SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Sections 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported) May 7, 1997
American Consolidated Laboratories, Inc.
(Exact Name of Registrant as Specified on its Charter)
Florida 000-18448 59-2624130
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(State or Other Jurisdiction (Commission File IRS Employer
of Incorporation) Number) Identification No.
1640 North Market Drive, Raleigh, North Carolina 27609
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (919) 872-0744
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N/A
(Former Name or Former Address, if Changed Since Last Report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
This Form 8-K is being filed with respect to (i) the consummation of
the acquisition by the Registrant on May 7, 1997 (the "Effective Time") of
NovaVision, Inc., a North Carolina corporation ("Acquiree"), by its merger into
NV Acquisition, Inc., a wholly owned subsidiary of the Registrant, and (ii) the
loan agreement entered into by the Registrant immediately after the merger, such
loan secured by substantially all of the assets of the Registrant and its
subsidiaries. As a part of the terms of the merger, NV Acquisition, Inc. was
renamed NovaVision, Inc.
("NovaVision").
Immediately prior to the merger:
(a) TD Capital Focus, L.P., the Registrant's primary lender
converted $2,088,273 of debt into 2,088,273 shares of the
Registrant's Series A Preferred Stock, no par value per share
("ACL Preferred Stock"), which ACL Preferred Stock entitles
its holders to (i) cumulative cash dividends at the rate of
$0.10 per annum per share owned or cumulative share dividends
at the rate of 10% per annum of the stated value of $1.00 per
share owned, at the option of the Registrant, (ii) liquidation
preference over common stock of $1.00 plus accrued but unpaid
dividends, (iii) cash redemption upon certain triggering
events and (iv) one vote per share on all matters submitted to
a vote of the Registrant's shareholders; and
(b) Sirrom Investments, Inc., a Tennessee corporation having its
principal office in Nashville, Tennessee and Acquiree's
primary lender ("Sirrom"), converted 1,000,000 shares of
Acquiree's Series A Redeemable Preferred Stock, $1.00 par
value per share ("Acquiree Series A Preferred Stock"), into
1,000,000 shares of Acquiree's Common Stock, $1.00 par value
per share ("Acquiree Common Stock").
Under the terms of the merger:
(c) each share of Acquiree Common Stock outstanding was converted
into one share of the Registrant's common stock, $0.05 par
value per share ("ACL Common Stock");
(d) each share of Acquiree Series A Preferred Stock was converted
into one share of ACL Preferred Stock;
(e) each share of the Acquiree's Series B Redeemable Convertible
Preferred Stock, $1.00 par value per share ("Acquiree Series B
Preferred Stock"), was converted into 0.3125 shares of ACL
Common Stock;
(f) the Registrant assumed the obligations of Acquiree pursuant to
the Nova Stock Option Plan adopted on June 12, 1995 (the "Nova
Plan"), except that each Nova
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Stock Option to purchase a certain number of shares of the
common stock of Acquiree assumed by the Registrant may be
exercised solely for the same number of shares of the
Registrant's common stock and with certain other exceptions.
(g) Bart C. Gutekunst, William J. Burns, Jr. and Alan Rabin were
named to the Registrant's Board of Directors
Immediately following the merger:
(h) the Registrant entered into a loan agreement with Sirrom
whereby the Registrant borrowed $1,575,000 at an interest rate
of thirteen and one-half percent (13.5%) per annum (computed
on the basis of a 360-day year), such interest to be payable
on the first day of each month beginning in July, 1997 until
April 25, 2002 at which time the entire outstanding principal
balance, together with all accrued and unpaid interest, shall
be immediately due and payable in full. The loan is secured by
substantially all of the assets of the Registrant and its
subsidiaries.
The aggregate number of shares of ACL Common Stock issued in connection
with the acquisition was 3,561,906, and the aggregate number of shares of ACL
Preferred Stock issued in connection with the acquisition was 2,808,175. The
consideration for the acquisition was arrived at through private negotiation.
At the Effective Time, an aggregate of 412,700 options were outstanding
under the Nova Plan, each with an exercise price of $0.01 per share.
Acquiree was a designer, manufacturer and distributor of contact lenses
and contact lens materials located in Research Triangle Park, North Carolina.
Acquiree competed primarily in the high margin rigid gas permeable segment of
the contact lens market and sold to both contact lens finishing laboratories and
directly to practitioners. Its assets consisted primarily of equipment,
inventory, certain patents and FDA approvals. The Registrant intends to continue
to utilize the assets acquired from the Acquiree to further its contact lens
design, manufacture and distribution business.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS
(a,b) Financial Statements and Pro Forma Financial Information.
Acquiree has historically not had its financial statements audited. The
Registrant is currently exploring the possibility of having past financial
statements of Acquiree audited and will file such financial statements and pro
forma financial information by amendment as soon as they become available.
(c) Exhibits.
The exhibits to this Form 8-K are listed in the accompanying
Index to Exhibits.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AMERICAN CONSOLIDATED LABORATORIES, INC.
(Registrant)
Date: May 22, 1997 By: /s/ Kenneth C. Kirkham
Kenneth C. Kirkham
Chief Financial Officer
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INDEX TO EXHIBITS
The following exhibits are filed as part of this report:
EXHIBIT NO. DESCRIPTION
2 Agreement and Plan of Merger by and among NovaVision, Inc., Bart C.
Gutekunst, the Registrant and NV Acquisition, Inc. dated May 7,
1997.
The following schedules to the Agreement and Plan of
Merger, filed as Exhibit 2 hereto, have been omitted. The
Registrant hereby undertakes to furnish supplementally a
copy of any such omitted schedule to the Commission upon
request.
i. Plan of Merger (included in Articles of Merger filed as Exhibit
3(a)(2))
ii. ACL Disclosure Schedule
iii. Nova Disclosure Schedule
iv. Gutekunst Employment Agreement
v. Accredited Investor Representation
vi. OcuTec Investor Representation
vii. OcuTec Estoppel Certificate
viii.Nova Attorney Opinion
ix. Nova Shareholder Certificate
x. ACL Attorney Opinion
xi. Escrow and Indemnity Agreement
*3(a)(1) Articles of Incorporation of the Registrant, as amended,
filed as Exhibit 3(a) to the Registrant's Quarterly Report
on Form 10-QSB for the quarter ended March 31, 1997.
3(a)(2) Articles of Merger of NovaVision, Inc. into NV Acquisition, Inc.
dated April 7, 1997.
*3(b) Bylaws of the Registrant, as amended, filed as Exhibit
3(b) to the Registrant's Quarterly Report on Form 10-QSB
for the quarter ended March 31, 1997.
4(a) Loan Agreement dated as of May 7, 1997 by and between the Registrant
and Sirrom Investments, Inc.
4(b) Joint and Several Unconditional Continuing Guaranty dated as of May
7, 1997 of Loan Agreement dated as of May 7, 1997 by the Registrant,
NovaVision, Inc., Biopolymer Corporation, Salvatori Ophthalmic
Manufacturing Corporation, S-O Nebraska, Inc., Wolcon Labs, Inc. and
Carolina Contact Lens, Inc.
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4(c) Promissory Note dated May 7, 1997 by and between the Registrant and
Sirrom Investments, Inc.
4(d) Intercreditor Agreement dated as of May 7, 1997, among the
Registrant, Sirrom Investments, Inc., Tullis-Dickerson
Capital Focus, L.P., NovaVision, Inc., Biopolymer
Corporation, Salvatori Ophthalmic Manufacturing
Corporation, and Carolina Contact Lens, Inc.
4(e) Security Agreement dated as of May 7, 1997, by and between the
Registrant NovaVision, Inc., Biopolymer Corporation, Salvatori
Ophthalmic Manufacturing Corporation, S-O Nebraska, Inc., Wolcon
Labs, Inc. and Carolina Contact Lens, Inc. (collectively, the
"Grantors") and Sirrom Investments, Inc., as agent pursuant to that
certain Intercreditor Agreement of even date herewith by and between
Tullis-Dickerson Capital Focus, L.P., Sirrom Investments, Inc. and
the Grantors.
4(f) Trademark and Patent Security Agreement dated as of May 7,
1997, by and between the Registrant and Sirrom
Investments, Inc., as agent pursuant to that certain
Intercreditor Agreement of even date herewith by and
between Tullis- Dickerson Capital Focus, L.P., Sirrom and
the Grantors.
4(g) Stock Pledge Agreement dated as of May 7, 1997, by and
between the Registrant, and Sirrom Investments, Inc., as
agent pursuant to that certain Intercreditor Agreement of
even date herewith by and between Tullis- Dickerson
Capital Focus, L.P., Sirrom and the Grantors.
4(h) Stock Purchase Warrant dated as of May 7, 1997, issued by
the Registrant to Sirrom Investments, Inc.
10(a) Employment Agreement between the Registrant and Bart C. Gutekunst
dated May 7, 1997.
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* Incorporated by reference to the document indicated
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AGREEMENT AND PLAN OF MERGER
by and among
NOVAVISION, INC.
AMERICAN CONSOLIDATED LABORATORIES, INC.
and
NV ACQUISITION, INC.
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<TABLE>
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ARTICLE I
DEFINITIONS..............................................................................................1
ARTICLE II
THE MERGER...............................................................................................6
2.1 The Merger......................................................................................6
2.2 Conversion of Shares............................................................................6
2.3 Closing.........................................................................................6
2.4 Deliveries at Closing...........................................................................6
2.5 Effectiveness of The Merger.....................................................................6
2.6 Further Assurances..............................................................................7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ACL AND NVA............................................................7
3.1 Organization, Qualification and Corporate Power of ACL and NVA..................................8
3.2 Capitalization..................................................................................8
3.3 Noncontravention................................................................................8
3.4 Financial Statements............................................................................9
3.5 Brokers' Fees...................................................................................9
3.6 Investment......................................................................................9
3.7 Title to Assets.................................................................................9
3.8 Subsidiaries....................................................................................9
3.9 Events Subsequent to Most Recent Fiscal Year End................................................9
3.10 Undisclosed Liabilities........................................................................11
3.11 Legal Compliance...............................................................................11
3.12 Tax Matters....................................................................................11
3.13 Real Property..................................................................................13
3.14 Intellectual Property..........................................................................13
3.15 Tangible Assets................................................................................15
3.16 Inventory......................................................................................15
3.17 Contracts......................................................................................16
3.18 Notes and Accounts Receivable..................................................................16
3.19 Liabilities....................................................................................16
3.20 Powers of Attorney.............................................................................16
3.21 Insurance......................................................................................16
3.22 Litigation.....................................................................................17
3.23 Product Warranty...............................................................................17
3.24 Product Liability..............................................................................17
3.25 Employees......................................................................................17
3.26 Employee Benefits..............................................................................18
3.27 Guaranties.....................................................................................18
3.28 Environmental Protection.......................................................................18
3.29 Disclosure.....................................................................................18
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES CONCERNING NOVA AND ITS
SUBSIDIARY..............................................................................................19
4.1 Organization, Qualification, and Corporate Power...............................................19
4.2 Capitalization.................................................................................19
4.3 Noncontravention...............................................................................20
4.4 Brokers' Fees..................................................................................20
4.5 Title to Assets................................................................................20
4.6 Subsidiaries...................................................................................20
4.7 Financial Statements...........................................................................21
4.8 Events Subsequent to Most Recent Fiscal Year End. .............................................21
4.9 Undisclosed Liabilities........................................................................23
4.10 Legal Compliance...............................................................................23
4.11 Tax Matters....................................................................................23
4.12 Real Property..................................................................................24
4.13 Intellectual Property..........................................................................25
4.14 Tangible Assets................................................................................27
4.15 Inventory......................................................................................27
4.16 Contracts......................................................................................27
4.17 Notes and Accounts Receivable..................................................................28
4.18 Liabilities.....................................................................................28
4.19 Powers of Attorney.............................................................................28
4.20 Insurance......................................................................................28
4.21 Litigation.....................................................................................28
4.22 Product Warranty...............................................................................29
4.23 Product Liability..............................................................................29
4.24 Employees......................................................................................29
4.25 Employee Benefits..............................................................................29
4.26 Guaranties.....................................................................................30
4.27 Environmental Protection.......................................................................30
4.28 Disclosure.....................................................................................30
ARTICLE V
PRE-CLOSING COVENANTS...................................................................................30
5.1 General........................................................................................30
5.2 Notices and Consents...........................................................................30
5.3 Operation of Business..........................................................................31
5.4 Preservation of Business.......................................................................31
5.5 Full Access....................................................................................31
5.6 Notice of Developments.........................................................................31
5.7 Exclusivity....................................................................................31
5.8 Plan of Merger; Reservation of Shares..........................................................31
5.9 Press Releases.................................................................................32
5.10 Employment Agreements..........................................................................32
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ARTICLE VI
POST-CLOSING COVENANTS..................................................................................32
6.1 General........................................................................................32
6.2 Litigation Support.............................................................................32
6.3 Transition.....................................................................................32
6.4 Confidentiality. .............................................................................32
6.5 Registration...................................................................................33
ARTICLE VII
CONDITIONS PRECEDENT....................................................................................33
7.1 Conditions Precedent -- ACL and Nova...........................................................34
7.2 Conditions to Obligation of ACL................................................................34
7.3 Conditions to Obligation of Nova...............................................................36
ARTICLE VIII
REMEDIES FOR BREACHES OF THIS AGREEMENT.................................................................36
8.1 Indemnity......................................................................................36
8.2 Notices, Claims and Defense....................................................................37
8.3 Defense of Third Party Claims. ...............................................................37
8.4 Determination of Adverse Consequences..........................................................38
8.5 Dispute Resolution.............................................................................38
8.6 Limitation on Indemnification..................................................................38
8.8 Exclusive Remedy...............................................................................39
ARTICLE IX
TERMINATION.............................................................................................39
9.1 Termination....................................................................................39
9.2 Effect of Termination..........................................................................40
ARTICLE X
MISCELLANEOUS...........................................................................................40
10.1 No Third-Party Beneficiaries...................................................................40
10.2 Expenses.......................................................................................40
10.3 Entire Agreement...............................................................................40
10.4 Succession and Assignment......................................................................41
10.5 Counterparts...................................................................................41
10.6 Headings.......................................................................................41
10.7 Notices........................................................................................41
10.8 Governing Law..................................................................................42
10.9 Amendments and Waivers.........................................................................42
10.10 Incorporation of Exhibits and Schedules...............................................42
10.11 Submission to Jurisdiction............................................................42
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER ("Merger Agreement" or "Agreement"), dated
as of May 6, 1997, between and among NOVAVISION, INC. ("Nova"), a North Carolina
corporation having its principal office at Raleigh, North Carolina, AMERICAN
CONSOLIDATED LABORATORIES, INC. ("ACL"), a Florida corporation having its
principal office at Raleigh, North Carolina, and NV Acquisition, Inc. ("NVA"), a
North Carolina corporation, which is a subsidiary of ACL.
The parties desire that ACL shall acquire Nova through a merger of Nova
into NVA, in exchange for ACL common and preferred stock, and the parties desire
to provide for certain undertakings, conditions, representations, warranties and
covenants in connection with the transactions contemplated hereby.
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties, covenants and agreements herein contained, and
intending to be legally bound, the parties agree as follows:
ARTICLE I
DEFINITIONS
"ACL Common Stock" means the shares of common stock, par value $0.05
per share, of ACL.
"ACL Series A Preferred Stock" means the Series A Preferred Stock,
without par value, of ACL, having a 10% dividend rate and with rights otherwise
equivalent to Nova Series A Preferred Stock, to be issued by ACL pursuant to
this Agreement.
"ACL Stock" means ACL Common Stock, ACL Series A Preferred Stock and
ACL Series B Preferred Stock.
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, Liabilities, obligations, Taxes, liens, losses, expenses, and
fees, including all costs and expenses of litigation, and reasonable attorneys'
fees.
"Closing Date" means the date specified pursuant to Section 2.2 as the
date on which the parties hereto shall close the transactions contemplated
herein.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission.
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"Disclosure Schedule" means the ACL Disclosure Schedule and the Nova
Disclosure Schedule required to be delivered on the date hereof and initialed by
the Parties, pursuant to Articles III and IV. Nothing in any Disclosure Schedule
shall be deemed adequate to disclose an exception to a representation or
warranty made herein, however, unless the Disclosure Schedule identifies the
exception with reasonable particularity and describes the relevant facts in
reasonable detail. Without limiting the generality of the foregoing, the mere
listing (or inclusion of a copy) of a document or other item shall not be deemed
adequate to disclose an exception to a representation or warranty made herein
(unless the representation or warranty has to do with the existence of the
document or other item itself). The Disclosure Schedule will be arranged in
paragraphs corresponding to the lettered and numbered paragraphs contained in
the corresponding Article of the Agreement.
"Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (b) qualified defined contribution retirement plan or arrangement
which is an Employee Pension Benefit Plan, (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any Multiemployeer Plan), or (d) Employee Welfare Benefit Plan or
material fringe benefit plan or program.
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
ss.3(1).
"Environmental Laws" has the meaning attributed to it in Section 3.21.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Financial Statements" means:
(a) with respect to ACL, the consolidated balance sheet
(including related notes and schedules, if any) of ACL as of December
31, 1996 and the related consolidated statements of income, changes in
Shareholders' equity and cash flows (including related notes and
schedules, if any) for the year ended December 31, 1996 as filed by ACL
in Securities Documents, and
(b) with respect to Nova, (i) its unaudited balance sheets
(including related notes and schedules, if any) as of December 31,
1996, and the related statements of operations (including related notes
and schedules, if any) for the year ended December 31, 1996; (ii) its
unaudited balance sheets (including related notes and schedules, if
any) as of December 31, 1995, and the related statements of operations
(including related notes and schedules, if any) for each of the two
years ended December 31, 1995; and (iii) its balance sheets (including
related notes and schedules, if any) and
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related statements of operations (including related notes and
schedules, if any) with respect to period ended March 31, 1997, if any,
as delivered to ACL.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"Intellectual Property" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e) all trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (f) all computer software (including data and
related documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
"Knowledge" means actual knowledge after reasonable investigation.
"Liability" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"Material Adverse Effect" means a material adverse effect on the
financial conditions, results of operations, business, or prospects of the party
as to which such term is applied.
"Merger" means the merger of Nova with and into NVA upon the terms set
forth in Article II.
"NCBCA" means the North Carolina Business Corporation Act, as amended.
"Nova Common Shareholders" means the holders of Nova Common Stock.
"Nova Common Stock" means the shares of common stock $1.00 par value,
of NovaVision, Inc.
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"Nova Series A Preferred Stock" means the shares of Series A Redeemable
Preferred stock, $1.00 par value, of NovaVision, Inc.
"Nova Series B Preferred Stock" means the shares of Series B
Redeemable, Convertible Preferred stock, $1.00 par value, of NovaVision, Inc.,
convertible at $4.00 per share to Nova Common Stock.
"Nova Series A Preferred Shareholders" means the holders of Nova Series
A Preferred Stock.
"Nova Series B Preferred Shareholders" means the holders of Nova Series
B Preferred Stock.
"Nova Shareholder" means any holder of Nova Common Stock, Nova Series A
Preferred Stock, or Nova Series B Preferred Stock.
. "Nova Stock" means Nova Common Stock, Nova Series A Preferred Stock
and Nova Series B Preferred Stock.
"Nova Stock Options" means those options exercisable at $0.01 per
share, to purchase an aggregate of 412,700 shares of Nova Common Stock, granted
by Nova under the Nova Stock Option Plan adopted on June 12, 1995.
"Nova Stock Option Holders" means the holders of Nova Stock Options.
"Nova Stock Warrants" means those warrants to purchase an aggregate of
222,000 shares of Nova Common Stock, granted by Nova, to Sirrom, OcuTec and
William H. Burns, Jr.
"OcuTec" means OcuTec Holdings, Inc., a North Carolina corporation
having its principal office in Raleigh, North Carolina, a Nova Shareholder.
"OcuTec Warrants" means warrants for 200,000 shares of Nova Common
Stock exercisable at $1.00 per share, held by OcuTec.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
. "Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"Plan of Merger" has the meaning prescribed in Section 2.1.
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"Rights" means warrants, options, rights, convertible securities and
other arrangements or commitments which obligate an entity to issue or dispose
of any of its capital stock or other ownership interests, and stock appreciation
rights, performance units and similar stock-based rights whether or not they
obligate the issuer thereof to issue stock or other securities or to pay cash.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Documents" means all reports, proxy statements,
registration statements and all similar documents filed, or required to be
filed, pursuant to the Securities Laws.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar liens, (b) liens for Taxes not yet due and payable or for Taxes that
the taxpayer is contesting in good faith through appropriate proceedings, (c)
purchase money liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of Business and
not incurred in connection with the borrowing of money.
"Securities Laws" means the Securities Act, the Exchange Act, and the
rules and regulations of the Commission promulgated thereunder.
"Sirrom" means Sirrom Investments, Inc., a Tennessee corporation having
its principal office in Nashville, Tennessee, a Nova Shareholder.
"Subsidiary" means any corporation with respect to which a specified
Person (or Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors, including without limitation Biopolymer Corporation, a
subsidiary of Nova.
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code ss.59A),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"TD" means Tullis-Dickerson Capital Focus, LP.
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"TD Sub Debt" means the subordinated debt of ACL to TD, the balance,
including both principal and accrued interest, of which is approximately
$2,300,000.
Other terms used herein are defined in the preamble and elsewhere in
this Agreement.
ARTICLE II
THE MERGER
2.1 The Merger. In accordance with the plan of merger attached hereto
as Exhibit 2.1 (the "Plan of Merger") and the NCBCA, at the Effective Time Nova
shall be merged with and into NVA and the separate corporate existence of Nova
shall thereupon cease. NVA shall be the surviving corporation in the Merger and
shall continue to be governed by the laws of the state of North Carolina, and
the separate corporate existence of NVA with all its rights, privileges,
immunities, powers and franchise shall continue unaffected by the Merger, except
as set forth in the Plan of Merger. The Merger shall have the effects specified
in the NCBCA.
2.2 Conversion of Shares. The Merger, which the parties intend to
qualify as a corporate reorganization under Section 368(a)(2)(D) of the Code,
shall occur as provided in the Plan of Merger.
2.3 Closing. The closing of the transactions contemplated by this
Agreement (the "Closing"), subject to compliance with applicable conditions to
the Closing, shall take place at the offices of Schell Bray Aycock Abel &
Livingston P.L.L.C., 1500 Renaissance Plaza, 230 North Elm Street, Greensboro,
North Carolina on May ___, 1997.
2.4 Deliveries at Closing. At the Closing,
(a) Nova will deliver to ACL the various certificates,
instruments and documents referred to in Section 7.2 below;
(b) each of the Nova Shareholders will deliver to ACL stock
certificates representing all of his or its shares of Nova Stock,
endorsed in blank or accompanied by duly executed assignment documents;
2.5 Effectiveness of The Merger. The Merger shall become effective as
of the time and date of the filing of the Articles of Merger with the Secretary
of State of North Carolina in accordance with the provisions of the NCBCA, or at
the time specified in the Articles of Merger, if later than the time of filing.
The Articles of Merger shall be so filed as soon as practicable after the
Closing. The date and time when the Merger shall become effective is herein
referred to as the "Effective Time" as soon as practicable following the Merger:
(a) ACL will deliver to Nova the various certificates,
instruments and documents referred to in Section 7.3 below; and
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(b) ACL will deliver, or instruct its transfer agent to
deliver, to each respective Nova Shareholder certificates evidencing
the shares of ACL Stock into which such Nova Shareholder's Nova Stock
has been converted pursuant to the Merger
2.6 Further Assurances. If, at any time after the Closing, ACL or Nova
shall consider or be advised that any further deeds, assignments or assurances
in law or any other actions are necessary, desirable or proper to vest, perfect
or confirm of record or otherwise, in ACL the direct or indirect title to be
acquired by reason of, or as a result of, the Acquisition, ACL and Nova agree
that each of them and, in the case of ACL and Nova, their proper officers and
directors, shall and will execute and deliver all such proper deeds, assignments
and assurances in law and do all things necessary, desirable or proper to vest,
perfect or confirm title to such stock or property or rights in ACL and
otherwise to carry out the purpose of this Agreement, and that, in the case of
ACL and Nova, their proper officers and directors are fully authorized and
directed in the name of such corporations or otherwise to take any and all such
actions.
(a) Nova Stock Options. At the Effective Time, each option or
other right to purchase shares of Nova Stock pursuant to the Nova Stock
Option Plan that are outstanding at the Effective Time, whether or not
exercisable, shall be converted into and become rights with respect to
ACL Common Stock, and ACL shall assume each Nova Stock Option, in
accordance with the terms of the Nova Stock Option Plan, except that
from and after the Effective Time (i) ACL and its Board of Directors or
compensation committee shall be substituted for Nova and any of Nova's
Board of Directors administering such Nova Stock Option Plan, (ii) each
Nova Stock Option assumed by ACL may be exercised solely for shares of
ACL Common Stock, and (iii) the number of shares of ACL Common Stock
subject to such Nova Stock Option shall be equal to the number of
shares of Nova Common Stock subject to such Nova Stock Option
immediately prior to the Effective Time.
(b) Restrictions or limitations on transfer with respect to
Nova Common Stock awarded under the Nova Stock Option Plan shall remain
in full force and effect with respect to shares of ACL Common Stock
into which such restricted stock is converted pursuant to this
Agreement
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ACL AND NVA
ACL and NVA represent and warrant to Nova that the statements contained
in this Article III are correct and complete as of the date of this Agreement
and will be correct and complete as of the Closing Date (as though made then and
as though the Closing date were substituted for the date of this Agreement
throughout Article III), except as set forth in the ACL Disclosure Schedule
attached hereto.
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3.1 Organization, Qualification and Corporate Power of ACL and NVA.
Each of ACL and NVA is a corporation duly organized, validly existing, and in
good standing under the laws of the jurisdiction of its incorporation. Each of
ACL and NVA has full power and authority (including full corporate power and
authority) to execute and deliver this Agreement and to perform its obligations
hereunder. This Agreement constitutes the valid and legally binding obligation
of ACL and NVA, enforceable in accordance with its terms and conditions. Each of
ACL and NVA has all licenses, permits, and authorizations necessary to carry on
the businesses in which it is engaged and to own and use the properties owned
and used by it. Section 3.1 of the Disclosure Schedule lists the directors and
officers of ACL and NVA. ACL has delivered to Nova correct and complete copies
of the charter and bylaws of ACL (as amended to date). The minute books
(containing the records of meetings of the Shareholders, the board of directors,
and any committees of the board of directors), the stock certificate books, and
the stock record books are correct and complete. Neither ACL nor NVA is in
default under or in violation of any provision of its Articles of Incorporation
or bylaws.
3.2 Capitalization. The entire authorized capital stock of ACL consists
of the following:
(a) 20,000,000 shares of ACL Common Stock, $0.05 par value, of which
3,978,081 shares are issued and outstanding as of April 22, 1997;
(b) 5,000,000 shares of ACL Preferred Stock, no par value, of which no
shares are issued and outstanding;
(c) Options to purchase 1,309,844 shares of ACL Common Stock; and
(d) warrants to purchase 1,603,670 shares of ACL Common Stock.
All of the issued and outstanding shares of ACL Stock have been duly
authorized and are validly issued, fully paid, and nonassessable. Except as set
forth in Section 3.2 of the ACL Disclosure Schedule, there are no outstanding or
authorized options, warrants, purchase rights, subscription rights, conversion
rights, exchange rights, or other contracts or commitments that could require
ACL to issue, sell, or otherwise cause to become outstanding any of its capital
stock. There are no outstanding or authorized stock appreciation, phantom stock,
profit participation, or similar rights with respect to ACL. There are no voting
trusts, proxies, or other agreements or understandings with respect to the
voting of the capital stock of ACL.
3.3 Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(A) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which ACL or NVA is subject or any provision of
its charter or bylaws or (B) conflict with, result in a breach of,
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constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice
under any agreement, contract, lease, license, instrument, or other arrangement
to which ACL or NVA is a party or by which it is bound or to which any of its
assets is subject.
3.4 Financial Statements. ACL has previously delivered to Nova true and
complete copies of its Financial Statements. The Financial Statements (including
the notes thereto) have been prepared in accordance with GAAP applied on a
consistent basis throughout the periods covered thereby, present fairly the
financial condition of ACL as of such dates and the results of operations of ACL
for such periods, are correct and complete, and are consistent with the books
and records of ACL (which books and records are correct and complete); provided,
however, that the interim Financial Statements, if any, are subject to normal
year-end adjustments (which will not be material individually or in the
aggregate) and lack footnotes and other presentation items.
3.5 Brokers' Fees. Neither ACL nor NVA has any Liability or obligation
to pay any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement for which any Nova Shareholder
could become liable or obligated.
3.6 Investment. Neither ACL nor NVA is acquiring the Nova Stock with a
view to or for sale in connection with any distribution thereof within the
meaning of the Securities Act.
3.7 Title to Assets. ACL has good and marketable title to, or a valid
leasehold interest in, the properties and assets used by it, located on its
premises, or shown on the Most Recent Balance Sheet or acquired after the date
thereof, free and clear of all Security Interests, except for inventory disposed
of in the Ordinary Course of Business since the date of the Most Recent Balance
Sheet.
3.8 Subsidiaries. Section 3.8 of the Disclosure Schedule sets forth for
each Subsidiary of ACL (i) its name and jurisdiction of incorporation, (ii) the
number of shares of authorized capital stock of each class of its capital stock,
(iii) the number of issued and outstanding shares of each class of it capital
stock, the names of the holders thereof, and the number of shares held by each
such holder, and (iv) the number of shares of its capital stock held in
treasury. All of the issued and outstanding shares of capital stock of each
Subsidiary of ACL have been duly authorized and are validly issued, fully paid,
and nonassessable. ACL holds of record and owns beneficially all of the
outstanding shares of each Subsidiary of ACL.
3.9 Events Subsequent to Most Recent Fiscal Year End. Since the most
recent fiscal year end, there has not been any material adverse change in the
business, financial condition, operations, results of operations, or future
prospects of ACL. Without limiting the generality of the foregoing, since that
date:
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(a) ACL has not sold, leased, transferred, or assigned any of its
assets, tangible or intangible, other than for a fair consideration in
the Ordinary Course of Business;
(b) ACL has not entered into any agreement, contract, lease, or license
(or series of related agreements, contracts, leases, and licenses)
either involving more than $5,000 or outside the Ordinary Course of
Business;
(c) no party (including ACL) has accelerated, terminated, modified, or
canceled any agreement, contract, lease, or license (or series of
related agreements, contracts, leases, and licenses) involving more
than $5,000 to which ACL is a party or by which it is bound;
(d) ACL has not imposed any Security Interest upon any of its assets,
tangible or intangible;
(e) ACL has not made any capital expenditure (or series of related
capital expenditures) either involving more than $5,000 or outside the
Ordinary Course of Business;
(f) ACL has not made any capital investment in, any loan to, or any
acquisition of the securities or assets of, any other Person (or series
of related capital investments, loans, and acquisitions) either
involving more than $5,000 or outside the Ordinary Course of Business;
(g) ACL has not issued any note, bond, or other debt security or
created, incurred, assumed, or guaranteed any indebtedness for borrowed
money or capitalized lease obligation either involving more than $5,000
singly or $25,000 in the aggregate;
(h) ACL has not canceled, compromised, waived, or released any right or
claim (or series of related rights and claims) either involving more
than $5,000 or outside the Ordinary Course of Business;
(i) ACL has not granted any license or sublicense of any rights under
or with respect to any Intellectual Property;
(j) there has been no change made or authorized in the charter or
bylaws of ACL;
(k) ACL has not declared, set aside, or paid any dividend or made any
distribution with respect to its capital stock (whether in cash or in
kind) or redeemed, purchased, or otherwise acquired any of its capital
stock;
(l) ACL has not experienced any damage, destruction, or loss (whether
or not covered by insurance) to its property;
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(m) ACL has not made any loan to, or entered into any other transaction
with, any of its directors, officers, and employees outside the
Ordinary Course of Business;
(n) ACL has not entered into any employment contract or collective
bargaining agreement, written or oral, or modified the terms of any
existing such contract or agreement;
(o) ACL has not granted any increase in the base compensation of any of
its directors, officers, and employees outside the Ordinary Course of
Business;
(p) ACL has not adopted, amended, modified, or terminated any bonus,
profit-sharing, incentive, severance, or other plan, contract, or
commitment for the benefit of any of its directors, officers, and
employees (or taken any such action with respect to any other Employee
Benefit Plan);
(q) ACL has not made any other change in employment terms for any of
its directors, officers, and employees outside the Ordinary Course of
Business;
(r) ACL has not made or pledged to make any charitable or other capital
contribution outside the Ordinary Course of Business;
(s) there has not been any other material occurrence, event, incident,
action, failure to act, or transaction outside the Ordinary Course of
Business involving ACL; and
(t) ACL has not committed to any of the foregoing.
3.10 Undisclosed Liabilities. ACL has no Liability (and there is no
Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against it giving rise to any
Liability), except for Liabilities set forth in the most recent Financial
Statements (and in the notes thereto) or the ACL Disclosure Schedule.
3.11 Legal Compliance. ACL and its respective predecessors and
affiliates has complied with all applicable laws (including rules, regulations,
codes, plans, injunctions, judgments, orders, decrees, rulings, and charges
thereunder) of federal, state, local, and foreign governments (and all agencies
thereof), and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been filed or commenced against any of
them alleging any failure so to comply.
3.12 Tax Matters.
(a) ACL has filed all Tax Returns that it was required to file. All
such Tax Returns were correct and complete in all respects. All Taxes
owed by ACL (whether or not shown on any Tax Return) have been paid.
ACL currently is the beneficiary of any
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extension of time within which to file any Tax Return. No claim has
ever been made by an authority in a jurisdiction where ACL does not
file Tax Returns that it is or may be subject to taxation by that
jurisdiction. There are no Security Interests on any of the assets of
ACL that arose in connection with any failure (or alleged failure) to
pay any Tax.
(b) ACL has withheld and paid all Taxes required to have been withheld
and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, Shareholder, or other third party.
(c) No ACL director or officer (or employee responsible for Tax
matters) of ACL expects any authority to assess any additional Taxes
for any period for which Tax Returns have been filed. There is no
dispute or claim concerning any Tax Liability of ACL either (A) claimed
or raised by any authority in writing or (B) as to which any of the ACL
directors and officers (and employees responsible for Tax matters) has
Knowledge based upon personal contact with any agent of such authority.
Section 3.12 of the Disclosure Schedule lists all federal, state,
local, and foreign income Tax Returns filed with respect to ACL for
taxable periods ended on or after December 31, 1996, indicates those
Tax Returns that have been audited, and indicates those Tax Returns
that currently are the subject of audit. ACL has delivered to the Nova
correct and complete copies of all federal income Tax Returns,
examination reports, and statements of deficiencies assessed against or
agreed to by ACL since December 31, 1996.
(d) ACL has not waived any statute of limitations in respect of Taxes
or agreed to any extension of time with respect to a Tax assessment or
deficiency.
(e) ACL has not filed a consent under Code ss.341(f) concerning
collapsible corporations. ACL has not made any payments, is obligated
to make any payments, or is a party to any agreement that under certain
circumstances could obligate it to make any payments that will not be
deductible under Code ss.280G. ACL has disclosed on its federal income
Tax Returns all positions taken therein that could give rise to a
substantial understatement of federal income Tax within the meaning of
Code ss.6662. ACL is not a party to any Tax allocation or sharing
agreement. ACL (A) has not been a member of an Affiliated Group filing
a consolidated federal income Tax Return (other than a group the common
parent of which was ACL) or (B) has any Liability for the Taxes of any
Person (other than ACL) under Reg. ss.1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise.
(f) Section 3.12 of the Disclosure Schedule sets forth the following
information with respect to ACL as of the most recent practicable date:
(A) the basis of ACL in its assets; and (B) the amount of any net
operating loss, net capital loss, unused investment or other credit,
unused foreign tax, or excess charitable contribution allocable to ACL.
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(g) The unpaid Taxes of ACL (A) did not, as of the most recent fiscal
month end, exceed the reserve for Tax Liability (rather than any
reserve for deferred Taxes established to reflect timing differences
between book and Tax income) set forth on the face of the most recent
balance sheet (rather than in any notes thereto) and (B) do not exceed
that reserve as adjusted for the passage of time through the Closing
Date in accordance with the past custom and practice of ACL in filing
its Tax Returns.
3.13 Real Property.
(a) ACL owns no real property.
(b) Section 3.13(b) of the ACL Disclosure Schedule includes correct and
complete copies of all of ACL's leases. With respect to each such
lease, the lease is legal, valid, binding, enforceable, and in full
force and effect.
3.14 Intellectual Property.
(a) ACL owns or has the right to use pursuant to license, sublicense,
agreement, or permission all Intellectual Property necessary or
desirable for the operation of the businesses of ACL as presently
conducted and as presently proposed to be conducted. Each item of
Intellectual Property owned or used by ACL immediately prior to the
Closing hereunder will be owned or available for use by ACL on
identical terms and conditions immediately subsequent to the Closing
hereunder. ACL has taken all necessary and desirable action to maintain
and protect each item of Intellectual Property that it owns or uses.
(b) ACL has not interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Intellectual Property rights of
third parties, and none of the directors and officers (and employees
with responsibility for Intellectual Property matters) of ACL has ever
received any charge, complaint, claim, demand, or notice alleging any
such interference, infringement, misappropriation, or violation
(including any claim that ACL must license or refrain from using any
Intellectual Property rights of any third party). To the Knowledge of
ACL (and employees with responsibility for Intellectual Property
matters) of ACL, no third party has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual
Property rights of ACL.
(c) Section 3.14(c) of the Disclosure Schedule identifies all
Intellectual Property owned by ACL, including each patent or
registration which has been issued to ACL with respect to any of its
Intellectual Property, each pending patent application or application
for registration which ACL has made with respect to any of its
Intellectual Property, and each license, agreement, or other permission
which ACL has granted to any third party with respect to any of its
Intellectual Property (together with any
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exceptions). ACL has delivered to Nova correct and complete copies of
all such patents, registrations, applications, licenses, agreements,
and permissions (as amended to date) and have made available to Nova
correct and complete copies of all other written documentation
evidencing ownership and prosecution (if applicable) of each such item.
Section 3.14(c) of the Disclosure Schedule also identifies each trade
name or unregistered trademark used by ACL in connection with any of
its businesses. With respect to each item of Intellectual Property
required to be identified in Section 3.14(c) of the Disclosure
Schedule:
(i) ACL possesses all right, title, and interest in and to the
item, free and clear of any Security Interest, license, or
other restriction;
(ii) the item is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge;
(iii) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand is pending or, to the
Knowledge of ACL directors and officers (and employees with
responsibility for Intellectual Property matters) is
threatened which challenges the legality, validity,
enforceability, use, or ownership of the item; and
(iv) ACL has never agreed to indemnify any Person for or
against any interference, infringement, misappropriation, or
other conflict with respect to the item.
(d) Section 3.14(d) of the Disclosure Schedule identifies each item of
Intellectual Property that any third party owns and that ACL uses
pursuant to license, sublicense, agreement, or permission. ACL has
delivered to Nova correct and complete copies of all such licenses,
sublicenses, agreements, and permissions (as amended to date). With
respect to each item of Intellectual Property required to be identified
in Section 3.14(d) of the Disclosure Schedule:
(i) the license, sublicense, agreement, or permission covering
the item is legal, valid, binding, enforceable, and in full
force and effect;
(ii) the license, sublicense, agreement, or permission will
continue to be legal, valid, binding, enforceable, and in full
force and effect on identical terms following the consummation
of the transactions contemplated hereby
(iii) no party to the license, sublicense, agreement, or
permission is in breach or default, and no event has occurred
which with notice or lapse of time would constitute a breach
or default or permit termination, modification, or
acceleration thereunder;
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(iv) no party to the license, sublicense, agreement, or
permission has repudiated any provision thereof;
(v) with respect to each sublicense, the representations and
warranties set forth in subsections (i) through (iv) above are
true and correct with respect to the underlying license;
(vi) the underlying item of Intellectual Property is not
subject to any outstanding injunction, judgment, order,
decree, ruling, or charge;
(vii) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand is pending or, to the
Knowledge of ACL and the directors and officers (and employees
with responsibility for Intellectual Property matters) of ACL,
is threatened which challenges the legality, validity, or
enforceability of the underlying item of Intellectual
Property; and
(viii) ACL has not granted any sublicense or similar right
with respect to the license, sublicense, agreement, or
permission.
(e) To the Knowledge of ACL and the directors and officers (and
employees with responsibility for Intellectual Property matters) of ACL, ACL
will not interfere with, infringe upon, misappropriate, or otherwise come into
conflict with, any Intellectual Property rights of third parties as a result of
the continued operation of its businesses as presently conducted and as
presently proposed to be conducted.
(f) Neither ACL nor the directors and officers (and employees with
responsibility for Intellectual Property matters) of ACL has any Knowledge of
any new products, inventions, procedures, or methods of manufacturing or
processing that any competitors or other third parties have developed which
reasonably could be expected to supersede or make obsolete any product or
process of ACL.
3.15 Tangible Assets. ACL owns or leases all buildings, machinery,
equipment, and other tangible assets necessary for the conduct of its business
as presently conducted. Each such tangible asset is free from defects (patent
and latent), has been maintained in accordance with normal industry practice, is
in good operating condition and repair (subject to normal wear and tear), and is
suitable for the purposes for which it presently is used.
3.16 Inventory. The inventory of ACL consists of raw materials and
supplies, manufactured and purchased parts, goods in process, and finished
goods, all of which is merchantable and fit for the purpose for which it was
procured or manufactured, and none of which is slow-moving, obsolete, damaged,
or defective, subject only to the reserve for inventory writedown set forth in
the Most Recent Financial Statements (or in the notes thereto)
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as adjusted for the passage of time through the Closing Date in accordance with
the past custom and practice of ACL.
3.17 Contracts. Section 3.17 of the ACL Disclosure Schedule lists all
contracts, commitments, agreements (including agreements for the borrowing of
money or the extension of credit), leases (other than real property leases),
understandings and obligations, whether written or oral, to which ACL is a party
or by which ACL is bound or affected, other than obligations to pay monthly
amounts of $1,000.00 or less ("Contracts"). ACL has delivered to Nova true and
complete copies of all written Contracts and true and complete memoranda of all
oral Contracts, including any and all amendments and other modifications
thereto. Each of the Contracts is valid, binding and enforceable in accordance
with its terms and is in full force and effect. No purchase commitments are in
excess of the requirements of the Ordinary Course of Business of ACL. There are
no existing defaults by ACL, and no events or circumstances have occurred which,
with or without notice or lapse of time or both, would constitute defaults by
ACL under any of the Contracts. The consummation of the transactions
contemplated by this Agreement will not, with respect to any Contract, (i)
constitute a default thereunder, (ii) require the consent of any person or
party, or (iii) affect the continuation, validity and effectiveness thereof or
the terms thereof.
3.18 Notes and Accounts Receivable. All notes and accounts receivable
of ACL are reflected properly on their books and records, are valid receivables
subject to no setoffs or counterclaims, are current and collectible in
accordance with the terms thereof, and will be collected in accordance with
their terms at their recorded amounts, subject only to the reserve for bad debts
set forth on the face of the most recent Financial Statement (or in the notes
thereto) as adjusted for the passage of time through the Closing date in
accordance with the past custom and practice of ACL.
3.19 Liabilities. Section 3.19 of the Disclosure Schedule contains a
true and complete list of all Liabilities of ACL, including without limitation
all accounts payable, obligations to furnish goods or services or to pay for
goods or services to be delivered, Taxes, and other accrued expenses of whatever
kind, whether or not shown on the Financial Statements.
3.20 Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of any of ACL.
3.21 Insurance. Section 3.21 of the Disclosure Schedule describes all
insurance policies maintained by ACL with respect to its business. Such policies
are valid, binding and enforceable in accordance with their terms, are in full
force and effect, and all premiums due thereon have been paid and will be paid
through the Closing date. To the best of the Knowledge of ACL, such policies
provide adequate coverage for all risks customarily insured against by companies
engaging in a business similar to the business of ACL. Except as shown
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on Section 3.21 of the Disclosure Schedule, ACL has not been refused any
insurance by any insurance carrier during the past two years.
3.22 Litigation. Section 3.22 of the Disclosure Schedule sets forth
each instance in which ACL (i) is subject to any outstanding injunction,
judgment, order, decree, ruling, or charge or (ii) is a party or, to the
Knowledge of ACL and the directors and officers (and employees with
responsibility for litigation matters) of ACL, is threatened to be made a party
to any action, suit, proceeding, hearing, or investigation of, in, or before any
court or quasi-judicial or administrative agency of any federal, state, local,
or foreign jurisdiction or before any arbitrator. None of the actions, suits,
proceedings, hearings, and investigations set forth in Section 3.22 of the
Disclosure Schedule could result in any material adverse change in the business,
financial condition, operations, results of operations, or future prospects of
ACL. ACL (and employees with responsibility for litigation matters) ACL has no
reason to believe that any such action, suit, proceeding, hearing, or
investigation may be brought or threatened against ACL.
3.23 Product Warranty. Each product manufactured, sold, leased, or
delivered by ACL has been in conformity with all applicable contractual
commitments and all express and implied warranties, and ACL has no Liability
(and there is no Basis for any present or future action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand against any of them
giving rise to any Liability) for replacement or repair thereof or other damages
in connection therewith, subject only to the reserve for product warranty claims
set forth on the face of the Most Recent Balance Sheet (rather than in any notes
thereto) as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of ACL. No product manufactured,
sold, leased, or delivered by ACL is subject to any guaranty, warranty, or other
indemnity beyond the applicable standard terms and conditions of sale or lease.
Section 3.23 of the Disclosure Schedule includes copies of the standard terms
and conditions of sale or lease for ACL (containing applicable guaranty,
warranty, and indemnity provisions).
3.24 Product Liability. ACL has no Liability (and there is no Basis for
any present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand against any of them giving rise to any Liability)
arising out of any injury to individuals or property as a result of the
ownership, possession, or use of any product manufactured, sold, leased, or
delivered by ACL.
3.25 Employees. To the Knowledge of ACL, no executive, key employee, or
group of employees has any plans to terminate employment with ACL. ACL is not a
party to or bound by any collective bargaining agreement, nor has it experienced
any strikes, grievances, claims of unfair labor practices, or other collective
bargaining disputes. ACL has not committed any unfair labor practice.
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3.26 Employee Benefits.
(a) ACL does not now maintain and has not ever maintained an
Employee Benefit Plan.
(b) ACL does not contribute to, never has contributed to and
never has been required to contribute to any Multiemployer
Plan or has any Liability (including withdrawal Liability)
under any Multiemployer Plan.
(c) Section 3.26 of the Disclosure Schedule lists each
Employee Welfare Benefit Plan maintained or sponsored
providing medical, health, or life insurance or other
welfare-type benefits for current or future retired or
terminated employees, their spouses, or their dependents
(other than in accordance with Code ss.4980B). All such plans
are in full compliance with ERISA.
3.27 Guaranties. ACL is not a guarantor or otherwise is liable for any
Liability or obligation (including indebtedness) of any other Person.
3.28 Environmental Protection. The existing and prior uses of the
assets of ACL comply with, and at all times have complied with, and ACL is not
in violation of and has not violated, in connection with the ownership, use,
maintenance or operation of its assets, any Environmental Laws. For purposes
hereof, "Environmental Laws" means any applicable federal, state, county or
local statutes, laws, regulations, rules, ordinances, codes, licenses or permits
of any governmental authorities relating to environmental matters, including by
way of illustration and not by way of limitation the Comprehensive Environmental
Response, Compensation and Liability Act as amended, the Resource Conservation
Recovery Act as amended, the Clean Air Act, the Toxic Substances Control Act,
any "Superfund" or "Superlien" law, or any other federal, state or local
statute, law, ordinance, code, rule, regulation, order, decree or guideline
(whether published or unpublished) regulating, relating to or imposing liability
or standards of conduct concerning any petroleum, petroleum by- product
(including but not limited to crude oil, diesel oil, fuel oil, gasoline,
lubrication oil, oil refuse, oil hydrocarbons, regardless of specific gravity),
natural or synthetic gas, hazardous substance or materials, toxic or dangerous
waste, substance or material, pollutant or contaminant.
3.29 Disclosure. The representations and warranties contained in this
Article III do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Article III not misleading.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
CONCERNING NOVA AND ITS SUBSIDIARY
Nova represents and warrants to ACL and NVA that the statements
contained in this Article IV with respect to Nova and its Subsidiary are correct
and complete as of the date of this Agreement and will be correct and complete
as of the Closing date (as though made then and as though the Closing date were
substituted for the date of this Agreement throughout this Article IV), except
as set forth in the Nova Disclosure Schedule attached hereto.
4.1 Organization, Qualification, and Corporate Power. Nova is a
corporation duly organized, validly existing, and in good standing under the
NCBCA. Nova is not authorized to conduct business under the laws of any
jurisdiction other than North Carolina, which is the only jurisdiction where
such qualification is required. Nova has full corporate power and authority to
execute and deliver this Agreement and to perform its obligations hereunder.
This Agreement constitutes the valid and legally binding obligation of Nova,
enforceable in accordance with its terms. Nova has all licenses, permits, and
authorizations necessary to carry on the businesses in which it is engaged and
to own and use the properties owned and used by it. Section 4.1 of the
Disclosure Schedule lists the directors and officers of Nova. Nova has delivered
to ACL correct and complete copies of the charter and bylaws of Nova (as amended
to date). The minute books (containing the records of meetings of the
Shareholders, the board of directors, and any committees of the board of
directors), the stock certificate books, and the stock record books of Nova are
correct and complete. Nova is not in default under or in violation of any
provision of its Articles of Incorporation or bylaws.
4.2 Capitalization. The entire authorized capital stock of Nova
consists of the following:
(a) 5,000,000 shares of Nova Common Stock, $1.00 par value, of
which 3,561,906 shares are issued and outstanding;
(b) 5,000,000 shares of Nova Series A Preferred Stock, $1.00
par value, of which 2,808,175 shares are issued and outstanding as of
March 31, 1997;
(c) 5,000,000 shares of Nova Series B Preferred Stock, $1.00
par value, of which no shares are issued and outstanding;
(d) options to acquire 412,700 shares of Nova Common Stock;
and
(e) warrants to acquire 222,000 shares of Nova Common Stock.
All of the issued and outstanding shares of Nova Stock have been duly
authorized, are validly issued, fully paid, and nonassessable, and are held of
record by the respective Nova
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Shareholders as set forth in Section 4.2 of the Disclosure Schedule. Except as
set forth in Section 4.2 of the Disclosure Schedule, there are no outstanding or
authorized options, warrants, purchase rights, subscription rights, conversion
rights, exchange rights, or other contracts or commitments that could require
Nova to issue, sell, or otherwise cause to become outstanding any of its capital
stock. There are no outstanding or authorized stock appreciation, phantom stock,
profit participation, or similar rights with respect to Nova. There are no
voting trusts, proxies, or other agreements or understandings with respect to
the voting of the capital stock of Nova.
4.3 Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which Nova is subject or any provision of the
Articles of Incorporation or bylaws of Nova or (ii) conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license, instrument, or other
arrangement to which Nova is a party or by which it is bound or to which any of
its assets is subject (or result in the imposition of any Security Interest upon
any of its assets). Nova need not to give any notice to, make any filing with,
or obtain any authorization, consent, or approval of any government or
governmental agency in order for the Parties to consummate the transactions
contemplated by this Agreement.
4.4 Brokers' Fees. Nova has no Liability or obligation to pay any fees
or commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement.
4.5 Title to Assets. Nova has good and marketable title to, or a valid
leasehold interest in, the properties and assets used by it, located on its
premises, or shown on the Most Recent Balance Sheet or acquired after the date
thereof, free and clear of all Security Interests, except for inventory disposed
of in the Ordinary Course of Business since the date of the Most Recent Balance
Sheet.
4.6 Subsidiaries. Section 4.6 of the Disclosure Schedule sets forth for
each Subsidiary of Nova (i) its name and jurisdiction of incorporation, (ii) the
number of shares of authorized capital stock of each class of its capital stock,
(iii) the number of issued and outstanding shares of each class of it capital
stock, the names of the holders thereof, and the number of shares held by each
such holder, and (iv) the number of shares of its capital stock held in
treasury. All of the issued and outstanding shares of capital stock of each
Subsidiary of Nova have been duly authorized and are validly issued, fully paid,
and nonassessable. Nova holds of record and owns beneficially all of the
outstanding shares of each Subsidiary of Nova.
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4.7 Financial Statements. Nova has previously delivered to ACL true and
complete copies of its Financial Statements. The Financial Statements (including
the notes thereto) have been prepared in accordance with GAAP applied on a
consistent basis throughout the periods covered thereby, present fairly the
financial condition of Nova as of such dates and the results of operations of
Nova for such periods, are correct and complete, and are consistent with the
books and records of Nova (which books and records are correct and complete);
provided, however, that the interim Financial Statements, if any, are subject to
normal year-end adjustments (which will not be material individually or in the
aggregate) and lack footnotes and other presentation items.
4.8 Events Subsequent to Most Recent Fiscal Year End. Since the most
recent fiscal year end, there has not been any material adverse change in the
business, financial condition, operations, results of operations, or future
prospects of Nova. Without limiting the generality of the foregoing, since that
date:
(a) Nova has not sold, leased, transferred, or assigned any of
its assets, tangible or intangible, other than for a fair consideration
in the Ordinary Course of Business;
(b) Nova has not entered into any agreement, contract, lease,
or license (or series of related agreements, contracts, leases, and
licenses) either involving more than $5,000 or outside the Ordinary
Course of Business;
(c) no party (including Nova) has accelerated, terminated,
modified, or canceled any agreement, contract, lease, or license (or
series of related agreements, contracts, leases, and licenses)
involving more than $5,000 to which Nova is a party or by which it is
bound;
(d) Nova has not imposed any Security Interest upon any of its
assets, tangible or intangible;
(e) Nova has not made any capital expenditure (or series of
related capital expenditures) either involving more than $5,000 or
outside the Ordinary Course of Business;
(f) Nova has not made any capital investment in, any loan to,
or any acquisition of the securities or assets of, any other Person (or
series of related capital investments, loans, and acquisitions) either
involving more than $5,000 or outside the Ordinary Course of Business;
(g) Nova has not issued any note, bond, or other debt security
or created, incurred, assumed, or guaranteed any indebtedness for
borrowed money or capitalized lease obligation either involving more
than $5,000 singly or $25,000 in the aggregate;
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(h) Nova has not cancelled, compromised, waived, or released
any right or claim (or series of related rights and claims) either
involving more than $5,000 or outside the Ordinary Course of Business;
(i) Nova has not granted any license or sublicense of any
rights under or with respect to any Intellectual Property;
(j) there has been no change made or authorized in the charter
or bylaws of Nova;
(k) Nova has not issued, sold, or otherwise disposed of any of
its capital stock, or granted any options, warrants, or other rights to
purchase or obtain (including upon conversion, exchange, or exercise)
any of its capital stock;
(l) Nova has not declared, set aside, or paid any dividend or
made any distribution with respect to its capital stock (whether in
cash or in kind) or redeemed, purchased, or otherwise acquired any of
its capital stock;
(m) Nova has not experienced any damage, destruction, or loss
(whether or not covered by insurance) to its property;
(n) Nova has not made any loan to, or entered into any other
transaction with, any of its directors, officers, and employees outside
the Ordinary Course of Business;
(o) Nova has not entered into any employment contract or
collective bargaining agreement, written or oral, or modified the terms
of any existing such contract or agreement;
(p) Nova has not granted any increase in the base compensation
of any of its directors, officers, and employees outside the Ordinary
Course of Business;
(q) Nova has not adopted, amended, modified, or terminated any
bonus, profit-sharing, incentive, severance, or other plan, contract,
or commitment for the benefit of any of its directors, officers, and
employees (or taken any such action with respect to any other Employee
Benefit Plan);
(r) Nova has not made any other change in employment terms for
any of its directors, officers, and employees outside the Ordinary
Course of Business;
(s) Nova has not made or pledged to make any charitable or
other capital contribution outside the Ordinary Course of Business;
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(t) there has not been any other material occurrence, event,
incident, action, failure to act, or transaction outside the Ordinary
Course of Business involving Nova; and
(u) Nova has not committed to any of the foregoing.
4.9 Undisclosed Liabilities. Nova has no Liability (and there is no
Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against it giving rise to any
Liability), except for Liabilities set forth on the face of the most recent
Balance Sheet (rather than in any notes thereto).
4.10 Legal Compliance. Nova and its respective predecessors and
affiliates has complied with all applicable laws (including rules, regulations,
codes, plans, injunctions, judgments, orders, decrees, rulings, and charges
thereunder) of federal, state, local, and foreign governments (and all agencies
thereof), and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been filed or commenced against any of
them alleging any failure so to comply.
4.11 Tax Matters.
(a) Nova has filed all Tax Returns that it was required to
file. All such Tax Returns were correct and complete in all respects.
All Taxes owed by Nova (whether or not shown on any Tax Return) have
been paid. Nova currently is the beneficiary of any extension of time
within which to file any Tax Return. No claim has ever been made by an
authority in a jurisdiction where Nova does not file Tax Returns that
it is or may be subject to taxation by that jurisdiction. There are no
Security Interests on any of the assets of Nova that arose in
connection with any failure (or alleged failure) to pay any Tax.
(b) Nova has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, Shareholder, or other third
party.
(c) No Nova Shareholder or director or officer (or employee
responsible for Tax matters) of Nova expects any authority to assess
any additional Taxes for any period for which Tax Returns have been
filed. There is no dispute or claim concerning any Tax Liability of
Nova either (A) claimed or raised by any authority in writing or (B) as
to which any of the Nova Shareholders and the directors and officers
(and employees responsible for Tax matters) of Nova has Knowledge based
upon personal contact with any agent of such authority. Section 4.11 of
the Disclosure Schedule lists all federal, state, local, and foreign
income Tax Returns filed with respect to Nova for taxable periods ended
on or after December 31, 1996, indicates those Tax Returns that have
been audited, and indicates those Tax Returns that currently are the
subject of
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audit. The Nova Shareholders have delivered to the ACL correct and
complete copies of all federal income Tax Returns, examination reports,
and statements of deficiencies assessed against or agreed to by Nova
since December 31, 1996.
(d) Nova has not waived any statute of limitations in respect
of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(e) Nova has not filed a consent under Code ss.341(f)
concerning collapsible corporations. Nova has not made any payments, is
obligated to make any payments, or is a party to any agreement that
under certain circumstances could obligate it to make any payments that
will not be deductible under Code ss.280G. Nova has disclosed on its
federal income Tax Returns all positions taken therein that could give
rise to a substantial understatement of federal income Tax within the
meaning of Code ss.6662. Nova is not a party to any Tax allocation or
sharing agreement. Nova (A) has not been a member of an Affiliated
Group filing a consolidated federal income Tax Return (other than a
group the common parent of which was Nova) or (B) has any Liability for
the Taxes of any Person (other than Nova) under Reg. ss.1.1502-6 (or
any similar provision of state, local, or foreign law), as a transferee
or successor, by contract, or otherwise.
(f) Section 4.11 of the Disclosure Schedule sets forth the
following information with respect to Nova as of the most recent
practicable date: (A) the basis of Nova in its assets; and (B) the
amount of any net operating loss, net capital loss, unused investment
or other credit, unused foreign tax, or excess charitable contribution
allocable to Nova.
(g) The unpaid Taxes of Nova (A) did not, as of the most
recent fiscal month end, exceed the reserve for Tax Liability (rather
than any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) set forth on the face of the
most recent balance sheet (rather than in any notes thereto) and (B) do
not exceed that reserve as adjusted for the passage of time through the
Closing Date in accordance with the past custom and practice of Nova in
filing its Tax Returns.
4.12 Real Property.
(a) Nova owns no real property.
(b) Nova has one lease which expires on August 31, 1997. Nova
has delivered to ACL a correct and complete copy of the lease. With
respect to such lease, the lease is legal, valid, binding, enforceable,
and in full force and effect.
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4.13 Intellectual Property.
(a) Nova owns or has the right to use pursuant to license,
sublicense, agreement, or permission all Intellectual Property
necessary or desirable for the operation of the businesses of Nova as
presently conducted and as presently proposed to be conducted. Each
item of Intellectual Property owned or used by Nova immediately prior
to the Closing hereunder will be owned or available for use by Nova on
identical terms and conditions immediately subsequent to the Closing
hereunder. Nova has taken all necessary and desirable action to
maintain and protect each item of Intellectual Property that it owns or
uses.
(b) Nova has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual
Property rights of third parties, and none of the Nova Shareholders and
the directors and officers (and employees with responsibility for
Intellectual Property matters) of Nova has ever received any charge,
complaint, claim, demand, or notice alleging any such interference,
infringement, misappropriation, or violation (including any claim that
Nova must license or refrain from using any Intellectual Property
rights of any third party). To the Knowledge of any of the Nova
Shareholders and the directors and officers (and employees with
responsibility for Intellectual Property matters) of Nova, no third
party has interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Intellectual Property rights of
Nova.
(c) Section 4.13(c) of the Disclosure Schedule identifies all
Intellectual Property owned by Nova, including each patent or
registration which has been issued to Nova with respect to any of its
Intellectual Property, each pending patent application or application
for registration which Nova has made with respect to any of its
Intellectual Property, and each license, agreement, or other permission
which Nova has granted to any third party with respect to any of its
Intellectual Property (together with any exceptions). Nova has
delivered to ACL correct and complete copies of all such patents,
registrations, applications, licenses, agreements, and permissions (as
amended to date) and have made available to ACL correct and complete
copies of all other written documentation evidencing ownership and
prosecution (if applicable) of each such item. Section 4.13(c) of the
Disclosure Schedule also identifies each trade name or unregistered
trademark used by Nova in connection with any of its businesses. With
respect to each item of Intellectual Property required to be identified
in Section 4.13(c) of the Disclosure Schedule:
(i) Nova possesses all right, title, and interest in
and to the item, free and clear of any Security Interest,
license, or other restriction;
(ii) the item is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge;
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(iii) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending
or, to the Knowledge of any of the Nova Shareholders and the
directors and officers (and employees with responsibility for
Intellectual Property matters) of Nova, is threatened which
challenges the legality, validity, enforceability, use, or
ownership of the item; and
(iv) Nova has never agreed to indemnify any Person
for or against any interference, infringement,
misappropriation, or other conflict with respect to the item.
(d) Section 4.13(d) of the Disclosure Schedule identifies each
item of Intellectual Property that any third party owns and that Nova
uses pursuant to license, sublicense, agreement, or permission. Nova
has delivered to ACL correct and complete copies of all such licenses,
sublicenses, agreements, and permissions (as amended to date). With
respect to each item of Intellectual Property required to be identified
in Section 4.13(d) of the Disclosure Schedule:
(i) the license, sublicense, agreement, or permission
covering the item is legal, valid, binding, enforceable, and
in full force and effect;
(ii) the license, sublicense, agreement, or
permission will continue to be legal, valid, binding,
enforceable, and in full force and effect on identical terms
following the consummation of the transactions contemplated
hereby
(iii) no party to the license, sublicense, agreement,
or permission is in breach or default, and no event has
occurred which with notice or lapse of time would constitute a
breach or default or permit termination, modification, or
acceleration thereunder;
(iv) no party to the license, sublicense, agreement,
or permission has repudiated any provision thereof;
(v) with respect to each sublicense, the
representations and warranties set forth in subsections (i)
through (iv) above are true and correct with respect to the
underlying license;
(vi) the underlying item of Intellectual Property is
not subject to any outstanding injunction, judgment, order,
decree, ruling, or charge;
(vii) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending
or, to the Knowledge of any of Nova Shareholders and the
directors and officers (and employees with responsibility
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for Intellectual Property matters) of Nova, is threatened
which challenges the legality, validity, or enforceability of
the underlying item of Intellectual Property; and
(viii) Nova has not granted any sublicense or similar
right with respect to the license, sublicense, agreement, or
permission.
(e) To the Knowledge of any of the Nova Shareholders and the
directors and officers (and employees with responsibility for
Intellectual Property matters) of Nova, Nova will not interfere with,
infringe upon, misappropriate, or otherwise come into conflict with,
any Intellectual Property rights of third parties as a result of the
continued operation of its businesses as presently conducted and as
presently proposed to be conducted.
(f) None of the Nova Shareholders and the directors and
officers (and employees with responsibility for Intellectual Property
matters) of Nova has any Knowledge of any new products, inventions,
procedures, or methods of manufacturing or processing that any
competitors or other third parties have developed which reasonably
could be expected to supersede or make obsolete any product or process
of Nova.
4.14 Tangible Assets. Nova owns or leases all buildings, machinery,
equipment, and other tangible assets necessary for the conduct of its business
as presently conducted. Each such tangible asset is free from defects (patent
and latent), has been maintained in accordance with normal industry practice, is
in good operating condition and repair (subject to normal wear and tear), and is
suitable for the purposes for which it presently is used.
4.15 Inventory. The inventory of Nova consists of raw materials and
supplies, manufactured and purchased parts, goods in process, and finished
goods, all of which is merchantable and fit for the purpose for which it was
procured or manufactured, and none of which is slow-moving, obsolete, damaged,
or defective, subject only to the reserve for inventory writedown set forth on
the face of the Most Recent Balance Sheet (rather than in any notes thereto) as
adjusted for the passage of time through the Closing Date in accordance with the
past custom and practice of Nova.
4.16 Contracts. Section 4.16 of the Nova Disclosure Schedule lists all
contracts, commitments, agreements (including agreements for the borrowing of
money or the extension of credit), leases (other than real property leases),
understandings and obligations, whether written or oral, to which Nova is a
party or by which Nova is bound or affected, other than obligations to pay
monthly amounts of $1,000.00 or less ("Contracts"). Nova has delivered to ACL
true and complete copies of all written Contracts and true and complete
memoranda of all oral Contracts, including any and all amendments and other
modifications thereto. Each of the Contracts is valid, binding and enforceable
in accordance with its terms and is in full force
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and effect. No purchase commitments are in excess of the requirements of the
Ordinary Course of Business of Nova. There are no existing defaults by Nova, and
no events or circumstances have occurred which, with or without notice or lapse
of time or both, would constitute defaults by Nova under any of the Contracts.
The consummation of the transactions contemplated by this Agreement will not,
with respect to any Contract, (i) constitute a default thereunder, (ii) require
the consent of any person or party, or (iii) affect the continuation, validity
and effectiveness thereof or the terms thereof.
4.17 Notes and Accounts Receivable. All notes and accounts receivable
of Nova are reflected properly on their books and records, are valid receivables
subject to no setoffs or counterclaims, are current and collectible in
accordance with the terms thereof, and will be collected in accordance with
their terms at their recorded amounts, subject only to the reserve for bad debts
set forth on the face of the most recent Balance Sheet (rather than in any notes
thereto) as adjusted for the passage of time through the Closing date in
accordance with the past custom and practice of Nova.
4.18 Liabilities. Section 4.18 of the Disclosure Schedule contains a
true and complete list of all Liabilities of Nova, including without limitation
all accounts payable, obligations to furnish goods or services or to pay for
goods or services to be delivered, Taxes, and other accrued expenses of whatever
kind, whether or not shown on the Financial Statements.
4.19 Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of any of Nova.
4.20 Insurance. Section 4.20 of the Disclosure Schedule describes all
insurance policies maintained by Nova with respect to its business. Such
policies are valid, binding and enforceable in accordance with their terms, are
in full force and effect, and all premiums due thereon have been paid and will
be paid through the Closing date. To the best of the Knowledge of the Nova
Shareholders, such policies provide adequate coverage for all risks customarily
insured against by companies engaging in a business similar to the business of
Nova. Except as shown on Section 4.20 of the Disclosure Schedule, Nova has not
been refused any insurance by any insurance carrier during the past two years.
4.21 Litigation. Section 4.21 of the Disclosure Schedule sets forth
each instance in which Nova (i) is subject to any outstanding injunction,
judgment, order, decree, ruling, or charge or (ii) is a party or, to the
Knowledge of any of the Nova Shareholders and the directors and officers (and
employees with responsibility for litigation matters) of Nova, is threatened to
be made a party to any action, suit, proceeding, hearing, or investigation of,
in, or before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator. None of
the actions, suits, proceedings, hearings, and investigations set forth in
Section 4.21 of the Disclosure Schedule could result in any material adverse
change in the business, financial condition, operations, results of operations,
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or future prospects of Nova. None of the Nova Shareholders and the directors and
officers (and employees with responsibility for litigation matters) of Nova has
any reason to believe that any such action, suit, proceeding, hearing, or
investigation may be brought or threatened against Nova.
4.22 Product Warranty. Each product manufactured, sold, leased, or
delivered by Nova has been in conformity with all applicable contractual
commitments and all express and implied warranties, and Nova has no Liability
(and there is no Basis for any present or future action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand against any of them
giving rise to any Liability) for replacement or repair thereof or other damages
in connection therewith, subject only to the reserve for product warranty claims
set forth on the face of the Most Recent Balance Sheet (rather than in any notes
thereto) as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of Nova. No product manufactured,
sold, leased, or delivered by Nova is subject to any guaranty, warranty, or
other indemnity beyond the applicable standard terms and conditions of sale or
lease. Section 4.22 of the Disclosure Schedule includes copies of the standard
terms and conditions of sale or lease for Nova (containing applicable guaranty,
warranty, and indemnity provisions).
4.23 Product Liability. Nova has no Liability (and there is no Basis
for any present or future action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand against any of them giving rise to any
Liability) arising out of any injury to individuals or property as a result of
the ownership, possession, or use of any product manufactured, sold, leased, or
delivered by Nova.
4.24 Employees. To the Knowledge of any of the Nova Shareholders and
the directors and officers (and employees with responsibility for employment
matters) of Nova, no executive, key employee, or group of employees has any
plans to terminate employment with Nova. Nova is not a party to or bound by any
collective bargaining agreement, nor has it experienced any strikes, grievances,
claims of unfair labor practices, or other collective bargaining disputes. Nova
has not committed any unfair labor practice.
4.25 Employee Benefits.
(a) Nova does not now maintain and has not ever maintained an
Employee Benefit Plan.
(b) Nova does not contribute to, never has contributed to and
never has been required to contribute to any Multiemployer Plan or has
any Liability (including withdrawal Liability) under any Multiemployer
Plan.
(c) Section 4.25 of the Disclosure Schedule lists each
Employee Welfare Benefit Plan maintained or sponsored providing
medical, health, or life insurance or
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other welfare-type benefits for current or future retired or terminated
employees, their spouses, or their dependents (other than in accordance
with Code ss.4980B). All such plans are in full compliance with ERISA.
4.26 Guaranties. Nova is not a guarantor or otherwise is liable for any
Liability or obligation (including indebtedness) of any other Person.
4.27 Environmental Protection. The existing and prior uses of the
assets of Nova comply with, and at all times have complied with, and Nova is not
in violation of and has not violated, in connection with the ownership, use,
maintenance or operation of its assets, any Environmental Laws. For purposes
hereof, "Environmental Laws" means any applicable federal, state, county or
local statutes, laws, regulations, rules, ordinances, codes, licenses or permits
of any governmental authorities relating to environmental matters, including by
way of illustration and not by way of limitation the Comprehensive Environmental
Response, Compensation and Liability Act as amended, the Resource Conservation
Recovery Act as amended, the Clean Air Act, the Toxic Substances Control Act,
any "Superfund" or "Superlien" law, or any other federal, state or local
statute, law, ordinance, code, rule, regulation, order, decree or guideline
(whether published or unpublished) regulating, relating to or imposing liability
or standards of conduct concerning any petroleum, petroleum by- product
(including but not limited to crude oil, diesel oil, fuel oil, gasoline,
lubrication oil, oil refuse, oil hydrocarbons, regardless of specific gravity),
natural or synthetic gas, hazardous substance or materials, toxic or dangerous
waste, substance or material, pollutant or contaminant.
4.28 Disclosure. The representations and warranties contained in this
Article IV do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Article IV not misleading.
ARTICLE V
PRE-CLOSING COVENANTS
The Parties agree as follows with respect to the period between the
execution of this Agreement and the Closing:
5.1 General. Each of the Parties will use his or its reasonable best
efforts to take all action and to do all things necessary, proper, or advisable
in order to consummate and make effective the transactions contemplated by this
Agreement (including satisfaction, but not waiver, of the closing conditions set
forth in Article VII below).
5.2 Notices and Consents. Nova will give any notices to third parties,
and will use its best efforts to obtain any third party consents, that ACL
reasonably may request in connection with the matters referred to in Section 4.3
above. Each of the Parties will give any notices to, make any filings with, and
use its reasonable best efforts to obtain any
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authorizations, consents, and approvals of governments and governmental agencies
required to consummate the transactions contemplated herein.
5.3 Operation of Business. Nova will not engage in any practice, take
any action, or enter into any transaction outside the Ordinary Course of
Business. Without limiting the generality of the foregoing, Nova will not
declare, set aside, or pay any dividend or make any distribution with respect to
its capital stock or redeem, purchase, or otherwise acquire any of its capital
stock, or otherwise engage in any practice, take any action, or enter into any
transaction of the sort described in Article IV above.
5.4 Preservation of Business. Nova will keep its business and
properties substantially intact, including its present operations, physical
facilities, working conditions, and relationships with lessors, licensors,
suppliers, customers, and employees.
5.5 Full Access. Nova will permit representatives of ACL to have full
access at all reasonable times, and in a manner so as not to interfere with the
normal business operations of Nova, to all premises, properties, personnel,
books, records (including Tax records), contracts, and documents of or
pertaining to Nova.
5.6 Notice of Developments. Nova will give prompt written notice to ACL
of any material adverse development causing a breach of any of the
representations and warranties above. Each Party will give prompt written notice
to the others of any Material Adverse Development causing a breach of any of his
or its own representations and warranties above. No disclosure by any Party
pursuant to this Section 5.6, however, shall be deemed to amend or supplement
the Disclosure Schedule or to prevent or cure any misrepresentation, breach of
warranty, or breach of covenant.
5.7 Exclusivity. Nova will not (i) solicit, initiate, or encourage the
submission of any proposal or offer from any Person relating to the acquisition
of any capital stock or other voting securities, or any substantial portion of
the assets, of Nova (including any acquisition structured as a merger,
consolidation, or share exchange) or (ii) participate in any discussions or
negotiations regarding, furnish any information with respect to, assist or
participate in, or facilitate in any other manner any effort or attempt by any
Person to do or seek any of the foregoing. Nova will notify ACL immediately if
any Person makes any proposal, offer, inquiry, or contact with respect to any of
the foregoing.
5.8 Plan of Merger; Reservation of Shares. ACL has reserved for
issuance such number of shares of ACL Stock as shall be necessary to pay the
consideration to be distributed to the Nova Shareholders as contemplated in
Article II. If at any time the aggregate number of shares of ACL Stock available
for issuance hereunder shall not be sufficient to effect the Merger, ACL shall
take all appropriate action as may be required to increase the amount of the
authorized ACL Stock.
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5.9 Press Releases. ACL and Nova shall agree with each other as to the
form and substance of any press release related to this Agreement or the
transactions contemplated hereby and thereby, and consult with each other as to
the form and substance of other public disclosures related thereto, provided,
that nothing contained herein shall prohibit either party, following
notification to the other party, from making any disclosure which it reasonably
believes to be required by law.
5.10 Employment Agreements. ACL shall enter into an employment
agreement with Bart C. Gutekunst ("Gutekunst") in form and substance as attached
hereto as Exhibit 5.10.
ARTICLE VI
POST-CLOSING COVENANTS
The Parties agree as follows with respect to the period following the
Closing:
6.1 General. In case at any time after the Closing any further action
is necessary or desirable to carry out the purposes of this Agreement, each of
the Parties will take such further action (including the execution and delivery
of such further instruments and documents) as any other Party reasonably may
request, all at the sole cost and expense of the requesting Party (unless the
requesting Party is entitles to indemnification therefor under Article VI
below). Nova acknowledges and agrees that from and after the Closing ACL will be
entitled to possession of all documents, books, records (including Tax records),
agreements, and financial data of any sort relating to Nova.
6.2 Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving Nova, each of the other Parties will cooperate
with him or it and his or its counsel in the contest or defense, make available
their personnel, and provide such testimony and access to their books and
records as shall be necessary in connection with the contest or defense, all at
the sole cost and expense of the contesting or defending Party (unless the
contesting or defending Party is entitled to indemnification therefor under
Article VIII below).
6.3 Transition. Nova will not take any action that is designed or
intended to have the effect of discouraging any lessor, licensor, customer,
supplier, or other business associate of Nova from maintaining the same business
relationships with Nova after the Closing as it maintained with Nova prior to
the Closing.
6.4 Confidentiality. Nova will treat and hold as such all of the
Confidential Information, refrain from using any of the Confidential Information
except in connection with this Agreement, and deliver promptly to ACL or
destroy, at the request and option of ACL,
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all tangible embodiments (and all copies) of the Confidential Information which
are in his or its possession. In the event that Nova or any of its Shareholders,
officers or directors are requested or required (by oral question or request for
information or documents in any legal proceeding, interrogatory, subpoena, civil
investigative demand, or similar process) to disclose any Confidential
Information, Nova will notify ACL promptly of the request or requirement so that
ACL may seek an appropriate protective order or waive compliance with the
provisions of this Section 6.4. If, in the absence of a protective order or the
receipt of a waiver hereunder, any of the Nova Shareholders is, on the advice of
counsel, compelled to disclose any Confidential Information to any tribunal or
else stand liable for contempt, that Nova may disclose the Confidential
Information to the tribunal; provided, however, that Nova shall use its
reasonable best efforts to obtain, at the reasonable request of ACL, an order or
other assurance that confidential treatment will be accorded to such portion of
the Confidential Information required to be disclosed as ACL shall designate.
The foregoing provisions shall not apply to any Confidential Information which
is generally available to the public immediately prior to the time of
disclosure.
6.5 Registration. Upon written request by the majority in interest of
the Nova Shareholders who receive ACL Common Stock upon consummation of the
Merger, as promptly as practicable following the receipt by ACL of the audited
financial statements required by the Securities and Exchange Commission, but not
more than 60 days thereafter or after receipt of such written request, whichever
is later, ACL shall file a registration statement on Form S-3 or an equivalent
form under the Securities Act and any applicable state securities laws covering
resale of the ACL Common Stock issued to the Nova Shareholders in the Merger and
shall use its best efforts to cause the registration statement to remain
effective and current until such time as such Nova Shareholders are entitled to
sell such shares under Rule 144 of the Securities and Exchange Commission. Such
registration shall be effected at the Company's expense except for underwriting
discounts and commissions and fees and expenses of counsel for the Nova
Shareholders, if any. If at any time during the effectiveness of the
registration statement, ACL becomes aware that the information contained in the
registration statement is not current, ACL will promptly notify Nova
Shareholders whose ACL Common Stock is registered thereunder, who will refrain
from selling any further shares pursuant to the registration statement until
such time as it is amended to render it current. ACL shall not, however, be
required to amend the registration statement to include undisclosed material
information that has not been disclosed for business reasons, and the Nova
Shareholders will refrain from selling shares pursuant to the registration
statement until such time as ACL notifies them that the information is no longer
material or has been disclosed in a report or other document filed with the
Securities and Exchange Commission.
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ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions Precedent -- ACL and Nova. The respective obligations of
ACL and Nova to effect the transactions contemplated by this Agreement shall be
subject to satisfaction or waiver of the following conditions at or prior to the
Closing Date:
(a) All corporate action necessary to authorize the execution,
delivery and performance of this Agreement and consummation of the
transactions contemplated hereby and thereby shall have been duly and
validly taken.
(b) Neither ACL nor Nova shall be subject to any order, decree
or injunction of a court or agency of competent jurisdiction which
enjoins or prohibits consummation of the merger or the other
transactions contemplated by this Agreement and no action, suit or
proceeding shall be pending or, in the good faith opinion of the
terminating party, threatened, which seeks to enjoin or prohibit
consummation of the transactions contemplated by this Agreement or
seeks material damages in respect thereof;
(c) Bart C. Gutekunst, William H. Burns, Jr. and Alan Rabin
shall have been elected as directors of ACL;
(d) Sirrom shall have converted 1,000,000 shares of Nova
Series A Preferred Stock into 1,000,000 shares of Nova Common Stock;
(e) Approximately 1,750,000 shares of ACL Series A Preferred
Stock shall have been issued to TD in satisfaction of approximately
$1,750,000 of the TD SubDebt, leaving a balance of the TD SubDebt of
$550,000; and
(f) OcuTec shall have released its warrants for 200,000 shares
of Nova Common Stock at $1.00 per share, effective as of the Closing
Date.
7.2 Conditions to Obligation of ACL. The obligation of ACL to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
(a) the representations and warranties set forth in Article IV
above shall be true and correct in all material respects at and as of
the Closing date;
(b) Nova shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
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(c) Nova shall have procured all of the third party consents
specified in Section 4.3 above.
(d) Nova shall have delivered to ACL a certificate to the
effect that each of the conditions specified above in Section 7.2(a)
through (c) is satisfied in all respects;
(e) Bart C. Gutekunst shall have entered into an employment
agreement with ACL in the form as attached hereto as Exhibit 5.10.
(f) Each of the Nova Shareholders (other than OcuTec) shall
have delivered to ACL a duly executed Accredited Investor
Representation in the form of Exhibit 7.2(f) attached hereto.
(g) OcuTec shall have delivered to ACL a duly executed
Investor Representation in the form of Exhibit 7.2(g) attached hereto.
(h) Bart C. Gutekunst, William H. Burns, Jr., and the Nova
Stock Option Holders shall have delivered to ACL a duly executed Escrow
and Indemnity Agreement in the form of Exhibit 8.6(b) attached.
(i) OcuTec, Alan Touch, James Jansen and Lewis Eslinger shall
have delivered to ACL a duly executed Estoppel Certificate in the form
of Exhibit 7.2(i) attached hereto.
(j) ACL shall have received from counsel to Nova an opinion in
form and substance as set forth in Exhibit 7.2(j) attached hereto,
addressed to ACL, and dated as of the Closing Date;
(k) Each of the Nova Shareholders shall have delivered to ACL
a duly executed certificate in the form of Exhibit 7.2(k) attached.
(l) ACL shall have obtained from Sirrom financing
substantially in accordance with the terms and conditions outlined in
Sirrom's letter to ACL and Nova dated March 17, 1997; and
(m) all actions to be taken by Nova and the Nova Shareholders
in connection with consummation of the transactions contemplated hereby
and all certificates, opinions, instruments, and other documents
required to effect the transactions contemplated hereby will be
reasonably satisfactory in form and substance to ACL.
ACL may waive any condition specified in this Section 7.2 if it
executes a writing so stating at or prior to the Closing.
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7.3 Conditions to Obligation of Nova. The obligation of Nova to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
(a) the representations and warranties set forth in Article
III above shall be true and correct in all material respects at and as
of the Closing Date;
(b) ACL shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(c) ACL shall have delivered to Nova a certificate to the
effect that each of the conditions specified above in Sections 7.3(a)
and (b) is satisfied in all respects;
(d) Nova shall have received from counsel to ACL an opinion in
form and substance as set forth in Exhibit 7.3(d) attached hereto,
addressed to Nova, and dated as of the Closing date; and
(e) all actions to be taken by ACL in connection with
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Nova Shareholders.
Nova may waive any condition specified in this Section 7.3 if it
executes a writing so stating at or prior to the Closing.
ARTICLE VIII
REMEDIES FOR BREACHES OF THIS AGREEMENT
8.1 Indemnity.
(a) Nova agrees to indemnify and hold harmless ACL and NVA,
and their respective representatives, shareholders, controlling persons
and affiliates, for any Adverse Consequences that ACL or NVA may
suffer, which arise, directly or indirectly, from the breach of any of
the representations, warranties or covenants of Nova contained in this
Agreement or the Schedules or other documents delivered in connection
therewith relating to Intellectual Property or which gives rise to an
undisclosed Liability. The indemnity obligations of Nova shall be
enforceable by ACL or NVA against the Indemnity Shares (as defined in
Section 8.6(b) hereof) and against the Nova Shareholders and
Optionholders to the extent provided in the Escrow and Indemnity
Agreement (as defined in Section 8.6).
(b) ACL agrees to indemnify and hold harmless the Nova
Shareholders, and their respective representatives, shareholders,
controlling persons and affiliates for any
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Adverse Consequences that Nova or the Nova Shareholders may suffer,
which arise, directly or indirectly, from the breach of any of the
representations, warranties or covenants of ACL or NVA contained in
this Agreement or the Schedules or other documents delivered in
connection therewith which give rise to an undisclosed Liability.
(c) No party (the "Indemnifying Party) shall have any
obligation to indemnify any other party entitled to indemnity (the
Indemnified Party") under this Section 8.1 from and against any Adverse
Consequences suffered by any other party which arise from the breach of
any representations, warranties or covenants (i) until the total of all
Adverse Consequences with respect to such matters exceeds $75,000 and
then only (x) for the amount by which such Adverse Consequences exceed
$75,000, and (y) with respect to Adverse Consequences arising from any
individual breach or series of related breaches which equal or exceed
$5,000, and (ii) to the extent the total of all Adverse Consequences
suffered by the Indemnified Party with respect to such matters exceeds
a $2,7000,000 aggregate ceiling.
8.2 Notices, Claims and Defense.
If any matter should arise which, in the opinion of the Indemnified
Party, shall constitute or give rise to an Adverse Consequences subject to
indemnification under this Article VIII (an "Indemnity Claim"), the Indemnified
Party shall promptly send written notice (a "Notice of Claim") of same to the
Indemnifying Party by first class registered or certified mail, return receipt
requested. The Notice of Claim shall describe the relevant circumstances
(including, to the extent determinable, the estimated amount for which
indemnification under this Article VIII is sought) in reasonable detail. The
Indemnifying Party shall have a period of 30 days after Notice of Claims within
which to cure the Adverse Consequences. The Indemnified Party shall continue to
advise the Indemnifying Party promptly as to developments which may come to its
attention affecting matters relating to such claim. The Indemnified Party will
use its best efforts to mitigate the Adverse Consequences with respect to which
any such Notice of Claim has been given, and, if such Indemnity Claim is based
upon a claim, demand, suit or action of a third party (a "Third Party Claim"),
then the provisions of Section 8.3 below with respect to the defense thereof
shall be applicable.
8.3 Defense of Third Party Claims. In the event that any third party
initiates a claim, demand, suit or action for which indemnification is sought
under this Article VIII, then within thirty (30) days after receipt of notice of
any such claim, demand, suit or action (the "Third Party Claim") the Indemnified
Party shall, if an Indemnity Claim in respect thereof is to be made against the
Indemnifying Party hereunder, notify the Indemnifying Party in writing of such
Third Party Claim. Except as provided in the next sentence, in the case of any
such Third Party Claim, the Indemnifying Party shall be entitled to participate
therein, by assuming the defense thereof with counsel satisfactory to the
Indemnified Party after notice from the Indemnifying Party to the Indemnified
Party of its or their election to assume the defense
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thereof and, thereafter, the Indemnifying Party shall not be liable to the
Indemnified Party hereunder for any legal expenses subsequently incurred by
Indemnified Party in connection with the defense thereof. The Indemnified Party
shall have the right to employ its own counsel in any such defense and the fees
and expenses of such counsel, and other expenses subsequently incurred by the
Indemnified Party in connection with such defense, shall be at the expense of
the Indemnified Party, unless (i) the employment of such counsel has been
authorized by the Indemnifying Party in connection with the defense of any such
claim or (ii) the Indemnified Party reasonably shall have determined that a
conflict of interest exists which makes representation by its own counsel
advisable or (iii) the Indemnifying Party shall not have assumed the defense of
such action and employed counsel therefor reasonably satisfactory to the
Indemnified Party within a reasonable time after notice of such action is given,
and in any such event the fees and expenses shall constitute a portion of the
Adverse Consequences with respect to which the Indemnified Party will be
entitled to indemnification.
8.4 Determination of Adverse Consequences. The Parties shall take into
account the time cost of money in determining Adverse Consequences for purposes
of this Article VIII.
8.5 Dispute Resolution. Any claim, controversy, or dispute (a
"Dispute") with respect to an Indemnity Claim hereunder shall, to the maximum
extent allowed by applicable law, be submitted to and finally resolved by
binding arbitration. An Indemnifying Party may file a written Demand for
Arbitration with the American Arbitration Association's Charlotte, North
Carolina Regional Office, and shall send a copy of the Demand for Arbitration to
the Indemnified Party. The arbitration shall be conducted pursuant to the terms
of the Federal Arbitration Act and (except as otherwise specified herein) the
Commercial Arbitration Rules of the American Arbitration Association in effect
at the time the arbitration is commenced. The venue for the arbitration shall be
Raleigh, North Carolina. The arbitration shall be conducted before one (1)
arbitrator selected through the American Arbitration Association's arbitrator
selection procedures. The arbitrator thus constituted shall promptly fix the
time, date(s), and place of the hearing, and notify the parties. The arbitrator
shall render a decision within ten (10) days of completion of the hearing, which
decision may include an award of interest, legal fees and costs of arbitration.
If the decision of the arbitrator does not include an award of legal fees or
costs of arbitration, the Indemnifying Party shall pay its own legal fees, the
legal fees of the Indemnified Party, plus the costs of arbitration. The
arbitrator shall promptly transmit an executed copy of the award to all of the
parties hereto. The award of the arbitrator shall be final, binding and
conclusive upon the parties hereto and shall be enforceable in any court of
competent jurisdiction.
8.6 Limitation on Indemnification. (a) Except as otherwise provided in
the Escrow and Indemnity Agreement, an Indemnifying Party shall have no
liability to an Indemnified Party under Section 8.1 of this Article VIII unless
on or before the second anniversary following the Closing Date an Indemnified
Party gives notice to an Indemnifying Party specifying the factual basis of a
claim hereunder in reasonable detail to the extent then known to an Indemnified
Party.
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(b) The liability of the Indemnifying Party to ACL or NVA will not
exceed in the aggregate the value, from time to time, of the shares of ACL
Common Stock received by the Nova Shareholders or reserved for Nova Stock Option
Holders in the Merger (the "Indemnity Shares"), and ACL's sole remedy for breach
of any of Nova's representations, warranties and covenants shall be to proceed
as provided in the Escrow and Indemnity Agreement in the form attached as
Exhibit 8.6(b).
(c) In the event of an Indemnity Claim against ACL or NVA, ACL may
either pay the amount of an Indemnity Claim in cash or, in its discretion, issue
to the Indemnified Party ACL Common Stock which is registered or will be
registered for resale upon the request of such Indemnified Party. The number of
shares of ACL Common Stock so issued shall equal the amount of the Indemnity
Claim, as agreed or finally determined, divided by the greater of $1.00 or the
fair market value of one share of ACL Common Stock as determined by the average
of high bid for ACL Common Stock an NASDAQ for the ten trading days immediately
preceding the date of the notice of indemnity Claim. Each Indemnified Party
agrees to provide to ACL such representations and warranties as ACL may
reasonably request to ensure compliance with applicable federal and state
securities laws with respect to such stock issuance.
8.8 Exclusive Remedy. The Parties acknowledge and agree that the
foregoing indemnification provisions in this Article VIII shall be the exclusive
remedy of the parties with respect to Nova, its subsidiary, and their respective
officers and directors, and the transactions contemplated by this Agreement.
Without limiting the generality of the foregoing, the Parties hereby waive any
statutory, equitable, or common law rights or remedies relating to any
Environmental Laws.
ARTICLE IX
TERMINATION
9.1 Termination. This Agreement may be terminated and the Acquisition
abandoned:
(a) at any time prior to the Closing Date, by the consent in
writing of Nova and ACL;
(b) at any time prior to the Closing Date, by ACL in writing
if Nova or any of the Nova Shareholders has, or by Nova in writing if
ACL has, breached (i) any covenant or undertaking contained herein, or
(ii) any representation or warranty contained herein, and, in each such
case, if such breach is materially adverse and has not been cured by
the earlier of 10 days following written notice of such breach to the
party committing such breach or the Closing Date;
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(c) on the Closing Date, by Nova or ACL in writing, if any of
the conditions precedent to the obligations of such party to consummate
the transactions contemplated hereby have not been satisfied or
fulfilled, and the party giving the notice is not in breach of any of
its representations, warranties, covenants or undertakings herein;
(d) at any time prior to the Closing Date, by ACL in writing
if the Nova Shareholders, when their vote is taken thereon, do not
unanimously approve the Acquisition contemplated herein;
(e) at any time following May 15, 1997, by Nova or ACL in
writing, if the Closing Date has not occurred by the close of business
on such date, and the party giving the notice is not in breach of any
of its representations, warranties, covenants or undertakings therein;
and
(f) at any time prior to May 15, 1997 by ACL in writing if ACL
determines in good faith, after the performance of its due diligence,
that the financial conditions, business or prospects of Nova are
materially adversely different from what was reasonably expected by
ACL; provided that ACL shall advise Nova at least 10 days prior to such
termination as to the reasons for ACL's determination and Nova shall
have a period of 10 days following such notice to cure such conditions
in a manner satisfactory to ACL; and, provided further, that this
Section 9.1(f) shall not limit in any way the due diligence
investigation of Nova which ACL may perform or otherwise affect any
other rights which ACL has after the date hereof under the terms of
this Agreement.
9.2 Effect of Termination. In the event this Agreement is terminated
pursuant to Section 10.1, this Agreement shall become void and have no effect,
except that (i) the provisions hereof relating to press releases,
confidentiality and expenses set forth in Sections 5.9, 6.4, and 10.2,
respectively, shall survive any such termination.
ARTICLE X
MISCELLANEOUS
10.1 No Third-Party Beneficiaries. Except as specifically provided
herein, this Agreement shall not confer any rights or remedies upon any Person
other than the Parties and their respective successors and permitted assigns.
10.2 Expenses. Each of ACL and Nova shall pay its own expenses,
including attorney's fees, with respect to the Merger and the other transactions
contemplated hereby.
10.3 Entire Agreement. This Agreement (including the documents referred
to herein) constitutes the entire agreement among the Parties and supersedes any
prior
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understandings, agreements, or representations by or among the Parties, written
or oral, to the extent they related in any way to the subject matter hereof.
10.4 Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of his or its rights, interests, or obligations hereunder without the prior
written approval of the Parties; provided, however, that ACL may (i) assign any
or all of its rights and interests hereunder to one or more of its Affiliates
and (ii) designate one or more of its Affiliates to perform its obligations
hereunder (in any or all of which cases ACL nonetheless shall remain responsible
for the performance of all of its obligations hereunder).
10.5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
10.6 Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
10.7 Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to Nova: Copy to:
----------- --------
NOVAVISION, INC. W. THURSTON DEBNAM, JR.
2700-200 Gateway Centre Blvd. 4700 New Bern Avenue
Morrisville, North Carolina 27580 Raleigh, North Carolina 27610
Telephone:919-469-3733 Telephone:919-250-2000
Fax:919-460-4487 Fax: 919-250-2100
Attention: Bart C. Gutekunst
Chief Executive Officer
If to ACL or NVA: Copy to:
American Consolidated Laboratories, Inc. Schell Bray Aycock Abel &
1640 North Market Drive Livingston P.L.L.C.
Raleigh, North Carolina 27609 P.O. Box 21847
Telephone:919-872-0744 Greensboro, North Carolina 27401
Fax: 919-873-0042 Telephone: 910-370-8800
Attention:Chief Executive Officer Fax: 910-370-8830
Attention: Doris R. Bray
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Tullis-Dickerson Capital Focus, LP
1 Greenwich Plaza
Greenwich, CT 06830
Telephone: 203-629-8700
Fax: 203-629-9293
Attention: Joan Neuscheler
Any Party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address set forth above
using any other means (including personal delivery, expedited courier, messenger
service, telecopy, telex, ordinary mail, or electronic mail), but no such
notice, request, demand, claim, or other communication shall be deemed to have
been duly given unless and until it actually is received by the intended
recipient. Any Party may change the address to which notices, requests, demands,
claims, and other communications hereunder are to be delivered by giving the
other Parties notice in the manner herein set forth.
10.8 Governing Law. This Agreement shall be governed by and construed
in accordance with the domestic laws of the State of North Carolina without
giving effect to any choice or conflict of law provision or rule (whether of the
State of North Carolina or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of North
Carolina.
10.9 Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Parties. No waiver by any Party of any default, misrepresentation, or breach of
warranty or covenant hereunder, whether intentional or not, shall be deemed to
extend to any prior or subsequent default, misrepresentation, or breach of
warranty or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent such occurrence.
10.10 Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
10.11 Submission to Jurisdiction. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in Raleigh, North Carolina,
in any action or proceeding arising out of or relating to this Agreement and
agrees that all claims in respect of the action or proceeding may be heard and
determined in any such court. Each Party also agrees not to bring any action or
proceeding arising out of or relating to this Agreement in any other court. Each
of the Parties waives any defense of inconvenient forum to the maintenance of
any action or proceeding so brought and waives any bond, surety, or other
security that might be required of any other Party with respect thereto. Each
Party agrees that a final judgment in any action or proceeding so brought shall
be conclusive and may be enforced by suit on the judgment or in any other manner
provided by law or at equity.
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
NOVAVISION, INC.
By: /s/ Bart C. Gutekunst
---------------------
Title: CEO
---------------------
AMERICAN CONSOLIDATED LABORATORIES, INC.
By: /s/ Joseph A.Arena
---------------------
Title: CEO
---------------------
NV ACQUISITION, INC.
By: /s/ Joseph A.Arena
---------------------
Title: CEO
---------------------
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SCHEDULE OF EXHIBITS
EXHIBIT
2.1 Plan of Merger
3 ACL Disclosure Schedule
4 Nova Disclosure Schedule
5.10 Gutekunst Employment Agreement
7.2(f) Accredited Investor Representation
7.2(g) OcuTec Investor Representation
7.2(i) Estoppel Certificate
7.2(j) Nova Attorney Opinion
7.2(k) Nova Shareholder Certificate
7.3(d) ACL Attorney Opinion
8.6(b) Escrow and Indemnity Agreement
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ARTICLES OF MERGER
OF
NOVAVISION, INC.
INTO
NV ACQUISITION, INC.
NV Acquisition, Inc., a corporation organized under the laws of North
Carolina (the "Surviving Corporation"), hereby submits these Articles of Merger
for the purpose of merging NovaVision, Inc., a corporation organized under the
laws of North Carolina (the "Merging Corporation"), into the Surviving
Corporation:
I. The following Plan of Merger was duly approved in the manner prescribed by
law by the shareholders of each of the corporations participating in the merger:
A. CORPORATIONS PARTICIPATING IN MERGER
NovaVision, Inc., a North Carolina corporation ("the "Merging
Corporation"), shall merge with and into NV Acquisition, Inc., a North Carolina
corporation, which shall be the surviving corporation (the "Surviving
Corporation").
B. NAME OF SURVIVING CORPORATION
After the merger, the Surviving Corporation shall have the name
"NovaVision, Inc."
C. TERMS AND CONDITIONS OF THE MERGER.
The merger of the Merging Corporation into the Surviving Corporation
shall be effected pursuant to the following terms and conditions:
1. Upon the merger's becoming effective, the corporate existence
of the Merging Corporation shall be merged into the Surviving
Corporation, and the corporate existence of the Surviving Corporation
will continue. Except insofar as the same may be continued by law or to
carry out the purposes of this Plan of Merger and except as continued in
and merged into the Surviving Corporation, the separate existence of the
Merging Corporation shall cease as of the Effective Time and the
Surviving Corporation shall be the successor of the Merging Corporation.
The time when the merger becomes effective is hereinafter referred to as
the "Effective Time."
2. The Articles of Incorporation and bylaws of NV Acquisition,
Inc. as of the Effective Time shall be the Articles of Incorporation and
bylaws, respectively, of the Surviving Corporation, until altered,
amended or repealed as provided therein.
<PAGE>
3. The directors and officers of NV Acquisition, Inc. as of the
Effective Time shall be the directors and officers of the Surviving
Corporation until their successors are elected or appointed according to
the bylaws of the Surviving Corporation.
D. CONVERSION OF SHARES
At the Effective Time, the outstanding shares of the corporations
participating in the merger will be converted and exchanged as follows:
1. Surviving Corporation. The outstanding shares of NV
Acquisition, Inc. will not be converted, exchanged, or altered in any
manner as a result of the merger and will remain outstanding as shares
of the Surviving Corporation.
2. Merging Corporation. Upon the merger's becoming effective,
each outstanding share of the Merging Corporation will be converted into
shares of the Surviving Corporation as follows:
(a) Each share of common stock, $1.00 par value per
share, of the Merging Corporation shall be converted
into one (1) share of Series A Preferred Stock, no par
value per share, of American Consolidated Laboratories,
Inc. a Florida corporation.
(b) Each share of Series A Redeemable Preferred Stock,
$1.00 par value per share, of the Merging Corporation
shall be converted into one (1) share of Series A
Preferred Stock, no par value per share, of American
Consolidated Laboratories, Inc.
(c) Each share of Series B Redeemable Convertible
Preferred Stock, $1.00 par value per share, of the
Merging Corporation shall be converted into 0.3125
shares of common stock, $0.05 par value per share, of
American Consolidated Laboratories, Inc.
(d) No fractional shares will be issued. Any
shareholder of stock of the Merging Corporation who
would otherwise be entitled to receive five-tenths
(0.5) or more of a share will instead receive an
additional whole share, and any shareholder who would
otherwise be entitled to less than five-tenths (0.5) of
a share will not receive any consideration for such
fractional interest.
E. AMENDMENTS TO ARTICLES OF INCORPORATION
The Articles of Incorporation of the Surviving Corporation is amended by
the Articles of Merger to change the name of the Surviving Corporation to
NovaVision, Inc.
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F. ABANDONMENT
After approval of this Plan by the shareholders of the Merging
Corporation and the Surviving Corporation, and at any time prior to the merger's
becoming effective, the Boards of Directors of the merging corporations may, in
their discretion, abandon the merger.
II. The merger will become effective upon the filing of these Articles of Merger
with the Secretary of State of North Carolina.
This the 7th day of May, 1997.
NV ACQUISITION, INC.
By:/s/ Joseph A. Arena
--------------------------------------------
Joseph A. Arena, Chief Executive Officer
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LOAN AGREEMENT
THIS LOAN AGREEMENT ("Agreement"), dated as of the 7th day of May,
1997, is made and entered into on the terms and conditions hereinafter set
forth, by and between AMERICAN CONSOLIDATED LABORATORIES, INC., a Florida
corporation ("Borrower"), and SIRROM INVESTMENTS, INC., a Tennessee corporation
("Lender").
RECITALS:
WHEREAS, Borrower has requested that Lender make available to Borrower
a term loan in the original principal amount of One Million Five Hundred
Seventy-Five Thousand and No/100 Dollars ($1,575,000.00) (the "Loan") on the
terms and conditions hereinafter set forth, and for the purpose(s) hereinafter
set forth; and
WHEREAS, in order to induce Lender to make the Loan to Borrower,
Borrower has made certain representations to Lender; and
WHEREAS, Lender, in reliance upon the representations and inducements
of Borrower, has agreed to make the Loan upon the terms and conditions
hereinafter set forth.
AGREEMENT:
NOW, THEREFORE, in consideration of the agreement of Lender to make the
Loan, the mutual covenants and agreements hereinafter set forth, and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Borrower and Lender hereby agree as follows:
ARTICLE 1
THE LOAN
1.1 Evidence of Loan Indebtedness and Repayment. Subject to the terms
and conditions hereof, the Lender shall make the Loan to Borrower by wire
transfer in immediately available funds. The Loan shall be evidenced by a
Secured Promissory Note in the original principal amount of One Million Five
Hundred Seventy-Five Thousand and No/100ths Dollars ($1,575,000.00),
substantially in the form of Exhibit A attached hereto and incorporated herein
by this reference (the "Note"), dated as of the date hereof, executed by
Borrower, in favor of Lender. The Loan shall be payable in accordance with the
terms of the Note. The Note, this Agreement and any other instruments and
documents executed by Borrower, any guarantor of Borrower, or any shareholder,
subsidiary or
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affiliate of Borrower, now or hereafter evidencing, securing or in any way
related to the indebtedness evidenced by the Note are herein individually
referred to as a "Loan Document" and collectively referred to as the "Loan
Documents."
1.2 Processing Fee. Borrower shall pay Lender a processing fee of
Thirty-Nine Thousand Three Hundred Seventy-Five and No/100 Dollars ($39,375.00),
which shall be paid on the date the Loan is funded.
1.3 Partial Prepayment. Borrower may prepay the indebtedness evidenced
by the Note in whole or in part at any time and from time to time.
1.4 Purpose. The purpose of the Loan shall be to retire Borrower's
existing debt to Fidelity Funding Group, Inc. in the principal amount of
approximately $500,000 plus a $60,000 prepayment fee and for working capital.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.1 Borrower's Representations. Borrower hereby represents and
warrants to Lender as follows:
(a) Organizational Status. Borrower is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Florida and has the power as such a corporation to own and
operate its properties, to carry on its business as now conducted and
to enter into and to perform its obligations under this Agreement and
the other Loan Documents to which it is a party. Borrower is duly
qualified to do business and in good standing in each state in which a
failure to be so qualified would have a material adverse effect on
Borrower's financial condition or its ability to conduct its business
in the manner now conducted.
(b) Subsidiaries. Schedule 2.1(b) hereto is a complete list of
each corporation, partnership, joint venture or other business
organization (the "Subsidiary" or, with respect to all such
organizations, the "Subsidiaries") in which Borrower or any Subsidiary
owns, directly or indirectly, any capital stock or other equity
interest, or with respect to which Borrower or any Subsidiary, alone
or in combination with others, is in a control position, which list
shows the jurisdiction of incorporation or other organization and the
percentage of stock or other equity interest of each Subsidiary owned
by Borrower. Each Subsidiary which is a corporation is duly organized,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation and is duly qualified to transact
business as a foreign corporation and is in good standing in the
jurisdictions listed in Schedule 2.1(b), which are the only
jurisdictions where the properties owned or leased or the business
transacted by it makes such licensing or qualification to do business
as a foreign corporation necessary, and no other jurisdiction has
demanded, requested or otherwise
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indicated that (or inquired whether) it is required so to qualify.
Each Subsidiary which is not a corporation is duly organized and
validly existing under the laws of the jurisdiction of its
organization. The outstanding capital stock of each Subsidiary which
is a corporation is validly issued, fully paid and nonassessable.
Borrower and the Subsidiaries have good and valid title to the equity
interests in the Subsidiaries shown as owned by each of them on
Schedule 2.1(b), free and clear of all liens, claims, charges,
restrictions, security interests, equities, proxies, pledges or
encumbrances of any kind. Except where otherwise indicated herein or
unless the context otherwise requires, any reference to Borrower
herein shall include Borrower and all of its Subsidiaries.
(c) Authorization. Borrower has full legal right, power and
authority to conduct its business and affairs. Borrower has full legal
right, power and authority to enter into and perform its obligations
under the Loan Documents, without the consent or approval of any other
person, firm, governmental agency or other legal entity. The execution
and delivery of this Agreement, the borrowing hereunder, the execution
and delivery of each Loan Document to which Borrower is a party, and
the performance by Borrower of its obligations thereunder are within
the corporate powers of Borrower and have been duly authorized by all
necessary corporate action properly taken, have received all necessary
governmental approvals, if any were required, and do not and will not
contravene or conflict with any provision of law, any applicable
judgment, ordinance, regulation or order of any court or governmental
agency, the charter or bylaws of Borrower, or any agreement binding
upon Borrower or its properties. The officer(s) executing this
Agreement, the Note and all of the other Loan Documents to which
Borrower is a party are duly authorized to act on behalf of Borrower.
(d) Validity and Binding Effect. This Agreement and the other
Loan Documents are the legal, valid and binding obligations of the
Borrower, enforceable in accordance with their respective terms,
subject to limitations imposed by bankruptcy, insolvency, moratorium
or other similar laws affecting the rights of creditors generally or
the application of general equitable principles.
(e) Capitalization. Schedule 2.1(e) hereto accurately
reflects, as of the date hereof, (i) the authorized capital stock of
Borrower by class, (ii) the number of shares outstanding in each
class, and (iii) the number of shares presently reserved for issuance
pursuant to warrants and convertible securities (the appropriate
number of reserved shares may increase from time to time pursuant to
the provisions of such warrants and securities). The Stock Purchase
Warrant of this date issued by Borrower to Lender is referred to as
the "Warrant." As of the date hereof, Borrower shall not have
outstanding any stock or securities convertible or exchangeable for
any shares of its Common Stock or containing any profit participation
features, nor shall it have outstanding any rights or options to
subscribe for or to purchase its Common Stock or any stock
appreciation rights or phantom stock plans, except as set forth on
Schedule 2.1(e) and for the Warrant. Schedule 2.1(e) accurately sets
forth the following with respect to all outstanding options
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<PAGE>
and rights to acquire the Borrower's Common Stock from Borrower: (i)
the total number of shares issuable upon exercise of all outstanding
options, (ii) the range of exercise prices for all such outstanding
options, (iii) the number of shares issuable, the exercise price and
the expiration date for each such outstanding option and (iv) with
respect to all outstanding options, warrants and rights to acquire
Borrower's capital stock other than the Warrant, the holder, the
number of shares covered, the exercise price and the expiration date.
As of the date hereof, Borrower shall not be subject to any obligation
(contingent or otherwise) to repurchase, redeem, retire or otherwise
acquire any shares of its capital stock or any warrants, options or
other rights to acquire its capital stock, except as set forth in the
Warrant or on Schedule 2.1(e). As of the date hereof, all of the
outstanding shares of Borrower's capital stock shall be validly
issued, fully paid and nonassessable. Except as set forth on Schedule
2.1(e), there are no statutory or contractual preemptive rights,
rights of first refusal, anti-dilution rights or any similar rights,
held by stockholders or option holders of Borrower, with respect to
the issuance of the Warrant or the issuance of the Common Stock upon
exercise of the Warrant. All such rights granted in the documents
listed on Schedule 2.1(e) have been effectively waived with regard to
the issuance of the Warrant, the exercise of the Warrant and the
issuance of the Common Stock upon exercise of the Warrant. Borrower
has not violated any applicable federal or state securities laws in
connection with the offer, sale or issuance of any of its capital
stock, and the offer, sale and issuance of the Warrant hereunder do
not require registration under the Securities Act or any applicable
state securities laws. To the best of Borrower's knowledge, there are
no agreements among Borrower's stockholders with respect to any other
aspect of Borrower's affairs, except as set forth on Schedule 2.1(e).
(f) Trademarks, Patents, Etc. Schedule 2.1(f) is an accurate
and complete list of all patents, trademarks, tradenames, trademark
registrations, service names, service marks, copyrights, licenses,
formulas and applications therefor owned by Borrower or used or
required by Borrower in the operation of it's business, title to each
of which is, except for liens in favor of Lender and as set forth in
Schedule 2.1(f) hereto, held by Borrower free and clear of all adverse
claims, liens, security agreements, restrictions or other
encumbrances. There is no infringement action, lawsuit, claim or
complaint which asserts that Borrower's operations violate or infringe
the rights or the trade names, trademarks, trademark registration,
service name, service mark or copyright of others with respect to any
apparatus or method of Borrower or any adversely held trademark, trade
name, trademark registration, service name, service mark or copyright,
and Borrower is not in any way making use of any confidential
information or trade secrets of any person except with the consent of
such person.
(g) No Conflicts. Consummation of the transactions hereby
contemplated and the performance of the obligations of Borrower under
and by virtue of the Loan Documents will not result in any breach of,
or constitute a default under, any mortgage, security deed or
agreement, deed of trust, lease, bank loan or credit agreement,
corporate charter or bylaws, agreement or certificate of limited
partnership, partnership agreement,
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license, franchise or any other instrument or agreement to which
Borrower is a party or by which Borrower or its respective properties
may be bound or affected or to which Borrower has not obtained an
effective waiver.
(h) Litigation. There are no actions, suits or proceedings
pending, or, to the knowledge of Borrower threatened, against or
affecting Borrower or involving the validity or enforceability of any
of the Loan Documents at law or in equity, or before any governmental
or administrative agency; and to Borrower's knowledge, Borrower is not
in default with respect to any order, writ, injunction, decree or
demand of any court or any governmental authority.
(i) Financial Statements. The financial statements of Borrower
attached hereto as Schedule 2.1(i)(A), (i) with respect to NovaVision,
Inc. and its subsidiaries, are true and correct in all material
respects and fairly present the financial condition of Borrower as of
the date(s) thereof, and (ii) with respect to American Consolidated
Laboratories, Inc. and its subsidiaries, have been prepared on the
basis of generally accepted accounting principles, consistently
applied, and fairly present the financial condition of such entities
as of the date thereof. No material adverse change has occurred in the
financial condition of Borrower since the date(s) thereof, and no
additional borrowings have been made by Borrower since the date(s)
thereof other than as set forth on Schedule 2.1(i)(B).
(j) Other Agreements; No Defaults. Borrower is not a party to
any indenture, loan or credit agreement, lease or other agreement or
instrument, or subject to any charter or corporate restriction, that
could reasonably be expected to have a material adverse effect on the
business, properties, assets, operations or conditions, financial or
otherwise, of Borrower, or the ability of Borrower to carry out its
obligations under the Loan Documents to which it is a party. Except as
described in Schedule 2.1(j) attached hereto, Borrower is not in
default in any material respect in the performance, observance or
fulfillment of any of the obligations, covenants or conditions
contained in any agreement or instrument material to its business to
which it is a party, including but not limited to this Agreement and
the other Loan Documents, and, to Borrower's knowledge, no other
default or event has occurred and is continuing that with notice or
the passage of time or both would constitute a default or event of
default under any of same.
(k) Compliance With Law. Borrower has obtained all necessary
licenses, permits and approvals and authorizations necessary or
required in order to conduct its business and affairs as heretofore
conducted and as hereafter intended to be conducted. To Borrower's
knowledge, Borrower is in compliance with all laws, regulations,
decrees and orders applicable to it (including but not limited to
laws, regulations, decrees and orders relating to environmental,
occupational and health standards and controls, antitrust,
5
<PAGE>
monopoly, restraint of trade or unfair competition), to the extent
that noncompliance, in the aggregate, cannot reasonably be expected to
have a material adverse effect on its respective business, operations,
property or financial condition and will not materially adversely
affect Borrower's ability to perform its obligations under the Loan
Documents.
(l) Debt. Schedule 2.1(l) is a complete and correct list of
all credit agreements, indentures, purchase agreements, promissory
notes and other evidences of indebtedness, guaranties, capital leases
and other instruments, agreements and arrangements presently in effect
providing for or relating to extensions of credit (including
agreements and arrangements for the issuance of letters of credit or
for acceptance financing) in respect of which the Borrower or any of
the properties thereof is in any manner directly or contingently
obligated for a principal amount in excess of $25,000; and the maximum
principal or face amounts of the credit in question that are
outstanding and that can be outstanding are correctly stated, and all
liens of any nature given or agreed to be given as security therefor
are correctly described or indicated in such Schedule.
(m) Taxes. Except as set forth in Schedule 5.1(m) attached
hereto, Borrower has filed or caused to be filed all tax returns that
to its knowledge are required to be filed (except for returns that
have been appropriately extended), and has paid, or will pay when due,
all taxes shown to be due and payable on said returns and all other
taxes, impositions, assessments, fees or other charges imposed on them
by any governmental authority, agency or instrumentality, prior to any
delinquency with respect thereto (other than taxes, impositions,
assessments, fees and charges currently being contested in good faith
by appropriate proceedings, for which appropriate amounts have been
reserved). No tax liens have been filed against Borrower or any of the
property thereof.
(n) Small Business Concern. Borrower, together with its
"affiliates" (as that term is defined in Title 13, Code of Federal
Regulations, ss. 121.103), is a "small business concern" within the
meaning of the Small Business Investment Act of 1958, as amended, and
the regulations promulgated thereunder. The information set forth in
the Small Business Administration Forms 480, 652 and Parts A and B of
Form 1031 regarding Borrower upon delivery, pursuant to Section 4.1
hereof, will be accurate and complete. Borrower does not presently
engage in, and it will not hereafter engage in, any activities, and
Borrower will not use directly or indirectly, the proceeds from the
Loan, for any purpose for which a Small Business Investment Company is
prohibited from providing funds by the Small Business Investment Act
and the regulations thereunder, including Title 13, Code of Federal
Regulations ss.107.720.
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(o) Certain Transactions. Except as set forth on Schedule
2.1(o) hereto, Borrower is not indebted, directly or indirectly, to
any of its shareholders, officers or directors or to their respective
spouses or children, in any amount whatsoever; none of said
shareholders, officers or directors or any members of their immediate
families, are indebted to Borrower or have any direct or indirect
ownership interest in any firm or corporation with which Borrower has
a business relationship, or any firm or corporation which competes
with Borrower, except that shareholders, officers and/or directors of
Borrower may own no more than 4.9% of outstanding stock of publicly
traded companies which may compete with Borrower. No shareholder,
officer or director or any member of their immediate families, is,
directly or indirectly, interested in any material contract with
Borrower. Borrower is not a guarantor or indemnitor of any
indebtedness of any other person, firm or corporation.
(p) Statements Not False or Misleading. No representation or
warranty given as of the date hereof by Borrower contained in this
Agreement or any schedule attached hereto or any statement in any
document, certificate or other instrument furnished by Borrower to
Lender pursuant hereto, taken as a whole and evaluated in the context
presented, contains any untrue statement of a material fact, or omits
to state any material fact which is necessary in order to make the
statements contained therein not misleading in light of the
circumstances under which such information was presented.
(q) Margin Regulations. Borrower is not engaged in the
business of extending credit for the purpose of purchasing or carrying
margin stock. No proceeds received pursuant to this Agreement will be
used to purchase or carry any equity security of a class which is
registered pursuant to Section 12 of the Securities Exchange Act of
1934, as amended.
(r) Significant Contracts. Schedule 2.1(r) is a complete and
correct list of all contracts, agreements and other documents pursuant
to which Borrower receives revenues in excess of $25,000 per fiscal
year. Each such contract, agreement and other document is in full
force and effect as of the date hereof and Borrower knows of no reason
why such contracts, agreements and other documents would not remain in
full force and effect pursuant to the terms thereof.
(s) Environment. Borrower has duly complied with, and its
business, operations, assets, equipment, property, leaseholds or other
facilities are in compliance in all material respects with, the
provisions of all applicable federal, state and local environmental,
health, and safety laws, codes and ordinances, and all rules and
regulations promulgated thereunder. Borrower has been issued and will
maintain all required federal, state and local permits, licenses,
certificates and approvals relating to (1) air emissions; (2)
discharges to surface water or groundwater; (3) noise emissions; (4)
solid or liquid waste disposal; (5) the use, generation, storage,
transportation or disposal of toxic or hazardous substances or wastes
(which shall include any and all such materials listed in
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any federal, state or local law, code or ordinance and all rules and
regulations promulgated thereunder as hazardous or potentially
hazardous); or (6) other environmental, health or safety matters.
Borrower has not received notice of, does not know of, and does not
have reason to believe that facts exists which would reasonably be
expected to constitute, any material violations of any federal, state
or local environmental, health or safety laws, codes or ordinances,
and any rules or regulations promulgated thereunder with respect to
its businesses, operations, assets, equipment, property, leaseholds,
or other facilities. Except in accordance with a valid governmental
permit, license, certificate or approval, there has been no emission,
spill, release or discharge into or upon (1) the air; (2) soils, or
any improvements located thereon; (3) surface water or groundwater; or
(4) the sewer, septic system or waste treatment, storage or disposal
system servicing the premises, of any toxic or hazardous substances or
wastes at or from the premises; and accordingly the premises of
Borrower are free of any material amount of such toxic or hazardous
substances or wastes. There has been no complaint, order, directive,
claim, citation or notice by any governmental authority or any person
or entity with respect to (1) air emissions; (2) spills, releases or
discharges to soils or improvements located thereon, surface water,
groundwater or the sewer, septic system or waste treatment, storage or
disposal systems servicing the premises; (3) noise emissions; (4)
solid or liquid waste disposal; (5) the use, generation, storage,
transportation or disposal of toxic or hazardous substances or waste;
or (6) other environmental, health or safety matters affecting
Borrower or its business, operations, assets, equipment, property,
leaseholds or other facilities in any material respect. The
representations in the preceding two sentences are made to the best of
Borrower's knowledge, information and belief, with no special
diligence in preparation for the execution of this Agreement;
provided, however, should any of such representations prove false in
any material respect as to impose a material liability upon Borrower,
the representation shall be deemed breached for the purpose of
establishing a default under this Agreement. Borrower does not have
any indebtedness, obligation or liability (absolute or contingent,
matured or not matured), with respect to the storage, treatment,
cleanup or disposal of any solid wastes, hazardous wastes or other
toxic or hazardous substances (including without limitation any such
indebtedness, obligation, or liability with respect to any current
regulation, law or statute regarding such storage, treatment, cleanup
or disposal).
(t) Fees/Commissions. Except as described in Section 2.1(t)
attached hereto, Borrower has not agreed to pay any finder's fee,
commission, origination fee or other fee or charge to any person or
entity with respect to the Loan and investment transactions
contemplated hereunder.
(u) ERISA. Borrower is in compliance in all material respect
with all applicable provisions of ERISA as defined in Section 3.11
hereof). Neither a reportable event nor a prohibited transaction (as
defined in ERISA) has occurred and is continuing with respect to any
Plan (as defined in Section 3.11 hereof); no notice of intent to
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terminate a Plan has been filed nor has any Plan been terminated; no
circumstances exist which constitute grounds entitling the Pension
Benefit Guaranty Corporation (together with any entity succeeding to
or all of its functions, the "PBGC") to institute proceedings to
terminate, or appoint a trustee to administer, a Plan, nor has the
PBGC instituted any such proceedings; neither Borrower nor any
commonly controlled entity (as defined in ERISA) has completely or
partially withdrawn from a multiemployer plan(as defined in ERISA);
Borrower and each commonly controlled entity has met its minimum
funding requirements under ERISA with respect to all of its Plans and
the present fair market value of all Plan property exceeds the present
value of all vested benefits under each Plan, as determined on the
most recent valuation date of the Plan and in accordance with the
provisions of ERISA and the regulations thereunder for calculating the
potential liability of Borrower or any commonly controlled entity to
the PBGC or the Plan under Title IV or ERISA; and neither Borrower nor
any commonly controlled entity has incurred any liability to the PBGC
under ERISA.
(v) Title to Properties. Borrower has good, indefeasible and
insurable title to, or valid leasehold interests in, all its real
properties and good title to its other assets, free and clear of all
liens other than Permitted Liens (as defined in Section 3.15 hereof).
(w) Limited Offering of Note and Warrant. Neither Borrower nor
anyone acting on its behalf has taken, or will take, any action which
would subject the issuance or sale of the Note and Warrant to Section
5 of the Securities Act of 1933, as amended, or the registration or
qualification provisions of the blue sky laws of any state.
(x) Registration Rights. Except as described in the Warrant,
Borrower is not under any obligation to register under the Securities
Act of 1933, as amended, or the Trust Indenture Act of 1939, as
amended, any of its presently outstanding securities or any of its
securities that may subsequently be issued.
(y) Employees. Borrower has no current labor problems or
disputes which Borrower reasonably believes could be expected to have
a material adverse effect.
(z) Issuance Taxes. All taxes imposed on Borrower in
connection with the issuance, sale and delivery of the Note, the
Warrant and the capital stock issuable upon exercise of the Warrant
have been or will be fully paid, and all laws imposing such taxes have
been or will be fully satisfied by Borrower.
(aa) Status of Certain Subsidiaries and Division. Borrower
warrants and agrees that Wolcon Labs, Inc., a Michigan corporation,
and S-O Nebraska, Inc., a Florida corporation, which are wholly-owned
subsidiaries of American Consolidated Laboratories, Inc., are both in
the process of being dissolved and neither of them has or shall have
an office or any assets. The dissolution of these entities shall not
be an Event of Default under this Agreement.
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ARTICLE 3
COVENANTS AND AGREEMENTS
Borrower covenants and agrees that during the term of this Agreement:
3.1 Payment of Obligations. Borrower shall pay the indebtedness
evidenced by the Note according to the terms thereof, and shall timely pay or
perform, as the case may be, all of the other obligations of Borrower to Lender,
direct or contingent, however evidenced or denominated, and however and whenever
incurred, including but not limited to indebtedness incurred pursuant to any
present or future commitment of Lender to Borrower, together with interest
thereon, and any extensions, modifications, consolidations and/or renewals
thereof and any notes given in payment thereof.
3.2 Financial Statements and Reports. Borrower shall furnish to Lender
(i) as soon as practicable and in any event within ninety (90) days after the
end of each fiscal year of Borrower, an audited balance sheet of Borrower as of
the close of such fiscal year, an audited statement of earnings and retained
earnings of Borrower as of the close of such fiscal year and an audited
statement of cash flows for Borrower for such fiscal year, prepared in
accordance with generally accepted accounting principles consistently applied
and accompanied by an unqualified audit report prepared by an independent
certified public accountant acceptable to Lender showing the financial condition
of Borrower at the close of such year and the results of its operations during
such year and accompanied by a certificate of the President of Borrower, stating
that to the best of the knowledge of such officer, Borrower has kept, observed,
performed and fulfilled each covenant, term and condition of this Agreement and
the other Loan Documents during the preceding fiscal year and that no Event of
Default has occurred and is continuing (or if an Event of Default has occurred
and is continuing, specifying the nature of same, the period of existence of
same and the action Borrower proposes to take in connection therewith), (ii)
within fifteen (15) days of the end of each calendar month, a status report
indicating the financial performance of Borrower during such month and the
financial position of Borrower as of the end of such month, (iii) within thirty
(30) days of the end of each quarter, a balance sheet of Borrower as of the
close of such quarter and a statement of earnings and retained earnings of
Borrower as of the close of such quarter, all in reasonable detail, and prepared
substantially in accordance with generally accepted accounting principles
consistently applied (except for the absence of footnotes and subject to
year-end adjustments), and (iv) with reasonable promptness, such other financial
data as Lender may reasonably request. Without Lender's prior written consent,
Borrower shall not modify or change any accounting policies or procedures in
effect on the date hereof in any material respect.
3.3 Maintenance of Books and Records; Inspection. Borrower shall
maintain its books, accounts and records in accordance with generally accepted
accounting principles consistently applied, and after reasonable notice from
Lender, permit Lender, its officers and employees and any professionals
designated by Lender in writing, at Borrower's expense, to visit
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and inspect any of its properties, corporate books and financial records, and to
discuss its accounts, affairs and finances with Borrower or the principal
officers of Borrower during reasonable business hours, all at such times as
Lender may reasonably request; provided that no such inspection shall materially
interfere with the conduct of Borrower's business.
3.4 Insurance. Without limiting any of the requirements of any of the
other Loan Documents, Borrower shall maintain, in amounts customary for entities
engaged in comparable business activities, (i) to the extent required by
applicable law, worker's compensation insurance (or maintain a legally
sufficient amount of self insurance against worker's compensation liabilities,
with adequate reserves, under a plan approved by Lender, such approval not to be
unreasonably withheld or delayed), and (ii) fire and "all risk" casualty
insurance on its properties against such hazards and in at least such amounts as
are customary in Borrower's business. Borrower will make reasonable efforts to
obtain and maintain public liability insurance in an amount, and at a cost,
deemed reasonable to the Borrower's Board of Directors. At the request of
Lender, Borrower will deliver forthwith a certificate specifying the details of
such insurance in effect.
3.5 Taxes and Assessments. Borrower shall (i) file all tax returns and
appropriate schedules thereto that are required to be filed under applicable
law, prior to the date of delinquency, (ii) pay and discharge all taxes,
assessments and governmental charges or levies imposed upon Borrower upon its
income and profits or upon any properties belonging to it, prior to the date on
which penalties attach thereto, and (iii) pay all taxes, assessments and
governmental charges or levies that, if unpaid, might become a lien or charge
upon any of its properties; provided, however, that Borrower in good faith may
contest any such tax, assessment, governmental charge or levy described in the
foregoing clauses (ii) and (iii) so long as appropriate reserves are maintained
with respect thereto.
3.6 Corporate Existence. Borrower shall maintain its corporate
existence and good standing in the state of its incorporation, and its
qualification and good standing as a foreign corporation in each jurisdiction in
which such qualification is necessary pursuant to applicable law.
3.7 Compliance with Law and Other Agreements. Except where the failure
to do so would not materially adversely affect Borrower's operations or its
ability to fulfill its obligations under the Loan Documents, Borrower shall
maintain its business operations and property owned or used in connection
therewith in compliance with (i) all applicable federal, state and local laws,
regulations and ordinances governing such business operations and the use and
ownership of such property, and (ii) all agreements, licenses, franchises,
indentures and mortgages to which Borrower is a party or by which Borrower or
any of its properties is bound. Without limiting the foregoing, Borrower shall
pay all of its indebtedness promptly in accordance with the terms thereof,
except for indebtedness with respect to which a good faith dispute exists.
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3.8 Notice of Default. Borrower shall give written notice to Lender of
the occurrence of any default, event of default or Event of Default under this
Agreement or any other Loan Document promptly upon the occurrence thereof.
3.9 Notice of Litigation. Borrower shall give notice, in writing, to
Lender of (i) any actions, suits or proceedings, instituted by any persons
whomsoever against Borrower or affecting any of the assets of Borrower wherein
the amount at issue is in excess of Twenty-Five Thousand and No/100ths Dollars
($25,000.00), and (ii) any dispute, not resolved within sixty (60) days of the
commencement thereof, between Borrower on the one hand and any governmental
regulatory body on the other hand, which dispute might materially interfere with
the normal operations of Borrower.
3.10 Conduct of Business. Borrower will continue to engage in a
business of the same general type and manner as conducted by it on the date of
this Agreement.
3.11 ERISA Plan. If Borrower has in effect, or hereafter institutes, a
pension plan that is subject to the requirements of Title IV of the Employee
Retirement Income Security Act of 1974, Pub. L. No. 93-406, September 2, 1974,
88 Stat. 829, 29 U.S.C.A. ss. 1001 et seq. (1975), as amended from time to time
("ERISA"), then the following warranty and covenants shall be applicable during
such period as any such plan (the "Plan") shall be in effect: (i) Borrower
hereby warrants that no fact that might constitute grounds for the involuntary
termination of the Plan, or for the appointment by the appropriate United States
District Court of a trustee to administer the Plan, exists at the time of
execution of this Agreement, (ii) Borrower hereby covenants that throughout the
existence of the Plan, Borrower's contributions under the Plan will meet the
minimum funding standards required by ERISA and Borrower will not institute a
distress termination of the Plan, and (iii) Borrower covenants that it will send
to Lender a copy of any notice of a reportable event (as defined in ERISA)
required by ERISA to be filed with the Labor Department or the Pension Benefit
Guaranty Corporation, at the time that such notice is so filed.
3.12 Dividends, Distributions, Stock Rights, etc. Except as described
in Schedule 3.12 attached hereto, Borrower shall not declare or pay any dividend
of any kind (other than stock dividends payable to all holders of any class of
capital stock), in cash or in property, on any class of the capital stock of
Borrower, or purchase, redeem, retire or otherwise acquire for value any shares
of such stock, nor make any distribution of any kind in cash or property in
respect thereof, nor make any return of capital of shareholders, nor make any
payments in cash or property in respect of any stock options, stock bonus or
similar plan (except as required or permitted hereunder), nor grant any
preemptive rights with respect to the capital stock of Borrower, without the
prior written consent of Lender.
3.13 Guaranties; Loans; Payment of Debt. Without Lender's prior express
written consent, Borrower shall not guarantee nor be liable in any manner,
whether directly or indirectly, or become contingently liable after the date of
this Agreement in connection with the obligations
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or indebtedness of any person or entity whatsoever, except for the endorsement
of negotiable instruments payable to Borrower for deposit or collection in the
ordinary course of business. Without Lender's prior express written consent,
which shall not be unreasonably withheld, Borrower shall not (i) make any loan,
advance or extension of credit to any person other than in the normal course of
its business, or (ii) make any payment on any subordinated debt.
3.14 Debt. Without the express prior written consent of Lender,
Borrower shall not create, incur, assume or suffer to exist indebtedness of any
description whatsoever, excluding:
(a) the indebtedness evidenced by the Note;
(b) the endorsement of negotiable instruments payable to Borrower
for deposit or collection in the ordinary course of business;
(c) debts incurred in the ordinary course of business (each of
which, individually, does not exceed $25,000);
(d) the indebtedness listed on Schedule 2.1(l) hereto and as
described in Schedule 2.1(c) hereto; and
(e) debt for the cost of acquisition of equipment in an amount not
exceeding $50,000 or the value of the property acquired,
whichever is less, in the aggregate.
3.15 No Liens. Borrower shall not create, incur, assume or suffer to
exist any lien, security interest, security title, mortgage, deed of trust or
other encumbrance upon or with respect to any of its properties, now owned or
hereafter acquired, except the following permitted liens (the "Permitted
Liens"):
(a) liens in favor of Lender;
(b) liens for taxes or assessments or other governmental charges
or levies if not yet due and payable;
(c) liens in connection with the leasing of equipment in favor of
the Lessor of such equipment;
(d) liens described on Schedule 3.15 hereto; and
(e) liens securing obligations permitted under Section 3.14(e)
hereto.
3.16 Mergers, Consolidations, Acquisitions and Sales. Without the prior
written consent of Lender, Borrower shall not (a) be a party to any merger,
consolidation or corporate reorganization, nor (b) purchase or otherwise acquire
all or substantially all of the assets or stock of, or any partnership or joint
venture interest in, any other person, firm or entity, nor (c) sell, transfer,
convey, grant a security interest in or lease all or any substantial part of its
assets, nor (d) create any Subsidiaries nor convey any of its assets to any
Subsidiary.
3.17 Transactions With Affiliates. Borrower shall not enter into any
transaction, including, without limitation, the purchase, sale or exchange of
property or the rendering of any service, with any affiliate, except in the
ordinary course of and pursuant to the reasonable
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requirements of Borrower's business and upon fair and reasonable terms no less
favorable to Borrower than Borrower would obtain in a comparable arm's length
transaction with a person not an affiliate. For the purposes of this Section
3.17, "affiliate" shall mean a person, corporation, partnership or other entity
controlling, controlled by or under common control with Borrower.
3.18 Environment. Borrower shall be and remain in compliance with the
provisions of all federal, state and local environmental, health, and safety
laws, codes and ordinances, and all rules and regulations issued thereunder;
notify Lender immediately of any notice of a hazardous discharge or
environmental complaint received from any governmental agency or any other
party; notify Lender immediately of any hazardous discharge from or affecting
its premises; immediately contain and remove the same, in compliance with all
applicable laws; promptly pay any fine or penalty assessed in connection
therewith; permit Lender to inspect the premises, to conduct tests thereon, and
to inspect all books, correspondence, and records pertaining thereto; and at
Lender's request, and at Borrower's expense, provide a report of a qualified
environmental engineer, satisfactory in scope, form, and content to Lender, and
such other and further assurances reasonably satisfactory to Lender that the
condition has been corrected.
ARTICLE 4
CONDITIONS TO CLOSING
4.1 Closing of the Loan. The obligation of Lender to fund the Loan on
the date hereof (the "Closing Date") is subject to the fulfillment, on or prior
to the Closing Date, of each of the following conditions:
(a) Borrower shall have performed and complied in all material
respects with all of the covenants, agreements, obligations and
conditions required by this Agreement.
(b) Lender shall have received an opinion of the Borrower's
counsel, Schell Bray Aycock Abel & Livingston P.L.L.C., dated the
Closing Date, in form and substance satisfactory to Lender's counsel,
Boult, Cummings, Conners & Berry, PLC;
(c) Borrower shall have delivered to Lender a Note executed by
Borrower, substantially in the form of Exhibit A attached hereto and
incorporated herein by this reference.
(d) Borrower shall have delivered to Lender a Stock Purchase
Warrant executed by Borrower, substantially in the form of Exhibit B
attached hereto and incorporated herein by this reference.
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(e) Borrower shall have delivered to Lender a Security
Agreement executed by each Borrower and related UCC-1 Financing
Statement(s) executed by each Borrower, each of which is substantially
in the form of Exhibit C attached hereto and incorporated herein by
this reference.
(f) Borrower shall have delivered to Lender a Trademark and
Patent Security Agreement executed by each Borrower and related UCC-1
Financing Statement(s) executed by each Borrower, in the form of
Exhibit D attached hereto and incorporated herein by this reference.
(g) Borrower shall have delivered to Lender a Stock Pledge
Agreement and related stock certificates and stock powers with respect
to Borrower's interest in NovaVision, Inc., executed by Borrower,
substantially in the form of Exhibit E attached hereto and incorporated
herein by this reference.
(h) Lender shall have received such stock certificates,
certifications and other evidence as it may require confirming
Borrower's successful acquisition of NovaVision, Inc., pursuant to that
letter of intent dated February 10, 1997, as previously delivered to
Lender.
(i) Borrower shall have delivered to Lender a Joint and
Several Unconditional Continuing Guaranty whereby each Borrower
guarantees the obligations of each other Borrower to Lender, in the
form attached hereto as Exhibit F.
(j) Borrower shall have delivered to Lender an amendment to
the existing Trademark and Patent Security Agreement and Stock Pledge
Agreement executed by NovaVision, Inc. dated as of December 18, 1996,
to reflect that these documents also secure the guaranty of NovaVision,
Inc. for the obligations of Borrower to Lender.
(k) Borrower shall have delivered to Lender amendments to the
existing Trademark and Patent Security Agreement executed by Biopolymer
Corporation dated as of December 18, 1996, to reflect that this
document also secures the guaranty of Biopolymer Corporation for the
obligations of Borrower to Lender.
(l) Borrower shall have delivered to Lender the Small Business
Administration Forms 480, 652 and 1031 (Parts A and B) completed by
Borrower.
(m) Borrower shall have delivered to Lender the Small Business
Administration Economic Impact Assessment completed by Borrower, a form
of which is attached hereto as Exhibit G and incorporated herein by
this reference.
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(n) Borrower shall have delivered a Landlord's Consent and
Subordination of Lien for each leased location, executed by Borrower's
Landlord, in substantially the form attached hereto as Exhibit H and
incorporated herein by this reference.
(o) Lender shall have received an executed Intercreditor
Agreement in form and substance acceptable to Lender establishing that
the Loan and Borrower's $550,000 debt to Tullis-Dickerson Capital
Focus, L.P. will share in a first priority perfected security interest
in Borrower's assets on a PARI PASSU basis.
(p) Lender shall have received copies of the corporate charter
and other publicly filed organizational documents of Borrower,
certified by the Secretary of State or other appropriate public
official in the jurisdiction in which Borrower is incorporated.
(q) Lender shall have received certified (as of the date of
this Agreement) copies of all corporate action taken by Borrower,
including resolutions of its Board of Directors, authorizing the
execution, delivery and performance of the Loan Documents.
(r) Lender shall have received a certificate as to the legal
existence and good standing of the Borrower, issued by the Secretary of
State or other appropriate public official in the jurisdiction in which
the Borrower is incorporated.
(s) Lender shall have received certificates of the Secretaries
of State or other appropriate public officials as to Borrower's
qualification to do business and good standing in each jurisdiction in
which a failure to be so qualified would have a material adverse effect
on its financial position or its ability to conduct its business in the
manner now conducted and as hereafter intended to be conducted.
(t) Lender shall have received an Authorization Agreement for
Pre-Authorized Payments (Debit) executed by Borrowers in substantially
the form of Exhibit I attached hereto and incorporated herein by this
reference.
(u) NovaVision, Inc. and Lender shall have executed an
amendment to the Secured Promissory Note dated December 18, 1996 in the
principal amount of $520,000 changing the interest rate thereunder to
the rate of 13.5%.
(v) Borrower shall have executed and delivered to Lender a
collateral first priority assignment of any key man life insurance
policies in effect as of the closing and shall further grant such an
assignment as to any future such life insurance policies.
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ARTICLE 5
DEFAULT AND REMEDIES
5.1 Events of Default. The occurrence of any of the following shall
constitute an Event of Default hereunder:
(a) Default in the payment of the principal of or interest on
the indebtedness evidenced by the Note in accordance with the terms of
the Note, which default is not cured within fifteen (15) days;
(b) Any representation or warranty by Borrower or any
subsidiary or affiliate of Borrower as to any material matter hereunder
or under any of the other Loan Documents, or any schedule, statement,
resolution, report, certificate, notice or writing delivered to Lender
by such a party with respect to the Loan, be found to be untrue in any
material respect on the date as of which the facts set forth therein
are stated or certified;
(c) Failure of Borrower, any guarantor of the Loan or
shareholder, subsidiary or affiliate of Borrower to perform any of its
obligations, covenants or agreements under this Agreement, the Note or
any of the other Loan Documents;
(d) Borrower (i) shall generally not pay or shall be unable to
pay its debts as such debts become due; or (ii) shall make an
assignment for the benefit of creditors or petition or apply to any
tribunal for the appointment of a custodian, receiver or trustee for it
or a substantial part of its assets; or (iii) shall commence any
proceeding under any bankruptcy, reorganization, arrangement,
readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction, whether now or hereafter in effect; or (iv) shall have
had any such petition or application filed or any such proceeding
commenced against it in which an order for relief is entered or an
adjudication or appointment is made; or (v) shall indicate, by any act
or intentional and purposeful omission, its consent to, approval of or
acquiescence in any such petition, application, proceeding or order for
relief or the appointment of a custodian, receiver or trustee for it or
a substantial part of its assets; or (vi) shall suffer any such
custodianship, receivership or trusteeship to continue undischarged for
a period of sixty (60) days or more;
(e) Borrower shall be liquidated, dissolved, partitioned or
terminated, or the charter thereof shall expire or be revoked;
(f) A default or event of default shall occur under any of the
other Loan Documents and, if subject to a cure right, such default or
event of default shall not be cured within the applicable cure period;
(g) Borrower shall default in the timely payment or
performance of any obligation now or hereafter owed to Lender in
connection with any other indebtedness of
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Borrower now or hereafter owed to Lender within fifteen (15) days of
when such amount becomes due;
(h) Except as described in Schedule 5.1(h) attached hereto,
Borrower shall have defaulted and continue to be in default in the
timely payment or performance of any other indebtedness or obligation,
which in the aggregate exceeds Twenty-Five Thousand and No/100ths
Dollars ($25,000.00) or materially adversely affects Borrower's
financial condition; or
(i) A significant change in the executive staff or management
of Borrower shall occur.
With respect to any Event of Default described above that is capable of
being cured and that does not already provide its own cure procedure (a "Curable
Default"), the occurrence of such Curable Default shall not constitute an Event
of Default hereunder if such Curable Default is fully cured and/or corrected
within thirty (30) days (ten (10) days, if such Curable Default may be cured by
payment of a sum of money) of notice thereof to Borrower given in accordance
with the provisions hereof; provided, however, that this provision shall not
require notice to Borrower and an opportunity to cure any Curable Default of
which Borrower has had actual knowledge for the requisite number of days set
forth.
5.2 Acceleration of Maturity; Remedies. Upon the occurrence of any
Event of Default described in subsection 5.1(d), the indebtedness evidenced by
the Note as well as any and all other indebtedness of Borrower to Lender shall
be immediately due and payable in full; and upon the occurrence of any other
Event of Default described above, Lender at any time thereafter may at its
option accelerate the maturity of the indebtedness evidenced by the Note as well
as any and all other indebtedness of Borrower to Lender; all without notice of
any kind. Upon the occurrence of any such Event of Default and the acceleration
of the maturity of the indebtedness evidenced by the Note:
(a) Lender shall be immediately entitled to exercise any and
all rights and remedies possessed by Lender pursuant to the terms of
the Note and all of the other Loan Documents; and
(b) Lender shall have any and all other rights and remedies
that Lender may now or hereafter possess at law, in equity or by
statute.
5.3 Remedies Cumulative; No Waiver. No right, power or remedy conferred
upon or reserved to Lender by this Agreement or any of the other Loan Documents
is intended to be exclusive of any other right, power or remedy, but each and
every such right, power and remedy shall be cumulative and concurrent and shall
be in addition to any other right, power and remedy given hereunder, under any
of the other Loan Documents or now or hereafter existing at law, in equity or by
statute. No delay or omission by Lender to exercise any right, power or remedy
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accruing upon the occurrence of any Event of Default shall exhaust or impair any
such right, power or remedy or shall be construed to be a waiver of any such
Event of Default or an acquiescence therein, and every right, power and remedy
given by this Agreement and the other Loan Documents to Lender may be exercised
from time to time and as often as may be deemed expedient by Lender.
5.4 Proceeds of Remedies. Any or all proceeds resulting from the
exercise of any or all of the foregoing remedies shall be applied as set forth
in the Loan Document(s) providing the remedy or remedies exercised; if none is
specified, or if the remedy is provided by this Agreement, then as follows:
First, to the costs and expenses, including without limitation
reasonable attorney's fees, incurred by Lender in connection with the
exercise of its remedies;
Second, to the expenses of curing the default that has
occurred, in the event that Lender elects, in its sole discretion, to
cure the default that has occurred;
Third, to the payment of the obligations of Borrower under the
Loan Documents (the "Obligations"), including but not limited to the
payment of the principal of and interest on the indebtedness evidenced
by the Note, in such order of priority as Lender shall determine in its
sole discretion; and
Fourth, the remainder, if any, to Borrower or to any other
person lawfully thereunto entitled.
ARTICLE 6
TERMINATION
6.1 Termination of this Agreement. This Agreement shall remain in full
force and effect until the later of (i) the Maturity Date (as defined in the
Note), or (ii) the payment by Borrower of all amounts owed to Lender, at which
time Lender shall cancel the Note and deliver it to Borrower; provided, however,
that if at any time Borrower has satisfied all obligations to Lender, Borrower
may terminate this Agreement by providing written notice to Lender.
ARTICLE 7
MISCELLANEOUS
7.1 Performance By Lender. If Borrower shall default in the payment,
performance or observance of any covenant, term or condition of this Agreement,
which default is not cured within the applicable cure period, then Lender may,
at its option, pay, perform or observe the same, and all payments made or costs
or expenses incurred by Lender in connection therewith
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(including but not limited to reasonable attorney's fees), with interest thereon
at the highest default rate provided in the Note (if none, then at the maximum
rate from time to time allowed by applicable law), shall be immediately repaid
to Lender by Borrower and shall constitute a part of the Obligations. Lender
shall be the sole judge of the necessity for any such actions and of the amounts
to be paid.
7.2 Successors and Assigns Included in Parties. Whenever in this
Agreement one of the parties hereto is named or referred to, the heirs, legal
representatives, successors, successors-in-title and assigns of such parties
shall be included, and all covenants and agreements contained in this Agreement
by or on behalf of Borrower or by or on behalf of Lender shall bind and inure to
the benefit of their respective heirs, legal representatives,
successors-in-title and assigns, whether so expressed or not.
7.3 Costs and Expenses. Borrower agrees to pay all reasonable costs and
expenses incurred by Lender in connection with the making of the Loan, including
but not limited to filing fees, recording taxes and reasonable attorneys' fees,
promptly upon demand of Lender. Borrower further agrees to pay all premiums for
insurance required to be maintained by Borrower pursuant to the terms of the
Loan Documents and all of the out-of-pocket costs and expenses incurred by
Lender in connection with the collection of the Loan, amendment to the Loan
Documents, or prepayment of the Loan, including but not limited to reasonable
attorneys' fees, promptly upon demand of Lender. Any references herein or in any
of the other Loan Documents to fees of attorneys shall means fees based upon
such attorneys' normal hourly rates and other usual charges.
7.4 Assignment. The Note, this Agreement and the other Loan Documents
may be endorsed, assigned and/or transferred in whole or in part by Lender, and
any such holder and/or assignee of the same shall succeed to and be possessed of
the rights and powers of Lender under all of the same to the extent transferred
and assigned. Lender may grant participations in all or any portion of its
interest in the indebtedness evidenced by the Note, and in such event Borrower
shall continue to make payments due under the Loan Documents to Lender and
Lender shall have the sole responsibility of allocating and forwarding such
payments in the appropriate manner and amounts. Borrower shall not assign any of
its rights nor delegate any of its duties hereunder or under any of the other
Loan Documents without the prior express written consent of Lender.
7.5 Time of the Essence. Time is of the essence with respect to each
and every covenant, agreement and obligation of Borrower hereunder and under all
of the other Loan Documents.
7.6 Severability. If any provision(s) of this Agreement or the
application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of such provisions to other persons or circumstances shall not be affected
thereby and shall be enforced to the greatest extent permitted by law.
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7.7 Interest and Loan Charges Not to Exceed Maximum Allowed by Law.
Anything in this Agreement, the Note or any of the other Loan Documents to the
contrary notwithstanding, in no event whatsoever, whether by reason of
advancement of proceeds of the Loan, acceleration of the maturity of the unpaid
balance of the Loan or otherwise, shall the interest and loan charges agreed to
be paid to Lender for the use of the money advanced or to be advanced hereunder
exceed the maximum amounts collectible under applicable laws in effect from time
to time. It is understood and agreed by the parties that, if for any reason
whatsoever the interest or loan charges paid or contracted to be paid by
Borrower in respect of the indebtedness evidenced by the Note shall exceed the
maximum amounts collectible under applicable laws in effect from time to time,
then ipso facto, the obligation to pay such interest and/or loan charges shall
be reduced to the maximum amounts collectible under applicable laws in effect
from time to time, and any amounts collected by Lender that exceed such maximum
amounts shall be applied to the reduction of the principal balance of the
indebtedness evidenced by the Note and/or refunded to Borrower so that at no
time shall the interest or loan charges paid or payable in respect of the
indebtedness evidenced by the Note exceed the maximum amounts permitted from
time to time by applicable law.
7.8 Article and Section Headings; Defined Terms. Numbered and titled
article and section headings and defined terms are for convenience only and
shall not be construed as amplifying or limiting any of the provisions of this
Agreement.
7.9 Notices. Any and all notices, elections or demands permitted or
required to be made under this Agreement shall be in writing, signed by the
party giving such notice, election or demand and shall be delivered personally,
telecopied, telexed, or sent by certified mail or overnight via nationally
recognized courier service (such as Federal Express), to the other party at the
address set forth below, or at such other address as may be supplied in writing
and of which receipt has been acknowledged in writing. The date of personal
delivery, telecopy or telex or two (2) business days after the date of mailing
(or the next business day after delivery to such courier service), as the case
may be, shall be the date of such notice, election or demand. For the purposes
of this Agreement:
The Address of Lender is: Sirrom Investments, Inc.
Suite 200
500 Church Street
Nashville, TN 37219
Attention: Donald F. Barrickman
Telecopy No.: 615/726-1208
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with a copy to: Boult, Cummings, Conners & Berry
414 Union Street, Suite 1600
Nashville, TN 37219
Attention: John E. Murdock III
Telecopy No.: 615/252-2359
The Address of Borrower is: American Consolidated Laboratories, Inc.
1640 North Market Drive
Raleigh, North Carolina 27609
Attention: Joseph A. Arena
Telecopy No.:(919) 469-3733
with a copy to: Schell Bray Aycock Abel & Livingston P.L.L.C.
Suite 1500 Renaissance Plaza
230 North Elm Street
Greensboro, North Carolina 27401
Attention: Bruce H. Connors
Telecopy No.: (910) 370-8830
7.10 Entire Agreement. This Agreement and the other written agreements
between Borrower and Lender represent the entire agreement between the parties
concerning the subject matter hereof, and all oral discussions and prior
agreements are merged herein; provided, if there is a conflict between this
Agreement and any other document executed contemporaneously herewith with
respect to the Obligations, the provision of this Agreement shall control. The
execution and delivery of this Agreement and the other Loan Documents by the
Borrower were not based upon any fact or material provided by Lender, nor was
the Borrower induced or influenced to enter into this Agreement or the other
Loan Documents by any representation, statement, analysis or promise by Lender.
7.11 Governing Law and Amendments. This Agreement and all of the Loan
Documents shall be construed and enforced under the laws of the State of
Tennessee applicable to contracts to be wholly performed in such State. No
amendment or modification hereof shall be effective except in a writing executed
by each of the parties hereto.
7.12 Survival of Representations and Warranties. All representations
and warranties contained herein or in any of the Loan Documents or made by or
furnished on behalf of the Borrower in connection herewith or in any Loan
Documents shall survive the execution and delivery of this Agreement and all
other Loan Documents.
7.13 Jurisdiction and Venue. Borrower hereby consents to the
jurisdiction of the courts of the State of Tennessee and the United States
District Court for the Middle District of Tennessee, as well as to the
jurisdiction of all courts from which an appeal may be taken from such courts,
for the purpose of any suit, action or other proceeding arising out of any of
its
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obligations arising under this Agreement or any other Loan Documents or with
respect to the transactions contemplated hereby, and expressly waives any and
all objections it may have as to venue in any of such courts.
7.14 Waiver of Trial by Jury. LENDER AND BORROWER HEREBY WAIVE TRIAL BY
JURY IN ANY ACTIONS, PROCEEDINGS, CLAIMS OR COUNTER-CLAIMS, WHETHER IN CONTRACT
OR TORT, AT LAW OR IN EQUITY, ARISING OUT OF OR IN ANY WAY RELATING TO THIS
AGREEMENT OR THE LOAN DOCUMENTS.
7.15 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties to this Agreement in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same Agreement.
7.16 Construction and Interpretation. Should any provision of this
Agreement require judicial interpretation, the parties hereto agree that the
court interpreting or construing the same shall not apply a presumption that the
terms hereof shall be more strictly construed against one party by reason of the
rule of construction that a document is to be more strictly construed against
the party that itself or through its agent prepared the same, it being agreed
that the Borrower, Lender and their respective agents have participated in the
preparation hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, or
have caused this Agreement to be executed by their duly authorized officers, as
of the day and year first above written.
LENDER:
SIRROM INVESTMENTS, INC.,
a Tennessee corporation
By: /s/ Donald F. Barrickman
Title: Vice President
BORROWER:
AMERICAN CONSOLIDATED LABORATORIES,
INC.,
a Florida corporation
By: /s/ Joseph A. Arena
Title: CEO
23
<PAGE>
INDEX OF SCHEDULES AND ATTACHMENTS
Exhibit A - Form of Note
Exhibit B - Form of Stock Purchase Warrant
Exhibit C - Form of Security Agreement and UCC-1
Exhibit D - Form of Trademark and Patent Security Agreement
Exhibit E - Form of Pledge and Security Agreement (ACL)
Exhibit F - Form of Jont and Several Unconditional Continuing Guaranty
Exhibit G - Form of Economic Impact Assessment
Exhibit H - Form of Landlord's Consent and Subordination of Lien
Exhibit I - Form of Pre-Authorized Payments (Debit)
Schedule 2.1(b) - Subsidiaries
Schedule 2.1(e) - Capital Structure
Schedule 2.1(f) - Trademarks and Patents
Schedule 2.1(i)(A) and (B) - Financial Statements
Schedule 2.1(j) - Defaults under other Agreements
Schedule 2.1(l) - Debt and Liens
Schedule 2.1(m) - Taxes
Schedule 2.1(o) - Shareholder Loans and Insider Dealings
Schedule 2.1(r) - Material Contracts
Schedule 2.1(t) - Taxes
Schedule 3.12 - Permitted Dividends
Schedule 3.15 - Permitted Encumbrances
Schedule 5.1(h) - Certain Defaults
<PAGE>
<PAGE>
JOINT AND SEVERAL UNCONDITIONAL CONTINUING GUARANTY
THIS JOINT AND SEVERAL UNCONDITIONAL CONTINUING GUARANTY
("Guaranty") is executed as of May 7, 1997 by AMERICAN CONSOLIDATED
LABORATORIES, INC. ("ACL"), a Florida corporation; NOVAVISION, INC.
("NovaVision"), a North Carolina corporation; BIOPOLYMER CORPORATION
("Biopolymer"), a Delaware corporation; SALVATORI OPHTHALMIC MANUFACTURING
CORPORATION ("SOMC"), a Florida corporation; S-O NEBRASKA, INC. ("S-O"), a
Florida corporation; WOLCON LABS, INC. ("Wolcon"), a Michigan corporation and
CAROLINA CONTACT LENS, INC. ("CCL"), a North Carolina corporation (collectively
"Guarantors") in favor of SIRROM INVESTMENTS, INC. ("Sirrom"), a Tennessee
corporation and TULLIS- DICKERSON CAPITAL FOCUS, L.P. ("TDCF"), a Delaware
limited partnership.
RECITALS:
WHEREAS, as set forth in that Intercreditor Agreement of this
date (as hereafter amended, modified or restated, the "Intercreditor Agreement")
among the parties hereto, Sirrom (as a Lender and as Agent) and TDCF (Sirrom as
a Lender (and, where relevant, as Agent) and TDCF are referred to herein
collectively as the "Lender Parties"), the Lender Parties have extended or
agreed to extend credit to ACL, and Sirrom has previously extended credit to
NovaVision, on certain terms and conditions (such credit is referred to herein
as the "Loans," which term shall have the same definition as it is assigned in
the Intercreditor Agreement); and
WHEREAS, the Guarantors are affiliated with one another and
are operationally and financially dependent upon one another such that the
extension of credit to any of them is a direct benefit to the others and
constitutes sufficient consideration and value to support the complete and
unconditional liability of each Guarantor for the entire indebtedness of ACL and
NovaVision to the Lender Parties (ACL and NovaVision are sometimes referred to
collectively as "Borrowers," and any reference herein to "Borrower" shall be
deemed a reference to ACL and NovaVision or either of them);
NOW, THEREFORE, as an inducement to cause the Lender Parties
to extend credit to Borrowers, and for other valuable consideration, the receipt
and sufficiency of which are acknowledged, it is agreed as follows:
1. Definition of Obligations. As used herein, the
"Obligations" shall mean (i) the Loans, (ii) all obligations under present and
future documents evidencing or further securing the Loans, (iii) all further
extensions of credit by the Lender Parties to Borrower made in compliance with
the requirements of the Intercreditor Agreement as to become subject thereto,
and (iv) all modifications, amendments, extensions, renewals and restatements of
the foregoing.
2. Guaranty of Payment. Except to the extent that ACL and
NovaVision are also Borrowers, in which cases their liability will be in their
capacity as Borrowers and not as
<PAGE>
Guarantors hereunder, the Guarantors hereby jointly and severally guarantee to
the Lender Parties the timely payment and performance of the Obligations.
3. Guaranty Unconditional. Guarantors' guarantee of the
Obligations is absolute and unconditional. The validity of this Guaranty and
each Guarantor's absolute obligation to pay hereunder shall not be impaired by
any event whatsoever, including, but not limited to, the merger, consolidation,
dissolution, cessation of business or liquidation of Borrower; the financial
decline or bankruptcy of Borrower; the failure of any other party to guarantee
the Obligations or to provide collateral therefor; the Lender Parties'
compromise or settlement, with or without release, of any other party liable for
the Obligations; the Lender Parties' failure to perfect their security interest
in any collateral for the Obligations; the Lender Parties' release of any
collateral for the Obligations; the Lender Parties' failure to file suit against
Borrower (regardless of whether Borrower is becoming insolvent, is believed to
be about to leave the state or any other circumstance); the Lender Parties'
failure to give any Guarantor notice of default by Borrower; the
unenforceability of the Obligations against Borrower, due to bankruptcy
discharge, counterclaim or otherwise; the acceleration of the Obligations at any
time; the extension, increase, modification or renewal of the Obligations; the
Lender Parties' failure to exercise diligence in collection; the termination of
any relationship of any Guarantor with Borrower, including, but not limited to,
any relationship of ownership or commerce; Borrower's change of name or use of
any name other than the name used to identify Borrower in this Guaranty;
Borrower's use of the credit extended by the Lender Parties for any purpose
whatsoever; or any other event which might otherwise constitute a legal or
equitable discharge of, or defense available to, a guarantor or surety. Each
advance of credit by the Lender Parties to Borrower following the execution
hereof shall be deemed made in reliance upon the continued operation of this
Guaranty and shall constitute additional consideration for each Guarantor's
execution of this Guaranty. Each Guarantor agrees that this Guaranty shall be
valid and binding upon such Guarantor upon the delivery of this executed
Guaranty to Agent by any party whomsoever.
4. Guaranty Irrevocable. Each Guarantor's guarantee of the
Obligations is irrevocable, except that each Guarantor may at any time by
written notice to the Lender Parties prospectively terminate such Guarantor's
liability for any advances made by the Lender Parties subsequent to Lender's
receipt of the termination notice, except for any advance that the Lender
Parties had previously committed to make. After the delivery of such notice to
the Lender Parties, such Guarantor shall remain fully liable for: all principal,
interest and expenses outstanding as of the time of the Lender Parties' receipt
of the cancellation hereof; for all interest subsequently accruing thereon and
for all expenses subsequently incurred by the Lender Parties with respect
thereto; and for all subsequent principal advances that the Lender Parties may
have previously committed to make (regardless of whether the Lender Parties
waived any default or condition precedent in actually making any such advance),
together with all interest thereon and expenses related thereto.
5. Primary Liability of Guarantors. This Guaranty constitutes
a guarantee of payment and performance and not of collection. Accordingly, the
Lender Parties may enforce this Guaranty against Guarantors (or any of them)
without first making demand upon or
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<PAGE>
instituting collection proceedings against Borrower. Each Guarantor's liability
for the Obligations is hereby declared to be primary, and not secondary, and any
Guarantor may be called upon hereunder to make any payment when due under the
Obligations irrespective of the acceleration of the Obligations.
6. Bankruptcy of Borrower. If proceedings are instituted by
Borrower under any state insolvency law or under any federal bankruptcy law, or
if such proceedings are instituted against Borrower, the Lender Parties may, at
their option, without notice, notwithstanding any limitation on the Lender
Parties' ability to use such proceedings as the basis of a default against
Borrower, declare all the Obligations presently due and payable by Guarantors.
7. No Marshaling of Assets. The Lender Parties may proceed
against any collateral securing the Obligations and against parties liable
therefor in such order as they may elect, and Guarantors shall not be entitled
to require the Lender Parties to marshal assets. The benefit of any rule of law
or equity to the contrary is hereby expressly waived.
8. Impairment of Collateral; Release of Liable Parties. The
Lender Parties may, in their sole discretion and with or without consideration,
release any collateral securing the Obligations or release any party liable
therefor. The defenses of impairment of collateral and impairment of recourse
and any requirement of diligence on the Lender Parties' part in collecting the
Obligations are hereby waived.
9. Deferral of Rights Against Borrower and Others. Each
Guarantor hereby irrevocably agrees that it shall not exercise (i) any right of
subrogation to the rights of the Lender Parties against Borrower, or (ii) any
and all other common law, statutory, contractual or other right of indemnity,
exoneration, contribution or other right of payment from any party whatsoever in
connection with the Obligations, until and unless the Obligations are first paid
in full. Guarantors acknowledge that their respective rights of contribution
have not otherwise been impaired by this Guaranty and that such rights are
properly taken into consideration in determining solvency and value for the
purpose of analysis under fraudulent conveyance laws and any other such laws.
10. References to Lender Parties. Rights granted to the Lender
Parties in this Guaranty are subject to the provisions of the Intercreditor
Agreement regarding the rights and duties of Agent to act on behalf of the
Lenders and the Required Lenders thereunder, as applicable, with respect to the
Obligations.
11. Amendment of Obligations. The Lender Parties may, without
notice to or the joinder of any Guarantor and without affecting any Guarantor's
liability hereunder, modify, extend, accelerate, reinstate, refinance, increase
or renew the Obligations (with or without the execution of new promissory notes)
and grant any consent or indulgence with respect thereto.
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<PAGE>
12. Independent Obligations; No Setoff. Each Guarantor's
obligation under this Guaranty is independent of any other obligations among the
Lender Parties, Borrower and Guarantors. No setoff, counterclaim, reduction or
diminution of any obligation, or defense of any kind or nature that any
Guarantor or Borrower has or may have against the Lender Parties shall be
effective against the Lender Parties in the enforcement of this Guaranty.
13. Waivers of Notice. Guarantors hereby waive any requirement
of presentment, protest, notice of dishonor, notice of default, demand, and all
other actions or notices that may be required on the Lender Parties' part in
connection with the Obligations.
14. Guaranty Secured. This Guaranty is secured by all
collateral now or hereafter held by Lender Parties to secure obligations of each
Guarantor to the Lender Parties.
15. Application of Funds. The Lender Parties may apply amounts
received from any Guarantor for Borrower's account to the payment of the
Obligations is such order as the Agent may elect.
16. Subordination. Each Guarantor agrees that any existing or
future loan made by such Guarantor to Borrower and any other existing or future
obligation of Borrower to such Guarantor shall be subordinate to the Obligations
as to both payment and collection except as provided in this paragraph.
Accordingly, each Guarantor agrees not to accept any payment whatsoever from
Borrower (except for repayment of inter-company obligations, in the absence of a
default or an event of default under Borrowers' obligations to Lenders) or to
allow any payment by Borrower on such Guarantor's behalf until this Guaranty has
been terminated in full. Each Guarantor hereby grants to Agent for the account
of the Lender Parties a security interest in all accounts owed such Guarantor by
Borrower and in all instruments, chattel paper and other property now or
hereafter evidencing obligations of Borrower to such Guarantor, together with
all collateral therefor. Agent may file this Guaranty (or a copy hereof) as a
financing statement with respect thereto, or Agent may require any Guarantor to
execute a separate financing statement with respect thereto, or Agent may
require any Guarantor to take any other action necessary to perfect the Lender
Parties' security interest therein, at Guarantors' expense. Without limiting the
foregoing, all such property owned by any Guarantor in which a security interest
may be perfected by possession shall be delivered to the Lender Parties
immediately as made available to such Guarantor. Each Guarantor agrees that, in
the event of a bankruptcy or other insolvency proceeding involving Borrower,
such Guarantor will timely file a claim for the amount of the subordinated debt,
in form approved by Agent. Each Guarantor agrees to pursue said claim with
diligence and to comply with any instructions from Agent pertaining to the
pursuit of the claim. The proceeds of any such claim shall be delivered to Agent
for the account of the Lender Parties until the Obligations are paid in full.
17. Corporate Capacity. Each Guarantor warrants that it is and
shall remain a duly organized corporation in good standing under the laws of its
domicile, and that such Guarantor is and shall remain duly qualified to do
business in each state other than its domicile in which qualification is
necessary. Each Guarantor warrants that its execution and delivery of
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<PAGE>
and performance under this Guaranty and all related documents are permitted
under and will not violate any provision of such Guarantor's Charter or By-Laws.
Each Guarantor further warrants that the execution of all necessary resolutions
and other prerequisites of corporate action have been duly performed so that the
individual executing this Guaranty and related documents on behalf of such
Guarantor is duly authorized to bind such Guarantor by his or her signature.
18. Cancellation by Agent. Agent may evidence its cancellation
of this Guaranty and the release of any Guarantor from liability hereunder by
delivering to such Guarantor an instrument of release, or by delivering this
Guaranty to such Guarantor, or both. Unless Agent issues a written statement
that this Guaranty has been "Canceled in Full As To All Obligations," however,
the purported cancellation hereof and release of such Guarantor shall not impair
such Guarantor's continuing liability for (i) surviving liability of Borrower to
reimburse the Lender Parties for expenses or to indemnify the Lender Parties
provided for in any document executed prior to the purported cancellation hereof
evidencing or securing the Obligations; and (ii) liability for avoided payments
and expenses related thereto (as provided in detail below).
19. Recovery of Avoided Payments. If any amount applied by the
Lender Parties to the Obligations is subsequently challenged by a bankruptcy
trustee, debtor-in-possession or other person or entity as an avoidable transfer
on the grounds that the payment constituted a preferential payment or a
fraudulent conveyance under state law or the Bankruptcy Code or any successor
statute thereto or on any other grounds, the Lender Parties may, at their option
and in their sole discretion, elect whether to contest such challenge. If the
Lender Parties contest the avoidance action, all costs of the proceeding,
including the fees and expenses of the Lender Parties' attorneys, will become
part of the Obligations. If the contested amount is nevertheless successfully
avoided, the avoided amount will also become part of the Obligations hereunder.
If the Lender Parties elect not to contest the avoidance action, the Lender
Parties may tender the amount subject to the avoidance action to the bankruptcy
court, trustee or debtor-in-possession and the amount so advanced shall become
part of the Obligations hereunder. Each Guarantor's obligation to reimburse the
Lender Parties for amounts due under this paragraph shall survive the purported
cancellation hereof except as otherwise provided above.
20. Assistance in Litigation. Each Guarantor covenants to,
upon request, cooperatively participate in any proceeding in which such
Guarantor is not an adverse party to the Lender Parties and which concerns the
Lender Parties' rights regarding the Obligations or any collateral now or
hereafter securing its payment.
21. Savings Provision. Should the liability of any Guarantor
hereunder for the entire amount of the Obligations be subject to avoidance or
limitation, notwithstanding the contrary agreement and intention of the parties
hereto, under any state or federal fraudulent conveyance law or other similar
law that may be determined to be applicable, then the liability of such
Guarantor shall be limited to the maximum amount for which such Guarantor may be
liable without legal impairment.
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<PAGE>
22. Standard of Care; Limitation of Damages. The Lender
Parties shall be liable to Guarantors only for matters arising from this
Guaranty or otherwise related to the Obligations resulting from the Lender
Parties' gross negligence or willful misconduct, and liability for all other
matters is hereby waived. The Lender Parties shall not in any event be liable to
any Guarantor for special or consequential damages arising from this Guaranty or
otherwise related to the Obligations.
23. No Reliance on the Lender Parties' Analysis or
Information. Each Guarantor acknowledges and represents that, in connection with
such Guarantor's decision to enter into this Guaranty, such Guarantor has not
relied upon any financial projection, budget, assessment or other analysis by
the Lender Parties or upon any representation by the Lender Parties as to the
risks, benefits or prospects of Borrower's business activities or present or
future capital needs incidental thereto or the present or future provisions of
documents with Borrower that evidence the Obligations, all such considerations
having been examined fully and independently by each Guarantor. Each Guarantor
represents that it has made arrangements for the obtaining of information
regarding Borrower, and agrees that the Lender Parties are not obligated to
provide such Guarantor with any present or ongoing information about the
financial condition, operations or prospects of Borrower.
24. Recitals. Each Guarantor warrants and agrees that the
recitals set forth at the beginning of this Guaranty are true.
25. Consent to Jurisdiction and Venue. Each Guarantor hereby
irrevocably consents to the jurisdiction of the United States District Court for
the Middle District of Tennessee and of all Tennessee state courts sitting in
Davidson County, Tennessee, for the purpose of any litigation to which the
Lender Parties may be a party and which concerns this Guaranty or the
Obligations.
26. Not Partners; No Third Party Beneficiaries. Nothing
contained herein or in any related document shall be deemed to render any of the
Lender Parties a partner of Borrower or any Guarantor for any purpose. This
Guaranty and any documents securing the Obligations has been executed for the
sole benefit of the Lender Parties as an inducement to cause them to extend
credit to Borrower, and neither any Guarantor nor any other third party is
authorized to rely upon the Lender Parties' rights hereunder or to rely upon an
assumption that the Lender Parties has or will exercise their rights under any
document.
27. Costs of Collection Against Guarantors. Guarantors jointly
and severally agree to pay all costs of collection, including, without
limitation, court costs and reasonable attorney's fees that the Lender Parties
may incur in enforcing the terms of this Guaranty against any Guarantor.
28. Notices. Any communications concerning this Guaranty or
the credit described herein shall be given as provided in the Intercreditor
Agreement.
29. Indulgence Not Waiver. The Lender Parties' indulgence in
the existence
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<PAGE>
of a default under the Obligations or any departure from the terms of this
Guaranty or any other document shall not prejudice the Lender Parties' rights to
make demand and recover from Guarantors in accordance with this Guaranty.
30. Cumulative Remedies. The remedies provided the Lender
Parties in this Guaranty are not exclusive of any other remedies that may be
available to the Lender Parties under any other document or at law or equity.
31. Amendment and Waiver in Writing. No provision of this
Guaranty can be amended or waived, except by a statement in writing signed by
the party against which enforcement of the amendment or waiver is sought. The
parties anticipate that additional subsidiaries of Borrower shall from time to
time become parties hereto by amendment, and no Guarantor shall be required to
consent to or join in any amendment adding an additional Guarantor hereunder.
32. Assignment. This guaranty shall be binding upon the heirs,
successors and assigns of Guarantors and Lender Parties, except that Guarantors
shall not assign any rights or delegate any obligations arising hereunder
without the prior written consent of the Lender Parties. Any attempted
assignment or delegation by any Guarantor without the required prior consent
shall be void.
33. Severability. Should any provision of this Guaranty be
invalid or unenforceable for any reason, the remaining provisions hereof shall
remain in full effect.
34. Applicable Law. The validity, construction and enforcement
of this Guaranty and all other documents executed with respect to the
Obligations shall be determined according to the laws of Tennessee, in which
state this Guaranty has been executed and delivered.
35. Gender and Number. Words used herein indicating gender or
number shall be read as the context may require.
36. Captions Not Controlling. Captions and headings have been
included in this Guaranty for the convenience of the parties, and shall not be
construed as affecting the content of the respective paragraphs.
37. Entire Agreement; No Oral Representations Limiting
Enforcement. This Guaranty represents the entire agreement between the parties
concerning the liability of Guarantors for the Obligations, and any oral
statements regarding Guarantor's liability for the Obligations are merged
herein. Without limiting the foregoing, Guarantors acknowledge the Lender
Parties' intention to enforce this Guaranty to the fullest extent possible and
Guarantors acknowledge that the Lender Parties have made no oral statements to
Guarantors that could be construed as a waiver of the Lender Parties' right to
enforce this Guaranty by all available legal means.
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<PAGE>
38. Waiver of Jury Trial. EACH GUARANTOR HEREBY KNOWINGLY AND
VOLUNTARILY, WITH BENEFIT OF COUNSEL, WAIVES THE RIGHT TO HAVE ANY DISPUTE
ARISING FROM OR RELATED TO THIS GUARANTY OR THE OBLIGATIONS TRIED BY A JURY,
WITH THE RESULT THAT ANY SUCH DISPUTE WOULD BE TRIED BY A JUDGE RATHER THAN A
JURY. GUARANTOR ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO AGENT
AND LENDERS IN ENTERING INTO THE TRANSACTIONS DESCRIBED IN THE INTERCREDITOR
AGREEMENT AND CONFIRMS THAT NO REPRESENTATIVE OF AGENT OR LENDERS HAS MADE ANY
STATEMENT OR SUGGESTION THAT THIS PROVISION WILL NOT BE ENFORCED IN ACCORDANCE
WITH ITS TERMS.
39. Statute of Limitations. Each Guarantor hereby waives the
benefit of any statute of limitation applicable to such Guarantor's obligations
under this Guaranty, to the fullest extent permitted by law. Should a statute of
limitation nevertheless apply, then each Guarantor acknowledges and agrees that
the statute of limitation applicable to this Guaranty shall begin to run only
upon the Lender Parties' accrual of a cause of action against Guarantor
hereunder caused by such Guarantor's refusal to honor a demand for performance
hereunder made by the Lender Parties in writing; provided, however, if,
subsequent to the demand upon such Guarantor, the Lender Parties reache an
agreement with Borrower on any terms causing the Lender Parties to forbear in
the enforcement of its demand upon such Guarantor, the statute of limitation
shall be reinstated for its full duration until the Lender Parties subsequently
again make written demand upon such Guarantor.
40. No Burdensome Agreements. Each Guarantor warrants that it
is not a party to any contract or agreement and is not subject to any contingent
liability that does or may impair such Guarantor's ability to perform under the
terms of this Guaranty. Each Guarantor further warrants that the execution and
performance of this Guaranty will not cause a default, acceleration or other
event under any other contract or agreement to which such Guarantor or any
property of such Guarantor is subject, and will not result in the imposition of
any charge, penalty, lien or other encumbrance against any of such Guarantor's
property, except in favor of the Lender Parties.
41. Legal and Binding Agreement. Each Guarantor warrants that
the execution, delivery and performance of this Guaranty will not violate any
judicial or administrative order or governmental law or regulation, and that
this Guaranty is valid, binding and enforceable in every respect according to
its terms.
42. No Consent Required. Each Guarantor warrants that such
Guarantor's execution, delivery and performance of this Guaranty do not require
the consent of or the giving of notice to any third party including, but not
limited to, any other lender, governmental body or regulatory authority.
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<PAGE>
43. Notice to Lender Upon Perceived Breach. Each Guarantor
agrees to give the Lender Parties prompt written notice of any action or
inaction by the Lender Parties in connection with the obligations that such
Guarantor believes may be actionable against the Lender Parties or a defense to
payment for any reason, including, but not limited to, commission of a tort or
violation of any contractual duty or duty implied by law.
Executed as of the date first written above.
THE UNDERSIGNED ACKNOWLEDGE A
THOROUGH UNDERSTANDING OF THE TERMS
OF THIS GUARANTY AND AGREE TO BE
BOUND THEREBY:
AMERICAN CONSOLIDATED LABORATORIES, INC.
By: /s/ Joseph A. Arena
Title: CEO
NOVAVISION, INC.
By: /s/ Bart C. Gutekunst
Title: President
BIOPOLYMER CORPORATION
By: /s/ Bart C. Gutekunst
Title: President
SALVATORI OPHTHALMIC MANUFACTURING
CORPORATION
By: /s/ Joseph A. Arena
Title: Vice President
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<PAGE>
CAROLINA CONTACT LENS, INC.
By: /s/ Joseph A. Arena
Title: Vice President
S-O NEBRASKA, INC.
By: /s/ Joseph A. Arena
Title: Vice President
WOLCON LABS, INC.
By: /s/ Joseph A. Arena
Title: Vice President
- 10 -
<PAGE>
THE OBLIGATIONS EVIDENCED BY THIS INSTRUMENT ARE SUBJECT TO THAT INTERCREDITOR
AGREEMENT DATED AS OF MAY 7, 1997, AMONG SIRROM INVESTMENTS, INC., A TENNESSEE
CORPORATION; TULLIS-DICKERSON CAPITAL FOCUS, L.P., A DELAWARE LIMITED
PARTNERSHIP; AMERICAN CONSOLIDATED LABORATORIES, INC., A FLORIDA CORPORATION;
NOVAVISION, INC., A NORTH CAROLINA CORPORATION; BIOPOLYMER CORPORATION, A
DELAWARE CORPORATION; SALVATORI OPHTHALMIC MANUFACTURING CORPORATION, A FLORIDA
CORPORATION; AND CAROLINA CONTACT LENS, INC., A NORTH CAROLINA CORPORATION, AS
IT MAY BE AMENDED, MODIFIED, EXTENDED OR RESTATED FROM TIME TO TIME.
SECURED PROMISSORY NOTE
$1,575,000.00 May 7, 1997
FOR VALUE RECEIVED, the undersigned, AMERICAN CONSOLIDATED
LABORATORIES, INC., a Florida corporation ("Maker"), promises to pay to the
order of SIRROM INVESTMENTS, INC., a Tennessee corporation ("Payee"; Payee and
any subsequent holder[s] hereof are hereinafter referred to collectively as
"Holder"), at the office of Payee in Nashville, Tennessee, or at such other
place as Holder may designate to Maker in writing from time to time, and by
automatic debit if Holder so requires, the principal sum of ONE MILLION FIVE
HUNDRED SEVENTY-FIVE THOUSAND AND NO/100THS DOLLARS ($1,575,000.00), together
with interest on the outstanding principal balance hereof from the date hereof
at the rate of thirteen and one-half percent (13.5%) per annum (computed on the
basis of a 360-day year).
Interest only on the outstanding principal balance hereof shall be due
and payable monthly, in arrears, with the first installment being payable on the
first (1st) day of July, 1997, and subsequent installments being payable on the
first (1st) day of each succeeding month thereafter until April 25, 2002 (the
"Maturity Date"), at which time the entire outstanding principal balance,
together with all accrued and unpaid interest, shall be immediately due and
payable in full.
The indebtedness evidenced hereby may be prepaid in whole or in part,
at any time and from time to time, without penalty. Any such prepayments shall
be credited first to any accrued and unpaid interest and then to the outstanding
principal balance hereof.
Time is of the essence of this Note. It is hereby expressly agreed that
in the event that any default be made in the payment of principal or interest as
stipulated above, which default is not cured following the giving of any
applicable notice and within five (5) days; or in the event that any default or
event of default shall occur under that certain Loan Agreement of even date
Page 1 of 3 Pages
<PAGE>
herewith, between Maker and Payee (the "Loan Agreement"), which default or event
of default is not cured following the giving of any applicable notice and within
any applicable cure period set forth in said Loan Agreement; then, and in such
event, the entire outstanding principal balance of the indebtedness evidenced
hereby, together with any other sums advanced hereunder, under the Loan
Agreement and/or under any other instrument or document now or hereafter
evidencing, securing or in any way relating to the indebtedness evidenced
hereby, together with all unpaid interest accrued thereon, shall, at the option
of Holder and without notice to Maker, at once become due and payable and may be
collected forthwith, regardless of the stipulated date of maturity. Upon the
occurrence of any default as set forth herein, at the option of Holder and
without notice to Maker, all accrued and unpaid interest, if any, shall be added
to the outstanding principal balance hereof, and the entire outstanding
principal balance, as so adjusted, shall bear interest thereafter until paid at
an annual rate (the "Default Rate") equal to the lesser of (i) the rate that is
seven percentage points (7.0%) in excess of the above-specified interest rate,
or (ii) the maximum rate of interest allowed to be charged under applicable law
(the "Maximum Rate"), regardless of whether or not there has been an
acceleration of the payment of principal as set forth herein. All such interest
shall be paid at the time of and as a condition precedent to the curing of any
such default.
In the event this Note is placed in the hands of an attorney for
collection, or if Holder incurs any costs incident to the collection of the
indebtedness evidenced hereby, Maker and any indorsers hereof agree to pay to
Holder an amount equal to all such costs, including without limitation all
actual reasonable attorney's fees and all court costs.
Presentment for payment, demand, protest and notice of demand, protest
and nonpayment are hereby waived by Maker and all other parties hereto. No
failure to accelerate the indebtedness evidenced hereby by reason of default
hereunder, acceptance of a past-due installment or other indulgences granted
from time to time, shall be construed as a novation of this Note or as a waiver
of such right of acceleration or of the right of Holder thereafter to insist
upon strict compliance with the terms of this Note or to prevent the exercise of
such right of acceleration or any other right granted hereunder or by applicable
laws. No extension of the time for payment of the indebtedness evidenced hereby
or any installment due hereunder, made by agreement with any person now or
hereafter liable for payment of the indebtedness evidenced hereby, shall operate
to release, discharge, modify, change or affect the original liability of Maker
hereunder or that of any other person now or hereafter liable for payment of the
indebtedness evidenced hereby, either in whole or in part, unless Holder agrees
otherwise in writing. This Note may not be changed orally, but only by an
agreement in writing signed by the party against whom enforcement of any waiver,
change, modification or discharge is sought.
The indebtedness and other obligations evidenced by this Note are
further evidenced by (i) the Loan Agreement and (ii) certain other instruments
and documents, as may be required to protect and preserve the rights of Maker
and Payee as more specifically described in the Loan Agreement.
Page 2 of 3 Pages
<PAGE>
All agreements herein made are expressly limited so that in no event
whatsoever, whether by reason of advancement of proceeds hereof, acceleration of
maturity of the unpaid balance hereof or otherwise, shall the amount paid or
agreed to be paid to Holder for the use of the money advanced or to be advanced
hereunder exceed the Maximum Rate. If, from any circumstances whatsoever, the
fulfillment of any provision of this Note or any other agreement or instrument
now or hereafter evidencing, securing or in any way relating to the indebtedness
evidenced hereby shall involve the payment of interest in excess of the Maximum
Rate, then, ipso facto, the obligation to pay interest hereunder shall be
reduced to the Maximum Rate; and if from any circumstance whatsoever, Holder
shall ever receive interest, the amount of which would exceed the amount
collectible at the Maximum Rate, such amount as would be excessive interest
shall be applied to the reduction of the principal balance remaining unpaid
hereunder and not to the payment of interest. This provision shall control every
other provision in any and all other agreements and instruments existing or
hereafter arising between Maker and Holder with respect to the indebtedness
evidenced hereby.
This Note is intended as a contract under and shall be construed and
enforceable in accordance with the laws of the State of Tennessee, except to the
extent that federal law may be applicable to the determination of the Maximum
Rate.
As used herein, the terms "Maker" and "Holder" shall be deemed to
include their respective successors, legal representatives and assigns, whether
by voluntary action of the parties or by operation of law.
MAKER:
AMERICAN CONSOLIDATED
LABORATORIES, INC.,
a Florida corporation
By: /s/ Joseph A. Arena
Joseph A. Arena
Title: Chief Executive Officer
Page 3 of 3 Pages
<PAGE>
INTERCREDITOR AGREEMENT
This Intercreditor Agreement is entered into as of the 7th day of May,
1997, among SIRROM INVESTMENTS, INC. ("Sirrom"), a Tennessee corporation;
TULLIS- DICKERSON CAPITAL FOCUS, L.P. ("TDCF"), a Delaware limited partnership;
AMERICAN CONSOLIDATED LABORATORIES, INC. ("ACL"), a Florida corporation;
NOVAVISION, INC. ("NovaVision"), a North Carolina corporation; BIOPOLYMER
CORPORATION ("Biopolymer"), a Delaware corporation; SALVATORI OPHTHALMIC
MANUFACTURING CORPORATION ("SOMC"), a Florida corporation; and CAROLINA CONTACT
LENS, INC. ("CCL"), a North Carolina corporation (Sirrom and TCDF are referred
to herein collectively as the "Lenders," and ACL, NovaVision, Biopolymer, SOMC
and CCL are referred to herein collectively as the "Borrower Parties").
Recitals
A. The Borrower Parties are liable to Sirrom variously as co-borrowers
and as guarantors for the indebtedness evidenced by (i) that Secured Promissory
Note dated as of December 18, 1996 made by NovaVision payable to the order of
Sirrom in the original principal amount of $520,000, a copy of which is attached
hereto as Exhibit A, and (ii) that Secured Promissory Note dated as of the date
hereof made by ACL payable to the order of Sirrom in the original principal
amount of $1,575,000, a copy of which is attached as Exhibit B (these
obligations, collectively with all obligations under documents now or hereafter
further evidencing or securing those obligations, as they may hereafter be
extended, amended, modified or restated in accordance with this Agreement, are
referred to herein as the "Sirrom Debt").
B. The Borrower Parties are liable to TDCF variously as co-borrowers
and as guarantors for the indebtedness evidenced by that Amended and Restated
Promissory Note dated as of May ___, 1997, in the principal amount of $550,000,
a copy of which is attached as Exhibit C (this obligation, collectively with all
obligations under documents now or hereafter further evidencing or securing
those obligations, as they may hereafter be extended, amended, modified or
restated in accordance with this Agreement, are referred to herein as the "TDCF
Debt"; the Sirrom Debt and the TDCF Debt are referred to herein collectively as
the "Loans"; and the instruments described in recitals A and B are referred to
herein as the "Notes").
C. The parties intend that Sirrom act as collateral agent with respect
to the collateral instruments listed in Exhibit D hereto (the "Collateral
Documents") and that, upon the occurrence of a default or event of default under
either of the Loans upon their final maturity, or upon the occurrence of any
other default or event of default that occasions the acceleration of the
maturity of either of the Loans (each a "Collection Event"), Sirrom shall act as
collateral agent for the purpose of acting to collect the Loans, with the
Lenders sharing PARI PASSU in all net recoveries from these efforts.
<PAGE>
Now, therefore, in consideration of the extensions of the Loans and for
other valuable consideration, the receipt and sufficiency of which are
acknowledged, the parties agree as follows:
1. Definitions. In addition to the terms defined above, as used in this
Agreement, the following capitalized terms have the meanings set forth below:
"Agent" means Sirrom in its capacity as collateral agent under this
Agreement. The use of the term "Agent" in this manner is not intended to invoke
the laws of agency or to otherwise impose any duties upon Sirrom in this
capacity beyond those expressly provided for in this Agreement.
"Collateral" means all property in which a lien or security interest is
granted under the Collateral Documents.
"Loan Documents" means the Notes, the Collateral Documents and any
other documents evidencing or securing the Loans.
"Pro Rata" means in accordance with the respective total outstanding
balances of principal outstanding as of the occurrence of the Collection Event
"Restricted Amendments and Waivers" means modifications, amendments or
waivers of any provision of the Loan Documents that would (i) increase the
principal amount of the Loan, (ii) reduce the quality or quantity of the
Collateral or otherwise impair the Collateral in any way, (iii) modify covenants
as to make them more restrictive on a Borrower Party including, but not limited
to, the modification of financial covenants against the interests of a Borrower
Party, (iv) create new Events of Default or make existing Events of Default more
restrictive on a Borrower Party, (v) accelerate the due dates of any payments of
principal or interest, or (vi) increase the interest rate thereunder or create
or increase any other payment obligation (of interest, fees or otherwise) of a
Borrower Party.
"Required Lenders" means both of the Lenders.
2. Appointment of Agent. The Lenders hereby appoint Sirrom as Agent to
act as specified in this Agreement.
3. Agreements of the Lenders Regarding Administration of Loans. The
Lenders agree that, in the absence of a Collection Event, they shall each freely
administer their own Loans for their own accounts, except that (i) Agent shall,
pursuant to its role as collateral agent, be solely authorized to issue releases
of Collateral as may be necessary and permitted under the Loan Documents in the
ordinary course of business, subject to the approval of both Lenders as provided
further below in this Agreement, (ii) neither Lender shall receive or accept any
prepayment of its Loan, except on a Pro Rata basis, without the written consent
of the other Lender, (iii) neither Lender shall enter into any Restricted
Amendments and Waivers without the written consent of the other Lender, (iv)
neither Lender shall otherwise
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<PAGE>
amend, waive or modify any of the Loan Documents relating to its Loan without
giving the other Lender concurrent written notice upon the execution thereof,
and (v) neither Lender shall directly or indirectly obtain additional security
or credit enhancement for the payment of its Loan in a manner that would prefer
that Lender over the other Lender. After the occurrence of a Collection Event,
Agent shall have the exclusive right to administer and collect the Loans, as
provided below in this Agreement.
4. Agreements Regarding Notices of Defaults. Each Lender agrees to give
the other Lender a copy of any notice to or from any Borrower Party that gives
notice of, waives, advises of a cure of or otherwise regards a default, event of
default, unmatured default or other event or condition that, with the giving of
notice, the passing of time, or both, would cause the occurrence of a default or
an event of default under that Lender's Loan.
5. Powers and Duties of Agent.
a) General Powers of Agent. Subject to the terms and
conditions of this Agreement, prior to and after the occurrence of a
Collection Event, Agent shall have the power and authority to (i)
retain possession of stock certificates and any other negotiable
Collateral or other Collateral that any Borrower party similarly
tenders to secure the Loans, for the benefit of both of the Lenders and
(ii) serve as the secured party of record for the benefit of both of
the Lenders with respect to UCC filings and other documentation
incidental to the securing of the Loans.
b) Powers of Agent Following a Collection Event. Upon the
occurrence of a Collection Event, the Lenders shall collaborate as to
an appropriate plan of action for the enforcement of the Loan
Documents. If the Lenders agree on a particular course of action, Agent
shall act in accordance with the wishes of the Lenders. If the Lenders
fail to agree on a course of action within a time determined by Agent
(but in no event less than five (5) days after the occurrence of the
Collection Event), or if circumstances arise that in Agent's judgment
require immediate action on Agent's part and make collaboration with
the Lenders impracticable, Agent shall take such action as Agent deems
to be in the best interests of the Lenders. In furtherance of its power
to collect the Loans, upon the occurrence of a Collection Event and
thereafter until the Lenders may otherwise jointly agree, Agent shall
have the exclusive right to (i) receive payments under and enforce the
Loan Documents, including, but not limited to, the rights to file suit
for collection of the Loans and to foreclose or take any other action
in the enforcement of any security interest or lien securing the Loans,
(ii) enter into amendments, modifications, settlements, compromises and
waivers with respect to the Loan Documents, (iii) file claims on
account of the Loans in any bankruptcy case or other proceeding
involving the Loans or join in the commencement of such a proceeding,
(iv) perform all other functions expressly imposed upon Agent in this
Agreement, and (v) perform all those other duties reasonably incidental
to the foregoing. Notwithstanding the foregoing, even after the
occurrence of a Collection Event, each Lender may without the consent
of the other Lender or of Agent (but
3
<PAGE>
with concurrent written notice thereto) take such action as may be
necessary to convert such Lender's Loan in full or in part to an equity
interest in one or more Borrower Parties in accordance with such
Lender's agreement with any one or more of the Borrower Parties.
c) Cooperation of the Lenders. The Lenders shall cooperate
with Agent in its performance of its duties under this Agreement and
shall assist Agent through the execution and delivery of such documents
and the performance of such other functions as may be reasonably
necessary to enable Agent to perform hereunder. Each Lender hereby
appoints Agent as such Lender's attorney-in-fact, with full power of
substitution, to take any action permitted Agent hereunder with respect
to the Loans and the Loan Documents.
d) Remittance by Agent and Lenders. All actions taken by Agent
shall inure to the benefit of the Lenders Pro Rata. Agent shall remit
to Lenders all amounts it receives in collecting the Loans, net of the
expenses for which it is entitled to payment under Section 8 hereof, at
least once each calendar month. Should any payments received by Agent
be recovered as preferences in bankruptcy or otherwise, Lenders shall
upon request pay to Agent the amount needed to comply with such
requirements.
6. Nature of Duties of Agent; Standard of Care.
a) Capacity of Agent. Agent's duties hereunder are
administrative and ministerial in nature, and Agent's capacity is that
of an independent contractor for the Lenders. Agent is not a trustee or
other fiduciary for the Lenders, and Agent has no duties whatsoever to
the Lenders except as expressly set forth in this Agreement. Agent
shall have no liability to the Lenders for any action or inaction
relating to this Agreement or the other Loan Documents, even for
matters arising from its ordinary negligence, except for actual losses
caused by its gross negligence or reckless or willful misconduct.
b) Limitations on Agent's Duties. Agent shall not be obligated
to take any action hereunder or under any other Loan Document (i) if
such action would, in the opinion of Agent, be contrary to applicable
law, this Agreement or the other Loan Documents, (ii) if it would
likely subject Agent to a tax in any jurisdiction where it is not then
subject to a tax, (iii) if it would likely require Agent to qualify to
do business in any jurisdiction where it is not then so qualified,
unless Agent receives security or indemnity satisfactory to it against
any tax or other liability in connection with such qualification or
resulting from the taking of such action in connection therewith, or
(iv) if it would likely subject Agent to IN PERSONAM jurisdiction in
any location where it is not then so subject.
c) Agent's Right to Require Instructions in Performance of
Duties. If Agent, in its sole and absolute discretion, requests
instructions from the Required
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<PAGE>
Lenders with respect to any act or action (including the failure to
act) in connection with this Agreement, Agent shall be entitled, at its
option, to refrain from such action, or to continue such inaction,
unless and until Agent shall have received such instructions, and Agent
shall incur no liability by reason of so acting or refraining from
action. No Lender shall have any right of action whatsoever against
Agent as a result of Agent's acting or refraining from acting hereunder
or under any other Loan Document in accordance with the instructions of
the Required Lenders in such a case.
d) Agent's Reliance on Others in Performance of Duties. Agent
shall be entitled to rely, and shall be fully protected in relying,
upon any note, writing, resolution, notice, statement, consent,
certificate, telex, teletype or facsimile message, order or other
documentary, teletransmission or telephone message believed by it in
good faith to be genuine and correct and to have been signed, sent or
made by the proper person. Agent may consult with legal counsel
(including counsel for Borrower Parties), accountants and other experts
selected by it with respect to all matters pertaining to this Agreement
and the other Loan Documents and its duties hereunder and thereunder
and shall not be liable for any action taken or omitted to be taken by
it in good faith in accordance with the advice of such counsel
(including counsel for Borrower Parties), accountants or experts.
7. Sharing of Information. The Lenders and Agent shall share payment
information with one another respecting the Loans from time to time upon their
requests of one another to confirm the balances of the Loans and the payment
history thereof. Except for this obligation and as otherwise expressly provided
in this Agreement, the Lenders and Agent shall have no duty or responsibility,
either initially or on a continuing basis, to provide a Lender or Agent with any
credit or other information concerning the business, prospects, operations,
properties, financial or other condition or creditworthiness of the Borrower
Parties or any other person that may come into its possession. The Borrower
Parties agree that the Lenders and Agent may freely share with one another
information about the Loans.
8. Indemnification of Agent. To the extent Agent is not reimbursed by
or on behalf of Borrower Parties, and without limiting the obligation of the
Borrower Parties to do so, the Lenders will Pro Rata reimburse and indemnify
Agent, from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses (including attorneys' fees
and expenses) or disbursements of any kind or nature whatsoever that may at any
time (including at any time following the indefeasible repayment in full of the
Loans) be imposed on, incurred by or asserted against Agent in any way relating
to or arising out of this Agreement or any other Loan Document or the
transactions contemplated thereby or any action taken or omitted by Agent under
or in connection with any of the foregoing, and in particular will reimburse
Agent for out-of-pocket expenses promptly upon demand by Agent therefor, even if
incurred due to the ordinary negligence of Agent; provided, however, that no
Lender shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
finally determined by a court of competent jurisdiction and not subject to any
appeal or pursuant to arbitration to have resulted from Agent's gross negligence
or reckless
- 5 -
<PAGE>
or willful misconduct. Agent may offset any amounts due Agent by a Lender
against obligations of Agent to that Lender.
9. No Representations by Agent. Each Lender acknowledges that neither
Agent nor any of its officers, directors, employees, attorneys, accountants or
agents has made any representation or warranty to it regarding the Borrower
Parties, the Loans, the Collateral or otherwise relating to this Agreement.
Agent shall not be responsible to a Lender for any recitals, statements,
information, representations or warranties herein or in any other Loan Document
or in any document, instrument, certificate or other writing delivered in
connection herewith or therewith or for the execution, effectiveness,
genuineness, validity, enforceability, perfection, priority or sufficiency of
this Agreement or any other Loan Document or the financial condition of the
Borrower Parties or any other person, or be required to make any inquiry
concerning either the performance or observance of any of the terms, provisions
or conditions of this Agreement or any other Loan Document, or the financial
condition of the Borrower Parties or any other person.
10. Independent Investigations by the Lenders. Each Lender acknowledges
that, independently and without reliance upon Agent or any other Lender and
based on such documents and information as it has deemed and may deem
appropriate, (i) it has made its own appraisal of and investigation into the
business, prospects, operations, properties, financial and other condition and
creditworthiness of the Borrower Parties in connection with its decision to
enter into this Agreement and extend credit to the Borrower Parties, and (ii) it
will continue to make its own credit analysis, appraisals and decisions in
taking or not taking action hereunder.
11. Agent in its Individual Capacity. With respect to its Loan, Agent
shall have the same rights and powers under the Loan Documents as any other
Lender or holder of a Note and may exercise the same as though it were not
performing the duties specified herein; and the terms "Lenders," "Required
Lenders," and any similar terms shall, unless the context clearly otherwise
indicates, include Agent in its individual capacity as a Lender.
12. Successor Agent. Agent may resign from that capacity at any time
upon sixty (60) days' prior written notice to the Borrower Parties and the
Lenders. Such resignation shall take effect upon the appointment of a successor
Agent as provided herein. The Required Lenders will, with ACL's approval (which
shall not be unreasonably withheld), appoint a successor Agent. Upon the written
acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations hereunder and under
the other Loan Documents. After any retiring Agent's resignation as Agent, the
indemnity and exculpatory provisions of this Agreement shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was Agent.
13. Sharing of Payments, etc. Each Lender agrees that if it shall,
through the exercise of a right of set-off, counterclaim or otherwise, obtain
payment with respect to the
- 6 -
<PAGE>
Loans which results in its receiving more than its Pro Rata Share of the
aggregate payments with respect to all of the Loans, then (a) such Lender shall
be deemed to have simultaneously purchased from the other Lender a share in the
Loans so that the amount of the Loans held by each of the Lenders shall continue
to equal their respective Pro Rata Shares, and (b) such other adjustments shall
be made from time to time as shall be equitable to insure that the Lenders share
such payments ratably. If a Lender remits payments to the other Lender under
this Section 13 and later is required to refund the same as a preferential
payment or otherwise, the other Lender who shared in the payment shall similarly
arrange their interests in the Loans to reverse the distribution to them as to
allow the originally remitting Lender to refund such payment.
14. Assignments and Participations. A Lender may assign all of its
interest in its Loan provided that the acquiring Lender shall expressly assume
full responsibility as a Lender hereunder. Such an assignment shall not release
the assigning Lender from any obligations to Agent arising from occurrences
prior to such assignment. A Lender may grant a security interest in its Loan
provided that the secured party takes such security interest subject to the
provisions of this Agreement.
15. Bankruptcy Provisions. Should any of the Borrower Parties become a
party to a case under the Bankruptcy Code, each Lender shall be entitled to file
its own claim, to the extent such a filing may be necessary. Agent shall review
each claim before being filed by a Lender to assure that the claim is filed on a
basis consistent with Agent's records and Agent's legal positions taken pursuant
to this Agreement. Should any of the Borrower Parties become a party to a
reorganization proceeding under the Bankruptcy Code, each Lender shall be
recognized as the holder of a separate claim for the purpose of the approval or
rejection of a plan under 11 U.S.C. ss. 1126, and shall vote such claim as
directed by Agent. Agent shall continue to administer the Loans on behalf of the
Lenders, as they may be amended by any adopted Plan of Reorganization.
16. Foreclosure of Collateral. In the event of a foreclosure of any
Collateral, Agent may issue a credit bid for the account of all of the Lenders,
up to the amount of the then outstanding Loans. Any property acquired at such a
foreclosure (or acquired by Agent through a conveyance in lieu of foreclosure)
shall be held and administered by Agent for the benefit of all of the Lenders
pursuant to the terms of this Agreement.
17. Legends. Concurrently with the execution hereof, each of the Notes
shall be marked with a legend stating as follows:
The obligations evidenced by this instrument are subject to that
Intercreditor Agreement dated as of May __, 1997, among SIRROM
INVESTMENTS, INC., a Tennessee corporation; TULLIS-DICKERSON CAPITAL
FOCUS, L.P., a Delaware limited partnership; AMERICAN CONSOLIDATED
LABORATORIES, INC., a Florida corporation; NOVAVISION, INC., a North
Carolina corporation; BIOPOLYMER CORPORATION, a Delaware corporation;
SALVATORI OPHTHALMIC MANUFACTURING
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<PAGE>
CORPORATION, a Florida corporation; and CAROLINA CONTACT LENS, INC., a
North Carolina corporation, as it may be amended, modified, extended or
restated from time to time.
18. Amendment of Collateral Documents. Concurrently with the execution
hereof, certain of the Collateral Documents have been amended or amended and
restated to reflect that all collateral previously or hereafter granted to
secure any of the Loans shall hereafter be deemed to secure all of the Loans.
The parties to this Agreement agree that, if there exist other documents now or
hereafter securing any of the Loans, such documents shall be deemed to have been
amended hereby to secure all of the Loans, subject to the administrative powers
of Agent under this Agreement.
19. Other Relationships With Borrower Parties. Each Lender and Agent is
free to engage in other business relationships with the Borrower Parties,
provided that such relationship does not violate any restriction set forth in
the Loan Documents or this Agreement.
20. Responses to Requests. With respect to any consent or approval
requested by ACL or Agent under a provision of this Agreement, the Lenders shall
endeavor to provide to Agent written notice of their approval or disapproval
within five (5) Business Days of receipt of the request; provided, however, if a
Lender fails to give such notice within five (5) Business Days, the request
shall be regarded as approved by such Lender.
21. Consent to Jurisdiction. The parties hereto hereby irrevocably
consent to the jurisdiction of the United States District Court for the Middle
District of Tennessee and of all Tennessee state courts sitting in Davidson
County, Tennessee, for the purpose of any litigation to which Lender may be a
party and which concerns this Agreement or the Secured Indebtedness. It is
further agreed that venue for any such action shall lie exclusively with courts
sitting in Davidson County, Tennessee, unless Lender agrees to the contrary in
writing.
22. Not Partners; No Third Party Beneficiaries. Nothing contained
herein or in any related document shall be deemed to render either Lender a
partner of any Borrower Party for any purpose. This Agreement has been executed
for the sole benefit of Lenders and Agent, and no third party is authorized to
rely upon their rights hereunder or to rely upon an assumption that Lenders or
Agent has or will exercise its rights under this Agreement or under any document
referred to herein.
23. Business Days. If the last day of any notice period falls on a day
that is not a business day for Sirrom, the notice period shall end on the next
following business day.
24. Notices. Any communications concerning this Agreement shall be
addressed as follows:
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<PAGE>
As to TCDF:
Tullis-Dickerson Capital Focus, L.P.
Attn: Joan P. Neuscheler
1 Greenwich Plaza
Greenwich, CT 06830
As to Sirrom:
Donald F. Barrickman
Sirrom Investments, Inc.
500 Church Street, Suite 200
Nashville, TN 37219
With a copy to:
Boult, Cummings, Conners & Berry, PLC
Attn: John E. Murdock III
P.O. Box 198062
Nashville, Tennessee 37219
As to Borrower Parties:
As provided in the Loan Documents
Communications shall only be effective when set forth in writing and actually
received at the address indicated above.
25. Incorporation of Exhibits. All Exhibits referred to in this
Agreement are incorporated herein by this reference.
26. Cumulative Remedies. The remedies provided Lenders and Agent in
this Agreement are not exclusive of any other remedies that may be available to
them under any other document or at law or equity.
27. Amendment and Waiver in Writing. No provision of this Agreement can
be amended or waived, except by a statement in writing signed by the party
against which enforcement of the amendment or waiver is sought; provided,
however, amendments hereto that do not affect the substantive rights of the
Borrower Parties shall not require the consent of the Borrower Parties, which
have joined in the execution hereof only for the purpose of evidencing their
knowledge of the provisions hereof.
28. Assignment. This Agreement shall be binding upon and inure to the
benefit of the respective heirs, successors and assigns of the parties.
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<PAGE>
29. Entire Agreement. This Agreement and the other written agreements
among the Borrower Parties, Lenders and Agent represent the entire agreement
between the parties concerning the subject matter hereof, and all oral
discussions and prior agreements are merged herein.
30. Severability. Should any provision of this Agreement be invalid or
unenforceable for any reason, the remaining provisions hereof shall remain in
full effect.
31. Time of Essence. Time is of the essence of this Agreement, and all
dates and time periods specified herein shall be strictly observed, except that
Agent may permit specific deviations therefrom by its written consent.
32. Applicable Law. The validity, construction and enforcement of this
Agreement shall be determined according to the laws of Tennessee applicable to
contracts executed and performed entirely within that state, in which state.
33. Gender and Number. Words used herein indicating gender or number
shall be read as context may require.
34. Captions Not Controlling. Captions and headings have been included
in this Agreement for the convenience of the parties, and shall not be construed
as affecting the content of the respective paragraphs.
Executed the date first written above.
THE UNDERSIGNED ACKNOWLEDGE
A THOROUGH UNDERSTANDING OF
THE TERMS OF THIS AGREEMENT
AND AGREE TO BE BOUND
THEREBY:
SIRROM INVESTMENTS, INC.
By: /s/ Donald F. Barrickman
Title: Vice President
TULLIS-DICKERSON CAPITAL FOCUS, L.P.
By: /s/ Tullis-Dickerson Partners
Title: Joan P. Nenscheler, General Partner
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<PAGE>
AMERICAN CONSOLIDATED
LABORATORIES, INC.
By: /s/ Joseph A. Arena
Title: CEO
NOVAVISION, INC.
By: /s/ Bart C. Gutekunst
Title: President
BIOPOLYMER CORPORATION
By: /s/ Bart C. Gutekunst
Title: President
SALVATORI OPHTHALMIC
MANUFACTURING CORPORATION
By: /s/ Joseph A. Arena
Title: Vice President
CAROLINA CONTACT LENS, INC.
By: /s/ Joseph A. Arena
Title: Vice President
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<PAGE>
EXHIBIT D
COLLATERAL DOCUMENTS
Trademark and Patent Security Agreement executed by American Consolidated
Laboratories, Inc.
Stock Pledge Agreement executed by American Consolidated Laboratories, Inc.
First Amended and Restated Trademark and Patent Security Agreement
executed by NovaVision, Inc.
First Amended and Restated Stock Pledge Agreement executed by NovaVision, Inc.
First Amended and Restated Trademark and Patent Security Agreement executed by
Biopolymer Corporation.
Trademark and Patent Security Agreement executed by Carolina Contact Lens, Inc.
Trademark and Patent Security Agreement executed by Salvatori Ophthalmic
Manufacturing Corporation.
Joint and Several Unconditional Continuing Guaranty executed by all
parties.
Security Agreement executed by all parties.
Blocked account in name of NovaVision, Inc.
Security Interest Arising udner that Loan and Security Agreement between ACL and
TDCF
Various Financing Statements with respect to the above security interests
- 12 -
<PAGE>
SECURITY AGREEMENT
THIS SECURITY AGREEMENT ("Agreement") is dated as of the 7th day of
May, 1997, by and between AMERICAN CONSOLIDATED LABORATORIES, INC. ("ACL"), a
Florida corporation; NOVAVISION, INC. ("NovaVision"), a North Carolina
corporation; BIOPOLYMER CORPORATION ("Biopolymer"), a Delaware corporation;
SALVATORI OPHTHALMIC MANUFACTURING CORPORATION ("SOMC"), a Florida corporation;
S-O NEBRASKA, INC. ("S-O"), a Florida corporation; WOLCON LABS, INC. ("Wolcon")
a Michigan corporation and CAROLINA CONTACT LENS, INC. ("CCL"), a North Carolina
corporation (each of the foregoing are individually referred to as "Grantor" and
collectively referred to as "Grantors"), and SIRROM INVESTMENTS, INC.
("Sirrom"), a Tennessee corporation, as agent pursuant to that certain
Intercreditor Agreement of even date herewith by and between TULLIS-DICKERSON
CAPITAL FOCUS, L.P. ("TDCF"), Sirrom and Grantors (the "Intercreditor
Agreement") ("Sirrom" and "TDCF" collectively referred to hereinafter as
"Lenders").
WITNESSETH:
WHEREAS, each Grantor is liable either as borrower or as guarantor on
each of the obligations evidenced by (1) that certain Loan Agreement and Secured
Promissory Note dated December 18, 1996, payable to the order of Sirrom in the
original principal amount of $520,000; and (2) that certain Loan Agreement and
Amended and Restated Promissory Note dated of even date herewith payable to the
order of TDCF in the original principal amount of $550,000; and (3) a loan to be
made by Sirrom (the "Sirrom Loan") in the original principal amount of
$1,575,000 pursuant to that certain Loan Agreement and Secured Promissory Note
of even date herewith (all of the foregoing loan agreements, notes and all other
documents executed in connection with said transactions are collectively
referred to as the "Loan Documents" and all of the obligations evidenced thereby
are collectively referred to as the "Loans"); and
WHEREAS, each Grantor is either a borrower or a wholly-owned subsidiary
of a borrower and will directly benefit from the Sirrom Loan; and
WHEREAS, in connection with the making of the Sirrom Loan, Lenders
desire to obtain from each Grantor, and each Grantor desires to mortgage, pledge
and grant to, Sirrom, as agent pursuant to the Intercreditor Agreement, for the
benefit of Lenders, a security interest in all of its right, title and interest
in, to and under that certain collateral more particularly described below, to
secure the payment and performance of the Loans.
<PAGE>
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Grant of Security Interest. Each Grantor herein hereby grants to
Sirrom, as agent pursuant to the Intercreditor Agreement, for the benefit of
Lenders, a security interest in the following described property and any and all
proceeds and products thereof and accessions thereto (as to an individual
Grantor, "Grantor's Collateral" and as to the Grantors collectively, the
"Collateral"):
(a) Equipment. All equipment of Grantor of any kind and description,
whether now owned or hereafter acquired and wherever located, together
with all parts, accessories and attachments and all replacements
thereof and additions thereto;
(b) Inventory, Accounts, Contract Rights, Chattel Paper and General
Intangibles. All of Grantor's inventory and any agreements for lease of
same and rentals therefrom, and all of Grantor's accounts, accounts
receivable, contract rights, chattel paper and general intangibles and
the proceeds therefrom, whether now in existence or owned or hereafter
arising or acquired, entered into or created, and wherever located; and
whether held for lease or sale, or furnished or to be furnished under
contracts of service;
(c) Trademarks, Etc. All trademarks and service marks now held or
hereafter acquired by Grantor, both those that are registered with the
United States Patent and Trademark Office and any unregistered marks
used by Grantor in the United States, and trade dress, including logos
and designs, in connection with which any such marks are used, together
with all registrations regarding such marks and the rights to renewals
thereof, and the goodwill of the business of Grantor symbolized by such
marks;
(d) Copyrights. All copyrights now held or hereafter acquired by
Grantor and any applications for U.S. copyrights hereafter made by
Grantor; and
(e) Proprietary Information, Computer Data, Etc. All proprietary
information and trade secrets of Grantor with respect to Grantor's
business and all of Grantor's computer programs and the information
contained therein and all intellectual property rights with respect
thereto.
2. Secured Indebtedness. The obligations secured hereby shall include,
but are not limited to, Grantor's obligations hereunder, Grantor's obligations
under any Loan Document,
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and Grantor's obligations under any Unconditional Guaranty, in connection with
(a) the Loans payable to the order of Lenders that shall be due and payable as
set forth in the Loan Documents, and any renewals or extensions thereof, (b) the
full and prompt payment and performance of any and all other indebtednesses and
other obligations of any Grantor to any Lender, direct or contingent (including
but not limited to obligations incurred as indorser, guarantor or surety),
however evidenced or denominated, and however and whenever incurred, including
but not limited to indebtednesses incurred pursuant to any present or future
commitment of any Lender to any Grantor or any future advance by any Lender to
any Grantor, whether obligatory or non-obligatory, and (c) all future advances
made by Lenders for taxes, levies, insurance and preservation of the Collateral
and all attorney's fees, court costs and expenses of whatever kind incident to
the collection of any of said indebtedness or other obligations and the
enforcement and protection of the security interest created hereby.
3. Representations, Warranties and Agreements of Grantors. Each Grantor
represents, warrants and agrees, on its own behalf, as follows:
(a) Except as set forth on Schedule 3(a)(i) hereto (the
"Permitted Encumbrances"), Grantor is the owner of Grantor's
Collateral, free and clear of any liens and security interests and that
it will defend Grantor's Collateral against the claims and demands of
all persons other than Permitted Encumbrances. All of Grantor's
collateral is presently located in the states and counties set forth on
Schedule 3(a)(ii).
(b) Grantor will promptly notify Lenders, in writing, of any
new place or places of business if Grantor's Collateral is used in
business, or of any change in it's residence if Grantor's Collateral is
not used in business, and regardless of use, of any change in the
location of Grantor's Collateral or any records pertaining thereto.
(c) Grantor will pay to Lenders all amounts secured hereby as
and when the same shall be due and payable, whether at maturity, by
acceleration or otherwise, and will promptly perform all terms of said
indebtedness and this or any other security or loan agreement between
any Grantor and any Lender, and will promptly discharge all said
liabilities.
(d) Grantor will at all times keep Grantor's Collateral
insured against all insurable hazards in amounts equal to the full cash
value of the Grantor's Collateral. Such insurance shall be in such
companies as may be acceptable to Lenders, with provisions satisfactory
to Lenders for payment of all losses thereunder to Lenders as their
interests may appear. If required by Lenders, Grantor shall deposit the
policies with Lenders. So long as there exists no event of default
hereunder or under and Loan Document and the proceeds received under
any policy are less than $50,000, Lenders shall deliver said proceeds
to Grantor for the purpose of repairing or restoring
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<PAGE>
Grantor's Collateral. If there exists an event of default hereunder or
under any Loan Document or if the proceeds received under any policy
exceed $50,000, at Lenders' option, said proceeds may be applied to the
payment of any indebtedness secured hereby, whether or not due and
payable, or at Lenders' option may be delivered by Lenders to Grantor
for the purpose of repairing or restoring Grantor's Collateral. Grantor
assigns to Lenders all right to receive proceeds of insurance not
exceeding the amounts secured hereby, directs any insurer to pay all
proceeds directly to Lenders as their interests may appear, and
appoints each Lender as Grantor's attorney in fact to endorse any draft
or check made payable to Grantor in order to collect the benefits of
such insurance; provided, however, that so long as no event of default
exists hereunder or under any Loan Document, Grantor shall be entitled
to settle and compromise all claims under its casualty policies and, if
the proceeds of such settlement or compromise are less than $50,000,
Lenders shall disburse said proceeds to Grantor upon receipt of
satisfactory evidence that the proceeds shall be used to repair or
replace Grantors's damaged or destroyed Collateral. If Grantor fails to
keep Grantor's Collateral insured as required by Lenders, Lenders shall
have the right to obtain such insurance at Grantor's expense and add
the cost thereof to the other amounts secured hereby.
(e) Grantor will pay all costs of filing of financing,
continuation and termination statements with respect to the security
interests created hereby, and Lenders are authorized to do all things
that they deem reasonably necessary to perfect and continue perfection
of the security interests created hereby and to protect the Collateral.
(f) The address set forth after Grantor's signature on this
Agreement is Grantor's principal place of business and the place where
the records concerning all intangible Grantor's Collateral are kept
and/or maintained.
4. Default. Grantor shall be in default upon failure to observe or
perform any of Grantor's agreements herein contained, or upon the occurrence of
a default or Event of Default under the Loan Agreements or any other Loan
Document that has not been cured during the applicable grace period, or if any
warranty or statement by Grantor herein or furnished in connection herewith is
materially false or misleading in any material respect.
5. Remedies Upon Default. Upon default hereunder, all sums secured
hereby shall immediately become due and payable at Lenders' option without
notice to Grantor, and Lenders may proceed to enforce payment of same and to
exercise any and all rights and remedies provided by the Uniform Commercial Code
(Tennessee) or other applicable law, as well as all other rights and remedies
possessed by Lenders, all of which shall be cumulative. Whenever Grantor is in
default hereunder, and upon demand by Lenders, Grantor shall assemble Grantor's
Collateral and make it available to Lenders at a place reasonably
4
<PAGE>
convenient to Lenders and Grantor. Any notice of sale, lease or other intended
disposition of Grantor's Collateral by Lenders sent to Grantor at the address
hereinafter set forth, or at such other address of Grantor as may be shown on
Lender's records, at least five (5) days prior to such action, shall constitute
reasonable notice to Grantor.
Lenders may waive any default before or after the same has been
declared without impairing its right to declare a subsequent default hereunder,
this right being a continuing one.
6. Severability. If any provision of this Agreement is held invalid,
such invalidity shall not affect the validity or enforceability of the remaining
provisions of this Agreement.
7. Binding Effect. This Agreement shall inure to the benefit of
Lenders' successors and assigns and shall bind Grantors' heirs, representatives,
successors and assigns. If Grantor is composed of more than one person, firm
and/or entity, their obligations hereunder shall be joint and several.
8. Financial Reporting. Grantor has no undisclosed or contingent
liabilities that are not reflected in the financial statements on file with
Lenders at the execution of this Agreement. Lenders shall have the right, at any
time, by its own auditors, accountants or other agents, to examine or audit any
of the books and records of Grantor, or Grantor's Collateral, all of which will
be made available upon request. Such accountants or other representatives of
Lenders will be permitted to make any verification of the existence of Grantor's
Collateral or accuracy of the records that Lenders deem necessary or proper. Any
reasonable expenses incurred by Lenders in making such examination, inspection,
verification or audit shall be paid by said Grantor promptly on demand and shall
be secured by the security interest granted hereby.
9. Termination Statement. Grantor agrees that, notwithstanding the
payment in full of all indebtedness secured hereby and whether or not there is
any outstanding obligation of Lenders to make future advances, Lenders shall not
be required to send Grantor a termination statement with respect to any
financing statement filed to perfect Lenders' security interest(s) in any of
Grantor's Collateral, unless and until Grantor shall have made written demand
therefor. Upon receipt of proper written demand, Lenders may at their option, in
lieu of sending a termination statement to Grantor, cause said termination
statement to be filed with the appropriate filing officer(s).
10. Protection of Collateral. Grantor will not permit any liens or
security interests other than those created by this Agreement and the Permitted
Encumbrances to attach to any of Grantor's Collateral, nor permit any of
Grantor's Collateral to be levied upon under any legal process, nor permit
anything to be done that may impair the security intended to be afforded by this
Agreement, nor permit any tangible Grantor's Collateral to become attached to or
commingled with other goods without the prior written consent of Lenders.
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<PAGE>
11. Special Agreements With Respect to Certain Tangible Collateral.
Each Grantor additionally agrees and warrants as follows:
(a) Grantor will not permit any of Grantor's Collateral to be
removed from the location specified herein, except for temporary
periods in the normal and customary use thereof, without the prior
written consent of Lenders, and will permit Lenders to inspect
Grantor's Collateral at any time.
(b) If any of Grantor's Collateral is equipment or goods of a
type normally used in more than one state (whether or not actually so
used), Grantor will contemporaneously herewith furnish Lenders a list
of the states wherein such equipment or goods are or will be used, and
hereafter will notify Lenders in writing (i) of any other states in
which such equipment or goods are so used, and (ii) of any change in
the location of Grantor's chief place of business.
(c) Grantor will not sell, exchange, lease or otherwise
dispose of any of Grantor's Collateral or any interest therein without
the prior written consent of Lenders; provided, however, so long is
there exists no default, Grantor may sell, exchange, lease or otherwise
dispose of (i) inventory in the ordinary course of business and (ii)
obsolete equipment.
(d) Grantor will keep Grantor's Collateral in good condition
and repair, ordinary wear and tear excepted, and will pay and discharge
all taxes, levies and other impositions levied thereon as well as the
cost of repairs to or maintenance of same, and will not permit anything
to be done that may impair the value of any of Grantor's Collateral in
any material respect. If Grantor fails to pay such sums, Lenders may do
so for Grantor's account and add the amount thereof to the other
amounts secured hereby.
(e) Until default in any of the terms hereof, or the terms of
any indebtedness secured hereby, Grantor shall be entitled to
possession of Grantor's Collateral and to use the same in any lawful
manner, provided that such use does not cause excessive wear and tear
to Grantor's Collateral, cause it to decline in value at an excessive
rate, or violate the terms of any policy of insurance thereon.
(f) Grantor will not allow any material portion of Grantor's
Collateral to be attached to real estate in such manner as to become a
fixture or a part of any real estate.
12. Special Agreements With Respect to Intangible and Certain Tangible
Collateral. Each Grantor additionally warrants and agrees as follows:
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<PAGE>
(a) So long as Grantor is not in default hereunder, Grantor
shall have the right to process and sell Grantor's inventory in the
regular course of business. Lenders' security interest hereunder shall
attach to all proceeds of all sales or other dispositions of Grantor's
Collateral. If at any time any such proceeds shall be represented by
any instruments, chattel paper or documents of title, then such
instruments, chattel paper or documents of title shall be promptly
delivered to Lenders and subject to the security interest granted
hereby. If at any time any of Grantor's inventory is represented by any
document of title, such document of title will be delivered promptly to
Lenders and subject to the security interest granted hereby.
(b) By the execution of this Agreement, Lenders shall not be
obligated to do or perform any of the acts or things provided in any
contracts covered hereby that are to be done or performed by Grantor,
but if there is a default by Grantor in the payment of any amount due
in respect of any indebtedness secured hereby, then Lenders may, at
their election, perform some or all of the obligations provided in said
contracts to be performed by Grantor, and if Lenders incur any
liability or expenses by reason thereof, the same shall be payable by
Grantor upon demand and shall also be secured by this Agreement.
(c) At any time after Grantor is in default hereunder or under
the Loan Agreement, Lenders shall have the right to notify the account
debtors obligated on any or all of Grantor's accounts receivable to
make payment thereof directly to Lenders, and to take control of all
proceeds of any such accounts receivable. Until such time as Lenders
elect to exercise such right by mailing to Grantor written notice
thereof, Grantor is authorized, as agent of the Lenders, to collect and
enforce said accounts receivable.
13. Power of Attorney. Grantor hereby constitutes the Lenders or their
designees, as Grantor's attorneys-in-fact with power, upon the occurrence and
during the continuance of an Event of Default, to endorse Grantor's name upon
any notes, acceptances, checks, drafts, money orders, or other evidences of
payment or Collateral that may come into either its or the Lenders' possession;
to sign the name of Grantor on any invoice or bill of lading relating to any of
the accounts receivable, drafts against customers, assignments and verifications
of accounts receivable and notices to customers; to send verifications of
accounts receivable; to notify the Post Office authorities to change the address
for delivery of mail addressed to Grantor to such address as the Lenders may
designate; to execute any of the documents referred to in Section 3(e) hereof in
order to perfect and/or maintain the security interests and liens granted herein
by Grantor to the Lenders; to do all other acts and things necessary to carry
out this Security Agreement. All acts of said attorney or designee are hereby
ratified and approved, and said attorney or designee shall not be liable for any
acts of commission or omission (other than acts of gross negligence or willful
misconduct), nor for any error of judgment or mistake of fact or law; this power
being coupled with an interest is irrevocable
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until all of the obligations secured hereby are paid in full and any and all
promissory notes executed in connection therewith are terminated and satisfied.
14. Governing Law and Amendments. This Agreement and all of the Loan
Documents shall be construed and enforced under the laws of the State of
Tennessee applicable to contracts to be wholly performed in such State. No
amendment or modification hereof shall be effective except in a writing executed
by each of the parties hereto.
15. Survival of Representations and Warranties. All representations and
warranties contained herein or made by or furnished on behalf of the Grantors in
connection herewith shall survive the execution and delivery of this Agreement.
16. Counterparts. This Agreement may be executed in any number of
counterparts and by different parties to this Agreement in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same Agreement.
17. Construction and Interpretation. Should any provision of this
Agreement require judicial interpretation, the parties hereto agree that the
court interpreting or construing the same shall not apply a presumption that the
terms hereof shall be more strictly construed against one party by reason of the
rule of construction that a document is to be more strictly construed against
the party that itself or through its agent prepared the same, it being agreed
that the Grantors, Lenders and their respective agents have participated in the
preparation hereof.
18. Restatement of Prior Agreements. NovaVision is party to a Security
Agreement dated December 18, 1996, by and between NovaVision and Sirrom.
Biopolymer is party to a Security Agreement dated December 18, 1996, by and
between Biopolymer and Sirrom. This Agreement shall amend and restate in full
each of the foregoing Security Agreements (the "Prior Security Agreements") and
the security interest granted herein is a continuation of the security interest
granted in the Prior Security Agreements, with no impairment of the attachment
or perfection of said security interest.
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<PAGE>
IN WITNESS WHEREOF, Grantors and Lenders have executed this Agreement,
or have caused this Agreement to be executed as of the date first above written.
Grantor:
AMERICAN CONSOLIDATED
LABORATORIES, INC.
By: /s/ Joseph A. Arena
Title: CEO
Address: 1648 E. North Market Drive
Raleigh, North Carolina 27609
NOVAVISION, INC.
By: /s/ Bart C. Gutekunst
Title: President
Address:
BIOPOLYMER CORPORATION
BY: /s/ Bart C. Gutekunst
Title: President
Address:
SALVATORI OPHTHALMIC
MANUFACTURING CORPORATION
By: /s/ Joseph A. Arena
Title: Vice President
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Address: 6416 Parklane Drive
Sarasota, Florida 34243
S-O NEBRASKA, INC.
By: /s/ Joseph A. Arena
Title: Vice President
Address:
WOLCON LABS, INC
By: /s/ Joseph A. Arena
Title: Vice President
Address:
CAROLINA CONTACT LENS, INC. ("CCL"),
By: /s/ Joseph A. Arena
Title: Vice President
Address: 1640 N. Market Drive
Raleigh, North Carolina 27609
AGENT:
SIRROM INVESTMENTS, INC.
By: /s/ Donald F. Barrickman
Title: Vice President
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<PAGE>
Schedule 3(a)(i)
Permitted Encumbrances
(a) liens of carriers, warehousemen, mechanics and materialmen imposed
by mandatory provisions of law pursuant to operation in the ordinary course of
business for sums not yet due and payable or which are being contested in good
faith by appropriate proceedings by Grantor;
(b) liens incurred in the ordinary course of business in connection
with worker's compensation, unemployment insurance or other forms of
governmental insurance or benefits or in respect of pledges or deposits to
secure bids, tenders, contracts, leases or statutory obligations or to secure
obligations on surety or appeal bonds;
(c) encumbrances consisting of zoning restrictions, easements or other
restrictions on the use of real property, none of which materially impairs the
use of such property by Grantor in the operation of its business, and none of
which is violated in any material respect by existing or proposed structures or
land uses;
(d) statutory liens of banks and other financial institutions arising
during the collection of instruments in the ordinary course of business;
(e) Note payable to the Oncologic Foundation, Inc. secured by a lien on
two lathes in the Sarasota facility;
(g) TDCF $550,00 secured debt, secured by receivables, inventory and
fixed assets. Priority of liens are pari passu with liens in favor of Sirrom.
<PAGE>
Schedule 3(a)(ii)
LOCATION OF COLLATERAL
1. ACL's collateral is located as follows:
(a) Manattee County, Florida
(b) Wake County, North Carolina
2. NovaVision's collateral is located in Wake County, North Carolina.
3. Biopolymer's collateral is located in Wake County, North Carolina
4. CCL's collateral is located as follows:
(a) Wake County, North Carolina
(b) Montogmery County, Pennsylvania (Philcon Laboratory, an
operating division of CCL
5. SOMC's collateral is located in Sarasota, Manattee County, Florida.
6. Wolcon presently has no collateral.
7. S-O presently has no collateral.
<PAGE>
TRADEMARK AND PATENT
SECURITY AGREEMENT
THIS TRADEMARK AND PATENT SECURITY AGREEMENT ("Agreement") is
dated as of the 7th day of May, 1997, by and between AMERICAN CONSOLIDATED
LABORATORIES, INC., a Florida corporation ("Grantor"), and SIRROM INVESTMENTS,
INC. ("Sirrom"), a Tennessee corporation, as agent pursuant to that certain
Intercreditor Agreement of even date herewith by and between TULLIS-DICKERSON
CAPITAL FOCUS, L.P. ("TDCF"), Sirrom and Grantor (the "Intercreditor Agreement")
("Sirrom" and "TDCF" are collectively referred to hereinafter as "Lenders").
WITNESSETH:
WHEREAS, Grantor is liable either as borrower or as guarantor on each
of the obligations evidenced by (1) that certain Loan Agreement and Secured
Promissory Note dated December 18, 1996, executed by NovaVision, Inc.
("NovaVision"), payable to the order of Sirrom in the original principal amount
of $520,000; and (2) that certain Loan Agreement and Amended and Restated
Promissory Note of even date herewith, executed by Grantor payable to the order
of TDCF in the original principal amount of $550,000; and (3) a loan to be made
by Sirrom (the "Sirrom Loan") to Grantor in the original principal amount of
$1,575,000 pursuant to that certain Loan Agreement and Secured Promissory Note
of even date herewith (all of the foregoing loan agreements, notes and all other
documents executed in connection with said transactions are collectively
referred to as the "Loan Documents", all of the obligations evidenced thereby
are collectively referred to as the "Loans", and "Grantor" and "NovaVision" are
collectively referred to as "Borrowers"); and
WHEREAS, Grantor owns certain Trademarks and Patents listed on Schedule
A hereto; and
WHEREAS, Lenders desire to obtain from Grantor, and Grantor desires to
mortgage, pledge and grant to, Sirrom, as agent pursuant to the Intercreditor
Agreement, for the benefit of Lenders, a security interest in all of its right,
title and interest in, to and under the Collateral, including the property
listed on the attached Schedule A, together with any renewal or extension
thereof, and all Proceeds thereof, to secure the payment of the Obligations;
WHEREAS, it is a condition precedent to Sirrom making the Sirrom Loan
to Grantor, that Grantor execute this Agreement;
<PAGE>
AGREEMENT:
NOW, THEREFORE, in consideration of the premises and to induce Sirrom
to enter into and make the Sirrom Loan to Grantor, Grantor hereby agrees with
Lenders, as follows:
1. Defined Terms. Unless otherwise defined herein, terms which are
defined in the Loan Documents and used herein are so used as so defined, and the
following terms shall have the following meanings:
"Collateral" has the meaning assigned to it in Section 2 of this
Security Agreement.
"Obligations" means obligations secured hereby and shall include (a)
the Loans, and any renewals or extensions thereof, (b) the full and prompt
payment and performance of any and all other indebtednesses and other
obligations of Borrowers to Lenders, direct or contingent (including but not
limited to obligations incurred as indorser, guarantor or surety), however
evidenced or denominated, and however and whenever incurred, including but not
limited to indebtednesses incurred pursuant to any present or future commitment
of Lenders to Borrowers, and (c) all future advances made by Lenders for taxes,
levies, insurance and preservation of the Collateral and all attorney's fees,
court costs and expenses of whatever kind incident to the collection of any of
said indebtedness or other obligations and the enforcement and protection of the
security interest created hereby.
"Patents" means all types of exclusionary or protective rights granted
(or applications therefor) for inventions in any country of the world
(including, without limitation, letters patent, plant patents, utility models,
breeders' right certificates, inventor's certificates and the like), and all
reissues and extensions thereof and all divisions, continuations and
continuations-in-part thereof, including, without limitation, all such rights
referred to in Schedule A hereto.
"Patent License" means all agreements material to the operation of
Grantor's businesses, whether written or oral, providing for the grant by or to
the Grantor of any right to manufacture, use or sell any invention covered by a
Patent, including, without limitation, any thereof referred to in Schedule A
hereto.
"Proceeds" means "proceeds," as such term is defined in Section
9-306(1) of the UCC and, to the extent not included in such definition, shall
include, without limitation, (a) any and all proceeds of any insurance,
indemnity, warranty, guaranty or letter of credit payable to the Grantor, from
time to time with respect to any of the Collateral, (b) all payments (in any
form whatsoever) paid or payable to the Grantor from time to time in connection
with any taking of all or any part of the Collateral by any governmental
authority or any Person acting under
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color of governmental authority), (c) all judgments in favor of the Grantor in
respect of the Collateral and (d) all other amounts from time to time paid or
payable or received or receivable under or in connection with any of the
Collateral.
"Security Agreement" means this Trademark and Patent Security
Agreement, as amended, supplemented or otherwise modified from time to time.
"Trademarks" means (a) all trademarks, trade names, corporate names,
company names, business names, fictitious business names, trade styles, service
marks, logos and other source of business identifiers used in any country in the
world, whether registered or unregistered, and the goodwill associated
therewith, now existing and material to the businesses of the Grantor or
hereafter acquired, and (b) all registrations, recordings and renewals thereof,
and all applications in connection therewith, issued by or filed in a national,
state or local governmental authority of any country, including, without
limitation, all such rights referred to in Schedule A hereto.
"Trademark License" means any agreement, material to the businesses of
the Grantor, written or oral, providing for the grant by or to the Grantor of
any right to use any Trademark, including, without limitation, any thereof
referred to in Schedule A hereto.
"UCC" means the Uniform Commercial Code as from time to time in effect
in the State of Tennessee.
2. Grant of Security Interest. As collateral security for the prompt
and complete payment and performance when due (whether at the stated maturity,
by acceleration or otherwise) of the Obligations, Grantor hereby assigns and
grants to Sirrom, as agent for the benefit of Lenders, a security interest in
all of Grantor's right, title and interest in and to the following property now
owned or at any time hereafter acquired by Grantor or in which Grantor now has,
or at any time in the future may acquire, any right, title or interest
(collectively, the "Collateral"):
(i) all Trademarks;
(ii) all Trademark Licenses;
(iii) all Patents;
(iv) all Patent Licenses; and
(v) to the extent not otherwise included, all Proceeds and products of
any and all of the foregoing;
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that are material to the business of Grantor, and whether or not included in
Schedule A.
3. Representations and Warranties Concerning Trademarks. Grantor
represents and warrants that Schedule A hereto includes all of Grantor's
registered Trademarks and Trademark Licenses and all of the Patents and Patent
Licenses owned by Grantor in its own name or as to which Grantor has any
colorable claim of ownership that are material to the businesses of Grantor as
of the date hereof. To the best of Grantor's knowledge, each Trademark and
Patent is valid, subsisting, unexpired, enforceable and has not been abandoned.
Except as set forth in Schedule A, none of the Trademarks or Patents is the
subject of any licensing or franchise agreement. All licenses of the Trademarks
and Patents are in force and, to the best knowledge of the Grantor, not in
default. No holding, decision or judgment has been rendered by any governmental
authority which would limit, cancel or question the validity of any material
Trademark or Patent. No action or proceeding is pending (i) seeking to limit,
cancel or question the validity of any Trademark or Patent or the Grantor's
ownership thereof or (ii) which, if adversely determined, would reasonably be
likely to have a material adverse effect on the value of any Trademark or
Patent.
4. Covenants. Grantor covenants and agrees with Lenders that, from and
after the date of this Security Agreement until the Obligations are paid in
full:
(a) Further Documentation. From time to time, upon the written
request of Sirrom, and at the sole expense of Grantor, the Grantor will
promptly and duly execute and deliver such further instruments and
documents and take such further action as Sirrom may reasonably request
for the purpose of obtaining or preserving the full benefits of this
Security Agreement and of the rights and powers herein granted,
including, without limitation, the filing of any financing or
continuation statements under the UCC in effect in any jurisdiction
with respect to the liens created hereby. Grantor also hereby
authorizes Sirrom to file any such financing or continuation statement
without the signature of Grantor to the extent permitted by applicable
law. A carbon, photographic or other reproduction of this Security
Agreement shall be sufficient as a financing statement for filing in
any jurisdiction.
(b) Limitation on Lien on Collateral. Grantor will not create,
incur or permit to exist, will take all commercially reasonable actions
to defend the Collateral against, and will take such other commercially
reasonable action as is necessary to remove, any lien or claim on or to
the Collateral, other than the liens created hereby, and other than as
permitted pursuant to the Loan Documents, and will take all
commercially reasonable actions to defend the right, title and interest
of Lenders in and to any of the Collateral against the claims and
demands of all persons whomsoever.
(c) Limitations on Dispositions of Collateral. Grantor will
not sell, transfer or otherwise dispose of any of the Collateral, or
attempt, offer or contract to do so
4
<PAGE>
except as permitted in the Loan Documents.
(d) Notices. Grantor will advise Lenders promptly, in
reasonable detail, at their addresses set forth in the Loan Documents,
(i) of any lien (other than liens created hereby or permitted under the
Loan Documents) on, or claim asserted against, Trademarks or Patents
and (ii) of the occurrence of any other event which could reasonably be
expected to have a material adverse effect on the aggregate value of
the Collateral or on the liens created hereunder.
(e) Patents and Trademarks..
(i) Grantor (either itself or through licensees)
will, except with respect to any Trademark that the Grantor
shall reasonably determine is of immaterial economic value to
it or otherwise reasonably determines not to do so, (A)
continue to use each Trademark on each and every trademark
class of goods applicable to its current line as reflected in
its current catalogs, brochures and price lists in order to
maintain such Trademark in full force free from any claim of
abandonment for non-use, (B) maintain as in the past the
quality of products and services offered under such Trademark,
(C) use reasonable efforts to employ such Trademark with the
appropriate notice of registration, (D) not adopt or use any
mark which is confusingly similar or a colorable imitation of
such Trademark unless within 30 days after such use or
adoption Sirrom for the benefit of Lenders, shall obtain a
perfected security interest in such mark pursuant to this
Security Agreement, and (E) not (and not permit any licensee
or sublicensee thereof to) do any act or knowingly omit to do
any act whereby any Trademark may become invalidated.
(ii) Grantor will not, except with respect to any
Patent that Grantor shall reasonably determine is of
immaterial economic value to it or otherwise reasonably
determine so to do, do any act, or omit to do any act, whereby
any Patent may become abandoned or dedicated.
(iii) Grantor will promptly notify Lenders if it
knows, or has reason to know, that any application relating to
any Patent or any Trademark may become abandoned or dedicated,
or of any adverse determination or material development
(including, without limitation, the institution of, or any
such determination or development in, any proceeding in the
United States Patent and Trademark office or any court or
tribunal in any country) regarding the Grantor's ownership of
any Patent or Trademark or its right to register the same or
to keep and maintain the same.
(iv) Whenever a Grantor, either by itself or through
any agent,
5
<PAGE>
employee, licensee or designee, shall file an application for
any Patent or for the registration of any Trademark with the
United States Patent and Trademark Office or any similar
office or agency in any other country or any political
subdivision thereof, the Grantor shall report such filing to
Lenders within five business days after the last day of the
fiscal quarter in which such filing occurs. Upon request of
Sirrom, the Grantor shall execute and deliver any and all
reasonably necessary agreements, instruments, documents, and
papers as Sirrom may request to evidence Lenders' security
interest in any newly filed Patent or Trademark and the
goodwill and general intangibles of the Grantor relating
thereto or represented thereby, and Grantor hereby constitutes
Sirrom its attorney-in-fact to execute and file all such
writings for the foregoing purposes, all acts of such attorney
being hereby ratified and confirmed; such power being coupled
with an interest is irrevocable until the Obligations are paid
in full.
(v) Grantor, except with respect to any Patent or
Trademark the Grantor shall reasonably determine is of
immaterial economic value to it or it otherwise reasonably
determines not to so do, will take all reasonable and
necessary steps, including, without limitation, in any
proceedings before any tribunal, office or agency in any other
country or any political subdivision thereof, to maintain and
pursue each application (and to obtain the relevant
registration or Patent) and to maintain each Patent and each
registration of Trademarks, including, without limitation,
filing of applications for renewal, affidavits of use and
affidavits of incontestability when appropriate.
(vi) In the event Grantor knows or has reason to know
that any Patent or Trademark included in the Collateral is
infringed, misappropriated or diluted by a third party, the
Grantor shall promptly notify Lenders after it learns thereof
and shall, unless the Grantor shall reasonably determine that
such Patent or Trademark is of immaterial economic value to
the Grantor which determination the Grantor shall promptly
report to Lenders, promptly sue for infringement,
misappropriation or dilution, or take such other actions as
the Grantor shall reasonably deem appropriate under the
circumstances to protect such Patent or Trademark.
5. Appointment as Attorney-in-Fact.
(a) Powers. Grantor hereby irrevocably constitutes and
appoints Sirrom and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full
irrevocable power and authority in the place and stead of the Grantor
and in the name of the Grantor or in its own name, from time to time
after the occurrence, and during the continuation of, an Event of
Default in Lenders' discretion, for the purpose of carrying out the
terms of this Security Agreement, to take any and all appropriate
action and to execute any and
6
<PAGE>
all documents and instruments which may be necessary or desirable to
accomplish the purposes of this Security Agreement, and, without
limiting the generality of the foregoing, the Grantor hereby gives
Sirrom the power and right, on behalf of the Grantor without notice to
or assent by the Grantor, to do the following:
(i) at any time when any Event of Default shall have
occurred and is continuing, in the name of the Grantor or its
own name, or otherwise, to take possession of and endorse and
collect any checks, drafts, notes, acceptances or other
instruments for the payment of moneys due under, or with
respect to, any Collateral and to file any claim or to take
any other action or proceeding in any court of law or equity
or otherwise deemed appropriate by Lenders for the purpose of
collecting any and all such moneys due with respect to such
Collateral whenever payable;
(ii) to pay or discharge taxes and liens levied or
placed on or threatened against the Collateral, to effect any
repairs or any insurance called for by the terms of this
Security Agreement and to pay all or part of the premiums
therefor and the costs thereof; and
(iii) (a) to direct any party liable for any payment
under any of the Collateral to make payment of any and all
monies due or to become due thereunder directly to Sirrom or
as Sirrom shall direct, (b) to ask or demand for, collect,
receive payment of and receipt for, any and all moneys, claims
and other amounts due or to become due at any time in respect
of or arising out of any Collateral, (c) to sign and endorse
any invoices, freight or express bills, bills of lading,
storage or warehouse receipts, drafts against debtors,
assignments, verifications, notices and other documents in
connection with any of the Collateral, (d) to commence and
prosecute any suits, actions or proceedings at law or in
equity in any court of competent jurisdiction to collect the
Collateral or any portion thereof and to enforce any other
right in respect of any Collateral, (e) to defend any suit,
action or proceeding brought against the Grantor with respect
to any Collateral, (f) to settle, compromise or adjust any
suit, action or proceeding described in the preceding clause
and, in connection therewith, to give such discharges or
releases as Sirrom may deem appropriate, (g) to assign any
Trademark (along with goodwill of the business to which such
Trademark pertains), throughout the world for such term or
terms, on such conditions, and in such manner, as Lenders
shall in their sole discretion determine, and (h) generally,
to sell, transfer, pledge and make any agreement with respect
to or otherwise deal with any of the Collateral as fully and
completely as though Lenders were the absolute owner thereof
for all purposes, and to do, at Lenders' option and the
Grantor's expense, at any time, or from time to time, all acts
and things which Lenders deem necessary to protect, preserve
or realize upon the
7
<PAGE>
Collateral and the liens of Lenders thereon and to effect the
intent of this Security Agreement, all as fully and
effectively as the Grantor might do.
Grantor hereby ratifies all that said attorneys shall lawfully
do or cause to be done by virtue hereof. This power of
attorney is a power coupled with an interest and shall be
irrevocable.
(b) Other Powers. Grantor also authorizes sirrom, at any time
and from time to time, to execute, in connection with the sale provided for in
Section 8 hereof, any endorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral.
(c) No Duty on the Part of Lenders. The powers conferred on
Sirrom hereunder are solely to protect the interests of Lenders in the
Collateral and shall not impose any duty upon Sirrom to exercise any such
powers. Sirrom shall be accountable only for amounts that it actually receives
as a result of the exercise of such powers, and neither it nor any of its
partners, officers, directors, employees or agents shall be responsible to the
Grantor for any act or failure to act hereunder, except for their own gross
negligence or willful misconduct or failure to comply with mandatory provisions
of applicable law.
6. Performance by Lenders of Grantor's Obligations. If Grantor fails to
perform or comply with any of its agreements contained herein and Lenders, as
provided for by the terms of this Security Agreement, shall themselves perform
or comply, or otherwise cause performance or compliance, with such agreement,
the expenses of Lenders incurred in connection with such performance or
compliance, together with interest thereon at the highest default rate provided
in the Loan Documents, shall be payable by the Grantor to Lenders on demand and
shall constitute Obligations secured hereby.
7. Proceeds. It is agreed that if an Event of Default shall occur and
be continuing (a) all Proceeds received by Grantor consisting of cash, checks
and other cash equivalents shall be held by the Grantor in trust for Lenders,
segregated from other funds of the Grantor, and shall, forthwith upon receipt by
the Grantor, be turned over to Sirrom in the exact form received by Grantor
(duly endorsed by Grantor to Sirrom, if required), and (b) any and all such
Proceeds received by Sirrom (whether from Grantor or otherwise) shall promptly
be applied by Sirrom against, the Obligations (whether matured or unmatured),
such application to be in such order as Sirrom shall elect. Any balance of such
Proceeds remaining after the Obligations shall have been paid in full shall be
paid over to Grantor or to whomsoever may be lawfully entitled to receive the
same.
8. Remedies. If an Event of Default shall occur and be continuing,
Lenders, may exercise, in addition to all other rights and remedies granted to
it in this Security Agreement and in any other instrument or agreement securing,
evidencing or relating to the Obligations, all
8
<PAGE>
rights and remedies of a secured party under the UCC. Without limiting the
generality of the foregoing, Lenders without demand of performance or other
demand, presentment, protest, advertisement or notice of any kind (except any
notice required by law referred to below) to or upon Grantor or any other person
(all and each of which demands, defenses, advertisements and notices are hereby
waived), may in such circumstances forthwith collect, receive, appropriate and
realize upon the Collateral, or any part thereof, and/or may forthwith sell,
lease, assign, give option or options to purchase, or otherwise dispose of and
deliver the Collateral or any part thereof (or, contract to do any of the
foregoing), in one or more parcels at public or private sale or sales, at any
office of either Lender or elsewhere upon such terms and conditions as it may
deem advisable and at such prices as it may deem best, for cash or on credit or
on future delivery without assumption of any credit risk. Lenders shall have the
right upon any such public sale or sales, and, to the extent permitted by law,
to purchase the whole or any part of the Collateral so sold, free of any right
or equity of redemption in the Grantor, which right or equity is hereby waived
or released. Grantor further agrees, at Lenders' request, to assemble the
Collateral and make it available to Lenders at places which Lenders shall
reasonably select, whether at the Grantor's premises or elsewhere. Lenders shall
apply the net proceeds of any such collection, recovery, receipt, appropriation,
realization or sale, after deducting all reasonable costs and expenses of every
kind incurred therein or incidental to the care or safekeeping of any of the
Collateral or in any way relating to the Collateral or the rights of Lenders
hereunder, including, without limitation, reasonable attorneys' fees and
disbursements, to the payment in whole or in part of the Obligations, in such
order as Lenders may elect, and only after such application and after the
payment by Lenders of any other amount required by any provision of law,
including, without limitation, Section 9-504(l)(c) of the UCC, need Lenders
account for the surplus, if any, to the Grantor. To the extent permitted by
applicable law, Grantor waives all claims, damages and demands it may acquire
against Lenders arising out of the exercise by them of any rights hereunder. If
any notice of a proposed sale or other disposition of Collateral shall be
required by law, such notice shall be deemed reasonable and proper if given at
least 10 days before such sale or other disposition. Grantor shall remain liable
for any deficiency if the proceeds of any sale or other disposition of the
Collateral are insufficient to pay the Obligations and the fees and
disbursements of any attorneys employed by Lenders to collect such deficiency.
9. Limitation on Duties Regarding Preservation of Collateral. Sirroms's
sole duty with respect to the custody, safekeeping and physical preservation of
the Collateral in its possession, under Section 9-207 of the UCC or otherwise,
shall be to deal with it in the same manner as Sirrom would deal with similar
property for its own account. Neither Lenders nor any of their partners,
directors, officers, employees or agents shall be liable for failure to demand,
collect or realize upon all or any part of the Collateral or for any delay in
doing so or shall be under any obligation to sell or otherwise dispose of any
Collateral upon the request of the Grantor or otherwise.
9
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10. Powers Coupled with an Interest. All authorizations and agencies
herein Contained with respect to the Collateral are irrevocable and powers
coupled with an interest.
11. Severability. Any provision of this Security Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
12. Paragraph Headings. The paragraph headings used in this Security
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
13. No Waiver; Cumulative Remedies. Lenders shall not by any act
(except by a written instrument pursuant to Section 14 hereof), delay,
indulgence, omission or otherwise be deemed to have waived any right or remedy
hereunder or to have acquiesced in any default or Event of Default or in any
breach of any of the terms and conditions hereof. No failure to exercise, nor
any delay in exercising, on the part of Lenders, any right, power or privilege
hereunder shall operate as a waiver thereof. No single or partial exercise of
any right, power or privilege hereunder shall preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. A
waiver by Lenders of any right or remedy hereunder on any occasion shall not be
construed as a bar to any right or remedy which Lenders would otherwise have on
any future occasion. The rights and remedies herein provided are cumulative, may
be exercised singly or concurrently and are not exclusive of any rights or
remedies provided by law.
14. Waivers and Amendments; Successors and Assigns. None of the terms
or provisions of this Security Agreement may be waived, amended, supplemented or
otherwise modified except by a written instrument executed by the Grantor and
Sirrom, as agent for Lenders, provided that any provision of this Security
Agreement may be waived by in a written letter or agreement executed by Sirrom
as agent for Lenders or by telex or facsimile transmission from Sirrom as agent
for Lenders. This Security Agreement shall be binding upon the successors and
assigns of the Grantor and shall inure to the benefit of Lenders and their
successors and assigns.
15. Notices. All notices, requests and demands to or upon the Grantor
or Lenders to be effective shall be in writing or by telecopy or telex and
unless otherwise expressly provided herein, shall be deemed to have been duly
given or made when delivered by hand, or, in the case of mail, three days after
deposit in the postal system, first class postage prepaid, or, in the case of
telecopy notice, confirmation of receipt received, or, in the case of telex
notice, when sent, answerback received, addressed to a party at the address
provided for such party in the Loan Documents.
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16. Governing Law. This Security Agreement shall be governed by, and
construed and interpreted in accordance with, the laws of the State of Tennessee
applicable to contracts to be wholly performed in such State.
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed and delivered as of the date first above written.
GRANTOR:
AMERICAN CONSOLIDATED LABORATORIES, INC.,
a Florida corporation
By: Joseph A. Arena
Title: CEO
AGENT:
SIRROM INVESTMENTS, INC.,
a Tennessee corporation
By: /s/ Donald F. Barrickman
Title: Vice President
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SCHEDULE A
LIST OF PATENTS
NONE
LIST OF TRADEMARKS
ALLVUE
BiVue
ConstaVu
Sof-form
Accuform
Comfort Control
The Tailors of Contact Lenses
LIST OF LICENSE AGREEMENTS
David A Volk - The Company has a license agreement to manufacture the ALLVUE
soft contact lens and an aspheric RGP lens under the Comfort Control trade name.
Kontur Kontact Lens Co., Inc.- The Company has a license agreement to (1) the
process/formula to produce methifilcon A; (2) the design for a soft toric lens,
and (3) the design for the Sof-form 55 spherical lens.
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<PAGE>
STOCK PLEDGE AGREEMENT
This Stock Pledge Agreement ("Agreement") is entered into as of the 7th
day of May, 1997, by and between AMERICAN CONSOLIDATED LABORATORIES, INC.
("ACL"), a North Carolina corporation, and SIRROM INVESTMENTS, INC. ("Sirrom"),
a Tennessee corporation, as agent pursuant to that certain Intercreditor
Agreement of even date herewith by and between TULLIS-DICKERSON CAPITAL FOCUS,
L.P. ("TDCF"), Sirrom and Grantors (the "Intercreditor Agreement") ("Sirrom" and
"TDCF" are collectively referred to hereinafter as "Lenders").
WHEREAS, ACL is liable either as borrower or as guarantor on each of
the obligations evidenced by (1) that certain Loan Agreement and Secured
Promissory Note dated December 18, 1996, payable to the order of Sirrom in the
original principal amount of $520,000; and (2) that certain Loan Agreement and
Amended and Restated Promissory Note of even date herewith payable to the order
of TDCF in the original principal amount of $550,000; and (3) a loan to be made
by Sirrom (the "Sirrom Loan") in the original principal amount of $1,575,000
pursuant to that certain Loan Agreement and Secured Promissory Note of even date
herewith (all of the foregoing loan agreements, notes and all other documents
executed in connection with said transactions are collectively referred to as
the "Loan Documents" and all of the obligations evidenced thereby are
collectively referred to as the "Loans"); and
WHEREAS, one condition to Sirrom's agreement to make the Sirrom Loan is
that Lenders must be provided a first priority perfected pledge of certain stock
owned by ACL;
NOW, THEREFORE, as an inducement to cause Sirrom to make the Sirrom
Loan, and for other valuable consideration, the receipt and sufficiency of which
are acknowledged, it is agreed as follows:
1. Definition of Secured Indebtedness. As used herein, "Secured
Indebtedness" shall mean the obligations of ACL under this Agreement and all
present and future debts and other obligations of ACL to Lenders, whether
arising by contract, tort, guaranty, overdraft, or otherwise; whether or not the
advances or events creating such debts or other obligations are presently
foreseen; whether such obligations were originally payable to Lenders or are
acquired by Lenders from another person or entity; and regardless of the class
of the debts or other obligations, be they otherwise secured or unsecured.
Without limiting the foregoing, the "Secured Indebtedness" specifically includes
the Loans, as evidenced by the Loan Documents, and all modifications, extensions
and renewals thereof.
2. Pledge of Stock. To secure the payment of the Secured Indebtedness,
ACL
<PAGE>
hereby pledges to Sirrom, as agent pursuant to the Intercreditor Agreement, for
the benefit of Lenders, and grants to Sirrom, as agent pursuant to the
Intercreditor Agreement, for the benefit of Lenders, a security interest in the
shares of the common stock of the corporations listed in Exhibit A hereto (each
an "Issuer"), as evidenced by the certificates described in Exhibit A attached
hereto, together with all dividends, distributions and other rights of payment
arising therefrom or with respect thereto and proceeds thereof (collectively the
"Pledged Stock").
3. Perfection. Lenders' security interest in the Pledged Stock shall be
perfected by Sirrom's possession of the certificates evidencing the same. Sirrom
shall also be provided with stock powers covering the Pledged Stock executed in
blank by ACL.
4. Warranties. ACL warrants to Lenders that the following warranties
are presently true and covenants that they shall remain true at and "as of" all
times hereafter until Sirrom releases the Pledged Stock:
(a) Title. ACL is the sole legal and equitable owner of the
Pledged Stock, and ACL's absolute title thereto is not the subject of any claim
or challenge threatened or asserted by any third party.
(b) Valid Stock. The Pledged Stock has been validly issued and
is fully paid for and non-assessable.
(c) No Liens or Restrictions. The Pledged Stock is not and
will not be subject to any security interest, lien, restriction of transfer,
"buy-sell" agreement, voting agreement, redemption agreement, option or other
agreements, except for those restrictions and agreements, if any, that are noted
on the stock certificates, and Permitted Liens (as defined in the Loan
Agreement).
(d) Valid Lien. This Agreement provides Lenders with a valid
pledge of, and a valid first priority security interest in, the Pledged Stock.
(e) Percentage of Ownership of Issuer. The Pledged Stock
represents the percentage of the total outstanding shares of each Issuer's stock
as set forth in Exhibit A hereto.
(f) No Other Classes of Stock. Each Issuer has only one class
of stock outstanding.
(g) No Options. No Issuer has any options, warrants or
convertible debt instruments outstanding that could require the issuance of
additional stock.
5. Covenants. ACL covenants with Lenders as follows:
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<PAGE>
(a) Additional Stock. ACL shall receive any stock issued or
delivered as a result of ownership of the Pledged Stock as Lenders' agent and
shall deliver the same immediately to Sirrom upon receipt. Such additional stock
shall become part of the Pledged Stock hereunder upon issuance.
(b) No Further Encumbrance. ACL shall not sell or transfer any
or all of the Pledged Stock or grant or suffer the attachment of any Encumbrance
to any or all of the Pledged Stock.
(c) Notices. If Lenders so request, ACL shall forward promptly
after ACL's receipt to Lenders, copies of all proxy solicitations, meeting
notices, and other writings pertaining to the Pledged Stock.
6. Record Ownership. Lenders may, at any time and in its sole
discretion following the occurrence and during the continuation of a default
under this Agreement, cause any or all of the Pledged Stock to be transferred of
record into Lenders' name or into the name of a nominee. ACL hereby appoints
Sirrom as ACL's attorney-in-fact for the purpose of so transferring record
ownership of the Pledged Stock. The mere transfer of record ownership shall be
for preservation of Lenders' rights only and shall not be considered a sale or
disposition of the Pledged Stock or an acquisition thereof in full or partial
satisfaction of the Secured Indebtedness, unless Lenders specifically so provide
in writing and Lenders shall, notwithstanding such a transfer of record, allow
ACL the benefit of provisions herein regarding distributions and voting rights.
7. Voting Rights. As long as there is no default under this Agreement,
ACL shall be entitled to exercise all voting rights arising from ownership of
the Pledged Stock.
8. Right to Distributions. As long as there is no default under this
Agreement, ACL shall have the exclusive right to receive all distributions of
cash made with respect to the Pledged Stock.
9. Return of Pledged Stock. The Pledged Stock shall be returned to ACL
when (i) the Secured Indebtedness has been paid in full and (ii) Lenders (or
either of them) have no further obligation to extend credit to be included in
the Secured Indebtedness. The return of the Pledged Stock shall be without
recourse against Lenders and shall be effected without any representation or
warranty on Lenders' part, notwithstanding any provision of the Uniform
Commercial Code or other law that might otherwise imply or require
representations or warranties as to title or other matters.
10. Recitals. ACL warrants and agrees that the recitals set forth at
the beginning of this Agreement are true.
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<PAGE>
11. No Burdensome Agreements. ACL warrants that ACL is not a party to
any contract or agreement and is not subject to any contingent liability that
does or may impair ACL's ability to perform under the terms of this Agreement.
ACL further warrants that the execution and performance of this Agreement will
not cause a default, acceleration or other event under any other contract or
agreement to which ACL or any property of ACL is subject, and will not result in
the imposition of any charge, penalty, lien or other encumbrance against any of
ACL's property except in favor of Lenders.
12. Legal and Binding Agreement. ACL warrants that the execution and
performance of this Agreement will not violate any judicial or administrative
order or governmental law or regulation, and that this Agreement is valid,
binding and enforceable in every respect according to its terms.
13. No Consent Required. ACL warrants that ACL's execution, delivery
and performance of this Agreement do not require the consent of or the giving of
notice to any third party including, but not limited to, any other lender,
governmental body or regulatory authority.
14. No Default. ACL warrants that, as of the execution of this
Agreement, no default exists hereunder and no condition exists which, with the
giving of notice, the passing of time, or both, would constitute such a default.
15. Default Defined. The occurrence of an Event of Default under the
Loan Documents shall constitute a default under this Agreement.
16. Remedies Upon Default. Upon the occurrence and during the
continuation of a default hereunder, Lenders may exercise any of the following
remedies:
(a) Power to Vote Pledged Stock. If Lenders so elect in
writing, Lenders shall have the exclusive right to exercise voting powers and
give consents, waivers, ratifications and notices relating to the Pledged Stock.
ACL hereby irrevocably appoints Sirrom as ACL's proxy and attorney-in-fact to so
act with respect to the Pledged Stock. Lenders may exercise their power to vote
the Pledged Stock pursuant to the power granted in this subparagraph or pursuant
to the Irrevocable Proxy executed in favor of Lenders in connection with the
execution of this Agreement. Issuer and Issuer's secretary and transfer agent
(if any) are hereby irrevocably authorized and directed to honor the Irrevocable
Proxy in favor of Lenders without any inquiry whatsoever on their part, and ACL
hereby agrees that Issuer, Issuer's secretary and transfer agent (if any) and
all employees and agents of both of them shall not be liable to ACL for honoring
the Irrevocable Proxy upon Lenders' demand. Lenders' exercise of any rights
under the Irrevocable Proxy pending disposition of the Pledged Stock at a
private or public sale shall not be considered a disposition of any or all of
the Pledged Stock and shall not be considered an acceptance of the Pledged Stock
in satisfaction of any or all of the Secured Indebtedness.
-4-
<PAGE>
(b) Record Ownership. Lenders may cause any or all of the
Pledged Stock to be transferred of record into Lenders' name. ACL hereby
appoints Sirrom as ACL's attorney-in-fact for the purpose of so transferring
record ownership of the Pledged Stock. The mere transfer of record ownership
shall be for preservation of Lenders' rights only and shall not be considered a
sale or disposition of the Pledged Stock or an acquisition thereof in full or
partial satisfaction of the Secured Indebtedness, unless Lenders specifically so
provide in writing.
(c) Receipt of Distributions. Lenders shall have the exclusive
right to receive all distributions made with respect to the Pledged Stock.
Lenders shall apply cash distributions to payment of the Secured Indebtedness
and hold all other types of property distributed for sale pursuant to the
Uniform Commercial Code as adopted in Tennessee as proceeds of the Pledged
Stock. Lenders' right to receive such distributions shall be further evidenced
by the Irrevocable Proxy executed in connection with this Agreement.
(d) Sale of Pledged Stock. Lenders may sell the Pledged Stock
or any part thereof at public or private sale or at any appropriate broker's
board or securities exchange, for cash, on credit, or for future delivery.
(i) If notice of the disposition is required by law to be
given, such notice shall be sufficient and commercially
reasonable if given at least five (5) days prior to the
proposed disposition.
(ii) Lenders may purchase any or all of the Pledged Stock sold
at any public sale or, to the extent permitted by law, at any
private sale.
(iii) ACL acknowledges that the Pledged Stock has not been
registered pursuant to applicable securities laws and that
compliance with applicable laws upon any disposition by
Lenders may bring a lower price than would otherwise be
obtained for the Pledged Stock. Without limiting the authority
of Lenders to take all other measures deemed necessary by
Lenders to comply with any applicable securities laws, ACL
agrees that, or prior to any sale of the Pledged Stock,
Lenders may, in their sole discretion, restrict prospective
purchasers to persons who will represent that they will
purchase for their own account for investment and not with
view to the distribution or sale of any of the Pledged Stock
and who will agree that the Pledged Stock so purchased may
bear an appropriate restrictive legend.
(iv) At or prior to any sale, Lenders may, in their sole
discretion, require that prospective purchasers establish, to
Lenders' satisfaction, that they are investors of sufficient
financial means and/or business acumen to qualify as
"accredited investors" or that they meet any other appropriate
standard of investor suitability under federal and/or state
securities laws.
-5-
<PAGE>
(v) At any sale, Lenders shall have the right to transfer to
the purchaser thereof the Pledged Stock sold. Sirrom is hereby
appointed ACL's attorney-in-fact for the purpose of supplying
any endorsements necessary to effect such transfer. Each
purchaser at any such sale (including, without limitation,
Lenders) shall hold the property sold free from any claim or
right of any kind, including any equity or rights of
redemption of ACL. ACL hereby specifically waives all rights
of redemption, stay or appraisal which ACL has or may have
under any rule of law or statute now existing or hereafter
adopted.
(vi) At any sale, the Pledged Stock may be sold in one lot as
an entirety or in separate portions, as Lenders may determine.
(vii) If any of the Issuer's securities are then registered
for public sale, then, prior to any sale hereunder, Lenders
may, but shall not be obligated to, seek to have all or part
of the Pledged Stock registered for public distribution
pursuant to any applicable state or federal law or seek
assurances from any state or federal authority that the
intended disposition of Pledged Stock will qualify under an
exception to laws that otherwise require registration for the
sale of stock.
(viii) In addition to other costs of sale, all expenses
incurred by Lenders in addressing securities law matters
relating to the sale of the Pledged Stock, including, but not
limited to, reasonable attorney's fees, shall become part of
the Secured Indebtedness.
(ix) Lenders shall not be obligated to make any sale pursuant
to any notice given and may, without notice or publication,
adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and
place fixed for the sale, and such sale may be resumed at any
time and place to which the same may be so adjourned.
(x) In the case of any sale of all or any part of the Pledged
Stock on credit or for future delivery, payments made by the
purchaser shall reduce the outstanding balance of the Secured
Indebtedness as payments are received, and the outstanding
principal balance of the Secured Indebtedness shall continue
to accrue interest over the time that such payments are made,
until the principal and accrued interest constituting the
Secured Indebtedness have been paid in full. Lenders shall not
incur any liability in case of the failure of such purchaser
to completely pay for the Pledged Stock so sold and, in the
case of any such failure, the Pledged Stock may again be sold
pursuant to the provisions hereof.
17. Application of Proceeds. All amounts received by Lenders by
exercise of its remedies hereunder shall be applied as provided in the Loan
Documents.
-6-
<PAGE>
18. Incorporation of Exhibits. All Exhibits referred to in this
Agreement are incorporated herein by this reference.
19. Indulgence Not Waiver. Lenders' indulgence in the existence of a
default hereunder or any other departure from the terms of this Agreement shall
not prejudice Lenders' rights to declare a default or otherwise demand strict
compliance with this Agreement.
20. Cumulative Remedies. The remedies provided Lenders in this
Agreement are not exclusive of any other remedies that may be available to
Lenders under any other document or at law or equity.
21. Amendment and Waiver in Writing. No provision of this Agreement can
be amended or waived, except by a statement in writing signed by the party
against which enforcement of the amendment or waiver is sought.
22. Assignment. This Agreement shall be binding upon and inure to the
benefit of the heirs, successors and assigns of ACL and the successors and
assigns of Lenders, except that ACL shall not assign any rights or delegate any
obligations arising hereunder without the prior written consent of Lenders. Any
attempted assignment or delegation by ACL without the required prior consent
shall be void.
23. Entire Agreement. This Agreement and the other written agreements
between ACL and Lenders represent the entire agreement between the parties
concerning the subject matter hereof, and all oral discussions and prior
agreements are merged herein.
24. Severability. Should any provision of this Agreement be invalid or
unenforceable for any reason, the remaining provisions hereof shall remain in
full effect.
25. Time of Essence. Time is of the essence of this Agreement, and all
dates and time periods specified herein shall be strictly observed, except that
Lenders may permit specific deviations therefrom by its written consent.
26. Applicable Law. The validity, construction and enforcement of this
Agreement and all other documents executed with respect to the Secured
Indebtedness shall be determined according to the laws of Tennessee applicable
to contracts executed and performed entirely within that state.
27. Jurisdiction, Venue, Waiver of Jury Trial. Disputes arising under
this Agreement shall be governed as to matters of jurisdiction, venue and waiver
of right to jury trial by the provisions of the Loan Documents.
-7-
<PAGE>
28. Gender and Number. Words used herein indicating gender or number
shall be read as context may require.
29. Captions Not Controlling. Captions and headings have been included
in this Agreement for the convenience of the parties, and shall not be construed
as affecting the content of the respective paragraphs.
Dated as of the date first written above:
THE UNDERSIGNED ACKNOWLEDGE A THOROUGH
UNDERSTANDING OF THE TERMS OF THIS AGREEMENT
AND AGREE TO BE BOUND THEREBY:
AMERICAN CONSOLIDATED LABORATORIES, INC.
By: /s/ Joseph A. Arena
Title: CEO
SIRROM INVESTMENTS, INC.
By: /s/ Donald F. Barrickman
Title: Vice President
-8-
<PAGE>
EXHIBIT A
DESCRIPTION OF PLEDGED STOCK
<TABLE>
<CAPTION>
ISSUER NUMBER OF CERTIFICATE NUMBER % OF ISSUER'S STOCK
SHARES
<S> <C> <C> <C>
NOVAVISION, INC. 1,000 1 100
CAROLINA CONTACT LENS, INC. 1,100 4 100
SALVATORI OPHTHALMIC 1,000 1 100
MANUFACTURING CORPORATION
WOLCON LABS, INC. 5,100 4 100
4,900 5
S-O NEBRASKA, INC 1,000 1 100
</TABLE>
-9-
<PAGE>
STOCK PURCHASE WARRANT
This Warrant is issued as of the 7th day of May, 1997, by AMERICAN
CONSOLIDATED LABORATORIES, INC., a Florida corporation (the "Company"), to
SIRROM INVESTMENTS, INC., a Tennessee corporation (SIRROM INVESTMENTS, INC. and
any subsequent assignee or transferee hereof are hereinafter referred to
collectively as "Holder" or "Holders").
AGREEMENT:
1. ISSUANCE OF WARRANT; TERM. For and in consideration of SIRROM
INVESTMENTS, INC. making a loan to the Company in an amount of One Million Five
Hundred Seventy-Five Thousand and no/100ths Dollars ($1,575,000.00) pursuant to
the terms of a secured promissory note of even date herewith (the "Note") and
related loan agreement of even date herewith (the "Loan Agreement"), and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company hereby grants to Holder the right to purchase 720,000
shares of the Company's common stock (the "Common Stock"), which the Company
represents to equal 6.69% of the shares of capital stock outstanding on the date
hereof, calculated on a fully diluted basis and assuming exercise of this
Warrant ("Base Amount"), provided that in the event that any portion of the
indebtedness evidenced by the Note is outstanding on the following dates, the
Base Amount shall be increased to the corresponding number set forth below:
DATE BASE AMOUNT
- ---------------------- -----------------------------------------------------
May 7, 2000 836,328 shares, which the Company
represents to equal 7.69% of the shares of
the Company's capital stock outstanding
on the date hereof calculated on a fully
diluted basis after exercise of this
Warrant
May 7, 2001 955,434 shares, which the Company
represents to equal 8.69% of the shares of
the Company's capital stock outstanding
on the date hereof calculated on a fully
diluted basis after exercise of this
Warrant
<PAGE>
May 7, 2002 1,077,177 shares, which the Company
represents to equal 9.69% of the shares of
the Company's capital stock outstanding
on the date hereof calculated on a fully
diluted basis after exercise of this
Warrant
The shares of Common Stock issuable upon exercise of this Warrant are
hereinafter referred to as the "Shares." This Warrant shall be exercisable at
any time and from time to time from the date hereof until July 7, 2002.
2. EXERCISE PRICE. The exercise price (the "Exercise Price") per share
for which all or any of the Shares may be purchased pursuant to the terms of
this Warrant shall be One Cent ($.01).
3. EXERCISE. This Warrant may be exercised by the Holder hereof (but
only on the conditions hereinafter set forth) as to all or any increment or
increments of One Hundred (100) Shares (or the balance of the Shares if less
than such number), upon delivery of written notice of intent to exercise to the
Company at the following address: 1640 North Market Drive, Raleigh, North
Carolina 27609 or such other address as the Company shall designate in a written
notice to the Holder hereof, together with this Warrant and payment to the
Company of the aggregate Exercise Price of the Shares so purchased. The Exercise
Price shall be payable, at the option of the Holder, (i) by certified or bank
check, (ii) by the surrender of the Note or portion thereof having an
outstanding principal balance equal to the aggregate Exercise Price or (iii) by
the surrender of a portion of this Warrant where the Shares subject to the
portion of this Warrant that is surrendered have a fair market value equal to
the aggregate Exercise Price. Upon exercise of this Warrant as aforesaid, the
Company shall as promptly as practicable, and in any event within fifteen (15)
days thereafter, execute and deliver to the Holder of this Warrant a certificate
or certificates for the total number of whole Shares for which this Warrant is
being exercised in such names and denominations as are requested by such Holder.
If this Warrant shall be exercised with respect to less than all of the Shares,
the Holder shall be entitled to receive a new Warrant covering the number of
Shares in respect of which this Warrant shall not have been exercised, which new
Warrant shall in all other respects be identical to this Warrant. The Company
covenants and agrees that it will pay when due any and all state and federal
issue taxes which may be payable in respect of the issuance of this Warrant or
the issuance of any Shares upon exercise of this Warrant.
4. COVENANTS AND CONDITIONS. The above provisions are subject to the
following:
(a) Neither this Warrant nor the Shares have been registered
under the Securities Act of 1933, as amended ("Securities Act") or any
state securities laws ("Blue Sky Laws"). This Warrant has been acquired
for investment purposes and not with a view
2
<PAGE>
to distribution or resale and may not be sold or otherwise transferred
without (i) an effective registration statement for such Warrant under
the Securities Act and such applicable Blue Sky Laws, or (ii) an
opinion of counsel, which opinion and counsel shall be reasonably
satisfactory to the Company and its counsel, that registration is not
required under the Securities Act or under any applicable Blue Sky Laws
(the Company hereby acknowledges that Caldwell & Caldwell, P.C. is
acceptable counsel). Transfer of the shares issued upon the exercise of
this Warrant shall be restricted in the same manner and to the same
extent as the Warrant and the certificates representing such Shares
shall bear substantially the following legend:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR ANY APPLICABLE STATE SECURITIES LAW
AND MAY NOT BE TRANSFERRED UNTIL (I) A REGISTRATION STATEMENT
UNDER THE ACT AND SUCH APPLICABLE STATE SECURITIES LAWS SHALL
HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (II) IN THE
OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY, REGISTRATION
UNDER SUCH SECURITIES ACTS AND SUCH APPLICABLE STATE
SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH
PROPOSED TRANSFER.
The Holder hereof and the Company agree to execute such other documents
and instruments as counsel for the Company reasonably deems necessary
to effect the compliance of the issuance of this Warrant and any shares
of Common Stock issued upon exercise hereof with applicable federal and
state securities laws.
(b) The Company covenants and agrees that all Shares which may
be issued upon exercise of this Warrant will, upon issuance and payment
therefor, be legally and validly issued and outstanding, fully paid and
nonassessable, free from all taxes, liens, charges and preemptive
rights, if any, with respect to the issuance thereof. The Company shall
at all times reserve and keep available for issuance upon the exercise
of this Warrant such number of authorized but unissued shares of Common
Stock as will be sufficient to permit the exercise in full of this
Warrant.
(c) The Company covenants and agrees that it shall not sell
any shares of the Company's capital stock at a price per share below
the fair market value of such shares, without the prior written consent
of the Holder hereof. In the absence of an established public market
for the shares of stock sold by the Company, fair market value shall be
established by the Company's board of directors in a commercially
reasonable manner and the basis for determination shall be provided in
writing to the Holder hereof. In the event
3
<PAGE>
that the Company sells shares of the Company's capital stock in
violation of this Section 4(c), the number of shares issuable upon
exercise of this Warrant shall be equal to the product obtained by
multiplying the number of shares issuable pursuant to this Warrant
prior to such sale by the quotient obtained by dividing (i) the fair
market value of the shares issued in violation of this Section 4(c) by
(ii) the price at which such shares were sold. The issuance of shares
pursuant to warrants or other options to purchase shares shall not
cause an adjustment under the preceding sentence, but the issuance of
such warrant or option shall cause such an adjustment, when the warrant
or option is itself issued, if the exercise price at issuance is less
than the fair market value at that time. Additionally, the issuance of
stock pursuant to the acquisition by the Company of NovaVision,Inc., a
North Carolina corporation, closed concurrently with the issuance of
this Warrant (the "NovaVision Transaction") shall cause no adjustment
under this Section.
5. TRANSFER OF WARRANT. Subject to the provisions of Section 4 hereof,
this Warrant may be transferred, in whole or in part, to any person or business
entity, by presentation of the Warrant to the Company with written instructions
for such transfer. Upon such presentation for transfer, the Company shall
promptly execute and deliver a new Warrant or Warrants in the form hereof in the
name of the assignee or assignees and in the denominations specified in such
instructions. The Company shall pay all expenses incurred by it in connection
with the preparation, issuance and delivery of Warrants under this Section.
6. WARRANT HOLDER NOT SHAREHOLDER; RIGHTS OFFERING; PREEMPTIVE RIGHTS.
Except as otherwise provided herein, this Warrant does not confer upon the
Holder, as such, any right whatsoever as a shareholder of the Company.
Notwithstanding the foregoing, if the Company should offer to all of the
Company's shareholders the right to purchase any securities of the Company, then
all shares of Common Stock that are subject to this Warrant shall be deemed to
be outstanding and owned by the Holder and the Holder shall be entitled to
participate in such rights offering. The Company shall not grant any preemptive
rights with respect to any of its capital stock without the prior written
consent of the Holder.
7. OBSERVATION RIGHTS. The Holder of this Warrant shall receive notice
of and be entitled to attend or may send a representative to attend all meetings
of the Company's Board of Directors in a non-voting observation capacity and
shall receive a copy of all correspondence and information delivered to the
Company's Board of Directors, from the date hereof until such time as the
indebtedness evidenced by the Note has been paid in full. Only one (1)
representative of the Holder(s) of this Warrant may attend any given meeting of
the Company's Board of Directors under the authority of this Section.
4
<PAGE>
8. ADJUSTMENT UPON CHANGES IN STOCK.
(a) If all or any portion of this Warrant shall be exercised
subsequent to any stock split, stock dividend, recapitalization,
combination of shares of the Company, or other similar event, occurring
after the date hereof, then the Holder exercising this Warrant shall
receive, for the aggregate price paid upon such exercise, the aggregate
number and class of shares which such Holder would have received if
this Warrant had been exercised immediately prior to such stock split,
stock dividend, recapitalization, combination of shares, or other
similar event. If any adjustment under this Section 8(a), would create
a fractional share of Common Stock or a right to acquire a fractional
share of Common Stock, such fractional share shall be disregarded and
the number of shares subject to this Warrant shall be the next higher
number of shares, rounding all fractions upward. Whenever there shall
be an adjustment pursuant to this Section 8(a), the Company shall
forthwith notify the Holder or Holders of this Warrant of such
adjustment, setting forth in reasonable detail the event requiring the
adjustment and the method by which such adjustment was calculated.
(b) If all or any portion of this Warrant shall be exercised
subsequent to any merger, consolidation, exchange of shares,
separation, reorganization or liquidation of the Company, or other
similar event, occurring after the date hereof, as a result of which
shares of Common Stock shall be changed into the same or a different
number of shares of the same or another class or classes of securities
of the Company or another entity, or the holders of Common Stock are
entitled to receive cash or other property, then the Holder exercising
this Warrant shall receive, for the aggregate price paid upon such
exercise, the aggregate number and class of shares, cash or other
property which such Holder would have received if this Warrant had been
exercised immediately prior to such merger, consolidation, exchange of
shares, separation, reorganization or liquidation, or other similar
event. If any adjustment under this Section 8(b) would create a
fractional share of Common Stock or a right to acquire a fractional
share of Common Stock, such fractional share shall be disregarded and
the number of shares subject to this Warrant shall be the next higher
number of shares, rounding all fractions upward. Whenever there shall
be an adjustment pursuant to this Section 8(b), the Company shall
forthwith notify the Holder or Holders of this Warrant of such
adjustment, setting forth in reasonable detail the event requiring the
adjustment and the method by which such adjustment was calculated.
5
<PAGE>
9. PUT AGREEMENT.
(a) The Company hereby irrevocably grants and issues to Holder
the right and option to sell to the Company (the "Put") this Warrant
for a period of 30 days immediately prior to the expiration thereof, at
a purchase price (the "Purchase Price") equal to the Fair Market Value
(as hereinafter defined) of the shares of Common Stock issuable to
Holder upon exercise of this Warrant.
(b) The Company shall pay to the Holder, in cash or certified
or cashier's check, the Purchase Price in exchange for the delivery to
the Company of this Warrant within ninety (90) days of the receipt of
written notice, addressed as set forth in Section 3 hereto, from the
Holder of its intention to exercise the Put.
(c) The Fair Market Value of the shares of Common Stock of the
Company issuable pursuant to this Warrant shall be determined as
follows:
(i) The Company and the Holder shall each appoint an
independent, experienced appraiser who is a member of a
recognized professional association of business appraisers.
The two appraisers shall determine the value of the shares of
Common Stock which would be issued upon the exercise of the
Warrant, assuming that the sale would be between a willing
buyer and a willing seller, both of whom have full knowledge
of the financial and other affairs of the Company, and neither
of whom is under any compulsion to sell or to buy.
(ii) If the higher of the two appraisals is not more
than 10% more than the lower of the appraisals, the Fair
Market Value shall be the average of the two appraisals. If
the higher of the two appraisals is 10% or more than the lower
of the two appraisals, then a third appraiser shall be
appointed by the two appraisers, and if they cannot agree on a
third appraiser, the American Arbitration Association shall
appoint the third appraiser. The third appraiser, regardless
of who appoints him or her, shall have the same qualifications
as the first two appraisers.
(iii) The Fair Market Value after the appointment of
the third appraiser shall be the mean of the three appraisals.
(iv) The fees and expenses of the appraisers shall be
paid one-half by the Company and one-half by the Holder.
(v) If the Company is publicly traded on a recognized
domestic stock exchange at the time of determination, then,
notwithstanding the foregoing, the Fair Market Value shall
equal the average bid price at the close of each market day
for the twenty (20) market days next preceding the date on
which Holder issues its election to put this Warrant under the
authority of this Section 9.
6
<PAGE>
10. REGISTRATION.
(a) The Company and the holders of the Shares agree that if at
any time after the date hereof the Company shall propose to file a
registration statement with respect to any of its Common Stock on a
form suitable for a secondary offering, it will give notice in writing
to such effect to the registered holder(s) of the Shares at least
thirty (30) days prior to such filing, and, at the written request of
any such registered holder, made within ten (10) days after the receipt
of such notice, will include therein at the Company's cost and expense
(including the fees and expenses of a single counsel to such holder(s),
but excluding underwriting discounts, commissions and filing fees
attributable to the Shares included therein) such of the Shares as such
holder(s) shall request; provided, however, that if the offering being
registered by the Company is underwritten and if the representative of
the underwriters certifies in writing that the inclusion therein of the
Shares would materially and adversely affect the sale of the securities
to be sold by the Company thereunder, then the Company shall be
required to include in the offering only that number of securities,
including the Shares, which the underwriters determine in their sole
discretion will not jeopardize the success of the offering (the
securities so included to be apportioned pro rata among all selling
shareholders according to the total amount of securities entitled to be
included therein owned by each selling shareholder, but in no event
shall the total amount of Shares included in the offering be less than
the number of securities included in the offering by any other single
selling shareholder unless all of the Shares are included in the
offering). Holder agrees that the registration of shares incidental to
the NovaVision transaction shall not be subject to this provision or to
any other provision of this Warrant regarding rights upon issuance,
registration, transfer or sale of shares of the stock of the Company.
(b) Whenever the Company undertakes to effect the registration
of any of the Shares, the Company shall, as expeditiously as reasonably
possible:
(i) Prepare and file with the Securities and Exchange
Commission (the "Commission") a registration statement
covering such Shares and use its best efforts to cause such
registration statement to be declared effective by the
Commission as expeditiously as possible and to keep such
registration effective until the earlier of (A) the date when
all Shares covered by the registration statement have been
sold or (B) two hundred seventy (270) days from the effective
date of the registration statement; provided, that before
filing a registration statement or prospectus or any amendment
or supplements thereto, the Company will furnish to each
Holder of Shares covered by such registration statement and
the underwriters, if any, copies of all such documents
proposed to be filed (excluding exhibits, unless any such
person shall specifically request exhibits), which documents
will be subject to the review of such Holders and
underwriters, and the Company will not file such registration
statement or any amendment thereto or any prospectus or any
supplement thereto (including any documents incorporated
7
<PAGE>
by reference therein) with the Commission if (A) the
underwriters, if any, shall reasonably object to such filing
or (B) if information in such registration statement or
prospectus concerning a particular selling Holder has changed
and such Holder or the underwriters, if any, shall reasonably
object.
(ii) Prepare and file with the Commission such
amendments and post-effective amendments to such registration
statement as may be necessary to keep such registration
statement effective during the period referred to in Section
10(b)(i) and to comply with the provisions of the Securities
Act with respect to the disposition of all securities covered
by such registration statement, and cause the prospectus to be
supplemented by any required prospectus supplement, and as so
supplemented to be filed with the Commission pursuant to Rule
424 under the Securities Act.
(iii) Furnish to the selling Holder(s) such numbers
of copies of such registration statement, each amendment
thereto, the prospectus included in such registration
statement (including each preliminary prospectus), each
supplement thereto and such other documents as they may
reasonably request in order to facilitate the disposition of
the Shares owned by them.
(iv) Use its best efforts to register and qualify
under such other securities laws of such jurisdictions as
shall be reasonably requested by any selling Holder and do any
and all other acts and things which may be reasonably
necessary or advisable to enable such selling Holder to
consummate the disposition of the Shares owned by such Holder,
in such jurisdictions; provided, however, that the Company
shall not be required in connection therewith or as a
condition thereto to qualify to transact business or to file a
general consent to service of process in any such states or
jurisdictions.
(v) Promptly notify each selling Holder of the
happening of any event as a result of which the prospectus
included in such registration statement contains an untrue
statement of a material fact or omits any fact necessary to
make the statements therein not misleading and, at the request
of any such Holder, the Company will prepare a supplement or
amendment to such prospectus so that, as thereafter delivered
to the purchasers of such Shares, such prospectus will not
contain an untrue statement of a material fact or omit to
state any fact necessary to make the statements therein not
misleading.
(vi) Provide a transfer agent and registrar for all
such Shares not later than the effective date of such
registration statement.
(vii) Enter into such customary agreements (including
underwriting agreements in customary form for a primary
offering) and take all such other
8
<PAGE>
actions as the underwriters, if any, reasonably request in
order to expedite or facilitate the disposition of such Shares
(including, without limitation, effecting a stock split or a
combination of shares).
(viii) Make available for inspection by any selling
Holder or any underwriter participating in any disposition
pursuant to such registration statement and any attorney,
accountant or other agent retained by any such selling Holder
or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause
the officers, directors, employees and independent accountants
of the Company to supply all information reasonably requested
by any such seller, underwriter, attorney, accountant or agent
in connection with such registration statement.
(ix) Promptly notify the selling Holder(s) and the
underwriters, if any, of the following events and (if
requested by any such person) confirm such notification in
writing: (A) the filing of the prospectus or any prospectus
supplement and the registration statement and any amendment or
post-effective amendment thereto and, with respect to the
registration statement or any post-effective amendment
thereto, the declaration of the effectiveness of such
documents, (B) any requests by the Commission for amendments
or supplements to the registration statement or the prospectus
or for additional information, (C) the issuance or threat of
issuance by the Commission of any stop order suspending the
effectiveness of the registration statement or the initiation
of any proceedings for that purpose and (D) the receipt by the
Company of any notification with respect to the suspension of
the qualification of the Shares for sale in any jurisdiction
or the initiation or threat of initiation of any proceeding
for such purposes.
(x) Make every reasonable effort to prevent the entry
of any order suspending the effectiveness of the registration
statement and obtain at the earliest possible moment the
withdrawal of any such order, if entered.
(xi) Cooperate with the selling Holder(s) and the
underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing the Shares to be sold
and not bearing any restrictive legends, and enable such
Shares to be in such lots and registered in such names as the
underwriters may request at least two (2) business days prior
to any delivery of the Shares to the underwriters.
(xii) Provide a CUSIP number for all the Shares not
later than the effective date of the registration statement.
(xiii) Prior to the effectiveness of the registration
statement and any post-effective amendment thereto and at each
closing of an underwritten offering, (A) make such
representations and warranties to the selling Holder(s) and
the
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underwriters, if any, with respect to the Shares and the
registration statement as are customarily made by issuers in
primary underwritten offerings; (B) use its best efforts to
obtain "cold comfort" letters and updates thereof from the
Company's independent certified public accountants addressed
to the selling Holders and the underwriters, if any, such
letters to be in customary form and covering matters of the
type customarily covered in "cold comfort" letters by
underwriters in connection with primary underwritten
offerings; (C) deliver such documents and certificates as may
be reasonably requested (1) by the holders of a majority of
the Shares being sold, and (2) by the underwriters, if any, to
evidence compliance with clause (A) above and with any
customary conditions contained in the underwriting agreement
or other agreement entered into by the Company; and (D) obtain
opinions of counsel to the Company and updates thereof (which
counsel and which opinions shall be reasonably satisfactory to
the underwriters, if any), covering the matters customarily
covered in opinions requested in underwritten offerings and
such other matters as may be reasonably requested by the
selling Holders and underwriters or their counsel. Such
counsel shall also state that no facts have come to the
attention of such counsel which cause them to believe that
such registration statement, the prospectus contained therein,
or any amendment or supplement thereto, as of their respective
effective or issue dates, contains any untrue statement of any
material fact or omits to state any material fact necessary to
make the statements therein not misleading (except that no
statement need be made with respect to any financial
statements, notes thereto or other financial data or other
expertized material contained therein). If for any reason the
Company's counsel is unable to give such opinion, the Company
shall so notify the Holders of the Shares and shall use its
best efforts to remove expeditiously all impediments to the
rendering of such opinion.
(xiv) Otherwise use its best efforts to comply with
all applicable rules and regulations of the Commission, and
make generally available to its security holders earnings
statements satisfying the provisions of Section 11(a) of the
Securities Act, no later than forty-five (45) days after the
end of any twelve-month period (or ninety (90) days, if such
period is a fiscal year) (A) commencing at the end of any
fiscal quarter in which the Shares are sold to underwriters in
a firm or best efforts underwritten offering, or (B) if not
sold to underwriters in such an offering, beginning with the
first month of the first fiscal quarter of the Company
commencing after the effective date of the registration
statement, which statements shall cover such twelve-month
periods.
(c) After the date hereof, the Company shall not grant to any
holder of securities of the Company any registration rights which have
a priority greater than or equal to those granted to Holders pursuant
to this Warrant without the prior written consent of the Holder(s).
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(d) The Company's obligations under Section 10(a) above with
respect to each holder of Shares are expressly conditioned upon such
holder's furnishing to the Company in writing such information
concerning such holder and the terms of such holder's proposed offering
as the Company shall reasonably request for inclusion in the
registration statement. If any registration statement including any of
the Shares is filed, then the Company shall indemnify each holder
thereof (and each underwriter for such holder and each person, if any,
who controls such underwriter within the meaning of the Securities Act)
from any loss, claim, damage or liability arising out of, based upon or
in any way relating to any untrue statement of a material fact
contained in such registration statement or any omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, except for any such
statement or omission based on information furnished in writing by such
holder of the Shares expressly for use in connection with such
registration statement; and such holder shall indemnify the Company
(and each of its officers and directors who has signed such
registration statement, each director, each person, if any, who
controls the Company within the meaning of the Securities Act, each
underwriter for the Company and each person, if any, who controls such
underwriter within the meaning of the Securities Act) and each other
such holder against any loss, claim, damage or liability arising from
any such statement or omission which was made in reliance upon
information furnished in writing to the Company by such holder of the
Shares expressly for use in connection with such registration
statement.
(e) For purposes of this Section 10, all of the Shares shall
be deemed to be issued and outstanding.
11. CERTAIN NOTICES. In case at any time the Company shall propose to:
(a) declare any cash dividend upon its Common Stock;
(b) declare any dividend upon its Common Stock payable in
stock or make any special dividend or other distribution to the holders
of its Common Stock;
(c) offer for subscription to the holders of any of its Common
Stock any additional shares of stock in any class or other rights;
(d) reorganize, or reclassify the capital stock of the
Company, or consolidate, merge or otherwise combine with, or sell of
all or substantially all of its assets to, another corporation;
(e) voluntarily or involuntarily dissolve, liquidate or wind
up of the affairs of the Company; or
(f) redeem or purchase any shares of its capital stock or
securities convertible
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into its capital stock, except for the redemption of preferred stock in
accordance with its terms in existence on the date of the issuance of
this Warrant;
then, in any one or more of said cases, the Company shall give to the
Holder of the Warrant, by certified or registered mail, (i) at least
twenty (20) days' prior written notice of the date on which the books
of the Company shall close or a record shall be taken for such
dividend, distribution or subscription rights or for determining rights
to vote in respect of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up,
and (ii) in the case of such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, at
least twenty (20) days' prior written notice of the date when the same
shall take place. Any notice required by clause (i) shall also specify,
in the case of any such dividend, distribution or subscription rights,
the date on which the holders of Common Stock shall be entitled
thereto, and any notice required by clause (ii) shall specify the date
on which the holders of Common Stock shall be entitled to exchange
their Common Stock for securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding up, as the case may be.
12. RIGHTS OF CO-SALE.
(a) Co-Sale Right. Tullis - Dickerson Capital Focus, L.P., a
Delaware limited partnership (the "Majority Shareholder") shall not
enter into any transaction that would result in the sale by it of any
Common Stock now or hereafter owned by it, unless prior to such sale
such Majority Shareholder shall give notice to Holder of its intention
to effect such sale in order that Holder may exercise its rights under
this Section 12 as hereinafter described. Such notice shall set forth
(i) the number of shares to be sold by such Majority Shareholder, (ii)
the principal terms of the sale, including the price at which the
shares are intended to be sold, and (iii) an offer by such Majority
Shareholder to use his best efforts to cause to be included with the
shares to be sold by it in the sale, on a share-by-share basis and on
the same terms and conditions, the Shares issuable or issued to Holder
pursuant this Warrant. Notwithstanding the foregoing, the distribution
of Common Stock to the owners of the Majority Shareholder shall not
give rise to a co-sale right under this Warrant. Additionally, upon
such a distribution, this right of co-sale shall terminate with respect
to the Common Stock so distributed except as to sales contracted for
before, upon or within ninety (90) days after such distribution. The
right of co-sale shall not apply to sales of shares of Common Stock in
the open market pursuant to Rule 144 of the Securities and Exchange
Commission or any successor rule of similar effect.
(b) Rejection of Co-Sale Offer. If Holder has not accepted
such offer in writing within a period of ten (10) days from the date of
receipt of the notice, then such Majority Shareholder shall thereafter
be free for a period of ninety (90) days to sell the number of shares
specified in such notice, at a price no greater than the price set
forth in such notice and on otherwise no more favorable terms to such
Majority Shareholder than as set forth
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in such notice, without any further obligation to Holder in connection
with such sale. In the event that such Majority Shareholder fails to
consummate such sale within such ninety-day period, the shares
specified in such notice shall continue to be subject to this Section.
(c) Acceptance of Co-Sale Offer. If Holder accepts such offer
in writing within ten (10) day period, such acceptance shall be
irrevocable unless such Majority Shareholder shall be unable to cause
to be included in his sale the number of Shares of stock held by Holder
and set forth in the written acceptance. In that event, such Majority
Shareholder and Holder shall participate in the sale equally, with such
Majority Shareholder and Holder each selling half the total number of
such shares to be sold in the sale.
13. ARTICLE AND SECTION HEADINGS. Numbered and titled article and
section headings are for convenience only and shall not be construed as
amplifying or limiting any of the provisions of this Warrant.
14. NOTICE. Any and all notices, elections or demands permitted or
required to be made under this Warrant shall be in writing, signed by the party
giving such notice, election or demand and shall be delivered personally,
telecopied, telexed, or sent by certified mail or overnight via nationally
recognized courier service (such as Federal Express), to the other party at the
address set forth below, or at such other address as may be supplied in writing
and of which receipt has been acknowledged in writing. The date of personal
delivery or telecopy or two (2) business days after the date of mailing (or the
next business day after delivery to such courier service), as the case may be,
shall be the date of such notice, election or demand. For the purposes of this
Warrant:
The Address of Holder is: Sirrom Investments, Inc.
Suite 200
500 Church Street
Nashville, TN 37219
Attention: Donald F. Barrickman
Telecopy No. 615/726-1208
with a copy to: Boult, Cummings, Conners & Berry
414 Union Street
Suite 1600
Nashville, TN 37219
Attention: John E. Murdock III
Telecopy No. 615/252-6359
The Address of Company is: American Consolidated Laboratories, Inc.
1640 North Market Drive
Raleigh, North Carolina 27609
Attention: Joseph A. Arena
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with a copy to: Schell Bray Aycock Abel & Livingston P.L.L.C.
Suite 1500 Renaissance Plaza
230 North Elm Street
Greensboro, North Carolina 27401
Attention: Doris R. Bray
Telecopy No.: (910) 370-8830
15. SEVERABILITY. If any provisions(s) of this Warrant or the
application thereof to any person or circumstances shall be invalid or
unenforceable to any extent, the remainder of this Warrant and the application
of such provisions to other persons or circumstances shall not be affected
thereby and shall be enforced to the greatest extent permitted by law.
16. ENTIRE AGREEMENT. This Warrant between the Company and Holder
represents the entire agreement between the parties concerning the subject
matter hereof, and all oral discussions and prior agreement are merged herein.
17. GOVERNING LAW AND AMENDMENTS. This Warrant shall be construed and
enforced under the laws of the State of Florida applicable to contracts to be
wholly performed in such State; provided, however, should the Company be
redomesticated, the laws of the new domicile shall thereafter apply, it being
further agreed that the Company may not be redomesticated by any means unless
Holder receives the written opinion of counsel to the Company that this Warrant
is enforceable in accordance with its terms under the laws of the new domicile.
No amendment or modification hereof shall be effective except in a writing
executed by each of the parties hereto.
18. COUNTERPARTS. This Warrant may be executed in any number of
counterparts and be different parties to this Warrant in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same Warrant.
19. JURISDICTION AND VENUE. The Company hereby consents to the
jurisdiction of the courts of the State of Tennessee and the United States
District Court for the Middle District of Tennessee, as well as to the
jurisdiction of all courts from which an appeal may be taken from such courts,
for the purpose of any suit, action or other proceeding arising out of any of
its obligations arising under this Agreement or with respect to the transactions
contemplated hereby, and expressly waives any and all objections it may have as
to venue in any of such courts.
20. EQUITY PARTICIPATION. This Warrant is issued in connection with the
Loan Agreement. It is intended that this Warrant constitute an equity
participation under and pursuant to T.C.A. ss.47-24-101, et seq. and that equity
participation be permitted under said statutes and not constitute interest on
the Note. If under any circumstances whatsoever, fulfillment of any obligation
of this Warrant, the Loan Agreement, or any other agreement or document executed
in connection with the Loan Agreement, shall violate the lawful limit of any
applicable usury statue or any other applicable law with regard to obligations
of like character and amount, then
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<PAGE>
the obligation to be fulfilled shall be reduced to such lawful limit, such that
in no event shall there occur, under this Warrant, the Loan Agreement, or any
other document or instrument executed in connection with the Loan Agreement, any
violation of such lawful limit, but such obligation shall be fulfilled to the
lawful limit. If any sum is collected in excess of the lawful limit, such excess
shall be applied to reduce the principal amount of the Note.
21. This Warrant supersedes that Stock Purchase Warrant dated June 21,
1995 issued to Sirrom Capital Corporation by Ocutec Acquisition Corp., which
Stock Purchase Warrant shall be deemed terminated upon the issuance of this
Warrant.
IN WITNESS WHEREOF, the parties hereto have set their hands as of the
date first above written.
COMPANY: AMERICAN CONSOLIDATED LABORATORIES,
INC.,
a Florida corporation
By: /s/ Joseph A. Arena
Joseph A. Arena
Title: Chief Executive Officer
HOLDER: SIRROM INVESTMENTS, INC.,
a Tennessee corporation
By: /s/ Donald F. Barrickman
Donald F. Barrickman
Title: Vice President
IN WITNESS WHEREOF, the parties hereto have executed or caused this
Warrant to be executed as of the date first above written for the purpose of
agreeing to the terms and conditions of Section 12 hereof.
MAJORITY
SHAREHOLDER: TULLIS-DICKERSON CAPITAL FOCUS, L.P.
By: /s/ Tullis-Dickerson Partners
Title: Joan E. Nenscheler, General Partner
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EMPLOYMENT AGREEMENT
Employment Agreement, dated as of May 7, 1997, between AMERICAN
CONSOLIDATED LABORATORIES, Inc., a Florida Corporation (the "Company") and Bart
C. Gutekunst, a Connecticut resident (the "Executive").
1. EMPLOYMENT DUTIES
a. The Company hereby agrees to employ the Executive as the
Chairman of the Board of Directors of the Company. The
Executive shall carry out those duties, consistent with the
usual and customary duties of the position, as set forth in
the By-Laws and as the Board of Directors of the Company may
determine from time to time. The Executive shall employ
approximately one-half of his business time and best efforts
to the performance of his duties under this Agreement.
b. The Executive agrees to serve as a member of the Board of
Directors of the Company without additional compensation.
c. The Company hereby permits the Executive to continue to reside
outside the state of North Carolina.
2. TERM OF EMPLOYMENT
a. The Term of the Executive's employment shall commence on May
7, 1997, (the "Initial Employment Date") and will end on the
first anniversary of such date (such term, including any
extensions thereof pursuant to this Section 2, being hereafter
referred to as the "Term") unless extended or sooner
terminated as herein provided.
b. Unless earlier terminated pursuant to Section 4 of this
Agreement, the term of this Agreement will be extended
automatically in one year increments of each anniversary of
the Initial Employment Date, unless either party to this
agreement gives notice of its intent to terminate this
Agreement at least 90 days prior to the next termination date
of this Agreement. The Executive shall abstain from any vote
of the Board of Directors as an interested party in any
determination by the Board of Directors whether to terminate
this Agreement pursuant to this Section 2 or Section 4 of this
Agreement.
3. COMPENSATION
a. Base Salary. The Executive shall receive a Base Salary of
$60,000 per annum. The Compensation payable to the Executive
shall be payable in accordance with the payroll policies of
the Company as from time to time in effect, and will be
<PAGE>
subject to customary withholdings for income taxes, FICA and
similar charges.
b. Bonus. In addition to a base salary, the Executive will be
eligible to receive a bonus of up to 33.33% of his Base Salary
determined by the Compensation Committee of the Board of
Directors based on the Executive's performance and the
Company's performance for the preceding calendar year.
c. Participation in Executive Benefit Plans. The Executive will
be eligible to participate in the Company's group life,
hospitalization or disability insurance plan, health program,
pension plan, stock option plan or other similar benefit plan
of the Company on the same terms and conditions as are
available to the other executives of the Company.
d. Business Expenses. Subject to such policies and procedures as
may from time to time be established by the Board of
Directors, the Company will reimburse the Executive for all
reasonable expenses actually incurred or paid by the Executive
in the performance of services under this Agreement, upon
presentation of expense statements or vouchers or such other
supporting information as the Company may reasonably require.
e. Vacation. The Executive will be entitled to annual paid
vacation leave of three weeks per annum. Unused vacation leave
will not accrue.
4. TERMINATION
a. Termination for Cause; Voluntary Resignation by Executive.
"Termination for Cause" will include termination by the Company on any of the
following grounds only:
i. The Executive's engaging in misconduct materially
injurious to the Company;
ii. Any uncured breach of this Agreement by the
Executive;
iii. The Executive's conviction of any crime (whether or
not involving the Company) which constitutes a felony
in the jurisdiction involved;
iv. The Executive's failure or refusal to perform his
duties as required by this Agreement.
b. In the event that the Executive shall be Terminated for Cause
or the Executive resigns or quits:
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<PAGE>
i. all compensation hereunder in respect to periods
after such termination, resignation or quitting will
terminate upon such termination or resignation;
ii. the Executive shall be deemed to have resigned as
Chairman of the Board of Directors, but termination
shall not constitute resignation as a member of the
Board of Directors.
c. Termination at the end of the Term or Not for Cause. Upon
termination of the Executive's employment hereunder at the end
of the Term, or upon Termination Not for Cause;
i. The Executive shall receive an amount equal to the
Executive's Base Salary calculated on the basis of
his then prevailing annual salary rate for a period
of six months after such Term or Termination Not for
Cause.
ii. The Executive shall be deemed to have resigned as
Chairman of the Board of Directors, but termination
shall not constitute resignation as a member of the
Board of Directors.
5. COVENANTS AGAINST COMPETITION, NO SOLICITATION
During the term of this Agreement, and for a period of one (1) year
following the termination of the Executive's employment hereunder, and
in consideration of the Company's agreement to pay the Executive the
salary, bonus and benefits described in Section 3 of this Agreement,
the Executive agrees that he will not, directly or indirectly, engage
or be interested in any business that engages anywhere in the
continental United States in the business of producing, manufacturing,
marketing or distributing contact lenses or the raw materials from
which contact lenses are made or any other product manufactured by the
Company during the Term, except within the scope of his duties as
Chairman of the Board of Directors.
The Executive will not directly or indirectly for a period of one (1)
year following the termination of the Executive's employment hereunder
actively solicit for employment or hire any person who is employed by
the Company.
6. PROPERTY OF THE COMPANY
All memoranda, notes, lists, records and other documents or papers (and
all copies thereof), including such items stored in computer memories,
on microfiche or by any other means, made or compiled by or on behalf
of the Executive or made available to him relating to the Company are
and will be the Company's property and will be
3
<PAGE>
delivered to the Company promptly upon the termination of his
employment with the Company or any other time on request and such
information shall be held confidential by the Executive after the
termination of his employment with the Company.
7. CONFIDENTIALITY
Anything herein to the contrary notwithstanding, Executive shall hold
in a fiduciary capacity for the benefit of the Company all secret or
confidential information, knowledge or data of the Company not
generally known to the public obtained by Executive during his
employment by the Company obtained by Executive during his employment
by the Company, and Executive shall not during his employment by the
Company or at any time during the three-year period after the
termination of such employment, communicate or divulge any such
information, knowledge or data to any person, firm or corporation other
than the Company, or persons, firms or corporations designated by the
Company.
8. RIGHTS AND REMEDIES UPON BREACH
The parties hereto agree and stipulate that the restraints imposed by
Sections 5, 6 and 7 of this Agreement (the "Protective Provisions")
shall be enforceable through injunction as well as an action for
damages, that such restraints upon the Executive are reasonable with
regard to their limitations and necessary for the protection of the
Company and its business, and that such restraints will not be unduly
burdensome to the Executive.
9. SEVERABILITY OF COVENANTS
The parties hereto acknowledge and agree that the Protective Provisions
are reasonable and valid in geographical and temporal scope, and in all
other respects. If any court determines that any of the Protective
Provisions, or any part thereof, are invalid or unenforceable, the
remainder of the Protective Provisions will not thereby be affected and
will be given full effect, without regard to the invalid portions. It
is agreed by the Company and the Executive that if any portion of the
covenants set forth in these Sections 5 - 10 are held to be invalid,
arbitrary or against public policy, such portion of such covenants
shall be considered divisible both as to time and geographical area.
The Company and the Executive agree that, if any court of competent
jurisdiction determines the specified time period or the specified
geographical area applicable to these Sections 5 - 10 to be invalid,
unreasonable, arbitrary or against public policy, a lesser time period
or geographical area which is determined to be reasonable, non-
arbitrary and not against public policy may be enforced against the
Executive.
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10. ENFORCEABILITY IN JURISDICTIONS
The Company and Executive intend to and hereby confer jurisdiction to
enforce the Protective Provisions upon the courts of any jurisdiction
within the geographical scope of such covenants. If the courts of any
one or more of such jurisdictions hold the Protective Provisions
unenforceable by reason of the breadth of such scope or otherwise, it
is the intention of the Company and the Executive that such
determination not bar or in any way affect the Company's right to the
relief provided in these Sections 5 - 10 in the courts of any other
jurisdiction within the geographical scope of such Protective
Provisions, as to breaches of such Protective Provisions in such other
respective jurisdictions, such Protective Provisions as they relate to
each jurisdiction being, for this purpose, severable into diverse and
independent covenants.
11. MANAGEMENT OF THE COMPANY
Nothing in this Agreement shall limit the right of the Board of
Directors to manage the business and affairs of the Company or
otherwise establish policy for the benefit of the Company.
12. NOTICE
Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be delivered personally or sent
by certified, registered, or express mail, postage prepaid. Any such
notice will be deemed given when so delivered personally, or if mailed,
two days after the date of deposit in the United States mails, as
follows:
If to the Company, to:
American Consolidated Laboratories
1640 North Market Street
Raleigh, North Carolina 27609
With a copy to each of:
Thomas P. Dickerson
Tullis-Dickerson & Co., Inc.
One Greenwich Plaza
Greenwich, CT 06830
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<PAGE>
Bonnie Pinzel, Esq.
Schifino & Fleischer
One Tampa City Center
201 North Franklin St.
Tampa, FL 33602-5174
Thomas Kruger, Esq.
Battle, Fowler LLP
75 East 55th St.
New York, NY 10022
If to the Executive, to:
Bart C. Gutekunst
10 Timothy Road
Weston, CT 06883
13. ENTIRE AGREEMENT
This Agreement contains the entire agreement between the parties with
respect to the subject matter of this Agreement and supersedes all
prior agreements, written or oral, with respect thereto.
14. WAIVERS AND AMENDMENTS; REMEDIES
This Agreement may be amended, superseded, canceled, renewed, or
extended and the terms of this Agreement may be waived, only by a
written instrument signed by the parties, or, in the case of a waiver,
by the party waiving compliance. No delay on the part of any party in
exercising any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any waiver on the part of any party of any
such right, power or privilege nor any single or partial exercise of
any such right, power or privilege constitute a waiver of the
subsequent exercise of any such right, power or privilege. The rights
and remedies herein provided are cumulative and are not exclusive of
any rights or remedies that any party may otherwise have at law or in
equity.
15. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
the laws of North Carolina (other than any North Carolina law
respecting conflict-of-laws that would make the laws of any other
jurisdiction applicable).
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16. ASSIGNMENT
This Agreement, and the Executive's rights and obligations hereunder,
are personal in nature and may not be assigned by the Executive. The
Company may assign this Agreement and its rights, together with its
obligation, hereunder in connection with any sale, transfer or other
disposition of all or substantially all of its assets or business,
whether by merger, consolidation or otherwise.
17. COUNTERPARTS
This Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an
original but all such counterparts together shall constitute one and
the same instrument.
18. HEADINGS
The headings in this Agreement are for reference only, and shall not
affect the interpretation of this Agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement on the day and year first above written.
AMERICAN CONSOLIDATED LABORATORIES, INC.
BY: /s/ Joseph A. Arena
Joseph A. Arena
Director and Chief Executive Officer
/s/ Bart C. Gutekust
Bart C. Gutekunst
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