<PAGE> 1
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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
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<PAGE> 2
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>
i
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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
<PAGE> 4
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
2
<PAGE> 5
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."
3
<PAGE> 6
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.
4
<PAGE> 7
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.
5
<PAGE> 8
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.
6
<PAGE> 9
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
7
<PAGE> 10
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.
8
<PAGE> 11
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.
9
<PAGE> 12
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.
10
<PAGE> 13
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.
11
<PAGE> 14
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>
12
<PAGE> 15
(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.
13
<PAGE> 16
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.
14
<PAGE> 17
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>
15
<PAGE> 18
<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.
16
<PAGE> 19
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
17
<PAGE> 20
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").
18
<PAGE> 21
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.
19
<PAGE> 22
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.
20
<PAGE> 23
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.
21
<PAGE> 24
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.
22
<PAGE> 25
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
<PAGE> 26
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
<PAGE> 27
BOCA RATON CAPITAL CORPORATION AND SUBSIDIARIES
REPORT ON AUDITS OF FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<PAGE> 28
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>
<PAGE> 29
[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
F-1
<PAGE> 30
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.
F-2
<PAGE> 31
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.
F-3
<PAGE> 32
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.
F-4
<PAGE> 33
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.
F-5
<PAGE> 34
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.
F-6
<PAGE> 35
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.
F-7
<PAGE> 36
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.
F-8
<PAGE> 37
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.
F-9
<PAGE> 38
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.
F-10
<PAGE> 39
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.
F-11
<PAGE> 40
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.
<PAGE> 1
EXHIBIT 2.1
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
<PAGE> 2
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.
2
<PAGE> 3
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
3
<PAGE> 4
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:
4
<PAGE> 5
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
5
<PAGE> 6
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
6
<PAGE> 7
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.
7
<PAGE> 8
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:
8
<PAGE> 9
<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
9
<PAGE> 10
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
10
<PAGE> 11
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
11
<PAGE> 12
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.
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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;
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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
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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.
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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.
51
<PAGE> 52
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
52
<PAGE> 53
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.
<PAGE> 54
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.
<PAGE> 55
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.
<PAGE> 56
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.
<PAGE> 57
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.
<PAGE> 58
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
<PAGE> 59
Schedule 5.10
Accounts Receivable
None.
<PAGE> 60
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.
<PAGE> 61
Schedule 5.12
Patents, Trademarks, Servicemarks and Copyrights
See Attachment A hereto.
<PAGE> 62
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
<PAGE> 63
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,
<PAGE> 64
1997, Murphy responded with a reply to the counterclaims and a demand for bill
of particulars.
<PAGE> 65
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.
<PAGE> 66
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.
<PAGE> 67
Schedule 5.16
Employees and Labor Relations
1. See Schedule 5.13(1)
<PAGE> 68
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).
<PAGE> 69
Schedule 6.2
Subsidiaries
None.
<PAGE> 70
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>
<PAGE> 71
Schedule 6.6
SEC Reports and Financial Statements
None.
<PAGE> 72
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.
<PAGE> 73
Schedule 6.10
Properties, Leases and Equipment
None.
<PAGE> 74
Schedule 6.11
Accounts Receivable
None.
<PAGE> 75
Schedule 6.12
Patents, Trademarks, Service Marks and Copyrights
None.
<PAGE> 76
Schedule 6.13
Litigation
See Schedule 6.8.
<PAGE> 77
Schedule 6.14
Reports and Taxes
None.
<PAGE> 78
Schedule 6.15
Agreements
None.
<PAGE> 79
Schedule 6.16
Employees and Labor Relations
None.
<PAGE> 80
Schedule 6.17
Employee Benefit Plans and ERISA
None.
<PAGE> 1
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
<PAGE> 2
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.
2
<PAGE> 3
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
3
<PAGE> 1
EXHIBIT 21.1
List of Subsidiaries
--------------------
CRP Acquisition Corp.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S AUDITED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1996 AND
1995.
</LEGEND>
<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
0
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>
