP capital stock ("CRP Stock")
immediately prior to the effective time of the Merger will be converted into the
right to receive an aggregate of 4,501,080 shares of BRCC Common Stock which is
equivalent to 80% of the outstanding shares of BRCC Common Stock immediately
following the effective time of the Merger (assuming none of BRCC's shareholders
exercises their rights to dissent from approval of the Merger and excluding
250,000 shares of BRCC Common Stock to be issued to CRP's financial consultant
if the Merger is consummated); provided, however, that 1,875,750 shares of BRCC
Common Stock to be issued to the existing CRP shareholders will be held in
escrow (the "Escrowed Shares") until the earlier of (a) six (6) months after the
Merger is consummated and (b) the date of consummation of a long-term financing
which results in at least $1,500,000 in net proceeds to BRCC or the Surviving
Subsidiary, in the event that neither BRCC nor the Surviving Subsidiary
consummates a long term financing which results in at least $1,500,000 in net
proceeds to such corporation within six (6) months of the closing of the Merger,
the Escrowed Shares will be returned to BRCC and cancelled; (ii) Merger Sub will
merge with and into CRP, (iii) each of the current members of the BRCC Board of
Directors (the "BRCC Board") will resign and a new board of directors (the "New
BRCC Board") consisting of seven (7) individuals shall be appointed effective
upon consummation of the Merger, (iv) new articles of incorporation (the "New
BRCC Articles") and new by-laws (the "New BRCC ByLaws"") shall be adopted by
BRCC and (v) BRCC's name will be changed to "CRP Holding Corp." See "Rights of
Dissenting BRCC Shareholders" and Appendix II for a description of the rights of
BRCC shareholders who dissent from approval of the Merger.
THE MERGER
BACKGROUND OF THE MERGER
The terms and conditions of the Merger Agreement were determined
through arm's length negotiations between BRCC and CRP. In determining the form
of the transaction and the amount of consideration, numerous factors were
considered by BRCC and CRP. See "--Reasons for the Merger; Recommendation of the
BRCC Board; Interests of Certain Persons" and "Opinion of Financial Advisor."
REASONS FOR THE MERGER; RECOMMENDATION OF THE BRCC BOARD; INTERESTS OF CERTAIN
PERSONS
The Merger is intended to be beneficial to both CRP and BRCC's
shareholders. For CRP's shareholders the Merger is expected to afford them with
access to both the public capital markets as
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well as the assets of BRCC for financing and growth opportunities. Management of
CRP believes that growth in its operations and business has been restricted
because of limitations on its ability to obtain greater levels of financing and
that they have the management capabilities and years of experience to
significantly expand its operations if appropriately financed. Management of CRP
believes that the Merger, which will result in a publicly-held holding company
with a subsidiary possessing the combined assets of BRCC and CRP, will expedite
CRP's ability to raise funds in the public capital markets and thereby permit
CRP to attain growth in its operations and business. CRP also expects to benefit
from the services and expertise of a new Chief Executive Officer and President
and certain new directors in assisting it in identifying financing
opportunities, devising financing strategies and reducing costs. See "Management
and Operations of BRCC following the Merger."
For the BRCC shareholders, the Merger represents an opportunity to
acquire an equity interest in a growth company. As of October 1995, BRCC was an
inactive business development company ("BDC") that held one portfolio security,
RailAmerica, Inc., and the balance of its investments was in cash or cash
equivalents. RailAmerica, Inc. is a publicly-traded transportation holding
company which owns and develops short line and regional railroads. BRCC's Board
of Directors believed shareholders' return on assets was not sufficient to
continue operations as a BDC because of the relative size of the BRCC's asset
base to its ongoing expenses. In addition, based on BRCC's then financial and
operational structure, BRCC's Board of Directors did not believe it was
practical to raise additional capital for BRCC and determined that it would be
in the best interest of BRCC and its shareholders to withdraw BRCC's status as a
BDC and seek a merger with an operating company. BRCC's withdrawal of its status
as a BDC was effective on December 22, 1995. Since October 1995, BRCC's Board of
Directors has sought to combine BRCC with an established, privately-held
operating company with growth potential that desired expedited access to the
capital markets.
CRP designs and constructs clean rooms and associated products for the
semiconductor, pharmaceutical, biotechnology, medical device and other
industries. In addition, CRP's film division produces Ultraclean(TM) packaging
materials for these industries. See "Business of CRP". CRP's management asked
CRP's financial consultant and advisor, Josephthal Lyon & Ross Incorporated
("Josephthal"), to identify suitable companies that met the criteria established
by management for a combination with CRP. Josephthal is an investment banking
and financial advisory firm with knowledge, through its affiliates, of the
industry in which CRP operates. Josephthal identified BRCC as a suitable company
that met the criteria established by management of CRP for a combination with
CRP. Pursuant to the terms of its financial consulting and advisory agreement
with CRP, upon consummation of the Merger, Josephthal will be paid a $50,000 fee
and receive 250,000 shares of BRCC Common Stock for advising CRP on the Merger.
See "Business of CRP-Legal Proceedings" and "Certain Transactions."
The BRCC Board identified and considered several combination
candidates, but none met all of the criteria established by the BRCC Board until
Josephthal introduced CRP to BRCC. Based upon its evaluation of CRP, the BRCC
Board concluded that, with adequate funding, CRP has the potential for long-term
growth.
Prior to taking action on the Merger, the BRCC Board reviewed various
materials relevant to the Merger and received presentations from, and reviewed
carefully the terms and conditions of the transactions contemplated by the
Merger Agreement with BRCC's management and BRCC's legal and financial advisors,
including Spencer Trask Securities Incorporated. See "Opinion of Financial
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Advisor." The BRCC Board considered a number of factors in reaching its
determination to seek a Merger with CRP, the most significant of which was that
the Merger would provide BRCC's shareholders a continuing equity interest with
potential for greater long-term capital growth and liquidity than presently
exists as to the BRCC Common Stock, since BRCC would acquire an established,
growth-oriented operating business with greater resources to pursue the
advancement of its operations and experienced management.
The BRCC Board also considered the following factors: (i) the financial
condition, results of operations, business and prospects of BRCC and CRP as well
as the risks involved in achieving those prospects; (ii) current industry,
economic and market conditions; (iii) an analysis of certain publicly available
information with respect to other companies that it believed to be comparable in
part to CRP, and the trading markets for certain of such other companies'
securities; (iv) the limited prospects for future liquidity for BRCC's
shareholders; (v) the terms and conditions of the Merger Agreement; (vi) the
possible alternatives to the Merger, including liquidation and the prospects of
BRCC continuing to successfully operate as an independent entity; (vii) the tax
and accounting aspects of the Merger; (viii) the experience of management of CRP
and the prospects of the industry in which CRP operates.
In view of the wide variety of factors considered by the BRCC Board of
Directors in connection with its evaluation of the proposed Merger, the BRCC
Board did not find it practicable to, and did not, quantify or otherwise assign
relative weights to the individual factors considered beyond recognizing that
the opportunity for BRCC shareholders to acquire an equity interest in an
established, operating business with growth potential was of greater importance
than the other factors considered.
C. Lawrence Rutstein, a member of the BRCC Board, has an interest in
recommending the Merger, which may not be identical to those of unaffiliated
shareholders of BRCC. Pursuant to the Merger Agreement, C. Lawrence Rutstein
will be re-appointed as a member of the New BRCC Board at the effective time of
the Merger. See "Management and Operations of BRCC Following the Merger."
Josephthal, CRP's financial consultant, will receive a $50,000 fee and
250,000 shares of BRCC Common Stock upon the consummation of the Merger. Dan
Purjes is the Chairman of Josephthal, a principal shareholder of BRCC and an
executive officer, director and principal shareholder of Josephthal Holdings,
Inc. the parent company of Josephthal. CRP and Mr. Purjes have recently settled
a legal action commenced by Mr. Purjes against CRP for an alleged breach of
contract by issuing one and two-thirds shares of CRP Stock to Mr. Purjes prior
to consummation of the Merger which shares shall convert into 450,108 shares of
BRCC Common Stock upon consummation of the Merger, provided, however, that
187,575 of such shares of BRCC Common Stock will be Escrowed Shares (as defined
above). Therefore, Josephthal and Mr. Purjes have substantial interests in the
Merger which may not be identical to unaffiliated shareholders of BRCC. See
"Business of CRP-Legal Proceedings" and "Certain Transactions."
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RECOMMENDATION OF BRCC BOARD
BRCC'S BOARD OF DIRECTORS BELIEVES THE ISSUANCE AND THE MERGER TO BE
FAIR TO AND IN THE BEST INTERESTS OF BRCC AND ITS SHAREHOLDERS, HAS APPROVED THE
ISSUANCE AND THE MERGER AND RECOMMENDS A VOTE FOR APPROVAL OF THE ISSUANCE AND
THE MERGER.
ACCOUNTING TREATMENT
Pursuant to the Merger Agreement, as is further described herein, CRP
will be acquired through an exchange of stock, effective upon the consummation
of the Merger by BRCC, whose stock is publicly traded. As a result of the BRCC
acquisition, the shareholders of CRP will receive 80% of the shares of BRCC in
exchange for 100% of the shares of CRP.
Under generally accepted accounting principles, the acquisition will be
accounted for as a recapitalization of CRP or reverse acquisition, whereby CRP
will be deemed the acquiror. The purchase price to be paid by CRP for BRCC will
consist of the net monetary assets of BRCC.
The Merger will result in both a change in majority equity ownership
and management of BRCC and the cessation of BRCC's business operation as
previously conducted. This transaction is being accounted for as a capital
transaction which is equivalent to the issuance of stock by CRP for the net
assets of BRCC accompanied by a recapitalization of CRP. Under this method of
accounting and financial reporting, CRP will reflect in the combined financial
statements the assets and liabilities of BRCC at their book value and will not
combine the historical earnings of BRCC with those of CRP. See the Financial
Statements included herein which include pro forma financial statements
reflecting the Merger.
Pursuant to the Merger Agreement, certain shares received by the CRP
shareholders will be placed in escrow until the earlier of six months after
consummation of the Merger and the date of consummation of a long-term financing
which results in at least $1.5 million in net proceeds. The Escrowed Shares will
be legally outstanding and reported as such on the face of the balance sheet of
CRP and will be included in the calculation of earnings per share. The Company
intends to account for the issuance of the Escrowed Shares as a capital
transaction. However, the staff of the Securities and Exchange Commission may
view the placement of shares in escrow as a recapitalization by promoters
similar to a reverse stock split and the agreement to release the shares upon
the achievement of the criteria discussed above as a separate compensatory
arrangement between the registrant and the promoters. If the Company is required
to recognize a compensation expense upon the issuance of the Escrowed Shares,
the compensation expense would be equal to the product of (a) the number of
Escrowed Shares (1,875,750 shares) and (b) the fair market value of the shares
on the date of release from escrow.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discusses the principal United States federal income tax
consequences of the Merger that are relevant to holders of the BRCC Common
Stock. The discussion is based on the Internal Revenue Code of 1986, as amended
(the "Code"), and existing final, temporary and proposed Treasury Regulations,
Revenue Rulings and judicial decisions, all of which are subject to prospective
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and retroactive changes. The discussion does not address the tax consequences
that may be relevant to holders of the BRCC Common Stock with special tax status
(including, for example, dealers in securities, banks or other financial
institutions) and does not address any foreign, state or local tax consequences
of the Merger. Accordingly, holders of the BRCC Common Stock should consult with
their own tax advisors concerning the application of United States federal
income tax laws, as well as the laws of any state, local or foreign taxing
jurisdiction, to their particular situations.
No gain or loss will be recognized for United States federal income tax
purposes by holders of the BRCC Common Stock as a result of the Merger. However,
the receipt of cash by a holder of the BRCC Common Stock that properly elects to
exercise dissenters' rights generally will result in taxable gain or loss to
such holder for United States federal income tax purposes in an amount equal to
the difference between the amount of cash received and the holder's tax basis in
such BRCC Common Stock. Such gain or loss generally should be capital gain or
loss, provided the shares of the BRCC Common Stock were held as a capital asset
on the date of the Merger. Under recently enacted legislation, capital gains of
individuals with respect to property held for more than eighteen months
generally will be subject to United States federal income tax at a maximum rate
of 20%, and a maximum rate of 28% with respect to property held for more than
one year but not more than eighteen months.
CUSTOMARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
We have made forward-looking statements in this document that are
subject to risks and uncertainties. Forward-looking statements include the
information concerning possible or assumed future results of operations of BRCC
and CRP set forth under "--Reasons for the Merger; Recommendations of the Board;
Interests of Certain Persons" and "Opinion of Financial Advisor" and those
statements preceded by, followed by or that include the words "believes,"
"excepts," "anticipates" or similar expressions. For those statements, we claim
the protection of the safe harbor for forward-looking statements contained in
the Private Securities Litigation Reform Act of 1995. You should understand that
the following important factors, in addition to those discussed elsewhere in
this document and in the documents which we incorporate by reference, could
affect the future results of BRCC and CRP, and could cause those results to
differ materially from those expressed in our forward-looking statements:
materially adverse changes in economic conditions in the markets served by BRCC
and CRP; a significant delay in the expected closing of the Merger; future
regulatory actions and conditions in BRCC's and CRP's operating areas; and
competition from others.
REGULATORY APPROVALS
BRCC and CRP are not aware of any federal or state regulatory
requirements which must be complied with, other than the filing of the
Certificate of Merger with the Secretary of State of the
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State of New York and the Articles of Merger and the New BRCC Articles with the
Secretary of State of the State of Florida.
OPINION OF FINANCIAL ADVISOR
The Board of Directors of BRCC received the written opinion of Spencer
Trask Securities Incorporated ("Spencer Trask") dated July 14, 1997 to the
effect that, as of such date, the terms of the Amended and Restated Agreement
and Plan of Merger and Reorganization dated as of March 26, 1997 are fair to
holders of shares of BRCC Common Stock from a financial point of view (the
Spencer Trask written fairness opinion is herewith referred to as the "Fairness
Opinion"). A copy of the Fairness Opinion is attached hereto as Appendix III.
Holders of BRCC Common Stock are urged to read the Fairness Opinion in its
entirety for an explanation of the assumptions made, matters considered and
limitations of the Spencer Trask review.
In connection with rendering its advice and its written Fairness
Opinion, Spencer Trask reviewed and analyzed, among other things, the following:
(i) the Merger Agreement; (ii) the financial statements and other financial
information concerning BRCC, including the Annual Reports on Form 10-KSB for the
fiscal years ended December 31, 1995 and 1996, respectively, and the Quarterly
Report on Form 10-QSB for the quarter ended March 31, 1997; (iii) certain
publicly available information concerning the trading of, and the trading market
for, BRCC Common Stock, including news reports as per Bloomberg Information
Services; (iv) the stock issuance and trading history of BRCC; (v) the financial
statements and other financial information concerning CRP, including audited
financial statements for the years ended December 31, 1993, 1994, 1995 and 1996
and unaudited financial statements for the three months ended March 31, 1997;
(vi) certain internal information, primarily financial in nature, concerning the
business and operations of CRP furnished by CRP for purposes of Spencer Trask's
analysis, including the business plan prepared by CRP's management, internal
management-prepared budgeted income statements, order backlog, asset schedules
and product literature; (vii) the Distribution Agreement with VWR Scientific,
Inc.; (viii) certain publicly available information with respect to certain
other companies that Spencer Trask believed to be comparable to CRP and the
trading markets for certain of such other companies' securities; and (ix)
certain publicly available information concerning the nature and terms of
certain other transactions considered relevant to the inquiry. Spencer Trask
also met with certain officers and employees of CRP and BRCC to discuss the
foregoing, as well as other matters deemed relevant to the inquiry. Further,
Spencer Trask made such other analyses and examinations as it deemed necessary
or appropriate, including visits to CRP's facilities in Ronkonkoma, New York.
During the course of its analysis, Spencer Trask had access to all
materials and personnel it deemed necessary or pertinent to the formation of its
Fairness Opinion. No limitations were imposed by BRCC or CRP on the scope of
Spencer Trask's investigation. Spencer Trask assumed that all information
supplied by CRP and BRCC, or publicly available, was accurate, without
independent verification thereof.
The amount of consideration to be paid to the holders of CRP Common
Stock under the Merger Agreement was derived as a result of negotiations between
the management of BRCC and CRP.
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As a result of the Nasdaq delisting of BRCC Common Stock in January
1993 and the subsequent limited volume of trading on the OTC Bulletin Board
(recent bid price of $0.25 and recent asked price of $0.437 as of date of the
fairness opinion), the BRCC share valuation presented was based on a
fundamental approach which took into account BRCC's book value plus an imputed
"shell value" as an SEC-reporting company estimated at $150,000. The "shell
value" was based on a merger candidate's (such as CRP's) avoided initial public
offering expenses. Spencer Trask estimated the fair value per share of BRCC
Common Stock, pre-CRP merger, to be $0.54. In valuing the shares to be issued to
CRP shareholders in connection with the Merger, consideration was given by
Spencer Trask to the lack of liquidity of the BRCC Common Stock (implying a
discount) as well as to the fact that the BRCC shares represent a controlling
interest in CRP (implying a premium). For purposes of Spencer Trask's valuation
analysis, the discount and premium were deemed to be offsetting and the shares
of BRCC Common Stock to be issued to CRP were valued at $0.54 each.
In its opinion, Spencer Trask defined fair market value of CRP to be
the price at which CRP would change hands between a willing buyer and a willing
seller, neither being under any compulsion to buy or sell and both having
reasonable knowledge of all relevant facts. Spencer Trask conducted a variety of
financial analyses with respect to CRP, including those described below:
Identification of somewhat similar publicly-held companies and
utilization of their market valuation in terms of multiples of sales, operating
income, net income and book value as a basis for estimating how the company
being evaluated would be valued based on industry averages. CRP is engaged in
several lines of business, and no public companies were found by Spencer Trask
to have a similar mix of business. However, a number of somewhat similar
companies were identified which sell into the same markets as CRP, in SIC codes
3069, 3081, 3559 and 3564. The companies used in Spencer Trask's analyses were
Asyst Technologies, Kulicke & Soffa, Applied Science, Plasma-Therm, Blessing
Corp., Semitool, Sub Micron Systems, Gasonics, Brooks Automation, Daw and Genus.
The ratios for these companies were enterprise value/revenue (median 1.3);
enterprise value/EBIT (median 13.3); price/net earnings (median 15.7); and
market equity/book value (median 2.6). Spencer Trask deemed the first two ratios
relevant to CRP and application thereto, inclusive of a 30% acquisition premium,
resulted in an implied enterprise value of $9,870,000. For this purpose,
enterprise value was defined by Spencer Trask in its opinion to be equity value
plus preferred stock and long term debt. A 30% weight had been applied by
Spencer Trask to this valuation approach.
Analysis of purchase terms with respect to acquisitions of generally
comparable publicly-held companies in terms of multiples of sales, operating
income, net income and book value as a basis for estimating how the company
being evaluated would be valued if it were sold. Information about mergers and
acquisitions involving transaction values of less than $150 million and target
semiconductor equipment, plastic packaging, industrial fan and other
manufacturing companies in SIC codes 3069, 3081, 3559 and 3564 was obtained by
Spencer Trask from Securities Data Company. In its opinion, Spencer Trask stated
that during the period from January 1, 1991 through June 7, 1997 there had been
six transactions reported involving acquired companies deemed by Spencer Trask
to be generally comparable to CRP and for which some financial information was
available. The ratios for these acquired companies utilized by Spencer Trask
were transaction value/revenue (median 0.72), transaction value/operating income
(median 13.6), equity price/net income (median 24.4) and equity price/book value
(median 2.3). Spencer Trask deemed the first two ratios relevant to CRP and
application thereto resulted in an implied enterprise value of $5,030,000. For
this purpose, transaction value was treated as being analogous to enterprise
value and therefore defined as the equity price plus
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assumption of preferred stock and long term debt. A 30% weight had been applied
by Spencer Trask to this valuation approach.
Income approach (discounted cash flow analysis). In the opinion of
Spencer Trask this approach is based on the premise that the value of a company
is the present value of its future earnings as measured by cash generated in
excess of operating needs. According to Spencer Trask, projected future cash
flow was estimated and discounted to present value by means of applying the
estimated weighted average cost of capital ("WACC") which took into account such
factors as risk-free interest rates, equity risk premium, small company premium
and special risk factors (if applicable), target debt/equity ratio and
volatility of the company relative to the overall stock market ("beta").
Management of CRP had prepared internal budgets covering 1997 and 1998,
which were the principal basis for the projected cash flow statements during
that time frame which were utilized by Spencer Trask in the discounted cash flow
analysis. However, in both years adjustments were made having the effect of
lowering the revenue, operating income and net income anticipated by management.
The years 1999 and 2000 were added, based on 7.5% per annum growth rates in
revenue and relatively stable operating margins. The estimated net present value
of CRP's future cash flow was $5,795,000 and a 40% weight had been applied by
Spencer Trask to this valuation.
The BRCC Board selected Spencer Trask Securities, Inc. to provide a
fairness opinion in connection with the Merger because Spencer Trask is an
investment banking firm which is regularly engaged in securities transactions,
equity research, mergers and acquisitions, private placements and business
valuation. Roger K. Baumberger, Managing Director - Corporate Finance of Spencer
Trask, is a Chartered Financial Analyst and a member of the Association for
Investment Management and Research and the New York Society of Security
Analysts.
Spencer Trask Securities, Inc. is being paid a fee for its valuation
analysis and related Fairness Opinion, which compensation is not contingent on
the results of the analyses, opinions and conclusions in its report. The
reported analyses, opinions and conclusions of Spencer Trask were based upon
professional judgments applied to the indicated assumptions.
COMPARATIVE PER SHARE DATA
The following table shows comparative historical per share data for
BRCC and CRP and unaudited pro forma consolidated per share data for BRCC. The
historical per share data for BRCC and CRP does not give effect to the Merger.
The pro forma consolidated per share data for BRCC gives effect to the Merger
with CRP. This data assume no exercise prior to the closing of outstanding
options for BRCC Common Stock. The information presented should be read in
conjunction with the historical financial statements and notes thereto of BRCC
and CRP and the unaudited Pro Forma Consolidated Financial Statements which
appear elsewhere in this Proxy Statement. The pro forma data are presented for
comparative purposes only and are not indicative of the consolidated financial
position or results of operations in the future or of what the consolidated
financial position or results of operations would have been had the Merger been
consummated during the periods or as of the date for which the pro forma data
are presented in accordance with the assumptions set forth above. See "Index to
Financial Statements and Pro Forma Consolidated Financial Statements."
9
<PAGE> 12
Income (LOSS) PER SHARE BEFORE EXTRAORDINARY ITEMS:
<TABLE>
<CAPTION>
Year Ended Six Months
December 31, 1996 Ended June 30, 1997
----------------- --------------------
<S> <C> <C>
Historical BRCC $ (.21) $ (.17)
Historical CRP $ (57,000.00) $ (44,440.00)
Pro Forma Consolidated per BRCC share(1) $ (.29) $ (.22)
BOOK VALUE PER SHARE: December 31, 1996 June 30, 1997
----------------- --------------------
Historical BRCC(2) $ .70 $ .54
Historical CRP(3) $ (98,993.00) $ (143,434.00)
Pro Forma Consolidated per BRCC share(4) $ (.19) $ (.31)
</TABLE>
- -------------------
(1) Each of BRCC and CRP report its financial position and results of
operations using a December 31 fiscal year end. The unaudited pro forma
consolidated income per BRCC share data for the year ended December 31,
1996 include the statements of operations for BRCC for the year ended
December 31, 1996 and that of CRP for the year ended December 31, 1996.
The unaudited pro forma consolidated income per BRCC share data for the
six months ended June 30, 1997 include the statements of operations
for BRCC and for CRP for the six months ended June 30, 1997.
(2) The historical book value data for BRCC for the fiscal year ended
December 31, 1996 and for the six months ended June 30, 1997 are
obtained from BRCC's audited December 31, 1996 balance sheet and BRCC's
unaudited June 30, 1997 balance sheet, respectively.
(3) The historical book value data for CRP for the fiscal year ended
December 31, 1996 and for the six months ended June 30, 1997 are
obtained from CRP's audited December 31, 1996 balance sheets and CRP's
unaudited June 30, 1997 balance sheet, respectively.
(4) The unaudited pro forma consolidated book value per BRCC share data for
the year ended December 31, 1996 include the book value for BRCC and
the book value for CRP at December 31, 1996. The unaudited pro forma
consolidated book value per BRCC share data for the six months ended
June 30, 1997 include the book value for BRCC and the book value for
CRP at June 30, 1997.
MARKET VALUE OF BRCC COMMON STOCK
The BRCC Common Stock currently trades on the OTC Electronic Bulletin
Board administered by the NASD. There is no established trading market for the
shares of CRP Common Stock. The following table sets forth the price per share
of BRCC Common Stock on December 11, 1996 (the date preceding the initial public
announcement of the proposed Merger) and on August 25, 1997 (the latest
practicable date for which information was available). The prices of the BRCC
Common Stock are based on the average closing bid and asked prices as reported
on the Electronic Bulletin Board on such
10
<PAGE> 13
date. BRCC believes that the market coverage and liquidity for the BRCC Common
Stock and the ability of a BRCC shareholder to sell at favorable prices under
favorable commission structures has been adversely affected. The prices set
forth below are not necessarily indicative of the liquidity of the trading
market nor for market trades for a large number of shares of BRCC Common Stock.
Such over-the-counter market quotations reflect inter-dealer prices, without
retail mark-ups, mark-downs or commissions, and may not represent actual
transactions.
<TABLE>
<CAPTION>
BRCC Common Stock
Average of Closing Bid and
Date Asked Price
<S> <C>
December 11, 1996 $.6875
August 25, 1997 $.625
</TABLE>
<TABLE>
<CAPTION>
Quarter Ending 1997 High Bid Low Bid
------------------- -------- -------
<S> <C> <C>
March 31........................... $.625 $.625
June 30............................ $.625 $.25
</TABLE>
For additional information regarding the BRCC Common Stock, see
"Appendix IV--Annual Report on Form 10-KSB for BRCC for the Year Ended December
31, 1996" under the caption "Market for the Issuer's Common Equity and Related
Shareholder Matters."
DIVIDENDS
On March 11, 1996, BRCC paid a special cash distribution (the "Special
Distribution") of $2.25 per share on each share of BRCC Common Stock
outstanding of record on January 11, 1996. Except for the Special
Distribution, BRCC has not paid any cash dividends since its inception and does
not intend to pay any cash dividends on the BRCC Common Stock in the
foreseeable future, but presently intends to retain all earnings, if any, for
use in its business operations.
On each of July 1, 1995 and January 1, 1996, respectively, CRP made
special non-cash distributions of $150,000 and $33,067 in the aggregate, to its
shareholders, in order to reduce outstanding loan amounts made by CRP to its
shareholders. One third of each of the distributions was applied to the amounts
outstanding of each of Messrs. Gerber, Gross and Nassberg. Except for the
foregoing non-cash distributions, CRP has not paid any dividends, including cash
dividends, since its inception and does not intend to pay any cash dividends on
its common stock in the foreseeable future, but intends to retain all earnings,
if any, for use in its business operations. Furthermore, declaration of
dividends by CRP is prohibited under the covenants of certain financing
documents to which it is a party. CRP has obtained a waiver of any default which
may have arisen as a result of the non-cash distributions. See "Management's
Discussion and Analysis of Financial Conditions and Results of Operations of
CRP -- Liquidity and Capital Resources."
As of August 26, 1997, BRCC had approximately 630 holders of record.
On that date, CRP had approximately 3 holders of record.
11
<PAGE> 14
RIGHTS OF DISSENTING BRCC SHAREHOLDERS
If the Merger Agreement is approved by the required vote of BRCC
shareholders and is not abandoned or terminated, holders of the BRCC Common
Stock who did not consent to the Merger may, by complying with Sections
607.1301, 607.1302 and 607.1320 of the Florida 1989 Business Corporation Act
(the "FBCA"), be entitled to dissenters' rights as described therein. The record
holders of the shares of BRCC Common Stock that are eligible to, and do,
exercise dissenters' rights with respect to the Merger are referred to herein as
"Dissenting Shareholders," and the shares of BRCC Common Stock with respect to
which they exercise dissenters' rights are referred to herein as "Dissenting
Shares." If a BRCC shareholder has a beneficial interest in shares of BRCC
Common Stock that are held of record in the name of another person, such as a
broker or nominee, and such BRCC shareholder desires to perfect whatever
dissenters' rights such beneficial BRCC shareholder may have, such beneficial
BRCC shareholder must act promptly to cause the holder of record timely and
properly to follow the steps summarized below.
The following discussion is not a complete statement of Florida law
relating to dissenters' rights and is qualified in its entirety by reference to
Sections 607.1301, 607.1302 and 607.1320 of the FBCA attached to this Proxy
Statement as Appendix II and incorporated herein by reference. This discussion
and Sections 607.1301, 607.1302 and 607.1320 of the FBCA should be reviewed
carefully by any holder who wishes to exercise statutory dissenters' rights or
preserve the right to do so, since failure to comply with the required
procedures will result in the loss of such rights.
Shares of BRCC Common Stock must satisfy each of the following
requirements to qualify as Dissenting Shares: (i) the shares of BRCC Common
Stock must be outstanding on the BRCC record date, (ii) the Dissenting
Shareholder must deliver to BRCC, before the vote on the Merger Agreement is
taken, a written notice of his intent to demand payment for his shares if the
proposed Merger is effectuated, (iii) the Dissenting Shareholder must not vote
his shares in favor of the Merger Agreement, (iv) the Dissenting Shareholder
must make a written demand that BRCC repurchase shares of BRCC Common Stock at
fair market value, and (v) the Dissenting Shareholder must deposit his
certificates with BRCC. Note that delivery by a shareholder of an executed proxy
which fails to indicate how the shares should be voted does not comply with the
above requirements and will result in the forfeiture of his dissenters' rights.
Within 10 days following approval of the Merger by BRCC Shareholders,
BRCC is required to mail to each holder of shares of BRCC Common Stock who filed
a notice of intent to demand payment for his shares a notice of the approval of
the Merger Agreement. Within 20 days after the giving of such notice to him, the
Dissenting Shareholder must file with BRCC a notice of election to dissent,
stating his name and address, the number, classes, and series of shares as to
which he dissents, and a demand for payment of the fair value of his shares. Any
Dissenting Shareholder failing to file such election to dissent within this 20
day period will be bound by the terms of the Merger Agreement. Any Dissenting
Shareholder filing such an election to dissent must deposit his certificates for
certificated shares with BRCC simultaneously with the filing of the election to
dissent. BRCC may restrict the transfer of uncertificated shares from the date
the Dissenting Shareholder's election to dissent is filed with BRCC.
Within 10 days after the expiration of the period in which Dissenting
Shareholders may file their notices of election to dissent, or within 10 days
after the Merger is effected, whichever is later
12
<PAGE> 15
(but in no case later than 90 days from the BRCC shareholders' authorization of
the Merger), BRCC must make a written offer to each Dissenting Shareholder who
has filed an election to dissent to pay an amount BRCC estimates to be the fair
value for such shares. Such notice and offer by BRCC must be accompanied by a
balance sheet of BRCC as of the latest available date (the date of which must be
within 12 months of the date of the offer) and a profit and loss statement for
the 12-month period ended on the date of such balance sheet.
If within 30 days after the making of such offer any Dissenting
Shareholder accepts the same, payment for his shares shall be made within 90
days after the making of such offer or the consummation of the Merger, whichever
is later. Upon payment of the agreed value, the Dissenting Shareholder shall
cease to have any interest in such shares.
If BRCC fails to make its offer within the prescribed period, or if it
makes an offer and a Dissenting Shareholder fails to accept the same within the
30-day acceptance period, then BRCC, within 30 days after receipt of a written
demand from any Dissenting Shareholder which is given within 60 days after the
date of the consummation of the Merger, will have the option to file (within
such 60-day period) an action in the appropriate court in the county where the
registered office of BRCC is located requesting that the court determine the
fair value of the shares. If BRCC fails to institute such court proceeding, any
Dissenting Shareholder may do so in the name of the corporation. The judgment of
the court will be plenary and exclusive, and all Dissenting Shareholders who are
made parties will be entitled to judgment for the amount the court determines is
the fair value of the shares, which, at the discretion of the court, may include
interest.
While costs and expenses of an appraisal proceeding will generally be
borne by BRCC, the court has equitable powers to assess any part of the costs
against all or some of the Dissenting Shareholders who are parties and whose
action in failing to accept BRCC's offer the court finds to be arbitrary,
vexatious or not in good faith. The court has similar equitable powers to
allocate among the parties the fees and expenses of appraisers appointed by the
court, but not the fees and expenses of counsel or experts employed by any
party.
THE FOREGOING IS ONLY A SUMMARY OF THE APPLICABLE DISSENTERS' RIGHTS,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SECTIONS 607.1301, 607.1302 AND
607.1320 OF THE FBCA, COPIES OF WHICH ARE ATTACHED TO THIS PROXY STATEMENT AS
APPENDIX II AND INCORPORATED HEREIN BY REFERENCE. ANY BRCC SHAREHOLDER WHO
INTENDS TO DISSENT FROM THE MERGER SHOULD REVIEW SUCH PROVISIONS CAREFULLY, AND
SHOULD CONSULT WITH THEIR OWN ATTORNEY. BRCC SHAREHOLDERS WISHING TO PERFECT
THEIR DISSENTERS' RIGHTS MUST STRICTLY COMPLY WITH THE APPLICABLE PROVISIONS OF
THE FBCA AS SET FORTH IN APPENDIX II.
THE MERGER AGREEMENT
THE DESCRIPTION OF THE MERGER AGREEMENT SET FORTH BELOW DOES NOT
PURPORT TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
MERGER AGREEMENT, A COPY OF WHICH IS ATTACHED HERETO AS APPENDIX V AND
INCORPORATED HEREIN BY REFERENCE.
13
<PAGE> 16
GENERAL TERMS OF THE MERGER AGREEMENT
The Merger Agreement provides that, subject to the terms and conditions
set forth therein, Merger Sub will be merged with and into CRP which shall be
the surviving corporation (the "Surviving Subsidiary") and the separate
existence of Merger Sub will cease. Upon effectiveness of the Merger, all shares
of CRP Stock issued and outstanding immediately prior to the effective time of
the Merger will be converted into the right to receive an aggregate of 4,501,080
shares of BRCC Common Stock which is equivalent to 80% of the outstanding shares
of BRCC Common Stock immediately following the effective time of the Merger
(assuming none of BRCC's shareholders exercises their rights to dissent from
approval of the Merger and excluding 250,000 shares of BRCC Common Stock to be
issued to Josephthal, as CRP's financial consultant, if the Merger is
consummated); provided, however, that 1,875,750 shares of the BRCC Common Stock
to be issued to the existing CRP shareholders will be held in escrow (the
"Escrowed Shares") until the earlier of (i) six (6) months after the Merger is
consummated and (ii) the date of consummation of a long-term financing which
results in at least $1,500,000 in net proceeds to BRCC or the Surviving
Subsidiary. In the event that neither BRCC nor the Surviving Subsidiary
consummates a long term financing which results in at least $1,500,000 in net
proceeds to such corporation within six (6) months of the closing of the Merger,
the Escrowed Shares will be returned to the BRCC and cancelled. See "Rights of
Dissenting BRCC Shareholders" and Appendix II for a description of the rights of
BRCC shareholders who dissent from approval of the Merger.
EFFECTIVE TIME
As promptly as practicable after the satisfaction or waiver (if
permissible) of the conditions to the Merger, the Merger will be consummated and
become effective at the time at which all certificates or documents (the "Merger
Documents") are accepted for filing by the appropriate government agency or such
later date or time as may be specified in the Merger Documents (the "Effective
Time"). See "--Conditions."
MANNER OF CONVERSION OF CRP STOCK
Subject to the terms and conditions of the Merger Agreement, at the
Effective Time by virtue of the Merger and without any action on the part of
BRCC, Merger Sub or CRP or their respective shareholders, (i) each share of CRP
Stock issued and outstanding immediately prior to the Effective Time shall be
converted into the right to receive such number of shares of BRCC Common Stock
which is equal to the quotient of (x) 4,501,080 divided by (y) the number of
shares of CRP Stock issued and outstanding at the Effective Time, (ii) each
share of CRP Stock held in treasury of CRP immediately prior to the Effective
Time shall automatically be cancelled and extinguished without any conversion
thereof and no payment shall be made with respect thereto, (iii) each issued and
outstanding share of the capital stock of Merger Sub shall be converted into and
become one fully paid and nonassessable share of common stock, par value $0.01
per share, of the Surviving Subsidiary.
SHARE CONSIDERATION ADJUSTMENT
Pursuant to the Merger Agreement, 1,875,750 shares of BRCC Common Stock
to be issued to the existing holders of CRP Stock shall be held in escrow (the
"Escrowed Shares") until the earlier of (a) six (6) months after the Merger is
consummated and (b) the date of consummation of a long-
14
<PAGE> 17
term financing which results in at least $1,500,000 in net proceeds
("Financing") to BRCC or the Surviving Subsidiary. In the event that neither
BRCC nor the Surviving Subsidiary consummates a Financing within six (6) months
of the date the Merger is consummated, the Escrowed Shares will be returned to
BRCC and cancelled. If BRCC or the Surviving Subsidiary consummates a Financing
within six (6) months from the date the Merger is consummated, the Escrowed
Shares will be released from escrow to the appropriate shareholders. See "The
Merger-Accounting Treatment".
CONDITIONS
The respective obligations of BRCC and CRP to effect the Merger are
subject to the satisfaction or waiver (if permissible) of the following
conditions:
(i) the Merger Agreement and the transactions contemplated thereby
shall have been approved and adopted by (a) the affirmative vote of the holders
of the BRCC Common Stock as required by the Old BRCC Articles, (b) the
affirmative vote of the holders of the CRP Stock entitled to cast at least
two-thirds (2/3) of the total number of votes entitled to be cast, and (c) the
affirmative vote of the holders of the common stock of Merger Sub entitled to
cast at least two-thirds (2/3) of the total number of votes entitled to be cast;
(ii) any authorizations, notices, consents, orders or approvals of, or
declarations or filings with, or expirations of waiting periods imposed by, any
governmental entity, the failure to obtain which would have a material adverse
effect on the Surviving Subsidiary, shall have been filed, occurred or been
obtained. BRCC shall have received all state securities or blue sky permits and
other authorizations necessary to issue the BRCC Common Stock pursuant to the
Merger Agreement;
(iii) no temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or other
legal restraint or prohibition preventing the consummation of the Merger shall
be in effect (each party agreeing to use all reasonable efforts to have any such
order reversed or injunction lifted);
(iv) each of CRP and BRCC shall have completed their respective
business, financial and legal audits to the reasonable satisfaction of CRP and
BRCC, as the case may be;
(v) the termination of a Shareholder Agreement dated as of September 3,
1991, by and among CRP and Gerber, Gross and Nassberg;
(vi) CRP shall have received any such consent, waiver, modification,
amendment, suspension or otherwise (in form reasonably satisfactory to CRP and
Boca) of The Chase Manhattan Bank reasonably satisfactory to CRP and Boca, as
trustee under an indenture dated as of December 1, 1984, necessary for the
consummation of the Merger and the transactions contemplated thereby and to
waive any current defaults thereunder as of the Effective Time, and as may be
necessary or appropriate so that no event of default shall occur or be
continuing immediately subsequent to the Effective Time or as may otherwise be
necessary or appropriate;
(vii) CRP shall have received a waiver from Leon Hertzson ("Hertzson"),
as Sublessor under a Sublease Agreement, dated as December 1, 1984 by and among
Hertzson, CRP and Colonial Glove
15
<PAGE> 18
and Garment, Inc. ("Colonial"), with respect to certain rental payments which
are in arrears from April through October of 1996;
(viii) CRP shall have received any consent, waiver, modification,
amendment, suspension or otherwise as may be required (in form reasonably
satisfactory to CRP and Boca) under the Revolving Credit Agreement dated
December 22, 1995, as amended, between CRP and Concorde Growth Corporation
("Concorde") and any other agreements between CRP and Concorde, necessary for
consummation of the transactions contemplated hereby and to waive any current
defaults thereunder, as of the Effective Time, and as may be necessary or
appropriate so that no event of default shall be continuing immediately
subsequent to the Effective Time, or as may otherwise be necessary or
appropriate;
(ix) the aggregate effect of all inaccuracies in the representations
and warranties of BRCC or CRP, as the case may be, set forth in the Merger
Agreement does not and will not have a material adverse effect on BRCC or CRP,
as the case may be;
(x) the representations and warranties of BRCC or CRP, as the case may
be, shall be true and correct in all material respects as of the date of the
Merger Agreement and, except to the extent such representations and warranties
speak as of an earlier date, as of the Effective Time as though made on and as
of the Effective Time, except as otherwise contemplated by the Merger Agreement;
(xi) BRCC or CRP, as the case may be, shall have performed in all
material respects all obligations required to be performed by it under the
Merger Agreement at or prior to the Effective Time;
(xii) the termination of any employment agreement with Mr. Paul Gerber
as of the Effective Time; and
(xiii) BRCC shall deliver to CRP at the closing of the Merger the
resignations of each of its officers and directors, which resignations shall be
effective as of the Effective Time.
REPRESENTATIONS AND WARRANTIES
The parties to the Merger Agreement have made various customary
representations and warranties as to, among other things, their respective
businesses and financial condition, the satisfaction of certain legal
requirements, certain property, taxes, labor and litigation matters and accuracy
of disclosure.
BUSINESS OF BRCC AND CRP PENDING THE MERGER
Each of BRCC and CRP has respectively agreed that, prior to the
Effective Time or earlier termination of the Merger Agreement, unless the other
party shall have consented in writing, it will conduct its operations according
to its ordinary course consistent with past practice, to use all reasonable best
efforts to preserve substantially intact its business organizations, keep
available the services of its current officers and employees and preserve its
relationships with licensors, licensees, customers, suppliers, employees and
others. In addition, each of BRCC and CRP have agreed not to take any of a
number of specific actions, without the consent of the other, including the
issuance of
16
<PAGE> 19
additional capital stock, the sale of assets other than in the ordinary course
of business, the amendment of its articles of incorporation or bylaws, the
incurrence of indebtedness, the making of capital expenditures, the payment of
dividends of other distributions in respect of their capital stock, the
redemption, subdivision, split or combination of its capital stock, or the
acquisition of substantially all of the assets of, or merger with, another
entity.
NO SOLICITATION
Under the Merger Agreement each of CRP, BRCC and Merger Sub has agreed
that it and its subsidiaries, if any, will use its best efforts to ensure that
none of its affiliates, officers, directors, representatives or agents shall,
directly or indirectly, solicit any person, entity or group concerning any
merger, business combination, sale of a significant amount of assets, sale of
shares of capital stock outside the ordinary course of business, tender or
exchange offer or similar transaction involving such party or its subsidiaries
(each an "Acquisition Transaction"), provided, that each of CRP and BRCC may
participate in negotiations with or furnish information to a third party if its
respective board of directors, after consulting with outside counsel, determines
that the failure to do so may violate its fiduciary duties.
AMENDMENT; TERMINATION
The parties to the Merger Agreement may not amend the Merger Agreement
except by an instrument signed on behalf of each of the parties thereto.
The Merger Agreement may be terminated and the Merger abandoned at any
time prior to the Effective Time, before or after approval of the shareholders
of BRCC or CRP by mutual written consent of BRCC and CRP. The Merger Agreement
also may be terminated by action of either BRCC or CRP if (i) the shareholders
of BRCC or CRP do not approve the Merger or (ii) there has been a breach on the
part of the other party in the party's representations, warranties or covenants
set forth in the Merger Agreement, or any failure on the part of the other party
to comply with its obligations under the Merger Agreement. As of the date hereof
the Merger Agreement also may be terminated by action of BRCC at anytime.
BRCC also may terminate the Merger Agreement if prior to the approval
of the Merger by the BRCC shareholders, BRCC receives a firm offer with respect
to an Acquisition Transaction and the BRCC Board, after consulting with its
legal counsel, determines in good faith that to proceed with the Merger may
violate its fiduciary duties. In addition, CRP may terminate the Merger
Agreement if the BRCC Board withdraws, amends or modifies its favorable
recommendation of the Merger or promulgates any recommendation with respect to
an Acquisition Transaction other than a recommendation to reject such
Acquisition Transaction.
FEES AND EXPENSES
All fees and expenses incurred in connection with the Merger Agreement
and the transactions contemplated thereby will be paid by the party incurring
such expenses, whether or not the Merger is consummated.
17
<PAGE> 20
SELECTED FINANCIAL DATA OF CRP
The following table sets forth selected financial data for CRP. The
selected data as of and for the years ended December 31, 1994, 1995 and 1996 are
derived from the financial statements of CRP which have been audited by
Dalessio, Millner & Leben LLP, independent public accountants, and should be
read in conjunction with the financial statements of CRP and the Notes thereto
included elsewhere herein and "Management's Discussion and Analysis of Financial
Condition and Results of Operations of CRP."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
1994 1995 1996
---------- ---------- -------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.............................. $13,461,093 $16,984,734 $12,254,173
Cost of sales.......................... 10,128,304 12,847,487 9,027,475
Gross profit........................... 3,332,789 4,137,247 3,226,698
Selling and shipping................... 1,347,960 1,238,775 1,117,930
General and administrative............. 2,136,326 2,316,235 2,332,079
Total operating expenses............... 3,484,286 3,555,010 3,450,009
Total other income (expense)........... (141,497) (378,441) (631,692)
Net income (loss)...................... (292,994) 203,796 (855,003)
Dividends paid(1)...................... ___ 150,000 33,067
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------------
1994 1995 1996
---------- ---------- -------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.............. $ 6,330 $ 10,355 $ 319,520
Working capital (deficiency)........... (1,506,836) (614,663) (3,431,462)
Total assets........................... 6,890,446 6,598,947 5,962,178
Total liabilities...................... 7,541,074 7,195,779 7,447,080
Stockholders' equity (deficit)......... (650,628) (596,832) (1,484,902)
</TABLE>
- ------------------
(1)Represents non-cash distributions to CRP's shareholders in order to reduce
outstanding loan amounts made by CRP to its shareholders.
18
<PAGE> 21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF CRP
OVERVIEW
CRP designs and constructs clean rooms and associated products for the
semiconductor, pharmaceutical, biotechnology, medical device and other
industries. CRP manufactures all of its products at its facility located in
Ronkonkoma, New York and has six sales offices located throughout the United
States.
CRP had an accumulated deficit of approximately $2.2 million as of
June 30, 1997 and net losses of approximately $855,000 and $667,000 for the
year ended December 31, 1996 and the six months ended June 30, 1997,
respectively. Subsequent to June 30, 1997, CRP has continued to generate
losses. Moreover, in prior periods, CRP has experienced significant negative
cash flow which has prevented CRP from meeting normal payment terms of many of
its accounts payable, including key vendors to CRP's business. The report of
independent public auditors of CRP on CRP's financial statements for the fiscal
year ended December 31, 1996 contains an explanatory paragraph to the effect
that CRP's recurring losses from operations, CRP's deficiency in its working
capital and defaults on its debt covenants raise substantial doubt about CRP's
ability to continue as a going concern. Although CRP has cured or obtained
waivers of past defaults, the continuation of recent operating losses by the
Surviving Subsidiary after the Merger could impair the combined companies'
ability to continue as a going concern.
As of March 1, 1997, CRP hired a new Chief Executive Officer to
streamline operations and implement cost reduction measures. Since March 1,
1997, CRP has implemented such cost reduction measures and eliminated
approximately 25 employees which CRP's management believes will result in a
substantial reduction in operating expenses and improve CRP's ability to meet
its payment obligations on a timely basis.
Revenue Recognition. Revenue related to the distribution of products is
recognized at the time of title transfer, which occurs at the time of shipment.
Revenue from the design and construction of clean rooms is recognized
on the percentage-of-completion method, measured by the percentage of contract
costs incurred to estimated total contract costs for each contract. This method
is used because management considers it to be the best available measure of
progress on these contracts. Contract costs include all direct material and
labor costs and those indirect costs related to contract performance, such as
indirect labor, supplies, tools, repairs, and depreciation and amortization
costs. Selling, general and administrative costs are charged to expense as
incurred.
Provisions for estimated losses on uncompleted contracts are made in
the period in which such losses are determined. Changes in job performance, job
conditions, and estimated profitability, including those arising from contract
penalty provisions, and final contract settlement may result in revisions to
costs and income and are recognized in the period in which the revisions are
determined. An amount equal to contract costs attributable to claims is included
in revenues when realization is probable and the amount can be reliably
estimated.
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Contract payments received in excess of revenue recognized are carried
as liabilities until recognized as revenue.
RESULTS OF OPERATIONS
Six Months Ended June 30, 1996 and 1997
Net Sales. Net sales increased approximately 11% to $5.8 million for
the six months ended June 30, 1997 from $6.5 million for the six months ended
June 30, 1996.
Costs of Sales. Costs of sales increased approximately 2% from $4.5
million for the six months ended June 30, 1996 to $4.6 million for the six
months ended June 30, 1997. The increase was primarily due to an increase in
sales in CRP's lower gross profit engineering division and a decrease in sales
in CPR's higher gross profit Ultraclean packaging division. Costs of sales
represented approximately 70.2% and 80.8% of net sales for the six months
ended June 30, 1996 and 1997, respectively. The major components of cost of
sales are raw material and finished goods purchases, direct labor, freight and
administration and support.
Gross Profit. Gross profit decreased 42.8% from approximately
$1,932,000 for the six months ended June 30, 1996 to approximately $1,100,000
for the six months ended June 30, 1997. This decrease was primarily due to an
increase in sales in CRP's lower gross profit engineering division and a
decrease in sales in CRP's higher gross profit Ultraclean packaging division as
well as increased sales with a key distributor, which is at a lower gross
profit. Gross profit represented 29.8% and 19.2% of net sales for the six
months ended June 30, 1996 and 1997, respectively.
Selling and Shipping Expenses. Selling and shipping expenses were
approximately $550,000 and $521,000 for the six months ended June 30, 1996
and 1997, respectively, and represented approximately 8.5% and 9.0%,
respectively, of net sales in such periods. These expenses include personnel,
advertising, and other costs incurred to support CRP's sales effort.
General and Administrative Expenses. General and administrative
expenses decreased from approximately $1,141,000 for the six months ended June
30, 1996 to $1,053,000 or 7.7% for the six months ended June 30, 1997. General
and administrative expenses represented approximately 17.6% and 18.3% of net
sales for the six months ended June 30, 1996 and 1997, respectively. The
expenses include administrative, legal and corporate expenses. Although many of
these expenses are fixed in nature, new management has, where possible,
initiated substantial cost reduction increases and policies at the end of the
first quarter for fiscal 1997.
Other Income/Expense. Other income expense decreased approximately 25%
from $262,000 for the six months ended June 30, 1996 to approximately
$197,000 for the six months ended June 30, 1997. The decrease was due
primarily to lower borrowings under CRP's credit facility. Other
income/expense represented approximately 4.0% and 3.4% of net sales in the
six months ended June 30, 1996 and 1997, respectively.
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Years Ended December 31, 1995 and 1996.
Net Sales. Net sales decreased approximately 27.8% to $12.2 million in
1996 from $17.0 million in 1995. The sales decrease was primarily due to a
slowdown in CRP's clean room engineering division which provides design and
construction services for clean rooms. Due to a downward trend in the
semiconductor industry's expansion of manufacturing capacity in 1996, this
division's revenues decreased approximately $4.8 million.
Cost of Sales. Cost of sales decreased $3.8 million or approximately
29.7% from $12.8 million for the year ended December 31, 1995 to $9.0 million
for the year ended December 31, 1996. This decrease was primarily due to the
reduction in sales in CRP's clean room engineering division. Cost of sales were
approximately 75.6% and 73.7% of net sales in the years ended December 31, 1995
and 1996, respectively. The change of approximately 1.9% is primarily due to an
increase in sales in CRP's high gross profit Ultraclean(TM) packaging and
manufacturing divisions, and a decrease in sales in CRP's lower gross profit
engineering division. The major components of cost of sales are raw material and
finished goods purchases, direct labor, freight, and administration and support.
Gross Profit. Gross profit decreased $910,000 or approximately 22.0%
from $4.1 million to $3.2 million for the years ended December 31, 1995 and
1996, respectively. As a percentage of net sales, gross profit increased 1.9%
from 24.4% to 26.3% of net sales for the years ended December 31, 1995 and 1996,
respectively. This increase is primarily due to a decrease of net sales in the
CRP's lower margin engineering division and an increase in net sales in the
CPR's higher margin Ultraclean(TM) packaging and manufacturing divisions.
Selling and Shipping Expenses. Selling and shipping expenses decreased
$121,000 or approximately 9.8%, from approximately $1.24 million to $1.12
million for the years ended December 31, 1995 and 1996, respectively. Selling
and shipping expenses represented 7.3% and 9.1% of net sales for the years ended
December 31, 1995 and 1996, respectively. These expenses include personnel,
advertising, and other costs incurred to support CRP's sales effort. The
decrease in selling and shipping expenses is due primarily to a reduction in
advertising costs as well as commissions due to a decrease in net sales.
General and Administrative Expenses. General and administrative
expenses increased $16,000 from $2.31 million to $2.33 million for the years
ended December 31, 1995 and 1996, respectively. General and Administrative
expenses represented 13.6% and 19.0% of net sales for the years ended December
31, 1995 and 1996, respectively. These expenses include administrative, legal,
and corporate expenses. Although many of these expenses are fixed in nature,
CRP's management has, where possible, initiated measures as of the end of the
first quarter of 1997 to substantially reduce general and administrative costs.
Other Income/Expenses. Other income/expenses increased $180,000,or
approximately 39.7% from $452,000 to $632,000 in the years ended December 31,
1995 and 1996, respectively. Other income/expense represented 2.7% and 5.2% of
net sales for the years ended December 31, 1995 and 1996, respectively. Other
income/expenses consist primarily of interest expense. The increase was due
primarily to a loss on a disposal of an asset of approximately $46,000 in 1996
and a gain on extinguishment of debt in 1995 of $74,000,
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LIQUIDITY AND CAPITAL RESOURCES
CRP had net cash provided by operating activities of approximately
$1,000,000 and net cash used in operating activities of approximately $150,000
in the years ended December 31, 1995 and 1996, respectively. The positive cash
flow in 1995 was primarily due to CRP's net income, non-cash expenses for
depreciation and amortization, decreases in accounts receivable and inventory,
and increases in accounts payable and accrued expenses. The positive cash flow
was partially offset by a decrease in billings in excess of costs and estimated
earnings on uncompleted contracts. The negative cash flow in 1996 was largely
the result of CRP's net loss, a decrease in accounts payable and a provision for
doubtful accounts receivable. These uses of cash were partially offset by
non-cash expenses for depreciation and amortization, a decrease in accounts
receivable, inventories and billings in excess of costs, and estimated earnings
on uncompleted contracts.
CRP had net cash used in operating activities of approximately $105,000
and net cash provided by operating activities of approximately $58,000 for the
six months ended June 30, 1996 and 1997, respectively. The negative cash flow in
1996 was largely a result of an increase in inventory, and decreases in accounts
payable and billings in excess of costs and estimated earnings on uncompleted
contracts. The positive cash flow in 1997 was primarily due to decreases in
inventory, and an increase in accounts payable and accrued expenses. This
positive cash flow was partially offset by CRP's net loss, an increase in
prepaid expenses, and a decrease in billings in excess of costs and estimated
earnings on uncompleted contracts.
Net cash used in investing activities was primarily due to the
acquisition of furniture and fixtures, machinery and equipment, including
computer hardware and software.
CRP had net cash used of $757,000 from financing activities for the
year ended December 31, 1995 and net cash provided by financing activities of
approximately $517,000 for the year ended December 31, 1996. The negative cash
flow in 1995 was primarily due to repayments of borrowings and dividends paid.
The positive cash flow in 1996 was primarily due to borrowings under CRP's
financing arrangement and from a note payable to BRCC. CRP had net cash provided
by financing activities of approximately $174,000 for the six months ended June
30, 1996 and net cash used in financing activities of approximately $339,000 for
the six months ended June 30, 1997. The positive cash flow in 1996 was primarily
due to borrowings under CRP's financing arrangement, offset by repayments of
capital lease obligations. The negative cash flow in 1997 was primarily due to
repayments of borrowings and repayments of capital lease obligations.
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CRP had a line of credit with a bank that expired in April 1995.
Pursuant to this line of credit, borrowings bore interest at the bank's prime
rate plus 1.5%. In May 1995, the bank agreed to extend the maturity date to June
30, 1995. As part of the extension agreement, the interest rate was modified to
equal the bank's prime rate plus 2.5% and increased to the bank's prime rate
plus 3% subsequent to June 30, 1995. Certain stockholders of CRP personally
guaranteed the line of credit.
In October 1995, CRP refinanced the above-referenced line of credit
with a new financial institution (the "New Credit Facility"). The New Credit
Facility had provided for maximum borrowings of $1,500,000 which would be
available for advances against eligible accounts receivable, as defined, at the
rate of 90%. On December 22, 1995, CRP entered into a new two year financing
agreement with the same financial institution to replace the $1,500,000 credit
facility discussed above, for advances to be made at the lesser of $2,000,000 or
85% of eligible accounts receivable, as defined. Advances bear interest at 3.5%
above the prime rate (8.25% at December 31, 1996 and 8.5% at June 30, 1997) plus
an administrative fee of .4% on the average daily outstanding balance for the
immediately preceding month, with a total minimum monthly fee payable of
$10,000. A facility fee equal to $10,000 was paid upon the commencement of the
loan and $20,000 was payable upon the one year anniversary of the loan. This
agreement provides for, among other things, a security interest in substantially
all of the CRP's assets; maintenance of minimum levels of net worth; limitations
on loans to officers, shareholders, directors or affiliates, and payments of
cash dividends to stockholders and upstream dividends to BRCC after the Merger
and is guaranteed by the CRP's stockholders. In July 1997, CRP and the financial
institution amended the financing agreement to modify certain restrictive
covenants.
Additionally, the same financial institution provided CRP with a
$275,000 credit facility (the "Inventory Facility"). Maximum borrowings are
based upon eligible inventory, as defined. This facility bears interest at 3.5%
above the prime rate, with monthly principal payments commencing July 1, 1997 of
$5,500 with a balloon payment for the residual amount in December 1997. At June
30, 1997, CRP had an aggregate outstanding amount of $275,000 under the
Inventory Facility. CRP also borrowed $275,000 under an accommodation note from
this same financial institution. The accommodation note matures in December
1997, is payable in monthly installments of $7,401 with a balloon payment of
$180,721, and bears interest at 3.5% above the prime rate plus an administrative
fee of .4% on the average daily balance outstanding of the immediately preceding
month. The loan agreement restricts dividend payments and upstream dividends to
parent companies.
In conjunction with the October 1995 refinancing, CRP's former bank
agreed to reduce the principal amount outstanding under the line of credit by
$75,000. The balance of the loan was repaid. In fiscal 1995, CRP recognized
$73,668 of income as an extraordinary item resulting from this modification.
In September 1996, CRP entered into a consulting agreement for
financial and investment banking services relating to its proposed merger. CRP
has agreed to pay its investment advisors a fee of $50,000 and 250,000 shares of
common stock of CRP upon the consummation of the merger agreement discussed
below.
In December 1996, the Company entered into the Merger Agreement. It is
anticipated that for financial reporting purposes, the Merger will be treated as
a capital transaction, equivalent to the issuance of common stock by CRP for the
net monetary assets of BRCC, accompanied by a recapitalization of CRP. In
connection with the execution of the Merger Agreement, BRCC loaned CRP $350,000
due to be repaid on April 30, 1997, bearing interest at the prime rate plus 1%.
As of
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the date hereof, CRP has not repaid this loan. The loan is guaranteed by CRP's
stockholders and there respective spouses.
In April 1997, CRP borrowed $100,000 from each of Mr. Paul Gerber, a
principal stockholder and director of CRP and Mr. Nassberg a director of CRP.
Such amounts, together with accrued interest at the annual rate of 10% per
annum, are payable on May 17, 1998.
CRP occupies a manufacturing, warehouse and office facility in
Ronkonkoma, New York which it subleases from a former stockholder (the
"Lessor"). The Lessor leases the facility from an industrial development agency
under a lease agreement dated December 1, 1984. In connection with the
construction of the facility, the industrial development agency issued
$3,500,000 of Industrial Development Bonds ("IRBs") which are secured by the
facility pursuant to a Trust Indenture dated December 1, 1984 (the "Trust
Indenture"). In addition, the Lessor, CRP, and Colonial Glove and Garment, Inc.
have guaranteed all outstanding principal, and accrued interest thereon, under
the IRBs. The holders of the IRBs have allegedly exercised their right to redeem
the IRBs pursuant to the terms of the Trust Indenture. In July 1997, The Chase
Manhattan Bank, in its capacity as successor trustee under the Trust Indenture,
commenced a legal action on behalf of the bondholders against the industrial
development agency, the Lessor, CRP and Colonial Glove and Garment, Inc. seeking
a foreclosure on the real property and the facility and money damages to
satisfy all amounts owed to the bondholders, plus cost and expenses of the
sale of the property and of the legal action. As of June 30, 1997,
$1,050,372.05 was outstanding under the IRBs. CRP's management believes that
the current fair market value of the real property and the facility exceeds
the outstanding amounts under the IRBs.
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BUSINESS OF CRP
CRP, incorporated under the laws of the State of New York in 1965,
designs and constructs clean rooms and associated products for the
semiconductor, pharmaceutical, biotechnology, medical device and other
industries. CRP's highly experienced engineering division has the capability to
design and construct state-of-the-art clean rooms to the precise requirements of
its customers as well as conform to government and, industry standards. CRP's
manufacturing division produces sophisticated high-end customized and
semi-customized equipment needed to create contamination-controlled
environments. CRP's film division manufactures and markets proprietary
Ultraclean(TM) packaging proven to have superior performance characteristics in
clean room and contamination-controlled applications. CRP's distribution
division resells a range of branded and quality private label ancillary products
specifically for clean room usage.
In an effort to refine CRP's objectives and build upon its strengths
and reputation in the industry, Charles A. Chenes assumed the position of
President and Chief Executive Officer in March, 1997. Mr. Chenes intends to
strengthen CRP's direction and improve customer service and sales functions by
implementing policies and procedures aimed at increasing selling activities and
heightening customer support, with a new, improved quality control program. Mr.
Chenes is in the process of reorganizing CRP, placing an emphasis on CRP's
principal product line, Ultraclean(TM) as well as laminar flow equipment and
hard and soft wall clean rooms.
INDUSTRY BACKGROUND
According to Cleanrooms Magazine, an industry publication, the
worldwide contamination control market is project to grow from $4.9 billion in
1995 to $11.8 billion in 2000. This extraordinary growth will be driven by
increased usage by the existing base of contamination control users such as
the semiconductor and pharmaceutical industries as well as new users such as
the automotive and food processing industries.
Clean rooms are the most effective approach to achieving a
contamination controlled environment. A clean room is a specially designed room
in which particulate presence and environmental conditions are carefully
maintained. Filters are placed in the walls and/or ceilings to control the
presence of particles and the room air flow is controlled to minimize any
contact of remaining particles with the product or process being made or
performed. Humidity, temperature, static, lighting, and other environmental
variables are also carefully maintained to meet predetermined parameters. Clean
rooms are used for product manufacture and assembly, testing, research and
development, packaging, aseptic processing and to perform medical/surgical
procedures. Clean rooms are operated and maintained under strict procedures to
minimize the risk of introducing foreign particles. Employees working in clean
rooms wear specialized garments and follow special procedures whenever entering
and exiting the clean room. The operating requirements become more rigorous as
the quality of the clean room increases. Federal Standard 209 classifies room
air cleanliness according to the amount and size of particles circulating within
the room. Clean rooms are classified in multiples of 10 ranging from Class
100,000 (100,000 particles of 0.5 microns or larger in one cubic feet of air) to
Class I (one particle of 0.5 microns or larger in one cubic feet of air). The
class of clean room depends on the application; the higher the level of
cleanliness, the more expensive the clean room.
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The greatest demand for clean room products and services has been and
continues to be in the manufacture and assembly of products based on modern
technology. The semiconductor market is the largest market for clean rooms and
other contamination control products. Integrated circuits ("IC") can be rendered
ineffective by a minute particle, undetectable to the human eye, and must be
discarded. To minimize the risk of particle contamination and improve product
yield, manufacturers produce these circuits in clean room environments. IC
manufacturers also require that all materials used in the IC process be "clean".
Therefore, manufacturers of equipment and components used in producing ICs also
must be produced in clean environments. Other major markets that require
contamination control in the production process are the biotechnology, medical
device and pharmaceutical industries, where contamination control is required
under the United States Food and Drug Administration's Good Manufacturing
Procedures.
PRODUCTS AND SERVICES
CRP's engineering division, Clean Room Engineering ("CRE"), designs and
constructs customized, state-of-the-art clean rooms in compliance with Federal
Standard 209. CRE's four-phase system ensures that customers receive facilities
and services that meet their specific needs. Clients can choose conceptualize
design development (Phase I), complete facility design (Phase II), design,
supply and supervise services (Phase III) or a full turn-key (Phase IV)
facility. By maintaining a flexible approach to clean room engineering, CRP
seeks to provide its customers with a high degree of quality at a lower cost.
CRP's manufacturing division manufactures approximately 100 different
types of complex, high-end contamination-control products. The most popular
products are (i) the A2000 Series soft wall clean room, which enables customers
to install a Class 10 to Class 10,000 clean room in an existing room within
weeks and at a fraction of the cost of a built-in facility; (ii) laminar flow
work stations, which create Class 100 conditions in work areas by designing the
air flow to carry any particles and contaminants away from the product or
process; (iii) air showers, which remove surface dirt and lint on workers'
garments and (iv) pass-thrus, which allow the movement of materials between the
clean room and the outside environment.
CRP's Ultraclean Film(TM) division manufactures clean films and
packaging in a variety of materials, including polyethylene, polypropylene,
Teflon, nylon, Mylar and Aclar, all of which are marketed under the Ultraclean
Film trademark. CRP produces its films in a Class 100 clean room located at
CRP's facility. CRP's plastic film has been used by NASA to package samples
collected from the surface of the moon and is used by pharmaceutical,
biotechnology, and electronic firms for packaging of parts and for other
contamination protection purposes. CRP has obtained patent protection on the
polypropylene breather bag and breather tubing. CRP's breather product line is
used by many of the major pharmaceutical and medical companies in those
applications that the United States Food and Drug Administration require Class
100 sterilization/packaging. Demand has consistently exceeded supply and
recently CRP added machinery intended to triple the output of its breather
bags/tubing. CRP intends to continue to address the need for new, modern
equipment to meet the demands of the marketplace.
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CRP's clean room ancillary products division offers for resale
consumables designed specifically for contaminant-controlled environments. These
selected goods are sourced from a number of vendors.
CUSTOMERS
CRP's principal customers are semiconductor manufacturers. CRP has sold
its clean rooms to many of the world's leading semiconductor manufacturers. A
major component of CRP's strategy is to develop long-term strategic
relationships with such manufacturers. In addition, CRP sells clean rooms to
other manufacturers requiring ultraclean environments.
During the past three years, CRP's major customers have included
Genentech, Merck & Co., Bristol Myers Squibb, Chiron, IBM, Digital Equipment,
Xerox, Eastman Kodak, Becton Dickinson, Texas Instruments, Corning and AT&T.
Because of the nature of CRP's business, CRP does not have customers in any year
which account for more than 10% of revenues.
SALES AND MARKETING
CRP's marketing program is focused on expanding market acceptance of
CRP's integrated clean room approach and on building long term strategic
relationships. By offering its customers a full array of clean room services and
products, CRP is able to provide customers a single point of contact for design,
component procurement, installation and ongoing service.
Management believes that an aggressive approach to sales and marketing
is integral to CRP's success. Therefore, CRP's sales and marketing campaign is
very aggressive and, in management's opinion, has substantially contributed to
new business generation and increased company recognition. To gain a competitive
advantage, CRP has an established direct sales force whose goal is to
aggressively market CRP's complete line of services and products in established
territories. Supporting these representatives is an in-house group of
technically knowledgeable telemarketing, sales support and customer service
personnel. Augmenting the direct selling efforts is CRP's product and
capabilities catalog, which is distributed to a mailing list of more than 10,000
names. CRP also uses advertising and promotion targeted to the industries that
are the greatest users of contamination control products. In addition, VWR
Scientific, Inc. distributes Ultraclean Film(TM) and other products through a
non-exclusive arrangement with CRP.
CRP sales have been concentrated in certain regions; primarily the
Northeastern and Southeastern United States. Management is committed to achieve
broader geographic representation; six new sales offices were opened in 1995 and
1996, and plans currently exist to open four additional sales offices in 1997 in
major high technology centers. In addition, management is exploring the
feasibility of locating sales offices in California, Arizona, Texas and New
Mexico in 1997-1998. CRP is also currently contemplating establishing
distribution facilities in new markets such as Puerto Rico, Europe and the Far
East, although such efforts will not occur in the immediate future.
CRP has initiated an outbound telemarketing effort in order to increase
its film and supply business, not only with current customers, but also as an
entry into new customers. Telemarketers
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partner with CRP's outside sales force in following up leads and building a
territory. Additionally, CRP has developed a direct mail campaign targeted at
prospective customers. CRP also actively participates in trade shows and
conferences in the packaging, semiconductor, medical and pharmaceutical
industries.
PRODUCT DEVELOPMENT
CRP's product development effort presently focuses on enhancing
existing products and developing new products to meet customer requirements.
Almost all of CRP's systems development effort is expended in the course of
developing or refining clean room designs responsive to specific customer
demands. CRP seeks to anticipate industry trends by analyzing feedback from
sales and service personnel on industry needs and developments. CRP believes
that its significant and growing experience base in designing, installing and
servicing clean rooms and manufacturing clean room components is a competitive
advantage.
INTELLECTUAL PROPERTY
CRP currently holds United States patents with respect to various
aspects of its clean room wall systems, floor systems and air handling systems.
The patents expire at various times. Although CRP patents have value, CRP
believes that the success of its business depends more on innovation, technical
expertise, and knowledge of its personnel and other factors. In addition, no
assurance can be given that any patents issued to CRP will not be challenged,
invalidated or circumvented, or the rights thereunder will provide competitive
advantages to CRP.
CRP also relies upon trade secret protection for its confidential and
proprietary information. There can be no assurance that others will not
independently develop substantially equivalent proprietary information and
techniques or otherwise gain access to CRP's trade secrets or disclose such
technology, or that CRP can meaningfully protect its trade secrets.
COMPETITION
CRP believes it is one of the few comprehensive manufacturers and
marketers of contamination-control services and products in the United States,
providing design, engineering, manufacturing, installation, testing,
certification, and ongoing customer support. CRP competes with a number of
companies providing clean room products or services. CRP competes with
architectural and engineering firms for the provision of design and engineering
services.
CRP believes the principal competitive factors in the clean room
industry are quality, time to completion, reliability, responsiveness for design
and installation, product performance and price. CRP believes it competes
favorably with respect to such factors, although there can be no assurance that
it will continue to do so in the future.
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FACILITIES
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations of CRP - Liquidity and Capital Resources" and "- Legal
Proceedings."
EMPLOYEES
As of June 30, 1997, CRP had 85 full time employees. CRP's management
believes that its relations with its employees are satisfactory.
LEGAL PROCEEDINGS
In February 1997, an action was brought against CRP for breach of
contract related to certain supplemental and disability benefits in an amount of
$200,000 plus interest. CRP believes that it has defenses to these claims. The
full amount of the liability has been provided for in the financial statements
of CRP in previous years.
An action was brought against CRP by Dan Purjes, a former lender, who
had made a loan to CRP in 1993. The loan was repaid in full in 1995. However,
Mr. Purjes alleged that he was entitled to a certain percentage of CRP's equity
as part of the loan. Mr. Purjes is the Chairman of Josephthal, CRP's investment
banking firm and a principal shareholder of CRP and BRCC. In 1995, CRP had
provided $50,000 for the estimated settlement of this matter. CRP and Mr. Purjes
have settled this legal action by issuing one and two-thirds shares of CRP Stock
to Mr. Purjes prior to consummation of the Merger which shares shall convert
into 450,108 shares of BRCC Common Stock upon consummation of the Merger. CRP
valued the issuance of such CRP Stock at $188,000. Accordingly, $138,000 was
charged to expense in 1996.
CRP occupies a manufacturing, warehouse and office facility in
Ronkonkoma, New York which it subleases from a former stockholder (the
"Lessor"). The Lessor leases the facility from an industrial development agency
under a lease agreement dated December 1, 1984. In connection with the
construction of the facility, the industrial development agency issued
$3,500,000 of Industrial Development Bonds ("IRBs") which are secured by the
facility pursuant to a Trust Indenture dated December 1, 1984 (the "Trust
Indenture"). In addition, the Lessor, CRP, and Colonial Glove and Garment, Inc.
have guaranteed all outstanding principal, and accrued interest thereon, under
the IRBs. The holders of the IRBs have allegedly exercised their right to redeem
the IRBs pursuant to the terms of the Trust Indenture. In July 1997, The Chase
Manhattan Bank, in its capacity as successor trustee under the Trust Indenture,
commenced a legal action on behalf of the bondholders against the industrial
development agency, the Lessor, CRP and Colonial Glove and Garment, Inc. seeking
a foreclosure on the real property and the facility and money damages to
satisfy all amounts owed to the bondholders, plus cost and expenses of the
sale of the property and of the legal action. As of June 30, 1997,
$1,050,372.05 was outstanding under the IRBs. CRP's management believes that
the current fair market value of the real property and the facility exceeds
the outstanding amounts under the IRBs.
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CERTAIN TRANSACTIONS
In April, 1997, each of Mr. Gerber, a principal stockholder and
director of CRP, and Mr. Nassberg, a director of CRP, made loans to CRP of
$100,000. Such amounts, together with accrued interest at an annual rate of 10%,
are payable on May 17, 1998.
CRP has made loans to Paul Gerber, a principal stockholder of CRP. As
of June 30, 1997, the outstanding principal, and accrued interest thereon, of
these loans equalled $196,366. The outstanding principal, and accrued interest
thereon, of these loans are payable in full thirty-six months from the date of
closing of the Merger.
Each of the existing stockholders of CRP has personally guaranteed
CRP's borrowings, and accrued interest thereon, under its current line of credit
and the $350,000 promissory note of BRCC, and the accrued interest thereon.
Josephthal, CRP's financial consultant, will receive a $50,000 fee and
250,000 shares of BRCC Common Stock upon the consummation of the Merger. Dan
Purjes is the Chairman of Josephthal, a principal shareholder of BRCC and an
executive officer, director and principal shareholder of Josephthal Holdings,
Inc., the parent company of Josephthal. CRP and Mr. Purjes have settled a legal
action commenced by Mr. Purjes against CRP for an alleged breach of contract by
issuing one and two-thirds shares of CRP Stock to Mr. Purjes prior to
consummation of the Merger which shares shall convert into 450,108 shares of
BRCC Common Stock upon consummation of the Merger, provided, however, that
187,575 of such shares of BRCC Common Stock will be Escrowed Shares (as defined
above). See "Business of CRP - Legal Proceedings."
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LEGAL PROCEEDINGS OF BRCC
On June 30, 1994, BRCC entered into an Agreement and Plan of Merger
("Weitzer Agreement") with Weitzer Homebuilders Incorporated ("WHB"), WHB Merger
Sub, Inc. ("Sub"), Harry Weitzer and certain corporations controlled by Harry
Weitzer (collectively, the "Weitzer Entities"). The Weitzer Entities terminated
the proposed merger ("Failed Merger") on December 23, 1994. On June 30, 1994,
consistent with BRCC's investment policies, BRCC extended a one-year loan (the
"Weitzer Loan") to Weitzer Financial, Inc., an entity controlled by Harry
Weitzer. The Weitzer Loan was in the principal amount of $500,000 with an
interest rate equal to the prime rate plus 1%. The principal, and the accrued
interest thereon, of the Weitzer Loan was repaid in July 1995. In June 1997, WHB
and Harry Weitzer (collectively, the "Weitzer Plaintiffs") commenced an action
in the Circuit Court of the Fifteenth Judicial Circuit in and for Palm Beach
County, Florida against BRCC for breach of the Weitzer Agreement, fraudulent
inducement and fraudulent and negligent misrepresentation in connection with
the Failed Merger. The Weitzer Plaintiffs allege unspecified damages in this
action. BRCC is vigorously defending its rights against the alleged claims.
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MANAGEMENT AND OPERATIONS OF BRCC FOLLOWING THE MERGER
After the Merger, CRP will be a wholly-owned subsidiary of BRCC. BRCC
currently intends to maintain CRP's corporate headquarters in Ronkonkoma, New
York and CRP will have access to the resources of BRCC.
DIRECTORS
If the Merger is consummated each existing director of BRCC shall
resign effective upon the consummation of the Merger. Pursuant to the Merger
Agreement, immediately following consummation of the Merger, a new board of
directors (the "New BRCC Board") shall be appointed which shall consist of the
following individuals:
Name Age
Edward Nassberg (1) 59
Robert Witter (1) 52
Kenneth Gross (2) 68
Sherwood Larkin (2) 45
Paul Gerber (3) 54
Charles A. Chenes (3) 60
C. Lawrence Rustein (3) 53
(1) New Class I Director
(2) New Class II Director
(3) New Class III Director
The New BRCC Board shall be classified, one class to be originally
elected for a term expiring at the annual meeting of shareholders to be held in
1998 ("New Class I Directors"), another class to be originally elected for a
term expiring at the annual meeting of shareholders to be held in 1999 ("New
Class II Directors") and another class to be originally elected for a term
expiring at the annual meeting of shareholders to be held in 2000 ("New Class
III Directors"), with each director to serve until his successor has been duly
elected and qualified.
Edward Nassberg is a member of the Board of Directors of CRP and has
served as Treasurer since October, 1990. Mr. Nassberg served as Chief Executive
Officer from 1974 to 1994 of, Plex-Chem Plastics International, Inc., an
international distributor of plastics and chemicals.
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<PAGE> 35
Robert Witter is the founder and has been the Chief Executive Officer
of Witter Publishing Corporation since 1987. Mr. Witter is also the founding
publisher of Cleanrooms magazine, a leading trade magazine on the contamination
control industry.
Kenneth Gross is a member of the Board of Directors of CRP and has
served as its Secretary since October, 1990. Mr. Gross founded, and has served
as Vice President of Goldmark Plastic Compounds, Inc. for more than forty-five
years.
Sherwood Larkin has served as the Chief Operating Officer of Josephthal
Lyon & Ross Incorporated since November 1996, and the Chief Financial Officer of
Josephthal Lyon & Ross Incorporated since March 1994. Prior thereto Mr. Larkin
was a Partner at BDO Seidman LLP. Mr. Larkin is a member of the New York State
Society of Accountants and the American Institute of Certified Public
Accountants.
Paul Gerber has served as President and Chief Executive Officer of CRP
from October, 1990 until March, 1997, and has been a member of the Board of
Directors of CRP since October, 1991. From March, 1980 until October 1989, Mr.
Gerber served as President of Paul Gerber Associates, representing CRP in the
New York/New Jersey area.
Charles A. Chenes became President and Chief Executive Officer of CRP
in March, 1997. Prior thereto, he served as Chairman, President and Chief
Executive Officer of Polygon Industries, Inc. from April, 1996 until February,
1997, and, President and Chief Executive Officer of RLA Community Lending
Corporation from February, 1995 until March, 1996, where he reorganized and
restructured corporate operations. Mr. Chenes served as Chairman, President and
Chief Executive Officer from November, 1990 until April, 1995, and, President
and Chief Executive Officer from February, 1990 until November, 1990, of
Continental Savings of America, ultimately initiating an initial public offering
generating $20.0 million in capital. From August, 1988 until October, 1989, Mr.
Chenes served as Senior Vice President, Consumer Bank Division and President,
HonFed Subsidiaries, of HonFed Bank.
C. Lawrence Rutstein was elected as a director of BRCC in February
1995. Since May 1997, Mr. Rutstein has been Chief Executive Officer and
President of QPQ Corporation, a Nasdaq SmallCap Market traded corporation. Mr.
Rutstein has been the President and Chief Executive Officer of CapQuest
Partners, Inc., a private investment banking firm since January, 1996. Mr.
Rutstein was the Chairman of The Rittenhouse Group, Inc., a private consulting
company from May, 1994 to May, 1995. From 1991 to 1993, Mr. Rutstein was the
General Partner and Vice President of Memphis Chicks Baseball Club, an AA
Affiliate of the Kansas City Royals. Mr. Rutstein is also a member of the board
of directors of Packquisition Corp. and Future Graph, Inc.
COMMITTEES OF THE NEW BRCC BOARD
Committee structure and membership will be determined by the New BRCC
Board shortly after completion of the Merger. It is anticipated that the New
BRCC Board will form an audit committee and a compensation committee, all of
which will be comprised of non-employee directors.
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<PAGE> 36
COMPENSATION OF DIRECTORS
Directors who are employees of BRCC or CRP will not receive any
compensation for service on the New BRCC Board. The specific terms of the
compensation to be paid to non-employee Directors of the New BRCC Board have not
been determined.
EXECUTIVE OFFICERS
If the Merger is consummated, effective upon consummation of the Merger
each existing officer of BRCC shall resign and the following individuals will be
appointed to the respective offices of BRCC set forth opposite their names:
Name Age Position
Charles A. Chenes 60 Chief Executive Officer
and President
Joseph Flynn 32 Chief Financial Officer
Kenneth Gross 68 Secretary
Charles A. Chenes' principal occupation and business experience is set
forth under the caption "--Directors."
Joseph Flynn, has served as Chief Financial Officer of CRP since June,
1994. Prior thereto, Mr. Flynn served as Senior Accountant of BDO Seidman from
December, 1993 until June, 1994 and of David Berdon and Co., CPA's from
December, 1988 until December, 1993.
Kenneth Gross's principal occupation and business experience is set
forth under the caption "--Directors."
EXECUTIVE COMPENSATION
CRP and Mr. Charles A. Chenes have entered into an employment agreement
dated February 28, 1997. Pursuant to this employment agreement, Mr. Chenes will
serve as President, Chief Executive Officer and director of CRP and receive an
annual salary of $150,000. A bonus and salary review occur six months after the
date of the agreement. In addition, upon consummation of the Merger, Mr. Chenes
will receive options exercisable to purchase (i) 50,000 shares of BRCC Common
Stock at an exercise price of $.52 per share which vest immediately upon grant
and (ii) 125,000 shares of BRCC Common Stock at an exercise price of $1.00 per
share which vest on the earlier of (a) two years after the date of grant and (b)
the date CRP reports net income for a fiscal year of in excess of $1,000,000.
The New BRCC Board will rely on its compensation committee, which will be
composed of non-employee directors, to recommend the form and amount of
compensation to be paid to BRCC's and CRP's respective executive officers
following the Merger.
For information regarding compensation paid to the executive officers
of BRCC in 1996, see Appendix IV Annual Report on Form 10-KSB for BRCC for the
year ended December 31, 1996 - Item 10-Executive Compensation.
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<PAGE> 37
Compensation paid to executive officers of CRP in 1996 was as follows:
Paul Gerber, President and Chief Executive Officer $233,000(1)
George A. Gerber, Vice President-Operations $211,808(2)
Joseph Flynn, Chief Financial Officer $ 71,383
(1)Includes lease, gas and maintenance payments with respect to two automobiles
of approximately $25,000.
(2)Includes lease, gas and maintenance payments with respect to an automobile of
approximately $14,600.
STOCK OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS AND FIVE PERCENT SHAREHOLDERS
FOLLOWING THE MERGER.
The following table sets forth certain information with respect to the
beneficial ownership of BRCC capital stock, as of the record date and after
giving effect to the Merger, by (i) each stockholder who is known by BRCC to be
the beneficial owner of more than five percent (5%) of BRCC Common Stock, the
only class of BRCC capital stock currently outstanding, (ii) each director and
executive officer of BRCC who owns any shares of BRCC Common Stock, and (iii)
all officers and directors as a group. Except as otherwise indicated, BRCC
believes that the beneficial owners of the shares listed below have sole
investment and voting power with respect to such shares, subject to community
property laws where applicable (based upon information available to BRCC).
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<PAGE> 38
<TABLE>
<CAPTION>
SHARES OF BRCC COMMON
SHARES OF BRCC COMMON STOCK TO BE BENEFICIALLY
NAME AND ADDRESS STOCK BENEFICIALLY OWNED OWNED AFTER THE
OF BENEFICIAL OWNER PRIOR TO MERGER(1) MERGER(1)(2)
------------------- ------------------------ ------------------------
NUMBER PERCENT NUMBER PERCENT
------ ------- ------ -------
<S> <C> <C> <C> <C>
Paul Gerber 0 * 1,350,324 24%
c/o Clean Room Products, Inc.
1800 Ocean Avenue
Ronkonkoma, New York 11779
Felicia Gross 0 * 1,350,324 24%
c/o Goldmark Plastics
Nassau Terminal Road
New Hyde Park, New York 11040
Kenneth Gross 0 * 1,350,324(3) 24%(3)
c/o Goldmark Plastics
Nassau Terminal Road
New Hyde Park, New York 11040
Sheila Nassberg 0 * 1,350,324 24%
c/o Goldmark Plastics
Nassau Terminal Road
New Hyde Park, New York 11040
Edward Nassberg 0 * 1,350,324(4) 24%(4)
c/o Goldmark Plastics
Nassau Terminal Road
New Hyde Park, New York 11040
Dan Purjes 109,744(5) 9.8%(5) 559,852(6) 9.95%(6)
c/o Josephthal Lyon & Ross
Incorporated
200 Park Avenue
New York, New York 10166
Charles Chenes(7) 0 * 50,000 *
c/o Clean Room Products, Inc.
1800 Ocean Avenue
Ronkonkoma, New York 11779
C. Lawrence Rutstein(8) 10,000 * 10,000 *
340 Overlook Lane
Gulph Mills, PA 19428
Sherwood Larkin 198 * 198 *
c/o Josephthal Lyon & Ross Incorporated
200 Park Avenue
New York, NY 10166
All officers and directors as a group (8 10,198(9) * 4,111,170(10) 72.3%
persons)
</TABLE>
- ---------------
*Less than 1%.
(1)A person is deemed to be the beneficial owner of securities that can be
acquired within 60 days from the date set forth above through the exercise of
any option, warrant or right. Shares of BRCC Common Stock subject to options,
warrants or rights that are currently exercisable or exercisable within 60 days
are deemed outstanding for purposes of computing
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<PAGE> 39
the percentage ownership of the person holding such options, warrants or rights,
but are not deemed outstanding for purposes of computing the percentage
ownership of any other person.
(2)Assumes none of BRCC's shareholders exercises their rights to dissent from
approval of the Merger.
(3)Includes 1,350,324 shares of BRCC Common Stock to be issued to his spouse on
consummation of the Merger.
(4)Includes 1,350,324 shares of BRCC Common Stock to be issued to his spouse on
consummation of the Merger.
(5)Includes (a) 2,500 shares owned by his minor children; (b) 3,000 shares held
in his profit sharing plan account; (c) 1,000 shares held in his individual
retirement account; and (d) 11,500 shares owned by the Josephthal Profit Sharing
Plan, of which Mr. Purjes has the authority to appoint and discharge its
trustees. Mr. Purjes disclaims beneficial ownership of the shares held by his
minor children and the Josephthal Profit Sharing Plan. Excludes (a) 250,000
shares of Common Stock to be issued to Josephthal if the Merger is consummated
and (b) 450,108 shares to be issued to Mr. Purjes in exchange for his ownership
interest in CRP prior to the Merger. See "Certain Transactions."
(6)Includes (a) 2,500 shares owned by his minor children; (b) 3,000 shares held
in his profit sharing plan account; (c) 1,000 shares held in his individual
retirement account; (d) 11,500 shares owned by the Josephthal Profit Sharing
Plan, of which Mr. Purjes has the authority to appoint and discharge its
trustees; (e) 250,000 shares of Common Stock to be issued to Josephthal if the
Merger is consummated; and (f) 450,108 shares to be issued to Mr. Purjes in
exchange for his ownership interest in CRP prior to the Merger. Mr. Purjes
disclaims beneficial ownership of the shares held by his minor children and the
Josephthal Profit Sharing Plan. See "Certain Transactions."
(7)Includes 50,000 shares which are issuable upon the exercise of options to be
granted upon consummation of the Merger.
(8)Includes 10,000 shares which are issuable upon the exercise of outstanding
options.
(9)Includes 10,000 shares which are issuable upon the exercise of outstanding
options.
(10)Includes (a) 10,000 shares which are issuable upon the exercise of
outstanding options, (b) 50,000 options to be granted to Mr. Charles Chenes upon
consummation of the Merger, and (c) an aggregate of 2,700,648 shares to be
issued to the spouses of certain directors upon consummation of the Merger.
BRCC SHAREHOLDERS' RIGHTS
The rights of the BRCC shareholders are currently governed by the
Florida 1989 Business Corporation Act ("FBCA"), the Old BRCC Articles and the
amended and restated by-laws of BRCC (the "Old BRCC By-Laws"). In accordance
with the Merger Agreement, at the Effective Time BRCC will amend and restate its
articles of incorporation (the "New BRCC Articles") and its by-laws (the "New
BRCC By-Laws"). Accordingly, upon consummation of the Merger, the rights of BRCC
shareholders will be governed by the FBCA, the New BRCC Articles of
Incorporation and the New BRCC By-Laws. The following is a summary of certain
differences between the current rights of BRCC shareholders and those of BRCC
shareholders following the Merger.
The following discussion is not intended to be complete and is
qualified by reference to the FBCA, the Old BRCC Articles, the Old BRCC By-Laws,
the New BRCC Articles and the New BRCC By-Laws. A copy of the New BRCC Articles
and the New BRCC By-Laws, in substantially the forms to be adopted at the
Effective Time, are attached to this Proxy Statement as Appendix VI and Appendix
VII, respectively. Copies of the Old BRCC Articles and the Old BRCC By-laws are
incorporated by reference herein and will be sent to holders of shares of BRCC
Common Stock upon request. See "Where You Can Find Additional Information."
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<PAGE> 40
AUTHORIZED CAPITAL
The Old BRCC Articles and the New BRCC Articles each authorize
45,000,000 shares of capital stock, consisting of 40,000,000 shares of common
stock, par value $.001 per share, and 5,000,000 shares of preferred stock, par
value $1.00 per share ("Preferred Stock"). Old BRCC Articles and the New BRCC
Articles also each authorize the Board of Directors to fix the rights,
preferences, privileges and restrictions of one or more series of the authorized
shares of Preferred Stock. See "Description of Capital Stock Following the
Merger."
SPECIAL MEETING OF THE SHAREHOLDERS
Section 607.0702 of the FBCA provides that the holders of not less than
ten percent (10%), unless a greater percentage not to exceed fifty percent (50%)
is required by the articles of incorporation, of all the votes entitled to be
cast at the meeting may call a special meeting of shareholders. The Old BRCC
Articles and the Old BRCC By-Laws and the New BRCC Articles and New BRCC By-Laws
permit a special meeting of the shareholders of BRCC to be called by the holders
of at least fifty percent (50%) of the issued and outstanding shares of capital
stock entitled to vote as a single class with the BRCC Common Stock.
BOARD OF DIRECTORS
BRCC's Board of Directors currently consists of five (5) directors and
following the Merger BRCC's Board of Directors will consist of seven (7)
directors. Under the Old BRCC Articles and the Old BRCC By-Laws the number of
directors may be increased or decreased between three and eleven directors by
the board of directors. Pursuant to the New BRCC Articles and the New BRCC
ByLaws, the number of directors may be increased or decreased between three and
9 directors by the board of directors.
REMOVAL OF DIRECTORS
Section 607.0808 of the FBCA provides that, if cumulative voting is not
authorized, a director may be removed only if the number of votes cast to remove
him exceeds the number of votes cast not to remove him. The holders of BRCC
Common Stock are not entitled to cumulative voting under the Old BRCC Articles
or the New BRCC Articles. Under the Old BRCC Articles and the Old BRCC By-Laws a
director or the full BRCC Board could be removed from office but only for cause
by (i) the affirmative vote of 75% of the voting power of all of the then
outstanding shares of voting stock or, alternatively, (ii) the affirmative vote
of 66 2/3% of the voting power of all of the then outstanding shares of voting
stock and a majority of disinterested directors. The New BRCC Articles and the
New BRCC By-Laws provide that any director or the full BRCC Board may be removed
from office but only for cause by the affirmative vote of the holders of at
least 80% of the combined voting power of the then outstanding shares of voting
stock, voting together as a single class.
CLASSIFIED BOARD
The Old BRCC Articles and the New BRCC Articles establish three classes
of directors, with each director elected for a term expiring at the third
succeeding annual meeting of shareholders after his or her election.
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<PAGE> 41
SUPERMAJORITY VOTE REQUIREMENTS
The Old BRCC Articles require certain transactions with an Interested
Shareholder or any Affiliate or Associate of an Interested Shareholder (as such
terms are defined in Appendix I hereto) to be approved by the vote of (i) the
holders of at least seventy-five percent (75%) of the issued and outstanding
voting securities of BRCC and (ii) at least sixty-six and two thirds percent
(66-2/3%) of the issued and outstanding shares of voting securities of BRCC
Beneficially Owned (as defined in Appendix I hereto) by shareholders other than
any Interested Shareholder. These transactions include any merger, consolidation
or other combination with an Interested Shareholder or any Affiliate or
Associate of an Interested Shareholder, any sale, lease or other transfer or
disposition of in excess of 5% of BRCC's assets or business with an Interested
Shareholder or any Affiliate or Associate of an Interested Shareholder, the
issuance of any securities of BRCC to an Interested Shareholder or any Affiliate
or Associate of an Interested Shareholder, any purchase, exchange, lease or
other acquisition by BRCC of in excess of five percent (5%) of the assets or
business of an Interested Shareholder or any Affiliate or Associate of an
Interested Shareholder, the adoption of any plan or proposal for the liquidation
or dissolution of BRCC, any reclassification or recapitalization of BRCC the
effect of which would increase the percentage ownership of outstanding equity
securities owned by an Interested Shareholder or any Affiliate or Associate of
an Interested Shareholder, or any loans, advances, guarantees, pledges or other
financial assistance or tax credits to benefit an Interested Shareholder or any
Affiliate or Associate of an Interested Shareholder. The New BRCC Articles do
not contain any supermajority approval requirements regarding any such
transactions.
AMENDMENTS OF ARTICLES OF INCORPORATION
The Old BRCC Articles require the affirmative vote of (i) the holders
of at least seventy-five percent (75%) of the then outstanding voting stock,
voting together as a single class, or (ii) a majority of disinterested directors
and the holders of at least sixty-six and two-thirds percent (66-2/3%) of the
then outstanding voting stock, voting together as a single class, to amend,
modify or repeal any of the provisions of the old BRCC Articles relating to
"Capital Stock (Capitalization)", "Management of the Corporation," "Board of
Directors," "Special Voting Provisions," "Acquisition Offers,"
"Indemnification," "Amendments" or "Control Share Acquisitions." The New BRCC
Articles require the affirmative vote of the holders of sixty-six and two-thirds
percent (66 2/3%) of the then outstanding voting stock, voting together as a
single class, to amend, modify or repeal, or adopt any provision inconsistent
with, any provision of the New BRCC Articles relating to "Capitalization
(Capital Stock)", "Management of the Corporation," "Board of Directors,"
"Indemnification," "Amendments" or "Control Share Acquisition."
CONTROL SHARE ACQUISITION
The Old BRCC Articles elect to be subject to the provisions of Section
607.0902 of the FBCA regarding "control share acquisitions" (as defined in the
FBCA). The New BRCC Articles elect not to be subject to Section 607.0902 of the
FBCA, or any successor statute thereto, regarding "control share acquisitions."
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<PAGE> 42
AFFILIATED TRANSACTIONS
The Old BRCC Articles and the New BRCC Articles elect not to be subject
to the applicable provisions of the FBCA regarding "affiliated transactions" (as
defined in the FBCA).
DESCRIPTION OF CAPITAL STOCK FOLLOWING THE MERGER
The summary of the terms of the capital stock of BRCC following
consummation of the Merger set forth below does not purport to be complete and
is qualified by reference to the New BRCC Articles. Copies of the New BRCC
Articles in substantially the form to be adopted immediately at the Effective
Time, are attached hereto as Appendix VI.
AUTHORIZED CAPITAL STOCK
Under the New BRCC Articles, the authorized capital stock of BRCC will
consist of 40,000,000 shares of common stock of which 5,626,350 will be
outstanding as of the Effective Time (assuming none of BRCC's shareholders
exercises any right of a dissenting shareholder and excluding 250,000 shares of
BRCC Common Stock to be issued to Josephthal if the Merger is consummated) and
5,000,000 shares of Preferred Stock, of which none will be outstanding as of the
Effective Time. If the Merger is consummated, BRCC will issue an aggregate of
4,501,080 shares of BRCC Common Stock; provided, however, that 1,875,750 shares
of BRCC Common Stock to be issued to the existing CRP shareholders will be held
in escrow (the "Escrowed Shares") until the earlier of (i) six (6) months after
the Merger is consummated and (ii) the date of consummation of a long-term
financing which results in at least $1,500,000 in net proceeds to BRCC or the
Surviving Subsidiary. In the event that neither BRCC nor the Surviving
Subsidiary consummates a long term financing which results in at least
$1,500,000 in net proceeds to such corporation within six (6) months of the
closing of the Merger, the Escrowed Shares will be returned to BRCC and
cancelled. There can be no assurance that any financing will be consummated
after the Merger.
COMMON STOCK
All of the outstanding shares of BRCC Common Stock are validly issued,
fully paid and nonassessable. The shares of BRCC Common Stock issuable pursuant
to the Merger will, when issued, be validly issued, fully paid and
nonassessable. Holders of BRCC Common Stock will be entitled to one vote for
each share of BRCC Common Stock held of record on all matters submitted to a
vote of the shareholders.
The holders of shares of BRCC Common Stock will not be entitled to
cumulative voting rights for the election of directors. Accordingly, the holders
of more than 50% of the shares of BRCC Common Stock voting for election of
directors will be able to elect 100% of the directors if they choose to do so.
In this event, the holders of the balance of the shares voting for the election
of directors would not be able to elect any person or persons to the New BRCC
Board. Upon consummation of the Merger, the existing shareholders of CRP will
receive the equivalent of 80% of the issued and outstanding shares of BRCC
Common Stock (assuming none of BRCC's shareholders exercises their rights to
dissent from approval of the Merger and excluding 250,000 shares of BRCC Common
Stock to be issued to Josephthal if the Merger is consummated).
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Holders of BRCC Common Stock may, at the sole discretion of the New
BRCC Board, receive dividends, out of legally available funds, subject to prior
rights of the holders of Preferred Stock then outstanding. However, declaration
or payment of dividends will be prohibited under the covenants of certain
financing documents to which CRP is a party. Holders of BRCC Common Stock will
not be entitled to preemptive rights nor subscription, sinking fund, redemption
or conversion privileges. The absence of preemptive rights could result in a
dilution of the interests of BRCC shareholders if additional shares of BRCC
Common Stock are issued. Upon liquidation or dissolution of BRCC, the holders of
the BRCC Common Stock will share pro rata in the assets available for
distribution after payment of all prior claims including all claims of Preferred
Stock then outstanding.
The transfer agent for the BRCC Common Stock is American Stock Transfer
& Trust Company.
PREFERRED STOCK
The New BRCC Board has the authority to issue up to 5,000,000 shares of
Preferred Stock in one or more series and to fix the number of shares
constituting such series, the voting powers, designation, preferences and
relative participation, option or other special rights and qualifications,
limitations and restriction thereof, including the dividend rights and dividend
rate, terms of redemption (including sinking fund provisions), redemption price
or prices, conversion rights and liquidation preferences of the shares
constituting the series without further vote or action by the shareholders. The
issuance of Preferred Stock by the New BRCC Board could affect the rights of the
holders of the BRCC Common Stock. For example, such issuance could result in a
class of securities outstanding that would have preference with respect to
voting rights and dividends, and in liquidation, over the BRCC Common Stock, and
could (upon conversion or otherwise) enjoy all of the rights appurtenant to the
BRCC Common Stock.
The New BRCC Board's authority to issue Preferred Stock could
potentially be used to discourage, delay or prevent a takeover of BRCC through a
merger, tender offer, proxy contest or otherwise by making such attempts more
difficult to achieve or more costly. The New BRCC Board may issue Preferred
Stock with voting and conversion rights that could adversely affect the voting
power of the holders of the BRCC Common Stock. There are no agreements or
understandings for issuance of Preferred Stock and no present intention to issue
Preferred Stock.
CERTAIN FLORIDA LEGISLATION
Florida has enacted legislation that may deter or frustrate takeover of
Florida publicly-held corporations. The "control-share acquisition" section of
the FBCA generally provides that shares acquired in excess of certain specified
thresholds, beginning at 20% of a corporation's outstanding voting shares, will
not possess any voting rights unless such voting rights are approved by a
majority vote of the corporation's disinterested shareholders. The "affiliated
transactions" section of the FBCA generally requires majority approval by
disinterested directors or supermajority approval of shareholders of certain
specified transactions (such as a merger, consolidation, sale of assets,
issuance or transfer of shares or reclassification of securities) between a
corporation and holders of 10 percent or more of the outstanding voting shares
of the corporation, or any affiliate of such shareholder. BRCC has elected in
the New BRCC Articles not to be governed by the provisions of the "control-share
acquisition" or "affiliated transactions" sections of the FBCA. The practical
effect of these
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provisions of the New BRCC Articles is that BRCC would be susceptible to a
takeover or other transaction resulting in a change of control if the New BRCC
Board so permits.
FINANCIAL INFORMATION
BRCC's Annual Report on Form 10-KSB for the year ended December 31,
1996, BRCC's Annual Report on Form 10-KSB/A for the year ended December 31, 1996
and BRCC's Quarterly Report on Form 10-QSB for the six months ended June 30,
1997 are incorporated herein by reference. The audited financial statements of
CRP at December 31, 1996 and for each of the two years audited in the period
ended December 31, 1996 included in this Proxy Statement have been included
herein in reliance on the report of Dalessio, Millner & Leben LLP, independent
accountants, given on the authority of that firm as experts in accounting and
auditing.
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PROPOSAL 2
APPROVAL OF AMENDED AND RESTATED
ARTICLES OF INCORPORATION AND BY-LAWS
Pursuant to Article X of the Old BRCC Articles, if a quorum is present, an
affirmative vote of the holders of at least seventy-five percent (75%) of the
issued and outstanding shares of BRCC Common Stock, present either in person or
by Proxy at the Meeting, is required for the approval of the adoption of the New
BRCC Articles and New BRCC By-Laws. If Proposal 1 of this Proxy Statement is
approved and the Merger is consummated, the New BRCC Articles and New BRCC
By-Laws will be adopted as part of the Merger without any further action by the
shareholders of BRCC. See "Proposal 1 - BRCC Shareholders' Rights" for a
discussion of certain differences between the current rights of BRCC
shareholders and the rights of BRCC shareholders if the New BRCC Articles and
New BRCC By-Laws are approved and become effective either under approval of
Proposal 1 or Proposal 2.
The discussion under "Proposal 1 - BRCC Shareholders' Rights" is not intended to
be complete and is qualified by reference to the FBCA, the Old BRCC Articles,
the Old BRCC By-Laws, the New BRCC Articles and the New BRCC By-Laws. Copies of
the New BRCC Articles and the New BRCC By-Laws, in substantially the forms to be
adopted if approved, are attached to this Proxy Statement as Appendix VI and
Appendix VII, respectively. Copies of the Old BRCC Articles and the Old BRCC
By-Laws are incorporated by reference herein and will be sent to holders of BRCC
upon request. See "Where You Can Find Additional Information."
As discussed under "Proposal 1 - The Merger--Reasons for the Merger;
Recommendation of the BRCC Board; Interests of Certain Persons," the BRCC Board
believes it would be in the best interests of shareholders of BRCC to seek a
merger with an operating company based upon BRCC's financial and operational
structure. Although the BRCC Board recommends a vote for the Merger discussed in
Proposal 1, the Merger may not be consummated, even if approved by the BRCC
shareholders, because the Merger is subject to the satisfaction or waiver (if
permissible) of certain conditions, other than BRCC shareholder approval. See
"Proposal 1 - The Merger Agreement - Conditions." There can be no assurance that
the conditions discussed thereunder will be satisfied or waived (if
permissible). The BRCC Board believes that it would be beneficial to approve the
New BRCC Articles and New BRCC By-Laws in order to simplify corporate
governance, generally, and to elect not to be subject to FBCA Section 607.0902
regarding "control share acquisitions" and to eliminate supermajority voting
requirements for certain mergers, business combinations and the liquidation and
dissolution of BRCC, specifically. See Proposal 1 - BRCC Shareholders' Rights."
The Board believes that the adoption of the New BRCC Articles will facilitate
the negotiation of future mergers or business combinations, if any, in the event
that the Merger is not consummated for any reason, and facilitate the
liquidation and dissolution of BRCC if no merger or business combination is
consummated.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE
NEW ARTICLES OF INCORPORATION AND NEW BY-LAWS
43
<PAGE> 46
OTHER MATTERS
The BRCC Board does not know of any other matters which may be brought before
the Meeting. However, if any such other matters are properly presented for
action, it is the intention of the persons named in the accompanying form of
Proxy to vote the shares represented thereby in accordance with their judgment
on such matters.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
BRCC files annual and quarterly reports, proxy statements and other information
with the Securities and Exchange Commission ("SEC"). You may read and copy any
reports, statements or other information we file at the SEC's public reference
rooms in Washington, D.C., New York, New York and Chicago, Illinois. Please call
the SEC at 1-800-SEC-0330 for further information on the public reference rooms.
Our SEC filings are also available to the public electronically by means of the
web site maintained by the SEC at "http://www.sec.gov."
BRCC has supplied all information contained or incorporated by reference in this
Proxy Statement relating to BRCC and CRP has supplied all such information
relating to CRP.
INFORMATION CONCERNING BRCC
The Securities and Exchange Commission ("SEC") allows us to "incorporate by
reference" information into this Proxy Statement which means that we can
disclose important information to you by referring you to another document filed
separately with the SEC. This information incorporated by reference is deemed to
be part of this Proxy Statement, except for any information superseded by
information in this Proxy Statement. This proxy Statement incorporates by
reference the documents set forth below that we have previously filed with the
SEC. This document contains important information about BRCC and its finances. A
copy of each of BRCC's Annual Report on Form 10-KSB for the year ended December
31, 1996, BRCC's Annual Report on Form 10-KSB/A for the year ended December 31,
1996 and BRCC's Quarterly Report on Form 10-QSB are set forth in
Appendix IV to this Proxy Statement.
BRCC SEC FILING
(FILE 0-16631) PERIOD
Annual Report on Form 10-KSB Year ended December 31, 1996
Annual Report on Form 10-KSB/A Year ended December 31, 1996
Quarterly Report on Form 10-QSB Six months ended June 30, 1997
Amended and Restated
Articles of Incorporation
Amended and Restated
By-Laws
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE
IN THIS PROXY STATEMENT TO VOTE ON THE MERGER. WE HAVE NOT AUTHORIZED ANYONE TO
PROVIDE YOU WITH
44
<PAGE> 47
INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED IN THIS PROXY STATEMENT.
THIS PROXY STATEMENT IS DATED AUGUST 28, 1997. YOU SHOULD NOT ASSUME THAT THE
INFORMATION CONTAINED IN THE PROXY STATEMENT IS ACCURATE AS OF ANY DATE OTHER
THAN SUCH DATE, AND NEITHER THE MAILING OF THE PROXY STATEMENT TO SHAREHOLDERS
NOR THE ISSUANCE OF BRCC COMMON STOCK IN THE MERGER SHALL CREATE ANY IMPLICATION
TO THE CONTRARY.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS FOR 1997 ANNUAL
MEETING
Under the Commission's proxy rules, shareholder proposals that meet
certain conditions may be included in BRCC's proxy statement and proxy for a
particular annual meeting. Proposals of shareholders that are intended to be
presented by such shareholders at BRCC's 1998 Annual Meeting must be received by
BRCC no later than January 15, 1998 to be considered for inclusion in the proxy
statement and form of proxy relating to that meeting. Receipt by BRCC of any
such proposal from a qualified shareholder in a timely manner will not ensure
its inclusion in BRCC's proxy material because there are other requirements in
the proxy rules for such inclusion.
MISCELLANEOUS
If the accompanying form of Proxy is executed properly and returned,
the shares represented thereby will be voted at the Meeting in accordance with
the instructions on the Proxy, unless the Proxy is revoked. If no instructions
are indicated in such Proxy, the shares represented thereby will be voted FOR
the approval of the Issuance and the Merger thereby waiving such shareholder's
right to dissent, FOR the approval of the New Articles and in the discretion of
the Proxy holders as to any other matter which may properly come before the
Meeting. Any Shareholder who has given a Proxy may revoke such Proxy at any time
prior to its exercise at the Meeting by (i) giving written notice of the
revocation to Franklyn B. Weichselbaum, as Secretary of BRCC, (ii) properly
submitting to the Meeting a duly executed Proxy bearing a later date, or (iii)
attending the Meeting and voting by ballot, except as to any matter or matters
upon which a vote shall have been cast, pursuant to the authority conferred by
such Proxy prior to such revocation. Attendance at the Meeting will not in and
of itself revoke a Proxy. All written notices of revocation and other
communications with respect to revocation of Proxies should be addressed as
follows: Franklyn B. Weichselbaum, Secretary, Boca Raton Capital Corporation,
6516 Via Rosa, Boca Raton, Florida 33433.
All costs relating to the solicitation of Proxies will be borne by
BRCC. Proxies may be solicited by the officers of BRCC personally, by mail or by
telephone or telegraph, and BRCC may pay brokers and other persons holding
shares of stock in their names or those of their nominees for their reasonable
expenses in sending soliciting material to their principals.
BY ORDER OF THE BOARD OF DIRECTORS
Franklyn B. Weichselbaum
Secretary
Boca Raton, Florida
August 28, 1997
45
<PAGE> 48
INDEX TO FINANCIAL STATEMENTS
AND PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
CLEAN ROOM PRODUCTS, INC.
Independent Auditors' Report............................................. F-2
Balance Sheets as of December 31, 1996
and June 30, 1997 (unaudited).......................................... F-3
Statements of Operations for the years ended December 31, 1996
and 1995 and the six months ended June 30, 1997
(unaudited) and 1996 (unaudited)....................................... F-4
Statement of Changes in Stockholders' (Deficit) for the years
ended December 31, 1996 and 1995 and for the six months ended
June 30, 1997 (unaudited).............................................. F-5
Statement of Cash Flows for the years ended December 31, 1996 and
1995 and for the six months ended June 30, 1997
(unaudited) and 1996 (unaudited) ...................................... F-6
Notes to Financial Statements............................................ F-7
PRO FORMA CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED)
Introduction to Pro Forma Consolidated Financial Statements
(unaudited)............................................................ F-17
Pro Forma Consolidated Balance Sheet as of
June 30, 1997 (unaudited).............................................. F-19
Pro Forma Consolidated Statement of Operations
for the year Ended December 31, 1996 (unaudited)....................... F-20
Pro Forma Consolidated Statements of Operations
for the six months ended June 30, 1997 (unaudited)..................... F-21
F-1
<PAGE> 49
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Clean Room Products, Inc.
Ronkonkoma, New York
We have audited the accompanying balance sheet of Clean Room Products, Inc. as
of December 31, 1996 and the related statements of operations, cash flows, and
changes in stockholders' (deficit) for the years ended December 31, 1996 and
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Clean Room Products, Inc. as of
December 31, 1996, and the results of its operations and its cash flows for the
years ended December 31, 1996 and 1995 in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1, the Company
has experienced recurring losses from operations, has a deficiency in its
working capital, and is in default on its debt covenants. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 1. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
New York, New York DALESSIO, MILLNER & LEBEN LLP
April 23, 1997, except for Certified Public Accountants
Note 12(b) as to which the
date is May 1, 1997
F-2
<PAGE> 50
CLEAN ROOM PRODUCTS, INC.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
December 31, 1996 June 30, 1997
----------------- -------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 319,520 $ 4,226
Accounts receivable, less allowance for
doubtful accounts of $37,250 at December 31,
1996 and $10,000 at June 30, 1997 1,696,846 1,390,526
Inventories 1,113,163 928,905
Prepaid expenses and other 3,703 86,097
----------- -----------
TOTAL CURRENT ASSETS 3,133,232 2,409,754
PROPERTY AND EQUIPMENT, less accumulated
depreciation and amortization 2,615,328 2,422,903
DUE FROM STOCKHOLDER 204,353 212,664
DEPOSITS AND OTHER 9,265 36,408
----------- -----------
$ 5,962,178 $ 5,081,729
=========== ===========
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 1,743,412 $ 1,848,989
Loans payable 1,435,967 1,068,075
Note payable 350,000 367,986
Loans payable-stockholders -- 204,111
Billings in excess of costs and estimated
earnings on uncompleted contracts 569,303 528,250
Accrued expenses 982,683 1,001,127
Current portion of obligations under
capital leases 1,406,338 1,347,314
Employee benefit obligations 76,991 98,086
----------- -----------
TOTAL CURRENT LIABILITIES 6,564,694 6,463,938
OBLIGATIONS UNDER CAPITAL LEASES, less
current portion 724,747 632,755
EMPLOYEE BENEFIT OBLIGATIONS, less
current portion 157,639 136,544
----------- -----------
TOTAL LIABILITIES 7,447,080 7,233,237
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' (DEFICIT):
Common stock; no par value; 200 shares
authorized; 15 shares issued and outstanding 1,100 1,100
Additional paid-in capital 65,949 65,949
Deficit (1,551,951) (2,218,557)
----------- -----------
TOTAL STOCKHOLDERS' (DEFICIT) (1,484,902) (2,151,508)
----------- -----------
$ 5,962,178 $ 5,081,729
=========== ===========
</TABLE>
See Accompanying Notes to Financial Statements
F-3
<PAGE> 51
CLEAN ROOM PRODUCTS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For The Years Ended For the Six Months Ended
December 31, June 30,
1996 1995 1997 1996
---- ---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
NET SALES $ 12,254,173 $ 16,984,734 $ 5,754,994 $ 6,474,540
COST OF SALES 9,027,475 12,847,487 4,650,549 4,542,540
------------ ------------ ----------- -----------
GROSS PROFIT 3,226,698 4,137,247 1,104,445 1,932,000
------------ ------------ ----------- -----------
OPERATING EXPENSES:
Selling and shipping 1,117,930 1,238,775 521,160 549,514
General and administrative 2,332,079 2,316,235 1,053,148 1,141,021
------------ ------------ ----------- -----------
TOTAL OPERATING EXPENSES 3,450,009 3,555,010 1,574,308 1,690,535
------------ ------------ ----------- -----------
OPERATING (LOSS) INCOME (223,311) 582,237 (469,863) 241,465
------------ ------------ ----------- -----------
OTHER INCOME (EXPENSE):
Interest expense (476,660) (428,781) (249,366) (290,693)
Interest and dividend income 15,834 17,538 8,312 7,848
Write-off of fixed assets (45,915) -- -- --
Other (124,951) (40,866) 44,311 20,759
------------ ------------ ----------- -----------
TOTAL OTHER INCOME (EXPENSE) (631,692) (452,109) (196,743) (262,086)
------------ ------------ ----------- -----------
(LOSS) INCOME BEFORE EXTRAORDINARY ITEM (855,003) 130,128 (666,606) (20,621)
EXTRAORDINARY ITEM:
Gain on extinguishment of debt -- 73,668 -- --
------------ ------------ ----------- -----------
NET (LOSS) INCOME $ (855,003) $ 203,796 $ (666,606) $ (20,621)
============ ============ =========== ===========
</TABLE>
See Accompanying Notes to Financial Statements
F-4
<PAGE> 52
CLEAN ROOM PRODUCTS, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' (DEFICIT)
(INFORMATION WITH RESPECT TO THE SIX MONTHS ENDED
JUNE 30, 1997 IS UNAUDITED)
<TABLE>
<CAPTION>
Common Additional
Stock Paid-in Capital Deficit Total
----- --------------- ------- -----
<S> <C> <C> <C> <C>
Balance,
January 1, 1995 $1,100 $65,949 $ (717,677) $ (650,628)
Net income -- -- 203,796 203,796
Distributions -- -- (150,000) (150,000)
------ ------- ----------- -----------
Balance,
December 31, 1995 1,100 65,949 (663,881) (596,832)
Net loss -- -- (855,003) (855,003)
Distributions -- -- (33,067) (33,067)
------ ------- ----------- -----------
Balance,
December 31, 1996 1,100 65,949 (1,551,951) (1,484,902)
Net loss -- -- (666,606) (666,606)
------ ------- ----------- -----------
Balance,
June 30, 1997 (unaudited) $1,100 $65,949 $(2,218,557) $(2,151,508)
====== ======= =========== ===========
</TABLE>
See Accompanying Notes to Financial Statements
F-5
<PAGE> 53
CLEAN ROOM PRODUCTS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For The Years Ended For the Six Months Ended
December 31, June 30,
1996 1995 1997 1996
---- ---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $(855,003) $ 203,796 $(666,606) $ (20,621)
Adjustments to reconcile net (loss) income to net
cash (used in) provided by operating activities:
Gain on extinguishment of debt -- (73,668) -- --
Recovery of bad debt -- -- 27,250 --
Depreciation and amortization 456,170 354,940 236,488 231,131
Provision for doubtful accounts 37,250 -- -- --
Write-off of fixed assets 45,915 -- -- --
Changes in operating assets and liabilities:
Decrease (increase) in:
Accounts receivable 289,798 115,565 279,070 246,502
Inventories 182,071 187,851 184,258 (53,421)
Prepaid expenses and other (2,044) 30,202 (82,394) (23,902)
Accrued interest from stockholders (7,987) (17,518) (4,200) --
Deposits and other 1,735 10,309 (17,143) (15,738)
Increase (decrease) in:
Accounts payable (685,444) 420,613 105,577 (341,296)
Billings in excess of costs and estimated
earnings on uncompleted contracts 184,904 (549,137) 36,430 52,887
Accrued expenses 205,736 348,293 (41,053) (177,234)
Employee benefit obligations (3,672) (24,542) -- (3,672)
--------- ----------- --------- ---------
Net cash (used in) provided by operating activities (150,571) 1,006,704 57,677 (105,364)
--------- ----------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (102,458) (337,029) (34,063) (78,009)
Repayments (advances) of stockholders' loans 12,417 (58,573) -- 12,485
--------- ----------- --------- ---------
Net cash (used in) provided by investing activities (90,041) (395,602) (34,063) (65,524)
--------- ----------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from note payable 350,000 -- -- --
Net (payments) under note payable-bank -- (1,414,569) -- --
Net borrowings (payments) from loans payable 352,602 1,083,365 (367,892) 269,214
Loans from stockholders -- -- 200,000 --
Financing costs -- (10,000) (20,000) --
Repayments on capital lease obligations (152,825) (191,335) (151,016) (95,140)
Repayment of loan payable -- (74,538) -- --
--------- ----------- --------- ---------
Net cash provided by (used in) financing activities 549,777 (607,077) (338,908) 174,074
--------- ----------- --------- ---------
NET INCREASE (DECREASE) IN CASH 309,165 4,025 (315,294) 3,186
CASH, BEGINNING OF YEAR 10,355 6,330 319,520 10,355
--------- ----------- --------- ---------
CASH, END OF YEAR $ 319,520 $ 10,355 $ 4,226 $ 13,541
========= =========== ========= =========
</TABLE>
See Accompanying Notes to Financial Statements
F-6
<PAGE> 54
CLEAN ROOM PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO THE SIX MONTHS ENDED
JUNE 30, 1997 AND 1996 IS UNAUDITED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Business
Clean Room Products, Inc. (the "Company") was incorporated in the State
of New York in 1965. The Company manufacturers and distributes products
for critical environment facilities and designs and constructs clean
rooms throughout the United States.
Basis of Presentation
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. The Company has
experienced recurring losses from operations, has a deficiency in its
working capital, and is in default on its debt covenants. These factors
raise substantial doubt about the Company's ability to continue as a
going concern. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
In 1997, the Company commenced a restructuring program. This program
included the reorganization of the Company's senior management with the
appointment of a new chief executive officer. The Company has embarked
upon a substantial cost cutting effort. Additionally, the Company is
refocusing its sales efforts on higher margin products. On April 17,
1997, the Company received a $200,000 loan from its stockholders to
fund its short-term working capital needs and is proceeding with its
merger with Boca Raton Capital Corp., a publicly traded "shell" company
with in excess of $400,000 in liquid assets (See Note 12). Management
believes that these actions will enable the Company to continue as a
going concern. The Company's continued existence is dependent upon its
ability to achieve and maintain positive cash flow.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Inventories
Inventories are stated at the lower of cost or market. Cost is
determined using the first-in, first-out method (FIFO).
Property and Equipment
Property and equipment is carried at cost. Depreciation is computed
using the straight-line method over the estimated useful lives of the
related assets, ranging from five to seven years.
Leasehold improvements and property held under capital leases are
amortized over the lesser of the lease term or the useful life of the
property.
F-7
<PAGE> 55
CLEAN ROOM PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO THE SIX MONTHS ENDED
JUNE 30, 1997 AND 1996 IS UNAUDITED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
Asset Impairment
The Company adopted Statement of Financial Accounting Standards
("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of," effective January 1,
1996. SFAS No. 121 requires impairment losses to be recognized on
long-lived assets used in operations when indicators of impairment are
present and the undiscounted cash flows estimated to be generated by
those assets are less than the assets' carrying amount. SFAS No. 121
also addresses the accounting for long-lived assets that are expected
to be disposed of. There was no effect on the financial statements of
the adoption of SFAS No. 121.
Revenue Recognition
Revenue related to the distribution of products is recognized at the
time of title transfer, which occurs at the time of shipment.
Revenue from the design and construction of clean rooms is recognized
on the percentage-of-completion method, measured by the percentage of
contract costs incurred to estimated total contract costs for each
contract. This method is used because management considers it to be the
best available measure of progress on these contracts. Contract costs
include all direct material and labor costs and those indirect costs
related to contract performance, such as indirect labor, supplies,
tools, repairs, and depreciation and amortization costs. Selling,
general and administrative costs are charged to expense as incurred.
Provisions for estimated losses on uncompleted contracts are made in
the period in which such losses are determined. Changes in job
performance, job conditions, and estimated profitability, including
those arising from contract penalty provisions, and final contract
settlement may result in revisions to costs and income and are
recognized in the period in which the revisions are determined. An
amount equal to contract costs attributable to claims is included in
revenues when realization is probable and the amount can be reliably
estimated.
The liability "billings in excess of costs and estimated earnings on
uncompleted contracts", represents billings in excess of revenue
recognized.
Income Taxes
The Company is an S Corporation for Federal and New York State tax
purposes. Accordingly, the current taxable income (loss) of the Company
is taxable to its stockholders, who are responsible for the payment of
income taxes or benefits thereon.
Statements of Cash Flows
For purposes of the statements of cash flows, the Company considers all
highly liquid investments purchased with an original maturity of three
months or less to be cash equivalents.
F-8
<PAGE> 56
CLEAN ROOM PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO THE SIX MONTHS ENDED
JUNE 30, 1997 AND 1996 IS UNAUDITED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
Interim Periods
The financial statements for the six months ended June 30, 1997 and
1996 are unaudited but, in the opinion of management, include all
adjustments, consisting of only normal recurring adjustments necessary
for the fair presentation of financial position and results of
operations. Results for the interim periods are not necessarily
indicative of the results for a full year.
NOTE 2 - INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
December 31, June 30,
1996 1997
---- ----
<S> <C> <C>
Raw materials $ 615,667 $ 521,455
Finished goods 497,496 407,450
---------- ----------
$1,113,163 $ 928,905
========== ==========
</TABLE>
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
December 31, June 30,
1996 1997
---- ----
<S> <C> <C> <C>
Leasehold improvements $1,087,937 $1,098,941
Office and lab equipment 680,299 596,486
Machinery 507,069 271,054
Automobiles 12,807 -
Property under capital leases:
Manufacturing, warehouse, and
office facility 3,887,944 3,887,944
Machinery 130,223 130,223
---------- ----------
6,306,279 5,984,648
Less: accumulated depreciation and
amortization (a) 3,690,951 3,561,745
---------- ----------
$2,615,328 $2,422,903
========== ==========
</TABLE>
(a) Includes $2,378,194 and $2,486,962 of accumulated amortization
on property held under capital leases at December 31, 1996 and
June 30, 1997, respectively.
NOTE 4 - DUE FROM STOCKHOLDER
Loans to the Company's stockholders had no specified repayment date and
bore interest at 8% per annum. In 1996, the stockholder loan was
converted into a promissory note in the amount of $196,366 with
principal and interest payable in full thirty six months from the date
of closing of the merger transaction discussed in Note 12.
The Company recorded $15,875, $17,518, $8,311, and $9,611 of interest
income on these loans for the years ended December 31, 1996 and 1995
and the six months ended June 30, 1997 and 1996, respectively.
F-9
<PAGE> 57
CLEAN ROOM PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO THE SIX MONTHS ENDED
JUNE 30, 1997 AND 1996 IS UNAUDITED)
NOTE 5 - INVESTMENT IN LIMITED PARTNERSHIP
The Company has a 95% limited partnership interest in a limited
partnership which has been fully written-off due to losses recorded in
prior years under the equity method of accounting. As of December 31,
1996, the Company had a negative capital account in this limited
partnership, for tax purposes, of $1,032,891. The Company is not liable
for any further contributions to the limited partnership, which owns
and operates a low-income apartment complex located in Kentucky. The
carrying value of this investment will be adjusted in subsequent years
only in the event that future net income of the limited partnership,
less any distributions, exceeds the Company's negative capital account.
NOTE 6 - BILLINGS IN EXCESS OF COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED
CONTRACTS
Costs and estimated earnings on uncompleted contracts consists of the
following:
<TABLE>
<CAPTION>
December 31, June 30,
1996 1997
---- ----
<S> <C> <C>
Billings to date $1,900,617 $ 602,271
---------- ----------
Costs incurred on uncompleted contracts 1,003,901 60,081
Estimated earnings recognized to date 327,413 13,940
---------- ----------
1,331,314 74,021
---------- ----------
Billings in excess of costs and estimated
earnings on uncompleted contracts $ 569,303 $ 528,250
========== ==========
</TABLE>
NOTE 7 - LOANS PAYABLE
The Company had a line of credit with a bank that expired in April
1995. Borrowings bore interest at the bank's prime rate plus 1.5 %. In
May 1995, the bank agreed to extend the maturity date to June 30, 1995.
As part of the extension agreement, the interest rate was modified to
equal the bank's prime rate plus 2.5% and increased to the bank's prime
rate plus 3% subsequent to June 30, 1995. Certain stockholders
personally guaranteed the line of credit.
F-10
<PAGE> 58
CLEAN ROOM PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO THE SIX MONTHS ENDED
JUNE 30, 1997 AND 1996 IS UNAUDITED)
NOTE 7 - LOANS PAYABLE (CON'T)
In October 1995, the Company refinanced the above Stock referenced line
of credit with a new financial institution (the "New Credit Facility").
The New Credit Facility had provided for maximum borrowings of
$1,500,000 which would be available for advances against eligible
accounts receivable, as defined, at the rate of 90%. Advances bore a
finance fee at the rate of .9% per ten (10) day period each accounts
receivable invoice remained outstanding based on the face value of the
invoice. On December 22, 1995, the Company entered into a new two year
financing agreement with the same financial institution to replace the
$1,500,000 credit facility discussed above, for advances to be made at
the lesser of $2,000,000 or 85% of eligible accounts receivable, as
defined. Advances bear interest at 3.5% above the prime rate (8.25% at
December 31, 1996 and 8.5% at June 30, 1997) plus an administrative fee
of .4% on the average daily outstanding balance for the immediately
preceding month, with a total minimum monthly fee payable of $10,000.
This agreement provides for, among other things, a security interest in
substantially all of the Company's assets, maintenance of minimum
levels of net worth, limitations on loans to officers, stockholders,
directors or affiliates, payments of cash dividends, and is guaranteed
by the Company's stockholders. At December 31, 1996 and June 30,
1997, the Company was in violation of certain of the covenants.
Additionally, the same financial institution provided the Company with
a $275,000 credit facility (the "Inventory Facility"). Maximum
borrowings are based upon eligible inventory, as defined. This facility
bears interest at 3.5% above the prime rate, with monthly principal
payments commencing July 1, 1997 of $5,500 with a balloon payment for
the residual amount in December 1997. At December 31, 1996 and June 30,
1997, the Company had outstanding amounts of $275,000 under the
Inventory Facility. The Company also borrowed $275,000 under an
accommodation note from this same financial institution. The
accommodation note matures in December 1997, is payable in monthly
installments of $7,401 with a balloon payment of $180,721, and bears
interest at 3.5% above the prime rate plus an administrative fee of .4%
on the average daily balance outstanding of the immediately preceding
month.
In conjunction with the October 1995 refinancing, the Company's former
bank agreed to reduce the principal amount outstanding under the line
of credit by $75,000. The balance of the loan was repaid. In fiscal
1995, the Company recognized $73,668 of income as an extraordinary item
resulting from this modification.
NOTE 8 - LEASES
The Company occupies a manufacturing, warehouse, and office facility
which it subleases from a former stockholder. The former stockholder
leases the facility from an industrial development agency under an
agreement dated December 1, 1984. The former stockholder has the option
to purchase the facility for $1 upon retirement of the $3,500,000 of
Industrial Development Revenue Bonds ("IRB") issued to finance the
facility construction.
F-11
<PAGE> 59
CLEAN ROOM PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO THE SIX MONTHS ENDED
JUNE 30, 1997 AND 1996 IS UNAUDITED)
NOTE 8 - LEASES (CONT'D)
The Company's sublease terminates upon retirement of the IRB, but
contains a provision requiring it to enter into a new lease agreement
at that time, through November 30, 2004, with identical terms as the
sublease agreement. The sublease agreement, as amended October 21,
1991, requires the Company to pay monthly rent of $33,520 for five
years, after which time rents are to be adjusted annually to fair
rental value. The sublease has been capitalized at the present value of
the minimum lease payments, which approximates the portion of the cost
of the facility that was financed with the IRB. The sublease contains
certain financial and technical covenants. At December 31, 1996 and
June 30, 1997, the Company was in default of certain of these
covenants.
The Company has guaranteed the IRB, which has an unpaid balance of
approximately $1,143,000 as of December 31, 1996 and $1,051,000 at June
30, 1997. At December 31, 1996 and June 30, 1997 the former stockholder
was in default of the IRB and an action has been brought against the
Company by the holder of the IRB to enforce the guarantee against the
Company. Accordingly, the guaranteed portion of the lease has been
classified as a current liability.
In 1994, the Company and the former stockholder amended the sublease to
reduce the monthly minimum rental payments from $33,520 as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
May 1, 1994 to February 28, 1995 $ 25,125
March 1, 1995 to December 1, 1995 $ 30,708
January 1, 1996 to October 20, 1996 $ 27,916
</TABLE>
Thereafter the monthly minimum payments
shall be at fair rental value, in no
event less than the IRB's debt service payment ($15,350 plus
interest).
In fiscal 1995 and 1996 and continuing into 1997, the Company has been
in arrears on this lease. Accordingly, the rental payment terms to be
established as of October 20, 1996 have not yet been established.
The present value of the remaining future minimum lease payments and
the carrying value of the manufacturing, warehouse, and office facility
were reduced by approximately $480,000 based on the above-mentioned
amendment and using the rental payment in effect at January 1, 1996 for
the remainder of the term of the lease.
The Company also has capital and operating leases for machinery and
equipment and automobiles with various dates of expiration through
January 2001.
F-12
<PAGE> 60
CLEAN ROOM PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO THE SIX MONTHS ENDED
JUNE 30, 1997 AND 1996 IS UNAUDITED)
NOTE 8 - LEASES (CONT'D)
Future minimum payments, by year and in the aggregate, under the
capital and operating leases are as follows:
<TABLE>
<CAPTION>
Capitalized Operating
Leases Leases
------ ------
<S> <C> <C> <C>
December 31,
1997 $ 470,503 $ 50,119
1998 386,753 25,124
1999 356,700 18,138
2000 343,575 10,928
2001 335,352 5,846
Thereafter 1,005,000 -
---------- --------
Total minimum lease payments 2,897,883 $110,155
========
Less: amount representing
interest 766,798
----------
Present value of net minimum
lease payments $2,131,085
----------
Current portion $1,406,338
==========
Long-term portion $ 724,747
==========
</TABLE>
Rent expense was $70,739, $66,313, $29,754, and $49,202 for the years
ended December 31, 1996 and 1995 and the six months ended June 30,
1997 and 1996, respectively.
NOTE 9 - EMPLOYEE BENEFIT PLANS
a) The Company provided an employee with supplemental retirement and
disability benefits. These benefits are unfunded by the Company. At
December 31, 1996 and June 30, 1997 the Company has a liability of
$234,630 representing the present value of the obligation using a 7%
discount rate. In 1996, the Company fell into arrears on the payments
of this liability. (See Note 14)
Future minimum payments, by year and in the aggregate, are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
December 31,
1997 $ 76,991
1998 44,400
1999 44,400
2000 44,400
2001 44,400
Thereafter 33,300
--------
Total minimum payments 287,891
Less: amount representing interest 53,261
--------
Present value of minimum payments $234,630
========
Current portion $ 76,991
========
Long-term portion $157,639
========
</TABLE>
F-13
<PAGE> 61
CLEAN ROOM PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO THE SIX MONTHS ENDED
JUNE 30, 1997 AND 1996 IS UNAUDITED)
NOTE 9 - EMPLOYEE BENEFIT PLANS (CONT'D)
b) The Company's profit sharing plan, a qualified salary reduction plan
under Section 401(k) of the Internal Revenue Code, covers substantially
all employees. The Company, at the discretion of the Board of
Directors, may match a portion of the employees' contributions to the
plan. Employer contributions to the employee 401(k) savings and profit
sharing plan were $33,674, $38,027, $13,743, and $22,600, for the years
ended December 31, 1996 and 1995 and the six months ended June 30,
1997 and 1996, respectively.
NOTE 10 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of financial instruments classified as current
assets or liabilities approximated fair value at December 31, 1996 and
June 30, 1997 due to the short-term maturity of these instruments. The
carrying value of long-term receivable from stockholder approximated
fair value at December 31, 1996 and June 1997.
NOTE 11 - COMMITMENTS AND CONTINGENCIES
Guarantees of Stockholders' Debts
The Company has provided financial guarantees on debt obligations of
two of its stockholders to the Company's former stockholder aggregating
approximately $25,000 as of December 31, 1996. Expiration dates of
these guarantees extended through 1997. The guarantees are not secured.
The Company's exposure to credit loss in the event of non-performance
by the other parties to these financial guarantees is represented by
the contractual amounts. At March 31, 1997, the debt obligations to the
Company's former stockholder have been satisfied.
Stockholders' Agreement
The Company is contingently liable under an agreement with its
stockholders to redeem all or a portion of their common stock, in the
event that the remaining stockholders decline to purchase such stock
when offered. The purchase price of the common shares is based on
either a bona-fide offer from a third party or book value, adjusted as
specified in the agreement.
Financial Instruments and Credit Risk
Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of trade accounts
receivable. Concentration of credit risk with respect to such
receivables is limited due to generally short payment terms and their
dispersion across geographic areas.
F-14
<PAGE> 62
CLEAN ROOM PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO THE SIX MONTHS ENDED
JUNE 30, 1997 AND 1996 IS UNAUDITED)
NOTE 12 - MERGER AGREEMENT
a) In September 1996, the Company entered into a consulting agreement with
an investment banking firm for financial and investment banking
services relating to its proposed merger discussed below. The Company
has agreed to pay its investment advisors a fee of $50,000 and 250,000
shares of common stock of the Company upon the consummation of the
proposed merger agreement.
b) In December 1996, the Company entered into an agreement and plan of
merger with Boca Raton Capital Corp. ("Boca"), a publicly held company
searching for a merger with an operating company, subject to the
completion of due diligence procedures, the receipt of certain waiver
on defaults of indebtedness (See Notes 7 and 8), and Boca shareholder
approval. Under the agreement, Boca will issue to the Company's
stockholders approximately 80% of its common stock. For financial
reporting purposes the merger will be treated as a capital transaction,
equivalent to the issuance of common stock by the Company for the net
monetary assets of Boca, accompanied by a recapitalization of the
Company. In connection with the execution of the merger agreement, Boca
advanced the Company $350,000 which was due to be repaid on April 30,
1997 bearing interest at the prime rate plus 1%. The loan is guaranteed
by the Company's stockholders. At June 30, 1997, the loan was not
repaid and the Company is currently in negotiations to extend the
maturity date of this note.
NOTE 13 - SUPPLEMENTAL CASH FLOW INFORMATION
a) Supplemental disclosure of cash flow information:
<TABLE>
<CAPTION>
December 31, June 30,
-------------------- --------------
1996 1995 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Payments for interest $453,555 $410,781 $243,244 $246,784
</TABLE>
b) Supplemental disclosure of non-cash financing and investing activities:
In 1996, capital lease obligations of $105,270 were incurred when the
Company entered into leases for new equipment.
In 1995, a capital lease obligation of $24,953 was incurred when the
Company entered into a lease for new equipment.
NOTE 14 - LITIGATION
a) In February 1997, an action was brought against the Company for breach
of contract related to certain supplemental and disability benefits
(See Note 9) in an amount of $200,000 plus interest. The Company
believes that it has defenses to these claims. The full amount of the
liability has been provided for in the financial statements in previous
years.
b) An action was brought against the Company by a former lender who had
made a loan to the Company in 1993 and was repaid in full in 1995 who
alleged that he was entitled to a certain percentage of the Company's
equity as part of the loan. This individual is related to the Company's
investment banking firm (See Note 12(a)). In 1995, the Company had
provided $50,000 for the estimated settlement of this matter. In March
1997, this matter was settled by the Company agreeing to the issuance
of shares of the Company's common stock valued at $188,000.
Accordingly, $138,000 was charged to expense in 1996.
F-15
<PAGE> 63
<PAGE> 64
CLEAN ROOM PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO THE SIX MONTHS ENDED
JUNE 30, 1997 AND 1996 IS UNAUDITED)
NOTE 15 - SUBSEQUENT EVENT
On April 17, 1997, the Company borrowed $200,000 from its stockholders
which is due to be repaid on May 17, 1998. This loan bears interest at
10% per annum.
F-16
<PAGE> 65
CLEAN ROOM PRODUCTS, INC. AND
BOCA RATON CAPITAL CORPORATION
INTRODUCTION TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Under the terms of the Merger Agreement, BRCC will issue at the Closing
a total of 4,501,080 shares of Boca Common Stock for all outstanding common
shares of CRP, including the shares to be issued to Dan Purjes. Since the Merger
will result in both a change in the majority equity ownership and management of
Boca and the cessation of Boca's present business, the Merger will be treated as
a "purchase" of Boca by CRP for accounting and financial reporting purposes.
Under this method of accounting, CRP will reflect in the combined financial
statements the assets and liabilities of Boca at their book value and will not
combine the historical earnings of Boca with those of CRP.
The following pro forma financial data gives effect to the following
transactions as if such transactions had occurred at the beginning of each
period for which operating data is presented and as of the dates for which
balance sheet data is presented:
(i) the conversion of all the outstanding shares of CRP Common Stock
(including the stock issued to Purjes in settlement of the Purjes
litigation) for an aggregate of 4,501,080 shares of Boca Common Stock,
(ii) the recognition of deferred taxes upon termination of CRP's S
Corporation election.
The pro forma balance sheet combines the balance sheet of CRP as of
June 30, 1997 with the balance sheet of Boca as of June 30, 1997. The pro
forma statements of operations combine the statement of operations of CRP for
the year ended December 31, 1996 with the statement of operations of Boca for
the year ended December 31, 1996 and the statement of operations of CRP for the
six months ended June 30, 1997 with the statement of operations of Boca for
the six months ended June 30, 1997.
The pro forma balance sheet and statement of operations may not be
indicative of the results that actually would have been achieved if the Merger
had been in effect as of the dates and for the periods indicated or which may be
obtained in the future. The pro forma statements should be read in conjunction
with the financial statements of CRP and Boca contained elsewhere herein.
F-17
<PAGE> 66
CLEAN ROOM PRODUCTS, INC.
BOCA RATON CAPITAL CORPORATION
NOTES TO PRO FORMA FINANCIAL STATEMENTS
(UNAUDITED)
(1) Represents the issuance of common stock by CRP in settlement of the
Purjes litigation.
(2) Represents adjustments to the equity accounts of the combined entity.
(3) Represents the reclassification of the historical earnings of Boca.
(4) Represents the elimination of intercompany loan.
(5) Represents the recognition of deferred taxes for the effect of
cumulative temporary differences upon termination of CRP's S
corporation election.
(6) Represents the elimination of intercompany income.
(7) Represents the elimination of non-recurring investment income.
F-18
<PAGE> 67
CLEAN ROOM PRODUCTS, INC. AND BOCA RATON CAPITAL CORPORATION
PRO FORMA BALANCE SHEET
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
BOCA CRP ADJUSTMENTS BALANCE
---- --- ----------- -------
<S> <C> <C> <C> <C>
ASSETS
CASH $301,171 $4,226 $305,397
NOTE RECEIVABLE 366,000 0 (366,000)(4) 0
ACCOUNTS RECEIVABLE LESS ALLOWANCE OF $10,000 0 1,390,526 1,390,526
INVENTORY 0 928,905 928,905
PREPAID EXPENSES 28,000 86,097 114,097
---------------------------------------- -----------
TOTAL CURRENT 695,171 2,409,754 (366,000) 2,738,925
---------------------------------------- -----------
PROPERTY & EQUIP- NET 0 2,422,903 2,422,903
DUE FROM STOCKHOLDER 0 212,664 212,664
DEPOSITS AND OTHER 0 36,408 36,408
---------------------------------------- -----------
TOTAL ASSETS $695,171 $5,081,729 ($366,000) $5,410,900
---------------------------------------- -----------
LIABILITIES
ACCOUNTS PAYABLE $90,837 $1,848,989 $1,986 (4) $1,941,812
LOANS PAYABLE 0 1,068,075 1,068,075
NOTE PAYABLE 0 367,986 (367,986)(4) 0
LOAN PAYABLE STOCKHOLDERS 0 204,111 204,111
BILLINGS IN EXCESS OF COSTS 0 528,250 528,250
DEFERRED INCOME TAXES PAYABLE 0 0 370,000 (5) 370,000
ACCRUED EXPENSES 0 1,001,127 (188,000)(1) 813,127
CURRENT PORTION OF CAPITAL LEASES 0 1,347,314 1,347,314
EMPLOYEE BENEFIT OBLIGATION 0 98,086 98,086
---------------------------------------- -----------
TOTAL CURRENT LIABILITIES 90,837 6,463,938 (184,000) 6,370,775
CAPITAL LEASES, LESS CURRENT PORTION 0 632,755 632,755
EMPLOYEE BENEFIT OBLIGATION, LESS CURRENT PORTION 0 136,544 136,544
---------------------------------------- -----------
TOTAL LIABILITIES 90,837 7,233,237 (184,000) 7,140,074
---------------------------------------- -----------
STOCKHOLDERS' EQUITY (DEFICIT)
COMMON STOCK 1,125 1,100 3,401 (1)(2) 5,626
ADDITIONAL PAID-IN CAPITAL 4,002,936 65,949 (3,117,284)(1)(2)(3) 951,601
DEFICIT (3,399,727) (2,218,557) 2,931,883 (3)(5) (2,686,401)
---------------------------------------- -----------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) 604,334 (2,151,508) (182,000) (1,729,174)
---------------------------------------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $695,171 $5,081,729 ($366,000) $5,410,900
---------------------------------------- -----------
</TABLE>
F-19
<PAGE> 68
CLEAN ROOM PRODUCTS, INC. AND BOCA RATON CAPITAL CORPORATION
PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
BOCA CRP ADJUSTMENTS BALANCE
---------------------------------------------- ------------
<S> <C> <C> <C> <C>
NET SALES $ 0 $ 12,254,173 $ 12,254,173
COST OF SALES 0 9,027,475 9,027,475
---------------------------------------------- ------------
GROSS PROFIT 0 3,226,698 3,226,698
---------------------------------------------- ------------
OPERATING EXPENSES:
SELLING AND SHIPPING 0 1,117,930 1,117,930
GENERAL AND ADMINISTRATIVE 420,747 2,332,079 2,752,826
---------------------------------------------- ------------
TOTAL OPERATING EXPENSES 420,747 3,450,009 3,870,756
---------------------------------------------- ------------
OPERATING (LOSS) (420,747) (223,311) (644,058)
---------------------------------------------- ------------
OTHER INCOME (EXPENSE):
INTEREST EXPENSE (2,937) (476,660) (479,597)
INTEREST AND DIVIDEND INCOME 36,637 15,834 52,471
NET REALIZED GAIN ON INVESTMENTS 1,244,374 0 (1,244,374)(7) 0
NET DECREASE IN UNREALIZED APPRECIATION
OF INVESTMENTS (1,088,750) 0 1,088,750(7) 0
WRITE OFF OF FIXED ASSETS 0 (45,915) (45,915)
OTHER 0 (124,951) (124,951)
---------------------------------------------- ------------
TOTAL OTHER INCOME (EXPENSE) 189,324 (631,692) (155,624)(7) (597,992)
---------------------------------------------- ------------
NET (LOSS) BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM (231,423) (855,003) (155,624)(7) (1,242,050)
PROVISION FOR INCOME TAXES:
DEFERRED INCOME TAXES 0 0 370,000(5) 370,000
---------------------------------------------- ------------
NET (LOSS) BEFORE EXTRAORDINARY ITEM (231,423) (855,003) (525,624) (1,612,050)
EXTRAORDINARY ITEM:
GAIN ON EXTINGUISHMENT OF DEBT 278,026 0 0 278,026
---------------------------------------------- ------------
NET INCOME (LOSS) $ 46,603 $ (855,003) $ (525,624) $ (1,334,024)
============================================== ============
NET INCOME (LOSS) PER SHARE
EXTRAORDINARY ITEM $ .05
CONTINUING OPERATIONS (.29)
---
$ (.24)
WEIGHTED AVERAGE NUMBER OF SHARES ===
OUTSTANDING 5,626,350
============
</TABLE>
F-20
<PAGE> 69
CLEAN ROOM PRODUCTS, INC. AND BOCA RATON CAPITAL CORPORATION
PRO FORMA STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30,1997
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
BOCA CRP ADJUSTMENTS BALANCE
---- --- ----------- -------
<S> <C> <C> <C> <C>
NET SALES $0 $5,754,994 $5,754,994
COST OF SALES 0 4,650,549 4,650,549
--------------------------------------- -----------
GROSS PROFIT 0 1,104,445 1,104,445
--------------------------------------- -----------
OPERATING EXPENSES:
SELLING AND SHIPPING 0 521,160 521,160
GENERAL AND ADMINISTRATIVE 206,336 1,053,148 1,259,484
--------------------------------------- -----------
TOTAL OPERATING EXPENSES 206,336 1,574,308 1,780,644
--------------------------------------- -----------
OPERATING (LOSS) (206,336) (469,863) (676,199)
--------------------------------------- -----------
OTHER INCOME (EXPENSE):
INTEREST EXPENSE 0 (249,366) 17,986 (6) (231,380)
INTEREST AND DIVIDEND INCOME 19,912 8,312 (17,986)(6) 10,238
OTHER 0 44,311 44,311
--------------------------------------- -----------
TOTAL OTHER INCOME (EXPENSE) 19,912 (196,743) 0 (176,831)
--------------------------------------- -----------
LOSS BEFORE INCOME TAXES (186,424) (666,606) 0 (853,030)
--------------------------------------- -----------
PROVISION FOR INCOME TAXES:
DEFERRED INCOME TAXES 0 0 370,000 (5) 370,000
--------------------------------------- -----------
NET (LOSS) ($186,424) ($666,606) ($370,000) ($1,223,030)
======================================= ===========
NET LOSS PER SHARE ($0.22)
===========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 5,626,350
===========
</TABLE>
F-21
<PAGE> 70
APPENDIX I
"Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, or, if said Rule 12b-2 shall be rescinded
and there shall be no successor rule or statutory provision thereto, pursuant to
said Rule 12b-2 as in effect on the filing date of these Amended and Restated
Articles of Incorporation.
"Beneficial Ownership" shall be determined pursuant to Rule
13d-3 of the General Rules and Regulations under the Securities Exchange Act of
1934 (or any successor rule or statutory provision), or, if said Rule 13d-3
shall be rescinded and there shall be no successor rule or statutory provision
thereto, pursuant to said Rule 13d-3 as in effect on the filing date of these
Amended and Restated Articles of Incorporation; provided, however, that a Person
shall, in any event, also be deemed the "Beneficial Owner" of any Voting Stock:
(1) which such Person or any of its Affiliates or Associates
Beneficially Owns, directly or indirectly; or
(2) which such Person or any of its Affiliates or Associates
has (i) the right to acquire (whether such right is exercisable
immediately or only after the passage of time), pursuant to any
agreement, arrangement or understanding (but shall not be deemed to be
the Beneficial Owner of any shares solely by reason of an agreement,
contract, or other arrangement with this Corporation to effect any
transaction which is described in any one or more of clauses of Section
1 of Article VII) or upon the exercise of conversation rights, exchange
rights, warrants, or options or otherwise, or (ii) sole or shared
voting or investment power with respect thereto pursuant to any
agreement, arrangement, understanding, relationship or otherwise (but
shall not be deemed to be the Beneficial Owner of any shares solely by
reason of a recoverable proxy granted for a particular meeting of
stockholders, pursuant to a public solicitation of proxies for such
meeting, with respect to shares of which neither such person nor any
such Affiliate or Associate is otherwise deemed the Beneficial Owner);
or
(3) which are Beneficially Owned, directly or indirectly, by
any other Person with which such first-mentioned Person or any of its
Affiliates or Associates acts as a partnership, limited partnership,
syndicate or other group pursuant to any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of any shares of capital stock of this Corporation.
Notwithstanding any of the foregoing to the contrary, (i) no
director or officer of this Corporation (or any Affiliate or Associate of any
such director or officer) shall, solely by reason of any or all of such
directors or officers acting in their capacities as such, be deemed, for any
purposes hereof, to Beneficially Own any Voting Stock Beneficially Owned by any
other such director or officer (or any Affiliate or Associate thereof), and (ii)
neither any employee stock ownership or similar plan of this Corporation or any
subsidiary of this Corporation nor any trustee with respect thereto (or any
Affiliate of such trustee) shall, solely by reason of such capacity of such
trustee, be deemed, for any purposes hereof, to Beneficially Own any Voting
Stock held under any such plan. For purposes of computing the percentage of
Beneficial Ownership of Voting Stock of a Person, the outstanding Voting
I-1
<PAGE> 71
Stock shall include shares deemed owned by such Person through application of
this subsection, but shall not include any other Voting Stock which may be
issuable by this Corporation pursuant to any agreement, or upon exercise of
conversion rights, warrants or options, or otherwise. For all other purposes,
the outstanding Voting Stock shall include only Voting Stock then outstanding
and shall not include any Voting Stock which may be issuable by this Corporation
pursuant to any agreement, or upon the exercise of conversion rights, warrants
or options or otherwise.
"Interested Shareholder" shall mean any person (other than the
Corporation, any Subsidiary thereof or Gary O. Marino, none of whom shall be an
Interested Shareholder for purposes of these Amended and Restated Articles of
Incorporation) who or which:
(1) is the Beneficial Owner, directly or indirectly, of more
than 10% of the voting power of the outstanding Voting Stock; or
(2) is an Affiliate of the Corporation and at any time within
the two-year period immediately prior to the date in question was the
Beneficial Owner, directly or indirectly, of 10% or more of the voting
power of the then outstanding Voting Stock; or
(3) is an assignee of or has otherwise succeeded to any shares
of Voting Stock which were at any time within the two-year period
immediately prior to the date in question Beneficially Owned by any
Interested Shareholder, if such assignment or succession shall have
occurred in the course of a transaction or series of transactions not
involving a public offering within the meaning of the Securities Act of
1933.
"Person" shall include an individual, a group acting in
concert, a corporation, a partnership, an association, a joint venture, a pool,
a joint stock company, a trust, an unincorporated organization or similar
company, a syndicate or any other group formed for the purpose of acquiring,
holding or disposing of securities.
"Subsidiary" means any corporation of which a majority of any
class of equity security is owned, directly or indirectly, by the Corporation.
"Voting Stock" means any issued and outstanding shares of
capital stock of the Corporation entitled to vote generally in the election of
directors; provided, however, that for the purpose of determining whether a
person is an Interested Shareholder pursuant to Paragraph G of this Section 3,
the number of shares of Voting Stock deemed to be outstanding shall include
shares deemed owned through application of Paragraph B of this Section 3 but
shall not include any other shares of Voting Stock which may be issuable
pursuant to any agreement, arrangement or understanding, or upon exercise of
conversion rights, warrants or options, or otherwise.
I-2
<PAGE> 72
APPENDIX II
607.1301 DISSENTER'S RIGHTS; DEFINITIONS.--The following definitions
apply to ss. 607.1302 and 607.1320:
(1) "Corporation" means the issuer of the shares held by a dissenting
shareholder before the corporate action or the surviving or acquiring
corporation by merger or share exchange of that issuer.
(2) "Fair value," with respect to a dissenter's shares, means the value
of the shares as of the close of business on the day prior to the shareholders'
authorization date, excluding any appreciation or depreciation in anticipation
of the corporate action unless exclusion would be inequitable.
(3) "Shareholders' authorization date" means the date on which the
shareholders' vote authorizing the proposed action was taken, the date on which
the corporation received written consents without a meeting from the requisite
number of shareholders in order to authorize the action, or, in the case of a
merger pursuant to s. 607.1104, the day prior to the date on which a copy of the
plan of merger was mailed to each shareholder of record of the subsidiary
corporation.
607.1302 RIGHT OF SHAREHOLDERS TO DISSENT.--(1) Any shareholder has the
right to dissent from, and obtain payment of the fair value of his shares in the
event of, any of the following corporate actions:
(a) Consummation of a plan of merger to which the corporation is a
party:
1. If the shareholder is entitled to vote on the merger, or
2. If the corporation is a subsidiary that is merged with its parent
under s. 607.1104, and the shareholders would have been entitled to vote on
action taken, except for the applicability of s. 607.1104;
(b) Consummation of a sale or exchange of all, or substantially all, of
the property of the corporation, other than in the usual and regular course of
business, if the shareholder is entitled to vote on the sale or exchange
pursuant to s. 607.1202, including a sale in dissolution but not including a
sale pursuant to court order or a sale for cash pursuant to a plan by which all
or substantially all of the net proceeds of the sale will be distributed to the
shareholders within 1 year after the date of sale;
(c) As provided in s. 607.0902(11), the approval of a control-share
acquisition;
(d) Consummation of a plan of share exchange to which the corporation
is a party as the corporation the shares of which will be acquired, if the
shareholder is entitled to vote on the plan;
(e) Any amendment of the articles of incorporation if the shareholder
is entitled to vote on the amendment and if such amendment would adversely
affect such shareholder by:
1. Altering or abolishing any preemptive rights attached to any of his
shares;
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2. Altering or abolishing the voting rights pertaining to any of his
shares, except as such rights may be affected by the voting rights of new shares
then being authorized of any existing or new class or series of shares;
3. Effecting an exchange, cancellation, or reclassification of any of
his shares, when such exchange, cancellation, or reclassification would alter or
abolish his voting rights or alter his percentage of equity in the corporation,
or effecting a reduction or cancellation of accrued dividends or other
arrearages in respect to such shares;
4. Reducing the stated redemption price of any of his redeemable
shares, altering or abolishing any provision relating to any sinking fund for
the redemption or purchase of any of his shares, or making any of his shares
subject to redemption when they are not otherwise redeemable;
5. Making noncumulative, in whole or in part, dividends of any of his
preferred shares which had theretofore been cumulative;
6. Reducing the stated dividend preference of any of his preferred
shares; or
7. Reducing any stated preferential amount payable on any of his
preferred shares upon voluntary or involuntary liquidation; or
(f) Any corporate action taken, to the extent the articles of
incorporation provide that a voting or nonvoting shareholder is entitled to
dissent and obtain payment for his shares.
(2) A shareholder dissenting from any amendment specified in paragraph
(1)(e) has the right to dissent only as to those of his shares which are
adversely affected by the amendment.
(3) A shareholder may dissent as to less than all the shares registered
in his name. In that event, his rights shall be determined as if the shares as
to which he has dissented and his other shares were registered in the names of
different shareholders.
(4) Unless the articles of incorporation otherwise provide, this
section does not apply with respect to a plan of merger or share exchange or a
proposed sale or exchange of property, to the holders of shares of any class or
series which, on the record date fixed to determine the shareholders entitled to
vote at the meeting of shareholders at which such action is to be acted upon or
to consent to any such action without a meeting, were either registered on a
national securities exchange or designated as a national market system security
on an interdealer quotation system by the National Association of Securities
Dealers, Inc., or held of record by not fewer than 2,000 shareholders.
(5) A shareholder entitled to dissent and obtain payment for his shares
under this section may not challenge the corporate action creating his
entitlement unless the action is unlawful or fraudulent with respect to the
shareholder or the corporation. (Last amended by Ch. 94-327, L. '94, eff.
6-2-94.)
607.1320 PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS.--(1)(a) If a
proposed corporate action creating dissenters' rights under s. 607.1320 is
submitted to a vote at a shareholders' meeting, the meeting notice shall state
that shareholders are or may be entitled to assert dissenters' rights and be
accompanied by a copy of ss. 607.1301, 607.1302, and 607.1320. A shareholder who
wishes to assert dissenters' rights shall:
1. Deliver to the corporation before the vote is taken written notice
of his intent to demand payment for his shares if the proposed action is
effectuated, and
2. Not vote his shares in favor of the proposed action. A proxy or vote
against the proposed action does not constitute such a notice of intent to
demand payment.
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(b) If proposed corporate action creating dissenters' rights under s.
607.1302 is effectuated by written consent without a meeting, the corporation
shall delivery a copy of ss. 607.1301, 607.1302, and 607.1320 to each
shareholder simultaneously with any request for his written consent or, if such
a request is not made, within 10 days after the date the corporation received
written consents without a meeting from the requisite number of shareholders
necessary to authorize the action.
(2) Within 10 days after the shareholders' authorization date, the
corporation shall give written notice of such authorization or consent or
adoption of the plan of merger, as the case may be, to each shareholder who
filed a notice of intent to demand payment for his shares pursuant to paragraph
(1)(a) or, in the case of action authorized by written consent, to each
shareholder, excepting any who voted for, or consented to writing to, the
proposed action.
(3) Within 20 days after the giving of notice to him, any shareholder
who elects to dissent shall file with the corporation a notice of such election,
stating his name and address, the number, classes, and series of shares as to
which he dissents, and a demand for payment of the fair value of his shares. Any
shareholder failing to file such election to dissent within the period set forth
shall be bound by the terms of the proposed corporate action. Any shareholder
filing an election to dissent shall deposit his certificates for certificated
shares with the corporation simultaneously with the filing of the election to
dissent. The corporation may restrict the transfer of uncertificated shares from
the date the shareholder's election to dissent is filed with the corporation.
(4) Upon filing a notice of election to dissent, the shareholder shall
thereafter be entitled only to payment as provided in this section and shall not
be entitled to vote or to exercise any other rights of a shareholder. A notice
of election may be withdrawn in writing by the shareholder at any time before an
offer is made by the corporation, as provided in subsection (5), to pay for his
shares. After such offer, no such notice of election may be withdrawn unless the
corporation consents thereto. However, the right of such shareholder to be paid
the fair value of his shares shall cease, and he shall be reinstated to have all
his rights as a shareholder as of the filing of his notice of election,
including any intervening preemptive rights and the right to payment of any
intervening dividend or other distribution or, if any such rights have expired
or any such dividend or distribution other than in cash has been completed, in
lieu thereof, at the election of the corporation, the fair value thereof in cash
as determined by the board as of the time of such expiration or completion, but
without prejudice otherwise to any corporate proceedings that may have been
taken in the interim, if:
(a) Such demand is withdrawn as provided in this section;
(b) The proposed corporate action is abandoned or rescinded or the
shareholders revoke the authority to effect such action;
(c) No demand or petition for the determination of fair value by a
court has been made or filed within the time provided in this section; or
(d) A court of competent jurisdiction determines that such shareholder
is not entitled to the relief provided by this section.
(5) Within 10 days after the expiration of the period in which
shareholders may file their notices of election to dissent, or within 10 days
after such corporate action is effected, whichever is later (but in no case
later than 90 days from the shareholders' authorization date), the corporation
shall make a written offer to each dissenting shareholder who has made demand as
provided in this section to pay an amount the corporation estimates to be the
fair value for such shares. If the corporate action has not been consummated
before the expiration of the 90-day period after the shareholders' authorization
date, the offer may be made conditional upon the consummation of such action.
Such notice and offer shall be accompanied by:
(a) A balance sheet of the corporation, the shares of which the
dissenting shareholder holds, as of the latest available date and not more than
12 months prior to the making of such offer; and
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(b) A profit and loss statement of such corporation for the 12-month
period ended on the date of such balance sheet or, if the corporation was not in
existence throughout such 12-month period, for the portion thereof during which
it was in existence.
(6) If within 30 days after the making of such offer any shareholder
accepts the same, payment for his shares shall be made within 90 days after the
making of such offer or the consummation of the proposed action, whichever is
later. Upon payment of the agreed value, the dissenting shareholder shall cease
to have an interest in such shares.
(7) If the corporation fails to make such offer within the period
specified therefor in subsection (5) or if it makes the offer and any dissenting
shareholder or shareholders fail to accept the same within the period of 30 days
thereafter, then the corporation, within 30 days after receipt of written demand
from any dissenting shareholder given within 60 days after the date on which
such corporate action was effected, shall, or at its election at any time within
such period of 60 days may, file an action in any court of competent
jurisdiction in the county in this state where the registered office of the
corporation is located requesting that the fair value of such shares be
determined. The court shall also determine whether each dissenting shareholder,
as to whom the corporation requests the court to make such determination, is
entitled to receive payment for his shares. If the corporation fails to
institute the proceeding as herein provided, any dissenting shareholder may do
so in the name of the corporation. All dissenting shareholders (whether or not
residents of this state), other than shareholders who have agreed with the
corporation as to the value of their shares, shall be made parties to the
proceeding as an action against their shares. The corporation shall serve a copy
of the initial pleading in such proceeding upon each dissenting shareholder who
is a resident of this state in the manner provided by law for the service of a
summons and complaint and upon each nonresident dissenting shareholder either by
registered or certified mail and publication or in such other manner as is
permitted by law. The jurisdiction of the court is plenary and exclusive. All
shareholders who are proper parties to the proceeding are entitled to judgment
against the corporation for the amount of the fair value of their shares. The
court may, if it so elects, appoint one or more persons as appraisers to receive
evidence and recommend a decision on the question of fair value. The appraisers
shall have such power and authority as is specified in the order of their
appointment or an amendment thereof. The corporation shall pay each dissenting
shareholder the amount found to be due him within 10 days after final
determination of the proceedings. Upon payment of the judgment, the dissenting
shareholder shall cease to have any interest in such shares.
(8) The judgment may, at the discretion of the court, include a fair
rate of interest, to be determined by the court.
(9) The costs and expenses of any such proceeding shall be determined
by the court and shall be assessed against the corporation, but all or any part
of such costs and expenses may be apportioned and assessed as the court deems
equitable against any or all of the dissenting shareholders who are parties to
the proceeding, to whom the corporation has made an offer to pay for the shares,
if the court finds that the action of such shareholders in failing to accept
such offer was arbitrary, vexatious, or not in good faith. Such expenses shall
include reasonable compensation for, and reasonable expenses of, the appraisers,
but shall exclude the fees and expenses of counsel for, and experts employed by,
any party. If the fair value of the shares, as determined, materially exceeds
the amount which the corporation offered to pay therefor or if no offer was
made, the court in its discretion may award to any shareholder who is a party to
the proceeding such sum as the court determines to be reasonable compensation to
any attorney or expert employed by the shareholder in the proceeding.
(10) Shares acquired by a corporation pursuant to payment of the agreed
value thereof or pursuant to payment of the judgment entered therefor, as
provided in this section, may be held and
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disposed of by such corporation as authorized but unissued shares of the
corporation, except that, in the case of a merger, they may be held and disposed
of as the plan of merger otherwise provides. The shares of the surviving
corporation into which the shares of such dissenting shareholders would have
been converted had they assented to the merger shall have the status of
authorized but unissued shares of the surviving corporation. (Last amended by
Ch. 93-281, L. '93, eff. 5-15-93.)
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APPENDIX III
[LETTERHEAD OF SPENCER TRASK SECURITIES INCORPORATED]
July 14, 1997
Boca Raton Capital Corporation
6516 Via Rosa
Boca Raton, FL 33433
Attention: Board of Directors
Gentlemen:
You have asked for the opinion of Spencer Trask Securities, Inc. ("Spencer
Trask") as to the fairness, from a financial point of view, to the stockholders
of Boca Raton Capital Corporation (the "Company") of the terms of the Amended
and Restated Agreement and Plan of Merger and Reorganization dated as of March
26, 1997 (the "Merger Agreement") between Boca Raton Capital Corp., CRP
Acquisition Corp. and Clean Room Products, Inc. ("CRP" or "Clean Room
Products").
In arriving at our opinion, we have reviewed such business records of the
Company and CRP as we considered relevant and necessary for purpose of our
opinion, including but not limited to the following:
Regarding the Company:
1. Amended and Restated Agreement and Plan of Merger and Reorganization
dated as of March 26, 1997, including related Exhibits, among the
Company, CRP Acquisition Corp. and Clean Room Products, Inc.
2. Form 1O-KSB reports for the fiscal years ended December 31, 1995 and
1996
3. Form 1O-QSB reports for the period ended March 31, 1997.
4. News reports as per Bloomberg Information Services.
5. Stock issuance and trading history
Regarding Clean Room Products:
1. Audited financial statements for the years ended December 31, 1993,
1994, 1995 and 1996
2. Unaudited financial statements for the three months ended March 31,
1996 and 1997
3. Business plan prepared by management
4. Internal management-prepared budgeted income statements
5. Intellectual property, including U.S. Patent No. 5,536,356
6. Order backlog
7. Asset schedules
8. Product literature
9. Distribution agreement with VWR Scientific, Inc.
10. Published articles relating to CRP and the industries to which it sells
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In addition, we have visited the CRP's facilities in Ronkonkoma, New York and
have discussed with management the current status of and outlook for CRP's
operating results, assets and liabilities; industry conditions and outlook;
material contained in the foregoing documents; and other matters we considered
relevant to our inquiry.
We have considered certain financial data of the CRP and compared that data with
similar data for publicly-held companies in businesses similar to that of CRP.
Also considered have been the financial terms of certain acquisitions involving
publicly held companies engaged in businesses somewhat similar to the Company.
We also conducted other financial studies and analyses as we deemed appropriate
for purposes of this opinion.
In our review and in arriving at our opinion we have not independently verified
any of the foregoing information and have relied upon its being complete and
accurate in all material aspects, and we have not made an independent appraisal
of specific properties or other assets of CRP. Our opinion is provided solely
for your benefit in connection with the Merger Agreement, according to the terms
of our engagement letter dated October 18, 1996.
Spencer Trask Securities, Inc., as part of its investment banking business, is
regularly engaged in the valuation of businesses and their securities in
connection with private placements, mergers and acquisitions, and valuations for
estate, corporate and other purposes. Spencer Trask is being paid a fee for
rendering this opinion and performing related valuation analyses, which fee is
not contingent upon its conclusions.
Based upon and subject to the foregoing, it is our opinion that, as of the date
of this letter, the terms of the Amended and Restated Agreement and Plan of
Merger and Reorganization dated as of March 26, 1997 among Boca Raton Capital
Corporation, CRP Acquisition Corp. and Clean Room Products, Inc. are fair, from
a financial point of view, to the stockholders of Boca Raton Capital
Corporation.
Very truly yours,
SPENCER TRASK SECURITIES, INC.
By: /s/ Roger Baumberger
Roger K. Baumberger, CFA
Managing Director - Corporate Finance
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APPENDIX IV
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM 10-KSB
ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
COMMISSION FILE NUMBER 0-16631
BOCA RATON CAPITAL CORPORATION
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
FLORIDA 59-2763089
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION) IDENTIFICATION NO.)
6516 VIA ROSA, BOCA RATON, FL 33433
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE: (561) 750-2252
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE EXCHANGE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE EXCHANGE ACT:
COMMON STOCK, $.001 PAR VALUE
CHECK WHETHER THE ISSUER (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY
SECTION 13 OR 15(D) OF THE EXCHANGE ACT DURING THE PAST 12 MONTHS (OR FOR SUCH
SHORTER PERIOD THAT THE ISSUER WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS
BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO
CHECK IF THERE IS NO DISCLOSURE OF DELINQUENT FILERS IN RESPONSE TO ITEM
405 OF REGULATION S-B CONTAINED IN THIS FORM, AND NO DISCLOSURE WILL BE
CONTAINED, TO THE BEST OF THE ISSUER'S KNOWLEDGE, IN DEFINITIVE PROXY OR
INFORMATION STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-KSB
OR ANY AMENDMENT TO THIS FORM 10-KSB. [ X ]
THE ISSUER'S REVENUES FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996 WERE
APPROXIMATELY $192,200 WHICH CONSISTED OF APPROXIMATELY $36,600 IN TOTAL
INVESTMENT INCOME AND APPROXIMATELY $155,600 IN NET UNREALIZED AND REALIZED GAIN
ON INVESTMENTS.
THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NON-AFFILIATES OF
THE ISSUER AS OF MARCH 24, 1997 (COMPUTED BY REFERENCE TO THE AVERAGE BID AND
ASKED PRICES OF ISSUER'S COMMON STOCK REPORTED ON THE OTC ELECTRONIC BULLETIN
BOARD ON SUCH DATE) WAS $771,435. DIRECTORS AND OFFICERS AND TEN PERCENT OR
GREATER SHAREHOLDERS ARE CONSIDERED AFFILIATES FOR PURPOSES OF THIS CALCULATION
BUT SHOULD NOT NECESSARILY BE DEEMED AFFILIATES FOR ANY OTHER PURPOSE.
THE NUMBER OF SHARES OUTSTANDING OF ISSUER'S COMMON STOCK AS OF MARCH 24,
1997 WAS 1,125,270.
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE): YES__ NO X
================================================================================
<PAGE> 80
INDEX
<TABLE>
<CAPTION>
Page
PART I
<S> <C>
ITEM 1 - BUSINESS...................................................................................... 1
ITEM 2 - PROPERTIES.................................................................................... 4
ITEM 3 - LEGAL PROCEEDINGS............................................................................. 4
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS................................................................................... 4
PART II
ITEM 5 - MARKET FOR THE ISSUER'S COMMON EQUITY AND
RELATED SHAREHOLDER MATTERS .............................................................. 5
ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS.......................................................... 7
ITEM 7 - FINANCIAL STATEMENTS.......................................................................... 8
ITEM 8 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE.................................................... 8
PART III
ITEM 9 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS.......................................................................... 9
ITEM 10 - EXECUTIVE COMPENSATION....................................................................... 12
ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT.................................................................... 15
ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS ....................................................................... 17
ITEM 13 - EXHIBITS, LISTS AND REPORTS ON FORM 8-K...................................................... 18
</TABLE>
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PART I
ITEM 1 - BUSINESS
GENERAL
Boca Raton Capital Corporation (the "Company"), a Florida corporation, was
organized in 1987. For the two years prior to December 22, 1995, the Company was
a closed-end management investment company that had elected status as a business
development company ("BDC") under the Investment Company Act of 1940, as amended
("1940 Act"). A BDC must be operated for the purpose of investing in the
securities of certain eligible portfolio companies ("Eligible Portfolio
Companies") and certain bankrupt or insolvent companies and making available
significant managerial assistance ("Making Available Significant Managerial
Assistance") to those investee companies ("Investee Companies") which are
qualifying assets ("Qualifying Assets") (as such capitalized terms are defined
in the 1940 Act).
As a BDC, the Company although not subject to the provisions of the 1940
Act relating to registered investment companies was nonetheless subject to a
number of provisions under the 1940 Act relating to BDC's. The Board of
Directors of the Company unanimously determined at a meeting held on October 12,
1995, that it would be in the best interest of the Company and its shareholders
to seek shareholder approval to withdraw the Company's election as a BDC in
accordance with the 1940 Act.
The Board determined that a withdrawal of election as a BDC was in the best
interest of the Company because of the Company's then current financial and
operational structure. Specifically, the Company held one portfolio security,
RailAmerica, Inc. ("RailAmerica") common stock, and the balance of its
investments were in cash or cash equivalents. RailAmerica is a diversified,
publicly-held transportation holding company that among other things owns and
develops short-line and regional freight railroads. Also, the Company's total
assets as of September 30, 1995 were approximately $4.1 million. Because of the
relative size of the Company's asset base to its ongoing expenses, the Board
believed the shareholders' return on assets was not sufficient to continue
operations as a BDC. The Board did not believe it was practical to attempt to
raise additional capital for the Company and determined that the Company would
best be suited for a merger with an operating company. Therefore, the Board
authorized the solicitation of shareholder approval to effectuate the withdrawal
at a Special Meeting of shareholders in lieu of the Annual Meeting ("1995
Special Meeting") held on December 15, 1995. At the 1995 Special Meeting, the
shareholders approved the withdrawal of the Company's election of status as a
BDC. The withdrawal became effective upon the Securities and Exchange
Commission's (the "Commission") receipt of the Company's notification of
withdrawal on December 22, 1995.
On March 11, 1996, the Company paid a special cash distribution (the
"Special Distribution") of $2.25 per share on each share of the Company's common
stock ("Common Stock") outstanding of record on January 11, 1996. The Special
Distribution was declared, by the Board of Directors, subject to shareholder
approval, on January 11, 1996. The Company's
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shareholders approved the Special Distribution at a special meeting of
shareholders (the "1996 Special Meeting") held on February 29, 1996.
On May 15, 1996, the Company sold 375,000 shares of RailAmerica common
stock which constituted all of the Company's remaining equity interest in
RailAmerica for approximately $3.42 per share (aggregate of approximately
$1,245,000 net proceeds). As of December 31, 1996, the Company's investments
were comprised of cash and cash equivalents and a note receivable of $350,000.
PROPOSED MERGER
On December 12, 1996, the Company entered into an Agreement and Plan of
Merger and Reorganization (the "Merger Agreement") with CRP Acquisition Corp., a
New York corporation and a wholly-owned subsidiary of the Company ("Merger
Sub"), and Clean Room Products, Inc., a New York Corporation ("CRP"). The Merger
Agreement was subsequently amended by the parties thereto as of March 26, 1997.
Subject to the terms and conditions of the Merger Agreement, as amended, Merger
Sub shall be merged with and into CRP in accordance with New York law (the
"Proposed Merger"). If the Proposed Merger is consummated, the separate
existence of Merger Sub will cease and CRP, as the surviving corporation of the
Proposed Merger (the "Surviving Corporation") shall, by virtue of the Proposed
Merger, continue in existence under New York law as a wholly-owned subsidiary of
the Company. Under the terms of the Merger Agreement, as amended, existing
shareholders of the Company will retain an aggregate of 1,125,270 shares of the
Company's Common Stock which is equivalent to 20% of the issued and outstanding
shares of the Company's Common Stock after giving effect to the Proposed Merger
or 30% of the issued and outstanding shares of the Company's Common Stock if the
Escrowed Shares (as defined below) are cancelled as described below (assuming
none of the Company's shareholders exercises their rights to dissent from
approval of the Proposed Merger and excluding the 250,000 shares of the
Company's Common Stock to be issued to Josephthal (as defined below) upon
consummation or the Proposed Merger). The existing shareholders of CRP will
receive an aggregate of 4,501,080 shares of the Company's Common Stock which is
equivalent to 80% of the issued and outstanding shares of Common Stock of the
Company after giving effect to the Proposed Merger (assuming none of the
Company's shareholders exercises their rights to dissent from approval of the
Proposed Merger and excluding the 250,000 shares of the Company's Common Stock
to be issued to Josephthal upon consummation of the Proposed Merger); provided,
however, that 1,875,750 shares of the Company's Common Stock to be issued to the
existing CRP shareholders will be held in escrow (the "Escrowed Shares") until
the earlier of (i) six (6) months after the Proposed Merger is consummated and
(ii) the date of consummation of a long-term financing which results in at least
$1,500,000 in net proceeds to the Company or the Surviving Corporation. In the
event that neither the Company nor the Surviving Corporation consummates a long
term financing which results in at least $1,500,000 in net proceeds to such
corporation within six (6) months of the closing of the Proposed Merger, the
Escrowed Shares will be returned to the Company and cancelled. The Proposed
Merger is subject to the satisfaction or waiver (if permissible) of certain
conditions, including, but not limited to, the approval of the Company's
shareholders. The Company intends to submit the Proposed Merger to the vote of
the Company's shareholders at a Special Meeting of shareholders as soon as
practicable. CRP designs and constructs clean
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rooms and associated products for the semiconductor, pharmaceutical,
biotechnology, medical device and other industries. In addition, CRP's film
division produces Ultraclean(TM) packaging materials for these industries.
In connection with the Proposed Merger, on December 12, 1996, the Company
extended a loan (the "CRP Loan") to CRP. The CRP Loan was in the original
principal amount of $350,000 with an interest rate equal to the prime rate of
Citibank, N.A. plus one percent (1%) per annum. The principal, and the accrued
interest thereon, of the CRP Loan is due and payable on April 30, 1997. Each of
the three shareholders of CRP and their respective spouses have individually
guaranteed the repayment of the principal, and accrued interest thereon, of the
CRP Loan. Additionally, in connection with the Proposed Merger, CRP has retained
Josephthal Lyon & Ross Incorporated ("Josephthal") as a financial consultant
pursuant to a financial consulting agreement ("CRP Consulting Agreement"). In
the event that the Proposed Merger is consummated, Josephthal will be paid a
$50,000 fee and receive 250,000 shares of the Company's Common Stock. See "Item
11 - Security Ownership of Certain Beneficial Owners and Management" and "Item
12 - Certain Relationships and Related Transactions."
TERMINATED MERGER
On June 30, 1994, the Company entered into an Agreement and Plan of Merger
with Weitzer Homebuilders Incorporated ("WHB"), WHB Merger Sub, Inc. ("Sub"),
Harry Weitzer and certain corporations controlled by Harry Weitzer
(collectively, the "Weitzer Entities"). In connection with the proposed merger
which was not consummated (the "Terminated Merger"), the Company in March 1994
paid Josephthal, the Company's financial consultant, a $150,000 fee pursuant to
a financial consulting agreement dated March 21, 1993. The Weitzer Entities
terminated the proposed merger on December 23, 1994, and Josephthal returned the
$150,000 fee to the Company. On June 30, 1994, consistent with the Company's
investment policies, the Company extended a one-year loan (the "Weitzer Loan")
to Weitzer Financial, Inc., an entity controlled by Harry Weitzer. The Weitzer
Loan was in the principal amount of $500,000 with an interest rate equal to the
prime rate plus 1%. The principal, and the accrued interest thereon, of the
Weitzer Loan was repaid in July 1995. See "Item 3--Legal Proceedings" and "Item
12 --Certain Relationships and Related Transactions."
EMPLOYEES
As of December 31, 1996, the Company had no full time employees. The
Company's Chief Executive Officer and President and Chief Financial Officer,
Secretary and Treasurer provided their services to the Company on a consulting
basis. See "Item 12 -- Certain Relationships and Related Transactions."
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ITEM 2 - PROPERTIES
The Company's corporate offices are temporarily located at 6516 Via Rosa,
Boca Raton, Florida 33433. This office space is made available to the Company by
Franklyn B. Weichselbaum, its Chief Financial Officer, Secretary and Treasurer,
at no cost. The Company does not own, lease or occupy any other properties.
ITEM 3 - LEGAL PROCEEDINGS
The Company is not a party to any pending legal proceedings. In January
1997, the Company was notified by WHB's legal counsel that WHB intended to seek
alleged damages in connection with unspecified claims relating to the Terminated
Merger. As of the date hereof, to the best of the Company's knowledge, WHB has
not commenced a legal proceeding. In the event that WHB commences a legal
action, the Company intends to vigorously defend its rights against any alleged
claims. See "Item 1-Business-Terminated Merger."
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended December 31, 1996.
IV-6
<PAGE> 85
PART II
ITEM 5 - MARKET FOR THE ISSUER'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The Common Stock is quoted on the OTC Electronic Bulletin Board. The
quarterly high and low bid prices for the Company's Common Stock are set forth
below and are based upon such prices as reported on the OTC Electronic Bulletin
Board. The prices set forth below are not necessarily indicative of the
liquidity of the trading market nor for market trades for a large number of
shares. Such over-the-counter market quotations reflect inter-dealer prices,
without retail mark-ups, mark-downs or commissions, and may not represent actual
transactions. Moreover, on March 11, 1996, the Company paid the Special
Distribution of $2.25 on each share of Common Stock outstanding of record at the
close of business on January 11, 1996.
<TABLE>
<CAPTION>
Quarter Ending
1995 High Bid Low Bid
- ---- -------- -------
<S> <C> <C>
March 31 ........................ $ 2 $ 1 1/2
June 30 ......................... $ 2 1/4 $ 1 1/2
September 30 .................... $ 2 $ 1 1/2
December 31 ..................... $ 2 1/4 $ 1 1/4
Quarter Ending
1996
- ----
March 31 ........................ $ 2 1/2 $ 1/2
June 30 ......................... $ 3/4 $ 1/2
September 30 .................... $ 3/4 $ 1/4
December 31 ..................... $ 3/4 $ 3/8
</TABLE>
On March 24, 1997 each of the high and low bid price for the Company's
Common Stock was $.625, respectively.
HOLDERS OF COMMON STOCK
As of March 24, 1997, there were approximately 625 holders of record of the
Company's Common Stock and 1,125,270 shares of Common Stock outstanding.
IV-7
<PAGE> 86
DIVIDENDS
On March 11, 1996, the Company paid a special cash distribution (the
"Special Distribution") of $2.25 per share on each share of Common Stock
outstanding of record on January 11, 1996. The Special Distribution was declared
by the Board of Directors, subject to shareholder approval, on January 11, 1996.
The Company's shareholders approved the Special Distribution at the 1996 Special
Meeting held on February 29, 1996. See "Item 1 -- Business" and "Item
6-Management's Discussion and Analysis." The payment by the Company of
dividends, if any, in the future rests within the discretion of its Board of
Directors and will depend upon, among other things, the Company's earnings, its
capital requirements and its financial condition, as well as other relevant
factors. Except for the Special Distribution, the Company has not paid any cash
dividends since its inception and does not intend to pay any cash dividends on
the Common Stock in the foreseeable future, but presently intends to retain all
earnings, if any, for use in its business operations.
IV-8
<PAGE> 87
ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
During 1995, the Company elected to withdraw from its status as a BDC under
the 1940 Act. This election became effective upon the Commission's receipt of
the Company's notification of withdrawal on December 22, 1995. As a result of
this, the Company adopted Statement of Financial Accounting Standards ("SFAS")
No. 115, "Accounting for Certain Investments in Debt and Equity Securities".
Under SFAS No. 115, investments are classified as either held to maturity,
trading or available for sale depending upon whether the investment is a debt or
equity security and management's intent with regards to the investment. The
Company's investment in RailAmerica was considered to be a trading security and
as such was carried at fair value as determined in good faith by the Board of
Directors. The adoption of SFAS No. 115 had no material impact on the results of
operations of the Company because under its status as a BDC in 1994 and for part
of 1995, the Company valued its investments in the same manner as required under
SFAS No. 115.
The Company reported net income of $46,603 and $256,554 for the years ended
December 31, 1996 and 1995, respectively. Included in net income was a net
unrealized and realized gain of $155,624 and $712,031 for 1996 and 1995,
respectively. The gain on investments for 1996 was due to the sale of 375,000
shares of RailAmerica and the gain on investments for 1995 was due to the sale
of 325,000 shares of RailAmerica. The balance of income consisted of investment
income of $36,637 and $155,993 less operating expenses of $423,684 and $515,576
for the years ended December 31, 1996 and 1995, respectively. In addition, the
Company had an extraordinary gain of $278,026 resulting from the extinguishment
of debt in 1996.
The investment income of $36,637 for the year ended December 31, 1996
consisted of interest income. This is compared to investment income of $155,993
for the year ended December 31, 1995 which consisted primarily of interest
income. The decrease in interest income was due to a decrease in the amount of
cash available for investment primarily as a result of a special $2.25 per share
cash distribution paid in March 1996 in the aggregate amount of approximately
$2,532,000.
Operating expenses for the year ended December 31, 1996 primarily consisted
of general and administrative expenses of $222,299, professional fees of
$198,448, and interest expense of $2,937. Such expenses for the comparable
period of 1995 consisted of general and administrative expenses of $172,448,
professional fees of $142,599, and interest expense of $200,529. The increase of
$49,851 in general and administrative expenses is primarily due to an increase
in aggregate monthly fees to the Company's officers and the payment of annual
directors fees in the aggregate amount of $50,000 for services rendered in 1996.
Professional fees increased $55,849 primarily due to increased legal fees in
connection with shareholder meetings and the Proposed Merger. Interest expense
decreased $197,592 due to the settlement in full satisfaction of a past due
promissory note in May 1996. In connection with the settlement
IV-9
<PAGE> 88
of the promissory note, the Company recognized an extraordinary gain on the
extinguishment of debt of $278,026.
LIQUIDITY AND CAPITAL RESOURCES
The Company had $518,645 in cash and total liabilities of $84,887 at
December 31, 1996. The Company had no long term liabilities. On March 11, 1996,
the Company paid a special cash distribution, out of capital surplus, in the
aggregate amount of approximately $2,532,000. As a result, cash and
stockholders' equity were reduced by the same amount.
At December 31, 1996, the Company did not maintain lines of credit, and
none are anticipated. The Company has no sources of cash flow at present apart
from interest income.
On May 15, 1996, the Company sold 375,000 shares of RailAmerica common
stock which constituted all of the Company's remaining equity interest in
RailAmerica for approximately $3.42 per share (aggregate of approximately
$1,245,000 net proceeds).
On May 23, 1996, the Company paid $310,000 to Woodoven Corporation as
settlement in full satisfaction of all principal and interest due and payable
pursuant to a promissory note dated April 5, 1990. As a result the Company
recognized an extraordinary gain on extinguishment of debt of $278,026 in the
year ended December 31, 1996.
ITEM 7 - FINANCIAL STATEMENTS
The financial statements required by this Item, the accompanying notes
thereto and the report of independent accountants are included as part of this
Form 10-KSB and immediately follow the signature page of this Form 10-KSB.
ITEM 8 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
IV-10
<PAGE> 89
PART III
ITEM 9 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
THE BOARD OF DIRECTORS
The following table sets forth information with respect to the directors of
the Company.
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITION SINCE
---- --- -------- -----
<S> <C> <C> <C>
Alan L. Jacobs(1) 55 Chief Executive Officer, 1995
President and Director
Robert H. Arnold(2) 53 Director 1995
Ronald L. Miller(3) 53 Director 1995
C. Lawrence Rutstein(1)(4) 52 Director 1995
Alan H. Weingarten(3)(4) 56 Director 1995
</TABLE>
- --------------
(1) Class III Director.
(2) Class II Director.
(3) Class I Director.
(4) Member of Audit Committee.
If the Proposed Merger is consummated, each existing director of the
Company shall resign effective upon the consummation of the Proposed Merger and
a new board of directors will be elected effective upon the consummation of the
Proposed Merger. See "Business- Proposed Merger."
In accordance with Article VI, Section 1 of the Company's Amended and
Restated Articles of Incorporation, the Board of Directors of the Company is
divided into three classes, designated Class I, Class II and Class III. The
current term of Class I directors extends to the 1998 annual meeting of
shareholders, that of Class II extends to the 1996 annual meeting and that of
Class III to the 1997 annual meeting. Each class, upon election, serves for a
three-year term. The background of each member of the Board of Directors is set
forth below:
Alan L. Jacobs was elected a director of the Company in February 1995. Mr.
Jacobs had previously served as a director of the Company from July 1993 to
September 9, 1994. He became the Chairman of the Board of the Company from
November 1993 to September 9, 1994. He became President and Chief Executive
Officer of the Company in November 1993. Since March 1997 to the present, Mr.
Jacobs has been Executive Vice President and a
Director of Capital Growth Holdings, Ltd., a public holding company.
IV-11
<PAGE> 90
Since January 1996 to the present, Mr. Jacobs also has been Executive Vice
President and Senior Managing Director of International Capital Growth, Ltd. and
its predecessor, Capital Growth International LLC, an investment banking firm.
From January 1992 to December 1995, Mr. Jacobs was an Associate Director of
Investment Banking of Josephthal Lyon & Ross Incorporated. From May 1985 to
December 1991, Mr. Jacobs was Managing Director, Investment Banking, with
Ladenburg Thalmann & Co., Inc., an investment banking firm.
Robert H. Arnold was elected as a director of the Company in February 1995.
Mr. Arnold is the founder of R.H. Arnold & Co., an investment banking firm, and
has served as the President of R.H. Arnold & Co. since 1989. Mr. Arnold is a
director of R. H. Arnold & Co.,; a Managing Director of HC Capital Partners
China, an international investment company; an advisor to Mezzanine Management
Limited, an investment management firm; a director of Covenant Investment
Management, an investment company; a director of Eagle Finance Corp.; a director
of Covenant Holding; and a director of Phoenix Four, Inc., an investment fund.
Ronald L. Miller was elected as a director of the Company in February 1995.
Mr. Miller is the founder of Miller Advisory Corp., an investment banking firm,
and has served as President of Miller Advisory Corp., since 1989. Mr. Miller is
Chairman of the Board of Provider Solutions Corp., a health care computer
software company; and a director of Pollo Tropical, Inc., a publicly traded
company which owns 35 franchises and 10 quick-serve restaurants featuring
grilled chicken.
C. Lawrence Rutstein was elected as a director of the Company in February
1995. Mr. Rutstein has been the President and Chief Executive Officer of
CapQuest Partners, Inc., a private investment banking firm since January 1996.
Mr. Rutstein was the Chairman of The Rittenhouse Group, Inc., a private
consulting company from May 1994 to May 1995. From 1991 to 1993, Mr. Rutstein
was the General Partner and Vice President of Memphis Chicks Baseball Club, an
AA Affiliate of the Kansas City Royals. From 1989 to 1991, Mr. Rutstein served
as Chairman of the Board of Cedar Group, Inc., a publicly traded company which
imports and distributes industrial fasteners.
Alan H. Weingarten was elected as a director of the Company in February
1995. Mr. Weingarten has served as Chief Executive Officer of Alan H. Weingarten
& Associates, Inc., a general management, marketing, product planning and
consulting organization since 1986. Mr. Weingarten is a director of Cybex
International, Inc. (formerly known as Lumex Inc.), a publicly traded company,
the Chairman of Cybex International Inc.'s audit committee and a member of Cybex
International, Inc.'s compensation and director affairs committees.
IV-12
<PAGE> 91
COMMITTEES
The Company has an Audit Committee which oversees the procedures, scope
and results of the annual audit and reviews the services provided by the
Company's independent public accountants. The Audit Committee consisting of
Messrs. Rutstein and Weingarten met one time during the year ended December 31,
1996. The Company had no other committees.
EXECUTIVE OFFICERS
The following table sets forth information with respect to the executive
officers of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION HELD
- ---- --- -------------
<S> <C> <C>
Alan L. Jacobs 55 Chief Executive Officer and President
Franklyn B. Weichselbaum 51 Chief Financial Officer, Treasurer and
Secretary
</TABLE>
The principal occupation of Mr. Jacobs is discussed above under "The Board
of Directors."
Franklyn B. Weichselbaum has been a consultant to the Company since May
1990 and was elected Treasurer and Chief Financial Officer of the Company in
November 1993 and Secretary of the Company in March 1995. Since September 1995,
Mr. Weichselbaum has served as consultant to Shulman & Associates, Inc. Mr.
Weichselbaum served as a consultant to Weitzer Homebuilders Incorporated, a
publicly traded company engaged in the design and construction of single family
residences, from October 1994 until August 1995. Mr. Weichselbaum also served as
a consultant to RailAmerica, Inc., a publicly held transportation holding
company, from May 1990 to March, 1994.
If the Proposed Merger is consummated, Mr. Jacobs and Mr Weichselbaum will
resign from their respective positions with the Company effective upon
consummation of the Proposed Merger.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers and persons who own more than ten percent of a registered
class of the Company's equity securities to file with the Commission initial
reports of ownership and reports of changes in ownership of Common Stock and
other equity securities of the Company. Directors, officers and greater than ten
percent stockholders are required by Commission regulation to furnish the
Company with copies of all Section 16(a) forms they file.
IV-13
<PAGE> 92
Based on a review of such timely filed forms received by it and
representations by persons that would be required to file such forms, the
Company believes that all required filings by current executive officers and
directors have been timely filed.
ITEM 10 - EXECUTIVE COMPENSATION
No executive officer of the Company received more than $100,000 in
compensation for the year ended December 31, 1996. The following table sets
forth the annual and long-term compensation for services in all capacities to
the Company for the years ended December 31, 1996, 1995, and 1994 of the Chief
Executive Officer of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION OTHER
NAME AND PRINCIPAL -------------------------------------------------- ANNUAL
POSITION YEAR SALARY ($) BONUS ($) COMPENSATION ($)
- ----------------------- ---- ---------- --------- ----------------
<S> <C> <C> <C> <C>
Alan L. Jacobs(1) 1996 $60,000 -- --
President and Chief 1995 $30,000 -- --
Executive Officer 1994 -- -- ---
(from November 1993
to present) and
Chairman of the Board
of Directors (from
November 1993 until
September 9, 1994)
</TABLE>
(1) Mr. Jacobs received no compensation from the Company for his services to the
Company prior to March 1995. Mr. Jacobs' then employer, Josephthal, received
$3,000 a month in consulting fees from the Company from March 1993 through
February 1995. See "Item 12 -- Certain Relationships and Related Transactions."
From March 1995 to December 1995, Mr. Jacobs was paid $3,000 per month.
Commencing January 1996, the Company compensated Mr. Jacobs at the rate of
$5,000 per month. Mr. Jacobs also received certain remuneration as a director of
the Company in the fiscal year ended December 31, 1996. See "Director
Remuneration."
OPTION/SAR GRANTS IN LAST FISCAL YEAR
(INDIVIDUAL GRANTS)
<TABLE>
<CAPTION>
PERCENT OF TOTAL
NUMBER OF OPTIONS/ SARS
SECURITIES GRANTED TO
UNDERLYING OPTIONS/ EMPLOYEES IN EXERCISE OR BASE
NAME SARS GRANTED (#) FISCAL YEAR PRICE ($/SH) EXPIRATION DATE
- --------------------------- ------------------- ------------------- -------------------- ---------------
<S> <C> <C> <C> <C>
Alan L. Jacobs 10,000 (1) $.75 (2) April 14, 2000
President and Chief
Executive Officer
</TABLE>
IV-14
<PAGE> 93
(1) During the fiscal year ended December 31, 1996, the Company had no full time
employees. The Company's Chief Executive Officer and President and the Chief
Financial Officer, Secretary and Treasurer provided their services to the
Company on a consulting basis. During 1996, the Company granted an aggregate of
60,000 options consisting of 10,000 options to each officer and each non-officer
director of the Company.
(2) Mr. Jacobs' options had an initial exercise price of $3.00 per share which
exceeded the market price per share and the book value per share of Common Stock
on the date of grant. Mr. Jacobs' options are currently exercisable to purchase
one share of Common Stock at an adjusted exercise price of $.75 per share,
giving effect to an adjustment for the payment of the Special Distribution of
$2.25 per share. See "Item 1 - Business."
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
The following table sets forth information with respect to unexercised
options to purchase Common Stock held by the Chief Executive Officer at December
31, 1996. No executive officer exercised any stock options during the fiscal
year ended December 31, 1996.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-
UNDERLYING UNEXERCISED THE-MONEY OPTIONS/SARS
OPTIONS/SARS AT FY-END (#) AT FY-END ($)
-------------------------- -------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Alan L. Jacobs 10,000 -- (1) --
President and Chief
Executive Officer
</TABLE>
(1) The closing bid price for Common Stock on December 31, 1996, as reported on
the OTC Electronic Bulletin Board, was $.625 per share. Consequently, Mr.
Jacobs' unexercised options were not in-the-money as of December 31, 1996.
DIRECTOR REMUNERATION
Since February 1995, directors have been entitled to receive $1,500 per
meeting attended and reimbursement for certain out-of-pocket expenses for
serving as such. Additionally, members of the Audit Committee have been entitled
to receive $1,500 per meeting attended and reimbursement for certain
out-of-pocket expenses for serving as such.
During the fiscal year ended December 31, 1996, BRCC's Board of Directors
met five times. All of the directors, other than Ronald L. Miller, attended at
least 75% of the meetings of the Board of Directors and of any committee on
which directors served. Mr. Miller attended three of the five meetings. The
Board of Directors also acts by unanimous written consent in lieu of a meeting
from time to time.
IV-15
<PAGE> 94
On January 11, 1996, the Company approved the payment to each director of
the Company of directors fees of $10,000 for services to be rendered as a
director during 1996 and granted 10,000 options to each officer and each
non-officer director of the Company. Each option had an initial exercise price
of $3.00 per share which exceeded the market price per share and the book value
per share of the Common Stock on the date of grant. Each option is exercisable
for four years commencing April 15, 1996 to purchase one share of Common Stock
at an adjusted exercise price of $.75 per share, giving effect to an adjustment
for the payment of the Special Distribution. See "Item 1 - Business."
The Company's By-laws include provisions, authorized by Florida law, which
require the Company to indemnify directors and officers of the Company against
certain liabilities and reasonable expenses incurred by reason of his/her being
or having been a director or an officer of the Company or for an act alleged to
have been committed by such director or officer in his/her capacity as a
director or officer of the Company. All rights to indemnification and advances
shall be deemed to be a contract between the Company and each indemnified person
who serves or served in such capacity at any time while such indemnification
provisions were in effect and, as such, are enforceable against the Company. The
Company has also obtained director and officer liability insurance.
IV-16
<PAGE> 95
ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the number of shares and percentage owned of
the Common Stock beneficially owned as of February 28, 1997 by (i) each person
known by the Company to be the beneficial owner of more than five percent of the
Common Stock, (ii) each director of the Company, (iii) each executive officer
named in the summary compensation table set forth above, and (iv) all officers
and directors of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS OF BENEFICIAL PERCENT OF
BENEFICIAL OWNER(1) OWNER CLASS
- ------------------- ----- -----
<S> <C> <C>
William B. Tanner(2) 177,600 15.7%
2076 Union Avenue
P.O. Box 40769
Memphis, Tennessee 38174
Dan Purjes(3) 109,744 9.8%
c/o Josephthal Lyon & Ross Incorporated
200 Park Avenue, 24 Floor
New York, New York 10166
Alan L. Jacobs(4) 17,562 1.5%
International Capital Growth, Ltd.
777 South Flagler Drive
8th Floor West Tower
Palm Beach, Florida 33401
Robert H. Arnold(4) 10,000 *
c/o R.H. Arnold & Co.
Carnegie Hall Tower
152 West 57th Street
New York, New York 10019
Ronald L. Miller(4) 10,000 *
c/o Miller Advisory Corp.
2601 Heron Lane N.
Clearwater, Florida 34622
C. Lawrence Rutstein(4) 10,000 *
340 Overlook Lane
Gulph Mills, Pennsylvania 19428
</TABLE>
IV-17
<PAGE> 96
<TABLE>
<CAPTION>
<S> <C> <C>
Alan H. Weingarten(4) 17,500 1.5%
c/o Alan H. Weingarten & Associates, Inc.
21759 Club Villa Terrace
Boca Raton, Florida 33433
All officers and directors as a group (6 75,062 6.3%
persons)(5)
- ----------
* Less than 1%.
</TABLE>
(1) Unless otherwise indicated, each person listed above has sole voting power
and sole investment power with respect to the shares owned by such person.
(2) Includes (a) 23,000 shares held by WBT Holding Co., Inc., an entity
controlled by Mr. Tanner; (b) 11,500 shares held by Mr. Tanner as custodian for
Weatherly Blake, Mr. Tanner's son; (c) 4,600 shares held by Mr. Tanner as
custodian for William Taylor Tanner, Mr. Tanner's grandson; (d) 11,500 shares
held by Crystal Tanner, Mr. Tanner's daughter; (e) 11,500 shares held by William
B. Tanner, Jr., Mr. Tanner's son; and (f) 12,000 shares held by WBT Holding Co.,
an entity controlled by Mr. Tanner. Mr. Tanner disclaims beneficial ownership of
all of these shares.
(3) Includes (a) 2,500 shares owned by his minor children; (b) 3,000 shares held
in his profit sharing plan account; (c) 1,000 shares held in his individual
retirement account; and (d) 11,500 shares owned by the Josephthal Profit Sharing
Plan, of which Mr. Purjes has the authority to appoint and discharge its
trustees. Mr. Purjes disclaims beneficial ownership of the shares held by his
minor children and the Josephthal Profit Sharing Plan. Excludes (a) 250,000
shares of Common Stock to be issued to Josephthal if the Proposed Merger is
consummated and (b) shares to be issued to Mr. Purjes in exchange for his
ownership interest in CRP prior to the Proposed Merger. See "Item 12 - Certain
Relationships and Related Transactions."
(4) Includes 10,000 shares which are issuable upon the exercise of outstanding
options.
(5) Includes 60,000 shares which are issuable upon the exercise of outstanding
options.
IV-18
<PAGE> 97
ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Alan L. Jacobs, President and Chief Executive Officer of the Company, was
employed by Josephthal from January 1992 to December 1995. In addition, Dan
Purjes, a managing director of Josephthal, is a shareholder of the Company and
an executive officer, director and principal shareholder of Josephthal Holdings,
Inc., the parent company of Josephthal. The Company and Josephthal were parties
to a financial consulting agreement dated March 2, 1993 pursuant to which the
Company paid Josephthal $3,000 a month in consulting fees from March 1993 until
February 1995. The Company paid such monthly fee for services provided by
Josephthal which included advice to, and consulting with, the Company concerning
financial planning, corporate organization and structure, financial matters in
connection with operation of the business of the Company, private and public
equity and debt financing, acquisitions, mergers and other similar business
combinations, and periodic analysis of the Company's financial statements.
Additionally, Alan Jacobs, the Company's President and Chief Executive Officer,
was not compensated directly by the Company for services rendered as an officer
of the Company prior to March 1995. However, Mr. Jacobs was compensated by
Josephthal. The $3,000 monthly fee was consistent with fees that Josephthal
received for providing similar financial consulting services to other small
public entities. In addition, the consulting agreement obligated the Company to
pay Josephthal a contingent transaction fee equal to two percent (2%) of the
amount of any financing or value of any transaction in connection with which
Josephthal, at the written request of the Company, renders advisory services to
the Company, but the source of the financing or transaction is not Josephthal.
The Company also was required to pay Josephthal contingent transaction fees for
financings or transactions introduced to the Company by Josephthal as agreed to
on a transaction-by-transaction basis. The consulting agreement was for a five
year term ending December 31, 1997, except that, after July 1, 1993, the
agreement was subject to termination by either party upon thirty days' prior
written notice. In March 1995, the consulting agreement was terminated by the
Company. In addition, as of March 1995, the Company agreed to pay Mr. Jacobs, as
Chief Executive Officer and President, $3,000 a month. As of January 1996, the
Company has agreed to pay Mr. Jacobs $5,000 per month as Chief Executive and
President of the Company.
In connection with the Proposed Merger, CRP has retained Josephthal as a
financial consultant pursuant to a financial consulting agreement ("CRP
Consulting Agreement"). In the event the Merger is consummated, Josephthal will
be paid a $50,000 fee and receive 250,000 shares of Common Stock. In addition,
subject to the terms and conditions of the Merger Agreement, Dan Purjes may
individually acquire up to 450,108 shares of Common Stock (or 10% of the total
shares of Common Stock to be issued in the Proposed Merger to all existing CRP
shareholders) in exchange for his 10% ownership interest of CRP's outstanding
capital stock prior to the effective date of the Merger.
The Company paid Mr. Franklyn Weichselbaum $2,200 per month in consulting
fees from July 1993 until February 1995. The $2,200 per month fee was negotiated
between the Company and Mr. Weichselbaum and was determined by estimating the
amount of time to be provided by Mr. Weichselbaum in connection with his
services as Treasurer and Chief Financial
IV-19
<PAGE> 98
Officer of the Company. In addition, the Company agreed to pay additional fees
to Mr. Weichselbaum for services provided by Mr. Weichselbaum which the Company
believed were not in the ordinary course of business, such as those rendered in
connection with performing due diligence and other consulting services in
connection with the terminated merger. The Company paid Mr. Weichselbaum an
aggregate of $70,000 in 1994 for the consulting services he rendered in
connection with the terminated merger. The amount of this fee was determined
based upon the complexity of work and the amount of time expended by Mr.
Weichselbaum. From March 1995 to December 1995, the Company paid Mr.
Weichselbaum, as Secretary, Treasurer and Chief Financial Officer of the
Company, $2,200 per month. As of January 1996, the Company has agreed to pay Mr.
Weichselbaum, $3,500 per month, as Secretary, Treasurer and Chief Financial
Officer of the Company.
ITEM 13 - EXHIBITS, LISTS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed herewith:
2.1 Amended and Restated Agreement and Plan of Merger and Reorganization,
dated as of March 26, 1997, by and among the registrant, CRP Acquisition Corp.
and Clean Room Products, Inc.
3.1 Amended and Restated Articles of Incorporation of the registrant;
incorporated by reference to Exhibit 28.0 of the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1989 (the "1989 10-K").
3.2 Bylaws of the registrant; incorporated by reference to the Registration
Statement on Form S-18 (No. 33-12232-A) filed with the Securities and Exchange
Commission on February 23, 1987 under the name U.S. Tech, Inc. (the "S-18
Registration Statement").
3.3 Amended Bylaws of the registrant; incorporated by reference to the
Registration Statement on Form 8-A filed with the Securities and Exchange
Commission on March 7, 1988 under the name Mariner Capital Corporation (the "8-A
Registration Statement").
3.4 Amendment to Bylaws of the registrant; incorporated by reference to
Exhibit 2.2 of the Registration Statement on Form N-2 (No. 33-27005) filed with
the Securities and Exchange Commission on February 13, 1989 under the name
Mariner Capital Corporation (the "N-2 Registration Statement").
3.5 Amendment to Bylaws of the registrant; incorporated by reference to
Exhibit 3.6 of the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1988, filed under the name of Mariner Capital Corporation
(the "1988 10-K").
3.6 Amendment to Bylaws of the registrant dated June 3, 1993; incorporated
by reference to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1992 (the "1992 10-K").
IV-20
<PAGE> 99
3.7 Warrant Agreement dated as of June 9, 1993 between the registrant and
Josephthal Lyon & Ross Incorporated; incorporated by reference to the Company's
Annual Report on Form 10-KSB for the fiscal year ended December 31, 1993 (the
"1993 10-KSB").
3.8 Warrant Agreement dated as of March 10, 1994 between the registrant and
Josephthal Lyon & Ross Incorporated; incorporated by reference to the Company's
1993 10- KSB.
3.9 Amended Bylaws of the registrant, as amended January 6, 1995;
incorporated by reference to Exhibit 3.9 of the Company's Annual Report on Form
10-KSB for the fiscal year ended December 31, 1994 (the "1994 10-KSB").
4.0 Form of Common Stock Certificate; incorporated by reference to Exhibit
4 of the N-2 Registration Statement.
4.1 Form of Convertible Note; incorporated by reference to Exhibit 4.1 of
the N-2 Registration Statement.
4.2 Form of Trust Indenture; incorporated by reference to Exhibit 5 of N-2
Registration Statement.
4.3 $200,000 Note Payable due November 25, 1995 to Bank of New England,
N.A.; incorporated by reference to Exhibit 4.3 of the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1990 (the "1990 10-K").
10.0 Amended and Restated 1988 Stock Option Plan; incorporated by
reference to Exhibit 10.2 of the 1990 10-K.
10.1 Employment Agreement (Gary O. Marino); incorporated by reference to
Exhibit 10.10 of the N-2 Registration Statement.*
10.2 Huron Transportation Group, Inc. Shareholders' Agreement; incorporated
by reference to Exhibit 10.8 of the 1988 10-K.
10.3 Huron Transportation Group, Inc. Executive Management Agreement;
incorporated by reference to Exhibit 10.9 of the 1988 10-K.
10.4 Guaranty of the Company to First of America Bank - Frankenmuth dated
February 17, 1989 regarding HERC indebtedness; incorporated by reference to
Exhibit 10.8 of the 1989 10-K.
10.5 Unconditional and Irrevocable Guaranty of the Company to the Bank of
New England, N.A. dated November 30, 1990 regarding Joint Venture indebtedness;
incorporated by reference to Exhibit 10.10 of the 1990 10-K.
IV-21
<PAGE> 100
10.6 Amended and Restated Indemnity and Stock Exchange Agreement dated
December 18, 1990 between the Company and Gary O. Marino; incorporated by
reference to Exhibit 10.6 of the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1991 (the "1991 10-K").
10.7 Employment Agreement, dated July 1, 1992, between the Company and Gary
O. Marino*; incorporated by reference to the Company's 1992 10-K.
10.8 Employment Agreement, dated July 1, 1992, between the Company and
Donald D. Redfearn*; incorporated by reference to the Company's 1992 10-K.
10.9 Employment Agreement, dated July 1, 1992, between the registrant and
Irwin J. Newman*; incorporated by reference to the Company's 1992 10-K.
10.10 Financial Consulting Agreement, dated March 2, 1993, between the
Company and Josephthal Lyon and Ross Incorporated; incorporated by reference to
the Company's 1992 10-K.
10.11 Financial Consulting Agreement, dated July 10, 1992, between the
Company and Stenton Leigh Capital Corp.; incorporated by reference to the
Company's 1992 10-K.
10.12 Stock Purchase Agreement, dated July 30, 1992, between Business Forms
Investments, Inc. and the Company; incorporated by reference to Exhibit No. 2 to
the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1992.
10.13 1992 Executive Officer Supplemental Compensation Plan; incorporated
by reference to the Company's 1992 10-K.*
10.14 Termination Agreement, dated November 2, 1993, between the registrant
and Gary O. Marino; incorporated by reference to the Company's 1993 10-KSB.
10.15 Termination Agreement, dated October 8, 1993, between the registrant
and Donald D. Redfearn; incorporated by reference to the Company's 1993 10-KSB.
10.16 Termination Agreement, dated October 19, 1993, between the registrant
and Irwin J. Newman; incorporated by reference to the Company's 1993 10-KSB.
10.17 Loan Agreement between the Company and Weitzer Financial Inc. dated
June 30, 1994; incorporated by reference to Exhibit 10.17 of the Company's 1994
10-KSB.
10.18 Promissory Note of Weitzer Financial Inc. dated June 30, 1994 in the
original principal amount of $500,000; incorporated by reference to Exhibit
10.18 of the Company's 1994 10-KSB.
10.19 Option Agreement, dated as of January 11, 1996, between the Company
and Alan L. Jacobs.
IV-22
<PAGE> 101
10.20 Option Agreement, dated as of January 11, 1996, between the Company
and Robert H. Arnold.
10.21 Option Agreement, dated as of January 11, 1996, between the Company
and Ronald L. Miller.
10.22 Option Agreement, dated as of January 11, 1996, between the Company
and C. Lawrence Rutstein.
10.23 Option Agreement, dated as of January 11, 1996, between the Company
and Alan H. Weingarten.
10.24 Option Agreement, dated as of January 11, 1996, between the Company
and Franklyn B. Weichselbaum.
10.25 Promissory Note of Clean Room Products, Inc., dated December 12,
1996, in the original principal amount of $350,000.
21.1 Subsidiaries of the registrant.
22.1 Proxy Statement for Special Meeting of shareholders on February 10,
1995; incorporated by reference to Exhibit 22.1 of the Company's 1994 10-KSB.
22.2 Proxy Statement for Special Meeting of shareholders in lieu of the
Annual Meeting on December 15, 1995; incorporated by reference to Exhibit 22.2
of the Company's 1995 10-KSB.
22.3 Proxy Statement for Special Meeting of shareholders on February 29,
1996; incorporated by reference to Exhibit 22.3 of the Company's 1995 10-KSB.
24.1 Power of Attorney, located on page 24 of this Annual Report on Form
10-KSB for the fiscal year ended December 31, 1996.
27.4 Financial Data Schedule for the fiscal year ended December 31, 1996.
99 Consent Order for Preliminary Injunction and Other Ancillary Relief
dated September 6, 1994; incorporated by reference to Exhibit No. 99 to the
Company's report on Form 8-K filed with the Securities and Exchange Commission
on September 20, 1994.
99.1 Order granting Receiver's Motion to Approve Status Report, Approve
Election of Board of Directors, Approve Payment of Certain Fees and Expenses and
Approve Dismissal and Discharge of Receiver dated March 14, 1995; incorporated
by reference to Exhibit 99.1 to the Company's report on Form 8-K filed with the
Securities and Exchange Commission on March 24, 1995.
IV - 23
<PAGE> 102
99.2 Status Report of Daniel H. Aronson, Receiver, dated February 27, 1995;
incorporated by reference to Exhibit 99.2 to the Company's report on Form 8-K
filed with the Securities and Exchange Commission on March 24, 1995.
99.3 Notification of Withdrawal of Election to be subject to Sections 55
through 65 of the Investment Company Act of 1940 filed pursuant to Section 54(c)
of the Investment Company Act of 1940.
- ----------
* Executive Compensation Plan or Arrangement
(b) No reports on Form 8-K were filed during the last quarter of 1996.
IV - 24
<PAGE> 103
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has caused this Report to be
signed on its behalf by the undersigned, thereunto duly authorized on March 26,
1997.
BOCA RATON CAPITAL CORPORATION
By: /s/Alan L. Jacobs
-------------------------------------
Alan L. Jacobs
President and Chief Executive Officer
IV - 25
<PAGE> 104
The undersigned directors and officers of Boca Raton Capital Corporation
hereby constitute and appoint Alan L. Jacobs and Franklyn B. Weichselbaum and
each of them, with full power to act without the other and with full power of
substitution and resubstitution, our true and lawful attorneys-in-fact with full
power to execute in our name and behalf in the capacities indicated below this
Annual Report on Form 10-KSB and any and all amendments thereto and to file the
same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission and hereby ratify and confirm all
that such attorneys-in-fact, or any of them, or their substitutes shall lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this Report has been signed below by the following persons on behalf of
the Registrant and in the capacities indicated on March 26, 1997.
Signatures Title
---------- -----
/s/Alan L. Jacobs President, Chief Executive Officer
- ----------------------------- and Director (Chief Executive Officer)
Alan L. Jacobs
/s/Franklyn B. Weichselbaum Chief Financial Officer,
- ---------------------------- Secretary and Treasurer (Principal
Franklyn B. Weichselbaum Financial and Accounting Officer)
/s/Robert H. Arnold Director
- ----------------------------
Robert H. Arnold
/s/Ronald L. Miller Director
- ----------------------------
Ronald L. Miller
/s/C. Lawrence Rutstein Director
- ----------------------------
C. Lawrence Rutstein
/s/Alan H. Weingarten Director
- ----------------------------
Alan H. Weingarten
IV - 26
<PAGE> 105
BOCA RATON CAPITAL CORPORATION AND SUBSIDIARIES
REPORT ON AUDITS OF FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
IV - 27
<PAGE> 106
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Pages
<S> <C>
Report of Independent Accountants F-1
Consolidated Balance Sheet as of December 31, 1996 F-2
Consolidated Statements of Income for the Years Ended
December 31, 1996 and 1995 F-3
Consolidated Statements of Shareholders' Equity
for the Years Ended December 31, 1996 and 1995 F-4
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1996 and 1995 F-5
Notes to Consolidated Financial Statements F-6 - F-11
</TABLE>
IV - 28
<PAGE> 107
[COOPERS & LYBRAND LOGO] [LETTERHEAD]
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and the
Board of Directors of Boca Raton Capital Corporation
We have audited the accompanying consolidated balance sheet of Boca Raton
Capital Corporation and Subsidiaries (the "Company") as of December 31, 1996
and the related consolidated statements of income, shareholders' equity, and
cash flows for each of the two years in the period then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Boca Raton
Capital Corporation and Subsidiaries as of December 31, 1996, and the results
of their operations and their cash flows for each of the two years in the
period then ended in conformity with generally accepted accounting principles.
[SIG]
COOPERS & LYBRAND L.L.P.
Miami, Florida
January 31, 1997
IV - 29
<PAGE> 108
BOCA RATON CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31, 1996
<TABLE>
<CAPTION>
1996
<S> <C>
ASSETS
Cash $ 518,645
Note receivable 350,000
Prepaid expenses 7,000
-----------
Total assets $ 875,645
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued expenses $ 84,887
-----------
Total liabilities 84,887
-----------
Shareholders' equity:
Common stock, $.001 par value; authorized 40,000,000
shares; 1,125,270 shares issued and outstanding 1,125
Additional paid-in capital 4,002,936
Accumulated deficit (3,213,303)
-----------
Total shareholders' equity 790,758
-----------
Total liabilities and shareholders' equity $ 875,645
===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
IV - 30
<PAGE> 109
BOCA RATON CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
for the years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Investment income:
Interest $ 36,637 $ 126,781
Other 0 29,212
----------- -----------
Total investment income 36,637 155,993
----------- -----------
Operating expenses:
General and administrative 222,299 172,448
Professional fees 198,448 142,599
Interest 2,937 200,529
----------- -----------
Total operating expenses 423,684 515,576
----------- -----------
Operating loss (387,047) (359,583)
----------- -----------
Realized and unrealized gain (loss) on investments:
Net realized gain on investments 1,244,374 1,504,927
Net decrease in unrealized appreciation of investments (1,088,750) (792,896)
----------- -----------
Net realized and unrealized gain on investments 155,624 712,031
----------- -----------
Income (loss) before income taxes and extraordinary item (231,423) 352,448
Income tax expense 0 95,894
----------- -----------
Net income (loss) before extraordinary item (231,423) 256,554
Extraordinary item - gain on extinguishment of debt 278,026 0
----------- -----------
Net income $ 46,603 $ 256,554
=========== ===========
Income (loss) per share:
Income (loss) before extraordinary gain $ (0.21) $ 0.23
Extraordinary gain 0.25 0
----------- -----------
Net income $ 0.04 $ 0.23
=========== ===========
Weighted average number of shares outstanding 1,125,270 1,125,270
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
IV - 31
<PAGE> 110
BOCA RATON CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
for the years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
Shares Par Paid-In Accumulated
Outstanding Value Capital Deficit Total
----------- ------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1994 1,125,270 $ 1,125 $ 6,534,795 $ (3,516,460) $ 3,019,460
Net income 0 0 0 256,554 256,554
--------- ------- ----------- ------------ -----------
Balance, December 31, 1995 1,125,270 1,125 6,534,795 (3,259,906) 3,276,014
Net income 0 0 0 46,603 46,603
Distribution to shareholders 0 0 (2,531,859) 0 (2,531,859)
--------- ------- ----------- ------------ -----------
Balance, December 31, 1996 1,125,270 $ 1,125 $ 4,002,936 $ (3,213,303) $ 790,758
========= ======= =========== ============ ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
IV - 32
<PAGE> 111
BOCA RATON CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income $ 46,603 $ 256,554
Adjustments to reconcile net income to net cash used in
operating activities:
Decrease in unrealized appreciation of investments 1,088,750 792,896
Gain on sale of investment (1,244,374) (1,504,927)
Extraordinary gain on extinguishment of debt (278,026) 0
Interest accrued but not paid on defaulted note 0 200,529
Increase in other assets (7,000) 0
Decrease in accounts payable and accrued expenses (40,337) 0
----------- -----------
Net cash used in operating activities (435,384) (458,839)
----------- -----------
Cash flows from investing activities:
Proceeds from sale of investment 1,245,000 1,505,469
Proceeds from note receivable 0 522,514
Issuance of notes receivable (350,000) 0
----------- -----------
Net cash provided by investing activities 895,000 2,027,983
----------- -----------
Cash flows from financing activities:
Distribution to shareholders (2,531,859) 0
Payments of notes payable (310,000) 0
----------- -----------
Net cash used in financing activities (2,841,859) 0
----------- -----------
Net increase (decrease) in cash (2,382,243) 1,569,144
Cash, beginning of year 2,900,888 1,331,744
----------- -----------
Cash, end of year $ 518,645 $ 2,900,888
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the year for income taxes $ 14,907 $ 39,087
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
IV-33
<PAGE> 112
BOCA RATON CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Business
Boca Raton Capital Corporation ("BRCC") was a non-diversified,
closed-end investment company, which had elected and was granted the
status as a Business Development Company ("BDC") under the Investment
Company Act of 1940 (the "1940 Act"). During 1995, BRCC's Board of
Directors were of the opinion that the shareholders return on assets
was not sufficient to continue operations as a BDC. As such, BRCC's
election to withdraw from its status as a BDC was filed with the
Securities and Exchange Commission and became effective as of December
22, 1995. No material impact to the financial statements resulted
from BRCC's change in status.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of BRCC and
its wholly-owned subsidiaries (collectively the "Company"). All
material intercompany balances and transactions have been eliminated
in consolidation.
VALUATION OF PORTFOLIO INVESTMENTS
The Company follows Statement of Financial Accounting Standards
("SFAS") No. 115, "Accounting for Certain Investments in Debt and
Equity Securities". Under SFAS No. 115, investments are classified as
either held to maturity, trading or available for sale depending upon
whether the investment is a debt or equity security and management's
intent with regards to the investment. The Company's investment in
RailAmerica was classified as trading which called for the investment
to be carried at fair value and changes in market value be credited or
charged to income. Investments for which market quotations are
readily available are valued at market. In the absence of market
quotations, investments are valued at their fair value as determined
in good faith by the Board of Directors. Due to the inherent
uncertainty of this valuation, these estimates may differ
significantly from the values that would have been used had a ready
market for the investments existed.
NET INCOME PER COMMON SHARE
Net income per common share is computed using the weighted average
number of common shares outstanding during each year.
Statement of Financial Accounting Standards ("SFAS") No. 128,
"Earnings per Share", establishes standards for computing and
presenting earnings per share and must be implemented by BRCC for both
interim and annual periods ending after December 31, 1997. This
pronouncement is not expected to have a material impact on the
financial statements of the Company.
IV-34
<PAGE> 113
BOCA RATON CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates, particularly with respect to the fair value
determination of investments, and the differences could be material.
2. PORTFOLIO INVESTMENTS:
During 1996, the Company sold its 375,000 shares of RailAmerica, Inc.
common stock, which represented its total investment as of December
31, 1995, and received net proceeds of $1,245,000. The Company
recorded a net realized gain of $155,624 during the year ended
December 31, 1996 as a result of this sale.
3. DEFAULTED NOTE PAYABLE AND ACCRUED INTEREST:
The Company had a note payable to a financial institution which was
taken over by regulatory authorities. At the time of the takeover,
the Company had suspended payments on this note in an effort to
negotiate extensions, refinance the obligation or reach a settlement.
The Company had adjusted the cumulative interest accrued on the note
to reflect the default rate of 18% in 1995. In 1996, a full
settlement was reached in the matter which consisted of payment of
principal of $310,000 and a release from all obligation. The
favorable settlement in this matter has been reflected as an
extraordinary item resulting from extinguishment of debt in the amount
of $278,026.
4. INCOME TAXES:
The Company accounts for income taxes pursuant to the provisions of
SFAS No. 109, "Accounting for Income Taxes". SFAS No. 109 requires
recognition of deferred tax liabilities and assets for the expected
future tax consequences of events that have been included in the
financial statements or tax returns. Under this method, deferred tax
liabilities and assets are determined based on the difference between
the financial statement and tax basis of assets and liabilities using
enacted tax rates in effect for the year in which the differences are
expected to reverse.
IV-35
<PAGE> 114
BOCA RATON CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
4. INCOME TAXES, CONTINUED:
The provision for income taxes for 1996 and 1995 is summarized as
follows:
<TABLE>
<CAPTION>
1996 1995
------ --------
<S> <C> <C>
Current:
Federal $ 0 $ 62,945
State 0 32,949
------ --------
0 95,894
------ --------
Deferred:
Federal 0 0
State 0 0
------ --------
0 0
------ --------
Total provision $ 0 $ 95,894
====== ========
</TABLE>
The significant components of the net deferred tax assets as of
December 31, 1996, are as follows:
<TABLE>
<S> <C>
Deferred tax assets:
Net operating loss carryforward $ 885,127
Other 98,132
Valuation allowance (983,259)
---------
Net deferred tax assets $ 0
=========
</TABLE>
SFAS No. 109 requires a valuation allowance against deferred tax
assets if, based on the weight of available evidence, it is more
likely than not that some or all of the deferred tax assets will not
be realized. At December 31, 1996, the Company has established a 100%
valuation allowance against net deferred tax assets.
For income tax purposes, the Company had a change in ownership during
1993 in connection with a private placement offering. The change in
ownership resulted in an annual limitation on the amount of pre-change
ownership net operating loss carryforwards which can be utilized to
offset the Company's future taxable income. The annual limitation is
approximately $128,000 and will be increased by the Company's
pre-change built in gains when recognized.
IV-36
<PAGE> 115
BOCA RATON CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
4. INCOME TAXES, CONTINUED:
As of December 31, 1996, the Company has available for federal income
tax reporting purposes pre-change net operating losses of
approximately $1,900,000 and post-change net operating losses of
approximately $381,000. These net operating loss carryforwards expire
in the years 1998 through 2008. Should the proposed merger discussed
in Note 7 occur, utilization of those net operating loss carryforwards
could be further limited.
RATE RECONCILIATION
A reconciliation of the difference between actual income tax expense
and income taxes computed at the federal statutory tax rate is as
follows:
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Federal statutory rate 34.00 % 34.00 %
State rate net of federal benefit 3.63 % 3.63 %
Benefit of NOL with prior period valuation allowance (37.63)% (10.42)%
------ ------
0.00 % 27.21 %
====== ======
</TABLE>
5. CONCENTRATION OF CREDIT RISK:
Financial instruments, which potentially subject the Company to
concentration of credit risk, consist primarily of cash and note
receivable. The Company maintains a majority of its cash with
financial institutions that management considers to have a high credit
standing. At times, such amounts may be in excess of the FDIC insured
limits. The Company has a note receivable in the amount of $350,000
(See Note 7) with a single counterparty. The Company did not require
the counterparty to provide collateral for the note; however, the
principal and accrued interest thereon has been individually
guaranteed by each of the three counterparty shareholders and their
respective spouses. The Company, however, does not anticipate
nonperformance by the counterparty.
6. RELATED PARTY TRANSACTIONS:
The Company and Josephthal were parties to a financial consulting
agreement through March 1995 for which the Company paid Josephthal
Lyon & Ross Incorporated ("Josephthal") $3,000 a month in consulting
fees for services provided by Mr. Alan Jacobs, President and Chief
Executive Officer of the Company. Until January 1, 1996, Mr. Jacobs
was an employee of Josephthal. In March 1995, the consulting agreement
was terminated. Beginning in April 1995 and through December 31,
1995, the Company agreed to pay Mr. Jacobs $3,000 a month in
consulting fees directly. Starting in 1996, the monthly consulting
fee was increased to $5,000 per month.
IV-37
<PAGE> 116
BOCA RATON CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
6. RELATED PARTY TRANSACTIONS, CONTINUED:
Pursuant to a consulting agreement, the Company paid Mr. Franklyn
Weichselbaum, as the Treasurer and Chief Financial Officer of the
Company, $2,200 per month in consulting fees. Starting in 1996, the
monthly consulting fee was increased to $3,500 per month.
On January 11, 1996, the Board of Directors approved the payment of a
retainer to each director of the Company of $10,000 for services to be
rendered as a director during 1996 and granted 10,000 options to each
of the four independent directors and to its two officers. This
retainer is in addition to the normal recurring fees received of
$1,500 per director per meeting attended. Each option entitles the
holder, for a period of four years commencing on April 15, 1996, to
purchase shares of the Company's common stock at an initial exercise
price of $3.00 per share. The exercise price exceeded the market
price per share and the book value per share of the Company's common
stock on the date of grant. The exercise price was subsequently
adjusted to $0.75 per share to reflect the special cash distribution
of $2.25 per share of common stock (See Note 8).
General and administrative expenses for 1996 are substantially
comprised of directors' fees and related expenses and consulting fees
paid to the officers.
7. PROPOSED MERGER:
In 1996, the Company entered into an agreement to merge CRP
Acquisition Corporation ("CRP"), its wholly-owned subsidiary, with and
into Clean Room Products, Inc., a New York corporation. The proposed
merger is subject to, among other things, the satisfactory completion
by the Company of a legal and business review of Clean Room Products,
Inc., and approval by the shareholders of the Company. CRP designs
and constructs clean rooms and associated products for the
semiconductor, pharmaceutical, biotechnology, medical device and other
industries. In addition, CRP's film division produces UltracleanTM
packaging materials for these industries. If the proposed merger is
consummated, Clean Room Products, Inc. will become a wholly-owned
subsidiary.
In connection with the proposed merger, on December 12, 1996, the
Company extended a loan to CRP. The loan was in the original
principal amount of $350,000 with an interest rate equal to the prime
rate, plus one percent (1%) per annum. The principal and the accrued
interest, thereon, is due and payable on April 30, 1997. Each of the
three CRP shareholders and their respective spouses have guaranteed
repayment of this note.
8. SPECIAL CASH DISTRIBUTIONS:
On January 11, 1996, the Board of Directors approved a special cash
distribution of $2.25 per share to the shareholders of record on
January 11, 1996. The special cash distribution was approved by the
Company's shareholders at a special meeting held on February 29, 1996
and the special cash distribution was paid on March 11, 1996.
IV-38
<PAGE> 117
BOCA RATON CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
9. LEGAL PROCEEDINGS:
In January 1997, the Company was notified of potential alleged damages
in connection with unspecified claims relating to previously terminated
merger proceedings. As of the date hereof, to the best of the Company's
knowledge, legal proceedings have not commenced. In the event of legal
actions relating to such matters, the Company intends to vigorously
defend its rights against any alleged claims.
IV-39
<PAGE> 118
EXHIBIT INDEX
Exhibit
- -------
2.1 Amended and Restated Agreement and Plan of Merger and Reorganization,
dated as of March 26, 1997, by and among the registrant, CRP
Acquisition Corp. and Clean Room Products, Inc.
10.25 Promissory Note of Clean Room Products, Inc., dated December 12, 1996,
in the original principal amount of $350,000.
21.1 Subsidiaries of the registrant.
24.1 Power of Attorney, located on page 24 of this Annual Report on Form
10-KSB for the fiscal year ended December 31, 1996.
27.4 Financial Data Schedules for the fiscal year ended December 31 1996.
IV-40
<PAGE> 119
EX-2.1
AMENDED AND RESTATED AGREEMENT & PLAN OF MERGER
IV-41
<PAGE> 120
[See Appendix V to the Proxy Statement]
IV-42
<PAGE> 121
EX-10.25
PROMISSORY NOTE
IV-43
<PAGE> 122
EXHIBIT 10.25
Promissory Note
$350,000 Dated as of December 12, 1996
For value received, Clean Room Products Inc., a New York corporation (the
"Borrower"), promises to pay to the order of Boca Raton Capital Corporation, a
Florida corporation (the "Lender"), at such times and in such amounts as
hereinafter set forth, at the principal office of the Lender at Boca Raton
Capital Corporation, 6516 Via Rosa, Boca Raton, Florida 33433, the principal sum
of ($350,000), in lawful money of the United States of America, and to pay
interest on the unpaid principal balance hereof in like money at such office
from the date hereof until the principal hereof shall have become due and
payable by acceleration or otherwise, at the rate per annum set forth below. The
principal amount of this Note together with all accrued and unpaid interest
hereon shall be due and payable on April 30, 1997. Interest on this Note shall
be computed at a fixed rate per annum equal to the rate of interest as announced
from time to time by Citibank, N.A. (the "Prime Rate") as of the date this Note
is executed, plus one percent (1%). Interest at the foregoing rate shall be
calculated on the basis of a 360-day year for the actual number of days elapsed
(i.e. 1/360th of a full year's interest shall accrue for each day that any
principal balance is outstanding under this Note). The unpaid principal balance
of this Note may be prepaid at any time without premium or penalty. In the event
that any Event of Default (as hereinafter defined) shall have occurred and be
continuing, the rate of interest during such period shall be computed at the
Prime Rate as of the date this note is executed plus five percent (5%).
This Note is the Note referred to in the Agreement and Plan of Merger and
Reorganization (the "Merger Agreement") dated as of December ____, 1996 made
between the Borrower and the Lender. Capitalized terms used herein and not
defined shall have the same meanings when used herein as in such Merger
Agreement.
The Borrower agrees to pay all costs incurred by any holder hereof,
including reasonable attorneys' fees (including those for appellate
proceedings), incurred in connection with any collection or attempted collection
or enforcement hereof.
In the event that any of the following events shall occur, each of which
shall constitute a default hereunder (an "Event of Default"), all liabilities of
the Borrower to the Lender evidenced by this Note shall become due and payable
three (3) days after written notice is provided by the Lender to the Borrower
except as set forth in clause (6) of this paragraph: (1) failure by the Borrower
to pay any amount owed hereunder, within five (5) business days of the time when
and as the same shall become due and payable, whether at the due date thereof or
at a date fixed for payment thereof or by acceleration thereof or otherwise; (2)
failure by the Borrower to perform or comply with any obligation, promise,
agreement or provision under this Note; (3) the dissolution or liquidation of
the Borrower, (4) a decree or order shall be entered by a court for relief in
respect of the Borrower under
IV-44
<PAGE> 123
Title 11 of the United States Code, as now or hereafter constituted, or any
other applicable Federal or state bankruptcy, insolvency or other similar law,
or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator
(or similar official) of the Borrower or of any substantial part of its
property, or ordering the winding-up or liquidation of its affairs and the
continuance of any such decree or order unstayed and in effect for a period of
sixty (60) consecutive days; (5) the Borrower shall file a petition or answer or
consent seeking relief under Title 11 of the United States Code, as now or
hereafter constituted, or any other applicable Federal or state bankruptcy,
insolvency or other similar law, or consent to the institution of proceedings
thereunder or to the filing of any such petition or to the appointment or taking
possession of a receiver, liquidator, assignee, trustee, custodian, sequestrator
(or other similar official) of the Borrower or any substantial part of its
property, or the Borrower shall fail generally to pay its debts as such debts
become due, or take corporate action in furtherance of any such action; or (6)
termination of the Merger Agreement; provided that in the event of a termination
of the Merger Agreement all liabilities of the Borrower evidenced by this Note
shall become due and payable three (3) months after the Merger Agreement is
terminated.
All parties to this Note, including the Borrower and any sureties,
endorsers or guarantors, hereby waive presentment for payment, demand, protest,
notice of dishonor, notice of acceleration of maturity, and all defenses on the
ground of extension of time for payment hereof, and agree to continue and remain
bound for the payment of principal, interest and all other sums payable
hereunder, notwithstanding any change or changes by way of release, surrender,
exchange or substitution of any security for this Note or by way of any
extension or extensions of time for payment of principal or interest; and all
such parties waive all and every kind of notice of such change or changes and
agree that the same may be made without notice to or consent of any of them. The
rights and remedies of the holder as provided herein shall be cumulative and
concurrent and may be pursued singularly, successively or together at the sole
discretion of the holder, and may be exercised as often as occasion therefor
shall occur, and the failure to exercise any such right or remedy shall in no
event be construed as a waiver or release of the same.
Anything herein to the contrary notwithstanding, the obligations of the
Borrower under this Note shall be subject to the limitation that payments of
interest to the Lender shall not be required to the extent that receipt of any
such payment by the Lender would be contrary to provisions of law applicable to
the Lender (if any) which limit the maximum rate of interest which may be
charged or collected by the Lender; provided, however, that nothing herein shall
be construed to limit the Lender to presently existing maximum rates of
interest, if an increased interest rate is hereafter permitted by reason of
applicable federal or state legislation. In the event that the Borrower makes
any payment of interest, fees or other charges, however denominated, pursuant to
this Note, which payment results in the interest paid to the Lender to exceed
the maximum rate of interest permitted by applicable law, any excess over such
maximum shall be applied in reduction of the principal balance owed to the
Lender as of the date of such payment, or if such excess exceeds the amount of
principal owed to the Lender as of the date of such payment, the difference
shall be paid by the Lender to the Borrower.
IV-45
<PAGE> 124
THE BORROWER HEREBY, AND THE LENDER BY ITS ACCEPTANCE OF THIS NOTE,
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT EITHER MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS NOTE AND ANY AGREEMENT CONTEMPLATED TO BE
EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OR EITHER PARTY. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDER MAKING THE LOAN EVIDENCED BY
THIS NOTE.
This Note shall be governed by and construed in accordance with the
internal laws of the State of New York.
IN WITNESS WHEREOF, the Borrower has caused this Note to be executed on
this December 12 day of 1996.
CLEAN ROOM PRODUCTS, INC.
By: /s/ Paul Gerber
------------------
Name: Paul Gerber
Title: President
IV-46
<PAGE> 125
EXHIBIT 21.1
List of Subsidiaries
--------------------
CRP Acquisition Corp.
IV-47
<PAGE> 126
FINANCIAL DATA SCHEDULE
IV-48
<PAGE> 127
[ARTICLE] 5
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S AUDITED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1996 AND
1995.
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] DEC-31-1996
[PERIOD-START] JAN-01-1996
[PERIOD-END] DEC-31-1996
[CASH] 518,645
[SECURITIES] 0
[RECEIVABLES] 0
[ALLOWANCES] 0
[INVENTORY] 0
[CURRENT-ASSETS] 875,645
[PP&E] 0
[DEPRECIATION] 0
[TOTAL-ASSETS] 875,645
[CURRENT-LIABILITIES] 84,887
[BONDS] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 1,125
[OTHER-SE] 789,633
[TOTAL-LIABILITY-AND-EQUITY] 875,645
[SALES] 0
[TOTAL-REVENUES] 36,637
[CGS] 0
[TOTAL-COSTS] 0
[OTHER-EXPENSES] 423,684
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 0
[INCOME-PRETAX] (231,423)
[INCOME-TAX] 0
[INCOME-CONTINUING] (231,423)
[DISCONTINUED] 0
[EXTRAORDINARY] 278,026
[CHANGES] 0
[NET-INCOME] 46,603
[EPS-PRIMARY] .04
[EPS-DILUTED] .04
</TABLE>
IV-49
<PAGE> 128
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM 10-KSB/A
ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
COMMISSION FILE NUMBER 0-16631
BOCA RATON CAPITAL CORPORATION
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
FLORIDA 59-2763089
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION) IDENTIFICATION NO.)
6516 VIA ROSA, BOCA RATON, FL 33433
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE: (561) 750-2252
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE EXCHANGE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE EXCHANGE ACT:
COMMON STOCK, $.001 PAR VALUE
CHECK WHETHER THE ISSUER (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY
SECTION 13 OR 15(D) OF THE EXCHANGE ACT DURING THE PAST 12 MONTHS (OR FOR SUCH
SHORTER PERIOD THAT THE ISSUER WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS
BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO
CHECK IF THERE IS NO DISCLOSURE OF DELINQUENT FILERS IN RESPONSE TO ITEM
405 OF REGULATION S-B CONTAINED IN THIS FORM, AND NO DISCLOSURE WILL BE
CONTAINED, TO THE BEST OF THE ISSUER'S KNOWLEDGE, IN DEFINITIVE PROXY OR
INFORMATION STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-KSB
OR ANY AMENDMENT TO THIS FORM 10-KSB. [ X ]
THE ISSUER'S REVENUES FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996 WERE
APPROXIMATELY $192,200 WHICH CONSISTED OF APPROXIMATELY $36,600 IN TOTAL
INVESTMENT INCOME AND APPROXIMATELY $155,600 IN NET UNREALIZED AND REALIZED GAIN
ON INVESTMENTS.
THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NON-AFFILIATES OF
THE ISSUER AS OF MARCH 24, 1997 (COMPUTED BY REFERENCE TO THE AVERAGE BID AND
ASKED PRICES OF ISSUER'S COMMON STOCK REPORTED ON THE OTC ELECTRONIC BULLETIN
BOARD ON SUCH DATE) WAS $771,435. DIRECTORS AND OFFICERS AND TEN PERCENT OR
GREATER SHAREHOLDERS ARE CONSIDERED AFFILIATES FOR PURPOSES OF THIS CALCULATION
BUT SHOULD NOT NECESSARILY BE DEEMED AFFILIATES FOR ANY OTHER PURPOSE.
THE NUMBER OF SHARES OUTSTANDING OF ISSUER'S COMMON STOCK AS OF MARCH 24,
1997 WAS 1,125,270.
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE): YES__ NO X
================================================================================
IV-50
<PAGE> 129
INDEX
<TABLE>
<CAPTION>
Page
PART II
<S> <C>
ITEM 7 - FINANCIAL STATEMENTS.......................................................................... 1
</TABLE>
IV-51
<PAGE> 130
ITEM 7 - FINANCIAL STATEMENTS
The financial statements required by this Item, the accompanying notes
thereto and the report of independent accountants are included as part of this
Form 10-KSB/A and immediately follow the signature page of this Form 10-KSB/A.
IV-52
<PAGE> 131
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this Report has been signed below by the following persons on behalf of
the Registrant and in the capacities indicated on August 27, 1997.
Signatures Title
---------- -----
/s/Alan L. Jacobs President, Chief Executive Officer
- ----------------------------- and Director (Chief Executive Officer)
Alan L. Jacobs
/s/Alan L. Jacobs* Chief Financial Officer,
- ---------------------------- Secretary and Treasurer (Principal
Franklyn B. Weichselbaum Financial and Accounting Officer)
/s/Alan L. Jacobs* Director
- ----------------------------
Robert H. Arnold
/s/Alan L. Jacobs* Director
- ----------------------------
Ronald L. Miller
/s/Alan L. Jacobs* Director
- ----------------------------
C. Lawrence Rutstein
/s/Alan L. Jacobs* Director
- ----------------------------
Alan H. Weingarten
* Pursuant to a Power of Attorney incorporated herein by reference to Exhibit
24.1 of the Registrant's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1996.
IV-53
<PAGE> 132
BOCA RATON CAPITAL CORPORATION AND SUBSIDIARIES
REPORT ON AUDITS OF FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
IV-54
<PAGE> 133
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Pages
<S> <C>
Report of Independent Accountants F-1
Consolidated Balance Sheet as of December 31, 1996 F-2
Consolidated Statements of Income for the Years Ended
December 31, 1996 and 1995 F-3
Consolidated Statements of Shareholders' Equity
for the Years Ended December 31, 1996 and 1995 F-4
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1996 and 1995 F-5
Notes to Consolidated Financial Statements F-6 - F-11
</TABLE>
IV-55
<PAGE> 134
[COOPERS & LYBRAND LOGO] [LETTERHEAD]
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and the
Board of Directors of Boca Raton Capital Corporation
We have audited the accompanying consolidated balance sheet of Boca Raton
Capital Corporation and Subsidiaries (the "Company") as of December 31, 1996
and the related consolidated statements of income, shareholders' equity, and
cash flows for each of the two years in the period then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Boca Raton
Capital Corporation and Subsidiaries as of December 31, 1996, and the results
of their operations and their cash flows for each of the two years in the
period then ended in conformity with generally accepted accounting principles.
[SIG]
COOPERS & LYBRAND L.L.P.
Miami, Florida
January 31, 1997, except for Note 9 and the last paragraph of Note 7, as to
which the date is July 30, 1997
IV-56
<PAGE> 135
BOCA RATON CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31, 1996
<TABLE>
<CAPTION>
1996
<S> <C>
ASSETS
Cash $ 518,645
Note receivable 350,000
Prepaid expenses 7,000
-----------
Total assets $ 875,645
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued expenses $ 84,887
-----------
Total liabilities 84,887
-----------
Shareholders' equity:
Common stock, $.001 par value; authorized 40,000,000
shares; 1,125,270 shares issued and outstanding 1,125
Additional paid-in capital 4,002,936
Accumulated deficit (3,213,303)
-----------
Total shareholders' equity 790,758
-----------
Total liabilities and shareholders' equity $ 875,645
===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
IV-57
<PAGE> 136
BOCA RATON CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
for the years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Investment income:
Interest $ 36,637 $ 126,781
Other 0 29,212
----------- -----------
Total investment income 36,637 155,993
----------- -----------
Operating expenses:
General and administrative 222,299 172,448
Professional fees 198,448 142,599
Interest 2,937 200,529
----------- -----------
Total operating expenses 423,684 515,576
----------- -----------
Operating loss (387,047) (359,583)
----------- -----------
Realized and unrealized gain (loss) on investments:
Net realized gain on investments 1,244,374 1,504,927
Net decrease in unrealized appreciation of investments (1,088,750) (792,896)
----------- -----------
Net realized and unrealized gain on investments 155,624 712,031
----------- -----------
Income (loss) before income taxes and extraordinary item (231,423) 352,448
Income tax expense 0 95,894
----------- -----------
Net income (loss) before extraordinary item (231,423) 256,554
Extraordinary item - gain on extinguishment of debt 278,026 0
----------- -----------
Net income $ 46,603 $ 256,554
=========== ===========
Income (loss) per share:
Income (loss) before extraordinary gain $ (0.21) $ 0.23
Extraordinary gain 0.25 0
----------- -----------
Net income $ 0.04 $ 0.23
=========== ===========
Weighted average number of shares outstanding 1,125,270 1,125,270
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
IV-58
<PAGE> 137
BOCA RATON CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
for the years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
Shares Par Paid-In Accumulated
Outstanding Value Capital Deficit Total
----------- ------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1994 1,125,270 $ 1,125 $ 6,534,795 $ (3,516,460) $ 3,019,460
Net income 0 0 0 256,554 256,554
--------- ------- ----------- ------------ -----------
Balance, December 31, 1995 1,125,270 1,125 6,534,795 (3,259,906) 3,276,014
Net income 0 0 0 46,603 46,603
Distribution to shareholders 0 0 (2,531,859) 0 (2,531,859)
--------- ------- ----------- ------------ -----------
Balance, December 31, 1996 1,125,270 $ 1,125 $ 4,002,936 $ (3,213,303) $ 790,758
========= ======= =========== ============ ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
IV-59
<PAGE> 138
BOCA RATON CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income $ 46,603 $ 256,554
Adjustments to reconcile net income to net cash used in
operating activities:
Decrease in unrealized appreciation of investments 1,088,750 792,896
Gain on sale of investment (1,244,374) (1,504,927)
Extraordinary gain on extinguishment of debt (278,026) 0
Interest accrued but not paid on defaulted note 0 200,529
Increase in other assets (7,000) 0
Decrease in accounts payable and accrued expenses (40,337) 0
----------- -----------
Net cash used in operating activities (435,384) (458,839)
----------- -----------
Cash flows from investing activities:
Proceeds from sale of investment 1,245,000 1,505,469
Proceeds from note receivable 0 522,514
Issuance of notes receivable (350,000) 0
----------- -----------
Net cash provided by investing activities 895,000 2,027,983
----------- -----------
Cash flows from financing activities:
Distribution to shareholders (2,531,859) 0
Payments of notes payable (310,000) 0
----------- -----------
Net cash used in financing activities (2,841,859) 0
----------- -----------
Net increase (decrease) in cash (2,382,243) 1,569,144
Cash, beginning of year 2,900,888 1,331,744
----------- -----------
Cash, end of year $ 518,645 $ 2,900,888
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the year for income taxes $ 14,907 $ 39,087
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
IV-60
<PAGE> 139
BOCA RATON CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Business
Boca Raton Capital Corporation ("BRCC") was a non-diversified,
closed-end investment company, which had elected and was granted the
status as a Business Development Company ("BDC") under the Investment
Company Act of 1940 (the "1940 Act"). During 1995, BRCC's Board of
Directors were of the opinion that the shareholders return on assets
was not sufficient to continue operations as a BDC. As such, BRCC's
election to withdraw from its status as a BDC was filed with the
Securities and Exchange Commission and became effective as of December
22, 1995. No material impact to the financial statements resulted
from BRCC's change in status.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of BRCC and
its wholly-owned subsidiaries (collectively the "Company"). All
material intercompany balances and transactions have been eliminated
in consolidation.
VALUATION OF PORTFOLIO INVESTMENTS
The Company follows Statement of Financial Accounting Standards
("SFAS") No. 115, "Accounting for Certain Investments in Debt and
Equity Securities". Under SFAS No. 115, investments are classified as
either held to maturity, trading or available for sale depending upon
whether the investment is a debt or equity security and management's
intent with regards to the investment. The Company's investment in
RailAmerica was classified as trading which called for the investment
to be carried at fair value and changes in market value be credited or
charged to income. Investments for which market quotations are
readily available are valued at market. In the absence of market
quotations, investments are valued at their fair value as determined
in good faith by the Board of Directors. Due to the inherent
uncertainty of this valuation, these estimates may differ
significantly from the values that would have been used had a ready
market for the investments existed.
NET INCOME PER COMMON SHARE
Net income per common share is computed using the weighted average
number of common shares outstanding during each year.
Statement of Financial Accounting Standards ("SFAS") No. 128,
"Earnings per Share", establishes standards for computing and
presenting earnings per share and must be implemented by BRCC for both
interim and annual periods ending after December 31, 1997. This
pronouncement is not expected to have a material impact on the
financial statements of the Company.
IV-61
<PAGE> 140
BOCA RATON CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates, particularly with respect to the fair value
determination of investments, and the differences could be material.
2. PORTFOLIO INVESTMENTS:
During 1996, the Company sold its 375,000 shares of RailAmerica, Inc.
common stock, which represented its total investment as of December
31, 1995, and received net proceeds of $1,245,000. The Company
recorded a net realized gain of $155,624 during the year ended
December 31, 1996 as a result of this sale.
3. DEFAULTED NOTE PAYABLE AND ACCRUED INTEREST:
The Company had a note payable to a financial institution which was
taken over by regulatory authorities. At the time of the takeover,
the Company had suspended payments on this note in an effort to
negotiate extensions, refinance the obligation or reach a settlement.
The Company had adjusted the cumulative interest accrued on the note
to reflect the default rate of 18% in 1995. In 1996, a full
settlement was reached in the matter which consisted of payment of
principal of $310,000 and a release from all obligation. The
favorable settlement in this matter has been reflected as an
extraordinary item resulting from extinguishment of debt in the amount
of $278,026.
4. INCOME TAXES:
The Company accounts for income taxes pursuant to the provisions of
SFAS No. 109, "Accounting for Income Taxes". SFAS No. 109 requires
recognition of deferred tax liabilities and assets for the expected
future tax consequences of events that have been included in the
financial statements or tax returns. Under this method, deferred tax
liabilities and assets are determined based on the difference between
the financial statement and tax basis of assets and liabilities using
enacted tax rates in effect for the year in which the differences are
expected to reverse.
IV-62
<PAGE> 141
BOCA RATON CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
4. INCOME TAXES, CONTINUED:
The provision for income taxes for 1996 and 1995 is summarized as
follows:
<TABLE>
<CAPTION>
1996 1995
------ --------
<S> <C> <C>
Current:
Federal $ 0 $ 62,945
State 0 32,949
------ --------
0 95,894
------ --------
Deferred:
Federal 0 0
State 0 0
------ --------
0 0
------ --------
Total provision $ 0 $ 95,894
====== ========
</TABLE>
The significant components of the net deferred tax assets as of
December 31, 1996, are as follows:
<TABLE>
<S> <C>
Deferred tax assets:
Net operating loss carryforward $ 885,127
Other 98,132
Valuation allowance (983,259)
---------
Net deferred tax assets $ 0
=========
</TABLE>
SFAS No. 109 requires a valuation allowance against deferred tax
assets if, based on the weight of available evidence, it is more
likely than not that some or all of the deferred tax assets will not
be realized. At December 31, 1996, the Company has established a 100%
valuation allowance against net deferred tax assets.
For income tax purposes, the Company had a change in ownership during
1993 in connection with a private placement offering. The change in
ownership resulted in an annual limitation on the amount of pre-change
ownership net operating loss carryforwards which can be utilized to
offset the Company's future taxable income. The annual limitation is
approximately $128,000 and will be increased by the Company's
pre-change built in gains when recognized.
IV-63
<PAGE> 142
BOCA RATON CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
4. INCOME TAXES, CONTINUED:
As of December 31, 1996, the Company has available for federal income
tax reporting purposes pre-change net operating losses of
approximately $1,900,000 and post-change net operating losses of
approximately $381,000. These net operating loss carryforwards expire
in the years 1998 through 2008. Should the proposed merger discussed
in Note 7 occur, utilization of those net operating loss carryforwards
could be further limited.
RATE RECONCILIATION
A reconciliation of the difference between actual income tax expense
and income taxes computed at the federal statutory tax rate is as
follows:
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Federal statutory rate 34.00 % 34.00 %
State rate net of federal benefit 3.63 % 3.63 %
Benefit of NOL with prior period valuation allowance (37.63)% (10.42)%
------ ------
0.00 % 27.21 %
====== ======
</TABLE>
5. CONCENTRATION OF CREDIT RISK:
Financial instruments, which potentially subject the Company to
concentration of credit risk, consist primarily of cash and note
receivable. The Company maintains a majority of its cash with
financial institutions that management considers to have a high credit
standing. At times, such amounts may be in excess of the FDIC insured
limits. The Company has a note receivable in the amount of $350,000
(See Note 7) with a single counterparty. The Company did not require
the counterparty to provide collateral for the note; however, the
principal and accrued interest thereon has been individually
guaranteed by each of the three counterparty shareholders and their
respective spouses. The Company, however, does not anticipate
nonperformance by the counterparty.
6. RELATED PARTY TRANSACTIONS:
The Company and Josephthal were parties to a financial consulting
agreement through March 1995 for which the Company paid Josephthal
Lyon & Ross Incorporated ("Josephthal") $3,000 a month in consulting
fees for services provided by Mr. Alan Jacobs, President and Chief
Executive Officer of the Company. Until January 1, 1996, Mr. Jacobs
was an employee of Josephthal. In March 1995, the consulting agreement
was terminated. Beginning in April 1995 and through December 31,
1995, the Company agreed to pay Mr. Jacobs $3,000 a month in
consulting fees directly. Starting in 1996, the monthly consulting
fee was increased to $5,000 per month.
IV-64
<PAGE> 143
BOCA RATON CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
6. RELATED PARTY TRANSACTIONS, CONTINUED:
Pursuant to a consulting agreement, the Company paid Mr. Franklyn
Weichselbaum, as the Treasurer and Chief Financial Officer of the
Company, $2,200 per month in consulting fees. Starting in 1996, the
monthly consulting fee was increased to $3,500 per month.
On January 11, 1996, the Board of Directors approved the payment of a
retainer to each director of the Company of $10,000 for services to be
rendered as a director during 1996 and granted 10,000 options to each
of the four independent directors and to its two officers. This
retainer is in addition to the normal recurring fees received of
$1,500 per director per meeting attended. Each option entitles the
holder, for a period of four years commencing on April 15, 1996, to
purchase shares of the Company's common stock at an initial exercise
price of $3.00 per share. The exercise price exceeded the market
price per share and the book value per share of the Company's common
stock on the date of grant. The exercise price was subsequently
adjusted to $0.75 per share to reflect the special cash distribution
of $2.25 per share of common stock (See Note 8).
General and administrative expenses for 1996 are substantially
comprised of directors' fees and related expenses and consulting fees
paid to the officers.
7. PROPOSED MERGER:
In 1996, the Company entered into an agreement to merge CRP
Acquisition Corporation ("CRP"), its wholly-owned subsidiary, with and
into Clean Room Products, Inc., a New York corporation. The proposed
merger is subject to, among other things, the satisfactory completion
by the Company of a legal and business review of Clean Room Products,
Inc., and approval by the shareholders of the Company. CRP designs
and constructs clean rooms and associated products for the
semiconductor, pharmaceutical, biotechnology, medical device and other
industries. In addition, CRP's film division produces UltracleanTM
packaging materials for these industries. If the proposed merger is
consummated, Clean Room Products, Inc. will become a wholly-owned
subsidiary.
In connection with the proposed merger, on December 12, 1996, the
Company extended a loan to CRP. The loan was in the original
principal amount of $350,000 with an interest rate equal to the prime
rate, plus one percent (1%) per annum. The principal and the accrued
interest, thereon, is due and payable on April 30, 1997. Each of the
three CRP shareholders and their respective spouses have guaranteed
repayment of this note.
As of July 30, 1997, CRP has not repaid the loan.
8. SPECIAL CASH DISTRIBUTIONS:
On January 11, 1996, the Board of Directors approved a special cash
distribution of $2.25 per share to the shareholders of record on
January 11, 1996. The special cash distribution was approved by the
Company's shareholders at a special meeting held on February 29, 1996
and the special cash distribution was paid on March 11, 1996.
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<PAGE> 144
BOCA RATON CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
9. SUBSEQUENT EVENT:
In June 1997, Weitzer Homebuilders Incorporated and Harry Weitzer
commenced an action against the Company for unspecified damages in
connection with a failed merger alleging breach of an agreement and
plan of merger, fraudulent inducement, and fraudulent and negligent
misrepresentation. The Company is vigorously defending its rights
against any alleged wrongdoing. The Company is unable to estimate the
potential loss, if any, that may result from this matter.
IV-66
<PAGE> 145
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
Commission File Number 0-16631
BOCA RATON CAPITAL CORPORATION
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
FLORIDA 59-2763089
-----------------------------------------------------------------
(State or other jurisdiction of (IRS Employer I.D. No.)
incorporation or organization)
6516 Via Rosa, Boca Raton, FL 33433
--------------------------------------------
(Address of principal executive offices)
(561) 750-2252
-----------------------------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes |X| No |_|
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 1,125,270 shares as of August 11,
1997.
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<PAGE> 146
BOCA RATON CAPITAL CORPORATION AND SUBSIDIARIES
INDEX TO FORM 10-QSB
QUARTER ENDED JUNE 30, 1997
PART I FINANCIAL INFORMATION Page No.
--------
Item 1 Financial Statements
Consolidated Balance Sheets - 3
June 30, 1997 and December 31, 1996
Consolidated Statements of Operations -
Three and Six Months Ended June 30, 1997 and 1996 4
Consolidated Statements of Cash Flows -
Six Months Ended June 30, 1997 and 1996 5
Notes to Consolidated Financial Statements - 6
Item 2 Management's Discussion and Analysis - 7
PART II OTHER INFORMATION
Item 1 Legal Proceedings 8
Item 4 Submission of Matters to a Vote of Security Holders 9
Item 5 Other Information 9
Item 6 Exhibits and Reports on Form 8-K 9
Signatures 11
Exhibit Index 12
IV-68
<PAGE> 147
BOCA RATON CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, 1997 and December 31, 1996
<TABLE>
<CAPTION>
ASSETS 1997 1996
----------- -----------
(Unaudited) *
<S> <C> <C>
Cash $ 301,171 $ 518,645
Note receivable 366,000 350,000
Prepaid expenses 28,000 7,000
----------- -----------
Total assets $ 695,171 $ 875,645
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued expenses $ 90,837 $ 84,887
----------- -----------
Total liabilities 90,837 84,887
----------- -----------
Stockholders' equity:
Common stock, $.001 par value; authorized 40,000,000
shares; issued and outstanding, 1,125,270 shares
at June 30, 1997 and December 31, 1996, respectively 1,125 1,125
Additional paid-in capital 4,002,936 4,002,936
Accumulated deficit (3,399,727) (3,213,303)
----------- -----------
Total stockholders' equity 604,334 790,758
----------- -----------
Total liabilities and stockholders' equity $ 695,171 $ 875,645
=========== ===========
</TABLE>
*From audited financial statements
See accompanying notes to consolidated financial statements.
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BOCA RATON CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
for the six and three months ended June 30, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
Six months ended June 30, Three months ended June 30,
------------------------- -------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Investment income:
Interest income $ 19,912 $ 27,503 $ 9,589 $ 2,460
----------- ----------- ----------- -----------
Total Investment income: 19,912 27,503 9,589 2,460
----------- ----------- ----------- -----------
Operating expenses:
General and administrative 107,381 151,671 45,653 31,181
Legal 95,505 28,804 60,645 --
Audit and tax 3,450 12,375 1,135 3,775
Interest -- 2,937 -- (13,650)
----------- ----------- ----------- -----------
Total operating expenses 206,336 195,787 107,433 21,306
----------- ----------- ----------- -----------
Operating loss (186,424) (168,284) (97,844) (18,846)
Realized and unrealized gain (loss) on investments:
Net realized gain on investments -- 1,244,374 -- 1,244,374
Net decrease in unrealized appreciation of investments -- (1,088,750) -- (1,088,750)
----------- ----------- ----------- -----------
Net realized and unrealized gain on investments -- 155,624 -- 155,624
----------- ----------- ----------- -----------
Income (loss) before extraordinary item (186,424) (12,660) (97,844) 136,778
Extraordinary item - gain on extinguishment of debt -- 278,026 -- 278,026
----------- ----------- ----------- -----------
Net income (loss) $ (186,424) $ 265,366 $ (97,844) 414,804
=========== =========== =========== ===========
Income (loss) per share:
Income (loss) before extraordinary gain $ (0.17) $ (0.01) $ (0.09) $ 0.12
Extraordinary gain -- 0.25 -- 0.25
----------- ----------- ----------- -----------
Net income (loss) $ (0.17) $ 0.24 $ (0.09) $ 0.37
=========== =========== =========== ===========
Weighted average number of shares 1,125,270 1,125,270 1,125,270 1,125,270
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
IV-70
<PAGE> 149
BOCA RATON CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the six months ended June 30, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (186,424) $ 265,366
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating activities:
Decrease in unrealized appreciation of investments 1,088,750
Increase in note receivable (16,000) --
Gain on sale of investment -- (1,244,374)
Extraordinary gain on extinguishment of debt -- (278,026)
Increase in prepaid expenses (21,000) (28,000)
Increase (decrease) in accounts payable
and accrued expenses 5,950 (68,783)
----------- -----------
Net cash provided by (used in) operating activities (217,474) (265,067)
----------- -----------
Cash flows from investing activities:
Proceeds from sale of investment -- 1,245,000
----------- -----------
Net cash provided by (used in) investing activities -- 1,245,000
----------- -----------
Cash flows from financing activities:
Principal payments on notes payable -- (310,000)
Payment of special cash distribution on common stock -- (2,531,858)
----------- -----------
Net cash provided by (used in) financing activities -- (2,841,858)
----------- -----------
Net decrease in cash (217,474) (1,861,925)
Cash, beginning of period 518,645 2,900,888
----------- -----------
Cash, end of period $ 301,171 $ 1,038,963
=========== ===========
Supplemental disclosures of cash flow information
Cash paid during the year for interest $ -- $ 2,937
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
IV-71
<PAGE> 150
BOCA RATON CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1: BASIS OF PRESENTATION
The consolidated financial statements of Boca Raton Capital Corporation
and Subsidiaries (the Company) included herein have been prepared by the
Company, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations.
In the opinion of management, the consolidated financial statements
contain all adjustments which are of a recurring nature, and disclosures
necessary to present fairly the consolidated balance sheets of the Company as of
June 30, 1997 and December 31, 1996, the related consolidated statements of
operations for the six and three months ended June 30, 1997 and 1996 and the
consolidated statements of cash flows for the six months ended June 30, 1997 and
1996
NOTE 2: INCOME TAXES
For income tax purposes, the Company had a change in ownership during
1993 in connection with a private placement offering. The change in ownership
resulted in an annual limitation on the amount of pre-change ownership net
operating loss carryfowards which can be utilized to offset the Company's
future taxable income. The annual limitation is approximately $128,000 and will
be increased by the Company's pre-change built in gains when recognized. As of
December 31, 1996, the Company has available for federal income tax reporting
purposes pre-change net operating losses of approximately $1,900,000 and
post-change net operating losses of approximately $381,000. These net operating
loss carryforwards expire in the years 1998 through 2008. Should the Proposed
Merger (as defined below) occur, utilization of those net operating loss
carryfowards would be further limited.
IV-72
<PAGE> 151
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
The Company reported net income (loss) of $(186,424) and $265,366 for
the six months ended June 30, 1997 and 1996, respectively. The net loss in the
six months ended June 30, 1997 consisted of investment income of $19,912 less
operating expenses of $206,336. Included in the net income for the six months
ended June 30, 1996 was a net unrealized and realized gain of $155,624. The
balance of net income (loss) consisted of investment income of $27,503 less
operating expenses of $195,787 for the six months ended June 30,1996, and an
extraordinary gain of $278,026 resulting from the extinguishment of debt in the
six months ended June 30, 1996.
Total investment income of $19,912 for the six months ended June 30,
1997 consisted of interest income. This is compared to total investment income
of $27,503 for the six months ended June 30, 1996 which consisted of interest
income. The decrease in interest income is a result of the decrease in the
Company's assets due to the payment of operating expenses and the special cash
distribution made in March of 1996.
Operating expenses for the six months ended June 30, 1997 consisted of
general and administrative expenses of $107,381 and professional fees of
$98,955. Such expenses for the comparable period of 1996 consisted of general
and administrative expenses of $151,671, professional fees of $41,179 and
interest expense of $2,937. The decrease of $44,290 in general and
administrative expenses was primarily a result of the payment in January 1996 of
an annual retainer fee for 1996 of $10,000 per director ($50,000 in the
aggregate), and costs related to a special meeting of shareholders held in
February 1996. The increase on professional fees is due to the Proposed Merger
with Clean Room Products, Inc.
The Company reported a net income (loss) of $(97,844) and $414,804 for
the three months ended June 30, 1997 and 1996, respectively. The net loss
consisted of investment income of $9,589 and $2,460 less operating expenses of
$107,433 and $21,306 for the three months ended June 30, 1997 and 1996,
respectively. In addition, the Company had an extraordinary gain of $278,026
resulting from the extinguishment of debt in the three months ended June 30,
1996.
Total investment income of $9,589 for the three months ended June 30,
1997 consisted of interest income. This is compared to total investment income
of $2,460 for the three months ended June 30, 1996 which consisted of interest
income.
IV-73
<PAGE> 152
Operating expenses for the three months ended June 30, 1997 consisted
of general and administrative expenses of $45,653 and professional fees of
$61,780. Such expenses for the comparable period of 1996 consisted of general
and administrative expenses of $31,181, professional fees of $3,775 and interest
expense of $(13,650). The increase of $14,472 in general and administrative
expenses and the increase on professional fees of $58,005 are primarily due to
the Proposed Merger with Clean Room Products, Inc. The decrease in interest
expense was related to the debt extinguishment.
Liquidity and Capital Resources
The Company has $301,171 in cash and total liabilities of $90,838 at
June 30, 1997. The Company has no liabilities due longer than twelve months.
The Company has no sources of cash flow at present apart from interest
income. The Company has minimal current operating expenses.
At June 30, 1997 the Company did not maintain lines of credit, and none
are anticipated.
If the Proposed Merger, as discussed below, is not consummated the
Company's current resources will be insufficient to meet the Company's
obligations for the next 12 months. As a result , the Company would be forced to
cease its operations.
PART II
ITEM 1 - LEGAL PROCEEDINGS
On June 30, 1994, BRCC entered into an Agreement and Plan of Merger (
"Weitzer Agreement") with Weitzer Homebuilders Incorporated ("WHB"), WHB Merger
Sub, Inc. ("Sub"), Harry Weitzer and certain corporations controlled by Harry
Weitzer (collectively, the "Weitzer Entities"). The Weitzer Entities terminated
the proposed merger ("Failed Merger") on December 23, 1994. In June 1997, WHB
and Harry Weitzer (collectively , the Weitzer Plaintiffs") commenced an action
in the Circuit Court of the Fifteenth Judicial Circuit in and for Palm Beach
County, Florida, against BRCC for breach of the Weitzer Agreement, fraudulent
inducement and fraudulent and negligent misrepresentation in connection with the
Failed Merger. The Weitzer Plaintiffs alleged unspecified damages in this
action. BRCC is vigorously defending its rights against the alleged claims.
IV-74
<PAGE> 153
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the six
months ended June 30, 1997.
ITEM 5 - OTHER INFORMATION
On December 12, 1996, the Company entered into an Agreement and Plan of
Merger and Reorganization (the "Merger Agreement") with CRP Acquisition Corp., a
New York corporation and wholly-owned subsidiary of the Company ("Merger Sub"),
and Clean Room Products, Inc., a New York Corporation ("CRP"). The Merger
Agreement was subsequently amended by the parties thereto as of March 26, 1997.
Subject to the terms and conditions of the Merger Agreement, as amended, Merger
Sub shall be merged with and into CRP (the "Proposed Merger"). The Proposed
Merger is subject to the satisfaction or waiver (if permissible) of certain
conditions, including, but not limited to, the approval of the Company's
shareholders. The Company intends to submit the Proposed Merger to the vote of
the Company's shareholders at a special meeting of shareholders as soon as
practicable. CRP designs and constructs clean rooms and associated products for
the semiconductor, pharmaceutical. biotechnology, medical device and other
industries. In addition, CRP's film division produces Ultraclean packaging
materials for these industries.
In connection with the Proposed Merger, On December 12 ,1996, the
Company extended a loan (the "CRP Loan") to CRP. The CRP Loan was in the
original principal amount of $350,000 with an interest rate equal to the prime
rate of Citibank N.A. plus one percent (1%) per annum. The principal, and the
accrued interest thereon, of the CPR Loan was due and payable on April 30, 1997.
Each of the three shareholders of CPR and their respective spouses have
individually guaranteed the repayment of the principal, and accrued interest
thereon, of the CRP Loan. As of August 11, 1997, the CPR Loan has not been
repaid.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
The following exhibits are filed herewith:
2.1 Amended and Restated Agreement and Plan of Merger and Reorganization, dated
as of March 26, 1997, by and among the registrant, CPR Acquisition Corp. and
Clean Room Products, Inc.; incorporated by reference to Exhibit 2.1 of the
Company's Annual Report on Form 10-KSB for the fiscal year ended December 31,
1996 (the "1996 10-K").
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<PAGE> 154
3.1 Amended and Restated Articles of Incorporation of the registrant;
incorporated by reference to Exhibit 28.0 of the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1989 (the "1989 10-K").
3.9 Amended Bylaws of the registrant, as amended January 6, 1995; incorporated
by reference to Exhibit 3.9 of the Company's Annual Report on Form 10-KSB for
the fiscal year ended December 31, 1994 (the "1994 10-KSB").
27.6 Financial Data Schedule for the six months ended June 30, 1997.
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<PAGE> 155
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: August 11, 1997 /s/ Alan L. Jacobs
-----------------------------------
Alan L. Jacobs, President
(Principal Executive Officer)
Date: August 11, 1997 /s/ Franklyn B. Weichselbaum
-----------------------------------
Franklyn B. Weichselbaum
Chief Financial Officer & Treasurer
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<PAGE> 156
EXHIBIT INDEX
27.6 Financial Data Schedule for the six months ended June 30, 1997.
IV-78
<PAGE> 157
APPENDIX V
AMENDED AND RESTATED
AGREEMENT AND PLAN
OF
MERGER AND REORGANIZATION
by and among
BOCA RATON CAPITAL CORP.,
CRP ACQUISITION CORP.
and
CLEAN ROOM PRODUCTS, INC.,
As of March 26, 1997
V-1
<PAGE> 158
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
("Agreement") dated as of March 26, 1997, between Boca Raton Capital Corp., a
Florida corporation ("Boca"), CRP Acquisition Corp., a New York corporation and
a wholly-owned subsidiary of Boca ("Sub"), and Clean Room Products, Inc., a New
York corporation ("CRP").
RECITALS
1. Each of Boca, Sub and CRP are parties to that certain
Agreement and Plan of Merger and Reorganization (the "Prior Agreement") dated as
of December 12, 1996, and, hereby desire to make certain amendments to the Prior
Agreement and to restate the Prior Agreement together with such amendments in
this Agreement.
2. Upon the terms and subject to the conditions of this Agreement
and in accordance with the Business Corporation Law of the State of New York
("New York Law"), Sub and CRP will enter into a business combination transaction
pursuant to which Sub will merge with and into CRP (the "Merger").
3. The board of directors of CRP has determined that the Merger
is consistent with and in furtherance of the long-term business strategy of CRP
and is fair to, and in the best interests of, CRP and its shareholders (the "CRP
Shareholders") and has approved and adopted this Agreement and has approved the
Merger and the other transactions contemplated hereby and recommended approval
and adoption of this Agreement and approval of the Merger by the CRP
Shareholders.
V-2
<PAGE> 159
4. The respective boards of directors of Boca and Sub have
determined that the Merger is consistent with and in furtherance of the
long-term business strategy of such companies and is fair to, and in the best
interests of, such companies and their shareholders, and has approved and
adopted this Agreement and has approved the Merger and the other transactions
contemplated hereby, subject to the conditions herein, and has agreed to
recommend approval and adoption of this Agreement and approval of the Merger by
the shareholders of Boca (the "Boca Shareholders").
5. For federal income tax purposes, it is intended that the
Merger qualify as a reorganization under the provisions of Section 368(a) of the
United States Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements herein contained, the
parties hereto agree as follows:
1
THE MERGER
1.1 Merger. Subject to the terms and conditions hereof, at the
Effective Time (as defined in Section 1.3 hereof), Sub shall be merged with and
into CRP in accordance with New York Law. As a result of the Merger, the
separate existence of Sub will cease and CRP, as the surviving corporation of
the Merger (the "Surviving Corporation") shall, by virtue of the Merger,
continue in existence under New York Law as a wholly-owned subsidiary of Boca.
1.2 Closing. Unless this Agreement shall have been terminated and the
transactions
V-3
<PAGE> 160
herein contemplated shall have been abandoned pursuant to Section 9.1 and
subject to the satisfaction or waiver, if permissible, of the conditions set
forth in Article 8, the consummation of the Merger will take place as promptly
as practicable (and in any event within two business days) after satisfaction
or, if permissible, waiver of the conditions set forth in Article 8 at the
offices of Rivkin, Radler & Kremer, EAB Plaza, Uniondale, New York 11556, unless
another date, time or place is agreed to in writing by the parties hereto (the
"Closing").
1.3 Effective Time. As promptly as practicable after the satisfaction
or, if permissible, waiver of the conditions set forth in Article 8, the parties
hereto shall cause the Merger to be consummated by filing a certificate of
merger (the "Certificate of Merger") with the Secretary of State of the State of
New York in such form as required by and executed in accordance with the
relevant provisions of New York Law (the date and time of the later of such
filings, or such later date or times as set forth therein, being the "Effective
Time").
2
ARTICLES OF INCORPORATION, BY-LAWS,
DIRECTORS AND OFFICERS
2.1 Articles and By-Laws. The certificate of incorporation and by-laws
of CRP in effect at the Effective Time shall be the certificate of incorporation
and by-laws of the Surviving Corporation.
2.2 Directors and Officers of Surviving Corporation. (a) The directors
of the Surviving Corporation and Boca from and after the Effective Time shall
consist of six (6) individuals:
V-4
<PAGE> 161
Charles A. Chenes; ("Chenes");
Paul Gerber ("Gerber");
Kenneth Gross ("Gross");
Edward Nassberg ("Nassberg");
and one (1) designee of Boca and one (1) designee of CRP who is
reasonably satisfactory to the board of directors of Boca.
(b) The officers of the surviving Corporation and Boca
from and after the Effective Time shall be as follows:
<TABLE>
<S> <C>
Charles A. Chenes Chief Executive Officer and President
Joseph Flynn Chief Financial Officer
Kenneth Gross Secretary and Treasurer
</TABLE>
2.3 Corporate Name. The name of the Surviving Corporation shall be
"Clean Room Products, Inc."
2.4 Certain Effects of the Merger. At the Effective Time, the separate
existence of Sub shall cease, and Sub shall be merged with and into CRP, which,
as the Surviving Corporation, shall thereupon and thereafter possess all the
rights, privileges, powers and franchises of a public as well as of a private
nature, and shall be subject to all the restrictions, disabilities and duties of
each of Sub and CRP. All the rights, privileges, powers and franchises of each
of Sub and CRP, and all property, real, personal and mixed, and all debts due to
either of Sub and CRP on whatever account, all contract rights and all other
interests due or belonging to each of Sub and CRP, shall be vested in the
Surviving Corporation. All property, rights, privileges, powers and franchises,
and all and every other interest, shall thereafter be as effectively the
property of the Surviving Corporation as they were of Sub and CRP and shall not
revert or be in any way impaired by reason of the Merger, but all rights of
creditors and all liens upon any property of
V-5
<PAGE> 162
either of Sub and CRP shall be preserved unimpaired, and all debts, liabilities
and duties of Sub and CRP shall thenceforth attach to the Surviving Corporation,
and may be enforced against it to the same extent as if said debts, liabilities
and duties had been incurred or contracted by the Surviving Corporation.
3
CONVERSION OF SHARES
3.1 Conversion of Shares. At the Effective Time, by virtue of the
Merger and without any further action:
(a) Each share of common stock, without par value, of CRP (the
"CRP Common Stock") issued and outstanding immediately prior to the
Effective Time owned by the CRP Shareholders shall be converted into
the right to receive the number of shares of common stock, $0.001 par
value, of Boca (the "Boca Common Stock") set forth in Section 3.1(d)
below (the "Exchange Ratio"); provided, however, that, in any event, if
between the date of this Agreement and the Effective Time the
outstanding shares of Boca Common Stock or CRP Common Stock shall have
been changed into a different number of shares or a different class, by
reason of any stock dividend, subdivision, reclassification,
recapitalization, split, combination, exchange of shares or otherwise,
the Exchange Ratio shall be correspondingly adjusted to reflect such
stock dividend, subdivision, reclassification, recapitalization, split,
combination or exchange of shares or other adjustment and provided
further, that such Exchange Ratio shall be adjusted to reflect any
issuance of Boca Common Stock or CRP Common Stock, if any, after the
date
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<PAGE> 163
of this Agreement and prior to the Effective Time. All such shares of
CRP Common Stock shall no longer be outstanding and shall automatically
be canceled and retired and shall cease to exist, and each certificate
previously evidencing any such shares shall thereafter represent the
right to receive, upon the surrender of such certificate in accordance
with the provisions of Section 3.2, certificates evidencing such number
of shares of Boca Common Stock into which such CRP Common Stock was
converted in accordance with the Exchange Ratio. The holders of such
certificates previously evidencing such shares of CRP Common Stock
outstanding immediately prior to the Effective Time shall cease to have
any rights with respect to such shares of CRP Common Stock except as
otherwise provided herein or by law.
(b) Each share of CRP Common Stock held in the treasury of CRP
immediately prior to the Effective Time shall automatically be canceled
and extinguished without any conversion thereof and no payment shall be
made with respect thereto.
(c) Each issued and outstanding share of the capital stock of
Sub shall be converted into and become one fully paid and nonassessable
share of Common Stock, par value $0.01 per share, of the Surviving
Corporation.
(d) The Exchange Ratio shall be 300,072 shares of Boca Common
Stock for each share of CRP Common Stock, unless the litigation between
CRP and Dan Purjes ("Purjes") described in Schedule 5.13 (the "Purjes
Litigation") is settled prior to the Effective Time, in which case the
Exchange Ratio shall be correspondingly adjusted to account for the
issuance of CRP Common Stock to Purjes as set forth in Schedule 5.3
hereto.
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3.2 Exchange of Certificates. At the Closing, Boca shall deliver to
each of the CRP Shareholders, in exchange for the CRP Shareholders' certificates
representing all of the issued and outstanding CRP Common Stock held by such
shareholder, certificates evidencing the shares of Boca Common Stock to which
such shareholder is entitled pursuant to Section 3.1(a) hereof.
4
EXCHANGE RATIO CONTINGENT ADJUSTMENT
4.1 Post-Closing Financing. For a period of six (6) months immediately
following the Effective Time (the "Escrow Period"), the Surviving Corporation
shall use its best efforts to seek and obtain commitments for long-term debt or
equity financing of the Surviving Corporation or Boca in an amount not less than
$1.5 million in net proceeds, in the aggregate (collectively, the "Financing").
4.2 Financing Escrow.
(a) At the Closing, the CRP Shareholders and, as the case may
be, Purjes shall place, or caused to be placed, in escrow pursuant to
an escrow agreement in the form of Exhibit A hereto (the "Escrow
Agreement"), certificates representing, in the aggregate, 1,875,750
shares of Boca Common Stock (the "Escrowed Shares").
(b) Each of the CRP Shareholders shall place, or cause to be
placed, into escrow 625,250 shares of Boca Common Stock, unless the
Purjes Litigation is settled prior to the Effective Time, in which case
the Escrowed Shares shall be placed, or caused to be placed, in escrow
by the CRP Shareholders and Purjes in the amounts set forth below:
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<TABLE>
<CAPTION>
<S> <C>
Gerber ................................................... 562,725 shares
Gross .................................................... 562,725 shares
Nassberg ................................................. 562,725 shares
Purjes ................................................... 187,575 shares
</TABLE>
4.3 Escrowed Shares.
(a) Concurrently with the closing of the Financing prior to
the expiration of the Escrow Period, the Escrowed Shares shall be
released from escrow and delivered to the CRP Shareholders and Purjes,
as the case may be, in accordance with the terms of the Escrow
Agreement.
(b) If the closing of the Financing has not occurred prior to
the expiration of the Escrow Period, the Escrowed Shares shall be
released from escrow and delivered to the Boca for cancellation in
accordance with the terms of the Escrow Agreement and shall be
considered authorized but unissued shares of Boca Common Stock.
4.4 Adjustment to Exchange Ratio. Except to the extent provided by law,
the parties hereto covenant and agree that each party shall treat any delivery
of the Escrowed Shares to the Surviving Corporation pursuant to Section 4.3(b)
hereof as an adjustment to the Exchange Ratio.
5
REPRESENTATIONS AND WARRANTIES OF CRP
CRP hereby represents and warrants to Boca and Sub as follows:
5.1 Organization. CRP is a corporation duly organized, validly existing
and in good standing under the laws of the State of New York and has all
requisite corporate power and authority to own, lease and operate its properties
and to carry on its business as now being
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conducted, except where the failure to be so organized, existing and in good
standing or to have such power and authority would not have a material adverse
effect on CRP. CRP is duly qualified or licensed to do business and in good
standing in each jurisdiction in which the property owned, leased or operated by
it, or the nature of the business conducted by it, makes such qualification or
licensing necessary, except where the failure to be so duly qualified or
licensed and in good standing would not, in the aggregate, have a material
adverse effect on CRP.
5.2 Subsidiaries. Except as set forth on Schedule 5.2, CRP has no
direct or indirect Subsidiaries (as hereinafter defined) and owns no capital
stock, other equity securities or similar equity investment, directly or
indirectly, in any person, corporation, association, partnership, joint venture,
trust or other entity. For purposes of this Agreement, the term "Subsidiary" or
"Subsidiaries" means any corporation of which the securities having a majority
of the ordinary voting power in electing the board of directors are, at the time
of such determination, owned by CRP or Boca, as the case may be.
5.3 Capitalization. The authorized capital stock of CRP consists of 200
shares of CRP Common Stock, of which 15 shares are issued and outstanding.
However, if the Purjes Litigation is settled prior to the Effective Time, shares
of CRP Common Stock shall be issued to Purjes in connection therewith, as set
forth in Schedule 5.3. All of the outstanding shares of CRP Common Stock are, or
will be when issued, duly authorized and validly issued, fully paid and
nonassessable. Other than the shares of CRP Common Stock owned by the CRP
Shareholders and, as the case may be, Purjes, listed on Schedule 5.3, no other
shares of capital stock of CRP are outstanding, and none of such shares was
issued in violation of any preemptive or preferential
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right. Except as set forth in Schedule 5.3, there are no outstanding
subscriptions, warrants, options or other commitments obligating CRP or the CRP
Shareholders to issue or dispose of any shares of CRP Common Stock or any other
of its equity or debt securities. Since June 30, 1996, neither CRP nor any of
the CRP Shareholders has (i) redeemed or acquired, nor is there any existing
agreement obligating CRP or the CRP Shareholders to redeem or acquire, any
shares of CRP Common Stock, or any other equity securities or any debt
securities of CRP, (ii) declared or paid any dividend, distribution or other
payment to shareholders (except for payment of salary and other benefits to CRP
Shareholders in the customary amounts) or (iii) authorized or effected any
split-up or recapitalization of CRP Common Stock.
5.4 Power and Authority. CRP has the requisite corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by CRP and the consummation by CRP of the Merger and of the other
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of CRP and no other corporate proceedings on the
part of CRP are necessary to authorize this Agreement or to consummate the
transactions so contemplated (other than, with respect to the Merger, the
approval and adoption of this Agreement by the holders of two-thirds of the then
outstanding shares of CRP Common Stock and the filing and recordation of
appropriate merger documents as required by New York Law). This Agreement has
been duly executed and delivered by CRP and is, assuming the due authorization,
execution and delivery hereof by Boca, enforceable in accordance with its terms,
except as may by limited by or subject to any bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally, and
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subject to general principles of equity.
5.5 Consents and Approvals; No Violation. Except as set forth on
Schedule 5.5, neither the execution, delivery and performance of this Agreement
by CRP nor the consummation of the transactions contemplated hereby will (i)
conflict with or result in any breach of any provisions of the certificate of
incorporation or by-laws of CRP, (ii) require any filing with, or permit,
authorization, consent or approval of, any court, arbitral tribunal,
administrative agency or commission or other governmental or other regulatory
authority or agency (a "Governmental Entity") except (A) for (x) applicable
requirements, if any, of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the Securities Act of 1933, as amended (the "Securities Act"),
state securities or "blue sky" laws and (y) filing and recordation of
appropriate merger documents as required by New York Law and (B) where the
failure to obtain such permits, authorizations, consents or approvals or to make
such filings would not have a material adverse effect on CRP, (iii) result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration) under any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, lease, license, contract, agreement or
other instrument or obligation to which CRP is a party or by which it or any of
its properties or assets may be bound or (iv) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to CRP, except, in
the case of clauses (iii) or (iv), for violations, breaches or defaults which
would not have a material adverse effect on CRP.
5.6 Financial Information. The (i) audited (A) balance sheets of the
company as at December 31, 1995 and 1994 (such balance sheet as at December 31,
1995 is sometimes referred
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to herein as the "Year-End Balance Sheet") and (B) statements of income, cash
flows and changes in shareholders' equity of CRP for each of the years ended
December 31, 1995, 1994 (each certified by Dalessio, Millner & Leben LLP) and
1993 (certified by BDO Seidman LLP), whose reports thereon are included therein
(together with the Year-End Balance Sheet, the "Audited Financial Statements"),
and (ii) unaudited (X) balance sheet of CRP as at June 30, 1996 (the "Interim
Balance Sheet"), and (Y) statements of income, cash flows and changes in
shareholders' equity of CRP for the six-month period then ended (together with
the Interim Balance Sheet, the "Interim Financial Statements"), have been
previously provided to Boca and Sub. Such balance sheets and the notes thereto
are true, complete and accurate and fairly present the assets, liabilities and
financial condition of CRP as of the respective dates thereof, and such
consolidated statements of income, cash flows and changes in shareholders'
equity and the notes thereto are true, complete and accurate and fairly present
the results of operation of CRP for the period therein referred to, all in
accordance with generally accepted accounting principles ("GAAP") consistently
applied throughout the periods involved, except, with respect to the Interim
Financial Statements, for certain normal and recurring adjustments that are only
made as of year end and which are not material.
5.7 No Undisclosed Liabilities. Except as set forth on Schedule 5.7, on
the date hereof, CRP does not have any liability or obligation of any nature,
whether fixed or contingent or otherwise, whether due or to become due, other
than those reflected or reserved against in the Interim Balance Sheet or
otherwise disclosed in the notes thereto, those liabilities disclosed elsewhere
in this Agreement or the Schedules hereto, those liabilities incurred since the
date of the Interim Balance Sheet in the ordinary course of business or those
liabilities which, in the
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aggregate, would not have a material adverse effect on CRP.
5.8 Absence of Certain Changes. Except as set forth on Schedule 5.8,
and except as otherwise contemplated by this Agreement, (a) since the date of
the Interim Balance Sheet the business of CRP has been conducted only in the
ordinary course, consistent with past practice, and there has not occurred any
event, condition, circumstance, change or development (whether or not in the
ordinary course of business consistent with past practice) that, individually or
in the aggregate, has had or, in the future, is reasonably likely to have a
material adverse effect on CRP, and (b) since the date of the Interim Balance
Sheet, neither the CRP Shareholders nor CRP has taken any action which, if taken
after the date of this Agreement, would constitute a breach of any of the
covenants set forth in Article 7 hereof.
5.9 Properties, Leases and Equipment. Schedule 5.9 sets forth a brief
description of all real property owned or leased by CRP. CRP has good and
marketable title to its real and personal properties and assets, subject to no
mortgages, liens, charges, encumbrances, security interests or any claims of any
nature (except the lien of current taxes whether or not due and payable) not
reflected in the Interim Financial Statements or the Schedules hereto. All of
the equipment, machinery, furniture and fixtures and other assets owned by CRP
are physically located in or about its premises and, except as described in
Schedule 5.9, none of it is subject to any commitment or other arrangement for
its use by the CRP Shareholders or any other person. The plants, warehouses,
structures, machinery and equipment of CRP are in good operating condition and
repair, subject only to ordinary wear and tear, and are not, to the best of
CRP's knowledge, in violation in any respect of any material applicable
building, zoning, safety or other law, ordinance or regulation in respect
thereof.
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5.10 Accounts Receivable. Except as provided in Schedule 5.10, accounts
receivable of CRP on the date hereof and at the Effective Time arose or will
have arisen in the ordinary course of business, and are or will be accurately
and fairly reflected in the Interim Financial Statements and the books and
records of CRP, subject to all applicable reserves. CRP believes that the
reserve established by CRP for bad debts or uncollectible accounts receivable on
its Interim Balance Sheet is adequate and that bad debts and uncollectible
accounts receivable will not exceed the reserve for bad debts or for
uncollectible accounts receivable reflected on the Interim Balance Sheet of CRP.
5.11 Inventory. The inventory disclosed in the Interim Balance Sheet of
CRP at June 30, 1996 is determined in accordance with GAAP, valued on a basis
consistent with that adopted in prior years. Except as set forth in Schedule
5.11, the inventory of CRP is of merchantable quality and in good condition and
is not subject in whole or in part to any lien, mortgage, pledge, hypothecation,
encumbrance, or claim of any nature. At the Effective Time, inventory will be at
levels consistent with past practices.
5.12 Patents, Trademarks, Service Marks and Copyrights. Schedule 5.12
lists and describes all of the patents, trademarks, service marks, trademark
registrations and applications therefor, trade names, copyrights, and copyright
registrations and applications therefor owned by or registered in the name of
CRP in the United States or any other country, or in which CRP has any rights by
license or otherwise. CRP owns, or is validly licensed under, such patents,
trademarks, service marks, trade names and copyrights necessary for the conduct
of its business as now operated without conflict with the rights of others.
Except as described herein or in Schedule 5.12, no patent, trademark or other
property right used by CRP in connection with its
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respective business is owned by any other party. CRP has full right to use all
processes, systems, business plans, publications and products used by it in its
business or necessary for its business, subject only to the restrictions or
agreements listed on Schedule 5.12.
5.13 Litigation. Except as set forth in Schedule 5.13 hereto, there is
no suit, claim, action, proceeding or investigation pending or, to the best
knowledge of CRP, threatened against CRP before any Governmental Entity which,
individually or in the aggregate, is reasonably likely to have a material
adverse effect on CRP or a material adverse effect on the ability of CRP to
consummate the transactions contemplated by this Agreement. Except as set forth
in Schedule 5.13 hereto, CRP is not subject to any outstanding order, writ,
injunction or decree which, insofar as can be reasonably foreseen, individually
or in the aggregate, would in the future have a material adverse effect on CRP
or a material adverse effect on the ability of CRP to consummate the
transactions contemplated hereby.
5.14 Reports and Taxes. CRP has properly filed or caused to be filed
all federal, state and local income and other tax returns, reports and
declarations that are required by applicable law to be filed by it, and has
paid, or made full and adequate provision for the payment of, all federal,
state, local and other income and other taxes properly due for the periods
covered by such returns, reports and declarations, except such taxes, if any, as
are adequately reserved against in its Interim Balance Sheet or the absence of
any of which would have a material adverse effect on CRP. CRP has complied in
all material respects with all provisions of the Code relating to the
withholding of taxes and has not presently pending any request for an extension
of time within which to file any tax return or for a waiver of the statute of
limitations with respect to any taxes or tax returns. Except as disclosed in
Schedule 5.14, CRP has not
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received notice of any tax deficiency outstanding, proposed or assessed against
it, nor has CRP executed any waiver of any statute of limitations on the
assessment or collection of any tax, which in any such event could have a
material adverse effect on CRP.
5.15 Agreements. Except as set forth in Schedule 5.15 hereto, CRP is
not in breach or violation of or in default in the performance of any term or
provision of, and no event has occurred which, with lapse of time or action by a
third party, could result in a default under (a) its certificate of
incorporation or by-laws or (b) any contract, commitment, agreement, indenture,
mortgage, loan agreement, note, lease, bond, license, approval or other
instrument or obligation to which it is bound or to which any of its assets or
property is subject, which breaches, violations or defaults, in the case of
clause (b) of this Section 5.15, would have, in the aggregate, a material
adverse effect on CRP. Except for agreements set forth in Schedule 5.15 hereto,
CRP is not a party to any material agreement not made in the ordinary course of
its business.
5.16 Employees and Labor Relations. With respect to its employees, CRP
is in substantial compliance with all federal, state, foreign and local laws and
regulations respecting employment and employment practices, terms and conditions
of employment, wages and hours and work places. Except as listed on Schedule
5.16, there is no unfair labor practice complaint against CRP pending before the
National Labor Relations Board or strike, lockout, dispute, or work stoppage
pending or threatened against or involving CRP and none has occurred since
January 1, 1993, (ii) no union organization campaign is in progress or, to the
best of CRP's knowledge, threatened, (iii) no charges, audits, investigations or
complaint proceedings are pending before the Equal Employment Opportunity
Commission or any state, local or federal agency responsible for the prevention
of unlawful employment practices with respect to CRP and
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(iv) CRP has not received notice of the intent of any federal, state or local
agency to conduct an audit or an investigation of or relating to or including
such employees or employment practices and no such investigation is in progress.
5.17 Employee Benefit Plans and ERISA.
(a) CRP maintains such pension, benefit and welfare plans as
are listed in Schedule 5.17. CRP has provided Boca with correct and
complete copies (incorporating all amendments) of the plans set forth
in such Schedule 5.17.
(b) All such pension, benefit and welfare plans of CRP have
been administered in compliance with their terms and, where applicable,
the Employee Retirement Security Act of 1974, as amended, and the rules
and regulations promulgated thereunder ("ERISA") and the Code, in all
material respects. The Internal Revenue Service ("IRS") has issued a
favorable determination letter with respect to the qualification of
each such plan which is intended to be qualified under Section 401(a)
of the Code and the exemption of any corresponding trust under Section
501(a) of the Code. A copy of the most recent determination letter for
each such plan will be furnished to Boca upon request. CRP is not aware
of anything which has occurred since the date of any such determination
letter that could cause the relevant plan or trust to lose such
qualification or exemption.
(c) With respect to each pension, benefit and welfare plan:
(i) there is no fact, including, without limitation, any Reportable
Event (as described in Section 4043(b) of ERISA), that exists that
would constitute grounds for termination of such plan by the Pension
Benefit Guaranty Corporation ("PBGC") or for the appointment by the
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appropriate United States District Court of a trustee to administer
such plan, in each case as contemplated by ERISA; (ii) to the best of
CRP's knowledge, neither CRP nor any fiduciary, trustee or
administrator of any such plan has engaged in a Prohibited Transaction
(as described in Section 406 of ERISA) that could subject CRP to any
material tax or penalty; (iii) CRP has not incurred any material
liability to the PBGC (except for the payment of premiums to the PBGC
which are described in Section 4006 of ERISA); and (iv) there is no
material Accumulated Funding Deficiency (within the meaning of Section
412 of the Code).
(d) No plan which is subject to Title IV of ERISA has been
terminated during the four-year period ending on the date hereof.
(e) CRP has no knowledge of any material liability being
incurred under Title IV of ERISA by it with respect to any pension plan
maintained by a trade or business (whether or not incorporated) which
is under common control with, or part of a controlled group of
corporations with CRP within the meaning of Sections 414(b) or (c) of
the Code.
(f) There has occurred no complete withdrawal or partial
withdrawal with respect to any multi-employer plan (within the meaning
of Section 4001(a)(3) of ERISA) that could cause CRP to incur any
material liability under or as a result of ERISA.
5.18 Information in Disclosure Documents. None of the information
supplied or to be supplied by CRP in writing specifically for inclusion or
incorporation by reference in the proxy statement relating to the meeting of the
Boca Shareholders to be held in connection with the Merger (the "Proxy
Statement") will, at the date mailed to the Boca Shareholders, at the time of
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the meeting of Boca Shareholders to be held in connection with the Merger and at
the Effective Time, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading.
5.19 Brokers. No broker, finder or investment banker (other than
Josephthal, Lyon & Ross Incorporated ("Josephthal")) is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated herein based upon arrangements made by or on behalf of
CRP. CRP has heretofore furnished to Boca a complete and correct copy of the
agreement between CRP and Josephthal pursuant to which such firm would be
entitled to any payment relating to the transactions contemplated herein.
5.20 Accuracy of Information, Etc. The information with respect to CRP,
and the representations and warranties made in this Agreement, and in any
statement, certificate, exhibit, or other document furnished or made available
by CRP to Boca or Sub pursuant to this Agreement or in connection with the
transactions contemplated hereby are true, correct and complete and do not
contain any statement which is false or misleading with respect to a material
fact required to be set forth herein or therein, and do not omit to state a
material fact necessary or required to be stated herein or therein in order to
make the statements contained herein or therein not materially false or
misleading.
6
REPRESENTATIONS AND WARRANTIES OF BOCA AND SUB
Boca and Sub hereby represent and warrant to CRP as follows:
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6.1 Organization. Each of Boca and Sub is a corporation duly organized,
validly existing and in good standing under the laws of the States of Florida
and New York, respectively, and has all requisite corporate power and authority
to own, lease and operate its properties and to carry on its business as now
being conducted, except where the failure to be so organized, existing and in
good standing or to have such power and authority would not have a material
adverse effect on Boca and Sub taken as a whole. Each of Boca and Sub is duly
qualified or licensed to do business and in good standing in each jurisdiction
in which the property owned, leased or operated by it, or the nature of the
business conducted by it, makes such qualification or licensing necessary,
except where the failure to be so duly qualified or licensed and in good
standing would not, in the aggregate, have a material adverse effect on Boca and
Sub taken as a whole.
6.2 Subsidiaries. Except as set forth in Schedule 6.2 and other than
Sub, a wholly-owned subsidiary of Boca organized solely for the purpose of
participating in the Merger, neither Boca nor Sub has any direct or indirect
Subsidiaries and neither Boca nor Sub owns any capital stock, other equity
securities or similar equity investment, directly or indirectly, in any person,
corporation, association, partnership, joint venture, trust or other entity.
6.3 Capitalization. The authorized capital stock of Boca consists of
(i) 40 million shares of Boca Common Stock, of which 1,125,270 shares are issued
and outstanding and (ii) 5 million shares of preferred stock, par value $1.00,
of which no shares are issued and outstanding. All of the outstanding shares of
Boca Common Stock are duly authorized and validly issued, fully paid and
nonassessable. Except as set forth in Schedule 6.3, there are no outstanding
subscriptions, warrants, options or other commitments obligating Boca to issue
any shares of Boca Common
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Stock or any other of its equity or debt securities. Since June 30, 1996,
neither Boca nor any of the Boca Shareholders has (i) redeemed or acquired, nor
is there any existing agreement obligating Boca or the Boca Shareholders to
redeem or acquire, any shares of Boca Common Stock, or any other equity
securities or any debt securities of Boca, (ii) declared or paid any dividend,
distribution or other payment to shareholders (except for payment of salary and
other benefits to shareholders in the customary amounts) or (iii) authorized or
effected any split-up or recapitalization of Boca Common Stock. The authorized
capital stock of Sub consists of 100 shares of common stock, par value $0.01 per
share, of which one share is validly issued, fully paid and nonassessable (the
"Sub Common Stock").
6.4 Power and Authority. Boca and Sub have the requisite corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby, subject to the approval of the Boca
Shareholders as set forth in Section 6.18. The execution, delivery and
performance of this Agreement by each of Boca and Sub and the consummation by
Sub of the Merger and by Boca and Sub of the other transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Boca and Sub, other than as set forth below, and no other corporate
proceedings on the part of Boca or Sub are necessary to authorize this Agreement
or to consummate the transactions so contemplated (other than, with respect to
the Merger, the approval and adoption of this Agreement by (i) the holders of
such number of then outstanding shares of Boca Common Stock as required pursuant
to the Articles of Incorporation of Boca and applicable Florida Law and (ii) the
holders of two-thirds of the then outstanding shares of Sub Common Stock, and
the filing and recordation of appropriate merger documents as required by New
York Law). This Agreement has been duly executed and
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delivered by Boca and Sub, as the case may be, and is, assuming the due
authorization, execution and delivery hereof by CRP, enforceable in accordance
with its terms, except as may be limited by or subject to any bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally, and subject to general principles of
equity.
6.5 Consents and Approvals; No Violation. Neither the execution,
delivery and performance of this Agreement by Boca and Sub nor the consummation
of the transactions contemplated hereby will (i) conflict with or result in any
breach of any provisions of the articles of incorporation or by-laws of Boca and
Sub, (ii) require any filing with, or permit, authorization, consent or approval
of, any Governmental Entity, except (A) for (x) applicable requirements, if any,
of the Exchange Act, the Securities Act, state securities or "blue sky" laws and
(y) filing and recordation of appropriate merger documents as required by New
York Law and (B) where the failure to obtain such permits, authorizations,
consents or approvals or to make such filings would not have a material adverse
effect on Boca and Sub taken as a whole, (iii) result in a violation or breach
of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, amendment, cancellation or
acceleration) under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation to which Boca or Sub is a party or by which it or any
of its properties or assets may be bound or (iv) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to Boca or Sub,
except, in the case of clauses (iii) or (iv), for violations, breaches or
defaults which would not have a material adverse effect on Boca and Sub taken as
a whole.
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6.6 SEC Reports and Financial Statements. Boca has filed with the
Securities and Exchange Commission (the "SEC"), and has heretofore made
available to CRP true and complete copies of, all forms, reports and documents
required to be filed by it since January 1, 1995 under the Exchange Act or the
Securities Act (as such documents have been amended since the time of their
filing, collectively, the "Boca SEC Documents"). Boca's Annual Reports on form
10-KSB for the years ended December 31, 1996 and 1995 (the "Boca 10-KSBs"),
including without limitation any financial statements or schedules included
therein, at the time filed, (a) did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading and (b) complied in all material
respects with the applicable requirements of the Exchange Act or the Securities
Act, as the case may be. The financial statements of Boca included in the Boca
10-KSBs comply as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto or, in the case of the
unaudited statements, as permitted by Form 10-QSB of the SEC) and fairly present
(subject, in the case of the unaudited statements, to normal, recurring audit
adjustments) the financial position of Boca as at the dates thereof and the
results of its operations and cash flows for the periods then ended. Except as
reflected, reserved against or otherwise disclosed in the financial statements
of Boca included in the Boca SEC Documents, as otherwise disclosed in the Boca
SEC Documents or as disclosed on Schedule 6.6 hereto, Boca does not have any
material liabilities or obligations (absolute, accrued, fixed,
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contingent or otherwise).
6.7 Information in Disclosure Documents and Registration Statements.
None of the information supplied or to be supplied by Boca or Sub in writing
specifically for inclusion or incorporation by reference in the Proxy Statement
in connection with the Merger (the "Proxy Statement") will, at the date mailed
to the Boca Shareholders, at the time of the meeting of the Boca Shareholders to
be held in connection with the Merger and at the Effective Time, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading. The Proxy
Statement will when filed comply as to form in all material respects with the
provisions of the Exchange Act and the rules and regulations thereunder, except
that no representation is made by Boca with respect to statements made therein
based on information supplied by CRP in writing for inclusion in the Proxy
Statement.
6.8 No Undisclosed Liabilities. On the date hereof, neither Boca nor
Sub has any liability or obligation of any nature, whether fixed or contingent
or otherwise, whether due or to become due, other than those set forth on
Schedule 6.8 hereto, and those reflected or reserved against in the Boca SEC
Documents, those liabilities disclosed elsewhere in this Agreement or the
Schedules hereto, or liabilities incurred since the date of the Boca SEC
Documents in the ordinary course of business or those liabilities which, in the
aggregate, would not have a material adverse effect on Boca and Sub, taken as a
whole.
6.9 Absence of Certain Changes. Except as otherwise contemplated by
this Agreement, since June 30, 1996, (a) the business of Boca has been conducted
only in the ordinary course, consistent with past practice, and there has not
occurred any event, condition, circumstance,
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change or development (whether or not in the ordinary course of business
consistent with past practice) that, individually or in the aggregate, has had
or, in the future, is reasonably likely to have a material adverse effect on
Boca, and (b) neither the Boca Shareholders nor Boca has taken any action which,
if taken after the date of this Agreement, would constitute a breach of any of
the covenants set forth in Article 7 hereof.
6.10 Properties, Leases and Equipment. Schedule 6.10 sets forth a brief
description of all real property owned or leased by Boca. Sub does not own or
lease any real property. Boca has good and marketable title to its respective
real and personal properties and assets, subject to no mortgages, liens,
charges, encumbrances, security interests or any claims of any nature (except
the lien of current taxes whether or not due and payable) not reflected in the
Boca SEC Documents or the Schedules hereto. All of the equipment, machinery,
furniture and fixtures and other assets owned by Boca are physically located in
or about its premises and, except as set forth in the Boca SEC Documents, none
of it is subject to any commitment or other arrangement for its use by the Boca
Shareholders or any other person. The plants, warehouses, structures, machinery
and equipment of Boca are in good operating condition and repair, subject only
to ordinary wear and tear, and are not, to the best of Boca's knowledge, in
violation in any respect of any material applicable building, zoning, safety or
other law, ordinance or regulation in respect thereof.
6.11 Accounts Receivable. Except as provided in Schedule 6.11, accounts
receivable of Boca on the date hereof and at the Effective Time arose or will
have arisen in the ordinary course of business, and are or will be accurately
and fairly reflected in the Boca SEC Documents for September 30, 1996 and the
books and records of Boca, subject to all applicable reserves. Boca
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believes that the reserve established by Boca for bad debts or uncollectible
accounts receivable in the Boca SEC Documents for September 30, 1996 is adequate
and that bad debts and uncollectible accounts receivable will not exceed the
reserve for bad debts or for uncollectible accounts receivable reflected in the
Boca SEC Documents for September 30, 1996 by any material amount.
6.12 Patents, Trademarks, Service Marks and Copyrights. Schedule 6.12
lists and describes all of the patents, trademarks, service marks, trademark
registrations and applications therefor, trade names, copyrights, and copyright
registrations and applications therefor owned by or registered in the name of
Boca in the United States or any other country, or in which Boca has any rights
by license or otherwise. Boca owns, or is validly licensed under, such patents,
trademarks, service marks, trade names and copyrights necessary for the conduct
of its business as now operated, to the best knowledge of its shareholders,
without conflict with the rights of others. Except as described herein or in
Schedule 6.12, no patent, trademark or other property right used by Boca in
connection with its respective business is owned by any other party. Boca has
full right to use all processes, systems, business plans, publications and
products used by it in its business or necessary for its business, subject only
to the restrictions or agreements listed on Schedule 6.12.
6.13 Litigation. Except as disclosed in the Boca SEC Documents filed
prior to the date of this Agreement and in Schedule 6.13, there is no suit,
claim, action, proceeding or investigation pending or, to the best knowledge of
Boca, threatened against Boca or Sub before any Governmental Entity which,
individually or in the aggregate, is reasonably likely to have a material
adverse effect on Boca and Sub taken as a whole or a material adverse effect on
the
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ability of Boca or Sub to consummate the transactions contemplated by this
Agreement. Except as set forth in Schedule 6.13, neither Boca nor Sub is subject
to any outstanding order, writ, injunction or decree which, insofar as can be
reasonably foreseen, individually or in the aggregate, would in the future have
a material adverse effect on Boca and Sub taken as a whole or a material adverse
effect on the ability of Boca or Sub to consummate the transactions contemplated
hereby.
6.14 Reports and Taxes. Each of Boca and Sub has properly filed or
caused to be filed all federal, state and local income and other tax returns,
reports and declarations that are required by applicable law to be filed by it,
and has paid, or made full and adequate provision for the payment of, all
federal, state, local and other income and other taxes properly due for the
periods covered by such returns, reports and declarations, except such taxes, if
any, as are adequately reserved against in its balance sheet dated as of
September 30, 1996 included in the Boca SEC Documents or the absence of any of
which would have a material adverse effect on Boca and Sub taken as a whole.
Each of Boca and Sub has complied in all material respects with all provisions
of the Code relating to the withholding of taxes and has not presently pending
any request for an extension of time within which to file any tax return or for
a waiver of the statute of limitations with respect to any taxes or tax returns.
Except as disclosed in Schedule 6.14, neither Boca nor Sub has received notice
of any tax deficiency outstanding, proposed or assessed against it, nor has Boca
or Sub executed any waiver of any statute of limitations on the assessment or
collection of any tax, which in any such event could have a material adverse
effect on Boca and Sub taken as a whole.
6.15 Agreements. Except as set forth in Schedule 6.15, neither Boca nor
Sub is in breach
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or violation of or in default in the performance of any term or provision of,
and no event has occurred which, with lapse of time or action by a third party,
could result in a default under (a) Boca or Sub's articles of incorporation or
by-laws or (b) any contract, commitment, agreement, indenture, mortgage, loan
agreement, note, lease, bond, license, approval or other instrument or
obligation to which either Boca or Sub is bound or to which any of its assets or
property is subject, which breaches, violations or defaults, in the case of
clause (b) of this Section 6.15, would have, in the aggregate, a material
adverse effect on Boca and Sub taken as a whole. Except for contracts set forth
in Schedule 6.15 hereto or in the Boca SEC Documents, neither Boca nor Sub is a
party to any material contract not made in the ordinary course of its business.
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6.16 Employees and Labor Relations. With respect to its employees, each
of Boca and Sub is in substantial compliance with all federal, state, foreign
and local laws and regulations respecting employment and employment practices,
terms and conditions of employment, wages and hours and work places. Except as
listed on Schedule 6.16, there is no unfair labor practice complaint against
Boca or Sub pending before the National Labor Relations Board or strike,
lockout, dispute, or work stoppage pending or threatened against or involving
Boca or Sub and none has occurred since January 1, 1993, (ii) no union
organization campaign is in progress or, to the best of Boca's knowledge,
threatened, (iii) no charges, audits, investigations or complaint proceedings
are pending before the Equal Employment Opportunity Commission or any state,
local or federal agency responsible for the prevention of unlawful employment
practices with respect to Boca or Sub and (iv) neither Boca nor Sub has received
notice of the intent of any federal, state or local agency to conduct an audit
or an investigation of or relating to or including such employees or employment
practices and no such investigation is in progress.
6.17 Employee Benefit Plans and ERISA.
(a) Boca maintains such pension, benefit and welfare plans as
are listed in Schedule 6.17. Boca has provided CRP with correct and
complete copies (incorporating all amendments) of the plans set forth
in such Schedule 6.17. Sub does not maintain any pension, benefit or
welfare plans.
(b) All such pension, benefit and welfare plans of Boca have
been administered in compliance with their terms and, where applicable,
ERISA and the Code, to all material extents. The IRS has issued a
favorable determination letter with respect to the qualification of
each such plan which is intended to be qualified under Section 401(a)
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of the Code and the exemption of any corresponding trust under Section
501(a) of the Code. A copy of the most recent determination letter for
each such plan will be furnished to CRP upon request. Boca is not aware
of anything which has occurred since the date of any such determination
letter that could cause the relevant plan or trust to lose such
qualification or exemption.
(c) With respect to each pension, benefit and welfare plan:
(i) there is no fact, including, without limitation, any Reportable
Event (as described in Section 4043(b) of ERISA), that exists that
would constitute grounds for termination of such plan by the PBGC or
for the appointment by the appropriate United States District Court of
a trustee to administer such plan, in each case as contemplated by
ERISA; (ii) to the best of Boca's knowledge, neither Boca nor any
fiduciary, trustee or administrator of any such plan has engaged in a
Prohibited Transaction that could subject Boca to any material tax or
penalty; (iii) Boca has not incurred any material liability to the PBGC
(except for the payment of premiums to the PBGC which are described in
Section 4006 of ERISA); and (iv) there is no material Accumulated
Funding Deficiency.
(d) No plan which is subject to Title IV of ERISA has been
terminated during the four-year period ending on the date hereof.
(e) Boca has no knowledge of any material liability being
incurred under Title IV of ERISA by it with respect to any pension plan
maintained by a trade or business (whether or not incorporated) which
is under common control with, or part of a controlled group of
corporations with Boca within the meaning of Sections 414(b) or (c) of
the Code.
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(f) There has occurred no complete withdrawal or partial
withdrawal with respect to any multi-employer plan (within the meaning
of Section 4001(a)(3) of ERISA) that could cause Boca to incur any
material liability under or as a result of ERISA.
6.18 Vote Required. The affirmative vote of the holders of Boca Common
Stock, as set forth in the articles of incorporation of Boca as in effect on the
date hereof, is the only vote of the holders of any class or series of Boca
capital stock necessary to approve the transaction contemplated herein.
6.19 Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated herein based upon arrangements made by or on behalf of
Boca or Sub provided, however that Spencer Trask Securities, Inc. ("Spencer
Trask") has or shall be retained as an independent financial advisor to render
an opinion regarding the fairness of the Merger and the transactions
contemplated herein.
6.20 Investment Company Act. None of Boca or any Subsidiary thereof is
an "investment company" or an "affiliated person" of an entity required to
register as an "investment company" as such terms are defined in the Investment
Company Act of 1940, as amended (the "Act"). The execution, delivery and
performance by Boca of this Agreement will not violate any provision of the Act
or any rule, regulation or order issued by the SEC thereunder, applicable in
each case to Boca or any Subsidiary thereof.
6.21 Accuracy of Information, Etc. The information with respect to Boca
and Sub, and the representations and warranties made in this Agreement, and in
any statement, certificate, exhibit, or other document furnished or made
available by Boca or Sub to CRP pursuant to this
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Agreement or in connection with the transactions contemplated hereby are true,
correct and complete and do not contain any statement which is false or
misleading with respect to a material fact required to be set forth herein or
therein, and do not omit to state a material fact necessary or required to be
stated herein or therein in order to make the statements contained herein or
therein not materially false or misleading.
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7
COVENANTS
7.1 Conduct of Business by CRP and Boca Pending the Merger. Each of CRP
and Boca covenants and agrees that, between the date hereof and the Effective
Time, unless the other party shall have consented in writing (such consent not
to be unreasonably withheld), the business of each of CRP and Boca shall, in all
material respects, be conducted in, and each of CRP and Boca shall not take any
material action, except in the ordinary course of business consistent with past
practice; and each of CRP and Boca shall use all reasonable best efforts to
preserve substantially intact its business organization, to keep available the
services of its current officers and employees and to preserve its relationships
with licensors, licensees, customers, suppliers, employees and any others
persons with whom it has significant business relations. Without limiting the
generality of the foregoing, and except as otherwise expressly provided in this
Agreement, each of CRP, Boca and Sub will not, prior to the Effective Time,
without the prior written consent of the other party:
(a) adopt any amendment to its respective certificate of
incorporation or articles of incorporation, as the case may be, or
by-laws or comparable organizational documents;
(b) issue, sell, deliver, pledge dispose of, grant, encumber
or authorize the issuance, sale, delivery, pledge, disposition, grant
or encumbrance of additional shares of capital stock of any class, or
securities convertible into capital stock of any class, or any rights,
warrants or options to acquire any convertible securities or capital
stock, other than the issuance of shares of Boca Common Stock upon the
exercise of stock options or
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stock grants pursuant to outstanding stock options on the date of this
Agreement in accordance with their present terms;
(c) declare, set aside, make or pay any dividend or other
distribution (whether in cash, securities or property or any
combination thereof) in respect of any class or series of its capital
stock;
(d) adjust, split, combine, subdivide, reclassify or redeem,
purchase or otherwise acquire, directly or indirectly, any shares of
its capital stock, or any of its other securities;
(e) (i) acquire (for cash or shares of stock) (including,
without limitation, by merger, consolidation, or acquisition of stock
or assets) any corporation, partnership, other business organization or
any division thereof or any assets; (ii) incur any indebtedness for
borrowed money or issue any debt securities or assume, guarantee or
endorse, or otherwise as an accommodation become responsible for, the
obligations of any person, or make any loans or advances, except (A)
short-term debt in connection with business creditors, accrued wages,
taxes and health and welfare obligations in the ordinary course of
business consistent with past practices, or (B) short-term borrowings
under existing lines of credit in the ordinary course of business
consistent with past practice; or (iii) enter into or amend any
contract, agreement, commitment or arrangement with Josephthal or with
respect to any matter set forth in this Section 7.1;
(g) increase the compensation payable or to become payable to
its executive officers or employees, except for increases in the
ordinary course of business in accordance with past practice, or grant
any severance or termination pay to, or enter into
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any employment or severance agreement with any director or executive
officer of it or any of its subsidiaries, or establish, adopt, enter
into or amend in any material respect or take action to accelerate any
rights or benefits under any collective bargaining, bonus, profit
sharing, thrift, compensation, stock option, restricted stock, pension,
severance or other plan, agreement, trust, fund, policy or arrangement
for the benefit of any director, executive officer or employee;
(h) take any action, other than reasonable and usual actions
in the ordinary course of business and consistent with past practice,
with respect to accounting policies or procedures;
(i) make any tax election or settle or compromise any material
tax liability; or
(j) agree in writing or otherwise to take any of the foregoing
actions or any action which would make any representation or warranty
in this Agreement untrue or incorrect in any material respect.
7.2 Conduct of Business by Sub Pending the Merger. During the period
from the date of this Agreement to the Effective Time, Sub (a) will remain a
wholly-owned subsidiary of Boca, (b) will not incur, directly or indirectly, any
liabilities or obligations except those incurred in connection with consummation
of this Agreement and the transactions contemplated hereby and (c) will not
engage, directly or indirectly, in any business or activities of any type or
kind and will not enter into any agreements or arrangements with any person or
entity, or be subject to or bound by any obligation or undertaking, which is not
contemplated by this Agreement.
7.3 Best Efforts. Subject to the terms and conditions of this
Agreement, each of the parties hereto agrees to use its best efforts to take, or
cause to be taken, all actions, and to do, or
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cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated by this Agreement including, without limitation, (i) the prompt
preparation and filing with the SEC of the Proxy Statement, (ii) such actions as
may be required to have the Proxy Statement cleared by the SEC, as promptly as
practicable, including by consulting with each other as to, and responding
promptly to, any SEC comments with respect thereto, and (iii) such actions as
may be required to be taken under applicable state securities or blue sky laws
in connection with the issuance of shares of Boca Common Stock contemplated
hereby. Each party shall promptly consult with the other with respect to,
provide any necessary information with respect to and provide the other (or its
counsel) copies of, all filings made by such party with any Governmental Entity
in connection with this Agreement and the transactions contemplated hereby .
7.4 Access to Information.
(a) From the date hereof to the Effective Time, each of CRP
and Boca shall (and shall cause the officers, directors, employees,
auditors, and agents to) afford the officers, employees, accountants,
counsel and other agents of the other party (the "Respective
Representatives") reasonable access at all reasonable times, to its
officers, employees, agents, properties, facilities, books, contracts,
commitments and records, other information necessary for the conduct of
a complete business, financial and legal audit of its business and
financial condition and, during such period, furnish such Respective
Representatives with all financial operating and other data and
information as may be reasonably requested.
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(b) All information obtained by Boca or CRP pursuant to this
Section 7.4 shall be kept confidential in accordance with the
confidentiality agreements, dated as of September 5, 1996, between CRP
and Boca.
(c) No investigation pursuant to this Section 7.4 shall affect
any representation or warranty in this Agreement of any party hereto or
any condition to the obligations of the parties hereto.
7.5 Boca Shareholders Meeting. Boca shall call and use its best efforts
to hold a meeting of its shareholders to be held as promptly as practicable
after clearance by the SEC of the Proxy Statement, for the purpose of voting
upon this Agreement and related matters. Boca will, through its board of
directors, recommend to its shareholders approval of such matters subject to:
(a) the satisfactory completion of Boca's business, financial and legal audit of
CRP's business and financial condition or 12:00 noon, New York time, on January
24, 1997, whichever occurs first; and (b) the receipt of an opinion of Spencer
Trask to the effect that the Merger and transactions contemplated herein are
fair to the Boca Shareholders from a financial point of view; provided, however,
that nothing contained in this Section 7.5 shall require the board of directors
of Boca to take any action or refrain from taking any action in violation of its
fiduciary duties.
7.6 Legal Conditions to Merger. Each of CRP and Boca will take all
reasonable actions necessary to comply promptly with all legal requirements
which may be imposed on itself with respect to the Merger (which actions shall
include, without limitation, furnishing all information required in connection
with approvals of or filings with any Governmental Entity and will promptly
cooperate with and furnish information to each other in connection with any such
requirements imposed upon any of them in connection with the Merger). Each of
CRP and Boca
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will take all reasonable actions necessary to obtain (and will cooperate with
each other in obtaining) any consent, authorization, order or approval of, or
any exemption by, any Governmental Entity or other public or private third
party, required to be obtained or made by Boca or CRP in connection with the
Merger or the taking of any action contemplated thereby or by this Agreement.
7.7 Articles of Incorporation and By-Law Amendments. (a) Prior to the
Effective Time, CRP and Boca shall agree to amendments to be effected to the
amended and restated articles of incorporation of Boca, including to change the
name of Boca to "CRP Holding Corp.", and the by-laws of Boca, and Boca shall
take all actions reasonably necessary so that such amendments become effective
no later than the Effective Time.
(b) Any of such foregoing amendments shall not adversely
effect the rights with respect to indemnification provided thereunder for
actions or omissions occurring at or prior to the Effective Time (including,
without limitation, the transactions contemplated by this Agreement), of
individuals who at any time prior to Effective Time, were directors or officers
of Boca.
7.8 Employee Benefit Plans.
(a) CRP and Boca agree that the benefit plans of CRP in effect
at the date of this Agreement shall, to the extent practicable, remain
in effect until otherwise determined after the Effective Time and, to
the extent such benefit plans are not continued, the Surviving
Corporation will maintain for a period of one year after the Effective
Time benefit plans which are no less favorable, in the aggregate, to
the employees covered by such plans.
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(b) Boca will, and will cause the Surviving Corporation to,
honor without modification all employee severance plans (or policies)
and employment and severance agreements of CRP in existence on the date
hereof as such agreements are in effect at the Effective Time,
including without limitation the plans and agreements specified in
Section 7.10 hereto.
7.9 No Solicitations. Each of the parties hereto will immediately cease
any existing discussions or negotiations with any third parties conducted prior
to the date hereof with respect to any merger, business combination, sale of a
significant amount of assets outside of the ordinary course of business, sale of
shares of capital stock outside of the ordinary course of business, tender or
exchange offer or similar transaction involving such party or any of its
subsidiaries or divisions (an "Acquisition Transaction"). Each of the parties
hereto shall use its best efforts to ensure that none of its affiliates,
officers, directors, representatives or agents shall, directly or indirectly,
solicit any person, entity or group concerning any Acquisition Transaction
(other than the transactions contemplated by this Agreement); provided, that
each of Boca and CRP may participate in negotiations with or furnish information
to a third party if their respective boards of directors, after consulting with
outside counsel, determines that the failure to do so may violate its fiduciary
duties.
7.10 Expenses. Whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses.
7.11 Brokers or Finders. Each of CRP and Boca represents, as to itself
and its affiliates that no agent, broker, investment banker, financial advisor
or other firm or person is or will be
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entitled to any brokers' or finder's fee or any other commission or similar fee
in connection with any of the transactions contemplated by this Agreement except
(i) Josephthal, whose fees and expenses will be borne by CRP or the Surviving
Corporation and (ii) Spencer Trask, whose fees and expenses will be borne by
Boca. Each of CRP and Boca agree to indemnify and hold the other harmless from
and against any and all claims, liabilities or obligations with respect to any
other fees, commissions or expenses asserted by any person on the basis of any
act or statement alleged to have been made by such party or its affiliate.
8
CONDITIONS
8.1 Conditions to Each Party's Obligation To Effect the Merger. The
respective obligations of the parties to effect the Merger shall be subject to
the satisfaction, on or prior to the Effective Time, of the following
conditions:
(a) Shareholder Approval. This Agreement and the transactions
contemplated hereby shall have been approved and adopted by (i) the
affirmative vote of the holders of the Boca Common Stock as required by
the articles of incorporation of Boca as in effect on the date hereof,
(ii) the affirmative vote of the holders of the CRP Common Stock
entitled to cast at least two-thirds (2/3) of the total number of votes
entitled to be cast, and (iii) the affirmative vote of the holders of
the common stock of Sub entitled to cast at least two-thirds (2/3) of
the total number of votes entitled to be cast.
(b) Other Approvals. Other than the filing provided for by
Section 1.3, any authorizations, notices, consents, orders or approvals
of, or declarations or filings with, or
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expirations of waiting periods imposed by, any Governmental Entity, the
failure to obtain which would have a material adverse effect on the
Surviving Corporation, shall have been filed, occurred or been
obtained. Boca shall have received all state securities or blue sky
permits and other authorizations necessary to issue the Boca Common
Stock pursuant to this Agreement.
(c) No Injunctions or Restraints. No temporary restraining
order, preliminary or permanent injunction or other order issued by any
court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Merger shall be in effect (each
party agreeing to use all reasonable efforts to have any such order
reversed or injunction lifted).
(d) Audits. Each of CRP and Boca shall have completed their
respective business, financial and legal audits to the reasonable
satisfaction of CRP and Boca, as the case may be.
(e) Opinion. Boca shall have received an opinion of Spencer
Trask or another independent financial advisor reasonably satisfactory
to the board of directors of Boca to the effect that the Merger and the
transactions contemplated herein are fair to the Boca Shareholders from
a financial point of view.
8.2 Conditions of Obligations of CRP. The obligations of CRP to effect
the Merger are subject to the satisfaction, on or prior to the Effective Time,
of the following conditions unless waived, if permissible, by CRP:
(a) Representations and Warranties. (i) The aggregate effect
of all inaccuracies in the representations and warranties of Boca and
Sub set forth in this
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Agreement does not and will not have a material adverse effect on Boca
and Sub taken as a whole and (ii) the representations and warranties of
Boca and Sub shall be true and correct in all material respects as of
the date of this Agreement and, except to the extent such
representations and warranties speak as of an earlier date, as of the
Effective Time as though made on and as of the Effective Time, except
as otherwise contemplated by this Agreement, and CRP shall have
received a certificate signed on behalf of Boca by the chief executive
officer and the chief financial officer of Boca to such effect.
(b) Performance of Obligations of Boca and Sub. Boca and Sub
shall have performed in all material respects all obligations required
to be performed under this Agreement at or prior to the Effective Time,
and CRP shall have received a certificate signed on behalf of Boca by
the chief executive officer and the chief financial officer of Boca to
such effect.
(c) Boca shall deliver to CRP at the Closing the resignations
of each of its officers and directors, which resignations shall be
effective as of the Effective Time.
(d) The termination of a Shareholder Agreement dated as of
September 3, 1991, by and among CRP and Gerber, Gross and Nassberg.
(e) CRP shall have received any such consent, waiver,
modification, amendment, suspension or otherwise (in form reasonably
satisfactory to CRP and Boca), of The Chase Manhattan Bank, as trustee
under an indenture dated as of December 1, 1984, necessary for the
consummation of the Merger and the transactions contemplated hereby,
and to waive any current defaults thereunder as of the Effective Time,
and as may be necessary or appropriate so that no event of default
shall occur or be continuing
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immediately subsequent to the Effective Time, or as may otherwise be
necessary or appropriate.
(f) CRP shall have received a waiver (in form reasonably
satisfactory to CRP and Boca) from Leon Hertzson ("Hertzson"), as
Sublessor under a Sublease Agreement, dated as December 1, 1984 by and
among Hertzson, CRP and Colonial Glove and Garment, Inc. ("Colonial"),
with respect to certain rental payments which are in arrears from April
through October of 1996.
(g) CRP shall have received any such consent, waiver
modification, amendment, suspension or otherwise as may be required (in
form reasonably satisfactory to CRP and Boca), under the Revolving
Credit Agreement dated December 22, 1995, between CRP and Concord
Growth Corporation ("Concord"), and any other agreements between CRP
and Concord, necessary for the consummation of the transactions
contemplated hereby and to waive any current defaults thereunder, as of
the Effective Time, and as may be necessary or appropriate so that no
event of default shall be continuing immediately subsequent to the
Effective Time, or as may otherwise be necessary or appropriate.
8.3 Conditions of Obligations of Boca and Sub. The obligation of Boca
and Sub to effect the Merger is subject to the satisfaction of the following
conditions, on or prior to the Effective Time, unless waived, if permissible, by
Boca:
(a) Representations and Warranties. (i) The aggregate effect
of all inaccuracies in the representations and warranties of CRP set
forth in this Agreement does not and will not have a material adverse
effect on CRP and (ii) the representations
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and warranties of CRP shall be true and correct in all material
respects as of the date of this Agreement and, except to the extent
such representations and warranties speak as of an earlier date, as of
the Effective Time as though made on and as of the Effective Time,
except as otherwise contemplated by this Agreement, and Boca shall have
received a certificate signed on behalf of CRP by the chief executive
officer and the chief financial officer of CRP to such effect.
(b) Performance of Obligations of CRP. CRP shall have
performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Effective Time,
and Boca and Sub shall have received a certificate signed on behalf of
CRP by the chief executive officer and the chief financial officer of
CRP to such effect.
(c) The termination of a Shareholder Agreement dated as of
September 3, 1991, by and among CRP and Gerber, Gross and Nassberg.
(d) CRP shall have received any such consent, waiver,
modification, amendment, suspension or otherwise (in form reasonably
satisfactory to CRP or Boca), of The Chase Manhattan Bank, as trustee
under an indenture dated as of December 1, 1984, necessary for the
consummation of the Merger and the transactions contemplated hereby,
and to waive any current defaults thereunder as of the Effective time,
and as may be necessary or appropriate so that no event of default
shall occur or be continuing immediately subsequent to the Effective
time, or as may otherwise be necessary or appropriate.
V-45
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(e) CRP shall have received a waiver (in form reasonably
satisfactory to CRP and Boca) from Hertzson, as Sublessor under a
Sublease Agreement, dated as December 1, 1984 by and among Hertzson,
CRP and Colonial, with respect to certain rental payments which are in
arrears from April through October of 1996.
(f) the termination of any employment agreement with Gerber as
of the Effective Time.
(g) CRP shall have received any such consent, waiver
modification, amendment, suspension or otherwise as may be required (in
form reasonably satisfactory to CRP and Boca), under the Revolving
Credit Agreement dated December 22, 1995, between CRP and Concord, and
any other agreements between CRP and Concord, necessary for the
consummation of the transactions contemplated hereby and to waive any
current defaults thereunder, as of the Effective Time, and as may be
necessary or appropriate so that no event of default shall be
continuing immediately subsequent to the Effective Time, or as may
otherwise be necessary or appropriate.
9
TERMINATION AND AMENDMENT
9.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after approval of the matters presented in
connection with the Merger by the shareholders of Boca or CRP:
(a) by mutual consent of CRP and Boca;
V-46
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(b) by either Boca or CRP if the Merger shall not have been
consummated before May 31, 1997 (unless the failure to so consummate
the Merger by such date shall be due to the action or failure to act of
the party seeking to terminate this Agreement);
(c) by CRP if (i) there has been a breach on the part of Boca
or Sub of the representations, warranties or covenants of Boca and Sub
set forth herein, or any failure on the part of Boca and Sub to comply
with their obligations hereunder, or any other events or circumstances
shall have occurred, such that, in any such case, any of the conditions
to the Closing set forth in Sections 8.1 or 8.2 hereof could not be
satisfied on or prior to May 31, 1997, (ii) the Boca Shareholders do
not approve the Merger and this Agreement at the meeting required under
Section 7.6 hereof, or (iii) the board of directors of Boca withdraws,
amends, or modifies its favorable recommendation of the Merger, or
promulgates any recommendation with respect to an Acquisition
Transaction other than a recommendation to reject such Acquisition
Transaction; or
(d) by Boca if (i) there has been a breach on the part of CRP
in the representations, warranties or covenants of CRP set forth
herein, or any failure on the part of CRP to comply with its
obligations hereunder, or any other events or circumstances shall have
occurred, such that, in any such case, any of the conditions to the
Closing set forth in Sections 8.1 or 8.3 hereof could not be satisfied
on or prior to May 31, 1997, (ii) the Boca Shareholders do not approve
the Merger and this Agreement at the meeting required under Section 7.6
hereof, or (iii) prior to the approval of the Merger by the Boca
Shareholders, Boca receives a firm offer with respect to an Acquisition
Transaction and
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the board of directors of Boca, after consulting with its outside
counsel, determines in good faith that to proceed with the Merger may
violate its fiduciary duties.
9.2 Effect of Termination. In the event of a termination of this
Agreement by either Boca or CRP as provided in Section 9.1, this Agreement shall
forthwith become void and there shall be no other liability or obligation on the
part of CRP or Boca or Sub or their respective officers or directors, other than
the provisions of Section 7.10; provided, however that any such termination
shall not relieve any party from liability for willful breach of any of its
covenants or agreements set forth in this Agreement.
10
MISCELLANEOUS
10.1 Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time.
10.2 Amendment. This Agreement may be amended in writing by the parties
hereto, at any time before or after approval of the matters presented in
connection with the Merger by the Boca Shareholders and the CRP Shareholders
but, after any such approval, no amendment shall be made which by law requires
further approval by such shareholders without such further approval. This
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties hereto.
10.3 Extension; Waiver. At any time prior to the Effective Time, the
parties hereto, may to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or
V-48
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other acts of the other parties hereto, (ii) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (iii) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party.
10.4 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally, or mailed by
registered or certified mail (return receipt requested) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a) if to CRP, to:
Clean Room Products, Inc.
1800 Ocean Avenue
Ronkonkoma, New York 11779
Attention: President
with a copy to:
Rivkin, Radler & Kremer
EAB Plaza
Uniondale, New York 11556
Attention: Barry R. Shapiro, Esq.
(b) if to Boca or Sub, to:
6516 Via Rosa
Boca Raton, Florida 33433
Attn: Mr. Alan L. Jacobs
with a copy to:
Orrick, Herrington & Sutcliffe LLP
666 Fifth Avenue
New York, New York 10103
Attn: Lawrence B. Fisher, Esq.
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(c) if to Josephthal, to:
Josephthal Lyon & Ross Incorporated
200 Park Avenue
24th Floor
New York, New York 10166
Attn: Dan Purjes
10.5 Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include",
"includes" or "including" are used in this Agreement they shall be deemed to be
followed by the words "without limitation". The phrase "made available" in this
Agreement shall mean that the information referred to has been made available if
requested by the party to whom such information is to be made available.
10.6 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
10.7 Entire Agreement; No Third Party Beneficiaries. This Agreement
(including the documents and the instruments referred to herein) and the
Confidentiality Agreements (a) constitute the entire agreement and supersede all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof and thereof, and (b) are not intended
to confer upon any person other than the parties hereto and thereto any rights
or remedies hereunder or thereunder.
V-50
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10.8 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of New York without regard to any
applicable conflicts of law.
10.9 Specific Performance. The parties hereto agree that if any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached, irreparable damage would occur, no
adequate remedy at law would exist and damages would be difficult to determine,
and that the parties shall be entitled to specific performance of the terms
hereof, in addition to any other remedy at law or equity.
10.10 Publicity. Except as otherwise required by law, or the rules of
the OTC Electronic Bulletin Board, for so long as this Agreement is in effect,
neither Boca nor CRP shall issue or cause the publication of any press release
or other public announcement with respect to the transactions contemplated by
this Agreement without the consent of the other party, which consent shall not
be unreasonably withheld.
10.11 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
V-51
<PAGE> 208
IN WITNESS WHEREOF, CRP, Boca and Sub have caused this
Agreement to be signed by their respective officers thereunto duly authorized as
of the date first written above.
CLEAN ROOM PRODUCTS, INC.
By: /s/ Charles A. Chenes
------------------------
Name: Charles A. Chenes
Title: President
BOCA RATON CAPITAL CORP.
By: /s/ Alan L. Jacobs
------------------------
Name: Alan L. Jacobs
Title: President
CRP ACQUISITION CORP.
By: /s/ Alan L. Jacobs
------------------------
Name: Alan L. Jacobs
Title: President
The undersigned are executing this Agreement with respect to Section 4.2 only.
/s/ Paul Gerber
------------------------
Paul Gerber
/s/ Felicia Gross
------------------------
Felicia Gross
/s/ Sheila Nassberg
------------------------
Sheila Nassberg
------------------------
Dan Purjes
V-52
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Schedule 5.2
Subsidiaries
1. CRP has a 95% investment in Oakridge Apartments, Ltd., a
limited partnership. See Note 5 to the notes to the Audited Financial
Statements.
V-53
<PAGE> 210
Schedule 5.3
Capitalization
1. CRP Shareholders on the date hereof:
Paul Gerber 5 shares
Felicia Gross 5 shares
Sheila Nassberg 5 shares
- --------------------------------------------------------------
TOTAL 15 shares issued and outstanding
2. Pursuant to the settlement of the Purjes Litigation, Purjes
shall be issued one and two-thirds (1 2/3) shares of CRP Common Stock. Such
issuance will increase the total number of shares of CRP Common Stock issued and
outstanding to sixteen and two-thirds (16 2/3) shares.
V-54
<PAGE> 211
Schedule 5.5
Consents
1. Consent of The Chase Manhattan Bank ("Chase") pursuant to the
Guaranty, dated as of December 1, 1984 by and among CRP, Leon Hertzson, Colonial
Glove and Garment, Inc. and Chase.
2. Waiver of Leon Hertzson ("Hertzson"), as Sublessor under a
Sublease Agreement, dated as December 1, 1984 by and among Hertzson, CRP and
Colonial Glove and Garment, Inc. ("Colonial"), with respect to certain rental
payments which are in arrears from April through October of 1996.
3. Waiver of Concord Growth Corporation, as lender under a
Revolving Credit Agreement, with respect to the breach of certain financial and
other covenants in such agreement. See Note 8 to the notes to the Audited
Financial Statements.
V-55
<PAGE> 212
Schedule 5.7
No Undisclosed Liabilities
1. The Financial Statements and the representations and
warranties made herein do not reflect any liabilities, current or deferred,
associated with CRP's termination of its S election under the Code. Such
liabilities may include, but are not limited to, tax liabilities that may result
from a negative net capital account in its limited partnership interest of
approximately $950,000 in Oakridge Apartments, and this amount may, in the
future, result in taxable income to the Surviving Corporation, which may have a
material adverse effect on the Surviving Corporation.
2. $350,000 Promissory Note of CRP to Boca.
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Schedule 5.8
Absence of Certain Changes
1. CRP is in arrears on payments under its Sublease Agreement,
dated as of December 1, 1987 by and among Leon Hertzson, CRP and Colonial Glove
and Garment, Inc., for the months of April, May, June, July, August, September
and October of 1996.
2. CRP has borrowed $350,000 from Boca pursuant to a promissory
note dated the date hereof.
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Schedule 5.9
Properties, Leases and Equipment
1. CRP subleases an approximately 65,000 square foot
manufacturing, warehouse and office building on an approximately seven acre site
in Ronkonkoma, New York.
2. CRP leases the following equipment from Advanta Leasing Corp.:
(a) Particle Counter -- lease dated July 11, 1995
(b) Vacuum Sealer -- lease dated February 5, 1996
3. CRP leases the following equipment from The Republic Group,
LLC:
(a) Web Cleaning System -- lease dated February 20, 1996
(b) Web Cleaning System -- lease dated April 18, 1996
V-58
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Schedule 5.10
Accounts Receivable
None.
V-59
<PAGE> 216
Schedule 5.11
Inventory
1. The inventory of CRP is subject to a first priority lien of
Concord Growth Corporation (the "Lender") in connection with a $2 million line
of credit extended pursuant to a Revolving Credit Agreement between CRP and the
Lender. See Note 8 to the notes to the Audited Financial Statements.
V-60
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Schedule 5.12
Patents, Trademarks, Servicemarks and Copyrights
See Attachment A hereto.
V-61
<PAGE> 218
ATTACHMENT A
REGISTERED TRADEMARKS
<TABLE>
<S> <C>
CRP. SOLUTIONS. PURE AND SIMPLE. CRE. SOLUTIONS. PURE AND SIMPLE
Registration No. 1,926,718 Registration No. 1,926,717
U.S. Servicemark Application No. 74/474,887 U.S. Trademark Application No. 74/474,272
BREATHER TUBING ULTRACLEAN FILM
Registration No. 1,979,014 Certificate of Registration No. 1,998,962
U.S. Trademark Appln. Serial No. U.S. Trademark Appln. Serial No.
74/535,978 74/498,080
FLEXI-GLOVE STAT-AWAY
U.S. Trademark Registration No. 1,902,560 Registration No. 1,422,409
COMMAND 2000 CRP (AND DESIGN)
Registration No. 1,916,151 Service Mark Received 9/96
U.S. Trademark Appln. Serial No. U.S. Serial No. 74/507,412
74/539,635
FILED FOR U.S. TRADEMARK REGISTRATION
CRE (AND DESIGN) CLEANRITE
Application filed for Service Mark U.S. Trademark Appln. Serial No.
U.S. Serial No. 75/152,653 74/490,629
As of 8/20/96 still waiting As of 9/26/96 CRP's application was
proceeding and a Notice of Allowance should
be forthcoming.
</TABLE>
CLEAN TRACK
Rejected 7/10/96
Still Waiting
SOF-SWAB
QUAT-2
HD DETERGENT
DUST MAGNET
CLEAN-N-DRI
REGISTERED U.S. PATENT
BREATHER BAG
Patent No. 5,536,356
V-62
<PAGE> 219
Schedule 5.13
Litigation
1. Florence Price, a former employee of CRP, brought an action in Small
Claims District Court of the County of Suffolk, Third District held at
Huntington Station for the alleged failure of CRP to timely make one of the
payments due under a certain salary continuation agreement between Ms. Price and
CRP, which provides for payments to Ms. Price of approximately $190,000 over the
next ten (10) years (the "Salary Agreement"). This action was dismissed on
January 29, 1997. On or about February 26, 1997, CRP was served with a complaint
alleging, inter alia, breach of the Salary Agreement, and praying for a
declaratory judgment, injunctive relief, attorney's fees and damages in the
amount of $200,000 plus accrued interest. CRP's defenses are anticipated to
include (i) that Ms. Price was dismissed for cause and (ii) that she is not, in
fact, disabled.
2. On October 9, 1996, CRP was served with a complaint captioned DGH
Systems, L.L.C., Plaintiff, against CRP, Defendant, Supreme Court of the State
of New York, County of Suffolk, Index No. 96-22570, for an alleged account
stated of $25,502.66 relating to alleged sales of goods. Although settlement
papers have not yet been filed, the parties have agreed in principle to a
settlement that will not require the payment of any consideration by CRP. DGH
will continue to service CRP on a cash-on-delivery basis.
3. Pending in Supreme Court, J.D. Hartford/New Britain, Connecticut, is a
claim against CRP by Liberty Industries, Inc. ("Liberty"). This complaint stems
from an alleged breach of a restrictive covenant by former Liberty employee John
Scheidel, in his new employment with CRP. The complaint includes claims for
breach of contract, misappropriation of trade secrets, unfair competition, and
interference with contract and seeks temporary and permanent injunctions, and
money damages. Although settlement papers have not yet been filed, Liberty has
agreed in principle to a lump sum payment of $16,000 in settlement of its
claims.
4. Pending in New York State Supreme Court, County of New York, is a claim
against CRP by Dan Purjes ("Purjes"). This action for specific performance stems
from the alleged breach of a contract between Purjes and CRP allegedly entered
into on or about May 30, 1993. Pursuant to the terms of the alleged contract,
Purjes invested monies in CRP in exchange for common stock of CRP and Colonial
Glove and Garment, Inc. The parties have agreed to settle this action in
exchange for the issuance to Purjes of 10% of the common stock of CRP.
5. On or about November 21, 1996, CRP was served with a verified complaint
of Richard Garrie Murphy II ("Murphy"), alleging breach of his employment
contract, bonus contract and severance agreement resulting in damages of (i)
$52,500 for breach of the bonus contract and (ii) an unspecified amount for
commissions allegedly owing under the employment agreement. No answer has yet
been filed. On or about December 26, 1996, CRP filed a verified answer and
counterclaims, including, but not limited to, breaches of Murphy's duties as an
employee, tortious interference with contractual advantage, and loss of goodwill
and damage to reputation. Counterclaim damages exceed the demands in the
verified complaint. On or about February 18,
V-63
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1997, Murphy responded with a reply to the counterclaims and a demand for bill
of particulars.
V-64
<PAGE> 221
Schedule 5.14
Reports and Taxes
On August 20, 1996, CRP entered into an agreement with the Town of
Islip Industrial Development Agency (the "IDA") restructuring its current
"payment in lieu of taxes" payment schedule under the Payment in Lieu of Taxes
("PILOT") Agreement dated December 21, 1994, between Leon Hertzson and the IDA.
V-65
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Schedule 5.15
Agreements
1. CRP is currently in default under its Sublease Agreement,
dated as December 1, 1984 by and among Leon Hertzson ("Hertzson"), CRP and
Colonial Glove and Garment, Inc. ("Colonial"), with respect to certain rental
payments which are in arrears from April through October of 1996. Because of
such default, CRP is in default under the Guaranty, dated as of December 1,
1984, by and among Hertzson, CRP, Colonial and The Chase Manhattan Bank, by
virtue of certain cross-default provisions therein.
2. CRP is contingently liable under an agreement with its
shareholders to redeem all or a portion of their common stock, in the event that
the remaining shareholders decline to purchase such stock when offered. The
purchase price of the common shares is based on either a bona-fide offer from a
third party or book value, adjusted as specified in the agreement.
3. CRP is a party to that certain employment agreement dated
March 2, 1993, with Paul Gerber.
4. Agreement dated August 30, 1996 by and between CRP and Town of
Islip Industrial Development Agency ("IDA"), modifying the Payment in Lieu of
Taxes (PILOT) Agreement dated December 21, 1987 by and between Hertzson and the
IDA.
5. On December 22, 1995, CRP entered into an agreement with
Concord Growth Corporation for a $2 million revolving credit facility with a
term of 2 years. The agreement provides for, among other things, a first
priority security interest on substantially all of the assets of CRP, as well as
the maintenance by CRP of minimum levels of net worth and certain financial and
other covenants. CRP is currently in default on certain of these covenants. CRP
has also entered into a $275,000 credit facility based upon eligible inventory,
as defined therein, with the same financial institution.
V-66
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Schedule 5.16
Employees and Labor Relations
1. See Schedule 5.13(1)
V-67
<PAGE> 224
Schedule 5.17
Employee Benefit Plans and ERISA
1. CRP maintains a qualified salary reduction plan under Section
401(k) of the Code, which covers substantially all employees. At the discretion
of the Board of Directors, CRP may match a portion of the employees'
contributions to the plan.
2. Oxford Freedom Plan (Comprehensive Healthcare Plan).
3. See Schedule 5.13(1).
V-68
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Schedule 6.2
Subsidiaries
None.
V-69
<PAGE> 226
Schedule 6.3
Capitalization
<TABLE>
<CAPTION>
No. of Shares of Boca
Common Stock Issuable
Name of Optionee Upon Exercise of Options
- ---------------- ------------------------
<S> <C>
Robert H. Arnold 10,000
Alan L. Jacobs 10,000
Ronald L. Miller 10,000
C. Lawrence Rutstein 10,000
Alan H. Weingarten 10,000
Franklyn B. Weichselbaum 10,000
------
Total 60,000
======
</TABLE>
V-70
<PAGE> 227
Schedule 6.6
SEC Reports and Financial Statements
None.
V-71
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Schedule 6.8
No Undisclosed Liabilities
On June 30, 1994, Boca entered into an Agreement and Plan of Merger
with Weitzer Homebuilders Incorporated ("WHB"), Weitzer Sub, Inc., Harry Weitzer
and certain corporations controlled by Harry Weitzer (the "Weitzer Entities").
During an examination of Boca by the staff of the Securities and Exchange
Commission (the "Commission") in the third quarter of 1994, Boca was informed
that its board of directors was improperly constituted in violation of the
Investment Company Act of 1940. As a result of a meeting among the Commission
and representatives of Boca, Boca agreed to a Consent Order for Preliminary
Injunction and Other Ancillary Relief (the "Consent Order") dated September 6,
1994 pursuant to which the then board of directors resigned and a receiver was
appointed to administer and manage the affairs and assets of the Company. The
Weitzer Entities terminated the proposed merger on December 23, 1994. The
receivership was terminated on March 14, 1995. In January 1997, Boca was
notified by WHB's legal counsel that WHB intended to seek alleged damages in
connection with unspecified claims relating to the terminated merger. As of the
date hereof, to the best of Boca's knowledge, WHB has not commenced any legal
proceedings against Boca.
V-72
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Schedule 6.10
Properties, Leases and Equipment
None.
V-73
<PAGE> 230
Schedule 6.11
Accounts Receivable
None.
V-74
<PAGE> 231
Schedule 6.12
Patents, Trademarks, Service Marks and Copyrights
None.
V-75
<PAGE> 232
Schedule 6.13
Litigation
See Schedule 6.8.
V-76
<PAGE> 233
Schedule 6.14
Reports and Taxes
None.
V-77
<PAGE> 234
Schedule 6.15
Agreements
None.
V-78
<PAGE> 235
Schedule 6.16
Employees and Labor Relations
None.
V-79
<PAGE> 236
Schedule 6.17
Employee Benefit Plans and ERISA
None.
V-80
<PAGE> 237
APPENDIX VI
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
CRP HOLDING CORP.
(originally incorporated on January 26, 1987 under the name U.S. Tech, Inc.)
The undersigned hereby certify that the following Amended and
Restated Articles of Incorporation, which:
(i) amend Articles I, IV, V and VI;
(ii) delete former Article VII in its entirety;
and
(iii) amend Articles VIII through XIII and
redesignate the same as articles VII through
XII, respectively,
were adopted by the Board of Directors at a meeting duly called and held on
____________ ____, 1997 and by the affirmative vote of the holders of the
requisite number of the issued and outstanding shares of common stock of CRP
Holding Corp. entitled to vote thereon at a special meeting of the shareholders
duly called and held on _______________ ____, 1997, all in accordance with the
Florida 1989 Business General Corporation Act and the Amended and Restated
Articles of Incorporation of CRP Holding Corp. then in effect.
ARTICLE I - NAME
The name of this corporation is CRP Holding Corp. (the
"Corporation").
ARTICLE II - COMMENCEMENT
The Corporation commenced business as of January 26, 1987, the
date of execution and acknowledgment of the Corporation's original Articles of
Incorporation.
ARTICLE III - PURPOSE
The Corporation is organized for the purpose of transacting
any or all lawful business.
VI-1
<PAGE> 238
ARTICLE IV - CAPITALIZATION
Section 4.1: Authorized Capital. The total number of shares of
all classes of stock which the Corporation shall have authority to issue is
Forty-five Million (45,000,000) shares, consisting of Forty Million (40,000,000)
shares of common stock, par value $.001 per share (the "Common Stock"), and Five
Million (5,000,000) shares of preferred stock, par value $1.00 per share (the
"Preferred Stock").
At any time and from time to time when authorized by
resolution of the Board of Directors of the Corporation (the "Board of
Directors") and without any action by its shareholders, the Corporation may
issue or sell any shares of its capital stock of any class or series, whether
out of the unissued shares thereof authorized by these Amended and Restated
Articles of Incorporation (the "Articles of Incorporation") or by any amendment
hereof or out of shares of its capital stock acquired by it after the issue
thereof, and whether or not the shares thereof so issued or sold shall confer
upon the holders thereof the right to exchange or convert such shares for or
into other shares of capital stock of the Corporation of any class or classes or
any series thereof . When similarly authorized, but without any action by its
shareholders, the Corporation may issue or grant rights, warrants or options, in
bearer or registered or such other form as the Board of Directors may determine,
for the purchase of shares of the capital stock of any class or series of the
Corporation within such period of time, or without limit as to time, to such
aggregate number of shares, and at such price per share, as the Board of
Directors may determine. Such rights, warrants or options may be issued or
granted separately or in connection with the issue of any bonds, debentures,
notes, obligations or other evidences of indebtedness or shares of the capital
stock of any class or series of the Corporation and for such consideration and
on such terms and conditions as the Board of Directors in its sole discretion
may determine. In each case the consideration to be received by the Corporation
for any such shares so issued or sold shall be such as shall be fixed from time
to time by resolution by the Board of Directors. Each share of the capital stock
of the corporation issued or sold pursuant to the foregoing provisions of this
Section 4.1 and the full consideration for which in each case as so fixed by the
Board of Directors shall have been paid or delivered to the Corporation, shall
be conclusively deemed to be fully paid stock and shall not be liable to any
further call or assessments thereon, and the holders thereof shall not be liable
for any further payments in respect thereof. The Corporation may receive in
payment, in whole or in part, for any shares of its capital stock issued or sold
by it, cash, labor done, personal property or real property or leases thereof,
and in the absence of actual fraud in the transaction, the judgment of the Board
of Directors as to the value of the labor, personal property or real property or
leases thereof so received shall be conclusive.
Section 4.2. Preferred Stock.
(a) The Board of Directors shall have authority by
resolution to issue the shares of Preferred Stock from time to
time on such terms as it may determine, to divide the
Preferred Stock into one or more series, and in connection
with the creation of any such series, in the resolution or
resolutions providing for the issuance of shares of such
particular series, to determine and fix the following:
VI-2
<PAGE> 239
(i) The distinctive designation of such series,
the number of shares which shall constitute such
series, which number may be increased or decreased
(but not below the number of shares then outstanding)
from time to time by action of the Board of
Directors, and the stated value thereof, if different
from the par value thereof;
(ii) The dividend rate, the times of payment of
dividends on the shares of such series, whether
dividends shall be cumulative, and, if so, from what
date or dates, and the preference or relation which
such dividends will bear to the dividends payable on
any shares of stock of any other class or any other
series of this class;
(iii) The price or prices at which, and the
terms and conditions on which, the shares of such
series may be redeemed;
(iv) The times, terms, and conditions, if any,
upon which shares of such series shall be subject to
redemption, including the amount the holders of
shares of such series shall be entitled to receive
upon redemption (which amounts may vary under
different conditions or at different redemption
dates) and the amount, terms, and conditions and
manner of operation of any purchase, retirement, or
sinking fund to be provided for the shares of such
series;
(v) Whether or not the shares of such series
shall be convertible into, or exchangeable for, any
other shares of stock of the Corporation or any other
securities and, if so convertible or exchangeable,
the conversion price or prices, or the rates of
exchange, and any adjustments thereof, at which such
conversion or exchange may be made, and any other
terms and conditions of such conversion or exchange;
(vi) The rights of the shares of such series in
the event of voluntary or involuntary liquidation,
dissolution or winding up, or upon any distribution
of the assets, of the Corporation;
(vii) Whether or not the shares of such
series shall have priority over or parity with or be
junior to the shares of any other class or series in
any respect, or shall be entitled to the benefit of
limitations restricting (a) the creation of
indebtedness of the Corporation, (b) the issuance of
shares of any other class or series having priority
over or being on a parity with the shares of such
series in any respect, or (c) the payment of
dividends on, the making of other distributions in
respect of, or the purchase or redemption of shares
of any other class or series on a parity with or
ranking junior to the shares of such series as to
dividends or assets, and the terms of any such
restrictions, or any other restriction with respect
to
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shares of any other class or series on a parity with
or ranking junior to the shares of such series in any
respect;
(viii) Whether such series shall have voting
rights, in addition to any voting rights provided by
law and, if so, the terms of such voting rights,
which may be general or limited; and
(ix) Any other powers, preferences,
privileges, and relative, participating, optional, or
other special rights of such series, and the
qualifications, limitations or restrictions thereof,
to the full extent now or hereafter permitted by law.
(b) The powers, preferences and relative,
participating, optional and other special rights of each
series of Preferred Stock, and the qualifications, limitations
or restrictions thereof, if any, may differ from those of any
and all other series at any time outstanding. All shares of
any one series of Preferred Stock shall be identical in all
respects with all other shares of such series, except that
shares of any one series issued at different times may differ
as to the dates from which dividends thereon shall be
cumulative.
(c) All Preferred Stock redeemed, purchased or
otherwise acquired by the Corporation (including shares
surrendered for conversion) shall be canceled and thereupon
restored to the status of authorized but unissued Preferred
Stock undesignated as to series.
Section 4.3. Common Stock. A statement of the designations,
powers, preferences, rights, qualifications, limitations and restrictions in
respect of the shares of Common Stock is as follows:
(a) Subject to the provisions of law and the rights
of any Preferred Stock and any other class or series of stock
having a preference as to dividends over the Common Stock then
outstanding, dividends may be paid on the Common Stock, out of
funds legally available therefor, at such times and in such
amounts as the Board of Directors shall from time to time
determine.
(b) In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the
Corporation, after payment or provision for payment of the
debts and other liabilities of the Corporation and the
preferential amounts to which the holders of the Preferred
Stock shall be entitled upon liquidation, the holders of
Common Stock shall be entitled, to the exclusion of the
holders of Preferred Stock, to share, ratably according to the
number of shares of Common Stock held by them, in all
remaining assets of the Corporation available for distribution
to its shareholders. For purposes of this Section 4.3(b),
neither the voluntary sale, conveyance, exchange or transfer
(for cash, shares of stock, securities or other consideration)
of all or substantially all of the property or assets
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of the Corporation nor the consolidation or merger of the
Corporation with any other corporation shall be deemed to be a
voluntary or involuntary liquidation, dissolution or winding
up of the Corporation, unless such voluntary sale, conveyance,
exchange or transfer shall be in connection with a plan of
liquidation, dissolution or winding up of the Corporation.
(c) Except as otherwise provided in this Certificate
of Incorporation or by applicable law, the holders of Common
Stock shall be entitled to vote on each matter on which the
shareholders of the Corporation shall be entitled to vote.
Each share of Common Stock shall have one vote, and the Common
Stock shall vote together as a single class.
ARTICLE V - MANAGEMENT OF THE CORPORATION
The following provisions are inserted for the management of
the business and the conduct of affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and shareholders:
Section 5.1: Powers of the Board of Directors. The business
and affairs of the Corporation shall be managed by or under the direction of the
Board of Directors. In addition to the powers and the authority expressly
conferred upon them by statute or by the Articles of Incorporation or the
By-Laws of the Corporation, the Board of Directors is hereby empowered to
exercise all such powers and do all such acts and things as may be exercised or
done by the Corporation.
Section 5.2: Election by Written Ballot. The directors of the
Corporation need not be elected by written ballot, unless the By-Laws so
provide.
Section 5.3: Shareholder Action. Any action required or
permitted to be taken by the shareholders of the Corporation at any annual or
special meeting of the shareholders may not be effected by any consent in
writing by such shareholders unless such consent shall be signed by the holders
of at least 66 2/3% of the combined voting power of the then outstanding shares
of Voting Stock or such higher vote as may be required by the Articles of
Incorporation, voting together as a single class. "Voting Stock" shall mean the
Common Stock and any shares of Preferred Stock issued pursuant to Section 4.1
hereof entitled to vote as a single class with the Common Stock.
Section 5.4: Special Meetings of Shareholders. Except as
otherwise required by law and subject to the rights of the holders of Preferred
Stock or any other class or series of stock having a preference over the Common
Stock as to dividends or upon liquidation, special meetings of the shareholders
of the Corporation may be called only by (i) the Chairman of the Board of
Directors, (ii) the President of the Corporation, (iii) the Board of Directors
pursuant to a resolution adopted by a majority of the directors, or (iv) the
holders of at least 50% of the Voting Stock of the Corporation.
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ARTICLE VI - BOARD OF DIRECTORS
Section 6.1: Classification of Board. Except as otherwise
fixed by or pursuant to the provisions of Article IV hereof relating to the
rights of the holders of any class or series of stock having a preference over
the Common Stock as to dividends or upon liquidation, the number of the
directors of the Corporation shall be fixed from time to time by or pursuant to
the By-Laws of the Corporation. The directors, other than those who may be
elected by the holders of the Preferred Stock or any other class or series of
stock having a preference over the Common Stock as to dividends or upon
liquidation pursuant to the terms of the Articles of Incorporation or any
resolution or resolutions providing for the issue of such class or series of
stock adopted by the Board of Directors, shall be classified, with respect to
the time for which they severally hold office, into three classes, as nearly
equal in number as possible, as shall be provided in the By-Laws of the
Corporation, one class to be originally elected for a term expiring at the
annual meeting of shareholders to be held in 1998, another class to be
originally elected for a term expiring at the annual meeting of shareholders to
be held in 1999, and another class to be originally elected for a term expiring
at the annual meeting of shareholders to be held in 2000, with each class to
hold office until its successors are elected and qualified. At each annual
meeting of the shareholders of the Corporation commencing in 1998, the date of
which shall be fixed by or pursuant to the By-Laws of the Corporation, the
successors of the class of directors whose term expires at that meeting shall be
elected to hold office for a term expiring at the annual meeting of shareholders
held in the third year following the year of their election. If the number of
directors constituting the Board of Directors is changed, any increase or
decrease shall be apportioned among the classes so as to maintain the number of
directors in each class as nearly equal as possible, and any additional
directors of any class elected to fill a vacancy resulting from an increase in
such class shall hold office for a term that shall coincide with the remaining
term of that class, but in no event shall a decrease in the number of directors
constituting the total number of directors which the Corporation would have if
there were no vacancies, shorten the term of any incumbent director. A director
shall hold office until the annual meeting of the shareholders for the year in
which his term expires and until his successor shall be elected and shall
qualify, subject however, to prior death, resignation, retirement,
disqualification or removal from office.
Notwithstanding the foregoing, whenever the holders of any one
or more classes or series of Preferred Stock issued by the Corporation shall
have the right, voting separately by class or series, to elect directors at an
annual or special meeting of shareholders, the election, term of office, filling
of vacancies and other features of such directorships shall be governed by the
terms of the Articles of Incorporation or the resolution or resolutions adopted
by the Board of Directors pursuant to Article IV, Section 4.2 applicable
thereto, and such directors so elected shall not be divided into classes
pursuant to this Article VI unless expressly provided by such terms.
Section 6.2: Notice of Nominations. Advance notice of
shareholder nominations for the election of directors and of business to be
brought by shareholders before any meeting of the shareholders of the
Corporation shall be given in the manner provided in the By-Laws of the
Corporation.
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Section 6.3. Vacancies. Except as otherwise provided for or
fixed by or pursuant to the provisions of Article IV hereof relating to the
rights of the holders of any class or series of stock having a preference over
the Common Stock as to dividends or upon liquidation, newly created
directorships resulting from any increase in the number of directors may be
filled by the Board of Directors, or as otherwise provided in the By-Laws of the
Corporation, and any vacancies on the Board of Directors resulting from death,
resignation, removal or other cause shall only be filled by the affirmative vote
of a majority of the remaining directors then in office, even though less than a
quorum of the Board of Directors, or by a sole remaining director, or as
otherwise provided in the By-Laws. Any director elected in accordance with the
preceding sentence of this Section 6.3 shall hold office for the remainder of
the full term of the class of directors in which the new directorship was
created or the vacancy occurred and until such director's successor shall have
been elected and qualified.
Section 6.4. Removal of Directors. Subject to any rights of
any class or series of stock having a preference over the Common Stock as to
dividends or upon liquidation, any director may be removed from office only for
cause and only by the affirmative vote of the holders of at least 80% of the
combined voting power of the then outstanding shares of Voting Stock, voting
together as a single class.
ARTICLE VII - ACQUISITION OFFERS
A director, when evaluating any offer of another person to (i)
make a tender or exchange offer for any equity security of the Corporation, (ii)
merge or consolidate the Corporation, or cause the Corporation to conduct a
share exchange or other combination, with another corporation or entity, or
(iii) purchase or otherwise acquire all or substantially all of the properties
and assets of the Corporation, in connection with the exercise of its judgment
in determining what is in the best interests of the Corporation and its
shareholders, shall give due consideration to the interests of the Corporation's
shareholders, and, in his discretion, may consider the following: (a) the social
and economic effect of acceptance of such offer on the Corporation's present and
future customers, suppliers, creditors, and employees and those of its
subsidiaries; (b) on the communities in which the Corporation and its
subsidiaries operate or are located; and (c) the long-term as well as short-term
interests of the Corporation, its subsidiaries and its shareholders, including
the possibility that these interests may be best served by the continued
independence of the Corporation.
ARTICLE VIII - INDEMNIFICATION
The Corporation shall indemnify and may advance expenses to
its officers and directors, and may indemnify its employees and agents, to the
fullest extent permitted by the provisions of the Florida 1989 Business
Corporation Act, as the same may be amended and supplemented. The
indemnification provided for herein shall not be deemed exclusive of any other
rights to which those indemnified may be entitled under any By-law, agreement,
vote of shareholders or disinterested directors or otherwise, both as to action
in his or her official capacity and as to action in another capacity while
holding such office. Such indemnification
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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 and personal
representatives of such a person. An adjudication of liability shall not affect
the right to indemnification for those indemnified.
ARTICLE IX - AMENDMENTS
Section 9.1: Amendment of Articles of Incorporation. The
Corporation reserves the right to amend or repeal any provision contained in the
Articles of Incorporation in the manner prescribed by the laws of the State of
Florida and all rights conferred upon shareholders are granted subject to this
reservation; provided, however, that in addition to any other provisions of the
Articles of Incorporation or requirements of law (and notwithstanding the fact
that a lesser percentage may be specified by the Articles of Incorporation or
any By-law), the affirmative vote of the holders of at least 66 2/3% or more of
the combined voting power of the then-outstanding shares of Voting Stock, voting
together as a single class, shall be required to amend, modify or repeal or
adopt any provision inconsistent with this Article IX or any of Articles IV, V,
VI, VIII, X, or XI herein.
Section 9.2: Amendment of By-Laws. The By-Laws of the
Corporation may be altered or repealed and By-Laws may be made at any annual
meeting of the shareholders or at any special meeting thereof if notice of the
proposed alteration or repeal of By-Law or By-Laws to be made be contained in
the notice of such special meeting, by the affirmative vote of the holders of at
least 66-2/3% of the voting power of all the then outstanding Voting Stock, or
by the affirmative vote of a majority of the Board, at any regular meeting of
the Board, or at any special meeting of the Board, if notice of the proposed
alteration or repeal, or By-Law or By-Laws to be made, be contained in the
notice of such special meeting.
ARTICLE X - AFFILIATED TRANSACTIONS
The Corporation elects not to be subject to the provisions of
Florida Statutes Section 607.0901 regarding Affiliated Transactions.
ARTICLE XI - CONTROL SHARE ACQUISITIONS
The Corporation elects not to be subject to the provisions of
the Florida Statutes Section 607.0902, or any successor statute thereto,
regarding Control-Share Acquisitions and rescinds its prior election to be
subject to said statute.
ARTICLE XII - REGISTERED OFFICE AND AGENT
The street and mailing address of the registered office of the
Corporation is 2300 West Glades Road, West Tower, Suite 440, Boca Raton, Florida
33431 and the name and address of the registered agent is Corporation Service
Company, 1201 Hays Street, Tallahassee, Florida 32301.
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IN WITNESS WHEREOF, CRP HOLDING CORP. has caused these Amended
and Restated Articles of Incorporation this ___ day of ___________, 1997.
-----------------------------
Alan L. Jacobs, President
ATTEST:
- -------------------------
Franklyn B. Weichselbaum
Secretary
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APPENDIX VII
AMENDED AND
RESTATED BY-LAWS
OF
CRP HOLDING CORP.
(As Adopted on _________ ___, 1997)
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of CRP Holding
Corp. (the "Corporation") shall be established and maintained at 2300 West
Glades Road, West Tower, Suite 440, Boca Raton, Florida, and the registered
agent of said corporation shall be Corporation Service Company, 1201 Hays
Street, Tallahassee, Florida 32301.
SECTION 2. OTHER OFFICES. The Corporation may have other offices,
either within or without the State of Florida, at such place or places as the
Board of Directors (the "Board") may from time to time appoint or the business
of the Corporation may require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
SECTION 1. ANNUAL MEETINGS. Annual meetings of shareholders for the
election of directors, and for the transaction of such other business as may
properly be brought before the meeting, shall be held at such place, either
within or without the State of Florida, and at such time and date as the Board,
by resolution, shall determine and as set forth in the notice of the meeting. In
the event the Board fails to so determine the time, date and place of meeting,
the annual meeting of shareholders shall be held at the principal executive
office of the Corporation in Florida at 10:00 a.m. on the first Tuesday in
March. If the date of the annual meeting shall fall upon a legal holiday, the
meeting shall be held on the next succeeding business day. At each annual
meeting, the shareholders entitled to vote shall elect directors and transact
such other business as shall be properly brought before the meeting.
SECTION 2. SPECIAL MEETINGS. Except as otherwise fixed by or pursuant
to the provisions of the Amended and Restated Articles of Incorporation (the
"Articles of Incorporation") relating to the rights of the holders of any class
or series of stock having a preference over the common stock, par value $.001 of
the Corporation (the "Common Stock") as to dividends or upon liquidation,
special meetings of the shareholders may be called at any time only by (i) the
Chairman of the Board, (ii) the President, (iii) the Board pursuant to a
resolution
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to dividends or upon liquidation, special meetings of the shareholders may be
called at any time only by (i) the Chairman of the Board, (ii) the President,
(iii) the Board pursuant to a resolution adopted by a majority of the directors
then in office, or (iv) the holders of at least 50% of the Voting Stock of the
Corporation. Special meetings shall be held on such day, at such time and such
place either within or without the State of Florida specified in the notice
thereof. "Voting Stock" shall mean the Common Stock together with any other
shares of stock of the Corporation entitled to vote together as a single class.
SECTION 3. VOTING. Each shareholder shall be entitled to vote in
accordance with the terms of the Articles of Incorporation and in accordance
with the provisions of these By-Laws, in person or by proxy, but no proxy shall
be voted after eleven (11) months from its date unless such proxy provides for a
longer period. A duly executed proxy shall be irrevocable if it states that it
is irrevocable and if, and only as long as, it is coupled with an interest
legally sufficient to support an irrevocable power. A shareholder may revoke any
proxy which is not irrevocable by attending the meeting and voting in person or
by filing with the person recording the proceedings of the meeting an instrument
in writing revoking the proxy or another duly executed proxy bearing a later
date. Upon the demand of any shareholder, the vote for directors and the vote
upon any question before the meeting, shall be by ballot. All elections for
directors shall be decided by plurality vote; all other questions shall be
decided by majority vote except as otherwise provided by the Articles of
Incorporation or the laws of the State of Florida.
Where a separate vote by a class or classes, present in person or
represented by proxy, shall constitute a quorum entitled to vote on that matter,
the affirmative vote of the majority of shares of such class or classes present
in person or represented by proxy at the meeting shall be the act of such class,
unless otherwise provided in the Articles of Incorporation or the laws of the
State of Florida.
SECTION 4. QUORUM. Except as otherwise required by law, by the Articles
of Incorporation or by these By-Laws, the presence, in person or by proxy, of
shareholders holding a majority of the Voting Stock, represented in person or by
proxy, shall constitute a quorum at all meetings of the shareholders. In case a
quorum shall not be present at any meeting, the chairman of the meeting or a
majority in interest of the shareholders entitled to vote thereat, present in
person or by proxy, shall have power to adjourn the meeting from time to time,
without notice other than announcement at the meeting, until the requisite
amount of stock entitled to vote shall be present. At any such adjourned meeting
at which the requisite amount of stock entitled to vote shall be represented,
any business may be transacted which might have been transacted at the meeting
as originally noticed; but only those shareholders entitled to vote at the
meeting as originally noticed shall be entitled to vote at any adjournment or
adjournments thereof.
SECTION 5. NOTICE OF MEETINGS. Written or printed notice, stating the
place, date and time of the meeting, and the general purpose or purposes for
which the meeting is called, shall be delivered by the Corporation to each
shareholder entitled to vote thereat at his address as it appears on the records
of the Corporation, not less than ten nor more than sixty days before the date
of the meeting. Notice shall be given in the manner provided by law, by or at
the direction of the Chairman of the Board, President, Secretary or the persons
calling the meeting.
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If mailed, such notice shall be deemed to be delivered when deposited in the
United States mail with postage thereon prepaid, addressed to the shareholder at
his address as it appears on the stock transfer books of the Corporation. Such
further notice shall be given as may be required by law. Only such business
shall be conducted at a special meeting of shareholders as shall have been
brought before the meeting pursuant to the Corporation's notice of meeting.
SECTION 6. NOTICE OF SHAREHOLDER BUSINESS AND NOMINATIONS.
(a) Annual Meetings of shareholders. Nominations of persons
for election to the Board and the proposal of business to be considered
by the shareholders may be made at an annual meeting of shareholders
(1) pursuant to the Corporation's notice of meeting, (2) by or at the
direction of the Board or (3) by any shareholder of the Corporation who
was a shareholder of record at the time of giving of notice provided
for in this By-Law, who is entitled to vote at the meeting and who
complies with the notice procedures set forth in this By-Law.
(i) For nominations or other business to be properly
brought before an annual meeting by a shareholder pursuant to
clause (3) of paragraph (a) above, the shareholder must have
given timely notice thereof in writing to the Secretary of the
Corporation and such other business must otherwise be a proper
matter for shareholder action. To be timely, a shareholder's
notice shall be delivered to the Secretary at the principal
executive offices of the Corporation not later than the close
of business on the 60th day nor earlier than the close of
business on the 90th day prior to the first anniversary of the
preceding year's annual meeting; provided, however, that in
the event that the date of the annual meeting is more than 30
days before or after such anniversary date, notice by the
shareholder to be timely must be so delivered not later than
the close of business on the 10th day following the earlier of
(A) the day on which notice of the date of the meeting was
delivered to shareholders in accordance with Section 5 of this
Article II, and (B) the day on which public announcement of
the date of such meeting is first made by the Corporation. In
no event shall the public announcement of an adjournment of an
annual meeting commence a new time period for the giving of a
shareholder's notice as described above. Such shareholder's
notice shall set forth (x) as to each person whom the
shareholder proposes to nominate for election or reelection as
a director, all information relating to such person that is
required to be disclosed in solicitations of proxies for
election of directors in an election contest or is otherwise
required, in each case, pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and Rule 14a-11 thereunder (including such person's
written consent to being named in the proxy statement as a
nominee and to serving as a director if elected); (y) as to
any other business that the shareholder proposes to bring
before the meeting, a brief description of the business
desired to be brought before the meeting, the reasons for
conducting such business at the meeting and any material
interest in such business of such shareholder and the
beneficial owner, if any, on whose behalf the proposal is
made; and (z) as to the shareholder giving the notice and the
beneficial owner, if any, on whose behalf the nomination or
proposal is made (I) the name
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and address of such shareholder, as they appear on the
Corporation's books, and of such beneficial owner and (II) the
class and number of shares of stock of the Corporation which
are owned beneficially and of record by such shareholder and
such beneficial owner.
(ii) Notwithstanding anything in these By-Laws to the
contrary, in the event that the number of directors to be
elected to the Board is increased and there is no public
announcement by the Corporation naming all of the nominees for
director or specifying the size of the increased Board at
least 70 days prior to the first anniversary of the preceding
year's annual meeting, a shareholder's notice required by this
By-Law shall also be considered timely, but only with respect
to nominees for any new positions created by such increase, if
it shall be delivered to the Secretary at the principal
executive offices of the Corporation not later than the close
of business on the 10th day following the day on which such
public announcement is first made by the Corporation.
(b) Special Meetings of shareholders. Only such business shall
be conducted at a special meeting of shareholders as shall have been
brought before the meeting pursuant to the Corporation's notice of
meeting. Nominations of persons to the Board may be made at a special
meeting of shareholders at which directors are to be elected pursuant
to the Corporation's notice of meeting (i) by or at the direction of
the Board or (ii) provided that the Board has determined that directors
shall be elected at such meeting, by any shareholder of the Corporation
who is a shareholder of record at the time of giving of notice provided
for in this By-Law, who shall be entitled to vote at the meeting and
who complies with the notice procedures set forth in this By-Law. In
the event the Corporation calls a special meeting of shareholders for
the purpose of electing one or more directors to the Board, any such
shareholder may nominate a person or persons (as the case may be), for
election to such positions as specified in the Corporation's notice of
meeting, if the shareholder's notice required by these By-Laws shall be
delivered to the Secretary at the principal executive offices of the
Corporation not earlier than the close of business on the 90th day
prior to such special meeting and not later than the close of business
on the later of the 60th day prior to such special meeting or the 10th
day following the day on which public announcement is first made of the
date of the special meeting and of the nominees proposed by the Board
to be elected at such meeting. In no event shall the public
announcement of an adjournment of a special meeting commence a new time
period for the giving of a shareholder's notice as described above.
(c) General.
(i) Only such persons who are nominated in accordance
with the procedures set forth in this By-Law shall be eligible
to serve as directors and only such business shall be
conducted at a meeting of shareholders as shall have been
brought before the meeting in accordance with the procedures
set forth in this By-Law. Except as otherwise provided by law,
the Articles of Incorporation or these By-Laws, the chairman
of the meeting shall have the power and duty to determine
whether a nomination or any business proposed to be brought
before the meeting was made or proposed, as the case may be,
in accordance with the procedures set forth in this By-Law
and, if any proposed nomination or business is not in
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compliance with this By-Law, to declare that such defective
proposal or nomination shall be disregarded.
(ii) For purposes of this By-Law, "public
announcement" shall mean disclosures in a press release
reported by the Dow Jones News Service, Associated Press or
comparable national news service or in a document publicly
filed by the Corporation with the Securities and Exchange
Commission pursuant to Section 13, 14 or 15(d) of the Exchange
Act.
(iii) Notwithstanding the foregoing provisions of
this By-Law, a shareholder shall also comply with all
applicable requirements of the Exchange Act and the rules and
regulations thereunder with respect to the matters set forth
in this By-Law. Nothing in this By-Law shall be deemed to
affect any rights of shareholders to request inclusion of
proposals in the Corporation's proxy statement pursuant to
Rule 14a-8 under the Exchange Act.
SECTION 7. SHAREHOLDERS LIST. A complete list of the shareholders
entitled to vote at any meeting of the shareholders, arranged in alphabetical
order, with the address of each, and the number of shares held by each, shall be
open to the examination of any shareholder, for any purpose germane to the
meeting, during ordinary business hours, for a period of at least ten (10) days
prior to the meeting, either 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 shall also
be produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any shareholder who is present.
SECTION 8. ADDRESSES OF SHAREHOLDERS. Each shareholder shall designate
to the Secretary of the Corporation an address to which notice of meetings and
all other corporate notices may be served upon or mailed to him, and if any
shareholder shall fail to designate such address, corporate notices may be
served upon him by mail directed to him at his last known post office address.
SECTION 9. INSPECTORS OF ELECTION. The Board may at any time appoint
one or more persons to serve as Judges of Voting at the next succeeding annual
meeting of shareholders or at any other meeting or meetings and the Board may at
any time fill any vacancy in the office of Judges of Voting. If the Board fails
to appoint Judges of Voting, or if any Judges of Voting appointed be absent or
refuse to act, or if his office becomes vacant and be not filled by the Board,
the chairman of any meeting of the shareholders may appoint one or more
temporary Judges of Voting for such meeting. All proxies shall be filed with the
Judges of Voting of the meeting before being voted upon. Each Judge, if any,
before entering upon the discharge of his or her duties, shall take and sign an
oath faithfully to execute the duties of Judge at such meeting with strict
impartiality and according to the best of his ability. The Judges, if any, shall
determine the number of shares of stock outstanding and voting power of each,
the shares of stock represented at the meeting, the existence of a quorum, and
the validity and effects of proxies, and shall receive votes, ballots or
consents, hear and determine all challenges and
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questions arising in connection with the right to vote, count and tabulate all
votes, ballots or consents, determine the result, and do such acts as are proper
to conduct the election or vote with fairness to all shareholders. On request of
the person presiding at the meeting, the Judge or Judges, if any, shall make a
report in writing of any challenge, question or matter determined by such Judge
or Judges and execute a certificate of any fact found by such Judge or Judges.
No director or candidate for the office of director shall act as a Judge of an
election of directors.
SECTION 10. SHAREHOLDER ACTION WITHOUT MEETING. Any action required or
permitted to be taken by the shareholders of the Corporation at any annual or
special meeting of the shareholders may not be effected by any consent in
writing by such shareholders unless such consent shall be signed by the holders
of at least 66 2/3% of the combined voting power of the then outstanding shares
of Voting Stock or such higher vote as may be required by the Articles of
Incorporation, voting together as a single class.
ARTICLE III
DIRECTORS
SECTION 1. NUMBER, QUALIFICATION, TERM OF OFFICE AND ELECTION. Except
as otherwise fixed by or pursuant to the provisions of the Articles of
Incorporation relating to the rights of the holders of any class or series of
stock having a preference over the Common Stock as to dividends or upon
liquidation, the number of directors shall be such as the Board may from time to
time by resolution of a majority of the directors then in office directs but
shall consist of not more than nine nor less than three directors. Directors
need not be shareholders. The directors, other than those who may be elected by
the holders of any class or series of stock having a preference over the Common
Stock as to dividends or upon liquidation pursuant to the terms of the Articles
of Incorporation or any resolution or resolutions providing for the issue of
such class or series of stock adopted by the Board, shall be classified, with
respect to the time for which they severally hold office, into three classes, as
nearly equal in number as possible, one class to be originally elected for a
term expiring at the annual meeting of shareholders to be held in 1998, another
class to be originally elected for a term expiring at the annual meeting of
shareholders to be held in 1999, and another class to be originally elected for
a term expiring at the annual meeting of shareholders to be held in 2000, with
each class to hold office until its successors are elected and qualified. At
each annual meeting of the shareholders of the Corporation, the successors of
the class of directors whose term expires at that meeting shall be elected to
hold office for a term expiring at the annual meeting of shareholders held in
the third year following the year of their election. Each director shall hold
office for the term for which he is appointed or elected and until his
successor, if any, shall have been elected and shall have qualified, or until
his death or until he shall have resigned or shall have been removed in the
manner hereinafter provided. Directors need not be elected by ballot, except
upon demand of any shareholder.
SECTION 2. RESIGNATIONS. Any director, member of a committee or other
officer may resign at any time. Such resignation shall be made in writing, and
shall take effect at the
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time specified therein, or if no time be specified, at the time of its receipt
by the Chairman, the Chief Executive Officer, the Chief Financial Officer, the
President, any Vice-President, or the Secretary. The acceptance of a resignation
shall not be necessary to make it effective.
SECTION 3. VACANCIES. Unless the Board otherwise determines, vacancies
resulting from death, resignation, retirement, disqualification, removal from
office or other cause, and newly created directorships resulting from any
increase in the authorized number of directors, may be filled only by the
affirmative vote of a majority of the remaining directors then in office, though
less than a quorum of the Board, and directors so chosen shall hold office for a
term expiring at the annual meeting of shareholders at which the term of office
of the class to which they have been elected expires and until such director's
successor shall have been duly elected and qualified. No decrease in the number
of authorized directors constituting the total number of directors of the
Corporation, if there were no vacancies, shall shorten the term of any incumbent
director.
SECTION 4. REMOVAL. Subject to the rights of any class or series of
stock having a preference over the Common Stock as to dividends or upon
liquidation, any director, or the entire Board, may be removed from office at
any time, but only for cause and only by the affirmative vote of the holders of
at least 80% of the combined voting power of all of the then-outstanding shares
of Voting Stock, voting together as a single class.
SECTION 5. POWERS. The Board shall exercise all of the powers of the
Corporation except such as are by law, or by the Articles of Incorporation or by
these By-Laws conferred upon or reserved to the shareholders.
SECTION 6. COMMITTEES. The Board may, by resolution or resolutions
adopted by a majority of the full Board, designate one or more committees, each
committee to consist of two or more of the directors of the Corporation. The
Board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. In the absence or disqualification of any member of such committee or
committees, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board to act at the meeting in the
place of any such absent or disqualified member.
Any such committee, to the extent provided in the resolution of the
Board, or in these By-Laws, shall have and may exercise all the powers and
authority of the Board in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be affixed to all
papers which may require it; but no such committee shall have such power or
authority in reference to amending the Articles of Incorporation, adopting an
agreement of merger or consolidation, recommending to the shareholders the sale,
lease or exchange of all or substantially all of the Corporation's property and
assets, recommending to the shareholders a dissolution of the Corporation or a
revocation of a dissolution, or amending the By-Laws of the Corporation; and,
unless the resolution, these By-Laws or the Articles of Incorporation expressly
so provide, no such committee shall have the power or authority to declare a
dividend or to authorize the issuance of stock.
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SECTION 7. MEETINGS.
(a) Regular Meetings. Regular meetings of the Board may be
held without notice of the time, date, place or purpose of such
meeting, at such places and times as shall be determined from time to
time by resolution of the directors.
(b) Special Meetings. Special meetings of the Board may be
called by the Chairman, the Chief Executive Officer, the President, or
by the Secretary on the written request of any two directors on at
least two hours' notice to each director and shall be held at such
place or places as may be determined by the directors, or as shall be
stated in the notice of the meeting; provided, however, that if such
meeting is held on less than two days' notice, notice thereof must be
given telephonically or by telecopy to such director's principal place
of business or personally to such director.
(c) Participation in Meetings. Unless otherwise restricted by
the Articles of Incorporation or these By-Laws, members of the Board,
or any committee designated by the Board, may participate in a meeting
of the Board, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons
participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at the
meeting.
SECTION 8. ACTION BY THE BOARD. Any act of the Board shall require the
approval of a majority of the directors then in office unless the Articles of
Incorporation or these By-Laws shall require the vote of a greater number.
SECTION 9. COMPENSATION. By resolution of the Board, directors may
receive a stated salary for their services as directors or as members of
committees, or by resolution of the Board, a fixed fee and expenses of
attendance may be allowed for attendance at each meeting. Nothing herein
contained shall be construed to preclude any director from serving the
Corporation in any other capacity as an officer, agent or otherwise, and
receiving compensation therefor.
SECTION 10. ACTION WITHOUT MEETING. Any action required or permitted to
be taken at any meeting of the Board, or of any committee thereof, may be taken
without a meeting by the unanimous written consent of all members of the Board
then in office, or of such committee as the case may be. Such written consent
shall be filed with the minutes of proceedings of the Board or committee.
SECTION 11. GENERAL STANDARDS FOR DIRECTORS.
(a) A director shall discharge his duties as a director,
including his duties as a member of any committee of the Board upon
which he may serve, in good faith, with the care of an ordinarily
prudent person in a like position would exercise under similar
circumstances, and in a manner he reasonably believes to be in the best
interests of the Corporation.
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(b) In discharging his duties, a director shall be entitled to
rely on information, opinions, reports or statements, including
financial statements and other financial data, in each case prepared or
presented by:
(i) one or more officers or employees of the
Corporation whom the director reasonably believes to be
reliable and competent in the matters presented;
(ii) legal counsel, public accountants or other
persons as to matters which the director reasonably believes
to be within such persons' professional or expert competence;
or
(iii) a committee of the Board upon which he does not
serve, duly designated in accordance with a provision of the
Articles of Incorporation or these By-Laws, as to matters
within its designated authority, which committee the director
reasonably believes to merit confidence.
(c) A director shall not be considered to be acting in good
faith if he has knowledge concerning the matter in question that would
cause such reliance described above to be unwarranted.
(d) In discharging his duties, a director may consider such
factors as the director deems relevant, including the long term
prospects and interests of the Corporation, and its shareholders, and
the social, economic, legal, or other effects of any action on the
employees, suppliers, customers of the Corporation or its subsidiaries;
the communities and society in which the Corporation or its
subsidiaries operate; and the economy of the state of the nation.
(e) A person who performs his duties in compliance with this
Section 11 shall have no liability for any action taken as a director,
or any failure to take any action, if he performed the duties of his
office in compliance with this Section 11.
SECTION 12. DIRECTORS CONFLICTS OF INTEREST. No contract or other
transaction between this Corporation and one or more of its directors or any
other corporation, firm, association, or entity in which one or more of the
directors are directors or officers or are financially interested, shall be
either void or voidable because of such relationship or interest because such
director or directors are present at the meeting of the Board or a committee
thereof which authorizes, approves or ratifies such contract or transaction, or
because his or their votes are counted for such purpose, if:
(a) The fact of such relationship or interest is disclosed or
known to the Board or committee which authorizes, approves or ratifies
the contract or transaction by a vote or consent sufficient for the
purpose without counting the votes or consents of such interested
directors; or
(b) The fact of such relationship or interest is disclosed or
known to the shareholders entitled to vote, and, they authorize,
approve or ratify such contract or transaction by vote or written
consent sufficient for the purpose, excluding shares held by such
interested director; or
(c) The contract or transaction is fair and reasonable as to
the Corporation at the time it is authorized by the Board, a committee
or the shareholders.
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Common or interested directors may be counted in determining
the presence of a quorum at a meeting of the Board of Directors or a
committee thereof which authorizes, approves or ratifies such contract
or transaction.
ARTICLE IV
OFFICERS
SECTION 1. OFFICERS. The officers of the Corporation shall be a
Chairman, the Chief Executive Officer, the Chief Financial Officer, the
President, and a Secretary, all of whom shall be elected by the Board and who
shall hold office until their successors are elected and qualified. None of the
officers of the Corporation need be directors. The Chairman shall be chosen from
among the directors. All officers elected by the Board shall each have such
powers and duties as generally pertain to their respective offices, subject to
the specific provisions of this Article IV. Such officers shall also have such
powers and duties as from time to time may be conferred by the Board or by any
committee thereof. The officers shall be elected at the first meeting of the
Board after each annual meeting. More than two offices may be held by the same
person.
SECTION 2. ELECTION AND TERM OF OFFICE. Only the elected officers of
the Corporation shall be elected annually by the Board at the regular meeting of
the Board held after the annual meeting of the shareholders. If the election of
officers shall not be held at such meeting, such election shall be held as soon
thereafter as convenient. Each officer shall hold office until his successor
shall have been duly elected and shall have qualified or until his earlier
death, or resignation, but any officer (other than the Chairman or the Chief
Executive Officer) may be removed from office at any time, with or without
cause, by either the affirmative vote of a majority of the directors then in
office or by the Chairman or the Chief Executive Officer. The Chairman and the
Chief Executive Officer may be removed from office, with or without cause, only
by the affirmative vote of a majority of the directors then in office. Such
removal or resignation shall be without prejudice to the contractual rights, if
any, of the person so removed.
SECTION 3. OTHER OFFICERS AND AGENTS. The Board or any committee
thereof may elect, from time to time, and the Chairman and the Chief Executive
Officer may appoint, from time to time, such other officers and agents as it may
deem advisable, who shall hold their offices for such terms and shall exercise
such powers and perform such duties as provided in these By-Laws, or as may be
prescribed by the Board or any committee thereof, or the Chairman or the Chief
Executive Officer, as the case may be.
SECTION 4. CHAIRMAN. The Chairman-of the Board, shall preside, if
present, at all meetings of the shareholders and at all meetings of the Board
and he shall perform such other duties and have such other powers as may from
time to time be designated and assigned to him by the Board.
SECTION 5. CHIEF EXECUTIVE OFFICER. The Chief Executive officer shall
have general direction of the affairs of the Corporation and general supervision
over its several
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officers, subject, however, to the control of the Board. He shall at each annual
meeting and from time to time report to the shareholders and to the Board all
matters within his knowledge which the interest of the Corporation may require
to be brought to their notice; may sign with the Secretary or an Assistant
Secretary any or all certificates of stock of the Corporation; in the absence of
the Chairman, shall preside at all meetings of the shareholders and at all
meetings of the Board; shall have the power to sign and execute in the name of
the Corporation all contracts, or other instruments authorized by the Board, and
in general shall perform all duties incident to the office of Chief Executive
Officer and such other duties as from time to time may be assigned to him by the
Board or as are prescribed by these By-Laws.
SECTION 6. CHIEF FINANCIAL OFFICER. The Chief Financial officer shall
have charge and custody of, and be responsible for, all funds and securities of
the Corporation, and deposit all such funds in the name of the Corporation in
such banks, trust companies or other depositories as shall be selected in
accordance with the provisions of these By-Laws; at all reasonable times exhibit
his books of account and records, and cause to be exhibited the books of account
and records of any corporation controlled by the Corporation, to any of the
directors of the Corporation upon application during business hours at the
office of the Corporation, or such other corporation where such books and
records are kept; render a statement of the condition of the finances of the
Corporation at all regular meetings of the Board and a full financial report at
the annual meeting of shareholders; if called upon to do so, receive and give
receipts for moneys due and payable to the Corporation from any source
whatsoever; may sign with a secretary or Assistant Secretary certificates of
stock of the Corporation; and, in general, perform all the duties incident to
the office of Chief Financial Officer and such other duties as from time to time
may be assigned to him by the Board or the Chief Executive Officer.
SECTION 7. PRESIDENT AND VICE-PRESIDENTS. The President and any
Vice-Presidents shall have such powers and shall perform such duties as may from
time to time be assigned to him by the Board or by the Chief Executive Officer;
and shall have the power to sign and execute in the name of the Corporation all
contracts or other instruments authorized by the Board, except where the Board
or the By-Laws shall expressly delegate or permit some other officer to do so.
The President and Vice-Presidents may also sign with the Secretary or an
Assistant Secretary certificates of stock of the Corporation.
SECTION 8. SECRETARY. The Secretary shall keep or cause to be kept the
minutes of the meetings of the shareholders, of the Board and of any committee
when so required; shall see that all notices are duly given in accordance with
the provisions of these By-Laws and as required by law; shall be custodian of
the corporate records and of the seal of the Corporation and see that the seal
is affixed to all documents on which it is required, the execution of which on
behalf of the Corporation under its seal is duly authorized in accordance with
the provisions of the By-Laws; shall keep or cause to be kept a register of the
post office address of each shareholder; may sign with the Chairman, Chief
Executive Officer, Chief Financial Officer, the President, or any Vice-President
certificates of stock of the Corporation; and, in general, the Secretary shall
perform all duties incident to the office of Secretary and such other duties as
may from time to time be assigned to him by the Board or by the Chief Executive
Officer.
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SECTION 9. ASSISTANT SECRETARIES. At the request of the Secretary, or
in his absence or disability, an Assistant Secretary shall perform the duties of
the Secretary and, when so acting, shall have all the powers of, and be subject
to all the restrictions upon, the Secretary. An Assistant Secretary shall
perform such other duties as from time to time may be assigned to him by the
Chief Executive Officer, the Secretary, or the Board.
SECTION 10. REMOVAL. Subject to Section 2 of this Article IV, any
officer elected, or agent appointed, by the Board may be removed by the
affirmative vote of a majority of the directors then in office whenever, in
their judgment, the best interests of the Corporation would be served thereby.
Any officer or agent appointed by the Chairman or the Chief Executive Officer
may be removed by him whenever, in his judgment, the best interests of the
Corporation would be served thereby. No elected officer shall have any
contractual rights against the Corporation for compensation by virtue of such
election beyond the date of the election of his successor, his death, his
resignation or his removal, whichever event shall first occur, except as
otherwise provided in an employment contract or under an employee deferred
compensation plan.
SECTION 11. VACANCIES. A newly created elected office and a vacancy in
any elected office because of the death, resignation, or removal may be filled
by the Board for the unexpired portion of the term at any meeting of the Board.
Any vacancy in an office appointed by the Chairman or the Chief Executive
Officer because of death, resignation, or removal may be filled by the Chairman
or the Chief Executive Officer.
ARTICLE V
MISCELLANEOUS
SECTION 1. CERTIFICATES OF STOCK. Certificates of stock, may be signed
by the Chairman, Chief Executive Officer, Chief Financial Officer, the
President, or any Vice-President, and the Secretary or an Assistant Secretary,
shall be issued to each shareholder certifying the number of shares owned by him
in the Corporation. Any of or all the signatures may be facsimiles.
SECTION 2. LOST CERTIFICATES. A new certificate of stock may be issued
in the place of any certificate theretofore issued by the Corporation, alleged
to have been lost or destroyed, and the directors may, in their discretion,
require the owner of the lost or destroyed certificate, or his legal
representatives, to give the Corporation a bond, in such sum as they may direct,
not exceeding double the value of the stock, to indemnify the Corporation
against any claim that may be made against it on account of the alleged loss of
any such certificate, or the issuance of any such new certificate.
SECTION 3. TRANSFER OF SHARES. The shares of stock of the Corporation
shall be transferable only upon its books by the holders thereof in person or by
their duly authorized attorneys or legal representatives, and upon such transfer
the old certificates shall be surrendered to the Corporation by the delivery
thereof to the person in charge of the stock and transfer books
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and ledgers, or to such other person as the directors may designate, by whom
they shall be cancelled, and new certificates shall thereupon be issued. A
record shall be made of each transfer and whenever a transfer shall be made for
collateral security, and not absolutely, it shall be so expressed in the entry
of the transfer.
SECTION 4. SHAREHOLDERS RECORD DATE. In order that the Corporation may
determine the shareholders entitled to notice of or to vote at any meeting of
shareholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting (if permitted) , or entitled to receive
payment of any dividend or other distribution or allotment or any rights, or
entitled to exercise any rights in respect of any change, conversion or exchange
of stock or for the purposes of any other lawful action, the Board may fix, in
advance, a record date, which shall not be more than seventy days prior to the
meeting or action requiring a determination by shareholders. A determination of
shareholders entitled to notice or to vote at a shareholders' meeting shall
apply to any adjournment of the meeting; provided, however, that the Board may
fix a new record date for the adjourned meeting.
SECTION 5. DIVIDENDS. Subject to the provisions of law and the Articles
of Incorporation, the Board may, out of funds legally available therefor at any
regular or special meeting, declare dividends upon the capital stock of the
Corporation as and when they deem expedient. Before declaring any dividend there
may be set apart out of any funds of the Corporation available for dividends
such sum or sums as the directors from time to time in their discretion deem
proper for working capital or as a reserve fund to meet contingencies or for
equalizing dividends or for such other purposes as the directors shall deem
conducive to the interests of the Corporation.
SECTION 6. SEAL. The corporate seal shall be circular in form and shall
contain the name of the Corporation, the year of its creation and the words
"CORPORATE SEAL FLORIDA." Said seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
SECTION 7. FISCAL YEAR. The fiscal year of the Corporation shall be
determined by resolution of the Board.
SECTION 8. CHECKS. All checks, drafts, or other orders for the payment
of money, notes or other evidences of indebtedness issued in the name of the
Corporation shall be signed by such officer or officers, agent or agents of the
Corporation, and in such manner as shall be determined from time to time by
resolution of the Board.
SECTION 9. NOTICE AND WAIVER OF NOTICE. Whenever any notice is required
by these By-Laws to be given, personal notice is not meant unless expressly so
stated, and any notice so required shall be deemed to be sufficient if given by
depositing the same in the United States mail, postage prepaid, addressed to the
person entitled thereto at his address as it appears on the records of the
Corporation, and such notice shall be deemed to have been given on the day of
such mailing. Shareholders not entitled to vote shall not be entitled to receive
notice of any meetings except as otherwise provided by statute.
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Whenever any notice whatsoever is required to be given under the
provisions of any law, or under the provisions of the Articles of Incorporation
of the Corporation or these By-Laws, a waiver thereof in writing, signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto.
SECTION 10. VOTING OF SHARES IN OTHER CORPORATION. Shares in other
corporations which are held by the Corporation may be represented and voted by
the Chairman, the Chief Executive Officer, the Chief Financial Officer, the
President, or any Vice-President, in person or by proxy or proxies appointed by
one of them, subject, however, to the right of the Board to appoint some other
person to vote the shares.
ARTICLE VI
AMENDMENTS
These By-Laws may be altered or repealed and By-Laws may be made at any
annual meeting of the shareholders or at any special meeting thereof if notice
of the proposed alteration or repeal of By-Law or By-Laws to be made be
contained in the notice of such special meeting, by the affirmative vote of the
holders of at least 66-2/3% of the voting power of all the then outstanding
Voting Stock, or by the affirmative vote of a majority of the Board, at any
regular meeting of the Board, or at any special meeting of the Board, if notice
of the proposed alteration or repeal, or By-Law or By-Laws to be made, be
contained in the notice of such special meeting.
ARTICLE VII
INDEMNIFICATION
SECTION 1. INDEMNIFICATION RESPECTING THIRD PARTY CLAIMS.
(a) The Corporation, to the full extent permitted, and in the
manner required, by the laws of the State of Florida as in effect on
the effective date of these Amended and Restated By-Laws or as such
laws may be amended from time to time, shall indemnify, in accordance
with the following provisions of this Article VII, any person who was
or is made a party to or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding (including
any appeal thereof), whether civil, criminal, administrative,
regulatory or investigative in nature (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 or officer of the Corporation, or, if at a time
when he or she was a director or officer of the Corporation, is or was,
serving at the request of the Corporation as a director, officer,
partner, trustee, fiduciary, employee or agent (a "Subsidiary Officer")
of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise (an "Affiliated Entity"), against
expenses (including attorneys' fees and disbursements) , costs,
judgments, fines, penalties and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit
or proceeding (including any appeal thereof) if such person acted in
good faith and in a manner which such person 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 or her conduct was unlawful; provided, however, that (i)
the Corporation shall not be obligated to indemnify a director or
officer of the Corporation or a Subsidiary Officer of
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any Affiliated Entity against expenses incurred in connection with an
action, suit, proceeding or investigation to which such person is
threatened to be made a party but does not become a party unless such
expenses were incurred with the approval of the Chairman, the Chief
Executive Officer, the Chief Financial Officer, or the Board or a
committee thereof and (ii) the Corporation shall not be obligated to
indemnify against any amount paid in settlement unless the Chairman,
the Chief Executive Officer, the Chief Financial Officer, or the Board
or a committee thereof has consented to such settlement. The
termination of any action, suit or proceeding by judgment, order,
settlement or conviction or upon a plea of nolo contendre or its
equivalent shall not, of itself, create a presumption that the person
did not act in good faith and in a manner which such person reasonably
believed to be in, or not opposed to, the best interests of the
Corporation, or, with respect to any criminal action or proceeding,
that such person had reasonable cause to believe that his or her
conduct was unlawful. Notwithstanding anything to the contrary in the
foregoing provisions of this Section l(a), a person shall not be
entitled, as a matter of right, to indemnification pursuant to this
Section l(a) against costs or expenses incurred in connection with any
action, suit or proceeding commenced by such person against the
Corporation or any Affiliated Entity or any person who is or was a
director, officer, fiduciary, employee or agent of the Corporation or a
Subsidiary Officer of any Affiliated Entity, but such indemnification
may be provided by the Corporation in a specific case as permitted by
Section 6 below in this Article VII.
(b) The Corporation may indemnify any employee or agent of the
Corporation in the manner and to the same or a lesser extent than it
shall indemnify any director or officer under Section 1(a) above in
this Article VII.
SECTION 2. INDEMNIFICATION RESPECTING DERIVATIVE CLAIMS.
(a) The Corporation, to the full extent permitted, and in the
manner required, by the laws of the State of Florida as in effect on
the effective date of these Amended and Restated By-Laws or as such
laws may be amended from time to time, shall indemnify, in accordance
with the following provisions of this Article VII, any person who was
or is made a party to or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding (including
any appeal thereof) brought 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 or officer of the Corporation, or is or was
serving at the request of the Corporation as a Subsidiary Officer of an
Affiliated Entity against expenses (including attorneys' fees and
disbursements) and costs actually and reasonably incurred by such
person in connection with the defense or settlement of such action,
suit, or proceeding (including any appeal thereof), not exceeding, in
the judgment of the Board, the estimated expense of litigating the
proceeding to conclusion, if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the
best interests of the Corporation, except that no indemnification shall
be made in respect of any claim, issue or matter as to which such
person shall have been adjudged to be liable to the Corporation unless,
and only to the extent that, the court in which such action, suit or
proceeding was brought, or any other court of competent jurisdiction,
shall determine upon application that, despite the adjudication of
liability but in view of all circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses and costs
as the court shall deem proper; provided, however, that the Corporation
shall not be obligated to indemnify a director or officer of the
Corporation or a Subsidiary Officer of any Affiliated Entity against
expenses incurred in connection with an action or suit to which such
person is threatened to be made a party but does not become a party
unless such expenses were incurred with the approval of the Chairman,
the Chief Executive Officer, the Chief Financial Officer, or the Board
or a committee
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thereof. Notwithstanding anything to the contrary in the foregoing
provisions of this Section 2 (a), a person shall not be entitled, as a
matter of right, to indemnification pursuant to this Section 2 (a)
against costs and expenses incurred in connection with any action or
suit in the right of the Corporation commenced by such person, but such
indemnification may be provided by the Corporation in any specific case
as permitted by Section 6 below in this Article VII.
(b) The Corporation may indemnify any employee or agent of the
Corporation in the manner and to the same or a lesser extent that it
shall indemnify any director or officer under Section 2(a) above in
this Article VII.
SECTION 3. DETERMINATION OF ENTITLEMENT TO INDEMNIFICATION. Any
indemnification to be provided under any of Sections 1(a), l(b), 2(a) or 2(b)
above in this Article VII (unless ordered by a court of competent jurisdiction)
shall be made by the Corporation only as authorized in the specific case upon a
determination that indemnification is proper under the circumstances because
such person had met the applicable standard of conduct set forth in such Section
of this Article VII. Such determination shall be made (i) by the Board by a
majority vote of a quorum consisting of directors who were not parties to the
action, suit or proceeding in respect of which indemnification is sought or by
majority vote of the members of a committee of the Board composed of at least
two members each of whom is not a party to such action, suit or proceeding, or
(ii) if such a quorum is not obtainable and/or such a committee is not
established or obtainable, or, even if obtainable, if a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, or
(iii) by the affirmative vote of a quorum consisting of the holders of a
majority of the holders of Common Stock not parties to such proceeding, or, if
no such quorum is obtainable, by a majority of holders of Common Stock who were
not parties to such proceeding. In the event a request for indemnification is
made by any person referred to in Sections 1(a) or 2(a) above in this Article
VII, the Corporation shall use its best efforts to cause such determination to
be made not later than 60 days after such request is made.
SECTION 4. RIGHT TO INDEMNIFICATION UPON SUCCESSFUL DEFENSE AND FOR
SERVICE AS A WITNESS.
(a) Notwithstanding the other provisions of this Article VII,
to the extent that a director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in any of
Sections 1 (a), 1 (b), 2 (a) or 2 (b) above in this Article VII, or
in defense of any claim, issue or matter therein, such person shall
be indemnified against expenses (including attorneys' fees and
disbursements) and costs actually and reasonably incurred by such
person in connection therewith.
(b) To the extent any person who is or was a director or
officer of the Corporation in office on the effective date of these
Amended Restated By-Laws or thereafter has served or prepared to serve
as a witness in any action, suit or proceeding (whether civil,
criminal, administrative, regulatory or investigative in nature) ,
including any investigation by any legislative body or any securities
or commodities exchange of which the Corporation is a member or to the
jurisdiction of which it is subject, by reason of his or her services
as a director or officer of the Corporation or his or her service as a
Subsidiary Officer of an Affiliated Entity at a time when he or she was
a director or
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officer of the Corporation (assuming such person is or was, as
evidenced by a writing to such effect, serving at the request of, or to
represent the interests of, the Corporation as a Subsidiary Officer of
such Affiliated Entity), but excluding service as a witness in an
action or suit commenced by such person, the Corporation shall
indemnify such person against expenses (including attorneys, fees and
disbursements) and out-of-pocket costs actually and reasonably incurred
by such person in connection therewith and shall use its best efforts
to provide such indemnity within 60 days after receipt by the
Corporation from such person of a statement requesting such
indemnification, averring such service and reasonably evidencing such
expenses and costs; it being understood, however, that the Corporation
shall have no obligation under this Article VII to compensate such
person for such person's time or efforts so expended. The Corporation
may indemnify any employee or agent of the Corporation in the manner
and to the same or lesser extent as it may indemnify any director or
officer of the Corporation pursuant to the foregoing sentence of this
paragraph.
SECTION 5. ADVANCE OF EXPENSES.
(a) Expenses and costs incurred by any person referred to in
Sections 1 (a) or 2 (a) above in this Article VII in defending a civil,
criminal, administrative, regulatory or investigative action, suit or
proceeding shall be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an
undertaking in writing by or on behalf of such person to repay such
amount if it shall ultimately be determined that such person is not
entitled to be indemnified in respect of such costs and expenses by the
Corporation as authorized by this Article VII. Such expenses (including
attorneys' fees) incurred by other employees and agents of the
Corporation may be so paid upon such terms and conditions, if any, as
the Board may deem appropriate.
(b) Expenses and costs incurred by any person referred to in
Sections l(b) or 2(b) above in this Article VII in defending a civil,
criminal, administrative, regulatory or investigative action, suit or
proceeding may be paid by the corporation in advance of the final
disposition of such action, suit or proceeding as authorized by the
Board or a committee thereof authorized to so act by the Board upon
receipt of an undertaking in writing by or on behalf of such person to
repay such amount if it shall ultimately be determined that such person
is not entitled to be indemnified by the Corporation in respect of such
costs and expenses as authorized by this Article VII.
SECTION 6. INDEMNIFICATION NOT EXCLUSIVE. The provision of
indemnification to or the advancement of expenses and costs to any person under
this Article VII, or the entitlement of any person to indemnification or
advancement of expenses and costs under this Article VII, shall not limit or
restrict in any way the power of the Corporation to indemnify or advance
expenses and costs to such person in any other way permitted by law or be deemed
exclusive of, or invalidate, any right to which any person seeking
indemnification or advancement of expenses and costs may be entitled under any
law, agreement, vote of shareholders or disinterested directors or otherwise,
both as to action in such person's capacity as an officer, director, employee or
agent of the Corporation and as to action in any other capacity.
SECTION 7. CORPORATE OBLIGATIONS; RELIANCE. The provisions of Section l
through 6 above of this Article VII shall be deemed to create a binding
obligation on the part of the Corporation to the officers and directors of the
Corporation on the effective date of these Amended and Restated By-Laws and
persons thereafter elected as officers and directors
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<PAGE> 263
SECTION 8. (including persons who served as officers and directors on
or after such date but are no longer officers and directors at the time they
present claims for advancement of expenses or indemnity), and such persons in
acting in their capacities as officers or directors of the Corporation or
Subsidiary Officers of any Affiliated Entity shall be entitled to rely on such
provisions of this Article VII, without giving notice thereof to the
Corporation.
SECTION 9. SUCCESSORS. The right of any person who is or was a
director, officer, employee or agent of the Corporation to indemnification or
advancement of expenses under Sections l through 7 above in this Article VII
shall continue after he or she shall have ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, distributees,
executors, administrators and other legal representatives of such person.
SECTION 10. INSURANCE. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of, or to
represent the interests of, the Corporation as a Subsidiary Officer of any
Affiliated Entity, against any liability asserted against such person and
incurred by such person in any capacity, or arising out of such person's status
as such, whether or not the Corporation would have the power to indemnify such
person against such liability under the provisions of this Article VII or
applicable law.
SECTION 11. DEFINITIONS OF CERTAIN TERMS.
(a) For purposes of the Article VII, references to "the
Corporation" shall include any constituent corporation (including any
constituent of a constituent) absorbed into the Corporation after the
effective date of these Amended and Restated By-Laws in a consolidation
or merger if such corporation would have been permitted (if its
corporate existence had continued) under applicable law to indemnify
its directors, officers, employees or agents, so that any person who is
or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request, or to represent the
interests of, such constituent corporation as a director, officer,
employee or agent of any Affiliated Entity shall stand in the same
position under the provisions of Sections l through 9 above in this
Article VII with respect to the resulting or surviving corporation as
such person would have with respect to such constituent corporation if
its separate existence had continued; provided, however, that, no such
person shall be entitled to indemnity from the corporation in respect
of his or her service to such constituent Corporation, or at the
request of such constituent corporation, pursuant to Sections l(a) or
2(a) above but may be indemnified by the Corporation in respect thereof
as permitted by Sections l(b) or 2(b) above.
(b) For purposes of this Article VII, references to "fines"
shall include any excise taxes assessed on a person with respect to any
employee benefit plan; references to "serving at the request of the
Corporation" shall include any service as a director, officer, trustee,
fiduciary, employee or agent of the Corporation or any Affiliated
Entity which service imposes duties on, or involves services by, such
director, officer, trustee, fiduciary, employee or agent with respect
to any employee benefit plan, its participants, or beneficiaries; and a
person who acted in good faith and in a manner such person reasonably
believed to be in the interest of the participants and beneficiaries of
an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interest of the Corporation" as referred to in this
Article VII.
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<PAGE> 264
BOCA RATON CAPITAL CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF BOCA RATON CAPITAL CORPORATION ("BRCC").
The undersigned hereby appoints Alan L. Jacobs and Franklyn B.
Weichselbaum, as Proxies, each with the power to appoint his substitute; and
hereby authorizes them, or any of them, to represent and vote as designated on
the reverse side of this proxy card, all the shares of common stock of BRCC held
of record by the undersigned on August 26, 1997 at the Special Meeting of
Shareholders to be held on October 9, 1997, or any adjournment or postponement
thereof.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
[X]
Please mark your votes as in this example.
TO VOTE WITH THIS PROXY BALLOT, FILL IN THE BOX TO THE RIGHT OF YOUR VOTE FOR
EACH PROPOSAL THEN SIGN, DATE AND RETURN THIS BALLOT IN THE ENVELOPE PROVIDED.
The undersigned hereby instructs each of
the proxies named hereon or their
substitutes to vote, in their
discretion, upon such other matters
which may properly come before the
meeting or any adjournment thereof.
1. Approval of the Issuance and the FOR AGAINST ABSTAIN
Merger. [ ] [ ] [ ]
2. Approval of the Amended and FOR AGAINST ABSTAIN
Restated Articles of Incorporation [ ] [ ] [ ]
and the Amended and Restated By-
Laws in the event the Merger is not
consummated.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF YOU EXECUTE AND RETURN THIS PROXY BUT DO NOT
SPECIFY OTHERWISE, THIS PROXY WILL BE VOTED FOR THE APPROVAL THE ISSUANCE AND
THE MERGER THEREBY WAIVING SUCH SHAREHOLDER'S RIGHT TO DISSENT AND FOR THE
APPROVAL OF THE AMENDED AND RESTATED ARTICLES OF INCORPORATION AND THE AMENDED
AND RESTATED BY-LAWS.
SIGNATURE
----------------------------- ---------------------------------------
DATED SIGNATURE IF JOINTLY OWNED DATED
Note: Please sign exactly as the name appears above. When shares are held by
Joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give the full title as such.
If a corporation, please sign the full corporate name by the President
or other authorized officer. If a partnership, please sign in the
partnership name by an authorized person.
