SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
FORM 10-K
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the fiscal year ended October 31, 1999
OR
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the transition period from ______________ to _______________.
Commission file number 0-21986
ABLE TELCOM HOLDING CORP.
(Exact name of registrant as specified in its charter)
FLORIDA 65-0013218
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1000 HOLCOMB WOODS PARKWAY, SUITE 440, ROSWELL, GEORGIA 30076
(Address of principal executive offices) (Zip Code)
(770) 993-1570
Registrant's telephone number, including area code:
Securities registered under Section 12(b) of the Exchange Act: NONE
Securities registered under Section 12(g) of the Act: COMMON STOCK
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of February 4, 2000, 11,400,818 shares of the registrant's Common Stock were
held by non-affiliates of the registrant (assuming, solely for these purposes,
such persons to be all persons other than (i) current directors and executive
officers of the registrant and (ii) persons believed by the registrant to
beneficially own more than 10% of the registrant's outstanding Common Stock,
based on reports, if any, submitted to the registrant by such persons). As of
such date, the aggregate market value of the voting stock of the registrant held
by non-affiliates, computed by reference to the average closing bid and asked
prices on that date, $69,088,957.
There were 15,341,053 shares of Common Stock outstanding as of February 4, 2000.
1
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TABLE OF CONTENTS
Page
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PART I
Item 1. Business..................................................... 3
Item 2. Properties................................................... 17
Item 3. Legal Proceedings............................................ 17
Item 4. Submission of Matters to a Vote of Security Holders.......... 18
PART II
Item 5. Market for Registrant's Common Equity and Related
Shareholders Matters......................................... 18
Item 6. Selected Financial Data...................................... 25
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations................ 25
Item 7a. Quantitative and Qualitative Disclosures About Market Risk... 30
Item 8. Financial Statements and Supplementary Data.................. 31
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.......................... 31
PART III
Item 10. Directors and Executive Officers of the Registrant........... 32
Item 11. Executive Compensation....................................... 36
Item 12. Security Ownership of Certain Beneficial Owners
and Management............................................... 45
Item 13. Certain Relationships and Related Transactions............... 47
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K.................................................. 48
Signatures................................................... 55
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PART I
ITEM 1. BUSINESS
OVERVIEW
Able Telcom Holding Corp. and its subsidiaries ("Able" or the "Company")
develops, builds and maintains communications systems for companies and
governmental authorities. The Company has five main organizational groups. Each
group is compromised of subsidiaries of the Company with each having local
executive management functioning under a decentralized operating environment.
The Company completed operational restructuring of its subsidiaries during
fiscal year 1999. As a result, the Company now has 14 active subsidiaries, 11 of
which are wholly-owned.
<TABLE>
<S> <C> <C> <C> <C>
-----------------------
AbleTelcom Holding
Corp.
Headquartered:
Atlanta, GA
- -------------------------------------------------------------------------------------------------------------------------
Network Services Network Development Transportation Construction Communications
Omaha, NE Atlanta, GA Services Tampa, FL Development
FY99 Consolidated FY99 Consolidated Mt. Laurel, NJ FY99 Consolidated Ft. Lauderdale, FL
Revenue: 63% Revenue: --% FY99 Consolidated Revenue: 27% FY99 Consolidated
Revenue: 9% Revenue: 1%
- -------------------------------------------------------------------------------------------------------------------------
Adesta Communications, Able ICP, Inc. Adesta Georgia Electric Able Telcom
Inc. formerly Ownership: 100% Transportation, Inc. Company International, Inc.
MFS Network Roswell, GA formerly Ownership: 100% Ownership: 100%
Technologies, Inc. MFS Transportation Albany, GA Ft. Lauderdale, FL
Ownership: 100% Systems, Inc.
Omaha, NE Ownership: 100%
Mt. Laurel, NJ
- -------------------------------------------------------------------------------------------------------------------------
TransTech, Inc. Patton Management Able Telcom CA
formerly Corp. Ownership: 80%
MFS TransTech, Inc. Ownership: 100% Venezuela
Ownership: 85% Tampa, FL
Mt. Laurel, NJ
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Southern Aluminum & Transportation Safety Able Telcom Do
Steel Corp. Contractors, Inc. Brasil, LTDA
Ownership: 100% Ownership: 100% Ownership: 99.9%
Irondale, AL Tampa, FL Brazil
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Specialty Electronic Able Able Wireless, Inc.
Systems, Inc. Telecommunications & Ownership: 100%
Ownership: 100% Power, Inc. Ft. Lauderdale, FL
Chantilly, VA Ownership: 100%
Leesburg, FL
-----------------------------------------------------------------------
</TABLE>
The service provided by each group is as follows:
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ORGANIZATIONAL GROUP SERVICE PROVIDED
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Network Services ................. Design, development, engineering,
installation, construction, operation and
maintenance services for telecommunications
systems.
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Network Development............... Established subsequent to October 31, 1999,
to own, operate and maintain local and
regional telecommunication networks.
- --------------------------------------------------------------------------------
Transportation Services........... Design, development, integration,
installation, construction, project
management, maintenance and operation of
automated toll collection systems.
- --------------------------------------------------------------------------------
Construction...................... Design, development, installation,
construction, maintenance and operation of
electronic traffic management and control
systems, and road signage.
- --------------------------------------------------------------------------------
Communications Development........ Design, installation and maintenance
services to foreign telephone companies in
South America.
- --------------------------------------------------------------------------------
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HISTORICAL DEVELOPMENT OF BUSINESS
The Company was incorporated in 1987 as "Delta Venture Fund, Inc.," a Colorado
corporation. Able adopted its current name in 1989 and changed its corporate
domicile to Florida in 1991. Commencing in mid-1992 until mid-1994, 95 percent
of the Company's revenues and profits were derived from telecommunication
services provided primarily through two majority owned subsidiaries located in
Caracas, Venezuela. These services were provided to one customer, CANTV, the
Venezuelan national telephone company. To decrease its exposure to foreign
markets, in 1994, Able expanded its business focus by marketing its services in
the southeastern United States, with the acquisition of Florida-based
Transportation Safety Contractors, Inc. and its affiliates (collectively
"TSCI"). TSCI installs and maintains traffic control signage, signalization and
lighting systems and performs outside plant telecommunication services. The
majority of TSCI's business is conducted in Florida and Virginia with these
states' respective Departments of Transportation and various city and county
municipalities.
To further expand in the domestic market and to facilitate a continued
acquisition program, the Company acquired the common stock of H.C. Connell, Inc.
("Connell") in December 1995. Connell performs primarily outside plant
telecommunication and electric power services for local telephone and utility
companies in central Florida. Connell was renamed Able Telecommunications and
Power, Inc. ("ATP") in January 1999. In October 1996, Able acquired the common
stock of Georgia Electric Company ("GEC"), headquartered in Albany, Georgia. GEC
operates in eight southeastern states and specializes in the installation,
testing and maintenance of intelligent highway and communication systems
including computerized traffic management, wireless and fiber optic data
networks, weather sensors, voice data and video systems and computerized
manufacturing and control systems. In December 1996, Able acquired the common
stock of Dial Communications, Inc. ("Dial") of Tallahassee, Florida. At that
time, Dial provided outside and inside plant telecommunication services to the
regional Bell operating company, other local and long distance telephone
companies, private businesses and universities. Able has subsequently
discontinued Dial's operations. In April 1998, Able acquired the common stock of
Patton Management Company ("Patton") of Atlanta, Georgia which provides advanced
telecommunication network services to upgrade existing networks and to provide
connectivity to office buildings, local and wide area networks.
In July 1998, in a transaction that increased Able's revenues by approximately
300 percent, the Company acquired the network construction and transportation
systems business of MFS Network Technologies, Inc. ("MFSNT") from MCI WorldCom,
Inc. ("WorldCom"). MFSNT was then divided into two entities, 1) the network
construction business became MFS Network Technologies, Inc. and 2) the
transportation systems business became MFS Transportation Systems, Inc. As part
of the MFSNT acquisition, the Company, WorldCom and MFSNT entered into a Master
Services Agreement (the "WorldCom Master Services Agreement") pursuant to which
the Company agreed to provide telecommunication infrastructure services to
WorldCom on a cost-plus 12 percent basis for a minimum of $40.0 million per
year. The aggregate sum payable to the Company for the five-year contract is
guaranteed to be no less than $325.0 million, subject to certain adjustments. To
achieve these established minimums, WorldCom has agreed to award the Company at
least 75 percent of all WorldCom's outside plant work related to its local
network projects up to $500.0 million and the Company has agreed to accept and
perform work orders from WorldCom for as much as $130.0 million of services
during each year of the five-year contract. The Company has also agreed that
WorldCom will have met all of its commitments to the Company, to the extent that
payments made to the Company reach an aggregate of $500.0 million at any time
during the five-year term of the contract.
In July 1999, the Company entered into a teaming agreement with 186K.Net, Co.
(the "186K Agreement"), a technology firm and hosting facility, to combine their
respective expertise in infrastructure engineering/design and high-end Internet
technology to deliver high-speed Internet connectivity, telecommunications and
systems integration solutions. Under the 186K Agreement, the Company will focus
on infrastructure build-outs and 186K.Net, Co. will focus on the delivery of
high-end Internet services. Included in the 186K Agreement is a deferred value
added equity swap that would allow either party to benefit by an increase in
market capitalization value over a three year period (refer to Exhibit 2.6 for
more detail).
In November 1999 (subsequent to the fiscal year end to which this Form 10-K
relates), the Company acquired the common stock of Southern Aluminum and Steel
Corporation ("SASCO") and Specialty Electronic Systems, Inc. ("SES") which
together provide expertise in design, installation and project implementation of
advanced highway communication networks and Intelligent Transportation Systems.
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In January 2000 (subsequent to the fiscal year end to which this Form 10-K
relates), Able established Able ICP, Inc. ("Able ICP") which will own, operate
and maintain local and regional telecommunication networks as part of Able's
Network Development Group. Able ICP is a development company that is expected to
require significant capital expenditures related to network construction and
which is not expected during fiscal 2000 to generate significant net income or
earnings before interest, depreciation, taxes and amortization. The Company's
ability to grow Able ICP and to implement its business plan will be dependent on
the Company's ability to fund its capital expenditure needs, either internally
or through borrowings and the sale of equity. No assurance can be given that the
Company will be able to meet Able ICP's funding needs on a timely basis or at
all, on terms acceptable to the Company, or that Able ICP will ever be
profitable.
In compliance with a contractual obligation with WorldCom, effective February
2000, all subsidiaries bearing "MFS" as part of their name were changed. MFS
Network Technologies, Inc. changed its name to Adesta Communications, Inc.
("Adesta Communications"), MFS Transportation Systems, Inc. changed its name to
Adesta Transportation, Inc. ("Adesta Transportation") and MFS TransTech, Inc.
changed its name to TransTech, Inc. In conjunction with these name changes, the
Company intends to present a proposal to its shareholders to change its name to
"The Adesta Group, Inc." at the next annual meeting of shareholders.
DISCLAIMER REGARDING FORWARD-LOOKING STATEMENTS
In the discussion in this Annual Report regarding the Company's business, and
that of its subsidiaries and Organizational Groups, any statement of its future
expectations, including without limitation, future revenues and earnings, plans
and objectives for future operations, future agreements, future economic
performance or expected operational developments and all other statements
regarding the future are "forward-looking" statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, Section 21E of the
Securities Exchange Act of 1934, as amended, and as that term is defined in the
Private Securities Litigation Reform Act of 1995. The Company intends that the
forward-looking statements be subject to the safe harbors created thereby. These
forward-looking statements are based on the past financial performance of recent
acquisitions and the Company's strategic plans. Although Able believes that its
expectations are based on reasonable assumptions, it can give no assurance that
its expectations will be achieved. The important factors, risks and
uncertainties that could cause actual results to differ materially from those in
the forward-looking statements herein (the "Cautionary Statements") include,
without limitation, the Company's reliance on third parties to complete the
transactions contemplated by the Company, the Company's degree of liquidity,
requirements and existing leverage, including the need to obtain additional
funds to provide working capital for operations, risks associated with debt and
preferred stock service requirements and interest rate fluctuations, risks
associated with Able's ability to continue its strategy of growth through
acquisitions and the integration thereof, risks of international business,
dependence on availability of transmission facilities, regulations risk
including the impact of the Telecommunications Act of 1996, contingent
liabilities and the impact of competitive services and pricing, Able's ability
to make effective acquisitions in the future and to successfully integrate newly
acquired businesses into existing operations, changes in laws and regulations,
including changes in tax rates, accounting standards, environmental laws, and
occupational, health and safety laws, the Company's access to foreign markets,
together with foreign economic conditions, including currency fluctuations, the
effect of, or changes in, general conditions, economic conditions in various
countries within South America, weather conditions that are adverse to Able's
specific businesses, the outcome of litigation, claims and assessments, as well
as other risks referenced from time to time in the Company's filings with the
Securities and Exchange Commission. All subsequent written and oral
forward-looking statements attributable to the Company or persons acting on its
behalf are expressly qualified in their entirety by the Cautionary Statements.
The Company does not undertake any obligations to release publicly any revisions
to such forward-looking statements to reflect events or circumstances after the
date hereof or to reflect the occurrence of unanticipated events. Please refer
to "Going Concern" in Item 7 on Page 30.
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STRATEGY
Able's strategy is to capture an increased share of the market for outsourced
network installation, maintenance and system integration services. The Company
believes that customers will continue to require such services to deploy and
upgrade the fiber optic, coaxial and digital network infrastructure associated
with advancements in technology and the competition created by the convergence
of the telecommunications, computer and media industries. Able intends to
accomplish this objective primarily through strategic acquisitions and internal
growth of existing and complementary lines of business. The Company believes
that the communication services industry is highly fragmented, consisting of a
large number of smaller, regional businesses and presents significant
opportunities for consolidation. The Company plans to target those businesses
with high quality management and strong performance records and to integrate
such acquired operations into the Company's Organizational Groups. The Company
makes no assurances, however, that it will be able to target or acquire
strategic acquisitions on terms beneficial to Able or that its internal growth
will develop as expected.
Additionally, the Company intends to expand its businesses through increased
marketing efforts by broadening the range of services it offers to its
customers. Able believes its current expertise in telecommunications, traffic
management and systems integration services can be expanded to cable television
and other cable and wireless communication systems and is actively seeking
acquisition candidates in areas that complement its existing strengths.
The Company also plans, through Able ICP, to own, operate and maintain local and
regional telecommunication networks.
The Company further expects to achieve margin improvement through
cross-utilization among operating groups of people, equipment and technologies
and through the centralization of certain financial controls, cash and risk
management. Able makes no assurances, however, that it will be able to achieve
projected margin improvements or if attained, that improvements will occur in a
timely manner.
FISCAL YEAR 1999 AND RECENT DEVELOPMENTS
GOING CONCERN
The accompanying consolidated financial statements and financial information has
been prepared assuming that the Company will continue as a going concern. The
Company incurred losses from operations of $1.9 million, net losses of $18.1
million and losses applicable to common stock of $36.8 million during the fiscal
year ended October 31, 1999. Significant payments were also made, both during
and subsequent to October 31, 1999, to redeem the Series B Preferred Stock and
to reduce obligations for loss contracts assumed in 1998 in the acquisition of
MFSNT. The Company has borrowed the maximum available under its existing Credit
Facility and is in default of the related covenants. While the Company is
current with respect to amounts due under the Credit Facility, the lender has
the right to demand payment and the Company has insufficient liquidity to pay
such amounts, if called. The Company has not yet been successful in obtaining
alternative financing and may have insufficient liquidity to fund its continuing
operations. Consequently, there is substantial doubt about the Company's ability
to continue as a going concern.
The Company's continuation as a going concern is dependent upon its ability to
(a) generate sufficient cash flow to meet its obligations on a timely basis, (b)
obtain additional financing as may be required, and (c) ultimately sustain
profitability.
Management's recent actions and plans in regard to these matters are as follows:
1. As part of the Company's ongoing efforts to strategically
align the profitable portions of its business and as a result
of significant turnover and the deterioration of underlying
contracts, the Company discontinued the operations of Dial and
Able Integrated Systems, Inc. ("AIS") during the fiscal year
ended October 31, 1999, which together used cash flows from
operations of approximately $7.4 million and $3.8 million
during the fiscal years ended October 31, 1999 and 1998.
6
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2. As discussed below and in the accompanying consolidated
financial statements, approximately $25.5 million of the
Company's indebtedness was converted to common stock of the
Company subsequent to October 31, 1999.
3. As discussed below and in the accompanying consolidated
financial statements, approximately $6.3 million of the
Company's Series B Preferred Stock was converted to common
stock of the Company and warrants to acquire the Company's
common stock, subsequent to October 31, 1999. Concurrent with
such conversion, the Company's remaining Series B Preferred
Stock was redeemed for approximately $10 million that was
funded through the issuance of $15.0 million of Series C
Convertible Preferred Stock. Warrants to acquire approximately
541,000 shares of Common Stock at varying prices were issued
as part of these transactions (refer to Exhibits 4.16 - 4.24
for more detail).
4. The Company is attempting to obtain a new credit facility with
new financing institutions and is pursuing additional
financing through discussions with other investors.
Able can give no assurance that these measures will provide the intended results
in a timely manner or at all.
REVIEW BY THE SECURITIES AND EXCHANGE COMMISSION
The Company is working to resolve questions by the staff of the Securities and
Exchange Commission ("SEC") regarding certain accounting and other disclosures
made by the Company in connection with the acquisition of MFSNT (the "MFSNT
Acquisition") from WorldCom effective July 2, 1998. As a result of the ongoing
review by the SEC, the Company's Annual Report on Form 10-K for the year ended
October 31, 1998, filed February 24, 1999, as amended March 1, 1999 (as amended,
the "1998 10-K") may be further amended by the Company following completion of
the SEC's review. Additionally, because the Company's Notice of Annual Meeting,
Proxy Statement and Proxy (collectively the "1998 Proxy") for the year ended
October 31, 1998 incorporates the 1998 10-K, the SEC has also not completed its
review of the 1998 Proxy and Able has not been able to hold a shareholder
meeting since April 1998. Once the SEC's reviews have been completed, Able
expects to hold its 1998 Annual Meeting.
While the MFSNT Acquisition closed on July 2, 1998, subsequent negotiations with
WorldCom resulted in a $41.9 million reduction in purchase price. The reduction
related primarily to projected losses on contracts assumed by Able from MFSNT.
The allocation of the purchase price, as reported in the Company's 1998 10-K,
established additional reserves for losses on assumed contracts that exceeded
reserves reflected in the unaudited balance sheet of MFSNT ($11.7 million) as of
July 2, 1998, by $28.8 million. The net assets reported by MFSNT at July 2, 1998
exceeded the adjusted purchase price by approximately the same amount.
The SEC's principal questions have centered on the following:
(1) The allocation of the $28.8 million in additional loss accruals to the
proper preacquisition period in the financial statements of MFSNT.
Resolution of this issue may result in the restatement of MFSNT's
preacquisition financial statements and related pro forma disclosures
included in Able's prior SEC filings.
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(2) The appropriate accounting for obligations to perform under long-term
network operation and maintenance agreements acquired as part of the MFSNT
Acquisition. Refer to Note 22 of the accompanying consolidated financial
statements "Unaudited Quarterly Financial Data" for an explanation of the
Company's accounting for long-term operations and maintenance agreements.
(3) The Company's accounting for its investment in Kanas. Refer to Note 9 of
the accompanying consolidated financial statements, "Investment in Kanas
(Held For Sale)," for an explanation of the Company's accounting for Kanas.
(4) The Company's accounting for the sale during the current year of the NYSTA
conduit. Refer to Note 8 of the accompanying consolidated financial
statements, "Network Assets Held For Sale," for an explanation of the
Company's accounting for the NYSTA conduit sale.
The SEC has not yet agreed with the Company that such accounting for the above
issues is appropriate and may require the Company to further change its
accounting for these matters.
CORPORATE REORGANIZATION
In conjunction with Able's reorganization much of the executive management of
the Company, including the Company's Chief Executive Officer, Chief Accounting
Officer and certain Group Presidents were replaced during fiscal year 1999. The
Company added a Senior Executive Vice President and General Counsel to its
executive staff.
As reflected above, the Company organized its subsidiaries into five main
operating groups (Network Services, Network Development, Transportation
Services, Construction, and Communications Development). Additionally, as part
of the Company's ongoing efforts to strategically align the profitable portions
of its business, the following steps were taken during the fiscal year ended
October 31, 1999 to discontinue the operations of, merge and/or manage
unprofitable subsidiaries:
1. The Company assigned control of certain of its previously
independent operating subsidiaries (Patton and ATP) to the
Construction Group.
2. The Company merged several of its previously independent
operating subsidiaries into currently profitable Construction
Group subsidiaries.
3. As a result of significant turnover and the deterioration of
underlying contracts, the Company discontinued the operations
of Dial and AIS, which together used cash flows from
operations of approximately $7.4 million and $3.8 million
during the fiscal years ended October 31, 1999 and 1998.
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WORLDCOM CONVERSION AGREEMENT
On January 12, 2000, the Company entered into an agreement with WorldCom whereby
WorldCom converted approximately $25.5 million of an original $30.0 million note
("Original WorldCom Note"), issued to WorldCom as part of the MFSNT Acquisition,
into 3,050,000 shares of Common Stock ("WorldCom Conversion Agreement"). The
conversion was based on the January 8, 2000 closing price of Common Stock at
$8.375 per share. The remainder of the Original WorldCom Note, approximately
$4.5 million was converted into an amended and restated note ("New WorldCom
Note"). The New WorldCom Note will bear interest at 11.5 percent and will mature
February 1, 2001.
PURCHASE OF SENIOR NOTES AND SERIES B PREFERRED STOCK
In January 1999, Interfiducia Partners, LLC, a Texas limited liability company
("Interfiducia"), entered into certain letter agreements with Able and the
holders of the Company's Series B Convertible Preferred Stock and Series B
Warrants, (the Series B Preferred Stock and the Series B Warrants collectively
the "Series B Securities"). These letter agreements related to the proposed
purchase by Interfiducia of, among other things, all or a portion of the
outstanding Series B Securities. Able performed due diligence regarding
Interfiducia at that time and all parties continued their respective
negotiations to finalize the contemplated transactions.
Because Able was then in default under certain provisions of the terms of the
Series B Securities, Able believed that it was important to complete the
transfer of all or a portion of the Series B Securities to a party willing to
waive the defaults. Interfiducia was not able to provide the funds necessary to
complete the transactions contemplated by the letter agreements in a timely
manner in order to avoid paying certain premiums and penalties to the holders of
the Series B Securities, which amounts were incurred as a result of the
defaults. As a result, on February 16, 1999, WorldCom advanced the Company $32.0
million ("WorldCom Advance") to facilitate the purchase of 2,785 shares, or
approximately 78%, of the Series B Preferred Stock and $10.0 million principal
amount of senior notes (the "Senior Notes").
The WorldCom Advance is non-interest bearing and is due on November 30, 2000. At
the same time, WorldCom also agreed to make available additional advances to the
Company of up to $15.0 million against amounts otherwise payable pursuant to the
WorldCom Master Services Agreement. These additional advances will accrue
interest at 11.5 percent and are repayable to WorldCom on November 30, 2000. The
repayment of the WorldCom Advance is subordinate to the Company's obligations to
its senior credit facility and certain construction contracts. The WorldCom
Advance was evidenced by a written agreement between Able and WorldCom, dated
February 16, 1999, which was subsequently amended and restated as of April 1,
1999.
Immediately thereafter, Able used the WorldCom Advance to advance funds (the
"Company Advance") to Cotton Communications, Inc. ("Cotton") (which may be
deemed as a Company affiliate). On February 17, 1999, pursuant to certain
purchase agreements between and among Able, Cotton, and the holders of the
Series B Securities (the "February Agreements"), Cotton, in turn, used the
Company Advance to purchase approximately 78 percent of the then outstanding
shares of Series B Preferred Stock, or 2,785 shares of the then 3,564 shares for
an aggregate of $18.9 million, which amounts included any accrued dividends,
interest or penalties, and the accrued obligations under the Senior Notes.
The sole shareholder, officer and director of Cotton was Tyler Dixon. Mr. Dixon
is a partner with the law firm of Raiford, Dixon & Thackston, LLP, which during
fiscal years 1999 and 1998 received approximately $0.3 and $0.1 million,
respectively in legal fees from Able for legal services rendered. Cotton
received no consideration from Able in connection with the transactions.
However, Able agreed to continue to use Mr. Dixon and his firm's legal services
and the Company waived any conflicts that may arise with respect to the
performance of such legal services as a result of Cotton's purchase of the
Series B Preferred Stock.
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Interfiducia continued to state to Able throughout the negotiations with Cotton
and the holders of the Series B Securities and subsequent to the consummations
of the February Agreements that it would acquire Cotton's position in the Series
B Securities. Cotton verbally agreed that, if Interfiducia came forward with
funds shortly after the consummation of the February Agreements, it would sell
certain of the Series B Securities and the Senior Notes to Interfiducia on the
same terms and conditions. Nonetheless, Interfiducia was never able to fund the
proposed acquisition in a timely manner nor was the Company able to obtain
satisfactory due diligence regarding Interfiducia and its principals. As a
result, Interfiducia never acquired Cotton's position.
In connection with the purchase and sale of the Senior Notes and the Series B
Preferred Stock, Cotton and the remaining holders of the Series B Preferred
Stock agreed to either waive all outstanding defaults under such securities or
refrain from exercising any remedies with respect to any such outstanding
defaults until October 31, 1999.
On March 22, 1999, Able redeemed the Senior Notes from Cotton, as well as the
2,785 shares of Series B Preferred Stock in exchange for the cancellation of the
Company Advance made to Cotton on February 17, 1999. The Company also assumed
Cotton's obligation to acquire 630,000 of the Series B Warrants at a price of
$3.00 per Warrant on or before April 30, 1999. The Senior Notes were marked
paid, the 2,785 shares of Series B Preferred Stock were cancelled, and the
Company purchased the 630,000 Series B Warrants at $3.00 per Series B Warrant
(for an aggregate of $1.9 million), at which time the 630,000 Series B Warrants
were canceled. Able also obtained a waiver of all outstanding defaults until
October 31, 1999. On October 31, 1999, the Company entered into a standstill
agreement while negotiating for the redemption/conversion of the then remaining
Series B Securities.
In connection with these transactions and as a result of the WorldCom Advance,
the Company recognized an extraordinary loss of approximately $3.1 million in
the second quarter of fiscal year 1999 on the purchase of the Senior Notes and a
reduction to income of approximately $10.0 million applicable to Common Stock on
the purchase of the Series B Preferred Stock.
SERIES C PREFERRED STOCK ISSUANCE AND SERIES B PREFERRED STOCK
CONVERSION/REDEMPTION
Subsequent to fiscal year end 1999, to finance the redemption of the remaining
Series B Preferred Stock, the Company issued an aggregate of 5,000 shares of
Series C Convertible Preferred Stock ("Series C Preferred Stock") with
detachable warrants ("Series C Preferred Stock Warrants") for $15.0 million. The
Series C Preferred Stock pays dividends at a rate of 5.9 percent of the stated
value ($3,000 per share) per annum and is immediately convertible into Common
Stock at an initial conversion price of $9.35. Commencing six months after the
closing date (February 4, 2000), and then for each six month period thereafter
(each of these dates, a "Series C Reset Date"), the conversion price shall be
recalculated to equal the average closing bid prices for Common Stock for the
ten consecutive trading days preceding the applicable Series C Reset Date,
however:
(a) no conversion price shall be adjusted if a recalculation would result
in a new conversion price that is greater than the current conversion
price, and
(b) if any such recalculation results in a conversion price less than
$4.00, the conversion price shall thereafter be $4.00.
The Series C Preferred Stock Warrants permit the holder to purchase 200,000
shares of Common Stock at an initial price per share of $10.75 which may from
time to time be adjusted. The conversion will be subject to Shareholder
approval.
The terms of the Series C Preferred Stock are complicated. In particular, the
conversion price of the Series C Preferred Stock may be reduced below $4.00 per
share if Able does not file a registration statement covering the Series C
Preferred Stock and the Common Stock to be issued upon conversion of the Series
C
<PAGE>
Preferred Stock by March, 2000 and if the registration statement is not
effective by October 31, 2000 (refer to Exhibits 4.16 - 4.24 for the terms of
the Series C Preferred Stock documents and the redemption of the Series B
Preferred Stock).
WORLDCOM OPTION AND STOCK APPRECIATION RIGHTS
As part of the MFSNT Acquisition, Able granted an option (the "WorldCom Option")
to WorldCom to purchase up to two million shares of the Company's Common Stock
("Common Stock") at an exercise price of $7.00 per share. WorldCom may elect to
exercise some or all of the WorldCom Option on a "cashless" basis rather than
for cash to the extent necessary to ensure that the actual number of shares of
Common Stock issued would not exceed 1,817,941 shares, which amount was based
upon just less than 20% of the then outstanding number of shares of Common
Stock, determined prior to Able executing the merger agreement with WorldCom
dated April 26, 1998, as amended September 9, 1998 (the "MFSNT Agreement"). A
"cashless" exercise means that WorldCom will receive shares of Common Stock with
a total market value equal to the per share excess of the market value of the
common stock over the exercise price multiplied by the number of shares of the
WorldCom Option being exercised. On January 8, 1999, the Company entered into a
modification to the WorldCom Option (the "WorldCom Modification") with WorldCom
which modified the WorldCom Option into stock appreciation rights ("SARs"),
unless and until such time as Able obtains shareholder approval (if ever),
pursuant to the Nasdaq Stock Market, Inc. ("Nasdaq") Marketplace Rule
4460(i)(1)(C) ("Rule 4460(i)(1)(C)"), to approve issuing 20 percent or more of
the Common Stock in connection with the MFSNT Acquisition (based upon the number
of shares outstanding prior to Able executing the MFSNT Agreement).
Under the WorldCom Modification, WorldCom is entitled to participate in an
increase in the value of an aggregate of two million shares of Common Stock. For
each SAR exercised, WorldCom receives an amount equal to the excess of the fair
market value of the Common Stock as of the applicable exercise date over $7.00
(the "Appreciation Amount"). The Appreciation Amount will be paid in cash within
fifteen days of receipt of an exercise notice; provided, however, to the extent
that Able is required to pay more than $10.0 million in any twelve month period
as a result of any exercises of any SARs, the amount of such excess will be
represented by a promissory note, with quarterly payments amortized ratably over
a period of six months at 10% per annum. The exercise period of the SARs granted
commences on the earlier of (1) one business day after the date upon which the
potential issuance of Common Stock under this Agreement is voted upon by the
Company shareholders, and (2) October 1, 2000 (the "Commencement Date"), and
ends on January 2, 2002. To date, no SARs have been exercised.
Payment of any SARs in cash only could materially and adversely effect the
Company's cash flow because (a) of the short time frame to pay for any SARs
exercised (between 15 and 30 days from the date notice is received by the
Company), and (b) the payment owed could be a significant amount, depending on
the number of SARs exercised and the then fair market value of the Common Stock.
Able also will grant to WorldCom, subject to shareholder approval, an equity
award in the form of stock appreciation rights or other equity participation
awards ("WorldCom Equity Awards/Phantom Stock Awards") which is generally
equivalent to up to 700,000 shares of Common Stock, payable in cash, stock, or a
combination of both, at Able's option. The WorldCom Equity Awards will be
convertible, in whole or in part, solely on the following days: July 2, 2000 or
July 2, 2001. On January 8, 1999, Able and WorldCom entered into a written
agreement (the "Intent Agreement") setting forth the terms and conditions of
when the WorldCom Equity Award Agreement (the "Equity Award Agreement") will be
effective. The Intent Agreement also sets forth the specific terms of the
WorldCom Equity Award, in the form of a Stock Appreciation Rights Agreement
("SAR Agreement"). The Intent Agreement provides that until Able obtains
shareholder approval in accordance with Rule 4460(i)(1)(C), the SAR Agreement
will be executed at such time as Able meets certain "Conditions to Issuance".
Additionally, upon the exercise of any WorldCom Equity Awards, any payments may
be made, in Able's sole discretion, in cash, Common Stock, or a combination of
both cash and Common Stock, assuming the Company obtains shareholder approval to
issue any of the payments in Common Stock. To date, the SAR Agreement has not
been executed (and thus no WorldCom Equity Awards have been issued), but it will
be once shareholder approval is obtained to
<PAGE>
issue payments to WorldCom in stock or a combination of stock and cash (up to
the equivalent of a maximum of 700,000 shares).
Able will submit a proposal to the Company's shareholders at its next annual
meeting of shareholders to approve issuing 20 percent or more of the outstanding
Common Stock in connection with the MFSNT Acquisition. If the Company's
shareholders approve Able's proposals (1) the SARs granted under the WorldCom
Modification automatically revert back to the WorldCom Option and the holder
will have the right to purchase an aggregate of 2,000,000 shares of Common Stock
at $7.00 per share through January 2, 2002, and (2) upon the exercise of any
WorldCom Equity Awards, Able would have the option to make the payments in cash,
stock, or a combination of cash and stock, at Able's discretion.
<PAGE>
TEAMING AGREEMENT WITH 186K.NET, CO.
In July 1999, the Company entered into a teaming agreement with 186K.Net, Co.
(the "186K Agreement"), a technology firm and hosting facility, to combine their
respective expertise in infrastructure engineering/design and high-end Internet
technology to deliver high-speed Internet connectivity, telecommunications and
systems integration solutions. Under the 186K Agreement, the Company will focus
on infrastructure build-outs and 186K.Net, Co. will focus on the delivery of
high-end Internet services. Included in the 186K Agreement is a deferred value
added equity that would allow either party to benefit by an increase in market
capitalization value over a three year period (refer to Exhibit 2.6 for more
detail).
ACQUISTION OF SASCO AND SES
On November 5, 1999, the Company acquired all of the outstanding common stock of
Southern Aluminum & Steel Corporation ("SASCO") along with Specialty Electronic
Systems, Inc. ("SES"). SASCO has operations in Birmingham, Cape Canaveral and
Atlanta and has 40 years' experience in surveillance systems, signalization,
Intelligent Transportation Systems ("ITS") and roadway lighting. It provides
expertise in design, installation, and project implementation of advanced
highway communication networks. SES is a systems/integration company in the ITS
market, having designed, fabricated, installed and integrated ITS systems in 11
states from the East Coast to Ohio and Texas.
Consideration for SASCO and SES was 75,000 shares of common stock with a value
of approximately $0.7 million. In addition to the initial consideration, the
Company has provided an earn-out provision to the prior shareholders whereby
additional consideration will be given based on certain performance
measurements. The additional consideration can be earned over a four-year
period. The Company intends to record this transaction using the purchase method
of accounting. The pro forma effect on consolidated results of operations, from
the acquisition of SASCO and SES, is not material.
9
<PAGE>
The earn-out consideration for year one (ending October 31, 2000) shall be
converted into the Company's common stock by dividing the earn-out consideration
by $8. The earn-out consideration for year two through year four shall be
converted into the Company's common stock by dividing the earn-out consideration
by the 52-week average of the closing market price of the Company's common stock
for each respective year.
The consideration shall be paid in shares of the Company's common stock. If the
combined consideration calculated pursuant to the terms of the two agreements,
and which includes the initial consideration and the earn-out consideration,
ever equals 19.9 percent of the total Company common stock issued and
outstanding then any and all consideration in excess of 19.9 percent of issued
and outstanding Company common stock shall be paid in cash or promissory note,
as mutually agreed upon by the Company and the former shareholders, at the time
of payment and shall include interest calculated at a market rate.
On a combined basis, SASCO and SES have total assets of less than $2 million and
are expected to generate third-party revenues during fiscal year 2000 of
approximately $15 million.
SERVICES, MARKETS AND CUSTOMERS
The Company conducts five distinct types of business activities, four of which
are primarily conducted in the United States and one of which is conducted
abroad. Domestically the Company provides network services, network development,
transportation services and construction. Abroad, principally in Venezuela, the
Company conducts communication development activities. Each of these activities
is discussed in more detail below. In most of Able's business activities it
faces competition that may be larger and may have substantially greater
financing, distribution and marketing resources than Able.
NETWORK SERVICES GROUP. The Network Services Group provides telecommunications
network services through two divisions: (i) the Telecommunications Systems
Integration Division provides general contracting services for large-scale
telecommunications projects, and (ii) the Telecommunications Construction
Division specializes in the construction of network projects or project phases.
The Company provides turnkey telecommunications infrastructure solutions through
the Telecommunications Systems Integration Division. As a telecommunications
systems integrator, Able provides "one-stop" capabilities that include project
development, design, engineering, construction management, and on going
maintenance and operations services for telecommunications networks. The
projects include the construction of fiber networks that provide advanced
digital voice, data and video communications and wireless infrastructure
deployment.
The Telecommunications Construction Division provides construction and technical
services for building both outside plant and inside plant telecommunications
systems. Outside plant services are large-scale installation and maintenance of
coaxial and fiber optic cable (installed either aerially or underground) and
ancillary equipment for digital voice, data and video transmissions. These
installations are most often undertaken to upgrade or replace existing
communications networks. Inside plant services, also known as premise wiring,
include design, engineering, installation and integration of telecommunications
networks for voice, video and data inside customers' facilities. Additionally,
Able provides maintenance and installation of electric utility grids and water
and sewer utilities. The Company provides outside plant telecommunications
services primarily under hourly and per unit basis contracts to local telephone
companies. Able also provides these services to long distance telephone
companies, electric utility companies, local municipalities and cable television
multiple system operators.
NETWORK DEVELOPMENT GROUP. The Network Development Group was established
subsequent to October 31, 1999, to design, engineer, construct, operate and
maintain state-of-the-art, 'future proof' (designed for low cost upgrades to
avoid obsolescence), fiber optic networks providing virtually unlimited
bandwidth, and a comprehensive suite of cutting edge multimedia
telecommunications services for users in Tier 3 cities (those with populations
between 100,000 and 250,000).
10
<PAGE>
TRANSPORTATION SERVICES GROUP. The Transportation Services Group provides
"one-stop" electronic toll and traffic management solutions for intelligent
transportation system infrastructure projects, including project development and
management, design, development, integration, installation, engineering,
construction, and systems operation and maintenance. Additionally, Able has and
continues to develop proprietary software and applications designed to support
these systems. The electronic toll and traffic management segment of the
intelligent transportation system industry uses technology to automate toll
collection for bridges and highways allowing for "non-stop" toll collection.
Electronic toll and traffic management systems use advanced scanning devices to
identify a vehicle's type, combined with the user's account information, as the
vehicle passes a tolling station and immediately debits the appropriate toll
from the user's account. In addition, significant support systems must be
developed to maintain electronic toll and traffic management accounts, and
process violations. Able developed automatic vehicle identification technology
jointly with Texas Instruments and used it in many of its electronic toll and
traffic management projects. The Transportation Services Group markets its
services to state and local government transportation departments.
CONSTRUCTION GROUP. The Company's Construction Group installs and maintains
traffic control and signalization devices. These services include the design and
installation of signal devices (such as stoplights, crosswalk signals and other
traffic control devices) for rural and urban traffic intersections, drawbridge
and railroad track signals and gate systems, and traffic detection and data
gathering devices. The Company also designs, develops, installs, maintains and
operates "intelligent highway" communications systems that involve the
interconnection of data and video systems, fog detection devices, remote
signalization or computerized signage. These systems monitor traffic conditions,
communicate such conditions to central traffic control computers, and provide
real-time responses to dynamic changes in traffic patterns and climate
conditions by changing speed limit display devices, lowering traffic control
gates, or changing the text on remote signs and signals. The Company also
installs and maintains computerized manufacturing systems for various industrial
businesses. Many of the functions of the Construction Group, particularly those
involved in intelligent highway systems, complement those of the Network
Services Group.
COMMUNICATIONS DEVELOPMENT GROUP. The Company's Communications Development Group
operates primarily in Venezuela. These activities consist of management of the
joint venture arrangements, which were formed to provide telecommunication
installation and maintenance services to privatized local phone companies. These
joint ventures are in the form of subsidiaries in which the Company has an 80%
voting and ownership interest and a 50% share of profits and losses. In 1996,
the Communications Development Group expanded its communication development
activities to include the marketing to Central and South American telephone
companies of NeuroLAMA, an internally developed proprietary telephone call
record and data collection system. Significant capital expenditures will be
required to install NeuroLAMA in South America.
11
<PAGE>
INDUSTRY AND GEOGRAPHIC AREA SEGMENT INFORMATION
Sales to unaffiliated customers, income (loss) from operations, and identifiable
assets pertaining to the Groups in which the Company operates are presented
below (in thousands).
<TABLE>
<CAPTION>
For the Fiscal Year Ended October 31,
----------------------------------------------------------
1999 1998 1997
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales to unaffiliated customers:
Network Services $260,354 $62,243 $ --
Transportation Services 39,394 24,639 --
Construction 113,948 125,270 82,171
Communication Development (International) 4,869 5,329 4,163
- ----------------------------------------------------------------------------------------------------------------------
$418,565 $217,481 $86,334
- ----------------------------------------------------------------------------------------------------------------------
Income (loss) from operations:
Network Services $ 14,746 $ 6,272 $ --
Transportation Services (10,618) 2,586 --
Construction (5,730) 1,718 4,824
Communication Development (International) 346 182 17
Unallocated Corporate Overhead (628) 651 --
- ----------------------------------------------------------------------------------------------------------------------
$ (1,884) $ 11,409 $ 4,841
- ----------------------------------------------------------------------------------------------------------------------
Identifiable assets:
Network Services $139,460 $159,660 $ --
Transportation Services 50,178 48,830 --
Construction 66,667 71,941 44,751
Communication Development (International) 3,813 4,496 2,509
Corporate 1,915 5,833 3,086
- ----------------------------------------------------------------------------------------------------------------------
$262,033 $290,760 $50,346
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
DEPENDENCE UPON KEY CUSTOMERS
The Company derives a significant portion of its revenues from a few large
customers. Those customers are as follows:
<TABLE>
<CAPTION>
Revenue for the Percentage of Total Revenues
Fiscal Year Ended During The Fiscal Years Ended
October 31, October 31,
Customer Operating Group 1999 1999 1998 1997
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
New Jersey Consortium Transportation and Network Services $78,515 18% 7% --
WorldCom Network Services 61,636 15% 14% --
Williams Communications, Inc. Network Services 49,621 12% -- --
Cooper Tire Company Construction 13,050 3% 6% 15%
Florida Power Corp. Construction 13,514 3% 2% 9%
State of Illinois (ISTHA) Network Services 11,680 2% 8% 12%
</TABLE>
MFSNT is party to multiple contracts with the New Jersey Consortium ("New Jersey
Consortium Contracts") which includes the New Jersey Turnpike Authority, New
Jersey Highway Authority, Port Authority of New York and New Jersey, South
Jersey Transportation Authority, State of Delaware Department of Transportation.
The New Jersey Consortium Contracts provide for, among other items, MFSNT to
construct and maintain a fully integrated automated toll collection system and
supporting fiber optic network. The estimated gross value of the New Jersey
Consortium Contracts is in excess of $280.0 million. During the fiscal year
ended October 31, 1999, the Company incurred net losses related to the New
Jersey Consortium Contracts of approximately $4.0 million, including penalties
of approximately $4.9 million associated with the failure to meet certain
milestones provided in the contracts. The Company is not currently incurring
additional penalties related to the New Jersey Consortium Contracts.
At October 31, 1999, the Company had billed and unbilled receivables of $18.3
million and $20.4 million related to the New Jersey Consortium, $10.9 million
and $8.7 million related to WorldCom and $6.2 million and $1.1 million related
to Williams Communications, Inc., respectively.
Able believes that a substantial portion of its total revenues and operating
income will continue to be derived from a concentrated group of customers, in
particular the New Jersey Consortium and WorldCom. The loss of the New Jersey
Consortium, WorldCom or any other such customers could have a material adverse
effect on Able's business, financial condition and results of operations.
12
<PAGE>
SUPPLIERS AND RAW MATERIALS
Able has no material dependence on any one supplier of raw materials.
CONTRACTS
The Company has and will continue to execute various construction and other
contracts which may require the Company to, among other items, maintain specific
financial parameters, meet specific milestones and post adequate collateral,
generally in the form of performance bonds. Failure by the Company to meet its
obligation under a contract may result in the loss of the contract and subject
the Company to litigation and various claims, including liquidated damages.
CONSTRUCTION CONTRACTS. For construction contracts, the Company obtains fixed
price or cost plus contracts for projects, either as a prime contractor or as a
subcontractor, on a competitive bid basis. Typically, for prime contracts, a
state department of transportation ("DOT") or other governmental body provides a
set of specifications for the project to qualified contractors. The Company then
estimates the total project cost based on input from engineering, production and
materials procurement personnel. Able then submits a bid along with a bid bond.
For most government-funded projects, the scope of work extends across many
industry segments. In such cases, the Company subcontracts its expertise to a
prime contractor. Able must submit performance bonds on substantially all
contracts obtained. The financial viability of the Company is dependent on
maintaining adequate bonding capacity and any loss of such could have a material
adverse effect on Able.
Government business is, in general, subject to special risks, such as delays in
funding, termination of contracts or subcontracts for the convenience of the
government or for the default by a contractor, reduction or modification of
contracts or subcontracts, changes in governmental policies, and the imposition
of budgetary constraints. The Company's contracts with governmental agencies
provide specifically that such contracts are cancelable for the convenience of
the government.
Contract duration is dependent on the size and scope of the project but
typically is from six months to three years. Contracts generally set forth
date-specific milestones and provide for liquidated damages for failure to meet
the milestones. During fiscal 1999, Able was subject to liquidated damages
relating to the "Violations Processing Center" portion of the New Jersey
Consortium Contract amounting to approximately $4.9 million.
In most cases, Able supplies the materials required for a particular project,
including materials and component parts required for the production of highway
signage and guardrails and the assembly of various electrical and computerized
systems. Aluminum sheeting, steel poles, concrete, reflective adhesive, wood
products, cabling and electrical components are the principal materials
purchased domestically for the production of highway signage and guard railing.
Generally, the supply and costs of these materials has been and is expected to
continue to be stable, and the Company is not dependent upon any one supplier
for these materials. The Company also purchases various components for the
assembly of various electrical, lighting and computerized traffic control
systems. Many of these materials must be certified as meeting specifications
established by the customer. The unavailability of those components could have
an adverse impact on meeting deadlines for the completion of projects which may
subject the Company to liquidated damages; however, the availability of these
materials, generally, has been adequate.
SERVICE CONTRACTS. The Company generally provides telecommunication, cable
television, electric utility and manufacturing system services (i.e.,
non-governmental business) under comprehensive operation and maintenance and
master service contracts that either give Able the right to perform certain
services at negotiated prices in a specified geographic area during the contract
period or pre-qualify the Company to bid on projects being offered by a
customer. Contracts for projects are awarded based on a number of factors such
as price competitiveness, quality of work, on-time completion and the ability to
mobilize equipment and personnel efficiently. Able is typically compensated on
an hourly or per unit basis or, less frequently, at a fixed price for services
performed. Contract duration is either for a specified term, usually one to
three years, or is dependent on the size and scope of the project. In most
cases, the Company's customers supply most of the materials required, generally
consisting of cable, equipment and hardware, and the Company supplies the
expertise, personnel, tools and equipment necessary to perform its services.
13
<PAGE>
SALES AND MARKETING
Able markets its systems integration services through a dedicated sales group.
Its salespeople market directly to existing and potential customers, including
municipalities and other government authorities, telecommunications companies
and utility companies. Able's salespeople work with those responsible for
project development and funding to facilitate network design and funding
procurement.
Typically, the contracting process for systems integration projects entails the
development of a list of qualified bidders and the establishment of a bid
schedule, the distribution of, and response to, a request for proposal ("RFP"),
and the awarding of the contract to an approved service provider. Important
elements in determining the qualifications of a bidder are its reputation, its
previous projects and its ability to secure bonding for the project. The selling
cycle, which is usually 12 to 24 months in duration, is protracted due to the
scope and complexity of the services provided.
Able markets its telecommunications construction services to local and long
distance telephone companies, utility companies, local municipalities and
certain corporations with particular communications needs. In addition, the
Company markets its construction services to certain systems integrators. A
dedicated sales force, as well as members of each subsidiaries' senior
management, actively market Able's services in their defined geographic regions.
Additionally, Able markets its transportation construction services to state and
local departments of transportation, public/private toll authorities and certain
international authorities.
COMPETITION
NETWORK SERVICES GROUP. The Telecommunications Systems Integration Division of
the Network Services Group competes for business in two segments: the
traditional request for proposal ("RFP")/bid based segment for the installation
and integration of infrastructure projects and a less traditional "project
development" segment. Able's largest competitors in the traditional RFP/bid
based segment are telecommunications service providers. The Telecommunications
Systems Integration Division has identified and pursued the "project
development" segment as a "niche" market for its services, providing network
alternatives to large public agencies, utilities and telecommunications service
providers through the use of public-private partnerships and other financing
models unique to the industry. These customers often must choose between
building their own networks or using an existing telecommunication service
provider's network. Once a customer has decided to build its own network, the
Company assists the customer in preparing a viable and customized project
business plan that addresses the customer's specific telecommunications needs,
including budgetary and other concerns. Able also has focused on "project
development" opportunities presenting ownership or participation opportunities
that can generate recurring revenues. The Company believes that no other company
presently provides this kind of complete, turnkey project development service
for these customers. Able can make no assurances, however, that other systems
integration companies will not develop the expertise, experience and resources
to provide services that achieve greater market acceptance or that are superior
in both price and quality to Able's services, or that it will be able to
maintain its competitive position.
The Telecommunications Construction Division competes for business with several
competitors on a much larger scale. In addition, the Telecommunications
Construction Division also competes in a market characterized by a large number
of smaller size private companies that compete for business generally in a
limited geographic area or with few principal customers. The Telecommunications
Construction Division's largest competitors are MasTec, Inc. and Dycom, Inc.
NETWORK DEVELOPMENT GROUP. The competitive environments within the large
metropolitan areas (called Tier 1 cities), such as New York, Los Angeles,
Chicago and Atlanta, already have an Incumbent Local Exchange Carrier ("ILEC")
and multiple Competitive Local Exchange Carriers ("CLECs") competing for their
large, high volume, business base. In addition, due to the high density of
apartment complexes, many have more than one cable company.
In contrast, the Tier 3 cities that the Network Development Group is targeting
typically have the ILEC, one cable company, and in some cases facilities based
CLECs targeting a limited area of businesses. In most cases both the cable
company and the ILEC have legacy infrastructures with very limited capability to
provide modern services.
14
<PAGE>
TRANSPORTATION SERVICES GROUP. The Transportation Services Group believes its
major competitors in the North American market are Lockheed Information
Management Co., a division of Lockheed Martin, and Syntonic Technology, Inc.,
doing business as Transcore ("Transcore").
CONSTRUCTION GROUP. The market in which the Construction Group competes is
characterized by large competitors who meet the experience, bonding and
licensure requirements for larger projects and by small private companies
competing for projects of $3 million or less in limited geographic areas. The
Construction Group's largest competitors include Lockheed Martin, Traffic
Control Devices of Florida and MasTec, Inc. The Construction Group's smaller
competitors are High Power of Florida, MICA Corporation of Texas and Fishback &
Moore. A number of these competitors may be larger, may have substantially
greater financial, distribution and marketing resources, and may have more
established reputations than Able.
COMMUNICATION DEVELOPMENT GROUP. The Communications Development Group competes
for business in the international market, primarily in Latin America. The
operations of the Communications Development Group are in Venezuela and Brazil.
In Venezuela, the market is characterized by a single customer, CANTV, the
telephone company of Venezuela, and a large number of smaller private companies
that compete for business generally in a limited geographic area. In Brazil, the
market consists of a myriad of smaller companies competing for a growing but
limited market, which forces margins down.
BACKLOG
The Company's estimated backlog at January 31, 2000, was as follows:
Operations and
Construction Maintenance
Organizational Group Contracts Contracts Total
- --------------------------------------------------------------------------------
Network Services $408,000 $179,000 $587,000
Transportation Services 140,000 120,000 260,000
Construction 151,000 33,000 184,000
- --------------------------------------------------------------------------------
$699,000 $332,000 $1,031,000
- --------------------------------------------------------------------------------
The Company expects to complete approximately 40% of the total backlog within
the next fiscal year. Due to the nature of the Company's contractual
commitments, in many instances its customers do not commit to the volume of
services to be purchased under a contract but, rather, commit the Company to
perform these services if requested by the customer and commit to obtain these
services from it if they are not performed internally. Many of the contracts are
multi-year agreements, ranging from less than one year to 20 years. The Company
includes the full amount of services projected to be performed over the life of
the contract in backlog due to its historical relationships with its customers
and experience in procurements of this nature. Contract backlog of $500 million
is under performance bonds and the Company may be subject to liquidated damages
for failure to perform in a timely manner. The Company's backlog may fluctuate
and does not necessarily indicate the amount of future sales. A substantial
amount of its order backlog can be canceled at any time without penalty, except,
in some cases, the Company can recover actual committed costs and profit on work
performed up to the date of cancellation. Cancellations of pending purchase
orders or termination or reductions of purchase orders in progress from its
customers could have a material adverse effect on its business, operating
results and financial condition. In addition, there can be no assurance as to
customers' requirements during a particular period or that such estimates at any
point in time are accurate.
RESEARCH AND DEVELOPMENT: PROPRIETARY TECHNOLOGY AND RIGHTS
The Company acquired proprietary software from MFSNT in the MFSNT Acquisition
including applications at the lane, plaza, host, and customer service center
levels within a sophisticated electronic toll collection system architecture.
Prior to the MFSNT Acquisition, MFSNT had also developed a proprietary video and
data multiplexing system used for surveillance, monitoring, and system audit
purposes. The benefits of this proprietary software include reduced operating
costs, non-stop tolling, reduced traffic congestion, efficient traffic
management, and increased revenue accountability. However, Able can make no
assurances that products will not be developed in the
15
<PAGE>
future that will produce the same or a better result or be produced in a more
economical manner. Below is a summary of certain of Able's proprietary
applications and technologies:
LANE SYSTEM APPLICATIONS. The lane system application is modular in nature to
allow and accommodate tolling operations in various configurations in accordance
with a customer's specific needs and operational requirements. The lane
controller application is the heart of the lane system. It runs on a standard PC
and under a real-time operating environment. The lane controller controls the
various in-lane equipment items and gathers data from the in-lane sensors to
provide transaction records for each vehicle that travels through a toll lane.
The lane controller coordinates and controls revenue collection events and
transactions. The lane controller also interacts with and can recognize
individual vehicles, as well as cars that evade toll collection. The transaction
data created at the lane level is sent to the plaza computer system for further
processing. The lane controller also has the unique capability of operating in a
completely autonomous mode if communications to the plaza system are disrupted.
PLAZA SYSTEM APPLICATIONS. The plaza system is the central repository of the
transaction data received from each toll lane. The data is stored in a database
and is then used for reporting and tracking purposes. Traffic reports, revenue
reports, and collector performance reports are among several reports that can be
generated from the plaza system. A real-time plaza supervisor system allows
client personnel to monitor traffic and collection events (as well as equipment
and security status) as each event actually occurs. The data received at the
lane plaza system level is forwarded to the host system for further processing
and review.
HOST SYSTEM APPLICATIONS. The primary role of the host application is to provide
the client with the capability to generate system-wide reports for traffic and
revenue, as well as audit and reconciliation capabilities. The host system also
acts as the primary interface to the customer service center ("CSC") system and
is the "conduit" for electronic toll transactions and patron account
information. The host application also controls the download of information to
the plaza and lane systems, such as toll schedules, employee identification
information, patron account status, time synchronization, and other information
required for daily operation of the system.
CSC SYSTEM APPLICATIONS AND SERVICES. The Company provides numerous CSC systems
and services, including hardware and software system applications and CSC
staffing, operations and management. The CSC application is a highly reliable
and robust, user friendly, efficient and fully auditable software application.
The system incorporates automated internal controls for audit and reconciliation
purposes and also employs a flexible design to accommodate potential changes to
customer policies, procedures, and/or operations.
VIDEO TRANSPORTATION DATA MULTIPLEXER ("VTDM") PRODUCT. The VTDM system is a
patented product that compiles video and data based records for every vehicle
that travels through a monitored lane. The VTDM provides auditors, toll
supervisors and other Customer personnel with the unique capability to record,
review, and analyze lane event data in an efficient and cost-effective manner.
This system can also be used for problem resolution relating to system and/or
toll collector performance. The VTDM system provides information (lane event
data) in the form of video and transaction event text (text-over-video display).
Cameras and VCRs are used to visually record lane activity on a 24-hour basis.
NEUROLAMA. The Communications Development Group ("CDG") has incurred in excess
of $1.0 million of costs developing its proprietary software, NeuroLAMA.
NeuroLAMA is a telephone call record and data collection system. NeuroLAMA helps
telephone companies increase revenues by decreasing fraud, eliminating
misoperation, and increasing efficiency through their analog telecommunications
systems. NeuroLAMA's quality, reliability and uniqueness of design are proving
far superior to any competing system. CDG estimates that roughly 250 million
analog lines worldwide could benefit from the implementation of NeuroLAMA. The
software is being marketed throughout South America. Currently, CDG has not
capitalized any costs related to this software.
Able relies on a combination of contractual rights, patents, trade secrets,
know-how, trademarks, non-disclosure agreements, licenses and other technical
measures to establish and protect the Company's proprietary rights to protect
its proprietary applications and technologies. To the extent necessary, Able
intends to vigorously defend any and all rights Able has, now or in the future,
in its proprietary applications and technologies. However, the Company can make
no assurances that it will be successful in pursuing any of its rights or, if
successful, that it will be timely.
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SEASONALITY
The Company operates throughout the United States, and its results of operations
are not significantly impacted by seasonal changes.
EMPLOYEES
At January 31, 2000, the Company and its subsidiaries had approximately 2,000
employees. The number of employees considered as laborers can vary significantly
according to contracts in progress. Such employees are generally available to
the Company through an extensive network of contacts within the communications
industry.
ITEM 2. PROPERTIES
The Company's corporate offices are in Roswell, Georgia, where it occupies 6,600
square feet under a lease that expires July 31, 2004. The Company also occupies
5,110 square feet of office space under a lease that expires January 31, 2004 in
West Palm Beach, Florida. The Company leases 35,815 square feet of office space
in Omaha, Nebraska, under a lease that expires September 30, 2004 and which
houses Adesta Communications, and 40,111 square feet in Mt. Laurel, New Jersey,
under a lease that expires February 28, 2003 and which houses Adesta
Transportation. The Company leases 6,400 square feet of space in Fairbanks,
Alaska, for a network operations center. The Company leases 6,800 square feet of
space in Fort Lauderdale, Florida, under a lease, which expires September 30,
2003, which facility is presently available for sublet. The Company leases
several field offices and numerous smaller offices. The Company also leases on a
short-term or cancelable basis temporary equipment yards or storage locations in
various areas as necessary to enable it to efficiently perform its service
contracts.
The Company owns (subject to a mortgage) and operates a 10,000 square foot
facility for operations based in Chesapeake, Virginia. The Company's Venezuelan
subsidiaries own and operate from a 33,000 square foot floor of an office
building located in Caracas, Venezuela, and lease an additional 50,000 square
feet of covered parking and shop facilities. The Company also owns a 15,000
square foot facility located on approximately three acres of land for operations
in Tampa, Florida.
The Company believes that its properties are in good condition and adequate for
current operations and, if additional capacity becomes necessary due to growth,
other suitable locations are available in all areas where it currently does
business. See "Commitments and Contingencies" in the Notes to the Consolidated
Financial Statements for additional information relating to leased facilities
which includes mortgage/lease obligations. Certain of the Company's properties
are subject to federal, state and local provisions involving the protection of
the environment. Compliance with these provisions has not had and is not
expected to have a material effect upon the Company's financial position.
ITEM 3. LEGAL PROCEEDINGS
In May 1998, SIRIT Technologies, Inc. ("SIRIT") filed a lawsuit in the United
States District Court for the Southern District of Florida, against the Company
and Thomas M. Davidson, who has since become a member of the Company's Board of
Directors. Mr. Davidson resigned in January 2000. SIRIT asserts claims against
the Company for tortuous interference, fraudulent inducement, negligent
misrepresentation and breach of contract in connection with the Company's
agreement to purchase the shares of MFSNT and seeks injunction relief and
compensatory damages in excess of $100.0 million.
In 1998, Shipping Financial Services Corp. ("SFSC") filed a lawsuit in the
United States District Court for the Southern District of Florida against the
Company, and certain of its officers. SFSC asserts claims under the federal
securities laws against the Company and four of its officers that the defendants
allegedly caused the Company to falsely represent and mislead the public with
respect to two acquisitions, COMSAT and MFSNT, and the ongoing financial
condition of the Company as a result of the acquisitions and the related
financing of those acquisitions. SFSC seeks certification as a class action on
behalf of itself and all others similarly situated and seeks unspecified damages
and attorneys' fees.
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In 1997, Bayport Pipeline, Inc. ("Bayport") filed a lawsuit against MFSNT
seeking a declaratory judgment concerning the rights and obligations of Bayport
and MFSNT under a Subcontract Agreement that was entered into on May 1, 1997
related to the NYSTA contract. The matter was referred to arbitration in January
1999. The total amount sought was not less than $5.5 million and subsequent to
year-end was increased to $19 million.
In 1997, U.S. Public Technologies, Inc. ("USPT") filed a lawsuit in the United
States District Court for the Southern District of California, (San Diego),
against MFSNT for breach of contract, breach of an alleged implied covenant of
good faith and fair dealing, tortious interference, violation of the California
Unfair Competition Act, promissory estoppel and unjust enrichment in connection
with a Teaming Agreement between MFSNT and USPT concerning the Consortium
Regional Electronic Toll Collection Implementation Program in the state of New
Jersey. In this lawsuit, USPT seeks actual damages in excess of $8.5 million and
unspecified exemplary damages. Discovery had not yet commenced in this lawsuit.
In 1999, Newbery Alaska, Inc. ("Newbery") filed a demand for arbitration seeking
approximately $3.8 million. This dispute arises out of Newbery's subcontract
with MFSNT related to the fiber optic network constructed by MFSNT for Kanas.
Newbery's claims are for the balance of the subcontract, including retainage and
disputed claims for extras based on alleged deficiencies in the plans and
specifications and various other alleged constructive change orders. The parties
are currently conducting discovery. Arbitration hearings on this matter should
take place in the spring or summer of 2000.
In 1998, Alphatech, Inc. ("Alphatech") filed a lawsuit in the U.S. District
Court in Massachusetts. This suit alleges ten counts, including breach of
Teaming Agreements on the E-470 project and the New Jersey Regional Consortium
project, breach of implied duty of good faith and fair dealing on both projects,
misappropriation of trade secrets, deceit, violation of Massachusetts General
Laws Chapter 93A, promissory estoppel, quantum meruit, and unjust enrichment.
Alphatech's claim is for $15 million. A hearing for a summary judgment is
scheduled in May 2000.
In 1998, T.A.M.E. Construction, Inc. ("TAME") sued for breach of contract,
promissory estoppel, discrimination and defamation related to certain contracts
performed by GEC. TAME alleges that it was wrongfully terminated as a
subcontractor. TAME claims contract damages in the amount of $250,000, punitive
damages for discrimination of $1,000,000 and defamation damages of an additional
$1,000,000. GEC has moved for summary judgment. This matter is not set for
trial.
The Company is subject to a number of shareholder and other lawsuits and claims
for various amounts which arise out of the normal course of its business. The
Company intends to vigorously defend itself in these matters. The disposition of
all pending lawsuits and claims is not determinable and may have a material
adverse effect on the Company's financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of the year covered by this Annual Report on Form 10K
for the fiscal year ended October 31, 1999, no matters were submitted to a vote
of the Company's security holders.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS
The Company's common stock, par value $.001 per share ("Common Stock"), began
trading on the National Association of Securities Dealers Automatic Quotation
("Nasdaq") System on February 24, 1994 under the symbol "ABTE." Prior to the
Nasdaq listing, the Company's Common Stock was sporadically traded on the
Over-The-Counter Bulletin Board, under the same symbol, since September 15,
1988, the date of the Company's initial public offering. Set forth below is the
range of the high and low closing bid quotations of the Common Stock for each
quarter within the last two fiscal years as reported by Nasdaq.
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MARKET PRICE OF COMMON STOCK AND DIVIDEND POLICY
The Common Stock is traded on the Nasdaq National Market System (NMS) under the
trading symbol "ABTE." The following table sets forth the high and low sale
prices for the Common Stock for each fiscal quarter indicated below.
Fiscal Quarter 1998 1999
- --------------------------------------------------------------------------------
High Low High Low
First Quarter 9-13/16 9-5/8 12-3/8 5-1/4
Second Quarter 12-7/16 7-5/16 11-9/16 5-3/4
Third Quarter 20-5/16 9-3/8 12-15/16 5-13/16
Fourth Quarter 10-5/8 1-3/4 10-1/16 7-1/2
At February 4, 2000, there were approximately 412 shareholders of record of the
Company's Common Stock. No cash dividends have been declared by the Company on
its Common Stock since its inception and the Company has no present intention to
declare or pay cash dividends on the Common Stock in the foreseeable future. The
Company intends to retain any earnings, which it may realize in the foreseeable
future to finance its operations. The terms of the Company's Series C Preferred
Stock and the Secured Credit Facility restrict the payment of cash dividends on
the Company's Common Stock. See "Management's Discussion of Financial Condition
and Results of Operations - Liquidity and Capital Resources," and "Consolidated
Audited Financial Statements of the Company."
SENIOR NOTES
On January 6, 1998, the Company sold $10.0 million in principal amount of its
12% Senior Subordinated Notes Due January 6, 2005 (the "Senior Notes") in a
non-public offering exempt from registration pursuant to an exemption from
registration pursuant to Section 4(2) of the Securities Act of 1933, as amended
(the "Securities Act"). The investors were provided with, or otherwise had
access to information, including financial information, about the Company. The
Senior Notes were sold to John Hancock Life Insurance Company, John Hancock
Variable Life Insurance Company and Signature 1A (Cayman), Ltd. The Company used
the proceeds to fund working capital needs.
As part of the Company's offering of the Senior Notes, the Company issued to the
holders thereof warrants to purchase in the aggregate 409,505 shares of Common
Stock. The warrants are exercisable at an exercise price of $8.25 per share,
commencing on the earlier of (i) January 6, 1999, or (ii) the merger or
consolidation of the Company with or into another entity or the sale of all or
substantially all of the Company's assets to another entity. The Senior Notes
were purchased from the holders by the Company effective February 17, 1999 and
subsequently canceled.
SERIES A CONVERTIBLE PREFERRED STOCK CONVERSIONS
During the year ended October 31, 1998, the Company received conversion notices
from the holders of the Company's Series A Preferred Stock and converted 995
Series A Preferred Shares, as defined below, into 920,946 shares of Common
Stock. In addition, 30,000 warrants related to the Series A Preferred Stock were
exercised during the year ended October 31, 1998. In each case, the issuance of
the common stock was undertaken upon conversion of Series A Preferred Stock then
held by the purchaser and was issued pursuant to an exemption from registration
under Section 4(2) of the Securities Act of 1933. The resale of such common
stock by the purchaser is registered on a Registration Statement on Form S-3
(No. 333-22105).
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The Series A Preferred Stock that was converted, as set forth above, was issued
on December 20, 1996 in a private placement transaction (the "Private
Placement"), exempt from registration, pursuant to Section 4(2) of the
Securities Act of 1933, as amended (the "Securities Act") for a total of 1,000
shares (the "Series A Preferred Shares") of the Company's Series A Preferred
Stock, par value $.10 per share. The investors were provided with, or otherwise
had access to, information, including financial information concerning the
Company. In connection with the Private Placement, the Company also issued
warrants totaling 200,000 shares of the Company's Common Stock (the "Series A
Warrants"). The number of shares purchasable pursuant to the Warrants was
subsequently reduced pursuant to its terms to an aggregate of 62,000 shares at
October 31, 1998. The purchasers paid the Company $6.0 million for the Series A
Preferred Shares and the Warrants. The Private Placement was effected pursuant
to a Series A Preferred Stock Agreement by and among the purchasers and the
Company dated December 20, 1996 (the "Agreement"). The Warrants became
exercisable on December 20, 1997. No Series A Preferred Shares remain
outstanding following the conversions effected during fiscal 1998.
The Series A Warrants are exercisable at a purchase price per share equal to
$9.82; provided, however, if there is an effective registration statement
covering the shares issuable upon the exercise of the Series A Warrants, the
purchasers may exercise the Series A Warrants in whole or in part in exchange
for the number of shares of Common Stock equal to the product of (i) the number
of shares as to which the Series A Warrants are being exercised multiplied by
(ii) a fraction, the numerator of which is the "Market Price" (as defined in the
Series A Warrants) less $9.82, and the denominator of which is the Market Price.
SERIES B CONVERTIBLE PREFERRED STOCK CONVERSIONS
During the fiscal year ended October 31, 1998, the Company received conversion
notices from certain holders of the Company's Series B Preferred Stock to
convert an aggregate of 436 shares of Series B Preferred Stock. In connection
with the conversion of such shares, the Company issued an aggregate of 1,007,927
shares of Common Stock, pursuant to an exemption from registration under Section
4(2) of the Act. The conversion price per share of Series B Preferred Stock was
approximately $2.18. Said conversion took place between September 14, 1998 and
October 2, 1998.
On June 30, 1998, Able issued to the RoseGlen Group and the Palladin Group (as
defined below) an aggregate of (i) 4,000 shares of Series B Preferred Stock and
(ii) Series B Warrants to purchase an aggregate of 1,000,000 shares of Common
Stock at a then exercise price of $19.80 per share. Able received total gross
proceeds of $20.0 million from the sale of the Series B Securities, offset by
$1.9 million in expenses associated with the issuance of the Series B
Securities. The Company sold the Series B Securities to finance part of the
purchase price of MFSNT. The sale of the Series B Securities was issued pursuant
to an exemption pursuant to Section 4(2) and Rule 506 of Regulation D of the
Securities Act.
The purchasers of the Series B Securities included two groups of accredited
investors (for a total of seven investors):
o The RoseGlen Group (the "RoseGlen Group"), which purchased
2,000 shares of Series B Preferred Stock and acquired Warrants
to purchase 370,000 shares of Common Stock, and
o The Palladin Group (the "Palladin Group"), which purchased
2,000 shares of Series B Preferred Stock and acquired Warrants
to purchase 630,000 shares of Common Stock.
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Prior to February 4, 2000, the RoseGlen Group and the Palladin Group owned the
following Company securities:
Series B Preferred Warrants Common Stock(2)
Stock
- -----------------------------------------------------------------------------
The RoseGlen Group 375 370,000 461,907
The Palladin Group(1) 404 -- 546,020
- -----------------------------------------------------------------------------
Total 779 370,000 1,007,927
- -----------------------------------------------------------------------------
(1) On May 7, 1999, the Company purchased 630,000 Series B Warrants owned
by the Palladin Group at $3.00 per share and, as a result, such
Warrants were retired.
(2) Represents shares of Common Stock issued upon conversion of an
aggregate of 436 shares of Series B Preferred Stock.
In January 1999, Interfiducia Partners, LLC, a Texas limited liability company
("Interfiducia"), entered into certain letter agreements with Able, the RoseGlen
Group and/or the Palladin Group relating to the proposed purchase by
Interfiducia of, among other things, all or a portion of the outstanding Series
B Securities from the RoseGlen Group and the Palladin Group. The Company
undertook due diligence regarding Interfiducia at that time and all parties
continued their respective negotiations to finalize the contemplated
transactions.
Because the Company was then in default under certain provisions of the terms of
the Series B Securities, Able believed that it was important to complete the
transfer of all or a portion of the Series B Securities to a party willing to
waive the defaults. Interfiducia was not able to provide the funds necessary to
complete the transactions contemplated by the letter agreements in a timely
manner in order to avoid paying certain premiums and penalties to the holders of
the Series B Securities. As a result, on February 16, 1999, WorldCom advanced
the Company $32.0 million ("WorldCom Advance") to facilitate the purchase of (i)
2,785 shares, or approximately 78 percent of the outstanding Series B Preferred
Stock and (ii) the outstanding $10.0 million principal amount of the Company's
12 percent Senior Subordinated Notes originally due January 6, 2005 (the "Senior
Notes"). The WorldCom Advance is non-interest bearing, and is due on November
30, 2000. At the same time, WorldCom also agreed to make available additional
advances to the Company of up to $15.0 million against amounts otherwise payable
pursuant to the WorldCom Master Services Agreement. These additional advances
would be repayable to WorldCom on November 30, 2000. The repayment of the
WorldCom Advance is subordinate to the Company's obligations to its senior
credit facility. The WorldCom Advance was evidenced by a written agreement
between Able and WorldCom dated February 16, 1999, which was subsequently
amended and restated as of April 1, 1999.
Immediately thereafter, the Company, in turn, used the WorldCom Advance to
advance funds (the "Company Advance") to Cotton Communications, Inc., which may
be deemed an affiliate of the Company. On February 17, 1999, pursuant to certain
purchase agreements between and among the Company, Cotton, the Palladin Group
and/or the RoseGlen Group (collectively the "February Agreements"), Cotton, in
turn, used the Company Advance to purchase approximately 78 percent of the
outstanding shares of Series B Preferred Stock, or 2,785 shares of the 3,564
shares outstanding (1,425 shares from the RoseGlen Group for $11.0 million and
1,360 shares from the Palladin Group for $7.85 million, which amounts included
any accrued dividends, interest or penalties), as well as the accrued
obligations under the Senior Notes.
The sole shareholder, officer and director of Cotton was Tyler Dixon. Mr. Dixon
is a partner with the law firm of Raiford, Dixon & Thackston, LLP, which, during
fiscal year 1999 and 1998, received approximately $0.3 million and $0.1 million
in legal fees from the Company. Cotton received no consideration from Able in
connection with the transactions. However, the Company agreed to continue using
the legal services of Mr. Dixon and the Company waived any conflicts that may
arise with respect to the performance of such legal services as a result of
Cotton's purchase of the Series B Preferred Stock. See "Certain Relationships
and Related Party Transactions" for a discussion concerning the consulting
agreement between Mr. Dixon and the Company dated January 1, 1999 and effective
April 1, 1999 and the grant of stock options to Mr. Dixon.
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Interfiducia continued to state to the Company throughout Cotton's negotiations
with the Palladin Group and the RoseGlen Group and subsequent to the
consummation of the February Agreements that it would acquire Cotton's position.
Cotton verbally agreed that, if Interfiducia came forward with funds shortly
after the consummation of the February Agreements, it would sell certain of the
Series B Securities and the Senior Notes to Interfiducia on the same terms and
conditions. Nonetheless, Interfiducia was never able to fund the proposed
acquisition in a timely manner nor was the Company able to obtain satisfactory
due diligence regarding Interfiducia and its principals. As a result,
Interfiducia never acquired Cotton's position.
In connection with the purchase and sale of the Senior Notes and the Series B
Preferred Stock, Cotton and the remaining holders of the Series B Preferred
Stock agreed to either waive all outstanding defaults under such securities or
refrain from exercising any remedies with respect to any such outstanding
defaults until October 31, 1999. During this period of time, the Company agreed
to use its best efforts to have declared effective the Registration Statement
covering the resale of shares of Common Stock underlying the remaining Series B
Securities (as well as underlying the WorldCom Option and the WorldCom Equity
Award as described in Proposal No. 5). The October 31, 1999 deadline was
extended from an initial date of December 27, 1998. To date, the Registration
Statement has not been declared effective and, while a "triggering event," as
defined below, has occurred, the Company has not, to date, received any
notice(s) of redemption from any of the holders of the Series B Preferred Stock.
As part of the February Agreements, generally,
--Cotton and the Company agreed that, notwithstanding any other
agreements, the conversion price of the Series B Preferred Stock owned
by Cotton would not be less than $8.25 per share, thus eliminating the
"floorless" conversion concerns as to the 2,785 shares of Series B
Preferred Stock owned by Cotton. Subsequently, the shares purchased by
Cotton were retired and the $8.25 per share "floor" has no effect on
the remaining outstanding shares of Series B Preferred Stock.
--The exercise price of the Warrants was reduced from $19.80 per share
to $13.50 for the Palladin Group and $13.25 for the RoseGlen Group.
--As to the RoseGlen Group,
-assuming Shareholder approval, the RoseGlen Group agreed to
convert its 375 shares of Series B Preferred Stock within 30
days after the Registration Statement registering the
underlying Common Stock is effective. As of October 25, 1999,
the number of shares of Common Stock issuable would be 647,430
which assumes that the RoseGlen Group has provided at least 60
days prior written notice that it intends to waive its 4.99%
share ownership limitation as described below.
-if the Common Stock is trading at 150% of the exercise price
of the Warrants (which is approximately $19.875 per share,
subject to certain reductions) for three consecutive trading
day periods, the Company may call for redemption of the
Warrants held by the RoseGlen Group, subject to the Common
Stock meeting certain requirements and adjustments.
--As to the Palladin Group,
-if, on or before April 30, 1999, the closing bid price for
the Common Stock is above $17.00 and there is an effective
Registration Statement, the Company may call for redemption of
the Warrants held by the Palladin Group, subject to certain
requirements and adjustments, including the 20% Share
Limitation and as of October 25, 1999 would be an aggregate of
694,498 shares.
-Palladin has agreed to a maximum conversion price equal to
the lesser of $3.5138 per share or the "Conversion Price," as
defined below.
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-On May 7, 1999, the Company purchased the Palladin Group
Warrants at $3.00 per share (for an aggregate of $18.9
million) and such Warrants were so retired.
On March 22, 1999, the Company entered into a termination agreement with Cotton
whereby the Company redeemed the Senior Notes held by Cotton, as well as the
2,785 shares of Series B Preferred Stock from Cotton, in exchange for the
cancellation of the Company Advance made to Cotton on February 17, 1999. The
Company also assumed Cotton's obligation to acquire 630,000 of the Series B
Warrants from the Palladin Group at a price of $3.00 per Series B Warrant on or
before April 30, 1999, which was extended to May 7, 1999, at which time the
Company acquired the 630,000 Series B Warrants from the Palladin Group. The
Senior Notes have now been marked paid and the 2,785 shares of Series B
Preferred Stock have been retired.
Pursuant to the original terms of the Series B Offering, holders of the Series B
Preferred Stock had the right to convert their shares at any time into shares of
Common Stock at a conversion rate equal to 97% of the "market value" of the
Common Stock (the "Conversion Price"). However, each holder of the Series B
Preferred Stock agreed that it would convert its shares of Series B Preferred
Stock into Common Stock only to the extent that, after the conversion, the
holder and its affiliates would beneficially own 4.99% or less of the Common
Stock.
On February 4, 2000, Able redeemed and retired all remaining shares of Series B
Preferred Stock by payment of $10,851,062 in cash and the issuance of 801,785 in
restricted common shares that were issued at or above market price and further
Able issued 267,000 Warrants to acquire its Common Stock at varying prices.
Also, on February 4, 2000, Able privately placed 5,000 shares of Series C
Preferred Stock with a small group of investors at $3,000 per share. The sale of
the Series C shares includes the issuance of Warrants to purchase up to 100,000
shares at prices substantially above market (see description of Series C
Convertible Preferred Stock below). Refer to Exhibits 4.16 - 4.24 for more
detail.
WORLDCOM CONVERSION AGREEMENT
On January 12, 2000, the Company entered into an agreement with WorldCom whereby
WorldCom converted approximately $25.5 million of an original $30.0 million note
("Original WorldCom Note"), issued to WorldCom as part of the MFSNT Acquisition,
into 3,050,000 shares of Common Stock ("WorldCom Conversion Agreement"). The
conversion was based on the January 8, 2000 closing price of Common Stock at
$8.375 per share. The remainder of the Original WorldCom Note, approximately
$4.5 million was converted into an amended and restated note ("New WorldCom
Note"). The New WorldCom Note will bear interest at 11.5 percent and will mature
February 1, 2001.
SERIES C PREFERRED STOCK ISSUANCE AND SERIES B PREFERRED STOCK
CONVERSION/REDEMPTION
Subsequent to fiscal year end 1999, to finance the redemption of the remaining
Series B Preferred Stock, the Company issued an aggregate of 5,000 shares of
Series C Convertible Preferred Stock ("Series C Preferred Stock") with
detachable warrants ("Series C Preferred Stock Warrants") for $15.0 million. The
Series C Preferred Stock pays dividends at a rate of 5.9 percent of the stated
value ($3,000 per share) per annum and is immediately convertible into Common
Stock at an initial conversion price of $9.35. Commencing six months after the
closing date (February 4, 2000), and then for each six month period thereafter
(each of these dates, a "Series C Reset Date"), the conversion price shall be
recalculated to equal the average closing bid prices for Common Stock for the
ten consecutive trading days preceding the applicable Series C Reset Date,
however:
(a) no conversion price shall be adjusted if a recalculation would
result in a new conversion price that is greater than the
current conversion price, and
(b) if any such recalculation results in a conversion price less
than $4.00, the conversion price shall thereafter be $4.00.
The Series C Preferred Stock Warrants permit the holder to purchase 200,000
shares of Common Stock at an initial price per share of $10.75 which may from
time to time be adjusted. The conversion will be subject to Shareholder
approval.
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The terms of the Series C Preferred Stock are complicated. In particular, the
conversion price of the Series C Preferred Stock may be reduced below $4.00 per
share if Able does not file a registration statement covering the Series C
Preferred Stock and the Common Stock to be issued upon conversion of the Series
C Preferred Stock by March 2000 and if the registration statement is not
effective by October 31, 2000 (refer to Exhibits 4.16 - 4.24 for the terms of
the Series C Preferred Stock documents and the redemption of the Series B
Preferred Stock).
WORLDCOM OPTION AND STOCK APPRECIATION RIGHTS
As part of the MFSNT Acquisition, Able granted an option (the "WorldCom Option")
to WorldCom to purchase up to two million shares of Common Stock at an exercise
price of $7.00 per share. WorldCom may elect to exercise some or all of the
WorldCom Option on a "cashless" basis rather than for cash to the extent
necessary to ensure that the actual number of shares of Common Stock issued
would not exceed 1,817,941 shares, which amount was based upon just less than
20% of the then outstanding number of shares of Common Stock, determined prior
to Able's executing the merger agreement with WorldCom dated April 26, 1998, as
amended September 9, 1998 (the "MFSNT Agreement"). A "cashless" exercise means
that WorldCom will receive shares of Common Stock with a total market value
equal to the per share excess of the market value of the common stock over the
exercise price multiplied by the number of shares of the WorldCom Option being
exercised. On January 8, 1999, the Company entered into a modification to the
WorldCom Option (the "WorldCom Modification") with WorldCom which modified the
WorldCom Option into stock appreciation rights ("SARs"), unless and until such
time as Able obtains shareholder approval (if ever), pursuant to the Nasdaq
Stock Market, Inc. ("Nasdaq") Marketplace Rule 4460(i)(1)(C) ("Rule
4460(i)(1)(C)"), to approve issuing 20 percent or more of the Common Stock in
connection with the MFSNT Acquisition (based upon the number of shares
outstanding prior to Able's executing the MFSNT Agreement).
Under the WorldCom Modification, WorldCom is entitled to participate in an
increase in the value of an aggregate of two million shares of Common Stock. For
each SAR exercised, WorldCom receives an amount equal to the excess of the fair
market value of the Common Stock as of the applicable exercise date over $7.00
(the "Appreciation Amount"). The Appreciation Amount will be paid in cash within
fifteen days of receipt of an exercise notice; provided, however, to the extent
that Able is required to pay more than $10.0 million in any twelve month period
as a result of any exercises of any SARs, the amount of such excess will be
represented by a promissory note, with quarterly payments amortized ratably over
a period of six months at 10% per annum. The exercise period of the SARs granted
commences on the earlier of (1) one business day after the date upon which the
potential issuance of Common Stock under this Agreement is voted upon by the
Company shareholders, and (2) October 1, 2000 (the "Commencement Date"), and
ends on January 2, 2002. To date, none have been exercised.
Payment of any SARs in cash only could materially and adversely effect the
Company's cash flow because (a) of the short time frame to pay for any SARs
exercised (between 15 and 30 days form the date notice is received by the
Company), and (b) the payment owed could be a significant amount, depending on
the number of SARs exercised and the then fair market value of the Common Stock.
Able also will be granting to WorldCom, subject to shareholder approval, an
equity award in the form of stock appreciation rights or other equity
participation awards ("WorldCom Equity Awards/Phantom Stock Awards") which is
generally equivalent to 600,000 shares of Common Stock, payable in cash, stock,
or a combination of both, at Able's option. The WorldCom Equity Awards are
convertible, in whole or in part, solely on the following days: July 2, 2000 or
July 2, 2001. On January 8, 1999, Able and WorldCom entered into a written
agreement (the "Intent Agreement") setting forth the terms and conditions of
when the WorldCom Equity Award Agreement (the "Equity Award Agreement") will be
executed. The Intent Agreement also sets forth the specific terms of the
WorldCom Equity Award, in the form of a Stock Appreciation Rights Agreement
("SAR Agreement"). The Intent Agreement provides that, until Able obtains
shareholder approval in accordance with Rule 4460(i)(1)(C), the SAR Agreement
will be executed at such time as Able meets certain "Conditions to Issuance."
Additionally, upon the exercise of any WorldCom Equity Awards, any payments may
be made, in Able's sole discretion, in cash, Common Stock, or a combination of
both cash and Common Stock, assuming that the Company obtains shareholder
approval to issue any payments in Common Stock. To date, the SAR Agreement has
not been executed (and thus no WorldCom Equity Awards have been issued), but it
will be once shareholder approval is obtained to issue payments to WorldCom in
stock or a combination of stock and cash (up to a maximum of 700,000 shares).
24
<PAGE>
Able will submit a proposal to the Company's shareholders at its next annual
meeting of shareholders to approve issuing 20 percent or more of the outstanding
Common Stock in connection with the MFSNT Acquisition. If the Company's
shareholders approve Able's proposals (1) the SARs granted under the WorldCom
Modification automatically revert back to the WorldCom Option and the holder
will have the right to purchase an aggregate of 2,000,000 shares of Common Stock
at $7.00 per share through January 2, 2002, and (2) upon the exercise of any
WorldCom Equity Awards, Able would have the option to make the payments in cash,
stock, or a combination of cash and stock, at Able's discretion.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth certain selected consolidated financial data of
the Company for the five years ended October 31, 1999 which has been derived
from the audited consolidated financial statements of the Company and its
subsidiaries. This data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Consolidated Financial Statements included elsewhere in this report.
<TABLE>
<CAPTION>
Fiscal Years Ended October 31
(in thousands, except per share data)
- ----------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $418,565 $217,481 $86,334 $48,906 $35,408
Net income (loss) (18,060) 2,514 2,857 (5,910) (281)
Net income (loss) applicable to common stock (36,758) (5,840) 1,331 (5,910) (281)
Weighted average shares outstanding 11,849 9,907 8,505 8,361 8,284
Income (loss) per share from operations-
Basic and diluted (3.10) (.59) .16 (.71) (.03)
Current assets 167,874 185,822 27,010 21,449 18,573
Current liabilities 166,772 159,678 12,969 17,155 11,175
Property and equipment, net 27,803 32,074 13,114 10,667 6,120
Total assets 262,033 290,760 50,346 38,919 32,482
Long-term debt 30,618 61,685 17,294 10,115 5,255
WorldCom Advance 32,000 -- -- -- --
Shareholders' equity 431 40,217 15,247 11,598 17,467
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis relates to the financial condition and
results of operations of the Company for the three years ended October 31, 1999.
This information should be read in conjunction with the Company's Consolidated
Financial Statements appearing elsewhere in this document.
25
<PAGE>
OVERVIEW
As discussed in Note 6 to the Company's consolidated financial statements,
"Assumption of COMSAT Contracts," during the fiscal year ended October, 31,
1998, GEC assumed obligations to complete 12 contracts with the Texas Department
of Transportation which were for the installation of intelligent traffic
management systems and design and construction of wireless communication
networks. The following is a summary of revenues and costs associated with the
COMSAT contracts for the fiscal years ended October 31 (amounts in thousands):
1999 1998
- ---------------------------------------------------------------------
Billings on the COMSAT contracts $ 7,952 $11,327
Deferred revenue recognized 3,935 8,481
- ---------------------------------------------------------------------
Total revenue recognized 11,887 19,808
Direct contract costs 8,675 10,672
- ---------------------------------------------------------------------
Gross margin from COMSAT contracts $ 3,212 $ 9,136
- ---------------------------------------------------------------------
At October 31, 1999, all of the COMSAT Contracts were substantially complete.
The revenues, cost of revenues and gross margins are non-recurring and are not
generally indicative of returns the Company expects to achieve on future
contracts.
The Company's results of operations reflect the operating results of MFSNT and
other acquired businesses only from the respective dates of acquisition.
Accordingly, the Company's results are not necessarily comparable on a
period-to-period basis.
The following table sets forth, for the fiscal years ended October 31, selected
elements of the Company's condensed consolidated statements of operations as a
percentage of its revenues:
1999 1998 1997
- --------------------------------------------------------------------------------
Revenues: 100.0% 100.0% 100.0%
- --------------------------------------------------------------------------------
Cost of revenues......................... 87.2 82.5 79.0
General and administrative............... 9.8 8.7 10.2
Depreciation and amortization............ 2.8 3.5 5.2
Impairment of long-lived assets.......... 0.6 -- --
Income (loss) from operations............ (0.4) 5.3 5.6
Other expenses, net...................... (3.9) 4.1 2.3
- --------------------------------------------------------------------------------
Net income (loss)........................ (4.3) 1.2 3.3
- --------------------------------------------------------------------------------
FISCAL YEAR ENDED OCTOBER 31, 1999 COMPARED WITH FISCAL YEAR ENDED OCTOBER 31,
1998.
REVENUES. For the fiscal year ended October 31, 1999, revenues totaled $418.6
million compared to $217.5 million during the fiscal year ended October 31,
1998, an increase of $201.1 million or 92 percent. This increase in revenues is
due primarily to growth in the Company's operations through the acquisition of
MFSNT on July 2, 1998. Revenues generated by MFSNT for the fiscal year ended
October 31, 1999, totaled approximately $264.0 million and included sales of
conduit capacity of approximately $35.7 million.
26
<PAGE>
COST OF REVENUES. For the fiscal year ended October 31, 1999 cost of revenues
totaled $365.1 million compared to $179.5 million during the fiscal year October
31, 1998, an increase of $185.6 million or 103 percent. This increase in cost of
revenues is due primarily to growth in the Company's operations through the
acquisition of MFSNT on July 2, 1998. Cost of revenues incurred by MFSNT for the
fiscal year ended October 31, 1999, totaled approximately $233.5 million and
included cost associated with sales of conduit capacity of approximately $34.7
million.
The Company's construction and maintenance margins (Revenues less Cost of
Revenues) were $53.5 million or 12.8 percent for the fiscal year ended October
31, 1999, compared to $38.0 million or 17.5 percent for the fiscal year ended
October 31, 1998. The dollar increase in construction and maintenance margins is
due primarily to the acquisition of MFSNT on July 2, 1998. Construction and
maintenance margins generated by MFSNT for the fiscal year ended October 31,
1999, totaled approximately $31.6 million and included margins from sales of
conduit capacity of $1.0 million. The decrease in construction and maintenance
margins on a percentage basis from fiscal year 1999 to fiscal year 1998 was due
primarily to increased emphasis on cost plus contracts (predominately with
WorldCom) and negative margins generated by Dial and AIS (which were closed in
fiscal year 1999).
At July 2, 1998, MFSNT had $11.7 million of reserves for losses on uncompleted
contracts recorded on its balance sheet. Through the Company's due diligence
efforts, the Company estimated the need for reserves for contract losses of
$40.5 million, resulting in a $28.8 million adjustment through purchase
accounting. Together these reserves relate to specific MFSNT jobs identified by
the Company as Loss Jobs. Revenues and costs recognized in the Company's
consolidated statement of operations related to these identified Loss Jobs
subsequent to the acquisition date have resulted in no net margin as all losses
were recorded against the reserve balance. The Company utilized the reserves for
losses on uncompleted contracts only on those jobs identified as Loss Jobs at
the date of acquisition. The following is a summary of the reserves for losses
on uncompleted contracts (amounts in thousands):
<TABLE>
<CAPTION>
NETWORK TRANSPORTATION
SERVICES SERVICES TOTAL
- ------------------------------------------ ----------------- ------------------- --------------
<S> <C> <C> <C> <C>
Previously recorded by MFNST (1) $6,100 $5,600 $11,700
Purchase accounting adjustments (1) 10,166 18,634 28,800
- ------------------------------------------ ----------------- ------------------- --------------
Adjusted balance, July 2, 1998 (1) 16,266 24,234 40,500
Amount utilized (8,237) (6,873) (15,110)
- ------------------------------------------ ----------------- ------------------- --------------
Balance, October 31, 1998 8,029 17,361 25,390
Valuation adjustments (2) 2,463 (3,082) (619)
Amount utilized (4,789) (11,362) (16,151)
- ------------------------------------------ ----------------- ------------------- --------------
Balance, October 31, 1999 $5,703 $2,917 $8,620
- ------------------------------------------ ----------------- ------------------- --------------
</TABLE>
(1) The difference between the $11.7 million reserves recorded on the July 2,
1998 MFSNT balance sheet and the $40.5 million of reserves for contract
losses that the Company estimated through due diligence efforts were
primarily the result of differences in the costs associated with: (i)
extending the estimated completion dates of the jobs; (ii) the software
development effort; (iii) liquidated damages; and (iv) disputed
subcontractor claims.
(2) The valuation adjustments made during the fiscal year ended October 31,
1999, were the result of final projected cost estimates on previously
identified Loss Jobs unavailable at the date of acquisition.
GENERAL AND ADMINISTRATIVE EXPENSES. For the fiscal year ended October 31, 1999
general and administrative expenses were $41.0 million compared to $19.0 million
during the fiscal year ended October 31, 1998, an increase of $22.0 million or
116 percent. This increase in general and administrative expenses is due
primarily to growth in the Company's operations through the acquisition of MFSNT
on July 2, 1998. General and administrative expenses incurred by MFSNT for the
fiscal year ended October 31, 1999, totaled approximately $14.8 million. The
remaining increase was due to i) significant professional fees associated with
pending litigation and reviews by the Securities and Exchange Commission; ii)
increases in the Company's management structure necessary to support the
Company's increased revenue in accordance with the Company's strategic
objective; and iii) costs associated with ongoing efforts to recapitalize
the Company.
DEPRECIATION AND AMORTIZATION. For the fiscal year period ended October 31,
1999, depreciation and amortization expense totaled $11.8 million compared to
$7.6 million during the fiscal year ended October 31, 1998, an increase of $4.2
million or 55 percent. As a percentage of revenues, depreciation and
amortization decreased from 3.49 percent during fiscal year 1998 to 2.83 percent
during fiscal year 1999 due to an increase in revenues which did not require the
same percentage increase in capital assets to support the operations of the
Company.
IMPAIRMENT OF LONG-LIVED ASSETS. During the fiscal year ended October 31, 1999,
the Company closed Dial and AIS that resulted in impairment of Dial goodwill of
$1.3 million. The Company also wrote-off $1.2 million of equipment.
INCOME (LOSS) FROM OPERATIONS. For the fiscal year ended October 31, 1999, loss
from operations was $1.9 million compared to income from operations of $ 11.4
million for the fiscal year ended October 31, 1998, a decrease of $13.3 million
or 117 percent. This decrease, as discussed above, was due primarily to lower
construction and maintenance margins and increased general and administrative
expenses.
OTHER EXPENSE, NET. For the fiscal year ended October 31, 1999, other expense
totaled $16.2 million compared to $8.9 million during the fiscal year ended
October 31, 1998, an increase of $7.3 million or 82 percent. Other expense
includes the following for the fiscal years ended October 31 (amounts in
thousands):
<TABLE>
<CAPTION>
1999 1998 $Change %Change
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest expense $9,512 $5,534 $3,978 72%
Extraordinary loss 3,067 -- 3,067 --
Change in value of stock appreciation rights 1,814 -- 1,814 --
Provision for (benefit from) income taxes (138) 3,405 (3,543) (104)%
Other 1,921 (44) 1,965 447%
</TABLE>
Interest Expense - The increase of $4.0 million in interest expense is due
primarily to the $30.0 million, 11.5 percent debt associated with the
acquisition of MFSNT on July 2, 1998 and accreted interest at 15 percent on
property taxes payable assumed in the acquisition of MFSNT.
27
<PAGE>
Extraordinary Loss - During the fiscal year ended October 31, 1999, the Company
purchased all of its outstanding Senior Subordinated Notes with an outstanding
principal balance of $10.0 million resulting in an extraordinary loss from the
early extinguishment of debt of $3.1 million. The Senior Subordinated Notes were
purchased by the Company with proceeds from the non-interest bearing WorldCom
Advance.
Change in Value of Stock Appreciation Rights - The change in the value of stock
appreciation rights is a non-cash charge associated with changes in the
intrinsic value of the WorldCom SAR. The Company expects shareholder approval
for the conversion of the WorldCom SAR into options for the Company's common
stock at the Company's next shareholders' meeting. If shareholder approval is
received, the SARs will not result in cash payments by the Company. Pending
approval, the WorldCom SAR liability will be increased or decreased based upon
the difference in the market price of the Company's common stock and the strike
price of the SARs.
Provision for (Benefit from) Income Taxes - For the fiscal year ended October
31, 1999, the benefit from income taxes was $0.1 million compared to a provision
for income taxes of $3.4 million during the fiscal year ended October 31, 1998,
a decrease of $3.5 million or 103 percent which corresponds to decreases in the
Company's income before taxes.
NET INCOME (LOSS). For the fiscal year ended October 31, 1999, net loss was
$18.1 million compared to net income of $2.5 million for the fiscal year ended
October 31, 1998 a decrease of $20.6 million. Net loss applicable to common
stock was $36.8 million after $18.7 million in charges related to the Series B
Preferred Stock and Warrants (see Note 14 of Notes to Consolidated Financial
Statements).
FISCAL YEAR ENDED OCTOBER 31, 1998 COMPARED WITH FISCAL YEAR ENDED OCTOBER 31,
1997.
REVENUES. For the fiscal year ended December 31, 1998 revenues increased $131.2
million, from $86.3 million through October 31, 1997 to $217.5 million, for the
fiscal year ended October 31, 1998. This increase in revenues is due primarily
to growth in the Company's operations through the acquisition of MFSNT in the
third quarter and the acquisition of Patton and the COMSAT Contracts in the
second quarter of fiscal 1998, as well as increased demands for services in the
traffic management and telecommunications industry. For the fiscal year ended
October 31, 1998, revenues increased approximately $87.0 million, $17.6 million
and $17.4 million related to the acquisition of MFSNT, the COMSAT contracts and
Patton, respectively.
COST OF REVENUES. For the fiscal year ended October 31, 1998 and 1997, cost of
revenues as a percentage of revenues increased from 78.95 percent to 82.54
percent. The increase was due to increased costs related to the Network Services
Group resulting from tighter margins and competition in the telecommunications
industry, as well as inclement weather which restricted some work during the
winter months and extended completion dates into later periods, offset by
decreased costs as a result of COMSAT Contracts included in the Transportation
Services Group's operations.
GENERAL AND ADMINISTRATIVE EXPENSES. For the fiscal year ended October 31, 1998
general and administrative expenses were $19.0 million, an increase of $10.2
million over the same period in the prior year. This increase was due to the
overall increase in the management structure at the corporate level, as well as
the division offices, necessary to support the Company's increased revenue in
accordance with the Company's strategic objective of growth through acquisition,
and an increase in costs resulting from the acquisition of MFSNT. For the fiscal
year ended October 31, 1998, general and administrative expenses relating to the
operations of MFSNT were approximately $5.1 million.
DEPRECIATION AND AMORTIZATION. For the fiscal year period ended October 31,
1998, depreciation and amortization expense as a percentage of revenue decreased
from 5.25% to 3.49% as compared to the same period in 1997. This decrease as a
percentage of revenue, is due to the significant increase in revenues which did
not require the same percentage increase in capital assets to support the
operations of the Company.
INCOME FROM OPERATIONS. For the fiscal year ended October 31, 1998, income from
operations was $11.4 million compared to $4.8 million for the same period in the
prior year, primarily as a result of the Company's growth through acquisitions.
28
<PAGE>
OTHER EXPENSE, NET. Other expense net increased by $3.9 million to $4.9 million
for the fiscal year ended October 31, 1998 as compared to $1.0 million for the
comparable period in 1997. This increase is due primarily to increased interest
costs related to the acquisition of MFSNT. Other expense, net was also impacted
by non-cash charges associated with stock options granted below market prices,
and amortization of loan costs associated with the Secured Credit Facility.
Income taxes increased from $0.7 million in fiscal 1997 to $3.4 million in
fiscal 1998. This increase is due to increased income from operations, state
taxes provided in the State of Georgia, and the write-off of foreign tax
credits.
NET INCOME. For the fiscal year ended October 31, 1998, net income was $2.5
million compared to net income of $2.9 million for the comparable period in 1997
for the reasons described above. For the year ended October 31, 1998, the loss
applicable to common stock of $(5.8) million, or $(0.59) per share, is a result
of an $8.0 million charge associated with the beneficial conversion privileges
on the Series B Preferred Stock, other non-recurring adjustments associated with
the Company's obtaining financing for a portion of the purchase price of MFSNT
and preferred stock dividends. For the year ended October 31, 1997, income
applicable to common stock was $1.3 million, or $0.16 per share.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows from operating, financing and investing activities for the fiscal
years ended October 31, 1999 and 1998 are as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998 $ Change
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating activities $ (8,551) $6,617 $(15,168)
Investing activities 13,531 (13,896) 27,427
Financing activities (1,956) 14,593 (16,549)
- ----------------------------------------------------------------------------------------------
Change in cash and cash equivalents 3,024 7,314 (4,290)
Cash and cash equivalents beginning of year 13,544 6,230 7,314
- ----------------------------------------------------------------------------------------------
Cash and cash equivalents end of year $16,568 $13,544 $ 3,024
- ----------------------------------------------------------------------------------------------
</TABLE>
The $15.2 million decrease in cash from operating activities during the fiscal
year ended October 31, 1999 compared to the fiscal year ended October 31, 1998
was primarily the result of increases in accounts receivables and accruals for
incurred job costs of approximately $10.9 million and $9.3 million,
respectively, and decreases in reserves for losses on uncompleted contracts of
$16.2 million, offset by, decreases in costs and excess of billings of $25.0
million and net losses of $18.1 million.
The $27.4 million increase in cash from investing activities during the fiscal
year ended October 31, 1999, compared to the fiscal year ended October 31, 1998,
was primarily the result of $27.0 million of net proceeds on the sale of conduit
capacity. This was offset by $7.2 million of cash placed in escrow pending
resolution of a contract dispute (see Note 8 of Notes to Consolidated Financial
Statements). The amount of cash used in investing activities during the fiscal
year ended October 31, 1998, included $8.7 million related to cash paid for
acquisitions.
The $16.5 million decrease in cash from financing activities of during the
fiscal year ended October 31, 1999, compared to the fiscal year ended October
31, 1998, was primarily the result of significant proceeds from debt and
preferred stock during fiscal year 1998 to fund the acquisition of MFSNT.
As of October 31, 1999, the Company was in default under certain provisions of
its Senior Credit Facility and had no available borrowing capacity.
29
<PAGE>
GOING CONCERN. The accompanying consolidated financial statements and financial
information was prepared assuming that the Company will continue as a going
concern. The Company incurred losses from operations of $1.9 million, net losses
of $18.1 million and loss applicable to common stock of $36.8 million during the
fiscal year ended October 31, 1999. Significant payments were also made, both
during and subsequent to October 31, 1999, to redeem the Series B Preferred
Stock and to reduce obligations for loss contracts assumed in 1998 in the
acquisition of MFSNT. The Company has borrowed the maximum available under its
existing Credit Facility and is in default of the related covenants. While the
Company is current with respect to amounts due under the Credit Facility, the
lender has the right to demand payment and the Company has insufficient
liquidity to pay such amounts, if called. The Company has not yet been
successful in obtaining alternative financing and may have insufficient
liquidity to fund its continuing operations. Consequently, there is substantial
doubt about the Company's ability to continue as a going concern.
The Company's continuation as a going concern is dependent upon its ability to
(a) generate sufficient cash flow to meet its obligations on a timely basis, (b)
obtain additional financing as may be required, and (c) ultimately sustain
profitability.
So long as the Company's Credit Facility lender does not accelerate the due date
of their loans and no events of default occur relating to the Series C Preferred
Stock which could require the Company to redeem the shares, the Company projects
that it has available cash from operations sufficient to meet the Company's
operating and capital requirements for the next twelve months.
YEAR 2000
Many computer programs and applications define the applicable year using two
digits rather than four in order to save memory and enhance the speed of
repeated data based calculations. The "Year 2000 problem" refers to the
inability of these computer programs on or after January 1, 2000 to recognize
that "00" refers to "2000" rather than "1900." The term "Year 2000-compliant"
means a computer or a computer system, which has been designed or modified to
recognize dates on or after January 1, 2000.
The Company established programs to coordinate its year 2000 ("Y2K") compliance
efforts across all business functions and geographic areas. It utilized the
following steps in executing its Y2K compliance program: 1) awareness, 2)
assessment, 3) renovation, 4) validation and testing, and 5) implementation.
During fiscal year 1999, the Company completed the awareness and assessment
steps for all areas. Able has not experienced any material Y2K problems since
the date change on January 1, 2000. However, there can be no assurance that
problems will not arise for Able, its suppliers, its customers or others with
whom Able does business later in 2000, either in connection with the leap year
or with systems that have not yet been fully tested. Able intends to continue to
monitor its compliance, as well as the compliance of others whose operations are
material to Able's business.
During fiscal year 1999, the costs related to the Company's Y2K compliance
efforts were approximately $2.0 million.
ITEM 7A. QUANTITATIVE AND QUALITATIVE INFORMATION ABOUT MARKET RISK
The Company is exposed to market risk from changes in interest rates on debt
obligations that impact the fair value of these obligations. The Company's
policy is to manage interest rates through a combination of fixed and variable
rate debt. Currently, the Company does not use derivative financial instruments
to manage its interest rate risk. The table below provides information about the
Company's risk exposure associated with changing interest rates (amounts in
thousands):
<TABLE>
<CAPTION>
Expected Maturity During the Fiscal Year Ended October 31,
- ---------------------------------------------------------------------------------------------------------
2000 2001 2002 2003 2004 Thereafter
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Variable rate debt $38,327 $32,953 $2,665 $2,609 $2,603 $5,250
Average interest rate 9.95% 11.53% 14.83% 14.96% 14.96% 14.98%
</TABLE>
The Company's most significant fixed-rate debt obligation at October 31, 1999,
was an 11.5% $30.0 million note payable to WorldCom. Subsequent to year-end,
$25.5 million of principal was converted to common stock. The fair value of the
Company's debt approximates its carrying value.
30
<PAGE>
At October 31, 1999, the Company is in technical default of certain provisions
of the Credit Facility as described in Note 11 in the accompanying financial
statements, "Debt". As such, the Credit Facility is immediately callable by the
holder and is therefore classified in the current portion of long-term debt.
During the default period, the Company is required to pay a default penalty of
two percent per annum on all outstanding balances.
Although the Company conducts business in foreign countries, the international
operations were not material to the Company's consolidated financial position,
results of operations or cash flows as of October 31, 1999. Additionally,
foreign currency transaction gains and losses were not material to the Company's
results of operation for the fiscal year ended October 31, 1999. Accordingly,
the Company was not subject to material foreign currency exchange rate risk from
the effects that exchange rate movements of foreign currencies would have on the
Company's future costs or on future cash flows the Company would receive from
its foreign subsidiaries. To date, the Company has not entered into any
significant foreign currency forward exchange contracts or other derivative
financial instruments to hedge the effects of adverse fluctuations in foreign
currency exchange rates.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's consolidated financial statements and related notes and reports of
independent public accountants are included herein under Item 14.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Arthur Andersen LLP has served as the Company's auditors to audit the
Consolidated Financial Statements of the Company and its subsidiaries since its
engagement by the Company on October 12, 1998. Ernst & Young LLP, the Company's
previous auditors, resigned as the Company's auditors effective September 7,
1998. The reports of Ernst & Young LLP on the Company's financial statements for
fiscal years ended October 31, 1997 and 1996 did not contain an adverse opinion
or disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope, or accounting principles. In connection with the audits of the
Company's financial statements for each of the two years ended October 31, 1997
and 1996, and in the subsequent interim periods, there were no disagreements
with Ernst & Young LLP on any matters of accounting principles or practices,
financial statement disclosure, or auditing scope and procedures which, if not
resolved to the satisfaction of Ernst & Young LLP, would have caused Ernst &
Young to make reference to the matter in their reports.
Ernst & Young informed the Company of the existence of the following reportable
events, as defined in Item 304(a)(l)(v) of Regulation S-K of the Securities Act
of 1933, as amended:
In their Report to the Audit Committee for the year ended October 31,
1997, Ernst & Young LLP advised the Company as to the existence of
reportable conditions in the Company's system of internal controls.
These reportable conditions related to: (i) the lack of segregation of
duties over the cash disbursement function, (ii) the failure to provide
adequate documentation to support the business purpose of certain
significant transactions with related parties, and (iii) the lack of
monitoring controls over operations of its foreign subsidiaries.
During the fiscal years ended October 31, 1998 and 1997 and during the
subsequent interim period prior to engaging Arthur Andersen LLP, neither the
Company nor anyone on the Company's behalf consulted with Arthur Andersen LLP
regarding either the application of accounting principles to a specified
transaction, either completed or proposed, or the type of audit opinion that
might be rendered on the Company's financial statements. Previously, Arthur
Andersen LLP was the independent auditor for MFS Network Technologies, Inc. and
Patton Management Corporation, both of which were acquired by the Company during
fiscal year 1998.
Information regarding the resignation of the Company's previous principal
accountant, Ernst & Young LLP and the engagement of Arthur Andersen LLP was
reported by the Company on Form 8-Ks filed September 14, 1998 and October 16,
1998, respectively.
31
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information concerning the executive
officers and directors of Able Telcom Holding Corp. as of February 10, 2000:
Name Age Position (4)
- --------------------------------------------------------------------------------
Billy V. Ray Jr. (2)(3) 42 President, Chief Executive Officer and
Acting Chief Financial Officer and a
Director
Frazier L. Gaines 60 Former Chief Executive Officer, President
- Able Telcom International
James E. Brands 62 Senior Executive Vice President
Michael Arp 52 Financial Vice President
Edward Z. Pollock 60 General Counsel
Michael A. Summers 34 Chief Accounting Officer
Stacy Jenkins 42 President - Adesta Communications
G. Vance Cartee 56 President - Adesta Transportation
J. Barry Hall 50 President - Construction Group
Richard A. Boyle 44 President - Patton Management Group
C. Frank Swartz (1)(2)(3) 61 Chairman of the Board of Directors
Alec McLarty (1)(2)(3) 49 Director
Gerald Pye 55 Director
- -------------------------------
(1) Member of the Audit Committee. Mr. C. Frank Swartz is the
Chairman of the Audit Committee.
(2) Member of the Compensation Committee. Mr. C. Frank Swartz is
the Chairman of the Compensation Committee.
(3) Member of the Nominating Committee.
(4) During the first two weeks of February 2000, the Company
filled the positions of Chief Financial Officer and Chief
Operating Officer. The required information regarding these
Executive Officers will be contained in the Form 10-Q to be
filed for the first quarter of the current fiscal year.
Directors are elected at the annual meeting of Able's shareholders and hold
office following election or until their successors are elected and qualified
the Directors may fill vacancies in the period between shareholder meetings. The
chief executive officer is elected by and serves at the discretion of the
Company's Board of Directors. All other executive officers are appointed by the
Chief Executive Officer.
During the fiscal year ended October 31, 1999, the Company's Chief Financial
Officer and its Chief Operating Officer resigned. Refer to footnote (4) above.
BILLY V. RAY, JR. has been the Company's President, Chief Executive Officer and
acting Chief Financial Officer since November 30, 1998 and has served as a
Director since December 1, 1998. From October 1, 1998 to November 30, 1998, Mr.
Ray was the Company's Executive Vice President of Mergers and Acquisitions and
Treasurer. From May 1998 to October 1998 and from January 1997 to June 1997, Mr.
Ray served as a consultant to the Company. Mr. Ray served as the Chief Financial
Officer of the Company from June 1997 to April 1998. From December 1995 to
January 1997 and from April 1997 to July 1997, Mr. Ray was the President of
Ten-Ray Utility Construction, Inc., a utility construction company. During a
part of that period, he also served as a consultant to Alcatel, a maker of
intelligent highway systems. From September 1994 to November 1995, Mr. Ray was
the Controller of Tri-Duct, a utility construction company, and served as a
consultant Tri-Duct from November 1995 to March 1996. From March
32
<PAGE>
1994 to September 1994, Mr. Ray was the staff manager at Mastec, Inc. a utility
construction company and he was assistant to the president at Burnup & Sims, a
utility construction company, from January 1993 to March 1994.
FRAZIER L. GAINES was a Director of the Company from August 1992 until March 19,
1999 and has served as President of Able Telcom International, Inc., a wholly
owned subsidiary of the Company, since June 1994. Mr. Gaines served as Interim
President and Chief Executive Officer of the Company from March 1998 to November
1998. From 1992 to 1994, Mr. Gaines was Chief Operating Officer of the Company.
From 1987 to 1992, Mr. Gaines was Vice President of Judycom, Inc. and Judycom
Construction Corporation, both of which were located in Lexington, Kentucky, and
engaged in fiber optic installation.
JAMES E. BRANDS has served as the Company's Senior Executive Vice President
since March 1999. From November 1997 to March 1999, Mr. Brands was the CFO of
Wilson Pest Control, Inc., a pest control services company. From July 1997 to
November 1997, Mr. Brands served as the Executive Vice President and a Director
of KBAS, Inc., an employee leasing company and from February 1997 to July 1997,
he was the CFO of Arrow Exterminators, which provides pest control services.
From January 1993 to March 1995, Mr. Brands served as Chairman, CEO and a
Director of Marquest Medical Products, Inc. (NASDAQ: MMPI), which manufactures
disposable products for respiratory, pulmonary and related medical segments and
also served as Vice Chairman, CFO and a director of Scherer Healthcare, Inc.
(Nasdaq: SCHR), which was involved in disposable medical products,
pharmaceutical development and medical waste management. From January 1985 to
February 1995, Mr. Brands was the Executive Vice President and a director of RPS
Investments, Inc., a private investment company involved in real estate,
manufacturing and services companies. Since 1981, Mr. Brands has been the owner
of Brands & Co., which provides financial and business consulting services.
MICHAEL ARP became the Company's Financial Vice President in January 1999. From
February 1997 through December 1998, Mr. Arp was the group controller of Georgia
Electric Company, Transportation Safety Contractors, Inc. and Transportation
Safety Contractors of Virginia, Inc. (collectively the "Traffic Management
Group"). From January 1994 to February 1997, Mr. Arp was President of American
Turf Manufacturing.
EDWARD Z. POLLOCK has been the Company's General Counsel since November 1998.
From 1963 to 1998, Mr. Pollock was a sole practitioner at the law firm of Edward
Z. Pollock.
MICHAEL A. SUMMERS has been the Company's Chief Accounting Officer since June
1999. From July 1996 to June 1999, Mr. Summers was a Senior Audit Manager with
Arthur Andersen LLP. From May 1995 to July 1996, Mr. Summers served as Financial
Reporting Manager for CalEnergy Company, Inc., a publicly traded independent
producer of power. From May 1994 to May 1995, Mr. Summers was the Chief
Accounting Officer for Mid-America Realty Investments, Inc., a publicly-traded
real estate investment trust which owned and managed income-producing commercial
real estate, primarily enclosed mall and neighborhood shopping centers. Mr.
Summers is a Certified Public Accountant and currently serves as a director
and/or a committee member for a variety of not-for-profit organizations.
STACY JENKINS was named President of Adesta Communications in July 1998. From
1990 to July 1998, Mr. Jenkins served as the Senior Vice President, Operations
Vice President, Engineering and Estimating; and as Project Manager for the
nationally recognized Iowa Communications Network. During this time, he directed
operations for more than 40 projects, with a combined value in excess of $300
million, in the United States and abroad.
G. VANCE CARTEE has been the President of Adesta Transportation since January
1999. From June 1998 to December 1998, Mr. Cartee served as a telecommunications
consultant, including performing consulting services for the Company. From
January 1996 to June 1998, Mr. Cartee was a business unit director for
Loral/Lockheed Martin Corp. From March 1993 to January 1996, Mr. Cartee was Vice
President and General Manager of Alcatel Contracting, N.A.
J. BARRY HALL has been the President of the Traffic Management Group since
October 1996, and now serves as President of the Construction Group. From 1990
to October 1996, Mr. Hall was Vice President of Georgia Electric Company.
33
<PAGE>
RICHARD A. BOYLE has been the President of Patton Management Corp., a subsidiary
of the Company since March 1996. From May 1991 to March 1996, Mr. Boyle was Vice
President and General Manager of Wright & Lopez, Inc., a telecommunications
contractor. From January 1990 to May 1991, Mr. Boyle was Vice President and
General Manager of Pressure Concrete Construction Company, a division of South
Eastern Public Services Co.
C. FRANK SWARTZ has served as a Director of the Company since August 1998 and as
Chairman of the Board since November 30, 1998. Mr. Swartz has been retired since
November 1994. For the five (5) years prior to November 1994, Mr. Swartz was
employed by GTE as the Director of Internal Support, based in Caracas,
Venezuela.
ALEC MCLARTY is the founder of Clarion Resources Communications Corporation
("Clarion") and has served as the Chairman and Chief Executive Officer of
Clarion since January 1996. Clarion is a multi-faceted company in the domestic
and international telecommunications industry providing services ranging from
research and development to international long distance services. In 1987, Mr.
McLarty founded Resurgens West, a telecommunications company and served as its
President until January 1996.
DR. GERALD PYE has served as a Director of the Company since January 1999. Mr.
Pye is a partner with Interfiducia, AG, a European investment firm.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) ("Section 16") of the Securities Exchange Act of 1934, as amended,
requires the Company's Executive Officers, Directors and 10% Shareholders to
file reports regarding initial ownership and changes in ownership with the SEC
and the Nasdaq Stock Market, Inc. Executive Officers, Directors and 10%
shareholders are required by SEC regulations to furnish the Company with copies
of all Section 16 forms they file. The Company's information regarding
compliance with Section 16 is based solely on a review of the copies of such
reports furnished to the Company by the Company's Executive Officers, Directors
and 10% Shareholders. These forms include (i) Form 3, which is the Initial
Statement of Beneficial Ownership of Securities, (ii) Form 4, which is a
Statement of Changes in Beneficial Ownership, and (iii) Form 5, which is an
Annual Statement of Changes in Beneficial Ownership (all of which were
inadvertently filed late for each Section 16 individual required to file such
Form 5). Form 5 filed in January 2000 for all Section 16 individuals include
stock options issued outside the plan and as such are subject to shareholder
approval.
It is the intention of the Company's General Counsel to oversee the timely
filing of the Section 16 forms.
34
<PAGE>
All other Section 16 forms appear to have been filed in a timely manner other
than as to the following individuals who were delinquent in filing certain forms
or failed to file certain forms during the fiscal year ended October 31, 1999.
<TABLE>
<CAPTION>
Name Of Individual Position Late Filing
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Billy V. Ray, Jr. President, Chief Executive Officer, Form 5 for fiscal year 1999 filed
Acting Chief Financial Officer and January 21, 2000.
Director
Frazier L. Gaines Former Chief Executive Officer, Form 5 for fiscal year 1999 filed
President - Able Telcom International January 21, 2000.
James E. Brands Senior Executive Vice President Form 5 for fiscal year 1999 filed
January 21, 2000.
Michael Arp Financial Vice President Form 5 for fiscal year 1999 filed
January 21, 2000.
Edward Z. Pollock General Counsel Form 5 for fiscal year 1999 filed
January 21, 2000.
Michael A. Summers Chief Accounting Officer Form 5 for fiscal year 1999 filed
January 21, 2000.
Stacy Jenkins President - Adesta Communications Form 5 for fiscal year 1999 filed
January 21, 2000.
G. Vance Cartee President - Adesta Transportation Form 5 for fiscal year 1999 filed
January 21, 2000.
Richard A. Boyle President - Patton Management Form 5 for fiscal year 1999 filed
January 21, 2000.
C. Frank Swartz Chairman of the Board of Directors Form 5 for fiscal year 1999 filed
January 21, 2000.
Alec McLarty Director Form 4 for the month of May was
filed on Form 5 for fiscal year 1999.
Form 5 for fiscal year 1999 filed
January 27, 2000.
Gerald Pye Director Form 5 for fiscal year 1999 has not
yet been filed.
Jonathan A. Bratt (1) Former Director Form 5 for fiscal year 1999 filed
January 24, 2000.
Thomas M. Davidson (2) Former Director Form 5 for fiscal year 1999 filed
January 24, 2000.
<FN>
- ------------------------------------------
(1) Mr. Bratt resigned from the Company's Board of Directors in February
2000.
(2) Mr. Davidson resigned from the Company's Board of Directors in January
2000.
</FN>
</TABLE>
35
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
The following table sets forth certain summary information for the years
indicated concerning the compensation awarded to, earned by, or paid to (i)
those persons serving as the Chief Executive Officer during the 1999 fiscal
year, (ii) the other four most highly compensated Executive Officers of the
Company who were serving as such at October 31, 1999, and (iii) up to two
additional individuals who had served as an Executive Officer of the Company
during the 1999 fiscal year but who were not Executive Officers at October 31,
1999, except that persons referred to in clauses (ii) and (iii) above generally
are not included in the table if they received total annual salary and bonus of
$100,000 or less for the 1999 fiscal year end. The persons named in this table
shall be collectively referred to as the "Named Executive Officers."
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
------------------------------------- -----------------
Other Securities
Annual Underlying All other
Name and Compen- Options(6)/ Compen-
Principal Position Year Salary($) Bonus($) sation ($) SARs (#) sation ($)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Billy V. Ray, Jr.(1) 1999 203,792 200,000 24,000
Chief Executive Officer and 1998 48,462 40,000 35,000 110,818
President, Acting Chief Financial 1997 34,615 56,961
Officer and Director
Frazier L. Gaines(2) 1999 201,138 2,500
Former Chief Executive Officer, 1998 153,986 210,000 4,609
President- Able Telcom International 1997 110,000 5,000 1,024,375
Michael Arp (3) 1999 149,565 30,000 24,000 28,500
Financial Vice President
Stacy Jenkins (4) 1999 207,304 55,000 4,000
President of Adesta Communications
J. Barry Hall (5) 1999 240,000 150,000
President - Construction Group 1998 209,173 75,000 27,500 33,906
1997 161,538
Richard Boyle (7) 1999 159,000 70,000 19,200 65,000 --
President - Patton Management
<FN>
(1) Mr. Ray has served as President and Chief Executive Officer of
the Company since December 1, 1998. Prior to that date he had
served the Company as its Chief Financial Officer and as Vice
President. For 1999, other compensation includes auto
allowance of $6,000 and housing allowance of $18,000. In 1998,
other compensation included consulting fees in the amount of
$92,099, an automobile allowance of $5,400, a housing
allowance of $12,600 and health insurance premiums paid on Mr.
Ray's behalf of $719. In 1997, other annual compensation
includes compensation for consulting services rendered prior
to Mr. Ray's appointment in June 1997, as the Company's Chief
Financial Officer, and a travel and housing allowance. Subject
to shareholder approval, the Board of Directors has approved a
grant of 50,000 shares of common stock to the Company's Chief
Executive Officer ("CEO") at no cost to him. The Board has
also approved the payment by the Company of taxes that will be
payable by the CEO with respect to the grant. When and if
shareholder approval is received, the Company will recognize
compensation expense, the amount of which may be significent,
for the fair market value of the shares on the date of
shareholder approval and cash paid to tax protect the CEO.
(2) Mr. Gaines served as the President and Chief Executive Officer
of the Company from March 1998 through November 30, 1998.
Prior thereto, Mr. Gaines was President of Able Telcom
International, Inc. (a position which he continues to hold).
For 1999, other compensation includes an auto allowance of
$2500. For 1998, other compensation includes an automobile
allowance of $4,500 and health insurance premiums paid by the
Company on Mr. Gaines behalf in the amount of $109. For 1997,
other compensation consists of an automobile allowance, a
housing allowance and an amount of $991,375, which represents
the difference between the price paid by Mr. Gaines upon the
exercise of certain stock options and the fair market value of
the underlying Common Stock on the date of exercise.
36
<PAGE>
(3) Mr. Arp joined the Company in January 1999. In 1999, Mr. Arp's
other compensation included a $1,500 monthly housing allowance
and a $5,000 auto allowance.
(4) Mr. Jenkins other compensation includes $4,000 for automobile
allowance.
(5) In 1998, other compensation includes a housing allowance of
$24,000, an automobile allowance of $7,800 and contributions
to the Company's 401K plan.
(6) Includes options that have not yet been approved by
shareholders.
(7) Mr. Boyle's other compensation includes a housing allowance
of $14,400 plus an automobile allowance of $4,800.
</FN>
</TABLE>
DIRECTOR COMPENSATION
Directors who are not employees of the Company or who do not own 5% or more of
any class of the Company's Common Stock (Non-Affiliate Directors) are paid
$12,000 annually plus $750 for each committee meeting attended and are
reimbursed for expenses associated with Board responsibilities. In addition,
pursuant to the Company's 1995 Stock Option Plan, as amended, Non-Affiliate
Directors receive one-time automatic grants of options to purchase 5,000 shares
of Common Stock having an exercise price equal to the fair market value at the
date of grant. In April 1999, the Company granted an option to purchase 10,000
shares of the Company's common stock to all Non-Affiliate Directors. Directors
who are also employed by the Company receive no additional fees or remuneration
for acting in their capacities as Directors of the Company.
THE ABLE TELCOM HOLDING CORP. 1995 STOCK OPTION PLAN, AS AMENDED
The Company adopted the 1995 Stock Option Plan (the "Plan") pursuant to which
550,000 shares of Common Stock were originally authorized for issuance. In April
1998, the shareholders of the Company approved the amendment of the Plan to
increase the number of shares outstanding under the Plan to 1,300,000. The
Company intends to amend its registration statement on Form S-8 to register the
additional 750,000 shares of Common Stock reserved for issuance under the Plan.
The Company may grant stock options (both Non-qualified Stock Options and
Incentive Stock Options, as defined in the Plan) and restricted stock under the
Plan to Non-Affiliate Directors (as defined in the Plan), key employees,
advisors and consultants (the "Participants"). The Plan also provides for the
automatic grant to Non-Affiliate Directors, at such time as an individual
becomes a Non-Affiliate Director of the Company, of Non-qualified Stock Options
to purchase 5,000 shares of Common Stock at an exercise price per share equal to
100% of the fair market value of the shares on the date of grant.
With respect to the grant of awards under the Plan to persons other than
Non-Affiliate Directors, the Board of Directors, or a committee appointed by the
Board of Directors (in either case, the "Plan Administrators"), will determine
persons to be granted stock options and restricted stock, the amount of stock to
be optioned or granted to each such person, and the terms and conditions of any
stock options and restricted stock. Both Incentive Stock Options and
Non-qualified Stock Options may be granted under the Plan. An Incentive Option
is intended to qualify as an incentive stock option within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). Any
Incentive Stock Option granted under the Plan will have an exercise price of not
less than 100% of the fair market value of the shares on the date on which such
option is granted. With respect to an Incentive Stock Option granted to a
Participant who owns more than 10% of the total combined voting stock of the
Company or any parent or subsidiary of the Company, the exercise price for such
option must be at least 110% of the fair market value of the shares subject to
the option on the date the option is granted. A Non-qualified Stock Option
granted under the Plan (i.e., an option to purchase the Common Stock that does
not meet the Code's requirements for Incentive Options) shall be as determined
by the Plan Administrators.
Subject to the terms of the Plan, the Plan Administrators may award shares of
restricted stock to the Participants. Generally, a restricted stock award will
not require the payment of any option price by the Participant but will call for
the transfer of shares to the Participant subject to forfeiture, without payment
of any consideration by the Company, if the Participant's employment terminates
during a "restricted" period (which must be at least six months) specified in
the award of the restricted stock.
37
<PAGE>
STOCK OPTIONS ISSUED OUTSIDE THE PLAN DURING FISCAL YEARS 1998 AND 1999
During the fiscal year ended October 31, 1998, the Company issued options to
purchase an aggregate of 892,000 shares of Common Stock to employees, Officers
and Directors of the Company and its subsidiaries at exercise prices ranging
from $6.20 to $14.00 per share. On December 31, 1998, all of these options were
rescinded. Immediately thereafter, the same number of options were issued on
December 31, 1998 at an exercise price of $5.75, which was the average of the
ten-day closing market price for the Company's Common Stock for the period from
December 16-December 30, 1998. The expiration for the exercise period for these
options range from December 31, 2000 to April 24, 2005. Of the 892,000 options
granted in the fiscal year ended October 31, 1998, all were immediately vested
as of December 31, 1998. During fiscal year 1999 the Company issued options to
purchase an aggregate of approximately 1.8 million shares of common stock to
employees, consultants and certain individuals who will be participating in an
advisory capacity. The expiration and vesting schedules vary from immediate to
June 30, 2004. No options were issued at less than market value. ALL OPTIONS
ISSUED OUTSIDE THE PLAN ARE SUBJECT TO SHAREHOLDER APPROVAL.
OPTION GRANTS DURING THE FISCAL YEAR ENDED OCTOBER 31, 1999
During the fiscal year ended October 31, 1999, the following options were
granted to the following Named Executive Officers, as well as certain other
executive officers:
<TABLE>
<CAPTION>
Potential Realizable
Value at
% of Total Assumed Annual Rates
Options of Stock Price
Number of Granted to Market Appreciation
Shares (3) Employees Exercise price on for Option Term(2)
Underlying in Fiscal or Date of Expiration --------------------------
Name Options(#) Year ($/Sh)(1) Base Price Grant Date 5% ($) 10% ($)
- ------------------- ------------ ------------- ----------- ---------- ------------ --------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Billy V. Ray, Jr. 50,000 .19 6.375 6.375 05/07/03 69,000 138,000
10,000 .004 5.75 5.75 12/31/00 5,750 11,500
100,000 .038 5.75 5.75 12/31/01 57,500 115,000
Frazier Gaines -- -- -- -- -- -- --
Michael Arp 40,000 .15 5.75 5.75 12/31/00 34,500 69,000
25,000 .09 6.375 6.375 05/07/03 23,905 47,813
Edward Z. Pollock 40,000 .15 5.75 5.75 12/31/00 34,500 69,000
25,000 .09 6.375 6.375 05/07/03 23,905 47,813
Stacy Jenkins 100,000 .038 5.75 5.75 12/31/00 57,500 111,500
25,000 .09 6.375 6.375 05/07/03 23,905 47, 813
J. Barry Hall -- -- -- -- -- -- --
James E. Brands 100,000 .038 6.375 6.375 04/30/02 95,620 191,250
G. Vance Cartee 40,000 .15 5.75 5.75 12/31/01 34,500 69,000
25,000 .09 6.375 6.375 05/07/03 23,905 47,813
35,000 .10 9.94 9.94 07/26/02 52,185 104,370
Michael Summers 40,000 .15 7.625 7.625 06/01/03 47,750 91,500
Richard Boyle 65,000 .24 6.375 6.375 05/07/01 62,156 124,313
<FN>
(1) On December 31, 1998, in an effort to clear up a large number
of ambiguities in the minutes of Board of Director meetings
and in order to maintain compliance with various debtor
documents as well as to keep the Company in substantial
compliance with certain rules of the Securities and Exchange
Commission and Nasdaq the Board of Directors rescinded all of
the above options grants and reissued new options in the
amounts set
38
<PAGE>
forth above at the then fair market value, as defined in the
Plan, per share on December 31, 1998, which was $5.75.
(2) The potential realizable values are based upon assumed 5
percent and 10 percent annualized stock price growth rates and
are not intended to forecast future price appreciation of the
Company's Common Stock. Actual gains, if any, on stock option
exercises will depend on the amount, if any, by which the fair
market value exceeds the option exercise price on the date the
option is exercised. There is no assurance that the amounts
reflected in this table will be achieved.
(3) All of the options granted to officers, directors and
consultants during the past fiscal year are subject to
shareholder approval. The Proxy Statement for the next meeting
of Company shareholders will contain a proposal regarding all
said options.
</FN>
</TABLE>
OPTION EXERCISES AND PERIOD-END VALUES
The following table provides information on options exercised in the fiscal year
ended October 31, 1999 by the persons named in the "Summary Compensation Table"
above, the number of unexercised options each of them held at October 31, 1999
and the value of the unexercised "in-the-money" options each of them held as of
that date.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying In-the-Money Options
Shares Options/at FY End(#)(1) at FY-End ($)
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized($) Unexercisable Unexercisable(2)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Billy V. Ray -- -- 127,000/33,000 378,080/80,520
Frazier Gaines -- -- 80,000/80,000 244,800/244,800
Michael Arp -- -- 18,000/16,500 50,100/40,260
Stacy Jenkins -- -- 100,000/100,000 306,000/306,000
J. Barry Hall -- -- -- --
Rick Boyle -- -- 65,000/65,000 158,125/158,125
<FN>
(1) On December 31, 1998, in an effort to clear up a large number
of ambiguities in the minutes of Board of Director meetings
and in order to maintain compliance with various debtor
documents as well as to keep the Company in substantial
compliance with certain rules of the Securities and Exchange
Commission and Nasdaq, the Board of Directors rescinded all of
the above options grants and reissued new options in the
amounts set forth above at the then fair market value, as
defined in the Plan, per share on December 31, 1998, which was
$5.75.
(2) For those options, which were "In-the-Money" at October 31,
1999, the valuation is based on the closing price of the
common stock of Able Telcom Holding Corp. of $ 8.81.
</FN>
</TABLE>
EMPLOYMENT AND CONSULTING AGREEMENTS
BILLY V. RAY, JR., President, Chief Executive Officer and Acting Chief Financial
Officer and Director, is party to an employment agreement, dated December 1,
1998 with the Company (the "Ray Employment Agreement"). The Ray Employment
Agreement terminates on November 30, 2000, and provides that Mr. Ray is to be
paid a salary of $180,000 per year, plus a housing allowance of $1,500 per month
and an automobile allowance of $500 per month, as well as health insurance and
other benefits. The Ray Employment Agreement may be extended for an additional
two-year period. The Ray Employment Agreement also contains a covenant by Mr.
Ray not to compete with the Company for a period of three years following
termination of his employment. The Ray Employment Agreement also provides that
if Mr. Ray's employment is terminated with cause, Mr. Ray will be entitled to 90
days prior notice. However, should Mr. Ray's employment be terminated without
cause, Mr. Ray will be paid out the
39
<PAGE>
remainder of his contract, or for 90 days, whichever is greater. In addition,
the Ray Employment Agreement provides for the grant of 100,000 options to
purchase 100,000 shares of Common Stock, as approved by the Company's Board of
Directors, which vested immediately. On December 31, 1998, the Company's Board
of Directors rescinded the above grant of options and issued new options to
purchase 100,000 shares through December 31, 2001 at an exercise price of $5.75
per share. Effective May 7, 1999, Mr. Ray's base salary increased to $240,000
per year, and he was granted options to purchase 50,000 shares of Common Stock
at $6.375 per share, one-third of which vested as of May 7, 1999, one-third vest
on May 7, 2000 and one-third vest on May 7, 2001. The exercise period for the
options granted on May 7, 1999 to Mr. Ray commences as of the date of vesting
and continues through the earlier of (i) September 19, 2005 or (ii) two years
from the date Mr. Ray no longer is an employee and/or serves as a Director of
the Company. In December 1999, Mr. Ray was granted an additional salary increase
to $350,000.
FRAZIER L. GAINES, President of Able Telcom International, Inc., is party to an
employment agreement, dated November 12, 1998 with the Company (the "Gaines
Employment Agreement"). The Gaines Employment Agreement terminates on November
11, 2001, may be extended for one additional year, allows for a consulting
agreement to be signed at the end of the initial three year term, and provides
that Mr. Gaines is to be paid a salary of $200,000 per year, plus health and
life insurance and a monthly automobile allowance of $500. The Gaines Employment
Agreement also provides that the Company will pay all health and life insurance
benefits plus $60,000 per year for the number of years equal to Mr. Gaines'
years of service and will be payable beginning at Mr. Gaines' termination date.
The Gaines Employment Agreement also contains a covenant by Mr. Gaines not to
compete with the Company for a period of three years following termination of
his employment. The Gaines Employment Agreement also provides that if Mr.
Gaines' employment is terminated with cause Mr. Gaines will be entitled to 30
days prior notice. However, should Mr. Gaines' employment be terminated without
cause, Mr. Gaines will be paid one-year's severance plus regular Company health
and insurance benefits. $100,000 of this amount would be payable immediately
upon termination with the remainder of the $100,000 payable within 45 days from
termination. In addition, the Gaines Employment Agreement provides for the grant
of options to purchase 100,000 shares of Common Stock, subject to approval by
the Company's Board of Directors, which vest over a three year period, or
immediately upon either a change in control or ownership of the Company. To
date, these options have not been approved by the Company's Board of Directors.
JAMES E. BRANDS, Senior Executive Vice President, is party to a consulting and
employment agreement, dated March 15, 1999 with the Company (the "Brands
Employment Agreement"). The Brands Employment Agreement terminates on April 5,
2001, which may be extended for an additional one-year period. The Brands
Employment Agreement provides that Mr. Brands was paid (i) a consulting fee of
$20,000 for the period commencing March 15, 1999 and ending May 15, 1999, and
(ii) a salary of (A) $5,750 for the period between April 2, 1999 to April 30,
1999, (B) $2,500 for the period between May 1, 1999 to May 31, 1999 and (C)
$12,500 per month from June 1, 1999 through May 31, 2000; provided that if
another executive or management employee other than a CEO is hired during the
initial term of the Brands Employment Agreement at a rate of more than $12,500
per month, Mr. Brands' monthly rate shall immediately become the same as such
employee. Mr. Brands is also entitled to an automobile allowance of $500 per
month or at the Company's option, the Company may provide Mr. Brands with a late
model Lincoln Town Car and reimbursement of its operating costs, a housing
allowance of $1,500 per month effective August 1, 1999 (and during April 2, 1999
to July 31, 1999, Mr. Brands will be reimbursed for actual expenses incurred),
plus health and life insurance benefits. However, no housing allowance was paid
to Mr. Brands. In addition, the Brands Employment Agreement provides for the
grant of options to purchase 100,000 shares of Common Stock at $6.375 per share,
of which 75,000 vested as of April 5, 1999 and 25,000 will vest on June 21, 2000
(which options are subject to divestiture if Mr. Brands is not a Company
employee on April 5, 2000). In the event of a change of control or ownership of
the Company, the options will vest immediately. The exercise period terminates
two years from each vesting date. Mr. Brands was granted a salary increase to
$175,000 as of January 1, 2000.
MICHAEL ARP, Financial Vice President, is party to an employment agreement,
dated January 1, 1999 with the Company (the "Arp Employment Agreement"). The Arp
Employment Agreement terminates on December 31, 2000, and provides that Mr. Arp
is to be paid a salary of $12,500 per month, an automobile allowance of $500 per
month, and a housing allowance of $1,000 per month, plus health and life
insurance benefits. The Arp Employment Agreement also provides that if Mr. Arp's
employment is terminated with cause that Mr. Arp will be entitled to 90 days
prior notice. However, should Mr. Arp's employment be terminated without cause,
Mr. Arp will be paid out the
40
<PAGE>
remainder of the term of the Arp Employment Agreement. In addition, the Arp
Employment Agreement provides for the grant of options to purchase 40,000 shares
of Common Stock, as approved by the Company's Board of Directors, of which
20,000 vested as of January 1, 1999, 10,000 vest as of December 31, 1999 and
10,000 vest as of December 31, 2000, or immediately upon either a change in
control or ownership of the Company. These options terminate on December 31,
2001. Effective May 7, 1999, Mr. Arp was granted options to purchase 25,000
shares of Common Stock at $6.375 per share, one-third of which vested as of May
7, 1999, one-third vest on May 7, 2000 and one-third vest on May 7, 2001. The
exercise period for the options granted on May 7, 1999 to Mr. Arp commences as
of the date of vesting and continues through the earlier of (i) September 19,
2005 or (ii) two years from the date Mr. Arp is no longer an employee of the
Company. Mr. Arp was granted a salary increase to $175,000 on January 1, 2000.
EDWARD POLLOCK, General Counsel, is party to an employment agreement, dated
January 1, 1999 with the Company (the "Pollock Employment Agreement"). The
Pollock Employment Agreement terminates on December 31, 2000 and provides that
Mr. Pollock is to be paid an initial salary of $10,000 per month for the period
from January 1, 1999 to June 30, 1999, increased to $11,000 per month for the
period from July 1, 1999 to December 31, 1999, increased to $12,000 monthly for
the period from January 1, 2000 to June 30, 2000, and increased to $12,500
monthly for the period from July 1, 2000 to December 31, 2000. In addition, the
Pollock Employment Agreement provides an automobile allowance of $300 per month,
plus health insurance and other benefits. The Pollock Employment Agreement may
be extended for an additional two-year period. The Pollock Employment Agreement
also contains a covenant by Mr. Pollock not to compete with the Company for a
period of three years following termination of his employment. The Pollock
Employment Agreement also provides that if Mr. Pollock's employment is
terminated with cause, Mr. Pollock will be entitled to 90 days prior notice.
However, should Mr. Pollock's employment be terminated without cause, Mr.
Pollock will be paid out the remainder of his contract. In addition, the Pollock
Employment Agreement provides for the grant of options to purchase 40,000 shares
of Common Stock, as approved by the Company's Board of Directors, which vest
over a three year period (20,000 options vested on January 1, 1999, 10,000
options will vest on January 1, 2000 and 10,000 options will vest on January 2,
2001), unless there is a change in control or ownership of the Company.
Effective May 7, 1999, Mr. Pollock's salary increased to $150,000 per year and
he was granted options to purchase 25,000 shares at $6.375 per share, one-third
of which vested as of May 7, 1999, one-third vest on May 7, 2000 and one-third
vest on May 7, 2001. The exercise period for the options granted on May 7, 1999
to Mr. Pollock commences as of the date of vesting and continues through the
earlier of (i) September 19, 2005 or (ii) two years from the date Mr. Pollock no
longer is an employee of the Company.
MICHAEL A. SUMMERS, Chief Accounting Officer, is party to an employment
agreement, dated May 31, 1999 with the Company (the "Summers Employment
Agreement"). The Summers Employment Agreement terminates on May 31, 2001, and
provides that Mr. Summers is to be paid a salary of $130,000 per year, plus
health insurance and other benefits. The Summers Employment Agreement also
contains a covenant by Mr. Summers that upon termination of his employment, he
will not interfere with or disrupt any of the Company's business relationships
nor will Mr. Summers solicit any employees for a period of two years following
termination. The Summers Employment Agreement also provides that if Mr. Summers'
employment is terminated with cause that Mr. Summers will be entitled to 90 days
prior notice. However, should Mr. Summers' employment be terminated without
cause, Mr. Summers will be paid out the remainder of his annual contract salary,
or for 180 days, whichever is greater. In addition, the Summers Employment
Agreement provides for the grant of options to purchase 40,000 shares of Common
Stock, as approved by the Company's Board of Directors, of which 15,000 options
vested on June 1, 1999, 15,000 options will vest on June 1, 2000 and the
remaining 10,000 options will vest on June 1, 2001; provided that upon a change
in control or ownership of the Company, the options will all vest immediately.
The exercise price of Mr. Summers' options is $7.625 per share. Mr. Summers was
granted a salary increase to $150,000 on January 1, 2000.
STACY JENKINS, President of Adesta Communications, is party to an employment
agreement, dated July 16, 1998 with the Company (the "Jenkins Employment
Agreement"). The Jenkins Employment Agreement terminates on July 15, 2001, and
provides that Mr. Jenkins is to be paid a salary of $200,000 per year, an
automobile allowance of $500 per month, plus health insurance and other
benefits. The Jenkins Employment Agreement also contains a covenant by Mr.
Jenkins not to compete with the Company for a period of two years following
termination of his employment. The Jenkins Employment Agreement also provides
that if Mr. Jenkins' employment is terminated with cause that Mr. Jenkins will
be entitled to 30 days prior notice. However, should Mr. Jenkins' employment be
terminated without cause, Mr. Jenkins will be paid out the remainder of his
annual salary contract rate, or for 90
41
<PAGE>
days, whichever is greater. In addition, the Jenkins Employment Agreement
provides for the grant of options to purchase 100,000 shares of Common Stock, as
approved by the Company's Board of Directors, which vest after one year of
employment, or immediately upon either a change in control or ownership of the
Company or if Mr. Jenkins is terminated without cause. On December 31, 1998, the
Company's Board of Directors rescinded the above grant of options and issued new
options to purchase 100,000 shares at $5.75 per share through December 31, 2000
or 90 days after termination of employment, whichever is earlier. Effective May
7, 1999, Mr. Jenkins' base salary increased to $216,000 per year and he was
granted options to purchase 25,000 shares of Common Stock at $6.375 per share,
one-third of which vested as of May 7, 1999, one-third vest on May 7, 2000 and
one-third vest on May 7, 2001. The exercise period for the options granted on
May 7, 1999 to Mr. Jenkins commences as of the date of vesting and continues
through the earlier of (i) September 19, 2005 or (ii) two years from the date
Mr. Jenkins no longer is an employee of the Company. Mr. Jenkins was granted a
salary increase to $240,000 effective January 1, 2000.
G. VANCE CARTEE, President of Adesta Transportation, is party to an employment
agreement, dated January 4, 1999 with the Company (the "Cartee Employment
Agreement"). The Cartee Employment Agreement terminates on January 2, 2001, and
provides that Mr. Cartee is to be paid a salary of $150,000 per year, plus
insurance and other benefits. The Cartee Employment Agreement also contains a
covenant by Mr. Cartee not to compete with the Company for a period of one-year
following termination of his employment. The Cartee Employment Agreement also
provides that if Mr. Cartee's employment is terminated with cause that Mr.
Cartee will be entitled to 90 days prior notice. However, should Mr. Cartee's
employment be terminated without cause, Mr. Cartee will be paid out the
remainder of his contract, or for 180 days, whichever is greater. In addition,
the Cartee Employment Agreement provides for the grant of options to purchase
40,000 shares of Common Stock, as approved by the Company's Board of Directors,
which vest on the earlier of January 1, 2000, or immediately upon either a
change in control or ownership of the Company or at such time as Mr. Cartee's
employment is terminated without cause. On December 31, 1998, the Company's
Board of Directors rescinded the above grant of options and issued new options
to purchase 40,000 shares at $5.75 per share, all of which are fully vested,
through December 31, 2001. Effective May 7, 1999, Mr. Cartee's base salary
increased to $162,000 per year and he was also granted options to purchase
25,000 shares of Common Stock at $6.375 per share, one-third of which vested as
of May 7, 1999, one-third vest on May 7, 2000 and one-third vest on May 7, 2001.
The exercise period for the options granted on May 7, 1999 to Mr. Cartee
commences as of the date of vesting and continues through the earlier of (i)
September 19, 2005 or (ii) two years from the date Mr. Cartee no longer is an
employee of the Company. Mr. Cartee was granted a salary increase to $182,000
effective January 1, 2000.
J. BARRY HALL, President of the Construction Group, which includes
Transportation Safety Contractors, Inc. ("TSCI"), is party to an employment
agreement dated October 12, 1996 with TSCI (the "Hall Employment Agreement").
The Hall Employment Agreement terminates on October 11, 2001, and provides that
Mr. Hall is to be paid a salary of $150,000 per year, plus insurance and other
benefits. The Hall Employment Agreement also contains a covenant by Mr. Hall not
to compete with the Company for a period of two years following termination of
his employment, unless the Company terminates the Hall Employment Agreement for
cause or if Mr. Hall terminates the agreement with good reason, in which case
the non-competition period will terminate after six (6) months (which period may
be extended by the Company up to one year in exchange for additional
compensation). Effective May 7, 1999, Mr. Hall received a cash bonus of
$100,000, based upon compensation that has been assigned to Mr. Hall from Gerry
Hall, a former Chief Executive Officer of the Company currently under contract,
and Mr. J. Barry Hall's brother.
RICHARD A. BOYLE, President of the Patton Management Group, is party to an
employment agreement, dated April 1, 1998 with the Company (the "Boyle
Employment Agreement"). The Boyle Employment Agreement terminates on March 31,
2000, and provides that Mr. Boyle is to be paid a salary of $159,000 per year,
plus insurance and other benefits. The Boyle Employment Agreement also contains
a covenant by Mr. Boyle not to compete with the Company for a period of two
years following termination of his employment. Also, pursuant to the terms of
the Patton Management Corporation acquisition documents, Mr. Boyle's
non-competition agreement has been extended for one additional year. The Boyle
Employment Agreement also provides that if Mr. Boyle is terminated with cause
that Mr. Boyle will not be entitled to any notice. Effective May 7, 1999, Mr.
Boyle was granted options to purchase 65,000 shares of Common Stock at $6.375
per share, one-third of which vested as of May 7, 1999, one-third vest on May 7,
2000 and one-third vest on May 7, 2001. The exercise period for the options
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<PAGE>
granted on May 7, 1999 to Mr. Boyle commences as of the date of vesting and
continues through the earlier of (i) September 19, 2005 or (ii) two years from
the date Mr. Boyle is no longer an employee of the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal year ended October 31, 1999, compensation for the Company's
Executive Officers was determined by the Company's Compensation Committee,
consisting of Messrs. C. Frank Swartz, Alec McLarty and Billy V. Ray. Mr. Swartz
is Chairman of the Committee and he and Alec McLarty are the two non-employee
members of the Compensation Committee. In addition to being a Director of Able,
Mr. Ray is the Chief Executive Officer, President and Acting Chief Financial
Officer of the Company. Mr. Ray excused himself from all discussions and
abstained from voting on any issues relating to the compensation and bonuses to
be paid to Mr. Ray as Chief Executive Officer.
In April 1998, the Company engaged Washington Equity Partners ("WEP") as an
advisor in connection with the MFSNT Acquisition, including the financing
thereof. At the time of the engagement, Mr. Thomas M. Davidson, a member of the
Company's Board of Directors and a former member of the Compensation Committee
who resigned as a Director in January 2000, was Managing Director of WEP. In
connection with the engagement, the Company agreed to pay WEP a fee if the
Company consummated the financing of the MFSNT Acquisition through an investor
contacted by WEP. Such fee equals 2% of the gross proceeds of any senior
indebtedness issued by the Company, 3% of the gross proceeds of any subordinated
indebtedness issued by the Company, and 4% of the gross proceeds of any equity
securities issued by the Company. In addition, the Company agreed to pay WEP,
upon the consummation of the MFSNT Acquisition, a fee of 2% of the aggregate
purchase price paid by the Company for this acquisition up to $50 million, and
1-1/2% of the aggregate purchase price in excess of $50 million. Able also
committed to reimburse WEP for its reasonable travel and out-of-pocket expenses
(up to a maximum of $20,000 without prior approval) incurred in connection with
its engagement. Under the agreement, the Company agreed indemnify WEP and its
permitted assigns against all losses and expenses, including reasonable counsel
fees and expenses, arising out of the MFSNT Acquisition or the financing, except
any losses or expenses found in a final judgment by a court of competent
jurisdiction to have resulted from WEP's bad faith, gross negligence or breach
of its agreement with the Company. Mr. Davidson subsequently left his position
as Managing Director of WEP in April 1998 and WEP assigned its rights in the
agreement to Mr. Davidson, who became a Director of the Company in June 1998. On
October 21, 1998, Mr. Davidson and the Company executed a letter agreement
pursuant to which the Company agreed to pay Mr. Davidson $1,332,000 in
satisfaction of amounts owing under the agreement with WEP with respect to the
MFSNT Acquisition and the related financing. During the 1999 fiscal year, Mr.
Davidson was paid $350,000 and on April 30, 1999, Mr. Davidson converted the
remaining amount due totaling $828,000 to 118,286 shares of common stock at the
then market price of $7.00 per share.
REPORT ON EXECUTIVE COMPENSATION
During the fiscal year ended October 31, 1999, the Compensation Committee was
responsible for setting and approving the salaries, bonuses and other
compensation for the Company's Executive Officers, establishing compensation
programs, and determining the amounts and conditions of all grants of awards
under the Plan.
COMPENSATION OBJECTIVES. The Compensation Committee believes that the objectives
of executive compensation are to attract, motivate and retain highly qualified
executives, to align the interests of these executives with those of the
Shareholders and to motivate Company executives to increase shareholder value by
improving corporate performance and profitability. To meet these objectives, the
Board of Directors seeks to provide competitive salary levels and compensation
incentives that attract and retain qualified executives, to recognize individual
performance and achievements, as well as performance of the Company relative to
its peers and to encourage ownership of Company stock.
EXECUTIVE SALARIES. Base salaries for executives are determined initially by
evaluating the responsibilities of the position, the experience of the
individual, internal comparability considerations, as appropriate, the
competition in the marketplace for management talent and the compensation
practices among public companies the size of, or in businesses similar to, the
Company. Salary adjustments are determined and normally made at twelve-month
intervals.
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<PAGE>
ANNUAL BONUSES. The Company has historically paid bonuses to executives whom the
Board of Directors determines have contributed materially to the Company's
success during the most recently completed fiscal year. The bonuses are intended
to enable the Company's executives to participate in the Company's success, as
well as provide incentives for future performance. Bonus compensation has
typically been determined as a percentage of the executive's salary based upon
the pre-tax net income of the Company as a whole or the subsidiary, which
employs the executive.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER. The compensation of Billy V. Ray,
President and Chief Executive Officer of the Company, was adjusted during the
year to better reflect the accomplishments of Mr. Ray. The increases were based
upon arm-length negotiations between Mr. Ray and the remaining members of the
Board of Directors. In agreeing to increase Mr. Ray's compensation, the Board of
Directors sought to provide an appropriate incentive to Mr. Ray. The Board of
Directors believes that Mr. Ray's salary was appropriate for the chief executive
officer of a public company the size of the Company. See "Summary Compensation
Table" for information concerning Mr. Ray's compensation. The Board of Directors
approved the payment of a bonus to Mr. Ray of $200,000, based upon the Company's
operating results and strategic accomplishments during fiscal year 1999. Mr. Ray
did not participate nor did he vote on any issues relating to his compensation.
Frazier Gaines served as the Chief Executive Officer of the Company from March
1998 through November 1998 (excluding August 19-31, 1998) when he resigned to
direct his energies into Able Telcom International. During the fiscal year ended
October 31, 1999, Mr. Gaines was paid $ 15,000 as Chief Executive Officer for
the period of November 1 to November 30, 1998 thereupon Mr. Gaines resumed his
position as President of Able Telcom International. Mr. Gaines received other
compensation that is more fully presented in the "Summary of Compensation"
above.
STOCK OPTIONS. The Board of Directors may grant to certain employees of the
Company long-term incentives consisting of non-qualified stock options and
incentive stock options and stock options outside the plan. In order to vary the
types of awards that may be offered, the Board of Directors approved the Plan
Amendments, which will increase the number of shares of stock available for
grant under the Stock Option Plan and will allow for the grant of shares of
Common Stock subject to restrictions. During fiscal year 1999, the Board of
Directors approved grants of stock options to all Executive Officers. See
"Executive Compensation--Option Grants During the Fiscal Year Ended October 31,
1999".
Respectfully Submitted,
C. Frank Swartz, Chairman
Alec McLarty
Billy V. Ray
44
<PAGE>
STOCK PERFORMANCE
The following performance graph compares the cumulative total return on the
Company's Common Stock with the cumulative total return of the companies in the
Standard and Poor's 500 index, the Nasdaq Telecommunications Stocks Index and a
self-determined peer group consisting of Advanced Communications Systems, Inc.,
AmeriLink Corp.; ANTEC Corporation; C-Cor Electronics, Inc.; Comtech
Telecommunications Corp.; Dycom Industries, Inc.; Eltrax Systems, Inc.; Internet
Communications Corp.; IPC Information Systems, Inc.; IWL Communications, Inc.;
Lockheed Martin; MasTec, Inc.; NumereX Corp.; Porta Systems Corp.; Tollgrade
Communications Corp.; View Tech, Inc.; and World Access, Inc. The cumulative
total return for each of the periods shown in the performance graph is measured
assuming an initial investment of $100 on October 31, 1994 and assuming dividend
reinvestment. No dividends have been paid on the Common Stock.
COMPARISON OF THE 12-MONTH CUMULATIVE TOTAL RETURN AMONG ABLE TELCOM HOLDING
CORP., THE S&P 500 INDEX, SELF-DETERMINED PEER GROUPS AND THE NASDAQ
TELECOMMUNICATIONS STOCKS INDEX
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Able Telcom Holding Corp. 100 75 120 110 100 125
Peer Group 100 145 200 220 250 130
S&P 500 100 125 155 205 250 320
Nasdaq Telecommunications 100 110 120 175 235 430
</TABLE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows, as of January 31, 2000, the Common Stock owned
beneficially by (i) Each Director of the Company, (ii) each Executive Officer,
(iii) all Directors and Executive Officers as a group, and (iv) each person
known by the Company to be the "beneficial owner" of more than five percent (5%)
of such Common Stock. "Beneficial ownership" is a technical term broadly defined
by the Securities and Exchange Commission to mean more than ownership in the
usual sense. For example, you "beneficially" own Common Stock not only if you
hold it directly, but also if you indirectly (through a relationship, a position
as a director or trustee, or a contract or understanding), have (or share the
power to vote the stock, or sell it) the right to acquire it within 60 days.
Except as disclosed in the footnotes below, each of the Directors and Executive
Officers listed have sole voting and investment power over his or her shares. As
of February 4, 2000, there were 15,341,053 shares of Common Stock issued and
outstanding and approximately 413 holders of record.
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<PAGE>
<TABLE>
<CAPTION>
Shares Percentage
Beneficially Beneficially
Name (1) Current Title Owned (9) Owned
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Billy V. Ray, Jr. (2) President, Chief Executive Officer and Acting 160,000 1%
Chief Financial Officer, Director
Frazier L. Gaines (3) Former Chief Executive Officer, President - 208,000 1.3%
Able Telcom International
James E. Brands (2) Senior Executive Vice President 100,000 *
Michael Arp (4) Financial Vice President 48,250 *
Edward Z. Pollock(2) General Counsel 38,500 *
Michael A. Summers (2) Chief Accounting Officer 15,000 *
Stacy Jenkins (5) President - Adesta Communications 125,000 *
G. Vance Cartee (2) President - Adesta Transportation 100,000 *
Richard A. Boyle (2) President - Patton Management Corp. 65,000 *
C. Frank Swartz (2) Chairman of the Board of Directors 30,000 *
Alec McLarty (6) Director 11,610 *
Gerald Pye Director -- --
All Directors and Executive Officers
as a Group (12 Persons) 901,360 5.8%
Gideon D. Taylor (7) Former Director and Officer 946,638 6.1%
WorldCom (8) 3,050,000 19.8%
<FN>
* Less than 1%.
(1) The address for each of Able's Directors and Executive
Officers is 1000 Holcomb Woods Parkway, Suite 440, Roswell,
Georgia 30076.
(2) These represent stock options that are immediately
exercisable.
(3) Includes 80,000 shares underlying stock options, which are
immediately exercisable, and 128,000 shares held in a trust
controlled by Mr. Gaines. These do not include an aggregate of
9,000 shares held by Mr. Gaines as trustee to four minor
children and for which Mr. Gaines disclaims any beneficial
ownership.
(4) Includes 18,250 shares underlying options, which are
immediately exercisable, and 30,000 shares owned by Mr. Arp.
(5) Includes 100,000 shares underlying options, which are
immediately exercisable, and 25,000 shares owned by Mr.
Jenkins.
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<PAGE>
(6) Includes 10,000 shares underlying options, which are
immediately exercisable, and 1,610 owned by Mr. McLarty's
wife.
(7) These include (i) 21,619 shares owned by Mr. Taylor's wife,
and (ii) 220,000 shares underlying stock options, which are
immediately exercisable. Mr. Taylor's address is 265 Harper
Road, Dry Fork, VA 24549.
(8) These shares were issued to WorldCom by converting debt into
3,050,000 shares at $8.375 per share on January 13, 2000.
WorldCom's address is 515 East Amite St., Jackson, MS 39201.
(9) All of the options granted to Officers, Directors and
Consultants during the past fiscal year are subject to
shareholder approval. The Proxy Statement will contain a
proposal regarding all said options.
</FN>
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
On October 12, 1996, the Company acquired all of the issued and outstanding
capital stock of Georgia Electric Company ("GEC"), which prior to the
acquisition was owned equally by Gerry W. and J. Barry Hall (collectively, the
"Halls"). Following the acquisition, Gerry Hall was elected to the board of
directors of the Company, and on June 12, 1997, was elected President and Chief
Executive Officer of the Company. Gerry Hall resigned as President, Chief
Executive Officer and a director of the Company on March 2, 1998. The purchase
price for the GEC acquisition was $3 million in cash, plus the issuance at the
end of each of the next five fiscal years of a number of shares of Common Stock
to be determined pursuant to a formula contained in the acquisition agreement by
dividing a dollar figure derived from GEC's actual pre-tax profits and operating
margins compared with target profits and margins for each such fiscal year by a
discounted per share price. In the event that GEC is sold by the Company prior
to the end of fiscal year 2001, the Company is obligated to issue to Gerry Hall
and Barry Hall a number of shares of Common Stock having a market value (as
determined in accordance with the contract) of $1 million for each year that
earn-out consideration remains payable. The GEC acquisition agreement was
amended in February 1998 to increase the percentage discount applicable to the
price of the Common Stock for purposes of determining the number of shares to be
issued with respect to each fiscal year and to limit the total market value of
the shares of Common Stock which could be issued under the agreement. The shares
issued to the Halls for fiscal year 1998 totaled 508,398.
The Company entered into a consulting agreement with Tyler Dixon dated January
1, 1999 and effective as of April 1, 1999, whereby Mr. Dixon will serve as legal
consultant to the Company, will provide the Company with a minimum of 80 hours
of legal services per month commencing April 1, 1999 and continuing through May
31, 2000, and will be compensated at a rate of $16,000 per month. Mr. Dixon also
received options to purchase 40,000 shares of Common Stock at $6.375 per share,
which exercise period commenced on April 1, 1999 and will terminate two years
from the expiration of the consulting agreement or any extensions or renewals
thereof (whichever occurs last). Mr. Dixon is a partner in the law firm of
Raiford, Dixon & Thackston, LLP, which, during fiscal 1999 and 1998, received
approximately $0.3 million and $0.1 million in legal fees from the Company. Mr.
Dixon was also the sole officer, director and shareholder of Cotton
Communications, Inc. ("Cotton").
On February 17, 1999, in order to facilitate the purchase of (i) 2,785 shares of
Series B Preferred Stock, par value $.001 from the Palladin Group and the
RoseGlen Group acquired in connection with the Series B Offering, and (ii) the
outstanding $10.0 million principal amount of Senior Notes, the Company advanced
Cotton approximately $32.0 million ("Company Advance"), which advance accrues
interest at 11.5% and matures on November 30, 2000. Immediately thereafter,
Cotton purchased 2,785 shares of Series B Preferred Stock (1,425 shares from the
RoseGlen Group for $11.0 million and 1,360 shares from the Palladin Group for
$7.85 million), as well as the Senior Notes.
On March 22, 1999, the Company entered into a termination agreement with Cotton
whereby the Company redeemed the Senior Notes held by Cotton, as well as the
2,785 shares of Series B Preferred Stock from Cotton in exchange for the
cancellation of the Company Advance made to Cotton on February 17, 1999. The
Company also assumed Cotton's obligation to acquire 630,000 of the Series B
Warrants at a price of $3.00 per Series B Warrant. The Senior Notes have since
been canceled and the 2,785 shares of Series B Preferred Stock have been
retired. Additionally, the 630,000 Series B Warrants were purchased by the
Company and retired.
47
<PAGE>
See also "Compensation Committee Interlocks and Insider Participation" regarding
certain related party transactions between the Company, members of the
Compensation Committee and with Mr. Thomas Davidson, a former Director of the
Company.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K
(a) 1. The following consolidated financial statements of Able
Telcom Holding Corp. and its Organizational Groups are
included as part of this report.
Reports of Independent Public Accountants on the Consolidated Financial
Statements:
Consolidated Balance Sheets - October 31, 1999 and 1998
Consolidated Statements of Operations - Years ended October 31, 1999,
1998 and 1997
Consolidated Statements of Shareholders' Equity - Years ended October
31, 1999, 1998 and 1997
Consolidated Statements of Cash Flows - Years ended October 31, 1999,
1998 and 1997
Notes to Consolidated Financial Statements
(a) 2. The financial statement schedule for the years ended
October 31, 1999, 1998 and 1997 is filed as part of this
report and should be read in conjunction with the Consolidated
Financial Statements of the Company.
Schedule II-Valuation and Qualifying Accounts
Schedules not listed above have been omitted because they are not applicable or
not required or the information required to be set forth therein is included in
the Consolidated Financial Statements or Notes thereto.
(a) 3. The exhibits listed on the accompanying Index to
Exhibits immediately following the Financial Statement
Schedules are filed as part of, or incorporated by reference
into, this Report.
EXHIBIT NO. DESCRIPTION
2.1 Asset Purchase Agreement, dated November 26, 1997, among Able
Telcom Holding Corp., Georgia Electric Company, Transportation
Safety Contractors, Inc., COMSAT RSI Acquisitions, Inc. and
COMSAT Corporation (1)
2.2 Indemnification Agreement, dated February 25, 1998, among Able
Telcom Holding Corp., Georgia Electric Company, Transportation
Safety Contractors, Inc., COMSAT RSI Acquisitions, Inc. and
COMSAT Corporation (1)
2.3 Stock Purchase Agreement, dated as of April 1, 1998, among
Able Telcom Holding Corp., James P Patton, Rick Boyle and
Claiborne K. McLemore III (2)
2.4 Closing Memorandum and Schedule, dated April 1, 1998, among
Able Telcom Holding Corp., James P. Patton, Rick Boyle and
Claiborne K. McLemore III (2)
2.5 Agreement and Plan of Merger by an among MFS Acquisition
Corp., Able Telcom Holding Corp., MFS Network Technologies,
Inc. and MFS Communications Company, Inc. dated as of April
22, 1998 (9)
2.5.1 Amendment to Agreement and Plan of Merger among MFS
Acquisition Corp., Able Telcom Holding Corp., MFS Network
Technologies, Inc. and MFS Communications Company, Inc. dated
as of July 2, 1998 (10)
48
<PAGE>
2.5.1.1 Amendment No. 2 dated as of July 21, 1998 to Agreement and
Plan of Merger among MFS Acquisition Corp., Able Telcom
Holding Corp., MFS Network Technologies, Inc. and MFS
Communications Company, Inc. (11)
2.5.1.2 Agreement between WorldCom Network Services, Inc. and Able
Telcom Holding Corp. dated as of September 9, 1998 (13)
2.5.1.3 Agreement between WorldCom Network Services, Inc. and Able
Telcom Holding Corp. dated January 26, 1999 (12)
2.5.2 Promissory Note of Able Telcom Holding Corp. dated July 2,
1998 to MFS Communications Company, Inc. (10)
2.5.2.1 11.5% Promissory Note between Able Telcom Holding Corp., and
WorldCom Network Services, Inc. dated as of September 1, 1998
(12)
2.5.3 Stock Pledge Agreement dated as of July 2, 1998 by Able Telcom
Holding Corp. in favor of WorldCom, Inc. (10)
2.5.4 Master Services Agreement between WorldCom Network Services,
Inc. and MFS Network Technologies, Inc. dated as of July 2,
1998 (exhibits omitted) (11)
2.5.5 Assumption and Indemnity Agreement dated as of July 2, 1998
among Able Telcom Holding Corp., WorldCom Inc., MFS
Communications Company, Inc., MFS Intelenet, Inc., MFS
Datanet, Inc., MFS Telcom, Inc. and MFS Communications, Ltd.
(schedule omitted) (10)
2.5.6 License Agreement between MFS Communications Company, Inc. and
Able Telcom Holding Corp. dated as of July 2, 1998 (10)
2.5.7 Modification to Stock Option Agreement between the Company and
WorldCom, Inc. dated January 8, 1999 (12)
2.5.8 Agreement to Enter into Stock Appreciation Rights Agreement
between the Company and WorldCom, Inc. dated January 8, 1999
(12)
2.5.9 Financing Agreement between WorldCom Network Services, Inc.
and Able Telcom Holding Corp. dated February 16, 1999 (12)
2.5.9.1 Amendment and Restatement of Financing Agreement by and
between WorldCom Network Services, Inc. and Able Telcom
Holding Corp. dated April 1, 1999. (17)
2.5.10 Agreement dated March 15, 1999 by and between Able Telcom
Holding Corp. and WorldCom Network Services, Inc. (17)
2.5.14 Letter Agreement dated January 11, 2000 related to WorldCom
Conversion of Certain Debt into Equity
2.6 Teaming Agreement dated July 7, 1999 by and between Able
Telcom Holding Corp. and 186K.Net, Co.
49
<PAGE>
2.7 Agreement and Plan of Merger by and among Able Telcom Holding
Corp., SES Acquisition Corp., and Specialty Electronics
Systems, Inc. and the Shareholders dated as of November 5,
1999.
2.7.1 Schedule 2.6(a)-SASCO relating to the Agreement and Plan of
Merger by and among Able Telcom Holding Corp., SES Acquisition
Corp., and Specialty Electronics Systems, Inc. and the
Shareholders dated as of November 5, 1999.
2.7.2 Schedule 2.6(a)-SES relating to the Agreement and Plan of
Merger by and among Able Telcom Holding Corp., SES Acquisition
Corp., and Specialty Electronics Systems, Inc. and the
Shareholders dated as of November 5, 1999.
2.7.3 Stock Purchase Agreement by and among Able Telcom Holding
Corp., Southern Aluminum & Steel Corporation and the
Shareholders dated November 5, 1999.
2.7.4 Registration Rights Agreement associated with the Stock
Purchase Agreement by and among Able Telcom Holding Corp.,
Southern Aluminum & Steel Corporation and the Shareholders
dated November 5, 1999.
2.7.5 Employment Agreement with Donald G. Garner dated November 5,
1999.
2.7.5.1 Non-Competition Agreement with Donald G. Garner dated November
5, 1999.
2.7.6 Employment Agreement with C. Michael Hoover dated November 5,
1999.
2.7.6.1 Non-Competition Agreement with C. Michael Hoover dated
November 5, 1999.
2.7.7 Employment Agreement with Jesse R. Joyner dated November 5,
1999.
2.7.7.1 Non-Competition with Jesse R. Joyner dated November 5, 1999.
3.1 Articles of Incorporation of Able Telcom Holding Corp., as
amended (3) (4)
3.1.1 Articles of Amendment to the Articles of Incorporation of Able
Telcom Holding Corp. (13)
3.1.2 Articles of Amendment to the Articles of Incorporation of Able
Telcom Holding Corp. dated January 25, 2000.
3.2 Bylaws of Able Telcom Holding Corp., as amended (3)
4.2 Specimen Common Stock Certificate (3)
4.3 Specimen Series A Preferred Stock Certificate (6)
4.3.1 Specimen Series B Preferred Stock Certificate
4.3.2 Specimen Series C Preferred Stock Certificate
4.4 Form of Warrant issued to Credit Suisse, First Boston and
Silverton International Fund Limited (4)
4.6 Able Telcom Holding Corp. 1995 Stock Option Plan (13)
4.7 Amendment to Able Telcom Holding Corp. 1995 Stock Option Plan,
dated April 24, 1998 (13)
4.8 Series B Convertible Preferred Stock Purchase Agreement (13)
50
<PAGE>
4.9 Registration Rights Agreement for Series B Convertible
Preferred Stock Purchase Agreement and 350,000 Warrants (13)
4.10 Registration Rights Agreement for 650,000 Warrants associated
with Series B Convertible Preferred Stock Purchase Agreement
(13)
4.11 Form of Common Stock Purchase Warrants for 350,000 Shares in
connection with Series B Convertible Preferred Stock Purchase
Agreement (13)
4.12 Form of Common Stock Purchase Warrants for 650,000 Shares in
connection with Series B Convertible Preferred Stock Purchase
Agreement (13)
4.13 Preferred Stock Purchase Agreement by and among Able Telcom
Holding Corp., RGC International Investors, LDC, and Cotton
Communications, Inc. dated February 17, 1999 (12)
4.14 Warrant Amendment between Able Telcom Holding Corp., and
Purchasers (as defined) dated February 17, 1999 (12)
4.15 Securities Purchase Agreement by and between the Sellers (as
defined) and Cotton Communications, Inc. dated February 17,
1999 (12)
4.15.1 Letter Agreement dated February 17, 1999 from Cotton
Communications, Inc. to John Hancock Mutual Life Insurance
Company.
4.15.2 Letter Agreement dated February 17, 1999 from Cotton
Communications, Inc. to Able Telcom Holding Corp.
4.15.3 Termination Agreement dated March 22, 1999 by and between Able
Telcom Holding Corp. and Cotton Communication, Inc.
4.16 Series B Convertible Preferred Stock Exchange Agreement by and
between Able Telcom Holding Corp. and the Palladin Group dated
February 4, 2000.
4.16.3 Letter Agreement dated February 17, 1999 from the Palladin
Group to Able Telcom Holding Corp.
4.16.4 Letter dated March 19, 1999 from Able Telcom Holding Corp. to
the Palladin Group associated with the termination of
Financing Agreement dated February 17, 1999.
4.17 Form of First Common Stock Purchase Warrants in connection
with Series B Convertible Preferred Stock Exchange Agreement
with the Palladin Group
4.18 Form of Second Common Stock Purchase Warrants in connection
with Series B Convertible Preferred Stock Exchange Agreement
with the Palladin Group
4.19 Series B Convertible Preferred Stock Exchange Agreement by and
between Able Telcom Holding Corp. and the RoseGlen Group dated
February 4, 2000.
4.20 Form of Common Stock Purchase Warrants in connection with
Series B Convertible Preferred Stock Exchange Agreement with
the RoseGlen Group
4.21 Registration Rights Agreement associated with Series B
Convertible Preferred Stock Exchange Agreement
4.22 Series C Convertible Preferred Stock Purchase Agreement
51
<PAGE>
4.23 Form of Common Stock Purchase Warrants in connection with
Series C Convertible Preferred Stock Purchase Agreement
4.24 Registration Rights Agreement associated with Series C
Convertible Preferred Stock Purchase Agreement
10.15 Stock Purchase Agreement between Able Telcom Holding Corp.,
Traffic Management Group, Inc., Georgia Electric Company,
Gerry W. Hall and J. Barry Hall (5)
10.16 Stock Purchase Agreement between Able Telcom Holding Corp.,
Telecommunications Services Group, Inc., Dial Communications,
Inc., William E. Newton and Sybil C. Newton (8)
10.17 Promissory Note of Able Telcom Holding Corp. Payable to
William E. Newton and Sybil C. Newton (8)
10.23 Form of Stock Purchase Agreement among Able Telcom Holding
Corp., Traffic Management Group, Inc., Georgia Electric
Company, Gerry W. Hall and J. Barry Hall (5)
10.25 Securities Purchase Agreements, dated as of January 6, 1998,
between Able Telcom Holding Corp. and each of the Purchasers
named therein (6)
10.25.1 Letter Agreement dated July 2, 1998 related to Securities
Purchase Agreements dated as of January 6, 1998 (13)
10.26 Senior Secured Revolving Credit Agreement dated as of April 6,
1998, between Able Telcom Holding Corp. and Suntrust Bank,
South Florida, N.A. and Bank of America, FSB (9)
10.27 Credit Agreement among Able Telcom Holding Corp., NationsBank,
N.A. and The Several Lenders from Time to Time Parties Hereto
dated as of June 11, 1998 (exhibits and schedules omitted)
(13)
10.30 Employment Agreement with Stacy Jenkins, dated July 16, 1998
(13)
10.32 Amendment to June 11, 1998 Credit Agreement among Able Telcom
Holding Corp. NationsBank N.A., and the Several Lenders from
Time to Time Parties thereto, dated as of June 30, 1998 (13)
10.32.1 Amendment and Amended and Restated Limited Waiver to June 11,
1998 Credit Agreement among Able Telcom Holding Corp.,
NationsBank N.A., and the Several Lenders from Time to Time
Parties thereto, dated as of June 30, 1998 (16)
10.33 Employment Agreement with Billy V Ray, Jr., dated October 1,
1998 (12)
10.35 Financial Advisor and Placement Engagement Letter, dated April
3, 1998, between Washington Equity Partners and Able Telcom
Holding Corp. (14)
10.36 Employment Agreement with G. Vance Cartee, dated January 4,
1999 (12)
10.37 Employment Agreement with Edward Pollock, dated January 1,
1999 (12)
10.38 Employment Agreement with Frazier L. Gaines, dated November
12, 1998 (12)
10.40 Employment Agreement with Rick Boyle, dated April 1, 1998 (12)
10.41 Financing Agreement between Able Telcom Holding Corp. and
Cotton Communications, Inc. dated February 17, 1999 (without
exhibits) (12)
52
<PAGE>
10.41.1 Termination Agreement between Able Telcom Holding Corp. and
Cotton Communications, Inc. dated March 22, 1999 (14)
10.42 11.5% Non-Recourse Promissory Note between Cotton
Communications, Inc. and Able Telcom Holding Corp. dated
February 17, 1999 (12)
10.43 Stock Pledge Agreement between Able Telcom Holding Corp. and
Cotton Communications, Inc. dated February 17, 1999 (12)
10.44 Employment Agreement with Michael Arp, dated January 1, 1999
(14)
10.45 Consulting Agreement and Employment Agreement with James E.
Brands, dated March 15, 1999 (14)
10.46 Employment Agreement with Michael Summers, dated May 31, 1999.
(17)
11 Computation of Per Share Earnings (7)
16.1 Letter regarding change in certifying accountants (15)
21 Subsidiaries of Able Telcom Holding Corp.
23.1 Consent of Ernst & Young LLP
23.2 Consent of Arthur Andersen LLP
27 Financial Data Schedule
- -------------------
(1) Incorporated by reference from an exhibit to the Company's Current
Report Form 8-K (File No. 0-21986), as filed March 12, 1998, as amended
April 14, 1998.
(2) Incorporated by reference from an exhibit to the Company's Current
Report on Form 8-K (File No. 0-21986), ass filed April 14, 1998.
(3) Incorporated by reference from an exhibit to the Company's Registration
Statement on Form S-1 (File No. 33-65854), as declared effective by the
Commission on February 26, 1994.
(4) Incorporated by reference from an exhibit to the Company's Current
Report on Form 8-K (File No. 0-21986), as filed December 31, 1996.
(5) Incorporated by reference from an exhibit to the Company's Current
Report on Form 8-K (File No. 0-21986), as filed October 25, 1996.
(6) Incorporated by reference from an exhibit to the Company's Annual
Report on Form 10-K (File No. 0-21986) for the fiscal year ended
October 31, 1997, as filed February 13, 1998, as amended March 20,
1998.
(7) Incorporated by reference from Note 5 to the Condensed Consolidated
Financial Statements (Unaudited) filed herewith.
(8) Incorporated by reference from an exhibit to the Company's Current
Report on Form 8-K (File No. 0-21986), as filed December 13, 1996, as
amended February 11, 1997.
(9) Incorporated by reference from an exhibit to the Company's Quarterly
Report on Form 10-Q (File No. 0-21986), for the quarter ended April 30,
1998, as filed June 14, 1998.
53
<PAGE>
(10) Incorporated by reference from an exhibit to the Company's Current
Report on Form 8-K (File No. 0-21986), as filed July 16, 1998.
(11) Incorporated by reference from an exhibit to the Company's Current
Report on Form 8-K (File No. 0-21986), as filed August 3, 1998.
(12) Incorporated by reference from an exhibit to the Company's Annual
Report on Form 10-K (File No. 0-21986), for the fiscal year ended
October 31, 1998, as filed February 24, 1999, as amended March 1, 1999.
(13) Incorporated by reference to an exhibit to the Company's Quarterly
Report on Form 10-Q (File No. 0-21986), for the quarter ended July 31,
1998, as filed September 21, 1998, as amended October 13, 1998.
(14) Incorporated by reference to an exhibit to the Company's Form S-1 (File
No. 333-65991), as filed October 22,1998, as amended April 8, 1999.
(15) Incorporated by reference from an Exhibit to the Company's Current
Report on Form 8-K (File No. 0-21986), as filed September 14, 1998.
(16) Incorporated by reference to an exhibit to the Company's Quarterly
Report on Form 10-Q (File No. 0-21986), for the quarter ended January
31, 1999, as filed March 17, 1999.
(17) Incorporated by reference to an exhibit to the Company's Quarterly
Report on Form 10-Q (File No. 0-21986), for the quarter ended April 30,
1999, as filed June 14, 1999.
(b) Reports on Form 8-K
None
54
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized this 16th of February 2000.
ABLE TELCOM HOLDING CORP.
BY: /s/ BILLY V. RAY, JR.
---------------------
BILLY V. RAY, JR.,
President, Chief Executive Officer, and
Acting Chief Financial Officer
<TABLE>
<CAPTION>
Signatures Title Date Signed
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
/s/ BILLY V. RAY, JR. President and Chief Executive Officer February 16, 2000
- --------------------- and Director, Acting Chief Financial
Billy V. Ray, Jr. Officer (Principal Executive Officer
and Acting Principal Financial Officer)
/s/ MICHAEL A. SUMMERS Chief Accounting Officer February 18, 2000
- ----------------------
Michael A. Summers
/s/ C. FRANK SWARTZ Chairman of the Board of Directors February 16, 2000
- -------------------
C. Frank Swartz
/s/ ALEC MCLARTY Director February 16, 2000
- ----------------
Alec McLarty
</TABLE>
File courtesy cc: with Nasdaq.
55
<PAGE>
ABLE TELCOM HOLDING CORP. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
Page
Report of Independent Public Accountants................................ F-2
Report of Independent Certified Public Accountants...................... F-3
Consolidated Financial Statements:
Consolidated Balance Sheets - October 31, 1999 and 1998................. F-4
Consolidated Statements of Operations -
Years Ended October 31, 1999, 1998 and 1997........................ F-5
Consolidated Statements of Shareholders' Equity -
Years Ended October 31, 1999, 1998 and 1997........................ F-6
Consolidated Statements of Cash Flows -
Years Ended October 31, 1999, 1998 and 1997........................ F-7
Notes to Consolidated Financial Statements - October 31, 1999........... F-8
Financial Statement Schedule:
II. Valuation and Qualifying Accounts - Years Ended October 31,
1999, 1998 and 1997............................................. F-35
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of
Able Telcom Holding Corp.:
We have audited the accompanying consolidated balance sheets of Able Telcom
Holding Corp. (a Florida Corporation) and subsidiaries as of October 31, 1999
and 1998 and the related consolidated statements of operations, shareholders'
equity and cash flows for the years then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Able Telcom Holding Corp. and
subsidiaries as of October 31, 1999 and 1998, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. The Company incurred
significant operating losses during the fiscal year ended October 31, 1999.
Significant payments were also made, both during and subsequent to October 31,
1999, to redeem the Series B Preferred Stock and to reduce obligations for loss
contracts assumed in 1998 in the acquisition of MFS Network Technologies, Inc.
The Company has borrowed the maximum available under its existing Credit
Facility and is in default of the related covenants. The lender has the right to
demand payment and the Company has insufficient liquidity to pay such amounts,
if called. The Company has not yet been successful in obtaining alternative
financing and may have insufficient liquidity to fund its continuing operations.
Consequently, there is substantial doubt about the Company's ability to continue
as a going concern. Management's plans in regard to these matters are described
in Note 3. The consolidated financial statements do not include any adjustments
relating to the recoverability and classification of asset carrying amounts or
the amount and classification of liabilities that might result should the
Company be unable to continue as a going concern.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The financial statement schedule listed
in the index to the consolidated financial statements is presented for purposes
of complying with the Securities and Exchange Commission's rules and is not part
of the basic financial statements. The schedule has been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
ARTHUR ANDERSEN LLP
Omaha, Nebraska
February 11, 2000
F-2
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Shareholders and Board of Directors of
Able Telcom Holding Corp.:
We have audited the accompanying consolidated statements of operations,
shareholders' equity and cash flows of Able Telcom Holding Corp. and
subsidiaries for the year ended October 31, 1997. Our audit also included the
financial statement schedule listed in the Index at Item 14(a). These financial
statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated results of operations and
cash flows of Able Telcom Holding Corp. and subsidiaries for the year ended
October 31, 1997, in conformity with accounting principles generally accepted in
the United States. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.
ERNST & YOUNG LLP
West Palm Beach, Florida
January 19, 1998
F-3
<PAGE>
ABLE TELCOM HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
OCTOBER 31, OCTOBER 31,
1999 1998
----------- -----------
<S> <C> <C>
ASSETS
Currents Assets:
Cash and cash equivalents............................................................ $ 16,568 $ 13,544
Accounts receivable, including retainage of $16,158 and $10,182 and net of allowances
for bad debts of $3,032 and $866 at October 31, 1999 and 1998, respectively.. 73,645 64,159
Costs and profits in excess of billings on uncompleted contracts..................... 71,808 105,478
Prepaid expenses and other current assets............................................ 5,853 2,641
-------- --------
Total current assets......................................................... 167,874 185,822
Property and equipment:
Land and buildings................................................................... 3,801 4,473
Equipment, furnitures and fixtures................................................... 43,989 42,522
-------- --------
47,790 46,995
Less - Accumulated depreciation...................................................... (19,987) (14,921)
-------- --------
Property and equipment, net.......................................................... 27,803 32,074
Other assets:
Goodwill, net of accumulated amortization of $4,078 and $2,162 at
October 31, 1999 and 1998, respectively...................................... 41,222 31,374
Assets held for sale................................................................. -- 38,750
Investment in Kanas.................................................................. 12,159 --
Other non-current assets............................................................. 12,975 2,740
-------- --------
Total other assets........................................................... 66,356 72,864
-------- --------
Total assets................................................................. $262,033 $290,760
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term-debt.................................................... $ 35,754 $ 14,438
Accounts payable and accrued liabilities including retainage of $11,618 and $10,374
at October 31, 1999 and 1998, respectively................................... 66,617 61,229
Accruals for incurred job costs...................................................... 45,593 51,111
Billings in excess of costs and profits on uncompleted contracts..................... 6,478 6,328
Reserves for losses on uncompleted contracts......................................... 8,620 25,390
Notes payable shareholders/directors................................................. -- 1,182
Stock appreciation rights payable.................................................... 3,710 --
-------- --------
Total current liabilities.................................................... 166,772 159,678
Long-term debt, non-current portion.................................................. 30,618 61,685
Advance from WorldCom................................................................ 32,000 --
Property tax payable, non-current portion............................................ 15,468 15,118
Other non-current liabilities and minority interest.................................. 422 2,737
-------- --------
Total liabilities.................................................................... 245,280 239,218
Commitments and contingencies.................................................................
Series B Preferred Stock, $.10 par value; stated at aggregate accumulated redemption value at
October 31, 1999; 4,000 shares authorized;
779 and 3,564 shares issued and outstanding.......................................... 16,322 11,325
-------- --------
Shareholders' Equity:
Common stock, $.001 par value, authorized 25,000,000 shares; 11,891,338 and
11,065,670 shares issued and outstanding, respectively............................. 12 11
Additional paid-in capital........................................................... 38,290 35,164
Senior Note Warrants................................................................. 1,244 1,244
Series B Preferred Stock Warrants.................................................... 2,735 5,400
WorldCom Stock Options............................................................... -- 3,490
WorldCom Phantom Stock............................................................... 606 606
Retained deficit..................................................................... (42,456) (5,698)
-------- --------
Total shareholders' equity........................................................... 431 40,217
-------- --------
Total liabilities and shareholders' equity........................................... $262,033 $290,760
======== ========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
ABLE TELCOM HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE YEARS
ENDED OCTOBER 31,
1999 1998 1997
-------- -------- -------
<S> <C> <C> <C>
Revenue:
Construction and maintenance................................. $382,844 $217,481 $86,334
Conduit sale................................................. 35,721 -- --
-------- -------- -------
Total revenue................................................ 418,565 217,481 86,334
Costs and expenses:
Construction and maintenance................................. 330,387 179,505 68,164
Costs of conduit sale........................................ 34,673 -- --
General and administrative expense........................... 41,041 18,967 8,797
Depreciation................................................. 9,644 6,638 4,124
Amortization................................................. 2,189 962 408
Impairment of long-lived assets.............................. 2,515 -- --
-------- -------- -------
Total costs and expenses..................................... 420,449 206,072 81,493
-------- -------- -------
Income (loss) from operations........................................... (1,884) 11,409 4,841
Other income (expense):
Interest expense............................................. (9,512) (5,534) (1,565)
Change in value of stock appreciation rights ................ (1,814) -- --
Equity in losses of investment in Kanas...................... (591) -- --
Other........................................................ (761) 662 601
-------- -------- -------
Total other income (expense)................................. (12,678) (4,872) (964)
-------- -------- -------
Income (loss) before income taxes, minority interest
and extraordinary item....................................... (14,562) 6,537 3,877
Provision for (benefit from) income taxes............................... (138) 3,405 727
-------- -------- -------
Income before minority interest and extraordinary item.................. (14,424) 3,132 3,150
Minority interest....................................................... (569) (618) (293)
-------- -------- -------
Income (loss) before extraordinary item................................. (14,993) 2,514 2,857
Extraordinary loss on the early extinguishment
of debt, net of tax of zero in 1999.......................... (3,067) -- --
-------- -------- -------
Net income (loss)....................................................... (18,060) 2,514 2,857
Beneficial conversion privilege of preferred stock...................... -- (8,013) (1,266)
Repurchase of Series B Preferred Stock.................................. (4,496) -- --
Modification of conversion price of Series B Preferred Stock............ (6,430) -- --
Modification of exercise price of Series B Preferred Stock Warrants..... (1,894) -- --
Increase in default redemption value of Series B Preferred Stock........ (5,878) -- --
Preferred stock dividends............................................... -- (341) (260)
-------- -------- -------
Income (loss) applicable to common stock................................ ($36,758) ($5,840) $1,331
======== ======== =======
Weighted average shares outstanding:
Basic........................................................ 11,776,072 9,907,060 8,504,972
Diluted...................................................... 11,776,072 9,907,060 8,504,972
Income (loss) per share (see Note 2):
Basic:
Income (loss) applicable to common stock before
extraordinary item................................... ($2.86) ($0.59) $0.16
Extraordinary loss....................................... (0.26) -- --
Income (loss) applicable to common stock................. (3.12) (0.59) 0.16
Diluted:
Income (loss) applicable to common stock before
extraordinary item................................... ($2.86) ($0.59) $0.16
Extraordinary loss....................................... (0.26) -- --
Income (loss) applicable to common stock................. (3.12) (0.59) 0.16
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
ABLE TELCOM HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED OCTOBER 31, 1999, 1998, AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
Common Additional Series B
------------------- Paid-in Senior Preferred WorldCom
Shares $.001 Par Capital Note Warrants Warrants Options
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, October 31, 1996 8,203 $ 9 $ 12,833 $ - $ - $ -
Issuance of common stock in
connection with acquisition 109 - 620 - - -
Issuance of common stock for services 2 - 12 - - -
Issuance of common stock for exercise of
options 262 - 732 - - -
Compensation recognized on stock options - - 338 - - -
Issuance of common stock for conversion of
convertible preferred stock 5 - 34 - - -
Changes in unrealized loss on investments - - - - - -
Convertible preferred dividends paid - - - - - -
Embedded dividend recognized on convertible
preferred shares - - - - - -
Tax benefit from exercise of options - - 527 - - -
Net income - - - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, October 31, 1997 8,581 9 15,096 - - -
Issuance of common stock for GEC earnout 204 - 1,278 - - -
Compensation expense for below
market options - - 93 - - -
Issuance of common stock for
exercise of options 352 - 2,071 - - -
Tax benefit from exercise of options - - 516 - - -
Dividends on Series A preferred stock - - - - - -
Embedded dividend recognized on Series
A Preferred Stock - - - - - -
Issuance of common stock for conversion
of Series A Preferred Stock 921 1 6,817 - - -
Valuation of subordinated note warrants - - - 1,244 - -
Valuation of Series B Preferred Stock Warrants - - - - 5,400 -
Embedded dividend recognized on Series
B Preferred Stock - - 7,909 - - -
Valuation of WorldCom options - - - - - 3,490
Valuation of WorldCom phantom stock awards - - - - - -
Issuance of common stock for conversion
of Series B Preferred Stock 1,008 1 1,384 - - -
Dividends on Series B Preferred Stock - - - - - -
Net income - - - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, October 31, 1998 11,066 11 35,164 1,244 5,400 3,490
Conversion of the WorldCom Option to SARs - - 1,594 - - (3,490)
Issuance of common stock for GEC earnout 628 1 4,595 - - -
Series B Preferred Stock Transactions:
Repurchase of Series B Preferred Stock - - (5,506) - - -
Modification of conversion price of Series B
Preferred Stock - - 6,430 - - -
Modification of conversion price of Series B
Preferred Stock Warrants - - - - 1,894 -
Repurchase of Series B Preferred Stock Warrants - - 2,669 - (4,559) -
Increases to Series B default redemption value - - (7,970) - - -
Issuance of common stock in settlement of
notes payable to directors 118 - 828 - - -
Issuance of common stock for
exercise of options 79 - 355 - - -
Value of options granted to non-employees - - 131 - - -
Net loss - - - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, October 31, 1999 11,891 12 38,290 1,244 2,735 -
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Unrealized Loss Retained
WorldCom on Investments Earnings
Phantom Stock Net of Taxes (Deficit) TOTAL
--------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, October 31, 1996 $ - $ (54) $ (1,189) 11,599
Issuance of common stock to directors in
connection with acquisition - - - 620
Issuance of common stock for services - - - 12
Issuance of common stock for exercise of
options - - - 732
Compensation recognized on stock options - - - 338
Issuance of common stock for conversion of
convertible preferred stock - - - 34
Changes in unrealized loss on investments - 54 - 54
Convertible preferred dividends paid - - (260) (260)
Embedded dividend recognized on convertible
preferred shares - - (1,266) (1,266)
Tax benefit from exercise of options - - - 527
Net income - - 2,857 2,857
- ---------------------------------------------------------------------------------------------------------------
Balance, October 31, 1997 - - 142 15,247
Issuance of common stock for GEC earnout - - - 1,278
Compensation expense for below
market options - - - 93
Issuane of common stock for
exercise of options - - - 2,071
Tax benefit associated with stock options - - - 516
Dividends on Series A preferred stock - - (79) (79)
Embedded dividend recognized on Series
A Preferred Stock - - (104) (104)
Issuance of common stock for conversion
of Series A Preferred Stock - - - 6,818
Valuation of subordinated note warrants - - - 1,244
Valuation of Series B Preferred Stock Warrants - - - 5,400
Embedded dividend recognized on Series
B Preferred Stock - - (7,909) -
Valuation of WorldCom options - - - 3,490
Valuation of WorldCom phantom stock awards 606 - - 606
Issuance of common stock for conversion
of of Series B Preferred Stock - - - 1,385
Dividends on Series B Preferred Stock - - (262) (262)
Net income - - 2,514 2,514
- ---------------------------------------------------------------------------------------------------------------
Balance, October 31, 1998 606 - (5,698) 40,217
Conversion of the WorldCom Option to SARs - - - (1,896)
Issuance of common stock for GEC earnout - - - 4,596
Series B Preferred Stock Transactions:
Repurchase of Series B Preferred Stock - - (4,496) (10,002)
Modification of conversion price of Series B
Preferred Stock - - (6,430) -
Modification of conversion price of Series B
Preferred Stock Warrants - - (1,894) -
Repurchase of Series B Preferred Stock Warrants - - - (1,890)
Increases to Series B default redemption value - - (5,878) (13,848)
Issuance of common stock in settlement of
notes payable to directors - - - 828
Issuance of common stock for -
exercise of options - - - 355
Value of options granted to non-employees - - - 131
Net loss - - (18,060) (18,060)
- ---------------------------------------------------------------------------------------------------------------
Balance, October 31, 1999 606 - (42,456) 431
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements
F-6
<PAGE>
ABLE TELCOM HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS
ENDED OCTOBER 31,
1999 1998 1997
-------- ------- -------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(18,060) $2,514 $2,857
Adjustment to reconcile net income (loss) to net cash
provided by (used in) operating activities, net of
effects of acquisitions:
Extraordinary loss on early extinguishment of debt 3,067 - -
Depreciation 9,644 6,638 4,532
Amortization 2,189 962 -
Deferred income taxes (265) 717 727
Minority interest 569 618 293
Impairment of long-lived assets 2,515 - -
Equity in losses of investment in Kanas 591 - -
Change in value of stock appreciation rights 1,814 - -
Gain on sale of assets held for sale (1,048) - -
Accretion of property tax payable 2,284 - -
Compensation recognized for conversion of stock options - 93 338
Reduction in revenue for litigation - - (433)
Gain on disposal of property and equipment (234) - -
Issuance of options to non-employees 131 - -
Other - net 4 156 10
-------- ------- -------
3,201 11,698 8,324
Changes in assets and liabilities, net of effects from
acquisitions:
Change in accounts receivable (10,886) 2,694 1,002
Change in costs and profits in excess of
billings on uncompleted contracts 25,000 (16,987) (4,661)
Change in other current assets (2,947) 2,334 431
Change in other assets 327 1,247 (280)
Change in accounts payable and accrued liabilities 4,750 (23,117) (199)
Change in accruals for incurred job costs (9,318) - -
Change in billings in excess of costs and
profits on uncompleted contracts 150 569 (927)
Change in reserves for losses on uncompleted contracts (16,170) 25,390 -
Change in other non-current liabilities (2,658) 2,789 230
-------- ------- -------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (8,551) 6,617 3,920
-------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net (8,438) (9,966) (4,487)
Net proceeds from sale of property and equipment 2,103 90 96
Proceeds from sale of assets held for sale 27,048 - -
Sales of investments - - 567
Cash acquired in acquisitions - 4,661 404
Cash paid for acquisitions - (8,681) (3,000)
Cash invested in escrow account (7,182) - -
-------- ------- -------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 13,531 (13,896) (6,420)
-------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under lines of credit - 50,518 (4,626)
Payment of shareholder / director loans (354) (2,925) (250)
Borrowings from shareholder / director - 2,050 -
Proceeds from long-term debt 667 10,000 11,014
Proceeds from debt to finance acquisition - 10,000 3,000
Advances from WorldCom 32,000 - -
Repayments on long-term debt (13,485) (74,388) (9,272)
Distributions to minority interests (226) (502) (293)
Repurchase of Series B Preferred Stock Warrants (1,890) - -
Redemption of Series B Preferred Stock (18,857) - -
Proceeds from the issuance of Preferred Stock, net - 18,110 5,418
Proceeds from the exercise of stock options - 2,071 732
Proceeds from issuance of common stock for options 355 - -
Dividends paid (166) (341) (260)
-------- ------- -------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (1,956) 14,593 5,463
-------- ------- -------
Increase in cash and cash equivalents 3,024 7,314 2,963
Cash and cash equivalents at beginning of year 13,544 6,230 3,267
-------- ------- -------
Cash and cash equivalents at end of year $16,568 $13,544 $6,230
======== ======= =======
Supplemental disclosures of cash flow information:
Valuation of detachable warrants - $ 6,644 $ -
Discount on preferred stock - 7,909 -
Conversion of Series B Preferred Stock - 1,385 -
Conversion of Series A Preferred Stock - 6,818 -
Valuation of below market options on acquisition - 4,096 -
Issuance of common stock for services - - 11
Compensation recognized on below market options - 93 338
Common stock issued in accordance with GEC earnout provisions 4,596 1,278 621
Common stock issued in exchange for note payable to director 828 - -
Valuation of modification of conversion price of
Series B Preferred Stock Warrants 1,894 - -
Conversion of WorldCom Options to SARs 1,896 - -
Valuation of modification of
conversion of Series B Preferred Stock 6,430 - -
Increases to Series B Preferred Stock default redemption value 13,848 - -
Increases to goodwill for:
Accrued GEC earnout payments 1,806 (4,596) (1,278)
Recognition of deferred taxes for Patton
acquisition 1,460 - -
Reallocation of MFSNT purchase price 9,773 - -
Cash paid for:
Interest 3,689 4,226 1,684
Income taxes 4,643 29 -
</TABLE>
See notes to consolidated financial statements
F-7
<PAGE>
ABLE TELCOM HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1999
1. THE COMPANY:
Able Telcom Holding Corp. ("Able" or the "Company") develops, builds and
maintains communications systems for companies and governmental authorities. The
Company is headquartered in Atlanta, Georgia, and operates its subsidiaries
throughout the United States. The Company also has limited activities in South
America. The Company has five main organizational groups:
- --------------------------------------------------------------------------------
ORGANIZATIONAL GROUP SERVICE PROVIDED
- --------------------------------------------------------------------------------
Network Services ................. Design, development, engineering,
installation, construction, operation and
maintenance services for telecommunications
systems.
- --------------------------------------------------------------------------------
Network Development............... Established subsequent to October 31, 1999,
to own, operate and maintain local and
regional telecommunication networks.
- --------------------------------------------------------------------------------
Transportation Services........... Design, development, integration,
installation, construction, project
management, maintenance and operation of
automated toll collection systems.
- --------------------------------------------------------------------------------
Construction...................... Design, development, installation,
construction, maintenance and operation of
electronic traffic management and control
systems, and road signage.
- --------------------------------------------------------------------------------
Communications Development........ Design, installation and maintenance
services to foreign telephone companies in
South America.
- --------------------------------------------------------------------------------
Each group is comprised of subsidiaries of the Company with each having local
executive management functioning under a decentralized operating environment.
The Company's customers primarily include local and long distance telephone
companies, utilities and local, state and federal governments.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements are prepared on an accrual
basis and include the accounts of the Company and its subsidiaries, including
MFS Network Technologies, Inc., Georgia Electric Company, Patton Management
Corporation, Transportation Safety Contractors, Inc., Able Telecommunications &
Power, Inc. and Able Telcom International, Inc., Able Telcom CA and Able Telcom
Do Brasil, LTDA.
Minority shareholders of Able Telcom CA are entitled to share in 50 percent of
the earnings and losses of Able Telcom CA. The Company's share of ownership and
voting control is 80 percent. During the fiscal years ended October 31, 1999,
1998 and 1997, minority interests of $0.6 million, $0.6 million and $0.3
million, respectively, are reflected in the accompanying consolidated statements
of operations.
A substantial portion of consolidated total assets, liabilities and revenues are
generated by one subsidiary of the Company, MFS Network Technologies, Inc.
("MFSNT"), which was acquired effective July 2, 1998. Revenues and expenses of
businesses acquired in purchase transactions are included in the consolidated
results of operations since the date of acquisition. All material intercompany
accounts and transactions have been eliminated.
USE OF ESTIMATES AND SIGNIFICANT RISKS
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
The Company's construction and service activities are highly technical and its
contracts are complex. Some contracts have or will require several years to
complete. Work awarded to the Company is often the result of competitive bidding
and many of the Company's significant contracts are based on a fixed price
rather than cost-
F-8
<PAGE>
plus or time and materials. Initial cost estimates supporting the Company's bids
are necessarily based on facts and circumstances known at the time the estimates
are made. Estimates of projected contract costs must be continuously updated
over the period of contract performance. Contracts with governmental agencies
may include onerous requirements that adversely affect the cost and efficiency
of the Company's performance. High-profile public works can present difficulties
in obtaining final acceptance of completed work because of local political
considerations. Disputes regarding the scope of the work are not uncommon and
change order requests often require protracted negotiations and concessions on
the part of the Company. Unsatisfactory performance of subcontractors or failure
of installed equipment to function in accordance with contract specifications
may also adversely affect the Company's ultimate profitability. Most contracts
pose risks for both the quality and timeliness of performance. Many contracts
include liquidating or liquidated damage clauses to penalize the Company for
failure to meet contractual deadlines.
Considerable judgment must be applied to reasonably evaluate the potential
outcomes of issues that arise during the contract performance period and the
effect their resolution will have on the ultimate margins or losses that may be
realized by the Company. Consequently, the estimates that support the Company's
revenue recognition and cost accrual decisions have a very significant impact on
the results of operations reported by the Company.
CASH AND CASH EQUIVALENTS
The Company considers all unrestricted highly liquid investments with original
maturities of three months or less to be cash equivalents.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation is provided for using
the straight-line and accelerated methods over the estimated useful lives of the
assets that generally range from three to ten years.
GOODWILL
Goodwill represents the amount by which the purchase price of businesses
acquired exceeds the fair value of the net assets acquired under the purchase
method of accounting. Goodwill is being amortized on a straight-line basis over
20 years. A rollforward of goodwill from November 1, 1998 is as follows (amounts
in thousands):
Net goodwill, at November 1, 1998 $31,374
Patton Management Corporation ("Patton") (1) 1,460
Dial Communications, Inc. ("Dial") (2) (1,319)
Georgia Electric Company ("GEC") (3) 1,806
MFSNT (4) 9,773
Amortization (1,872)
- -------------------------------------------------------------------------------
Net goodwill, at October 31, 1999 $41,222
- -------------------------------------------------------------------------------
As discussed in Note 5 "Acquisitions," adjustments made to goodwill during the
fiscal year ended October 31, 1999, related to:
(1) Goodwill was increased to recognize deferred tax and other liabilities
of approximately $1.1 million and $0.4 million, respectively, assumed
in the 1998 acquisition of Patton.
(2) The Company terminated the operation of Dial and wrote-off the related
goodwill.
(3) The increase is for contingent earn-out consideration associated with
the 1996 acquisition of GEC.
(4) Goodwill was increased by approximately $9.8 million for adjustments to
the MFSNT purchase price allocation.
Amortization expense was $1.9 million, $1.0 million, and $0.4 million for the
fiscal years ended October 31, 1999, 1998 and 1997, respectively.
F-9
<PAGE>
IMPAIRMENT OF LONG-LIVED ASSETS
The Company, at each balance sheet date, evaluates whether events or changes in
circumstances have occurred that indicate the carrying value of its long-lived
assets and identifiable intangibles may not be recoverable. If such events or
changes in circumstances are deemed to have occurred, the Company estimates the
future cash flows related to the assets and compares the sum of the expected
future cash flows (undiscounted and without interest charges) to the carrying
amount of the assets to determine if there has been an impairment. If an
impairment has occurred, the Company will write the assets down to their
estimated fair value. The estimated fair value of the assets is typically
calculated using the present value of estimated expected future cash flows using
a discount rate commensurate with the risks involved. As described in Note 5,
"Acquisitions", the Company wrote-off $1.3 million of Dial goodwill during the
year ended October 31, 1999. In addition, the Company also wrote-off $1.2
million of equipment during the year ended October 31, 1999.
SELF-INSURED CLAIMS LIABILITY
The Company retains the risk, up to certain limits, for automobile, workers'
compensation, and employee group health claims. As of July 1, 1999, the Company
switched its self-insured automobile and workers' compensation policies to a
premium based, fully-insured policy, but continues to self-insure the employee
group health claims. A liability for unpaid claims and the associated claim
expenses, including incurred but not reported claims, is determined and
reflected in the consolidated financial statements as an accrued liability. The
self-insured claims liability includes estimates of incurred but not reported
claims of $1.6 million and $1.1 million at October 31, 1999 and 1998,
respectively. The determination of such claims and expenses and the
appropriateness of the related liability is continually reviewed and updated.
STOCK BASED COMPENSATION
The Company accounts for stock based compensation under Accounting Principles
Board Opinion No. 25, ("APB No. 25") "Accounting for Stock Issued to Employees,"
and related interpretations, and follows the disclosure provisions of Statement
of Financial Accounting Standards ("SFAS") No. 123. "Accounting for Stock-Based
Compensation." Refer to Note 15, "Stock Options and Other Stock Awarded to
Employees."
REVENUE RECOGNITION
Construction and Installation Contracts. Revenues recognized equal contract
costs incurred plus a percentage of the projected margin that will be earned on
each contract over the entire contract term. Measurements of cumulative progress
to completion approximate the cost-to-cost method. Contract costs include all
direct material and labor costs, as well as those indirect costs relating to the
contract such as indirect labor, supplies and equipment costs. Subcontractor
work completed and other costs not yet invoiced to the Company or processed for
payment are accrued at each balance sheet date as "Accruals For Incurred Job
Costs." Claims from sub-contractors are individually evaluated based upon the
merit of the claim, and if necessary, accruals for such claims are established.
Generally, the customer makes the determination of substantial contract
completion.
Changes in job performance, conditions and estimated costs result in changes in
the estimates for project profits unless change orders can be negotiated and
accepted by the customer. The cumulative effect of revised estimates are
recognized in the period in which the changes are determined. When the current
estimates of total contract revenue and contract costs indicate a loss ("Loss
Jobs"), a provision for the entire estimated loss on the contract is made.
Service Contracts. Service contracts consist primarily of recurring contracts
with telecommunication companies to maintain networks and grids; municipalities
to maintain electronic traffic management and control systems; and utility
companies to maintain utility facilities. Revenues from these contracts are
recognized at the time the services are rendered and accepted by the customer in
accordance with the provisions of the related contracts. Costs associated with
these contracts are incurred and recognized as the services are performed.
Losses on service contracts are recognized as incurred.
Change Orders. The Company begins to recognize revenues associated with change
orders once they have been approved by the customer.
F-10
<PAGE>
Segmentation. Each of the Company's contracts are evaluated to determine the
appropriate level of segmentation, if any, for revenue recognition purposes.
Contracts that include construction and installation elements and a long-term
service commitment are appropriately segmented and the long-term service
contract is separately accounted for as described above.
INCOME TAXES
The Company accounts for income taxes using an asset and liability approach that
requires the recognition of deferred tax assets and liabilities for the expected
future tax consequences of events that have been recognized in the Company's
consolidated financial statements or tax returns. In estimating future tax
consequences, the Company considers all expected future events other than
enactment of or changes in the tax law or rates. The Company files consolidated
federal income tax returns.
INCOME (LOSS) PER COMMON SHARE
Basic earnings (loss) per share is determined by dividing net income (loss) from
continuing operations available to common shareholders by the weighted average
number of common shares outstanding during each period. Diluted earnings per
share includes the effects of potentially issuable Common Stock, but only if
dilutive. The treasury stock method, using the average price of the Company's
Common Stock for the period, is applied to determine dilution from options and
warrants. The if-converted method is used for convertible securities. Because of
reported losses, there are no differences between basic and diluted per share
amounts for the Company for 1999 or 1998.
The Company has potentially dilutive securities that could have a dilutive
effect in the future. Those securities and their potentially dilutive effects
are as follows (dilutive shares in thousands):
<TABLE>
<CAPTION>
Potentially
Dilutive Average
Shares Strike Price
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Potentially dilutive securities outstanding at October 31, 1999:
WorldCom Options (subject to shareholder approval) (Refer to Note 5) 2,000 $ 7.00
Employee stock options (subject to shareholder approval) (Refer to Note 15) 1,604 6.14
Employee stock options (572,000 vested) (Refer to Note 15) 992 6.59
Shares issued to redeem Series B Convertible Preferred Stock in February
2000 (Refer to Note 23) 802 6.13
Senior Subordinated Note Warrants (Refer to Note 11) 410 8.25
Series B Preferred Stock Warrants (Refer to Note 14) 370 13.25
GEC Earnout (Refer to Note 5) 205 --
Series A Preferred Stock Warrants (Refer to Note 14) 62 9.82
Employee stock grants (subject to shareholder approval) (Refer to Note 15) 50 --
- ------------------------------------------------------------------------------------------------------------------------
Subtotal outstanding at October 31, 1999 6,495 6.80
- ------------------------------------------------------------------------------------------------------------------------
Potentially dilutive securities issued subsequent to October 31, 1999:
Conversion of WorldCom debt to equity (Refer to Note 23) 3,050 8.38
Warrants issued to redeem Series B Preferred Stock (Refer to Note 23) 200 10.13
Series C Convertible Preferred Stock (Refer to Note 23) 1,604 9.35
Series C Preferred Stock Warrants (Refer to Note 23) 200 10.75
Warrants issued to redeem Series B Preferred Stock (Refer to Note 23) 66 10.13
Shares issued for the acquisition of SASCO/SES (Refer to Note 23) 75 --
Warrants issued to financial advisors related to the Series C Convertible
Preferred Stock (Refer to Note 17) 75 10.72
Stock issued to settle litigation 25 --
- ------------------------------------------------------------------------------------------------------------------------
Subtotal issued subsequent to October 31, 1999 5,295 $8.73
- ------------------------------------------------------------------------------------------------------------------------
Total 11,790 $7.67
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
The conversion price of the Series C Preferred Stock may be reset to a floor of
$4.00 per share. If reset to the floor, conversion would result in the issuance
of 3.75 million common shares.
The Company has also granted to WorldCom rights to receive upon satisfaction of
certain conditions, including shareholder approval, phantom stock awards for up
to 700,000 shares of common stock, payable in cash, stock, or a combination of
both at the Company's option. Refer to Note 5, "Acquisitions."
F-11
<PAGE>
As described in Note 5, "Acquisitions", the Company is committed to issue shares
of common stock as contingent consideration earned by the sellers of Georgia
Electric Company through 2001. Common stock issued to date as contingent
consideration earned for the years ended October 31, 1998 and 1997 was 628,398
shares and 204,448 shares, respectively. Contingent consideration earned for the
year ended October 31, 1999, amounted to $1.8 million and is accrued at that
date in accounts payable and accrued liabilities. Approximately 205,000 shares
will be issued in fiscal 2000. The Company has made a similar commitment
subsequent to October 31, 1999, related to the acquisition of SASCO and SES
(refer to Note 23). The number of shares that may be issued as earn-out
consideration under these commitments in the future is not presently
determinable.
The Company has also executed a deferred value added equity swap agreement with
186K.NET. Either the Company or 186K.NET can exercise the swap at any time from
July 2000 to July 2003. Upon exercise, the Company has committed to issue shares
of its common stock to 186K.NET in exchange for common shares of 186K.NET of
equivalent value at the date of exercise. The value of the shares to be issued
and received is to be determined by the lower of 10% of the increase in the fair
market value of the Company or of 186K.NET from July 1999 to the date of
exercise. 186K.NET is a privately-owned start-up company that provides data and
communications facilities consulting services.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents, accounts receivable
(generally unsecured), accounts payable and notes payable approximate fair value
due to the short maturity of the instruments and the provision for what
management believes to be adequate reserves for potential losses. The fair
values of lines-of-credit and long-term debt approximate their carrying amount
since the currently effective rates reflect market rates for debt of similar
credit quality.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
SFAS NO. 133. In June 1998, the FASB issued SFAS No. 133, "Accounting for
Derivative Instruments and for Hedging Activities," (amended by SFAS No. 137,
"Accounting for Derivative Instrument and Hedging Activities - Deferral of the
Effective Date of FASB Statement No. 133"). This statement revises the
accounting for the recognition and measurement of derivatives and hedging
transactions and is effective for fiscal years beginning after June 15, 2000.
The Company does not anticipate the early adoption of this statement and has not
determined the impact it will have on the consolidated financial statements.
FIN 43. In June 1999, the FASB issued Interpretation No. 43, "Real Estate
Sales." The prospective effects of FIN 43 are addressed in Note 8, "Network
Assets Held For Sale."
RECLASSIFICATIONS
Certain items in the 1998 and 1997 consolidated financial statements have been
reclassified to conform to the 1999 presentation.
3. GOING CONCERN:
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. The Company incurred losses
from operations of $1.9 million, net losses of $18.1 million, and losses
applicable to common stock of $36.8 million during the fiscal year ended October
31, 1999. Significant payments were also made, both during and subsequent to
October 31, 1999, to redeem the Series B Preferred Stock and to reduce
obligations for loss contracts assumed in 1998 in the acquisition of MFSNT. The
Company has borrowed the maximum available under its existing Credit Facility
(refer to Note 11, "Debt") and is in default of the related covenants. While the
Company is current with respect to amounts due under the Credit Facility, the
lender has the right to demand payment and the Company has insufficient
liquidity to pay such amounts, if called. The Company has not
F-12
<PAGE>
yet been successful in obtaining alternative financing and may have insufficient
liquidity to fund its continuing operations. Consequently, there is substantial
doubt about the Company's ability to continue as a going concern.
The accompanying consolidated financial statements do not include any
adjustments relating to the recoverability and classification of asset carrying
amounts or the amount and classification of liabilities that might be necessary
should the Company be unable to continue as a going concern. The Company's
continuation as a going concern is dependent upon its ability to (a) generate
sufficient cash flow to meet its obligations on a timely basis, (b) obtain
additional financing as may be required, and (c) ultimately sustain
profitability.
Management's plans in regard to these matters are as follows:
(1) As part of the Company's ongoing efforts to strategically align the
profitable portions of its business and as a result of significant turnover
and the deterioration of underlying contracts, the Company closed Dial
Communications, Inc. ("Dial") and Able Integrated Systems, Inc. ("AIS")
during the fiscal year ended October 31, 1999, which together used cash
flows from operations of approximately $7.4 million and $3.8 million during
the fiscal years ended October 31, 1999 and 1998.
(2) As discussed in Note 11, "Debt," and Note 23, "Subsequent Events,"
approximately $25.5 million of the Company's indebtedness to WorldCom was
converted to common stock of the Company subsequent to October 31, 1999.
(3) As discussed in Note 14, "Preferred Stock," and Note 23, "Subsequent
Events," approximately $6.3 million of the accrued redemption value of the
Company's Series B Preferred Stock was paid by issuing common stock and
warrants of the Company subsequent to October 31, 1999. Concurrently, the
remaining Series B Preferred Stock redemption obligation of approximately
$10.0 million was paid with cash funded through the issuance of $15.0
million of Series C Preferred Stock.
(4) The Company is attempting to obtain a new credit facility with another
financial institution and is pursuing additional financing through
discussions with independent investors.
4. REVIEW BY THE SECURITIES AND EXCHANGE COMMISSION:
The Company is working to resolve questions by the staff of the Securities and
Exchange Commission ("SEC") regarding certain accounting and other disclosures
made by the Company in connection with the acquisition of MFSNT (the "MFSNT
Acquisition") from WorldCom effective July 2, 1998. As a result of the ongoing
review by the SEC, the Company's Annual Report on Form 10-K for the year ended
October 31, 1998, filed February 24, 1999, as amended March 1, 1999 (as amended,
the "1998 10-K") may be further amended by the Company following completion of
the SEC's review. Additionally, because the Company's Notice of Annual Meeting,
Proxy Statement and Proxy (collectively the "1998 Proxy") for the year ended
October 31, 1998 incorporates the 1998 10-K, the SEC has also not completed its
review of the 1998 Proxy and Able has not been able to hold a shareholder
meeting since April 1998. Once the SEC's reviews have been completed, Able
expects to hold an Annual Meeting.
While the MFSNT Acquisition closed on July 2, 1998, subsequent negotiations with
WorldCom resulted in a $41.9 million reduction in purchase price. The reduction
related primarily to projected losses on contracts assumed by Able from MFSNT.
The allocation of the purchase price, as reported in the Company's 1998 10-K,
established additional reserves for losses on assumed contracts that exceeded
reserves reflected in the unaudited balance sheet of MFSNT ($11.7 million) as of
July 2, 1998, by $28.8 million. The net assets reported by MFSNT at July 2, 1998
exceeded the adjusted purchase price by approximately the same amount.
The SEC's principal questions have centered on the following:
(1) The allocation of the $28.8 million in additional loss accruals to the
proper preacquisition period in the financial statements of MFSNT.
F-13
<PAGE>
Resolution of these issues may result in the restatement of MFSNT's
preacquisition financial statements and related pro forma disclosures
included in Able's prior SEC filings.
(2) The appropriate accounting for obligations to perform under long-term
network operation and maintenance agreements acquired as part of the MFSNT
Acquisition. Refer to Note 22, "Unaudited Quarterly Financial Data", for an
explanation of the Company's accounting for long-term operation and
maintenance contracts.
(3) The Company's accounting for its investment in Kanas. Refer to Note 9,
"Investment in Kanas (Held For Sale)," for an explanation of the Company's
accounting for Kanas.
(4) The Company's accounting for the sale during the current year of the NYSTA
conduit. Refer to Note 8, "Network Assets Held For Sale," for an
explanation of the Company's accounting for the NYSTA conduit sale.
The SEC has not yet agreed with the Company that such accounting for the
above issues is appropriate and may require the Company to further change
its accounting for these matters.
5. ACQUISITIONS:
On July 2, 1998, the Company acquired the network construction and
transportation systems business of MFSNT from WorldCom, Inc. ("WorldCom")
pursuant to a merger agreement dated April 26, 1998 ("Plan of Merger"). On
September 9, 1998, the Company and WorldCom finalized the terms of the Plan of
Merger through the execution of an amended agreement. The acquisition of MFSNT
was accounted for using the purchase method of accounting at a total price of
approximately $67.5 million. In addition, the MFSNT acquisition agreements, as
amended, provide that on November 30, 2000, the Company shall pay to WorldCom
certain amounts, if positive: (i) the difference between $12.0 million related
to losses on MFSNT projects in existence on March 31, 1998 and recorded by MFSNT
as of June 30, 1998, and the amount actually lost on such contracts through
November 30, 2000, and (ii) the difference between $5.0 million and the
aggregate costs incurred by Able for defense of litigation, and payments made in
settlement or in payment of judgments with respect to preacquisition litigation.
The range of this contingent consideration potentially payable to WorldCom is
from $0 to $17.0 million. Presently, Company management expects to pay no
additional consideration to WorldCom for these matters. The purchase price
for MFSNT included the following consideration (in millions):
Contract price $58.8
Transaction related costs 4.6
WorldCom Option 3.5
WorldCom Phantom Stock Awards 0.6
- ---------------------------------------------------------------
Total purchase price $67.5
- ---------------------------------------------------------------
The consolidated balance sheet as of October 31, 1998, reflects the Company's
preliminary allocation of the purchase price to the assets acquired and the
liabilities assumed based on initial estimates of their fair values. During the
fiscal year ended October 31, 1999, the Company
F-14
<PAGE>
obtained the information needed to complete its valuations and finalized the
allocation as set forth below: (in millions)
<TABLE>
<CAPTION>
As Previously Final
Reported Adjustments Allocation
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Accounts receivable (1) $47.0 $(1.4) $45.6
Costs and profits in excess of billings on uncompleted contracts (2) 93.7 (5.0) 88.7
Assets held for sale 38.8 -- 38.8
Prepaid expenses 1.0 -- 1.0
Property 5.7 -- 5.7
Goodwill 16.5 9.8 26.3
Accounts payable (3) (13.7) (0.5) (14.2)
Billings in excess of costs and profits on uncompleted contracts (56.6) -- (56.6)
Reserves for losses on uncompleted contracts (4) (40.5) 0.6 (39.9)
Accrued restructuring costs (5) (2.0) 0.3 (1.7)
Property taxes payable (15.0) -- (15.0)
Other accrued liabilities (6) (7.4) (3.8) (11.2)
- -----------------------------------------------------------------------------------------------------------------------
Total allocated purchase price $67.5 $ -- $67.5
- -----------------------------------------------------------------------------------------------------------------------
<FN>
(1) It was determined that a receivable from WorldCom of $1.4 million should
not have been recorded as part of the purchase price allocation. Therefore,
the Company has adjusted accounts receivable and goodwill.
(2) It was determined that certain long-term receivables were recorded at their
gross values versus their present values. These receivables are to be paid
to MFSNT over 20 years. Therefore, an adjustment of approximately $5.0
million to cost and profits in excess of billings (i.e. unbilled
receivables) and goodwill was necessary to properly reflect the present
value of these receivables. Refer to Note 8, "Network Assets Held For
Sale."
(3) It was determined that $0.5 million of accounts payable assumed had not
been included in the original purchase price allocation. The Company
adjusted accounts payable and goodwill to reflect these accounts payable.
(4) The Company reviewed its estimates of losses on loss contracts and recorded
adjustments to such reserves. The adjustments decreased the reserves and
goodwill by $0.6 million.
(5) Accrued restructuring costs related primarily to severance and benefit
costs associated with the involuntary termination of employees pursuant to
an approved restructuring plan. During the fiscal year ended October 31,
1998, approximately $1.7 million was incurred and charged against this
reserve. The excess reserve of $0.3 million was reversed and goodwill was
reduced.
(6) Subsequent to the acquisition of MFSNT, the Company recorded an additional
accrued liability of $3.8 million relating to a claim not previously
recognized by MFSNT.
</FN>
</TABLE>
In conjunction with the acquisition of MFSNT, the Company granted an option to
WorldCom (the "WorldCom Option") to purchase up to 2,000,000 shares of the
Company's common stock, at an exercise price of $7.00 per share, but subject to
a 1,817,941 share maximum issuance limitation through "cashless" exercise, and
the right to receive upon satisfaction of certain conditions phantom stock
awards (the "Phantom Stock Awards") equivalent to 600,000 shares of common
stock, payable in cash, stock, or a combination of both at the Company's option.
The WorldCom Phantom Stock Awards are exercisable only on the following three
days: July 1, 2000, July 2, 2001, or July 2, 2002. WorldCom will be entitled to
receive any appreciation of the Common Stock over a base price of $5 3/32 per
share, but in no event shall the maximum payment exceed $25.00 per share. The
Phantom Stock Awards may be adjusted to be based on up to 700,000 shares and the
base price may be increased, but the maximum payment per share will not change.
The fair values of the WorldCom Option and Phantom Stock Awards were estimated
at the date of grant at $3.5 million and $0.6 million, respectively, and were
included as a component of the total consideration paid for the acquisition of
MFSNT.
On January 8, 1999, the Company and WorldCom agreed to convert the WorldCom
Option into stock appreciation rights ("SARs") with similar terms and
provisions, except that the SARs provide for the payment of cash to WorldCom
based upon the appreciation of the Company's common stock over a base price of
$7.00 per share. The SARs may revert back to the WorldCom Option allowing for
the exercise of all 2,000,000 shares (no longer subject to the 1,817,941 share
limitation) if required shareholder approval of the options is received. The
conversion of the WorldCom Option to SARs was treated as the reacquisition of
the WorldCom Option in exchange for a cash-settled obligation indexed to changes
in the fair market value of the Company's stock. The intrinsic value of the SARs
at the date of exchange of approximately $1.9 million was charged to equity and
reflected as a current liability. The liability will
F-15
<PAGE>
be adjusted at each balance sheet date for increases or decreases in the
intrinsic value, with an offsetting charge or credit to income, until the SARs
are paid, or if approved by the shareholders, converted back to an Option. The
exercise period for the SARs granted commenced on July 1, 1999, and ends on
January 2, 2002. As of October 31, 1999, the intrinsic value of the stock
appreciation rights liability was $3.7 million. Changes in the valuation of the
SARs have resulted in non-cash charges of $1.8 million during the year ended
October 31, 1999.
In conjunction with the acquisition of MFSNT, the Company entered into a
five-year agreement with WorldCom to provide telecommunications infrastructure
services to WorldCom (the "WorldCom Master Services Agreements") for a minimum
of $40.0 million per year, provided that the aggregate sum payable to MFSNT
shall be not less than $325.0 million, including a fee of 12 percent of
reimbursable costs under the agreement ("Aggregate Sum"). If MFSNT declines any
of the first $130.0 million of contract work in any year of the agreement, the
value of the declined work reduces the Aggregate Sum. MFSNT has agreed that
WorldCom will have met all of its obligations to MFSNT to the extent that
payments to MFSNT reach an aggregate of $500.0 million at any time during the
five-year term. During the fiscal years ended October 31, 1999 and 1998, the
Company recognized revenues of approximately $61.6 million and $30.3 million,
respectively, from the WorldCom Master Services Agreement.
In compliance with a contractual obligation with WorldCom, effective February
2000, the names of all subsidiaries were changed to eliminate "MFS." MFS Network
Technologies, Inc. changed its name to Adesta Communications, Inc. ("Adesta
Communications"), MFS Transportation Systems, Inc. changed its name to Adesta
Transportation, Inc. ("Adesta Transportation") and MFS TransTech, Inc. changed
its name to TransTech, Inc.
PATTON MANAGEMENT CORPORATION
On April 1, 1998, the Company purchased all of the outstanding common stock of
Patton Management Corporation ("Patton") for a total purchase price of
approximately $4.0 million. The acquisition was accounted for using the purchase
method of accounting. Goodwill of approximately $4.3 million (as adjusted) was
recorded and is being amortized on a straight-line basis over 20 years. The
results of operations are included in the consolidated statements of operations
since the date of acquisition.
DIAL COMMUNICATIONS, INC.
On December 2, 1996, Able acquired all the outstanding common stock of Dial. As
consideration, the Company paid $3.0 million in cash, issued 108,489 shares of
common stock (fair value of $0.6 million) and issued a $0.9 million promissory
note with a three-year term. The acquisition was accounted for using the
purchase method of accounting. The results of operations are included in the
consolidated statements of operations since the date of acquisition. Goodwill of
$1.5 million was recorded in this transaction for amortization over 20 years
using the straight-line method.
As part of the Company's ongoing efforts to strategically align the profitable
portions of its business and as a result of significant turnover and the
deterioration of underlying contracts, the Company terminated the operations of
Dial during the fiscal year ended October 31, 1999. For the year ended October
31, 1999, Dial had negative contract margins of $1.6 million and losses before
income taxes of $8.4 million which included a $1.3 million write-off of
goodwill.
GEORGIA ELECTRIC COMPANY
On October 12, 1996, the Company, through a wholly owned subsidiary, acquired
all of the outstanding common stock of Georgia Electric Company ("GEC"). As
initial consideration, the Company paid $3.0 million in cash. Under the terms of
the earn-out provision of the acquisition agreement, the Company will issue
shares of common stock over a five-year period beginning in fiscal 1997,
contingent upon the operating performance of GEC and the market value of the
Company's stock. Such amounts will be accounted for as purchase price
adjustments. The acquisition was accounted for using the purchase method of
accounting. The results of operations are included in the consolidated
statements of operations since the date of acquisition.
The Company increased goodwill by $1.8 million, $4.6 million and $1.3 million
for the years ended October
F-16
<PAGE>
31, 1999, 1998 and 1997, respectively, as a result of additional purchase price
due to the former owner of GEC under the terms of the earn-out provisions of the
acquisition agreement. The goodwill is being amortized over 20 years from the
acquisition date, using the straight-line method. Corresponding amounts are
reflected as accounts payable and accrued liabilities in the consolidated
balance sheets pending the issuance of the Company's common stock.
Pro Forma Financial Information (Unaudited)
Unaudited pro forma financial information for the Company is presented below as
if the Company's acquisitions had taken place as of November 1, for each of the
following fiscal years ended October 31, (in thousands, except per share
amounts):
<TABLE>
<CAPTION>
1998 1997
- -------------------------------------------------------------------------------------
<S> <C> <C>
Revenues $401,400 $457,820
Net loss (58,793) (14,127)
Loss applicable to common stock (67,147) (15,653)
Basic loss applicable to common stock per share (6.78) (1.84)
</TABLE>
The reserves for losses on uncompleted MFSNT contracts established by the
Company through purchase accounting of $28.8 million have been included as
losses in the 1998 pro forma information.
This unaudited pro forma information does not purport to be indicative of the
results of operations which would have resulted had the acquisitions been
consummated at the dates assumed.
6. ASSUMPTION OF COMSAT CONTRACTS:
On February 25, 1998, GEC assumed obligations to complete 12 contracts (the
"COMSAT Contracts") with the Texas Department of Transportation from CRSI
Acquisition, Inc., a subsidiary of COMSAT Corporation ("COMSAT"). The COMSAT
Contracts were for the installation of intelligent traffic management systems
and the design and construction of wireless communication networks. In exchange
for assuming the obligations to perform under the COMSAT Contracts, GEC received
consideration from COMSAT of approximately $15.0 million and assumed existing
payables of approximately $2.6 million.
On February 25, 1998, the date when GEC assumed the COMSAT contracts, the
remaining amounts billable to the customers for these contracts totaled $17.0
million. The estimated costs to complete these contracts for COMSAT was from
$17.0 million to $27.3 million. GEC made the following entry to reflect the
assumption of the COMSAT contracts (amounts in thousands):
<TABLE>
<S> <C>
Consideration received:
Cash $ 4,663
Accounts receivable 3,754
Equipment and other assets 6,548
- -------------------------------------------------------------------------------------------
Subtotal 14,965
Accounts payable assumed (2,549)
- -------------------------------------------------------------------------------------------
Deferred revenue (net amount received from COMSAT to complete the contracts) $(12,416)
- -------------------------------------------------------------------------------------------
</TABLE>
The following is a summary of revenues and costs associated with the COMSAT
contracts for the fiscal years ended October 31 (amounts in thousands):
1999 1998
- ---------------------------------------------------------------------------
Billings on the COMSAT contracts (1) $ 7,952 $11,327
Deferred revenue recognized 3,935 8,481
- ---------------------------------------------------------------------------
Total revenues recognized 11,887 19,808
Direct contract costs 8,675 10,672
- ---------------------------------------------------------------------------
Gross margin from COMSAT contracts $ 3,212 $ 9,136
- ---------------------------------------------------------------------------
(1) Billings on the COMSAT contracts also include approved change order
revenues associated with these contracts but not anticipated when GEC
assumed such contracts.
F-17
<PAGE>
At October 31, 1999, all of the COMSAT Contracts were substantially complete.
The revenues, cost of revenues and gross margins are non-recurring and are not
generally indicative of returns the Company expects to achieve on future
contracts.
7. UNCOMPLETED CONTRACTS:
Uncompleted contracts consist of the following at October 31, (in thousands):
1999 1998
- ---------------------------------------------------------------------------
Costs incurred on uncompleted contracts $ 212,590 $116,073
Earning recognized on uncompleted contracts 36,704 29,086
- ---------------------------------------------------------------------------
Total 249,294 145,159
Less billings to date (229,557) (97,120)
- ---------------------------------------------------------------------------
Net $19,737 $ 48,039
- ---------------------------------------------------------------------------
Included in the accompanying consolidated balance sheets under the following
headings at October 31, (in thousands):
1999 1998
- ---------------------------------------------------------------------------
Costs and profits in excess of billings on
uncompleted contracts $71,808 $105,478
Billings in excess of costs and profits on
uncompleted contracts (6,478) (6,328)
Accruals for incurred job costs (45,593) (51,111)
- ---------------------------------------------------------------------------
Net $19,737 $48,039
- ---------------------------------------------------------------------------
8. NETWORK ASSETS HELD FOR SALE:
Assets held for sale at October 31, 1998, included approximately $26.0 million
of certain fiber optic conduit that was constructed by MFSNT prior to the MFSNT
Acquisition (the "NYSTA Network") and sold during the year ended October 31,
1999.
A portion (approximately 528 miles) of the NYSTA Network, was constructed on
rights of way obtained from the New York State Thruway Authority (i.e.,
"NYSTA"). This portion of the network is referred to as the "On-NYSTA network."
Separately, MFSNT was granted use of the right of way from others for a
contiguous network (the "Off-NYSTA" network) that connects the "On-NYSTA"
network to Cleveland, Ohio.
MFSNT owned or owns the conduit and equipment shelters installed in both
portions of the network. The conduit network was substantially complete and sold
at the date of acquisition in July 1998. As the system was constructed, the
costs had been initially deferred as "inventory" because it was MFSNT's
intention to sell undivided interests (indefeasible rights of use, or "IRU's")
in the owned ducts and shelters to other users. The fiber and electronics for
the network are generally owned by the users, although the Company retained
rights to a limited amount of excess capacity for some minor segments of the
network. The right of way for the On-NYSTA portion of the network is owned by
NYSTA (see revenue sharing with NYSTA below). Title to the On-NYSTA portion of
the network will transfer to NYSTA after twenty years.
The Company is not in the telephone or data distribution business, so no part of
the networks have been viewed as the construction of productive assets for their
own use.
The construction accounting was implemented with respect to the NYSTA Network as
follows:
o Total construction costs were estimated and accumulated in the job cost
ledgers as incurred. Costs incurred were effectively charged to cost of
construction and maintenance or left on the balance sheet as "costs and
profits in excess of billings on uncompleted contracts" based on signed
contracts from users.
o The approach treated each new contract signed as a sale of partially
completed "inventory." Some of the revenue would be recognized on signing
based on the calculated percentage complete and a proportionate part
F-18
<PAGE>
of the "inventory" costs would be charged off. In this way, revenues from
each new contract were effectively recognized on a progress to completion
basis.
o When it became apparent that total revenues to be received from sale of the
inventory, as well as profits from separate installation agreements with
the users, would be less than the costs to construct the conduit network,
an estimated loss expected to be incurred to complete the project was
accrued.
As owner of the right of way, NYSTA shares in user fees from the "On-NYSTA"
system. The arrangement entitled MFSNT to retain 100% of user fees up to
approximately $50.7 million. Then, NYSTA was entitled to 10% of user fees until
MFSNT had received and retained, as cost recovery, approximately $95.5 million
(i.e., from cumulative user fees of approximately $101.3 million); thereafter,
NYSTA is entitled to 50% of user fees and 20% of revenues received by MFSNT for
performance under operation and maintenance ("O&M") contracts with the users.
The O&M contracts provide for installment payments to MFSNT, generally over
twenty years, to offset costs of providing this service.
As part of the agreement, MFSNT also installed and maintains for NYSTA, free of
charge, a 16-strand fiber optic communications network within the conduit system
owned by MFSNT for the sole use of NYSTA.
At the date of acquisition of MFSNT by the Company, negotiations were in process
with a telecommunications company for purchase of nearly all the remaining
network capacity. In purchase accounting, the Company applied a similar
conceptual "inventory" approach to the valuation of this asset. It was estimated
that the user would pay a one-time, up-front fee of $34.5 million for the IRU's
with respect to both the On-NYSTA and Off-NYSTA portions of the network. Of that
amount it was estimated that approximately $8.5 million would be payable to
NYSTA based on the revenue sharing arrangement. Consequently, the Company
allocated $26.0 million of the purchase price to this asset. When the sale
closed in April 1999, Able recorded actual revenues of $35.7 million, and costs
of approximately $34.7 million, equal to $26.0 million assigned to the conduit
in purchase accounting, plus a revenue sharing payment due NYSTA from the
transaction of approximately $8.7 million.
The agreement with NYSTA also provides for sharing of "profits" experienced by
MFSNT in excess of certain specified percentages of related costs with respect
to fiber and equipment installation contracts for the "On-NYSTA" system
separately entered into by MFSNT with the users. Disputes have arisen between
MFSNT and NYSTA with respect to sharing of revenues from a specific installation
contract. Upon closing the April 1999 sale of the remaining conduit inventory, a
Partial Release and Settlement Agreement was made with NYSTA. From those
proceeds, $6.8 million was placed into escrow until NYSTA's rights to share in
revenues equal to twice that amount can be decided through arbitration or
otherwise settled. The escrowed funds are included in other non-current assets
as of October 31, 1999.
With only two exceptions, user fees were paid in their entirety at or shortly
after the time of execution of the user agreements. However, two of the user
agreements provide for the fees to be paid in installments over twenty years.
MFSNT had included these amounts in unbilled receivables (costs and profits in
excess of billings) at their gross, undiscounted future amounts. Consequently,
an adjustment was recorded by the Company to reallocate the purchase price to
recognize a discount on these long-term receivables. The discounted (at 10%)
present value of these long-term receivables was approximately $3.8 million at
October 31, 1999. Interest income from amortization of the discount was
approximately $0.2 million for the year ended October 31, 1999.
While MFSNT and the Company have sold IRU's that constitute virtually all the
usuable value of the network, MFSNT is still the legal owner and responsible for
property taxes assessed on the network. Ownership of the On-NYSTA portion of the
network automatically transfers to NYSTA after twenty years. Consistent with the
concept of having sold the network, MFSNT accrued and expensed, prior to the
acquisition, the estimated present value of future property taxes that would be
payable over the twenty-year term of the agreements. The Company recorded this
liability in purchase accounting at approximately $15.0 million, using a
discount rate of 15%. Amortization of the discount is included in interest
expense and amounted to $2.3 million and $0.8 million for the years ended
October 31, 1999 and 1998, respectively.
Prospective Accounting for Sales of Iru's: FIN 43 broadens the definition of
real estate and will likely require that some or all elements of fiber optic
networks (e.g., right-of-way and conduit) must now be defined as real estate and
revenue recognition criteria for the sale or lease of IRU's will be provided by
SFAS No. 66,
F-19
<PAGE>
"Accounting for Sales of Real Estate." SFAS 66 is a different accounting model
and is likely to result in the deferral and amortization of both costs and
revenues related to network assets that would have previously been accounted for
as described above. Among other requirements, SFAS 66 requires title to transfer
to the buyer for up-front revenue recognition to be appropriate. FIN 43 is
effective for all sales of real estate with property improvements or integral
equipment entered into after June 30, 1999. Consequently, none of the
transactions entered into by MFSNT prior to July 2, 1998, or the conduit sale
closed by the Company in April 1999 are subject to those provisions. However,
for transactions subsequent to June 30, 1999, the Company will be required to
apply the guidance of FIN 43.
Much of the conceptual basis for the IRU accounting historically followed by
MFSNT is that the arrangements for use of the conduit qualify for revenue
recognition as sales-type leases under SFAS No. 13. No part of the transaction
was viewed as a "real estate" transaction, so the legal transfer of title to the
"leased" assets was not considered determinative as to whether or not the
transactions could be recorded as sales versus operating leases.
9. INVESTMENT IN KANAS (HELD FOR SALE):
An equity interest in Kanas was acquired in the MFSNT Acquisition, and has been
held for sale since that time. The original carrying value of the Company's
interest in Kanas, which was assigned in purchase accounting, represents the net
proceeds originally expected to be received from the sale of Kanas stock and was
based, in part, on active negotiations with potential buyers.
The Company is a 25% owner of Kanas, with the remaining 75 percent owned by
native corporations of Alaska. Kanas was established by its shareholders with a
$100,000 total equity contribution ($25,000 per shareholder) to construct a
telecommunications network along the Alaskan Pipeline system between Prudhoe
Bay, Alaska and Valdez, Alaska (the "Alyeska Network"). MFSNT had been
contracted by Kanas to build the fiber optic network which cost in excess of
$83.0 million and was funded by Kanas through a credit agreement that is
guaranteed by WorldCom.
While Kanas provided MFSNT with notice of substantial completion in December
1998, the owner of the Alyeska Network has yet to give Kanas final acceptance of
the system and significant outstanding claims exist among the parties. As
described in Note 4, "Review By the Securities and Exchange Commission," Note 5,
"Acquisitions," and Note 10, "Reserves For Losses on Uncompleted Contracts,"
reserves were provided in purchase accounting for estimated amounts payable by
the Company to complete the project and settle outstanding claims. While MFSNT
has outstanding claims against Alyeska for work it believes was outside the
scope of the contract of at least $15.8 million, no recognition has been given
to those claims in the accompanying consolidated financial statements as
resolution of those matters remains uncertain. The construction costs incurred
by MFSNT significantly exceeded the revenues recognizable under the contract
terms.
Kanas owns and is responsible for maintaining the Alyeska Network. While the
Company does not participate in the day-to-day management of Kanas, Kanas has
contracted with MFSNT to operate and maintain the Alyeska Network for 15 years.
The term of the Kanas O&M agreement began in December 1998. To date, service
contract revenues have been insufficient to cover costs of performance and are
not projected to be sufficient to do so for at least the foreseeable future. As
described in Note 2, "Summary of Significant Accounting Policies," and Note 4,
"Review By the Securities and Exchange Commission," these operating losses are
being recognized as incurred.
As of October 31, 1999, the unaudited financial statements of Kanas reflected
total assets, liabilities and net deficit of $80.1 million, $87.8 million and
$7.7 million, respectively. The deficit includes approximately $8.9 million of
network depreciation. Management has been informed that as of October 31, 1999,
Kanas was current with respect to payment of interest on its debt, but it was in
technical default of loan covenants and has been assessed interest at a default
rate.
At the date of the acquisition of MFSNT, the Company anticipated a near-term
sale of its interest in Kanas. Accordingly, the estimated amount expected to be
realized on sale was allocated to this investment in purchase accounting and, in
accordance with the guidance of EITF Issue 87-11, "Allocation of Purchase Price
to Assets to be Sold," the equity method of accounting was not employed.
However, the anticipated final acceptance of the network by Alyeska has yet to
occur and the timing of any sale of this interest by the Company is uncertain.
Consequently, effective one year from the date of acquisition, the Company began
to apply equity method accounting to this
F-20
<PAGE>
investment based on the guidance of EITF Issue 90-06, "Accounting for Certain
Events Not Addressed in EITF 87-11 Relating to an Acquired Operating Unit to be
Sold."
In addition to equity in losses of Kanas, the Company is amortizing the
difference between the carrying value of the Kanas investment and its net equity
of Kanas over 19 years which is the remaining goodwill life related to the
acquisition of MFSNT. The amount of loss the Company recorded against the
carrying value of the asset was approximately $0.4 million, while the associated
amortization of the difference in carrying value was $0.2 million.
During the construction of the Alyeska Network, which was completed in December
1998, Kanas was a development-stage company. The Company has received no
dividends from Kanas.
WorldCom was and continues to be the guarantor of the payment obligations of
Kanas under its credit agreement. In conjunction with the acquisition of MFSNT,
the Company has agreed to indemnify WorldCom under its guarantee. The aggregate
commitment of the lenders under the Kanas credit agreement at October 31, 1999
was approximately $87.5 million.
10. RESERVES FOR LOSSES ON UNCOMPLETED CONTRACTS:
At July 2, 1998, MFSNT had $11.7 million of reserves for losses on uncompleted
contracts recorded on its balance sheet. Through the Company's due diligence
efforts, the Company estimated the need for reserves for contract losses of
$40.5 million, resulting in a $28.8 million adjustment through purchase
accounting. Together these reserves relate to specific MFSNT jobs identified by
the Company as Loss Jobs. Revenues and costs recognized in the Company's
consolidated statement of operations related to these identified Loss Jobs
subsequent to the acquisition date have resulted in no net margin as all losses
were recorded against the reserve balance. The Company utilized the reserves for
losses on uncompleted contracts only on those jobs identified as Loss Jobs at
the date of acquisition. The following is a summary of the reserves for losses
on uncompleted contracts (amounts in thousands):
Network Transportation
Services Services Total
- --------------------------------------------------------------------------------
Previously recorded by MFSNT (1) $6,100 $5,600 $11,700
Purchase accounting adjustments (1) 10,166 18,634 28,800
- --------------------------------------------------------------------------------
Adjusted balance, July 2, 1998 (1) 16,266 24,234 40,500
Amount utilized (8,237) (6,873) (15,110)
- --------------------------------------------------------------------------------
Balance, October 31, 1998 8,029 17,361 25,390
Valuation adjustments (2) 2,463 (3,082) (619)
Amount utilized (4,789) (11,362) (16,151)
- --------------------------------------------------------------------------------
Balance, October 31, 1999 $5,703 $2,917 $8,620
- --------------------------------------------------------------------------------
(1) The difference between the $11.7 million reserves recorded on the July 2,
1998 MFSNT balance sheet and the $40.5 million of reserves for contract
losses that the Company estimated through due diligence efforts were
primarily the result of differences in the costs associated with: (i)
extending the estimated completion dates of the jobs; (ii) the software
development effort; (iii) liquidated damages; and (iv) disputed
subcontractor claims.
(2) The valuation adjustments recorded during the fiscal year ended October 31,
1999, were the result of final projected cost estimates on previously
identified Loss Jobs unavailable at the date of acquisition.
11. DEBT:
The Company's debt consists of the following at October 31, (in thousands):
<TABLE>
<CAPTION>
1999 1998
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Revolving Credit Facility with bank that is currently in default which gives the lender the
right to accelerate payment, maturing November 2000, interest payment dates and rates vary
(9.61 percent at October 31, 1999, including default interest of 2 percent and 7.69 percent
at October 31, 1998), secured by the Company's existing and future restricted subsidiaries $35,000 $35,000
F-21
<PAGE>
Note payable to WorldCom maturing November 2000, interest is payable quarterly at an annual
rate of 11.5 percent. Subsequent to October 31, 1999, $25.5 million was converted to common
stock. Refer to Note 23, "Subsequent Events." 30,000 30,000
Senior Subordinated Notes, repaid during fiscal year 1999, original agreement provided for
annual payments of $5.0 million January 6, 2004 and 2005, 12.0 percent interest per annum, in
arrears, paid semi-annually -- 10,000
Notes payable 303 860
- ----------------------------------------------------------------------------------------------------------------------
65,303 75,860
Capital leases 1,069 1,350
- ----------------------------------------------------------------------------------------------------------------------
66,372 77,210
Less discount on Senior Subordinated Notes -- (1,087)
- ----------------------------------------------------------------------------------------------------------------------
66,372 76,123
Less current portion 35,754 14,438
- ----------------------------------------------------------------------------------------------------------------------
Long-term debt, non-current portion $30,618 $61,685
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
CREDIT FACILITIES
On June 11, 1998, the Company obtained a $35.0 million three-year senior secured
revolving credit facility ("Credit Facility") with a $5.0 million sub-limit for
the issuance of standby letter(s) of credit. The Credit Facility allows the
Company to select an interest rate based upon the prime rate or on a short-term
LIBOR, in each case plus an applicable margin, with respect to each draw the
Company makes thereunder. Interest is payable monthly in arrears on base rate
advances and at the expiration of each interest period for LIBOR advances. The
Credit Facility contains certain financial covenants which require, among other
conditions, that the Company maintain certain minimum ratios, minimum fixed
charge coverage, interest coverage, as well as limitations on total debt and
dividends to shareholders. The Credit Facility is secured by a perfected first
priority security interest on all tangible assets of the Company and a pledge of
the shares of stock of each of the Company's subsidiaries operating in the
United States. On June 30, 1998, the Credit Facility was amended to include (i)
the Company's acquisition of MFSNT and the related financing of such
transaction, (ii) changes in financial covenants related thereto, and (iii)
other amendments relating to investments, pledging and intercompany matters. At
October 31, 1998, and thereafter, the Company was in violation of certain of the
covenants in the Credit Facility, which were subsequently waived through
November 1, 1999.
At October 31, 1999, the Company is in technical default of certain provisions
of the Credit Facility. As such, the Credit Facility is immediately callable by
the holder and is therefore classified as a current liability in the
accompanying October 31, 1999, consolidated balance sheet. During the default
period, the Company is required to pay a default penalty of two percent per
annum on all outstanding balances.
WORLDCOM NOTE
In conjunction with the acquisition of MFSNT, the Company executed a $30.0
million promissory note to WorldCom ("WorldCom Note"). Subsequent to October 31,
1999, the Company entered into an agreement with WorldCom to convert
approximately $25.5 million of the WorldCom Note into the Company's Common
Stock. The Company issued a note for the difference between the $30.0 million
and $25.5 million with interest at 11.5 percent per annum due February 2001.
Refer to Note 23, "Subsequent Events."
SENIOR SUBORDINATED NOTES
Effective January 6, 1998, the Company issued $10.0 million of unsecured 12
percent Senior Subordinated Notes due January 6, 2005 (the "Senior Subordinated
Notes") with detachable warrants to purchase 409,505 shares of common stock at a
price of $8.25 per share, which were valued at approximately $1.2 million
resulting in a corresponding discount applicable to the Senior Subordinated
Notes.
In February 1999, the Company repurchased the Senior Subordinated Notes for
approximately $11.6 million using part of the proceeds from the WorldCom Advance
described in Note 12, "WorldCom Advance." The purchase of
F-22
<PAGE>
Senior Subordinated Notes resulted in an extraordinary loss on the early
extinguishment of debt of approximately $3.0 million, net of tax of zero.
AGGREGATE MATURITIES
The aggregate maturities of long-term debt and capital leases for years
subsequent to October 31, 1999, are as follows:
2000 $35,754
2001 30,321
2002 75
2003 19
2004 19
Thereafter 184
- ------------------------------------------------------------
$66,372
- ------------------------------------------------------------
12. WORLDCOM ADVANCE:
In February 1999, WorldCom advanced the Company $32.0 million ("WorldCom
Advance") as an advance against amounts otherwise payable by WorldCom to the
Company pursuant to the WorldCom Master Services Agreement. The proceeds of the
WorldCom Advance were used to facilitate the purchase of 2,785 shares, or
approximately 78% of the outstanding shares of Series B Preferred Stock (refer
to Note 14, Preferred Stock), and the purchase of the outstanding Senior
Subordinated Notes.
The WorldCom Advance bears no interest and is subordinate to the Credit
Facility. Payments under the WorldCom Advance were further subordinated to
liabilities associated with certain construction projects that are expected to
be completed during fiscal 2001.
The WorldCom Advance agreement also provides for additional advances to the
Company through November 30, 1999, of up to $15.0 million against amounts
otherwise payable pursuant to the WorldCom Master Services Agreement. These
additional advances are non-interest bearing and, subject to the subordination
agreements described above, include a stated date for repayment to WorldCom of
November 30, 2000. To date, the Company has not received any additional advances
against the $15.0 million available.
13. COMMITMENTS AND CONTINGENCIES:
LITIGATION
In 1998, SIRIT Technologies, Inc. ("SIRIT") filed a lawsuit in the United States
District Court for the Southern District of Florida, against the Company and
Thomas M. Davidson, who subsequently became a member of the Company's Board of
Directors. SIRIT asserts claims against the Company for tortuous interference,
fraudulent inducement, negligent misrepresentation and breach of contract in
connection with the Company's agreement to purchase the shares of MFSNT and
seeks injunction relief and compensatory damages in excess of $100.0 million.
In 1998, Shipping Financial Services Corp. ("SFSC") filed a lawsuit in the
United States District Court for the Southern District of Florida against the
Company, and certain of its officers. SFSC asserts claims under the federal
securities laws against the Company and four of its officers that the defendants
allegedly caused the Company to falsely represent and mislead the public with
respect to two acquisitions, COMSAT and MFSNT, and the ongoing financial
condition of the Company as a result of the acquisitions and the related
financing of those acquisitions. SFSC seeks certification as a class action on
behalf of itself and all others similarly situated and seeks unspecified damages
and attorneys' fees.
In 1997, Bayport Pipeline, Inc. ("Bayport") filed a lawsuit against MFSNT
seeking a declaratory judgment concerning the rights and obligations of Bayport
and MFSNT under a Subcontract Agreement that was entered into on May 1, 1997
related to the NYSTA contract. The matter was referred to arbitration in January
1999. The total amount sought was not less than $5.5 million and subsequent to
October 31, 1999, was increased to $19 million.
F-23
<PAGE>
In 1997, U.S. Public Technologies, Inc. ("USPT") filed a lawsuit in the United
States District Court for the Southern District of California, (San Diego),
against MFSNT for breach of contract, breach of an alleged implied covenant of
good faith and fair dealing, tortuous interference, violation of the California
Unfair Competition Act, promissory estoppel and unjust enrichment in connection
with a Teaming Agreement between MFSNT and USPT concerning the Consortium
Regional Electronic Toll Collection Implementation Program in the state of New
Jersey. In this lawsuit, USPT seeks actual damages in excess of $8.5 million and
unspecified exemplary damages. Discovery has not yet commenced in this lawsuit.
In 1999, Newbery Alaska, Inc. ("Newbery") filed a demand for arbitration seeking
approximately $3.8 million. This dispute arises out of Newbery's subcontract
with MFSNT related to the fiber optic network constructed by MFSNT for Kanas.
Newbery's claims are for the balance of the subcontract, including retainage and
disputed claims for extras based on alleged deficiencies in the plans and
specifications and various other alleged constructive change orders. The parties
are currently conducting discovery. Arbitration hearings on this matter should
take place in the spring or summer of 2000.
In 1998, Alphatech, Inc. ("Alphatech") filed a lawsuit in the U.S. District
Court in Massachusetts. This suit alleges ten counts, including breach of
Teaming Agreements on the E-470 project and the New Jersey Regional Consortium
project, breach of implied duty of good faith and fair dealing on both projects,
misappropriation of trade secrets, deceit, violation of Massachusetts General
Laws Chapter 93A, promissory estoppel, quantum meruit, and unjust enrichment.
Alphatech's claim is for $15 million. A hearing for a summary judgment is
scheduled in May 2000.
In 1998, T.A.M.E. Construction, Inc. ("TAME") sued for breach of contract,
promissory estoppel, discrimination and defamation related to certain contracts
performed by GEC. TAME alleges that it was wrongfully terminated as a
subcontractor. TAME claims contract damages in the amount of $250,000, punitive
damages for discrimination of $1,000,000 and defamation damages of an additional
$1,000,000. GEC has moved for summary judgment. This matter is not set for
trial.
The Company is subject to a number of shareholder and other lawsuits and claims
for various amounts which arise out of the normal course of its business. The
Company intends to vigorously defend itself in these matters. The disposition of
all pending lawsuits and claims is not determinable and may have a material
adverse effect on the Company's financial position.
CONTRACTS
The Company has and will continue to execute various construction and other
contracts which may require the Company to, among other items, maintain specific
financial parameters, meet specific milestones and post adequate collateral
generally in the form of performance bonds. Failure by the Company to meet its
obligations under these contracts may result in the loss of the contract and
subject the Company to litigation and various claims, including liquidated
damages. WorldCom continues to provide performance bonds on certain contracts
acquired in the acquisition of MFSNT.
LEASED PROPERTIES
As of October 31, 1999, the Company leased office space and equipment under
various noncancellable long-term operating lease arrangements. Rental expense
for operating leases amounted to approximately $2.3 million, $2.4 million and
$0.8 million for the fiscal years ended October 31, 1999, 1998 and 1997,
respectively.
During fiscal year 1999, the Company leased certain equipment under capitalized
lease agreements, which have been included in Property and Equipment. Cost and
accumulated amortization of such assets as of October 31, 1999, totaled $3.2
million and $1.8 million, respectively.
Future minimum lease payments required under operating and capital leases with
initial terms in excess of one year are as follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDING OCTOBER 31, CAPITAL LEASES OPERATING LEASES
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
F-24
<PAGE>
2000 $ 707 $ 3,549
2001 488 2,573
2002 60 1,938
2003 -- 1,386
2004 -- 811
Thereafter -- --
- -----------------------------------------------------------------------------------------------------------------------
Total minimum lease payments $1,255 $10,257
- -----------------------------------------------------------------------------------------------------------------------
Present value of net minimum lease payments $1,069
Less current installments or obligations under capital leases 707
- --------------------------------------------------------------------------------------------
Obligations under capital leases, excluding current installments $ 362
- --------------------------------------------------------------------------------------------
</TABLE>
14. PREFERRED STOCK:
SERIES A PREFERRED
Effective December 20, 1996, the Company completed a private placement
transaction of 1,000 shares of $10 par value, Series A Convertible Preferred
Stock (the "Series A Preferred Stock") and warrants to purchase 200,000 shares
of the Company's common stock at $9.82 per share. Proceeds from the offering
totaled $6.0 million. Each share of Series A Preferred Stock was convertible
into shares of the Company's common stock after April 30, 1997, at the lesser of
$9.82 per share or at a discount (increased to a maximum of 20 percent for
conversions after December 20, 1997) of the average closing bid price of a share
of common stock for three days preceding the date of conversion. The Company
recognized the discount attributable to the beneficial conversion privilege of
approximately $1.3 million by accreting the amount from the date of issuance,
December 20, 1996, through the last date the discount rate increase could occur,
December 20, 1997, as an adjustment of net income attributable to common
shareholders. This accretion adjustment, which also represents the adjustment
needed to accrete to the redemption value of the Preferred Stock, resulted in a
charge to retained earnings and accompanying credit to the Preferred Stock. The
Preferred Stock accrued dividends at an annual rate of five percent and was
payable quarterly in arrears in cash or through a dividend of additional shares
of Preferred Stock.
During fiscal 1998, all remaining Series A Preferred Stock was converted into
common stock pursuant to the terms thereof and the related number of warrants
was reduced to 62,000, due to either conversion or forfeiture.
SERIES B PREFERRED
Effective June 30, 1998, the Company completed a private placement transaction
of 4,000 shares of $0.10 par value, non-voting Series B Convertible Preferred
Stock bearing an annual dividend rate of four percent (the "Series B Preferred
Stock") and warrants to purchase 1,000,000 shares of the Company's common stock
at a then exercise price of $19.80 per share (the "Series B Preferred Stock
Warrants"). The net proceeds from the transaction, after transaction costs of
$1.9 million, totaled $18.1 million. The Series B Preferred Stock Warrants are
exercisable for a five-year period commencing June 30, 1998, and were assigned a
value of $5.4 million on the date of the transaction.
The Series B Preferred Stock was convertible immediately into shares of the
Company's common stock at 97 percent of the trading price of the common stock,
determined by a prescribed calculation, immediately preceding the conversion
date. The conversion amount of each share of Series B Preferred Stock was equal
to its face value of $5,000, plus any unpaid dividends thereon. The proceeds
from the Series B offering were allocated as follows (in millions):
<TABLE>
<S> <C> <C>
Gross offering proceeds (face value of preferred stock) $20.0
Offering costs (1.9)
Value of Series B Preferred Stock warrants issued (5.4)
- -----------------------------------------------------------------------------------------------------------
Amount attributable to preferred stock and beneficial conversion privilege 12.7 $12.7
Value of common stock issuable on conversion (face value divided by 97%) -- 20.6
- -----------------------------------------------------------------------------------------------------------
Amount deemed paid for the beneficial conversion privilege (7.9) $(7.9)
- -----------------------------------------------------------------------------------------------------------
Amount deemed paid for Series B Preferred Stock $4.8
- -----------------------------------------------------------------------------------------------------------
</TABLE>
Because the Series B Preferred Stock was immediately convertible, the discount
attributable to the beneficial
F-25
<PAGE>
conversion privilege was fully amortized at the date of issue and reflected as a
reduction in income applicable to common stock for the year ended October 31,
1998.
In September 1998, 436 shares of the Series B Preferred Stock were converted to
approximately 1.0 million shares of the Company's common stock.
The terms of the Series B Preferred Stock provided that if certain events of
default occurred, the holders could require the Company to redeem their shares
for cash at a premium price. During the first quarter of fiscal 1999, the
Company was deemed to be in technical violation of the Series B Preferred Stock
due to its failure to have a registration statement declared effective by
December 27, 1998, covering the common stock underlying the Series B Preferred
Stock and Warrants. During the first quarter of fiscal 1999, the holders of the
Series B Preferred Stock notified the Company of their intent to exercise their
redemption rights, however, the notice was subsequently deferred. The carrying
value of the Series B Preferred Stock was excluded from shareholders' equity at
October 31, 1998.
In February 1999, the Company purchased 2,785 shares of the Series B Preferred
Stock from the original holders for $18.9 million. The transaction was treated
as a repurchase of the shares and the related beneficial conversion feature. The
excess of the amount paid over the carrying value of the preferred stock and the
intrinsic value of the beneficial conversion privilege was recognized as an
additional loss applicable to common stock of approximately $4.5 million. The
holders of the remaining shares agreed to either waive all outstanding defaults
under the remaining Series B Preferred Stock or refrain from exercising any
remedies with respect to any such outstanding defaults until May 18, 1999.
During such period of time, the Company agreed to use its best efforts to have a
registration statement declared effective. Subsequent to May 18, 1999, the
Company received further extensions. As of October 31, 1999, the Company has not
been successful in getting a registration statement declared effective related
to the remaining Series B Preferred Stock.
In connection with the repurchase of the Series B Preferred Stock shares in
February 1999, the Company agreed to a modification of the conversion price with
respect to the remaining 779 shares of Series B Preferred Stock. The conversion
price was changed to a fixed amount of approximately $3.50 per share, which was
further reduced by 1.5 percent per month until a registration statement was
declared effective. The modification of the conversion price of the remaining
779 shares of Series B Preferred Stock resulted in a charge to income applicable
to common stock of approximately $6.4 million in the second quarter of fiscal
1999.
In February 1999, the Company also agreed to certain modifications in the
conversion price of the Series B Preferred Stock Warrants. The conversion price
of warrants to purchase 370,000 shares of the Company's common stock was reduced
to $13.25 per share and the conversion price of warrants to purchase 630,000
shares of the Company's common stock was reduced to $13.50 per share. The
modification of the conversion prices of the Series B Preferred Stock Warrants
resulted in a charge to income applicable to common stock of approximately $1.9
million in the second quarter of fiscal 1999. The charge was determined based on
valuation of the Series B Preferred Stock warrants immediately before the
modification and immediately after the modification using a Black Scholes
pricing model.
In May 1999, the Company repurchased the warrants to purchase 630,000 shares of
the Company's common stock for approximately $1.9 million, which amount was
approximately $2.7 million less than the previous valuations of those warrants
that was made when the warrants were issued and modified.
In May 1999, the Company acknowledged that it was in default on the Series B
Preferred Stock and agreed that further punitive default provisions included in
the terms of the Series B Preferred Stock had been triggered. Those provisions
effectively allowed the holders to convert their shares to common stock and put
the common stock to the Company for a redemption price per common share of
$12.125. Because of the put provision being invoked, the carrying value of the
Series B Preferred Stock was adjusted in May 1999 to reflect the calculated
redemption value. As the conversion price is decreased by 1.5 percent per month,
additional common shares issuable on conversion have been calculated and the
redemption amount has been increased as additional charges against income
applicable to common stock. As of October 31, 1999, the calculated redemption
price was approximately $16.3 million. The recharacterization of the Series B
Preferred Stock as a cash obligation of the Company resulted in charges to
income applicable to common stock of approximately $6.2 million and $1.0 million
in the third and fourth quarters of fiscal 1999, respectively.
F-26
<PAGE>
A summary of the above described transactions and their effects on equity and
income applicable to common stock is presented below (amounts in $millions):
<TABLE>
<CAPTION>
Additional
Series B Paid-in Charged to
Stock Warrants Capital Earnings
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Proceeds from Series B offering $12.7 $5.4 $7.9 $ (7.9)
Conversion of 436 Series B shares (1.4) -- 1.4 --
- -----------------------------------------------------------------------------------------------------------------
Balances at October 31, 1998 11.3 5.4 9.3 (7.9)
--------
Repurchase of 2,785 Series B shares (8.9) -- (5.5) (4.5)
February 1999 modifications of terms-
Additional embedded dividend -- -- 6.4 (6.4)
Additional warrant valuation -- 1.9 -- (1.9)
Repurchase of 630,000 warrants for $1.9 million -- (4.6) 2.7 --
May 1999 recharacterization of Series B Stock as put
liability 13.9 -- (8.0) (5.9)
--------
Total charged to earnings, year ended October 1999 (18.7)
- -----------------------------------------------------------------------------------------------------------------
Balances at October 31, 1999 $16.3 $2.7 $4.9 $(26.6)
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
As described in Note 23, "Subsequent Events," the Company repurchased the
remaining Series B Preferred Stock in February 1999. At October 31, 1999, the
original warrants to purchase 370,000 shares of the Company's common stock
remain outstanding.
15. STOCK OPTIONS AND OTHER STOCK AWARDED TO EMPLOYEES:
In fiscal 1996, the Company's shareholders adopted a stock option plan for the
issuance of up to 550,000 shares which included provisions for both incentive
and non-qualified stock options (the "Stock Option Plan") and which expires on
September 19, 2005. On April 24, 1998, the Company's shareholders amended the
Stock Option Plan to increase the aggregate number of shares of Common Stock
issuable under the Stock Option Plan from 550,000 to 1,300,000. The Company
intends to file a registration statement under the Securities Act of 1933 to
register these 750,000 additional shares of Common Stock reserved for issuance
under the Stock Option Plan.
Stock options are generally granted with an exercise price equal to the fair
market value of the Common Stock as of the date of grant. All outstanding
options have an option term ranging from 3 to 10 years with an average
outstanding life of 4.8 years as of October 31, 1999. Vesting terms range from
immediately vested to three year vesting terms. Stock options are summarized
below (shares in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------
Option Price Option Price Option Price
Shares Per Share Shares Per Share Shares Per Share
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding, beginning of year 664 $6.20-$14.00 372 $6.00-$7.81 160 $5.75-$6.88
Grants 1,134 5.75-9.94 592 5.34-14.00 323 6.00-7.81
Exercises (79) 5.75-7.25 (212) 5.34-7.81 (72) 6.00-6.88
Cancellations (647) 5.75-14.00 (88) 6.38-7.81 (39) 5.88-7.81
- ------------------------------------------------------------------------------------------------------------------------
Outstanding, end of year 1,072 5.75-9.94 664 6.20-14.00 372 6.00-7.81
- ------------------------------------------------------------------------------------------------------------------------
Options exercisable, end of year 652 5.75-9.94 91 6.20-14.00 95 6.00-7.81
- ------------------------------------------------------------------------------------------------------------------------
Weighted average fair value of
options granted during the
year $6.61 $8.56 $ --
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
F-27
<PAGE>
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
- --------------------------------------------------------------------------------------------------
Weighted
Average Weighted
Range of Number Remaining Average Number Average
Exercise Prices Outstanding Contractual Life Exercise Price Exercisable Exercise Price
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$5.75-$5.75 780 4.81 $5.75 507 $5.75
6.00- 7.25 90 5.31 7.04 67 6.97
7.43- 8.75 67 8.73 8.05 32 7.57
9.94- 9.94 135 2.73 9.94 46 9.94
- --------------------------------------------------------------------------------------------------
$5.75-$9.94 1,072 4.84 $6.59 652 $6.34
- --------------------------------------------------------------------------------------------------
</TABLE>
The Board of Directors has committed to issue, subject to shareholder approval,
approximately 1.6 million options with strike prices ranging from $5.75 to $8.00
to directors, officers and consultants. The Company may report significant
compensation expense at or subsequent to the date of shareholder approval, if
and when obtained, for any excess of the fair market value at that date over the
strike prices of these options. The Company will occasionally issue options to
consultants. The expense related to options granted to consultants was
approximately $0.1 million in 1999 based on the fair value of the services or
the options in accordance with SFAS No. 123.
The Company accounts for stock options in accordance with APB No. 25. SFAS 123
requires supplemental disclosure of stock-based compensation determined based on
the fair value of options as of the date of grant. The compensation so
determined is recognized for pro forma purposes over the vesting period of the
options. For the purpose of determining the pro forma amounts shown below, the
fair value of each option was estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted average
assumptions for options granted in 1999, 1998 and 1997, respectively; risk-free
interest rates of 5.97 percent, 5.40 percent, 5.65 percent; dividend yield of
zero percent for each year; expected lives of 1.5 years, two to six years and
two years; volatility of .59, .549-.561 and .463. Had compensation expense been
recognized in accordance with SFAS No. 123 the Company's income (loss)
applicable to common stock would approximate the pro forma amounts shown below
(in thousands except per share amounts):
Year Ended October 31,
- -----------------------------------------------------------------------------
1999 1998 1997
- -----------------------------------------------------------------------------
Income (loss) applicable to common stock:
As reported (36,758) (5,840) 1,331
Pro forma (38,302) (7,303) 1,121
Diluted income (loss) applicable to
common stock per share:
As reported $(3.10) $(0.59) $0.16
Pro forma (3.23) (0.74) 0.13
Subject to shareholder approval, the Board of Directors has approved a grant of
50,000 shares of common stock to the Company's Chief Executive Officer ("CEO")
at no cost to him. The Board has also approved the payment by the Company of
taxes that will be payable by the CEO with respect to the grant. When and if
shareholder approval is received, the Company will recognize compensation
expense, the amount of which may be significant, for the fair market value of
the shares, on the date of shareholder approval, and cash paid to tax protect
the CEO.
16. FIBER MARKETING RIGHTS:
The following fiber optic network construction projects were executed by MFSNT
prior to the July 1998 acquisition of MFSNT and contain continuing fiber
marketing rights:
Bay Area Rapid Transit (San Francisco Bay Area) ("BART"). The network was fully
constructed at the date of acquisition and the Company has no ownership rights.
It does have a right to market excess capacity on the system and is entitled to
receive commissions from BART based on a percentage of any resulting user fees
received by BART. During the years ended October 31, 1999 and 1998, commissions
of approximately $0.4 million and $0.3 million were earned by the Company under
this arrangement.
Illinois State Toll Highway Authority ("ISTHA"). This conduit network was under
construction at the date of acquisition and the Company has no ownership rights.
The Company does have marketing rights and is entitled to a percentage of user
fees successfully negotiated on behalf of ISTHA. The Company can also separately
negotiate with users for installation of fiber and electronic equipment. During
the years ended October 31, 1999 and 1998, the Company earned commissions of
$2.0 million and $1.2 million. Revenues from separate installation contracts
with the users were approximately $10.1 million and zero during the fiscal years
ended October 31, 1999 and 1998, respectively.
17. FINANCIAL ADVISORY SERVICES:
Two related firms, L. Dolcenea, Inc. and Platinum Advisory Services, Inc., were
paid approximately $1.0 million by the Company
F-28
<PAGE>
for various advisory services during the year ended October 31, 1999, including
services related to extensions of default waivers under the Series B Preferred
Stock. L. Dolcenea, Inc. was also paid $1.0 million by the Company in July 1998
related to the original issuance of the Series B Preferred Stock. The services
billed to the Company include assistance with negotiation of a proposed
settlement with SIRIT (Refer to Note 13, "Commitments and Contingencies"),
involvement with potential business acquisitions, obtaining officers and
directors' liability insurance for the Company and proposals for the issuance of
additional securities by the Company with terms similar to the Series B and
Series C Preferred Stock. Amounts paid include both amounts designated as
retainers and success fees. The Company may be committed to pay these advisors
additional amounts or issue warrants to them for the purchase of the Company's
common stock related to future transactions for which the advisors may claim
compensation.
These advisors were paid an additional $1.7 million in February 2000, at the
time of conversion and redemption of the remaining outstanding Series B
Preferred stock and issuance of the Series C Preferred Stock. These advisors
also received 75,000 warrants to acquire the Company's common stock. Refer to
Note 23, "Subsequent Events"
18. DEFINED CONTRIBUTION RETIREMENT PLAN AND POST-EMPLOYMENT OBLIGATIONS:
The Company sponsors a defined contribution retirement plan covering
substantially all employees of the Company. Participants may contribute up to
fifteen percent of their annual salaries, subject to certain limitations, as
pre-tax salary deferral. The Company makes certain matching and service related
contributions to the plan that totaled approximately $0.7 million during the
fiscal year ended October 31, 1999.
During the fiscal year ended October 31, 1999, the Company executed deferred
compensation arrangements with two former directors that provide for payments to
them of $60,000 to $75,000 per year plus fringe benefits for the number of years
equal to the years of service, subject to a minimum of ten years. During the
fiscal year ended October 31, 1999, the Company incurred expense of
approximately $0.8 million related to these arrangements and paid benefits to
one former employee of $0.1 million. The present value of these future
obligations, $0.8 million, was accrued as of October 31, 1999.
19. INCOME TAXES:
An analysis of the components of income (loss) before income taxes and minority
interest is presented below for the fiscal years ended October 31 (amounts in
thousands):
1999 1998 1997
- -----------------------------------------------------------------
Domestic $(18,285) $6,084 $3,304
Foreign 656 453 573
- -----------------------------------------------------------------
$(17,629) $6,537 $3,877
- -----------------------------------------------------------------
The provision (benefit) for income taxes is composed of the following for the
fiscal years ended October 31 (in thousands):
1999 1998 1997
- ------------------------------------------------------------------------------
Current:
Federal $(540) $1,937 $ --
State 402 751 --
- ------------------------------------------------------------------------------
(138) 2,688 --
- ------------------------------------------------------------------------------
Deferred:
Federal 4,003 792 657
State 149 (75) 70
Change in valuation allowance (4,152) -- --
- ------------------------------------------------------------------------------
-- 717 727
- ------------------------------------------------------------------------------
Total provision (benefit) for income taxes $(138) $3,405 $727
- ------------------------------------------------------------------------------
The difference between the provision (benefit) for income taxes computed at the
statutory federal income tax rate and the financial statement provision
(benefit) for income taxes is summarized as follows for the fiscal year ended
October 31:
1999 1998 1997
- --------------------------------------------------------------------------
Expected statutory amount (34.0)% 34.0% 34.0%
F-29
<PAGE>
Change in valuation allowance 26.4 -- --
Non-deductible goodwill 4.7 4.0 4.0
Foreign operations, net 3.0 4.0 (20.0)
State income taxes 1.5 7.0 0.2
Other (2.4) 3.0 3.8
- --------------------------------------------------------------------------
Actual tax provision (benefit) (0.8)% 52.0% 22.0%
- --------------------------------------------------------------------------
Deferred tax assets and liabilities result from differences in the timing of the
recognition of certain income and expense items for tax and financial reporting
purposes. The sources of these differences are as follows at October 31 (amounts
in thousands):
1999 1998
- --------------------------------------------------------------------------------
Current deferred tax assets (liabilities):
Allowance for doubtful accounts $1,243 $312
Accrued liabilities 1,029 --
Other (25) 747
- --------------------------------------------------------------------------------
2,247 1,059
- --------------------------------------------------------------------------------
Non-current deferred tax assets (liabilities):
Property and equipment (3,183) (755)
Net operating loss (NOL) carryforwards 2,806 --
Stock appreciation rights payable 744 --
Accrued liabilities 389 --
Other 204 (39)
- --------------------------------------------------------------------------------
960 (794)
- --------------------------------------------------------------------------------
Net deferred tax asset prior to valuation allowance 3,207 265
Valuation allowance (3,207) --
- --------------------------------------------------------------------------------
$ -- $265
- --------------------------------------------------------------------------------
At October 31, 1997, the Company had NOL carryforwards for Federal income tax
purposes of approximately $3.3 million. These NOL carryforwards were fully
utilized in fiscal year 1998. During fiscal 1999, the Company had a NOL for
income tax purposes of approximately $9.7 million, approximately $2.0 million of
which will be carried back to fiscal 1998 and the remainder of approximately
$7.7 million will be carried forward and will expire in 2019. A valuation
allowance of $3.2 million has been recognized at October 31, 1999, due to the
uncertainty that the Company will realize the income tax benefit from its net
deferred tax assets.
20. RELATED-PARTY TRANSACTIONS:
In payment of certain finders fees associated with the acquisition of MFSNT, the
Company issued a three-year, 10 percent note for $1.3 million to a third party
who subsequently became a member of the Company's Board of Directors. At October
31, 1998, the outstanding balance of this note was $1.2 million and is reflected
in current liabilities in the accompanying consolidated balance sheet. During
the year ended October 31, 1999, the Company issued 118,000 shares of Common
Stock to the Director in payment of the then remaining balance of the note of
$0.8 million.
In November 1997, a subsidiary of the Company assumed the obligations of Ten-Ray
Utility Construction, Inc. ("Ten-Ray"), a North Carolina corporation, as
contractor under two network construction contracts and paid the costs Ten-Ray
had accrued under the contracts of approximately $0.1 million. On January 30,
1998, the Company purchased from Ten-Ray certain construction equipment used in
connection with the contracts. The purchase price for the equipment was the
satisfaction of Ten-Ray's bank loans secured by the equipment in the amount of
$0.3 million, including principal and interest, which in the opinion of the
executives of the subsidiary was not more than the fair market value of the
equipment at the time of this transaction. The Company's then Chief Financial
Officer, beneficially owned approximately 7.7 percent of the voting stock of
Ten-Ray and had personally guaranteed the equipment loans to the bank.
21. SEGMENT INFORMATION:
F-30
<PAGE>
The Company currently operates primarily in two industry segments: network
services and transportation services. Transportation services are conducted
primarily in the United States with small projects in South America, Canada and
Asia, while telecommunication network services are conducted both in the United
States and Latin America. The Company manages and analyzes the operations of the
Company in four separate groups, Network Services Group, Transportation Services
Group, Construction Group and Communications Development Group. Subsequent to
October 31, 1999, the Company established the Network Development Group. Refer
to Note 1, "The Company," for descriptions of services provided by each
operating group. The Company's international operations are primarily within the
Communications Development Group and are immaterial to the Company's
consolidated operations.
<TABLE>
<CAPTION>
For the Fiscal Year Ended October 31,
- ------------------------------------------------------------------------------------------------------
1999 1998 1997
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales to unaffiliated customers:
Network Services $260,354 $62,243 $ --
Transportation Services 39,394 24,639 --
Construction 113,948 125,270 82,171
Communication Development (International) 4,869 5,329 4,163
- ------------------------------------------------------------------------------------------------------
$418,565 $217,481 $86,334
- ------------------------------------------------------------------------------------------------------
Income (loss) from operations:
Network Services $14,746 $6,272 $ --
Transportation Services (10,618) 2,586 --
Construction (5,730) 1,718 4,824
Communication Development (International) 346 182 17
Unallocated Corporate Overhead (628) 651 --
- ------------------------------------------------------------------------------------------------------
$(1,884) $11,409 $4,841
- ------------------------------------------------------------------------------------------------------
Identifiable assets:
Network Services $139,460 $159,660 $ --
Transportation Services 50,178 48,830 --
Construction 66,667 71,941 44,751
Communication Development (International) 3,813 4,496 2,509
Corporate 1,915 5,833 3,086
- ------------------------------------------------------------------------------------------------------
$262,033 $290,760 $50,346
- ------------------------------------------------------------------------------------------------------
</TABLE>
The Company derives a significant portion of its revenues from a few large
customers. Those customers are as follows:
<TABLE>
<CAPTION>
Revenue for the Percentage of Total Revenues
Fiscal Year During The Fiscal Years Ended
Ended October 31,
Customer Operating Group October 31, 1999 1999 1998 1997
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
New Jersey Consortium Transportation and Network Services $78,515 18% 8% --
WorldCom Network Services 61,636 15% 14% --
Williams Communications, Inc. Network Services 49,621 12% -- --
Cooper Tire Company Construction 13,050 3% 6% 15%
Florida Power Corp. Construction 13,514 3% 7% 9%
State of Illinois (ISTHA) Network Services 11,680 2% 5% --
</TABLE>
MFSNT is party to multiple contracts with the New Jersey Consortium ("New Jersey
Consortium Contracts") which includes the New Jersey Turnpike Authority, New
Jersey Highway Authority, Port Authority of New York and New Jersey, South
Jersey Transportation Authority and the State of Delaware Department of
Transportation. The New Jersey Consortium Contracts provide for, among other
items, MFSNT to construct and maintain a fully integrated automated toll
collection system and supporting fiber optic network. The gross revenues the
Company has or expects to receive from the New Jersey Consortium Contracts are
estimated to be approximately $280.0 million. During the fiscal year ended
October 31, 1999, the Company incurred net losses related to the New Jersey
Consortium Contracts of approximately $4.0 million, including penalties of
approximately $4.9 million associated with the failure to meet certain
milestones provided for in the contracts. The Company is not currently incurring
additional penalties related to the New Jersey Consortium Contracts. However,
scheduled minimum payments due the Company for operation of the violations
processing center have been deferred until certain work is completed by the
Company and accepted by the Consortium and may not be recouped as minimum
payments.
At October 31, 1999, the Company had billed and unbilled receivables of
approximately $18.3 million and $20.4 million relating to the New Jersey
Consortium, $10.9 million and $8.7 million relating to WorldCom and $6.2
million and $1.1 million relating to Williams Communications, Inc.,
respectively.
F-31
<PAGE>
The loss of the New Jersey Consortium, WorldCom or any other such customers
could have a material adverse effect on Able's business, financial condition and
results of operations.
22. UNAUDITED QUARTERLY FINANCIAL DATA (amounts in thousands except per
share data)
The fiscal 1999 quarterly unaudited amounts have been adjusted from amounts
previously reported by the Company in their quarterly filings with the
Securities and Exchange Commission. The adjustments relate to accounting errors
discovered subsequent to October 31, 1999. Their nature and effects on the
results of operations for each of the quarterly periods during fiscal 1999 are
summarized below (in thousands, except per share data):
<TABLE>
<CAPTION>
As Reported Adjustments Adjusted
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
First quarter:
Revenues $91,777 $ 1,303 $93,080
Operating income (loss) 5,363 (2,842) 2,521
Net income (loss) (581) (4,737) (5,318)
Income (loss) applicable to common stock (761) (4,737) (5,498)
Income (loss) applicable to common stock per share (0.06) (0.41) (0.47)
Second quarter:
Revenues 124,481 (752) 123,729
Operating income (loss) 536 (3,393) (2,857)
Net income (loss) 41 (1,636) (1,595)
Income (loss) applicable to common stock (15,151) 845 (14,306)
Income (loss) applicable to common stock per share (1.29) 0.07 (1.22)
Third quarter:
Revenues 102,562 219 102,781
Operating income (loss) 6,546 (5,091) 1,455
Net income (loss) 161 (5,646) (5,485)
Income (loss) applicable to common stock 122 (10,387) (10,265)
Income (loss) applicable to common stock per share .01 (0.88) (0.87)
Fourth quarter:
Revenues 98,975 -- 98,975
Operating income (loss) (3,003) -- (3,003)
Net income (loss) (5,662) -- (5,662)
Income (loss) applicable to common stock (6,689) -- (6,689)
Income (loss) applicable to common stock per share (0.56) -- (0.56)
</TABLE>
<TABLE>
<CAPTION>
NET INCOME (LOSS) APPLICABLE
NET INCOME (LOSS) TO COMMON STOCK
------------------------------------------------------------------------
FIRST SECOND THIRD FIRST SECOND THIRD
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Amounts previously reported $ (581) $ 41 $ 161 $ (761) $ (15,151) $ 122
------------------------------------------------------------------------
Adjustments:
WorldCom SAR obligation (1) (1,906) 821 (687) (1,906) 821 (687)
Improperly deferred costs (2) (763) (2,382) (2,778) (763) (2,382) (2,778)
Costs improperly charged against reserves (3) (368) 282 (2,398) (368) 282 (2,398)
Prior year accrual adjustment (4) (957) -- -- (957) -- --
Equipment impairment loss (5) -- (1,146) -- -- (1,146) --
Tax effects of other adjustments (6) (118) 807 309 (118) 807 309
Series B redemption and modification (7) -- -- -- -- 2,481 (3,338)
Series B liquidation value adjustment (8) -- -- -- -- -- (1,403)
Other adjustments (9) (625) (18) (92) (625) (18) (92)
------------------------------------------------------------------------
Total adjustments (4,737) (1,636) (5,646) (4,737) 845 (10,387)
------------------------------------------------------------------------
Restated Amount $(5,318) $(1,595) $(5,485) $(5,498) $(14,306) $(10,265)
------------------------------------------------------------------------
</TABLE>
Quarterly adjustments:
(1) The obligation under the WorldCom SARs (Note 5) was calculated using a
Black-Scholes option-pricing model. The obligation should have been
accounted for at "intrinsic value" determined as the difference between
the closing price of the Company's common stock on the balance sheet
date and the strike price of $7.00.
(2) For the first three quarters, the Company deferred certain costs
relating to its operation of the Violation Processing Center for the
New Jersey Consortium that should have been expensed as incurred.
(3) Indirect costs were not consistently allocated to Transportation
Services Group jobs. In addition, costs were charged against reserves
for Loss Jobs that were not related to those jobs.
(4) A prior year consolidating adjustment to reduce accrued expenses was
inappropriately not reversed in the preparation of the 1999
consolidations.
(5) An impairment loss for certain equipment for one of the Company's
subsidiaries should have been recognized in the second quarter.
(6) The tax provision for all quarters has been restated, including
reversal of approximately $1.2 million tax benefit originally offset
against the extraordinary loss on the early extinguishment of debt.
(7) The February 1999 redemption of Series B Preferred Stock and the
modification of the terms of the then remaining Series B shares was not
correctly determined.
(8) The Series B Preferred Stock should have been reflected at its
liquidation value upon recharacterization as a default obligation in
May 1999 Refer to Note 14, "Preferred Stock"
(9) Other adjustments made as a result of the year-end audit affected the
previously reported quarterly amounts as shown.
LONG-TERM SERVICE CONTRACTS
During the third quarter, an accrual of $8.4 million was made with an offsetting
increase to goodwill for projected losses on long-term service contracts
assumed as part of the acquisition of MFSNT for operation and maintenance of
fiber networks. The contracts extend for fifteen to twenty years. Performance
under these agreements, which were predominately executed in 1996 and 1997,
began during fiscal 1999. The Company subsequently determined that the costs to
perform under these contracts are expected to be greater than amounts presently
expected to be billable to network users under firm contractual commitments.
The appropriate accounting treatment for long-term service contracts of this
nature is not clearly defined, particularly when the contracts have been
assumed as part of a purchase business combination. However, based on the
Company's ongoing discussions with the SEC, the Company believes the SEC does
not believe accruals for future losses on these types of long-term service
obligations are appropriate. The Company has also subsequently determined that
such losses cannot be reasonably estimated due to potential changes in various
assumptions. Consequently, the Company has determined the appropriate accounting
for these obligations is to record any such losses in the periods in which the
losses are incurred. The Company has restated its quarterly results for the
first, second and third quarters of 1999 to reflect these losses as incurred and
to reverse the additional $8.4 million accrued for these obligations. The SEC
has not yet agreed with the Company that such accounting is appropriate and may
require the Company to further change its accounting policies for operations
and maintenance contracts.
Quarterly unaudited amounts for the fiscal years ended October 31, 1998 and 1997
are as follows (in thousands, except per share data):
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1998:
Revenues $22,268 $34,552 $58,305 $102,356
Operating income (loss) (1,164) 2,180 4,319 6,074
Net income (loss) (927) 867 790 1,784
Income (loss) applicable to common stock (1,081) 838 (7,186) 1,589
Income (loss) applicable to common stock per share (0.12) 0.09 (0.72) 0.16
1997:
Revenues 18,326 20,871 21,984 25,153
Operating income (loss) 1,144 1,785 1,024 888
Net income (loss) 507 851 932 567
F-32
<PAGE>
Income (loss) applicable to common stock 470 337 491 33
Income (loss) applicable to common stock per share 0.04 0.04 0.06 0.02
</TABLE>
23. SUBSEQUENT EVENTS
WORLDCOM DEBT TO EQUITY CONVERSION
On January 11, 2000, WorldCom agreed to convert approximately $25.5 million of
its $30.0 million WorldCom Note into 3,050,000 shares of the Company's Common
Stock ("WorldCom Conversion Agreement"). The conversion was based on the January
8, 2000 closing price of the Company's Common Stock of $8.375 per share. The
remainder of the original WorldCom Note of approximately $4.5 million was
converted into an amended and restated 11.5 percent subordinated promissory note
due February 2001.
SERIES B AND SERIES C PREFERRED STOCK
In February 2000, the Company purchased the remaining Series B Preferred Stock
outstanding for a redemption price of approximately $16.8 million. The
consideration paid included cash of $10.9 million, 802,000 shares of the
Company's common stock, and warrants to purchase 267,000 shares of common stock.
The warrants are exercisable with respect to 200,000 shares at $10.13 per share.
The price for the remaining 67,000 shares will be established at the end of 100
trading days, using a market-based formula, but could be as low as $.01 per
share. To fund the Series B redemption, the Company issued a new class of Series
C Convertible Preferred Stock with detachable warrants ("Series C Stock") for
cash of $15.0 million.
The Series C Stock has a dividend rate of 5.9% and is convertible immediately at
$9.35 per common share. The conversion price is subject to change every six
months. If the common stock is trading below the previously adjusted conversion
price, the conversion price will be reduced, but not to less than $4.00 per
common share. Under certain terms and conditions, the Company may redeem the
Series C Stock beginning 60 days after a registration statement for the
underlying common shares is declared effective at a price of $15 million plus
10% for each full or partial six-month period elapsed until redemption. The
terms of the Series C Preferred Stock include certain punitive provisions in the
event of default, including interest to accrue at 3% per month. The Series C
Stock was issued with detachable warrants for the purchase of 200,000 shares of
the Company's common stock at a price of $10.75 per share. The Financial
Advisors (Note 17) also are entitled to warrants for 75,000 common shares at
$10.75 per share.
The pro forma effect of the WorldCom Conversion Agreement and the Series B and
Series C Transactions on the October 31, 1999, consolidated balance sheet is as
follows:
<TABLE>
<CAPTION>
WorldCom
As Reported Conversion Series B Series C Pro Forma
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cash $ 16,568 $ -- $(10,879) $ 14,400 $ 20,089
Current assets 167,874 -- (10,879) 14,400 171,395
Total Assets 262,033 -- (10,879) 14,400 265,554
Current liabilities 166,772 -- -- -- 166,772
Long-term debt 46,086 (25,500) -- -- 20,586
Preferred stock 16,322 -- (16,322) 13,637 13,637
Equity 431 25,500 5,443 763 32,137
</TABLE>
ACQUISITION
On November 5, 1999, the Company acquired all of the outstanding common stock of
Southern Aluminum & Steel Corporation ("SASCO") along with Specialty Electronic
Systems, Inc. ("SES"). SASCO has operations in Birmingham, Cape Canaveral and
Atlanta and has 40 years' experience in surveillance systems, signalization,
Intelligent Transportation Systems ("ITS") and roadway lighting. It provides
expertise in design, installation, and project implementation of advanced
highway communication networks. SES is a systems/integration company in the ITS
market, having designed, fabricated, installed and integrated ITS systems in 11
states from the East Coast to Ohio and Texas.
Consideration for SASCO and SES was 75,000 shares of common stock with a value
of approximately $0.7 million. In addition to the initial consideration, the
Company has provided an earn-out provision to the prior shareholders whereby
additional consideration will be given based on certain performance
measurements. The additional consideration can be earned over a four year
period. The Company intends to record this transaction using the purchase method
of accounting. The pro forma effect on consolidated results of operations, from
the acquisition of SASCO and SES, is not material.
The earn-out consideration for year one (ending October 31, 2000) shall be
converted into the Company's common stock by dividing the earn-out consideration
by $8. The earn-out consideration for year two through year four shall be
converted into the Company's common stock by dividing the earn-out consideration
by the 52-week average of the closing market price of the Company's common stock
for each respective year.
The consideration shall be paid in shares of the Company's common stock.
However, the cumulative shares issued (initial and earn-out) may never exceed
19.9 percent of the total Company common stock issued and outstanding. Should
the 19.9 percent threshold be reached, any additional consideration earned will
be paid in cash or promissory notes with interest calculated at a market rate,
as mutually agreed upon by the Company and the former shareholders, at the time
of payment.
F-33
<PAGE>
Able Telcom Holding Corp. and Subsidiaries
Schedule II
Valuation and Qualifying Accounts
Years ended October 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
Balance at Charged to Balance at
Beginning of Costs and End of
Period Acquisitions Expenses Deductions Period
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts:
October 31, 1999 $866 $ -- $5,044 $2,878 $3,032
October 31, 1998 686 75 782 677 866
October 31, 1997 828 -- 160 302 686
Restructuring and other acquisition reserves:
October 31, 1999 1,541 -- -- 959 582
October 31, 1998 -- 4,997 -- 3,456 1,541
October 31, 1997 -- -- -- -- --
Reserves for litigation and claims:
October 31, 1999 4,014 -- -- 700 3,314
October 31, 1998 -- 5,000 -- 986 4,014
October 31, 1997 -- -- -- -- --
Reserves for losses on uncompleted contracts:
October 31, 1999 25,390 2,463 -- 19,233 8,620
October 31, 1998 -- 40,500 -- 15,110 25,390
October 31, 1997 -- -- -- -- --
</TABLE>
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
2.1 Asset Purchase Agreement, dated November 26, 1997, among Able
Telcom Holding Corp., Georgia Electric Company, Transportation
Safety Contractors, Inc., COMSAT RSI Acquisitions, Inc. and
COMSAT Corporation (1)
2.2 Indemnification Agreement, dated February 25, 1998, among Able
Telcom Holding Corp., Georgia Electric Company, Transportation
Safety Contractors, Inc., COMSAT RSI Acquisitions, Inc. and
COMSAT Corporation (1)
2.3 Stock Purchase Agreement, dated as of April 1, 1998, among
Able Telcom Holding Corp., James P Patton, Rick Boyle and
Claiborne K. McLemore III (2)
2.4 Closing Memorandum and Schedule, dated April 1, 1998, among
Able Telcom Holding Corp., James P. Patton, Rick Boyle and
Claiborne K. McLemore III (2)
2.5 Agreement and Plan of Merger by an among MFS Acquisition
Corp., Able Telcom Holding Corp., MFS Network Technologies,
Inc. and MFS Communications Company, Inc. dated as of April
22, 1998 (9)
2.5.1 Amendment to Agreement and Plan of Merger among MFS
Acquisition Corp., Able Telcom Holding Corp., MFS Network
Technologies, Inc. and MFS Communications Company, Inc. dated
as of July 2, 1998 (10)
2.5.1.1 Amendment No. 2 dated as of July 21, 1998 to Agreement and
Plan of Merger among MFS Acquisition Corp., Able Telcom
Holding Corp., MFS Network Technologies, Inc. and MFS
Communications Company, Inc. (11)
2.5.1.2 Agreement between WorldCom Network Services, Inc. and Able
Telcom Holding Corp. dated as of September 9, 1998 (13)
2.5.1.3 Agreement between WorldCom Network Services, Inc. and Able
Telcom Holding Corp. dated January 26, 1999 (12)
2.5.2 Promissory Note of Able Telcom Holding Corp. dated July 2,
1998 to MFS Communications Company, Inc. (10)
2.5.2.1 11.5% Promissory Note between Able Telcom Holding Corp., and
WorldCom Network Services, Inc. dated as of September 1, 1998
(12)
2.5.3 Stock Pledge Agreement dated as of July 2, 1998 by Able Telcom
Holding Corp. in favor of WorldCom, Inc. (10)
2.5.4 Master Services Agreement between WorldCom Network Services,
Inc. and MFS Network Technologies, Inc. dated as of July 2,
1998 (exhibits omitted) (11)
2.5.5 Assumption and Indemnity Agreement dated as of July 2, 1998
among Able Telcom Holding Corp., WorldCom Inc., MFS
Communications Company, Inc., MFS Intelenet, Inc., MFS
Datanet, Inc., MFS Telcom, Inc. and MFS Communications, Ltd.
(schedule omitted) (10)
2.5.6 License Agreement between MFS Communications Company, Inc. and
Able Telcom Holding Corp. dated as of July 2, 1998 (10)
2.5.7 Modification to Stock Option Agreement between the Company and
WorldCom, Inc. dated January 8, 1999 (12)
2.5.8 Agreement to Enter into Stock Appreciation Rights Agreement
between the Company and WorldCom, Inc. dated January 8, 1999
(12)
2.5.9 Financing Agreement between WorldCom Network Services, Inc.
and Able Telcom Holding Corp. dated February 16, 1999 (12)
2.5.9.1 Amendment and Restatement of Financing Agreement by and
between WorldCom Network Services, Inc. and Able Telcom
Holding Corp. dated April 1, 1999. (17)
2.5.10 Agreement dated March 15, 1999 by and between Able Telcom
Holding Corp. and WorldCom Network Services, Inc. (17)
2.5.14 Letter Agreement dated January 11, 2000 related to WorldCom
Conversion of Certain Debt into Equity
2.6 Teaming Agreement dated July 7, 1999 by and between Able
Telcom Holding Corp. and 186K.Net, Co.
<PAGE>
2.7 Agreement and Plan of Merger by and among Able Telcom Holding
Corp., SES Acquisition Corp., and Specialty Electronics
Systems, Inc. and the Shareholders dated as of November 5,
1999.
2.7.1 Schedule 2.6(a)-SASCO relating to the Agreement and Plan of
Merger by and among Able Telcom Holding Corp., SES Acquisition
Corp., and Specialty Electronics Systems, Inc. and the
Shareholders dated as of November 5, 1999.
2.7.2 Schedule 2.6(a)-SES relating to the Agreement and Plan of
Merger by and among Able Telcom Holding Corp., SES Acquisition
Corp., and Specialty Electronics Systems, Inc. and the
Shareholders dated as of November 5, 1999.
2.7.3 Stock Purchase Agreement by and among Able Telcom Holding
Corp., Southern Aluminum & Steel Corporation and the
Shareholders dated November 5, 1999.
2.7.4 Registration Rights Agreement associated with the Stock
Purchase Agreement by and among Able Telcom Holding Corp.,
Southern Aluminum & Steel Corporation and the Shareholders
dated November 5, 1999.
2.7.5 Employment Agreement with Donald G. Garner dated November 5,
1999.
2.7.5.1 Non-Competition Agreement with Donald G. Garner dated November
5, 1999.
2.7.6 Employment Agreement with C. Michael Hoover dated November 5,
1999.
2.7.6.1 Non-Competition Agreement with C. Michael Hoover dated
November 5, 1999.
2.7.7 Employment Agreement with Jesse R. Joyner dated November 5,
1999.
2.7.7.1 Non-Competition with Jesse R. Joyner dated November 5, 1999.
3.1 Articles of Incorporation of Able Telcom Holding Corp., as
amended (3) (4)
3.1.1 Articles of Amendment to the Articles of Incorporation of Able
Telcom Holding Corp. (13)
3.1.2 Articles of Amendment to the Articles of Incorporation of Able
Telcom Holding Corp. dated January 25, 2000.
3.2 Bylaws of Able Telcom Holding Corp., as amended (3)
4.2 Specimen Common Stock Certificate (3)
4.3 Specimen Series A Preferred Stock Certificate (6)
4.3.1 Specimen Series B Preferred Stock Certificate
4.3.2 Specimen Series C Preferred Stock Certificate
4.4 Form of Warrant issued to Credit Suisse, First Boston and
Silverton International Fund Limited (4)
4.6 Able Telcom Holding Corp. 1995 Stock Option Plan (13)
4.7 Amendment to Able Telcom Holding Corp. 1995 Stock Option Plan,
dated April 24, 1998 (13)
4.8 Series B Convertible Preferred Stock Purchase Agreement (13)
<PAGE>
4.9 Registration Rights Agreement for Series B Convertible
Preferred Stock Purchase Agreement and 350,000 Warrants (13)
4.10 Registration Rights Agreement for 650,000 Warrants associated
with Series B Convertible Preferred Stock Purchase Agreement
(13)
4.11 Form of Common Stock Purchase Warrants for 350,000 Shares in
connection with Series B Convertible Preferred Stock Purchase
Agreement (13)
4.12 Form of Common Stock Purchase Warrants for 650,000 Shares in
connection with Series B Convertible Preferred Stock Purchase
Agreement (13)
4.13 Preferred Stock Purchase Agreement by and among Able Telcom
Holding Corp., RGC International Investors, LDC, and Cotton
Communications, Inc. dated February 17, 1999 (12)
4.14 Warrant Amendment between Able Telcom Holding Corp., and
Purchasers (as defined) dated February 17, 1999 (12)
4.15 Securities Purchase Agreement by and between the Sellers (as
defined) and Cotton Communications, Inc. dated February 17,
1999 (12)
4.15.1 Letter Agreement dated February 17, 1999 from Cotton
Communications, Inc. to John Hancock Mutual Life Insurance
Company.
4.15.2 Letter Agreement dated February 17, 1999 from Cotton
Communications, Inc. to Able Telcom Holding Corp.
4.15.3 Termination Agreement dated March 22, 1999 by and between Able
Telcom Holding Corp. and Cotton Communication, Inc.
4.16 Series B Convertible Preferred Stock Exchange Agreement by and
between Able Telcom Holding Corp. and the Palladin Group dated
February 4, 2000.
4.16.3 Letter Agreement dated February 17, 1999 from the Palladin
Group to Able Telcom Holding Corp.
4.16.4 Letter dated March 19, 1999 from Able Telcom Holding Corp. to
the Palladin Group associated with the termination of
Financing Agreement dated February 17, 1999.
4.17 Form of First Common Stock Purchase Warrants in connection
with Series B Convertible Preferred Stock Exchange Agreement
with the Palladin Group
4.18 Form of Second Common Stock Purchase Warrants in connection
with Series B Convertible Preferred Stock Exchange Agreement
with the Palladin Group
4.19 Series B Convertible Preferred Stock Exchange Agreement by and
between Able Telcom Holding Corp. and the RoseGlen Group dated
February 4, 2000.
4.20 Form of Common Stock Purchase Warrants in connection with
Series B Convertible Preferred Stock Exchange Agreement with
the RoseGlen Group
4.21 Registration Rights Agreement associated with Series B
Convertible Preferred Stock Exchange Agreement
4.22 Series C Convertible Preferred Stock Purchase Agreement
<PAGE>
4.23 Form of Common Stock Purchase Warrants in connection with
Series C Convertible Preferred Stock Purchase Agreement
4.24 Registration Rights Agreement associated with Series C
Convertible Preferred Stock Purchase Agreement
10.15 Stock Purchase Agreement between Able Telcom Holding Corp.,
Traffic Management Group, Inc., Georgia Electric Company,
Gerry W. Hall and J. Barry Hall (5)
10.16 Stock Purchase Agreement between Able Telcom Holding Corp.,
Telecommunications Services Group, Inc., Dial Communications,
Inc., William E. Newton and Sybil C. Newton (8)
10.17 Promissory Note of Able Telcom Holding Corp. Payable to
William E. Newton and Sybil C. Newton (8)
10.23 Form of Stock Purchase Agreement among Able Telcom Holding
Corp., Traffic Management Group, Inc., Georgia Electric
Company, Gerry W. Hall and J. Barry Hall (5)
10.25 Securities Purchase Agreements, dated as of January 6, 1998,
between Able Telcom Holding Corp. and each of the Purchasers
named therein (6)
10.25.1 Letter Agreement dated July 2, 1998 related to Securities
Purchase Agreements dated as of January 6, 1998 (13)
10.26 Senior Secured Revolving Credit Agreement dated as of April 6,
1998, between Able Telcom Holding Corp. and Suntrust Bank,
South Florida, N.A. and Bank of America, FSB (9)
10.27 Credit Agreement among Able Telcom Holding Corp., NationsBank,
N.A. and The Several Lenders from Time to Time Parties Hereto
dated as of June 11, 1998 (exhibits and schedules omitted)
(13)
10.30 Employment Agreement with Stacy Jenkins, dated July 16, 1998
(13)
10.32 Amendment to June 11, 1998 Credit Agreement among Able Telcom
Holding Corp. NationsBank N.A., and the Several Lenders from
Time to Time Parties thereto, dated as of June 30, 1998 (13)
10.32.1 Amendment and Amended and Restated Limited Waiver to June 11,
1998 Credit Agreement among Able Telcom Holding Corp.,
NationsBank N.A., and the Several Lenders from Time to Time
Parties thereto, dated as of June 30, 1998 (16)
10.33 Employment Agreement with Billy V Ray, Jr., dated October 1,
1998 (12)
10.35 Financial Advisor and Placement Engagement Letter, dated April
3, 1998, between Washington Equity Partners and Able Telcom
Holding Corp. (14)
10.36 Employment Agreement with G. Vance Cartee, dated January 4,
1999 (12)
10.37 Employment Agreement with Edward Pollock, dated January 1,
1999 (12)
10.38 Employment Agreement with Frazier L. Gaines, dated November
12, 1998 (12)
10.40 Employment Agreement with Rick Boyle, dated April 1, 1998 (12)
10.41 Financing Agreement between Able Telcom Holding Corp. and
Cotton Communications, Inc. dated February 17, 1999 (without
exhibits) (12)
<PAGE>
10.41.1 Termination Agreement between Able Telcom Holding Corp. and
Cotton Communications, Inc. dated March 22, 1999 (14)
10.42 11.5% Non-Recourse Promissory Note between Cotton
Communications, Inc. and Able Telcom Holding Corp. dated
February 17, 1999 (12)
10.43 Stock Pledge Agreement between Able Telcom Holding Corp. and
Cotton Communications, Inc. dated February 17, 1999 (12)
10.44 Employment Agreement with Michael Arp, dated January 1, 1999
(14)
10.45 Consulting Agreement and Employment Agreement with James E.
Brands, dated March 15, 1999 (14)
10.46 Employment Agreement with Michael Summers, dated May 31, 1999.
(17)
11 Computation of Per Share Earnings (7)
16.1 Letter regarding change in certifying accountants (15)
21 Subsidiaries of Able Telcom Holding Corp.
23.1 Consent of Ernst & Young LLP
23.2 Consent of Arthur Andersen LLP
27 Financial Data Schedule
- -------------------
(1) Incorporated by reference from an exhibit to the Company's Current
Report Form 8-K (File No. 0-21986), as filed March 12, 1998, as amended
April 14, 1998.
(2) Incorporated by reference from an exhibit to the Company's Current
Report on Form 8-K (File No. 0-21986), ass filed April 14, 1998.
(3) Incorporated by reference from an exhibit to the Company's Registration
Statement on Form S-1 (File No. 33-65854), as declared effective by the
Commission on February 26, 1994.
(4) Incorporated by reference from an exhibit to the Company's Current
Report on Form 8-K (File No. 0-21986), as filed December 31, 1996.
(5) Incorporated by reference from an exhibit to the Company's Current
Report on Form 8-K (File No. 0-21986), as filed October 25, 1996.
(6) Incorporated by reference from an exhibit to the Company's Annual
Report on Form 10-K (File No. 0-21986) for the fiscal year ended
October 31, 1997, as filed February 13, 1998, as amended March 20,
1998.
(7) Incorporated by reference from Note 5 to the Condensed Consolidated
Financial Statements (Unaudited) filed herewith.
(8) Incorporated by reference from an exhibit to the Company's Current
Report on Form 8-K (File No. 0-21986), as filed December 13, 1996, as
amended February 11, 1997.
(9) Incorporated by reference from an exhibit to the Company's Quarterly
Report on Form 10-Q (File No. 0-21986), for the quarter ended April 30,
1998, as filed June 14, 1998.
(10) Incorporated by reference from an exhibit to the Company's Current
Report on Form 8-K (File No. 0-21986), as filed July 16, 1998.
(11) Incorporated by reference from an exhibit to the Company's Current
Report on Form 8-K (File No. 0-21986), as filed August 3, 1998.
(12) Incorporated by reference from an exhibit to the Company's Annual
Report on Form 10-K (File No. 0-21986), for the fiscal year ended
October 31, 1998, as filed February 24, 1999, as amended March 1, 1999.
(13) Incorporated by reference to an exhibit to the Company's Quarterly
Report on Form 10-Q (File No. 0-21986), for the quarter ended July 31,
1998, as filed September 21, 1998, as amended October 13, 1998.
(14) Incorporated by reference to an exhibit to the Company's Form S-1 (File
No. 333-65991), as filed October 22,1998, as amended April 8, 1999.
(15) Incorporated by reference from an Exhibit to the Company's Current
Report on Form 8-K (File No. 0-21986), as filed September 14, 1998.
(16) Incorporated by reference to an exhibit to the Company's Quarterly
Report on Form 10-Q (File No. 0-21986), for the quarter ended January
31, 1999, as filed March 17, 1999.
(17) Incorporated by reference to an exhibit to the Company's Quarterly
Report on Form 10-Q (File No. 0-21986), for the quarter ended April 30,
1999, as filed June 14, 1999.
EXHIBIT 2.5.14
January 11, 2000
Mr. David S. Myers
Vice President and Controller
MCI WorldCom
500 Clinton Center Drive
Clinton, Mississippi 39056
Re: Able Telcom Holding Corp.: MCI/WorldCom Conversion of Debt to
Equity
Dear Mr. Myers:
This letter will serve to document our agreement of this date regarding
the conversion by WorldCom Network Services, Inc. ("WorldCom") of some or all of
the 11.5% Subordinated Promissory Note (the "Note") of Able Telcom Holding,
Corp. ("Able") dated September 1, 1998 payable to WorldCom into shares of $.001
par value common stock ("Common Stock") of Able.
On January 12, 2000, WorldCom will deliver the Note to Able in exchange
for Able issuing 3,050,000 shares ("WorldCom Shares") of Common Stock to
WorldCom, representing less than 20% of the Common Stock outstanding subsequent
to that issuance. WorldCom will deliver a standard "for investment letter" to
Able.
One certificate for the WorldCom Shares shall be issued and delivered
to WorldCom and such certificate shall bear the following legend:
"These securities have not been registered under the Securities Act of
1933, as amended, or any state's securities laws. These securities may
not be sold, offered for sale, transferred or assigned except pursuant
to an effective registration statement under said Securities Act, any
applicable state securities laws or pursuant to an applicable exemption
from such registration requirements."
<PAGE>
Mr. David S. Myers
January 11, 2000
Page Two
Able agrees that it will cancel the Note upon delivery of the Note to
it and will execute another note in the same form as the Note in the amount of
$4,456, 250 due February 1, 2001. The portion of the Note converted is
determined based upon the January 8, 2000 closing price of Able Common Stock at
$8.375 per share.
Please sign an original and one copy of this letter in the space
indicated below to evidence our agreement. Please return the original to me and
keep the duplicate original copy for your files.
Should you have any questions, please contact me.
ABLE TELCOM HOLDING CORP.
By:_______________________________________
Name: James E. Brands
Title: Executive Vice President
MCI WORLDCOM
By:_______________________________________
Name: David S. Myers
Title: Vice President and Controller
EXHIBIT 2.6
TEAMING AGREEMENT
This TEAMING AGREEMENT (hereinafter "Agreement") is made as of this 7th day of
July, 1999 between 186K.NET, CO., a Florida Corporation, (hereinafter "186K"),
and Able Telecom Holding Corp., Inc., a Florida Corporation, (hereinafter
"Able").
WHEREAS, Able designs, sells, installs and maintains products and services to
customers in the telecommunications industry (hereinafter, "Able Services"); and
WHEREAS, 186K offers data and communications facilities consulting services,
Internet consulting services, systems integration consulting services, Internet
hosting and related services, Microsoft products and solutions, and general
product management services (hereinafter, "186K Services"), which may be used by
Able's customers in connection with Able Services; and
WHEREAS, the above identified parties, because of their unique and complementary
capabilities, have determined that they would benefit from a teaming agreement
in order to develop the best approach to a proposal or proposals in response to
the perceived needs of a customer or in response to a request for proposal.
NOW, THEREFORE, in consideration of the mutual promises herein and other good
and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the Parties agree as follows:
ARTICLE I
GENERAL AGREEMENT
1.1 Able and 186K agree to cooperatively market and sell those services
listed in Attachments A and B, including, without limitation, "City
Wide Networks" and related Able and 186K Services, as deemed
appropriate to specific customers as listed in Attachment C (hereafter
"Identified Customers"). The Parties agree to meet jointly with
Identified Customers to discuss the customers' needs for Able and 186K
Services (collectively, "Services"). Further, the parties agree to work
together to prepare proposals and to sell or provide Services to the
Identified Customers. If joint meetings are not feasible, Able or 186K
will fully brief the other party on the discussions held with
Identified Customers either during an ad hoc conference (which may be
by conference call) or in regularly scheduled meetings established by
the Parties. Further, 186K agrees to enter into a sub-license agreement
with Able with regard to Wavelet-based technology.
1.2 The cooperative marketing of Services will include actions and
activities described in Attachment D - Responsibilities and Areas of
Cooperation. These include roles and responsibilities of the parties,
contact with the customer, preparation of bids and proposals, marketing
and sales activities and customer support.
1.3 Each Party will be solely responsible for pricing of their respective
Services. Current list prices and discount schedules for the Able
Services are set forth in Attachment A and for the 186K Services in
Attachment B. These prices and discount schedules are provided
1
<PAGE>
for informational purposes only and are subject to revision at any
time. Any change in Service features or pricing will be communicated in
writing to the other Party as soon as practical, and Attachments A and
B will be amended accordingly.
1.4 Each party agrees that all prices, terms, warranties and benefits shall
be no less favorable to the other Party than those offered to any other
customer purchasing like quantities, regardless of whether priced as an
entire system or as an individual component of a system.
1.5 Additionally, Able and 186K shall work as strategic business partners
to determine the need for enhancements to the Services and "City Wide
Network" products and to define new "City Wide Network" products that
would be added to the list of Services in Attachments A and B.
1.6 Each Party will furnish the other with the cooperation and assistance
reasonably required, however: each Party, in all instances, will act as
an independent contractor in the performance of this Agreement. Neither
Party shall act as, or be deemed to be, agent for the other Party for
any purpose. Nothing in this Agreement shall be construed to grant
either 186K or Able the right to make commitments of any kind for or on
behalf of the other Party without the prior written consent of the
other Party.
1.7 Each Party will, whenever and wherever possible, make every reasonable
effort to allow the other Party the right of first refusal to
participate at the appropriate stage and level of pending business. In
all cases of wavelet-based technology deployment and "City Wide
Networks" projects the Parties will offer the right of first refusal to
participate, for the products and services contained in this agreement,
to each other.
1.8 Any news release, public announcement, advertisement or publicity
released by either Party concerning this Agreement, any proposals, or
any resulting contracts or subcontracts to be carried out hereunder
will be subject to prior approval of the other Party and where
reasonably practicable the Identified Customer, except that this
Agreement and the terms thereof may be made known to an Identified
Customer. Any such publicity shall give due credit to the contribution
of each Party.
1.9 All Services will be distributed under the logos and trademarks of the
providing Party. During the term of this Agreement, the Parties may
agree to joint use of logos and trademarks, trade names, and other
designations in connection with joint efforts, presentations, trade
show presence, advertisement and promotions of the Services: However,
notwithstanding the foregoing, neither party is granting a license for
the use of their respective Marks in any manner that is not a joint
presentation
1.10 Upon expiration or termination of this Agreement, both Parties will
immediately cease use of all logos and trademarks of the other party
(hereinafter "Marks" ) and neither will thereafter use, advertise or
display the Marks of the other Party, nor any Mark that is similar to
or confusing with any Mark associated with the other Party or the other
Party's Services.
2
<PAGE>
1.11 Either Party may, as required by applicable law and stock exchange or
stock association rules, make disclosures or announcements related to
this Agreement at any time, so long as the Party required to make such
announcement promptly notifies the other Party of such requirement and,
after learning of such requirement, discusses in good faith the exact
wording of such announcement.
ARTICLE II
PAYMENTS
2.1 As an advance to help fund 186K's efforts hereunder, Able shall make
the following payments to 186K: Twenty-Five Thousand Dollars ($25,000)
upon execution of this Agreement, Twenty-Five Thousand Dollars
($25,000) within seven (7) days from the date of this Agreement
Twenty-Five Thousand Dollars (U.S. $25,000) within fourteen (14) days
of the date of this Agreement, and Twenty-Five Thousand Dollars (US
$25,000) within Twenty-One (21) days of the this Agreement (the
"Advance"). Said Advance is to be considered a loan if not repaid under
the provisions of paragraph 2.2 below. If repayment is not complete
within 13 months of the date of the final advance, then Able will have
the option of converting the remaining loan balance into equity at the
then current valuation of 186K.Net,Co.
2.2 Except as expressly provided in this Section 2.2, each party shall be
entitled to receive all revenues generated from sales of its own
product. Without limiting the generality of the foregoing, 186K shall
pay Able fifty percent (50%) of the first revenues from customers
procured for "City Wide Network" products or other sources of revenue
generated from the implementation of this agreement until Able has
received repayment of the Advance.
2.3 Thereafter, 186K shall pay to Able commission payments based upon 3
percent of its gross revenues generated by "City Wide Network"
customers or other business generated by customers contracted by Able
and Able shall pay to 186K commission payments based upon 1.5 percent
of its gross revenues generated by "City Wide Network" customers or
other business generated by customers contracted by 186K.
2.4 Each Party shall grant to the other party a deferred value added share
stock option (the "Deferred Value Added Equity Swap"). The Deferred
Value Added Equity Swap shall not be transferrable except to affiliates
of either Party, and shall become exercisable one (1) year from the
date of this Agreement upon six months notice for a three year period
or immediately upon the sale, lease, or pledge of substantially all of
the granting Party's assets other than in the ordinary course of
business.
2.5 Either Party may exercise its Deferred Value Added Equity Swap by
providing the other Party with written notice pursuant to Section 4.2
hereof (the "Exercise Notice"). The Deferred Value Added Equity Swap
shall be paid in shares of common stock to the exercising party within
fifteen (15) days of the determination of its Fair Market Value
pursuant to Section 2.7 hereof.
3
<PAGE>
2.6 The value of the amount of Able stock 186K shall receive pursuant to
the Deferred Value Added Equity Swap shall be determined by taking ten
percent (10%) of the Fair Market Value (as defined in Section 2.8) as
it applies to Able on the date of execution of this agreement and
comparing it to the Fair Market Value (as defined in Section 2.8) of
Able on the date of exercise. The increase in the Fair Market Value of
Able, if any, will then be compared to the increase of the Fair Market
Value of 186K (as described in Section 2.7) and the lower of the two
will be the "Deferred Value." The "Deferred Value" will be divided by
the moving average of the stock price of Able for the ten (10) business
days immediately prior to the valuation date (as described in Section
2.8) to determine the number of shares to be issued.
2.7 The value of the amount of 186K stock Able shall receive pursuant to
the Deferred Value Added Equity Swap shall be determined by taking ten
percent (10%) the Fair Market Value (as defined in Section 2.8) as it
applies to 186K on the date of execution of this agreement and
comparing it to the Fair Market Value (as defined in Section 2.8) of
186K on the date of exercise. The increase in the Fair Market Value of
186K, if any, will then be compared to the increase of the Fair Market
Value of Able and the lower of the two will be the "Deferred Value."
The Fair Market Value of 186K at the Valuation Date will then be
divided by the total outstanding shares of 186K to determine a per
share value. This per share value will be divided in to the "Deferred
Value" to determine the number of shares of 186K to be issued to Able.
In no event shall ten percent (10%) of the current Fair Market Value of
186K at the date of execution be valued at less than two million five
hundred thousand Dollars ($2,500,000.00). See attachment J for
examples.
2.8 If the common stock of any Party is publicly traded, "Fair Market
Value" shall mean the market capitalization of such Party determined by
the moving average of the market price for such Party's common stock,
as quoted on the New York Stock Exchange, NASDAQ Exchange, OTC Bulletin
Board or similar exchange for the ten (10) business days immediately
prior to the Valuation Date multiplied by the number of shares of its
common stock issued and outstanding on the variation date. If the
common stock of any Party is not publicly traded, "Fair Market Value"
shall be determined by the following method: Raymond James &
Associates, Inc. (or a similar mutually agreed upon financial
institution) shall be the agreed upon appraiser; and the appraiser
shall determine the Fair Market Value as of the Valuation Date of ten
percent (10%) of the issued and outstanding shares of common stock of
the Parties as the deferred Value Added Equity Swap will be limited to
the lesser of the appreciation amounts.
ARTICLE III
RELATIONSHIP OF THE PARTIES
3.1 Each Party shall designate, in writing, one or more individuals within
its own organization to act as its representative(s), responsible to
direct performance of that Party's functions pursuant to this
Agreement. Each of the Parties agrees to identify a primary point of
contact for the transfer of marketing information, management of bids
and proposals, providing sales support and supporting resolution of
customer problems.
4
<PAGE>
When a potential customer for Services is identified by one Party, the
primary points of contact will coordinate the efforts and joint sales
calls of both Parties.
3.2 Meetings will be held on a schedule mutually agreeable to the Parties
where the Parties will review outstanding sales proposals and market
developments, further define customer needs, identify potential future
customers, or discuss other such items as either Party may wish to
discuss, consistent with the terms of this Agreement. These meetings
will be held at times and places that will not unduly disadvantage
either Party.
3.3 Both Parties agree that, when a specific customer and project is
identified to be addressed under this Agreement, one of the Parties
will take the lead as prime contractor and the other Party becomes a
subcontractor. The responsibilities of the Parties as either prime and
subcontractor are defined in Attachment D.
3.4 Each Party shall designate a sufficient number of employees who shall
be available, with reasonable notice, for joint meetings with
Identified Customers, proposal preparation, and participation in
discussions or negotiations, as deemed appropriate under this
agreement.
3.5 The standard terms and conditions for the sale of Able and 186K
Services are listed in Attachment G and H, respectively, for
informational purposes. These standard terms and conditions are subject
to modification for a given project, by mutual agreement. Requests for
modifications to the standard terms and conditions for a specific
project must be made at the time of the request for pricing, with such
modifications to be included in amended Attachment C - List of
Identified Customers and Projects. Delivery of standard Services
scheduled under this Agreement may be deferred or canceled, for any
given project, subject to the provisions and charges specified in
Attachments G and H.
3.6 The Parties may also team together to demonstrate their Services at
mutually agreed-upon trade shows, user group meetings and other
appropriate conferences and seminars. Each Party will be responsible
for the sale of its Services, including pricing, ordering, post-sales
support and warranty. However, it is the intent of both companies to
provide the customer with a quality solution and comprehensive customer
support.
3.7 In the event that 186K and Able decide to work together on new product
or Service development, the roles and responsibilities of the Parties
with regard to such product or Service development and migration paths
will be agreed to in a Statement of Joint Research and Development
Effort (hereafter "R&D effort") which, when completed, will be
incorporated hereto as Attachment I. This statement will define the
roles and responsibilities of the Partners with respect to the R&D
effort, provide a schedule for the developments and specify ownership
of intellectual property rights.
3.8 Any exchange of data or other confidential or proprietary information
and/or the disclosure of intellectual property related to any R&D
effort is to be governed by the rules established in Attachment F -
Intellectual Property which shall be executed by authorized
representatives of both 186K and Able.
5
<PAGE>
ARTICLE IV
OTHER TERMS AND CONDITIONS
4.1 This Agreement shall commence on the date this instrument is fully
executed and remain in force for three years from the effective date
set forth above, and shall automatically renew for additional one year
terms until terminated by either Party. Such termination shall be
effective after the Party seeking to terminate provides one hundred
eighty (180) days written notice to the other Party. Each Party shall
be responsible for completing any orders accepted prior to such
termination.
4.2 All notices, certificates, acknowledgments and other reports hereunder,
shall be in writing and shall be deemed properly delivered when mailed
by registered letter to the other Party at its address as follows or to
such other address as either Party may, by written notice, designate to
the other:
(a) If to 186K:
186K
T Lee Aloisio, C.E.O.
186K.Net, Co.
6401 North Congress Avenue, Suite 200
Boca Raton, FL 33487
(561) 988-2021
(561) 988-0234 (telefax)
[email protected] (e-mail)
Copy to:
Michael G. Platner, Esq.
Gunster, Yoakley, Valdes-Fauli & Stewart, P.A.
500 E. Broward Blvd., 14th Floor
Ft. Lauderdale, FL 33394
(954) 468-1373
(954) 523-1722 (telefax)
(b) To Able Telecom Holding Corp.Inc.
1601 Forum Place
West Palm Beach, FL 33401
Copy to:
____________________________
____________________________
4.3 This Agreement shall not be amended or modified, nor shall any waiver
or any right hereunder be effective unless set forth in a document
executed by duly authorized representatives of both 186K and Able. The
failure of any Party to enforce any term of this agreement which is
breeched by the other Party shall not be deemed to be a waiver of
6
<PAGE>
such term, covenant or condition or any subsequent breach of the same
or any other term, covenant or condition herein contained.
4.4 This Agreement may not be assigned or otherwise transferred by either
Party, in whole or in part, without the express prior written consent
of the other Party. The foregoing shall not apply in the event that
either Party shall change its name or merge with another corporation.
4.5 Each Party shall indemnify the other for damages incurred as a result
of, or arising out of that Party's acts or omissions in carrying out or
failing to carry out this Agreement.
4.6 Except to the extent that damages arise from the breach of this
Agreement, any costs or expenses incurred by either Party in connection
with this Agreement, or its implementation, shall be borne by each
Party separately and individually, and neither Party shall be liable or
obligated to the other for any such cost or expense.
4.7 Notwithstanding any other provision of this Agreement, neither Party
shall be liable for any incidental, indirect, special or consequential
damages incurred by the other Party, including the loss of revenues or
profits, that arises out of or in connection with this Agreement,
regardless of whether such damages result from an action or breach of
contract, tort or strict liability, and regardless of whether such
damages were foreseeable.
4.8 Either Party may at any time make announcements required by applicable
law and stock exchange or stock association rules so long as the Party
required to make such announcement, promptly after learning of such
requirement, notifies the other Party of such requirement and discusses
in good faith the exact wording of any such announcement.
4.9 Should a dispute arise between the Parties' personnel working on a
proposal, every effort will be made to resolve the dispute by the same
personnel. When such resolution cannot be achieved, the dispute will be
referred to the next level manager. If these managers cannot achieve
resolution, the parties agree that they will seek a customer
representative associated with the project to decide the dispute.
4.10 This Agreement shall be governed and construed under the laws of the
state of Florida.
4.11 If any part, term or provision of this Agreement shall be held void,
illegal, unenforceable, or in conflict with any law of a federal, state
or local government having jurisdiction over this Agreement, the
validity of the remaining portions or provisions shall not be affected
thereby and the Parties will immediately begin negotiations for a
replacement for such part, term or provision.
4.12 This Agreement contains all the agreements, representations and
understandings of the Parties hereto and supersedes and replaces any
and all previous understandings, proposals, commitments or agreements,
oral or written, related to a teaming agreement
7
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for proposals or contracts for the sale or provision of Services to
Identified Customers prior to the establishment of this Teaming
Agreement between the Parties.
4.13 Any dispute which would be actionable in a court of law or equity with
proper jurisdiction relating to or arising from the terms,
interpretation or performance of this agreement (other than claims for
preliminary injunctive relief or other prejudgement remedies) will be
resolved at the request of either party through binding arbitration.
Arbitration shall be conducted in Palm Beach County, FL under the rules
and procedures of the American Arbitration Association (AAA) in
accordance with Commercial Arbitration Rules. The parties shall require
that the AAA appoint a panel of three arbitrators and, if feasible,
include one arbitrator who possesses knowledge of the subject matter of
this agreement; however, the arbitration shall proceed even if the
person is unavailable. The arbitration shall proceed to award even if
one party fails to participate. The prevailing party shall be entitled
to recover all reasonable costs and attorney fees. The award shall be
the exclusive remedy of the parties and shall be enforceable in any
court of competent jurisdiction.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on the date
herein indicated.
Able Telecom Holding Corp., Inc. 186K.Net Co.
By: /S/ BILLY V. RAY, JR. By: /S/ T. LEE ALOISIO
--------------------- ------------------
Name: Billy V. Ray, Jr. Name: T. Lee Aloisio
Title: CEO & President Title: CEO
Date: 7-7-99 Date: 7-7-99
8
<PAGE>
ATTACHMENT A
ABLE PRODUCTS AND PRICES
Bid Price To Be Determined By Market:
Smart Cities
9
<PAGE>
ATTACHMENT B
186K PRODUCTS AND PRICES
Shared -
Shared servers are divided into three groups providing the customer reliability
and the ability to choose commerce functionality, database requirements,
features, memberships, personalization, and the amount of customers per server.
Server limitation will range from 175 to 10 users per server. Monthly fee range
is from $24.95 to $1,500.00.
Dedicated -
Dedicated Servers will provide customers with specialized offerings similar to
the shared servers with added benefits of dedicated bandwidth, commerce and
higher reliability requirements.
Clustered -
The company offers a range of clustered hosting solutions for customers with
applications that require high application availability or high traffic
performance. 186K's clustered solutions are based on industry leading hardware
and software from Compaq, Cisco and Fore Systems and are complimented with
186K's managed services and high performance content delivery.
Co-location Services -
Co-location provides businesses the opportunity to locate their services at the
186K.NET facility with the benefits of security, management and atmosphere
control. This service is the most efficient and fastest connectivity to the
Internet. It also allows businesses to lease equipment and consequently enter
the market at a lower cost. Carriers do not allow co-location options to any
business without the technical staff and financial backing to support their
location. This service, levels the playing field so that small businesses can
compete with larger companies. Monthly fees start at $250.00 per month to
$850.00 per month for a full rack. Leasing cost is dependent on equipment.
Application Outsourcing -
At this time, The Company has identified one product and will begin deploying to
software companies in the rental applications market. The company anticipates
opportunities with Microsoft's Back Office and Windows 2000 to enhance this
service.
Microsoft Commercial Internet System (MCIS)
Web Development
10
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ATTACHMENT C
LIST OF IDENTIFIED CUSTOMERS AND PROJECTS
Note: This attachment is to be amended to identify any new customers and to
define their specific projects that will be addressed jointly under
this agreement. Information to be included: Customer, project, and any
special or unique terms and conditions for a given project.
11
<PAGE>
ATTACHMENT D
RESPONSIBILITIES AND AREAS OF COOPERATION
1. It shall be the responsibility of both Parties to:
a. maintain interoperability of the Services;
b. distribute a letter to sales teams outlining the nature of the
co-marketing agreement, and to provide Product, application
and sales information that positions the Capabilities and
Services;
c. provide a list of contacts for sales activity, as well as
information on marketing, pricing and other available sales
support activities;
d. identify customers to be addressed jointly, and to agree which
Party will be the prime and which will be the subcontractor on
a given project;
e. employ a sufficient number of experienced sales and technical
personnel to respond in a prompt and professional manner to
all requests for customer presentations, to perform the
product planning, marketing, business product management and
development efforts necessary to carry out its
responsibilities under this Agreement;
f. make available a sufficient number of employees who have the
requisite skills and knowledge provide an appropriate supply
of glossy sales literature, PowerPoint files, etc. for use by
the partner company, and to establish procedures for
replenishing supplies;
g. develop processes and channels for notifying sales force of
new features, enhancements, price changes, etc.;
h. the shares information and jointly develop all RFPs, RFQs and
RFIs associated with "City Wide Network" products and
applications;
i. share information on the credit rating of an identified
customer;
j. after the Parties have submitted a proposal to an Identified
Customer for a particular project, neither Party shall submit
other competing bids on the same project, without alerting the
other Party early in the bidding process, nor communicate any
additional or different price information to the Identified
Customer without informing the other;
k. share feedback from the customer regarding submitted
proposals;
l. when a contract is awarded to the prime contractor,
immediately commence good faith negotiation of a subcontract
subject to the requirements of the contract with the customer,
applicable laws and regulations, and consistent with the terms
of this Agreement;
m. provide technical support for the Parties' own hardware and
software, as required by either the contract with the
Identified Customer, and consistent with the established
support policies of each of the Parties or as defined jointly
by the Parties on a project by project basis and incorporated,
by amendment to Attachment C - List of Identified Customers
and Projects.
2. Further, it shall be the responsibility of the prime contractor to:
a. amend Attachment C - List of Identified Customers and Projects
to reflect the addition of a new Identified Customer and
define the specific project;
12
<PAGE>
b. manage all contacts with the Identified Customer with respect
to joint proposals or the sale of Services;
c. negotiate any contracts with the Identified Customers;
d. provide the subcontractor with all information concerning
major discussions, negotiations and changes in the Identified
Customer's requirements that are pertinent to the
subcontractor's portion of the proposal to an Identified
Customer;
e. reserve the right to withhold what it considers sensitive
material from subcontractor which is not directly related to
subcontractor's Services;
f. use its best efforts to persuade the Identified Customer to
provide the subcontractor with an opportunity to be present at
contract negotiation meetings which may concern the
subcontractor's portion of the proposal;
g. prepare and present proposals to the Customer, with support
from the subcontractor, as appropriate;
h. include the subcontractor's price and other data and
information in its proposal, and to coordinate with the
subcontractor in drafting the portion of the proposal relating
to the subcontractor's Services and activities under the
proposal;
i. adjust any price within the price range provided by the
subcontractor without specific approval of the subcontractor;
j determine the final contents of the proposal to be submitted
to an Identified Customer subject to the provisions of this
Agreement, but agrees to review, with subcontractor prior to
the submission of proposal, all matters, including price and
the portion of the proposal to be performed by the
subcontractor;
k. ensure that any Proprietary Information and other Intellectual
Property contained in the final proposal will be included in
compliance with the conditions provided in Attachment F;
l. be solely responsible for any changes to the subcontractor's
portion of the proposal which are made without the
subcontractor's concurrence;
m. reserve the right to not bid the subcontractor's Services if
the subcontractor is unwilling or unable to provide the
Services or related support;
n. transmit to the subcontractor a copy of the final proposal
submitted to the Customer at the time of submission;
o. advise the subcontractor of the estimated probability of a
contract award; and
p. to use its best efforts to secure approval of the subcontract
by an Identified Customer, in the event such approval is
necessary.
3. In addition, it shall be the responsibility of the subcontractor to:
a. attend bidders' conferences with the prime contractor, as
deemed necessary by mutual agreement of the Parties;
b. accept referrals made by the prime contractor and confirm
acceptance of the referral to the prime contractor within five
(5) business days;
c. provide access to and assistance in using the subcontractor's
demonstration sites for customer presentations, on a mutually
agreed schedule;
d. prepare the initial version of its portion of a proposal that
includes the subcontractor's equipment or services;
13
<PAGE>
e. provide such other assistance as the prime contractor may
reasonably request in preparation of the proposal, including
but not limited to, system engineering related to the design
of a specific system solution for the Identified Customer;
f. review and approve, in a timely manner, any contractual terms
and conditions that affect subcontractor's portion of the
proposal;
g. contact the Identified Customer directly only with the full
knowledge and prior concurrence of the prime contractor;
h. upon contract award, negotiate a subcontract, in good faith,
that includes, among other appropriate provisions, those terms
and conditions that the subcontractor agreed to at the time of
the proposal or thereafter, the specific Services to be
provided and work to be performed by the subcontractor;
i. execute sales and, when applicable, maintenance and other
support agreements directly with the Identified Customer for
each successful sale of the subcontractor's Services in
accordance with then current standard agreements or specific
agreements made pursuant to the specific project;
j. ship such hardware or software to be sold or licensed, as
appropriate, to the Identified Customer, and in the case of
software, provide the license for such software to the
Identified Customer;
k. provide all resources required for installation, including
project management, technical support, warranty service and
post-warranty maintenance service for the subcontractor's
Services in accordance with the subcontractor's then-current
standard agreements or specific agreements made pursuant to
the specific project;
l. provide sufficient training to the prime contractor's support
resources, should the prime contractor be requested to provide
support for the subcontractor's Services in certain customer
projects;
m. to sell or license to the prime contractor, as appropriate,
its hardware, software, or services included in a proposal to
a Customer, according to the terms agreed to by the Parties in
the joint proposal or thereafter;
n. to maintain such drawings, documentation, source code and
tools as reasonably deemed necessary to support or maintain
the subcontractor's hardware or software;
o. to perform in accordance with the subcontract and this
Agreement, and if the subcontractor is unwilling or unable to
provide support or maintain its hardware or software for any
period under the terms of the subcontract, to license, without
cost to the prime contractor, any drawings, documentation,
source code and tools that will enable the prime contractor,
or a third Party, to provide the requisite support or
maintenance services to Identified Customers, with the terms
of such license to be incorporated in revisions to the
subcontract;
p. provide the prime contractor with all reports required by this
Agreement and perform all other obligations required of the
subcontractor by this Agreement.
4. Other areas of cooperation that may be implemented, on a best effort
basis by the Parties, to support this Teaming Agreement include, but
are not limited to the following:
a. Trade Shows & Conferences:
(i) Identify mutual interest in trade shows/conferences
and devise ways to leverage demonstrations, presence
& footprint(s);
14
<PAGE>
(ii) Team together to jointly demonstrate the Capabilities
and the Offer at mutually agreed upon trade shows,
user group meetings and other appropriate conferences
and seminars.
b. Training:
(i) Develop opportunities to acquaint product, market and
sales managers with the Services and capabilities of
the pertinent Product offerings;
(ii) Develop ordering processes and acquaint market and
sales managers with it's use.
c. Web Pages and Links:
(i) Build links to the partner's internet home pages to
facilitate public and/or internal access to company
and Product information;
(ii) Provide appropriate access to the partner's intranet
to facilitate and support joint bids, proposals and
contracts.
d. Tools for the Sales Force and Market Managers:
(i) Develop canned presentations, application guides,
configurators, etc. and make available in electronic
or hard copy format;
(ii) Develop a user friendly way to provide updated
Product information to the field; (iii) Generate
information targeting specific identified customers;
(iv) Develop process for support and tracking of
bids, possibly using Web Pages; (v) Define ordering
processes, billing status and problem resolution, and
explore mechanization;
(vi) Develop a process for making demo equipment available
to Identified Customers, as appropriate;
(vii) Explore joint postmortem analysis of bids to improve
success ratio.
e. Coordination of Product Planning, Market Research and Customer
Feedback: Establish periodic review sessions with product and
market managers to coordinate product and market strategies,
15
<PAGE>
ATTACHMENT E
RESEARCH & DEVELOPMENT
In the event that 186K and Able decide to work together on the development of a
specific new Service or Services, the roles and responsibilities of the Parties
with regard to such development and migration paths will be agreed to in a
STATEMENT OF JOINT RESEARCH AND DEVELOPMENT EFFORT which, when completed, will
be appended to this Agreement as Attachment I.
The Parties shall include in Attachment I a detailed description of the
resources to be provided by each Party to achieve the objectives and goals of
the project, including information and human resources, materials, equipment and
services. Attachment I shall also include schedules for furnishing such
resources, mutually agreed-upon milestones and the dates of critical events and
shall make provision for cancellation costs, if applicable.
The ownership of each Product or service jointly developed shall be defined for
each item in Attachment I, with such definition to include ownership of the
Product or Service. The normal development output of each Party not requiring
additional resources of the other Party and which pertains to the integration
and/or enhancement of such Party's Services shall remain the property of such
Party and shall not be the property of the other Party. Such property shall
include, but not be limited to, copyrights, patents and other intellectual
property rights.
In this regard, it is recognized and agreed that the Parties shall grant
licenses or other rights to an Identified Customer to inventions, data and
information under provisions which may be contained in the prime contract;
provided, however, that such license or other rights shall not exceed those
required by said prime contract, unless otherwise agreed upon by both Parties.
16
<PAGE>
ATTACHMENT F
INTELLECTUAL PROPERTY
1. During the term of this Agreement, the Parties, to the extent of their
right to do so, and as is required for each to perform its obligations
hereunder, may exchange proprietary and confidential information with
each other and, if both Parties agree, with Identified Customers. Any
information, other than proprietary or confidential information
identified, as provided herein, shall not be restricted by either Party
as to the other Party's use thereof.
2. Proprietary and confidential information is defined as, but not limited
to pricing, performance, sales, financial, contractual, and special
marketing information, ideas, technical data, engineering, network
designs, and concepts originated by the disclosing Party, not
previously published or otherwise disclosed to the general public, not
previously available to the receiving Party or others without
restriction, and which the disclosing Party indicates a desire to
protect against unrestricted disclosure or competitive use, and which
is furnished pursuant to this Agreement and appropriately identified as
being proprietary or confidential when furnished.
3. Neither Party shall divulge, duplicate or use, proprietary and
confidential information ("Information") for any purpose not connected
with preparation of a proposal by the Parties and the eventual sale or
provision of Services pursuant to such a proposal, but instead shall
hold in confidence any Information disclosed to it by the other Party
in connection with the performance of this Agreement, and marked with a
proprietary or confidential legend.
4. Neither Party shall reverse compile or reverse engineer the other
Party's software.
5. The Parties each will designate in writing one or more individuals
within their own organization as the only person(s) for receiving
Information exchanged between the Parties pursuant to this Agreement.
6. All Information provided to the other Party will be in writing, clearly
identified as proprietary or confidential, and addressed to the
individual designated to receive Information. In the event that it
becomes necessary to orally disclose Information, the disclosing Party
shall indicate at the time of disclosure that such Information is
proprietary and will summarize such Information in writing within
fifteen (15) days and submit the summary to the receiving Party. The
receiving Party shall protect both the orally disclosed Information and
the written summary of such Information.
7. No license is either granted or implied by the conveying of Information
to a Party. None of the Information which may be submitted or exchanged
by the Parties shall constitute any representation, warranty,
assurance, guarantee or inducement by either Party to the other with
respect to the infringement of trademarks, patents, copyrights or other
intellectual property right or any right of privacy, or other rights of
third persons.
17
<PAGE>
8. All Intellectual property rights, including copyrights, patents and
other intellectual property, shall remain the property of the
originating Party, and all Services will be distributed under the logos
and trademarks of the manufacturing company. During the term of this
Agreement, the Parties may agree to joint use of logos and trademarks,
trade names, and other designations (hereinafter "Marks") in connection
with joint efforts, presentations, trade show presence, advertisement
and promotions of each Party's Services. However, notwithstanding the
foregoing, neither party is granting the other party a license to use
their respective Marks in any manner that is not a joint presentation.
9. Upon expiration or termination of this Agreement, both Parties will
immediately cease use of all Marks of the other Party and neither will
thereafter use, advertise or display the Marks of the other Party, nor
any Mark that is similar to or confusing with any Mark associated with
the other Party or Services.
10. If either Party develops hardware or software that incorporates a
feature, functionality or information that is the same or equivalent to
that disclosed by the other Party pursuant to a confidentiality
obligation, then the Party developing such hardware or software shall
have the burden of demonstrating that it has not misused the other
Party's proprietary information.
11. Each Party is authorized to incorporate Information in proposals
contemplated by this Agreement for submittal to Identified Customers,
provided that both Parties have agreed to do so and the Identified
Customer has agreed in writing to keep the Information in confidence.
12. Information which is exchanged may be used by the receiving Party only
in connection with a proposal or in the performance of any contract
award thereunder.
13. In the event a Party to whom Information has been disclosed proposes to
disclose such to an unaffiliated consultant, agent or third Party, it
shall obtain the written consent of the disclosing Party and arrange
for the execution by the consultant, agent or third Party of a
nondisclosure agreement in a form satisfactory to the disclosing Party.
14. Handling of Information, as set forth in this Agreement, is not
applicable to the following:
(a) Information which becomes lawfully known or available to the
receiving Party from a source other than the disclosing Party,
including the Customer, and without breach of this Agreement
by the recipient.
(b) Information developed independently by the receiving Party
without access to Information of the other Party.
(c) Information which is within, or later falls within, the public
domain without breach of this Agreement by the recipient.
(d) Information publicly disclosed with the prior written approval
of the other Party, or
(e) Information disclosed by the Party providing the same to
others on a non-restricted basis.
18
<PAGE>
15. If during the term of the Agreement, or any resulting subcontract,
copyrightable work patentable inventions result, the following shall
apply:
(a) No license, expressed or implied, shall inure to the other
participating Party as a result of any copyrightable work, or
a patent being granted to one of the Parties for inventions,
created exclusively by its employees.
(b) Rights to file patent applications, and rights in, and
reporting of, subject copyrights, inventions, applications and
patents issued thereon in all countries shall be exclusive to
the Party whose employee(s) created such invention exclusive
of the employees of the other Party.
(c) In the case of joint inventions or copyrightable works, that
is inventions or works made jointly by at least one employee
of each Party hereto, each Party shall have an equal undivided
one-half interest in and to such joint inventions and works,
as well as in and to copyright applications,copyrights
thereon, patent applications and patents thereon in all
countries, subject to the provisionshereof and to the rights
conveyed to the Customer, if any, under the prime contract or
the subcontract. Neither Party shall be required to account to
the other Party for any income received by reason of such
joint invention.
(d) In the case of joint inventions and , the Parties shall agree
as to which will have the first right of selection to file
patent and/or copyright applications in any country in its
area of endeavor. Each Party in turn shall make its election
to file an application for the joint invention or work in a
country of its choosing, notifying the other Party of its
decision at the earliest practicable time. Income derived from
a specific patent or copyrightable work shall be the property
of the Party holding the patent or copyright in that country.
(e) The expense for preparing, filing, and prosecuting each joint
application and for issue of the respective patent or
copyright shall be borne by the Party which prepares and files
the application as will any taxes or annuities that may be
levied on a pending or issued patent or copyright. The other
Party shall furnish the filing Party with all documents or
other assistance that may be necessary for the filing and
prosecution of each application.
16. Nothing herein shall restrict either Party from disclosing any portion
of such Information, on a restricted basis, pursuant to a judicial or
other lawful order, but only to the extent of such order; provided,
however, the receiving Party shall immediately notify the disclosing
Party of such judicial or other lawful order and assist the disclosing
Party in its efforts to obtain a protective order or confidential
treatment.
19
<PAGE>
17. The obligations of nondisclosure and non-use of Information imposed in
the preceding paragraphs shall be perpetual unless and until the
Information becomes publicly available through any means other than a
violation of the non-disclosing party of its obligations hereunder.
Upon termination or cancellation of this Agreement, the Parties agree
to immediately return or destroy all proprietary or confidential
information in their possession.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on the date
herein indicated.
Able Telecom Holding Corp., Inc. 186K.Net Co.
By: /S/ EDWARD Z. POLLOCK By: /S/ DAN KOURY
------------------------ ------------------
Name: Edward Z. Pollock Name: Dan Koury
Title: General Counsel Title: President
(Date) July 7, 1999 (Date) 7-7-99
20
<PAGE>
ATTACHMENT G
ABLE'S STANDARD PAYMENT TERMS AND CONDITIONS
21
<PAGE>
ATTACHMENT H
186K'S STANDARD PAYMENT TERMS AND CONDITIONS
Invoicing Monthly with net 30.
Development costs are collected at target completion points.
20% Deposit collected on consulting and engineer projects.
Product and Hosting pricing are collected in advance of deliverables and
products may have a restocking fees paid directly to third parties.
22
<PAGE>
ATTACHMENT I
STATEMENT OF JOINT R&D EFFORT
23
<PAGE>
ATTACHMENT J
STATEMENT OF JOINT R&D EFFORT
186K/ABLE DEFERRED VALUE ADDED EQUITY SWAP
INCREMENTAL ANALYSIS
Base Value for Calculating Increases
Able ######
186K 25,000,000
Market Cap Increase Participation
Able 10%
186K 10%
Limitation
Lesser of appreciation amount for Able or for 186K at time of exercise
RESULTANT AMOUNTS
ABLE PERFORMANCE 186K PERFORMANCE
---------------- ----------------
MARKET CAP DEFERRED VALUE TO MARKET CAP DEFERRED VALUE TO
INCREASE 186K INCREASE ABLE
-------- ---- -------- ----
10% 2,500,000 10% 250,000
20% 2,500,000 20% 500,000
30% 3,000,000 30% 750,000
40% 4,000,000 40% 1,000,000
50% 5,000,000 50% 1,250,000
60% 6,000,000 60% 1,500,000
70% 7,000,000 70% 1,750,000
80% 8,000,000 80% 2,000,000
90% 9,000,000 90% 2,250,000
100% 10,000,000 100% 2,500,000
24
EXHIBIT 2.7
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
ABLE TELCOM HOLDING CORP.,
SES ACQUISITION CORP.,
SPECIALTY ELECTRONIC SYSTEMS, INC.
AND THE SHAREHOLDERS
Dated as of November 5, 1999
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I DEFINITIONS..................................................2
ARTICLE II THE MERGER...................................................6
SECTION 2.1 The Merger...................................................6
SECTION 2.2 Effective Time...............................................6
SECTION 2.3 Effects of the Merger........................................6
SECTION 2.4 Articles of Incorporation and Bylaws.........................6
SECTION 2.5 Directors and Officers.......................................6
SECTION 2.6 Conversion of Securities.....................................7
ARTICLE III CLOSING .....................................................7
SECTION 3.1 Location, Date...............................................7
SECTION 3.2 Deliveries...................................................7
ARTICLE IV SHAREHOLDER APPROVAL; DISSENTING SHARES;
EXCHANGE OF CERTIFICATES.....................................8
SECTION 4.1 Shareholder Approval.........................................8
SECTION 4.2 Dissenting Shares............................................8
SECTION 4.3 Exchange of Certificates.....................................8
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE SHAREHOLDERS.........................................9
SECTION 5.1 Organization, Standing, Qualification and Capitalization.....9
SECTION 5.2 Subsidiaries of the Company.................................10
SECTION 5.3 Financial Statements........................................10
SECTION 5.4 Properties and Permits......................................10
SECTION 5.5 Taxes.......................................................11
SECTION 5.6 Litigation and Labor Matters................................12
SECTION 5.7 Insurance...................................................12
SECTION 5.8 Intellectual Property Rights................................13
SECTION 5.9 Contracts and Commitments...................................14
SECTION 5.10 Absence of Undisclosed Liabilities..........................15
SECTION 5.11 Absence of Default..........................................15
SECTION 5.12 Existing Condition..........................................15
SECTION 5.13 Restrictions................................................15
SECTION 5.14 Employee Benefits...........................................16
SECTION 5.15 Bank Accounts and Directors and Officers....................18
SECTION 5.16 Compliance with Laws and Instruments........................18
SECTION 5.17 Environmental Compliance....................................18
SECTION 5.18 Non-Competition Agreements..................................19
SECTION 5.19 Change of Control Provisions................................20
SECTION 5.20 Validity of Merger Transactions.............................20
SECTION 5.21 Licenses....................................................20
i
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SECTION 5.22 Brokers.....................................................20
SECTION 5.23 Year 2000 Compliance........................................20
SECTION 5.24 Disclosure..................................................21
SECTION 5.25 Investment Representations..................................21
SECTION 5.26 Earn-Out Consideration......................................21
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF ABLE AND SUBSIDIARY ......21
SECTION 6.1 Organization, Good Standing and Authority...................21
SECTION 6.2 Validity of Merger Transactions.............................22
SECTION 6.3 Litigation..................................................22
SECTION 6.4 Brokers.....................................................22
ARTICLE VII ............................................................22
ARTICLE VIII INDEMNIFICATION.............................................22
SECTION 8.1 Indemnification.............................................22
ARTICLE IX CONDITIONS TO CONSUMMATION OF THE MERGER....................25
SECTION 9.1 Conditions to Each Party's Obligation to Effect the Merger..25
SECTION 9.2 Conditions to the Shareholders' Obligations to Effect
the Merger..................................................25
SECTION 9.3 Conditions to Able's and Sub's Obligation to Effect
the Merger..................................................26
ARTICLE X TERMINATION, AMENDMENT AND WAIVER...........................26
SECTION 10.1 Termination.................................................26
SECTION 10.2 Effect of Termination.......................................27
SECTION 10.3 Fees and Expenses...........................................27
SECTION 10.4 Amendment...................................................27
SECTION 10.5 Waiver......................................................27
ARTICLE XI GENERAL PROVISIONS..........................................28
SECTION 11.1 Survival of Representations, Warranties and Covenants.......28
SECTION 11.2 Notices.....................................................28
SECTION 11.4 Severability................................................29
SECTION 11.5 Entire Agreement............................................29
SECTION 11.6 Assignment..................................................29
SECTION 11.7 Headings and Gender.........................................29
SECTION 11.8 Governing Law...............................................29
SECTION 11.9 Counterparts................................................29
ii
<PAGE>
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") is made and
entered into as of November 5, 1999 by and among Able Telcom Holding Corp., a
Florida corporation ("ABLE"), SES Acquisition Corp., a Florida corporation
("SUB"), Specialty Electronic Systems, Inc., a Delaware corporation (the
"COMPANY"), Southern Aluminum and Steel Corporation, a Florida corporation, and
C. Michael Hoover (each individually, a "SHAREHOLDER"; collectively, the
"SHAREHOLDERS"), Donald G. Garner and Jesse R. Joyner.
RECITALS
This Agreement sets forth the terms and conditions under which Sub will
merge with and into the Company (the "MERGER"). In connection therewith, Sub
will be the Surviving Company of the Merger (the "SURVIVING COMPANY") and shall
become a wholly-owned subsidiary of Able. The Shareholders shall receive shares
of common stock, no par value per share, of Able (the "ABLE COMMON STOCK") in
connection with the Merger in accordance with the provisions set forth herein.
NOW THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, Able, Sub, the Company and the Shareholders hereby agree as follows:
ARTICLE I
DEFINITIONS
Capitalized terms shall have the meanings provided below or as
parenthetically in this Agreement:
"ABLE COMMON STOCK" has the meaning set forth in the Recitals of this
Agreement.
"ANNUALIZED TOTAL" means the total of the Sales Payment and the Profit
Payment earned for the portion of Year Two, Year Three or Year Four, as
applicable (the year of termination), annualized for the full year.
"BREACH" means any inaccuracy in or breach of, or any failure to
perform or comply with a representation, warranty, covenant, obligation or other
provision of this Agreement or any Related Agreement.
"CERTIFICATE OF MERGER" has the meaning set forth in Section 2.2
hereof.
"CLAIM" has the meaning set forth in Section 8.1(c) hereof.
"CLOSING" has the meaning set forth in Section 3.1 hereof.
"CLOSING DATE" has the meaning set forth in Section 3.1 hereof.
"CODE" has the meaning set forth in Section 5.14(b) hereof.
2
<PAGE>
"COMPANY" has the meaning set forth in the preamble of this Agreement.
"COMPANY COMMON STOCK" means the common stock, $5.00 par value per
share, of the Company.
"COMPANY MATERIAL ADVERSE EFFECT" means a material adverse effect on
the business, assets, Properties, or existing or prospective business, results
of operations, or financial condition of the Company and its Subsidiaries, taken
as a whole.
"CONSIDERATION" means the combined Initial Consideration and the
Earn-Out Consideration.
"CONTRACT" means any agreement or contract, whether written or oral,
that is legally binding, including any commitment to purchase.
"DELAWARE ACT" means the Delaware General Corporation Law.
"DISSENTING SHARES" has the meaning set forth in Section 4.2 hereof.
"EARN-OUT CONSIDERATION" has the meaning set forth in Section 2.6
hereof.
"EARN-OUT CONSIDERATION VALUE" has the meaning set forth on SCHEDULE
2.6(A) hereto.
"EFFECTIVE TIME" has the meaning set forth in Section 2.2 hereof.
"ENCUMBRANCE" means any mortgage, charge, claim, equitable interest,
lien, option, pledge, security interest, right of first refusal or other
encumbrance.
"ENVIRONMENTAL CLAIM" has the meaning set forth in Section 5.17 hereof.
"ENVIRONMENTAL LAWS" has the meaning set forth in Section 5.17 hereof.
"ERISA AFFILIATE" has the meaning set forth in Section 5.14(a) hereof.
"FINANCIAL STATEMENTS" means, collectively, the Company's
audited/reviewed balance sheet and related audited/reviewed statements of
operations and retained earnings and statements of cash flows for the fiscal
years ended July 31, 1999 and 1998, including the notes thereto and the reports
prepared in connection therewith by independent certified public accountants.
"FLORIDA ACT" means the Florida 1989 Business Corporation Act.
"GAAP" means, at any particular time, generally accepted accounting
principles as in effect in the United States at such time; provided, however,
that, if it was permissible to use more than one principle at such time in
respect of a particular accounting matter, GAAP shall refer to the principle
which was then employed by the Company.
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"GARNER" means Donald G. Garner.
"HAZARDOUS MATERIAL" has the meaning set forth in Section 5.17 hereof.
"HOOVER" means C. Michael Hoover.
"INITIAL CONSIDERATION" has the meaning set forth in Section 2.6
hereof.
"INSIDER" means (i) any Shareholder, (ii) any member of the family of a
Shareholder who is closer in relation than a second cousin or (iii) any
corporation, partnership limited liability company, trust or other entity in
which any of such Persons owns any beneficial interest or is a director,
officer, employee, trustee, partner or holder of more than five percent of the
outstanding capital stock thereof or is otherwise an affiliate as defined in
Rule 12b-2 promulgated under the Securities Exchange Act of 1934, as amended.
"INTELLECTUAL PROPERTY RIGHTS" has the meaning set forth in Section
5.8(a) hereof.
"IRS" has the meaning set forth in Section 5.5 hereof.
"JOYNER" means Jesse R. Joyner.
"LEASED REAL PROPERTY" means, collectively, the real estate leased by
the Company, together with the Company's leasehold interests in and to all
buildings and improvements erected thereon, and all fixtures and appliances
installed in, attached to, or situated in or upon such real estate and any and
all appurtenances relating to such real estate.
"LIABILITIES" means, collectively, any debt, obligation or liability.
"LOSS(ES)" has the meaning set forth in Section 8.1 hereof.
"MERGER" has the meaning set forth in the Recitals of this Agreement.
"PARTIES" means Able, Sub, the Company, the Shareholders, Garner and
Joyner.
"PAYMENT CERTIFICATE" has the meaning set forth in Section 4.3(a)
hereof.
"PAYMENT DATE" has the meaning set forth on SCHEDULE 2.6(A) hereto.
"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 agency (or any department, agency or political
subdivision thereof).
"PLANS" has the meaning set forth in Section 5.14(a) hereof.
"PROCEEDING" means any action, arbitration, audit, complaint,
investigation, petition, litigation or suit (whether civil, criminal,
administrative, investigative or informal) commenced,
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brought, conducted or heard by or before, or otherwise involving, any
governmental body or administrator or any arbitrator.
"PROFIT PAYMENT" has the meaning set forth on SCHEDULE 2.6(A) hereto.
"PROPERTIES" means the Leased Real Property and the equipment and
operations located thereon.
"REAL PROPERTY" means, collectively, the real estate owned by the
Company, together with all of the Company's rights, title and interests in and
to all buildings and improvements erected thereon, and all fixtures and
appliances installed in, attached to, or situated in or upon such real estate
and any and all appurtenances relating to such real estate.
"RELATED AGREEMENTS" means, collectively, all agreements, documents,
certificates and instruments to be delivered pursuant to or in connection with
this Agreement, including Exhibits, A, B, C and E hereto.
"SALES PAYMENT" has the meaning set forth on SCHEDULE 2.6(A) hereto.
"SASCO" means Southern Aluminum and Steel Corporation.
"SASCO ACQUISITION" means Able's acquisition of all of the Company
Common Stock.
"SHAREHOLDER(S)" has the meaning set forth in the preamble of this
Agreement.
"SUB" has the meaning set forth in the preamble of this Agreement.
"SUBSIDIARY" means any corporation, partnership, limited liability
company, association or other entity of which securities or other ownership
interests representing 50% or more of the ordinary voting power are, at the time
as of which any determination is being made, owned or controlled by Able, Sub or
the Company, as applicable.
"SUB COMMON STOCK" means the common stock, $0.01 par value per share,
of Sub.
"SURVIVING COMPANY" has the meaning set forth in the Recitals of this
Agreement.
"TAX(ES)" means all federal, state, local or foreign taxes of any kind,
charges, fees, customs, duties, imposts, levies, required deposits or other
assessments, including, without limitation, all net income, gross receipts, ad
valorem, value added, transfer, gains, franchise, profits, inventory, net worth,
capital stock, asset, sales, use, license, estimated, withholding, payroll,
transaction, capital, employment, social security, required deposits, workers
compensation, unemployment, excise, severance, stamp, occupation and property
taxes, together with any interest and any penalties, fines, additions to tax or
additional amounts imposed by any taxing authority (domestic or foreign) and any
transferee liability in respect of Taxes.
"TAX RETURNS" means any return, report, form or other documents or
information filed with or submitted to, or required to be filed with or
submitted to, any governmental body in
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connection with the determination, assessment, collection or payment of any Tax
(including all filings with respect to employment-related Taxes).
"THREATENED" has the following meaning: A Proceeding, claim, dispute or
other matter will be deemed to have been Threatened with respect to a Person, if
such Person has received any demand, statement or other notice with respect to
such Proceeding, claim, dispute or other matter.
"TRADE SECRETS" has the meaning set forth in Section 5.8(b) hereof.
"TRANSFER AGENT" means Florida Atlantic Stock Transfer, Inc.
"WELFARE PLAN" has the meaning set forth in Section 5.14(l) hereof.
"YEAR FOUR" means the fiscal year ending October 31, 2003.
"YEAR THREE" means the fiscal year ending October 31, 2002.
"YEAR TWO" means the fiscal year ending October 31, 2001.
"YEAR ONE" means the fiscal year beginning November 1, 1999 and ending
October 31, 2000.
ARTICLE II
THE MERGER
SECTION 2.1 THE MERGER. At the Effective Time and upon the terms and
subject to the satisfaction or waiver of the conditions of this Agreement, Sub
shall be merged with and into the Company pursuant to Section 607.1107 of the
Florida Act and Section 252 of the Delaware Act. The separate corporate
existence of Sub shall cease. The Company shall succeed to and assume all the
rights and obligations of Sub.
SECTION 2.2 EFFECTIVE TIME. The Parties shall execute a Certificate of
Merger in such form as may be required (the "CERTIFICATE OF MERGER") and Able
and the Surviving Company shall cause such document to be filed with the
Secretary of State of the State of Florida and the Secretary of State of the
State of Delaware, and shall take all such other and further actions as may be
required by law to make the Merger effective. The Merger shall be effective at
such time as the Certificate of Merger referenced above is duly filed with and
accepted by the Secretary of State of the State of Florida and the Secretary of
State or the State of Delaware, whichever occurs last (the "EFFECTIVE TIME").
SECTION 2.3 EFFECTS OF THE MERGER. The Merger shall have the effects
set forth in the Florida Act and the Delaware Act. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time, all the
properties, rights, privileges, powers and franchises of Sub and the Company
shall vest in the Surviving Company and all debts, Properties and duties of Sub
and the Company shall become the debts, Properties and duties of the Surviving
Company.
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SECTION 2.4 ARTICLES OF INCORPORATION AND BYLAWS.
(a) The Articles of Incorporation of the Company in effect at the
Effective Time shall be the Articles of Incorporation of the Surviving Company
as amended in the Certificate of Merger to reflect the name of the Surviving
Corporation to be Specialty Electronic Systems, Inc., until amended in
accordance with applicable law.
(b) The Bylaws of the Surviving Company in effect at the Effective Time
shall be the Bylaws of the Surviving Company until amended in accordance with
applicable law.
SECTION 2.5 DIRECTORS AND OFFICERS. The CEO of Able and the President
of SES shall be the initial directors and Garner, Hoover and Joyner shall be the
initial officers of the Surviving Company, each to hold office from the
Effective Time in accordance with the Articles of Incorporation and the Bylaws
of the Surviving Company, or until his or her successor is duly appointed and
qualified.
SECTION 2.6 CONVERSION OF SECURITIES. At the Effective Time, by virtue
of the Merger and without any action an the part of the Parties or the holder of
any of the following securities:
(a) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time, by virtue of the Merger and without any
action on the part of the holders thereof, shall be canceled and extinguished
and converted into the right to receive the Consideration, as set forth below
and on SCHEDULE 2.6 (A) hereto, divided by the number of shares of Company
Common Stock then outstanding.
(b) The Company Common Stock held by SASCO will be purchased by Able
pursuant to the SASCO Acquisition of even date herewith. Such shares shall be
canceled by Able and the Consideration which would have been payable to SASCO
shall be paid to the former shareholders of SASCO as allocated in Section 2.6(d)
hereof.
(c) In consideration for the Company Common Stock and the covenants,
representations and warranties contained in this Agreement, at Closing Sub shall
deliver shares of Able Common Stock as follows (the "INITIAL CONSIDERATION"):
Hoover 21,429 shares
Garner 10,500 shares
Joyner 10,088 shares
(d) From and after the Closing, Sub shall deliver to each of Hoover,
Garner and Joyner additional shares of Able Common Stock if earned in accordance
with SCHEDULE 2.6(A) hereto (the "EARN-OUT CONSIDERATION") as described on
SCHEDULE 2.6(A) to this Agreement. At each Payment Date, the total amount of
Earn-Out Consideration earned as of such date shall be delivered to the
individuals on the following allocation basis:
Hoover 51.00%
Garner 24.99%
Joyner 24.01%
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(e) In the event Able permanently terminates all operations of SES at
any point during Year One, the total Earn-Out Consideration payable to Hoover,
Garner and Joyner for Year One shall be $1,344,538 to be allocated as set forth
in Section 2.6(d) above. No further Consideration shall be payable at any time.
(f) In the event Able permanently terminates all operations of SES at
any point during Year Two, Year Three or Year Four, the total Earn-Out
Consideration payable to Hoover, Garner and Joyner for such year shall be the
higher of the Estimated Earn-Out Consideration Value or the Annualized Total
calculated for the year of termination. No further Consideration shall be
payable at any time.
(g) Each share of Sub Common Stock issued and outstanding immediately
prior to the Effective Time, by virtue of the Merger and without any action on
the part of the holders thereof, shall be converted into and become fully paid
and nonassessable shares of common stock of the Surviving Company.
ARTICLE III
CLOSING
SECTION 3.1 LOCATION, DATE. The closing (the "CLOSING") of the Merger
shall be held at the offices of Able, in Roswell, Georgia, on November 5, 1999
at 9:01 am, unless the Parties hereto agree in writing to another date or place,
and, in any event, shall occur one-minute after the Closing of the SASCO
Acquisition. The date on which the Closing occurs is referred to herein as the
"CLOSING DATE."
SECTION 3.2 DELIVERIES. At the Closing,
(a) The Surviving Company shall deliver to the Secretary of State of
the State of Florida and the Secretary of State of Delaware a duly executed copy
of the Certificate of Merger as required by the Florida Act and the Delaware
Act;
(b) The Parties shall deliver to each other the respective agreements
and other documents and instruments specified with respect to them in Article IX
hereof and such other items as may be reasonably requested; and
(c) The Parties shall take all such other and further actions as may be
required by applicable law to make the Merger effective upon the terms and
subject to the conditions hereof.
ARTICLE IV
SHAREHOLDER APPROVAL; DISSENTING SHARES;
EXCHANGE OF CERTIFICATES
SECTION 4.1 SHAREHOLDER APPROVAL. The Board of Directors of Sub and the
Company have submitted and recommended this Agreement to their respective
Shareholders and such Shareholders have approved this Agreement as required by
applicable law.
SECTION 4.2 DISSENTING SHARES. Notwithstanding anything in this
Agreement to the contrary, shares outstanding immediately prior to the Effective
Time and held by a holder who
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has not voted in favor of the Merger or consented thereto in writing and who has
demanded dissenter's rights for such shares in accordance with Section 607.1302
of the Florida Act ("DISSENTING SHARES") shall not be converted into a right to
receive the Consideration unless such holder fails to perfect or withdraws or
otherwise loses his right to dissenter's rights under the Florida Act. If, after
the Effective Time, such holder fails to perfect or withdraws or loses his
dissenter's rights, such shares shall be treated as if they have been converted
as of the Effective Time into a right to receive the Consideration without
interest thereon. The Company shall give Able prompt notice of any demands by
any Shareholder for dissenter's rights with respect to Company Common Stock and,
prior to the Effective Time, Able shall have the right to direct all
negotiations and proceedings with respect to such demands. Prior to the
Effective Time, the Company shall not, except with the prior written consent of
Able, make any payment with respect to, or settle or offer to settle, any such
demands.
SECTION 4.3 EXCHANGE OF CERTIFICATES.
(a) From and after the Effective Time, the Transfer Agent shall act as
exchange agent in effecting the exchange for the Consideration of certificates
(the "CERTIFICATES") that, immediately prior to the Effective Time, represented
Company Common Stock entitled to payment pursuant to Section 2.6 and SCHEDULE
2.6(A) hereto.
On the Payment Date for each of Year One, Year Two, Year Three, and
Year Four, or, in the event that such Payment Date falls on a weekend or a
national holiday, the next business day thereafter, the Surviving Company shall
authorize the Transfer Agent to deliver to each of Garner, Hoover and Joyner,
the Consideration earned for such Payment Date, as set forth on SCHEDULE 2.6(A)
hereto.
(b) At and after the Effective Time, there shall be no transfers on the
stock transfer books of the Company of any shares. If, after the Effective Time,
Certificates formerly representing Company Common Stock are presented to the
Surviving Company or the Transfer Agent, they shall be canceled and exchanged
for the right to receive Consideration, as provided in Article IV, subject to
applicable law in the case of Dissenting Shares.
(c) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making and delivery of an affidavit of that fact by the
person claiming such Certificate to have been lost, stolen or destroyed and, if
required by Able, the posting by such person of a bond in such reasonable amount
as Able may direct as indemnity against any claim that would be made against the
Company or Able with respect to such Certificate, the Transfer Agent will issue
in exchange for such lost, stolen or destroyed Certificate the aggregate
Consideration deliverable in respect thereof pursuant to this Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SHAREHOLDERS
The Company, as to itself, the Shareholders, as to the Company and, for
the purposes of Sections 5.24 and 5.26, as to themselves, and Garner and Joyner,
as to SASCO, represent and warrant to Able and Sub as follows:
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SECTION 5.1 ORGANIZATION, STANDING, QUALIFICATION AND CAPITALIZATION.
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, and has all requisite
corporate power and authority to conduct its business as presently conducted and
to own and lease the Properties and assets used in connection therewith. The
execution and delivery of this Agreement and the Related Agreements and the
consummation of the transactions contemplated hereby and thereby are within the
corporate power of the Company and have been duly authorized by all necessary
corporate action on the part of the Company. A complete and accurate copy of (i)
the Articles of Incorporation of the Company and all amendments thereto
certified by the Secretary of State of the State of Delaware and (ii) the Bylaws
of the Company and all amendments thereto, certified by the Company's Secretary,
will have been delivered to Able. The Company is duly qualified to do business
as a foreign corporation in Georgia and Virginia and is in good standing in each
such state and foreign jurisdiction, such jurisdictions being the only
jurisdictions in which the Company is required to be so qualified.
The total authorized capital stock of the Company consists of 100
shares of $5.00 par value Common Stock of which 100 shares are issued and
outstanding. All of such shares were duly authorized and validly issued and are
fully paid and non-assessable. There are no shares of capital stock of the
Company issued and outstanding except for such shares. None of such shares was
issued in violation of any preemptive or preferential right. There are currently
no stock options outstanding. The Company is not and, at the Closing, the
Company will not be, nor is any Shareholder, a party to or bound by any written
or oral Contract or agreement which grants to any Person an option or right of
first refusal or other right of any character to acquire at any time, or upon
the happening of any stated events, shares of capital stock or other securities
of the Company whether or not presently issued or outstanding. The Shareholders
are the record and beneficial holders of all outstanding securities of the
Company.
SECTION 5.2 SUBSIDIARIES OF THE COMPANY. The Company does not own any
shares of any corporation and has no interest in any partnership, limited
liability company, joint venture or other legal entity.
SECTION 5.3 FINANCIAL STATEMENTS. The Company has delivered to Able
true, complete and accurate copies of the Financial Statements, all of which
have been prepared in accordance with GAAP, applied on a basis consistent with
that of the preceding fiscal year.
(a) The Financial Statements fairly represent the financial condition
and results of operations, equity and cash flow of the Company as of the
respective dates of and for the respective periods referred to in the Financial
Statements, all in accordance with GAAP consistently applied.
(b) All inventory of the Company as set forth in the Financial
Statements consisted of, and all inventory as of the Closing Date will consist
of, raw materials, work-in-process and finished goods of a quality and quantity
usable or salable in the ordinary course of business of the Company. The value
at which inventories were reflected in the Financial Statements approximates
cost, with adequate provision for obsolete material, all in accordance with GAAP
applied on a basis consistent with that of the preceding fiscal year.
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(c) All accounts receivable, billed and unbilled, of the Company as set
forth in the Financial Statements are, and all accounts receivable which arise
between the date hereof and the Closing Date will be, genuine, valid, binding
and subsisting, having arisen or arising out of bona fide sales and deliveries
of products or the performance of services in the ordinary course of business
consistent with past practice and are collectible in the ordinary course of
business, subject to no defenses, counterclaims or set-offs, but subject to
allowances and accruals as reflected in the Financial Statements. Such
allowances and accruals are reasonable and appropriate on the basis of the
Company's prior experience and are in accordance with GAAP consistently applied.
SECTION 5.4 PROPERTIES AND PERMITS. The Company has good and marketable
title to all its Properties and assets as reflected in the July 31, 1999 balance
sheet of the Company (except Properties and assets sold or otherwise disposed of
in the ordinary course of business, consistent with past practice), free and
clear of all Encumbrances of any nature whatsoever, except any Encumbrances
disclosed in the Financial Statements, or liens for current Taxes not yet due
and payable. All plants, structures and equipment owned or used by the Company
are suitable for the purposes used, are adequate and sufficient for all current
operations of its business, and, subject to ordinary wear and tear, are in good
operating condition and repair. SCHEDULE 5.4 hereto sets forth a true, correct
and complete list of all Leased Real Property owned or used by the Company,
together with a list of each lease, sublease, license or any other instrument
under which the Company claims or holds such leasehold or other interest or
right to the use thereof, and with respect to the leases, subleases, licenses
and other instruments on SCHEDULE 5.4, identifying which of those leases,
subleases, licenses or other instruments, if any, require that a consent be
obtained (from any lessors, guarantors or any other third parties) before a
valid transfer may be obtained and identifying in each instance the party which
is required to grant consent thereto, the location of the premises, the date and
term of the agreement, the amount of the monthly rent and any additional
material terms thereof. Such leases, subleases, licenses and other agreements
are valid, subsisting, in full force and effect and binding upon the parties
thereto in accordance with their terms. To the best of the Shareholders' and the
Company's knowledge, all of the facilities set forth on SCHEDULE 5.4 are
equipped in conformity with all laws and governmental regulations applicable to
the Companies or their business. Prior to the date hereof, the Company has
delivered to Able true, correct and complete copies of all of the leases,
subleases, licenses and other instruments set forth on SCHEDULE 5.4 and any
related agreements. The Company has paid in full all amounts due, and has
satisfied in full all Liabilities due and payable, under such leases, subleases,
licenses and other agreements. The Company is not, and, as of the Closing Date,
the Company will not be, in default under any of such leases, subleases,
licenses or other agreements, nor (to the best knowledge of the Shareholders and
the Company) is any other party in default thereunder, and no facts or
circumstances have occurred which, with the giving of notice or the passage of
time or both, would constitute a default under any of such leases, subleases,
licenses or other agreements.
SECTION 5.5 TAXES. The amounts recorded as provisions for Taxes in the
Financial Statements are sufficient for the payment of all Taxes, whether
disputed or not. The Company has duly and timely filed all Tax Returns which
were required to be filed by it, and has paid, or has recorded adequate reserves
on the Financial Statements for the payment of, all Taxes shown on all Tax
Returns. All Tax Returns are true, correct and complete in all material
respects. No Tax Return of the Company has been examined or audited by the
Internal
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Revenue Service (the "IRS") or any state, local, foreign or other taxing
authority and there are no open, pending or Threatened tax-related Proceedings,
audits, examinations, assessments, asserted deficiencies or claims for
additional Taxes with respect to the Company. There are no past or current
revenue agents' reports or any other assertions of deficiencies or other
Liabilities for Taxes (including any reports, statements, summaries and other
communications or assertions or claims of deficiencies or other Properties) with
respect to the Company. There are no waivers or extensions of any applicable
statutes of limitation for the assessment and collection of Taxes for which the
Company or Able may be liable that are in effect and no requests for such
waivers are pending. There are no Tax rulings, requests for rulings, or closing
agreements with any taxing authority that may affect the Company. The Company is
not required to make any adjustments with respect to a change in accounting
method and no such adjustments have been proposed by the IRS or requested by the
Company. The Company is not a party to any Tax sharing or allocation agreement,
nor is it potentially required to indemnify any person with respect to Taxes.
The Company is not a party to any arrangement that is treated as a partnership
for Tax purposes. SCHEDULE 5.5 lists all states, territories and jurisdictions
(whether foreign or domestic) in which the Company is required to file Tax
Returns. No claim or inquiry has been made by any taxing authority in a
jurisdiction where the Company does not file Tax Returns that it either is or
may be subject to Tax in such jurisdiction. There are no liens for Taxes upon
the assets of or with respect to the Company except for liens for current Taxes
not yet due and payable. No power of attorney related to Taxes has been granted
by the Company or with respect to the Company that will remain in force after
the Closing Date. The Company is not nor has it ever been a member of an
"affiliated group" within the meaning of Code Section 1504(a)(1) nor has the
Company been required to join in any consolidated, combined, unitary or License,
state or local Tax filings.
SECTION 5.6 LITIGATION AND LABOR MATTERS. Except as provided for or
disclosed in the Financial Statements:
(a) There is no litigation, Proceeding or governmental investigation
pending or Threatened, against or related to the Company or, its Properties,
assets or business;
(b) There is no litigation, Proceeding or governmental investigation
pending or Threatened, against or related to any Shareholder or any
Shareholder's properties, assets or business that could reasonably be expected
to have an adverse impact on the Company;
(c) The Company is not in default with respect to any order, writ,
injunction or decree of any court or federal, state, municipal, foreign or
governmental department, commission, board, bureau, agency or instrumentality;
(d) The Company has not committed, and neither the Shareholders nor the
Company has received any notice of or claim that the Company has committed any
unfair labor practice under applicable federal, state or foreign law; and
(e) There is no pending action or Proceeding that has been commenced
against the Company that may have the effect of preventing, delaying or making
illegal the Merger and, to the best knowledge of the Shareholders and the
Company, no such action or Proceeding has been Threatened.
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SECTION 5.7 INSURANCE. The Company is insured under various policies of
fire, liability and other forms of insurance, as set forth on SCHEDULE 5.7
hereto, which policies are valid and enforceable in accordance with their terms
and provide adequate insurance for the business and the assets of the Company,
in accordance with industry standards. At no time was there a period in which
the Company lacked such insurance coverage. The Company shall continue to carry
all such policies or similar policies during the pendency of this Agreement, and
all outstanding claims under such policies are described in SCHEDULE 5.7 hereto.
There is no liability for retrospective insurance premium adjustments for any
period prior to the date hereof. SCHEDULE 5.7 hereto sets forth a complete and
accurate list of the following, each of which have been made available to Able
for its review:
(a) All comprehensive general liability and other policies of insurance
under which the Company is or has been insured at any time.
(b) All property and casualty policies of insurance under which the
Company is presently insured.
(c) All obligations of the Company to provide insurance coverage to
third parties (for example under leases or other Contracts).
(d) The expiration date of each insurance policy under which the
Company is currently insured.
SECTION 5.8 INTELLECTUAL PROPERTY RIGHTS.
(a) SCHEDULE 5.8(A) hereto sets forth all patents and patent
applications; all trademarks, service marks, logos, trade names (whether
registered or unregistered) and applications for registration and registrations
therefor; Internet domain names and 1-800 and 1-888 telephone numbers; all
copyrights (whether registered or unregistered) and applications for
registration and registrations therefor; all inventions, processes, technical
information, know-how, designs, drawings, specifications, database systems and
computer software (including source code), used or developed by the Company, or
in which the Company has an interest, and all licenses relating to the foregoing
(collectively, the "INTELLECTUAL PROPERTY RIGHTS"), and their respective actual
or potential use or application. No other patent, trademark, service mark, trade
name or copyright, or license under any thereof, is necessary to permit the
Company to be owned by Able or the Company's business to be conducted as now
conducted or as heretofore or proposed to be conducted. The Company owns
exclusively and/or has the exclusive and unrestricted right to use, free and
clear of all Encumbrances, all Intellectual Property Rights, and all renewals
therefor and claims for infringement thereof, without infringing upon or
otherwise acting adversely to the right or claimed right of any third party
under or with respect to any Intellectual Property Rights. The Company is not
obligated or under any liability whatsoever to make any payments by way of
royalties, fees or otherwise to any owner or licensee of, or other claimant to,
any patent, trademark, service mark, trade name, copyright or other intangible
asset, with respect to the use of any of the Intellectual Property Rights, in
connection with the ownership of its assets, the conduct of its business or
otherwise.
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(b) The Company owns exclusively and has exclusive and unrestricted
right to use all Trade Secrets required for or incident to the development,
manufacture, operation, advertisement, promotion, distribution and sale of all
products sold and services offered, or proposed to be sold or offered, by the
Company free and clear of all Encumbrances, including, without limitation, of
any former employer of its employees. Trade Secrets shall mean all trade
secrets, confidential information, "know-how," inventions, designs, customer
lists, processes, computer programs (including source code) and technical data
and information (the "TRADE SECRETS"). A list of the headings or titles and,
where appropriate, a general, non-confidential description of all Trade Secrets
used or developed in the conduct of Company's business is included in SCHEDULE
5.8(B) hereto.
(c) The Company has taken reasonable security measures to protect the
secrecy, confidentiality and value of all of its Trade Secrets. Each of its
employees and other Persons who either alone or in concert with others
developed, invented, discovered, derived, programmed or designed any of the
Trade Secrets, or who has knowledge of or access to information about any of the
Trade Secrets, has entered into a written agreement with the Company providing
that such Trade Secrets and other information are proprietary to the Company and
are not to be divulged or misused, and transferring to the Company, without any
further consideration being given therefor, all of such employees or other
persons right, title and interest in and unto such Trade Secrets and other
information, and to all Intellectual Property Rights and other rights with
respect to such Trade Secrets and information.
(d) The Shareholders and the Company have no knowledge, and have not
received any communication alleging, that the Company has violated or, by
conducting its business as now conducted or proposed to be conducted after the
Closing Date, violates or would violate any of the patents, licenses,
trademarks, services marks, trade names, copyrights, trade secrets or other
proprietary rights of any person or entity. The Shareholders and the Company are
not aware of any third party that is infringing upon or violating any of the
Company's Intellectual Property Rights, Trade Secrets or other proprietary
rights.
SECTION 5.9 CONTRACTS AND COMMITMENTS. SCHEDULE 5.9 hereto sets forth a
complete and accurate list of, and the Company has made available to Able for
its review, complete and correct copies of:
(a) Each Contract (other than open purchase orders) that involves the
performance of services or the delivery of goods or materials by the Company of
an amount or value in excess OF $100,000;
(b) Each Contract (other than open sales orders) that involves the
performance of services for or the delivery of goods or materials to the Company
of amount or value in excess of $100,000;
(c) Each Contract that was not entered into in the ordinary course of
business that involves expenditures or receipts in excess of $25,000 to which
the Company is a party;
(d) Each license or other Contract with respect to intellectual
property, including, without limitation, the Intellectual Property Rights, to
which the Company is a party;
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(e) Each Contract to which any employee of the Company is a party
relating to wages, hours and other conditions of employment;
(f) Each Contract for capital expenditures in excess of $10,000 to
which the Company is a party;
(g) Each Contract or commitment relating to the borrowing of money or a
line of credit to which the Company is a party or by which the Company or its
assets are bound;
(h) Each Contract or commitment with any present or former officer,
director, Shareholder, employee or consultant of the Company, pursuant to which
any payment is or may become due to any such person in excess of $10,000;
(i) Each lease agreement pertaining to any personal property leased by
the Company;
(j) Each representative or sales agency Contract or commitment to which
the Company is a party;
(k) Each Contract restricting a Person from competing with the Company;
(l) Each bonus, pension, profit sharing, retirement, stock purchase,
stock option, hospitalization, insurance, vacation pay or other similar plan;
and
(m) Each Contract prohibiting the transfer or assignment of such
Contract or requiring consent prior to the transfer or assignment of such
Contract.
Except for delays, minor failures to meet specifications or other minor
defaults which are normal in the conduct of business between the Company and
other parties to the above Contracts, all parties to the above Contracts have
complied with the provisions thereof, no party is in default thereunder, and no
event has occurred which but for the passage of time or the giving of notice
would constitute a default thereunder. The Company has not received any written
notice of any default with respect to any of the above Contracts.
SECTION 5.10 ABSENCE OF UNDISCLOSED LIABILITIES. There are no material
Liabilities or obligations of the Company either accrued, absolute, contingent
or otherwise, including, but not limited to, any Liabilities for Taxes due or to
become due, except:
(a) To the extent reflected in the July 31, 1999 reviewed balance sheet
and not heretofore paid or discharged; and
(b) Those incurred, consistently with past business practice, in or as
a result of the normal and ordinary course of business since July 31, 1999.
SECTION 5.11 ABSENCE OF DEFAULT. The Company is not in default in the
performance, observance or fulfillment of any obligation, covenant or condition
contained in any debenture or note, or contained in any conditional sale or
equipment trust agreement, or loan or other borrowing agreement to which the
Company is a party.
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SECTION 5.12 EXISTING CONDITION. Except as disclosed in SCHEDULE 5.12
hereto, since July 31, 1999, there has not been (i) any material adverse change
in the business, operations, prospects, Properties, assets, Liabilities, or
condition, financial or otherwise, of the Company; (ii) any damage, destruction
or loss, whether covered by insurance or not, materially and adversely affecting
the business, operations, prospects, Properties, assets, Liabilities, or
condition, financial or otherwise, of the Company; (iii) any declaration,
setting aside or payment of any dividend, or any distribution or payment in
respect of capital stock or any other securities of the Company, or any
redemption, purchase or other acquisition of any capital stock or other
securities of the Company; (iv) any increase in the compensation payable or to
become payable by the Company to any of its respective officers, directors,
employees, partners or agents; (v) any change in the terms of any bonus,
insurance, pension or other benefit plan for or with any of the Company's
officers, directors or employees which increases amounts paid, payable or to
become payable thereunder; or (vi) any complaints or other concerns which relate
to a Company's labor relations.
SECTION 5.13 RESTRICTIONS. Except as set forth on SCHEDULE 5.13 hereto,
the Company is not subject to any charter or other corporate restriction, any
agreement or any judgment, order, writ, injunction or decree, which materially
and adversely affects or, so far as the Shareholder or the Company can now
foresee, may in the future materially and adversely affect, the business,
operations, prospects, Properties, assets, Liabilities, or condition, financial
or otherwise, of the Company.
SECTION 5.14 EMPLOYEE BENEFITS.
(a) SCHEDULE 5.14 hereto, lists each bonus, deferred compensation,
incentive compensation, stock purchase, stock option, severance or termination
pay, hospitalization or other medical, life or other insurance, supplemental
unemployment benefits, profit sharing, pension, or retirement plan, program,
agreement or arrangement, or other employee benefit plan, program, agreement or
arrangement (other than arrangements involving the payment of wages) sponsored,
maintained or contributed to or required to be contributed to by the Company or
by any trade or business, whether or not incorporated (an "ERISA AFFILIATE")
that together with the Company would be deemed a "single employer" within the
meaning of Section 4001(a)(14) of ERISA, for the benefit of any current or
former employee, director, partner or independent Contractor of the Company or
any ERISA Affiliate, whether formal or informal and whether legally binding or
not (the "PLANS") with respect to which the Company or any ERISA Affiliate has,
within the six-year period ending on the Closing Date, or may in the future have
any liability or obligation to contribute or make payments of any kind.
(b) Each Plan is in writing and the Company has furnished to Able a
copy of each Plan and any amendments thereto and, if applicable, with respect to
each Plan (i) a copy of each trust or other funding arrangement and all
amendments thereto, (ii) each summary plan description and summary of material
modifications, (iii) the three most recently filed Forms 5500 under ERISA or the
Internal Revenue Code of 1986, as amended (the "CODE"), (iv) all determination
letters, rulings, information letters and any other material document or
correspondence relating to a Plan from the IRS, the United States Department of
Labor, or the Pension Benefit Guaranty Corporation, (v) the three most recently
prepared financial statements and (vi) all Contracts relating to the Plans with
respect to which the Company or any ERISA Affiliate may have any liability,
including, without limitation, insurance Contracts,
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investment management agreements, subscription and participation agreements and
record keeping agreements. The Company does not have any express or implied
commitment to create or incur liability with respect to or cause to exist any
other employee benefit plan, program, agreement or arrangement, or to enter into
any Contract or agreement to provide compensation or benefits to any individual
or to modify or change or terminate any Plan, other than with respect to a
modification, change or termination required by ERISA or the Code, which will
not materially increase the cost of maintaining such Plan.
(c) Each Plan is now and has been operated in accordance with its terms
and the requirements of all applicable laws, orders, rules and regulations,
including, without limitation, ERISA and the Code, including, without
limitation, all applicable Form 5500 filing requirements. The Company has
performed all obligations required to be performed by it under, is not in any
respect in default under or in violation of, and has no knowledge of any default
or violation by any party to, any Plan. No governmental investigation or legal
action, suit or claim is pending or, to the best knowledge of the Shareholders
and the Company, threatened with respect to any Plan and, to the best knowledge
of the Shareholders and the Company, no fact or event exists that could give
rise to any such investigation, action, suit or claim.
(d) None of the Plans is (i) subject to Title IV of ERISA, (ii) a
"multiemployer pension plan" as such term is defined in Section 3(37) of ERISA,
(iii) subject to the laws of a country or jurisdiction other than the United
States, or (iv) subject to Section 302 of ERISA or Section 412 of the Code.
(e) Neither the Company, any ERISA Affiliate, any of the Plans, any
trust created thereunder, nor any trustee or administrator thereof has engaged
in a transaction in connection with which the Company or any ERISA Affiliate,
any of the Plans, any such trust, or any trustee or administrator thereof, or
any party dealing with the Plans or any such trust could be subject to either a
civil liability or penalty pursuant to Section 409, 502(i) or 502(1) of ERISA or
a tax imposed pursuant to Chapter 43 of the Code.
(f) Full payment has been made, or will be made, in accordance with the
terms of each of the Plans and any applicable collective bargaining agreement,
of all amounts which the Company or any ERISA Affiliate is required to pay, and
all such amounts properly accrued through the Closing Date with respect to the
current plan year thereof will be paid by the Company on or prior to the Closing
Date or will be properly recorded on the Company's financial statements.
(g) Each of the Plans that is intended to be "qualified" in form within
the meaning of Section 401(a) of the Code is so qualified and has been the
subject of a favorable determination letter from the IRS regarding such
qualification, no such determination letter has been revoked and revocation has
not been Threatened, no event has occurred and no circumstances exist that would
adversely affect the tax qualification of such Plan; and such Plan has not been
amended since the effective date of its most recent determination letter in any
respect that might adversely affect its qualification or materially increase its
cost. Each of the Plans that is intended to satisfy the requirements under
Section 401(k) of the Code satisfies such requirements.
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(h) No employee of the Company will be entitled to any additional
benefits or any acceleration of the time of payment or vesting of any benefits
under any Plan as a result of the transactions contemplated by this Agreement.
(i) No amounts payable under the Plans will fail to be deductible for
license income tax purposes by virtue of Section 280G of the Code.
(j) No compensation payable by the Company to any of its respective
employees under any existing Contract, Plan or other employment arrangement
(including by reason of the Merger) will be subject to disallowance under
Section 162(m) of the Code.
(k) No Plan provides benefits, including, without limitation, death or
medical benefits (whether or not insured), with respect to current or former
employees upon retirement or other termination of service (other than (i)
coverage mandated by applicable law, (ii) death benefits or retirement benefits
under any "employee pension plan," as that term is defined in Section 3(2) of
ERISA, (iii) deferred compensation benefits accrued as Liabilities on the books
of the Company or an ERISA Affiliate, or (iv) benefits the full cost of which is
borne by the current or former employee (or his beneficiary)).
(l) Except as set forth on SCHEDULE 5.14, each Plan that is an
"employee welfare benefit plan" as defined in Section 3(1) of ERISA ("WELFARE
PLAN") is fully insured and with respect to such Welfare Plans no premium for
insured benefits can be increased other than on the Contract anniversary for the
related policy. Each such Welfare Plan may be amended or terminated without
liability to the Company or Able at any time after the Closing Date.
(m) With respect to each Plan that is funded wholly or partially
through an insurance policy, there will be no liability of the Company or an
ERISA Affiliate, as of the Closing Date, under any such insurance policy or
ancillary agreement with respect to such insurance policy in the nature of a
retroactive rate adjustment loss sharing arrangement or other actual or
contingent liability arising wholly or partially out of events occurring prior
to the Closing Date.
SECTION 5.15 BANK ACCOUNTS AND DIRECTORS AND OFFICERS. SCHEDULE 5.15
contains a true and complete list of the name and location of each bank in which
the Company has an account, each safety deposit box or custody agreement and the
names of the Persons authorized to draw thereon or to withdraw therefrom.
SCHEDULE 5.15 also sets forth the names of all directors and officers of the
Company.
SECTION 5.16 COMPLIANCE WITH LAWS AND INSTRUMENTS. The Company and the
Shareholders have complied with and are not in default under, or in violation
of, any laws, ordinances, rules or regulations or orders (including, without
limitation, any safety, health, wage, hour, employment and trade laws,
ordinances, rules, regulations and orders) applicable to its business,
operations, or Properties, or the Company which materially and adversely affects
or, so far as the Shareholders and the Company can foresee, may in the future
materially and adversely affect its business, operations, prospects, Properties,
assets, Liabilities or condition, financial or otherwise, of the Company. All
necessary approvals, authorizations, consents, licenses, permits or orders with
respect to the Company's business, operations and Properties have been obtained,
are in full force and effect as of the date hereof
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and are set forth on SCHEDULE 5.16 hereto. Neither the ownership or use of the
Company's Properties, nor the conduct of its business, nor the ownership of its
assets, conflicts with the rights of any other Person or violates, or with or
without the giving of notice or the passage of time, or both, will violate,
conflict with or result in a breach, default, right to accelerate or loss of
rights under, or result in the creation of any Encumbrance pursuant to, any term
or provision of the Articles of Incorporation or Bylaws of the Company as
presently in effect, or any note, mortgage, deed of trust, indenture, lease,
permit, license, consent, approval, agreement, instrument, insurance policy,
law, statute, rule or regulation or any order, judgment, award or decree to
which the Company is a party or by which the Company, its business, Properties
or assets may be bound or affected.
SECTION 5.17 ENVIRONMENTAL COMPLIANCE. The Company is not in violation
of or delinquent under, nor has it received notice of any violation or
delinquency with respect to, any decree, order or arbitration award or any law,
statute, ordinance, rule or regulation of or agreement with, or any license or
permit from, any governmental, regulatory or administrative authority to which
it or its Properties, assets, personnel or business are subject and which
relates to the environment including, without limitation, Environmental Laws
(defined below). There are no circumstances or conditions existing that may
prevent or interfere with such compliance in the future. The Company has
obtained all approvals, consents, permits, licenses and other authorizations of
governmental agencies required to be obtained by it under Environmental Laws.
Except as set forth on SCHEDULE 5.17, all such approvals, consents, permits,
licenses, and other authorizations are in good standing and will not be
adversely affected by a change of control. There is no Environmental Claim
(defined below) pending or, to the best knowledge of the Shareholders and the
Company, Threatened against the Company or its assets or relating to its
business or Properties. There are no past or present actions, activities,
circumstances, conditions, events or incidents, at any location, including,
without limitation, the release, emission, discharge, presence or disposal of
any Hazardous Material (defined below) that could form the basis of any
Environmental Claim against the Company or its assets. SCHEDULE 5.17 contains a
true and complete list of each facility previously owned, operated or leased by
the Company or its predecessors. There exist no surveys, reports, assessments,
audits, evaluations, sampling results or other documents relating to the
presence, migration or disposal of any Hazardous Material prepared for or at the
request of the Company or in its possession or at or relating to any of its
assets, its business or any facility previously owned, leased or operated by it.
The Company has not, and to the knowledge of the Company and the Shareholders,
no other Person has, caused a release or threat of release of any Hazardous
Material at, on, under, or otherwise affecting the soil, surface or ground water
of any Properties owned, leased, or operated by the Company, except where such
release or threat of release would not have a material adverse effect on the
business or the assets, Properties, operations, prospects, or condition,
financial or otherwise, of the Company. The Company has provided Able with
copies of all documents in the Company's possession or control relating to
Environmental Laws and the business, the assets and the Properties of the
Company. "ENVIRONMENTAL LAWS" means all federal, state and local laws, statutes,
ordinances, judgments, decrees, licenses, permits, rules and regulations
relating to pollution or protection of human health or the environment
including, without limitation, laws, statutes, ordinances, judgments, decrees,
licenses, permits, rules and regulations relating to emissions, discharges,
releases or threatened releases of any Hazardous Material, or otherwise relating
to the use, treatment, storage, disposal, transport or handling of any Hazardous
Material. "ENVIRONMENTAL CLAIM" means any claim, complaint, action, suit,
Proceeding,
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investigation or notice by any Person alleging potential liability arising out
of, based on, or resulting from (a) the release, emission, discharge or disposal
into, or the presence in, the environment including, without limitation, the
indoor environment, of any Hazardous Material at any location, whether or not
owned by the Company or (b) circumstances forming the basis of any violation, or
alleged violation, of any Environmental Law. "HAZARDOUS MATERIAL" means any
material, substance or compound regulated under Environmental Laws as a
pollutant, toxic substance, contaminant, hazardous waste, hazardous material,
hazardous substance, extremely hazardous material, extremely hazardous
substance, hazardous air pollutant, radioactive substance, radioactive waste,
special waste, medical waste, or words of similar import, petroleum or any
fraction, by-product, constituent or refined product thereof, asbestos or
polychlorinated biphenyl.
SECTION 5.18 NON-COMPETITION AGREEMENTS. The Company is not a party to
any agreement or other commitment imposing any restriction on the manner or in
the geographic location in which it conducts or may conduct its business or
uses, or may use, its Properties and assets in competition with any third party.
SECTION 5.19 CHANGE OF CONTROL PROVISIONS. Neither the execution and
delivery of this Agreement or the Related Agreements nor the consummation of the
transactions provided for herein or therein will trigger any obligation of the
Company to any Person, including, without limitation, the obligation to make
payments to any Person pursuant to any Contract or agreement to which the
Company is a party or by which its assets are bound.
SECTION 5.20 VALIDITY OF MERGER TRANSACTIONS. Neither the execution and
delivery of this Agreement or the Related Agreements by the Company nor the
consummation by the Company of the transactions provided for herein or therein
will conflict with, violate, or result in a breach, default or the creation of
any Encumbrance pursuant to, any agreement to which the Company is a party or by
which it is bound or any law, order, judgment or decree or any provision of the
Articles of Incorporation or Bylaws of the Company or any Contract to which the
Company is a party. The Company has the full power and legal authority to
execute this Agreement and the Related Agreements and to consummate and perform
the transactions contemplated hereby and thereby. The execution and delivery of
this Agreement and the Related Agreements and the consummation of the
transactions contemplated hereby and thereby are within the corporate power of
the Company and have been duly authorized by all necessary corporate action on
the part of the Company. This Agreement and the Related Agreements to which the
Company is a party have been duly executed and delivered by the Company and
constitute the legal, valid and binding obligations of the Company, enforceable
against it in accordance with their respective terms.
SECTION 5.21 LICENSES.
(a) The Company possesses all of the licenses that are necessary to
entitle the Company to own or lease, operate and use its assets and Properties
and to conduct its business as currently conducted.
(b) All licenses held by the Company are listed on SCHEDULE 5.21(B)
hereto. True and correct copies of such licenses have been delivered to Able and
Sub prior to the date hereof.
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(c) Each of the licenses held by the Company is in full force and
effect, and as of the date hereof, no proceeding is pending or, to the Company's
knowledge, after due inquiry of Company personnel, threatened seeking the
revocation, suspension or limitation of any such license.
SECTION 5.22 BROKERS. No broker, finder or investment banker is
entitled to any brokerage, finder's fee or other fee or commission payable by
the Company in connection with the transactions contemplated by this Agreement
based upon arrangements made by and on behalf of the Company.
SECTION 5.23 YEAR 2000 COMPLIANCE. The Company has (i) analyzed the
operations of the Company and its affiliates that could be adversely affected by
failure to become Year 2000 compliant (that is, that computer applications,
imbedded microchips and other systems will be able to perform date-sensitive
functions prior to and after December 31, 1999) and (ii) developed a plan for
becoming Year 2000 compliant in a timely manner, the implementation of which is
on schedule in all material respects. The Company reasonably believes that it
will become Year 2000 compliant for its operations and those of its affiliates
on a timely basis except to the extent that a failure to do so could not
reasonably be expected to have a material adverse effect on the Company's
business, operations, financial condition or prospects. Any suppliers and
vendors that are material to the operations of the Company or its affiliates
will be Year 2000 compliant for their own computer applications except to the
extent that a failure to do so could not reasonably be expected to have a
material adverse effect on the Company's business, operations, financial
condition or prospects.
SECTION 5.24 DISCLOSURE. No representation or warranty by the Company
or the Shareholders in this Agreement nor any statement, document or certificate
furnished or to be furnished to Able in connection herewith or pursuant hereto
contains or will contain any untrue statement of a material fact or omits or
will omit to state any material fact necessary to make any statement herein or
therein not misleading. The Company has made available for inspection by Able
and its representatives complete and correct copies of the corporate minute
books of the Company. Such minute books contain the minutes of all meetings of
Shareholders, the board of directors and any committees thereof of the Company
that have been held prior to the date hereof and all written consents to action
executed in lieu thereof.
SECTION 5.25 INVESTMENT REPRESENTATIONS. The Able Common Stock being
delivered pursuant to the provisions of this Agreement will be held by each
Shareholder for his or her own account and not with a view to, or for resale in
connection with, the distribution thereof.
SECTION 5.26 EARN-OUT CONSIDERATION. The Shareholders acknowledge and
agree that the Earn-Out Consideration to be paid pursuant to Section 2.6 and
SCHEDULE 2.6(A) of this Agreement shall be calculated based on the aggregate
sales and profits of the Company and SASCO.
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF ABLE AND SUBSIDIARY
Able and Sub represent and warrant to the Company that:
SECTION 6.1 ORGANIZATION, GOOD STANDING AND AUTHORITY.
(a) Able is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Florida, and has all requisite
corporate power and authority to conduct its business as presently conducted and
to own and lease the Properties and assets used in connection therewith. The
execution and delivery of this Agreement and the Related Agreements and the
consummation of the transactions contemplated hereby and thereby are within the
corporate power of Able and have been duly authorized by all necessary corporate
action on the part of Able. This Agreement and the Related Agreements to which
Able is a party constitute the legal, valid and binding obligations of Able,
enforceable against Able in accordance with their respective terms.
(b) Sub is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Florida, and has all requisite
corporate power and authority to conduct its business as presently conducted and
to own and lease the Properties and assets used in connection therewith. The
execution and delivery of this Agreement and the Related Agreements and the
consummation of the transactions contemplated hereby and thereby are within the
corporate power of Sub and have been duly authorized by all necessary corporate
action on the part of Sub. This Agreement and the Related Agreements to which
Sub is a party constitute the legal, valid and binding obligations of Sub,
enforceable against Sub in accordance with their respective terms.
SECTION 6.2 VALIDITY OF MERGER TRANSACTIONS. Neither the execution and
delivery of this Agreement or the Related Agreements by Able or Sub nor the
consummation by Able or Sub of the transactions provided for herein or therein
will conflict with, violate, or result in a breach of or default under any
Contract to which Able or Sub is a party or by which it or its assets are bound
or any law, order, judgment or decree or any provision of the Certificate of
Incorporation or Bylaws of Able or Sub or any Contract to which Able or Sub is a
party.
SECTION 6.3 LITIGATION. There is no pending action or Proceeding that
has been commenced against Able or Sub and that may have the effect of
preventing, delaying, or making illegal the Merger and, to the best knowledge of
Able and Sub, no such action or Proceeding has been Threatened.
SECTION 6.4 BROKERS. No broker, finder or investment banker is entitled
to any brokerage, finder's fee or other fee or commission payable by Able or Sub
in connection with the transactions contemplated by this Agreement based upon
arrangements made by and on behalf of Able or Sub.
ARTICLE VII
[RESERVED]
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ARTICLE VIII
INDEMNIFICATION
SECTION 8.1 INDEMNIFICATION.
(a) The Shareholders shall indemnify and hold harmless Able and Sub and
their officers, directors, employees, Shareholders, representatives and agents,
from and against any claims, damages, losses, Liabilities, Taxes, injuries to
Persons, property or natural resources, fines, penalties, costs and expenses
(including, without limitation, settlement costs, any reasonable legal,
accounting or other expenses incurred in connection with investigating or
defending any actions or Threatened actions and court costs) (a "LOSS" or
"LOSSES") sustained or required to be paid by reason of, arising out of or
caused by (i) any misrepresentation or Breach of any representation or warranty
made by the Company or any Shareholder in this Agreement, or any Related
Agreement or other certificate, instrument or document contemplated hereby, (ii)
any Breach of or failure to perform any covenant, agreement or obligation of the
Company or any Shareholder contained in this Agreement, or any Related Agreement
or other certificate, instrument or document contemplated hereby, (iii) any
audits or examinations, including, without limitation, the reopening of past
audits, made in respect of Taxes or Plans relating to any period ending on or
prior to the Closing Date or any penalties asserted by, or fees under voluntary
compliance programs payable to, the Internal Revenue Service or Department of
Labor, including, without limitation, for failure to file Forms 5500 on any due
date for such forms occurring prior to the Closing Date, (iv) without limiting
in any way any other provision of this Section 8.1, and whether or not disclosed
in any Schedule hereto, or in any other document related to this transaction,
any act or omission occurring, or condition existing, on or prior to the Closing
Date, and relating, directly or indirectly, to the facilities, assets,
Properties, operations or businesses, owned, leased, operated, or conducted by
the Company as of the Closing Date (including, but not limited to, the storage,
generation, transport or disposal or Hazardous Materials at any location), which
Losses relate, directly or indirectly, to any Environmental Claim as defined in
Section 5.16 (including, without limitation, Losses relating, directly or
indirectly, to injury to persons, including any current or former employee at
the facilities, Properties, operations, or businesses) or (v) without limiting
any way any other provision of this Section 8.1, and whether or not disclosed in
any Schedule hereto or in any other document related to this transaction, any
act or omission occurring, or condition existing, at any time, and relating,
directly or indirectly, to Environmental Laws and to the facilities, assets,
Properties, operations, or businesses formerly owned, leased, operated, or
conducted by the Company or any predecessor (including, but not limited to,
disposal of Hazardous Materials at any location).
(b) Able shall indemnify and hold harmless the Company from and against
any Loss or Losses sustained or required to be paid by reason of, arising out of
or caused by (i) any misrepresentation or Breach of any representation or
warranty made by Able in this Agreement or any other certificate, instrument or
document contemplated hereby; or (ii) any Breach of any covenant, agreement or
obligation of Able contained in this Agreement, or any other certificate,
instrument or document contemplated hereby.
(c) In the event that any indemnified party is made a defendant in or
party to any claim, action, suit or Proceeding, judicial or administrative,
instituted by any third party for
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Losses, or otherwise receives any demand from any third party for Losses (any
such third party claim, action, suit or Proceeding being referred to as a
"CLAIM"), the indemnified party (referred to in this clause (c)(i) as the
"notifying party") shall give the indemnifying party prompt notice thereof. The
failure to give such notice shall not affect whether an indemnifying party is
liable for reimbursement unless such failure has resulted in the loss of
substantive rights with respect to the indemnifying party's ability to defend
such Claim, and then only to the extent of such Loss. The indemnifying party
shall be entitled to contest and defend such Claim; provided, that the
indemnifying party (A) has a reasonable basis for concluding that such defense
may be successful, (B) diligently contests and defends such Claim, and (C)
acknowledges in writing that it is obligated to provide indemnification with
respect to such Claim. Notice of the intention so to contest and defend shall be
given by the indemnifying party to the notifying party within 20 business days
after the notifying party's notice of such Claim (but, in all events, at least
five business days prior to the date that an answer to such Claim is due to be
filed). Such contest and defense shall be conducted by reputable attorneys
employed by the indemnifying party. The notifying party shall be entitled at any
time, at its own cost and expense (which expense shall not constitute a Loss
unless the notifying party reasonably determines that the indemnifying party is
not adequately representing or, because of a conflict of interest, may not
adequately represent, the interests of the indemnified parties, and only to the
extent that such expenses are reasonable), to participate in such contest and
defense and to be represented by attorneys of its or their own choosing. If the
notifying party elects to participate in such defense, the notifying party will
cooperate with the indemnifying party in the conduct of such defense. Neither
the notifying party nor the indemnifying party may concede, settle or compromise
any Claim without the consent of the other party, which consent will not be
unreasonably withheld. Notwithstanding the foregoing, if the indemnifying party
fails to acknowledge in writing its obligation to provide indemnification in
respect of such Claim, then the notifying party alone shall be entitled to
contest, defend and settle such Claim in the first instance (in which case,
expenses incurred in connection therewith shall constitute a Loss) and, only if
the notifying party chooses not to contest, defend or settle such Claim, the
indemnifying party shall then have the right to contest and defend (but not
settle) such Claim.
(d) In the event any indemnified party should have a claim against any
indemnifying party that does not involve a Claim, including, but not limited to,
an Environmental Claim, the indemnified party shall deliver a notice of such
claim with reasonable promptness to the indemnifying party. The failure to give
such notice shall not affect whether an indemnifying party is liable for
reimbursement unless such failure has resulted in the loss of substantive rights
with respect to the indemnifying party's ability to defend such Claim, and then
only to the extent of such Loss. If the indemnifying party notifies the
indemnified party that it does not dispute the claim described in such notice or
fails to notify the indemnified party within 15 days after delivery of such
notice by the indemnified party whether the indemnifying party disputes the
claim described in such notice, the Loss in the amount specified in the
indemnified party's notice will be conclusively deemed a liability of the
indemnifying party and the indemnifying party shall pay the amount of such Loss
to the indemnified party on demand.
(e) After the Closing, the rights set forth in this Section 8.1 shall
be the indemnified parties' sole and exclusive remedies against the other for
misrepresentations or Breaches of covenants contained in this Agreement or in
any exhibit, schedule or other document delivered or to be delivered pursuant to
the terms of this Agreement or otherwise referenced or incorporated in this
Agreement. Notwithstanding the foregoing, nothing herein shall prevent
24
<PAGE>
any of the indemnified parties from bringing an action based upon allegations of
fraud, bad faith or willful misconduct in connection with this Agreement. In the
event action is brought in accordance with the preceding sentence of this clause
(iii), the prevailing party's attorneys' fees and costs shall be paid by the
nonprevailing party.
(f) The Shareholders shall not be liable in an amount which, if added
to all other amounts paid as indemnification payments, would exceed the
Consideration, except as set forth in the next sentence. Able shall not be
entitled to pursue any indemnification claim or recovery against the Company
beyond the foregoing limit, except to the extent any such claim or recovery is
based upon Company's or the Shareholder's (i) Breach of a representation and
warranty made in Article V, or (ii) fraud, bad faith or willful misconduct in
connection with this Agreement, or (iii) arises in connection with Section
8.1(a)(vi) hereof in which case Able's remedy shall not be limited.
(g) The obligations set forth in this Section 8.1 shall be
unconditional and absolute. In the event of a conflict between the provisions of
this Section 8.1 and any other provisions of this Agreement, the provisions of
Section 8.1 shall control. The Shareholders shall not have any indemnification
obligations under this Section 8.1 for Losses until such time as total Losses
for which Able is otherwise entitled to indemnification hereunder equal $25,000
in the aggregate, whereafter the Shareholders shall be liable for all Losses;
provided, however, that any indemnification obligations arising in connection
with Section 8.1(a)(ii), (v) or (vi) hereof shall not be subject to such
limitation. Able shall not have any indemnification obligations under this
Section 8.1 for Losses until such time as total Losses for which the
Shareholders are otherwise entitled to indemnification hereunder equal $25,000
in the aggregate, whereafter Able shall be liable for all Losses.
(h) The indemnification obligations set forth in this Section 8.1 shall
survive any assignment or other transfer by Able.
ARTICLE IX
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 9.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER.
The respective obligations of each Party to effect the Merger shall be subject
to the satisfaction or waiver at or prior to the Effective Time of the following
conditions:
(a) The Parties shall execute all Related Agreements required by this
Agreement, including, but not limited to, that certain Stock Purchase Agreement
dated of even date herewith by and among SASCO, Able, Garner and Joyner
substantially in the form attached as EXHIBIT B hereto.
(b) Able and each of Garner, Hoover and Joyner shall enter into a
registration of rights agreement substantially in the form attached as EXHIBIT C
hereto.
(c) SES shall furnish Able with a Secretary's certificate certifying
the Certificate of Incorporation of SES, the Bylaws of SES, and the due adoption
of the resolutions relating to the Merger and the actions contemplated by this
Agreement, which certificate, bylaws and resolutions shall be attached to the
appropriate Secretary's certificate.
25
<PAGE>
(d) Able shall furnish SES with a Secretary's certificate certifying
the Articles of Incorporation of Able and of Sub, the Bylaws of Able and of Sub,
and the due adoption of the resolutions relating to the Merger and the actions
contemplated by this Agreement, which certificate, bylaws and resolutions shall
be attached to the appropriate Secretary's certificate.
SECTION 9.2 CONDITIONS TO THE SHAREHOLDERS' OBLIGATIONS TO EFFECT THE
MERGER. The obligations of the Company to effect the Merger shall be subject to
satisfaction or waiver at or prior to the Closing of the following additional
condition:
(a) Each of Able and Sub shall have performed in all material respects
its obligations under this Agreement required to be performed by it at or prior
to the Closing; the representations and warranties of Able and Sub contained in
this Agreement which are qualified with respect to materiality shall be true and
correct in all material respects, and such representations and warranties that
are not so qualified shall be true and correct in all respects in each case as
of the date of this Agreement and at and as of the Closing as if made at and as
of such time, except as contemplated by this Agreement; and the Company shall
have received a certificate of the Secretary of Able as to the satisfaction of
this condition.
SECTION 9.3 CONDITIONS TO ABLE'S AND SUB'S OBLIGATION TO EFFECT THE
MERGER. The obligations of Able and Sub to effect the Merger shall be subject to
the satisfaction or waiver at or prior to the Closing of the following
additional conditions:
(a) The Company and the Shareholders shall have performed in all
material respects its obligations under this Agreement required to be performed
by it at or prior to the Closing; the representations and warranties of the
Company and the Shareholders contained in this Agreement which are qualified
with respect to materiality shall be true and correct in all material respects,
and such representations and warranties that are not so qualified shall be true
and correct in all respects, in each case as of the date of this Agreement and
at and as of the Closing as if made at and as of such time. Able and Sub shall
have received a Certificate of the Shareholders as to the satisfaction of this
condition.
(b) The Company and Hoover shall have entered into an employment
agreement substantially in the form attached as EXHIBIT A hereto.
(c) The Company and Hoover shall have entered into a non-competition
agreement substantially in the form attached as EXHIBIT D hereto.
(d) The Company shall have paid certain notes payable, as set forth on
SCHEDULE 9.3(d) hereto.
(e) Able shall have received a certificate from each of the Company,
the Shareholders, Garner and Joyner, dated the Closing, in substantially the
form set forth as EXHIBIT E.
26
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ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
SECTION 10.1 TERMINATION. This Agreement may be terminated at a time
prior to the Effective Time:
(a) By mutual consent of Able, Company and the Boards of Directors of
the Able and the Company;
(b) By either Able or the Company if (i) the Merger shall not have been
consummated by November 30, 1999 or such other later date as the parties may
agree upon in writing; provided, however, that the right to terminate this
Agreement under this Section 9.1(a) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the cause of, or
resulted in, the failure of the Merger to occur on or before such date; or (ii)
a court of competent jurisdiction or governmental, regulatory or administrative
agency or commission shall have issued an order, decree or ruling or taken any
other action (which order, decree, ruling or other action the parties hereto
shall use their best efforts to vacate), in each case permanently restraining,
enjoining or otherwise prohibiting the transactions contemplated by this
Agreement; or
(c) By Able if the Company fails to satisfy any of the conditions set
forth in Section 9.3 hereto, if a material Breach of any of the representations,
warranties or covenants of the Company set forth in this Agreement has been
committed by the Company and such Breach has not been (1) waived by Able, or (2)
cured by the Company within 10 days after receipt of written notice thereof to
the Company from Able or if Able is not satisfied with the results of due
diligence and provides the Company with written notice of Able's desire to
terminate this Agreement and the reason therefor; or
(d) By the Company if a material Breach of any of the representations,
warranties, or covenants of Able set forth in this Agreement has been committed
by Able and such Breach has not been (1) waived by the Company, or (2) cured by
Able within 10 days after receipt of written notice thereof from the Company; or
(e) By mutual written consent of Able and Company.
SECTION 10.2 EFFECT OF TERMINATION. Anything to the contrary set forth
in this Agreement notwithstanding, the sole and exclusive right and remedy of
any of the parties hereto for and with respect to any Breach of a
representation, warranty, covenant or agreement of any of the other parties
hereto under this Agreement or any of the Related Agreements that occurs before
the Closing and with respect to which any of the parties hereto terminate this
Agreement shall be to terminate this Agreement pursuant to and in accordance
with the provisions of this Section 10.2; provided, however, (a) that if this
Agreement is terminated because of a willful Breach by the Company or the
Shareholders terminates this Agreement or otherwise decline to close the Merger
when (i) Able shall have satisfied all conditions set forth in Section 10.2
hereof or prior to the last date under this Agreement when Able could have
satisfied such conditions, and (ii) Able is otherwise prepared to close the
Merger but for the Company's failure to close, Able shall be entitled to receive
from the Company an amount equal to all reasonable out-of-pocket fees and
expenses (including fees and expenses of its counsel) incurred by Able and its
affiliates in connection herewith.
27
<PAGE>
In the event of the termination of this Agreement as provided in
Article IX, this Agreement will forthwith become null and void and there shall
be no liability on the part of any party hereto except that (A) Articles 8 and
10.1 (Survival of Representations, Warranties and Covenants) will remain in full
force and effect and (B) nothing herein will relieve any party from liability
for any wilful breach hereof.
SECTION 10.3 FEES AND EXPENSES. Except as set forth in Section 9.2,
each Party shall be responsible for its own fees, costs and expenses incurred in
connection with the Merger.
SECTION 10.4 AMENDMENT. This Agreement may be amended only by mutual
consent of Able, Sub, the Company and the Boards of Directors of Able, Sub and
the Company at any time before or after approval of this Agreement, and by the
Shareholders of Sub and of the Company if required by applicable law.
SECTION 10.5 WAIVER. Any party hereto may (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties of the other
parties contained herein, and (c) waive compliance with any of the agreements or
conditions of the other parties contained herein. Any such extension or waiver
shall be valid if set forth in an instrument in writing signed by the party or
parties to be bound thereby. Any waiver of any term or condition shall not be
construed as a waiver of any subsequent breach or a subsequent waiver of the
same term or condition, or a waiver of any other term or condition, of this
Agreement. The failure of any party to assert any of its rights hereunder shall
not constitute a waiver of any of such rights.
ARTICLE XI
GENERAL PROVISIONS
SECTION 11.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. All
representations and warranties made by Able, Sub, the Company and the
Shareholders in this Agreement or pursuant hereto shall survive the Closing for
a period of three years, except for (a) the representations and warranties
relating to Taxes of all kinds which shall in each case survive the Closing
until claims based thereon shall have been barred by the relevant statutes of
limitations and (b) the representations and warranties contained in Section
5.16, which shall survive the Closing indefinitely; provided, that in the event
that any claim for a Breach of a representation or warranty has been asserted
prior to the last day such representation or warranty would otherwise survive
pursuant to this Section 10.1 such representation and warranty shall survive
until the final disposition of such claim.
SECTION 11.2 NOTICES. All notices an other communications given or made
pursuant hereto will be in writing and will be deemed to have been duly given or
made as of the date delivered or mailed if delivered personally or mailed by
registered or certified mail (postage prepaid, return receipt requested), or
transmitted by confirmed facsimile, to the parties at the following addresses or
facsimile numbers, as the case may be, or at such other address or facsimile
number for a party as shall be specified by like notice, except that notices of
changes of address or facsimile number shall be effective upon receipt:
28
<PAGE>
(a) if to Able or Sub:
ABLE TELCOM HOLDING CORP.
1000 Holcomb Woods Parkway
Suite 400
Roswell, GA 30076
Attn: President
Telephone: (770) 993-1570
Facsimile: (770) 993-8532
with a copy to:
PAUL, HASTINGS, JANOFSKY & WALKER LLP
Suite 2400
600 Peachtree Street, N.E.
Atlanta, GA 30308-2222
Attn: Wayne Shortridge
Telephone: (404) 815-2214
Facsimile: (404) 815-2424
(b) if to the Company:
SPECIALTY ELECTRONIC SYSTEMS, INC.
4500 Southgate Place
Suite 550
Chantilly, VA 20151
Attn: C. Michael Hoover
Telephone: (703) 631-8245
Facsimile: (703) 631-8246
SECTION 11.4 SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement will
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto will
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the greatest extent
possible.
SECTION 11.5 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement, and supersedes all prior agreements and undertakings, both written
and oral, among the parties, or any of them, with respect to the subject matter
hereof and are not intended to confer upon any other Person any rights or
remedies hereunder.
SECTION 11.6 ASSIGNMENT. This Agreement shall not be assigned by
operation of law or otherwise, except that Able may assign all or any of its
rights hereunder to any Affiliate of Able
29
<PAGE>
provided that no such assignment will relieve the assigning party of its
obligations hereunder and the assignee shall specifically assume the obligations
of the assignor hereunder.
SECTION 11.7 HEADINGS AND GENDER . Article and Section headings in this
Agreement are included herein for convenience of reference only and will not
constitute a part of this Agreement for any other purpose. The use of the
masculine pronoun herein when referring to any party has been for convenience
only and shall be deemed to refer to the particular party intended regardless of
the actual gender of such party.
SECTION 11.8 GOVERNING LAW. This Agreement will by governed by, and
construed in accordance with, the law of the State of Florida, without giving
effect to the principles of conflict of laws of such State.
SECTION 11.9 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of with when so executed will be deemed to be an original but all of which
taken together will constitute one and the same instrument.
30
<PAGE>
IN WITNESS WHEREOF, Able, Sub and the Company have caused this
Agreement to be executed as of the date first written above by their respective
representatives thereunto duly authorized.
ABLE:
ABLE TELCOM HOLDING CORP.
/s/ BILLY V. RAY
--------------------------------------------
Name: Billy V. Ray
Title: President
SUB:
SES ACQUISITION CORP.
/s/ BILLY V. RAY
--------------------------------------------
Name: Billy V. Ray
Title: President
THE COMPANY:
SPECIALTY ELECTRONIC SYSTEMS, INC.
/s/ C. MICHAEL HOOVER
--------------------------------------------
Name: C. Michael Hoover
Title: President
SASCO:
SOUTHERN ALUMINUM AND STEEL CORPORATION
/s/ DONALD G. GARNER
--------------------------------------------
Name: Donald G. Garner
Title: President
/s/ C. MICHAEL HOOVER
--------------------------------------------
C. Michael Hoover
31
<PAGE>
/s/ DONALD G. GARNER
--------------------------------------------
Donald G. Garner, signing for the purposes
of Section 4.3 and Article V only
/s/ JESSER J>
--------------------------------------------
Jesse R. Joyner, signing for the purposes of
Section 4.3 and Article V only
EXHIBIT 2.7.1
Schedule 2.6(a)
CONSIDERATION(1)
The Earn-Out Consideration which shall be payable in shares of Able Common Stock
valued as described below, at the Payment Date for each of Year One, Year Two,
Year Three and Year Four is estimated as set forth on the table below. The
actual Earn-Out Consideration payable for each of Year One, Year Two, Year Three
and Year Four is based upon aggregate sales and profits(2) of the Company and
SASCO reaching the below projections at each of those dates, and will be subject
to adjustment to reflect actual aggregate sales and profits pursuant to the
formula set forth below for years ending October 31, 2000, 2001, 2002 and 2003:
ESTIMATED EARN-OUT
YEAR PAYMENT DATE PROJECTED SALES PROJECTED CONSIDERATION
PROFITS VALUE
One January 15, 2001 $19,300,000 $1,351,000 $1,344,538
Two January 15, 2002 $24,200,000 $1,694,000 $ 700,280
Three January 15, 2003 $27,000,000 $1,890,000 $ 840,336
Four January 15, 2004 $30,000,000 $2,100,000 $ 700,280
- --------
(1) The Consideration shall be paid in shares of Able Common Stock until the
combined Consideration calculated pursuant to the terms of this Agreement and
pursuant to the terms of the SASCO Stock Purchase Agreement, and which includes
the Initial Consideration and the Earn-Out Consideration, equals 19.9% of the
total Able Common Stock issued and outstanding. Any and all Consideration in
excess of 19.9% of issued and outstanding Able Common Stock shall be paid in
cash or by promissory note, as mutually agreed upon by Able and the
Shareholders, at the time of payment and shall include interest calculated at
the market rate.
(2) Profit shall be determined in accordance with generally accepted accounting
principles. Profit includes all revenues and expenses of the business except for
income taxes and net interest expense, and corporate overhead which will not
exceed 2 1/2% of revenues per year.
<PAGE>
Earn-Out Consideration:
Sales/Projected Sales x 25% of Potential Payment (2/7 of combined SES and SASCO
Potential Payment) = Sales Payment
Profit/Potential Profit x 75% of Potential Payment (2/7 of combined SES and
SASCO Potential Payment) = Profit Payment
Sales Payment + Profit Payment = Earn-Out Consideration
Examples:
If combined sales at October 31, 2001, are $23,000,000 and combined profit is
$1,500,000
Sale portion 23,000,000/24,200,000 = 95.04% x 175,070 = 166,387
Profit portion 1,500,000/ 1,694,000 = 88.55% x 525,210 = 465,073
------- -------
Consideration 700,280 631,460
If combined sales at October 31, 2002 are $28,000,000 and combined profit is
$2,150,000
Sale portion 28,000,000/27,000,000 = 103.70% x 210,084 = 217,857
Profit portion 2,150,000/ 1,890,000 = 113.76% x 630,252 = 716,978
------- -------
Consideration 840,336 934,835
The Earn-Out Consideration for Year One (ending October 31, 2000) shall be
converted into Able Common Stock by dividing the Consideration by $8.00. The
Earn-Out Consideration for each of Year Two, Year Three and Year Four shall be
converted into Able Common Stock by dividing the Earn-Out Consideration by the
52-week average of the closing market price of the Able Common Stock for each
respective year.
EXHIBIT 2.7.2
Schedule 2.6(a)
CONSIDERATION(1)
The Earn-Out Consideration which shall be payable in shares of Able Common Stock
valued as described below, at the Payment Date for each of Year One, Year Two,
Year Three and Year Four is estimated as set forth on the table below. The
actual Earn-Out Consideration payable for each of Year One, Year Two, Year Three
and Year Four is based upon aggregate sales and profits(2) of the Company and
SES reaching the below projections at each of those dates, and will be subject
to adjustment to reflect actual aggregate sales and profits pursuant to the
formula set forth below for years ending October 31, 2000, 2001, 2002 and 2003:
ESTIMATED
YEAR PAYMENT DATE PROJECTED SALES PROJECTED EARN-OUT CONSIDERATION
PROFITS VALUE
One January 15, $19,300,000 $1,351,000 $1,055,462
2001
Two January 15, $24,200,000 $1,694,000 $549,720
2002
Three January 15, $27,000,000 $1,890,000 $659,664
2003
Four January 15, $30,000,000 $2,100,000 $549,720
2004
Earn-Out Consideration:
- --------
(1) The Consideration shall be paid in shares of Able Common Stock until the
combined Consideration calculated pursuant to the terms of this Agreement and
pursuant to the terms of the SES Merger Agreement, and which includes the
Initial Consideration and the Earn-Out Consideration, equals 19.9% of the total
Able Common Stock issued and outstanding. Any and all Consideration in excess of
19.9% of issued and outstanding Able Common Stock shall be paid in cash or by
promissory note, as mutually agreed upon by Able and the Shareholders, at the
time of payment and shall include interest calculated at the market rate.
(2) Profit shall be determined in accordance with generally accepted accounting
principles. Profit includes all revenues and expenses of the business except for
income taxes and net interest expense, and corporate overhead which will not
exceed 2 1/2% of revenues per year.
<PAGE>
Sales/Projected Sales x 25% of Potential Payment (5/7 of combined SES and SASCO
Potential Payment) = Sales Payment
Profit/Potential Profit x 75% of Potential Payment (5/7 of combined SES and
SASCO Potential Payment) = Profit Payment
Sales Payment + Profit Payment = Earn-Out Consideration
Examples:
If combined sales at October 31, 2001, are $23,000,000 and combined profit is
$1,500,000
Sale portion 23,000,000/24,200,000 = 95.04% x 137,430 = 130,613
Profit portion 1,500,000/ 1,694,000 = 88.55% x 412,290 = 365,083
------- -------
Earn-Out Consideration 549,720 495,695
If combined sales at October 31, 2002 are $28,000,000 and combined profit is
$2,150,000
Sale portion 28,000,000/27,000,000 = 103.70% x 164,916 = 171,018
Profit portion 2,150,000/ 1,890,000 = 113.76% x 494,748 = 562,825
------- -------
Earn-Out Consideration 659,664 733,843
The Earn-Out Consideration for Year One (ending October 31, 2000) shall be
converted into Able Common Stock by dividing the Earn-Out Consideration by
$8.00. The Earn-Out Consideration for each of Year Two, Year Three and Year Four
shall be converted into Able Common Stock by dividing the Earn-Out Consideration
by the 52-week average of the closing market price of the Able Common Stock for
each respective year.
EXHIBIT 2.7.3
STOCK PURCHASE AGREEMENT
BY AND AMONG
ABLE TELCOM HOLDING CORP.,
SOUTHERN ALUMINUM & STEEL CORPORATION
AND THE SHAREHOLDERS
Dated as of November 5, 1999
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I DEFINITIONS..................................................2
ARTICLE II PURCHASE AND SALE OF COMMON STOCK............................6
ARTICLE III CLOSING .....................................................7
SECTION 3.1 Location, Date...............................................7
SECTION 3.2 Deliveries...................................................7
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS...........7
SECTION 4.1 Stock Ownership and Other Matters............................7
SECTION 4.2 Earn-Out Consideration.......................................8
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE COMPANY................8
SECTION 5.1 Organization, Standing, Qualification and Capitalization.....8
SECTION 5.2 Subsidiaries of the Company..................................9
SECTION 5.3 Financial Statements.........................................9
SECTION 5.4 Properties and Permits......................................10
SECTION 5.5 Taxes.......................................................11
SECTION 5.6 Litigation and Labor Matters................................11
SECTION 5.7 Insurance...................................................12
SECTION 5.8 Intellectual Property Rights................................13
SECTION 5.9 Contracts and Commitments...................................14
SECTION 5.10 Absence of Undisclosed Liabilities..........................15
SECTION 5.11 Absence of Default..........................................15
SECTION 5.12 Existing Condition..........................................16
SECTION 5.13 Restrictions................................................16
SECTION 5.14 Employee Benefits...........................................16
SECTION 5.15 Bank Accounts and Directors and Officers....................19
SECTION 5.16 Compliance with Laws and Instruments........................19
SECTION 5.17 Environmental Compliance....................................20
SECTION 5.18 Non-Competition Agreements..................................21
SECTION 5.19 Change of Control Provisions................................21
SECTION 5.20 Validity of Contemplated Transactions.......................21
SECTION 5.21 Licenses....................................................21
SECTION 5.22 Brokers.....................................................22
SECTION 5.23 Year 2000 Compliance........................................22
SECTION 5.24 Disclosure..................................................22
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SECTION 5.25 Investment Representations..................................22
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF ABLE......................23
SECTION 6.1 Organization, Good Standing and Authority...................23
SECTION 6.2 Validity of Contemplated Transactions.......................23
SECTION 6.3 Litigation..................................................23
SECTION 6.4 Brokers.....................................................23
ARTICLE VII ............................................................23
ARTICLE VIII INDEMNIFICATION.............................................24
SECTION 8.1 Indemnification.............................................24
ARTICLE IX CONDITIONS TO CONSUMMATION OF THE ACQUISITION...............27
SECTION 9.1 Conditions to Each Party's Obligation to Effect
the Acquisition.............................................27
SECTION 9.2 Conditions to the Shareholders' Obligations to Effect
the Acquisition.............................................27
SECTION 9.3 Conditions to Able's Obligation to Effect the Acquisition...27
ARTICLE X TERMINATION, AMENDMENT AND WAIVER...........................28
SECTION 10.1 Termination.................................................28
SECTION 10.2 Effect of Termination.......................................29
SECTION 10.3 Fees and Expenses...........................................29
SECTION 10.4 Amendment...................................................29
SECTION 10.5 Waiver......................................................30
ARTICLE XI GENERAL PROVISIONS..........................................30
SECTION 11.1 Survival of Representations, Warranties and Covenants.......30
SECTION 11.2 Notices.....................................................30
SECTION 11.4 Severability................................................31
SECTION 11.5 Entire Agreement............................................32
SECTION 11.6 Assignment..................................................32
SECTION 11.7 Headings and Gender.........................................32
SECTION 11.8 Governing Law...............................................32
SECTION 11.9 Counterparts................................................32
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "AGREEMENT") is made and entered
into as of November 5, 1999 by and among Able Telecom Holding Corp., a Florida
corporation ("ABLE"), Southern Aluminum & Steel Corporation, a Florida
corporation (the "COMPANY") and Donald G. Garner and Jesse R. Joyner (each
individually, a "SHAREHOLDER"; collectively, the "SHAREHOLDERS").
RECITALS
WHEREAS, the total authorized capital stock of the Company consists of
100 shares of common stock, par value $5.00 per share (the "COMPANY COMMON
STOCK");
WHEREAS, together, the Shareholders own 100 shares of Company Common
Stock, constituting all of the issued and outstanding Company Common Stock; and
WHEREAS, the Shareholders desire to sell, and Able desires to purchase,
all of the issued and outstanding Company Common Stock to Able, upon the terms
and subject to the conditions hereinafter set forth (the "ACQUISITION").
NOW THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
intending to be legally bound hereby, Able, the Company and the Shareholders
hereby agree as follows:
ARTICLE I
DEFINITIONS
Capitalized terms shall have the meanings provided below or as
parenthetically in this Agreement:
"ABLE" has the meaning set forth in the preamble of this Agreement.
"ABLE COMMON STOCK" means the common stock, no par value per share, of
Able.
"ACQUISITION" has the meaning set forth in the Recitals of this
Agreement.
"ANNUALIZED TOTAL" means the total of the Sales Payment and the Profit
Payment earned for the portion of Year Two, Year Three or Year Four, as
applicable (the year of termination), annualized for the full year.
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"BREACH" means any inaccuracy in or breach of, or any failure to
perform or comply with a representation, warranty, covenant, obligation or other
provision of this Agreement or any Related Agreement.
"CLAIM" has the meaning set forth in Section 8.1(c) hereof.
"CLOSING" has the meaning set forth in Section 3.1 hereof.
"CLOSING DATE" has the meaning set forth in Section 3.1 hereof.
"CODE" has the meaning set forth in Section 5.14(b) hereof.
"COMPANY" has the meaning set forth in the preamble of this Agreement.
"COMPANY COMMON STOCK" means the common stock, $5.00 par value per
share, of the Company.
"COMPANY MATERIAL ADVERSE EFFECT" means a material adverse effect on
the business, assets, Properties, or existing or prospective business, results
of operations, or financial condition of the Company and its Subsidiaries, taken
as a whole.
"CONSIDERATION" has the meaning set forth in Section 2.6(a) hereof.
"CONTRACT" means any agreement or contract, whether written or oral,
that is legally binding, including any commitment to purchase.
"DISSENTING SHARES" has the meaning set forth in Section 4.2 hereof.
"EARNOUT CONSIDERATION" has the meaning set forth in Section 2.1(c)
hereof.
"EARN-OUT CONSIDERATION VALUE" has the meaning set forth on SCHEDULE
2.1(A) hereto.
"EFFECTIVE TIME" has the meaning set forth in Section 2.2 hereof.
"ENCUMBRANCE" means any mortgage, charge, claim, equitable interest,
lien, option, pledge, security interest, right of first refusal or other
encumbrance.
"ENVIRONMENTAL CLAIM" has the meaning set forth in Section 5.17 hereof.
"ENVIRONMENTAL LAWS" has the meaning set forth in Section 5.17 hereof.
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"ERISA AFFILIATE" has the meaning set forth in Section 5.14(a) hereof.
"FINANCIAL STATEMENTS" means, collectively, the Company's
audited/reviewed balance sheet and related audited/reviewed statements of
operations and retained earnings and statements of cash flows for the fiscal
years ended July 31, 1999 and 1998, including the notes thereto and the reports
prepared in connection therewith by independent certified public accountants.
"FLORIDA ACT" means the Florida 1989 Business Corporation Act.
"GAAP" means, at any particular time, generally accepted accounting
principles as in effect in the United States at such time; provided, however,
that, if it was permissible to use more than one principle at such time in
respect of a particular accounting matter, GAAP shall refer to the principle
which was then employed by the Company.
"GARNER" means Donald G. Garner.
"HAZARDOUS MATERIAL" has the meaning set forth in Section 5.17 hereof.
"HOOVER" means C. Michael Hoover.
"INITIAL CONSIDERATION" has the meaning set forth in Section 2.1(b)
hereof.
"INSIDER" means (i) any Shareholder, (ii) any member of the family of a
Shareholder who is closer in relation than a second cousin or (iii) any
corporation, partnership limited liability company, trust or other entity in
which any of such Persons owns any beneficial interest or is a director,
officer, employee, trustee, partner or holder of more than five percent of the
outstanding capital stock thereof or is otherwise an affiliate as defined in
Rule 12b-2 promulgated under the Securities Exchange Act of 1934, as amended.
"INTELLECTUAL PROPERTY RIGHTS" has the meaning set forth in Section
5.8(a) hereof.
"IRS" has the meaning set forth in Section 5.5 hereof.
"JOYNER" means Jesse R. Joyner.
"LEASED REAL PROPERTY" means, collectively, the real estate leased by
the Company, together with the Company's leasehold interests in and to all
buildings and improvements erected thereon, and all fixtures and appliances
installed in, attached to, or situated in or upon such real estate and any and
all appurtenances relating to such real estate.
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"LIABILITIES" means, collectively, any debt, obligation or liability.
"LOSS(ES)" has the meaning set forth in Section 8.1 hereof.
"PARTIES" means Able, the Company and the Shareholders.
"PAYMENT DATE" has the meaning set forth on SCHEDULE 2.1(A) hereto.
"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 agency (or any department, agency or political
subdivision thereof).
"PLANS" has the meaning set forth in Section 5.14(a) hereof.
"PROCEEDING" means any action, arbitration, audit, complaint,
investigation, petition, litigation or suit (whether civil, criminal,
administrative, investigative or informal) commenced, brought, conducted or
heard by or before, or otherwise involving, any governmental body or
administrator or any arbitrator.
"PROFIT PAYMENT" has the meaning set forth on SCHEDULE 2.1(A) hereto.
"PROPERTIES" means the Leased Real Property and the equipment and
operations located thereon.
"REAL PROPERTY" means, collectively, the real estate owned by the
Company, together with all of the Company's rights, title and interests in and
to all buildings and improvements erected thereon, and all fixtures and
appliances installed in, attached to, or situated in or upon such real estate
and any and all appurtenances relating to such real estate.
"RELATED AGREEMENTS" means, collectively, all agreements, documents,
certificates and instruments to be delivered pursuant to or in connection with
this Agreement, including Exhibits, A, B, C and D hereto.
"SALES PAYMENT" has the meaning set forth on SCHEDULE 2.6(A) hereto.
"SES" means Specialty Electronic Systems, Inc.
"SES MERGER" means the merger of SES with SES Acquisitions Corp.
"SHAREHOLDER(S)" has the meaning set forth in the preamble of this
Agreement.
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"SUBSIDIARY" means any corporation, partnership, limited liability
company, association or other entity of which securities or other ownership
interests representing 50% or more of the ordinary voting power are, at the time
as of which any determination is being made, owned or controlled by Able or the
Company, as applicable.
"TAX(ES)" means all federal, state, local or foreign taxes of any kind,
charges, fees, customs, duties, imposts, levies, required deposits or other
assessments, including, without limitation, all net income, gross receipts, ad
valorem, value added, transfer, gains, franchise, profits, inventory, net worth,
capital stock, asset, sales, use, license, estimated, withholding, payroll,
transaction, capital, employment, social security, required deposits, workers
compensation, unemployment, excise, severance, stamp, occupation and property
taxes, together with any interest and any penalties, fines, additions to tax or
additional amounts imposed by any taxing authority (domestic or foreign) and any
transferee liability in respect of Taxes.
"TAX RETURNS" means any return, report, form or other documents or
information filed with or submitted to, or required to be filed with or
submitted to, any governmental body in connection with the determination,
assessment, collection or payment of any Tax (including all filings with respect
to employment-related Taxes).
"THREATENED" has the following meaning: A Proceeding, claim, dispute or
other matter will be deemed to have been Threatened with respect to a Person, if
such Person has received any demand, statement or other notice with respect to
such Proceeding, claim, dispute or other matter.
"TRADE SECRETS" has the meaning set forth in Section 5.8(b) hereof.
"TRANSFER AGENT" means Florida Atlantic Stock Transfer, Inc.
"WELFARE PLAN" has the meaning set forth in Section 5.14(l) hereof.
"YEAR FOUR" means the fiscal year ending October 31, 2003.
"YEAR THREE" means the fiscal year ending October 31, 2002.
"YEAR TWO" means the fiscal year ending October 31, 2001.
"YEAR ONE" means the fiscal year beginning November 1, 1999 and ending
October 31, 2000.
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ARTICLE II
PURCHASE AND SALE OF COMMON STOCK
SECTION 2.1 PURCHASE AND SALE OF COMMON STOCK.
(a) At the Closing, the Shareholders, in reliance on the
representations, warranties and covenants of Able contained herein and subject
to the terms and conditions of this Agreement, shall sell to Able all of the
Company Common Stock, and Able, in reliance on the representations, warranties
and covenants of the Company and the Shareholders contained herein and subject
to the terms and conditions of this Agreement shall purchase the Company Common
Stock from the Shareholders for the Consideration as set forth on SCHEDULE
2.1(A) hereto.
(b) In consideration for the shares of Company Common Stock and the
covenants, representations and warranties contained in this Agreement, at
Closing, Able shall deliver shares of Able Common Stock as follows (the "INITIAL
CONSIDERATION"):
Garner 16,821 shares
Joyner 16,162 shares
(c) From and after the Closing, Able shall deliver to each of Garner
and Joyner additional shares of Able Common Stock if earned in accordance with
SCHEDULE 2.1(A) hereto (the "EARN-OUT CONSIDERATION") as described on SCHEDULE
2.1(A) to this Agreement. At each Payment Date, the total amount of Earn-Out
Consideration earned as of such date shall be delivered to the individuals on
the following allocation basis:
Garner 51%
Joyner 49%
(d) In the event Able permanently terminates all operations of SASCO at
any point during Year One, the total Earn-Out Consideration payable to Hoover,
Garner and Joyner for Year One shall be $1,055,462 to be allocated as set forth
in Section 2.1(c) above. No further Consideration shall be payable at any time.
(e) In the event Able permanently terminates all operations of SASCO at
any point during Year Two, Year Three or Year Four, the total Earn-Out
Consideration payable to Hoover, Garner and Joyner for such year shall be the
higher of the Estimated Earn-Out Consideration Value or the Annualized Total
calculated for the year of termination. No further Consideration shall be
payable at any time.
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ARTICLE III
CLOSING
SECTION 3.1 LOCATION, DATE. The closing (the "CLOSING") of the
Acquisition shall be held at the offices of Able, in Roswell, Georgia, on
November 5, 1999 at 9:00 am, unless the Parties hereto agree in writing to
another date or place. The date on which the Closing occurs is referred to
herein as the "CLOSING DATE."
SECTION 3.2 DELIVERIES. At the Closing,
(a) the Shareholders shall deliver to Able free and clear of all
Encumbrances thereon of every kind, the certificates for the shares of all
issued and outstanding Company Common Stock in negotiable form for valid
transfer, duly endorsed in blank or with separate executed stock transfer powers
attached, with signatures guaranteed by a bank of trust company or by a firm
having membership in the New York Stock Exchange, Inc.
(b) the Parties shall deliver to each other the respective agreements
and other documents and instruments specified with respect to them in Article IX
hereof and such other items as may be reasonably requested.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
SECTION 4.1 STOCK OWNERSHIP AND OTHER MATTERS. The Shareholders
represent and warrant to Able that the Shareholders are the lawful owner of
record and beneficially of 100 shares of Company Common Stock free and clear of
all Encumbrances of every kind, and the Shareholders have full legal power and
all authorization required by law to transfer and deliver said shares in
accordance with this Agreement. At the Closing, the Shareholders will be the
lawful owners of record and beneficially of the shares described above and shall
validly convey and transfer, to Able all issued and outstanding Company Common
Stock, free and clear of all Encumbrances. None of the Company Common Stock is,
or at the Closing, will be, subject to restrictions on the transfer thereof,
except for restrictions imposed by applicable federal and state securities laws.
Neither of the Shareholders are, and, at the Closing will be, a party to or
bound by any written or oral Contract or agreement which grants to any Person an
option or right of first refusal or other right of any character to acquire at
any time, or upon the happening of any stated events, shares of capital stock or
other securities of the Company whether or not presently issued and outstanding
on the Closing Date. There is no pending action or Proceeding that has been
commenced against the Shareholders that may have the effect of preventing,
delaying or making illegal the contemplated transactions and no such action or
Proceeding has been Threatened. Neither the execution and delivery of this
Agreement or the Related Agreements by the Shareholders nor the consummation by
the Shareholders of the transactions provided for herein or
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therein will conflict with, violate, or result in a breach of, default under or
the creation of any Encumbrance pursuant to, any agreement to which the
Shareholder is a party or by which it is bound or any law, permit, license,
order, judgment or decree or any provision of the charter or By-Laws of the
Company or any Contract to which either the Company or the Shareholders is a
party. The Shareholders have full power and legal authority to execute and
deliver this Agreement and the Related Agreements and to consummate and perform
the transactions contemplated hereby and thereby. This Agreement and the Related
Agreements to which the Shareholders are a party have been duly executed and
delivered by the Shareholders and constitute the legal, valid and binding
obligations of the Shareholders, enforceable against the Shareholders in
accordance with their respective terms. No permit, authorization, consent or
approval of, or filing with or notification to, any governmental, regulatory or
administrative body or any other third party is required in connection with the
execution and delivery of this Agreement and the Related Agreements by the
Shareholders. No representation or warranty by the Shareholders in this
Agreement contains or will contain any untrue statement of a material fact or
omits or will omit to state any material fact necessary to make any statement
herein not misleading.
SECTION 4.2 EARN-OUT CONSIDERATION. The Shareholders acknowledge and
agree that the Earn-Out Consideration to be paid pursuant to Section 2.1 and
SCHEDULE 2.1(A) of this Agreement shall be earned based on the achievement of
certain targeted levels of aggregate sales and profits for the Company and SES
combined.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company, as to itself, and the Shareholders, as to the Company, for
the purposes of Section 5.24, as to themselves, represent and warrant to Able as
follows:
SECTION 5.1 ORGANIZATION, STANDING, QUALIFICATION AND CAPITALIZATION.
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Florida, and has all requisite corporate
power and authority to conduct its business as presently conducted and to own
and lease the Properties and assets used in connection therewith. A complete and
accurate copy of (i) the Articles of Incorporation of the Company and all
amendments thereto certified by the Secretary of State of the State of Florida
and (ii) the Bylaws of the Company and all amendments thereto, certified by the
Company's Secretary, will have been delivered to Able. The Company is duly
qualified to do business as a foreign corporation in Alabama, Florida, Georgia,
Idaho, Kentucky, Louisiana, Mississippi, North Carolina, Ohio, South Carolina,
Tennessee, Texas and Virginia and is in good standing in each such state and
foreign jurisdiction, such jurisdictions being the only jurisdictions in which
the Company is required to be so qualified.
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The total authorized capital stock of the Company consists of 100
shares of $5.00 par value Common Stock of which 100 shares are issued and
outstanding. All of such shares were duly authorized and validly issued and are
fully paid and non-assessable. There are no shares of capital stock of the
Company issued and outstanding except for such shares. None of such shares was
issued in violation of any preemptive or preferential right. There are currently
no stock options outstanding. The Company is not and, at the Closing, the
Company will not be, nor is any Shareholder, a party to or bound by any written
or oral Contract or agreement which grants to any Person an option or right of
first refusal or other right of any character to acquire at any time, or upon
the happening of any stated events, shares of capital stock or other securities
of the Company whether or not presently issued or outstanding. The Shareholders
are the record and beneficial holders of all outstanding securities of the
Company.
SECTION 5.2 SUBSIDIARIES OF THE COMPANY. The Company does not own any
shares of any corporation and has no interest in any partnership, limited
liability company, joint venture or other legal entity.
SECTION 5.3 FINANCIAL STATEMENTS. The Company has delivered to Able
true, complete and accurate copies of the Financial Statements, all of which
have been prepared in accordance with GAAP, applied on a basis consistent with
that of the preceding fiscal year.
(a) The Financial Statements fairly represent the financial condition
and results of operations, equity and cash flow of the Company as of the
respective dates of and for the respective periods referred to in the Financial
Statements, all in accordance with GAAP consistently applied.
(b) All inventory of the Company as set forth in the Financial
Statements consisted of, and all inventory as of the Closing Date will consist
of, raw materials, work-in-process and finished goods of a quality and quantity
usable or salable in the ordinary course of business of the Company. The value
at which inventories were reflected in the Financial Statements approximates
cost, with adequate provision for obsolete material, all in accordance with GAAP
applied on a basis consistent with that of the preceding fiscal year.
(c) All accounts receivable, billed and unbilled, of the Company as set
forth in the Financial Statements are, and all accounts receivable which arise
between the date hereof and the Closing Date will be, genuine, valid, binding
and subsisting, having arisen or arising out of bona fide sales and deliveries
of products or the performance of services in the ordinary course of business
consistent with past practice and are collectible in the ordinary course of
business, subject to no defenses, counterclaims or set-offs, but subject to
allowances and accruals as reflected in the Financial Statements. Such
allowances and accruals are reasonable
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and appropriate on the basis of the Company's prior experience and are in
accordance with GAAP consistently applied.
SECTION 5.4 PROPERTIES AND PERMITS. The Company has good and marketable
title to all its Properties and assets as reflected in the July 31, 1999 balance
sheet of the Company (except Properties and assets sold or otherwise disposed of
in the ordinary course of business, consistent with past practice), free and
clear of all Encumbrances of any nature whatsoever, except any Encumbrances
disclosed in the Financial Statements, or liens for current Taxes not yet due
and payable. All plants, structures and equipment owned or used by the Company
are suitable for the purposes used, are adequate and sufficient for all current
operations of its business, and, subject to ordinary wear and tear, are in good
operating condition and repair. SCHEDULE 5.4 hereto sets forth a true, correct
and complete list of all Leased Real Property owned or used by the Company,
together with a list of each lease, sublease, license or any other instrument
under which the Company claims or holds such leasehold or other interest or
right to the use thereof, and with respect to the leases, subleases, licenses
and other instruments on SCHEDULE 5.4, identifying which of those leases,
subleases, licenses or other instruments, if any, require that a consent be
obtained (from any lessors, guarantors or any other third parties) before a
valid transfer may be obtained and identifying in each instance the party which
is required to grant consent thereto, the location of the premises, the date and
term of the agreement, the amount of the monthly rent and any additional
material terms thereof. Such leases, subleases, licenses and other agreements
are valid, subsisting, in full force and effect and binding upon the parties
thereto in accordance with their terms. To the best of the Shareholders' and the
Company's knowledge, all of the facilities set forth on SCHEDULE 5.4 are
equipped in conformity with all laws and governmental regulations applicable to
the Companies or their business. Prior to the date hereof, the Company has
delivered to Able true, correct and complete copies of all of the leases,
subleases, licenses and other instruments set forth on SCHEDULE 5.4 and any
related agreements. The Company has paid in full all amounts due, and has
satisfied in full all Liabilities due and payable, under such leases, subleases,
licenses and other agreements. The Company is not, and, as of the Closing Date,
the Company will not be, in default under any of such leases, subleases,
licenses or other agreements, nor (to the best knowledge of the Shareholders and
the Company) is any other party in default thereunder, and no facts or
circumstances have occurred which, with the giving of notice or the passage of
time or both, would constitute a default under any of such leases, subleases,
licenses or other agreements.
SECTION 5.5 TAXES. The amounts recorded as provisions for Taxes in the
Financial Statements are sufficient for the payment of all Taxes, whether
disputed or not. The Company has duly and timely filed all Tax Returns which
were required to be filed by it, and has paid, or has recorded adequate reserves
on the Financial Statements for the payment of, all Taxes shown on all Tax
Returns. All Tax Returns are true, correct and complete in all material
respects. No Tax Return of the Company has been examined or audited by the
Internal
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Revenue Service (the "IRS") or any state, local, foreign or other taxing
authority and there are no open, pending or Threatened tax-related Proceedings,
audits, examinations, assessments, asserted deficiencies or claims for
additional Taxes with respect to the Company. There are no past or current
revenue agents' reports or any other assertions of deficiencies or other
Liabilities for Taxes (including any reports, statements, summaries and other
communications or assertions or claims of deficiencies or other Properties) with
respect to the Company. There are no waivers or extensions of any applicable
statutes of limitation for the assessment and collection of Taxes for which the
Company or Able may be liable that are in effect and no requests for such
waivers are pending. There are no Tax rulings, requests for rulings, or closing
agreements with any taxing authority that may affect the Company. The Company is
not required to make any adjustments with respect to a change in accounting
method and no such adjustments have been proposed by the IRS or requested by the
Company. The Company is not a party to any Tax sharing or allocation agreement,
nor is it potentially required to indemnify any person with respect to Taxes.
The Company is not a party to any arrangement that is treated as a partnership
for Tax purposes. SCHEDULE 5.5 lists all states, territories and jurisdictions
(whether foreign or domestic) in which the Company is required to file Tax
Returns. No claim or inquiry has been made by any taxing authority in a
jurisdiction where the Company does not file Tax Returns that it either is or
may be subject to Tax in such jurisdiction. There are no liens for Taxes upon
the assets of or with respect to the Company except for liens for current Taxes
not yet due and payable. No power of attorney related to Taxes has been granted
by the Company or with respect to the Company that will remain in force after
the Closing Date. The Company is not nor has it ever been a member of an
"affiliated group" within the meaning of Code Section 1504(a)(1) nor has the
Company been required to join in any consolidated, combined, unitary or License,
state or local Tax filings.
SECTION 5.6 LITIGATION AND LABOR MATTERS. Except as provided for or
disclosed in the Financial Statements:
(a) There is no litigation, Proceeding or governmental investigation
pending or Threatened, against or related to the Company or, its Properties,
assets or business;
(b) There is no litigation, Proceeding or governmental investigation
pending or Threatened, against or related to any Shareholder or any
Shareholder's properties, assets or business that could reasonably be expected
to have an adverse impact on the Company;
(c) The Company is not in default with respect to any order, writ,
injunction or decree of any court or federal, state, municipal, foreign or
governmental department, commission, board, bureau, agency or instrumentality;
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(d) The Company has not committed, and neither the Shareholders nor the
Company has received any notice of or claim that the Company has committed any
unfair labor practice under applicable federal, state or foreign law; and
(e) There is no pending action or Proceeding that has been commenced
against the Company that may have the effect of preventing, delaying or making
illegal the Acquisition and, to the best knowledge of the Shareholders and the
Company, no such action or Proceeding has been Threatened.
SECTION 5.7 INSURANCE. The Company is insured under various policies of
fire, liability and other forms of insurance, as set forth on SCHEDULE 5.7
hereto, which policies are valid and enforceable in accordance with their terms
and provide adequate insurance for the business and the assets of the Company,
in accordance with industry standards. At no time was there a period in which
the Company lacked such insurance coverage. The Company shall continue to carry
all such policies or similar policies during the pendency of this Agreement, and
all outstanding claims under such policies are described in SCHEDULE 5.7 hereto.
There is no liability for retrospective insurance premium adjustments for any
period prior to the date hereof. SCHEDULE 5.7 hereto sets forth a complete and
accurate list of the following, each of which have been made available to Able
for its review:
(a) All comprehensive general liability and other policies of insurance
under which the Company is or has been insured at any time.
(b) All property and casualty policies of insurance under which the
Company is presently insured.
(c) All obligations of the Company to provide insurance coverage to
third parties (for example under leases or other Contracts).
(d) The expiration date of each insurance policy under which the
Company is currently insured.
SECTION 5.8 INTELLECTUAL PROPERTY RIGHTS.
(a) SCHEDULE 5.8(A) hereto sets forth all patents and patent
applications; all trademarks, service marks, logos, trade names (whether
registered or unregistered) and applications for registration and registrations
therefor; Internet domain names and 1-800 and 1-888 telephone numbers; all
copyrights (whether registered or unregistered) and applications for
registration and registrations therefor; all inventions, processes, technical
information, know-how, designs, drawings, specifications, database systems and
computer software (including source code), used or developed by the Company, or
in which the Company has an interest, and all licenses
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relating to the foregoing (collectively, the "INTELLECTUAL PROPERTY RIGHTS"),
and their respective actual or potential use or application. No other patent,
trademark, service mark, trade name or copyright, or license under any thereof,
is necessary to permit the Company to be owned by Able or the Company's business
to be conducted as now conducted or as heretofore or proposed to be conducted.
The Company owns exclusively and/or has the exclusive and unrestricted right to
use, free and clear of all Encumbrances, all Intellectual Property Rights, and
all renewals therefor and claims for infringement thereof, without infringing
upon or otherwise acting adversely to the right or claimed right of any third
party under or with respect to any Intellectual Property Rights. The Company is
not obligated or under any liability whatsoever to make any payments by way of
royalties, fees or otherwise to any owner or licensee of, or other claimant to,
any patent, trademark, service mark, trade name, copyright or other intangible
asset, with respect to the use of any of the Intellectual Property Rights, in
connection with the ownership of its assets, the conduct of its business or
otherwise.
(b) The Company owns exclusively and has exclusive and unrestricted
right to use all Trade Secrets required for or incident to the development,
manufacture, operation, advertisement, promotion, distribution and sale of all
products sold and services offered, or proposed to be sold or offered, by the
Company free and clear of all Encumbrances, including, without limitation, of
any former employer of its employees. Trade Secrets shall mean all trade
secrets, confidential information, "know-how," inventions, designs, customer
lists, processes, computer programs (including source code) and technical data
and information (the "TRADE SECRETS"). A list of the headings or titles and,
where appropriate, a general, non-confidential description of all Trade Secrets
used or developed in the conduct of Company's business is included in SCHEDULE
5.8(B) hereto.
(c) The Company has taken reasonable security measures to protect the
secrecy, confidentiality and value of all of its Trade Secrets. Each of its
employees and other Persons who either alone or in concert with others
developed, invented, discovered, derived, programmed or designed any of the
Trade Secrets, or who has knowledge of or access to information about any of the
Trade Secrets, has entered into a written agreement with the Company providing
that such Trade Secrets and other information are proprietary to the Company and
are not to be divulged or misused, and transferring to the Company, without any
further consideration being given therefor, all of such employees or other
persons right, title and interest in and unto such Trade Secrets and other
information, and to all Intellectual Property Rights and other rights with
respect to such Trade Secrets and information.
(d) The Shareholders and the Company have no knowledge, and have not
received any communication alleging, that the Company has violated or, by
conducting its business as now conducted or proposed to be conducted after the
Closing Date, violates or would violate any of the patents, licenses,
trademarks, services marks, trade names, copyrights, trade secrets or
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other proprietary rights of any person or entity. The Shareholders and the
Company are not aware of any third party that is infringing upon or violating
any of the Company's Intellectual Property Rights, Trade Secrets or other
proprietary rights.
SECTION 5.9 CONTRACTS AND COMMITMENTS. SCHEDULE 5.9 hereto sets forth a
complete and accurate list of, and the Company has made available to Able for
its review, complete and correct copies of:
(a) Each Contract (other than open purchase orders) that involves the
performance of services or the delivery of goods or materials by the Company of
an amount or value in excess OF $100,000;
(b) Each Contract (other than open sales orders) that involves the
performance of services for or the delivery of goods or materials to the Company
of amount or value in excess of $100,000;
(c) Each Contract that was not entered into in the ordinary course of
business that involves expenditures or receipts in excess of $25,000 to which
the Company is a party;
(d) Each license or other Contract with respect to intellectual
property, including, without limitation, the Intellectual Property Rights, to
which the Company is a party;
(e) Each Contract to which any employee of the Company is a party
relating to wages, hours and other conditions of employment;
(f) Each Contract for capital expenditures in excess of $10,000 to
which the Company is a party;
(g) Each Contract or commitment relating to the borrowing of money or a
line of credit to which the Company is a party or by which the Company or its
assets are bound;
(h) Each Contract or commitment with any present or former officer,
director, Shareholder, employee or consultant of the Company, pursuant to which
any payment is or may become due to any such person in excess of $10,000;
(i) Each lease agreement pertaining to any personal property leased by
the Company;
(j) Each representative or sales agency Contract or commitment to which
the Company is a party;
(k) Each Contract restricting a Person from competing with the Company;
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(l) Each bonus, pension, profit sharing, retirement, stock purchase,
stock option, hospitalization, insurance, vacation pay or other similar plan;
and
(m) Each Contract prohibiting the transfer or assignment of such
Contract or requiring consent prior to the transfer or assignment of such
Contract.
Except for delays, minor failures to meet specifications or other minor
defaults which are normal in the conduct of business between the Company and
other parties to the above Contracts, all parties to the above Contracts have
complied with the provisions thereof, no party is in default thereunder, and no
event has occurred which but for the passage of time or the giving of notice
would constitute a default thereunder. The Company has not received any written
notice of any default with respect to any of the above Contracts.
SECTION 5.10 ABSENCE OF UNDISCLOSED LIABILITIES. There are no material
Liabilities or obligations of the Company either accrued, absolute, contingent
or otherwise, including, but not limited to, any Liabilities for Taxes due or to
become due, except:
(a) To the extent reflected in the July 31, 1999 reviewed balance sheet
and not heretofore paid or discharged; and
(b) Those incurred, consistently with past business practice, in or as
a result of the normal and ordinary course of business since July 31, 1999.
SECTION 5.11 ABSENCE OF DEFAULT. The Company is not in default in the
performance, observance or fulfillment of any obligation, covenant or condition
contained in any debenture or note, or contained in any conditional sale or
equipment trust agreement, or loan or other borrowing agreement to which the
Company is a party.
SECTION 5.12 EXISTING CONDITION. Except as disclosed in SCHEDULE 5.12
hereto, since July 31, 1999, there has not been (i) any material adverse change
in the business, operations, prospects, Properties, assets, Liabilities, or
condition, financial or otherwise, of the Company; (ii) any damage, destruction
or loss, whether covered by insurance or not, materially and adversely affecting
the business, operations, prospects, Properties, assets, Liabilities, or
condition, financial or otherwise, of the Company; (iii) any declaration,
setting aside or payment of any dividend, or any distribution or payment in
respect of capital stock or any other securities of the Company, or any
redemption, purchase or other acquisition of any capital stock or other
securities of the Company; (iv) any increase in the compensation payable or to
become payable by the Company to any of its respective officers, directors,
employees, partners or agents; (v) any change in the terms of any bonus,
insurance, pension or other benefit plan for or with any of the Company's
officers, directors or employees which increases
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amounts paid, payable or to become payable thereunder; or (vi) any complaints or
other concerns which relate to a Company's labor relations.
SECTION 5.13 RESTRICTIONS. Except as set forth on SCHEDULE 5.13 hereto,
the Company is not subject to any charter or other corporate restriction, any
agreement or any judgment, order, writ, injunction or decree, which materially
and adversely affects or, so far as the Shareholder or the Company can now
foresee, may in the future materially and adversely affect, the business,
operations, prospects, Properties, assets, Liabilities, or condition, financial
or otherwise, of the Company.
SECTION 5.14 EMPLOYEE BENEFITS.
(a) SCHEDULE 5.14 hereto, lists each bonus, deferred compensation,
incentive compensation, stock purchase, stock option, severance or termination
pay, hospitalization or other medical, life or other insurance, supplemental
unemployment benefits, profit sharing, pension, or retirement plan, program,
agreement or arrangement, or other employee benefit plan, program, agreement or
arrangement (other than arrangements involving the payment of wages) sponsored,
maintained or contributed to or required to be contributed to by the Company or
by any trade or business, whether or not incorporated (an "ERISA AFFILIATE")
that together with the Company would be deemed a "single employer" within the
meaning of Section 4001(a)(14) of ERISA, for the benefit of any current or
former employee, director, partner or independent Contractor of the Company or
any ERISA Affiliate, whether formal or informal and whether legally binding or
not (the "PLANS") with respect to which the Company or any ERISA Affiliate has,
within the six-year period ending on the Closing Date, or may in the future have
any liability or obligation to contribute or make payments of any kind.
(b) Each Plan is in writing and the Company has furnished to Able a
copy of each Plan and any amendments thereto and, if applicable, with respect to
each Plan (i) a copy of each trust or other funding arrangement and all
amendments thereto, (ii) each summary plan description and summary of material
modifications, (iii) the three most recently filed Forms 5500 under ERISA or the
Internal Revenue Code of 1986, as amended (the "CODE"), (iv) all determination
letters, rulings, information letters and any other material document or
correspondence relating to a Plan from the IRS, the United States Department of
Labor, or the Pension Benefit Guaranty Corporation, (v) the three most recently
prepared financial statements and (vi) all Contracts relating to the Plans with
respect to which the Company or any ERISA Affiliate may have any liability,
including, without limitation, insurance Contracts, investment management
agreements, subscription and participation agreements and record keeping
agreements. The Company does not have any express or implied commitment to
create or incur liability with respect to or cause to exist any other employee
benefit plan, program, agreement or arrangement, or to enter into any Contract
or agreement to provide compensation or benefits to any individual or to modify
or change or terminate any Plan, other
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than with respect to a modification, change or termination required by ERISA or
the Code, which will not materially increase the cost of maintaining such Plan.
(c) Each Plan is now and has been operated in accordance with its terms
and the requirements of all applicable laws, orders, rules and regulations,
including, without limitation, ERISA and the Code, including, without
limitation, all applicable Form 5500 filing requirements. The Company has
performed all obligations required to be performed by it under, is not in any
respect in default under or in violation of, and has no knowledge of any default
or violation by any party to, any Plan. No governmental investigation or legal
action, suit or claim is pending or, to the best knowledge of the Shareholders
and the Company, threatened with respect to any Plan and, to the best knowledge
of the Shareholders and the Company, no fact or event exists that could give
rise to any such investigation, action, suit or claim.
(d) None of the Plans is (i) subject to Title IV of ERISA, (ii) a
"multiemployer pension plan" as such term is defined in Section 3(37) of ERISA,
(iii) subject to the laws of a country or jurisdiction other than the United
States, or (iv) subject to Section 302 of ERISA or Section 412 of the Code.
(e) Neither the Company, any ERISA Affiliate, any of the Plans, any
trust created thereunder, nor any trustee or administrator thereof has engaged
in a transaction in connection with which the Company or any ERISA Affiliate,
any of the Plans, any such trust, or any trustee or administrator thereof, or
any party dealing with the Plans or any such trust could be subject to either a
civil liability or penalty pursuant to Section 409, 502(i) or 502(1) of ERISA or
a tax imposed pursuant to Chapter 43 of the Code.
(f) Full payment has been made, or will be made, in accordance with the
terms of each of the Plans and any applicable collective bargaining agreement,
of all amounts which the Company or any ERISA Affiliate is required to pay, and
all such amounts properly accrued through the Closing Date with respect to the
current plan year thereof will be paid by the Company on or prior to the Closing
Date or will be properly recorded on the Company's financial statements.
(g) Each of the Plans that is intended to be "qualified" in form within
the meaning of Section 401(a) of the Code is so qualified and has been the
subject of a favorable determination letter from the IRS regarding such
qualification, no such determination letter has been revoked and revocation has
not been Threatened, no event has occurred and no circumstances exist that would
adversely affect the tax qualification of such Plan; and such Plan has not been
amended since the effective date of its most recent determination letter in any
respect that might adversely affect its qualification or materially increase its
cost. Each of
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the Plans that is intended to satisfy the requirements under Section 401(k) of
the Code satisfies such requirements.
(h) No employee of the Company will be entitled to any additional
benefits or any acceleration of the time of payment or vesting of any benefits
under any Plan as a result of the transactions contemplated by this Agreement.
(i) No amounts payable under the Plans will fail to be deductible for
license income tax purposes by virtue of Section 280G of the Code.
(j) No compensation payable by the Company to any of its respective
employees under any existing Contract, Plan or other employment arrangement
(including by reason of the Acquisition) will be subject to disallowance under
Section 162(m) of the Code.
(k) No Plan provides benefits, including, without limitation, death or
medical benefits (whether or not insured), with respect to current or former
employees upon retirement or other termination of service (other than (i)
coverage mandated by applicable law, (ii) death benefits or retirement benefits
under any "employee pension plan," as that term is defined in Section 3(2) of
ERISA, (iii) deferred compensation benefits accrued as Liabilities on the books
of the Company or an ERISA Affiliate, or (iv) benefits the full cost of which is
borne by the current or former employee (or his beneficiary)).
(l) Except as set forth on SCHEDULE 5.14, each Plan that is an
"employee welfare benefit plan" as defined in Section 3(1) of ERISA ("WELFARE
PLAN") is fully insured and with respect to such Welfare Plans no premium for
insured benefits can be increased other than on the Contract anniversary for the
related policy. Each such Welfare Plan may be amended or terminated without
liability to the Company or Able at any time after the Closing Date.
(m) With respect to each Plan that is funded wholly or partially
through an insurance policy, there will be no liability of the Company or an
ERISA Affiliate, as of the Closing Date, under any such insurance policy or
ancillary agreement with respect to such insurance policy in the nature of a
retroactive rate adjustment loss sharing arrangement or other actual or
contingent liability arising wholly or partially out of events occurring prior
to the Closing Date.
SECTION 5.15 BANK ACCOUNTS AND DIRECTORS AND OFFICERS. SCHEDULE 5.15
contains a true and complete list of the name and location of each bank in which
the Company has an account, each safety deposit box or custody agreement and the
names of the Persons authorized to draw thereon or to withdraw therefrom.
SCHEDULE 5.15 also sets forth the names of all directors and officers of the
Company.
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SECTION 5.16 COMPLIANCE WITH LAWS AND INSTRUMENTS. The Company and the
Shareholders have complied with and are not in default under, or in violation
of, any laws, ordinances, rules or regulations or orders (including, without
limitation, any safety, health, wage, hour, employment and trade laws,
ordinances, rules, regulations and orders) applicable to its business,
operations, or Properties, or the Company which materially and adversely affects
or, so far as the Shareholders and the Company can foresee, may in the future
materially and adversely affect its business, operations, prospects, Properties,
assets, Liabilities or condition, financial or otherwise, of the Company. All
necessary approvals, authorizations, consents, licenses, permits or orders with
respect to the Company's business, operations and Properties have been obtained,
are in full force and effect as of the date hereof and are set forth on SCHEDULE
5.16 hereto. Neither the ownership or use of the Company's Properties, nor the
conduct of its business, nor the ownership of its assets, conflicts with the
rights of any other Person or violates, or with or without the giving of notice
or the passage of time, or both, will violate, conflict with or result in a
breach, default, right to accelerate or loss of rights under, or result in the
creation of any Encumbrance pursuant to, any term or provision of the Articles
of Incorporation or Bylaws of the Company as presently in effect, or any note,
mortgage, deed of trust, indenture, lease, permit, license, consent, approval,
agreement, instrument, insurance policy, law, statute, rule or regulation or any
order, judgment, award or decree to which the Company is a party or by which the
Company, its business, Properties or assets may be bound or affected.
SECTION 5.17 ENVIRONMENTAL COMPLIANCE. The Company is not in violation
of or delinquent under, nor has it received notice of any violation or
delinquency with respect to, any decree, order or arbitration award or any law,
statute, ordinance, rule or regulation of or agreement with, or any license or
permit from, any governmental, regulatory or administrative authority to which
it or its Properties, assets, personnel or business are subject and which
relates to the environment including, without limitation, Environmental Laws
(defined below). There are no circumstances or conditions existing that may
prevent or interfere with such compliance in the future. The Company has
obtained all approvals, consents, permits, licenses and other authorizations of
governmental agencies required to be obtained by it under Environmental Laws.
Except as set forth on SCHEDULE 5.17, all such approvals, consents, permits,
licenses, and other authorizations are in good standing will not be adversely
affected by a change of control. There is no Environmental Claim (defined below)
pending or, to the best knowledge of the Shareholders and the Company,
Threatened against the Company or its assets or relating to its business or
Properties. There are no past or present actions, activities, circumstances,
conditions, events or incidents, at any location, including, without limitation,
the release, emission, discharge, presence or disposal of any Hazardous Material
(defined below) that could form the basis of any Environmental Claim against the
Company or its assets. SCHEDULE 5.17 contains a true and complete list of each
facility previously owned, operated or leased by the Company or its
predecessors. There exist no surveys, reports, assessments, audits, evaluations,
sampling results or other documents relating to the presence,
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migration or disposal of any Hazardous Material prepared for or at the request
of the Company or in its possession or at or relating to any of its assets, its
business or any facility previously owned, leased or operated by it. The Company
has not, and to the knowledge of the Company and the Shareholders, no other
Person has, caused a release or threat of release of any Hazardous Material at,
on, under, or otherwise affecting the soil, surface or ground water of any
Properties owned, leased, or operated by the Company, except where such release
or threat of release would not have a material adverse effect on the business or
the assets, Properties, operations, prospects, or condition, financial or
otherwise, of the Company. The Company has provided Able with copies of all
documents in the Company's possession or control relating to Environmental Laws
and the business, the assets and the Properties of the Company. "ENVIRONMENTAL
LAWS" means all federal, state and local laws, statutes, ordinances, judgments,
decrees, licenses, permits, rules and regulations relating to pollution or
protection of human health or the environment including, without limitation,
laws, statutes, ordinances, judgments, decrees, licenses, permits, rules and
regulations relating to emissions, discharges, releases or threatened releases
of any Hazardous Material, or otherwise relating to the use, treatment, storage,
disposal, transport or handling of any Hazardous Material. "ENVIRONMENTAL CLAIM"
means any claim, complaint, action, suit, Proceeding, investigation or notice by
any Person alleging potential liability arising out of, based on, or resulting
from (a) the release, emission, discharge or disposal into, or the presence in,
the environment including, without limitation, the indoor environment, of any
Hazardous Material at any location, whether or not owned by the Company or (b)
circumstances forming the basis of any violation, or alleged violation, of any
Environmental Law. "HAZARDOUS MATERIAL" means any material, substance or
compound regulated under Environmental Laws as a pollutant, toxic substance,
contaminant, hazardous waste, hazardous material, hazardous substance, extremely
hazardous material, extremely hazardous substance, hazardous air pollutant,
radioactive substance, radioactive waste, special waste, medical waste, or words
of similar import, petroleum or any fraction, by-product, constituent or refined
product thereof, asbestos or polychlorinated biphenyl.
SECTION 5.18 NON-COMPETITION AGREEMENTS. The Company is not a party to
any agreement or other commitment imposing any restriction on the manner or in
the geographic location in which it conducts or may conduct its business or
uses, or may use, its Properties and assets in competition with any third party.
SECTION 5.19 CHANGE OF CONTROL PROVISIONS. Neither the execution and
delivery of this Agreement or the Related Agreements nor the consummation of the
transactions provided for herein or therein will trigger any obligation of the
Company to any Person, including, without limitation, the obligation to make
payments to any Person pursuant to any Contract or agreement to which the
Company is a party or by which its assets are bound.
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SECTION 5.20 VALIDITY OF CONTEMPLATED TRANSACTIONS. Neither the
execution and delivery of this Agreement or the Related Agreements by the
Company nor the consummation by the Company of the transactions provided for
herein or therein will conflict with, violate, or result in a breach, default or
the creation of any Encumbrance pursuant to, any agreement to which the Company
is a party or by which it is bound or any law, order, judgment or decree or any
provision of the Articles of Incorporation or Bylaws of the Company or any
Contract to which the Company is a party. The Company has the full power and
legal authority to execute this Agreement and the Related Agreements and to
consummate and perform the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement and the Related Agreements and the
consummation of the transactions contemplated hereby and thereby are within the
corporate power of the Company and have been duly authorized by all necessary
corporate action on the part of the Company. This Agreement and the Related
Agreements to which the Company is a party have been duly executed and delivered
by the Company and constitute the legal, valid and binding obligations of the
Company, enforceable against it in accordance with their respective terms.
SECTION 5.21 LICENSES.
(a) The Company possesses all of the licenses that are necessary to
entitle the Company to own or lease, operate and use its assets and Properties
and to conduct its business as currently conducted.
(b) All licenses held by the Company are listed on SCHEDULE 5.21(B)
hereto. True and correct copies of such licenses have been delivered to Able
prior to the date hereof.
(c) Each of the licenses held by the Company is in full force and
effect, and as of the date hereof, no proceeding is pending or, to the Company's
knowledge, after due inquiry of Company personnel, threatened seeking the
revocation, suspension or limitation of any such license.
SECTION 5.22 BROKERS. No broker, finder or investment banker is
entitled to any brokerage, finder's fee or other fee or commission payable by
the Company in connection with the transactions contemplated by this Agreement
based upon arrangements made by and on behalf of the Company.
SECTION 5.23 YEAR 2000 COMPLIANCE. The Company has (i) analyzed the
operations of the Company and its affiliates that could be adversely affected by
failure to become Year 2000 compliant (that is, that computer applications,
imbedded microchips and other systems will be able to perform date-sensitive
functions prior to and after December 31, 1999) and (ii) developed a plan for
becoming Year 2000 compliant in a timely manner, the implementation of which is
on schedule in all material respects. The Company reasonably believes that it
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will become Year 2000 compliant for its operations and those of its affiliates
on a timely basis except to the extent that a failure to do so could not
reasonably be expected to have a material adverse effect on the Company's
business, operations, financial condition or prospects. Any suppliers and
vendors that are material to the operations of the Company or its affiliates
will be Year 2000 compliant for their own computer applications except to the
extent that a failure to do so could not reasonably be expected to have a
material adverse effect on the Company's business, operations, financial
condition or prospects.
SECTION 5.24 DISCLOSURE. No representation or warranty by the Company
or the Shareholders in this Agreement nor any statement, document or certificate
furnished or to be furnished to Able in connection herewith or pursuant hereto
contains or will contain any untrue statement of a material fact or omits or
will omit to state any material fact necessary to make any statement herein or
therein not misleading. The Company has made available for inspection by Able
and its representatives complete and correct copies of the corporate minute
books of the Company. Such minute books contain the minutes of all meetings of
Shareholders, the board of directors and any committees thereof of the Company
that have been held prior to the date hereof and all written consents to action
executed in lieu thereof.
SECTION 5.25 INVESTMENT REPRESENTATIONS. The Able Common Stock being
delivered pursuant to the provisions of this Agreement will be held by each
Shareholder for his or her own account and not with a view to, or for resale in
connection with, the distribution thereof.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF ABLE
Able represents and warrants to the Company that:
SECTION 6.1 ORGANIZATION, GOOD STANDING AND AUTHORITY. Able is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Florida, and has all requisite corporate power and
authority to conduct its business as presently conducted and to own and lease
the Properties and assets used in connection therewith. The execution and
delivery of this Agreement and the Related Agreements and the consummation of
the transactions contemplated hereby and thereby are within the corporate power
of Able and have been duly authorized by all necessary corporate action on the
part of Able. This Agreement and the Related Agreements to which Able is a party
constitute the legal, valid and binding obligations of Able, enforceable against
Able in accordance with their respective terms.
SECTION 6.2 VALIDITY OF CONTEMPLATED TRANSACTIONS. Neither the
execution and delivery of this Agreement or the Related Agreements by Able nor
the consummation by Able
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of the transactions provided for herein or therein will conflict with, violate,
or result in a breach of or default under any Contract to which Able is a party
or by which it or its assets are bound or any law, order, judgment or decree or
any provision of the Certificate of Incorporation or Bylaws of Able or any
Contract to which Able is a party.
SECTION 6.3 LITIGATION. There is no pending action or Proceeding that
has been commenced against Able that may have the effect of preventing,
delaying, or making illegal the Acquisition and, to the best knowledge of Able,
no such action or Proceeding has been Threatened.
SECTION 6.4 BROKERS. No broker, finder or investment banker is
entitled to any brokerage, finder's fee or other fee or commission payable by
Able in connection with the transactions contemplated by this Agreement based
upon arrangements made by and on behalf of Able.
ARTICLE VII
[RESERVED]
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1 INDEMNIFICATION.
(a) The Shareholders shall indemnify and hold harmless Able and its
officers, directors, employees, shareholders, representatives and agents, from
and against any claims, damages, losses, Liabilities, Taxes, injuries to
Persons, property or natural resources, fines, penalties, costs and expenses
(including, without limitation, settlement costs, any reasonable legal,
accounting or other expenses incurred in connection with investigating or
defending any actions or Threatened actions and court costs) (a "LOSS" or
"LOSSES") sustained or required to be paid by reason of, arising out of or
caused by (i) any misrepresentation or Breach of any representation or warranty
made by the Company or any Shareholder in this Agreement, or any Related
Agreement or other certificate, instrument or document contemplated hereby, (ii)
any Breach of or failure to perform any covenant, agreement or obligation of the
Company or any Shareholder contained in this Agreement, or any Related Agreement
or other certificate, instrument or document contemplated hereby, (iii) any
audits or examinations, including, without limitation, the reopening of past
audits, made in respect of Taxes or Plans relating to any period ending on or
prior to the Closing Date or any penalties asserted by, or
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fees under voluntary compliance programs payable to, the Internal Revenue
Service or Department of Labor, including, without limitation, for failure to
file Forms 5500 on any due date for such forms occurring prior to the Closing
Date, (iv) without limiting in any way any other provision of this Section 8.1,
and whether or not disclosed in any Schedule hereto, or in any other document
related to this transaction, any act or omission occurring, or condition
existing, on or prior to the Closing Date, and relating, directly or indirectly,
to the facilities, assets, Properties, operations or businesses, owned, leased,
operated, or conducted by the Company as of the Closing Date (including, but not
limited to, the storage, generation, transport or disposal or Hazardous
Materials at any location), which Losses relate, directly or indirectly, to any
Environmental Claim as defined in Section 5.16 (including, without limitation,
Losses relating, directly or indirectly, to injury to persons, including any
current or former employee at the facilities, Properties, operations, or
businesses) or (v) without limiting any way any other provision of this Section
8.1, and whether or not disclosed in any Schedule hereto or in any other
document related to this transaction, any act or omission occurring, or
condition existing, at any time, and relating, directly or indirectly, to
Environmental Laws and to the facilities, assets, Properties, operations, or
businesses formerly owned, leased, operated, or conducted by the Company or any
predecessor (including, but not limited to, disposal of Hazardous Materials at
any location).
(b) Able shall indemnify and hold harmless the Company from and against
any Loss or Losses sustained or required to be paid by reason of, arising out of
or caused by (i) any misrepresentation or Breach of any representation or
warranty made by Able in this Agreement or any other certificate, instrument or
document contemplated hereby; or (ii) any Breach of any covenant, agreement or
obligation of Able contained in this Agreement, or any other certificate,
instrument or document contemplated hereby.
(c) In the event that any indemnified party is made a defendant in or
party to any claim, action, suit or Proceeding, judicial or administrative,
instituted by any third party for Losses, or otherwise receives any demand from
any third party for Losses (any such third party claim, action, suit or
Proceeding being referred to as a "CLAIM"), the indemnified party (referred to
in this clause (c)(i) as the "notifying party") shall give the indemnifying
party prompt notice thereof. The failure to give such notice shall not affect
whether an indemnifying party is liable for reimbursement unless such failure
has resulted in the loss of substantive rights with respect to the indemnifying
party's ability to defend such Claim, and then only to the extent of such Loss.
The indemnifying party shall be entitled to contest and defend such Claim;
provided, that the indemnifying party (A) has a reasonable basis for concluding
that such defense may be successful, (B) diligently contests and defends such
Claim, and (C) acknowledges in writing that it is obligated to provide
indemnification with respect to such Claim. Notice of the intention so to
contest and defend shall be given by the indemnifying party to the notifying
party within 20 business days after the notifying party's notice of such Claim
(but, in all events, at least five business days prior to the date that an
answer to such
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Claim is due to be filed). Such contest and defense shall be conducted by
reputable attorneys employed by the indemnifying party. The notifying party
shall be entitled at any time, at its own cost and expense (which expense shall
not constitute a Loss unless the notifying party reasonably determines that the
indemnifying party is not adequately representing or, because of a conflict of
interest, may not adequately represent, the interests of the indemnified
parties, and only to the extent that such expenses are reasonable), to
participate in such contest and defense and to be represented by attorneys of
its or their own choosing. If the notifying party elects to participate in such
defense, the notifying party will cooperate with the indemnifying party in the
conduct of such defense. Neither the notifying party nor the indemnifying party
may concede, settle or compromise any Claim without the consent of the other
party, which consent will not be unreasonably withheld. Notwithstanding the
foregoing, if the indemnifying party fails to acknowledge in writing its
obligation to provide indemnification in respect of such Claim, then the
notifying party alone shall be entitled to contest, defend and settle such Claim
in the first instance (in which case, expenses incurred in connection therewith
shall constitute a Loss) and, only if the notifying party chooses not to
contest, defend or settle such Claim, the indemnifying party shall then have the
right to contest and defend (but not settle) such Claim.
(d) In the event any indemnified party should have a claim against any
indemnifying party that does not involve a Claim, including, but not limited to,
an Environmental Claim, the indemnified party shall deliver a notice of such
claim with reasonable promptness to the indemnifying party. The failure to give
such notice shall not affect whether an indemnifying party is liable for
reimbursement unless such failure has resulted in the loss of substantive rights
with respect to the indemnifying party's ability to defend such Claim, and then
only to the extent of such Loss. If the indemnifying party notifies the
indemnified party that it does not dispute the claim described in such notice or
fails to notify the indemnified party within 15 days after delivery of such
notice by the indemnified party whether the indemnifying party disputes the
claim described in such notice, the Loss in the amount specified in the
indemnified party's notice will be conclusively deemed a liability of the
indemnifying party and the indemnifying party shall pay the amount of such Loss
to the indemnified party on demand.
(e) After the Closing, the rights set forth in this Section 8.1 shall
be the indemnified parties' sole and exclusive remedies against the other for
misrepresentations or Breaches of covenants contained in this Agreement or in
any exhibit, schedule or other document delivered or to be delivered pursuant to
the terms of this Agreement or otherwise referenced or incorporated in this
Agreement. Notwithstanding the foregoing, nothing herein shall prevent any of
the indemnified parties from bringing an action based upon allegations of fraud,
bad faith or willful misconduct in connection with this Agreement. In the event
action is brought in accordance with the preceding sentence of this clause
(iii), the prevailing party's attorneys' fees and costs shall be paid by the
nonprevailing party.
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(f) The Shareholders shall not be liable in an amount which, if added
to all other amounts paid as indemnification payments, would exceed the
Consideration, except as set forth in the next sentence. Able shall not be
entitled to pursue any indemnification claim or recovery against the Company
beyond the foregoing limit, except to the extent any such claim or recovery is
based upon Company's or the Shareholder's (i) Breach of a representation and
warranty made in Article V, or (ii) fraud, bad faith or willful misconduct in
connection with this Agreement, or (iii) arises in connection with Section
8.1(a)(vi) hereof in which case Able's remedy shall not be limited.
(g) The obligations set forth in this Section 8.1 shall be
unconditional and absolute. In the event of a conflict between the provisions of
this Section 8.1 and any other provisions of this Agreement, the provisions of
Section 8.1 shall control. The Shareholders shall not have any indemnification
obligations under this Section 8.1 for Losses until such time as total Losses
for which Able is otherwise entitled to indemnification hereunder equal $25,000
in the aggregate, whereafter the Shareholders shall be liable for all Losses;
provided, however, that any indemnification obligations arising in connection
with Section 8.1(a)(ii), (v) or (vi) hereof shall not be subject to such
limitation. Able shall not have any indemnification obligations under this
Section 8.1 for Losses until such time as total Losses for which the
Shareholders are otherwise entitled to indemnification hereunder equal $25,000
in the aggregate, whereafter Able shall be liable for all Losses.
(h) The indemnification obligations set forth in this Section 8.1 shall
survive any assignment or other transfer by Able.
ARTICLE IX
CONDITIONS TO CONSUMMATION OF THE ACQUISITION
SECTION 9.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
ACQUISITION. The respective obligations of each Party to effect the Acquisition
shall be subject to the satisfaction or waiver at or prior to the Effective Time
of the following conditions:
(a) The Parties shall execute all Related Agreements required by this
Agreement, including, but not limited to, that certain Agreement and Plan of
Merger dated of even date herewith by and among SES, Able, SES Acquisition
Corp., the Company, Hoover, Joyner and Garner, substantially in the form
attached as EXHIBIT B hereto.
(b) Able and the Shareholders shall enter into a registration of rights
agreement substantially in the form attached as EXHIBIT C hereto.
(c) The Parties shall furnish each other with a Secretary's certificate
certifying the Articles of Incorporation of each Party, the Bylaws of each
Party, and the due adoption of the
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resolutions relating to the Acquisition and the actions contemplated by this
Agreement, which articles, bylaws and resolutions shall be attached to the
appropriate Secretary's certificate.
SECTION 9.2 CONDITIONS TO THE SHAREHOLDERS' OBLIGATIONS TO EFFECT THE
ACQUISITION. The obligations of the Shareholders to effect the Acquisition shall
be subject to satisfaction or waiver at or prior to the Closing of the following
additional conditions:
(a) Able shall have performed in all material respects its obligations
under this Agreement required to be performed by it at or prior to the Closing;
the representations and warranties of Able contained in this Agreement which are
qualified with respect to materiality shall be true and correct in all material
respects, and such representations and warranties that are not so qualified
shall be true and correct in all respects in each case as of the date of this
Agreement and at and as of the Closing as if made at and as of such time, except
as contemplated by this Agreement; and the Company shall have received a
certificate of the Secretary of Able as to the satisfaction of this condition.
SECTION 9.3 CONDITIONS TO ABLE'S OBLIGATION TO EFFECT THE ACQUISITION.
The obligations of Able to effect the Acquisition shall be subject to the
satisfaction or waiver at or prior to the Closing of the following additional
conditions:
(a) The Company and the Shareholders shall have performed in all
material respects its obligations under this Agreement required to be performed
by it at or prior to the Closing; the representations and warranties of the
Company and the Shareholders contained in this Agreement which are qualified
with respect to materiality shall be true and correct in all material respects,
and such representations and warranties that are not so qualified shall be true
and correct in all respects, in each case as of the date of this Agreement and
at and as of the Closing as if made at and as of such time. Able shall have
received a Certificate of the Shareholders as to the satisfaction of this
condition.
(b) The Company and each of Garner and Joyner shall have entered into
an employment agreement substantially in the form attached as EXHIBIT A hereto.
(c) The Company and each of Garner and Joyner shall have entered into a
non-competition agreement substantially in the form attached as EXHIBIT D
hereto.
(d) The Company shall have paid certain notes payables, as set forth on
SCHEDULE 9.3(D) hereto.
(e) Able shall have received a certificate from the Company and each of
the Shareholders, dated the Closing, in substantially the form set forth as
EXHIBIT E.
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ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
SECTION 10.1 TERMINATION. This Agreement may be terminated at a time
prior to the Effective Time:
(a) By mutual consent of Able, Company and the Boards of Directors of
Able and the Company;
(b) By either Able or the Company if (i) the Acquisition shall not have
been consummated by November 30, 1999 or such other later date as the parties
may agree upon in writing; provided, however, that the right to terminate this
Agreement under this Section 9.1(a) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the cause of, or
resulted in, the failure of the Acquisition to occur on or before such date; or
(ii) a court of competent jurisdiction or governmental, regulatory or
administrative agency or commission shall have issued an order, decree or ruling
or taken any other action (which order, decree, ruling or other action the
parties hereto shall use their best efforts to vacate), in each case permanently
restraining, enjoining or otherwise prohibiting the transactions contemplated by
this Agreement; or
(c) By Able if the Company fails to satisfy any of the conditions set
forth in Section 9.3 hereto, if a material Breach of any of the representations,
warranties or covenants of the Company set forth in this Agreement has been
committed by the Company and such Breach has not been (1) waived by Able, or (2)
cured by the Company within 10 days after receipt of written notice thereof to
the Company from Able or if Able is not satisfied with the results of due
diligence and provides the Company with written notice of Able's desire to
terminate this Agreement and the reason therefor; or
(d) By the Company if a material Breach of any of the representations,
warranties, or covenants of Able set forth in this Agreement has been committed
by Able and such Breach has not been (1) waived by the Company, or (2) cured by
Able within 10 days after receipt of written notice thereof from the Company; or
(e) By mutual written consent of Able and Company.
SECTION 10.2 EFFECT OF TERMINATION. Anything to the contrary set forth
in this Agreement notwithstanding, the sole and exclusive right and remedy of
any of the parties hereto for and with respect to any Breach of a
representation, warranty, covenant or agreement of any of the other parties
hereto under this Agreement or any of the Related Agreements that occurs before
the Closing and with respect to which any of the parties hereto terminates this
Agreement shall be to terminate this Agreement pursuant to and in accordance
with the
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provisions of this Section 10.2; provided, however, (a) that if this Agreement
is terminated because of a willful Breach by the Company or the Shareholders
terminates this Agreement or otherwise declines to close the Acquisition when
(i) Able shall have satisfied all conditions set forth in Section 10.2 hereof or
prior to the last date under this Agreement when Able could have satisfied such
conditions, and (ii) Able is otherwise prepared to close the Acquisition but for
the Company's failure to close, Able shall be entitled to receive from the
Company an amount equal to all reasonable out-of-pocket fees and expenses
(including fees and expenses of its counsel) incurred by Able and its affiliates
in connection herewith.
In the event of the termination of this Agreement as provided in
Article IX, this Agreement will forthwith become null and void and there shall
be no liability on the part of any party hereto except that (A) Articles 8 and
10.1 (Survival of Representations, Warranties and Covenants) will remain in full
force and effect and (B) nothing herein will relieve any party from liability
for any wilful breach hereof.
SECTION 10.3 FEES AND EXPENSES. Except as set forth in Section 9.2,
each Party shall be responsible for its own fees, costs and expenses incurred in
connection with the Acquisition.
SECTION 10.4 AMENDMENT. This Agreement may be amended only by mutual
consent of Able, the Company and the Boards of Directors of Able and the Company
at any time before or after approval of this Agreement, and by the Shareholders
of the Company if required by applicable law.
SECTION 10.5 WAIVER. Any party hereto may (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties of the other
parties contained herein, and (c) waive compliance with any of the agreements or
conditions of the other parties contained herein. Any such extension or waiver
shall be valid if set forth in an instrument in writing signed by the party or
parties to be bound thereby. Any waiver of any term or condition shall not be
construed as a waiver of any subsequent breach or a subsequent waiver of the
same term or condition, or a waiver of any other term or condition, of this
Agreement. The failure of any party to assert any of its rights hereunder shall
not constitute a waiver of any of such rights.
ARTICLE XI
GENERAL PROVISIONS
SECTION 11.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. All
representations and warranties made by Able, the Company and the Shareholders in
this Agreement or pursuant hereto shall survive the Closing for a period of
three years, except for (a) the representations and warranties relating to Taxes
of all kinds which shall in each case survive the Closing until claims based
thereon shall have been barred by the relevant statutes of
30
<PAGE>
limitations and (b) the representations and warranties contained in Section
5.16, which shall survive the Closing indefinitely; provided, that in the event
that any claim for a Breach of a representation or warranty has been asserted
prior to the last day such representation or warranty would otherwise survive
pursuant to this Section 10.1 such representation and warranty shall survive
until the final disposition of such claim.
SECTION 11.2 NOTICES. All notices an other communications given or made
pursuant hereto will be in writing and will be deemed to have been duly given or
made as of the date delivered or mailed if delivered personally or mailed by
registered or certified mail (postage prepaid, return receipt requested), or
transmitted by confirmed facsimile, to the parties at the following addresses or
facsimile numbers, as the case may be, or at such other address or facsimile
number for a party as shall be specified by like notice, except that notices of
changes of address or facsimile number shall be effective upon receipt:
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(a) if to Able:
ABLE TELCOM HOLDING CORP.
1000 Holcomb Woods Parkway
Suite 400
Roswell, GA 30076
Attn: President
Telephone: (770) 993-1570
Facsimile: (770) 993-8532
with a copy to:
PAUL, HASTINGS, JANOFSKY & WALKER LLP
Suite 2400
600 Peachtree Street, N.E.
Atlanta, GA 30308-2222
Attn: Wayne Shortridge
Telephone: (404) 815-2214
Facsimile: (404) 815-2424
(b) if to the Company:
SOUTHERN ALUMINUM & STEEL CORPORATION
1849 Crestwood Boulevard
P.O. Box 100309
Irondale, AL 35210
Attn: President
Telephone: (205) 956-1640
Facsimile: (205) 956-1519
with copies to:
SOUTHERN ALUMINUM & STEEL CORPORATION
405 Atlantis Road
Suite D
Cape Canaveral, FL 32920
Attn: Vice President
Telephone: (407) 784-1100
Facsimile: (407) 799-4004
32
<PAGE>
SECTION 11.4 SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement will
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto will
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the greatest extent
possible.
SECTION 11.5 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement, and supersedes all prior agreements and undertakings, both written
and oral, among the parties, or any of them, with respect to the subject matter
hereof and are not intended to confer upon any other Person any rights or
remedies hereunder.
SECTION 11.6 ASSIGNMENT. This Agreement shall not be assigned by
operation of law or otherwise, except that Able may assign all or any of its
rights hereunder to any Affiliate of Able provided that no such assignment will
relieve the assigning party of its obligations hereunder and the assignee shall
specifically assume the obligations of the assignor hereunder.
SECTION 11.7 HEADINGS AND GENDER. Article and Section headings in this
Agreement are included herein for convenience of reference only and will not
constitute a part of this Agreement for any other purpose. The use of the
masculine pronoun herein when referring to any party has been for convenience
only and shall be deemed to refer to the particular party intended regardless of
the actual gender of such party.
SECTION 11.8 GOVERNING LAW. This Agreement will by governed by, and
construed in accordance with, the law of the State of Florida, without giving
effect to the principles of conflict of laws of such State.
SECTION 11.9 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of with when so executed will be deemed to be an original but all of which
taken together will constitute one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, Able, the Company and the Shareholders have caused
this Agreement to be executed as of the date first written above by their
respective representatives thereunto duly authorized.
ABLE:
ABLE TELCOM HOLDING CORP.
/s/ BILLY V. RAY
--------------------------------------------
Name: Billy V. Ray
Title: President
THE COMPANY:
SOUTHERN ALUMINUM AND STEEL CORPORATION
/s/ DONALD G. GARNER
--------------------------------------------
Name: Donald G. Garner
Title: President
THE SHAREHOLDERS:
/s/ DONALD G. GARNER
--------------------------------------------
Donald G. Garner
/s/ JESSE R. JOYNER
--------------------------------------------
Jesse R. Joyner
34
EXHIBIT 2.7.4
FORM OF
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is entered into
as of November __, 1999, by and between Able Telcom Holding Corp., a Florida
corporation (the "Company"), and each of Donald G. Garner, C. Michael Hoover and
Jesse R. Joyner (each sometimes referred to herein individually as a
"Shareholder" and sometimes collectively as the "Shareholders").
WHEREAS, effective as of the date hereof, Specialty Electronics
Systems, Inc. ("SES"), of which Hoover and Southern Aluminum & Steel Corporation
("SASCO") were former shareholders, has been merged with and into SES
Acquisition Corp. ("SES Acquisition"), a wholly-owned subsidiary of the Company;
WHEREAS, effective as of the date hereof, SASCO, of which Garner and
Joyner were former shareholders, has been merged with and into SASCO Acquisition
Corp. ("SASCO Acquisition"), a wholly-owned subsidiary of the Company;
WHEREAS, in connection with such mergers, the Shareholders will receive
shares of the Company's Common Stock, as defined below, in an amount to be
determined pursuant to the terms of the Agreement and Plan of Merger dated of
even date herewith, by and among the Company, SES, SES Acquisition and the
Shareholders (the "SES Merger Agreement") and pursuant to the terms of that
certain Agreement and Plan of Merger, dated of even date herewith, by and among
the Company, SASCO, SASCO Acquisition, Garner and Joyner (the "SASCO Merger
Agreement" and together with the SES Merger Agreement, the "Merger Agreements");
and
WHEREAS, to provide liquidity to the Stockholders with respect to the
ownership of the Common Stock, the Company wishes to provide certain rights to
the Stockholders to require registration for resale of their shares of Common
Stock with the Securities and Exchange Commission;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. DEFINITIONS. For convenience, certain terms used in more than one part
of this Agreement are listed in alphabetical order and defined or referred to
below (such terms as well as any other terms defined elsewhere in this Agreement
shall be equally applicable to both singular and plural forms of the terms
defined).
"AGREEMENT" means this Registration Rights Agreement.
"BOARD" means the Board of Directors of the Company.
"COMMON STOCK" means the Common Stock, no par value of the Company.
"COMMISSION" means the Securities and Exchange Commission.
<PAGE>
"EQUITY SECURITY" means any stock or similar security of the Company or
any security (whether stock or indebtedness for borrowed money) convertible of
exchangeable, with or without consideration, into or for any stock or similar
security, or any security (whether stock or indebtedness for borrowed money)
carrying any warrant or right to subscribe to or purchase any stock or similar
security, or any such warrant or right.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"HOLDER" of any security means the record or beneficial owner of such
security.
"HOLDERS OF A MAJORITY OF THE REGISTRABLE SECURITIES" means the Person
or Persons who are the Holders of greater than 50% of the shares of Registrable
Securities then outstanding.
"PERSON" includes any natural person, corporation, trust, association,
company, partnership, joint venture and other entity and any government,
governmental agency, instrumentality or political subdivision.
The terms "REGISTER," "REGISTERED" and "REGISTRATION" refer to a
registration effected by preparing and filing with the Commission a registration
statement in compliance with the Securities Act, and the declaration or ordering
of the effectiveness of such registration statement by the Commission.
"REGISTRABLE SECURITIES" means (1) all Common Stock owned now or in the
future by the Stockholders pursuant to the Merger Agreements, and (2) any
securities issued or issuable with respect to the Common Stock referred to in
clause (1) above by way of a stock dividend or stock split or in connection with
a combination of shares, reclassification, recapitalization, merger or
consolidation or reorganization of the Company; PROVIDED, HOWEVER, that such
shares of Common Stock shall not be treated as Registrable Securities (i) they
have been sold to or through a broker or dealer or underwriter in a public
distribution or a public securities transaction, (ii) they have been sold in a
transaction exempt from the registration and prospectus delivery requirements of
the Securities Act under Section 4(1) thereof so that all transfer restrictions
and restrictive legends with respect to such Common Stock are removed upon the
consummation of such sale or (iii) they are available for resale under Rule 144
under the Securities Act without reference to the volume limitations thereof.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHAREHOLDERS" has the meaning assigned to it in the preamble hereto.
2. REQUIRED REGISTRATION.
(a) Upon the written request of all of the Shareholders delivered to
the Company on or after the Payment Date for Year Four, the Company shall
prepare and file as soon as reasonably practicable a registration statement
under the Securities Act covering all of the Registrable Securities and shall
use its commercially reasonable efforts
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<PAGE>
to cause such registration statement to become effective as expeditiously as
possible; PROVIDED that the Company may delay filing any registration statement
and withhold efforts to cause any such registration statement to become
effective pursuant to this Section 2 for a period of up to a maximum of 180 days
if (i) (A) in the opinion of counsel for the Company, the Company would thereby
be required to disclose information relating to pending corporate developments
or business transactions (including any financing) involving the Company not
otherwise required by law to be publicly disclosed and (B) in the good faith
judgment of the Board such disclosure at such time could have a material adverse
effect on the Company or on any such corporate development or business
transaction or (ii) in the good faith judgment of the Board such registration
would have a material adverse effect on a registered public offering of
securities by the Company then in process (which registered public offering will
give rise to the incidental registration rights set forth in Section 3 hereof
upon its consummation). Following the delay of the filing of a registration
statement or withholding of efforts to cause any registration statement to
become effective in accordance with the above, the Company shall promptly
proceed with such filing or resume efforts to cause a declaration of
effectiveness at the earliest time such disclosure can be made without material
adverse effect or such other public offering is abandoned or completed (subject
to section 2(c) hereof), as the case may be, whether or not such 180-day period
has expired. The Company shall include in such registration statement all shares
of Registrable Securities.
(b) The Company shall be obligated to prepare, file and use
its commercially reasonable efforts to cause to become effective only one
registration statement pursuant to this Section 2 and shall be obligated to
maintain the effectiveness of such registration statement until the earlier of
(i) the sale of all shares registered pursuant thereto or (ii) the date that is
120 days after the date on which the registration statement is initially
declared effective.
(c) Notwithstanding the requirements of Section 2(a), the
Company (i) shall not be required by this Section 2 to effect a registration of
Registrable Securities unless Form S-3 or other equivalent form is then
available for such registration and (ii) shall not be required to effect a
registration of Registrable Securities pursuant to this Section 2 within the
180-day period immediately following the effective date of any underwritten
offering of securities by the Company.
(d) If Shareholders intend to distribute the Registrable
Securities covered by their request by means of an underwriting, they shall
provide the Company with the name of the managing underwriter or underwriters
(the "managing underwriter") that a majority in interest of the Shareholders
propose to employ, which managing underwriter shall be reasonably acceptable to
the Company, as a part of their request made pursuant to this Section 2, and the
Shareholders shall include such information in the written notice referred to in
Section 2(a). If no such notice is provided, the Company may at its option
require distribution of such securities by means of a firm commitment
underwriting and may choose the managing underwriter, so long as such
underwriter is a nationally recognized underwriting firm, which managing
underwriter shall be reasonably acceptable to a majority in interest of the
Shareholders. In either such event the right of any Holder to registration
pursuant to this Section 2 shall be conditioned upon such Holder's participation
in such underwriting and the inclusion of such Holder's
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<PAGE>
Registrable Securities in the underwriting to the extent requested (unless
otherwise mutually agreed by the Holders of a Majority of the Registrable
Securities and such Holder) to the extent provided herein. All Holders proposing
to distribute their securities through such underwriting shall enter into
(together with the Company) an underwriting agreement with the underwriter or
underwriters selected for such underwriting, in the manner set forth above,
provided that such underwriting agreement is in customary form and is reasonably
acceptable to the Holders of a majority of the shares of Registrable Securities.
(e) If the managing underwriter has not limited the number of
Registrable Securities to be underwritten, the Company and, subject to the
requirements of Section 7 hereof, other holders of the Company's securities may
include securities for its (or their) own account in such registration if (i)
the managing underwriter so agrees and (ii) the number of Registrable Securities
which would otherwise have been included in such registration and underwriting
will not thereby be limited and (iii) such other securities are then registrable
on Form S-3.
3. INCIDENTAL REGISTRATION.
(a) Each time the Company shall determine to file a
registration statement under the Securities Act (other than pursuant to Section
2 hereof and other than on Form S-4 or S-8, a registration statement on Form S-1
covering solely an employee benefit plan, a registration statement on Form S-3
covering solely offers pursuant to a dividend or interest reinvestment plan or
the Company's selling shareholder registration statement on Form S-1 currently
under review by the SEC) in connection with the proposed offer and sale for
money of any of its securities either for its own account or on behalf of any
other security holder, the Company shall give prompt written notice of its
determination to the Shareholders. Upon the written request of a Holder of any
shares of Registrable Securities given within ten days after the receipt of such
written notice from the Company, the Company shall cause all such Registrable
Securities, the Holders of which have so requested registration thereof to be
included in such registration statement and registered under the Securities Act,
all to the extent requisite to permit the sale or other disposition by the
prospective seller or sellers of the Registrable Securities to be so registered.
(b) If the registration of which the Company gives written
notice pursuant to Section 3(a) is for a public offering involving an
underwriting, the Company shall so advise the Shareholders as a part of its
written notice. All Shareholders proposing to distribute their Registrable
Securities through such underwriting shall enter into (together with the Company
and the other holders distributing their securities through such underwriting)
an underwriting agreement with the underwriter or underwriters selected for such
underwriting by the Company, provided that such underwriting agreement is in
customary form and is reasonably acceptable to the Holders of a majority of the
shares of Registrable Securities requested to be included in such registration
and provides for such Shareholders to withhold from the market all other
Registrable Shares held by such Shareholders for not more than 180 days.
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<PAGE>
(c) Notwithstanding any other provision of this Section 3, if
the managing underwriter of an underwritten distribution advises the Company and
the Holders of the Registrable Securities participating in such registration in
writing that in its good faith judgment the inclusion of the Registrable
Securities and the other securities requested to be registered would materially
adversely affect the distribution of all securities to be offered in such
registration, then (i) the number of shares of Registrable Securities and other
securities to be included in the offering other than any shares to be included
on behalf of the Company shall be reduced to that number of shares which in the
good faith judgment of the managing underwriter can be sold in such offering
(except for shares to be included pursuant to demand registration rights granted
by the Company in accordance with Section 7 hereof, in an offering initiated
upon the exercise of such rights, which shall have priority over the shares of
Registrable Securities), and (ii) such reduced number of shares shall be
allocated among all participating Holders of Registrable Securities and the
holders of other securities to be included therein, in proportion, as nearly as
practicable, as each such Person's shares to be included bears to the aggregate
number of shares of Registrable Securities and other securities proposed to be
included by such Holders and other holders at the time of the filing of the
registration statement. All Registrable Securities and other securities which
are excluded from the underwriting by reason of the underwriter's marketing
limitation and all other Registrable Securities not originally requested to be
so included shall not be included in such registration and shall be (A) withheld
from the market by the Holders thereof for a period, not to exceed 180 days
following the effective date of such registration, which the managing
underwriter reasonably determines is necessary to effect the underwritten public
offering and (B) upon notice from the Company, withheld from the market by the
Holders thereof for a period not to exceed 30 days prior to the effective date
of such registration.
4. REGISTRATION PROCEDURES. If and whenever the Company is
required by the provisions of Section 2 or 3 hereof to effect the registration
of Registrable Securities under the Securities Act, the Company, at its expense
and as expeditiously as possible, shall:
(a) In accordance with the Securities Act and all applicable
rules and regulations, prepare and file with the Commission a registration
statement with respect to such securities and use its commercially reasonable
efforts to cause such registration statement to become and remain effective
until the securities covered by such registration statement have been sold, and
prepare and file with the Commission such amendments and supplements to such
registration statement and the prospectus contained therein as may be necessary
to keep such registration statement effective and such registration statement
and prospectus accurate and complete until the securities covered by such
registration statement have been sold;
(b) If the offering is to be underwritten, in whole or in
part, enter into a written underwriting agreement in form and substance
reasonably satisfactory to the managing underwriter of the public offering and
the Holders of a majority of the Registrable Securities participating in such
offering;
(c) Furnish to the Holders of securities participating in such
registration and to the underwriters of the securities being registered such
number of
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<PAGE>
copies of the registration statement and each amendment and supplement thereto,
preliminary prospectus, final prospectus and such other documents as such
underwriters and Holders may reasonably request in order to facilitate the
public offering of such securities;
(d) Use its commercially reasonable efforts to register or
qualify the securities covered by such registration statement under such state
securities or blue sky laws of such jurisdictions as such participating Holders
and underwriters may reasonably request within such time period as is required
by the laws of such jurisdictions, except that the Company shall not for any
purpose be required to execute a general consent to service of process or to
qualify to do business as a foreign corporation in any jurisdiction where it is
not so qualified;
(e) Notify the Shareholders participating in such
registration, promptly after it shall receive notice thereof, of the date and
time when such registration statement and each post-effective amendment thereto
has become effective or a supplement to any prospectus forming a part of such
registration statement has been filed;
(f) Notify the Shareholders participating in such registration
promptly of any request by the Commission for the amending or supplementing of
such registration statement or prospectus or for additional information;
(g) Prepare and file with the Commission, as soon as
practicable upon the request of a majority of the Shareholders, any amendments
or supplements to such registration statement or prospectus which, in the
opinion of counsel for the Holders, is required under the Securities Act or the
rules and regulations thereunder in connection with the distribution of the
Registrable Securities by such Holders;
(h) Prepare and file promptly with the Commission, and
promptly notify the Shareholders of the filing of, such amendments or
supplements to such registration statement or prospectus as may be necessary to
correct any statements or omissions if, at the time when a prospectus relating
to such securities is required to be delivered under the Securities Act, any
event has occurred as the result of which any such prospectus or any other
prospectus as then in effect would include an untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading;
(i) In case any of such Holders or any underwriter for any
such Holders is required to deliver a prospectus at a time when the prospectus
then in circulation is not in compliance with the Securities Act or the rules
and regulations of the Commission, prepare as soon as practicable upon request
such amendments or supplements to such registration statement and such
prospectus as may be necessary in order for such prospectus to comply with the
requirements of the Securities Act and such rules and regulations;
(j) Advise the Shareholders promptly after it shall receive
notice or obtain knowledge thereof, of the issuance of any stop order by the
Commission suspending the effectiveness of such registration statement or the
initiation or threatening
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<PAGE>
of any proceeding for that purpose and promptly use its commercially reasonable
efforts to prevent the issuance of any stop order or to obtain its withdrawal if
such stop order should be issued; and
(k) Make available for inspection upon reasonable request by
any Holder of Registrable Securities covered by such registration statement, by
any managing underwriter of any distribution to be effected pursuant to such
registration statement and by any attorney, accountant or other agent retained
by any such Holder or any such underwriter, all financial and other records,
pertinent corporate documents and properties of the Company, and cause all of
the Company's officers, directors and employees to supply all information
reasonably requested by any such Holder, underwriter, attorney, accountant or
agent in connection with such registration statement (if available).
5. EXPENSES.
(a) With respect to each registration effected pursuant to
Section 2 hereof and with respect to each inclusion of shares of Registrable
Securities in a registration statement pursuant to Section 3 hereof, the Company
shall bear all fees, costs and expenses of and incidental to such registration
and the public offering in connection therewith; PROVIDED, HOWEVER, that
security holders participating in any such registration shall bear their pro
rata share of the (i) underwriting discount and commissions, (ii) any transfer
taxes related to the sale such of securities and (iii) any accountant comfort
letter requested by the managing underwriter(s) of such registration.
(b) The fees, costs and expenses of registration to be borne
as provided in paragraph (a) above, shall include, without limitation, all
registration, filing and NASD fees, printing expenses, fees and disbursements of
counsel and accountants for the Company, fees and disbursements of counsel for
the underwriter or underwriters of such securities (if the Company and/or
selling security holders are otherwise required to bear such fees and
disbursements), all legal fees and disbursements and other expenses of complying
with state securities or blue sky laws of any jurisdictions in which the
securities to be offered are to be registered or qualified, reasonable fees and
disbursements of one firm of counsel for the selling security holders, selected
by the Holders of a majority of the shares of Registrable Securities to be
included in such registration.
6. INDEMNIFICATION.
(a) The Company hereby agrees to indemnify and hold harmless
each Holder of Registrable Securities included in a registration statement
pursuant to the provisions of this Agreement and each of such Holder's officers
and directors and each Person who controls such Holder within the meaning of the
Securities Act and any underwriter (as defined in the Securities Act) for such
Holder, and any Person who controls such underwriter within the meaning of the
Securities Act, from and against, and agrees to reimburse such Holder, its
officers, directors and controlling Persons and each such underwriter and
controlling Person of such underwriter with respect to, any and all claims,
actions (actual or threatened), demands, losses, damages, liabilities, costs and
expenses to which such Holder, its officers, directors or controlling Persons,
or any such
7
<PAGE>
underwriter or controlling Person of such underwriter may become subject under
the Securities Act or otherwise, insofar as such claims, actions, demands,
losses, damages, liabilities, costs or expenses arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact contained
in such registration statement, any prospectus contained therein, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading; PROVIDED, HOWEVER, that
the Company will not be liable in any such case to the extent that any such
claim, action, demand, loss, damage, liability, cost or expense is caused by an
untrue statement or alleged untrue statement or omission or alleged omission so
made in strict conformity with written information furnished by such Holder,
such underwriter or such controlling Person specifically for use in the
preparation thereof.
(b) Each Holder of shares of Registrable Securities which are
included in a registration statement pursuant to the provisions of this
Agreement hereby agrees, severally and not jointly, to indemnify and hold
harmless the Company, its officers and directors and each Person who controls
the Company within the meaning of the Securities Act, from and against, and
agrees to reimburse the Company, its officers, directors and controlling Persons
with respect to, any and all claims, actions (actual or threatened), demands,
losses, damages, liabilities, costs or expenses to which the Company, its
officers, directors, or such controlling Persons may become subject under the
Securities Act or otherwise, insofar as such claims, actions, demands, losses,
damages, liabilities, costs or expenses arise out of or are based upon any
untrue or alleged untrue statement of any material fact contained in such
registration statement, any prospectus contained therein, or any amendment or
supplement thereto, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading, in each case to the extent, BUT ONLY TO
THE EXTENT, that such untrue statement or alleged untrue statement or omission
or alleged omission was so made in reliance upon and in strict conformity with
written information furnished by such Holder specifically for use in the
preparation thereof.
(c) Promptly after receipt by a party indemnified pursuant to
the provisions of subsection (a) or (b) of this Section 6 of notice of the
commencement of any action involving the subject matter of the foregoing
indemnity provisions, such indemnified party will, if a claim therefor is to be
made against the indemnifying party pursuant to the provisions of subsection (a)
or (b), notify the indemnifying party of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to an indemnified party otherwise than under this
Section 6 and shall not relieve the indemnifying party from liability under this
Section 6 unless such indemnifying party is prejudiced by such omission. In case
any such action is brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it may wish, jointly
with any other indemnifying parties similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party; PROVIDED, HOWEVER,
that if the defendants in any such action include both the indemnified party and
the indemnifying party and the indemnified party shall
8
<PAGE>
have reasonably concluded that there may be legal defenses available to it
and/or other indemnified parties which are different from or additional to those
available to the indemnifying party, the indemnified party or parties shall have
the right to select separate counsel (in which case the indemnifying party shall
not have the right to direct the defense of such action on behalf of the
indemnified party or parties). Upon the permitted assumption by the indemnifying
party of the defense of such action, and approval by the indemnified party of
counsel, which approval will not be unreasonably withheld, the indemnifying
party shall not be liable to such indemnified party under subsection (a) or (b)
for any legal or other expenses subsequently incurred by such indemnified party
in connection with the defense thereof (other than reasonable costs of
investigation) unless (i) the indemnified party shall have employed separate
counsel in connection with the assertion of legal defenses in accordance with
the proviso to the immediately preceding sentence, (ii) the indemnifying party
shall not have employed counsel satisfactory to the indemnified party to
represent the indemnified party within a reasonable time, (iii) the indemnifying
party and its counsel do not actively and vigorously pursue the defense of such
action, or (iv) the indemnifying party has authorized the employment of counsel
for the indemnified party at the expense of the indemnifying party. No
indemnifying party shall be liable to an indemnified party for any settlement of
any action or claim without the consent of the indemnifying party and no
indemnifying party may unreasonably withhold its consent to any such settlement.
No indemnifying party will consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such indemnified party of a release from all
liability with respect to such claim or litigation.
(d) If the indemnification provided for in subsection (a) or
(b) of this Section 6 is held by a court of competent jurisdiction to be
unavailable to a party to be indemnified with respect to any claims, actions,
demands, losses, damages, liabilities, costs or expenses referred to therein,
then each indemnifying party under any such subsection, in lieu of indemnifying
such indemnified party thereunder, hereby agrees to contribute to the amount
paid or payable by such indemnified party as a result of such claims, actions,
demands, losses, damages, liabilities, costs or expenses in such proportion as
is appropriate to reflect the relative benefits received by such indemnifying
party on the one hand and the indemnified party on the other from the related
offering. If, however, the allocation provided by the immediately preceding
sentence is not permitted by applicable law, then each indemnifying party shall
contribute to such amount payable by such indemnified person in such proportion
as is appropriate to reflect not only such relative benefits but also the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the statements or omissions which resulted
in such claims, actions, demands, losses, damages, liabilities, costs or
expenses, as well as any other relevant equitable considerations. The relative
benefits received by an indemnifying party on the one hand and an indemnified
party on the other shall be deemed to be in the same proportion as the total net
proceeds from the offering (before deducting expenses) received by each party
bear to the total net proceeds from the offering received by each other party
and, with respect to an underwriter, the total underwriting discounts and
commissions received by such underwriter, and in each case as set forth in the
table on the cover page of the related prospectus. The relative fault of the
indemnifying party and of the indemnified party shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or
9
<PAGE>
the omission or alleged omission to state a material fact relates to information
supplied by the indemnifying party or by the indemnified party and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution hereunder
from any person who was not guilty of such fraudulent misrepresentation.
7. REPORTING REQUIREMENTS UNDER THE EXCHANGE ACT. The Company
shall at all times use its commercially reasonable efforts to file timely
(whether or not it shall then be required to do so) such information, documents
and reports as the Commission may require or prescribe under Section 13 or 15(d)
(whichever is applicable) of the Exchange Act. The Company forthwith upon
request shall furnish to any Holder of Registrable Securities (a) a written
statement by the Company that it has complied with the reporting of Section 13
or 15(d) of the Exchange Act; (b) a copy of the most recent annual or quarterly
report of the Company, and (c) such other reports and documents filed by the
Company with the Commission as such Holder may reasonably request in availing
itself of an exemption for the sale of Registrable Securities without
registration under the Securities Act. The Company acknowledges and agrees that
the purposes of the requirements contained in this Section 8 are (x) to enable
any such Holder to comply with the current public information requirement
contained in paragraph (c) of Rule 144 under the Securities Act should such
Holder ever wish to dispose of any of the securities of the Company acquired by
it without registration under the Securities Act in reliance upon Rule 144 (or
any other similar exemptive provision) and (y) to qualify the Company for the
use of registration statements on Form S-3. In addition, the Company shall use
its commercially reasonable efforts to take such other measures and file such
other information, documents and reports, as shall be required of it hereafter
by the Commission as a condition to the availability of Rule 144 under the
Securities Act (or any similar exemptive provision hereafter in effect) and the
use of Form S-3 (or any similar form hereafter in effect). The Company also
covenants to use its commercially reasonable efforts, to the extent that it is
reasonably within its power to do so, to qualify for the use of Form S-3.
8. SHAREHOLDER INFORMATION. The Company may request each Holder
of Registrable Securities as to which any registration is to be effected
pursuant to this Agreement to furnish the Company with such information with
respect to such Holder and the distribution of such Registrable Securities as
the Company may from time to time reasonably request in writing, including as
shall be required by law or by the Commission in connection therewith, and each
Holder of Registrable Securities as to which any registration is to be effected
pursuant to this Agreement shall furnish the Company with such information, and
shall completely respond to any reasonable questionnaire with respect thereto in
a timely manner.
9. FORMS. All references in this Agreement to particular forms of
registration statements are intended to include, and shall be deemed to include,
references to all successor forms which are intended to replace, or to apply to
similar transactions as, the forms herein referenced.
10
<PAGE>
10. MISCELLANEOUS.
(a) WAIVERS AND AMENDMENTS. With the written consent of the
Holders of a Majority of the Registrable Securities, the obligations of the
Company and the rights of the Shareholders under this Agreement may be waived
(either generally or in a particular instance, either retroactively or
prospectively and either for a specified period of time or indefinitely), and
with the same consent the Company, when authorized by resolution of its Board,
may enter into a supplementary agreement for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement or of any supplemental agreement or modifying in any manner the
rights and obligations hereunder of the Shareholders and the Company; PROVIDED,
HOWEVER, that no such waiver or supplemental agreement shall reduce the
aforesaid proportion of Registrable Securities, the Holders of which are
required to consent to any waiver or supplemental agreement, without the consent
of the Holders of all of the Registrable Securities. Neither this Agreement nor
any provision hereof may be changed, waived, discharged or terminated orally or
by course of dealing, but only by a statement in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought, except to the extent provided in this Section 11(a). Specifically, but
without limiting the generality of the foregoing, the failure of any Shareholder
at any time or times to require performance of any provision hereof by the
Company shall in no manner affect the right of any Shareholder at a later time
to enforce the same, assuming such right can then otherwise be enforced. No
waiver by any party of the breach of any term or provision contained in this
Agreement, in any one or more instances, shall be deemed to be, or construed as,
a further or continuing waiver of any such breach, or a waiver of the breach of
any other term or covenant contained in this Agreement.
(b) EFFECT OF WAIVER OR AMENDMENT. Each Shareholder
acknowledges that by operation of Section 11(a) hereof the Holders of a Majority
of the Registrable Securities will, subject to the limitations contained in such
Section 11(a), have the right and power to diminish or eliminate certain rights
of such Shareholder under this Agreement.
(c) RIGHTS OF SHAREHOLDERS INTER SE. Subject to the consent
provisions of Section 11(a) above, each Shareholder shall have the absolute
right to exercise or refrain from exercising any right or rights which such
Shareholder may have by reason of this Agreement or any Registrable Security,
including, without limitation the right to consent to the waiver of any
obligation of the Company under this Agreement and to enter into an agreement
with the Company for the purpose of modifying this Agreement or any agreement
effecting any such modification, and such Shareholder shall not incur any
liability to any other Shareholder with respect to exercising or refraining from
exercising any such right or rights.
(d) NOTICES. All notices, requests, consents and other
communications required or permitted hereunder shall be in writing and shall be
delivered, or mailed first class postage prepaid, registered or certified mail,
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<PAGE>
(i) If to any Shareholder, addressed to such Shareholder at
the address set forth below the signature line for such Shareholder, or at such
other address as such Shareholder may specify by written notice to the Company,
or
(ii) If to the Company, to the address set forth below the
signature line for the Company or at such other address as the Company may
specify by written notice to the Shareholders, and each such notice, request,
consent and other communication shall for all purposes of the Agreement be
treated as being effective or having been given when delivered, if delivered
personally, or, if sent by cable, telegram or telex, or by registered or
certified mail (postage prepaid, return receipt requested) at the earlier of its
actual receipt or three days after the same has been delivered as aforesaid.
(e) VALIDITY. If any provision of this Agreement or the
application thereof to any person or circumstance in held invalid or
unenforceable, the remainder of this Agreement, and the application of such
provision to other persons or circumstances, shall not be affected thereby, and
to such end, the provisions of this Agreement are agreed to be severable.
(f) PARTIES IN INTEREST. All the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the respective successors and assigns of the parties hereto, whether so
expressed or not and, in particular, shall inure to the benefit of and be
enforceable by the Holder or Holders at the time of any of the Registrable
Securities. Subject to the immediately preceding sentence, this Agreement shall
not run to the benefit of or be enforceable by any Person other than a party to
this Agreement and its successors and assigns.
(g) DESCRIPTIVE HEADINGS. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
(h) CHOICE OF LAW. It is the intention of the parties that the
internal substantive laws, and not the laws of conflicts, of the State of
Florida should govern the enforceability and validity of this Agreement, the
construction of its terms and the interpretation of the rights and duties of the
parties.
(i) COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
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<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed personally or by a duly authorized representative
thereof as of the day and year first above written.
ABLE TELCOM HOLDING CORP.
By: ________________________________
Name:
Title:
1000 Holcomb Woods Pkwy., Suite 400
Roswell, GA 30076
SHAREHOLDERS:
____________________________________
Donald G. Garner
1849 Crestwood Blvd
P.O. Box 100309
Irondale, AL 35210
____________________________________
C. Michael Hoover
5218 Ellicot Court
Centreville, VA 20120
____________________________________
Jesse R. Joyner
1185 Carrigan Blvd
Merrit Island, FL 32952
13
EXHIBIT 2.7.5
EXHIBIT A
FORM OF
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and
entered into as of this 5th day of November, 1999 by and between Southern
Aluminum & Steel Corporation, a Florida corporation ("SASCO"), and Donald G.
Garner (the "Employee").
RECITALS:
WHEREAS, as of the date hereof, Able Telcom Holding Corp. ("Able"), is
purchasing, pursuant to a Stock Purchase Agreement, dated November 5, 1999, all
of the issued and outstanding capital stock of SASCO;
WHEREAS, Employee will sell all of his ownership interest in SASCO to
Able in connection with the aforementioned acquisition;
WHEREAS, Employee is currently employed by SASCO;
WHEREAS, Able, in connection with its review of SASCO has considered
Employee's services important to the business of SASCO and, following the
acquisition, Able and SASCO desire for SASCO to continue to employ the Employee;
WHEREAS, in order to protect fully SASCO's and its affiliates' trade
secrets and confidential information and the goodwill of the business of SASCO
which Able has acquired by virtue of the acquisition described above and to
ensure that Able enjoys the benefits of such goodwill and business, SASCO and
the Employee desire to provide for Employee's agreement of confidentiality and
agreement not to compete with SASCO or its affiliates as specified herein; and
WHEREAS, SASCO and the Employee desire to set forth herein the terms
and conditions on which the Employee will continue to be employed by SASCO
including the terms of Employee's agreement not to compete.
NOW, THEREFORE, in consideration of the mutual promises, agreements and
mutual covenants set forth herein and for other good and valuable consideration
the parties hereto hereby agree as follows:
<PAGE>
1. EMPLOYMENT. SASCO hereby agrees to continue to employ the Employee, and
the Employee hereby accepts such continuation of employment with SASCO, upon the
terms and subject to the conditions set forth in this Agreement.
2. POSITION AND DUTIES. Subject to the authority of the Board, the
Employee shall continue to perform the duties historically performed by Employee
as President of SASCO and such other duties as are appropriate for such position
and are assigned to such position in the future. The Employee shall also serve
in such additional capacities as may be requested of him from time to time by
the Board of Directors of SASCO (the "Board"). The Employee shall devote
substantially all of his business time, attention, skill and best efforts to the
diligent performance of his duties hereunder. On all matters not delegated to
the Employee, the Employee shall report to the Chairman of the Board of SASCO
and such other officers of SASCO as shall be assigned to supervise Employee from
time to time.
3. TERM. The term of employment hereunder shall commence as of the date
hereof (the "Commencement Date") and shall continue thereafter for a period of
four years through and including November 5, 2003 (the "Term") unless earlier
terminated in accordance with the provisions hereof. Notwithstanding the above,
the covenants set forth in
(i) Section 5 hereof shall survive for the periods set forth therein
notwithstanding any termination of employment hereunder including any
termination pursuant to this Section 3 upon the expiration of the Term; and
(ii) Section 6 hereof shall survive for the periods set forth therein
notwithstanding any termination of employment hereunder other than termination
without cause as set forth in Section 10 hereof, including any termination
pursuant to this Section 3 upon the expiration of the Term.
4. COMPENSATION. As compensation for all services rendered by the Employee
under this Agreement, SASCO shall pay the Employee compensation as follows:
(a) ANNUAL COMPENSATION. For all services rendered by the Employee
during his employment under this Agreement, beginning on the Commencement Date,
SASCO shall pay the Employee an annual salary in an amount not less than
$150,000, payable bi-weekly, or at such other intervals as Able executives may
be paid, in substantially equal installments. The Employee's salary shall be
eligible for increases granted by the Board in its sole discretion.
(b) BENEFITS. The Employee shall be entitled to participate in those
perquisites and benefits generally available to employees of Able and its
affiliates of similar status and rank as the Employee in accordance with Able's
regular policies.
(c) BONUSES. The Employee shall be eligible for merit bonuses based on
management's and the Board of Director's discretion and their evaluation of
Employee's performance and the financial performance of the consolidated Able
group.
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<PAGE>
(d) TAXES AND WITHHOLDINGS. All taxes and governmentally required
withholdings shall be deducted from any amount paid by SASCO to the Employee
hereunder in conformity with applicable laws.
5. CONFIDENTIALITY. The Employee acknowledges and agrees that the Trade
Secrets (as defined below) and the Confidential Information (as defined below)
of SASCO and its affiliates (including any parent, subsidiaries or commonly
controlled entities) and all physical embodiments thereof (collectively referred
to as the "Proprietary Information") are valuable, special and unique assets of
the business of SASCO and its affiliates and have been developed by SASCO and
its affiliates and will continue to be developed by SASCO and its affiliates
following Able's purchase of SASCO at considerable time and expense. Employee
further acknowledges that access to such Proprietary Information is essential to
performance of Employee's duties and responsibilities under this Agreement.
Therefore, in order to obtain access to such Proprietary Information, Employee
agrees that except with respect to those duties assigned to him by SASCO,
Employee shall hold in strictest confidence all Proprietary Information,
regardless of whether such Proprietary Information was received prior to, on or
subsequent to the date of this Agreement, will not reproduce, use, distribute,
disclose, publish or otherwise disseminate any Proprietary Information, in whole
or in part, and will take no action causing, or fail to take any action
necessary to prevent causing, any Proprietary Information to lose its character
as Proprietary Information, nor wilfully make use of such information for
Employee's own purposes or for the benefits of any person, firm, corporation,
association or other entity (except SASCO and its affiliates) under any
circumstances, except that Employee may disclose such Proprietary Information
pursuant to a court order, subpoena or other legal process, provided that, at
least ten days in advance of any legal disclosure, the Employee shall furnish
SASCO with a copy of the judicial or administrative order requiring that such
information be disclosed together with a written description of the information
to be disclosed (which description shall be in sufficient detail to allow SASCO
and its affiliates to determine the nature and scope of the information proposed
to be disclosed), and the Employee covenants and agrees to cooperate with SASCO
and its affiliates to deliver the minimum amount of information necessary to
comply with such order.
For purposes of this Agreement, the term "Trade Secrets" means
information, including but not limited to, any technical or nontechnical data,
formula, pattern, compilation, program, device, method, technique, drawing,
process, financial data, financial plan, product plan, list of actual or
potential customers or suppliers, or other information similar to any of the
foregoing, which derives economic value, actual or potential, from not being
generally known to, and not being readily ascertainable by proper means by,
other persons who can derive economic value from its disclosure or use. For
purposes of this Agreement, the term "Trade Secrets" does not include
information that Employee can show by competent proof (i) was known to Employee
and reduced to
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<PAGE>
writing prior to disclosure by SASCO or its affiliates (but only if Employee
promptly notifies SASCO of Employee's prior knowledge); (ii) was generally known
to the public at the time SASCO or its affiliates disclosed the information to
Employee; (iii) became generally known to the public after disclosure to the
Employee through no act or omission of Employee; or (iv) was disclosed to
Employee by a third party having a bona fide right both to possess the
information and to disclose the information to Employee.
The term "Confidential Information" means any data or information of
SASCO (including information of SASCO or SASCO's affiliates), other than Trade
Secrets, regarding the business of SASCO and its affiliates or their policies
and operations which is valuable to SASCO and not generally known to competitors
of SASCO and its affiliates. For purposes of this Agreement, the term
"Confidential Information" does not include information that Employee can show
by competent proof (i) was known to Employee and reduced to writing prior to
disclosure by SASCO or its affiliates (but only if Employee promptly notifies
SASCO of Employee's prior knowledge); (ii) was generally known to the public at
the time SASCO or its affiliates disclosed the information to Employee; (iii)
became generally known to the public after disclosure to the Employee through no
act or omission of Employee; or (iv) was disclosed to Employee by a third party
having a bona fide right both to possess the information and to disclose the
information to Employee.
The provisions of this Section 5 will apply to Trade Secrets for so
long as such information remains a Trade Secret and to Confidential Information
during Employee's employment with SASCO and for a period of three years
following any termination of Employee's employment with SASCO for whatever
reason.
6. COVENANT NOT TO COMPETE.
(a) AGREEMENT NOT TO COMPETE. SASCO designs, installs and implements
surveillance systems, signalization, Intelligent Transportation Systems and
roadway lighting for advanced highway communications networks (the "Business").
In order to fully protect SASCO's and its affiliates' Confidential Information
and Trade Secrets and the goodwill of the Business of SASCO purchased by Able on
the date hereof, and to ensure that SASCO enjoys the benefits of that Business,
for a period of five years from the date hereof (the "Non-Competition Period"),
Employee shall not, except as authorized in writing by SASCO, directly or
indirectly, be employed by, render services to, assist, participate in the
affairs of, invest in, or otherwise be connected with, any person or enterprise
which person or enterprise is engaged in, or is planning to engage in, and shall
not personally engage in, any business that is in any respect competitive with
the Business of SASCO or any of its affiliates, whether relating to products or
services of the Business, within any state in which SASCO is conducting Business
or reasonably expects
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<PAGE>
to conduct business at the time the Employee's employment is terminated and any
state in which SASCO conducted Business within the two years preceding the
termination of the Employee's employment (the "Territory"); provided that
Employee may hold investments representing a less than 5% interest in any
publicly held entity competing with SASCO. SASCO recognizes Employee's ownership
of SASCO, LLC, which owns 36% of L&K Electric Supply, and hereby acknowledges
and agrees that such ownership shall not violate the laws of this Section 6(a).
In furtherance of such covenant not to compete, Employee hereby acknowledges
that SASCO currently does business, and following the acquisition described
herein, SASCO shall continue to do business in a growing number of locales
throughout the United States and that in his capacity as an employee of SASCO
his responsibilities have involved and will continue to involve the conduct of
business throughout such Territory.
(b) NON-SOLICITATION COVENANT. Employee agrees that for the
Non-Competition Period, he will not, nor will he assist any of his affiliates
to, directly or indirectly, recruit or otherwise solicit or induce any agent,
non-employee sales representative, customer, subscriber or supplier of SASCO or
any affiliate of SASCO to terminate its employment or other arrangement with
SASCO or any affiliate of SASCO, otherwise change its relationship with SASCO or
any affiliates of SASCO, or establish any relationship with Employee or any of
his affiliates for any business purpose deemed materially competitive with the
Business.
(c) NON-INTERFERENCE WITH EMPLOYEES. Employee agrees that for the
Non-Competition Period, he will not, nor will he assist any of his affiliates
to, directly or indirectly, recruit or otherwise solicit or induce employee of
SASCO or any affiliate of SASCO to terminate or otherwise negatively affect his
or her employment relationship with SASCO or any affiliate of SASCO, or
establish an employment relationship directly or indirectly with Employee or any
entity other than SASCO or its affiliate with whom Employee is affiliated,
absent the express written consent of SASCO's Board of Directors.
(d) REMEDIES. The parties recognize, acknowledge and agree that (i) any
breach or threatened breach of the provisions of this Section 6 shall cause
irreparable harm and injury to SASCO and that money damages alone will not
provide an adequate remedy for such breach or threatened breach, (ii) the
duration, scope and geographical application of this Section 6 are fair and
reasonable under the circumstances of the business of SASCO, and are reasonably
required to protect the legitimate business interests of SASCO and the goodwill
of the business purchased by Able, (iii) the restrictions contained in this
Section 6 will not prevent the Employee from earning or seeking a livelihood,
and (iv) the restrictions contained in this Section 6 shall apply in all areas
where such application is permitted by law. Accordingly, the Employee agrees
that
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<PAGE>
SASCO shall be entitled to have the provisions of this Section 6 specifically
enforced by any court having jurisdiction, and that such a court may issue a
temporary restraining order, preliminary injunction or other appropriate
equitable relief, without having to prove the inadequacy of available remedies
at law, having to post any bond or any other undertaking. In addition, SASCO
shall be entitled to avail itself of all such other actions and remedies
available to it or any of its affiliates under law or in equity and shall be
entitled to such damages as it sustains by reason of such breach or threatened
breach. It is the express desire and intent of the parties that the provisions
of this Section 6 be enforced to the full extent possible.
(e) SEVERABILITY. In light of the fact that the covenants set forth in
Section 6 are reasonably required to protect the legitimate interests of SASCO,
if any provision of this Section 6 hereof is held to be unenforceable because of
the duration of such provision, the area covered thereby or the scope of the
activity restrained, the parties hereby expressly agree that the court making
such determination shall have the power to reduce the duration and/or areas of
such provision and/or the scope of the activity to be restrained contained in
such provision and, in its reduced form, such provision shall then be
enforceable. The parties hereto intend and agree that the covenants contained in
Section 6(a) shall be construed as a series of separate covenants, one for each
municipality, community or county included within the area designated by Section
6(a). Except for geographic coverage, the terms and conditions of each such
separate covenant shall be deemed identical to the covenant contained in Section
6(a). Furthermore, if any court shall refuse to enforce any of the separate
covenants deemed included in Section 6(a), then such unenforceable covenant
shall be deemed eliminated from the provisions hereof to the extent necessary to
permit the remaining separate covenants to be enforced in accordance with their
terms. The prevailing party in any action arising out of a dispute in respect of
any provision of this Section 6 shall be entitled to recover from the
non-prevailing party reasonable attorneys' fees and costs and disbursements
incurred in connection with the prosecution or defense, as the case may be, of
any such action.
7 RESPONSIBILITIES UPON TERMINATION. Upon the termination of his
employment by SASCO for whatever reason and irrespective of whether or not such
termination is voluntary on his part:
(a) The Employee shall advise SASCO of the identity of his new employer
within ten days after accepting new employment and further agrees to keep SASCO
so advised of any change in employment during the Non-Competition Period;
(b) SASCO in its sole discretion may notify any new employer of the
Employee that the Employee has the obligations set forth in paragraph 6 to SASCO
during the Non-Competition Period;
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<PAGE>
(c) The Employee shall deliver to SASCO immediately upon termination of
his employment all proprietary information and all other records, forms,
contracts, memoranda, work papers, customer data and any other proprietary
documents of SASCO which have come into his possession by reason of his
employment with SASCO and which contain Trade Secrets or Confidential
Information, and any other documents necessary for the consistent operation by
SASCO of its business, irrespective of whether or not any of said documents were
prepared for him, and he shall not retain memoranda in respect of or copies of
any of said documents; and
(d) The Employee shall participate in an exit interview with SASCO.
8. SEPARATE AGREEMENTS. The covenants of the Employee contained in
Sections 5 and 6 of this Agreement shall be construed as separate agreements
independent of any other agreement, claim, or cause of action of the Employee
against SASCO, whether predicated on this Agreement or otherwise. In particular,
the covenants of the Employee contained in Sections 5 and 6 of this Agreement
shall be independent of the corresponding covenants of Employee set forth in
that certain Non-Competition Agreement dated of even date herewith by and
between SASCO and the Employee (the "Non-Competition Agreement"). In no event
shall the termination of Employee's responsibilities under this Agreement result
in the termination of Employee's responsibilities under the Non-Competition
Agreement. The covenants contained in this Agreement are necessary to protect
the legitimate business interests of SASCO.
9. TERMINATION FOR CAUSE. SASCO shall have the right at any time to
terminate the employment of the Employee for cause by delivering to him a
written notice specifying such cause. If SASCO exercises such right, SASCO's
obligation under this Agreement to make any further payments to the Employee
shall thereupon cease and terminate. This Section 9 of this Agreement in no way
limits SASCO's right to terminate Employee's employment without cause pursuant
to Section 10 of this Agreement. As used herein, the term "cause" shall include
but not be limited by:
(a) misappropriating any funds or any material property of SASCO or its
affiliates, customers, suppliers or other related entities;
(b) obtaining or attempting to obtain any material personal profit from
any transaction, other than as contemplated by this Agreement, in which the
Employee has an interest which is adverse to the interest of SASCO unless SASCO
shall first give its written consent to such transaction;
(c) (i) neglecting or refusing to perform the duties contemplated by
this Agreement, (ii) the willful taking of actions which directly impair the
Employee's ability
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<PAGE>
to perform his duties contemplated by this Agreement; (iii) breaching any term
of this Agreement; or (iv) taking any action detrimental to SASCO's goodwill or
damaging to SASCO's relationships with its customers, suppliers or employees;
provided that such neglect or refusal, action or breach shall have continued for
a period of or is not remedied within 10 days following written notice thereof;
(d) being convicted of or pleading guilty or NOLO CONTENDERE to any
crime or offense constituting a felony under applicable law or any crime or
offense involving fraud or moral turpitude;
(e) acting or refraining from acting in respect of any of the duties
contemplated by this Agreement and the Board determines in good faith that such
action or inaction constituted gross negligence or a willful act of malfeasance
or misfeasance; or
(f) any material intentional failure to comply with laws or
governmental regulations applicable to SASCO or the conduct of SASCO's business.
10. TERMINATION WITHOUT CAUSE. SASCO shall have the right at any time to
terminate the employment of the Employee and this Agreement without cause
effective upon 30 days prior written notice to the Employee. Upon termination of
this Agreement pursuant to this Section 10, the Employee shall be entitled to
receive, in full settlement and discharge of SASCO's obligation to the Employee,
(i) a lump sum amount equal to all compensation accrued and unpaid as of the
date of termination; and (ii) in equal semi-monthly installments an amount equal
to the base salary to which Employee would have been entitled under Section 4(a)
hereof if this Agreement had not been terminated.
11. TERMINATION UPON DEATH OR DISABILITY. SASCO may terminate the
employment of the Employee and this Agreement effective upon notice to the
Employee (or his heirs or legal representatives, as the case may be) if the
Employee either dies or is incapacitated or disabled by accident, sickness or
otherwise and has been rendered mentally or physically incapable with or without
reasonable accommodation of performing the services and duties required to be
performed by him under this Agreement for a period of at least 90 consecutive
days or 120 days within any 12 month period. Upon termination of this Agreement
pursuant to this Section 11, the Employee (or his heirs or legal
representatives, as the case may be) shall be entitled to receive, in full
settlement and discharge of SASCO's obligation to the Employee, a lump sum
amount equal to all compensation unpaid as of the date of termination.
12. SEVERABILITY. If any provision of this Agreement is held to be illegal,
invalid or unenforceable under present or future laws, such provision shall be
fully severable, this Agreement shall be construed and enforced as if such
illegal, invalid or unenforceable
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<PAGE>
provision had never comprised a part of this Agreement, and the remaining
provisions of this Agreement shall remain in full force and effect and shall not
be affected by the illegal, invalid or unenforceable provision or by its
severance from this Agreement.
13. MISCELLANEOUS.
(a) GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the law of the State of Florida, without giving effect to the
principles of conflicts of laws of such state.
(b) COUNTERPARTS. This Agreement may be executed in several
counterparts each of which is an original. This Agreement and any counterpart so
executed shall be deemed to be one and the same instrument. It shall not be
necessary in making proof of this Agreement or any counterpart hereof to produce
or account for any of the other counterparts.
(c) CONTENTS OF AGREEMENT; PARTIES IN INTEREST, ETC. This Agreement
sets forth the entire understanding of the parties. Any previous agreements or
understandings between the parties regarding the subject matter hereof are
merged into and superseded by this Agreement. All representations, warranties,
covenants, terms, conditions and provisions of this Agreement shall be binding
upon and inure to the benefit of and be enforceable by the respective heirs,
legal representatives, successors and permitted assigns of SASCO and the
Employee. Neither this Agreement nor any rights, interests or obligations
hereunder may be assigned by any party without the prior written consent of the
other party hereto.
(d) SECTION HEADINGS. The section headings herein have been inserted
for convenience of reference only and shall in no way modify or restrict any of
the terms or provisions hereof.
(e) NOTICES. All notices, requests, demands and other communications
which are required or permitted hereunder shall be sufficient if given in
writing and delivered personally or by registered or certified mail, postage
prepaid, by a nationally recognized overnight courier service, or by facsimile
transmission (with a copy simultaneously sent by registered or certified mail,
postage prepaid), as follows (or to such other address as shall be set forth in
a notice given in the same manner):
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<PAGE>
(1) If to SASCO, to:
Southern Aluminum & Steel Corporation
c/o Able Telcom Holding Corp.
1000 Holcomb Woods Parkway
Suite 440
Roswell, GA 30076
Telephone: (770) 993-1570
Facsimile: (770) 993-8532
Attn: President
Copies to:
Paul Hastings Janofsky & Walker LLP
600 Peachtree Street, Suite 2400
Atlanta, Georgia 30308
Facsimile: (404) 815-2424
Attn: Elizabeth H. Noe, Esq.
(2) If to the Employee, to:
Donald G. Garner
15 North Atlantic Avenue, #205
Cocoa Beach, FL 32931
Telephone: (205) 956-1640
Facsimile: (205) 956-1519
(f) MODIFICATION AND WAIVER. Any of the terms or conditions of this
Agreement may be waived in writing at any time by the party which is entitled to
the benefits thereof, and this Agreement may be modified or amended at any time
by SASCO and the Employee. No supplement, modification or amendment of this
Agreement shall be binding unless executed in writing by each of the parties
hereto. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provision hereof nor shall such waiver
constitute a continuing waiver.
(g) THIRD PARTY BENEFICIARIES. Except as otherwise expressly set forth
herein, no individual or entity shall be a third-party beneficiary of the
representations, warranties, covenants and agreements made by any party hereto.
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<PAGE>
(h) MEDIATION. SASCO and the Employee shall attempt in good faith to
mediate any claim or controversy arising out of or relating to this Agreement or
any breach thereof if either of them requests mediation and gives written notice
to the other (the "Mediation Notice"). Any notice given pursuant to the
preceding sentence shall include a brief statement of the claim or controversy.
If SASCO and the Employee do not resolve the claim or controversy within twenty
days after the date of the Mediation Notice, SASCO and the Employee shall then
use reasonable efforts to agree upon an independent mediator. If SASCO and the
Employee do not agree upon an independent mediator within ten days after the
date of the Mediation Notice, either party may request that JAMS/Endispute
("JAMS"), or a similar mediation service of a similar national scope if JAMS no
longer then exists, appoint an independent mediator. SASCO and the Employee
shall share the costs of mediation equally and shall pay such costs in advance
upon the request of the mediator or any party. Within ten days after selection
of the mediator, the mediator shall set the mediation. If SASCO and the Employee
do not resolve the dispute within 30 days after the date of the Mediation
Notice, the dispute shall be decided by arbitration as set forth in Section
14(i) hereof.
(i) ARBITRATION. Any claim or controversy arising out of or relating to
this Agreement or any breach thereof shall be settled by arbitration if such
claim or controversy is not settled pursuant to Section 14(h) hereof. The venue
for any such arbitration shall be Atlanta, Georgia. Except as expressly set
forth herein, all arbitration proceedings under this Section 14(i) shall be
undertaken in accordance with the Commercial Arbitration Rules of the American
Arbitration Association (the "AAA") then in force. Only individuals who are (i)
lawyers engaged full-time in the practice of law and (ii) on the AAA register of
arbitrators shall be selected as an arbitrator. There shall be one arbitrator
who shall be chosen in accordance with the rules of the AAA. Within 20 days of
the conclusion of the arbitration hearing, the arbitrator shall prepare written
findings of fact and conclusions of law. Judgment on the written award may be
entered and enforced in any court of competent jurisdiction. It is mutually
agreed that the written decision of the arbitrator shall be valid, binding,
final and non-appealable; provided however, that the parties hereto agree that
the arbitrator shall not be empowered to award punitive damages against any
party to such arbitration. The arbitrator shall require the non-prevailing party
to pay the arbitrator's full fees and expenses or, if in the arbitrator's
opinion there is no prevailing party, the arbitrator's fees and expenses will be
borne equally by the parties thereto. In the event action is brought to enforce
the provisions of this Agreement pursuant to this Section 14(i), the
non-prevailing parties shall be required to pay the reasonable attorneys' fees
and expenses of the prevailing parties, except that if in the opinion of the
court or arbitrator deciding such action there is no prevailing party, each
party shall pay its own attorneys' fees and expenses.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed or have caused
this Agreement to be duly executed as of the date first above written.
EMPLOYEE
_____________________________________
Donald G. Garner
SASCO
SOUTHERN ALUMINUM & STEEL CORPORATION
By:__________________________________
Name:________________________________
Title:_______________________________
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EXHIBIT 2.7.5.1
EXHIBIT E
FORM OF
NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT (this "Agreement") is made and entered
into as of this 5th day of November, 1999 by and between Southern Aluminum &
Steel Corporation, a Florida corporation ("SASCO"), and Donald G. Garner
("Seller").
RECITALS:
WHEREAS, as of the date hereof, Able Telcom Holding Corp. ("Able") is
purchasing, pursuant to a Stock Purchase Agreement, dated November 5, 1999 (the
"Stock Purchase Agreement"), all of the issued and outstanding capital stock of
SASCO;
WHEREAS, Seller holds 51%of the issued and outstanding stock of SASCO;
WHEREAS, as a result of the above-described acquisition, Seller will
sell all of his ownership interest in SASCO and will receive shares of Able
common stock as determined by the Stock Purchase Agreement;
WHEREAS, in order to protect fully SASCO's and its affiliates'
confidential information and the goodwill of the business of SASCO which Able
has acquired by virtue of the acquisition described above and to ensure that
Able enjoys the benefits of such goodwill and business, SASCO and Seller desire
to provide for Seller's agreement of confidentiality and agreement not to
compete with SASCO and its affiliates as specified herein; and
WHEREAS, SASCO and Seller desire to set forth herein the terms of
Seller's agreement of confidentiality and agreement not to compete.
NOW, THEREFORE, in consideration of the mutual promises, agreements and
mutual covenants set forth herein and for other good and valuable consideration
the parties hereto hereby agree as follows:
1. CONFIDENTIALITY. Seller acknowledges and agrees that the Trade Secrets
(as defined below) and the Confidential Information (as defined below) of SASCO
and its affiliates (including any parent, subsidiaries or commonly controlled
entities) and all physical embodiments thereof (collectively referred to as the
"Proprietary Information") are valuable, special and unique assets of the
business of SASCO and its affiliates and have been developed by SASCO and its
affiliates and will continue to be developed by SASCO and its affiliates
following Able's purchase of SASCO at considerable time and expense. Seller
further acknowledges that access to such Proprietary Information is essential to
performance of
<PAGE>
Seller's duties and responsibilities under this Agreement. Therefore, in order
to obtain access to such Proprietary Information, Seller agrees that except with
respect to those duties assigned to him by SASCO and for the time periods set
forth below, Seller shall hold in strictest confidence all Proprietary
Information, regardless of whether such Proprietary Information was received
prior to, on or subsequent to the date of this Agreement, and will not
reproduce, use, distribute, disclose, publish or otherwise disseminate any
Proprietary Information, in whole or in part, and will take no action causing,
or fail to take any action necessary to prevent causing, any Proprietary
Information to lose its character as Proprietary Information, nor wilfully make
use of such information for Seller's own purposes or for the benefits of any
person, firm, corporation, association or other entity (except SASCO and its
affiliates) under any circumstances, except that Seller may disclose such
Proprietary Information pursuant to a court order, subpoena or other legal
process, provided that, at least ten days in advance of any legal disclosure,
Seller shall furnish SASCO with a copy of the judicial or administrative order
requiring that such information be disclosed together with a written description
of the information to be disclosed (which description shall be in sufficient
detail to allow SASCO and its affiliates to determine the nature and scope of
the information proposed to be disclosed), and Seller covenants and agrees to
cooperate with SASCO and its affiliates to deliver the minimum amount of
information necessary to comply with such order.
For purposes of this Agreement, the term "Trade Secrets" means
information, including but not limited to, any technical or nontechnical data,
formula, pattern, compilation, program, device, method, technique, drawing,
process, financial data, financial plan, product plan, list of actual or
potential customers or suppliers, or other information similar to any of the
foregoing, which derives economic value, actual or potential, from not being
generally known to, and not being readily ascertainable by proper means by,
other persons who can derive economic value from its disclosure or use. For
purposes of this Agreement, the term "Trade Secrets" does not include
information that Seller can show by competent proof (i) was known to Seller and
reduced to writing prior to disclosure by SASCO or its affiliates to Seller (but
only if Seller promptly notifies SASCO of Seller's prior knowledge); (ii) was
generally known to the public at the time SASCO or its affiliates disclosed the
information to Seller; (iii) became generally known to the public after
disclosure to Seller through no act or omission of Seller; or (iv) was disclosed
to Seller by a third party having a bona fide right both to possess the
information and to disclose the information to Seller.
The term "Confidential Information" means any data or information of
SASCO (including information of SASCO or SASCO's affiliates), other than Trade
Secrets, regarding the business of SASCO and its affiliates or their policies
and operations which is valuable to SASCO and not generally known to competitors
of SASCO and its affiliates. For purposes of this Agreement, the term
"Confidential Information" does not include information that Seller can show by
competent proof (i) was known to Seller and reduced to writing prior to
disclosure by SASCO or its affiliates to Seller (but only if Seller promptly
notifies SASCO of Seller's prior knowledge); (ii) was generally known to the
public at the time SASCO or its affiliates disclosed the information to Seller;
(iii) became generally known to the public after
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<PAGE>
disclosure to Seller through no act or omission of Seller; or (iv) was disclosed
to Seller by a third party having a bona fide right both to possess the
information and to disclose the information to Seller.
The provisions of this Section 1 will apply to Trade Secrets for so
long as such information remains a Trade Secret and to Confidential Information
for a period of five years from the date hereof.
2. COVENANT NOT TO COMPETE.
a. AGREEMENT NOT TO COMPETE. SASCO designs, installs and implements
surveillance systems, signalization, Intelligent Transportation Systems and
roadway lighting for advanced highway communications networks (the "Business").
In order to fully protect SASCO's and its affiliates' Confidential Information
and Trade Secrets and the goodwill of the Business of SASCO purchased by Able on
the date hereof, and to ensure that SASCO enjoys the benefits of that Business,
for a period of five years from the date hereof (the "Non-Competition Period"),
Seller shall not, except as authorized in writing by SASCO, directly or
indirectly, be employed by, render services to, assist, participate in the
affairs of, invest in, or otherwise be connected with, any person or enterprise
which person or enterprise is engaged in, or is planning to engage in, and shall
not personally engage in, any business that is in any respect competitive with
the Business of SASCO or any of its affiliates, with respect to any products or
services of the Business of SASCO and its affiliates, within any state in which
SASCO is conducting Business or reasonably expects to conduct business at the
time of this Agreement (the "Territory"); provided that Seller may hold
investments representing a less than 5% interest in any publicly held entity
competing with SASCO. SASCO recognizes Seller's ownership of SASCO, LLC, which
owns 36% of L&K Electric Supply, and hereby acknowledges and agrees that such
ownership shall not violate the terms of this Section 2(a). In furtherance of
such covenant not to compete, Seller hereby acknowledges that SASCO currently
does business, and following the merger described herein, SASCO shall continue
to do business in a growing number of locales throughout the United States and
that in his capacity as an employee of SASCO his responsibilities have involved
and will continue to involve the conduct of business throughout such Territory.
b. NON-SOLICITATION COVENANT. Seller agrees that for the
Non-Competition Period, he will not, nor will he assist any of his affiliates
to, directly or indirectly, recruit or otherwise solicit or induce any agent,
non-employee sales representative, customer, subscriber or supplier of SASCO or
any affiliate of SASCO to terminate its contract, relationship or other
arrangement with SASCO or any affiliate of SASCO, otherwise change its
relationship with SASCO or any affiliates of SASCO, or establish any
relationship with Seller or any of his affiliates for any business purpose
deemed materially competitive with the Business.
c. NON-INTERFERENCE WITH EMPLOYEES. Seller agrees that for the
Non-Competition Period, he will not, nor will he assist any of his affiliates
to, directly or indirectly,
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<PAGE>
recruit or otherwise solicit or induce any employee of SASCO or any affiliate of
SASCO to terminate or otherwise negatively affect its employment relationship
with SASCO or any affiliate of SASCO, or establish an employment relationship
directly or indirectly with Seller or any entity other than SASCO or its
affiliates with whom Seller is affiliated, absent the express written consent of
SASCO's Board of Directors.
d. REMEDIES. The parties recognize, acknowledge and agree that (i) any
breach or threatened breach of the provisions of this Section 2 shall cause
irreparable harm and injury to SASCO and that money damages alone will not
provide an adequate remedy for such breach or threatened breach, (ii) the
duration, scope and geographical application of this Section 2 are fair and
reasonable under the circumstances of the business of SASCO, and are reasonably
required to protect the legitimate business interests of SASCO and the goodwill
of the business purchased by Able, (iii) the restrictions contained in this
Section 2 will not prevent Seller from earning or seeking a livelihood, and (iv)
the restrictions contained in this Section 2 shall apply in all areas where such
application is permitted by law. Accordingly, Seller agrees that SASCO shall be
entitled to have the provisions of this Section 2 specifically enforced by any
court having jurisdiction, and that such a court may issue a temporary
restraining order, preliminary injunction or other appropriate equitable relief,
without having to prove the inadequacy of available remedies at law, having to
post any bond or any other undertaking. In addition, SASCO shall be entitled to
avail itself of all such other actions and remedies available to it or any of
its affiliates under law or in equity and shall be entitled to such damages as
it sustains by reason of such breach or threatened breach. It is the express
desire and intent of the parties that the provisions of this Section 2 be
enforced to the full extent possible.
e. SEVERABILITY. In light of the fact that the covenants set forth in
Section 2 are reasonably required to protect the legitimate interests of SASCO,
if any provision of this Section 2 hereof is held to be unenforceable because of
the duration of such provision, the area covered thereby or the scope of the
activity restrained, the parties hereby expressly agree that the court making
such determination shall have the power to reduce the duration and/or areas of
such provision and/or the scope of the activity to be restrained contained in
such provision to that which is reasonable for protection of the business
interests of SASCO and its affiliates and, in its reduced form, such provision
shall then be enforceable. The parties hereto intend and agree that the
covenants contained in Section 2(a) shall be construed as a series of separate
covenants, one for each municipality, community, county or state included within
the area designated by Section 2(a). Except for geographic coverage, the terms
and conditions of each such separate covenant shall be deemed identical to the
covenant contained in Section 2(a). Furthermore, if any court shall refuse to
enforce any of the separate covenants deemed included in Section 2(a), then such
unenforceable covenant shall be deemed eliminated from the provisions hereof to
the extent necessary to permit the remaining separate covenants to be enforced
in accordance with their terms. The prevailing party in any action arising out
of a dispute in respect of any provision of this Section 2 shall be entitled to
recover from the non-prevailing party reasonable attorneys' fees and costs and
disbursements incurred in connection with the prosecution or defense, as the
case may be, of any such action.
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<PAGE>
3. SEPARATE AGREEMENTS. The covenants of Seller contained in Sections 1
and 2 of this Agreement shall be construed as separate agreements independent of
any other agreement, claim, or cause of action of Seller against SASCO, whether
predicated on this Agreement or otherwise. In particular, the covenants of
Seller contained in Sections 1 and 2 of this Agreement shall be independent of
the corresponding covenants of Seller set forth in that certain Employment
Agreement dated of even date herewith by and between SASCO and Seller (the
"Employment Agreement"). In no event shall the termination of Seller's
responsibilities under this Agreement result in the termination of Seller's
responsibilities under the Employment Agreement. The covenants contained in this
Agreement are necessary to protect the legitimate business interests of SASCO.
4. TERMINATION. The covenants set forth in Sections 1 and 2 hereof shall
continue for the period set forth therein. Notwithstanding the above, in the
event Seller's employment with SES is terminated without cause, the covenants
set forth in Section 2 hereof shall terminate on the effective date of Seller's
termination.
5. MISCELLANEOUS.
a. GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the laws of the State of Florida, without giving effect to the
principles of conflicts of laws of such state.
b. COUNTERPARTS. This Agreement may be executed in several counterparts
each of which is an original. This Agreement and any counterpart so executed
shall be deemed to be one and the same instrument. It shall not be necessary in
making proof of this Agreement or any counterpart hereof to produce or account
for any of the other counterparts.
c. CONTENTS OF AGREEMENT; PARTIES IN INTEREST, ETC. This Agreement sets
forth the entire understanding of the parties. Any previous agreements or
understandings between the parties regarding the subject matter hereof are
merged into and superseded by this Agreement. All representations, warranties,
covenants, terms, conditions and provisions of this Agreement shall be binding
upon and inure to the benefit of and be enforceable by the respective heirs,
legal representatives, successors and permitted assigns of SASCO and Seller.
Neither this Agreement nor any rights, interests or obligations hereunder may be
assigned by any party without the prior written consent of the other party
hereto.
d. SECTION HEADINGS. The section headings herein have been inserted for
convenience of reference only and shall in no way modify or restrict any of the
terms or provisions hereof.
e. NOTICES. All notices, requests, demands and other communications
which are required or permitted hereunder shall be sufficient if given in
writing and delivered personally or by registered or certified mail, postage
prepaid, by a nationally recognized overnight courier service, or by facsimile
transmission (with a copy simultaneously sent by registered or certified mail,
postage prepaid), as follows (or to such other address as shall be set forth in
a notice given in the same manner):
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<PAGE>
1. If to SASCO, to:
Southern Aluminum & Steel Corporation
c/o Able Telcom Holding Corp.
1000 Holcomb Woods Parkway
Suite 440
Roswell, GA 30076
Telephone: (770) 993-1570
Facsimile: (770) 993-8532
Attn: President
Copies to:
Paul Hastings Janofsky & Walker LLP
600 Peachtree Street, Suite 2400
Atlanta, Georgia 30308
Facsimile: (404) 815-2424
Attn: Elizabeth H. Noe, Esq.
2. If to Seller, to:
Donald G. Garner
1849 Crestwood Boulevard
P.O. Box 100309
Irondale, AL 35210
Telephone: (205) 956-1640
Facsimile: (205) 956-1519
f. MODIFICATION AND WAIVER. Any of the terms or conditions of this
Agreement may be waived in writing at any time by the party which is entitled to
the benefits thereof, and this Agreement may be modified or amended at any time
by SASCO and Seller. No supplement, modification or amendment of this Agreement
shall be binding unless executed in writing by each of the parties hereto. No
waiver of any of the provisions of this Agreement shall be deemed or shall
constitute a waiver of any other provision hereof nor shall such waiver
constitute a continuing waiver.
g. THIRD PARTY BENEFICIARIES. Except as otherwise expressly set forth
herein, no individual or entity shall be a third-party beneficiary of the
representations, warranties, covenants and agreements made by any party hereto.
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<PAGE>
h. MEDIATION. SASCO and Seller shall attempt in good faith to mediate
any claim or controversy arising out of or relating to this Agreement or any
breach thereof if either of them requests mediation and gives written notice to
the other (the "Mediation Notice"). Any notice given pursuant to the preceding
sentence shall include a brief statement of the claim or controversy. If SASCO
and Seller do not resolve the claim or controversy within 20 days after the date
of the Mediation Notice, SASCO and Seller shall then use reasonable efforts to
agree upon an independent mediator. If SASCO and Seller do not agree upon an
independent mediator within ten days after the date of the Mediation Notice,
either party may request that JAMS/Endispute ("JAMS"), or a similar mediation
service of a similar national scope if JAMS no longer then exists, appoint an
independent mediator. SASCO and Seller shall share the costs of mediation
equally and shall pay such costs in advance upon the request of the mediator or
any party. Within ten days after selection of the mediator, the mediator shall
set the mediation. If SASCO and Seller do not resolve the dispute within 30 days
after the date of the Mediation Notice, the dispute shall be decided by
arbitration as set forth in Section 14(h) hereof.
i. ARBITRATION. Any claim or controversy arising out of or relating to
this Agreement or any breach thereof shall be settled by arbitration if such
claim or controversy is not settled pursuant to Section 4(g) hereof. The venue
for any such arbitration shall be Atlanta, Georgia, or such other location as
the parties may mutually agree. Except as expressly set forth herein, all
arbitration proceedings under this Section 4(h) shall be undertaken in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association (the "AAA") then in force. Only individuals who are (i) lawyers
engaged full-time in the practice of law and (ii) on the AAA register of
arbitrators shall be selected as an arbitrator. There shall be one arbitrator
who shall be chosen in accordance with the rules of the AAA. Within 20 days of
the conclusion of the arbitration hearing, the arbitrator shall prepare written
findings of fact and conclusions of law. Judgment on the written award may be
entered and enforced in any court of competent jurisdiction. It is mutually
agreed that the written decision of the arbitrator shall be valid, binding,
final and non-appealable; provided however, that the parties hereto agree that
the arbitrator shall not be empowered to award punitive damages against any
party to such arbitration. The arbitrator shall require the non-prevailing party
to pay the arbitrator's full fees and expenses or, if in the arbitrator's
opinion there is no prevailing party, the arbitrator's fees and expenses will be
borne equally by the parties thereto. In the event action is brought to enforce
the provisions of this Agreement pursuant to this Section 4(h), the
non-prevailing parties shall be required to pay the reasonable attorneys' fees
and expenses of the prevailing parties, except that if in the opinion of the
court or arbitrator deciding such action there is no prevailing party, each
party shall pay its own attorneys' fees and expenses.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed or have caused
this Agreement to be duly executed as of the date first above written.
SELLER
____________________________________
Donald G. Garner
SASCO
SOUTHERN ALUMINUM & STEEL CORPORATION
By: ________________________________
Name: ______________________________
Title: _____________________________
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EXHIBIT 2.7.6
EXHIBIT A
FORM OF
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and
entered into as of this 5th day of November, 1999 by and between SES Acquisition
Corp., a Delaware corporation to be renamed Specialty Electronic Systems, Inc.
as a result of the Merger described below ("SES"), and C. Michael Hoover (the
"Employee").
RECITALS:
WHEREAS, as of the date hereof, SES Acquisition Corp. ("SES
Acquisition"), a wholly-owned subsidiary of Able Telcom Holding Corp. ("Able"),
is merging, pursuant to an Agreement and Plan of Merger, dated November 5, 1999,
with and into SES (the "Merger");
WHEREAS, Employee will sell all of his ownership interest in SES to
Able in connection with the aforementioned merger;
WHEREAS, Employee is currently employed by SES;
WHEREAS, Able, in connection with its review of SES, has considered
Employee's services important to the business of SES and, following the merger
with SES Acquisition, Able and SES desire for SES to continue to employ the
Employee;
WHEREAS, in order to protect fully SES's and its affiliates' trade
secrets and confidential information and the goodwill of the business of SES
which Able has acquired by virtue of the merger described above and to ensure
that Able enjoys the benefits of such goodwill and business, SES and the
Employee desire to provide for Employee's agreement of confidentiality and
agreement not to compete with SES or its affiliates as specified herein; and
WHEREAS, SES and the Employee desire to set forth herein the terms and
conditions on which the Employee will continue to be employed by SES including
the terms of Employee's agreement not to compete.
<PAGE>
NOW, THEREFORE, in consideration of the mutual promises, agreements and
mutual covenants set forth herein and for other good and valuable consideration
the parties hereto hereby agree as follows:
1. EMPLOYMENT. SES hereby agrees to continue to employ the Employee, and
the Employee hereby accepts such continuation of employment with SES, upon the
terms and subject to the conditions set forth in this Agreement.
2. POSITION AND DUTIES. Subject to the authority of the Board, the
Employee shall continue to perform the duties historically performed by Employee
as President of SES and such other duties as are appropriate for such position
and are assigned to such position in the future. The Employee shall also serve
in such additional capacities as may be requested of him from time to time by
the Board of Directors of SES (the "Board"). The Employee shall devote
substantially all of his business time, attention, skill and best efforts to the
diligent performance of his duties hereunder. On all matters not delegated to
the Employee, the Employee shall report to the Chairman of the Board of SES and
such other officers of SES as shall be assigned to supervise Employee from time
to time.
3. TERM. The term of employment hereunder shall commence as of the date
hereof (the "Commencement Date") and shall continue thereafter for a period of
four years through and including November 5, 2003 (the "Term") unless earlier
terminated in accordance with the provisions hereof. Notwithstanding the above,
the covenants set forth in
(i) Section 5 hereof shall survive for the periods set forth therein
notwithstanding any termination of employment hereunder including any
termination pursuant to this Section 3 upon the expiration of the Term; and
(ii) Section 6 hereof shall survive for the periods set forth therein
notwithstanding any termination of employment hereunder other than termination
without cause as set forth in Section 10 hereof, including any termination
pursuant to this Section 3 upon the expiration of the Term.
4. COMPENSATION. As compensation for all services rendered by the Employee
under this Agreement, SES shall pay the Employee compensation as follows:
(a) ANNUAL COMPENSATION. For all services rendered by the Employee
during his employment under this Agreement, beginning on the Commencement Date,
SES shall pay the Employee an annual salary in an amount not less than $150,000,
payable bi-weekly, or at such other intervals as Able executives may be paid, in
substantially equal installments. The Employee's salary shall be eligible for
increases granted by the Board in its sole discretion.
(b) BENEFITS. The Employee shall be entitled to participate in those
perquisites and benefits generally available to employees of Able and its
affiliates of similar status and rank as the Employee in accordance with Able's
regular policies.
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<PAGE>
(c) BONUSES. The Employee shall be eligible for merit bonuses based on
management's and the Board of Director's discretion and their evaluation of
Employee's performance and the financial performance of the consolidated Able
group.
(d) TAXES AND WITHHOLDINGS. All taxes and governmentally required
withholdings shall be deducted from any amount paid by SES to the Employee
hereunder in conformity with applicable laws.
5. CONFIDENTIALITY. The Employee acknowledges and agrees that the Trade
Secrets (as defined below) and the Confidential Information (as defined below)
of SES and its affiliates (including any parent, subsidiaries or commonly
controlled entities) and all physical embodiments thereof (collectively referred
to as the "Proprietary Information") are valuable, special and unique assets of
the business of SES and its affiliates and have been developed by SES and its
affiliates and will continue to be developed by SES and its affiliates following
Able's purchase of SES at considerable time and expense. Employee further
acknowledges that access to such Proprietary Information is essential to
performance of Employee's duties and responsibilities under this Agreement.
Therefore, in order to obtain access to such Proprietary Information, Employee
agrees that except with respect to those duties assigned to him by SES, Employee
shall hold in strictest confidence all Proprietary Information, regardless of
whether such Proprietary Information was received prior to, on or subsequent to
the date of this Agreement, will not reproduce, use, distribute, disclose,
publish or otherwise disseminate any Proprietary Information, in whole or in
part, and will take no action causing, or fail to take any action necessary to
prevent causing, any Proprietary Information to lose its character as
Proprietary Information, nor wilfully make use of such information for
Employee's own purposes or for the benefits of any person, firm, corporation,
association or other entity (except SES and its affiliates) under any
circumstances, except that Employee may disclose such Proprietary Information
pursuant to a court order, subpoena or other legal process, provided that, at
least ten days in advance of any legal disclosure, the Employee shall furnish
SES with a copy of the judicial or administrative order requiring that such
information be disclosed together with a written description of the information
to be disclosed (which description shall be in sufficient detail to allow SES
and its affiliates to determine the nature and scope of the information proposed
to be disclosed), and the Employee covenants and agrees to cooperate with SES
and its affiliates to deliver the minimum amount of information necessary to
comply with such order.
For purposes of this Agreement, the term "Trade Secrets" means
information, including but not limited to, any technical or nontechnical data,
formula, pattern, compilation, program, device, method, technique, drawing,
process, financial data, financial plan, product plan, list of actual or
potential customers or suppliers, or other information similar to any of the
foregoing, which derives economic value, actual or
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<PAGE>
potential, from not being generally known to, and not being readily
ascertainable by proper means by, other persons who can derive economic value
from its disclosure or use. For purposes of this Agreement, the term "Trade
Secrets" does not include information that Employee can show by competent proof
(i) was known to Employee and reduced to writing prior to disclosure by SES or
its affiliates (but only if Employee promptly notifies SES of Employee's prior
knowledge); (ii) was generally known to the public at the time SES or its
affiliates disclosed the information to Employee; (iii) became generally known
to the public after disclosure to the Employee through no act or omission of
Employee; or (iv) was disclosed to Employee by a third party having a bona fide
right both to possess the information and to disclose the information to
Employee.
The term "Confidential Information" means any data or information of
SES (including information of SES or SES's affiliates), other than Trade
Secrets, regarding the business of SES and its affiliates or their policies and
operations which is valuable to SES and not generally known to competitors of
SES and its affiliates. For purposes of this Agreement, the term "Confidential
Information" does not include information that Employee can show by competent
proof (i) was known to Employee and reduced to writing prior to disclosure by
SES or its affiliates (but only if Employee promptly notifies SES of Employee's
prior knowledge); (ii) was generally known to the public at the time SES or its
affiliates disclosed the information to Employee; (iii) became generally known
to the public after disclosure to the Employee through no act or omission of
Employee; or (iv) was disclosed to Employee by a third party having a bona fide
right both to possess the information and to disclose the information to
Employee.
The provisions of this Section 5 will apply to Trade Secrets for so
long as such information remains a Trade Secret and to Confidential Information
during Employee's employment with SES and for a period of three years following
any termination of Employee's employment with SES for whatever reason.
6. COVENANT NOT TO COMPETE.
(a) AGREEMENT NOT TO COMPETE. SES designs, fabricates, installs and
integrates ITS systems (the "Business"). In order to fully protect SES's and its
affiliates' Confidential Information and Trade Secrets and the goodwill of the
Business of SES purchased by Able on the date hereof, and to ensure that SES
enjoys the benefits of that Business, for a period of five years from the date
hereof (the "Non-Competition Period"), Employee shall not, except as authorized
in writing by SES, directly or indirectly, be employed by, render services to,
assist, participate in the affairs of, invest in, or otherwise be connected
with, any person or enterprise which person or enterprise is engaged in, or is
planning to engage in, and shall not personally engage in, any business that is
in any respect competitive with the Business of SES or any of its affiliates,
whether relating to
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<PAGE>
products or services of the Business, within any state in which SES is
conducting Business or reasonably expects to conduct business at the time the
Employee's employment is terminated and any state in which SES conducted
Business within the two years preceding the termination of the Employee's
employment (the "Territory"); provided that Employee may hold investments
representing a less than 5% interest in any publicly held entity competing with
SES. In furtherance of such covenant not to compete, Employee hereby
acknowledges that SES currently does business, and following the purchase
described herein, SES shall continue to do business in a growing number of
locales throughout the United States and that in his capacity as an employee of
SES his responsibilities have involved and will continue to involve the conduct
of business throughout such Territory.
(b) NON-SOLICITATION COVENANT. Employee agrees that for the
Non-Competition Period, he will not, nor will he assist any of his affiliates
to, directly or indirectly, recruit or otherwise solicit or induce any agent,
non-employee sales representative, customer, subscriber or supplier of SES or
any affiliate of SES to terminate its employment or other arrangement with SES
or any affiliate of SES, otherwise change its relationship with SES or any
affiliates of SES, or establish any relationship with Employee or any of his
affiliates for any business purpose deemed materially competitive with the
Business.
(c) NON-INTERFERENCE WITH EMPLOYEES. Employee agrees that for the
Non-Competition Period, he will not, nor will he assist any of his affiliates
to, directly or indirectly, recruit or otherwise solicit or induce employee of
SES or any affiliate of SES to terminate or otherwise negatively affect his or
her employment relationship with SES or any affiliate of SES, or establish an
employment relationship directly or indirectly with Employee or any entity other
than SES or its affiliate with whom Employee is affiliated, absent the express
written consent of SES's Board of Directors.
(d) REMEDIES. The parties recognize, acknowledge and agree that (i) any
breach or threatened breach of the provisions of this Section 6 shall cause
irreparable harm and injury to SES and that money damages alone will not provide
an adequate remedy for such breach or threatened breach, (ii) the duration,
scope and geographical application of this Section 6 are fair and reasonable
under the circumstances of the business of SES, and are reasonably required to
protect the legitimate business interests of SES and the goodwill of the
business purchased by Able, (iii) the restrictions contained in this Section 6
will not prevent the Employee from earning or seeking a livelihood, and (iv) the
restrictions contained in this Section 6 shall apply in all areas where such
application is permitted by law. Accordingly, the Employee agrees that SES shall
be entitled to have the provisions of this Section 6 specifically enforced by
any court having jurisdiction, and that such a court may issue a temporary
restraining order, preliminary
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<PAGE>
injunction or other appropriate equitable relief, without having to prove the
inadequacy of available remedies at law, having to post any bond or any other
undertaking. In addition, SES shall be entitled to avail itself of all such
other actions and remedies available to it or any of its affiliates under law or
in equity and shall be entitled to such damages as it sustains by reason of such
breach or threatened breach. It is the express desire and intent of the parties
that the provisions of this Section 6 be enforced to the full extent possible.
(e) SEVERABILITY. In light of the fact that the covenants set forth in
Section 6 are reasonably required to protect the legitimate interests of SES, if
any provision of this Section 6 hereof is held to be unenforceable because of
the duration of such provision, the area covered thereby or the scope of the
activity restrained, the parties hereby expressly agree that the court making
such determination shall have the power to reduce the duration and/or areas of
such provision and/or the scope of the activity to be restrained contained in
such provision and, in its reduced form, such provision shall then be
enforceable. The parties hereto intend and agree that the covenants contained in
Section 6(a) shall be construed as a series of separate covenants, one for each
municipality, community or county included within the area designated by Section
6(a). Except for geographic coverage, the terms and conditions of each such
separate covenant shall be deemed identical to the covenant contained in Section
6(a). Furthermore, if any court shall refuse to enforce any of the separate
covenants deemed included in Section 6(a), then such unenforceable covenant
shall be deemed eliminated from the provisions hereof to the extent necessary to
permit the remaining separate covenants to be enforced in accordance with their
terms. The prevailing party in any action arising out of a dispute in respect of
any provision of this Section 6 shall be entitled to recover from the
non-prevailing party reasonable attorneys' fees and costs and disbursements
incurred in connection with the prosecution or defense, as the case may be, of
any such action.
7. RESPONSIBILITIES UPON TERMINATION. Upon the termination of his
employment by SES for whatever reason and irrespective of whether or not such
termination is voluntary on his part:
(a) The Employee shall advise SES of the identity of his new employer
within ten days after accepting new employment and further agrees to keep SES so
advised of any change in employment during the Non-Competition Period;
(b) SES in its sole discretion may notify any new employer of the
Employee that the Employee has the obligations set forth in paragraph 6 to SES
during the Non-Competition Period;
(c) The Employee shall deliver to SES immediately upon termination of
his employment all proprietary information and all other records, forms,
contracts,
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<PAGE>
memoranda, work papers, customer data and any other proprietary documents of SES
which have come into his possession by reason of his employment with SES and
which contain Trade Secrets or Confidential Information, and any other documents
necessary for the consistent operation by SES of its business, irrespective of
whether or not any of said documents were prepared for him, and he shall not
retain memoranda in respect of or copies of any of said documents; and
(d) The Employee shall participate in an exit interview with SES.
8. SEPARATE AGREEMENTS. The covenants of the Employee contained in
Sections 5 and 6 of this Agreement shall be construed as separate agreements
independent of any other agreement, claim, or cause of action of the Employee
against SES, whether predicated on this Agreement or otherwise. In particular,
the covenants of the Employee contained in Sections 5 and 6 of this Agreement
shall be independent of the corresponding covenants of Employee set forth in
that certain Non-Competition Agreement dated of even date herewith by and
between SES and the Employee (the "Non-Competition Agreement"). In no event
shall the termination of Employee's responsibilities under this Agreement result
in the termination of Employee's responsibilities under the Non-Competition
Agreement. The covenants contained in this Agreement are necessary to protect
the legitimate business interests of SES.
9. TERMINATION FOR CAUSE. SES shall have the right at any time to
terminate the employment of the Employee for cause by delivering to him a
written notice specifying such cause. If SES exercises such right, SES's
obligation under this Agreement to make any further payments to the Employee
shall thereupon cease and terminate. This Section 9 of this Agreement in no way
limits SES's right to terminate Employee's employment without cause pursuant to
Section 10 of this Agreement. As used herein, the term "cause" shall include but
not be limited by:
(a) misappropriating any funds or any material property of SES or its
affiliates, customers, suppliers or other related entities;
(b) obtaining or attempting to obtain any material personal profit from
any transaction, other than as contemplated by this Agreement, in which the
Employee has an interest which is adverse to the interest of SES unless SES
shall first give its written consent to such transaction;
(c) (i) neglecting or refusing to perform the duties contemplated by
this Agreement, (ii) the willful taking of actions which directly impair the
Employee's ability to perform his duties contemplated by this Agreement; (iii)
breaching any term of this Agreement; or (iv) taking any action detrimental to
SES's goodwill or damaging to SES's
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<PAGE>
relationships with its customers, suppliers or employees; provided that such
neglect or refusal, action or breach shall have continued for a period of or is
not remedied within 10 days following written notice thereof;
(d) being convicted of or pleading guilty or NOLO CONTENDERE to any
crime or offense constituting a felony under applicable law or any crime or
offense involving fraud or moral turpitude;
(e) acting or refraining from acting in respect of any of the duties
contemplated by this Agreement and the Board determines in good faith that such
action or inaction constituted gross negligence or a willful act of malfeasance
or misfeasance; or
(f) any material intentional failure to comply with laws or
governmental regulations applicable to SES or the conduct of SES's business.
10. TERMINATION WITHOUT CAUSE. SES shall have the right at any time to
terminate the employment of the Employee and this Agreement without cause
effective upon 30 days prior written notice to the Employee. Upon termination of
this Agreement pursuant to this Section 10, the Employee shall be entitled to
receive, in full settlement and discharge of SES's obligation to the Employee,
(i) a lump sum amount equal to all compensation accrued and unpaid as of the
date of termination; and (ii) in equal semi-monthly installments an amount equal
to the base salary to which Employee would have been entitled under Section 4(a)
hereof if this Agreement had not been terminated.
11. TERMINATION UPON DEATH OR DISABILITY. SES may terminate the employment
of the Employee and this Agreement effective upon notice to the Employee (or his
heirs or legal representatives, as the case may be) if the Employee either dies
or is incapacitated or disabled by accident, sickness or otherwise and has been
rendered mentally or physically incapable with or without reasonable
accommodation of performing the services and duties required to be performed by
him under this Agreement for a period of at least 90 consecutive days or 120
days within any 12 month period. Upon termination of this Agreement pursuant to
this Section 11, the Employee (or his heirs or legal representatives, as the
case may be) shall be entitled to receive, in full settlement and discharge of
SES's obligation to the Employee, a lump sum amount equal to all compensation
unpaid as of the date of termination.
12. SEVERABILITY. If any provision of this Agreement is held to be illegal,
invalid or unenforceable under present or future laws, such provision shall be
fully severable, this Agreement shall be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part of this
Agreement, and the remaining provisions of
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<PAGE>
this Agreement shall remain in full force and effect and shall not be affected
by the illegal, invalid or unenforceable provision or by its severance from this
Agreement.
13. MISCELLANEOUS.
(a) GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the law of the State of Florida, without giving effect to the
principles of conflicts of laws of such state.
(b) COUNTERPARTS. This Agreement may be executed in several
counterparts each of which is an original. This Agreement and any counterpart so
executed shall be deemed to be one and the same instrument. It shall not be
necessary in making proof of this Agreement or any counterpart hereof to produce
or account for any of the other counterparts.
(c) CONTENTS OF AGREEMENT; PARTIES IN INTEREST, ETC. This Agreement
sets forth the entire understanding of the parties. Any previous agreements or
understandings between the parties regarding the subject matter hereof are
merged into and superseded by this Agreement. All representations, warranties,
covenants, terms, conditions and provisions of this Agreement shall be binding
upon and inure to the benefit of and be enforceable by the respective heirs,
legal representatives, successors and permitted assigns of SES and the Employee.
Neither this Agreement nor any rights, interests or obligations hereunder may be
assigned by any party without the prior written consent of the other party
hereto.
(d) SECTION HEADINGS. The section headings herein have been inserted
for convenience of reference only and shall in no way modify or restrict any of
the terms or provisions hereof.
(e) NOTICES. All notices, requests, demands and other communications
which are required or permitted hereunder shall be sufficient if given in
writing and delivered personally or by registered or certified mail, postage
prepaid, by a nationally recognized overnight courier service, or by facsimile
transmission (with a copy simultaneously sent by registered or certified mail,
postage prepaid), as follows (or to such other address as shall be set forth in
a notice given in the same manner):
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<PAGE>
(1) If to SES, to:
Specialty Electronic Systems, Inc.
c/o Able Telcom Holding Corp.
1000 Holcomb Woods Parkway
Suite 440
Roswell, GA 30076
Telephone: (770) 993-1570
Facsimile: (770) 993-8532
Attn: President
Copies to:
Paul Hastings Janofsky & Walker LLP
600 Peachtree Street, Suite 2400
Atlanta, Georgia 30308
Facsimile: (404) 815-2424
Attn: Elizabeth H. Noe, Esq.
(2) If to the Employee, to:
C. Michael Hoover
5218 Ellicot Court
Centreville, VA 20120
Telephone:
Facsimile:
(f) MODIFICATION AND WAIVER. Any of the terms or conditions of this
Agreement may be waived in writing at any time by the party which is entitled to
the benefits thereof, and this Agreement may be modified or amended at any time
by SES and the Employee. No supplement, modification or amendment of this
Agreement shall be binding unless executed in writing by each of the parties
hereto. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provision hereof nor shall such waiver
constitute a continuing waiver.
(g) THIRD PARTY BENEFICIARIES. Except as otherwise expressly set forth
herein, no individual or entity shall be a third-party beneficiary of the
representations, warranties, covenants and agreements made by any party hereto.
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<PAGE>
(h) MEDIATION. SES and the Employee shall attempt in good faith to
mediate any claim or controversy arising out of or relating to this Agreement or
any breach thereof if either of them requests mediation and gives written notice
to the other (the "Mediation Notice"). Any notice given pursuant to the
preceding sentence shall include a brief statement of the claim or controversy.
If SES and the Employee do not resolve the claim or controversy within twenty
days after the date of the Mediation Notice, SES and the Employee shall then use
reasonable efforts to agree upon an independent mediator. If SES and the
Employee do not agree upon an independent mediator within ten days after the
date of the Mediation Notice, either party may request that JAMS/Endispute
("JAMS"), or a similar mediation service of a similar national scope if JAMS no
longer then exists, appoint an independent mediator. SES and the Employee shall
share the costs of mediation equally and shall pay such costs in advance upon
the request of the mediator or any party. Within ten days after selection of the
mediator, the mediator shall set the mediation. If SES and the Employee do not
resolve the dispute within 30 days after the date of the Mediation Notice, the
dispute shall be decided by arbitration as set forth in Section 14(i) hereof.
(i) ARBITRATION. Any claim or controversy arising out of or relating to
this Agreement or any breach thereof shall be settled by arbitration if such
claim or controversy is not settled pursuant to Section 14(h) hereof. The venue
for any such arbitration shall be Atlanta, Georgia. Except as expressly set
forth herein, all arbitration proceedings under this Section 14(i) shall be
undertaken in accordance with the Commercial Arbitration Rules of the American
Arbitration Association (the "AAA") then in force. Only individuals who are (i)
lawyers engaged full-time in the practice of law and (ii) on the AAA register of
arbitrators shall be selected as an arbitrator. There shall be one arbitrator
who shall be chosen in accordance with the rules of the AAA. Within 20 days of
the conclusion of the arbitration hearing, the arbitrator shall prepare written
findings of fact and conclusions of law. Judgment on the written award may be
entered and enforced in any court of competent jurisdiction. It is mutually
agreed that the written decision of the arbitrator shall be valid, binding,
final and non-appealable; provided however, that the parties hereto agree that
the arbitrator shall not be empowered to award punitive damages against any
party to such arbitration. The arbitrator shall require the non-prevailing party
to pay the arbitrator's full fees and expenses or, if in the arbitrator's
opinion there is no prevailing party, the arbitrator's fees and expenses will be
borne equally by the parties thereto. In the event action is brought to enforce
the provisions of this Agreement pursuant to this Section 14(i), the
non-prevailing parties shall be required to pay the reasonable attorneys' fees
and expenses of the prevailing parties, except that if in the opinion of the
court or arbitrator deciding such action there is no prevailing party, each
party shall pay its own attorneys' fees and expenses.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed or have caused
this Agreement to be duly executed as of the date first above written.
EMPLOYEE
_____________________________________
C. Michael Hoover
SES
SPECIALTY ELECTRONIC SYSTEMS, INC.
By:__________________________________
Name:________________________________
Title:_______________________________
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EXHIBIT 2.7.6.1
EXHIBIT E
FORM OF
NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT (this "Agreement") is made and entered
into as of this 5th day of November, 1999 by and between Specialty Electronic
Systems, Inc., a Delaware corporation ("SES"), and C. Michael Hoover ("Seller").
RECITALS:
WHEREAS, as of the date hereof, SES Acquisition Corp. ("SES
Acquisition"), a wholly-owned subsidiary of Able Telcom Holding Corp. ("Able"),
is merging, pursuant to an Agreement and Plan of Merger, dated November 5, 1999,
with and into SASCO;
WHEREAS, Seller holds 51%of the issued and outstanding stock of SES;
WHEREAS, as a result of the above-described merger, Seller will sell
all of his interest in SES and will receive shares of Able common stock as
determined by the SES Merger Agreement;
WHEREAS, in order to protect fully SES's and its affiliates'
confidential information and the goodwill of the business of SES which Able has
acquired by virtue of the stock purchase described above and to ensure that Able
enjoys the benefits of such goodwill and business, SES and Seller desire to
provide for Seller's agreement of confidentiality and agreement not to compete
with SES and its affiliates as specified herein; and
WHEREAS, SES and Seller desire to set forth herein the terms of
Seller's agreement of confidentiality and agreement not to compete.
NOW, THEREFORE, in consideration of the mutual promises, agreements and
mutual covenants set forth herein and for other good and valuable consideration
the parties hereto hereby agree as follows:
1. CONFIDENTIALITY. Seller acknowledges and agrees that the Trade Secrets
(as defined below) and the Confidential Information (as defined below) of SES
and its affiliates (including any parent, subsidiaries or commonly controlled
entities) and all physical embodiments thereof (collectively referred to as the
"Proprietary Information") are valuable, special and unique assets of the
business of SES and its affiliates and have been developed by SES and its
affiliates and will continue to be developed by SES and its affiliates following
Able's purchase of SES at considerable time and expense. Seller further
acknowledges that access to such Proprietary
<PAGE>
Information is essential to performance of Seller's duties and responsibilities
under this Agreement. Therefore, in order to obtain access to such Proprietary
Information, Seller agrees that except with respect to those duties assigned to
him by SES and for the time periods set forth below, Seller shall hold in
strictest confidence all Proprietary Information, regardless of whether such
Proprietary Information was received prior to, on or subsequent to the date of
this Agreement, and will not reproduce, use, distribute, disclose, publish or
otherwise disseminate any Proprietary Information, in whole or in part, and will
take no action causing, or fail to take any action necessary to prevent causing,
any Proprietary Information to lose its character as Proprietary Information,
nor wilfully make use of such information for Seller's own purposes or for the
benefits of any person, firm, corporation, association or other entity (except
SES and its affiliates) under any circumstances, except that Seller may disclose
such Proprietary Information pursuant to a court order, subpoena or other legal
process, provided that, at least ten days in advance of any legal disclosure,
Seller shall furnish SES with a copy of the judicial or administrative order
requiring that such information be disclosed together with a written description
of the information to be disclosed (which description shall be in sufficient
detail to allow SES and its affiliates to determine the nature and scope of the
information proposed to be disclosed), and Seller covenants and agrees to
cooperate with SES and its affiliates to deliver the minimum amount of
information necessary to comply with such order.
For purposes of this Agreement, the term "Trade Secrets" means
information, including but not limited to, any technical or nontechnical data,
formula, pattern, compilation, program, device, method, technique, drawing,
process, financial data, financial plan, product plan, list of actual or
potential customers or suppliers, or other information similar to any of the
foregoing, which derives economic value, actual or potential, from not being
generally known to, and not being readily ascertainable by proper means by,
other persons who can derive economic value from its disclosure or use. For
purposes of this Agreement, the term "Trade Secrets" does not include
information that Seller can show by competent proof (i) was known to Seller and
reduced to writing prior to disclosure by SES or its affiliates to Seller (but
only if Seller promptly notifies SES of Seller's prior knowledge); (ii) was
generally known to the public at the time SES or its affiliates disclosed the
information to Seller; (iii) became generally known to the public after
disclosure to Seller through no act or omission of Seller; or (iv) was disclosed
to Seller by a third party having a bona fide right both to possess the
information and to disclose the information to Seller.
The term "Confidential Information" means any data or information of
SES (including information of SES or SES's affiliates), other than Trade
Secrets, regarding the business of SES and its affiliates or their policies and
operations which is valuable to SES and not generally known to competitors of
SES and its affiliates. For purposes of this Agreement, the term "Confidential
Information" does not include information that Seller can show by competent
proof (i) was known to Seller and reduced to writing prior to disclosure by SES
or its affiliates to Seller (but only if Seller promptly notifies SES of
Seller's prior knowledge); (ii) was generally known to the public at the time
SES or its affiliates disclosed the information to
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<PAGE>
Seller; (iii) became generally known to the public after disclosure to Seller
through no act or omission of Seller; or (iv) was disclosed to Seller by a third
party having a bona fide right both to possess the information and to disclose
the information to Seller.
The provisions of this Section 1 will apply to Trade Secrets for so
long as such information remains a Trade Secret and to Confidential Information
for a period of five years from the date hereof.
2. COVENANT NOT TO COMPETE.
a. AGREEMENT NOT TO COMPETE. SES designs, fabricates, installs and
integrates ITS systems (the "Business"). In order to fully protect SES's and its
affiliates' Confidential Information and Trade Secrets and the goodwill of the
Business of SES purchased by Able on the date hereof, and to ensure that SES
enjoys the benefits of that Business, for a period of five years from the date
hereof (the "Non-Competition Period"), Seller shall not, except as authorized in
writing by SES, directly or indirectly, be employed by, render services to,
assist, participate in the affairs of, invest in, or otherwise be connected
with, any person or enterprise which person or enterprise is engaged in, or is
planning to engage in, and shall not personally engage in, any business that is
in any respect competitive with the Business of SES or any of its affiliates,
with respect to any products or services of the Business of SES and its
affiliates, within any state in which SES is conducting Business or reasonably
expects to conduct business at the time of this Agreement (the "Territory");
provided that Seller may hold investments representing a less than 5% interest
in any publicly held entity competing with SES. SES recognizes Seller's
ownership of SES, LLC, which owns 36% of L&K Electric Supply, and hereby
acknowledges and agrees that such ownership shall not violate the terms of this
Section 2(a). In furtherance of such covenant not to compete, Seller hereby
acknowledges that SES currently does business, and following the merger
described herein, SES shall continue to do business in a growing number of
locales throughout the United States and that in his capacity as an employee of
SES his responsibilities have involved and will continue to involve the conduct
of business throughout such Territory.
b. NON-SOLICITATION COVENANT. Seller agrees that for the
Non-Competition Period, he will not, nor will he assist any of his affiliates
to, directly or indirectly, recruit or otherwise solicit or induce any agent,
non-employee sales representative, customer, subscriber or supplier of SES or
any affiliate of SES to terminate its contract, relationship or other
arrangement with SES or any affiliate of SES, otherwise change its relationship
with SES or any affiliates of SES, or establish any relationship with Seller or
any of his affiliates for any business purpose deemed materially competitive
with the Business.
c. NON-INTERFERENCE WITH EMPLOYEES. Seller agrees that for the
Non-Competition Period, he will not, nor will he assist any of his affiliates
to, directly or indirectly, recruit or otherwise solicit or induce any employee
of SES or any affiliate of SES to terminate or otherwise negatively affect its
employment relationship with SES or any affiliate of SES, or
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<PAGE>
establish an employment relationship directly or indirectly with Seller or any
entity other than SES or its affiliates with whom Seller is affiliated, absent
the express written consent of SES's Board of Directors.
d. REMEDIES. The parties recognize, acknowledge and agree that (i) any
breach or threatened breach of the provisions of this Section 2 shall cause
irreparable harm and injury to SES and that money damages alone will not provide
an adequate remedy for such breach or threatened breach, (ii) the duration,
scope and geographical application of this Section 2 are fair and reasonable
under the circumstances of the business of SES, and are reasonably required to
protect the legitimate business interests of SES and the goodwill of the
business purchased by Able, (iii) the restrictions contained in this Section 2
will not prevent Seller from earning or seeking a livelihood, and (iv) the
restrictions contained in this Section 2 shall apply in all areas where such
application is permitted by law. Accordingly, Seller agrees that SES shall be
entitled to have the provisions of this Section 2 specifically enforced by any
court having jurisdiction, and that such a court may issue a temporary
restraining order, preliminary injunction or other appropriate equitable relief,
without having to prove the inadequacy of available remedies at law, having to
post any bond or any other undertaking. In addition, SES shall be entitled to
avail itself of all such other actions and remedies available to it or any of
its affiliates under law or in equity and shall be entitled to such damages as
it sustains by reason of such breach or threatened breach. It is the express
desire and intent of the parties that the provisions of this Section 2 be
enforced to the full extent possible.
e. SEVERABILITY. In light of the fact that the covenants set forth in
Section 2 are reasonably required to protect the legitimate interests of SES, if
any provision of this Section 2 hereof is held to be unenforceable because of
the duration of such provision, the area covered thereby or the scope of the
activity restrained, the parties hereby expressly agree that the court making
such determination shall have the power to reduce the duration and/or areas of
such provision and/or the scope of the activity to be restrained contained in
such provision to that which is reasonable for protection of the business
interests of SES and its affiliates and, in its reduced form, such provision
shall then be enforceable. The parties hereto intend and agree that the
covenants contained in Section 2(a) shall be construed as a series of separate
covenants, one for each municipality, community, county or state included within
the area designated by Section 2(a). Except for geographic coverage, the terms
and conditions of each such separate covenant shall be deemed identical to the
covenant contained in Section 2(a). Furthermore, if any court shall refuse to
enforce any of the separate covenants deemed included in Section 2(a), then such
unenforceable covenant shall be deemed eliminated from the provisions hereof to
the extent necessary to permit the remaining separate covenants to be enforced
in accordance with their terms. The prevailing party in any action arising out
of a dispute in respect of any provision of this Section 2 shall be entitled to
recover from the non-prevailing party reasonable attorneys' fees and costs and
disbursements incurred in connection with the prosecution or defense, as the
case may be, of any such action.
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<PAGE>
3. SEPARATE AGREEMENTS. The covenants of Seller contained in Sections 1
and 2 of this Agreement shall be construed as separate agreements independent of
any other agreement, claim, or cause of action of Seller against SES, whether
predicated on this Agreement or otherwise. In particular, the covenants of
Seller contained in Sections 1 and 2 of this Agreement shall be independent of
the corresponding covenants of Seller set forth in that certain Employment
Agreement dated of even date herewith by and between SES and Seller (the
"Employment Agreement"). In no event shall the termination of Seller's
responsibilities under this Agreement result in the termination of Seller's
responsibilities under the Employment Agreement. The covenants contained in this
Agreement are necessary to protect the legitimate business interests of SES.
4. TERMINATION. The covenants set forth in Sections 1 and 2 hereof shall
continue for the period set forth therein. Notwithstanding the above, in the
event Seller's employment with SES is terminated without cause, the covenants
set forth in Section 2 hereof shall terminate on the effective date of Seller's
termination.
5. MISCELLANEOUS. This Agreement will be governed by and construed in
accordance with the law of the State of Florida, without giving effect to the
principles of conflicts of laws of such state.
a. GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the laws of the State of Florida, without giving effect to the
principles of conflicts of laws of such state.
b. COUNTERPARTS. This Agreement may be executed in several counterparts
each of which is an original. This Agreement and any counterpart so executed
shall be deemed to be one and the same instrument. It shall not be necessary in
making proof of this Agreement or any counterpart hereof to produce or account
for any of the other counterparts.
c. CONTENTS OF AGREEMENT; PARTIES IN INTEREST, ETC. This Agreement sets
forth the entire understanding of the parties. Any previous agreements or
understandings between the parties regarding the subject matter hereof are
merged into and superseded by this Agreement. All representations, warranties,
covenants, terms, conditions and provisions of this Agreement shall be binding
upon and inure to the benefit of and be enforceable by the respective heirs,
legal representatives, successors and permitted assigns of SES and Seller.
Neither this Agreement nor any rights, interests or obligations hereunder may be
assigned by any party without the prior written consent of the other party
hereto.
d. SECTION HEADINGS. The section headings herein have been inserted for
convenience of reference only and shall in no way modify or restrict any of the
terms or provisions hereof.
e. NOTICES. All notices, requests, demands and other communications
which are required or permitted hereunder shall be sufficient if given in
writing and delivered personally or by registered or certified mail, postage
prepaid, by a nationally recognized overnight courier service, or by facsimile
transmission (with a copy simultaneously sent by registered or certified mail,
postage prepaid), as follows (or to such other address as shall be set forth in
a notice given in the same manner):
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<PAGE>
1. If to SES, to:
Specialty Electronic Systems, Inc.
c/o Able Telcom Holding Corp.
1000 Holcomb Woods Parkway
Suite 440
Roswell, GA 30076
Telephone: (770) 993-1570
Facsimile: (770) 993-8532
Attn: President
Copies to:
Paul Hastings Janofsky & Walker LLP
600 Peachtree Street, Suite 2400
Atlanta, Georgia 30308
Facsimile: (404) 815-2424
Attn: Elizabeth H. Noe, Esq.
2. If to Seller, to:
C. Michael Hoover
5218 Ellicott Court
Centreville, VA 20120
Telephone:
Facsimile:
f. MODIFICATION AND WAIVER. Any of the terms or conditions of this
Agreement may be waived in writing at any time by the party which is entitled to
the benefits thereof, and this Agreement may be modified or amended at any time
by SES and Seller. No supplement, modification or amendment of this Agreement
shall be binding unless executed in writing by each of the parties hereto. No
waiver of any of the provisions of this Agreement shall be deemed or shall
constitute a waiver of any other provision hereof nor shall such waiver
constitute a continuing waiver.
g. THIRD PARTY BENEFICIARIES. Except as otherwise expressly set forth
herein, no individual or entity shall be a third-party beneficiary of the
representations, warranties, covenants and agreements made by any party hereto.
h. MEDIATION. SES and Seller shall attempt in good faith to mediate any
claim or controversy arising out of or relating to this Agreement or any breach
thereof if either of
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<PAGE>
them requests mediation and gives written notice to the other (the "Mediation
Notice"). Any notice given pursuant to the preceding sentence shall include a
brief statement of the claim or controversy. If SES and Seller do not resolve
the claim or controversy within 20 days after the date of the Mediation Notice,
SES and Seller shall then use reasonable efforts to agree upon an independent
mediator. If SES and Seller do not agree upon an independent mediator within ten
days after the date of the Mediation Notice, either party may request that
JAMS/Endispute ("JAMS"), or a similar mediation service of a similar national
scope if JAMS no longer then exists, appoint an independent mediator. SES and
Seller shall share the costs of mediation equally and shall pay such costs in
advance upon the request of the mediator or any party. Within ten days after
selection of the mediator, the mediator shall set the mediation. If SES and
Seller do not resolve the dispute within 30 days after the date of the Mediation
Notice, the dispute shall be decided by arbitration as set forth in Section
14(h) hereof.
i. ARBITRATION. Any claim or controversy arising out of or relating to
this Agreement or any breach thereof shall be settled by arbitration if such
claim or controversy is not settled pursuant to Section 4(g) hereof. The venue
for any such arbitration shall be Atlanta, Georgia, or such other location as
the parties may mutually agree. Except as expressly set forth herein, all
arbitration proceedings under this Section 4(h) shall be undertaken in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association (the "AAA") then in force. Only individuals who are (i) lawyers
engaged full-time in the practice of law and (ii) on the AAA register of
arbitrators shall be selected as an arbitrator. There shall be one arbitrator
who shall be chosen in accordance with the rules of the AAA. Within 20 days of
the conclusion of the arbitration hearing, the arbitrator shall prepare written
findings of fact and conclusions of law. Judgment on the written award may be
entered and enforced in any court of competent jurisdiction. It is mutually
agreed that the written decision of the arbitrator shall be valid, binding,
final and non-appealable; provided however, that the parties hereto agree that
the arbitrator shall not be empowered to award punitive damages against any
party to such arbitration. The arbitrator shall require the non-prevailing party
to pay the arbitrator's full fees and expenses or, if in the arbitrator's
opinion there is no prevailing party, the arbitrator's fees and expenses will be
borne equally by the parties thereto. In the event action is brought to enforce
the provisions of this Agreement pursuant to this Section 4(h), the
non-prevailing parties shall be required to pay the reasonable attorneys' fees
and expenses of the prevailing parties, except that if in the opinion of the
court or arbitrator deciding such action there is no prevailing party, each
party shall pay its own attorneys' fees and expenses.
[Signature page follows]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed or have caused
this Agreement to be duly executed as of the date first above written.
SELLER
__________________________________
C. Michael Hoover
SES
SPECIALTY ELECTRONIC SYSTEMS, INC.
By: ______________________________
Name: ____________________________
Title: ___________________________
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EXHIBIT 2.7.7
EXHIBIT A
FORM OF
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into
as of this 5th day of November, 1999 by and between Southern Aluminum & Steel
Corporation, a Florida corporation ("SASCO"), and Jesse R. Joyner (the
"Employee").
RECITALS:
WHEREAS, as of the date hereof, Able Telcom Holding Corp. ("Able"), is
purchasing, pursuant to a Stock Purchase Agreement, dated November 5, 1999, all
of the issued and outstanding capital stock of SASCO;
WHEREAS, Employee will sell all of his ownership interest in SASCO to
Able in connection with the aforementioned acquisition;
WHEREAS, Employee is currently employed by SASCO;
WHEREAS, Able, in connection with its review of SASCO has considered
Employee's services important to the business of SASCO and, following the
acquisition, Able and SASCO desire for SASCO to continue to employ the Employee;
WHEREAS, in order to protect fully SASCO's and its affiliates' trade
secrets and confidential information and the goodwill of the business of SASCO
which Able has acquired by virtue of the acquisition described above and to
ensure that Able enjoys the benefits of such goodwill and business, SASCO and
the Employee desire to provide for Employee's agreement of confidentiality and
agreement not to compete with SASCO or its affiliates as specified herein; and
WHEREAS, SASCO and the Employee desire to set forth herein the terms
and conditions on which the Employee will continue to be employed by SASCO
including the terms of Employee's agreement not to compete.
NOW, THEREFORE, in consideration of the mutual promises, agreements and
mutual covenants set forth herein and for other good and valuable consideration
the parties hereto hereby agree as follows:
<PAGE>
1. EMPLOYMENT. SASCO hereby agrees to continue to employ the Employee, and
the Employee hereby accepts such continuation of employment with SASCO, upon the
terms and subject to the conditions set forth in this Agreement.
2. POSITION AND DUTIES. Subject to the authority of the Board, the
Employee shall continue to perform the duties historically performed by Employee
as Vice President of SASCO and such other duties as are appropriate for such
position and are assigned to such position in the future. The Employee shall
also serve in such additional capacities as may be requested of him from time to
time by the President or the Board of Directors of SASCO (the "Board"). The
Employee shall devote substantially all of his business time, attention, skill
and best efforts to the diligent performance of his duties hereunder. On all
matters not delegated to the Employee, the Employee shall report to the Chairman
of the Board of SASCO and such other officers of SASCO as shall be assigned to
supervise Employee from time to time.
3. TERM. The term of employment hereunder shall commence as of the date
hereof (the "Commencement Date") and shall continue thereafter for a period of
four years through and including November 5, 2003 (the "Term") unless earlier
terminated in accordance with the provisions hereof. Notwithstanding the above,
the covenants set forth in
(i) Section 5 hereof shall survive for the periods set forth therein
notwithstanding any termination of employment hereunder including any
termination pursuant to this Section 3 upon the expiration of the Term; and
(ii) Section 6 hereof shall survive for the periods set forth therein
notwithstanding any termination of employment hereunder other than termination
without cause as set forth in Section 10 hereof, including any termination
pursuant to this Section 3 upon the expiration of the Term.
4. COMPENSATION. As compensation for all services rendered by the Employee
under this Agreement, SASCO shall pay the Employee compensation as follows:
(a) ANNUAL COMPENSATION. For all services rendered by the Employee
during his employment under this Agreement, beginning on the Commencement Date,
SASCO shall pay the Employee an annual salary in an amount not less than
$150,000, payable bi-weekly, or at such other intervals as Able executives may
be paid, in substantially equal installments. The Employee's salary shall be
eligible for increases granted by the Board in its sole discretion.
(b) BENEFITS. The Employee shall be entitled to participate in those
perquisites and benefits generally available to employees of Able and its
affiliates of similar status and rank as the Employee in accordance with Able's
regular policies.
(c) BONUSES. The Employee shall be eligible for merit bonuses based on
management's and the Board of Director's discretion and their evaluation of
Employee's performance and the financial performance of the consolidated Able
group.
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(d) TAXES AND WITHHOLDINGS. All taxes and governmentally required
withholdings shall be deducted from any amount paid by SASCO to the Employee
hereunder in conformity with applicable laws.
5. CONFIDENTIALITY. The Employee acknowledges and agrees that the Trade
Secrets (as defined below) and the Confidential Information (as defined below)
of SASCO and its affiliates (including any parent, subsidiaries or commonly
controlled entities) and all physical embodiments thereof (collectively referred
to as the "Proprietary Information") are valuable, special and unique assets of
the business of SASCO and its affiliates and have been developed by SASCO and
its affiliates and will continue to be developed by SASCO and its affiliates
following Able's purchase of SASCO at considerable time and expense. Employee
further acknowledges that access to such Proprietary Information is essential to
performance of Employee's duties and responsibilities under this Agreement.
Therefore, in order to obtain access to such Proprietary Information, Employee
agrees that except with respect to those duties assigned to him by SASCO,
Employee shall hold in strictest confidence all Proprietary Information,
regardless of whether such Proprietary Information was received prior to, on or
subsequent to the date of this Agreement, will not reproduce, use, distribute,
disclose, publish or otherwise disseminate any Proprietary Information, in whole
or in part, and will take no action causing, or fail to take any action
necessary to prevent causing, any Proprietary Information to lose its character
as Proprietary Information, nor wilfully make use of such information for
Employee's own purposes or for the benefits of any person, firm, corporation,
association or other entity (except SASCO and its affiliates) under any
circumstances, except that Employee may disclose such Proprietary Information
pursuant to a court order, subpoena or other legal process, provided that, at
least ten days in advance of any legal disclosure, the Employee shall furnish
SASCO with a copy of the judicial or administrative order requiring that such
information be disclosed together with a written description of the information
to be disclosed (which description shall be in sufficient detail to allow SASCO
and its affiliates to determine the nature and scope of the information proposed
to be disclosed), and the Employee covenants and agrees to cooperate with SASCO
and its affiliates to deliver the minimum amount of information necessary to
comply with such order.
For purposes of this Agreement, the term "Trade Secrets" means
information, including but not limited to, any technical or nontechnical data,
formula, pattern, compilation, program, device, method, technique, drawing,
process, financial data, financial plan, product plan, list of actual or
potential customers or suppliers, or other information similar to any of the
foregoing, which derives economic value, actual or potential, from not being
generally known to, and not being readily ascertainable by proper means by,
other persons who can derive economic value from its disclosure or use. For
purposes of this Agreement, the term "Trade Secrets" does not include
information that Employee can show by competent proof (i) was known to Employee
and reduced to
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writing prior to disclosure by SASCO or its affiliates (but only if Employee
promptly notifies SASCO of Employee's prior knowledge); (ii) was generally known
to the public at the time SASCO or its affiliates disclosed the information to
Employee; (iii) became generally known to the public after disclosure to the
Employee through no act or omission of Employee; or (iv) was disclosed to
Employee by a third party having a bona fide right both to possess the
information and to disclose the information to Employee.
The term "Confidential Information" means any data or information of
SASCO (including information of SASCO or SASCO's affiliates), other than Trade
Secrets, regarding the business of SASCO and its affiliates or their policies
and operations which is valuable to SASCO and not generally known to competitors
of SASCO and its affiliates. For purposes of this Agreement, the term
"Confidential Information" does not include information that Employee can show
by competent proof (i) was known to Employee and reduced to writing prior to
disclosure by SASCO or its affiliates (but only if Employee promptly notifies
SASCO of Employee's prior knowledge); (ii) was generally known to the public at
the time SASCO or its affiliates disclosed the information to Employee; (iii)
became generally known to the public after disclosure to the Employee through no
act or omission of Employee; or (iv) was disclosed to Employee by a third party
having a bona fide right both to possess the information and to disclose the
information to Employee.
The provisions of this Section 5 will apply to Trade Secrets for so
long as such information remains a Trade Secret and to Confidential Information
during Employee's employment with SASCO and for a period of three years
following any termination of Employee's employment with SASCO for whatever
reason.
6. COVENANT NOT TO COMPETE.
(a) AGREEMENT NOT TO COMPETE. SASCO designs, installs and implements
surveillance systems, signalization, Intelligent Transportation Systems and
roadway lighting for advanced highway communications networks (the "Business").
In order to fully protect SASCO's and its affiliates' Confidential Information
and Trade Secrets and the goodwill of the Business of SASCO purchased by Able on
the date hereof, and to ensure that SASCO enjoys the benefits of that Business,
for a period of five years from the date hereof (the "Non-Competition Period"),
Employee shall not, except as authorized in writing by SASCO, directly or
indirectly, be employed by, render services to, assist, participate in the
affairs of, invest in, or otherwise be connected with, any person or enterprise
which person or enterprise is engaged in, or is planning to engage in, and shall
not personally engage in, any business that is in any respect competitive with
the Business of SASCO or any of its affiliates, whether relating to products or
services of the Business, within any state in which SASCO is conducting Business
or reasonably expects
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to conduct business at the time the Employee's employment is terminated and any
state in which SASCO conducted Business within the two years preceding the
termination of the Employee's employment (the "Territory"); provided that
Employee may hold investments representing a less than 5% interest in any
publicly held entity competing with SASCO. SASCO recognizes Employee's ownership
of SASCO, LLC, which owns 36% of L&K Electric Supply, and hereby acknowledges
and agrees that such ownership shall not violate the laws of this Section 6(a).
In furtherance of such covenant not to compete, Employee hereby acknowledges
that SASCO currently does business, and following the acquisition described
herein, SASCO shall continue to do business in a growing number of locales
throughout the United States and that in his capacity as an employee of SASCO
his responsibilities have involved and will continue to involve the conduct of
business throughout such Territory.
(b) NON-SOLICITATION COVENANT. Employee agrees that for the
Non-Competition Period, he will not, nor will he assist any of his affiliates
to, directly or indirectly, recruit or otherwise solicit or induce any agent,
non-employee sales representative, customer, subscriber or supplier of SASCO or
any affiliate of SASCO to terminate its employment or other arrangement with
SASCO or any affiliate of SASCO, otherwise change its relationship with SASCO or
any affiliates of SASCO, or establish any relationship with Employee or any of
his affiliates for any business purpose deemed materially competitive with the
Business.
(c) NON-INTERFERENCE WITH EMPLOYEES. Employee agrees that for the
Non-Competition Period, he will not, nor will he assist any of his affiliates
to, directly or indirectly, recruit or otherwise solicit or induce employee of
SASCO or any affiliate of SASCO to terminate or otherwise negatively affect his
or her employment relationship with SASCO or any affiliate of SASCO, or
establish an employment relationship directly or indirectly with Employee or any
entity other than SASCO or its affiliate with whom Employee is affiliated,
absent the express written consent of SASCO's Board of Directors.
(d) REMEDIES. The parties recognize, acknowledge and agree that (i) any
breach or threatened breach of the provisions of this Section 6 shall cause
irreparable harm and injury to SASCO and that money damages alone will not
provide an adequate remedy for such breach or threatened breach, (ii) the
duration, scope and geographical application of this Section 6 are fair and
reasonable under the circumstances of the business of SASCO, and are reasonably
required to protect the legitimate business interests of SASCO and the goodwill
of the business purchased by Able, (iii) the restrictions contained in this
Section 6 will not prevent the Employee from earning or seeking a livelihood,
and (iv) the restrictions contained in this Section 6 shall apply in all areas
where such application is permitted by law. Accordingly, the Employee agrees
that
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SASCO shall be entitled to have the provisions of this Section 6 specifically
enforced by any court having jurisdiction, and that such a court may issue a
temporary restraining order, preliminary injunction or other appropriate
equitable relief, without having to prove the inadequacy of available remedies
at law, having to post any bond or any other undertaking. In addition, SASCO
shall be entitled to avail itself of all such other actions and remedies
available to it or any of its affiliates under law or in equity and shall be
entitled to such damages as it sustains by reason of such breach or threatened
breach. It is the express desire and intent of the parties that the provisions
of this Section 6 be enforced to the full extent possible.
(e) SEVERABILITY. In light of the fact that the covenants set forth in
Section 6 are reasonably required to protect the legitimate interests of SASCO,
if any provision of this Section 6 hereof is held to be unenforceable because of
the duration of such provision, the area covered thereby or the scope of the
activity restrained, the parties hereby expressly agree that the court making
such determination shall have the power to reduce the duration and/or areas of
such provision and/or the scope of the activity to be restrained contained in
such provision and, in its reduced form, such provision shall then be
enforceable. The parties hereto intend and agree that the covenants contained in
Section 6(a) shall be construed as a series of separate covenants, one for each
municipality, community or county included within the area designated by Section
6(a). Except for geographic coverage, the terms and conditions of each such
separate covenant shall be deemed identical to the covenant contained in Section
6(a). Furthermore, if any court shall refuse to enforce any of the separate
covenants deemed included in Section 6(a), then such unenforceable covenant
shall be deemed eliminated from the provisions hereof to the extent necessary to
permit the remaining separate covenants to be enforced in accordance with their
terms. The prevailing party in any action arising out of a dispute in respect of
any provision of this Section 6 shall be entitled to recover from the
non-prevailing party reasonable attorneys' fees and costs and disbursements
incurred in connection with the prosecution or defense, as the case may be, of
any such action.
7. RESPONSIBILITIES UPON TERMINATION. Upon the termination of his
employment by SASCO for whatever reason and irrespective of whether or not such
termination is voluntary on his part:
(a) The Employee shall advise SASCO of the identity of his new employer
within ten days after accepting new employment and further agrees to keep SASCO
so advised of any change in employment during the Non-Competition Period;
(b) SASCO in its sole discretion may notify any new employer of the
Employee that the Employee has the obligations set forth in paragraph 6 to SASCO
during the Non-Competition Period;
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<PAGE>
(c) The Employee shall deliver to SASCO immediately upon termination of
his employment all proprietary information and all other records, forms,
contracts, memoranda, work papers, customer data and any other proprietary
documents of SASCO which have come into his possession by reason of his
employment with SASCO and which contain Trade Secrets or Confidential
Information, and any other documents necessary for the consistent operation by
SASCO of its business, irrespective of whether or not any of said documents were
prepared for him, and he shall not retain memoranda in respect of or copies of
any of said documents; and
(d) The Employee shall participate in an exit interview with SASCO.
8. SEPARATE AGREEMENTS. The covenants of the Employee contained in
Sections 5 and 6 of this Agreement shall be construed as separate agreements
independent of any other agreement, claim, or cause of action of the Employee
against SASCO, whether predicated on this Agreement or otherwise. In particular,
the covenants of the Employee contained in Sections 5 and 6 of this Agreement
shall be independent of the corresponding covenants of Employee set forth in
that certain Non-Competition Agreement dated of even date herewith by and
between SASCO and the Employee (the "Non-Competition Agreement"). In no event
shall the termination of Employee's responsibilities under this Agreement result
in the termination of Employee's responsibilities under the Non-Competition
Agreement. The covenants contained in this Agreement are necessary to protect
the legitimate business interests of SASCO.
9. TERMINATION FOR CAUSE. SASCO shall have the right at any time to
terminate the employment of the Employee for cause by delivering to him a
written notice specifying such cause. If SASCO exercises such right, SASCO's
obligation under this Agreement to make any further payments to the Employee
shall thereupon cease and terminate. This Section 9 of this Agreement in no way
limits SASCO's right to terminate Employee's employment without cause pursuant
to Section 10 of this Agreement. As used herein, the term "cause" shall include
but not be limited by:
(a) misappropriating any funds or any material property of SASCO or its
affiliates, customers, suppliers or other related entities;
(b) obtaining or attempting to obtain any material personal profit from
any transaction, other than as contemplated by this Agreement, in which the
Employee has an interest which is adverse to the interest of SASCO unless SASCO
shall first give its written consent to such transaction;
(c) (i) neglecting or refusing to perform the duties contemplated by
this Agreement, (ii) the willful taking of actions which directly impair the
Employee's ability
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<PAGE>
to perform his duties contemplated by this Agreement; (iii) breaching any term
of this Agreement; or (iv) taking any action detrimental to SASCO's goodwill or
damaging to SASCO's relationships with its customers, suppliers or employees;
provided that such neglect or refusal, action or breach shall have continued for
a period of or is not remedied within 10 days following written notice thereof;
(d) being convicted of or pleading guilty or NOLO CONTENDERE to any
crime or offense constituting a felony under applicable law or any crime or
offense involving fraud or moral turpitude;
(e) acting or refraining from acting in respect of any of the duties
contemplated by this Agreement and the Board determines in good faith that such
action or inaction constituted gross negligence or a willful act of malfeasance
or misfeasance; or
(f) any material intentional failure to comply with laws or
governmental regulations applicable to SASCO or the conduct of SASCO's business.
10. TERMINATION WITHOUT CAUSE. SASCO shall have the right at any time to
terminate the employment of the Employee and this Agreement without cause
effective upon 30 days prior written notice to the Employee. Upon termination of
this Agreement pursuant to this Section 10, the Employee shall be entitled to
receive, in full settlement and discharge of SASCO's obligation to the Employee,
(i) a lump sum amount equal to all compensation accrued and unpaid as of the
date of termination; and (ii) in equal semi-monthly installments an amount equal
to the base salary to which Employee would have been entitled under Section 4(a)
hereof if this Agreement had not been terminated.
11. TERMINATION UPON DEATH OR DISABILITY. SASCO may terminate the
employment of the Employee and this Agreement effective upon notice to the
Employee (or his heirs or legal representatives, as the case may be) if the
Employee either dies or is incapacitated or disabled by accident, sickness or
otherwise and has been rendered mentally or physically incapable with or without
reasonable accommodation of performing the services and duties required to be
performed by him under this Agreement for a period of at least 90 consecutive
days or 120 days within any 12 month period. Upon termination of this Agreement
pursuant to this Section 11, the Employee (or his heirs or legal
representatives, as the case may be) shall be entitled to receive, in full
settlement and discharge of SASCO's obligation to the Employee, a lump sum
amount equal to all compensation unpaid as of the date of termination.
12. SEVERABILITY. If any provision of this Agreement is held to be illegal,
invalid or unenforceable under present or future laws, such provision shall be
fully severable, this Agreement shall be construed and enforced as if such
illegal, invalid or unenforceable
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<PAGE>
provision had never comprised a part of this Agreement, and the remaining
provisions of this Agreement shall remain in full force and effect and shall not
be affected by the illegal, invalid or unenforceable provision or by its
severance from this Agreement.
13. MISCELLANEOUS.
(a) GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the law of the State of Florida, without giving effect to the
principles of conflicts of laws of such state.
(b) COUNTERPARTS. This Agreement may be executed in several
counterparts each of which is an original. This Agreement and any counterpart so
executed shall be deemed to be one and the same instrument. It shall not be
necessary in making proof of this Agreement or any counterpart hereof to produce
or account for any of the other counterparts.
(c) CONTENTS OF AGREEMENT; PARTIES IN INTEREST, ETC. This Agreement
sets forth the entire understanding of the parties. Any previous agreements or
understandings between the parties regarding the subject matter hereof are
merged into and superseded by this Agreement. All representations, warranties,
covenants, terms, conditions and provisions of this Agreement shall be binding
upon and inure to the benefit of and be enforceable by the respective heirs,
legal representatives, successors and permitted assigns of SASCO and the
Employee. Neither this Agreement nor any rights, interests or obligations
hereunder may be assigned by any party without the prior written consent of the
other party hereto.
(d) SECTION HEADINGS. The section headings herein have been inserted
for convenience of reference only and shall in no way modify or restrict any of
the terms or provisions hereof.
(e) NOTICES. All notices, requests, demands and other communications
which are required or permitted hereunder shall be sufficient if given in
writing and delivered personally or by registered or certified mail, postage
prepaid, by a nationally recognized overnight courier service, or by facsimile
transmission (with a copy simultaneously sent by registered or certified mail,
postage prepaid), as follows (or to such other address as shall be set forth in
a notice given in the same manner):
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<PAGE>
(1) If to SASCO, to:
Southern Aluminum & Steel Corporation
c/o Able Telcom Holding Corp.
1000 Holcomb Woods Parkway
Suite 440
Roswell, GA 30076
Telephone: (770) 993-1570
Facsimile: (770) 993-8532
Attn: President
Copies to:
Paul Hastings Janofsky & Walker LLP
600 Peachtree Street, Suite 2400
Atlanta, Georgia 30308
Facsimile: (404) 815-2424
Attn: Elizabeth H. Noe, Esq.
(2) If to the Employee, to:
Jesse R. Joyner
1185 Carrigan Blvd.
Merrit Island, FL 32952
Telephone:
Facsimile:
(f) MODIFICATION AND WAIVER. Any of the terms or conditions of this
Agreement may be waived in writing at any time by the party which is entitled to
the benefits thereof, and this Agreement may be modified or amended at any time
by SASCO and the Employee. No supplement, modification or amendment of this
Agreement shall be binding unless executed in writing by each of the parties
hereto. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provision hereof nor shall such waiver
constitute a continuing waiver.
(g) THIRD PARTY BENEFICIARIES. Except as otherwise expressly set forth
herein, no individual or entity shall be a third-party beneficiary of the
representations, warranties, covenants and agreements made by any party hereto.
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<PAGE>
(h) MEDIATION. SASCO and the Employee shall attempt in good faith to
mediate any claim or controversy arising out of or relating to this Agreement or
any breach thereof if either of them requests mediation and gives written notice
to the other (the "Mediation Notice"). Any notice given pursuant to the
preceding sentence shall include a brief statement of the claim or controversy.
If SASCO and the Employee do not resolve the claim or controversy within twenty
days after the date of the Mediation Notice, SASCO and the Employee shall then
use reasonable efforts to agree upon an independent mediator. If SASCO and the
Employee do not agree upon an independent mediator within ten days after the
date of the Mediation Notice, either party may request that JAMS/Endispute
("JAMS"), or a similar mediation service of a similar national scope if JAMS no
longer then exists, appoint an independent mediator. SASCO and the Employee
shall share the costs of mediation equally and shall pay such costs in advance
upon the request of the mediator or any party. Within ten days after selection
of the mediator, the mediator shall set the mediation. If SASCO and the Employee
do not resolve the dispute within 30 days after the date of the Mediation
Notice, the dispute shall be decided by arbitration as set forth in Section
14(i) hereof.
(i) ARBITRATION. Any claim or controversy arising out of or relating to
this Agreement or any breach thereof shall be settled by arbitration if such
claim or controversy is not settled pursuant to Section 14(h) hereof. The venue
for any such arbitration shall be Atlanta, Georgia. Except as expressly set
forth herein, all arbitration proceedings under this Section 14(i) shall be
undertaken in accordance with the Commercial Arbitration Rules of the American
Arbitration Association (the "AAA") then in force. Only individuals who are (i)
lawyers engaged full-time in the practice of law and (ii) on the AAA register of
arbitrators shall be selected as an arbitrator. There shall be one arbitrator
who shall be chosen in accordance with the rules of the AAA. Within 20 days of
the conclusion of the arbitration hearing, the arbitrator shall prepare written
findings of fact and conclusions of law. Judgment on the written award may be
entered and enforced in any court of competent jurisdiction. It is mutually
agreed that the written decision of the arbitrator shall be valid, binding,
final and non-appealable; provided however, that the parties hereto agree that
the arbitrator shall not be empowered to award punitive damages against any
party to such arbitration. The arbitrator shall require the non-prevailing party
to pay the arbitrator's full fees and expenses or, if in the arbitrator's
opinion there is no prevailing party, the arbitrator's fees and expenses will be
borne equally by the parties thereto. In the event action is brought to enforce
the provisions of this Agreement pursuant to this Section 14(i), the
non-prevailing parties shall be required to pay the reasonable attorneys' fees
and expenses of the prevailing parties, except that if in the opinion of the
court or arbitrator deciding such action there is no prevailing party, each
party shall pay its own attorneys' fees and expenses.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed or have caused
this Agreement to be duly executed as of the date first above written.
EMPLOYEE
_____________________________________
Jesse R. Joyner
SASCO
SOUTHERN ALUMINUM & STEEL CORPORATION
By:__________________________________
Name:________________________________
Title:_________________________________
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EXHIBIT 2.7.7.1
EXHIBIT E
FORM OF
NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT (this "Agreement") is made and entered
into as of this 5th day of November, 1999 by and between Southern Aluminum &
Steel Corporation, a Florida corporation ("SASCO"), and Jesse R. Joyner
("Seller").
RECITALS:
WHEREAS, as of the date hereof, Able Telcom Holding Corp. ("Able") is
purchasing, pursuant to a Stock Purchase Agreement, dated November 5, 1999 (the
"Stock Purchase Agreement"), all of the issued and outstanding capital stock of
SASCO;
WHEREAS, Seller holds 49%of the issued and outstanding stock of SASCO;
WHEREAS, as a result of the above-described acquisition, Seller will
sell all of his ownership interest in SASCO and will receive shares of Able
common stock as determined by the Stock Purchase Agreement;
WHEREAS, in order to protect fully SASCO's and its affiliates'
confidential information and the goodwill of the business of SASCO which Able
has acquired by virtue of the acquisition described above and to ensure that
Able enjoys the benefits of such goodwill and business, SASCO and Seller desire
to provide for Seller's agreement of confidentiality and agreement not to
compete with SASCO and its affiliates as specified herein; and
WHEREAS, SASCO and Seller desire to set forth herein the terms of
Seller's agreement of confidentiality and agreement not to compete.
NOW, THEREFORE, in consideration of the mutual promises, agreements and
mutual covenants set forth herein and for other good and valuable consideration
the parties hereto hereby agree as follows:
1. CONFIDENTIALITY. Seller acknowledges and agrees that the Trade Secrets
(as defined below) and the Confidential Information (as defined below) of SASCO
and its affiliates (including any parent, subsidiaries or commonly controlled
entities) and all physical embodiments thereof (collectively referred to as the
"Proprietary Information") are valuable, special and unique assets of the
business of SASCO and its affiliates and have been developed by SASCO and its
affiliates and will continue to be developed by SASCO and its affiliates
following Able's purchase of SASCO at considerable time and expense. Seller
further acknowledges that access to such Proprietary Information is essential to
performance of
<PAGE>
Seller's duties and responsibilities under this Agreement. Therefore, in order
to obtain access to such Proprietary Information, Seller agrees that except with
respect to those duties assigned to him by SASCO and for the time periods set
forth below, Seller shall hold in strictest confidence all Proprietary
Information, regardless of whether such Proprietary Information was received
prior to, on or subsequent to the date of this Agreement, and will not
reproduce, use, distribute, disclose, publish or otherwise disseminate any
Proprietary Information, in whole or in part, and will take no action causing,
or fail to take any action necessary to prevent causing, any Proprietary
Information to lose its character as Proprietary Information, nor wilfully make
use of such information for Seller's own purposes or for the benefits of any
person, firm, corporation, association or other entity (except SASCO and its
affiliates) under any circumstances, except that Seller may disclose such
Proprietary Information pursuant to a court order, subpoena or other legal
process, provided that, at least ten days in advance of any legal disclosure,
Seller shall furnish SASCO with a copy of the judicial or administrative order
requiring that such information be disclosed together with a written description
of the information to be disclosed (which description shall be in sufficient
detail to allow SASCO and its affiliates to determine the nature and scope of
the information proposed to be disclosed), and Seller covenants and agrees to
cooperate with SASCO and its affiliates to deliver the minimum amount of
information necessary to comply with such order.
For purposes of this Agreement, the term "Trade Secrets" means
information, including but not limited to, any technical or nontechnical data,
formula, pattern, compilation, program, device, method, technique, drawing,
process, financial data, financial plan, product plan, list of actual or
potential customers or suppliers, or other information similar to any of the
foregoing, which derives economic value, actual or potential, from not being
generally known to, and not being readily ascertainable by proper means by,
other persons who can derive economic value from its disclosure or use. For
purposes of this Agreement, the term "Trade Secrets" does not include
information that Seller can show by competent proof (i) was known to Seller and
reduced to writing prior to disclosure by SASCO or its affiliates to Seller (but
only if Seller promptly notifies SASCO of Seller's prior knowledge); (ii) was
generally known to the public at the time SASCO or its affiliates disclosed the
information to Seller; (iii) became generally known to the public after
disclosure to Seller through no act or omission of Seller; or (iv) was disclosed
to Seller by a third party having a bona fide right both to possess the
information and to disclose the information to Seller.
The term "Confidential Information" means any data or information of
SASCO (including information of SASCO or SASCO's affiliates), other than Trade
Secrets, regarding the business of SASCO and its affiliates or their policies
and operations which is valuable to SASCO and not generally known to competitors
of SASCO and its affiliates. For purposes of this Agreement, the term
"Confidential Information" does not include information that Seller can show by
competent proof (i) was known to Seller and reduced to writing prior to
disclosure by SASCO or its affiliates to Seller (but only if Seller promptly
notifies SASCO of Seller's prior knowledge); (ii) was generally known to the
public at the time SASCO or its affiliates disclosed the information to Seller;
(iii) became generally known to the public after
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<PAGE>
disclosure to Seller through no act or omission of Seller; or (iv) was disclosed
to Seller by a third party having a bona fide right both to possess the
information and to disclose the information to Seller.
The provisions of this Section 1 will apply to Trade Secrets for so
long as such information remains a Trade Secret and to Confidential Information
for a period of five years from the date hereof.
2. COVENANT NOT TO COMPETE.
a. AGREEMENT NOT TO COMPETE. SASCO designs, installs and implements
surveillance systems, signalization, Intelligent Transportation Systems and
roadway lighting for advanced highway communications networks (the "Business").
In order to fully protect SASCO's and its affiliates' Confidential Information
and Trade Secrets and the goodwill of the Business of SASCO purchased by Able on
the date hereof, and to ensure that SASCO enjoys the benefits of that Business,
for a period of five years from the date hereof (the "Non-Competition Period"),
Seller shall not, except as authorized in writing by SASCO, directly or
indirectly, be employed by, render services to, assist, participate in the
affairs of, invest in, or otherwise be connected with, any person or enterprise
which person or enterprise is engaged in, or is planning to engage in, and shall
not personally engage in, any business that is in any respect competitive with
the Business of SASCO or any of its affiliates, with respect to any products or
services of the Business of SASCO and its affiliates, within any state in which
SASCO is conducting Business or reasonably expects to conduct business at the
time of this Agreement (the "Territory"); provided that Seller may hold
investments representing a less than 5% interest in any publicly held entity
competing with SASCO. SASCO recognizes Seller's ownership of SASCO, LLC, which
owns 36% of L&K Electric Supply, and hereby acknowledges and agrees that such
ownership shall not violate the terms of this Section 2(a). In furtherance of
such covenant not to compete, Seller hereby acknowledges that SASCO currently
does business, and following the merger described herein, SASCO shall continue
to do business in a growing number of locales throughout the United States and
that in his capacity as an employee of SASCO his responsibilities have involved
and will continue to involve the conduct of business throughout such Territory.
b. NON-SOLICITATION COVENANT. Seller agrees that for the
Non-Competition Period, he will not, nor will he assist any of his affiliates
to, directly or indirectly, recruit or otherwise solicit or induce any agent,
non-employee sales representative, customer, subscriber or supplier of SASCO or
any affiliate of SASCO to terminate its contract, relationship or other
arrangement with SASCO or any affiliate of SASCO, otherwise change its
relationship with SASCO or any affiliates of SASCO, or establish any
relationship with Seller or any of his affiliates for any business purpose
deemed materially competitive with the Business.
c. NON-INTERFERENCE WITH EMPLOYEES. Seller agrees that for the
Non-Competition Period, he will not, nor will he assist any of his affiliates
to, directly or indirectly,
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<PAGE>
recruit or otherwise solicit or induce any employee of SASCO or any affiliate of
SASCO to terminate or otherwise negatively affect its employment relationship
with SASCO or any affiliate of SASCO, or establish an employment relationship
directly or indirectly with Seller or any entity other than SASCO or its
affiliates with whom Seller is affiliated, absent the express written consent of
SASCO's Board of Directors.
d. REMEDIES. The parties recognize, acknowledge and agree that (i) any
breach or threatened breach of the provisions of this Section 2 shall cause
irreparable harm and injury to SASCO and that money damages alone will not
provide an adequate remedy for such breach or threatened breach, (ii) the
duration, scope and geographical application of this Section 2 are fair and
reasonable under the circumstances of the business of SASCO, and are reasonably
required to protect the legitimate business interests of SASCO and the goodwill
of the business purchased by Able, (iii) the restrictions contained in this
Section 2 will not prevent Seller from earning or seeking a livelihood, and (iv)
the restrictions contained in this Section 2 shall apply in all areas where such
application is permitted by law. Accordingly, Seller agrees that SASCO shall be
entitled to have the provisions of this Section 2 specifically enforced by any
court having jurisdiction, and that such a court may issue a temporary
restraining order, preliminary injunction or other appropriate equitable relief,
without having to prove the inadequacy of available remedies at law, having to
post any bond or any other undertaking. In addition, SASCO shall be entitled to
avail itself of all such other actions and remedies available to it or any of
its affiliates under law or in equity and shall be entitled to such damages as
it sustains by reason of such breach or threatened breach. It is the express
desire and intent of the parties that the provisions of this Section 2 be
enforced to the full extent possible.
e. SEVERABILITY. In light of the fact that the covenants set forth in
Section 2 are reasonably required to protect the legitimate interests of SASCO,
if any provision of this Section 2 hereof is held to be unenforceable because of
the duration of such provision, the area covered thereby or the scope of the
activity restrained, the parties hereby expressly agree that the court making
such determination shall have the power to reduce the duration and/or areas of
such provision and/or the scope of the activity to be restrained contained in
such provision to that which is reasonable for protection of the business
interests of SASCO and its affiliates and, in its reduced form, such provision
shall then be enforceable. The parties hereto intend and agree that the
covenants contained in Section 2(a) shall be construed as a series of separate
covenants, one for each municipality, community, county or state included within
the area designated by Section 2(a). Except for geographic coverage, the terms
and conditions of each such separate covenant shall be deemed identical to the
covenant contained in Section 2(a). Furthermore, if any court shall refuse to
enforce any of the separate covenants deemed included in Section 2(a), then such
unenforceable covenant shall be deemed eliminated from the provisions hereof to
the extent necessary to permit the remaining separate covenants to be enforced
in accordance with their terms. The prevailing party in any action arising out
of a dispute in respect of any provision of this Section 2 shall be entitled to
recover from the non-prevailing party reasonable attorneys' fees and costs and
disbursements incurred in connection with the prosecution or defense, as the
case may be, of any such action.
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<PAGE>
3. SEPARATE AGREEMENTS. The covenants of Seller contained in Sections 1
and 2 of this Agreement shall be construed as separate agreements independent of
any other agreement, claim, or cause of action of Seller against SASCO, whether
predicated on this Agreement or otherwise. In particular, the covenants of
Seller contained in Sections 1 and 2 of this Agreement shall be independent of
the corresponding covenants of Seller set forth in that certain Employment
Agreement dated of even date herewith by and between SASCO and Seller (the
"Employment Agreement"). In no event shall the termination of Seller's
responsibilities under this Agreement result in the termination of Seller's
responsibilities under the Employment Agreement. The covenants contained in this
Agreement are necessary to protect the legitimate business interests of SASCO.
4. TERMINATION. The covenants set forth in Sections 1 and 2 hereof shall
continue for the period set forth therein. Notwithstanding the above, in the
event Seller's employment with SES is terminated without cause, the covenants
set forth in Section 2 hereof shall terminate on the effective date of Seller's
termination.
5. MISCELLANEOUS.
a. GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the laws of the State of Florida, without giving effect to the
principles of conflicts of laws of such state.
b. COUNTERPARTS. This Agreement may be executed in several counterparts
each of which is an original. This Agreement and any counterpart so executed
shall be deemed to be one and the same instrument. It shall not be necessary in
making proof of this Agreement or any counterpart hereof to produce or account
for any of the other counterparts.
c. CONTENTS OF AGREEMENT; PARTIES IN INTEREST, ETC. This Agreement sets
forth the entire understanding of the parties. Any previous agreements or
understandings between the parties regarding the subject matter hereof are
merged into and superseded by this Agreement. All representations, warranties,
covenants, terms, conditions and provisions of this Agreement shall be binding
upon and inure to the benefit of and be enforceable by the respective heirs,
legal representatives, successors and permitted assigns of SASCO and Seller.
Neither this Agreement nor any rights, interests or obligations hereunder may be
assigned by any party without the prior written consent of the other party
hereto.
d. SECTION HEADINGS. The section headings herein have been inserted for
convenience of reference only and shall in no way modify or restrict any of the
terms or provisions hereof.
e. NOTICES. All notices, requests, demands and other communications
which are required or permitted hereunder shall be sufficient if given in
writing and delivered personally or by registered or certified mail, postage
prepaid, by a nationally recognized overnight courier service, or by facsimile
transmission (with a copy simultaneously sent by registered or certified mail,
postage prepaid), as follows (or to such other address as shall be set forth in
a notice given in the same manner):
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<PAGE>
1. If to SASCO, to:
Southern Aluminum & Steel Corporation
c/o Able Telcom Holding Corp.
1000 Holcomb Woods Parkway
Suite 440
Roswell, GA 30076
Telephone: (770) 993-1570
Facsimile: (770) 993-8532
Attn: President
Copies to:
Paul Hastings Janofsky & Walker LLP
600 Peachtree Street, Suite 2400
Atlanta, Georgia 30308
Facsimile: (404) 815-2424
Attn: Elizabeth H. Noe, Esq.
2. If to Seller, to:
Jesse R. Joyner
1185 Carrigan Blvd.
Merritt Island, Fl 32952
Telephone:
Facsimile:
f. MODIFICATION AND WAIVER. Any of the terms or conditions of this
Agreement may be waived in writing at any time by the party which is entitled to
the benefits thereof, and this Agreement may be modified or amended at any time
by SASCO and Seller. No supplement, modification or amendment of this Agreement
shall be binding unless executed in writing by each of the parties hereto. No
waiver of any of the provisions of this Agreement shall be deemed or shall
constitute a waiver of any other provision hereof nor shall such waiver
constitute a continuing waiver.
g. THIRD PARTY BENEFICIARIES. Except as otherwise expressly set forth
herein, no individual or entity shall be a third-party beneficiary of the
representations, warranties, covenants and agreements made by any party hereto.
h. MEDIATION. SASCO and Seller shall attempt in good faith to mediate
any claim or controversy arising out of or relating to this Agreement or any
breach thereof if either
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<PAGE>
of them requests mediation and gives written notice to the other (the "Mediation
Notice"). Any notice given pursuant to the preceding sentence shall include a
brief statement of the claim or controversy. If SASCO and Seller do not resolve
the claim or controversy within 20 days after the date of the Mediation Notice,
SASCO and Seller shall then use reasonable efforts to agree upon an independent
mediator. If SASCO and Seller do not agree upon an independent mediator within
ten days after the date of the Mediation Notice, either party may request that
JAMS/Endispute ("JAMS"), or a similar mediation service of a similar national
scope if JAMS no longer then exists, appoint an independent mediator. SASCO and
Seller shall share the costs of mediation equally and shall pay such costs in
advance upon the request of the mediator or any party. Within ten days after
selection of the mediator, the mediator shall set the mediation. If SASCO and
Seller do not resolve the dispute within 30 days after the date of the Mediation
Notice, the dispute shall be decided by arbitration as set forth in Section
14(h) hereof.
i. ARBITRATION. Any claim or controversy arising out of or relating to
this Agreement or any breach thereof shall be settled by arbitration if such
claim or controversy is not settled pursuant to Section 4(g) hereof. The venue
for any such arbitration shall be Atlanta, Georgia, or such other location as
the parties may mutually agree. Except as expressly set forth herein, all
arbitration proceedings under this Section 4(h) shall be undertaken in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association (the "AAA") then in force. Only individuals who are (i) lawyers
engaged full-time in the practice of law and (ii) on the AAA register of
arbitrators shall be selected as an arbitrator. There shall be one arbitrator
who shall be chosen in accordance with the rules of the AAA. Within 20 days of
the conclusion of the arbitration hearing, the arbitrator shall prepare written
findings of fact and conclusions of law. Judgment on the written award may be
entered and enforced in any court of competent jurisdiction. It is mutually
agreed that the written decision of the arbitrator shall be valid, binding,
final and non-appealable; provided however, that the parties hereto agree that
the arbitrator shall not be empowered to award punitive damages against any
party to such arbitration. The arbitrator shall require the non-prevailing party
to pay the arbitrator's full fees and expenses or, if in the arbitrator's
opinion there is no prevailing party, the arbitrator's fees and expenses will be
borne equally by the parties thereto. In the event action is brought to enforce
the provisions of this Agreement pursuant to this Section 4(h), the
non-prevailing parties shall be required to pay the reasonable attorneys' fees
and expenses of the prevailing parties, except that if in the opinion of the
court or arbitrator deciding such action there is no prevailing party, each
party shall pay its own attorneys' fees and expenses.
-7-
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IN WITNESS WHEREOF, the parties hereto have executed or have caused
this Agreement to be duly executed as of the date first above written.
SELLER
_________________________________
Jesse R. Joyner
SASCO
SOUTHERN ALUMINUM & STEEL CORPORATION
By: _____________________________
Name: ___________________________
Title: __________________________
-8-
EXHIBIT 3.1.2
ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATION
OF
ABLE TELCOM HOLDING CORP.
--------------------------------------
Pursuant to Section 607.0602 of the
Florida Business Corporation Act
--------------------------------------
Pursuant to Section 607.0602 of the Florida Business Corporation Act
(the "FBCA"), Able Telcom Holding Corp. (the "COMPANY") hereby adopts the
following Amendment to its Articles of Incorporation, as amended (the
"AMENDMENT"):
1. The name of the Corporation is Able Telcom Holding Corp.
2. The Amendment set forth below was duly adopted on January 25, 2000
by the Board of Directors at a meeting duly held after appropriate notice in
accordance with Section 607.0822 of the FBCA.
3. This Amendment to the Company's Articles of Incorporation shall be
effected by adding the following Part C to Article III as follows:
C. SERIES C CONVERTIBLE PREFERRED STOCK
(1) DESIGNATION AND AMOUNT. The shares of such series shall be
designated "Series C Convertible Preferred Stock" (herein referred to as
"PREFERRED SHARES"), having a par value per share equal to $0.10, and the number
of shares constituting such series shall be 5,000.
(2) DIVIDENDS. The Preferred Shares will bear dividends
("DIVIDENDS") at a rate of 5.9% of the Stated Value per share of the Preferred
Shares per annum, which shall be cumulative and accrue daily from the Issuance
Date (as defined below) as an accretion to the Liquidation Value, whether or not
declared by the Board of Directors, on the last day of each Fiscal Quarter (as
defined below) beginning on the last day of the Fiscal Quarter on April 30, 2000
(each a "DIVIDEND DATE"). Notwithstanding the foregoing, accrued Dividends on
any Preferred Share may, at the election of the Company, be paid in cash on the
Dividend Date, PROVIDED that the Company provides written notice to that effect
to each holder of Preferred Shares at least 20 days prior to such Dividend Date.
(3) HOLDER'S CONVERSION OF PREFERRED SHARES. A holder of
Preferred Shares shall have the right, at such holder's option, to convert the
Preferred Shares into shares of
<PAGE>
the Company's common stock, par value $.001 per share (the "COMMON STOCK"), on
the following terms and conditions:
(a) CONVERSION RIGHT. At any time or times on or after the
Issuance Date (as defined below), any holder of Preferred Shares shall be
entitled to convert any whole number of Preferred Shares into fully paid and
nonassessable shares (rounded to the nearest whole share in accordance with
Section 3(h)) of Common Stock, at the Conversion Rate (as defined below);
PROVIDED, HOWEVER, that in no event shall any holder be entitled to convert
Preferred Shares in excess of that number of Preferred Shares which, upon giving
effect to such conversion, would cause the aggregate number of shares of Common
Stock beneficially owned by the holder and its affiliated entities to exceed
4.99% (the "RESTRICTED OWNERSHIP PERCENTAGE") of the outstanding shares of the
Common Stock following such conversion. For purposes of the foregoing proviso,
the aggregate number of shares of Common Stock beneficially owned by the holder
and its affiliates shall include the number of shares of Common Stock issuable
upon conversion of the Preferred Shares with respect to which the determination
of such proviso is being made, but shall exclude the number of shares of Common
Stock which would be issuable upon (i) conversion of the remaining, nonconverted
Preferred Shares beneficially owned by the holder and its affiliates, and (ii)
exercise or conversion of the unexercised or unconverted portion of any other
securities of the Company (including, without limitation, any warrants or
convertible preferred stock) subject to a limitation on conversion or exercise
analogous to the limitation contained herein beneficially owned by the holder
and its affiliates. Except as set forth in the preceding sentence, for purposes
of this Section 3(a), beneficial ownership shall be calculated in accordance
with Section 13(d) of the Securities Exchange Act of 1934, as amended. The
holder may waive the foregoing limitations by written notice to the Company upon
not less than 61 days' prior notice (with such waiver taking effect only upon
the expiration of such 61 day notice period); PROVIDED that (w) each holder
shall have the right at any time and from time to time to reduce its Restricted
Ownership Percentage immediately upon notice to the Company or in the event of a
Change in Control Transaction, (x) each holder shall have the right at any time
and from time to time to increase its Restricted Ownership Percentage or
otherwise waive in whole or in part the restrictions of this Section 3(a) upon
61 days' prior notice to the Company or immediately in the event of a Change in
Control Transaction, (y) each holder can make subsequent adjustments pursuant to
(w) or (x) any number of times from time to time (which adjustment shall be
effective immediately if it results in a decrease in the Restricted Ownership
Percentage or shall be effective upon 61 days' prior written notice or
immediately in the event of a Change in Control Transaction if it results in an
increase in the Restricted Ownership Percentage) and (z) each holder may
eliminate or reinstate this limitation at any time and from time to time (which
elimination will be effective upon 61 days' prior notice and which reinstatement
will be effective immediately); PROVIDED, FURTHER that the holder shall not be
permitted to waive any provision of this Section 3(a) to the extent that, if the
holder were to acquire additional shares of Common Stock pursuant to such
waiver, the limitation set forth in the first sentence of this Section 3(a)
would be exceeded if the Restricted Ownership Percentage were 9.9%. Without
limiting the foregoing, in the event of a Change in Control Transaction, any
holder may reinstate immediately (in whole or in part) the requirement that any
increase in its Restricted Ownership Percentage be subject to 61 days' prior
written notice, notwithstanding such
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<PAGE>
Change in Control Transaction, without imposing such requirement on, or
otherwise changing such holder's rights with respect to, any other Change in
Control Transaction. For this purpose, any material modification of the terms of
a Change in Control Transaction will be deemed to create a new Change in Control
Transaction. A "CHANGE IN CONTROL TRANSACTION" will be deemed to have occurred
upon the earlier of the announcement or consummation of a transaction or series
of transactions involving (x) any consolidation or merger of the Company with or
into any other corporation or other entity or person (whether or not the Company
is the surviving corporation), or any other corporate reorganization or
transaction or series of related transactions in which in excess of 50% of the
Company's voting power is transferred through a merger, consolidation, tender
offer or similar transaction, or (y) in excess of 50% of the Corporation's Board
of Directors consists of directors not nominated by the prior Board of Directors
of the Company, or (z) any person (as defined in Section 13(d) of the Exchange
Act, together with its affiliates and associates (as such terms are defined in
Rule 405 under the Act), beneficially owns or is deemed to beneficially own (as
described in Rule 13d-3 under the Exchange Act without regard to the 60-day
exercise period) in excess of 50% of the Company's voting power.
(b) CONVERSION RATE. The number of shares of Common Stock
issuable upon conversion of each of the Preferred Shares pursuant to Sections
3(a) and 3(g) shall be determined according to the following formula (the
"CONVERSION RATE"):
LIQUIDATION VALUE
-----------------
Conversion Price
For purposes of this Amendment, the following terms shall have the
following meanings:
(i) "APPROVED MARKET" means the Nasdaq National
Market or the American Stock Exchange or the New York Stock Exchange.
(ii) "BEST EFFORTS" means as to any party obligated
to use its Best Efforts to accomplish a particular objective that the obligated
party is required to make diligent, good faith, prompt, substantial and
persistent efforts as a prudent person desiring to achieve the applicable
objective would use in order to ensure that such objective is achieved as
expeditiously as possible; PROVIDED, HOWEVER, that an obligation to use Best
Efforts shall not be construed to limit the applicability of any remedy for
default or delay by such party under the terms of any Transaction Document,
including any applicable default payments and mandatory redemptions).
(iii) "CONVERSION PRICE" means, as of any Conversion
Date (as defined in Section 3(e)) or other date of determination, a price equal
to $9.35; PROVIDED, HOWEVER, that commencing on the same day of the month as the
Closing Date six months after the Closing Date, and then on the same day of the
month as the Closing Date at the end of each six month period thereafter (each
of these dates, a "RESET DATE"), the Conversion Price shall be recalculated to
equal the average Closing Bid Prices for the Common Stock for the ten
consecutive Trading Days preceding the applicable Reset Date; PROVIDED, FURTHER,
that (a) no Conversion Price shall be recalculated if such
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<PAGE>
recalculation would result in a new Conversion Price that is greater than the
then current Conversion Price and (b) if any such recalculation results in a
Conversion Price less than $4.00 (without taking into account any adjustments to
the Conversion Price under Section 3(c) hereof), the Conversion Price shall
thereafter be $4.00 (without prejudice to any adjustments to the Conversion
Price under Section 3(c) hereof). The Conversion Price during the six-month
period following the Closing Date is referred to herein as the "INITIAL
CONVERSION PRICE."
(iv) "CLOSING BID PRICE" means, for any security as
of any date, the last closing bid price for such security on the Nasdaq National
Market as reported by Bloomberg Financial Markets ("BLOOMBERG"), or, if the
Nasdaq National Market is not the principal trading market for such security,
the last closing bid price of such security on the Approved Market where such
security is listed or traded as reported by Bloomberg, or if the foregoing do
not apply, the last closing bid price of such security in the over-the-counter
market on the electronic bulletin board for such security as reported by
Bloomberg, or, if no closing bid price is reported for such security by
Bloomberg, the last closing trade price of such security that are listed by
Bloomberg, or, if no last closing trade price is reported for such security by
Bloomberg, the average of the bid prices of any market makers for such security
as reported in the "pink sheets" by the National Quotation Bureau, Inc. If the
Closing Bid Price cannot be calculated for such security on such date on any of
the foregoing bases, the Closing Bid Price of such security on such date shall
be the fair market value as mutually determined by the Company and the holders
of a majority of the outstanding Preferred Shares (including for purposes of
this determination any Preferred Shares with respect to which the Closing Bid
Price is being determined). If the Company and the holders of Preferred Shares
are unable to agree upon the fair market value of the Common Stock, then such
dispute shall be resolved pursuant to Section 3(e)(iii). (All such
determinations are to be appropriately adjusted for any stock dividend, stock
split or other similar transaction during any period for which the Closing Bid
Price is being determined).
(v) "CLOSING PRICE" means $7.79.
(vi) "DAY" means calendar day.
(vii) "FISCAL QUARTER" means each of the periods
beginning on and including November 1 and ending on and including January 31,
the period beginning on and including February 1 and ending on and including
April 30, the period beginning on and including May 1 and ending on and
including July 31, and the period beginning on and including August 1 and ending
on and including October 31.
(viii) "FORCE MAJEURE" means during the continuation
of any time that (i) trading generally shall have been suspended on or by, as
the case may be, any Approved Market on which the Common Stock is traded; or
(ii) a general moratorium on commercial banking activities in New York shall
have been declared by either Federal or New York State authorities.
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<PAGE>
(ix) "INVESTMENT AGREEMENT" means that certain Series
C Convertible Preferred Stock Purchase Agreement dated February 4, 2000 between
the Company and the initial holders of the Preferred Shares.
(x) "ISSUANCE DATE" means, with respect to each
Preferred Share, the date of issuance of the applicable Preferred Share.
(xi) "LIQUIDATION VALUE" means, on a per share basis,
the sum of (A) the Stated Value, plus (B) unpaid Default Interest (as defined
herein) through the date of determination, plus (C) any accrued dividends.
(xii) "NOTICE OF REDEMPTION" means any written notice
by a holder of Preferred Shares with respect to such holder's redemption of any
such shares pursuant to the provisions of this Amendment.
(xiii) "PERMITTED TRANSACTION" means (I) transactions
closed before 365 days after the Closing Date (as defined in the Investment
Agreement) between the Company and (x) MCI WorldCom, Inc. and WorldCom Network
Services, Inc.; (y) Triarc Companies, Inc.; or (z) Foothill Capital Corporation,
and/or Messrs. Peltz, May and Packer, or any affiliate of any of them; (II)
strategic investments in the Company or a subsidiary by an industry joint
venture partner, industry supplier, or customer thereof; and (III) a public or
private secondary offering with net proceeds to the Company of at least $20
million.
(xiv) "REGISTRATION STATEMENT" means the registration
statement covering the resale of the shares of Common Stock issuable upon
conversion or exercise of the Preferred Shares and Warrants (as defined in the
Investment Agreement) and required to be filed by the Company pursuant the
Registration Rights Agreement (as defined below.
(xv) "REGISTRATION RIGHTS AGREEMENT" means the
Registration Rights Agreement dated February 4, 2000 between the Company and the
Investors referred to as parties therein.
(xvi) "STATED VALUE" means $3,000.00.
(xvii) "TRADING DAY" shall mean any day in which the
Nasdaq Market or other Approved Market on which the Common Stock is then listed
or quoted is open for trading; PROVIDED, HOWEVER, that in the event that the
Common Stock is not listed or quoted on an Approved Market, then Trading Day
shall mean any weekday (except any day which shall be a federal legal holiday or
a day on which banking institutions in the State of New York are authorized or
required by law or other governmental action to close).
(xviii) "TRADING PRICE" means, for any security as of
any date, the trading price for such security on the Nasdaq National Market as
reported by Bloomberg or, if the Nasdaq National Market is not the principal
trading market for such security, the trading price of such security on the
Approved Market where such security is listed or
5
<PAGE>
traded as reported by Bloomberg, or if the foregoing do not apply, the trading
price of such security in the over-the-counter market on the electronic bulletin
board for such security as reported by Bloomberg, or, if no trading price is
reported for such security by Bloomberg, the trading price of such security that
is listed by Bloomberg, or, if no trading price is reported for such security by
Bloomberg, the average of the trading prices of any market makers for such
security as reported in the "pink sheets" by the National Quotation Bureau, Inc.
If the Trading Price cannot be calculated for such security on such date on any
of the foregoing bases, the Trading Price of such security on such date shall be
the fair market value as mutually determined by the Company and the holders of a
majority of the outstanding Preferred Shares (including for purposes of this
determination any Preferred Shares with respect to which the Trading Price is
being determined). If the Company and the holders of Preferred Shares are unable
to agree upon the fair market value of the Common Stock, then such dispute shall
be resolved pursuant to Section 3(e)(iii). (All such determinations are to be
appropriately adjusted for any stock dividend, stock split or other similar
transaction during any period for which the Trading Price is being determined).
(xix) "TRANSACTION DOCUMENT," individually, and
"TRANSACTION DOCUMENTS," collectively, shall have the meaning attributable to
such term by the Investment Agreement.
OTHER DEFINITIONS. Each of the following terms is defined in the
Section opposite the Section opposite such term:
DEFINED TERM SECTION
---------------------------------------- ---------------
ACT 3(f)(i)
AMENDMENT Preamble
BLOOMBERG 3(b)(iv)
CALL PRICE 3(f)(ii)
CAP ALLOCATION AMOUNT 12
COMMON STOCK 3(a)
COMPANY Preamble
COMPANY REDEMPTION 3(f)(iii)
COMPANY REDEMPTION PRICE 3(f)(i)
CONVERSION BENEFIT 4(b)
CONVERSION DATE 3(e)(i)
CONVERSION NOTICE 3(e)(i)
CONVERSION RATE 3(b)
DEFAULT INTEREST 4(g)
6
<PAGE>
DEFICIENCY 5(a)(ii)
DIVIDEND DATE 2
DIVIDENDS 2
EQUITY SALE 3(c)(i)
EXCHANGE CAP 12
EXCHANGEABLE SECURITIES 3(c)(i)(B)
FBCA Preamble
FIRST COMPANY REDEMPTION 3(f)(i)
INITIAL CONVERSION PRICE 3(b)(iii)
MAJOR TRANSACTION 4(c)
MAJOR TRANSACTION REDEMPTION PRICE 4(a)
MATERIAL ADVERSE EFFECT 4(d)(v)
MATURITY DATE 3(g)
NOTICE OF MAJOR TRANSACTION 4(e)
NOTICE OF REDEMPTION UPON MAJOR
TRANSACTION 4(e)
NOTICE OF REDEMPTION UPON TRIGGERING EVENT 4(f)
NOTICE OF TRIGGERING EVENT 4(f)
ORGANIC CHANGE 3(c)(iv)
PARI PASSU SHARES 9
PERSON 3(c)(iv)
PREFERRED FUNDS 9
PREFERRED SHARES 1
PREFERRED STOCK CERTIFICATE 3(e)(i)
PURCHASE RIGHTS 3(d)
PURCHASERS 12
REDEMPTION PRICE 4(b)
REDUCED PRICE 3(c)(i)
REGISTRABLE SECURITIES 4(d)(ii)
REGISTRATION DEADLINE 3(c)(vii)
RESET DATE 3(b)(ii)
7
<PAGE>
RESTRICTED OWNERSHIP PERCENTAGE 3(a)
SECOND COMPANY REDEMPTION 3(f)(iii)
SUSPENSION GRACE PERIOD 3(g)
TRANSFER AGENT 3(e)(i)
TRIGGERING EVENT 4(d)
TRIGGERING EVENT REDEMPTION PRICE 4(b)
VARIABLE NOTICE 3(c)(iii)
VARIABLE PRICE 3(c)(iii)
VARIABLE PRICE ELECTION NOTICE 3(c)(iii)
VOID OPTIONAL REDEMPTION NOTICE 4(g)
WARRANTS 3(b)(xiii)
(c) ADJUSTMENT TO CONVERSION PRICE - DILUTION AND OTHER
EVENTS. In order to prevent dilution of the rights granted under this Amendment,
the Conversion Price will be subject to adjustment from time to time as provided
in this Section 3(c).
(i) ADJUSTMENT OF CONVERSION PRICE FOR CERTAIN
ISSUANCES OF SECURITIES. (A) Notwithstanding anything else herein to the
contrary, if at any time during the period ending 12 months after the Closing
Date the Company issues or sells Common Stock or securities convertible into,
exercisable for, or exchangeable for, Common Stock (other than shares or options
issued (x) pursuant to the Corporation's employee, director or consultant stock
option plans or employee stock purchase plan currently in force; or (y) as
consideration for the acquisition or development of other entities within the
same industry as the Corporation, or otherwise issued in connection with
strategic acquisitions or alliances with strategic business partners, as
approved by the Board of Directors of the Corporation) (an "EQUITY SALE"), then,
if the effective or maximum sales price of the Common Stock or the Common Stock
into which such securities are convertible with respect to such transaction
(including the effective or maximum conversion, exercise or exchange price) is
less than the Conversion Price, as applicable at such time (the "REDUCED
PRICE"), the Conversion Price thereafter shall be reduced (and in no event
thereby increased) to equal such Reduced Price. If at any time when any
Preferred Shares are outstanding, whether during or after the 12-month period
referred to in the preceding sentence, the Corporation effects an Equity Sale at
a Reduced Price that is below the Closing Bid Price on the day any such Common
Stock or convertible securities that are part of such Equity Sale are issued or
sold, the Conversion Price thereafter shall be (unless any prior adjustment
provided pursuant to the preceding sentence is made) reduced (and in no event
thereby increased) by multiplying such Conversion Price by a fraction, (I) the
numerator of which shall be an amount equal to
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the sum of (1) the number of shares of Common Stock outstanding immediately
prior to the Equity Sale multiplied by the then prevailing Closing Bid Price,
and (2) the aggregate consideration received for the Equity Sale, and (II) the
denominator of which shall be the number of shares of Common Stock outstanding
immediately after the Equity Sale multiplied by the Closing Bid Price. Any
adjustment to the Conversion Price pursuant to this paragraph shall be
calculated after first taking into account all other applicable adjustments
under this Section 3(c).
(B) For the purposes of the foregoing
adjustment, in the case of the issuance of any convertible or exchangeable
securities, warrants, options or other rights to subscribe or exchange for or to
purchase shares of Common Stock ("EXCHANGEABLE SECURITIES"), the maximum number
of shares of Common Stock issuable upon exercise, conversion or exchange of such
Exchangeable Securities shall be deemed to be outstanding, PROVIDED that no
further adjustment shall be made upon the actual issuance of Common Stock upon
exercise, exchange or conversion of such Exchangeable Securities.
(ii) ADJUSTMENT OF CONVERSION PRICE UPON SUBDIVISION
OR COMBINATION OF COMMON STOCK. If the Company at any time subdivides (by any
stock split, stock, dividend, recapitalization or otherwise) one or more classes
of its outstanding shares of Common Stock into a greater number of shares, the
Conversion Price in effect immediately prior to such subdivision will be
proportionately reduced. If the Company at any time combines (by combination,
reverse stock split or otherwise) one or more classes of its outstanding shares
of Common Stock into a smaller number of shares, the Conversion Price in effect
immediately prior to such combination will be proportionately increased.
(iii) ADJUSTMENT OF CONVERSION PRICE UPON ISSUANCE OF
CONVERTIBLE SECURITIES. If the Company in any manner issues or sells convertible
securities that are convertible into or exchangeable for Common Stock at a price
which varies with the market price of the Common Stock (the formulation for such
variable price being herein referred to as, the "VARIABLE PRICE"), the Company
shall provide written notice thereof via facsimile and overnight courier to each
holder of the Preferred Shares ("VARIABLE NOTICE") on the date of issuance of
such convertible securities. If the holders of Preferred Shares representing at
least two-thirds of the Preferred Shares then outstanding provide written notice
via facsimile and overnight courier (the "VARIABLE PRICE ELECTION NOTICE") to
the Company within five business Trading Days of receiving a Variable Notice
that such holders desire to replace the Conversion Price then in effect with the
Variable Price described in such Variable Notice, then from and after the date
of the Company's receipt of the Variable Price Election Notice the Conversion
Price as to all outstanding Preferred Shares will automatically be replaced with
the Variable Price (together with such modifications to this Amendment as may be
required to give full effect to the substitution of the Variable Price for the
Conversion Price). A holder's delivery of a Variable Price Election Notice shall
serve as the consent required to amend this Amendment pursuant to Section 13
below. In the event that a holder delivers a Conversion Notice at any time after
the Company's issuance of convertible securities with a Variable Price but
before such holder's receipt of the Company's Variable Notice, then such holder
shall have the option by written notice to the Company either to rescind such
Conversion Notice or to
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<PAGE>
have the Conversion Price be equal to such Variable Price for the conversion
effected by such Conversion Notice.
(iv) REORGANIZATION, RECLASSIFICATION, CONSOLIDATION,
MERGER OR SALE. Any recapitalization, reorganization, reclassification,
consolidation, merger or sale of all or substantially all of the Company's
assets to another Person (as defined below) or other transaction which is
effected in such a way that holders of Common Stock are entitled to receive
(either directly or upon subsequent liquidation) stock, securities or assets
with respect to or in exchange for Common Stock is referred to herein as
"ORGANIC CHANGE." Prior to the consummation of any Organic Change, the Company
will make appropriate provision (in form and substance reasonably satisfactory
to the holders of a majority of the Preferred Shares then outstanding) to ensure
that each of the holders of the Preferred Shares will thereafter have the right
to acquire and receive in lieu of or in addition to (as the case may be) the
shares of Common Stock otherwise acquirable and receivable upon the conversion
of such holder's Preferred Shares, such shares of stock, securities or assets
that would have been issued or payable in such Organic Change with respect to or
in exchange for the number of shares of Common Stock which would have been
acquirable and receivable upon the conversion of such holder's Preferred Shares
had such Organic Change not taken place (without taking into account any
limitations or restrictions on the timing or amount of conversions). In any
case, the Company will make appropriate provision (in form and substance
reasonably satisfactory to the holders of a majority of the Preferred Shares
then outstanding) with respect to such holders' rights and interests to ensure
that the provisions of this Section 3(c) and Section 3(d) will thereafter be
applicable to the Preferred Shares (including, in the case of any such
consolidation, merger or sale in which the successor entity or purchasing entity
is other than the Company, an immediate adjustment of the Conversion Price to
reflect the value for the Common Stock reflected by the terms of such
consolidation, merger or sale, and if the value so reflected is less than the
Conversion Price in effect immediately prior to such consolidation, merger or
sale to reflect the price of the common stock of the surviving entity and the
market in which such common stock is traded). The Company will not effect any
such consolidation, merger or sale, unless prior to the consummation thereof,
the successor entity (if other than the Company) resulting from consolidation or
merger or the entity purchasing such assets assumes, by written instrument (in
form and substance satisfactory to the holders of a majority of the Preferred
Shares then outstanding), the obligation to deliver to each holder of Preferred
Shares such shares of stock, securities or assets as, in accordance with the
foregoing provisions, such holder may be entitled to acquire. "PERSON" shall
mean an individual, a limited liability company, a partnership, a joint venture,
a corporation, a trust, an unincorporated organization and a government or any
department or agency thereof.
(v) CERTAIN EVENTS. If any event occurs of the type
contemplated by the provisions of this Section 3(c) but not expressly provided
for by such provisions, then the Company's Board of Directors will make an
appropriate adjustment in the Conversion Price so as to protect the rights of
the holders of the Preferred Shares; PROVIDED, HOWEVER, that no such adjustment
will increase the Conversion Price as otherwise determined pursuant to this
Section 3(c).
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(vi) NOTICES
(A) Immediately upon any adjustment of the
Conversion Price, the Company will give written notice thereof to each holder of
the Preferred Shares, setting forth in reasonable detail and certifying the
calculation of such adjustment.
(B) The Company will give written notice to each
holder of the Preferred Shares at least 20 days prior to the date on which the
Company closes its books or takes a record (I) with respect to any pro rata
subscription offer to holders of Common Stock, or (II) for determining rights to
vote with respect to any Organic Change, dissolution or liquidation and in no
event shall such notice be provided to such holder prior to such information
being made known to the public.
(C) The Company will also give written notice to
each holder of the Preferred Shares at least 20 days prior to the date on which
any Organic Change, dissolution or liquidation will take place and in no event
shall such notice be provided to such holder prior to such information being
made known to the public.
(vii) Subject to the redemption rights of holders
under Section 4(b) and (d)(i) hereof, in the event the Registration Statement
has not been declared effective by the Securities and Exchange Commission on or
before the Registration Deadline (as defined in the Registration Rights
Agreement), then the Conversion Price shall be reduced by 10% on the day
following the Registration Deadline and shall be further reduced by an
additional 1% on the last day of each successive 30-day period after the
Registration Deadline until the Registration Statement has been declared
effective. For example, if the Registration Statement does not become effective
until 70 days from the Registration Deadline, the Conversion Price during days 1
through 30 shall be equal to 90% of the Conversion Price in effect on the
Registration Deadline (the "first Conversion Price"). The Conversion Price from
day 31 through day 60 shall be equal to 89% of the first Conversion Price; and
from day 61 and thereafter the Conversion Price shall be equal to 88% of the
first Conversion Price. In each case, the Conversion Price as so under this
Section 3(c)(vii) shall at all times be in addition to all other adjustments and
resets as set forth in Sections 3(c) (i) through (v) hereof.
(d) PURCHASE RIGHTS. In addition to any adjustments of the
Conversion Price pursuant to Section 3(c), if at any time after the Issuance
Date the Company grants, issues or sells any Options, Convertible Securities or
rights to purchase stock, warrants, securities or other property pro rata to the
record holders of any class of Common Stock (the "PURCHASE RIGHTS"), then the
holders of the Preferred Shares will be entitled to acquire, upon the terms
applicable to such Purchase Rights, the aggregate Purchase Rights which such
holder could have acquired if such holder had held the number of shares of
Common Stock acquirable upon complete conversion of the Preferred Shares
(without taking into account any limitations or restrictions on the timing or
amount of conversions) immediately before the date on which a record is taken
for the grant, issuance or sale of such Purchase Rights, or, if no such record
is taken, the date as of which the record holders of the Common Stock are to be
determined for the grant, issue or sale of such Purchase Rights.
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(e) MECHANICS OF CONVERSION. Subject to the Company's
inability to fully satisfy its obligations under a Conversion Notice (as defined
below) as provided for in Section 5:
(i) HOLDERS' DELIVERY REQUIREMENTS. To convert
Preferred Shares into full shares of Common Stock on any date (the "CONVERSION
DATE"), the holder thereof shall (A) transmit by facsimile (or otherwise
deliver), for receipt on or prior to 11:59 p.m. Eastern Time, on such date, a
copy of a fully executed notice of conversion in the form attached hereto as
EXHIBIT I (the "CONVERSION NOTICE") to the Company and its designated transfer
agent (the "TRANSFER AGENT"), and (B) surrender to a common carrier, for
delivery to the Company or the Transfer Agent as soon as practicable following
such date, the original certificate(s) representing the Preferred Shares being
converted (or an indemnification undertaking with respect to such shares in the
case of their loss, theft or destruction) (the "PREFERRED STOCK CERTIFICATE(S)")
and the originally executed Conversion Notice.
(ii) COMPANY'S RESPONSE. Upon receipt by the Company
of a facsimile copy of a Conversion Notice, the Company shall as soon as
practicable, but in any event not later than the next Trading Day, send, via
facsimile, a confirmation of receipt of such Conversion Notice to such holder.
Upon receipt by the Company or the Transfer Agent of the Preferred Stock
Certificate(s) to be converted pursuant to a Conversion Notice, together with
the originally executed Conversion Notice, the Company or the Transfer Agent (as
applicable) shall, on the next Trading Day following the date of such receipt,
(I) issue and surrender to a common carrier for overnight delivery to the
address specified in the Conversion Notice, a certificate, registered in the
name of the holder or its designee, for the number of shares of Common Stock to
which the holder shall be entitled, or (II) credit such aggregate number of
shares of Common Stock to which the holder shall be entitled to the holder's or
its designee's balance account with The Depository Trust Company. If the number
of Preferred Shares represented by the Preferred Stock Certificate(s) submitted
for conversion is greater than the number of Preferred Shares being converted,
then the Company or Transfer Agent, as the case may be, shall, as soon as
practicable and in no event later than two Trading Days after receipt of the
Preferred Stock Certificate(s) and at its own expense, issue and deliver to the
holder a new Preferred Stock Certificate representing the number of Preferred
Shares not converted.
(iii) DISPUTE RESOLUTION. In the case of a dispute as
to the determination of the Conversion Price or the Trading Price or the
arithmetic calculation of the Conversion Rate, the Company shall promptly issue
to the holder the number of shares of Common Stock that is not disputed and
shall submit the disputed determinations or arithmetic calculations to the
holder via facsimile within one Trading Day of receipt of such holder's
Conversion Notice. If such holder and the Company are unable to agree upon the
determination of the Conversion Price or the Trading Price or the arithmetic
calculation of the Conversion Rate within one Trading Day of such disputed
determination or arithmetic calculation being submitted to the holder, then the
Company shall within one Trading Day submit via facsimile (A) the disputed
determination of the Conversion Price to an independent, reputable investment
bank, or
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(B) the disputed arithmetic calculation of the conversion Rate to its
independent, outside accountant. The Company shall cause the investment bank or
the accountant, as the case may be, to perform the determinations or
calculations and notify the Company and the holder of the results no later than
two Trading Days from the time it receives the disputed determinations or
calculations. Such investment bank's or accountant's determination or
calculation, as the case may be, shall be binding upon all parties absent
manifest error.
(iv) RECORD HOLDER. The person or persons entitled to
receive the shares of Common Stock issuable upon a conversion of Preferred
Shares shall be treated for all purposes as the record holder or holders of such
shares of Common Stock on the Conversion Date.
(v) COMPANY'S FAILURE TO TIMELY CONVERT. If within
five Trading Days after the Company's or the Transfer Agent's receipt of the
Preferred Stock Certificates to be converted and the Conversion Notice the
Company shall fail (I) to issue a certificate for the number of shares of Common
Stock to which a holder is entitled or to credit the holder's balance account
with The Depository Trust Company for such number of shares of Common Stock to
which the holder is entitled upon such holder's conversion of the Preferred
Shares, or (II) to issue a new Preferred Stock Certificate representing the
number of Preferred Shares to which such holder is entitled, pursuant to Section
3(e)(ii), in addition to all other available remedies which such holder may
pursue hereunder and under the Investment Agreement (including indemnification
pursuant thereto), the Company shall pay additional damages to such holder on
each day after such fifth Trading Day that such conversion or delivery of such
Preferred Stock Certificates, as the case may be, is not timely effected in an
amount equal to 0.5% of the product of (A) the sum of the number of shares of
Common Stock not issued to the holder on a timely basis pursuant to Section
3(e)(ii) and to which such holder is entitled and, in the event the Company has
failed to deliver a Preferred Stock Certificate to the holder on a timely basis
pursuant to Section 3(e)(ii), the number of shares of Common Stock issuable upon
conversion of the Preferred Shares represented by such Preferred Stock
Certificate as of the last possible date which the Company could have issued
such Preferred Stock Certificate to such holder without violating Section
3(e)(ii); and (B) the Closing Bid Price of the Common Stock on the last possible
date which the Company could have issued such Common Stock and the Preferred
Stock Certificate, as the case may be, to such holder without violating Section
3(e)(ii).
(vi) PREMIUM PRICE REDEMPTION FOR CASH PAYMENT
DEFAULTS. In the event that the Company fails or refuses to pay any default
payment or honor any penalty or similar amounts when due, at any holder's option
and request by delivery of a Notice of Redemption, the Company shall purchase
all or a portion of the Preferred Shares, Common Shares and/or Warrant Shares
held by such holder (with any default payment penalty or similar amounts
accruing through the date of such purchase), within five Trading Days of such
request, at a purchase price equal to the greater of (1) 1.2 times the dollar
amount that is the product of (x) the number of shares so to be redeemed
pursuant to this clause, and (y) the Conversion Price as of the date of delivery
of the Notice of Redemption, or (2) the Conversion Benefit; PROVIDED that such
holder may revoke such request at any time prior to receipt of such payment of
such purchase price. Payment of
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the purchase price under this paragraph shall be made by the Company in
accordance with the procedures governing the payment of the Triggering Event
Redemption Price under Section 4(g) of this Amendment. Until such time as the
Company purchases such Preferred Shares at the request of such holder pursuant
to the two preceding sentences, at any holder's request and option the Company
shall as to such holder pay any accruing default payments penalty or similar
amounts by adding and including such amounts to the Liquidation Value instead of
in cash.
(vii) CONVERSION APPROVAL; BEST EFFORTS. If required,
the Company will use its Best Efforts to obtain promptly (and, in any event, on
or before the next annual stockholders meeting of the Company) shareholder
approval pursuant to Rule 4460(i) of the Nasdaq Stock Market Marketplace Rules
authorizing the issuance of all Common Shares and Warrant Shares issuable upon
the conversion of any Preferred Shares or the exercise of any Warrants
(including by calling a special meeting of such shareholders within ten days,
and holding such meeting within 45 days (PROVIDED that if the Trading Price
decreased by more than 20% over the preceding 30 days, then 45 shall be
increased to 60) of the date of any such attempted conversion) and having the
Company's Board of Directors recommend such approval in a proxy statement. If a
conversion by an Investor of any Preferred Shares in whole or in part for Common
Shares could result in the Company being delisted from the Nasdaq National
Market for issuing in excess of 20% of its outstanding Common Stock to the
holders without the approval of the Company's shareholders, and the Company
fails to seek or obtain Shareholder approval in accordance with the preceding
sentence, then the Company, upon the holder's request, must redeem any and all
Preferred Shares covered by the applicable Conversion Notice and any and all
Preferred Shares that would, if a Conversion Notice for all Preferred Shares
were then delivered, result in the Company being subject to such delisting, at a
price equal to 120% of the Liquidation Value.
(f) COMPANY REDEMPTION RIGHTS. The Company shall have the
right to redeem the Preferred Shares on the terms and conditions contained in
this Section 3(f).
(i) FIRST COMPANY REDEMPTION RIGHTS. Subject to the
restrictions and conditions contained in paragraphs (a) and (b) of this Section
3 and the exercise by any holder of its right to redeem Preferred Shares under
Section 4, commencing on the earlier of either 60 days after the Registration
Statement first becomes effective or December 31, 2000, the Company may, at its
option, from time to time, require all holders to redeem their Preferred Shares,
in whole or in part as specified by the Company (such redemption, a "FIRST
COMPANY REDEMPTION"), at the Company Redemption Price (as defined below)
pursuant to a Company Redemption Notice following the procedures set forth in
Section 3(f)(iv); PROVIDED, HOWEVER, that no First Company Redemption shall be
permitted unless: (A) the Closing Bid Price of the Common Stock is less than 70%
of the Closing Price for the ten consecutive Trading Days preceding the date of
such Company Redemption Notice, and (B) the Registration Statement has been
effective under the Securities Act of 1933, as amended (the "ACT"), for at least
60 consecutive days preceding the date of such Company Redemption Notice. A
First Company Redemption under this Section 3(f)(i) shall be effective upon the
close of business on the 15th Trading Day after the date that the Company
Redemption Notice is received by each holder. The "COMPANY REDEMPTION PRICE"
shall be the sum of (A) the Liquidation Value at the
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effective date of the First Company Redemption, plus (B) 10% of such Liquidation
Value for each whole or partial six-month period between the Closing Date and
the effective date of the First Company Redemption.
(ii) Commencing on the earlier of either 60 days
after the Registration Statement first becomes effective or December 31, 2000,
if the Closing Bid Price of the Common Stock is less than 70% of the Closing Bid
Price for any ten consecutive Trading Days ending subsequent to such 60th day
(each such Closing Bid Price, a "CALL PRICE"), and the Company is unable for any
reason to or elects not to exercise a First Company Redemption within five
Trading Days after the end of such ten consecutive Trading Day period then, the
Conversion Price shall immediately reset to equal the lower of (A) the average
Closing Bid Price for the ten consecutive Trading Days prior to the end of such
five Trading Day period, or (B) the lowest Call Price; and the Company shall
thereafter cease for the remainder of the time that any Preferred Share is
outstanding to be entitled to exercise a First Company Redemption. In no event
shall any reset of the Conversion Price under this Section 3(f)(ii) reduce the
Conversion Price to less than $4.00 (without taking into account any adjustments
to the Conversion Price under Section 3(c) hereof).
(iii) SECOND COMPANY REDEMPTION RIGHTS. Subject to
the restrictions and conditions contained in paragraph (a) of this Section 3 and
the exercise by any holder of its right to redeem Preferred Shares under Section
4, commencing after the Closing Date, the Company may, at its option, from time
to time, require all holders to redeem their Preferred Shares, in whole or in
part as specified by the Company (such redemption, a "SECOND COMPANY REDEMPTION"
and, collectively with a First Company Redemption, a "COMPANY REDEMPTION") at
the Company Redemption Price pursuant to a Company Redemption Notice following
the procedures set forth in Section 3(f)(iv); PROVIDED, HOWEVER, that no Second
Company Redemption shall be permitted during (A) the period ending 365 days
after the Closing Date or (B) any time from and after 366 days after the Closing
Date unless: (I) the Registration Statement has been effective under the Act for
at least 60 consecutive days preceding the date of such Company Redemption
Notice and (II) in the case of a Second Company Redemption during the period
specified in the preceding clause (A), the Closing Bid Price of the Common Stock
is equal to or greater than 170% of the Initial Conversion Price for the 20
consecutive Trading Days preceding the date of such Company Redemption Notice,
and in the case of a Second Company Redemption during the period specified in
the preceding clause (B), the Closing Bid Price of the Common Stock is equal to
or greater than 150% of the Initial Conversion Price for the 20 consecutive
Trading Days preceding the date of such Company Redemption Notice. A Second
Company Redemption shall be effective upon the close of business on the 15th
Trading Day after the date that the Company Redemption Notice is received by
each holder.
(iv) If the Company elects to make a Company
Redemption, the Company shall, within five Trading Days after the date the
Company first became eligible to elect any such Company Redemption, give a
Company Redemption Notice to the holders that it will require the holders to
redeem the Preferred Shares pursuant to this Section 3(f), subject to the
applicable terms and conditions of clauses (i) through (iii) of
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this Section 3(f) being satisfied. Any Company Redemption Notice must be given
by facsimile or by overnight courier to the holders. The Company Redemption
Notice shall be addressed to each such holder at the facsimile number or address
of such holder appearing on the books of the Company or given by such holder to
the Company for the purpose of notice. The Company Redemption Notice shall state
the number of Preferred Shares of each holder required to be redeemed and,
within not more than five Trading Days after the effective date of the Company
Redemption, such holder shall surrender to the Company at the place designated
in the Company Redemption Notice, or to an agent designated by the holder, such
holder's Preferred Stock Certificate(s) representing the shares so redeemed
against payment in cash of the applicable Company Redemption Price. If the
Registration Statement does not remain continuously effective during the period
commencing upon the delivery of the Company Redemption Notice and ending on the
date the Company Redemption is effective, the Company Redemption Notice with
respect to each holder shall be voidable at the option of such holder. If less
than all of the outstanding Preferred Shares are to be redeemed under this
Section 3(f), then the Company shall redeem a pro rata portion from each holder
according to the respective number of Preferred Shares held by such holder on
the date the Company Redemption is effective.
(g) MANDATORY CONVERSION AT MATURITY. If any Preferred Shares
remain outstanding on the Maturity Date (as defined below), then all such
Preferred Shares shall be converted as of such date in accordance with this
Section 3 as if the holders of such Preferred Shares had given the Conversion
Notice at the Maturity Date; PROVIDED, HOWEVER, that if a Triggering Event has
occurred and is continuing on the Maturity Date, then the Company shall, within
five Trading Days following the Maturity Date (unless otherwise notified in
writing by the holder of its request to have the Preferred Shares converted into
Common Stock), pay to each holder of Preferred Shares then outstanding, in
immediately available funds, an amount equal to the Triggering Event Redemption
Price (as defined below) as of the Maturity Date. All holders of Preferred
shares shall thereupon surrender all Preferred Stock Certificates, duly endorsed
for cancellation, to the Company or the Transfer Agent, provided that the
Company has complied with its obligations under this Section 3. "MATURITY DATE"
means the date which is five years after the Issuance Date, subject to extension
pursuant to Section 2(b)(vii) of the Registration Rights Agreement, which
extension shall include 1.5 days for each day in any Suspension Grace Period (as
defined in the Registration Rights Agreement).
(h) FRACTIONAL SHARES. The Company shall not issue any
fraction of a share of Common Stock upon any conversion. All shares of Common
Stock (including fractions thereof) issuable upon conversion of more than one
Preferred Share therefore shall be aggregated for purposes of determining
whether the conversion would result in the issuance of a fraction of a share of
Common Stock. If, after the aforementioned aggregation, the issuance would
result in the issuance of a fraction of a share of Common Stock, the Company
shall round such fraction of a share of Common Stock up or down to the nearest
whole share.
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(i) TAXES. The Company shall pay any and all taxes
which may be imposed upon it with respect to the issuance and delivery of shares
of Common Stock upon the conversion of the Preferred Shares.
(4) REDEMPTION AT OPTION OF HOLDERS.
(a) REDEMPTION OPTION UPON MAJOR TRANSACTION. In addition to
all other rights of the holders of Preferred Shares contained herein,
simultaneous with or after the occurrence of a Major Transaction (as defined
below), each holder of Preferred Shares shall have the right, at such holder's
option, to require the Company to redeem all or a portion of such holder's
Preferred Shares at a price per Preferred Share equal to 120% of the Liquidation
Value (the "MAJOR TRANSACTION REDEMPTION PRICE").
(b) REDEMPTION OPTION UPON TRIGGERING EVENT. In addition to
all other rights of the holders of Preferred Shares contained herein,
simultaneous with or after the occurrence of a Triggering Event (as defined
below), (i) the Company shall pay in cash to each holder Default Interest in an
amount equal to 3% of the Liquidation Value for the Preferred Shares held by
such holder for each 30-day period (prorated for any partial period) from and
after the expiration of the Suspension Grace Period; and (ii) at any time after
the 5th Trading Day following the expiration of the Suspension Grace Period,
each holder of Preferred Shares shall have the right, at such holder's option,
to require the Company to redeem all or a portion of such holder's Preferred
Shares at a price per Preferred Share (the "TRIGGERING EVENT REDEMPTION PRICE"
and, collectively with the Major Transaction Redemption Price, the "REDEMPTION
PRICE") equal to the greater of (i) 120% of the Liquidation Value; and (ii) the
product (such product, the "CONVERSION BENEFIT") of (A) the Conversion Rate on
the date of such holder's delivery of a Notice of Redemption Upon Triggering
Event (as defined in Section 4(f)), and (B) the greater of (I) the Closing Bid
Price on the Trading Day immediately preceding such Triggering Event or (II) the
Closing Bid Price on the date of the holder's delivery to the Company of a
Notice of Redemption Upon Triggering Event or, if such date of delivery is not a
Trading Day, the next Trading Day.
(c) "MAJOR TRANSACTION". A "MAJOR TRANSACTION" shall be deemed
to have occurred at such time as any of the following events:
(i) the consolidation, merger or other business
combination of the Company with or into another Person (other than (A) a
consolidation, merger or other business combination in which holders of the
Company's voting power immediately prior to the transaction continue after the
transaction to hold, directly or indirectly, the voting power of the surviving
entity or entities necessary to elect a majority of the members of the board of
directors (or their equivalent if other than a corporation) of such entity or
entities, or (B) pursuant to a migratory merger effected solely for the purpose
of changing the jurisdiction of incorporation of the Company);
(ii) the sale or transfer of all or substantially all
of the Company's assets; or
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(iii) a purchase, tender or exchange offer made to
and accepted by the holders of more than 30% of the outstanding shares of Common
Stock.
(d) "TRIGGERING EVENT". A "TRIGGERING EVENT" shall be deemed
to have occurred at such time as any of the following events:
(i) the failure of the Registration Statement to be
declared effective by the SEC on or prior to the Registration Deadline;
(ii) at any time following the Closing Date while the
Registration Statement is required to be maintained effective pursuant to the
terms of the Registration Rights Agreement, the effectiveness of the
Registration Statement is suspended for any reason (including, without
limitation by reason of any suspension or stop order with respect to the
Registration Statement or the fact that an event has occurred as a result of
which the prospectus (including any supplements thereto) included in such
Registration Statement then in effect includes an untrue statement of material
fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing), except for a period not exceeding the Suspension
Grace Period, and is unavailable to the holder of the Preferred Shares for sale
of the Registrable Securities (as defined in the Registration Rights Agreement)
in accordance with the terms of the Registration Rights Agreement;
(iii) delisting of the Common Stock from the Nasdaq
National Market (or any other Approved Market where they are currently listed)
at any time following the Closing Date for longer than the Suspension Grace
Period; provided that the delisting of the Common Stock from one Approved Market
concurrently with the listing of the Common Stock on another Approved Market
shall not be deemed a Triggering Event;
(iv) the Company's notice to any holder of Preferred
Shares, including by way of public announcement, at any time of its intention
not to comply with proper requests for conversion of any Preferred Shares into
shares of Common Stock, including due to any of the reasons set forth in Section
5(a) below, or the Company's failure to deliver Common Stock within ten Trading
Days of the Conversion Date; or
(v) any representation or warranty by the Company was
not true and correct at the time made (including the Issuance Date) or the
Company breaches any covenant or other term or condition of the Investment
Agreement, the Registration Rights Agreement, this Amendment, or any other
agreement, document, certificate or other instrument delivered in connection
with the transactions contemplated thereby or hereby, except (1) to the extent
that such breach would not have a Material Adverse Effect (as defined in the
Investment Agreement), and (2) in the case of a breach of a covenant which is
curable, such breach continues for a period of less than ten Trading Days.
(e) MECHANICS OF REDEMPTION AT OPTION OF HOLDER UPON MAJOR
TRANSACTION. No sooner than 15 Trading Days nor later than ten Trading Days
prior to the consummation of a Major Transaction, but not prior to the public
announcement of such
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Major Transaction, the Company shall deliver written notice thereof via
facsimile and overnight courier (a "NOTICE OF MAJOR TRANSACTION") to each holder
of Preferred Shares. At any time after receipt of a Notice of Major Transaction
(or, in the event a Notice of Major Transaction is not delivered at least ten
Trading Days prior to a Major Transaction, at any time on or after the date
which is ten Trading Days prior to a Major Transaction), any holder of the
Preferred Shares then outstanding may require the Company to redeem all or a
portion of the holder's Preferred Shares, which redemption shall be effective
concurrent with the consummation of the Major Transaction, then outstanding by
delivering written notice thereof via facsimile and overnight courier (a "NOTICE
OF REDEMPTION UPON MAJOR TRANSACTION") to the Company, which Notice of
Redemption Upon Major Transaction shall indicate (i) the number of Preferred
Shares that such holder is submitting for redemption, and (ii) the applicable
Major Transaction Redemption Price, as calculated pursuant to Section 4(a).
(f) MECHANICS OF REDEMPTION AT OPTION OF HOLDER UPON
TRIGGERING EVENT. Within one Trading Day after the occurrence of a Triggering
Event, the Company shall deliver written notice thereof via facsimile and
overnight courier ("NOTICE OF TRIGGERING EVENT") to each holder of Preferred
Shares. At any time after the earlier of a holder's receipt of a Notice of
Triggering Event and such holder becoming aware of a Triggering Event, any
holder of Preferred Shares then outstanding may require the Company to redeem
all or a portion of the holder's Preferred Shares then outstanding by delivering
written notice thereof via facsimile and overnight courier (a "NOTICE OF
REDEMPTION UPON TRIGGERING EVENT") to the Company, which Notice of Redemption
Upon Triggering Event shall indicate (i) the number of Preferred Shares that
such holder is submitting for redemption, and (ii) the applicable Triggering
Event Redemption Price, as calculated pursuant to Section 4(b).
(g) PAYMENT OF REDEMPTION PRICE. Upon the Company's receipt of
a Notice(s) of Redemption at Option of Holder Upon Triggering Event or a
Notice(s) of Redemption at Option of Holder Upon Major Transaction from any
holder of Preferred Shares, the Company shall immediately notify each holder of
Preferred Shares by facsimile of the Company's receipt of such Notice(s) or
Redemption at Option of Holder Upon Triggering Event or Notice(s) of Redemption
at Option of Holder Upon Major Transaction and each holder which has sent such a
notice shall promptly submit to the Company or its Transfer Agent such holder's
Preferred Stock Certificate(s) which such holder has elected to have redeemed.
The Company shall deliver the applicable Triggering Event Redemption Price, in
the case of a redemption pursuant to Section 4(f), to such holder within five
Trading Days after the Company's receipt of a Notice of Redemption Upon
Triggering Event and, in the case of a redemption pursuant to Section 4(e), the
Company shall deliver the applicable Major Transaction Redemption Price
immediately prior to the consummation of the Major Transaction; PROVIDED that a
holder's Preferred Stock Certificates shall have been so delivered to the
Company; and PROVIDED, FURTHER, that if the Company is unable to redeem all of
the Preferred Shares to be redeemed, the Company shall redeem an amount from
each holder of Preferred Shares being redeemed equal to such holder's pro-rata
amount (based on the number of Preferred Shares held by such holder relative to
the number of Preferred Shares outstanding) of all Preferred Shares being
redeemed. If the Company shall fail to redeem
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all of the Preferred Shares submitted for redemption, in addition to any remedy
such holder of Preferred Shares may have under this Amendment, the Investment
Agreement and the Registration Rights Agreement, the applicable Redemption Price
payable in respect of such unredeemed Preferred Shares shall bear default
interest ("DEFAULT INTEREST") at the rate of 2% per month (pro rated for partial
months) until paid in full. Until the Company pays such unpaid applicable
Redemption Price in full to a holder of Preferred Shares submitted for
redemption, such holder shall have the option, in lieu of redemption, to require
the Company to promptly return to such holder(s) all of the Preferred Shares
that were submitted for redemption by such holder(s) under this Section 4 and
for which the applicable Redemption Price has not been paid, by sending written
notice thereof to the Company via facsimile (the "VOID OPTIONAL REDEMPTION
NOTICE"). Upon the Company's receipt of such Void Optional Redemption Notice(s)
and prior to payment of the full applicable Redemption Price to such holder, (i)
the Notice(s) of Redemption at Option of Holder Upon Triggering Event or the
Notice(s) of Redemption at Option of Holder Upon Major Transaction, as the case
may be, shall be null and void with respect to those Preferred Shares submitted
for the redemption and for which the applicable Redemption Price has not been
paid, (ii) the Company shall immediately return any Preferred Shares submitted
to the Company by each holder for redemption under this Section 4(g) and for
which the applicable Redemption Price has not been paid, and (iii) the
Conversion Price of such returned Preferred Shares shall be adjusted to the
lesser of (A) the Conversion Price as in effect on the date on which the Void
Optional Redemption Notice(s) is delivered to the Company and (B) the lowest
Closing Bid Price during the period beginning on the date on which the Notice(s)
of Redemption of Option of Holder Upon Major Transaction or the Notice(s) of
Redemption at Option of Holder Upon Triggering Event, as the case may be, is
delivered to the Company; PROVIDED that no adjustment shall be made if such
adjustment would result in an increase in the Conversion Price then in effect.
Notwithstanding the foregoing, in the event of a dispute as to the determination
of the Closing Bid Price or the arithmetic calculation of the Redemption Price,
such dispute shall be resolved pursuant to Section 3(e)(iii) above. A holder's
delivery of a Void Optional Redemption Notice and exercise of its rights
following such notice shall not affect the Company's obligations to make any
payments which have accrued prior to the date of such notice. Payments provided
for in this Section 4 shall have priority to payments to other stockholders in
connection with a Major Transaction.
(5) CONVERSION DEFICIENCY; PREMIUM PRICE REDEMPTION FOR CONVERSION
DEFICIENCY. In the event that the Company does not have a sufficient number of
shares of Common Stock registered for resale under the Registration Statement
(or which are exempt from the registration requirements under Act pursuant to
Rule 144(k) under the Act) or is otherwise unable or unwilling to issue such
Common Shares (including without limitation by reason of the limit described in
Section 10 of the Registration Rights Agreement) in accordance with the terms of
this Amendment for any reason after receipt of a Conversion Notice, then:
(a) (i) The Company shall pay in cash to each holder an amount
equal to 3% of the Liquidation Value for the Preferred Shares held by
such holder for each
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30-day period (or portion thereof) that the Company fails or refuses to
issue Common Shares in accordance with the terms of this Amendment; and
(ii) At any time five days after the commencement of
the running of the first 30-day period described above in clause (i) of this
paragraph (a), at the request of any holder pursuant to a Notice of Redemption,
the Company promptly (1) shall purchase from such holder, at a purchase price
equal to the Triggering Event Redemption Price as of that Conversion Date, the
number of Preferred Shares equal to such holder's pro rata share of the
"Deficiency", as such term is defined below, if the failure to issue Common
Shares results from the lack of a sufficient number thereof and (2) shall
purchase all (or such portion as such holder may elect) of such holder's
Preferred Shares at such Triggering Event Redemption Price if the failure to
issue Common Shares results from any other cause. The "DEFICIENCY" shall be
equal to the number of Preferred Shares that would not be able to be converted
for Common Shares, due to an insufficient number of Common Shares available, if
all the outstanding Preferred Shares were submitted for conversion at the
Conversion Price set forth herein as of the date such Deficiency is determined.
Any request by a holder pursuant to this Section 5(a)(ii) shall be revocable by
that holder at any time prior to its receipt of the Triggering Event Redemption
Price.
(b) PRO-RATA CONVERSION AND REDEMPTION. In the event the
Company receives a Conversion Notice or Notice of Redemption (including
a Notice of Redemption Upon Major Transaction or Notice of Redemption
Upon Triggering Event) from more than one holder of Preferred Shares on
the same day and the Company can convert and/or redeem some, but not
all, of the Preferred Shares pursuant to this Section 5, the Company
shall convert and/or redeem from each holder of Preferred Shares
electing to have Preferred Shares converted and/or redeemed at such
time an amount equal to such holder's pro-rata amount (based on the
number of Preferred Shares held by such holder relative to the number
of Preferred Shares outstanding) of all Preferred Shares being
converted and redeemed at such time.
(6) REISSUANCE OF CERTIFICATES. In the event of a conversion or
redemption pursuant to this Amendment of less than all of the Preferred Shares
represented by a particular Preferred Stock Certificate, the Company shall
promptly cause to be issued and delivered to the holder of such Preferred Shares
a Preferred Stock Certificate representing the remaining Preferred Shares which
have not been so converted or redeemed.
(7) RESERVATION OF SHARES. The Company shall, so long as any of the
Preferred Shares are outstanding, reserve and keep available out of its
authorized and unissued Common Stock, solely for the purpose of effecting the
conversion of the Preferred Shares, such number of shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all of the
Preferred Shares then outstanding (without regard to any limitations on
conversions); PROVIDED that the number of shares of Common Stock so reserved
shall at no time be less than the number of shares of Common Stock for which the
Preferred Shares are at any time convertible, assuming a Conversion Price of
$4.00. The initial number of shares of Common Stock reserved for conversions of
the Preferred Shares and each increase in the number of shares so reserved shall
be allocated
21
<PAGE>
pro rata among the holders of the Preferred Shares based on the number of
Preferred Shares held by each holder at the time of issuance of the Preferred
Shares or increase in the number of reserved shares, as the case may be. In the
event a holder shall sell or otherwise transfer any of such holder's Preferred
Shares, each transferee shall be allocated a pro rata portion of the number of
reserved shares of Common Shares reserved for such transferor. Any shares of
Common Stock reserved and which remain allocated to any person or entity which
does not hold any Preferred Shares shall be allocated to the remaining holders
of Preferred Shares, pro rata based on the number of Preferred Shares then held
by such holder.
(8) VOTING RIGHTS. Holders of Preferred Shares shall have no voting
rights, except as required by law, including, but not limited to, the FBCA, and
as expressly provided in this Amendment.
(9) LIQUIDATION, DISSOLUTION, WINDING-UP. In the event of any voluntary
or involuntary liquidation, dissolution or winding up of the Company, the
holders of the Preferred Shares shall be entitled to receive in cash out of the
assets of the Company, whether from capital or from earnings available for
distribution to its stockholders (the "PREFERRED FUNDS"), before any amount
shall be paid to the holders of any of the capital stock of the Company of any
class junior in rank to the Preferred Shares in respect of the preferences as to
the distributions and payments on the liquidation, dissolution and winding up of
the Company, an amount per Preferred Share equal to the Liquidation Value;
PROVIDED that, if the Preferred Funds are insufficient to pay the full amount
due to the holders of Preferred Shares and holders of shares of other classes or
series of preferred stock of the Company that are of equal rank with the
Preferred Shares as to payments of Preferred Funds (the "PARI PASSU SHARES"),
then each holder of Preferred Shares and Pari Passu Shares shall receive a
percentage of the Preferred Funds equal to the full amount of Preferred Funds
payable to such holder as a liquidation preference, in accordance with their
respective Articles of Amendment, as a percentage of the full amount of
Preferred Funds payable to all holders of Preferred Shares and Pari Passu
Shares. The purchase or redemption by the Company of stock of any class, in any
manner permitted by law, shall not, for the purposes hereof, be regarded as a
liquidation, dissolution or winding up of the Company. Neither the consolidation
or merger of the Company with or into any other Person, nor the sale or transfer
by the Company of less than substantially all of its assets, shall, for the
purposes hereof, be deemed to be a liquidation, dissolution or winding up of the
Company. No holder of Preferred Shares shall be entitled to receive any amounts
with respect thereto upon any liquidation, dissolution or winding up of the
Company other than the amounts provided for herein; PROVIDED that a holder of
Preferred Shares shall be entitled to all amounts previously accrued with
respect to amounts owed hereunder.
(10) PREFERRED RANK; PARTICIPATION. All shares of Common Stock shall be
of junior rank to all Preferred Shares in respect to the preferences as to
distributions and payments upon the liquidation, dissolution and winding up of
the Company. The rights of the shares of Common Stock shall be subject to the
preferences and relative rights of the Preferred Shares. Without the prior
express written consent of the holders of not less than a majority of the
then-outstanding Preferred Shares, the Company shall not hereafter
22
<PAGE>
authorize or issue additional or other capital stock that is of senior rank or
PARI PASSU rank to the Preferred Shares in respect of the preferences as to
distributions and payments upon the liquidation, dissolution and winding up of
the Company; PROVIDED, HOWEVER, that the Company may issue additional or other
capital stock that is of senior rank or PARI PASSU rank with the Preferred
Shares in connection with (a) a Permitted Transaction; or (b) the capitalization
of Able, ICP, Inc. Without the prior express written consent of the holders of
not less than a majority of the then-outstanding Preferred Shares, the Company
shall not hereafter authorize or make any amendment to the Company's Articles of
Incorporation or bylaws, or file any resolution of the board of directors of the
Company with the Secretary of State of the State of Florida containing any
provisions, which would adversely affect or otherwise impair the rights or
relative priority of the holders of the Preferred Shares relative to the holders
of the Common Stock or the holders of any other class of capital stock. In the
event of the merger or consolidation of the Company with or into another
corporation, the Preferred Shares shall maintain their relative powers,
designations and preferences provided for herein and no merger shall result
inconsistent therewith.
(11) RESTRICTION ON REDEMPTION AND CASH DIVIDENDS WITH RESPECT TO OTHER
CAPITAL STOCK. Until all of the Preferred Shares have been converted or redeemed
as provided herein, the Company shall not, directly or indirectly, redeem, or
declare or pay any cash dividend or distribution on, its Common Stock without
the prior express written consent of the holders of not less than two-thirds of
the then outstanding Preferred Shares.
(12) LIMITATION ON NUMBER OF CONVERSION SHARES. Notwithstanding any
other provision herein, the Company shall not be obligated to issue any shares
of Common Stock upon conversion of the Preferred Shares if the issuance of such
shares of Common Stock would exceed that number of shares of Common Stock which
the Company may issue upon Conversion of the Preferred Shares (the "EXCHANGE
CAP") without breaching the Company's obligations under applicable rules or
regulations relating to the Nasdaq National Market, except that such limitation
shall not apply in the event that the Company (a) obtains the approval of its
stockholders as required by applicable rules and regulations relating to the
Nasdaq National Market for issuances of Common Stock in excess of such amount or
(b) obtains a written opinion from outside counsel to the Company that such
approval is not required, which opinion shall be reasonably satisfactory to the
holders of a majority of the Preferred Shares then outstanding. If and to the
extent that any such stockholder approval is required, the Company shall as soon
as practicable use its Best Efforts to obtain such approval in accordance with
Section 3(e)(vii) of this Amendment. Until such approval or written opinion is
obtained, no purchaser of Preferred Shares pursuant to the Investment Agreement
(the "PURCHASERS") shall be issued, upon conversion of Preferred Shares, shares
of Common Stock in an amount greater than the product of (i) the Exchange Cap
amount multiplied by (ii) a fraction, the numerator of which is the number of
Preferred Shares issued to such Purchaser pursuant of the Investment Agreement
and the denominator of which is the aggregate amount of all the Preferred Shares
issued to the Purchasers pursuant to the Investment Agreement (the "CAP
ALLOCATION AMOUNT"). In the event that any Purchaser shall sell or otherwise
transfer any of such Purchaser's
23
<PAGE>
Preferred Shares, the transferee shall be allocated a pro rata portion of such
Purchaser's Cap Allocation Amount. In the event that any holder of Preferred
Shares shall convert all of such holder's Preferred Shares into a number of
shares of Common Stock which in the aggregate, is less than such holder's Cap
Allocation Amount, then the difference between such holder's Cap Allocation
Amount and the number of shares of Common Stock actually issued to such holder
shall be allocated to the respective Cap Allocation Amounts of the remaining
holders of Preferred Shares on a pro rata basis in proportion to the number of
Preferred Shares then held by each such holder.
(13) VOTE TO CHANGE THE TERMS OF OR ISSUE PREFERRED SHARES. The
affirmative vote at a meeting duly called for such purpose or the written
consent without a meeting, of the holders of not less than two-thirds of the
then outstanding Preferred Shares, shall be required for (a) any change to this
Amendment or the Company's Articles of Incorporation which would amend, alter,
change or repeal any of the powers, designations, preferences and rights of the
Preferred Shares, or (b) any issuance of Preferred Shares other than pursuant to
the Investment Agreement.
(14) LOST OR STOLEN CERTIFICATES. Upon receipt by the Company of
evidence satisfactory to the Company of the loss, theft, destruction or
mutilation of any Preferred Stock Certificate(s) representing the Preferred
Shares, and, in the case of loss, theft or destruction, of any indemnification
undertaking by the holder to the Company and, in the case of mutilation, upon
surrender and cancellation of the Preferred Stock Certificate(s), the Company
shall execute and deliver new preferred stock certificate(s) of like tenor and
date; PROVIDED, HOWEVER, the Company shall not be obligated to re-issue
preferred stock certificates if the holder contemporaneously requests the
Company to convert such Preferred Shares into Common Stock.
(15) REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND
INJUNCTIVE RELIEF. The remedies provided in this Amendment shall be cumulative
and in addition to all other remedies available under this Amendment, at law or
in equity (including a decree of specific performance and/or other injunctive
relief), no remedy contained herein shall be deemed a waiver of compliance with
the provisions giving rise to such remedy, and nothing herein shall limit a
holder's right to pursue actual damages for any failure by the Company to comply
with the terms of this Amendment. The Company covenants to each holder of
Preferred Shares that there shall be no characterization concerning this
instrument other than as expressly provided herein. Amounts set forth or
provided for herein with respect to payments, conversion and the like (and the
computation thereof) shall be the amounts to be received by the holder thereof
and shall not, except as expressly provided herein, be subject to any other
obligation of the Company (or the performance thereof). The Company acknowledges
that a breach by it of its obligations hereunder will cause irreparable harm to
the holders of the Preferred Shares and that the remedy at law for any such
breach may be inadequate. The Company therefore agrees that, in the event of any
such breach or threatened breach, the holders of the Preferred Shares shall be
entitled, in addition to all other available remedies, to an injunction
restraining any breach, with the necessity of showing economic loss and without
any bond or other security being required.
24
<PAGE>
(16) SPECIFIC SHALL NOT LIMIT GENERAL; CONSTRUCTION. No specific
provision contained in this Amendment shall limit or modify any more general
provision contained herein. This Amendment shall be deemed to be jointly drafted
by the Company and the initial holders of the Preferred Shares and shall not be
construed against any person as the drafter hereof.
(17) FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part
of a holder of Preferred Shares in the exercise of any power, right or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege.
(18) NOTICES. Any notice required to be delivered pursuant to the terms
of this Amendment shall be delivered, unless otherwise provided in this
Amendment, in accordance with the terms, and subject to the notice provisions
of, the Investment Agreement.
(19) FORCE MAJEURE. The Company shall not be liable for any default or
delay in the performance of its obligations under this Amendment if and only to
the extent such delay or default is caused by Force Majeure; PROVIDED, HOWEVER,
that no event of Force Majeure shall excuse any such default or delay for longer
than an aggregate of 30 days in any calendar year.
25
<PAGE>
IN WITNESS WHEREOF, the Company has caused the foregoing Articles of
Amendment to the Articles of Incorporation to be signed on February 4, 2000.
ABLE TELCOM HOLDING CORP.
By:
------------------------------
Name:
Title:
26
<PAGE>
EXHIBIT I
ABLE TELCOM HOLDING CORP.
CONVERSION NOTICE
Reference is made to the Articles of Amendment for the Series C
Convertible Preferred Stock (the "Articles of Amendment"). In accordance with
and pursuant to the Articles of Amendment, the undersigned hereby elects to
convert the number of shares of Series C Convertible Preferred Stock, par value
$0.10 per share (the "Preferred Shares"), of Able Telcom Holding Corp., a
Florida corporation (the "Company"), indicated below into shares of Common
Stock, par value $.001 per share (the "Common Stock"), of the Company, by
tendering the stock certificate(s) representing the Preferred Shares specified
below as of the date specified below.
Date of Conversion:____________________________________________________
Number of Preferred Shares to be converted:____________________________
Stock certificate no(s). of Preferred Shares to be converted:__________
Please confirm the following information:
Conversion Price:______________________________________________________
Number of shares of Common
Stock to be issued:____________________________________________________
Please issue the Common Stock into which the Preferred Shares are being
converted and, if applicable, any check drawn on an account of the Company in
the following name and to the following address:
Issue to: __________________________________________
__________________________________________
Facsimile Number:
Authorization: __________________________________________
By:_______________________________________
Title:____________________________________
Dated: __________________________________________
Account Number
(if electronic book
entry transfer) __________________________________________
27
<PAGE>
Transaction Code Number
(if electronic book
entry transfer):____________________________________________________
THIS NOTICE MUST BE DELIVERED TO COMPANY AND TRANSFER AGENT
28
EXHIBIT 4.3.1
SPECIMEN
NUMBER INCORPORATED UNDER THE LAWS OF SHARES
PB THE STATE OF FLORIDA Preferred B
Able Telcom Holding Corp.
Series B Preferred Stock
This Certifies that ___________________________________________________ is the
registered holder of __________________________________________________ Shares
transferable only on the books of the Corporation by the holder hereof in person
or by Attorney upon surrender of this Certificate properly endorsed.
In Witness Whereof, the said Corporation has caused this Certificate to
be signed by its duly authorized officers and its Corporate Seal to be hereunto
affixed this ___________ day of July A.D. 1998
S/Billy V. Ray, Jr. S/Elizabeth Terrero
- ------------------- -------------------
President Secretary
EXHIBIT 4.3.2
SPECIMEN
NUMBER INCORPORATED UNDER THE LAWS OF SHARES
PC THE STATE OF FLORIDA Preferred C
Able Telcom Holding Corp.
Series C Preferred Stock
This Certifies that ___________________________________________________ is the
registered holder of __________________________________________________ Shares
transferable only on the books of the Corporation by the holder hereof in person
or by Attorney upon surrender of this Certificate properly endorsed.
In Witness Whereof, the said Corporation has caused this Certificate to
be signed by its duly authorized officers and its Corporate Seal to be hereunto
affixed this 8th day of February A.D. 2000
S/Billy V. Ray, Jr. S/Elizabeth Terrero
- ------------------- -------------------
President Secretary
EXHIBIT 4.15.1
February 17, 1999
John Hancock Mutual Life Insurance Company
John Hancock Variable Life Insurance Company
Signature lA (Cayman), Ltd.
200 Clarendon Street
Boston, MA 02117
Re: Able Telcom Holding Corp.
$10,000,000 12% Senior Subordinated Notes due January 6, 2005.
Gentlemen:
In connection with our purchase of the above-captioned notes for
consideration of $11,633,333.33 (the "Notes"), we hereby represent and warrant
as follows:
1. The undersigned understands that the Notes have not been registered
under the Securities Act of 1933, as amended (the "Act"), and may not
be sold except pursuant to a duly available exemption from such
registration requirements.
2. The undersigned is purchasing the Notes for its own account and not
with a view to or for sale which would be a violation of the Act. Any
private resale of the Notes by the undersigned shall only be made to
purchasers who would have been qualified to purchase the Notes at the
time of the original private placement.
3. The undersigned is an "accredited investor," as such term is defined in
Rule 501(a) of Regulation D under the Act, and has such knowledge and
experience in financial and business matters that it is capable of
evaluating the merits and risks of the purchase of the Notes, and has
concluded that it is able to bear those risks.
4. The Notes were not offered or sold to the undersigned by any form of
general solicitation or general advertising.
<PAGE>
5. The undersigned acknowledges that if any transfer of the Notes is to be
made in reliance on an exemption under the Act, the issuer of the Notes
may require an opinion of counsel satisfactory to it that such transfer
may be made pursuant to an exemption under the act.
6. In making any subsequent offering or sale of the Notes, the undersigned
will be acting only for itself and not as part of a sale or planned
distribution which would be violation of the Act.
7. The undersigned acknowledges that, so long as appropriate, a legend
similar to the following may appear on the certificates representing
the Notes: "These securities have not been registered under the
Securities Act of 1933 and may be reoffered and sold only if so
registered or if an exemption for registration is available."
COTTON COMMUNICATIONS, INC.
By: /s/TYLER DIXON
-----------------------
Title: President
EXHIBIT 4.15.2
February 19, 1999
Able Telecom Holding Corp.
1601 Forum Place, Suite 1110
West Palm Beach, Florida 33401
Attn: Billy V. Ray, President
Dear Billy:
As you are aware, effective February 17, 1999 the undersigned, Cotton
Communications, Inc. ("CC"), purchased all outstanding 12% Senior Subordinated
Notes (the "Notes") of Able Telcom Holding Corp. ("Able") and 2, 785 of the
outstanding shares of Able Series B Preferred Stock. In light of these
transactions, Able and CC hereby agree as follows:
1. CC hereby waives all outstanding defaults as of the date of this Letter
under the terms of the Series B Preferred Stock and the Registration
Rights Agreement related thereto and tinder the Notes and all related
documentation.
2. Until March 1, 2000, CC hereby agrees that it will not attempt to
exercise any default remedy it may have under the terms of the Series B
Preferred Stock or the Registration Rights Agreement and hereby further
agrees not to exercise any such default remedy so long as any such
agreement is in place between Able and any other holder of Series B
Preferred Stock.
3. Able and CC hereby amend the terms of the Notes to extend the maturity
date thereunder to March 1, 2000.
4. Able and CC hereby agree that, notwithstanding any provision of Able's
Articles of Incorporation as amended to date or of the purchase
agreement related to the Series B Preferred Stock, including any
provision relating to the conversion of the Series B Preferred Stock
upon the occurrence of any event or default or the failure of Able to
take any action or to cause any event to occur, the Conversion Price
for the Series B Preferred Stock held at any time by CC shall not be
less than $8.25 per share.
5. In consideration for the agreements by CC set forth in items 1 through
4 above, Able and CC hereby agree that, to the extent CC is required,
pursuant to the Securities Purchase Agreement between CC and Halifax
Fund, L.P., The Gleaneagles Fund Company, Palladin Overseas Fund
Limited, Colonial Penn Life Insurance Company, Palladin Securities
L.L.C. and Palladin Partners I, L.P., to purchase any warrants to
purchase common stock of Able (the "Warrants") the conversion price of
such Warrants shall automatically upon transfer to CC be reduced to a
price per share equal to no more than 85% of the closing price of Able
<PAGE>
common stock on the date prior to such transfer and, if less, to a
price per share equal to such closing price minus $3.00.
Please indicate your acceptance of the foregoing by signing in the
space provided below.
Sincerely,
COTTON COMMUNICATIONS, INC.
By: /s/ TYLER DIXON
-----------------------
Name: Tyler Dixon
Title: President
Accepted and agreed this 19th day of February, 1999 ABLE TELECOM HOLDING CORP.
By: /s/ BILLY V. RAY, JR.
------------------------------
Name: Billy V. Ray, Jr.
Title: President & CEO
EXHIBIT 4.15.3
TERMINATION AGREEMENT
This Termination Agreement (this " Agreement") is entered into as of
March 22, 1999 by and between ABLE TELECOM HOLDING CORP., a Florida corporation,
(" Able") and COTTON COMMUNICATIONS, INC., a Georgia corporation, ("Cotton").
WHEREAS, the parties are parties to a Financing Agreement dated
February 17, 1999, a Stock Pledge Agreement dated February 17, 1999 and a
$32,000,000 11.5% Non- Recourse Promissory Note payable by Able in favor of
Cotton dated February 17, 1999 (copies of which are attached hereto as Exhibits
A, B and C respectively) (the "Terminating Agreements");
WHEREAS, pursuant to the Terminating Agreements, Able loaned Cotton
$32,000,000 which Cotton used to purchase all the Senior Notes, as defined in
the Financing Agreement, and an aggregate of 2,785 shares of Series B Preferred
Stock, as defined in the Financing Agreement; and,
WHEREAS, the premises upon which the Terminating Agreements were
entered into have changed and in connection therewith the parties have agreed to
terminate the Terminating Agreements;
NOW, THEREFORE, in consideration of the foregoing premises and of the
mutual promises set forth in this Agreement and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
1. TERMINATION OF OBLIGATIONS. The parties agree that the
Terminating Agreements are hereby terminated as of the date hereof.
2. ASSUMPTION OF OBLIGATIONS. Able hereby assumes and agrees to
perform any and a11 obligations of Cotton arising in connection with
any and all of the Terminating Agreements, and in connection with any
of the agreements attached to the Terminating Agreements as Exhibits.
3. ASSIGNMENT AND CANCELLATION OF SENIOR NOTES AND SERIES B
PREFERRED STOCK.
Without recourse:
<PAGE>
(a) Cotton hereby assigns and transfers to Able all of
Cotton's right, title and interest in and to the Senior Notes and in 2,785
shares of the Series B Preferred Stock and hereby appoints Able or any of its
officers as its attorney-in-fact to do all acts and execute and deliver all
documents necessary to effect such transfer. This appointment of a power and
attorney-in-fact is coupled with an interest and is irrevocable.
(b) Able agrees to cancel and mark "paid" the Senior Notes and
redeem and cancel 2,785 shares of t11e Series B Preferred Stock.
4. INDEMNIFICATION. In the event that Cotton, or its
shareholders, directors, officers or agents (collectively and individually, the
"Indemnified Parties"), become involved in any action, proceeding or
investigation in connection with any matter contemplated by any of the
Terminating Agreements, and any agreement attached as an Exhibit to any
Terminating Agreement, Able shall reimburse the Indemnified Parties for their
reasonable legal and other expenses (including cost of any investigation and
preparation) as they are incurred by the Indemnified Parties.
Able shall also indemnify and hold harmless the Indemnified
Parties from and against any and all 1osses, claims, damages and liabilities,
joint or several, related to or arising out of any matters contemplated by any
of the Terminating Agreements and any agreement attached as an Exhibit to any
Terminating Agreement, unless and to the extent that it shall finally be
judicially determined that such losses, claims, damages or liabilities resulted
from the negligence or willful misconduct of the applicable Indemnified Party.
5. EFFECTIVE DATE. This Agreement shall be effective as of March
22, 1999.
6. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and assigns.
7. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to the principles of conflicts of law.
8. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall constitute an original and all of which, taken together,
shall constitute one and the same instrument.
9. SECTIONS AND HEADINGS. The division of this Agreement into
sections and the insertion of headings are for reference purposes only and shall
not affect the interpretation of this Agreement
[SIGNATURE PAGE FOLLOWS]
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first above written.
ABLE TELCOM HOLDING CORP.
By: /s/ BILLY V. RAY
----------------------------
Name:
Title:
COTTON COMMUNICATIONS, INC.
By: /s/ TYLER DIXON
---------------
Name: Tyler Dixon
Title: President
3
<PAGE>
EXHIBIT A
Financing Agreement by and between Able Telecom Holding Corp. and
Cotton Communications, Inc. dated February 17,1999.
4
<PAGE>
EXHIBIT B
$32,000,000 11.5% Non-Recourse Promissory Note by and between Able
Telecom Holding Corp. and Cotton Communications, Inc. dated February 17, 1999.
5
<PAGE>
EXHIBIT C
Stock Pledge Agreement by and between Able Telecom Holding Corp. and
Cotton Communications, Inc. dated February 17, 1999.
6
EXHIBIT 4.16
EXECUTION VERSION
SECURITIES EXCHANGE AGREEMENT
This SECURITIES EXCHANGE AGREEMENT is dated as of February 4, 2000 (the
"Agreement") by and among Halifax Fund L.P., The Gleneagles Fund Company,
Palladin Overseas Fund Limited, Colonial Penn Life Insurance Company, Palladin
Securities L.L.C. and Palladin Partners I, L.P. (collectively "Holders") and
Able Telcom Holding Corp. ("Company").
WHEREAS, the Holders have entered into that certain Convertible
Preferred Stock Purchase Agreement with the Company, dated June 26, 1998,
including all exhibits thereto, attached hereto as EXHIBIT A (the "Purchase
Agreement"); and pursuant thereto, on June 30, 1998, the Holders acquired 2,000
shares of Series B Preferred Stock (the "Preferred Shares");
WHEREAS, the Holders and the Company entered into a letter agreement
dated October 7, 1999, attached hereto as EXHIBIT B (the "Letter Agreement"),
whereby the Holders and the Company agreed to adjust the Conversion Price of the
Preferred Shares, the Pricing Period and the Triggering Event Redemption Price
of the Preferred Shares;
WHEREAS, the Holders currently hold 404 Preferred Shares with a
Conversion Price equal to $2.844; and
WHEREAS, the Holders desire to covert 250 Preferred Shares and, in
consideration of such conversion, the Company desires to issue to the Holders
Common Stock and warrants exercisable for shares of Common Stock and the Holders
desire to exchange 154 Preferred Shares and, in consideration of such exchange,
the Company desires to issue to the Holders the Closing Cash Payment (as defined
below).
NOW, THEREFORE, intending to be legally bound hereby, the parties
hereto agree as follows:
ARTICLE 1.
EXCHANGE OF THE PREFERRED SHARES
1.1 CONVERSION AND EXCHANGE OF THE PREFERRED SHARES AND PAYMENT OF THE
CLOSING CASH PAYMENT. At the Closing (as defined below):
(a) The Company will issue and deliver to the Holders, pro
rata, 301,787 shares of Common.
(b) The Company will issue and deliver to the Holders, pro
rata, warrants exercisable for 66,246 shares of Common Stock at the price per
share set forth therein (the "First Warrants") attached hereto as EXHIBIT C.
(c) The Company will issue and deliver to the Holders, pro
rata, warrants exercisable for 100,000 shares of Common Stock at a price per
share equal to $10.127 (the "Second Warrants", and together with the First
Warrants, the "Warrants") attached hereto as EXHIBIT D.
<PAGE>
EXECUTION VERSION
(d) The Company will pay to the Holders, pro rata, a cash
payment, by wire transfer in immediately available funds to an account
designated by the Holders, in an amount equal to $5,816,394 (the "Closing Cash
Payment").
(e) The Company will deliver an executed Registration Rights
Agreement dated February 4, 2000 covering the Common Stock and the shares of
Common Stock issuable upon exercise of the Warrants.
(f) The Company will deliver an opinion of counsel to the
Company satisfactory in form and substance to the Holders.
(g) The Holders will deliver to the Company the Preferred
Shares.
(h) The closing of the exchange of the Preferred Shares and
the issuance of the Common Stock and Warrants (the "Closing"), shall take place
at the offices of Arnold & Porter, 555 12th Street N.W., Washington, D.C., at
10:00 a.m., local time on February 4, 2000 or such other time and place and/or
on such other date as the Holders and the Company may agree. As conditions to
the Closing, all of the representations and warranties contained in Sections 1.3
and 1.4 hereof shall be true and correct as of the Closing as certified by both
the Holders and Company at the Closing.
1.2 ADJUSTMENT TO NUMBER OF SHARES OF COMMON STOCK ISSUED AT CLOSING.
At the end of the period that is one hundred (100) Trading Days from the date
hereof, the Holders will deliver a notice to the Company setting forth the
Average Price and the calculation of any adjustment required as described below:
If the Average Price is less than the Closing Price, the Company will
issue to the Holders, pro rata, additional shares of Common Stock in an amount
equal to (i) the Remaining Redemption Price divided by (ii) the Average Price,
minus (iii) the total number of shares issued pursuant to Section 1.1(a) and
total number of shares to be issued pursuant to the exercise of First Warrants
issued pursuant to Section 1.1(b); provided, however, if the Company is unable
to issue shares pursuant to the foregoing as a result of the failure to obtain
stockholder approval for the issuance of Common Stock to the Holders in excess
of the Maximum Share Amount, then the Company shall pay the Holders, pro rata, a
cash payment, by wire transfer in immediately available funds to an account
designated by the Holders, in an amount equal to (i) the Current Redemption
Price multiplied by (ii) an amount equal to (A) the Remaining Redemption Price
divided by (B) the Average Price, minus (C) the total number of shares issued
pursuant to Section 1.1(a) and total number of shares to be issued pursuant to
the exercise of First Warrants issued pursuant to Section 1.1(b).
1.3 COMPANY REPRESENTATIONS AND WARRANTIES.
In connection with the exchange of the Preferred Shares and the
issuance of the Common Stock and Warrants hereunder, the Company represents and
warrants to the Holders that:
(a) The Company has all requisite corporate power and
authority to enter into and perform this Agreement and to consummate the
transaction contemplated hereby and to issue the Common Stock and Warrants in
accordance with the terms hereof.
2
<PAGE>
EXECUTION VERSION
(b) The execution and delivery of this Agreement and the
Warrants and the consummation by the Company of the transactions contemplated
hereby and thereby, including the issuance of the Common Stock and the Warrants
contemplated by this Agreement have been duly authorized by all necessary
corporate action, and no further consent or authorization of the Company or its
Board of Directors (or any committee or subcommittee thereof) or its
stockholders is required.
(c) This Agreement constitutes, and upon execution, issuance
and delivery thereof, the Warrants shall constitute, valid and binding
obligations of the Company enforceable against the Company in accordance with
their terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally the enforcement of creditors' rights and
remedies or by other equitable principles of general application.
(d) The Common Stock and the shares of Common Stock issuable
upon the exercise of the Warrants are duly authorized and reserved for issuance
and, upon such conversion in accordance with the Warrants, such Common Stock and
such shares of Common Stock issuable upon the exercise of the Warrants, will be
validly issued, fully paid and non-assessable, free and clear of any and all
taxes, liens, claims and encumbrances, and entitled to be traded on the Nasdaq
NMS, the American Stock Exchange or the New York Stock Exchange, and the holders
of such Common Stock and such shares of Common Stock issuable upon the exercise
of the Warrants shall be entitled to all rights and preferences accorded to a
holder of Common Stock. The outstanding shares of Common Stock are currently
listed on the Nasdaq NMS.
1.4 HOLDERS' REPRESENTATIONS AND WARRANTIES
In connection with the exchange of the Preferred Shares and the
issuance of the Common Stock and Warrants hereunder, each of the Holders
represents and warrants to the Company that:
(a) Such Holder has the legal capacity and authority to enter
into and perform all of its obligations under this Agreement. This Agreement
constitutes the legal, valid and binding obligation of such Holder, enforceable
against such Holder in accordance with its terms. The execution, delivery and
performance of this Agreement does not and will not conflict with, violate,
cause a breach of or constitute a default under (i) any agreement, contract or
other instrument or obligation to which such Holders is a party or by which such
Holder is bound or (ii) any judgment, order, decree, statute, rule or regulation
to which such Holder is subject.
(b) Such Holder is an "accredited investor," as such term is
defined in Rule 501 of Regulation D promulgated under the Act. Such Holder and
its agents and representatives have such knowledge and experience in financial
and business matters as to enable it to utilize the information made available
to them in connection with the transactions contemplated hereby to evaluate the
merits and risks of an investment in the Common Stock and the Warrants and to
make an informed decision with respect thereto, and such an evaluation and
informed decision have been made.
(c) Such Holder is entering into this Agreement for its own
account and such Holder has no present arrangement (whether or not legally
binding) at any time to sell the Common Stock or Warrants to or through any
person or entity; PROVIDED, however, that by making the
3
<PAGE>
EXECUTION VERSION
representations herein, such Holder does not agree to hold the Common Stock or
Warrants for any minimum or other specific term and reserves the right to
dispose of the Common Stock and Warrants at any time in accordance with federal
and state securities laws applicable to such disposition.
1.5 DEFINITIONS. Defined terms used herein and not otherwise defined
shall have the meaning ascribed thereto in the Purchase Agreement. As used in
this Agreement, the following terms shall have the following meanings:
(a) "Average Price" means the average of the fifty low Trading
Prices on the Nasdaq NMS during each pair of two consecutive Trading Days from
the date hereof and ending on that date which is one hundred (100) Trading Days
from the date hereof. Notwithstanding the foregoing, if the Average Price is
less than $4.00, then the "Average Price" for this purpose shall be $4.00, and
if the Average Price is greater than $9.50, then the "Average Price" for this
purpose shall be $9.50.
(b) "Closing Price" means $7.79 the average closing bid price
for the Common Stock on the ten consecutive Trading Days immediately preceding
the Closing Date.
(c) "Conversion Amount" means the number of shares resulting
from the Conversion Rate multiplied by 404.
(d) "Conversion Price" means $2.844.
(e) "Conversion Rate" means the number of shares of Common
Stock resulting from dividing the Value of the Preferred Stock by the Conversion
Price.
(f) "Current Redemption Price" means $12.125, per share.
(g) "Maximum Share Amount" means 368,033 shares of Common
Stock.
(h) "Remaining Redemption Price" equals the Maximum Share
Amount multiplied by the Closing Price.
(i) "Total Redemption Price" means 96% times 404 multiplied by
the product of: (i) the Conversion Rate times (ii) the Current Redemption Price.
(j) "Trading Day" means any day on which the Common Stock is
traded for any period on the Nasdaq National Market ("Nasdaq"), or on the
principal securities exchange or other securities market where the Common Stock
is listed or traded.
(k) "Trading Price" means the trading price for the Common
Stock on Nasdaq as reported by Bloomberg Financial Markets ("Bloomberg"), or, if
Nasdaq is not the principal trading market for the Common Stock, the trading
price of the Common Stock on the principal securities exchange or trading market
where the Common Stock is listed or traded as reported by Bloomberg.
(l) "Value of Preferred Stock" means $5200, plus interest
since November 1, 1998 at a per annum rate of 4% per share of Preferred Stock.
4
<PAGE>
EXECUTION VERSION
ARTICLE 2.
GENERAL PROVISIONS
2.1 LEGENDS. The Holders understand and agree that, in addition to any
other legends required by applicable law, the certificate or certificates
representing the Common Stock and the Warrants will bear legends substantially
to the effect set forth below and that a stop transfer order may be placed with
respect thereto.
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
TRANSFERRED OR ASSIGNED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN
APPLICABLE EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.
2.2 SURVIVAL. The representations, warranties and covenants contained
in this Agreement shall survive the purchase and sale of the Common Stock and
the Warrants pursuant to this Agreement.
2.3 AMENDMENT. This Agreement may be amended, or any provision hereof
may be waived, at any time by an agreement in writing of the parties hereto.
2.4 ENTIRE AGREEMENT; SUCCESSORS. This Agreement contains the entire
agreement among the parties hereto with respect to the transactions contemplated
hereunder and supersedes all prior arrangements or understandings with respect
thereto, written or oral, other than documents referred to herein. The terms and
conditions of this Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective successors and permitted assigns.
2.5 NO ASSIGNMENT. No party hereto may assign any of its rights or
obligations under this Agreement to any other person without the written consent
of the other party.
2.6 NOTICES. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered personally,
by facsimile or sent by overnight express or by registered or certified mail,
postage prepaid, addressed as follows:
The Holders:
c/o The Palladin Group, L.P.
195 Maplewood Avenue
Maplewood NJ 07040
Attn: Robert L. Chender
Facsimile: (973) 313-6491
The Company:
Able Telcom Holding Corp.
1000 Holcomb Woods Parkway
Suite 440
5
<PAGE>
EXECUTION VERSION
Roswell, GA. 30076
Attn: President
Facsimile: (770) 993-8532
All such deliveries shall be deemed effective when received by the
person entitled to such receipt or when delivery has been attempted but refused
by such person. Any party may change the person or address to which such
deliveries shall be made with respect to such party by delivering notice thereof
to the other party hereto in accordance with this Section.
2.7 CAPTIONS. The captions contained in this Agreement are for
reference purposes only and are not part of this Agreement.
2.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
2.9 GOVERNING LAW AND VENUE. The validity, interpretation, construction
and performance of this Agreement shall be governed by the laws of the State of
New York applicable to agreements made and entirely to be performed within such
jurisdiction. The party bringing any action under this Agreement shall only be
entitled to choose the federal or state courts in the State of New York as the
venue for such action, and each party consents to the jurisdiction of the court
chosen in such manner for such action.
2.10 FURTHER ASSURANCES. Subject to the terms and conditions herein
provided, each of the parties hereto shall use reasonable efforts to take, or
cause to be taken, such action, to execute and deliver, or cause to be executed
and delivered, such additional documents and instruments and to do, or cause to
be done, all things necessary, proper or advisable under the provisions of this
Agreement and under applicable law to consummate and make effective the
transactions contemplated by this Agreement.
6
<PAGE>
EXECUTION VERSION
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
HOLDERS:
HALIFAX FUND, L.P.
THE GLENEAGLES FUND COMPANY
PALLADIN OVERSEAS FUND LIMITED
COLONIAL PENN LIFE INSURANCE COMPANY
By:
-------------------------------------------
The Palladin Group, L.P., as
Attorney-in-Fact and Investment Advisor
Name: Robert L. Chender
Title: Managing Director
PALLADIN SECURITIES L.L.C.
By:
-------------------------------------------
Name: Robert L. Chender
Title: Principal
PALLADIN PARTNERS I, L.P.
By:
-------------------------------------------
The Palladin Group, L.P., as
Attorney-in-Fact and Investment Advisor
Name: Robert L. Chender
Title: Managing Director
ABLE TELCOM HOLDING CORP.
By:
-------------------------------------------
Name:
-----------------------------------------
Title:
----------------------------------------
7
<PAGE>
EXECUTION VERSION
EXHIBIT C
COMMON STOCK PURCHASE WARRANT
EXHIBIT 4.16.3
February 17, 1999
Ed Pollock, Esq.
Able Telcom Holding Corp.
1601 Forum Place, Suite 1110
West Palm Beach, FL 33401
Dear Ed:
This letter is to confirm our conversations regarding our investment in Able
Telcom Holding Corp. (the "Company") .The Company acknowledges and agrees that
the Registration Statement has not been declared effective as required by the
Registration Rights Agreement; that a Triggering Event therefore occurred on
October 28, 1998; and that under the Registration Rights Agreement Palladin
Securities L.L.C., Halifax Fund, L.P., Palladin Partners I, L.P., The Gleneagles
Fund Company, Palladin Overseas Fund Limited and Colonial Penn Life Insurance
Company (collectively, the "Pa1ladin Investors") have the right to redeem their
Preferred Shares in accordance with the terms of the Articles of Amendment, and
that such right of redemption shall remain in effect until the shares of
Preferred Stock are converted or redeemed in accordance with the terms of the
Articles of Amendment. The Company further acknowledges that the circumstances
described in Section 3 (d) (viii) (x) of the Articles of Amendment and Section
2(b) (i) of the Registration Rights Agreement are applicable because the Company
failed to obtain effectiveness of the Registration Statement on or prior to
October 28, 1998. Capitalized terms used herein but not defined herein shall
have the meanings assigned thereto in the Registration Rights Agreement, the
Articles of Amendment or the Convertible Preferred Stock Purchase Agreement.
The Company has determined that it is in its best interest for the
parties to agree that:
1. The Company shall use its best efforts to cause the registration of the
Shares pursuant to the terms of the Registration Rights Agreement
within 90 days of the date hereof (the "Registration Period");
2. The undersigned hereby waives, to the extent provided herein, all
outstanding defaults under the terms of the Series B Preferred Stock
and the Registration Rights Agreement and hereby withdraws its previous
Notice of Redemption at Option of Holder Upon Triggering Event
delivered to Able on or about January 19, 1999;
3. The undersigned hereby agrees that it will not during the Registration
Period attempt to exercise any default remedy it may have under the
Registration Rights Agreement; and
4. The Company agrees if necessary, to permit and to facilitate the
understanding set forth in Section 2.11 of the Securities Purchase
Agreement between Cotton Communications, Inc. and the Palladin
Investors, dated even date herewith, including, without limitation, by
amending the Company's Articles of Amendment.
By signifying its agreement to the foregoing, the parties agree that
the Palladin Investors do not waive any other rights they may have under the
Articles of Amendment, the Registration Rights Agreement, the Preferred Stock
Purchase Agreement or any other agreement between the Company and the Palladin
Investors. Specifically, if Effective Registration has not occurred during the
Registration Period, the waiver in Section 2 above
<PAGE>
shall no longer be in effect and the Pal1adin Investors shall have all rights
and remedies they would have had as if this Agreement had never been entered
into by the parties.
Please indicate your agreement to the foregoing by signing in the space
provided.
Sincerely,
HALIFAX FUND, L.P.
THE GLENEAGLES FUND COMPANY
PALLADIN OVERSEAS FUND LIMITED
COLONIAL PENN LIFE INSURANCE
By: _________________________
By: The Palladin Group, L. P. as
Attorney-in-Fact and Investment Advisor
By:
Title:
PALLADIN SECURITIES L.L.C.
By: ________________________
Name:
Title:
PALLADIN PARTNERS I, L.P.
By: ________________________
By: Palladin Asset Management L.L.C. as
Attorney-in-Fact
By:
Title:
Accepted and Agreed to:
ABLE TELCOM HOLDING CORP.
By: _______________________
Name:
Title:
EXHIBIT 4.16.4
March 19, 1999
Jeffrey E. Deavers
The Palladin Group, L.P.
195 Maplewood Avenue
Maplewood, NJ 07040
Re: Able Telcom-Disposition of Series B Preferred Stock and Senior Notes
and Transfer of the Obligations to Purchase Warrants held by The
Palladin Group
Dear Jeff:
I am writing to notify you of the termination of the Financing
Agreement by and between Able Telcom Holding Corp. and Cotton Communications,
Inc. dated February 17, 1999. In connection with the termination, Able has
agreed to:
o Terminate the Non-Recourse Promissory Note made by Cotton and payable
to Able;
o Purchase all of the Series B Preferred Stock owned by Cotton;
o Purchase the 12% Senior Subordinated Notes from Cotton; and
o Assume any and all obligations of Cotton arising in connection with the
purchase of the Warrants of Able held by The Palladin Group, as defined
in the Purchase Agreement dated June 26, 1998, and pursuant to the
Warrant Amendment dated February, 1999 ("Warrant Purchase
Obligations").
<PAGE>
March 22, 1999
Page 2
In light of the foregoing, we request that the members of The Palladin
Group designated below agree to look solely to Able Telcom for satisfaction of
any and all of Cotton Communications' Warrant Purchase Obligations.
ABLE TELCOM HOLDING CORP.
By:___________________________
Edward Z. Pollock, In-House Counsel
Accepted and Agreed to:
HALIFAX FUND, LP
THE GLENEAGLES FUND COMPANY
PALLADIN OVERSEAS FUND LIMITED
COLONIAL PENN LIFE INSURANCE CORP.
_________________________
By:
Title:
PALLADIN SECURITIES, L.L.C.
_________________________
By:
Title:
PALLADIN PARTNERS L.L.P.
_________________________
By:
Title:
EXHIBIT 4.17
EXECUTION VERSION
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. IT MAY NOT BE SOLD, OFFERED FOR SALE,
TRANSFERRED OR ASSIGNED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN APPLICABLE
EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.
February 4, 2000
ABLE TELCOM HOLDING CORP.
[First Warrants]
Common Stock Purchase Warrant
Able Telcom Holding Corp., a Florida corporation (the "COMPANY"), hereby
certifies that for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, [_____________________], having an address at
c/o The Palladin Group, L.P.195 Maplewood Avenue, Maplewood NJ 07040
("PURCHASER") or any other Warrant Holder, as defined below, is entitled, on the
terms and conditions set forth below, to purchase from the Company at any time
beginning on the date of determination of the Average Price and ending thirty
(30) days thereafter, 66,246 fully paid and nonassessable shares of Common
Stock, $.001 par value, of the Company (the "COMMON STOCK"), at the Purchase
Price (hereinafter defined) per share, as the same may be adjusted pursuant to
Section 6 herein.
1. DEFINITIONS.
(a) The term "AGREEMENT" shall mean the Securities Exchange
Agreement dated as of February 4, 2000, between the Company and the Holders
signatory thereto.
(b) The term "BEST EFFORTS" means as to any party obligated
to use its Best Efforts to accomplish a particular objective that the obligated
party is required to make diligent, good faith, prompt, substantial and
persistent efforts as a prudent person desiring to achieve the applicable
objective would use in order to ensure that such objective is achieved as
expeditiously as possible.
(c) The term "PURCHASE PRICE" shall mean the product of
(i)(A) the Average Price (which shall not be greater than $9.50) multiplied by
(B) that number of shares of Common Stock issued to the Holders pursuant to
Section 1.1(a) of the Agreement, plus the number of shares to be issued pursuant
to this Warrant, minus (ii) the Remaining Redemption Price, divided by (iii) the
number of shares to be issued pursuant to this Warrant; provided, however, in
the event the Average Price is less than the Closing Price, the Purchase Price
shall mean $0.01.
<PAGE>
EXECUTION VERSION
(d) The term "WARRANT HOLDER" shall mean the Purchaser or
any assignee of all or any portion of this Warrant.
(e) The term "WARRANT SHARES" shall mean the Shares of
Common Stock or other securities issuable upon exercise of this Warrant.
Capitalized terms used but not defined in this Warrant shall have the
meanings specified in the Agreement.
2. EXERCISE OF WARRANT.
This Warrant may be exercised by the Warrant Holder, in whole or in
part, at any time and from time to time by either of the following methods:
(a) The Warrant Holder may surrender this Warrant, together with the
form of subscription at the end hereof duly executed by such Warrant Holder
("SUBSCRIPTION NOTICE"), at the offices of the Company or any transfer agent for
the Common Stock; together with payment of the aggregate Purchase Price for all
Warrant Shares exercised; or
(b) The Warrant Holder may also exercise this Warrant, in whole or in
part, in a "cashless" or "net-issue" exercise by delivering to the offices of
the Company or any transfer agent for the Common Stock this Warrant, together
with a Subscription Notice specifying the number of Warrant Shares to be
delivered to such Warrant Holder ("DELIVERABLE SHARES") and the number of
Warrant Shares with respect to which this Warrant is being surrendered in
payment of the aggregate Purchase Price for the Deliverable Shares ("SURRENDERED
SHARES"); provided that the Purchase Price multiplied by the number of
Deliverable Shares shall not exceed the value of the Surrendered Shares; and
provided further that the sum of the number of Deliverable Shares and the number
of Surrendered Shares so specified shall not exceed the aggregate number of
Warrant Shares represented by this Warrant. For the purposes of this provision,
each Warrant Share as to which this Warrant is surrendered will be attributed a
value equal to the fair market value (as defined below) of the Warrant Share
minus the Purchase Price of the Warrant Share (the "SPREAD"). The number of
Deliverable Shares shall be equal to (i) the number of Surrendered Shares
multiplied by the Spread; divided by (ii) the Purchase Price on the date of
exercise.
In the event that the Warrant is not exercised in full, the number of
Warrant Shares shall be reduced by the number of such Warrant Shares for which
this Warrant is exercised and/or surrendered, and the Company, at its expense,
shall within three (3) Trading Days (as defined below) issue and deliver or upon
the order of Warrant Holder a new Warrant of like tenor in the name of Warrant
Holder or as Warrant Holder (upon payment by Warrant Holder of any applicable
transfer taxes) may request, reflecting such adjusted Warrant Shares.
3. DELIVERY OF STOCK CERTIFICATES.
(a) Subject to the terms and conditions of this Warrant, as
soon as practicable after the exercise of this Warrant in full or in part, and
in any event within three (3) Trading Days thereafter, the Company shall
transmit the certificates (together with any other stock or other
2
<PAGE>
EXECUTION VERSION
securities or property to which Warrant Holder is entitled upon exercise) by
messenger or overnight delivery service to reach the address designated by such
holder within three (3) Trading Days after the receipt of the Subscription
Notice ("T+3"). If such certificates are not received by the Warrant Holder
within T+3, then the Warrant Holder will be entitled to revoke and withdraw its
exercise of its Warrant at any time prior to its receipt of those certificates.
In lieu of delivering physical certificates representing the
Warrant Shares deliverable upon exercise of Warrants, provided the Company's
transfer agent is participating in the Depository Trust Company ("DTC") Fast
Automated Securities Transfer ("FAST") program, upon request of the Warrant
Holder, the Company shall use its Best Efforts to cause its transfer agent to
electronically transmit the Warrant Shares issuable upon exercise to the Warrant
Holder, by crediting the account of Warrant Holder's prime broker with DTC
through its Deposit Withdrawal Agent Commission ("DWAC") system. The time
periods for delivery described above shall apply to the electronic transmittals
through the DWAC system. The parties agree to coordinate with DTC to accomplish
this objective. The exchange pursuant to Section 3 shall be deemed to have been
made immediately prior to the close of business on the date of the Subscription
Notice. The person or persons entitled to receive the Warrant Shares issuable
upon such exercise shall be treated for all purposes as the record holder or
holders of such Common Shares at the close of business on the date of the
Subscription Notice.
The term "TRADING DAY" means (x) if the Common Stock is
listed on the New York Stock Exchange or the American Stock Exchange, a day on
which there is trading on such stock exchange, (y) if the Common Stock is not
listed on either of such stock exchanges but sale prices of the Common Stock are
reported on an automated quotation system, a day on which trading is reported on
the principal automated quotation system on which sales of the Common Stock are
reported, or (z) if the foregoing provisions are inapplicable, a day on which
quotations are reported by National Quotation Bureau Incorporated.
(b) This Warrant may not be exercised as to fractional
shares of Common Stock. In the event that the exercise of this Warrant, in full
or in part, would result in the issuance of any fractional share of Common
Stock, then in such event the Warrant Holder shall be entitled to cash equal to
the fair market value of such fractional share. For purposes of this Warrant,
"FAIR MARKET VALUE" shall equal the closing trading price of the Common Stock on
the Approved Market (an "APPROVED MARKET" is the New York Stock Exchange or the
American Stock Exchange or the Nasdaq National Market) which is the principal
trading exchange or market for the Common Stock (the "PRINCIPAL MARKET") on the
date of determination or, if the Common Stock is not listed or admitted to
trading on any Approved Market, the average of the closing bid and asked prices
on the over-the-counter market as furnished by any New York Stock Exchange
member firm reasonably selected from time to time by the Company for that
purpose and reasonably acceptable to the Warrant Holder, or, if the Common Stock
is not listed or admitted to trading on any Approved Market or traded
over-the-counter and the average price cannot be determined as contemplated
above, the fair market value of the Common Stock shall be as reasonably
determined in good faith by the Company's Board of Directors with the
concurrence of the Warrant Holder.
3
<PAGE>
EXECUTION VERSION
4. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
(a) The Company shall comply with its obligations under the
Registration Rights Agreement with respect to the Warrant Shares, including,
without limitation, the Company's obligation to have filed and declared and
maintained effective a registration statement registering the Warrant Shares
under the Securities Act of 1933, as amended (the "ACT").
(b) The Company shall use its Best Efforts to take all
necessary action and proceedings as may be required and permitted by applicable
law, rule and regulation, including, without limitation, the notification of the
Principal Market, for the legal and valid issuance of this Warrant and the
Warrant Shares to the Warrant Holder under this Warrant.
(c) From the date hereof through the last date on which this
Warrant is exercisable, the Company shall use its Best Efforts to take all steps
necessary to insure that the Common Stock remains listed on the Principal
Market.
(d) The Warrant Shares, when issued in accordance with the
terms hereof, will be duly authorized and, when paid for or issued in accordance
with the terms hereof, shall be validly issued, fully paid and non-assessable.
The Company has authorized and reserved for issuance to Warrant Holder the
requisite number of shares of Common Stock to be issued pursuant to this
Warrant.
(e) The Company shall at all times reserve and keep
available, solely for issuance and delivery as Warrant Shares hereunder, 105% of
such number of shares of Common Stock as shall from time to time be issuable
hereunder.
(f) With a view to making available to the Warrant Holder
the benefits of Rule 144 promulgated under the Act and any other rule or
regulation of the Securities and Exchange Commission ("SEC") that may at any
time permit Warrant Holder to sell securities of the Company to the public
without registration, the Company agrees to use its Best Efforts to:
i) make and keep public information available, as
those terms are understood and defined in Rule 144, at all
times;
ii) file with the SEC in a timely manner all
reports and other documents required of the Company under
the Act and the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT"); and
iii) furnish to any Warrant Holder forthwith upon
request a written statement by the Company that it has
complied with the reporting requirements of Rule 144 and of
the Act and the Exchange Act, a copy of the most recent
annual or quarterly report of the Company, and such other
reports and documents so filed by the Company as may be
reasonably requested to permit any such Warrant Holder to
take advantage of any rule or regulation of the SEC
permitting the selling of any such securities without
registration.
4
<PAGE>
EXECUTION VERSION
5. REPRESENTATIONS AND COVENANTS OF THE PURCHASER.
The Purchaser shall not resell Warrant Shares, unless such
resale is pursuant to an effective registration statement under the Act or
pursuant to an applicable exemption from such registration requirements.
6. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES. The
number of and kind of securities purchasable upon exercise of this Warrant and
the Purchase Price shall be subject to adjustment from time to time as follows:
(a) SUBDIVISIONS, COMBINATIONS AND OTHER ISSUANCES. If the
Company shall at any time after the date hereof but prior to the expiration of
this Warrant subdivide its outstanding securities as to which purchase rights
under this Warrant exist, by split-up, spin-off, or otherwise, or combine its
outstanding securities as to which purchase rights under this Warrant exist, the
number of Warrant Shares as to which this Warrant is exercisable as of the date
of such subdivision, split-up, spin-off or combination shall forthwith be
proportionately increased in the case of a subdivision, or proportionately
decreased in the case of a combination. Appropriate proportional adjustments
(decrease in the case of subdivision, increase in the case of combination) shall
also be made to the Purchase Price payable per share, so that the aggregate
Purchase Price payable for the total number of Warrant Shares or Warrants
purchasable under this Warrant as of such date shall remain the same as it would
have been before such subdivision or combination.
(b) STOCK DIVIDEND. If at any time after the date hereof the
Company declares a dividend or other distribution on Common Stock payable in
Common Stock or other securities or rights convertible into or exchangeable for
Common Stock ("COMMON STOCK EQUIVALENTS") without payment of any consideration
by holders of Common Stock for the additional shares of Common Stock or the
Common Stock Equivalents (including the additional shares of Common Stock
issuable upon exercise or conversion thereof), then the number of shares of
Common Stock for which this Warrant may be exercised shall be increased as of
the record date (or the date of such dividend distribution if no record date is
set) for determining which holders of Common Stock shall be entitled to receive
such dividends, in proportion to the increase in the number of outstanding
shares (and shares of Common Stock issuable upon conversion of all such
securities convertible into Common Stock) of Common Stock as a result of such
dividend, and the Purchase Price shall be proportionately reduced so that the
aggregate Purchase Price for all the Warrant Shares issuable hereunder
immediately after the record date (or on the date of such distribution, if
applicable), for such dividend shall equal the aggregate Purchase Price so
payable immediately before such record date (or on the date of such
distribution, if applicable).
(c) OTHER DISTRIBUTIONS. If at any time after the date
hereof the Company distributes to holders of its Common Stock, other than as
part of its dissolution, liquidation or the winding up of its affairs, any
shares of its capital stock, any evidence of indebtedness or any of its assets
(other than Common Stock), then the number of Warrant Shares for which this
Warrant is exercisable shall be increased to equal: (i) the number of Warrant
Shares for which this Warrant is exercisable immediately prior to such event,
(ii) multiplied by a fraction, (A) the numerator of which shall be the fair
market value per share of Common Stock on the record date for the dividend
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<PAGE>
EXECUTION VERSION
or distribution, and (B) the denominator of which shall be the fair market value
price per share of Common Stock on the record date for the dividend or
distribution minus the amount allocable to one share of Common Stock of the
value (as jointly determined in good faith by the Board of Directors of the
Company and the Warrant Holder) of any and all such evidences of indebtedness,
shares of capital stock, other securities or property, so distributed. The
Purchase Price shall be reduced to equal: (i) the Purchase Price in effect
immediately before the occurrence of any event (ii) multiplied by a fraction,
(A) the numerator of which is the number of Warrant Shares for which this
Warrant is exercisable immediately before the adjustment, and (B) the
denominator of which is the number of Warrant Shares for which this Warrant is
exercisable immediately after the adjustment.
(d) MERGER, ETC. If at any time after the date hereof there
shall be a merger or consolidation of the Company with or into or a transfer of
all or substantially all of the assets of the Company to another entity, then
the Warrant Holder shall be entitled to receive upon or after such transfer,
merger or consolidation becoming effective, and upon payment of the Purchase
Price then in effect, the number of shares or other securities or property of
the Company or of the successor corporation resulting from such merger or
consolidation, which would have been received by Warrant Holder for the shares
of stock subject to this Warrant had this Warrant been exercised just prior to
such transfer, merger or consolidation becoming effective or to the applicable
record date thereof, as the case may be. The Company will not merge or
consolidate with or into any other corporation, or sell or otherwise transfer
its property, assets and business substantially as an entirety to another
corporation, unless the corporation resulting from such merger or consolidation
(if not the Company), or such transferee corporation, as the case may be, shall
expressly assume, by supplemental agreement reasonably satisfactory in form and
substance to the Warrant Holder, the due and punctual performance and observance
of each and every covenant and condition of this Warrant to be performed and
observed by the Company.
(e) RECLASSIFICATION, ETC. If at any time after the date
hereof there shall be a reorganization or reclassification of the securities as
to which purchase rights under this Warrant exist into the same or a different
number of securities of any other class or classes, then the Warrant Holder
shall thereafter be entitled to receive upon exercise of this Warrant, during
the period specified herein and upon payment of the Purchase Price then in
effect, the number of shares or other securities or property resulting from such
reorganization or reclassification, which would have been received by the
Warrant Holder for the shares of stock subject to this Warrant had this Warrant
at such time been exercised.
7. NO IMPAIRMENT. The Company will not, by amendment of its
Articles of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the Warrant Holder
against impairment. Without limiting the generality of the foregoing, the
Company (a) will not increase the par value of any Warrant Shares above the
amount payable therefor on such exercise, and (b) will take all such action as
may be reasonably necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable Warrant Shares on the exercise of
this Warrant.
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EXECUTION VERSION
8. NOTICE OF ADJUSTMENTS. Whenever the Purchase Price or number
of Shares purchasable hereunder shall be adjusted pursuant to Section 6 hereof,
the Company shall execute and deliver to the Warrant Holder a certificate
setting forth, in reasonable detail, the event requiring the adjustment, the
amount of the adjustment, the method by which such adjustment was calculated and
the Purchase Price and number of shares purchasable hereunder after giving
effect to such adjustment, and shall cause a copy of such certificate to be
mailed (by first class mail, postage prepaid) to the Warrant Holder.
9. RIGHTS AS SHAREHOLDER. Prior to exercise of this Warrant,
the Warrant Holder shall not be entitled to any rights as a shareholder of the
Company with respect to the Warrant Shares, including (without limitation) the
right to vote such shares, receive dividends or other distributions thereon or
be notified of shareholder meetings. However, in the event of any taking by the
Company of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend (other
than a cash dividend) or other distribution, any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right, the Company shall mail to
each Warrant Holder, at least 10 Trading Days prior to the date specified
therein, a notice specifying the date on which any such record date is to be
taken for the purpose of such dividend, distribution or right, and the amount
and character of such dividend, distribution or right.
10. LIMITATION ON EXERCISE. Notwithstanding anything to the
contrary contained herein, this Warrant may not be exercised by the Warrant
Holder to the extent that, after giving effect to Warrant Shares to be issued
pursuant to a Subscription Notice, the total number of shares of Common Stock
deemed beneficially owned by such holder (other than by virtue of ownership of
this Warrant, or ownership of other securities that have limitations on the
holder's rights to convert or exercise similar to the limitations set forth
herein), together with all shares of Common Stock deemed beneficially owned by
the holder's "affiliates" (as defined in Rule 144 of the Act) that would be
aggregated for purposes of determining whether a group under Section 13(d) of
the Exchange Act exists, would exceed 4.9% (the "4.9% LIMIT"); PROVIDED that (w)
each Warrant Holder shall have the right at any time and from time to time to
reduce the 4.9% Limit immediately upon notice to the Company or in the event of
a Change in Control Transaction, (x) each Warrant Holder shall have the right at
any time and from time to time to increase the 4.9% Limit or otherwise waive in
whole or in part the restrictions of this Section 10 upon 61 days' prior notice
to the Company or immediately in the event of a Change in Control Transaction,
(y) each Warrant Holder can make subsequent adjustments pursuant to (w) or (x)
any number of times from time to time (which adjustment shall be effective
immediately if it results in a decrease in the 4.9% Limit or shall be effective
upon 61 days' prior written notice or immediately in the event of a Change in
Control Transaction if it results in an increase in the 4.9% Limit) and (z) each
Warrant Holder may eliminate or reinstate this limitation at any time and from
time to time (which elimination will be effective upon 61 days' prior notice and
which reinstatement will be effective immediately) PROVIDED, FURTHER, that the
Warrant Holder shall not be permitted to waive any provision of this Section 10
to the extent that, if the Warrant Holder were to acquire additional shares of
Common Stock pursuant to such waiver, the limitation set forth in the first
sentence of this Section 10 would be exceeded if the 4.9% Limit were 9.99%.
Without limiting the foregoing, in the event of a Change in Control Transaction,
any holder may reinstate immediately (in whole or in part) the 4.9% Limit,
notwithstanding such Change in Control Transaction, without imposing such
7
<PAGE>
EXECUTION VERSION
requirement on, or otherwise changing such holder's rights with respect to, any
other Change in Control Transaction. For this purpose, any material modification
of the terms of a Change in Control Transaction will be deemed to create a new
Change in Control Transaction. The term "DEEMED BENEFICIALLY OWNED" as used in
this Warrant shall exclude shares that might otherwise be deemed beneficially
owned by reason of the redeemability of the Preferred Shares. A "CHANGE IN
CONTROL TRANSACTION" will be deemed to have occurred upon the earlier of the
announcement or consummation of a transaction or series of transactions (other
than the Merger) involving (x) any consolidation or merger of the Company with
or into any other corporation or other entity or person (whether or not the
Company is the surviving corporation), or any other corporate reorganization or
transaction or series of related transactions in which in excess of 50% of the
Company's voting power is transferred through a merger, consolidation, tender
offer or similar transaction, or (y) in excess of 50% of the Corporation's Board
of Directors consists of directors not nominated by the prior Board of Directors
of the Company, or (z) any person (as defined in Section 13(d) of the Exchange
Act, together with its affiliates and associates (as such terms are defined in
Rule 405 under the Act), beneficially owns or is deemed to beneficially own (as
described in Rule 13d-3 under the Exchange Act without regard to the 60-day
exercise period) in excess of 50% of the Company's voting power. The delivery of
a Subscription Notice by the Warrant Holder shall be deemed a representation by
such holder that it is in compliance with this paragraph.
11. REPLACEMENT OF WARRANT. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of such Warrant, the Company at its
expense promptly will execute and deliver, in lieu thereof a new Warrant of like
tenor.
12. SPECIFIC PERFORMANCE; CONSENT TO JURISDICTION; CHOICE OF LAW
(a) The Company and the Warrant Holder acknowledge and agree
that irreparable damage would occur in the event that any of the provisions of
this Warrant were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall he entitled
to an injunction or injunctions to prevent or cure breaches of the provisions of
this Warrant and to enforce specifically the terms and provisions hereof, this
being in addition to any other remedy to which either of them may be entitled by
law or equity.
8
<PAGE>
EXECUTION VERSION
(b) EACH OF THE COMPANY AND THE WARRANT HOLDER (I) HEREBY
IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL
COURTS LOCATED IN NEW YORK COUNTY, NEW YORK FOR THE PURPOSES OF ANY SUIT, ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS WARRANT AND (II) HEREBY WAIVES,
AND AGREES NOT TO ASSERT IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT
IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURT, THAT THE SUIT,
ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE OF
THE SUIT, ACTION OR PROCEEDING IS IMPROPER. EACH OF THE COMPANY AND THE WARRANT
HOLDER CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING
BY MAILING A COPY THEREOF TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES TO
IT UNDER THIS WARRANT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND
SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING IN THIS PARAGRAPH
SHALL AFFECT OR LIMIT ANY RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED
BY APPLICABLE LAW.
(c) THE COMPANY AND THE WARRANT HOLDER IRREVOCABLY WAIVE
THEIR RIGHT TO TRIAL BY JURY.
(d) THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS EXECUTED AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE
AND, WHERE APPLICABLE, FEDERAL LAW.
13. ENTIRE AGREEMENT; AMENDMENTS. This Warrant, the Exhibits
hereto and the provisions contained in the Securities Exchange Agreement or the
Registration Rights Agreement contain the entire understanding of the parties
with respect to the matters covered hereby and thereby and, except as
specifically set forth herein and therein, neither the Company nor the Warrant
Holder makes any representation, warranty, covenant or undertaking with respect
to such matters. No provision of this Agreement may be waived or amended other
than by a written instrument signed by the party against whom enforcement of any
such amendment or waiver is sought.
14. NOTICES. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be effective (a)
upon hand delivery or delivery by telex (with correct answer back received),
telecopy or facsimile at the address or number designated below (if delivered on
a business day during normal business hours where such notice is to be
received), or the first business day following such delivery (if delivered other
than on a business day during normal business hours where such notice is to be
received) or (b) on the second business day following the date of mailing by
express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:
to the Company:
Able Telcom Holding Corp.
1000 Holcomb Woods Parkway
Suite 440
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<PAGE>
EXECUTION VERSION
Roswell, GA. 30076
Attn: President
Facsimile: (770) 993-8532
to the Warrant Holder:
c/o The Palladin Group, L.P.
195 Maplewood Avenue
Maplewood NJ 07040
Attn: Robert L. Chender
Facsimile: (973) 313-6491
Either party hereto may from time to time change its address for notices under
this Section 14 by giving at least 10 days' prior written notice of such changed
address to the other party hereto.
15. MISCELLANEOUS. This Warrant and any term hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of such change, waiver, discharge
or termination is sought. The headings in this Warrant are for purposes of
reference only, and shall not limit or otherwise affect any of the terms hereof.
The invalidity or unenforceability of any provision hereof shall in no way
affect the validity or enforceability of any other provision.
16. ASSIGNMENT. This Warrant may be transferred or assigned, in
whole or in part, at any time and from time to time by the then Warrant Holder
by submitting this Warrant to the Company together with a duly executed
Assignment in substantially the form and substance of the Form of Assignment
which accompanies this Warrant and, upon the Company's receipt hereof, and in
any event, within three (3) business days thereafter, the Company shall issue a
Warrant to the Warrant Holder to evidence that portion of this Warrant, if any
as shall not have been so transferred or assigned; provided, however, that such
transfer or assignment shall be registered or qualified under all applicable
securities laws, or otherwise exempt therefrom.
17. SUCCESSORS AND ASSIGNS. This Warrant shall be binding upon
any entity succeeding to the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets.
[SIGNATURE PAGE FOLLOWS]
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<PAGE>
EXECUTION VERSION
Dated: February 4, 2000 ABLE TELCOM HOLDING CORP.
By:
--------------------------------------
Name:
Title:
[CORPORATE SEAL]
Attest:
By:
Its
(SIGNATURE PAGE OF ABLE TELCOM HOLDING CORP. COMMON STOCK PURCHASE WARRANT)
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<PAGE>
EXECUTION VERSION
(SUBSCRIPTION NOTICE)
FORM OF WARRANT EXERCISE
(TO BE SIGNED ONLY ON EXERCISE OF WARRANT)
TO: ABLE TELCOM HOLDING CORP.
ATTN: SECRETARY
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant:
_____ (A) for, and to purchase thereunder, ____________shares of
Common Stock of Able Telcom Holding Corp., a Florida
corporation (the "Common Stock"), and herewith, or by wire
transfer, makes payment of $ ______________ therefor; or
_____ (B) in a "cashless" or "net-issue exercise" for, and to
purchase thereunder, ______ shares of Common Stock, and
herewith makes payment therefor with _____________ Surrendered
Warrant Shares.
The undersigned requests that the certificates for such shares be issued in the
name of, and
_____ (A) delivered to _________________ , whose address is
_________________ ; or
_____ (B) electronically transmitted and credited to the account
of__________________, undersigned's prime broker (Account
No._______ ) with Depository Trust Company through its Deposit
Withdrawal Agent Commission system.
Dated:
____________________________________________
(Signature must conform to name of holder
as specified on the face of the Warrant)
____________________________________________
(Address)
Tax Identification Number:__________________
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<PAGE>
FORM OF ASSIGNMENT
(TO BE SIGNED ONLY ON TRANSFER OF WARRANT)
For value received, the undersigned hereby sells, assigns, and transfers unto
________________ the right represented by the within Warrant to purchase ______
shares of Common Stock of ABLE TELCOM HOLDING CORP., a Florida corporation, to
which the within Warrant relates, and appoints ________________ Attorney to
transfer such right on the books of ABLE TELCOM HOLDING CORP., a Florida
corporation, with full power of substitution of premises.
Dated: ______________
____________________________________________
(Signature must conform to name of holder
as specified on the face of the Warrant)
____________________________________________
(Address)
Signed in the presence of:
____________________________________________
<PAGE>
EXECUTION VERSION
EXHIBIT D
COMMON STOCK PURCHASE WARRANT
EXHIBIT 4.18
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. IT MAY NOT BE SOLD, OFFERED FOR SALE,
TRANSFERRED OR ASSIGNED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN APPLICABLE
EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.
February 4, 2000
ABLE TELCOM HOLDING CORP.
[Second Warrants]
Common Stock Purchase Warrant
Able Telcom Holding Corp., a Florida corporation (the "COMPANY"),
hereby certifies that for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, [____________], having an address
at [____________________________________________________________] ("PURCHASER")
or any other Warrant Holder, as defined below, is entitled, on the terms and
conditions set forth below, to purchase from the Company at any time beginning
on the date hereof and ending on the fifth anniversary of the date hereof,
100,000 fully paid and nonassessable shares of Common Stock, $.001 par value, of
the Company (the "COMMON STOCK"), at a purchase price per share of Common Stock
equal to $10.127 (the "Purchase Price"). Such Purchase Price may from time to
time be adjusted pursuant to Section 6 herein.
1. DEFINITIONS.
(a) The term "AGREEMENT" shall mean the Securities Exchange
Agreement dated as of February 4, 2000, between the Company and the Holders
signatory thereto.
(b) The term "BEST EFFORTS" means as to any party obligated
to use its Best Efforts to accomplish a particular objective that the obligated
party is required to make diligent, good faith, prompt, substantial and
persistent efforts as a prudent person desiring to achieve the applicable
objective would use in order to ensure that such objective is achieved as
expeditiously as possible.
(c) The term "CLOSING PRICE" shall have the meaning set
forth in the Agreement.
(d) The term "WARRANT HOLDER" shall mean the Purchaser or
any assignee of all or any portion of this Warrant.
(e) The term "WARRANT SHARES" shall mean the Shares of
Common Stock or other securities issuable upon exercise of this Warrant.
Capitalized terms used but not defined in this Warrant shall have the
meanings specified in the Agreement.
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2. EXERCISE OF WARRANT.
This Warrant may be exercised by the Warrant Holder, in whole or in
part, at any time and from time to time by either of the following methods:
(a) The Warrant Holder may surrender this Warrant, together with the
form of subscription at the end hereof duly executed by such Warrant Holder
("SUBSCRIPTION NOTICE"), at the offices of the Company or any transfer agent for
the Common Stock; together with payment of the aggregate Purchase Price for all
Warrant Shares exercised; or
(b) The Warrant Holder may also exercise this Warrant, in whole or in
part, in a "cashless" or "net-issue" exercise by delivering to the offices of
the Company or any transfer agent for the Common Stock this Warrant, together
with a Subscription Notice specifying the number of Warrant Shares to be
delivered to such Warrant Holder ("DELIVERABLE SHARES") and the number of
Warrant Shares with respect to which this Warrant is being surrendered in
payment of the aggregate Purchase Price for the Deliverable Shares ("SURRENDERED
SHARES"); provided that the Purchase Price multiplied by the number of
Deliverable Shares shall not exceed the value of the Surrendered Shares; and
provided further that the sum of the number of Deliverable Shares and the number
of Surrendered Shares so specified shall not exceed the aggregate number of
Warrant Shares represented by this Warrant. For the purposes of this provision,
each Warrant Share as to which this Warrant is surrendered will be attributed a
value equal to the fair market value (as defined below) of the Warrant Share
minus the Purchase Price of the Warrant Share (the "Spread"). The number of
Deliverable Shares shall be equal to (i) the number of Surrendered Shares
multiplied by the Spread; divided by (ii) the Purchase Price on the date of
exercise.
In the event that the Warrant is not exercised in full, the number of
Warrant Shares shall be reduced by the number of such Warrant Shares for which
this Warrant is exercised and/or surrendered, and the Company, at its expense,
shall within three (3) Trading Days (as defined below) issue and deliver or upon
the order of Warrant Holder a new Warrant of like tenor in the name of Warrant
Holder or as Warrant Holder (upon payment by Warrant Holder of any applicable
transfer taxes) may request, reflecting such adjusted Warrant Shares.
3. DELIVERY OF STOCK CERTIFICATES.
(a) Subject to the terms and conditions of this Warrant, as
soon as practicable after the exercise of this Warrant in full or in part, and
in any event within three (3) Trading Days thereafter, the Company shall
transmit the certificates (together with any other stock or other securities or
property to which Warrant Holder is entitled upon exercise) by messenger or
overnight delivery service to reach the address designated by such holder within
three (3) Trading Days after the receipt of the Subscription Notice ("T+3"). If
such certificates are not received by the Warrant Holder within T+3, then the
Warrant Holder will be entitled to revoke and withdraw its exercise of its
Warrant at any time prior to its receipt of those certificates.
In lieu of delivering physical certificates
representing the Warrant Shares deliverable upon exercise of Warrants, provided
the Company's transfer agent is participating in the Depository Trust Company
("DTC") Fast Automated Securities Transfer ("FAST") program, upon request of the
Warrant Holder, the Company shall use its Best Efforts to cause its transfer
agent to electronically transmit the Warrant Shares issuable upon exercise to
the Warrant Holder, by crediting the account of Warrant Holder's prime broker
with DTC through its Deposit Withdrawal Agent Commission ("DWAC") system. The
time periods for delivery described above shall apply to the electronic
transmittals through the DWAC system. The parties
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<PAGE>
agree to coordinate with DTC to accomplish this objective. The exchange pursuant
to Section 3 shall be deemed to have been made immediately prior to the close of
business on the date of the Subscription Notice. The person or persons entitled
to receive the Warrant Shares issuable upon such exercise shall be treated for
all purposes as the record holder or holders of such Common Shares at the close
of business on the date of the Subscription Notice.
The term "TRADING DAY" means (x) if the Common Stock is
listed on the New York Stock Exchange or the American Stock Exchange, a day on
which there is trading on such stock exchange, (y) if the Common Stock is not
listed on either of such stock exchanges but sale prices of the Common Stock are
reported on an automated quotation system, a day on which trading is reported on
the principal automated quotation system on which sales of the Common Stock are
reported, or (z) if the foregoing provisions are inapplicable, a day on which
quotations are reported by National Quotation Bureau Incorporated.
(b) This Warrant may not be exercised as to fractional
shares of Common Stock. In the event that the exercise of this Warrant, in full
or in part, would result in the issuance of any fractional share of Common
Stock, then in such event the Warrant Holder shall be entitled to cash equal to
the fair market value of such fractional share. For purposes of this Warrant,
"FAIR MARKET VALUE" shall equal the closing trading price of the Common Stock on
the Approved Market (an "Approved Market" is the New York Stock Exchange or the
American Stock Exchange or the Nasdaq National Market) which is the principal
trading exchange or market for the Common Stock (the "PRINCIPAL MARKET") on the
date of determination or, if the Common Stock is not listed or admitted to
trading on any Approved Market, the average of the closing bid and asked prices
on the over-the-counter market as furnished by any New York Stock Exchange
member firm reasonably selected from time to time by the Company for that
purpose and reasonably acceptable to the Warrant Holder, or, if the Common Stock
is not listed or admitted to trading on any Approved Market or traded
over-the-counter and the average price cannot be determined as contemplated
above, the fair market value of the Common Stock shall be as reasonably
determined in good faith by the Company's Board of Directors with the
concurrence of the Warrant Holder.
4. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
(a) The Company shall comply with its obligations under the
Registration Rights Agreement with respect to the Warrant Shares, including,
without limitation, the Company's obligation to have filed and declared and
maintained effective a registration statement registering the Warrant Shares
under the Securities Act of 1933, as amended (the "ACT").
(b) The Company shall use its Best Efforts to take all
necessary action and proceedings as may be required and permitted by applicable
law, rule and regulation, including, without limitation, the notification of the
Principal Market, for the legal and valid issuance of this Warrant and the
Warrant Shares to the Warrant Holder under this Warrant.
(c) From the date hereof through the last date on which this
Warrant is exercisable, the Company shall use its Best Efforts to take all steps
necessary to insure that the Common Stock remains listed on the Principal
Market.
(d) The Warrant Shares, when issued in accordance with the
terms hereof, will be duly authorized and, when paid for or issued in accordance
with the terms hereof, shall be validly issued, fully paid
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<PAGE>
and non-assessable. The Company has authorized and reserved for issuance to
Warrant Holder the requisite number of shares of Common Stock to be issued
pursuant to this Warrant.
(e) The Company shall at all times reserve and keep
available, solely for issuance and delivery as Warrant Shares hereunder, 105% of
such number of shares of Common Stock as shall from time to time be issuable
hereunder.
(f) With a view to making available to the Warrant Holder
the benefits of Rule 144 promulgated under the Act and any other rule or
regulation of the Securities and Exchange Commission ("SEC") that may at any
time permit Warrant Holder to sell securities of the Company to the public
without registration, the Company agrees to use its Best Efforts to:
i) make and keep public information available, as
those terms are understood and defined in Rule 144, at all
times;
ii) file with the SEC in a timely manner all
reports and other documents required of the Company under
the Act and the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT"); and
iii) furnish to any Warrant Holder forthwith upon
request a written statement by the Company that it has
complied with the reporting requirements of Rule 144 and of
the Act and the Exchange Act, a copy of the most recent
annual or quarterly report of the Company, and such other
reports and documents so filed by the Company as may be
reasonably requested to permit any such Warrant Holder to
take advantage of any rule or regulation of the SEC
permitting the selling of any such securities without
registration.
(g) In the event that the Company is unable to issue shares
upon exercise of this Warrant, in whole or in part, by the Holder, then the
Company shall pay to the Holder a cash payment, by wire transfer in immediately
available funds to an account designated by the Holder, per share in an amount
equal to the difference between the Purchase Price and the fair market value of
the Common Stock on the date of exercise.
5. REPRESENTATIONS AND COVENANTS OF THE PURCHASER.
The Purchaser shall not resell Warrant Shares, unless such
resale is pursuant to an effective registration statement under the Act or
pursuant to an applicable exemption from such registration requirements.
6. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES. The
number of and kind of securities purchasable upon exercise of this Warrant and
the Purchase Price shall be subject to adjustment from time to time as follows:
(a) SUBDIVISIONS, COMBINATIONS AND OTHER ISSUANCES. If the
Company shall at any time after the date hereof but prior to the expiration of
this Warrant subdivide its outstanding securities as to which purchase rights
under this Warrant exist, by split-up, spin-off, or otherwise, or combine its
outstanding securities as to which purchase rights under this Warrant exist, the
number of Warrant Shares as to which this Warrant is exercisable as of the date
of such subdivision, split-up, spin-off or combination shall forthwith be
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proportionately increased in the case of a subdivision, or proportionately
decreased in the case of a combination. Appropriate proportional adjustments
(decrease in the case of subdivision, increase in the case of combination) shall
also be made to the Purchase Price payable per share, so that the aggregate
Purchase Price payable for the total number of Warrant Shares or Warrants
purchasable under this Warrant as of such date shall remain the same as it would
have been before such subdivision or combination.
(b) STOCK DIVIDEND. If at any time after the date hereof the
Company declares a dividend or other distribution on Common Stock payable in
Common Stock or other securities or rights convertible into or exchangeable for
Common Stock ("COMMON STOCK EQUIVALENTS") without payment of any consideration
by holders of Common Stock for the additional shares of Common Stock or the
Common Stock Equivalents (including the additional shares of Common Stock
issuable upon exercise or conversion thereof), then the number of shares of
Common Stock for which this Warrant may be exercised shall be increased as of
the record date (or the date of such dividend distribution if no record date is
set) for determining which holders of Common Stock shall be entitled to receive
such dividends, in proportion to the increase in the number of outstanding
shares (and shares of Common Stock issuable upon conversion of all such
securities convertible into Common Stock) of Common Stock as a result of such
dividend, and the Purchase Price shall be proportionately reduced so that the
aggregate Purchase Price for all the Warrant Shares issuable hereunder
immediately after the record date (or on the date of such distribution, if
applicable), for such dividend shall equal the aggregate Purchase Price so
payable immediately before such record date (or on the date of such
distribution, if applicable).
(c) OTHER DISTRIBUTIONS. If at any time after the date
hereof the Company distributes to holders of its Common Stock, other than as
part of its dissolution, liquidation or the winding up of its affairs, any
shares of its capital stock, any evidence of indebtedness or any of its assets
(other than Common Stock), then the number of Warrant Shares for which this
Warrant is exercisable shall be increased to equal: (i) the number of Warrant
Shares for which this Warrant is exercisable immediately prior to such event,
(ii) multiplied by a fraction, (A) the numerator of which shall be the fair
market value per share of Common Stock on the record date for the dividend or
distribution, and (B) the denominator of which shall be the fair market value
price per share of Common Stock on the record date for the dividend or
distribution minus the amount allocable to one share of Common Stock of the
value (as jointly determined in good faith by the Board of Directors of the
Company and the Warrant Holder) of any and all such evidences of indebtedness,
shares of capital stock, other securities or property, so distributed. The
Purchase Price shall be reduced to equal: (i) the Purchase Price in effect
immediately before the occurrence of any event (ii) multiplied by a fraction,
(A) the numerator of which is the number of Warrant Shares for which this
Warrant is exercisable immediately before the adjustment, and (B) the
denominator of which is the number of Warrant Shares for which this Warrant is
exercisable immediately after the adjustment.
(d) MERGER, ETC. If at any time after the date hereof there
shall be a merger or consolidation of the Company with or into or a transfer of
all or substantially all of the assets of the Company to another entity, then
the Warrant Holder shall be entitled to receive upon or after such transfer,
merger or consolidation becoming effective, and upon payment of the Purchase
Price then in effect, the number of shares or other securities or property of
the Company or of the successor corporation resulting from such merger or
consolidation, which would have been received by Warrant Holder for the shares
of stock subject to this Warrant had this Warrant been exercised just prior to
such transfer, merger or consolidation becoming effective or to the applicable
record date thereof, as the case may be. The Company will not merge or
consolidate with or into any other corporation, or sell or otherwise transfer
its property, assets and business substantially as an entirety to another
corporation, unless the corporation resulting from such merger or consolidation
(if not the Company), or such transferee corporation, as the case may be, shall
expressly assume,
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by supplemental agreement reasonably satisfactory in form and substance to the
Warrant Holder, the due and punctual performance and observance of each and
every covenant and condition of this Warrant to be performed and observed by the
Company.
(e) RECLASSIFICATION, ETC. If at any time after the date
hereof there shall be a reorganization or reclassification of the securities as
to which purchase rights under this Warrant exist into the same or a different
number of securities of any other class or classes, then the Warrant Holder
shall thereafter be entitled to receive upon exercise of this Warrant, during
the period specified herein and upon payment of the Purchase Price then in
effect, the number of shares or other securities or property resulting from such
reorganization or reclassification, which would have been received by the
Warrant Holder for the shares of stock subject to this Warrant had this Warrant
at such time been exercised.
7. NO IMPAIRMENT. The Company will not, by amendment of its
Articles of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the Warrant Holder
against impairment. Without limiting the generality of the foregoing, the
Company (a) will not increase the par value of any Warrant Shares above the
amount payable therefor on such exercise, and (b) will take all such action as
may be reasonably necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable Warrant Shares on the exercise of
this Warrant.
8. NOTICE OF ADJUSTMENTS. Whenever the Purchase Price or number
of Shares purchasable hereunder shall be adjusted pursuant to Section 6 hereof,
the Company shall execute and deliver to the Warrant Holder a certificate
setting forth, in reasonable detail, the event requiring the adjustment, the
amount of the adjustment, the method by which such adjustment was calculated and
the Purchase Price and number of shares purchasable hereunder after giving
effect to such adjustment, and shall cause a copy of such certificate to be
mailed (by first class mail, postage prepaid) to the Warrant Holder.
9. RIGHTS AS SHAREHOLDER. Prior to exercise of this Warrant,
the Warrant Holder shall not be entitled to any rights as a shareholder of the
Company with respect to the Warrant Shares, including (without limitation) the
right to vote such shares, receive dividends or other distributions thereon or
be notified of shareholder meetings. However, in the event of any taking by the
Company of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend (other
than a cash dividend) or other distribution, any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right, the Company shall mail to
each Warrant Holder, at least 10 Trading Days prior to the date specified
therein, a notice specifying the date on which any such record date is to be
taken for the purpose of such dividend, distribution or right, and the amount
and character of such dividend, distribution or right.
10. LIMITATION ON EXERCISE. Notwithstanding anything to the
contrary contained herein, this Warrant may not be exercised by the Warrant
Holder to the extent that, after giving effect to Warrant Shares to be issued
pursuant to a Subscription Notice, the total number of shares of Common Stock
deemed beneficially owned by such holder (other than by virtue of ownership of
this Warrant, or ownership of other securities that have limitations on the
holder's rights to convert or exercise similar to the limitations set forth
herein), together with all shares of Common Stock deemed beneficially owned by
the holder's "affiliates" (as defined in Rule 144 of the Act) that would be
aggregated for purposes of determining whether a group under Section 13(d) of
the Exchange Act exists, would exceed 4.9% (the "4.9% LIMIT"); PROVIDED that (w)
each Warrant Holder
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shall have the right at any time and from time to time to reduce the 4.9% Limit
immediately upon notice to the Company or in the event of a Change in Control
Transaction, (x) each Warrant Holder shall have the right at any time and from
time to time to increase the 4.9% Limit or otherwise waive in whole or in part
the restrictions of this Section 10 upon 61 days' prior notice to the Company or
immediately in the event of a Change in Control Transaction, (y) each Warrant
Holder can make subsequent adjustments pursuant to (w) or (x) any number of
times from time to time (which adjustment shall be effective immediately if it
results in a decrease in the 4.9% Limit or shall be effective upon 61 days'
prior written notice or immediately in the event of a Change in Control
Transaction if it results in an increase in the 4.9% Limit) and (z) each Warrant
Holder may eliminate or reinstate this limitation at any time and from time to
time (which elimination will be effective upon 61 days' prior notice and which
reinstatement will be effective immediately) PROVIDED, FURTHER, that the Warrant
Holder shall not be permitted to waive any provision of this Section 10 to the
extent that, if the Warrant Holder were to acquire additional shares of Common
Stock pursuant to such waiver, the limitation set forth in the first sentence of
this Section 10 would be exceeded if the 4.9% Limit were 9.99%. Without limiting
the foregoing, in the event of a Change in Control Transaction, any holder may
reinstate immediately (in whole or in part) the 4.9% Limit, notwithstanding such
Change in Control Transaction, without imposing such requirement on, or
otherwise changing such holder's rights with respect to, any other Change in
Control Transaction. For this purpose, any material modification of the terms of
a Change in Control Transaction will be deemed to create a new Change in Control
Transaction. The term "DEEMED BENEFICIALLY OWNED" as used in this Warrant shall
exclude shares that might otherwise be deemed beneficially owned by reason of
the redeemability of the Preferred Shares. A "CHANGE IN CONTROL TRANSACTION"
will be deemed to have occurred upon the earlier of the announcement or
consummation of a transaction or series of transactions (other than the Merger)
involving (x) any consolidation or merger of the Company with or into any other
corporation or other entity or person (whether or not the Company is the
surviving corporation), or any other corporate reorganization or transaction or
series of related transactions in which in excess of 50% of the Company's voting
power is transferred through a merger, consolidation, tender offer or similar
transaction, or (y) in excess of 50% of the Corporation's Board of Directors
consists of directors not nominated by the prior Board of Directors of the
Company, or (z) any person (as defined in Section 13(d) of the Exchange Act,
together with its affiliates and associates (as such terms are defined in Rule
405 under the Act), beneficially owns or is deemed to beneficially own (as
described in Rule 13d-3 under the Exchange Act without regard to the 60-day
exercise period) in excess of 50% of the Company's voting power. The delivery of
a Subscription Notice by the Warrant Holder shall be deemed a representation by
such holder that it is in compliance with this paragraph.
11. REPLACEMENT OF WARRANT. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of such Warrant, the Company at its
expense promptly will execute and deliver, in lieu thereof a new Warrant of like
tenor.
12. SPECIFIC PERFORMANCE; CONSENT TO JURISDICTION; CHOICE OF LAW
(a) The Company and the Warrant Holder acknowledge and agree
that irreparable damage would occur in the event that any of the provisions of
this Warrant were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall he entitled
to an injunction or injunctions to prevent or cure breaches of the provisions of
this Warrant and to enforce specifically the terms and provisions hereof, this
being in addition to any other remedy to which either of them may be entitled by
law or equity.
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(b) EACH OF THE COMPANY AND THE WARRANT HOLDER (I) HEREBY
IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL
COURTS LOCATED IN NEW YORK COUNTY, NEW YORK FOR THE PURPOSES OF ANY SUIT, ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS WARRANT AND (II) HEREBY WAIVES,
AND AGREES NOT TO ASSERT IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT
IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURT, THAT THE SUIT,
ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE OF
THE SUIT, ACTION OR PROCEEDING IS IMPROPER. EACH OF THE COMPANY AND THE WARRANT
HOLDER CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING
BY MAILING A COPY THEREOF TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES TO
IT UNDER THIS WARRANT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND
SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING IN THIS PARAGRAPH
SHALL AFFECT OR LIMIT ANY RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED
BY APPLICABLE LAW.
(c) THE COMPANY AND THE WARRANT HOLDER IRREVOCABLY WAIVE
THEIR RIGHT TO TRIAL BY JURY.
(d) THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS EXECUTED AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE
AND, WHERE APPLICABLE, FEDERAL LAW.
13. ENTIRE AGREEMENT; AMENDMENTS. This Warrant, the Exhibits
hereto and the provisions contained in the Securities Exchange Agreement or the
Registration Rights Agreement contain the entire understanding of the parties
with respect to the matters covered hereby and thereby and, except as
specifically set forth herein and therein, neither the Company nor the Warrant
Holder makes any representation, warranty, covenant or undertaking with respect
to such matters. No provision of this Agreement may be waived or amended other
than by a written instrument signed by the party against whom enforcement of any
such amendment or waiver is sought.
14. NOTICES. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be effective (a)
upon hand delivery or delivery by telex (with correct answer back received),
telecopy or facsimile at the address or number designated below (if delivered on
a business day during normal business hours where such notice is to be
received), or the first business day following such delivery (if delivered other
than on a business day during normal business hours where such notice is to be
received) or (b) on the second business day following the date of mailing by
express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:
to the Company:
Able Telcom Holding Corp.
1000 Holcomb Woods Parkway
Suite 440
Roswell, GA. 30076
Attn: President
Facsimile: (770) 993-8532
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to the Warrant Holder:
c/o The Palladin Group, L.P.
195 Maplewood Avenue
Maplewood NJ 07040
Attn: Robert L. Chender
Facsimile: (973) 313-6491
Either party hereto may from time to time change its address for notices under
this Section 14 by giving at least 10 days' prior written notice of such changed
address to the other party hereto.
15. MISCELLANEOUS. This Warrant and any term hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of such change, waiver, discharge
or termination is sought. The headings in this Warrant are for purposes of
reference only, and shall not limit or otherwise affect any of the terms hereof.
The invalidity or unenforceability of any provision hereof shall in no way
affect the validity or enforceability of any other provision.
16. ASSIGNMENT. This Warrant may be transferred or assigned, in
whole or in part, at any time and from time to time by the then Warrant Holder
by submitting this Warrant to the Company together with a duly executed
Assignment in substantially the form and substance of the Form of Assignment
which accompanies this Warrant and, upon the Company's receipt hereof, and in
any event, within three (3) business days thereafter, the Company shall issue a
Warrant to the Warrant Holder to evidence that portion of this Warrant, if any
as shall not have been so transferred or assigned; provided, however, that such
transfer or assignment shall be registered or qualified under all applicable
securities laws, or otherwise exempt therefrom.
17. SUCCESSORS AND ASSIGNS. This Warrant shall be binding upon
any entity succeeding to the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets.
[SIGNATURE PAGE FOLLOWS]
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Dated: February 4, 2000 ABLE TELCOM HOLDING CORP.
By:
--------------------------------------
Name:
Title:
[CORPORATE SEAL]
Attest:
By:
Its
(SIGNATURE PAGE OF ABLE TELCOM HOLDING CORP. COMMON STOCK PURCHASE WARRANT)
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<PAGE>
(SUBSCRIPTION NOTICE)
FORM OF WARRANT EXERCISE
(TO BE SIGNED ONLY ON EXERCISE OF WARRANT)
TO: ABLE TELCOM HOLDING CORP.
ATTN: SECRETARY
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant:
_____ (A) for, and to purchase thereunder, ____________ shares of
Common Stock of Able Telcom Holding Corp., a Florida
corporation (the "Common Stock"), and herewith, or by wire
transfer, makes payment of $ _____________ therefor; or
_____ (B) in a "cashless" or "net-issue exercise" for, and to
purchase thereunder, ______ shares of Common Stock, and
herewith makes payment therefor with _____________ Surrendered
Warrant Shares.
The undersigned requests that the certificates for such shares be issued
in the name of, and
_____ (A) delivered to ___________________ , whose address is
__________________ ; or
_____ (B) electronically transmitted and credited to the account of
_______________ , undersigned's prime broker (Account
No.________________ ) with Depository Trust Company through
its Deposit Withdrawal Agent Commission system.
Dated:
___________________________________________
(Signature must conform to name of holder
as specified on the face of the Warrant)
___________________________________________
(Address)
Tax Identification Number:_________________
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<PAGE>
FORM OF ASSIGNMENT
(TO BE SIGNED ONLY ON TRANSFER OF WARRANT)
For value received, the undersigned hereby sells, assigns, and transfers unto
________________ the right represented by the within Warrant to purchase
_____________ shares of Common Stock of ABLE TELCOM HOLDING CORP., a Florida
corporation, to which the within Warrant relates, and appoints ________________
Attorney to transfer such right on the books of ABLE TELCOM HOLDING CORP., a
Florida corporation, with full power of substitution of premises.
Dated: ______________
___________________________________________
(Signature must conform to name of holder
as specified on the face of the Warrant)
___________________________________________
(Address)
Signed in the presence of:
___________________________________________
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EXHIBIT 4.19
EXECUTION VERSION
SECURITIES EXCHANGE AGREEMENT
This SECURITIES EXCHANGE AGREEMENT is dated as of February 4, 2000 (the
"Agreement") by and between RGC International Investors, LDC (the "Holder") and
Able Telcom Holding Corp. ("Company").
WHEREAS, the Holder has entered into that certain Convertible Preferred
Stock Purchase Agreement with the Company, dated June 26, 1998, including all
exhibits thereto, attached hereto as EXHIBIT A (the "Purchase Agreement"); and
pursuant thereto, on June 30, 1998, the Holder acquired 2,000 shares of Series B
Preferred Stock (the "Preferred Shares");
WHEREAS, the Holder currently holds 375 Preferred Shares with a
Conversion Price equal to $2.844; and
WHEREAS, the Holder desires to exchange 375 Preferred Shares and, in
consideration of such exchange, the Company desires to issue to the Holder
Common Stock, warrants exercisable for shares of Common Stock and the Closing
Cash Payment (as defined below).
NOW, THEREFORE, intending to be legally bound hereby, the parties
hereto agree as follows:
ARTICLE 1.
EXCHANGE OF THE PREFERRED SHARES
1.1 EXCHANGE OF THE PREFERRED SHARES AND PAYMENT OF THE CLOSING CASH
PAYMENT. At the Closing (as defined below):
(a) The Company will issue and deliver to the Holder 500,000
shares of Common Stock.
(b) The Company will issue and deliver to the Holder warrants
exercisable for 100,000 shares of Common Stock at a price per share equal to
130% of the Closing Price (as defined in the Warrants) (the "Warrants") attached
hereto as EXHIBIT B.
(c) The Company will pay to the Holder a cash payment, by wire
transfer in immediately available funds to an account designated by the Holder,
in an amount equal to $5,031,978 (the "Closing Cash Payment").
(d) The Company will deliver an executed Registration Rights
Agreement dated February 4, 2000 covering the Common Stock and the shares of
Common Stock issuable upon exercise of the Warrants.
(e) The Company will deliver to the Holder an opinion of
counsel to the Company satisfactory in form and substance to the Holder.
(f) The Holder will deliver to the Company the Preferred
Shares.
<PAGE>
(g) The closing of the exchange of the Preferred Shares and
the issuance of the Common Stock and Warrants (the "Closing"), shall take place
at the offices of Arnold & Porter, 555 12th Street N.W., Washington, D.C., at
10:00 a.m., local time on February 4, 2000 or such other time and place and/or
on such other date as the Holder and the Company may agree. As conditions to the
Closing, all of the representations and warranties contained in Sections 1.2 and
1.3 hereof shall be true and correct as of the Closing as certified by both the
Holder and Company at the Closing.
1.2 COMPANY REPRESENTATIONS AND WARRANTIES.
In connection with the exchange of the Preferred Shares and the
issuance of the Common Stock and Warrants hereunder, the Company represents and
warrants to the Holder that:
(a) The Company has all requisite corporate power and
authority to enter into and perform this Agreement and to consummate the
transaction contemplated hereby and to issue the Common Stock and Warrants in
accordance with the terms hereof.
(b) The execution and delivery of this Agreement and the
Warrants and the consummation by the Company of the transactions contemplated
hereby and thereby, including the issuance of the Common Stock and the Warrants
contemplated by this Agreement, have been duly authorized by all necessary
corporate action, and no further consent or authorization of the Company or its
Board of Directors (or any committee or subcommittee thereof) or its
stockholders is required.
(c) This Agreement constitutes, and upon execution, issuance
and delivery thereof, the Warrants and the Registration Rights Agreement shall
constitute, valid and binding obligations of the Company enforceable against the
Company in accordance with their terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the enforcement
of creditors' rights and remedies or by other equitable principles of general
application.
(d) The Common Stock and the shares of Common Stock issuable
upon the exercise of the Warrants are duly authorized and reserved for issuance
and, upon issuance in accordance with the terms of this Agreement (in the case
of the Common Stock) and upon exercise of the Warrants in accordance with the
Warrants (in the case of shares issuable upon exercise of the Warrants), such
Common Stock and such shares of Common Stock issuable upon the exercise of the
Warrants, will be validly issued, fully paid and non-assessable, free and clear
of any and all taxes, liens, claims and encumbrances, and entitled to be traded
on the Nasdaq NMS, the American Stock Exchange or the New York Stock Exchange,
and the holders of such Common Stock and such shares of Common Stock issuable
upon the exercise of the Warrants shall be entitled to all rights and
preferences accorded to a holder of Common Stock. The outstanding shares of
Common Stock are currently listed on the Nasdaq NMS.
1.3 HOLDER'S REPRESENTATIONS AND WARRANTIES
In connection with the exchange of the Preferred Shares and the
issuance of the Common Stock and Warrants hereunder, the Holder represents and
warrants to the Company that:
(a) The Holder has the legal capacity and authority to enter
into and perform all of its obligations under this Agreement. This Agreement
constitutes the legal, valid and binding
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<PAGE>
obligation of the Holder, enforceable against the Holder in accordance with its
terms. The execution, delivery and performance of this Agreement does not and
will not conflict with, violate, cause a breach of or constitute a default under
(i) any agreement, contract or other instrument or obligation to which the
Holder is a party or by which the Holder is bound or (ii) any judgment, order,
decree, statute, rule or regulation to which the Holder is subject.
(b) The Holder is an "accredited investor," as such term is
defined in Rule 501 of Regulation D promulgated under the Act. The Holder and
its agents and representatives have such knowledge and experience in financial
and business matters as to enable it to utilize the information made available
to them in connection with the transactions contemplated hereby to evaluate the
merits and risks of the exchange contemplated hereby and to make an informed
decision with respect thereto, and such an evaluation and informed decision have
been made.
(c) The Holder is entering into this Agreement for its own
account and the Holder has no present arrangement (whether or not legally
binding) at any time to sell the Common Stock or Warrants to or through any
person or entity; PROVIDED, however, that by making the representations herein,
the Holder does not agree to hold the Common Stock or Warrants for any minimum
or other specific term and reserves the right to dispose of the Common Stock and
Warrants at any time in accordance with federal and state securities laws
applicable to such disposition.
ARTICLE 2.
GENERAL PROVISIONS
2.1 LEGENDS. The Holder understands and agrees that, in addition to any
other legends required by applicable law, the certificate or certificates
representing the Common Stock and the Warrants will bear legends substantially
to the effect set forth below and that a stop transfer order may be placed with
respect thereto.
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
TRANSFERRED OR ASSIGNED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN
APPLICABLE EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.
2.2 SURVIVAL. The representations, warranties and covenants contained
in this Agreement shall survive the exchange of the Preferred Shares pursuant to
this Agreement.
2.3 AMENDMENT. This Agreement may be amended, or any provision hereof
may be waived, at any time by an agreement in writing of the parties hereto.
2.4 ENTIRE AGREEMENT; SUCCESSORS. This Agreement contains the entire
agreement among the parties hereto with respect to the transactions contemplated
hereunder and supersedes all prior arrangements or understandings with respect
thereto, written or oral, other than documents referred to herein. The terms and
conditions of this Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective successors and permitted assigns.
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<PAGE>
2.5 NO ASSIGNMENT. No party hereto may assign any of its rights or
obligations under this Agreement to any other person without the written consent
of the other party.
2.6 NOTICES. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered personally,
by facsimile or sent by overnight express or by registered or certified mail,
postage prepaid, addressed as follows:
The Holder:
c/o Rose Glen Capital Management, L.P.
3 Bala Plaza East, Suite 200
251 St. Asaphs Road
Bala Cynwyd, PA 19004
Attn: Wayne Bloch
Facsimile: 610-617-0570
The Company:
Able Telcom Holding Corp.
1000 Holcomb Woods Parkway
Suite 440
Roswell, GA. 30076
Attn: President
Facsimile: (770) 993-8532
All such deliveries shall be deemed effective when received by the
person entitled to such receipt or when delivery has been attempted but refused
by such person. Any party may change the person or address to which such
deliveries shall be made with respect to such party by delivering notice thereof
to the other party hereto in accordance with this Section.
2.7 CAPTIONS. The captions contained in this Agreement are for
reference purposes only and are not part of this Agreement.
2.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
2.9 GOVERNING LAW AND VENUE. The validity, interpretation, construction
and performance of this Agreement shall be governed by the laws of the State of
New York applicable to agreements made and entirely to be performed within such
jurisdiction. The party bringing any action under this Agreement shall only be
entitled to choose the federal or state courts in the State of New York as the
venue for such action, and each party consents to the jurisdiction of the court
chosen in such manner for such action.
2.10 FURTHER ASSURANCES. Subject to the terms and conditions herein
provided, each of the parties hereto shall use reasonable efforts to take, or
cause to be taken, such action, to execute and deliver, or cause to be executed
and delivered, such additional documents and instruments and to do, or cause to
be done, all things necessary, proper or advisable under the provisions of this
4
<PAGE>
Agreement and under applicable law to consummate and make effective the
transactions contemplated by this Agreement.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
HOLDER:
RGC INTERNATIONAL INVESTORS, LDC
By: Rose Glen Capital Management, L.P.
Investment Manager
By: RGC General Partner Corp, as
General Partner
_____________________________________
By: Wayne D. Bloch
Title: Managing Director
ABLE TELCOM HOLDING CORP.
By:_________________________________________
Name:_______________________________________
Title:______________________________________
6
<PAGE>
EXHIBIT B
COMMON STOCK PURCHASE WARRANT
7
EXHIBIT 4.20
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. IT MAY NOT BE SOLD, OFFERED FOR SALE,
TRANSFERRED OR ASSIGNED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN APPLICABLE
EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.
February 4, 2000
ABLE TELCOM HOLDING CORP.
Common Stock Purchase Warrant
Able Telcom Holding Corp., a Florida corporation (the "COMPANY"),
hereby certifies that for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, RGC International Investors LDC,
having an address c/o Rose Glen Capital Management, L.P., 3 Bala Plaza East,
Suite 200, 251 St. Asaphs Road, Bala Cynwyd, PA 19004 ("PURCHASER") or any other
Warrant Holder, as defined below, is entitled, on the terms and conditions set
forth below, to purchase from the Company at any time beginning on the date
hereof and ending on the fifth anniversary of the date hereof, 100,000 fully
paid and nonassessable shares of Common Stock, $.001 par value, of the Company
(the "COMMON STOCK"), at a purchase price per share of Common Stock equal to
$10.127 (the "Purchase Price"). Such Purchase Price may from time to time be
adjusted pursuant to Section 6 herein.
1. DEFINITIONS.
(a) The term "AGREEMENT" shall mean the Securities Exchange
Agreement dated as of February 4, 2000, between the Company and the Purchaser.
(b) The term "APPROVED MARKET" shall mean the Nasdaq
National Market or the American Stock Exchange or the New York Stock Exchange.
(b) The term "BEST EFFORTS" means as to any party obligated
to use its Best Efforts to accomplish a particular objective that the obligated
party is required to make diligent, good faith, prompt, substantial and
persistent efforts as a prudent person desiring to achieve the applicable
objective would use in order to ensure that such objective is achieved as
expeditiously as possible.
(c) The term "CLOSING DATE" means the date hereof.
(d) The term "TRADING DAY" means any day on which the Common
Stock is traded for any period on the Nasdaq National Market, or on the
principal securities exchange or other market where the Common Stock is listed
or traded.
(e) The term "WARRANT HOLDER" shall mean the Purchaser or
any assignee of all or any portion of this Warrant.
(f) The term "WARRANT SHARES" shall mean the Shares of
Common Stock or other securities issuable upon exercise of this Warrant.
Capitalized terms used but not defined in this Warrant shall have the
meanings specified in the Agreement.
<PAGE>
2. EXERCISE OF WARRANT.
This Warrant may be exercised by the Warrant Holder, in whole or in
part, at any time and from time to time by either of the following methods:
(a) The Warrant Holder may surrender this Warrant, together with the
form of subscription at the end hereof duly executed by such Warrant Holder
("SUBSCRIPTION NOTICE"), at the offices of the Company or any transfer agent for
the Common Stock; together with payment of the aggregate Purchase Price for all
Warrant Shares exercised; or
(b) The Warrant Holder may also exercise this Warrant, in whole or in
part, in a "cashless" or "net-issue" exercise by delivering to the offices of
the Company or any transfer agent for the Common Stock this Warrant, together
with a Subscription Notice specifying the number of Warrant Shares to be
delivered to such Warrant Holder ("DELIVERABLE SHARES") and the number of
Warrant Shares with respect to which this Warrant is being surrendered in
payment of the aggregate Purchase Price for the Deliverable Shares ("SURRENDERED
SHARES"); provided that the Purchase Price multiplied by the number of
Deliverable Shares shall not exceed the value of the Surrendered Shares; and
provided further that the sum of the number of Deliverable Shares and the number
of Surrendered Shares so specified shall not exceed the aggregate number of
Warrant Shares represented by this Warrant. For the purposes of this provision,
each Warrant Share as to which this Warrant is surrendered will be attributed a
value equal to the fair market value (as defined below) of the Warrant Share
minus the Purchase Price of the Warrant Share (the "Spread"). The number of
Deliverable Shares shall be equal to (i) the number of Surrendered Shares
multiplied by the Spread; divided by (ii) the Purchase Price of this Warrant on
the date of exercise.
In the event that the Warrant is not exercised in full, the number of
Warrant Shares shall be reduced by the number of such Warrant Shares for which
this Warrant is exercised and/or surrendered, and the Company, at its expense,
shall within three (3) Trading Days (as defined below) issue and deliver or upon
the order of Warrant Holder a new Warrant of like tenor in the name of Warrant
Holder or as Warrant Holder (upon payment by Warrant Holder of any applicable
transfer taxes) may request, reflecting such adjusted Warrant Shares.
3. DELIVERY OF STOCK CERTIFICATES.
(a) Subject to the terms and conditions of this Warrant, as
soon as practicable after the exercise of this Warrant in full or in part, and
in any event within three (3) Trading Days thereafter, the Company shall
transmit the certificates (together with any other stock or other securities or
property to which Warrant Holder is entitled upon exercise) by messenger or
overnight delivery service to reach the address designated by such holder within
three (3) Trading Days after the receipt of the Subscription Notice ("T+3"). If
such certificates are not received by the Warrant Holder within T+3, then the
Warrant Holder will be entitled to revoke and withdraw its exercise of its
Warrant at any time prior to its receipt of those certificates.
In lieu of delivering physical certificates representing the
Warrant Shares deliverable upon exercise of Warrants, provided the Company's
transfer agent is participating in the Depository Trust Company ("DTC") Fast
Automated Securities Transfer ("FAST") program, upon request of the Warrant
Holder, the Company shall use its Best Efforts to cause its transfer agent to
electronically transmit the Warrant Shares issuable upon exercise to the Warrant
Holder, by crediting the account of Warrant Holder's prime broker with DTC
through its Deposit Withdrawal Agent Commission ("DWAC") system. The time
periods for delivery described above shall apply to the electronic transmittals
through the DWAC system. The parties agree to coordinate with DTC to accomplish
this objective. The exchange pursuant to Section 3 shall be deemed to have been
made immediately prior to the close of business on the date of the Subscription
Notice. The person or persons entitled to receive the Warrant Shares issuable
upon such exercise shall be treated for all purposes as the record holder or
holders of such Common Shares at the close of business on the date of the
Subscription Notice.
(b) This Warrant may not be exercised as to fractional
shares of Common Stock. In the event that the exercise of this Warrant, in full
or in part, would result in the issuance of any fractional share of Common
Stock, then in such event the Warrant Holder shall be entitled to cash equal to
the fair market value of such fractional share. For purposes of this Warrant,
"FAIR MARKET VALUE" shall equal the closing trading price of the Common Stock on
the Approved Market which is the principal trading exchange or market for the
Common Stock (the "PRINCIPAL MARKET") on the date of determination or, if the
Common Stock is not listed or admitted to trading on any Approved Market, the
average of the
<PAGE>
closing bid and asked prices on the over-the-counter market as furnished by any
New York Stock Exchange member firm reasonably selected from time to time by the
Company for that purpose and reasonably acceptable to the Warrant Holder, or, if
the Common Stock is not listed or admitted to trading on any Approved Market or
traded over-the-counter and the average price cannot be determined as
contemplated above, the fair market value of the Common Stock shall be as
reasonably determined in good faith by the Company's Board of Directors with the
concurrence of the Warrant Holder.
4. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
(a) The Company shall comply with its obligations under the
Registration Rights Agreement with respect to the Warrant Shares, including,
without limitation, the Company's obligation to have filed and declared and
maintained effective a registration statement registering the Warrant Shares
under the Securities Act of 1933, as amended (the "ACT").
(b) The Company shall use its Best Efforts to take all
necessary action and proceedings as may be required and permitted by applicable
law, rule and regulation, including, without limitation, the notification of the
Principal Market, for the legal and valid issuance of this Warrant and the
Warrant Shares to the Warrant Holder under this Warrant.
(c) From the date hereof through the last date on which this
Warrant is exercisable, the Company shall use its Best Efforts to take all steps
necessary to insure that the Common Stock remains listed on the Principal
Market.
(d) The Warrant Shares, when issued in accordance with the
terms hereof, will be duly authorized and, when paid for or issued in accordance
with the terms hereof, shall be validly issued, fully paid and non-assessable.
The Company has authorized and reserved for issuance to Warrant Holder the
requisite number of shares of Common Stock to be issued pursuant to this
Warrant.
(e) The Company shall at all times reserve and keep
available, solely for issuance and delivery as Warrant Shares hereunder, 105% of
such number of shares of Common Stock as shall from time to time be issuable
hereunder.
(f) With a view to making available to the Warrant Holder
the benefits of Rule 144 promulgated under the Act and any other rule or
regulation of the Securities and Exchange Commission ("SEC") that may at any
time permit Warrant Holder to sell securities of the Company to the public
without registration, the Company agrees to use its Best Efforts to:
i) make and keep public information available, as
those terms are understood and defined in Rule 144, at all
times;
ii) file with the SEC in a timely manner all reports
and other documents required of the Company under the Act and
the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT"); and
iii) furnish to any Warrant Holder forthwith upon
request a written statement by the Company that it has
complied with the reporting requirements of Rule 144 and of
the Act and the Exchange Act, a copy of the most recent annual
or quarterly report of the Company, and such other reports and
documents so filed by the Company as may be reasonably
requested to permit any such Warrant Holder to take advantage
of any rule or regulation of the SEC permitting the selling of
any such securities without registration.
(g) In the event that the Company is unable to issue shares
upon exercise of this Warrant, in whole or in part, by the Holder, then the
Company shall pay to the Holder a cash payment, by wire transfer in immediately
available funds to an account designated by the Holder, per share in an amount
equal to the difference between the Purchase Price and the fair market value of
the Common Stock on the date of exercise.
5. REPRESENTATIONS AND COVENANTS OF THE PURCHASER.
<PAGE>
The Purchaser shall not resell Warrant Shares, unless such
resale is pursuant to an effective registration statement under the Act or
pursuant to an applicable exemption from such registration requirements.
6. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES. The number of
and kind of securities purchasable upon exercise of this Warrant and the
Purchase Price shall be subject to adjustment from time to time as follows:
(a) SUBDIVISIONS, COMBINATIONS AND OTHER ISSUANCES. If the
Company shall at any time after the date hereof but prior to the expiration of
this Warrant subdivide its outstanding securities as to which purchase rights
under this Warrant exist, by split-up, spin-off, or otherwise, or combine its
outstanding securities as to which purchase rights under this Warrant exist, the
number of Warrant Shares as to which this Warrant is exercisable as of the date
of such subdivision, split-up, spin-off or combination shall forthwith be
proportionately increased in the case of a subdivision, or proportionately
decreased in the case of a combination. Appropriate proportional adjustments
(decrease in the case of subdivision, increase in the case of combination) shall
also be made to the Purchase Price payable per share, so that the aggregate
Purchase Price payable for the total number of Warrant Shares or Warrants
purchasable under this Warrant as of such date shall remain the same as it would
have been before such subdivision or combination.
(b) STOCK DIVIDEND. If at any time after the date hereof the
Company declares a dividend or other distribution on Common Stock payable in
Common Stock or other securities or rights convertible into or exchangeable for
Common Stock ("COMMON STOCK EQUIVALENTS") without payment of any consideration
by holders of Common Stock for the additional shares of Common Stock or the
Common Stock Equivalents (including the additional shares of Common Stock
issuable upon exercise or conversion thereof), then the number of shares of
Common Stock for which this Warrant may be exercised shall be increased as of
the record date (or the date of such dividend distribution if no record date is
set) for determining which holders of Common Stock shall be entitled to receive
such dividends, in proportion to the increase in the number of outstanding
shares (and shares of Common Stock issuable upon conversion of all such
securities convertible into Common Stock) of Common Stock as a result of such
dividend, and the Purchase Price shall be proportionately reduced so that the
aggregate Purchase Price for all the Warrant Shares issuable hereunder
immediately after the record date (or on the date of such distribution, if
applicable), for such dividend shall equal the aggregate Purchase Price so
payable immediately before such record date (or on the date of such
distribution, if applicable).
(c) OTHER DISTRIBUTIONS. If at any time after the date
hereof the Company distributes to holders of its Common Stock, other than as
part of its dissolution, liquidation or the winding up of its affairs, any
shares of its capital stock, any evidence of indebtedness or any of its assets
(other than Common Stock), then the number of Warrant Shares for which this
Warrant is exercisable shall be increased to equal: (i) the number of Warrant
Shares for which this Warrant is exercisable immediately prior to such event,
(ii) multiplied by a fraction, (A) the numerator of which shall be the fair
market value per share of Common Stock on the record date for the dividend or
distribution, and (B) the denominator of which shall be the fair market value
price per share of Common Stock on the record date for the dividend or
distribution minus the amount allocable to one share of Common Stock of the
value (as jointly determined in good faith by the Board of Directors of the
Company and the Warrant Holder) of any and all such evidences of indebtedness,
shares of capital stock, other securities or property, so distributed. The
Purchase Price shall be reduced to equal: (i) the Purchase Price in effect
immediately before the occurrence of any event (ii) multiplied by a fraction,
(A) the numerator of which is the number of Warrant Shares for which this
Warrant is exercisable immediately before the adjustment, and (B) the
denominator of which is the number of Warrant Shares for which this Warrant is
exercisable immediately after the adjustment.
(d) MERGER, ETC. If at any time after the date hereof there
shall be a merger or consolidation of the Company with or into or a transfer of
all or substantially all of the assets of the Company to another entity, then
the Warrant Holder shall be entitled to receive upon or after such transfer,
merger or consolidation becoming effective, and upon payment of the Purchase
Price then in effect, the number of shares or other securities or property of
the Company or of the successor corporation resulting from such merger or
consolidation, which would have been received by Warrant Holder for the shares
of stock subject to this Warrant had this Warrant been exercised just prior to
such transfer, merger or consolidation becoming effective or to the applicable
record date thereof, as the case may be. The Company will not merge or
consolidate with or into any other corporation, or sell or otherwise transfer
its property, assets and business substantially as an entirety to another
corporation, unless the corporation resulting from such merger or consolidation
(if not the Company), or such transferee corporation, as the case may be, shall
expressly assume, by supplemental agreement reasonably satisfactory in form and
substance to the Warrant Holder, the due and punctual performance and observance
of each and every covenant and condition of this Warrant to be performed and
observed by the Company.
<PAGE>
(e) RECLASSIFICATION, ETC. If at any time after the date
hereof there shall be a reorganization or reclassification of the securities as
to which purchase rights under this Warrant exist into the same or a different
number of securities of any other class or classes, then the Warrant Holder
shall thereafter be entitled to receive upon exercise of this Warrant, during
the period specified herein and upon payment of the Purchase Price then in
effect, the number of shares or other securities or property resulting from such
reorganization or reclassification, which would have been received by the
Warrant Holder for the shares of stock subject to this Warrant had this Warrant
at such time been exercised.
7. NO IMPAIRMENT. The Company will not, by amendment of its Articles
of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the Warrant Holder
against impairment. Without limiting the generality of the foregoing, the
Company (a) will not increase the par value of any Warrant Shares above the
amount payable therefor on such exercise, and (b) will take all such action as
may be reasonably necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable Warrant Shares on the exercise of
this Warrant.
8. NOTICE OF ADJUSTMENTS. Whenever the Purchase Price or number of
Shares purchasable hereunder shall be adjusted pursuant to Section 6 hereof, the
Company shall execute and deliver to the Warrant Holder a certificate setting
forth, in reasonable detail, the event requiring the adjustment, the amount of
the adjustment, the method by which such adjustment was calculated and the
Purchase Price and number of shares purchasable hereunder after giving effect to
such adjustment, and shall cause a copy of such certificate to be mailed (by
first class mail, postage prepaid) to the Warrant Holder.
9. RIGHTS AS SHAREHOLDER. Prior to exercise of this Warrant, the
Warrant Holder shall not be entitled to any rights as a shareholder of the
Company with respect to the Warrant Shares, including (without limitation) the
right to vote such shares, receive dividends or other distributions thereon or
be notified of shareholder meetings. However, in the event of any taking by the
Company of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend (other
than a cash dividend) or other distribution, any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right, the Company shall mail to
each Warrant Holder, at least 10 Trading Days prior to the date specified
therein, a notice specifying the date on which any such record date is to be
taken for the purpose of such dividend, distribution or right, and the amount
and character of such dividend, distribution or right.
10. LIMITATION ON EXERCISE. Notwithstanding anything in this Warrant
to the contrary, in no event shall the Warrant Holder be entitled to exercise a
number of Warrants (or portions thereof) in excess of the number of Warrants (or
portions thereof) upon exercise of which the sum of (i) the number of shares of
Common Stock beneficially owned by the Warrant Holder and its affiliates (other
than shares of Common Stock which may be deemed beneficially owned through
ownership of the unexercised Warrants and the unexercised or unconverted portion
of any other securities of the Company subject to a limitation on conversion or
exercise analogous to the limitation contained herein) and (ii) the number of
shares of Common Stock issuable upon exercise of the Warrants (or portions
thereof) with respect to which the determination described herein is being made,
would result in beneficial ownership by the Warrant Holder and its affiliates of
more than 4.9% of the outstanding shares of Common Stock. For purposes of the
immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and Regulation 13D-G thereunder, except as otherwise provided in clause
(i) hereof.
11. REPLACEMENT OF WARRANT. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of such Warrant, the Company at its
expense promptly will execute and deliver, in lieu thereof a new Warrant of like
tenor.
12. SPECIFIC PERFORMANCE; CONSENT TO JURISDICTION; CHOICE OF LAW
(a) The Company and the Warrant Holder acknowledge and agree
that irreparable damage would occur in the event that any of the provisions of
this Warrant were not performed in accordance with their specific terms or
<PAGE>
were otherwise breached. It is accordingly agreed that the parties shall he
entitled to an injunction or injunctions to prevent or cure breaches of the
provisions of this Warrant and to enforce specifically the terms and provisions
hereof, this being in addition to any other remedy to which either of them may
be entitled by law or equity.
(b) EACH OF THE COMPANY AND THE WARRANT HOLDER (I) HEREBY
IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL
COURTS LOCATED IN NEW YORK COUNTY, NEW YORK FOR THE PURPOSES OF ANY SUIT, ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS WARRANT AND (II) HEREBY WAIVES,
AND AGREES NOT TO ASSERT IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT
IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURT, THAT THE SUIT,
ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE OF
THE SUIT, ACTION OR PROCEEDING IS IMPROPER. EACH OF THE COMPANY AND THE WARRANT
HOLDER CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING
BY MAILING A COPY THEREOF TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES TO
IT UNDER THIS WARRANT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND
SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING IN THIS PARAGRAPH
SHALL AFFECT OR LIMIT ANY RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED
BY APPLICABLE LAW.
(c) THE COMPANY AND THE WARRANT HOLDER IRREVOCABLY WAIVE
THEIR RIGHT TO TRIAL BY JURY.
(d) THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS EXECUTED AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE
AND, WHERE APPLICABLE, FEDERAL LAW.
13. ENTIRE AGREEMENT; AMENDMENTS. This Warrant, the Exhibits hereto
and the provisions contained in the Agreement or the Registration Rights
Agreement contain the entire understanding of the parties with respect to the
matters covered hereby and thereby and, except as specifically set forth herein
and therein, neither the Company nor the Warrant Holder makes any
representation, warranty, covenant or undertaking with respect to such matters.
No provision of this Agreement may be waived or amended other than by a written
instrument signed by the party against whom enforcement of any such amendment or
waiver is sought.
14. NOTICES. Any notice or other communication required or permitted
to be given hereunder shall be in writing and shall be effective (a) upon hand
delivery or delivery by telex (with correct answer back received), telecopy or
facsimile at the address or number designated below (if delivered on a business
day during normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received)
or (b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The addresses for such
communications shall be:
to the Company:
Able Telcom Holding Corp.
1000 Holcomb Woods Parkway
Suite 440
Roswell, GA. 30076
Attn: President
Facsimile: (770) 993-8532
to the Warrant Holder:
c/o Rose Glen Capital Management, L.P.
3 Bala Plaza East, Suite 200
251 St. Asaphs Road
Bala Cynwyd, PA 19004
Attn: Wayne Bloch
Facsimile: 610-617-0570
<PAGE>
Either party hereto may from time to time change its address for notices under
this Section 14 by giving at least 10 days' prior written notice of such changed
address to the other party hereto.
15. MISCELLANEOUS. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. The headings in this Warrant are for purposes of reference only, and
shall not limit or otherwise affect any of the terms hereof. The invalidity or
unenforceability of any provision hereof shall in no way affect the validity or
enforceability of any other provision.
16. ASSIGNMENT. This Warrant may be transferred or assigned, in whole
or in part, at any time and from time to time by the then Warrant Holder by
submitting this Warrant to the Company together with a duly executed Assignment
in substantially the form and substance of the Form of Assignment which
accompanies this Warrant and, upon the Company's receipt hereof, and in any
event, within three (3) business days thereafter, the Company shall issue a
Warrant to the Warrant Holder to evidence that portion of this Warrant, if any
as shall not have been so transferred or assigned; provided, however, that such
transfer or assignment shall be registered or qualified under all applicable
securities laws, or otherwise exempt therefrom.
17. SUCCESSORS AND ASSIGNS. This Warrant shall be binding upon any
entity succeeding to the Company by merger, consolidation or acquisition of all
or substantially all of the Company's assets.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
Dated: February 4, 2000 ABLE TELCOM HOLDING CORP.
By:
---------------------------------------
Name:
Title:
[CORPORATE SEAL]
Attest:
By:
Its
(SIGNATURE PAGE OF ABLE TELCOM HOLDING CORP. COMMON STOCK PURCHASE WARRANT)
<PAGE>
(SUBSCRIPTION NOTICE)
FORM OF WARRANT EXERCISE
(TO BE SIGNED ONLY ON EXERCISE OF WARRANT)
TO: ABLE TELCOM HOLDING CORP.
ATTN: SECRETARY
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant:
_____ (A) for, and to purchase thereunder,________________ shares of
Common Stock of Able Telcom Holding Corp., a Florida
corporation (the "Common Stock"), and herewith, or by wire
transfer, makes payment of $ _______________ therefor; or
_____ (B) in a "cashless" or "net-issue exercise" for, and to
purchase thereunder, ______ shares of Common Stock, and
herewith makes payment therefor with _____________Surrendered
WarrantShares.
The undersigned requests that the certificates for such shares be issued
in the name of, and
_____ (A) delivered to ______________ , whose address is ___________; or
_____ (B) electronically transmitted and credited to the account of
_____________ , undersigned's prime broker (Account
No.__________ ) with Depository Trust Company through its
Deposit Withdrawal Agent Commission system.
Dated:
______________________________________________
(Signature must conform to name of holder
as specified on the face of the Warrant)
______________________________________________
(Address)
Tax Identification Number:____________________
<PAGE>
FORM OF ASSIGNMENT
(TO BE SIGNED ONLY ON TRANSFER OF WARRANT)
For value received, the undersigned hereby sells, assigns, and transfers unto
__________________ the right represented by the within Warrant to purchase
_________ shares of Common Stock of ABLE TELCOM HOLDING CORP., a Florida
corporation, to which the within Warrant relates, and appoints ________________
Attorney to transfer such right on the books of ABLE TELCOM HOLDING CORP., a
Florida corporation, with full power of substitution of premises.
Dated: ______________
______________________________________________
(Signature must conform to name of holder
as specified on the face of the Warrant)
______________________________________________
(Address)
___________________________________
Signed in the presence of:
EXHIBIT 4.21
EXECUTION VERSION
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("Agreement") is entered into as of
February 4, 2000 between ABLE TELCOM HOLDING CORP., a Florida corporation with
offices at 1601 Forum Place, Suite 1110, West Palm Beach, Florida 33401 (the
"Company") and RGC International Investors, LDC (the "Investor").
W I T N E S S E T H:
WHEREAS, for the consideration set forth in the Securities Exchange
Agreement by and between the Company and the Investor, dated of even date
herewith (the "Exchange Agreement"), the Company has agreed to issue to the
Investor 500,00 shares of Common Stock and warrants exercisable for 100,000
shares of Common Stock in the form attached as EXHIBIT B to the Exchange
Agreement (the "WARRANTS");
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Agreement, the Company and the Investor agree as follows:
1. CERTAIN DEFINITIONS. Capitalized terms used herein and not otherwise
defined shall have the meaning ascribed thereto in the Warrants. As used in this
Agreement, the following terms shall have the following respective meanings:
"APPROVED MARKET" shall mean the NASDAQ, New York Stock Exchange or
American Stock Exchange.
"CLOSING" shall mean the acquisition of the Warrants by the Holders.
"CLOSING DATE" shall mean February 4, 2000.
"COMMISSION" or "SEC" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.
"REGISTRABLE SECURITIES" shall mean: (i) the 500,000 shares of
Common Stock issued to the Investor pursuant to the Exchange Agreement, (ii) the
Warrants Shares issued and/or issuable to each Holder or its permitted
transferees or designees upon exercise of the Warrants, or upon any stock split,
stock dividend, recapitalization or similar event with respect to such Warrant
Shares; (iii) any securities issued or issuable to each Holder upon the exercise
of any Warrants or Warrant Shares; and (iv) any other security of the Company
issued as a dividend or other distribution with respect to, or upon conversion
or exchange of or in replacement of Registrable Securities.
The terms "REGISTER", "REGISTERED" and "REGISTRATION" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and
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applicable rules and regulations thereunder, and the declaration or ordering of
the effectiveness of such registration statement.
"REGISTRATION EXPENSES" shall mean all expenses to be incurred by
the Company in connection with each Holder's registration rights under this
Agreement, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel for the Company, blue sky
fees and expenses, and the expense of any audited financial statements incident
to or required by any such registration (but excluding the compensation of
regular employees of the Company, which shall be paid in any event by the
Company).
"SELLING EXPENSES" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities and all fees and
disbursements of counsel for Holders not included within "Registration
Expenses".
"HOLDER" and "HOLDERS" shall include the Investor and any transferee
of the Warrants or Warrant Shares or Registrable Securities which have not been
sold to the public to whom the registration rights conferred by this Agreement
have been transferred in compliance with this Agreement.
"REGISTRATION STATEMENT" shall have the meaning set forth in Section
2(a) herein.
"REGULATION D" shall mean Regulation D as promulgated pursuant to
the Securities Act, and as subsequently amended.
"SECURITIES ACT" or "ACT" shall mean the Securities Act of 1933, as
amended.
"WARRANT SHARES" shall mean shares of Common Stock of the Company
issued and issuable upon exercise of the Warrants.
2. REGISTRATION REQUIREMENTS. The Company shall use its best efforts to
effect the registration of the Registrable Securities (including without
limitation the execution of an undertaking to file post-effective amendments,
appropriate qualification under applicable blue sky or other state securities
laws and appropriate compliance with applicable regulations issued under the
Securities Act) as would permit or facilitate the sale or distribution of all
the Registrable Securities in the manner (including manner of sale) and in all
states reasonably requested by the Holder. Such best efforts by the Company
shall include the following:
(a) The Company shall, as expeditiously as reasonably possible after
the Closing Date:
(i) But in any event within 45 days thereafter, prepare and
file a registration statement with the Commission pursuant to Rule 415 under the
Securities Act on Form S-3 under the Securities Act (or in the event that the
Company is ineligible to use such form, such other form as the Company is
eligible to use under the Securities Act) covering the Registrable Securities
("Registration Statement") which Registration Statement (including any
amendments or supplements thereto and prospectuses contained therein) shall not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the
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statements therein not misleading. Such Registration Statement shall, in
addition and without limitation, register (pursuant to Rule 416 under the
Securities Act, or otherwise) such additional indeterminate number of
Registrable Securities as shall be necessary to permit the full exercise of the
Warrants to prevent dilution resulting from stock splits, stock dividends or
similar transactions or (ii) by reason of changes in the Purchase Price.
Thereafter, the Company shall use its best efforts to cause such Registration
Statement and other filings to be declared effective as soon as possible, and in
any event prior to Registration Deadline (as defined below). The number of
shares of Common Stock initially included in such Registration Statement shall
be no less than the sum of (x) 500,00 shares of Common Stock, plus (y) 150% of
the number of Warrant Shares that are then issuable upon exercise of the
Warrants, without regard to any limitation on the Investor's ability to exercise
the Warrants. The Company acknowledges that the number of shares initially
included in the Registration Statement represents a good faith estimate of the
maximum number of shares issuable upon exercise of the Warrants.
(ii) Prepare and file with the SEC such amendments and
supplements to such Registration Statement and the prospectus used in connection
with such Registration Statement as may be necessary to keep the Registration
Statement effective and to comply with the provisions of the Act with respect to
the disposition of all securities covered by such Registration Statement until
such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statement and notify the Holders of the
filing and effectiveness of such Registration Statement and any amendments or
supplements. In the event the number of shares available under a Registration
Statement filed pursuant to this Agreement is insufficient to cover all of the
Registrable Securities issued or issuable upon and exercise of the Warrants, the
Company shall amend the Registration Statement, or file a new Registration
Statement (on the short form available therefore, if applicable), or both, so as
to cover all of the Registrable Securities, in each case, as soon as
practicable, but in any event within twenty (20) business days after the
necessity therefor arises (based on the market price of the Common Stock and
other relevant factors on which the Company reasonably elects to rely). The
Company shall use its best efforts to cause such amendment and/or new
Registration Statement to become effective as soon as practicable following the
filing thereof.
(iii) Furnish to each Holder such numbers of copies of a
current prospectus conforming with the requirements of the Act, copies of the
Registration Statement, any amendment or supplement thereto and any documents
incorporated by reference therein and such other documents as such Holder may
reasonably require in order to facilitate the disposition of Registrable
Securities owned by such Holder and, in the case of the Registration Statement
referred to in Section 2(a)(i), each letter written by or on behalf of the
Company to the SEC or the staff of the SEC, and each item of correspondence from
the SEC or the staff of the SEC, in each case relating to such Registration
Statement (other than any portion of any thereof which contains information for
which the Company has sought confidential treatment). The Company will
immediately notify each Investor by facsimile of the effectiveness of the
Registration Statement or any post-effective amendment. The Company will
promptly respond to any and all comments received from the SEC, with a view
towards causing any Registration Statement or any amendment thereto to be
declared effective by the SEC as soon as practicable and shall promptly file an
acceleration request as soon as practicable following the resolution or
clearance of all SEC
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<PAGE>
comments or, if applicable, following notification by the SEC that the
Registration Statement or any amendment thereto will not be subject to review.
(iv) (a) Register and qualify, or obtain an appropriate
exemption from registration or qualification, the securities covered by such
Registration Statement under such other securities or "Blue Sky" laws of such
jurisdictions as shall be reasonably requested by each Holder (b) prepare and
file in those jurisdictions such supplements (including post-effective
amendments) and supplements to such registrations and qualifications as may be
necessary to maintain the effectiveness thereof, (c) take such other actions as
may be necessary to maintain such registrations and qualifications in effect at
all times, and (iv) take all other actions reasonably necessary or advisable to
qualify the Registrable Securities for sale in such jurisdictions; provided that
the Company shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service of
process in any such states or jurisdictions, and shall not be required to
register or qualify in any jurisdiction where such registration or qualification
is not permitted or approved by such jurisdiction, following the Company's best
efforts to obtain such permission or approval.
(v) Notify each Holder immediately of the happening of any
event as a result of which the prospectus (including any supplements thereto or
thereof) included in such Registration Statement, as then in effect, includes an
untrue statement of material fact or omits to state a material fact required to
be stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing, and use its best efforts to promptly
update and/or correct such prospectus to correct such untrue statement or
omission, and deliver such number of copies of such supplement or amendment to
each Holder as such Holder may reasonably request.
(vi) Notify each Holder immediately of the issuance by the
Commission or any state securities commission or agency of any stop order
suspending the effectiveness of the Registration Statement or the initiation of
any proceedings for that purpose. The Company shall prevent the issuance of any
stop order and, if any stop order is issued, to obtain the lifting thereof at
the earliest possible time.
(vii) Permit a single firm of counsel, designated as Holders'
counsel by a majority of the Registrable Securities included in the Registration
Statement, to review the Registration Statement and all amendments and
supplements thereto within a reasonable period of time prior to each filing, and
shall not file any document in a form to which such counsel reasonably objects
and will not request acceleration of the Registration Statement without prior
notice to such counsel. The sections of the Registration Statement covering
information with respect to the Investor, the Investor's beneficial ownership of
securities of the Company or the Investor's intended method of disposition of
Registrable Securities shall conform to the information provided to the Company
by the Investor.
(viii) List the Registrable Securities covered by such
Registration Statement with all securities exchange(s) and/or markets on which
the Common Stock is then listed and prepare and file any required filings with
the National Association of Securities Dealers, Inc. or any exchange or market
where the Common Shares are traded.
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(ix) If applicable, take all steps necessary to enable Holders
to avail themselves of the prospectus delivery mechanism set forth in Rule 153
(or successor thereto) under the Act.
(x) The Company shall hold in confidence and not make any
disclosure of information concerning a Holder provided to the Company unless (a)
disclosure of such information is necessary to comply with federal or state
securities laws, (b) the disclosure of such information is necessary to avoid or
correct a misstatement or omission in any Registration Statement, (c) the
release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction, or (d) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Company agrees that
it shall, upon learning that disclosure of such information concerning a Holder
is sought in or by a court of governmental body of competent jurisdiction or
through other means, give prompt notice to such Holder prior to making such
disclosure, and allow such Holder, at its expense, to undertake appropriate
action to prevent disclosure of, or obtain a protective order for, such
information.
(xi) The Company shall provide a transfer agent and registrar,
which may be a single entity, for the Registrable Securities not later than the
effective date of the Registration Statement.
(xii) The Company shall cooperate with the Holders of
Registrable Securities being offered and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends with respect to
transferability) representing Registrable Securities to be offered pursuant to
the Registration Statement and enable such certificates to be in such
denominations or amounts, as the case may be, as the managing underwriter or
underwriters, if any, or the Holders may reasonably request and registered in
such names as the managing underwriter or underwriters, if any, or the Holders
may request, and, within three (3) business days after a Registration Statement
which includes Registrable Securities is ordered effective by the SEC, the
Company shall deliver, and shall cause legal counsel selected by the Company to
deliver, to the transfer agent for the Registrable Securities (with copies to
the Holders whose Registrable Securities are included in such Registration
Statement) an instruction in the form attached hereto as EXHIBIT 1 and an
opinion of such counsel in the form attached hereto as EXHIBIT 2.
(xiii) At the reasonable request of the Holders of a
majority-in-interest of the Registrable SecuritiEs, the Company shall prepare
and file with the SEC such amendments (including post-effective amendments) and
supplements to a Registration Statement and the prospectus used in connection
with the Registration Statement as may be necessary in order to change the plan
of distribution set forth in such Registration Statement.
(xiv) From and after the date of this Agreement, the Company
shall not, and shall not agree to, allow the holders of any securities of the
Company to include any of their securities in any Registration Statement under
Section 2(a) hereof or any amendment or supplement thereto under Section 3(b)
hereof without the consent of the holders of a majority-in-interest of the
Registrable Securities.
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<PAGE>
(xv) The Company shall take all other reasonable actions
necessary to expedite and facilitate disposition by the Holders of Registrable
Securities pursuant to the Registration Statement.
(b) Set forth below in this Section 2(b) are (I) events that may
arise that the Investors consider will interfere with the full enjoyment of
their rights under this Agreement (the "Interfering Events"), and (II) certain
remedies applicable in each of these events.
Paragraphs (i) through (iv) of this Section 2(b) describe the
Interfering Events, and provide a remedy to the Holders if an Interfering Event
occurs.
Paragraph (v) provides, INTER ALIA, that if cash payments
required as the remedy in the case of certain of the Interfering Events are not
paid when due, the Company may be required by the Holders to redeem outstanding
shares of Common Stock and Warrant Shares at a specified price.
Paragraph (vi) provides, INTER ALIA, that the Holders
have the right to specific performance.
The preceding paragraphs in this Section 2(b) are meant to
serve only as an introduction to this Section 2(b), are for convenience only,
and are not to be considered in applying, construing or interpreting this
Section 2(b).
(i) DELAY IN EFFECTIVENESS OF REGISTRATION STATEMENT. The
Company agrees that it shall file the Registration Statement complying with the
requirements of this Agreement promptly and in any event within 45 days
following the date hereof (the "Closing Date") and shall use its best efforts to
cause such Registration Statement to become effective as soon as possible and in
no event later than October 31, 2000 (the "Registration Deadline"). In the event
that such Registration Statement has not been declared effective by the
Registration Deadline, then the Purchase Price (as defined in the Warrant) shall
be reduced by 1% of the Purchase Price on the Registration Deadline during and
after the 30-day period ("Default Period") from and after the Registration
Deadline during any part of which such Registration Statement is not effective,
and shall be further reduced by an additional 1.5% during and after each Default
Period thereafter. In addition, the Purchase Price shall be subject to further
adjustment as set forth in the Warrant.
(ii) NO LISTING; PREMIUM PRICE REDEMPTION FOR DELISTING OF
CLASS OF SHARES. In the event that the Company fails, refuses or is unable to
cause the Registrable Securities covered by the Registration Statement to be
listed with the Approved Market and each other securities exchange and market on
which the Common Stock is then traded at all times during the period ("Listing
Period") from the earlier of (i) the 90th day following the Closing Date and
(ii) the date the Registration Statement is declared effective by the SEC, until
five years after the date hereof (the "Maturity Date"), then the Company shall
pay in cash to each Holder a default payment in an amount equal to three percent
(3%) of the aggregate market value represented by the shares of Common Stock
held by such Holder and of theWarrant Shares (measured by the fair market value
(as defined in the Warrant) of such shares as of the date the Company is
obligated to make each payment) that would be issued upon full conversion of the
Holder's Warrant (the "Share Value")
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<PAGE>
for each 30-day period during the Listing Period from and after such failure,
refusal or inability to so list the Registrable Securities until the Registrable
Securities are so listed.
(iii) BLACKOUT PERIODS. In the event any Holder's ability to
sell Registrable Securities under the Registration Statement is suspended for
more than (i) five (5) consecutive days or (ii) ten (10) days in any calendar
year ("Suspension Grace Period"), including without limitation by reason of a
suspension of trading of the Common Stock on the Approved Market, any suspension
or stop order with respect to the Registration Statement or the fact that an
event has occurred as a result of which the prospectus (including any
supplements thereto) included in such Registration Statement then in effect
includes an untrue statement of material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing, then the Company shall
pay in cash to each Holder an amount equal to three percent (3%) of the Share
Value for each 30-day period from and after the expiration of the Suspension
Grace Period.
(iv) CONVERSION DEFICIENCY; PREMIUM PRICE REDEMPTION FOR
CONVERSION DEFICIENCY. In the event that the Company does not have a sufficient
number of Common Shares available to satisfy the Company's obligations to any
Holder upon receipt of a Subscription Notice or is otherwise unable or unwilling
to issue such Common Shares (including without limitation by reason of the limit
described in Section 10 below) in accordance with the terms of the Warrant for
any reason after receipt of a Subscription Notice, then the Company shall pay in
cash to each Holder an amount equal to three percent (3%) of the Share Value
with respect to the Warrant Shares for each 30-day period (or portion thereof)
that the Company fails or refuses to issue Common Shares in accordance with the
terms of the Warrant.
(v) PREMIUM PRICE REDEMPTION FOR CASH PAYMENT DEFAULTS.
(A) The Company acknowledges that any failure,
refusal or inability by the Company described in the foregoing paragraphs (i)
through (iv) will cause the Holders to suffer damages in an amount that will be
difficult to ascertain, including without limitation damages resulting from the
loss of liquidity in the Registrable Securities and the additional investment
risk in holding the Registrable Securities. Accordingly, the parties agree that
it is appropriate to include in this Agreement the foregoing provisions for
default payments, discounts and mandatory redemptions in order to compensate the
Holders for such damages. The parties acknowledge and agree that the default
payments, discounts and mandatory redemptions set forth above represent the
parties' good faith effort to quantify such damages and, as such, agree that the
form and amount of such default payments, discounts and mandatory redemptions
are reasonable and will not constitute a penalty.
(B) Each default payment provided for in the
foregoing paragraphs (ii) through (iv) shall be in addition to each other
default payment. All default payments (which payments shall be pro rata on a per
diem basis for any period of less than 30 days) required to be made in
connection with the above provisions shall be paid in cash at any time upon
demand, and whether or not a demand is made, by the tenth (10th) day of each
calendar month for each partial or full 30-day period occurring prior to that
date.
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(C) In the event that the Company fails or refuses to
pay any default payment or honor any penalty or similar amounts when due, at any
Holder's request and option the Company shall purchase all or a portion of the
shares of Common Stock and Warrant Shares held by such Holder (with default
payments accruing through the date of such purchase), within five (5) days of
such request, at a purchase price equal to 130% of the fair market value (as
defined in the Warrant) of such shares or, if and to the extent that the Warrant
has not been exercised, by a 30% reduction in the then Purchase Price, provided
that such Holder may revoke such request at any time prior to receipt of such
payment of such purchase price.
(vi) CUMULATIVE REMEDIES. The default payments and mandatory
redemptions provided for above are in addition to and not in lieu or limitation
of any other rights the Holders may have at law, in equity or under the terms of
the Warrants or this Agreement, including without limitation the right to
specific performance. Each Holder shall be entitled to specific performance of
any and all obligations of the Company in connection with the registration
rights of the Holders hereunder.
(c) Subject to Section 2(b) above, the Company may suspend the use
of any prospectus used in connection with the Registration Statement only in the
event, and for such period of time as, such a suspension is required by the
rules and regulations of the Commission. The Company will use its best efforts
to cause such suspension to terminate at the earliest possible date.
(d) The Company shall file a Registration Statement with respect to
any newly authorized and/or reserved shares, if necessary to fulfill its
obligations under this Agreement, within five (5) business days of any
shareholders meeting authorizing same and shall use its best efforts to cause
such Registration Statement to become effective within sixty (60) days of such
shareholders meeting. If the Holders become entitled, pursuant to an event
described in clause (iii) of the definition of Registrable Securities, to
receive any securities in respect of Registrable Securities that were already
included in a Registration Statement, subsequent to the date such Registration
Statement is declared effective, and the Company is unable under the securities
laws to add such securities to the then effective Registration Statement, the
Company shall promptly file, in accordance with the procedures set forth herein,
an additional Registration Statement with respect to such newly Registrable
Securities. The Company shall use its best efforts to (i) cause any such
additional Registration Statement, when filed, to become effective under the
Securities Act, and (ii) keep such additional Registration Statement effective
during the period described in Section 5 below. All of the registration rights
and remedies under this Agreement shall apply to the registration of such newly
reserved shares and such new Registrable Securities, including without
limitation the provisions providing for default payments contained herein.
(e) Subject to the last sentence of this Section 2(e), if at any
time prior to the expiration of the Registration Period (as hereinafter defined)
the Company shall file with the SEC a Registration Statement relating to an
offering for its own account or the account of others under the Securities Act
of any of its equity securities (other than on Form S-4 or Form S-8 or their
then equivalents relating to equity securities to be issued solely in connection
with any acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans), the Company shall
send to each Holder who is entitled to registration rights under this Section
2(e) written notice of such determination and, if within
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fifteen (15) days after the effective date of such notice, such Holder shall so
request in writing, the Company shall include in such Registration Statement all
or any part of the Registrable Securities such Holder requests to be registered,
except that if, in connection with any underwritten public offering for the
account of the Company the managing underwriter(s) thereof shall impose a
limitation on the number of shares of Common Stock which may be included in the
Registration Statement because, in such underwriter(s)' judgment, marketing or
other factors dictate such limitation is necessary to facilitate public
distribution, then the Company shall be obligated to include in such
Registration Statement only such limited portion of the Registrable Securities
with respect to which such Holder has requested inclusion hereunder as the
underwriter shall permit. Any exclusion of Registrable Securities shall be made
pro rata among the Holders seeking to include Registrable Securities in
proportion to the number of Registrable Securities sought to be include by such
Holders; PROVIDED, HOWEVER, that the Company shall not exclude any Registrable
Securities unless the Company has first excluded all outstanding securities, the
holders of which are not contractually entitled to inclusion of such securities
in such Registration Statement or are not entitled to pro rata inclusion with
the Registrable Securities; and PROVIDED, FURTHER, HOWEVER, that, after giving
effect to the immediately preceding proviso, any exclusion of Registrable
Securities shall be made pro rata with holders of other securities having the
right to include such securities in the Registration Statement other than
holders of securities entitled to inclusion of their securities in such
Registration Statement by reason of demand registration rights. No right to
registration of Registrable Securities under this Section 2(e) shall be
construed to limit any registration required under Section 2(a) hereof. If an
offering in connection with which a Holder is entitled to registration under
this Section 2(e) is an underwritten offering, then each Holder whose
Registrable Securities are included in such Registration Statement shall, unless
otherwise agreed by the Company, offer and sell such Registrable Securities in
an underwritten offering using the same underwriter or underwriters and, subject
to the provisions of this Agreement, on the same terms and conditions as other
shares of Common Stock included in such underwritten offering. Notwithstanding
anything to the contrary set forth herein, the registration rights of the
Holders pursuant to this Section 2(e) shall only be available in the event the
Company fails to timely file, obtain effectiveness or maintain effectiveness of
the Registration Statement to be filed pursuant to Section 2(a) in accordance
with the terms of this Agreement.
3. EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration, qualification or compliance with registration
pursuant to this Agreement shall be borne by the Company, and all Selling
Expenses of a Holder shall be borne by such Holder.
4. REGISTRATION ON FORM S-3. The Company shall seek to qualify for
registration on Form S-3 or any comparable or successor form or forms, or in the
event that the Company is ineligible to use such form, such form as the Company
is eligible to use under the Securities Act.
5. REGISTRATION PERIOD. In the case of the registration effected by the
Company pursuant to this Agreement, the Company will use its best efforts to
keep such registration effective until all the Holders have completed the sales
or distribution described in the Registration Statement relating thereto or, if
earlier, until such Registrable Securities may be sold under Rule 144(k)
(provided that the Company's transfer agent has accepted an instruction from the
Company to such effect).
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6. INDEMNIFICATION.
(a) THE COMPANY INDEMNITY. The Company will indemnify each Holder,
each of its officers, directors and partners, and each person controlling each
Holder, within the meaning of Section 15 of the Securities Act and the rules and
regulations thereunder with respect to which registration, qualification or
compliance has been effected pursuant to this Agreement, and each underwriter,
if any, and each person who controls, within the meaning of Section 15 of the
Securities Act and the rules and regulations thereunder, any underwriter,
against all claims, losses, damages and liabilities (or actions in respect
thereof) arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any prospectus, offering circular or
other document (including any related registration statement, notification or
the like) incident to any such registration, qualification or compliance, or
based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or any violation by the Company of the Securities Act or any state
securities law or in either case, any rule or regulation thereunder applicable
to the Company and relating to action or inaction required of the Company in
connection with any such registration, qualification or compliance, and will
reimburse each Holder, each of its officers, directors and partners, and each
person controlling such Holder, each such underwriter and each person who
controls any such underwriter, for any legal and any other expenses reasonably
incurred in connection with investigating and defending any such claim, loss,
damage, liability or action, provided that the Company will not be liable in any
such case to a Holder to the extent that any such claim, loss, damage, liability
or expense arises out of or is based on any untrue statement or omission based
upon written information furnished to the Company by such Holder or the
underwriter (if any) therefor and stated to be specifically for use therein. The
indemnity agreement contained in this Section 6(a) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company (which consent will
not be unreasonably withheld).
(b) HOLDER INDEMNITY. Each Holder will, severally and not jointly,
if Registrable Securities held by it are included in the securities as to which
such registration, qualification or compliance is being effected, indemnify the
Company, each of its directors, officers, partners, and each underwriter, if
any, of the Company's securities covered by such a registration statement, each
person who controls the Company or such underwriter within the meaning of
Section 15 of the Securities Act and the rules and regulations thereunder, each
other Holder (if any), and each of their officers, directors and partners, and
each person controlling such other Holder(s) against all claims, losses, damages
and liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statement therein not
misleading, and will reimburse the Company and such other Holder(s) and their
directors, officers and partners, underwriters or control persons for any legal
or any other expenses reasonably incurred in connection with investigating and
defending any such claim, loss, damage, liability or action, in each case to the
extent, but only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the Company by such Holder
and stated to be specifically for use therein,
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and provided that the maximum amount for which such Holder shall be liable under
this indemnity shall not exceed the net proceeds received by such Holder from
the sale of the Registrable Securities. The indemnity agreement contained in
this Section 6(b) shall not apply to amounts paid in settlement of any such
claims, losses, damages or liabilities if such settlement is effected without
the consent of such Holder (which consent shall not be unreasonably withheld).
(c) PROCEDURE. Each party entitled to indemnification under this
Article (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim in any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not be unreasonably withheld), and the Indemnified Party
may participate in such defense at such party's expense, and provided further
that the failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this Article
except to the extent that the Indemnifying Party is materially and adversely
affected by such failure to provide notice. No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
in respect to such claim or litigation. Each Indemnified Party shall furnish
such information regarding itself or the claim in question as an Indemnifying
Party may reasonably request in writing and as shall be reasonably required in
connection with the defense of such claim and litigation resulting therefrom.
7. CONTRIBUTION. If the indemnification provided for in Section 6
herein is unavailable to the Indemnified Parties in respect of any losses,
claims, damages or liabilities referred to herein (other than by reason of the
exceptions provided therein), then each such Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such losses, claims, damages or
liabilities as between the Company on the one hand and any Holder on the other,
in such proportion as is appropriate to reflect the relative fault of the
Company and of such Holder in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative fault of the Company on the one
hand and of any Holder on the other shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to information
supplied by the Company or by such Holder.
In no event shall the obligation of any Indemnifying Party to
contribute under this Section 7 exceed the amount that such Indemnifying Party
would have been obligated to pay by way of indemnification if the
indemnification provided for under Section 6(a) or 6(b) hereof had been
available under the circumstances.
The Company and the Holders agree that it would not be just
and equitable if contribution pursuant to this Section 7 were determined by PRO
RATA allocation (even if the Holders or the underwriters were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in the immediately
preceding paragraphs. The amount paid or payable by an Indemnified Party as a
result of the losses, claims, damages and liabilities referred to in the
immediately
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preceding paragraphs shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such Indemnified
Party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this section, no Holder or underwriter shall
be required to contribute any amount in excess of the amount by which (i) in the
case of any Holder, the net proceeds received by such Holder from the sale of
Registrable Securities or (ii) in the case of an underwriter, the total price at
which the Registrable Securities purchased by it and distributed to the public
were offered to the public exceeds, in any such case, the amount of any damages
that such Holder or underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person liable for or guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not liable for or guilty of such fraudulent
misrepresentation.
8A. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR. The Investor hereby
makes the following representations and warranties to the Company as of the date
hereof:
(a) AUTHORIZATION; ENFORCEMENT. (i) The Investor has the requisite
power and authority to enter into and perform this Agreement and to acquire the
Warrants, (ii) the execution and delivery of this Agreement by the Investor and
the consummation by it of the transactions contemplated hereby have been duly
authorized by all necessary corporate or partnership action, and (iii) upon
execution, issuance and delivery hereof this Agreement will constitute, a valid
and binding obligation of the Investor enforceable against the Investor in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally the enforcement of creditors'
rights and remedies or by other equitable principles of general application.
8B. SURVIVAL. The indemnity and contribution agreements contained in
Sections 6 and 7 shall remain operative and in full force and effect regardless
of (i) any termination of this Agreement or any underwriting agreement, (ii) any
investigation made by or on behalf of any Indemnified Party or by or on behalf
of the Company, and (iii) the consummation of the sale or successive resales of
the Registrable Securities.
9. INFORMATION BY HOLDERS. Each Holder shall furnish to the Company
such information regarding such Holder and the distribution and/or sale proposed
by such Holder as the Company may reasonably request in writing and as shall be
reasonably required in connection with any registration, qualification or
compliance referred to in this Agreement. The intended method or methods of
disposition and/or sale (Plan of Distribution) of such securities as so provided
by such Holder shall be included without alteration in the Registration
Statement covering the Registrable Securities and shall not be changed without
written consent of such Holder or its designee representative.
10. NASDAQ LIMIT ON STOCK ISSUANCES. Notwithstanding anything to the
contrary herein, the Company shall not be obligated to issue or register with
the SEC any shares of Common Stock to the extent that such issuance or
registration is prohibited by any rule, regulation or policy of Nasdaq or any
exchange or market upon which the Common Stock may be traded.
12
<PAGE>
11. REPLACEMENT CERTIFICATES. The certificate(s) representing the
Common Shares or Warrant Shares held by the Holder (or then Holder) may be
exchanged by the Investor (or such Holder) at any time and from time to time for
certificates with different denominations representing an equal aggregate number
of Common Shares or Warrant Shares, as reasonably requested by the Investor (or
such Holder) upon surrendering the same. No service charge will be made for such
registration or transfer or exchange.
12. TRANSFER OR ASSIGNMENT. Except as otherwise provided herein, this
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The rights granted to the Investor by
the Company under this Agreement to cause the Company to register Registrable
Securities may be transferred or assigned (in whole or in part) to a transferee
or assignee of Warrants which transfer has been effected in compliance with the
Warrants, and all other rights granted to the Investor by the Company hereunder
may be transferred or assigned to any transferee or assignee of any Warrants;
provided in each case that the Company must be given written notice by the
Investor at the time of or within a reasonable time after said transfer or
assignment, stating the name and address of said transferee or assignee and
identifying the securities with respect to which such registration rights are
being transferred or assigned; and provided further that the transferee or
assignee of such rights agrees in writing to be bound by the registration
provisions of this Agreement.
13. MISCELLANEOUS.
(a) REMEDIES. The Company and the Investor acknowledge and agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent or cure breaches of the
provisions of this Agreement and to enforce specifically the terms and
provisions hereof, this being in addition to any other remedy to which any of
them may be entitled by law or equity.
(b) JURISDICTION. THE COMPANY AND THE INVESTOR (I) HEREBY
IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT
COURT, THE NEW YORK STATE COURTS AND OTHER COURTS OF THE UNITED STATES SITTING
IN NEW YORK COUNTY, NEW YORK FOR THE PURPOSES OF ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT AND (II) HEREBY WAIVE, AND AGREE
NOT TO ASSERT IN ANY SUCH SUIT ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT
PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURT, THAT THE SUIT, ACTION OR
PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE OF THE SUIT,
ACTION OR PROCEEDING IS IMPROPER. THE COMPANY AND THE INVESTOR CONSENT TO
PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY
THEREOF TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES TO IT UNDER THIS
AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT
SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING IN THIS PARAGRAPH SHALL AFFECT OR
LIMIT ANY RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
(c) NOTICES. Any notice or other communication required or permitted
to be given hereunder shall be in writing by facsimile, mail or personal
delivery and shall be effective upon actual receipt of such notice. The
addresses for such communications shall be:
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<PAGE>
to the Company:
Able Telcom Holding Corp.
1601 Forum Place
Suite 1110
West Palm Beach, Florida 33401
Facsimile: (561) 688-0455
Attention: Frazier L. Gaines, President
with copies to:
Paul, Hastings, Janofsky & Walker LLP
600 Peachtree Street, N.E.
Suite 2400
Atlanta, Georgia 30308-2222
Facsimile: (404) 815-2424
Attention: Wayne Shortridge, Esq.
to the Investor:
RGC International Investors, LDC
c/o Rose Glen Capital Management, L.P.
3 Bala Plaza East, Suite 200
251 St. Asaphs Road
Bala Cynwyd, PA 19004
Attention: Wayne Bloch
Facsimile: (610) 617-0570
with copies to:
Arnold & Porter
555 Twelfth Street, N.W.
Washington, DC 20004
Facsimile: (202) 942-5999
Attention: L. Stevenson Parker, Esq.
Any party hereto may from time to time change its address for notices by giving
at least 10 days' written notice of such changed address to the other parties
hereto.
(d) WAIVERS. No waiver by any party of any default with respect to
any provision, condition or requirement of this Agreement shall be deemed to be
a continuing waiver in the future or a waiver of any other provision, condition
or requirement hereof, nor shall any delay or omission of any party to exercise
any right hereunder in any manner impair the exercise of any such right accruing
to it thereafter. The representations and warranties and the agreements and
covenants of the Company and each Investor contained herein shall survive the
Closing.
14
<PAGE>
(e) EXECUTION. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement, it
being understood that all parties need not sign the same counterpart.
(f) PUBLICITY. The Company agrees that it will not disclose, and
will not include in any public announcement, the name of the Investor without
its consent, unless and until such disclosure is required by law or applicable
regulation, and then only to the extent of such requirement. The Company agrees
to deliver a copy of any public announcement regarding the matters covered by
this Agreement or any agreement or document executed herewith to each Investor
and any public announcement including the name of an Investor to such Investor,
prior to the publication of such announcements.
(g) ENTIRE AGREEMENT. This Agreement, together with the Warrants and
the agreements and documents contemplated hereby and thereby, contains the
entire understanding and agreement of the parties, and may not be modified or
terminated except by a written agreement signed by both parties.
(h) GOVERNING LAW; CONSENT OF JURISDICTION. THIS AGREEMENT AND THE
VALIDITY AND PERFORMANCE OF THE TERMS HEREOF SHALL BE GOVERNED BY AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS EXECUTED AND TO BE PERFORMED ENTIRELY IN SUCH STATE AND,
WHERE APPLICABLE, FEDERAL LAW.
(i) JURY TRIAL. EACH PARTY HERETO WAIVES THE RIGHT TO A TRIAL BY
JURY.
(j) TITLES. The titles used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.
[SIGNATURE PAGE FOLLOWS]
15
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
ABLE TELCOM HOLDING CORP.
By:________________________________________
Name:
Title:
INVESTOR:
RGC INTERNATIONAL INVESTORS, LDC
BY: ROSE GLEN CAPITAL MANAGEMENT, L.P.
INVESTMENT MANAGER
BY: RGC GENERAL PARTNER CORP, AS
GENERAL PARTNER
__________________________________________
BY:WAYNE BLOCHTNER CORP, AS
TITLE: MANAGING DIRECTOR
16
<PAGE>
EXHIBIT 1
TO REGISTRATION
RIGHTS AGREEMENT
[Company Letterhead]
[Date]
[Name and address of Transfer Agent]
Ladies and Gentlemen:
This letter shall serve as our irrevocable authorization and direction
to you (1) to transfer or re-register (or at the holders request to reissue to
the holder thereof without any restrictive legend) the certificates for the
shares of Common Stock, par value $0.001 per share (the "COMMON STOCK"), of Able
Telcom Holding Corp., a Florida corporation (the "COMPANY") represented by
certificate numbers ____ for an aggregate of ____ shares (the "OUTSTANDING
SHARES") of Common Stock presently registered in the name of RGC International
Investors, LDC (the "INVESTOR") (certain of which shares were previously issued
upon exercise of the Warrants (as hereinafter defined)), upon surrender of such
certificates to you, notwithstanding the legend appearing on such certificates,
and (2) to issue shares (the "WARRANT SHARES") of Common Stock to or upon the
order of the registered holder from time to time of the Warrants of the Company
(the "WARRANTS") upon surrender to you of a properly completed and duly executed
Exercise Agreement and such Warrants notwithstanding the legend appearing on
such Warrants. The transfer or re-registration of the certificates for the
Outstanding Shares by you should be made at such time as you are requested to do
so by the record holder of the Outstanding Shares. The certificate issued upon
such transfer or re-registration should be registered in such name as requested
by the holder of record of the certificate surrendered to you and should not
bear any legend which would restrict the transfer of the shares represented
thereby. In addition, you are hereby directed to remove any stop-transfer
instruction relating to the Outstanding Shares. Certificates for the Warrant
Shares should not bear any restrictive legend and should not be subject to any
stop-transfer restriction.
Pursuant to applicable securities laws or certain agreements between
the Company and the Investor, the Investor may be prohibited during certain
limited periods of time from selling its Outstanding Shares or other shares of
Common Stock issuable upon exercise of the Warrants under the Registration
Statement; PROVIDED, HOWEVER, that such Investor may continue to sell
17
<PAGE>
such securities pursuant to an exemption from registration under the Securities
Act of 1933, as amended (the "SECURITIES ACT"). The Company may, during such
periods, deliver a notice to you advising you to refrain from transferring any
Outstanding Shares pursuant to such Registration Statement, provided that such
notice shall not prohibit the transfer of such shares pursuant to an exemption
from registration under the Securities Act during such periods.
Contemporaneous with the delivery of this letter, the Company is
delivering to you a letter of ____________________ as to registration of the
Outstanding Shares and the Conversion Shares under the Securities Act of 1933,
as amended.
Should you have any questions concerning this matter, please contact
me.
Very truly yours,
ABLE TELCOM HOLDING CORP.
_______________________________________
By:
Title:
Enclosures:
cc: RGC International Investors, LDC
18
<PAGE>
EXHIBIT 2
TO REGISTRATION
RIGHTS AGREEMENT
[Date]
[Name and address
of Transfer Agent]
RE: ABLE TELCOM HOLDING CORP.
Ladies and Gentlemen:
We are counsel to Able Telcom Holding Corp., a Florida corporation (the
"COMPANY"), and we understand that RGC International Investors, LDC (the
"HOLDER") has received from the Company in an exchange, 500,000 shares of Common
Stock and warrants (the "WARRANTS") that are exercisable into 100,000 shares of
the Company's Common Stock, par value $0.001 per share (the "COMMON STOCK").
Pursuant to a Registration Rights Agreement, dated as of February 4, 2000,
between the Company and the Holder (the "REGISTRATION RIGHTS AGREEMENT"), the
Company agreed with the Holder, among other things, to register the Registrable
Securities (as that term is defined in the Registration Rights Agreement) under
the Securities Act of 1933, as amended (the "SECURITIES ACT"), upon the terms
provided in the Registration Rights Agreement. In connection with the Company's
obligations under the Registration Rights Agreement, on _______, 2000, the
Company filed a Registration Statement on Form S-3 (File No. 333-___________)
(the "REGISTRATION STATEMENT") with the Securities and Exchange Commission
relating to the Registrable Securities, which names the Holder as a selling
stockholder thereunder.
[Other introductory language to be inserted]
Based on the foregoing, we are of the opinion that the Registrable
Securities have been
19
<PAGE>
registered under the Securities Act.
[Other appropriate language to be included.]
Very truly yours,
cc: RGC International Investors, LDC
20
EXHIBIT 4.22
ABLE TELCOM HOLDING CORP.
SERIES C CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT ("AGREEMENT") dated as
of February 4, 2000 between Able Telcom Holding Corp., a Florida corporation
(the "COMPANY"), and each person or entity listed as an investor on SCHEDULE I
to this Agreement (each, individually, an "INVESTOR" and, collectively, the
"INVESTORS").
W I T N E S S E T H:
WHEREAS, the Company desires to sell and issue to the Investors, and
the Investors wish to purchase from the Company, an aggregate of 5,000 shares of
Series C Convertible Preferred Stock (the "SERIES C PREFERRED Stock"), having a
par value per share equal to $0.10, at an aggregate price of $15,000,000, having
the rights and privileges set forth in the Articles of Amendment setting forth
the terms of the Series C Convertible Preferred Stock of the Company ("ARTICLES
OF AMENDMENT") in the form of EXHIBIT 1.1A attached hereto, on the terms and
conditions set forth herein; and
WHEREAS, the Series C Preferred Stock will be convertible into shares
("COMMON SHARES") of common stock, $0.001 par value per share, of the Company
("COMMON STOCK"), pursuant to the terms of the Articles of Amendment, and the
Investors will have registration rights with respect to such Common Shares and
the Warrant Shares (as defined herein) pursuant to the terms of that certain
Registration Rights Agreement to be entered into between the Company and the
Investors substantially in the form of EXHIBIT 4.2(F) hereto ("REGISTRATION
RIGHTS Agreement"); and
WHEREAS, to induce the Investors to purchase the Series C Preferred
Stock, the Company has agreed to issue to the Investors warrants exercisable for
200,000 shares of Common Stock, in the form attached as EXHIBIT 1.1B
(individually, a "WARRANT," and collectively, the "WARRANTS");
NOW, THEREFORE, in consideration of the foregoing premises and the
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
PURCHASE AND SALE OF SERIES C PREFERRED STOCK AND WARRANTS
Section 1.1
(a) ISSUANCE OF SERIES C PREFERRED STOCK AND WARRANTS. Upon
the following terms and conditions, the Company shall issue and sell to each
Investor, and each Investor severally shall purchase from the Company, an
aggregate of 5,000 shares of Series C Preferred Stock, the number of shares of
Series C Preferred Stock and the number of Warrants indicated next to such
Investor's name on SCHEDULE I attached hereto.
<PAGE>
(b) PURCHASE PRICE. The aggregate purchase price for the
Series C Preferred Stock listed on SCHEDULE I (the "PURCHASE PRICE") shall be
$15,000,000 (Fifteen Million U.S. Dollars), or $3,000 (3,000 U.S. Dollars) per
share. Each Investor shall pay the aggregate purchase price listed opposite such
Investor's name on the List of Investors attached as SCHEDULE I hereto.
(c) WARRANTS. The Company shall, on the Closing Date, issue to
the Investors five-year Warrants to purchase in the aggregate 200,000 shares of
Common Stock, which will have an exercise price equal to 115% of the Initial
Conversion Price (as defined in the Articles of Amendment).
(d) THE CLOSING.
(i) The closing of the purchase and sale of
the Series C Preferred Stock and the Warrants (the "CLOSING"),
shall take place at the offices of Arnold & Porter, 555 12th
Street N.W., Washington, D.C. ("INVESTORS' COUNSEL"), at 10:00
a.m., local time on the later of the following: (A) the date
on which the last of the conditions set forth in Article IV
hereof to be fulfilled and applicable to the Closing shall be
fulfilled or waived in accordance herewith, or (B) such other
time and place and/or on such other date as the Investors and
the Company may agree. The date on which the Closing occurs is
referred to herein as the "CLOSING DATE".
(ii) On the Closing Date, the Company shall
deliver to each Investor (A) a certificate or certificates
(with the number of such certificates requested by such
Investor) representing the shares of Series C Preferred Stock
purchased hereunder by such Investor at the Closing registered
in the name of the Investor or its nominee and (B) the
Warrants registered in the name of such Investor or its
nominee in such denominations as reasonably requested by such
Investor, and such Investor shall deliver to the Company the
Purchase Price for the shares of Series C Preferred Stock
purchased by such Investor hereunder by wire transfer in
immediately available funds to an account designated in
writing by the Company. The delivery of payment by such
Investor of the Purchase Price applicable to it as set forth
in this paragraph shall constitute a payment delivered to the
Company in satisfaction of such Investor's obligation to pay
the Purchase Price hereunder. In addition, each of the Company
and each Investor shall deliver all documents, instruments and
writings required to be delivered by such party pursuant to
this Agreement at or prior to the applicable Closing.
Section 1.2 DEFINITIONS. Each of the following terms is defined in the
Section opposite such term:
DEFINED TERM SECTION
------------ -------
ACT 2.1(f)
2
<PAGE>
ADDITIONAL CLOSING 5.2(b)
ADDITIONAL CLOSING DATE 5.2(b)
AGREEMENT Preamble
APPROVED MARKETS 2.1(d)
ARTICLES OF AMENDMENT Preamble
BEST EFFORTS 3.10
BY-LAWS 2.1(c)
CHARTER 2.1(c)
CLOSING 1.1(d)(i)
CLOSING DATE 1.1(d)(i)
COMMON SHARES Preamble
COMMON STOCK Preamble
COMPANY Preamble
COMPANY PERMITS 2.1(t)
COMPUTER SYSTEM 2.1(ff)
CONVERSION DATE 3.2(a)
CONVERSION NOTICE 3.14
CONVERSION PRICE 3.9
EFFECTIVE REGISTRATION 3.1
EXCHANGE ACT 2.1(f)
EXCHANGE AGREEMENT 4.1(d)
INITIAL CONVERSION PRICE 1.1(c)
INTELLECTUAL PROPERTY 2.1(n)
INTERFERING EVENT 3.1
INVESTOR Preamble
INVESTORS' COUNSEL 1.1(d)(i)
LIQUIDATION VALUE 3.14
MATERIAL ADVERSE EFFECT 2.1(a)
NASD 2.1(d)
OFFER 3.18
PREFERRED STOCK 2.1(c)
PURCHASE PRICE 1.1(b)
REGISTRATION DEADLINE 5.1
REGISTRATION RIGHTS AGREEMENT Preamble
REGISTRATION STATEMENT 2.1(f)
SEC 2.1(f)
SEC DOCUMENTS 2.1(f)
SERIES C PREFERRED STOCK Preamble
SHAREHOLDER APPROVAL 3.14
TRADING DAYS 3.2(a)
TRADING PRICE 3.14
TRANSACTION DOCUMENT 2.1(b)
WARRANT Preamble
WARRANT SHARES 2.1(d)
3
<PAGE>
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby makes the following representations and warranties to each of the
Investors as of the date hereof and on each Closing Date:
(a) ORGANIZATION AND QUALIFICATION; MATERIAL ADVERSE EFFECT.
The Company is a corporation duly incorporated and existing in good standing
under the laws of the State of Florida and has the requisite corporate power to
own its properties and to carry on its business as now being conducted. The
Company does not have any direct or indirect subsidiaries other than the
subsidiaries listed on EXHIBIT 2.1(A) attached hereto. Except where specifically
indicated to the contrary, all references in this Agreement to subsidiaries
shall be deemed to refer to all direct and indirect subsidiaries of the Company.
The Company and each subsidiary is duly qualified as a foreign corporation to do
business and is in good standing in every jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification
necessary other than those in which the failure so to qualify would not have a
Material Adverse Effect. "MATERIAL ADVERSE EFFECT" means (i) any adverse effect
on the business, operations, properties, prospects, or financial condition of
the entity with respect to which such term is used and its subsidiaries or other
entities controlled by such entity, taken as a whole and which is (either alone
or together with all other adverse effects) material to such entity and its
subsidiaries or other entities controlled by such entity taken as a whole, and
(ii) any condition or situation, whether or not a materially adverse effect,
which would prohibit or otherwise adversely interfere with or affect the ability
of any party to this Agreement to enter into or perform its obligations under,
or to consummate the transactions contemplated by, this Agreement, the
Registration Rights Agreement, the Articles of Amendment or the Warrants or any
other agreement or document contemplated hereby or thereby.
(b) AUTHORIZATION; ENFORCEMENT. (i) The Company has all
requisite corporate power and authority to enter into and perform this
Agreement, the Articles of Amendment, the Warrants and the Registration Rights
Agreement (this Agreement, the Articles of Amendment, the Warrants and the
Registration Rights Agreement being, individually, a "TRANSACTION DOCUMENT" and,
collectively, the "TRANSACTION DOCUMENTS") and to consummate the transaction
contemplated thereby and to issue the Series C Preferred Stock and Warrants in
accordance with the terms hereof and thereof, and has duly filed with the
Secretary of State of the State of Florida the Articles of Amendment, (ii) the
execution and delivery of each Transaction Document by the Company and the
consummation by it of the transactions contemplated hereby and thereby,
including the issuance of the Series C Preferred Stock, the Warrants, the Common
Shares and the Warrant Shares have been duly authorized by all necessary
corporate action, and no further consent or authorization of the Company or its
Board of Directors (or any committee or subcommittee thereof) or stockholders is
required, (iii) this Agreement has been, and on the Closing Date, the Warrants,
the Articles of Amendment and the Registration Rights Agreement will be, duly
executed and delivered by the Company, and (iv) this Agreement constitutes, and
upon execution, issuance and delivery thereof each of the Transaction Documents
shall constitute,
4
<PAGE>
valid and binding obligations of the Company enforceable against the Company in
accordance with their terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally the enforcement of creditors'
rights and remedies or by other equitable principles of general application.
(c) CAPITALIZATION. The authorized capital stock of the
Company consists of 25,000,000 shares of Common Stock and 1,000,000 shares of
convertible redeemable preferred stock, par value $0.10 per share (the
"PREFERRED STOCK"); as of February 4, 2000, there are 15,300,000 shares of
Common Stock issued and outstanding and no shares of Preferred Stock issued and
outstanding; and 5,831,705 shares of Common Stock and no shares of Preferred
Stock are reserved for issuance to persons other than the Investors. All of the
outstanding shares of the Company's Common Stock and Preferred Stock have been
validly authorized and issued and are fully paid and nonassessable. No shares of
capital stock are entitled to preemptive rights; and there are as of the date
hereof outstanding options for 4,690,000 shares of Common Stock and outstanding
warrants for 779,505 shares of Common Stock (excluding the Warrants). Any shares
of Preferred Stock issued or to be issued will be junior in all respects to the
Series C Preferred Stock. Except as set forth on SCHEDULE 2(C), there are no
other scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights exchangeable for or convertible
into, any shares of capital stock of the Company, or contracts, commitments,
understandings, or arrangements by which the Company is or may become bound to
issue additional shares of capital stock of the Company or options, warrants,
scrip, rights to subscribe to, or commitments to purchase or acquire, any
shares, or securities or rights convertible or exchangeable into shares, of
capital stock of the Company. Attached hereto as EXHIBIT 2.1(C)(I) is a true and
correct copy of the Company's Certificate of Incorporation (the "CHARTER"), as
in effect on the date hereof, and attached hereto as EXHIBIT 2.1(C)(II) is a
true and correct copy of the Company's By-Laws (the "BY-LAWS"), as in effect on
the date hereof.
(d) ISSUANCE OF COMMON SHARES. The Common Shares and the
shares of Common Stock issuable upon the exercise of the Warrants (the "WARRANT
SHARES") are duly authorized and reserved for issuance and, upon such conversion
in accordance with the Articles of Amendment and/or exercise in accordance with
the Warrants, such Common Shares and Warrant Shares will be validly issued,
fully paid and non-assessable, free and clear of any and all taxes, liens,
claims and encumbrances, and entitled to be traded on the Nasdaq National Market
or the American Stock Exchange or the New York Stock Exchange (collectively with
the Nasdaq National Market, the "APPROVED MARKETS"), and the holders of such
Common Shares and Warrant Shares shall be entitled to all rights and preferences
accorded to a holder of Common Stock. The outstanding shares of Common Stock are
currently listed on the Nasdaq National Market, and the Company has not received
any notice (written or oral) from the Nasdaq National Market (or any other
Approved Market where the Common Stock is currently listed) indicating that
delisting of the Common Stock is under consideration.
(e) NO CONFLICTS. The execution, delivery and performance by
the Company of each of the Transaction Documents, including the issuance of the
Series C
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Preferred Stock and the Warrants, the conversion of the Series C Preferred Stock
into the Common Shares and the exercise of the Warrants into the Warrant Shares,
the reservation of the Common Shares and Warrant Shares and the consummation by
the Company of the transactions contemplated hereby and thereby do not and will
not (i) result in a violation of the Company's Charter or By-Laws or (ii)
violate or conflict with, or result in a breach of any provision of, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture, patent,
patent license or instrument to which the Company or any of its subsidiaries is
a party, or (iii) result in a violation of any federal, state, local or foreign
law, rule, regulation, order, judgment or decree (including Federal and state
securities laws and regulations) applicable to the Company or any of its
subsidiaries or by which any property or asset of the Company or any of its
subsidiaries is bound or affected. The business of the Company and its direct
and indirect subsidiaries is not being conducted in violation of, and is in
compliance with, all applicable laws, ordinances and regulations of any
governmental entity or the Company's Charter or By-Laws. Except for filings or
registrations pursuant to applicable Federal, state or foreign securities laws
that are expressly contemplated by the transactions contemplated herein and in
the Registration Rights Agreement, the Company is not required under Federal,
state, local or foreign law, rule or regulation to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency in order for it (x) to execute, deliver or perform any of
its obligations under this Agreement, the Registration Rights Agreement, the
Articles of Amendment or the Warrants, (y) to issue and sell the Series C
Preferred Stock and the Warrants in accordance with the terms hereof, to issue
the Common Shares upon conversion of the Series C Preferred Stock or to issue
the Warrant Shares on exercise of the Warrants or (z) for the registration
provisions provided in the Registration Rights Agreement.
(f) SEC DOCUMENTS; NO NON-PUBLIC INFORMATION; FINANCIAL
STATEMENTS. The Common Stock of the Company is registered pursuant to Section
12(g) of the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT")
and, except as set forth on SCHEDULE 2.1(F), the Company is in full compliance
with and has filed all reports, schedules, forms, statements and other documents
required to be filed by it with the Securities and Exchange Commission ("SEC")
pursuant to the reporting requirements of the Exchange Act, including material
filed pursuant to Section 13(a) or 15(d), in addition to one or more
registration statements and amendments thereto heretofore filed by the Company
with the SEC (all of the foregoing including all filings, exhibits, financial
statements, schedules and documents incorporated by reference therein being
referred to herein as the "SEC DOCUMENTS"). The Company has not directly or
indirectly provided to the Investors any material non-public information or any
information which, according to applicable law, rule or regulation, should have
been disclosed publicly by the Company but which has not been so disclosed.
Except as set forth on SCHEDULE 2.1(F), as of their respective dates, the SEC
Documents complied (and as of its effective date, the Registration Statement (as
defined in the Registration Rights Agreement) will comply) in all material
respects with the requirements of the Exchange Act (or, in the case of such
Registration Statement, the Securities Act of 1933, as amended (the "ACT")) and
the rules and regulations of the SEC promulgated thereunder and other federal,
state and local laws, rules and regulations applicable to such SEC Documents (or
such Registration Statement), and none of the SEC
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Documents contained (and, as of its effective date, such Registration Statement
will not contain) any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The SEC Documents contain (and, as of its effective date, such
Registration Statement will contain) all material information concerning the
Company, and no event or circumstance has occurred which would require the
Company to disclose such event or circumstance in order to make the statements
in the SEC Documents not misleading on the date hereof or on the Closing Date
but which has not been so disclosed (assuming for this purpose that the
Company's reports filed under the Exchange Act are being incorporated into an
effective Registration Statement filed by the Company under the Act). The
financial statements of the Company included (or to be included) in the SEC
Documents (or the Registration Statement) comply (or will comply) as to form and
substance in all material respects with applicable accounting requirements and
the published rules and regulations of the SEC or other applicable rules and
regulations with respect thereto. Such financial statements have been (or will
be) prepared in accordance with United States generally accepted accounting
principles applied on a consistent basis during the periods involved (except (i)
as may be otherwise indicated in such financial statements or the notes thereto
or (ii) in the case of unaudited interim statements, to the extent they may not
include footnotes or may be condensed or summary statements) and fairly present
(or will fairly present) in all material respects the financial position of the
Company as of the dates thereof and the results of operations and cash flows for
the periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments).
(g) PRINCIPAL EXCHANGE/MARKET. The principal market on which
the Common Stock is currently traded is the Nasdaq National Market.
(h) NO MATERIAL ADVERSE CHANGE. Except as declared in the SEC
Documents, since October 31, 1998, no Material Adverse Effect has occurred or
exists with respect to the Company or any of its subsidiaries, and no event or
circumstance has occurred that with notice or the passage of time or both is
reasonably likely to result in a Material Adverse Effect with respect to the
Company or any of its subsidiaries.
(i) NO UNDISCLOSED LIABILITIES. The Company and its
subsidiaries have no liabilities or obligations not disclosed in the SEC
Documents, other than those liabilities incurred in the ordinary course of the
Company's or its subsidiaries' respective businesses since October 31, 1998,
which liabilities, individually or in the aggregate, do not or would not have a
Material Adverse Effect on the Company or any of its direct or indirect
subsidiaries.
(j) NO UNDISCLOSED EVENTS OR CIRCUMSTANCES. No event or
circumstance has occurred or exists with respect to the Company or its direct or
indirect subsidiaries or their respective businesses, properties, prospects,
operations or financial condition, which, under applicable law, rule or
regulation, requires public disclosure or announcement by the Company but which
has not been so publicly announced or disclosed.
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(k) NO GENERAL SOLICITATION. Neither the Company, nor any of
its affiliates, or, to its knowledge, any person acting on its or their behalf,
has engaged in or conducted any form of general solicitation or general
advertising (within the meaning of Regulation D under the Act) with respect to
or in connection with the offer or sale of the Series C Preferred Stock, the
Warrants, the Common Shares or the Warrant Shares.
(l) NO INTEGRATED OFFERING. Neither the Company, nor any of
its affiliates, nor, to its knowledge, any person acting on its or their behalf,
has, directly or indirectly, made any offers or sales of any security or
solicited any offers to buy any security, under circumstances that would require
registration of the Series C Preferred Stock, the Warrants, the Common Shares or
Warrant Shares under the Act.
The issuance of the Series C Preferred Stock, Warrants, Common
Shares or Warrant Shares to the Investors will not be integrated with any other
past or currently contemplated issuance of the Company's securities which
requires stockholder approval under the rules of the Nasdaq National Market.
(m) [INTENTIONALLY OMITTED]
(n) INTELLECTUAL PROPERTY. The Company (and/or its
wholly-owned subsidiaries) owns or has licenses to use certain patents,
copyrights and trademarks ("INTELLECTUAL PROPERTY") associated with its
business. The Company and its subsidiaries have all Intellectual Property rights
which are needed to conduct the business of the Company and its subsidiaries as
it is now being conducted or as proposed to be conducted as disclosed in the SEC
Documents. Neither the Company nor any of its subsidiaries has any reason to
believe that the Intellectual Property rights which it owns are invalid or
unenforceable or that the use of such Intellectual Property by the Company or
its subsidiaries infringes upon or conflicts with any right of any third party,
and neither the Company nor any of its subsidiaries has received notice of any
such infringement or conflict. Neither the Company nor any of its subsidiaries
has knowledge of any infringement of its Intellectual Property by any third
party.
(o) NO LITIGATION. Except as set forth in SCHEDULE 2.1(O) and
in the SEC Documents, no litigation, arbitration, proceeding or claim (including
those for unpaid taxes) against the Company or any of its subsidiaries is
pending or, to the Company's knowledge, threatened, and no other event has
occurred, which if determined adversely could singly or in the aggregate
reasonably be expected to have a Material Adverse Effect on the Company or could
reasonably be expected singly or in the aggregate to materially and adversely
affect the transactions contemplated hereby. The legal proceedings described in
the SEC Documents will not have such an effect on the transactions contemplated
hereby, and will not have a Material Adverse Effect.
(p) BROKERS. The Company has taken no action which would give
rise to any claim by any person for brokerage commissions, finder's fees or
similar payments by any Investor relating to this Agreement or the transactions
contemplated hereby.
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(q) ACKNOWLEDGEMENT OF DILUTION. The Company understands and
acknowledges that the number of shares of Common Stock constituting Common
Shares or Warrant Shares may increase substantially in certain circumstances,
including the circumstance where the trading price of the Common Stock declines
which may have a dilutive effect on the Common Stock. Subject to Section 3.14,
the Company acknowledges that its obligation to issue Common Shares upon
conversion of the Series C Preferred Stock and Warrant Shares upon exercise of
the Warrants is absolute and unconditional, regardless of the dilution that such
issuance may have on other shareholders of the Company.
(r) OTHER INVESTORS. Except as set forth on EXHIBIT 2.1(R),
there are no outstanding securities issued by the Company that are entitled to
registration rights under the Act. Except as set forth in EXHIBIT 2.1(R), there
are no outstanding securities issued by the Company that are directly or
indirectly convertible into, exercisable into, or exchangeable for, shares of
Common Stock of the Company that have anti-dilution, preemptive or similar
rights that would be affected or triggered by the issuance of the Series C
Preferred Stock, the Common Shares, the Warrant Shares or the Warrants.
(s) CERTAIN TRANSACTIONS. Except as disclosed in the SEC
Documents, none of the officers, directors, or employees of the Company is
presently a party to any transaction with the Company or any of its subsidiaries
(other than for services as employees, officers and directors), including any
contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or from,
or otherwise requiring payments to or from any officer, director or such
employee or, to the knowledge of the Company, any corporation, partnership,
trust or other entity in which any officer, director, or any such employee has a
substantial interest or is an officer, director, trustee or partner.
(t) PERMITS; COMPLIANCE. Each of the Company and each of its
subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exemptions, consents, certificates,
approvals and orders necessary to own, lease and operate its properties and to
carry on its business as it is now being conducted (collectively, the "COMPANY
PERMITS"). There is no action or proceeding pending or, to the knowledge of the
Company, threatened regarding suspension or cancellation of any of the Company
Permits, except with respect to such Company Permits the failure of which to
possess, or the cancellation or suspension of which, would not, individually or
in the aggregate, have a Material Adverse Effect on the Company. Neither the
Company nor any of its subsidiaries is in material conflict with, or in material
default or material violation of, any of the Company Permits. Since October 31,
1998, neither the Company nor any of its subsidiaries has received any
notification with respect to possible material conflicts, material defaults or
material violations of applicable laws.
(u) INSURANCE. The Company and each of its subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and its direct and
indirect subsidiaries are engaged. Neither the Company nor any such subsidiary
has any reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain
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similar coverage from similar insurers as may be necessary to continue its
business without a significant increase in cost.
(v) INTERNAL ACCOUNTING CONTROLS. The Company and each of its
subsidiaries maintains a system of internal accounting controls sufficient, in
the judgment of the Company's board of directors, to provide reasonable
assurance that (i) transactions are executed in accordance with management's
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
(w) SHAREHOLDER RIGHTS PLAN. None of the acquisition of the
Preferred Shares, Warrants, Common Shares or Warrant Shares, nor the deemed
beneficial ownership of shares of Common Stock prior to, or the acquisition of
such shares pursuant to, the conversion of the Preferred Shares or the exercise
of the Warrants will, in any event or under any circumstance, trigger the poison
pill provisions of any stockholders' rights agreement or any similar agreements
currently in effect or to be adopted, or a substantially similar occurrence
under any agreement or plan.
(x) ENVIRONMENTAL MATTERS. Except as otherwise disclosed in
the SEC Documents, the Company and each of its subsidiaries is in compliance in
all material respects with all applicable state and federal environmental laws,
and no event or condition has occurred that may interfere with the compliance by
the Company or any of its subsidiaries with any environmental law or that may
give rise to any liability under any environmental law that, individually or in
the aggregate, would have a Material Adverse Effect.
(y) SOLVENCY.
(i) The Company's fair saleable value of its
assets exceeds the amount that will be required to be paid on
or in respect of the Company's existing debts and other
liabilities (including contingent liabilities) as they mature.
(ii) The Company's assets do not constitute
unreasonably small capital to carry out its business as now
conducted and as proposed to be conducted including the
Company's capital needs taking into account the particular
capital requirements of the business conducted by the Company,
and projected capital requirements and capital availability
thereof.
(iii) The Company does not intend to incur
debts beyond its ability to pay such debts as they mature
(taking into account the timing and amounts of cash to be
payable on or in respect of its debt). The cash flow together
with the proceeds received from the liquidation of the
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Company's assets after taking into account all anticipated
uses of the cash will at all times be sufficient to pay all
amounts on or in respect of its debt when such amounts are
required to be paid.
(iv) The Company does not intend, and does
not believe, that final judgments against the Company in
actions for money damages will be rendered at a time when, or
in an amount such that, the Company will be unable to satisfy
any such judgments promptly in accordance with their terms the
Company's cash flow, after taking into account all other
anticipated uses of the cash (including the payments on or in
respect of debt referred to in paragraph (iii) above), will at
all times be sufficient to pay all such judgments promptly in
accordance with their terms.
(v) Neither the Company nor any of its
subsidiaries is subject to any bankruptcy, insolvency or
similar proceeding.
(z) TAXES. All federal, state, city and other tax returns,
reports and declarations required to be filed by or on behalf of the Company or
any of its subsidiaries have been filed and such returns are complete and
accurate and disclose all taxes (whether based upon income, operations,
purchases, sales, payroll, licenses, compensation, business, capital, properties
or assets or otherwise) required to be paid in the periods covered thereby.
Copies of all such returns have been provided to the Investors. All taxes shown
on such returns and any deficiency assessments, penalties and interest have been
paid. All taxes required to be withheld by or on behalf of the Company in
connection with amounts paid or owing to any employees, independent contractor,
creditor or other party have been withheld, and such withheld taxes have either
been duly and timely paid to the proper governmental authorities or set aside
and reserved in accounts for such purposes (including, but not limited to any
tax required by Chapter 201 of Title XIV of the Florida Code).
(aa) TITLE TO PROPERTIES; ENCUMBRANCES. Except as set forth on
SCHEDULE 2.1(AA), there are no material real property, leaseholds, or other
interests therein owned by the Company not reflected in the Company's financial
statements included in the Company's Annual Report on Form 10-K for the year
ended October 31, 1998. The Company owns (with good and marketable title in the
case of real property) all the properties and assets (whether real, personal, or
mixed and whether tangible or intangible) that it purports to own. Except as set
forth on SCHEDULE 2.1(AA), all material properties and assets are free and clear
of all encumbrances and are not, in the case of real property, subject to any
rights of way, building use restrictions, exceptions, variances, reservations or
limitations of any nature, except with respect to all such properties and
assets, (i) mortgages or security interests securing specified liabilities or
obligations, with respect to which no default (or event that, with notice or
lapse of time or both, would constitute a default) exists, (ii) liens for
current taxes not yet due, and (iii) with respect to real property, (A) minor
imperfections of title, if any, none of which is substantial in amount,
materially detracts from the value, or impairs the use, of the property subject
thereto, or impairs the operations the Company or any of its subsidiaries, and
(B) zoning laws and other land use restrictions that do not impair the present
or anticipated use of the property subject thereto. All buildings, plans, and
structures owned by the Company or any of its subsidiaries lie wholly
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within the boundaries of the real property owned by the Company or such
subsidiaries, and do not encroach upon the property of, or otherwise conflict
with the property rights of, any other person.
(bb) NO VIOLATION OF CREDITOR COVENANTS. Except as set forth
on SCHEDULE 2.1(BB) or unless waivers in writing have been obtained with respect
thereto, no event of default has occurred and is continuing (or event which with
lapse of time or notice of both would constitute such an event) under any of the
revolving credit facilities or other financing arrangements of the Company or
any of its subsidiaries.
(cc) EFFECTIVENESS OF SEC FILINGS. The SEC has not issued any
stop order or other order suspending the effectiveness of any registration
involving the Company or any of its subsidiaries.
(dd) ACKNOWLEDGMENT REGARDING INVESTORS' PURCHASE OF
SECURITIES. The Company acknowledges and agrees that the Investors are acting
solely in the capacity of arm's length purchasers with respect to this Agreement
and the transactions contemplated hereby. The Company further acknowledges that
no Investor is acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to this Agreement and the transactions
contemplated hereby and any statement made by any Investor or any of their
respective representatives or agents in connection with this Agreement and the
transactions contemplated hereby is not advice or a recommendation and is merely
incidental to the Investors' purchase of the Securities. The Company further
represents to each Investor that the Company's decision to enter into this
Agreement has been based solely on the independent evaluation of the Company and
its representatives.
(ee) FOREIGN CORRUPT PRACTICES. Neither the Company, nor any
of its subsidiaries, nor any director, officer, agent, employee or other person
acting on behalf of the Company or any Subsidiary has, in the course of his
actions for, or on behalf of, the Company, used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expenses relating
to political activity; made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds;
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977; or made any bribe, rebate, payoff, influence payment,
kickback or other unlawful payment to any foreign or domestic government
official or employee.
(ff) YEAR 2000 COMPLIANCE. The Company's computer systems
(both hardware and software) and telephone systems used in connection with the
Business (collectively the "COMPUTER SYSTEM") are in good working order. The
Company reasonably believes that its Computer System (i) shall accurately input,
process and output all date and time data, from years in the same century or in
different centuries, including by yielding correct results in arithmetic
operations, comparisons and sorting of date and time data and in leap year
calculations, and (ii) will not abnormally cease to operate, return an error
message or otherwise fail due to date- or time-related processing or due to the
then-current date being before, on or after January 1, 2000 or any other date.
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Section 2.2 REPRESENTATIONS AND WARRANTIES OF THE INVESTORS. Each of
the Investors, severally (as to itself) and not jointly, hereby makes the
following representations and warranties to the Company as of the date hereof
and on the Closing Date:
(a) AUTHORIZATION; ENFORCEMENT. (i) Such Investor has the
requisite power and authority to enter into and perform this Agreement and the
Registration Rights Agreement and to purchase the Series C Preferred Stock being
sold hereunder and to acquire the Warrants, (ii) the execution and delivery of
this Agreement and the Registration Rights Agreement by such Investor and the
consummation by it of the transactions contemplated hereby and thereby have been
duly authorized by all necessary corporate or partnership action, and (iii) this
Agreement constitutes, and upon execution, issuance and delivery thereof the
Registration Rights Agreement will constitute, valid and binding obligations of
such Investor enforceable against such Investor in accordance with their terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to,
or affecting generally the enforcement of creditors' rights and remedies or by
other equitable principles of general application.
(b) NO CONFLICTS. The execution, delivery and performance by
such Investor of this Agreement and the Registration Rights Agreement, the
performance by such Investor under the terms of the Articles of Amendment and
Warrants, and the consummation by such Investor of the transactions contemplated
hereby and thereby do note and will not result in a violation of such Investor's
organizational documents.
(c) INVESTMENT REPRESENTATION. Such Investor is purchasing the
Series C Preferred Stock and the Warrants for its own account and not with a
view to distribution thereof in violation of any securities laws. Such Investor
has no present intention to sell the Series C Preferred Stock, Warrants, Common
Shares or Warrant Shares in violation of Federal or state securities laws and
such Investor has no present arrangement (whether or not legally binding) to
sell the Series C Preferred Stock, Warrants, Common Shares or Warrant Shares to
or through any person or entity; PROVIDED, HOWEVER, that by making the
representations herein, such Investor does not agree to hold the Series C
Preferred Stock, Warrants, Common Shares or Warrant Shares for any minimum or
other specific term and reserves the right to dispose of the Series C Preferred
Stock, Warrants, Common Shares or Warrant Shares at any time in accordance with
Federal and state securities laws applicable to such disposition.
(d) ACCREDITED INVESTOR. Such Investor is an "accredited
investor" as defined in Rule 501 of Regulation D promulgated under the Act. Such
Investor has such knowledge and experience in financial and business matters in
general and investments in particular that it is able to evaluate the merits and
risks of an investment in the Series C Preferred Stock and the Warrants and to
protect its own interests in connection with such investment. In addition (but
without limiting the effect of the Company's representations and warranties
contained herein), such Investor has received such information as it considers
necessary or appropriate for deciding whether to purchase the Series C Preferred
Stock and the Warrants pursuant hereto.
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(e) RULE 144. Such Investor understands that there is no
public trading market for the Series C Preferred Stock or the Warrants, that
none is expected to develop, and that the Series C Preferred Stock and the
Warrants must be held indefinitely unless such Series C Preferred Stock or
Warrants are converted or exercised, as the case may be, and the Common Shares
or Warrant Shares, as the case may be, are registered under the Act or an
exemption from registration is available. Such Investor has been advised or is
aware of the provisions of Rule 144 promulgated under the Act.
(f) BROKERS. Such Investor has taken no action which would
give rise to any claim by any person for brokerage commissions, finder's fees or
similar payments by the Company relating to this Agreement or the transactions
contemplated hereby.
(G) NOT AN AFFILIATE. Such Investor is not an officer,
director or "affiliate" (as defined in Rule 405 of the Act) of the Company.
(h) RELIANCE BY THE COMPANY. Such Investor understands that
the Series C Preferred Stock and Warrants are being offered and sold in reliance
on a transactional exemption from the registration requirements of Federal and
state securities laws and that the Company is relying upon the truth and
accuracy of the representations, warranties, agreements, acknowledgments and
understandings of such Investor set forth herein in order to determine the
applicability of such exemptions and the suitability of such Investor to acquire
the Series C Preferred Stock and Warrants.
ARTICLE III
COVENANTS
Section 3.1 REGISTRATION AND LISTING; EFFECTIVE REGISTRATION. Until
such time as no Series C Preferred Stock or Warrants are outstanding, the
Company will cause the Common Stock to continue at all times to be registered
under Section 12(g) of the Exchange Act, will comply in all respects with its
reporting and filing obligations under the Exchange Act, and will not take any
action or file any document (whether or not permitted by the Exchange Act or the
rules thereunder) to terminate or suspend such reporting and filing obligations.
Until such time as no Series C Preferred Stock or Warrants are outstanding, the
Company shall continue the listing or trading of the Common Stock on the Nasdaq
National Market or one of the other Approved Markets and shall comply in all
respects with the Company's reporting, filing and other obligations under the
bylaws or rules of the Nasdaq National Market or such other Approved Market on
which the Common Stock is listed and the National Association of Securities
Dealers ("NASD"). The Company shall cause the Common Shares and the Warrant
Shares to be listed on the Nasdaq National Market (or, if the Common Stock is
listed on another of the Approved Markets, on such other Approved Market) no
later than the registration of the Common Shares or the Warrant Shares under the
Act, and at all times shall continue such listing(s) on one of the Approved
Markets on which the Common Stock is listed. As used herein and in the
Registration Rights Agreement, the Articles of Amendment and the Warrants, the
term "EFFECTIVE REGISTRATION" shall mean that (a) all registration obligations
of the Company pursuant to the Registration Rights Agreement have been
satisfied, (b) such registration is not subject to any
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suspension or stop order, (c) the prospectus for each of the Common Shares
issuable upon conversion of the Series C Preferred Stock and the Warrant Shares
issuable upon exercise of the Warrants is current, (d) such Common Shares and
Warrant Shares are listed for trading on one of the Approved Markets and such
trading has not been suspended for any reason, (e) none of the Company or any
direct or indirect subsidiary of the Company is subject to any bankruptcy,
insolvency or similar proceeding, and (f) no Interfering Event (as defined in
Section 2(b) of the Registration Rights Agreement) exists.
Section 3.2 SERIES C PREFERRED STOCK ON CONVERSION AND WARRANTS ON
EXERCISE.
(a) Upon any conversion by an Investor (or then holder of
Series C Preferred Stock) of the Series C Preferred Stock pursuant to the terms
thereof, the Company shall issue and deliver to such Investor (or holder) within
three (3) Trading Days (as defined in the Articles of Amendment) of the
Conversion Date (as defined in the Articles of Amendment) a new certificate or
certificates for the number of shares of Series C Preferred Stock which such
Investor (or holder) has not yet elected to convert but which are evidenced in
part by the certificate(s) submitted to the Company in connection with such
conversion (with the number of and denomination of such new certificate(s)
designated by such Investor or holder).
(b) Upon any partial exercise by an Investor (or then holder
of the Warrants) of the Warrants, the Company shall issue and deliver to such
Investor (or holder) within three (3) days of the date on which such Warrants
are exercised, a new Warrant or Warrants representing the number of adjusted
Warrant Shares, in accordance with the terms of Section 2 of the Warrants.
Section 3.3 REPLACEMENT CERTIFICATES AND WARRANTS.
(a) The certificate(s) representing the shares of Series C
Preferred Stock held by any Investor (or then holder) may be exchanged by such
Investor (or such holder) at any time and from time to time for certificates
with different denominations representing an equal aggregate number of shares of
Series C Preferred Stock, as requested by such Investor (or such holder) upon
surrendering the same. No service charge will be made for such registration or
transfer or exchange.
(b) The Warrants will be exchangeable at the option of any
Investor (or then holder of the Warrants) at the office of the Company for other
Warrants of different denominations entitling such Investor (or the holder
thereof) to purchase in the aggregate the same number of Warrant Shares as are
purchasable under such Warrants. No service charge will be made for such
transfer or exchange.
Section 3.4 EXPENSES. The Company shall pay in immediately available
funds, at the Closing and promptly upon receipt of any further invoices relating
to same, all reasonable due diligence fees and expenses and attorneys' fees and
expenses of the Investors' Counsel incurred by the Investors in connection with
the preparation, negotiation, execution and delivery of this Agreement, the
Registration Rights Agreement, the Articles of Amendment, the Warrants and the
related agreements and documents and the transactions
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contemplated hereunder and thereunder; PROVIDED, HOWEVER, that the Company shall
have no obligation under this Section 3.4 to make any payments in excess of
$50,000. At Closing, the Company shall pay the amount due for such fees and
expenses (which may include fees and expenses estimated to be incurred for
completion of the transaction including post-closing matters). In the event such
amount is ultimately less than the actual fees and expenses, the Company shall
promptly pay such deficiency upon receipt of an invoice regarding same.
Section 3.5 SECURITIES COMPLIANCE. The Company shall notify the SEC and
the Nasdaq National Market, in accordance with their requirements, of the
transactions contemplated by this Agreement, the Articles of Amendment, the
Registration Rights Agreement and the Warrants, and shall take all other
necessary action and proceedings as may be required and permitted by applicable
law, rule and regulation for the legal and valid issuance of the Series C
Preferred Stock hereunder, the Common Shares issuable upon conversion thereof,
the Warrants and the Warrant Shares issuable upon exercise of the Warrants.
Section 3.6 DIVIDENDS OR DISTRIBUTIONS. So long as at least 20% of the
shares of Series C Preferred Stock or Warrants issued on the Closing Date remain
outstanding, the Company agrees that it shall not (a) declare or pay any
dividends or make any distributions to any holder or holders of Common Stock, or
(b) purchase or otherwise acquire for value, directly or indirectly, any Common
Stock or other equity security of the Company.
Section 3.7 NOTICES. The Company agrees to provide all holders of
Series C Preferred Stock and Warrants with copies of all notices and
information, including without limitation notices and proxy statements in
connection with any meetings, that are provided to the holders of shares of
Common Stock, contemporaneously with the delivery of such notices or information
to such Common Stock holders and within one (1) day after release, copies of all
press releases issued by the Company or any of its subsidiaries.
Section 3.8 USE OF PROCEEDS. The Company agrees that the proceeds
received by the Company from the sale of the Series C Preferred Stock hereunder
shall be used for paying holders of the Company's Series B Preferred Stock and
for general working capital purposes.
Section 3.9 ADJUSTMENTS. Except for the transactions set forth on
SCHEDULE 3.9, if at any time within twelve (12) months from the Closing Date the
Company sells or issues Common Stock (or other equity securities or rights
exercisable or exchangeable for, or convertible into, Common Stock or such other
equity securities including debt with an equity component) at an effective or
maximum sale price less than the then applicable Conversion Price (as defined in
the Articles of Amendment and as adjusted pursuant to the terms thereof), then
the Conversion Price will be adjusted in accordance with Section 3(c)(i) of the
Articles of Amendment.
Section 3.10 RESERVATION OF STOCK ISSUABLE UPON CONVERSION OF SERIES C
PREFERRED STOCK AND UPON EXERCISE OF THE WARRANTS. The Company shall at all
times reserve and keep available out of its authorized but unissued shares of
Common Stock, solely for the
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purpose of effecting the conversion of the Series C Preferred Stock and the
exercise of the Warrants, free of preemptive rights, such number of its shares
of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding Series C Preferred Stock and the full exercise of
the Warrants, and, if at any time the number of authorized but unissued shares
of Common Stock shall not be sufficient to effect the conversion of all the then
outstanding Series C Preferred Stock and the full exercise of the Warrants, the
Company will take such corporate action as may, in the opinion of its counsel,
be necessary to increase its authorized but unissued shares of Common Stock to
such number of shares as shall be sufficient for such purposes, including
without limitation engaging in Best Efforts (as defined in the Articles of
Amendment) to obtain the requisite shareholder approval. Without in any way
limiting the foregoing, the Company agrees to reserve and at all times keep
available solely for purposes of conversion of the Series C Preferred Stock and
the exercise of the Warrants such number of authorized but unissued shares of
Common Stock PROVIDED that the number of the shares of Common Stock so reserved
shall at no time be less than the number of shares of Common Stock for which the
shares of Series C Preferred Stock are at any time convertible, assuming a
Conversion Price of $4.00, and 105% of the aggregate shares issuable on exercise
of the Warrants, which numbers may be reduced by the number of Common Shares or
Warrant Shares actually delivered pursuant to conversion of the Series C
Preferred Stock or exercise of the Warrants and shall be appropriately adjusted
for any stock split, reverse split, stock dividend or reclassification of the
Common Stock. If the Company falls below the reserves specified in the
immediately preceding sentence and does not cure such non-compliance within
thirty (30) days of its start, then the Investors will be entitled to the
discount adjustments specified in Section 2(b)(i) of the Registration Rights
Agreement. If at any time the number of authorized but unissued shares of Common
Stock is not sufficient to effect the conversion of all the then outstanding
shares of Series C Preferred Stock or the full exercise of the Warrants, the
Investors shall be entitled to, INTER ALIA, the premium price redemption rights
provided in the Registration Rights Agreement.
Section 3.11 BEST EFFORTS. The parties shall use their Best Efforts to
satisfy timely each of the conditions described in Article IV of this Agreement.
Section 3.12 FORM D; BLUE SKY LAWS. The Company agrees to file a Form D
with respect to the Series C Preferred Stock, Warrants, Common Shares and
Warrant Shares, as required under Regulation D, and to provide a copy thereof to
each Investor promptly after such filing. The Company shall, on or before each
Closing Date, take such action as the Company shall have reasonably determined
is necessary to qualify the Series C Preferred Stock, Warrants, Common Shares
and Warrant Shares for sale to the Investors at the applicable Closing pursuant
to this Agreement under applicable securities or "blue sky" laws of the states
of the United States (or to obtain an exemption from such qualification), and
shall provide evidence of any such action so taken to each Investor on or prior
to the Closing Date.
Section 3.13 NO SENIOR INDEBTEDNESS; LIMITATION ON ISSUANCE OF EQUITY.
(a) Until ninety (90) days after the Registration Statement
has been declared effective by the SEC and the Common Shares are subject to
Effective Registration,
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neither the Company nor any of its subsidiaries will issue any equity securities
or instruments or rights convertible into or exchangeable or exercisable for any
equity securities except pursuant to presently outstanding convertible
securities and The Able Telcom Holding Corp. 1995 Stock Option Plan, as amended,
other options to employees of the Company and its subsidiaries, or under the
transactions set forth on SCHEDULE 3.13.
(b) For a period of twelve (12) months following the Closing,
except as consented to in writing by the Investors, the Company shall not issue
or grant (i) any convertible securities the terms of which do not provide for a
fixed rate of conversion throughout the term of the security or (ii) any option,
warrant or other right to purchase securities of the Company whose exercise is
contingent upon, or whose price is determined with respect to, the market price
for the Common Stock; PROVIDED, HOWEVER, that the twelve month period shall be
extended one day for each day that there is not Effective Registration.
Section 3.14 DELISTING; BEST EFFORTS. If required, the Company will use
its Best Efforts to obtain promptly shareholder approval pursuant to Rule
4460(i) of Nasdaq Stock Market Marketplace Rules (or otherwise obtain Nasdaq
Stock Market approval) authorizing the issuance of all Common Shares and Warrant
Shares issuable upon the conversion of any shares of Series C Preferred Stock or
the exercise of any Warrants ("SHAREHOLDER APPROVAL"), including by calling a
special meeting of such shareholders within ten (10) days, and holding such
meeting forty-five (45) days of the date of any such attempted conversion or, if
the Trading Price (as defined in the Articles of Amendment) has decreased by
more than 20% over the preceding thirty (30) days, then forty-five (45) days
shall be increased to sixty (60) days) and having the Company's Board of
Directors recommend such approval in a proxy statement. Without limiting the
foregoing, the Company shall, in any event, use its Best Efforts obtain such
Shareholder Approval no later than the Company's next annual meeting of
shareholders following the Closing Date. If a conversion of any shares of Series
C Preferred Stock in whole or in part for Common Shares by an Investor could
result in the Company being delisted from the Nasdaq National Market for issuing
in excess of 20% of its outstanding Common Stock to the Investors without the
Shareholder Approval, then the Company, upon the Investor's request, must redeem
any and all Series C Preferred Stock covered by the applicable Conversion Notice
(as defined in the Articles of Amendment) and any and all Series C Preferred
Stock that would, if a Conversion Notice for all shares of Series C Preferred
Stock were then delivered, result in the Company being subject to such
delisting, at a price equal to 120% of the Liquidation Value (as defined in the
Articles of Amendment).
Section 3.15 REGISTRATION RIGHTS. The Company shall file and use its
Best Efforts to cause to become effective, as promptly as possible, a
registration statement on Form S-3 under the Act (or in the event that the
Company becomes ineligible to use such form, such other form as the Company is
eligible to use under the Act) covering the resale of the Common Shares and the
Warrant Shares issuable upon the conversion of the shares of Series C Preferred
Stock and the exercise of the Warrants, respectively, and shall take all action
necessary to qualify the Common Shares and the Warrant Shares under all
applicable state securities laws, all in accordance with the Registration Rights
Agreement to be entered into by the Company and the Investors at the Closing.
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Section 3.16 LEGENDS. Upon effectiveness of the Registration Statement,
as amended from time to time, the Common Shares and the Warrant Shares and
certificates evidencing the same shall at all times be free of legends (except
as otherwise provided herein or in the Articles of Amendment, Warrants,
Registration Rights Agreement), "stop transfers", "stock transfer restrictions"
or other restrictions.
Section 3.17 CORPORATE EXISTENCE. The Company will take all reasonable
steps necessary to preserve and continue the corporate existence and solvency of
the Company. So long as an Investor beneficially owns any Series C Preferred
Stock, the Company shall maintain its corporate existence and shall not sell all
or substantially all of the Company's assets, except in the event of a merger or
consolidation or sale of all or substantially all of the Company's assets, where
the surviving or successor entity in such transaction (a) assumes the Company's
obligations hereunder and under the agreements and instruments entered into in
connection herewith and (b) is a publicly traded corporation whose Common Stock
is listed for trading on an Approved Market.
Section 3.18 RIGHT OF FIRST REFUSAL. Except for the transactions set
forth on SCHEDULE 3.18 and as contemplated by this Agreement, the Company shall
not, on or prior to the date which is 12 months following the Closing Date,
offer, sell, contract or otherwise issue or deliver any securities in a private
placement or other transaction (other than in connection with an employee stock
purchase or similar plan or an acquisition of another company), unless such
offer, sale, contract, issuance or delivery is first offered to the Investors.
The Company shall make such offer by providing the Investors with written notice
of the Company's intention to enter into the such a transaction together with a
term sheet containing the economic terms and significant provisions thereof and
any other information reasonably requested by the Investors (the "OFFER"). Such
Offer shall be given with respect to each such transaction contemplated by the
Company. Each Investor shall have twenty (20) Trading Days from receipt of the
Offer to deliver a written notice to the Company that such Investor wishes to
accept the Offer in whole or in part (subject to satisfactory due diligence and
reasonably acceptable definitive documentation) for the private placement. If an
Investor rejects the Offer or fails to respond within such twenty (20) Trading
Day period, then the Company shall be permitted to complete such private
placement without such Investor on terms and conditions substantially the same
as those contained in the Offer. If any private placement is contemplated on
terms and conditions not substantially the same as those contained in the Offer,
then such private placement shall be deemed a new private placement and the
Investors shall again be entitled to receive an Offer for such private placement
on such new terms and conditions (and/or with such new definitive documentation
if applicable). If an Investor accepts the Offer but fails to close the private
placement within thirty (30) Trading Days of acceptance of the Offer for any
reason other than (a) any breach by the Company of its obligations hereunder or
thereunder, (b) any delay by the Company or reasonable delay by such Investor in
connection with execution of definitive documentation, (c) failure of the
parties to reasonably agree on definitive documentation, or (d) reasonable
dissatisfaction by such Investor with their due diligence examination, the Offer
to such Investor shall terminate and such Investor shall not be entitled to
receive any Offer in any future private placement.
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Section 3.19 DUE DILIGENCE. From the date hereof through the Additional
Closing Date, the Company shall provide each Investor with reasonable access to
the information and/or persons necessary for such Investor to conduct its
financial, accounting, operational and legal due diligence in a manner
satisfactory to such Investor in its sole discretion.
ARTICLE IV
CONDITIONS TO CLOSINGS
Section 4.1 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY TO
SELL THE SERIES C PREFERRED STOCK. The obligation hereunder of the Company to
issue and/or sell the Series C Preferred Stock to the Investors at the Closing
(unless otherwise specified) is subject to the satisfaction, at or before the
Closing, of each of the applicable conditions set forth below. These conditions
are for the Company's sole benefit and may be waived by the Company at any time
in its sole discretion.
(a) ACCURACY OF THE INVESTORS' REPRESENTATIONS AND WARRANTIES.
The representations and warranties of each Investor will be true and correct in
all material respects as of the date when made and as of the Closing Date as
though made at that time (except for representations and warranties as of an
earlier date, which will be true and correct in all material respects as of such
date).
(b) PERFORMANCE BY THE INVESTORS. Each and every Investor
shall have performed all agreements and covenants and satisfied all conditions
required to be performed or satisfied by it at or prior to the Closing.
(c) NO INJUNCTION. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement or the Registration Rights Agreement or the
Articles of Amendment or the Warrants.
(d) EXCHANGE AGREEMENT. The execution and delivery of the
Exchange Agreement (as defined in the Registration Rights Agreement) by each
party thereto and the consummation of the transactions contemplated thereunder.
Section 4.2 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE INVESTORS TO
PURCHASE THE SERIES C PREFERRED STOCK. The obligation hereunder of each Investor
to acquire and pay for the Series C Preferred Stock at the Closing (unless
otherwise specified) is subject to the satisfaction, at or before the Closing,
of each of the applicable conditions set forth below. These conditions are for
each Investor's benefit and may be waived by each Investor at any time in its
sole discretion.
(a) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Company shall be true and correct in
all material respects as of the date when made and as of the Closing Date as
though made at that time
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(except for representations and warranties as of an earlier date, which shall be
true and correct in all material respects as of such date).
(b) PERFORMANCE BY THE COMPANY. The Company shall have
performed all agreements and covenants and satisfied all conditions required to
be performed or satisfied by the Company at or prior to the Closing.
(c) NASDAQ NATIONAL MARKET. From the date hereof to the
Closing Date, trading in the Company's Common Stock shall not have been
suspended by the SEC, the Nasdaq National Market (or other Approved Market) or
the NASD, and trading in securities generally as reported by the Nasdaq National
Market (or other Approved Market) shall not have been suspended or limited or
minimum prices shall not have been established on securities whose trades are
reported by the Nasdaq National Market, and the Common Stock shall not have been
delisted from the Nasdaq National Market (or any other Approved Market where
they are currently listed).
(d) NO INJUNCTION. No statute, rule, regulation, executive,
judicial or administrative order, decree, ruling or injunction shall have been
enacted, entered, promulgated or endorsed by any court or governmental authority
of competent jurisdiction which prohibits the consummation of any of the
transactions contemplated by this Agreement or the Registration Rights Agreement
or the Articles of Amendment or the Warrants.
(e) OPINION OF COUNSEL. At the Closing, the Investors shall
have received an opinion of counsel to the Company in the form attached hereto
as EXHIBIT 4.2(E) and such other opinions, certificates and documents as the
Investors or their counsel shall reasonably require incident to the Closing.
(f) REGISTRATION RIGHTS AGREEMENT. The Company and the
Investors shall have executed and delivered the Registration Rights Agreement in
the form and substance of EXHIBIT 4.2(F) attached hereto.
(g) ADVERSE CHANGES. Since July 31, 1999, the date through
which the most recent report of the Company on Form 10-Q has been prepared and
filed with the SEC, a copy of which is included in the SEC Documents, no event
shall have occurred which had or is likely to have, in the reasonable judgment
of the Investors, a Material Adverse Effect on the Company or any of its direct
or indirect subsidiaries, except as otherwise reflected in other SEC Documents
filed or press releases issued as of a date subsequent to July 31, 1999.
(h) OFFICER'S CERTIFICATE. The Company shall have delivered to
the Investors a certificate in form and substance satisfactory to the Investors
and the Investors' Counsel, executed by an officer of the Company, certifying as
to satisfaction of closing conditions, incumbency of signing officers, and the
true, correct and complete nature of the Charter, By-Laws, good standing of and
authorizing resolutions of the Company.
(i) SERIES C PREFERRED STOCK AND WARRANTS. The Investors shall
have received certificates representing the shares of Series C Preferred Stock
and the Warrants in the form and substance of EXHIBIT 1.1B hereto.
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(j) DUE DILIGENCE. Each Investor shall have completed its
financial, accounting, operational and legal due diligence in a manner
satisfactory to such Investor in its sole discretion.
(k) CONSENTS. The Company shall have received and delivered to
the Investors (i) the consent of all applicable lenders, to the extent required,
to the issuance of the Series C Preferred Stock and (ii) the waiver of any and
all pending events of default (or pending events which with the lapse of time or
notice or both would constitute an event of default) thereunder.
(l) EXCHANGE AGREEMENT. The execution and delivery of the
Exchange Agreement by each party thereto and the consummation of the
transactions contemplated thereunder.
ARTICLE V
ADDITIONAL PURCHASES
Section 5.1. OPTIONS FOR ADDITIONAL PREFERRED SHARES.
During the period from the Closing Date to (but excluding) the 240th
day following the Closing Date, the Investors shall have the right (but not the
obligation), upon written notice to the Company, to purchase additional
Preferred Shares for an aggregate purchase price of $15,000,000 (Fifteen Million
U.S. Dollars), at a price per share equal to the price per share set forth in
Section 1.1(b), having the rights, designations and preferences set forth in the
Articles of Amendment (as then in effect, including, without limitation, the
Conversion Price), and having the benefits of the Registration Rights Agreement
and this Agreement; PROVIDED, HOWEVER, that such 240-day period shall be
extended by 1.5 days for each day after Registration Deadline (as defined in the
Registration Rights Agreement) that there is not Effective Registration.
Section 5.2. NOTICES; ADDITIONAL CLOSING DATE.
(a) Any notice referred to in Section 5.1 shall be given by
facsimile and by overnight courier to the Company.
(b) The closing of the purchase and sale of additional shares
of Series C Preferred Stock pursuant to Section 5.1 shall take place at the
offices of counsel to the Investors at 10:00 a.m., local time (the "ADDITIONAL
CLOSING") on the date on which the last of the conditions set forth in this
Article V shall be fulfilled or waived in accordance herewith, or such other
time and place and/or on such other date as the Investors and the Company may
agree. The date and time at which the Additional Closing occurs is referred to
herein as the "ADDITIONAL CLOSING DATE."
(c) On the Additional Closing Date, the Company shall deliver
to each Investor (i) a certificate or certificates (with the number of an
denomination of such certificates requested by such Investor) representing the
shares of Series C Preferred
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Stock purchased at the Additional Closing by such Investor registered in the
name of the Investor or its nominee.
(d) The purchase price for any shares of Series C Preferred
Stock issued incident to a notice pursuant to this Section shall be paid by each
Investor, severally in proportion to such Investor's then holdings, by wire
transfer of immediately available federal funds to such account as the Company
shall specify in writing to such Investor, or, at such Investor's election, to
an account of an agent designated by such Investor.
Section 5.3 CONDITIONS OF THE COMPANY TO THE ADDITIONAL CLOSING. The
obligation of the Company to issue the shares of Series C Preferred Stock to the
Investors at the Additional Closing is subject to the satisfaction, at the
Additional Closing Date, of the conditions set forth in Section 4.1 as of such
Additional Closing Date as if made as of such Additional Closing Date.
Section 5.4 CONDITIONS OF EACH INVESTOR TO THE ADDITIONAL CLOSING. The
obligations of each Investor with respect to the Additional Closing to acquire
and pay for the shares of Series C Preferred Stock are subject to the
satisfaction, at the Additional Closing Date, of each of the conditions set
forth in each paragraph of Section 4.2, except paragraphs (f) and (j), as of the
Additional Closing Date as if made as of the Additional Closing Date and to the
additional conditions set forth below:
(a) There are not, and have not been in any of the preceding
thirty (30) Trading Days any Interfering Event; and
(b) The Company is not then in material breach of any of the
Transaction Documents.
ARTICLE VI
LEGEND AND STOCK
Section 6.1. The Company will issue one or more certificates
representing the shares of Series C Preferred Stock and the Warrants in the name
of the applicable Investor and in such denominations to be specified by such
Investor prior to (or from time to time subsequent to) Closing. Each certificate
representing the Series C Preferred Stock and the Warrants initially shall be
stamped or otherwise imprinted with a legend substantially in the following
form:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD,
OFFERED FOR SALE, TRANSFERRED OR ASSIGNED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT AND ANY
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APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION
FROM SUCH REGISTRATION REQUIREMENTS.
The Company agrees to reissue the shares of Series C Preferred Stock
and the Warrants without the legend set forth above at such time as (a) the
holder thereof is permitted to dispose of such Series C Preferred Stock and/or
Warrants and Common Stock issuable upon conversion or exercise thereof pursuant
to Rule 144(k) under the Act, or (b) such shares of Series C Preferred Stock
and/or Warrants are sold to a purchaser or purchasers who (in the opinion of
counsel to the seller or such purchaser(s), in form and substance customary for
opinions of counsel in similar transactions) are able to dispose of such shares
publicly without registration under the Act.
Prior to the Registration Statement being declared effective, any
Common Shares issued pursuant to conversion of the Series C Preferred Stock or
Warrant Shares issued upon exercise of the Warrants shall bear a legend in the
same form as the legend indicated above. Upon such Registration Statement
becoming effective, the Company agrees to promptly, but no later than three (3)
Trading Days thereafter, issue new certificates representing such Common Shares
and Warrant Shares without such legend. Any Common Shares issued pursuant to
conversion of the Series C Preferred Stock and any Warrant Shares issued upon
exercise of the Warrants after the Registration Statement has become effective
shall be free and clear of any legends, transfer restrictions and stop orders.
Notwithstanding the removal of such legend, each Investor agrees to sell the
Common Shares and Warrant Shares represented by the new certificates in
accordance with the applicable prospectus delivery requirements (if copies of a
current prospectus are provided to such Investor by the Company), if any, or in
accordance with an exception from the registration requirements of the Act.
Nothing herein shall limit the right of any holder to pledge these
securities pursuant to a bona fide margin account or lending arrangement.
ARTICLE VII
TERMINATION
Section 7.1 TERMINATION BY MUTUAL CONSENT. This Agreement may be
terminated at any time prior to the Closing by the unanimous written consent of
the Company and each of the Investors.
Section 7.2 OTHER TERMINATION. This Agreement may be terminated by
action of the Board of Directors of the Company or by any of the Investors at
any time if the Closing shall not have been consummated by the fifth Trading Day
following the date of this Agreement; PROVIDED, HOWEVER, that the party (or
parties) prepared to close shall retain its (or their) right to sue for any
breach by the other party (or parties).
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ARTICLE VIII
MISCELLANEOUS
Section 8.1 STAMP TAXES. The Company shall pay all stamp and other
taxes and duties levied in connection with the issuance of the Series C
Preferred Stock and the Warrants pursuant hereto, the Common Shares issued upon
conversion of the Series C Preferred Stock and the Warrant Shares issued upon
exercise of the Warrants.
Section 8.2 SPECIFIC PERFORMANCE; CONSENT TO JURISDICTION; JURY TRIAL.
(a) The Company and the Investors acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent or cure breaches of the provisions of
this Agreement and to enforce specifically the terms and provisions hereof, this
being in addition to any other remedy to which any of them may be entitled by
law or equity.
(b) THE COMPANY AND EACH OF THE INVESTORS (I) HEREBY
IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT
COURT, THE NEW YORK STATE COURTS AND OTHER COURTS OF THE UNITED STATES SITTING
IN NEW YORK COUNTY, NEW YORK FOR THE PURPOSES OF ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT AND (II) HEREBY WAIVES, AND AGREES
NOT TO ASSERT IN ANY SUCH SUIT ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT
PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURT, THAT THE SUIT, ACTION OR
PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE OF THE SUIT,
ACTION OR PROCEEDING IS IMPROPER. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE
COMPANY AND EACH OF THE INVESTORS CONSENTS TO PROCESS BEING SERVED IN ANY SUCH
SUIT, ACTION OR PROCEEDING BY MAILING A COPY THEREOF TO SUCH PARTY AT THE
ADDRESS IN EFFECT FOR NOTICES TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH
SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE
THEREOF. NOTHING IN THIS PARAGRAPH SHALL AFFECT OR LIMIT ANY RIGHT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.
(c) THE COMPANY AND EACH OF THE INVESTORS HEREBY WAIVE ALL
RIGHTS TO A TRIAL BY JURY.
Section 8.3 ENTIRE AGREEMENT; AMENDMENT. This Agreement, together with
the Registration Rights Agreement, the Warrants, the Articles of Amendment and
the agreements and documents executed in connection herewith and therewith,
contains the entire understanding of the parties with respect to the matters
covered hereby and thereby and, except as specifically set forth herein or
therein, neither the Company nor any Investor makes any representation,
warranty, covenant or undertaking with respect to such matters. In the event of
a conflict or inconsistency between this Agreement and any term of the Articles
of Amendment, the Articles of Amendment shall prevail. No provision of this
Agreement may be waived or amended other than by a written instrument signed by
the party against whom enforcement of any such amendment or waiver is sought.
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Section 8.4 NOTICES. Any notice or other communication required or
permitted to be given hereunder shall be in writing by mail, facsimile or
personal delivery and shall be effective upon actual receipt of such notice. The
addresses for such communications shall be:
to the Company:
Able Telcom Holding Corp.
1000 Holcomb Woods Parkway
Suite 440
Roswell, Georgia 30076
Attention: Billy V. Ray, President and Chief
Executive Officer
Facsimile: (770) 993-8703
with copies to:
Paul, Hastings, Janofsky & Walker LLP
600 Peachtree Street, N.E.
Suite 2400
Atlanta, Georgia 30308-2222
Attention: Wayne Shortridge
Facsimile: (404) 815-2424
to the Investors:
The Palladin Group, L.P.
195 Maplewood Avenue
Maplewood, New Jersey 07040
Facsimile: (973) 313-6491
Attention: Robert L. Chender
with copies to:
Arnold & Porter
555 Twelfth Street, NW
Washington, D.C. 20004
Attention: L. Stevenson Parker, Esq.
Facsimile: (202) 942-5999
Any party hereto may from time to time change its address for notices by giving
at least 10 days' written notice of such changed address to the other parties
hereto.
Section 8.5 INDEMNITY. Each party shall indemnify each other party
against any loss, cost or damages (including reasonable attorney's fees but
excluding consequential damages) incurred as a result of such parties' breach of
any representation, warranty, covenant or agreement in this Agreement.
26
<PAGE>
Section 8.6 WAIVERS. No waiver by any party of any default with respect
to any provision, condition or requirement of this Agreement shall be deemed to
be a continuing waiver in the future or a waiver of any other provision,
condition or requirement hereof, nor shall any delay or omission of any party to
exercise any right hereunder in any manner impair the exercise of any such right
accruing to it thereafter.
Section 8.7 HEADINGS. The headings herein are for convenience only, do
not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof.
Section 8.8 SUCCESSORS AND ASSIGNS. Except as otherwise provided
herein, this Agreement shall be binding upon and inure to the benefit of the
parties and their successors and permitted assigns. The parties hereto may amend
this Agreement without notice to or the consent of any third party. The Company
may not assign this Agreement or any rights or obligations hereunder without the
prior written consent of all Investors (which consent may be withheld for any
reason in their sole discretion), except that the Company may assign this
Agreement in connection with the sale of all or substantially all of its assets,
PROVIDED that the Company is not released from any of its obligations hereunder,
such assignee assumes all obligations of the Company hereunder, and appropriate
adjustment of the provisions contained in this Agreement, the Registration
Rights Agreement, the Articles of Amendment and the Warrants is made, in form
and substance satisfactory to the Investors, to place the Investors in the same
position as they would have been but for such assignment, in accordance with the
terms of the Articles of Amendment and the Warrants. Any Investor may assign
this Agreement (in whole or in part) or any rights or obligations hereunder
without the consent of the Company in connection with any sale or transfer of
shares of the Series C Preferred Stock or Warrants held by such Investor,
PROVIDED that such Investor may not assign this Agreement prior to the Closing
Date without the Company's prior written consent except to an affiliate or
affiliates of such Investor.
Section 8.9 NO THIRD PARTY BENEFICIARIES. This Agreement is intended
for the benefit of the parties hereto and their respective permitted successors
and assigns and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
Section 8.10 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS EXECUTED AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE
AND, WHERE APPLICABLE, FEDERAL LAW..
Section 8.11 SURVIVAL. The representations and warranties and the
agreements and covenants of the Company and each Investor contained herein shall
survive the Closing. If any provision of this Agreement becomes or is declared
by a court of competent jurisdiction to be illegal, unenforceable or void, this
Agreement shall continue in full force and effect without said provision,
PROVIDED that no such severability shall be effective if it were to materially
change the economic benefit of this Agreement to any party.
27
<PAGE>
Section 8.12 EXECUTION. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement, it
being understood that all parties need not sign the same counterpart.
Section 8.13 PUBLICITY. The Company agrees that it will not disclose,
and will not include in any public announcement, the name of any Investor
without such Investor's consent, unless and until such disclosure is required by
law or applicable regulation, and then only to the extent of such requirement.
The Company agrees that it will deliver a copy of any public announcement
regarding the matters covered by this Agreement, the Registration Rights
Agreement, the Articles of Amendment or the Warrants or any agreement and
document executed herewith and therewith to each Investor and any public
announcement including the name of an Investor to such Investor, reasonably in
advance of the release of such announcements. The Company will provide the
Investor the opportunity to review and comment on any press release announcing
consummation of the Closing or any other press release describing or referring
to the transactions contemplated hereby.
Section 8.14 SEVERABILITY. The parties acknowledge and agree that the
Investors are not agents, affiliates or partners of each other, that all
representations, warranties, covenants and agreements of the Investors hereunder
are several and not joint, that no Investor shall have any responsibility or
liability for the representations, warranties, agreements, acts or omissions of
any other Investor, and that any rights granted to Investors hereunder shall be
enforceable by each Investor hereunder.
Section 8.15 LIKE TREATMENT OF HOLDERS; REDEMPTION. Neither the Company
nor any of its affiliates shall, directly or indirectly, pay or cause to be paid
any consideration (immediate or contingent), whether by way of interest, fee,
payment for the redemption or conversion of the shares of Series C Preferred
Stock or exercise of the Warrants, or otherwise, to any holder of Series C
Preferred Stock or the Warrants, for or as an inducement to, or in connection
with the solicitation of, any consent, waiver or amendment of any terms or
provisions of the Articles of Amendment or this Agreement or the Registration
Rights Agreement or the Warrants, unless such consideration is required to be
paid to all holders of Series C Preferred Stock and Warrants bound by such
consent, waiver or amendment whether or not such holders so consent, waive or
agree to amend and whether or not such holders tender their shares of Series C
Preferred Stock or Warrants for redemption, conversion or exercise. The Company
shall not, directly or indirectly, redeem any shares of the Series C Preferred
Stock unless such offer of redemption is made PRO RATA to all holders of Series
C Preferred Stock on identical terms.
Section 8.16 NO STRICT CONSTRUCTION. The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against
any party.
Section 8.17 FORCE MAJEURE. The Company shall not be liable for any
default or delay in the performance of its obligations under this Agreement if
and only to the extent such delay or default is caused by Force Majeure;
PROVIDED, HOWEVER, that no event of Force Majeure shall excuse any such default
or delay for longer than an aggregate of thirty (30) days in any calendar year.
28
<PAGE>
[SIGNATURE PAGES FOLLOW]
29
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
ABLE TELCOM HOLDING CORP.
By: ________________________________
Name:
Title:
INVESTORS:
HALIFAX FUND, L.P.
By: The Palladin Group, L.P., as
Investment Manager
By: ________________________________
Name: Robert L. Chender
Title: Managing Director
THE GLENEAGLES FUND COMPANY
By: The Palladin Group, L.P., as
Investment Manager
By: ________________________________
Name: Robert L. Chender
Title: Managing Director
30
<PAGE>
PALLADIN OVERSEAS FUND LIMITED
By: The Palladin Group, L.P., as
Investment Manager
By: ________________________________
Name: Robert L. Chender
Title: Managing Director
PALLADIN PARTNERS I, L.P.
By: Palladin Asset Management, LLC,
as Investment Manager
By: ________________________________
Name:
Title:
LANCER SECURITIES (CAYMAN) LIMITED
By: ________________________________
The Palladin Group, L.P., as
Investment Manager
By: ________________________________
Name: Robert L. Chender
Title: Managing Director
PGEP III, LLC
By: The Palladin Group, L.P., as
Investment Manager
By: ________________________________
Name: Robert L. Chender
Title: Managing Director
31
<PAGE>
QUATTRO FUND LIMITED
By: Quattro Investors LP
By: ________________________________
Name: Andrew Kaplan
Title: Principal
[SIGNATURE PAGES TO ABLE TELCOM HOLDING CORP.
CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT]
32
<PAGE>
EXHIBITS AND SCHEDULES
Schedule I List of Investors
Schedule 2(c) Certain Rights to Capital Stock of the Company
Schedule 2.1(f) Company Non-Compliance with SEC Rules
Schedule 2.1(o) Litigation
Schedule 2.1(aa) Certain Property Encumbrances
Schedule 2.1(bb) Certain Events of Default
Schedule 3.9 Permitted Transactions
Schedule 3.13 Permitted Stock Option Transactions
Schedule 3.18 Permitted Convertible Security Transactions
Exhibit 1.1A Form of Articles of Amendment
Exhibit 1.1B Form of Warrant
Exhibit 2.1(a) List of Subsidiaries
Exhibit 2.1(c)(i) Certificate of Incorporation of the Company
Exhibit 2.1(c)(ii) By-Laws of the Company
Exhibit 2.1(r) Outstanding Securities Subject to Registration Rights, etc.
Exhibit 4.2(e) Opinion of Company Counsel
Exhibit 4.2(f) Registration Rights Agreement
33
<PAGE>
EXHIBIT I
<TABLE>
<CAPTION>
NUMBER OF SHARES OF NUMBER RESTRICTED
SERIES C OF OWNERSHIP
INVESTOR PREFERRED STOCK WARRANTS PURCHASE PRICE PERCENTAGE
-------- --------------- -------- -------------- ----------
<S> <C> <C> <C> <C>
Halifax Fund, L.P. 3,334 1 $10,000,000 4.99%
The Gleneagles Fund Company 333 1 $1,000,000 4.99%
Palladin Overseas Fund Limited 333 1 $1,000,000 4.99%
Palladin Partners I, L.P. 250 1 $750,000 4.99%
Lancer Securities (Cayman) Limited 333 1 $1,000,000 4.99%
PGEP III, LLC 250 1 $750,000 4.99%
Quattro Fund Limited 167 1 $500,000 4.99%
TOTAL
100% 5,000 7 $15,000,000 4.99%
</TABLE>
34
<PAGE>
SCHEDULE 2(C)
CERTAIN RIGHTS TO CAPITAL STOCK OF THE COMPANY
Shares Underlying Employee Options 2,690,000
WorldCom Option 2,000,000
WorldCom Equity Award 300,000
Shares Underlying RoseGlen Warrants 370,000
Shares Underlying Hancock Warrants 409,505
Shares Underlying Series A Preferred Warrants 62,200
----------
5,831,705
==========
35
<PAGE>
SCHEDULE 2.1(F)
COMPANY NON-COMPLIANCE WITH SEC RULES
The Company is compliant, as at this date, with all SEC Rules.
The Company may be required to file amendments to previously filed 10-Q's, 10-K
and the Company may be required to file an amendment to its previously filed
8-K.
36
<PAGE>
SCHEDULE 2.1(O)
LITIGATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF LITIGATION COUNSEL RANGE OF POTENTIAL GAIN (LOSS), IF DETERMINABLE
- ------------------------------------------------------------------------------------------------------------------------------
PROBABLE REASONABLY POSSIBLE REMOTE
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. WILLIAM CAUDILL V. ABLE - This Vezina, Lawrence & - 25,000.00 -
litigation is pending in Fort Piscitelli, PA
Lauderdale, Florida and arises
out of a handwritten
contractual agreement between
Mr. Caudill and a former
executive of Able. Mr. Caudill
seeks contract damages in the
amount of $250,000.00,
including stock options. Able
denies any liability as the
actions of the former executive
in entering into such a
contract were beyond his
power, a limitation well known
by the Plaintiff. Company
management believes that its
exposure will not exceed
$25,000; however, the ultimate
resolution of this matter is
currently not determinable.
- ------------------------------------------------------------------------------------------------------------------------------
2. SIRIT TECHNOLOGIES V. ABLE - On Paul, Hastings, - - -
May 21, 1998, Sirit Janofsky & Walker,
Technologies, Inc. ("Sirit") LLP
field a lawsuit in the Unites
States District Court for the
Southern District of Florida,
against the Able Telcom Holding
Corp. ("Able" or the "Company")
and Thomas M. Davidson
("Davidson"), who has since
become a member of the Company's
Board of Directors. Sirit asserts
claims against the Company for
tortuous interference, fraudulent
inducement, negligent
misrepresentation and breach of
contract in connection with the
Company's agreement to purchase
the network construction and
transportation systems business
of MFS Network Technologies, Inc.
("MFSNT") from WorldCom, Inc.
("WorldCom") and seeks injunction
relief and compensatory damages
in excess of $100.0 million.
Company management believes the
plaintiff's case is baseless and
will ultimately be resolved in
favor of the Company.
- ------------------------------------------------------------------------------------------------------------------------------
3. SAFETY PRODUCTS V. DIAL - This no counsel - $10,000 -
action arises out of a claim for
Goods Sold and Delivered pending
in Polk County, Florida.
Defendant is seeking payment for
$10,346. Dial has not yet
responded to the allegations.
Company management continues to
evaluate the facts of this case,
the result of which are currently
not determinable.
<PAGE>
- ------------------------------------------------------------------------------------------------------------------------------
4. T.A.M.E. V. GEC - This suit, Vezina, Lawrence & - - -
pending in the Western District Piscitelli, PA
of Texas, claims breach of
contract against GEC for
terminating an assumed contract
with T.A.M.E., a minority
(female) owned corporation.
T.A.M.E. claims contract damages
in the amount of $250,000.00,
punitive damages for
Discrimination of $1,000,000.00
and Defamation damages of an
additional $1,000,000.00. GEC
- ------------------------------------------------------------------------------------------------------------------------------
37
<PAGE>
- ------------------------------------------------------------------------------------------------------------------------------
has not yet answered the
allegations as it first must seek
a stay of the proceedings in
order to demand Arbitration.
Company management believes the
plaintiff's case is baseless and
will ultimately be resolved in
favor of the Company.
- ------------------------------------------------------------------------------------------------------------------------------
5. FLI-LINE TOOL V. GEC - This Vezina, Lawrence & - $100,000 -
suit, pending in the Western Piscitelli, PA
District of Texas, claims
breach of contract against GEC
for terminating a construction
contract and is seeking damages
of $216,470. GEC claims that
no contract existed. Company
management continues to
evaluate the facts of this
case, the result of which are
currently not determinable.
Trial in February 2000.
- ------------------------------------------------------------------------------------------------------------------------------
6. DIAL V. LUNT AND QUICK - Dial Ausley & McMullen - - -
filed suit in Leon County,
Florida for sums due and unpaid
under a lump sum construction
contract dated June 24, 1997.
Lunt & Quick has counterclaimed
alleging breach of contract by
Dial for failure to properly
perform the contract or to remedy
any deficiencies in their work.
Company management believes the
plaintiff's case is baseless and
will ultimately be resolved in
favor of the Company.
- ------------------------------------------------------------------------------------------------------------------------------
7. ALPHATECH V. MFS - Alleged - - -
breach of contract, arising out
of an alleged failure to adhere
to the terms of certain Teaming
Agreements relating to two
projects, E-470 and the New
Jersey Consortium. Alphatech is
claiming damages of approximately
$15 million . Company management
continues to evaluate the facts
of this case, the result of which
are currently not determinable.
This case is subject to the
"contingent consideration"
provisions of the MFSNT
acquisition agreements, and
together with all such claims is
reserved at $5.0 million.
- ------------------------------------------------------------------------------------------------------------------------------
8. US PUBLIC TECHNOLOGIES V. MFS - Raiford, Dixon & - - -
Alleged breach of contract, Thackston, LLP
arising out of an alleged
failure to adhere to the terms
of a Teaming Agreement relating
to the New Jersey Consortium
project. USPT's claim is set
out in six counts. They are
claiming damages of not less
than $8.5 million in respect of
each count. Company management
continues to evaluate the facts
of this case, the result of
which are currently not
determinable. This case is
subject to the "contingent
consideration" provisions of
the MFSNT acquisition
agreements, and together with
all such claims is reserved at
$5.0 million.
<PAGE>
- ------------------------------------------------------------------------------------------------------------------------------
9. JOHN BERRY V. MFS - Alleged Vezina, Lawrence & - 50,000.00 -
wrongful termination of Piscitelli, PA
employment contract and
defamation. Judgment (for John
Berry) by default is being
appealed. Defendant seeks
remaining amounts, including
stock options, due under his
employment or approximately
$180,000. Company management
continues to evaluate the facts
of this case, the result of
which are
- ------------------------------------------------------------------------------------------------------------------------------
38
<PAGE>
- ------------------------------------------------------------------------------------------------------------------------------
currently not determinable.
- ------------------------------------------------------------------------------------------------------------------------------
10. SHIPPING FINANCIAL, ET AL. V. Paul, Hastings, - - -
ABLE, GAINES ET AL. - Class Janofsky & Walker,
action suit claiming securities LLP
fraud based upon stock
fluctuation from $21+ to
$1.75. Company management
continues to evaluate the facts
of this case, the result of
which are currently not
determinable. However, Company
management believes there is
sufficient insurance coverage
to satisfy any judgment.
- ------------------------------------------------------------------------------------------------------------------------------
11. BAYPORT PIPELINE, INC. V. MFS Jenkens & Gilchrist - - -
NETWORK TECHNOLOGIES, INC. -
This is an arbitration
proceeding under the
construction industry rules.
Bayport alleges fraud, breach of
contract, quantum meruit, and
something called delay and
hindrance. Bayport seeks
approximately five and one half
million dollars in damages,
including approximately one
million dollars which MFS holds
as retainage. MFS is
counterclaiming against Bayport
for approximately one million
dollars alleging faulty
workmanship, bad faith, and
breach of contract. A hearing is
scheduled for late November, but
this date could change. Company
management continues to evaluate
the facts of this case, the
result of which are currently not
determinable. The Company has
reserved for all potential
damages through the job and/or
purchase accounting.
- ------------------------------------------------------------------------------------------------------------------------------
12. TAB ELECTRIC, INC. V. NEWBERRY Paul L. Davis and - - -
ALASKA, INC., MFS NETWORK Associates
TECHNOLOGIES AND FIREMAN'S FUND
INSURANCE COMPANY - Tab Electric
has sued MFSNT, Newberry and
Fireman's for approximately one
million dollars in connection
with alleged negligence, breach
of contract and other assorted
claims. Tab's claims against MFS
are based on negligence
(negligent supervision) and quasi
contract (MFS was enriched by
Tab's extra work). Trial is set
for April 17, 2000. There is an
ongoing dispute as to whether
WorldCom's insurer should pick up
the defense costs and ultimate
liability for this claim. Company
management continues to evaluate
the facts of this case, the
result of which are currently not
determinable. This case is
subject to the "contingent
consideration" provisions of the
MFSNT acquisition agreements, and
together with all such claims is
reserved at $5.0 million.
Additionally, the Company has
reserved for all potential
damages through the job and/or
purchase accounting.
<PAGE>
- ------------------------------------------------------------------------------------------------------------------------------
13. NEWBERRY V. MFS NETWORK Paul L. Davis and - - -
TECHNOLOGIES - This is a Associates
separate arbitration proceeding
wherein Newberry makes a claim
for approximately three
million, two hundred thousand
dollars for alleged extra work
outside of the original
contract. An arbitrator has
only recently been appointed
and discovery is just
- ------------------------------------------------------------------------------------------------------------------------------
39
<PAGE>
- ------------------------------------------------------------------------------------------------------------------------------
beginning. The arbitration
hearing will not be until late
2000, at the earliest. Company
management continues to evaluate
the facts of this case, the
result of which are currently not
determinable. This case is
subject to the "contingent
consideration" provisions of the
MFSNT acquisition agreements, and
together with all such claims is
reserved at $5.0 million.
Additionally, the Company has
reserved for all potential
damages through the job and/or
purchase accounting.
- ------------------------------------------------------------------------------------------------------------------------------
14. ALLSTATE V. MFS NETWORK no counsel - - -
TECHNOLOGIES - Subrogation matter
that has been turned over to our
insurance company with no
deductible.
- ------------------------------------------------------------------------------------------------------------------------------
15. EVAN PLOTKA V. ABLE - Former Vezina, Lawrence & - $10,000 -
employee suing for breach of Piscitelli, PA
oral contract. Company
believes case has no merit.
- ------------------------------------------------------------------------------------------------------------------------------
16. GARDNER V. MARS - $350,000 - -
Indemnification under agreement
with Mars. Plaintiff is suing
Mars for personal injury.
Plaintiff was formerly an Able
employee. Case has been mediated
unsuccessfully. Due for trial
March 2000.
- ------------------------------------------------------------------------------------------------------------------------------
17. CENTRAL LOCATING SERVICE V. Vezina, Lawrence & - $20,000 -
Dial - Monies due under Piscitelli, PA
contract Dial has valid
counterclaim for poor services.
- ------------------------------------------------------------------------------------------------------------------------------
18. STEVEN BATTERTON V. DIAL - Hurley, Rogner, $35,000 - -
Workers' Compensation claim. Miller, Cox &
Waranch, P.A.
- ------------------------------------------------------------------------------------------------------------------------------
19. BRAGG V. ABLE - EEOC action no counsel - - -
against Able. Former employee
claims age discrimination.
Company believes there is zero
likelihood of Plaintiff
prevailing.
- ------------------------------------------------------------------------------------------------------------------------------
20. JAY LOUIS DICKSTEIN V. ABLE - Paul, Hastings, - - -
Suit by Shareholder that may Janofsky & Walker,
become class certified. LLP
Company believes suit has no
merit.
- ------------------------------------------------------------------------------------------------------------------------------
21. BRENDA AND JOHN DADDYSMAN V. no counsel - - -
H.C. CONNELL - motor vehicle
accident, fully insured
- ------------------------------------------------------------------------------------------------------------------------------
22. LARRY ELROD V. KIGGINS & GEC - Campbell & Campbell - - -
GEC should RECEIVE $30,000 on
countersuit for property damage.
- ------------------------------------------------------------------------------------------------------------------------------
23. BERNARD EVERTSEN V. AT&P - Debbeld, Kaelber & - - -
Workers' Compensation, it Sage, P.A.
appears that the Company has
paid out full deductible. Any
further exposure would be that
of the insurance company.
- ------------------------------------------------------------------------------------------------------------------------------
24. GAINESVILLE REGIONAL UTILITIES no counsel $50,000 - -
V. DIAL - contract/negligence
action. The Company has a
$50,000 deductible.
<PAGE>
- ------------------------------------------------------------------------------------------------------------------------------
25. GILL V. COOPER TIRE - Workers' Cannon, Meyer von - - $100,000
Compensation case against Bremen & Goss
Cooper Tire, small likelihood of
recovery.
- ------------------------------------------------------------------------------------------------------------------------------
26. HORAN, KETCHEV - claim for Raiford, Dixon & - - -
legal services as 3rd party. Thackston, LLP
Able has denied claim. It
appears that statue has run.
$0.00 factor.
- ------------------------------------------------------------------------------------------------------------------------------
27. LAMAR V. BUSHEA & DIAL - Scott A. Cleary, - - -
Automobile negligence case. It Esq.
appears the Company has full
coverage.
- ------------------------------------------------------------------------------------------------------------------------------
28. MURCHIE V. MFS NETWORK Lester, Schwab, - - -
TECHNOLOGIES - slip and fall Katy & Dwyer
case, fully insured.
- ------------------------------------------------------------------------------------------------------------------------------
29. MURRAY V. DIAL - sexual - - -
harassment case, because of
timing it appears that
Plaintiff has gone away.
- ------------------------------------------------------------------------------------------------------------------------------
40
<PAGE>
- ------------------------------------------------------------------------------------------------------------------------------
30. OXFORD V. WILLIAMS & MFS Paul, Hastings, - - -
NETWORK TECHNOLOGIES - "right Janofsky & Walker,
of ways" case, has far reaching LLP
negative potential for
Williams/WorldCom. It appears
that Able, as a subcontractor
has no exposure.
- ------------------------------------------------------------------------------------------------------------------------------
31. KIMBERLY PHILLIPS V. DIAL - Smith, Hood & - $10,000 -
motor vehicle accident, full Perkins
insurance coverage less the
deductible.
- ------------------------------------------------------------------------------------------------------------------------------
32. RICHARD ORTIZ V. H.C. CONNELL - Fisher & Rushmer - $5,000 -
motor vehicle accident.
- ------------------------------------------------------------------------------------------------------------------------------
33. PYSCA V. MFS NETWORK Raiford, Dixon & - - -
TECHNOLOGIES - breach of Thackston, LLP
contract, no idea of range of
potential.
- ------------------------------------------------------------------------------------------------------------------------------
34. ROSA ROCHA V. MFS NETWORK Franklin L. Nolta - $25,000 -
TECHNOLOGIES - motor vehicle
accident in California, $1
million policy with $25,000
deductible.
- ------------------------------------------------------------------------------------------------------------------------------
35. SOUTHWEST GAS CORP. V. MFS - - -
NETWORK TECHNOLOGIES - gas line
hit and damaged during boring.
Gas leaked into a building
resulting in an explosion. Able's
subcontractor has tendered a
defense through their carrier /
unknown potential.
- ------------------------------------------------------------------------------------------------------------------------------
36. J'VON SPANN V. WORLDCOM - case - - -
against WorldCom
(pre-acquisition) by employee
for breach of employment
contract. To date we have not
been brought into the case.
Records have been subpoenaed and
subpoenas have been complied
with. It would appear that the
Company has no exposure in this
case.
- ------------------------------------------------------------------------------------------------------------------------------
37. SPITZ V. MFS - Subrogation $5,740 - -
matter.
- ------------------------------------------------------------------------------------------------------------------------------
38. THORNTON V. AT&P - Slip & fall - - -
case. It appears that Able has
full insurance coverage. The
case originally filed against
Florida Power, Able is brought
in under rights of
indemnification.
- ------------------------------------------------------------------------------------------------------------------------------
39. WHAT-A-BORE V. DIAL - contract Monts & Ware, LLP - - -
case. Dial paid the monies
being sought directly to the
town of Hilliard, FL at the
request/demand of Williams.
What-a-Bore, as our
subcontractor, had damage water
and sewer lines. Counsel believes
that Able can "set off" payments
to the town against Plaintiff's
claim which will basically cause
a wash.
- ------------------------------------------------------------------------------------------------------------------------------
40. VICTORINA MITJANS V. TSCI - Luks, Koleos & $40,000 - -
motor vehicle accident for Santaniello
which it appears the Company is
clearly liable, insurance
coverage with CNA is $1
million. It would appear the
Company stands exposed for
between $25,000 - $40,000
including legal fees.
- ------------------------------------------------------------------------------------------------------------------------------
41. GASH ELECTRIC V. MFS NETWORK Raiford, Dixon & - - -
TECHNOLOGIES Thackston, LLP
<PAGE>
- ------------------------------------------------------------------------------------------------------------------------------
42. DOUGLAS HINSON V. DIAL - - - $20,000
personal injury liability case
in which the Company seriously
questions liability. Worst
case scenario should settle for
much less than the $50,000
deductible. To date the
Company has denied liability
and has turned the case over to
the insurance carrier.
- ------------------------------------------------------------------------------------------------------------------------------
43. WISCONSIN CENTRAL V. MFS Fraser, Stryker, - - -
NETWORK TECHNOLOGIES - We have Vaughn, Meusey,
little
- ------------------------------------------------------------------------------------------------------------------------------
41
<PAGE>
- ------------------------------------------------------------------------------------------------------------------------------
information on this case other Olson, Boyer &
than it is being handled Bloch, P.C.
through Greg Benak's office in
Omaha.
- ------------------------------------------------------------------------------------------------------------------------------
44. WALTER DIXON V. ABLE - McConnaughhay, $20,000 - -
Workers' Compensation case, Duffy, Coonrod,
$100,000 deductible. Pope & Weaver, P.A.
- ------------------------------------------------------------------------------------------------------------------------------
45. VIRGINIA FUHS V. MFS NETWORK Donohue, Sabo, - - -
TECHNOLOGIES - wrongful death Varley &
occurring February 4, 1998 in a Armstrong, P.C.
negligence case. This matter
should be covered under
WorldCom policies which total
$2 million.
- ------------------------------------------------------------------------------------------------------------------------------
46. RONALD WEST V. GEC - negligence - - -
action with a claim of a backed
up sewer into a house and a cut
finger leading to infection.
Turned case over to the insurance
company. The company has full
coverage and will probably not
even have to pay the deductible
in this matter.
- ------------------------------------------------------------------------------------------------------------------------------
47. RAUL HERRERA V. MFS - motor
vehicle accident with negligence
claim originally served upon
WorldCom in October 1999 and sent
to the Company by certified mail
on January 10, 2000. Forwarded to
Allied on January 14, 2000. It is
for an injury that happened on
June 29, 1998. The Company is
waiting for word from Larry
Simons.
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL 500,740.00 255,000.00 120,000.00
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
42
<PAGE>
SCHEDULE 2.1(AA)
CERTAIN PROPERTY ENCUMBRANCES
All property is encumbered under a security agreement for a $35 million credit
facility outstanding to NationsBank.
43
<PAGE>
SCHEDULE 2.1(BB)
CERTAIN EVENTS OF DEFAULT
The Company has been informed that certain events of default may exist under the
credit facility shown in Schedule 2.1(aa).
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SCHEDULE 3.9
PERMITTED TRANSACTIONS
1. Transactions between the Company and (i) MCI WorldCom, Inc. and
WorldCom Network Services, Inc.; (ii) Triarc Companies, Inc.; or (iii)
Foothill Capital Corporation, and/or Messrs. Peltz, May and Packer, or
any affiliate of any of them.
2. Strategic investments in the Company or a subsidiary by an industry
joint venture partner, industry supplier, or a customer thereof.
3. A public or private secondary offering with net proceeds to the Company
of at least $20 million.
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SCHEDULE 3.13
PERMITTED STOCK OPTION TRANSACTIONS
1. Transactions between the Company and (i) MCI WorldCom, Inc. and
WorldCom Network Services, Inc.; (ii) Triarc Companies, Inc.; or (iii)
Foothill Capital Corporation, and/or Messrs. Peltz, May and Packer, or
any affiliate of any of them.
2. Strategic investments in the Company or a subsidiary by an industry
joint venture partner, industry supplier, or a customer thereof.
3. A public or private secondary offering with net proceeds to the Company
of at least $20 million.
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SCHEDULE 3.18
PERMITTED CONVERTIBLE SECURITY TRANSACTIONS
1. Transactions between the Company and (i) MCI WorldCom, Inc. and
WorldCom Network Services, Inc.; (ii) Triarc Companies, Inc.; or (iii)
Foothill Capital Corporation, and/or Messrs. Peltz, May and Packer, or
any affiliate of any of them.
2. Strategic investments in the Company or a subsidiary by an industry
joint venture partner, industry supplier, or a customer thereof.
3. A public or private secondary offering with net proceeds to the Company
of at least $20 million.
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EXHIBIT 1.1A
FORM OF ARTICLES OF AMENDMENT
48
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EXHIBIT 1.1B
FORM OF WARRANT
49
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EXHIBIT 2.1(A)
LIST OF SUBSIDIARIES
Able ICP, Inc. (100%)
Able Telcom, C.A. (80%)
Able Telcom Do Brasil, LTDA (99.9%)
Able Telcom International, Inc. (100%)
Able Wireless, Inc. (100%)
Able Telecommunications & Power, Inc. (100%)
Georgia Electric Company (100%)
MFS Network Technologies, Inc. (100%)
MFS Network Technologies of D.C., Inc. (100%)
MFS Transportation Systems, Inc. (100%)
MFS TransTech, Inc. (80%)
Patton Management Corp. (100%)
Transportation Safety Contractors, Inc. (100%)
Southern Aluminum & Steel Corp. (100%)
Specialty Electronics Systems, Inc. (100%)
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EXHIBIT 2.1(C)(I)
CERTIFICATE OF INCORPORATION OF THE COMPANY
51
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EXHIBIT 2.1(C)(II)
BY-LAWS OF THE COMPANY
52
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EXHIBIT 2.1(R)
OUTSTANDING SECURITIES SUBJECT TO REGISTRATION RIGHTS, ETC.
Thomas Davidson 118,286 shares
Shares underlying Series B Preferred Warrants 370,000
Shares underlying Hancock Warrants 409,505
Shares underlying Series A 62,200
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EXHIBIT 4.2(E)
OPINION OF COMPANY COUNSEL
54
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EXHIBIT 4.2(F)
REGISTRATION RIGHTS AGREEMENT
55
EXHIBIT 4.23
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. IT MAY NOT BE SOLD, OFFERED FOR SALE,
TRANSFERRED OR ASSIGNED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN APPLICABLE
EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.
February 4, 2000
ABLE TELCOM HOLDING CORP.
Common Stock Purchase Warrant
Able Telcom Holding Corp., a Florida corporation (the "COMPANY"),
hereby certifies that for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Halifax Fund, L.P., having an
address at c/o The Palladin Group, 195 Maplewood Avenue, Maplewood, New Jersey
07040 ("PURCHASER") or any other Warrant Holder, as defined below, is entitled,
on the terms and conditions set forth below, to purchase from the Company at any
time beginning on the date hereof and ending on the fifth anniversary of the
Closing Date, as defined below, as extended by 1.5 times the number of days
after the Registration Deadline (as defined in the Registration Rights
Agreement) during which there had been no Effective Registration, as defined
below, 133,334 fully paid and nonassessable shares of Common Stock, $.001 par
value, of the Company (the "COMMON Stock"), at a purchase price per share of
Common Stock of $10.75 (the "CONVERSION PRICE"), 115% of the Initial Conversion
Price (as defined in the Articles of Amendment). Such Conversion Price may from
time to time be adjusted pursuant to the terms of the Articles of Amendment and
the Agreement (the "PURCHASE PRICE"), as the same may be adjusted pursuant to
Section 5 herein.
1. DEFINITIONS.
(a) The term "AGREEMENT" shall mean the Series C Convertible
Preferred Stock Purchase Agreement dated as of February 4, 2000, between the
Company and the Investors signatory thereto.
(b) The term "ARTICLES OF AMENDMENT" shall mean the Articles
of Amendment providing for the Series C Preferred Stock dated as of February 4,
2000.
(c) The term "EFFECTIVE REGISTRATION" shall have the meaning
specified in the Agreement.
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(d) The term "CLOSING DATE" shall mean February 4, 2000.
(e) The term "REGISTRATION RIGHTS AGREEMENT" shall mean the
Registration Rights Agreement, dated as of February 4, 2000, between the Company
and the Investors signatory thereto.
(f) The term "WARRANT HOLDER" shall mean the Purchaser or
any assignee of all or any portion of this Warrant.
(g) The term "WARRANT SHARES" shall mean the Shares of
Common Stock or other securities issuable upon exercise of this Warrant.
Capitalized terms used but not defined in this Warrant shall have the
meanings specified in the Agreement or the Articles of Amendment.
2. EXERCISE OF WARRANT.
This Warrant may be exercised by the Warrant Holder, in whole or in
part, at any time and from time to time by either of the following methods:
(a) The Warrant Holder may surrender this Warrant, together with the
form of subscription at the end hereof duly executed by such Warrant Holder
("SUBSCRIPTION NOTICE"), at the offices of the Company or any transfer agent for
the Common Stock; together with payment of the aggregate Purchase Price for all
Warrant Shares exercised; or
(b) The Warrant Holder may also exercise this Warrant, in whole or in
part, in a "cashless" or "net-issue" exercise by delivering to the offices of
the Company or any transfer agent for the Common Stock this Warrant, together
with a Subscription Notice specifying the number of Warrant Shares to be
delivered to such Warrant Holder ("DELIVERABLE SHARES") and the number of
Warrant Shares with respect to which this Warrant is being surrendered in
payment of the aggregate Purchase Price for the Deliverable Shares ("SURRENDERED
SHARES"); PROVIDED that the Purchase Price multiplied by the number of
Deliverable Shares shall not exceed the value of the Surrendered Shares; and
PROVIDED, FURTHER, that the sum of the number of Deliverable Shares and the
number of Surrendered Shares so specified shall not exceed the aggregate number
of Warrant Shares represented by this Warrant. For the purposes of this
provision, each Warrant Share as to which this Warrant is surrendered will be
attributed a value equal to the Fair Market Value (as defined below) of the
Warrant Share minus the Purchase Price of the Warrant Share (the "SPREAD"). The
number of Deliverable Shares shall be equal to (i) the number of Surrendered
Shares multiplied by the Spread; divided by (ii) the Purchase Price of this
Warrant on the date of exercise.
In the event that the Warrant is not exercised in full, the number of
Warrant Shares shall be reduced by the number of such Warrant Shares for which
this Warrant is exercised and/or surrendered, and the Company, at its expense,
shall within three (3) Trading Days (as defined below) issue and deliver or upon
the order of Warrant Holder a new Warrant of like tenor in the
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name of Warrant Holder or as Warrant Holder (upon payment by Warrant Holder of
any applicable transfer taxes) may request, reflecting such adjusted Warrant
Shares.
3. DELIVERY OF STOCK CERTIFICATES.
(a) Subject to the terms and conditions of this Warrant, as
soon as practicable after the exercise of this Warrant in full or in part, and
in any event within three (3) Trading Days thereafter, the Company shall
transmit the certificates (together with any other stock or other securities or
property to which Warrant Holder is entitled upon exercise) by messenger or
overnight delivery service to reach the address designated by such holder within
three (3) Trading Days after the receipt of the Subscription Notice ("T+3"). If
such certificates are not received by the Warrant Holder within T+3, then the
Warrant Holder will be entitled to revoke and withdraw its exercise of its
Warrant at any time prior to its receipt of those certificates.
In lieu of delivering physical certificates
representing the Warrant Shares deliverable upon exercise of Warrants provided
the Company's transfer agent is participating in the Depository Trust Company
("DTC") Fast Automated Securities Transfer ("FAST") program, upon request of the
Warrant Holder, the Company shall use its Best Efforts (as defined in the
Articles of Amendment) to cause its transfer agent to electronically transmit
the Warrant Shares issuable upon exercise to the Warrant Holder, by crediting
the account of Warrant Holder's prime broker with DTC through its Deposit
Withdrawal Agent Commission ("DWAC") system. The time periods for delivery
described above shall apply to the electronic transmittals through the DWAC
system. The parties agree to coordinate with DTC to accomplish this objective.
The exchange pursuant to Section 3 shall be deemed to have been made immediately
prior to the close of business on the date of the Subscription Notice. The
person or persons entitled to receive the Warrant Shares issuable upon such
exercise shall be treated for all purposes as the record holder or holders of
such Common Shares at the close of business on the date of the Subscription
Notice.
The term "TRADING DAY" means (x) if the Common
Stock is listed on the New York Stock Exchange or the American Stock Exchange, a
day on which there is trading on such stock exchange, (y) if the Common Stock is
not listed on either of such stock exchanges but sale prices of the Common Stock
are reported on an automated quotation system, a day on which trading is
reported on the principal automated quotation system on which sales of the
Common Stock are reported, or (z) if the foregoing provisions are inapplicable,
a day on which quotations are reported by National Quotation Bureau
Incorporated.
(b) This Warrant may not be exercised as to fractional
shares of Common Stock. In the event that the exercise of this Warrant, in full
or in part, would result in the issuance of any fractional share of Common
Stock, then in such event the Warrant Holder shall be entitled to cash equal to
the Fair Market Value (as defined herein) of such fractional share. For purposes
of this Warrant, "FAIR MARKET VALUE" shall equal the closing trading price of
the Common Stock on the Approved Market which is the principal trading exchange
or market for the Common Stock (the "PRINCIPAL MARKET") on the date of
determination or, if the Common Stock is not listed or admitted to trading on
any Approved Market, the average of the closing bid and asked prices on the
over-the-counter market as furnished by any New York Stock Exchange member firm
reasonably selected from time to time by the Company for that purpose and
reasonably acceptable to the
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Warrant Holder, or, if the Common Stock is not listed or admitted to trading on
any Approved Market or traded over-the-counter and the average price cannot be
determined as contemplated above, the Fair Market Value of the Common Stock
shall be as reasonably determined in good faith by the Company's Board of
Directors with the concurrence of the Warrant Holder.
4. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
(a) The Company shall comply with its obligations under the
Registration Rights Agreement with respect to the Warrant Shares, including,
without limitation, the Company's obligation to have filed and declared and
maintained effective a registration statement registering the Warrant Shares
under the Securities Act of 1933, as amended (the "ACT").
(b) The Company shall take all necessary action and
proceedings as may be required and permitted by applicable law, rule and
regulation, including, without limitation, the notification of the Principal
Market, for the legal and valid issuance of this Warrant and the Warrant Shares
to the Warrant Holder under this Warrant.
(c) From the date hereof through the last date on which this
Warrant is exercisable, the Company shall take all steps necessary to ensure
that the Common Stock remains listed on the Principal Market.
(d) The Warrant Shares, when issued in accordance with the
terms hereof, will be duly authorized and, when paid for or issued in accordance
with the terms hereof, shall be validly issued, fully paid and non-assessable.
The Company has authorized and reserved for issuance to Warrant Holder the
requisite number of shares of Common Stock to be issued pursuant to this
Warrant.
(e) The Company shall at all times reserve and keep
available, solely for issuance and delivery as Warrant Shares hereunder, 105% of
such number of shares of Common Stock as shall from time to time be issuable
hereunder.
(f) With a view to making available to the Warrant Holder
the benefits of Rule 144 promulgated under the Act and any other rule or
regulation of the Securities and Exchange Commission ("SEC") that may at any
time permit Warrant Holder to sell securities of the Company to the public
without registration, the Company agrees to use its Best Efforts to:
i) make and keep public information available, as
those terms are understood and defined in Rule 144, at all
times;
ii) file with the SEC in a timely manner all
reports and other documents required of the Company under
the Act and the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT"); and
iii) furnish to any Warrant Holder forthwith upon
request a written statement by the Company that it has
complied with the reporting requirements of Rule 144 and of
the Act and the Exchange Act, a copy of
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the most recent annual or quarterly report of the Company,
and such other reports and documents so filed by the Company
as may be reasonably requested to permit any such Warrant
Holder to take advantage of any rule or regulation of the
SEC permitting the selling of any such securities without
registration.
5. REPRESENTATIONS AND COVENANTS OF THE PURCHASER.
The Purchaser shall not resell Warrant Shares, unless such
resale is pursuant to an effective registration statement under the Act or
pursuant to an applicable exemption from such registration requirements.
6. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES. The
number of and kind of securities purchasable upon exercise of this Warrant and
the Purchase Price shall be subject to adjustment from time to time as follows:
(a) SUBDIVISIONS, COMBINATIONS AND OTHER ISSUANCES. If the
Company shall at any time after the date hereof but prior to the expiration of
this Warrant subdivide its outstanding securities as to which purchase rights
under this Warrant exist, by split-up, spin-off, or otherwise, or combine its
outstanding securities as to which purchase rights under this Warrant exist, the
number of Warrant Shares as to which this Warrant is exercisable as of the date
of such subdivision, split-up, spin-off or combination shall forthwith be
proportionately increased in the case of a subdivision, or proportionately
decreased in the case of a combination. Appropriate proportional adjustments
(decrease in the case of subdivision, increase in the case of combination) shall
also be made to the Purchase Price payable per share, so that the aggregate
Purchase Price payable for the total number of Warrant Shares or Warrants
purchasable under this Warrant as of such date shall remain the same as it would
have been before such subdivision or combination.
(b) STOCK DIVIDEND. If at any time after the date hereof the
Company declares a dividend or other distribution on Common Stock payable in
Common Stock or other securities or rights convertible into or exchangeable for
Common Stock ("COMMON STOCK EQUIVALENTS") without payment of any consideration
by holders of Common Stock for the additional shares of Common Stock or the
Common Stock Equivalents (including the additional shares of Common Stock
issuable upon exercise or conversion thereof), then the number of shares of
Common Stock for which this Warrant may be exercised shall be increased as of
the record date (or the date of such dividend distribution if no record date is
set) for determining which holders of Common Stock shall be entitled to receive
such dividends, in proportion to the increase in the number of outstanding
shares (and shares of Common Stock issuable upon conversion of all such
securities convertible into Common Stock) of Common Stock as a result of such
dividend, and the Purchase Price shall be proportionately reduced so that the
aggregate Purchase Price for all the Warrant Shares issuable hereunder
immediately after the record date (or on the date of such distribution, if
applicable), for such dividend shall equal the aggregate Purchase Price so
payable immediately before such record date (or on the date of such
distribution, if applicable).
(c) OTHER DISTRIBUTIONS. If at any time after the date
hereof the Company distributes to holders of its Common Stock, other than as
part of its dissolution, liquidation or the
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<PAGE>
winding up of its affairs, any shares of its capital stock, any evidence of
indebtedness or any of its assets (other than Common Stock), then the number of
Warrant Shares for which this Warrant is exercisable shall be increased to
equal: (i) the number of Warrant Shares for which this Warrant is exercisable
immediately prior to such event, (ii) multiplied by a fraction, (A) the
numerator of which shall be the Fair Market Value per share of Common Stock on
the record date for the dividend or distribution, and (B) the denominator of
which shall be the Fair Market Value price per share of Common Stock on the
record date for the dividend or distribution minus the amount allocable to one
share of Common Stock of the value (as jointly determined in good faith by the
Board of Directors of the Company and the Warrant Holder) of any and all such
evidences of indebtedness, shares of capital stock, other securities or
property, so distributed. The Purchase Price shall be reduced to equal: (i) the
Purchase Price in effect immediately before the occurrence of any such event
(ii) multiplied by a fraction, (A) the numerator of which is the number of
Warrant Shares for which this Warrant is exercisable immediately before the
adjustment, and (B) the denominator of which is the number of Warrant Shares for
which this Warrant is exercisable immediately after the adjustment.
(d) MERGER, ETC. If at any time after the date hereof there
shall be a merger or consolidation of the Company with or into or a transfer of
all or substantially all of the assets of the Company to another entity, then
the Warrant Holder shall be entitled to receive upon or after such transfer,
merger or consolidation becoming effective, and upon payment of the Purchase
Price then in effect, the number of shares or other securities or property of
the Company or of the successor corporation resulting from such merger or
consolidation, which would have been received by Warrant Holder for the shares
of stock subject to this Warrant had this Warrant been exercised just prior to
such transfer, merger or consolidation becoming effective or to the applicable
record date thereof, as the case may be. The Company will not merge or
consolidate with or into any other corporation, or sell or otherwise transfer
its property, assets and business substantially as an entirety to another
corporation, unless the corporation resulting from such merger or consolidation
(if not the Company), or such transferee corporation, as the case may be, shall
expressly assume, by supplemental agreement reasonably satisfactory in form and
substance to the Warrant Holder, the due and punctual performance and observance
of each and every covenant and condition of this Warrant to be performed and
observed by the Company.
(e) RECLASSIFICATION, ETC. If at any time after the date
hereof there shall be a reorganization or reclassification of the securities as
to which purchase rights under this Warrant exist into the same or a different
number of securities of any other class or classes, then the Warrant Holder
shall thereafter be entitled to receive upon exercise of this Warrant, during
the period specified herein and upon payment of the Purchase Price then in
effect, the number of shares or other securities or property resulting from such
reorganization or reclassification, which would have been received by the
Warrant Holder for the shares of stock subject to this Warrant had this Warrant
at such time been exercised.
(f) PURCHASE PRICE ADJUSTMENT. In the event that within
twelve (12) months of the Closing Date the Company issues or sells any Common
Stock or securities which are convertible into or exchangeable for its Common
Stock or any convertible securities, or any warrants or other rights to
subscribe for or to purchase or any options for the purchase of its Common Stock
or any such convertible securities (other than (i) shares or options issued or
which
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may be issued to employees, directors or consultants, or pursuant to the
Company's employee or director option plans, (ii) shares issued upon exercise of
warrants issued prior to the date hereof to John Hancock Mutual Life Insurance
Co. and its affiliates, Rose Glen and the holders of the Series A Preferred
Stock, (iii) shares issued upon exercise of warrants issued prior to the date
hereof in conjunction with the Company's issuance of Series B Preferred Stock
and equity awards and options to WorldCom Network Services, Inc., and (iv)
shares issued upon exercise of options, warrants or rights outstanding on the
date of the Agreement and listed in any of the Company's reports filed under the
Exchange Act during the previous 12 months) at an effective purchase price per
share which is less than the greater of the Purchase Price then in effect or the
Fair Market Value (as defined in Section 3(b) above) of the Common Stock on the
Trading Day next preceding such issue or sale, then in each such case, the
Purchase Price in effect immediately prior to such issue or sale shall be
reduced effective concurrently with such issue or sale to an amount determined
by multiplying the Purchase Price then in effect by a fraction, (x) the
numerator of which shall be the sum of (1) the number of shares of Common Stock
outstanding immediately prior to such issue or sale, plus (2) the number of
shares of Common Stock which the aggregate consideration received by the Company
for such additional shares would purchase at such Fair Market Value or, Purchase
Price as the case may be, then in effect; and (y) the denominator of which shall
be the number of shares of Common Stock of the Company outstanding immediately
after such issue or sale.
For the purposes of the foregoing adjustment, in the case of
the issuance of any convertible securities, warrants, options or other rights to
subscribe for or to purchase or exchange for, shares of Common Stock
("CONVERTIBLE SECURITIES"), the maximum number of shares of Common Stock
issuable upon exercise, exchange or conversion of such Convertible Securities
shall be deemed to be outstanding, PROVIDED that no further adjustment shall be
made upon the actual issuance of Common Stock upon exercise, exchange or
conversion of such Convertible Securities.
The number of shares which may be purchased hereunder shall
be increased proportionately to any reduction in Purchase Price pursuant to this
paragraph 6(f), so that after such adjustments the aggregate Purchase Price
payable hereunder for the increased number of shares shall be the same as the
aggregate Purchase Price in effect just prior to such adjustments.
In the event of any such issuance for a consideration which
is less than such Fair Market Value and also less than the Purchase Price then
in effect, than there shall be only one such adjustment by reason of such
issuance, such adjustment to be that which results in the greatest reduction of
the Purchase Price computed as aforesaid.
7. NO IMPAIRMENT. The Company will not, by amendment of its
Articles of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the Warrant Holder
against impairment. Without limiting the generality of the foregoing, the
Company (a) will not increase the par value of any Warrant Shares above the
amount payable therefor on such exercise, and (b) will take all such action as
may be reasonably necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable Warrant Shares on the exercise of
this Warrant.
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8. NOTICE OF ADJUSTMENTS. Whenever the Purchase Price or number
of Shares purchasable hereunder shall be adjusted pursuant to Section 5 hereof,
the Company shall execute and deliver to the Warrant Holder a certificate
setting forth, in reasonable detail, the event requiring the adjustment, the
amount of the adjustment, the method by which such adjustment was calculated and
the Purchase Price and number of shares purchasable hereunder after giving
effect to such adjustment, and shall cause a copy of such certificate to be
mailed (by first class mail, postage prepaid) to the Warrant Holder.
9. RIGHTS AS SHAREHOLDER. Prior to exercise of this Warrant,
the Warrant Holder shall not be entitled to any rights as a shareholder of the
Company with respect to the Warrant Shares, including (without limitation) the
right to vote such shares, receive dividends or other distributions thereon or
be notified of shareholder meetings. However, in the event of any taking by the
Company of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend (other
than a cash dividend) or other distribution, any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right, the Company shall mail to
each Warrant Holder, at least ten (10) Trading Days prior to the date specified
therein, a notice specifying the date on which any such record date is to be
taken for the purpose of such dividend, distribution or right, and the amount
and character of such dividend, distribution or right.
10. LIMITATION ON EXERCISE. Notwithstanding anything to the
contrary contained herein, this Warrant may not be exercised by the Warrant
Holder to the extent that, after giving effect to Warrant Shares to be issued
pursuant to a Subscription Notice, the total number of shares of Common Stock
deemed beneficially owned by such holder (other than by virtue of ownership of
this Warrant, or ownership of other securities that have limitations on the
holder's rights to convert or exercise similar to the limitations set forth
herein), together with all shares of Common Stock deemed beneficially owned by
the holder's "affiliates" (as defined in Rule 144 of the Act) that would be
aggregated for purposes of determining whether a group under Section 13(d) of
the Exchange Act exists, would exceed the Warrant Holder's Restricted Ownership
Percentage specified on Schedule I to the Agreement; PROVIDED that (w) each
Warrant Holder shall have the right at any time and from time to time to reduce
its Restricted Ownership Percentage immediately upon notice to the Company or in
the event of a Change in Control Transaction, (x) each Warrant Holder shall have
the right at any time and from time to time to increase its Restricted Ownership
Percentage or otherwise waive in whole or in part the restrictions of this
Section 10 upon 61 days' prior notice to the Company or immediately in the event
of a Change in Control Transaction, (y) each Warrant Holder can make subsequent
adjustments pursuant to (w) or (x) any number of times from time to time (which
adjustment shall be effective immediately if it results in a decrease in the
Restricted Ownership Percentage or shall be effective upon 61 days' prior
written notice or immediately in the event of a Change in Control Transaction if
it results in an increase in the Restricted Ownership Percentage) and (z) each
Warrant Holder may eliminate or reinstate this limitation at any time and from
time to time (which elimination will be effective upon 61 days' prior notice and
which reinstatement will be effective immediately) PROVIDED, FURTHER, that the
Warrant Holder shall not be permitted to waive any provision of this Section 10
to the extent that, if the Warrant Holder were to acquire additional shares of
Common Stock pursuant to such waiver, the limitation set forth in the first
sentence of this Section 10 would be exceeded if its Restricted
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Ownership Percentage were 9.99%. Without limiting the foregoing, in the event of
a Change in Control Transaction, any holder may reinstate immediately (in whole
or in part) the requirement that any increase in its Restricted Ownership
Percentage be subject to 61 days' prior written notice, notwithstanding such
Change in Control Transaction, without imposing such requirement on, or
otherwise changing such holder's rights with respect to, any other Change in
Control Transaction. For this purpose, any material modification of the terms of
a Change in Control Transaction will be deemed to create a new Change in Control
Transaction. The term "DEEMED BENEFICIALLY OWNED" as used in this Warrant shall
include all shares that might be deemed beneficially owned by reason of the
convertibility of the Preferred Shares. A "CHANGE IN CONTROL TRANSACTION" will
be deemed to have occurred upon the earlier of the announcement or consummation
of a transaction or series of transactions (other than the Merger) involving (x)
any consolidation or merger of the Company with or into any other corporation or
other entity or person (whether or not the Company is the surviving
corporation), or any other corporate reorganization or transaction or series of
related transactions in which in excess of 50% of the Company's voting power is
transferred through a merger, consolidation, tender offer or similar
transaction, or (y) in excess of 50% of the Corporation's Board of Directors
consists of directors not nominated by the prior Board of Directors of the
Company, or (z) any person (as defined in Section 13(d) of the Exchange Act,
together with its affiliates and associates (as such terms are defined in Rule
405 under the Act), beneficially owns or is deemed to beneficially own (as
described in Rule 13d-3 under the Exchange Act without regard to the 60-day
exercise period) in excess of 50% of the Company's voting power. The delivery of
a Subscription Notice by the Warrant Holder shall be deemed a representation by
such holder that it is in compliance with this paragraph.
11. REPLACEMENT OF WARRANT. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of such Warrant, the Company at its
expense promptly will execute and deliver, in lieu thereof a new Warrant of like
tenor.
12. SPECIFIC PERFORMANCE; CONSENT TO JURISDICTION; CHOICE OF LAW
(a) The Company and the Warrant Holder acknowledge and agree
that irreparable damage would occur in the event that any of the provisions of
this Warrant were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall he entitled
to an injunction or injunctions to prevent or cure breaches of the provisions of
this Warrant and to enforce specifically the terms and provisions hereof, this
being in addition to any other remedy to which either of them may be entitled by
law or equity.
9
<PAGE>
(b) EACH OF THE COMPANY AND THE WARRANT HOLDER (I) HEREBY
IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL
COURTS LOCATED IN NEW YORK COUNTY, NEW YORK FOR THE PURPOSES OF ANY SUIT, ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS WARRANT AND (II) HEREBY WAIVES,
AND AGREES NOT TO ASSERT IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT
IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURT, THAT THE SUIT,
ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE OF
THE SUIT, ACTION OR PROCEEDING IS IMPROPER. EACH OF THE COMPANY AND THE WARRANT
HOLDER CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING
BY MAILING A COPY THEREOF TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES TO
IT UNDER THIS WARRANT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND
SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING IN THIS PARAGRAPH
SHALL AFFECT OR LIMIT ANY RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED
BY APPLICABLE LAW.
(c) THE COMPANY AND THE WARRANT HOLDER IRREVOCABLY WAIVE
THEIR RIGHT TO TRIAL BY JURY.
(d) THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK (WITHOUT
REGARD TO SUCH STATE'S PRINCIPLES OF CONFLICT OF LAWS) APPLICABLE TO CONTRACTS
EXECUTED AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE AND, WHERE APPLICABLE,
FEDERAL LAW.
13. ENTIRE AGREEMENT; AMENDMENTS. This Warrant, the Exhibits hereto
and the provisions contained in the Agreement or the Registration Rights
Agreement or the Articles of Amendment contain the entire understanding of the
parties with respect to the matters covered hereby and thereby and, except as
specifically set forth herein and therein, neither the Company nor the Warrant
Holder makes any representation, warranty, covenant or undertaking with respect
to such matters. No provision of this Agreement may be waived or amended other
than by a written instrument signed by the party against whom enforcement of any
such amendment or waiver is sought.
14. NOTICES. Any notice or other communication required or permitted
to be given hereunder shall be in writing and shall be effective (a) upon hand
delivery or delivery by telex (with correct answer back received), telecopy or
facsimile at the address or number designated below (if delivered on a business
day during normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received)
or (b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The addresses for such
communications shall be:
to the Company:
Able Telcom Holding Corp.
10
<PAGE>
1000 Holcomb Woods Parkway
Suite 440
Roswell, Georgia 30076
Attention: Billy V. Ray, President and
Chief Executive Officer
Facsimile: (770) 993-8703
with copies to:
Paul, Hastings, Janofsky & Walker L.L.P.
600 Peachtree Street, N.E.
Suite 2400
Atlanta, Georgia 30308
Attention: Wayne Shortridge
Facsimile: (404) 815-2424
to the Warrant Holder:
Halifax Fund, L.P.
c/o The Palladin Group, L.P.
195 Maplewood Avenue
Maplewood, New Jersey 07040
Attention: Robert L. Chender
Facsimile: (973) 313-6491
with copies to:
Arnold & Porter
555 Twelfth Street, N.W.
Washington, D.C. 20004
Attention: L. Stevenson Parker, Esq.
Facsimile: (202) 942-5999
Either party hereto may from time to time change its address for notices under
this Section 14 by giving at least ten (10) days' prior written notice of such
changed address to the other party hereto.
15. MISCELLANEOUS. This Warrant and any term hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of such change, waiver, discharge
or termination is sought. The headings in this Warrant are for purposes of
reference only, and shall not limit or otherwise affect any of the terms hereof.
The invalidity or unenforceability of any provision hereof shall in no way
affect the validity or enforceability of any other provision.
16. ASSIGNMENT. This Warrant may be transferred or assigned, in
whole or in part, at any time and from time to time by the then Warrant Holder
by submitting this Warrant to the Company together with a duly executed
Assignment in substantially the form and substance of the
11
<PAGE>
Form of Assignment which accompanies this Warrant and, upon the Company's
receipt hereof, and in any event, within three (3) business days thereafter, the
Company shall issue a Warrant to the Warrant Holder to evidence that portion of
this Warrant, if any as shall not have been so transferred or assigned;
PROVIDED, HOWEVER, that such transfer or assignment shall be registered or
qualified under all applicable securities laws, or otherwise exempt therefrom.
17. SUCCESSORS AND ASSIGNS. This Warrant shall be binding upon
any entity succeeding to the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets.
18. FORCE MAJEURE. The Company shall not be liable for any
default or delay in the performance of its obligations under this Warrant if and
only to the extent such delay or default is caused by Force Majeure; PROVIDED,
HOWEVER, that no event of Force Majeure shall excuse any such default or delay
for longer than an aggregate of thirty (30) days in any calendar year.
[SIGNATURE PAGE FOLLOWS]
12
<PAGE>
Dated: ABLE TELCOM HOLDING CORP.
By:
Name:
Title:
[CORPORATE SEAL]
Attest:
By:
Its
(SIGNATURE PAGE OF ABLE TELCOM HOLDING CORP. COMMON STOCK PURCHASE WARRANT)
13
<PAGE>
(SUBSCRIPTION NOTICE)
14
<PAGE>
FORM OF WARRANT EXERCISE
(TO BE SIGNED ONLY ON EXERCISE OF WARRANT)
TO: ABLE TELCOM HOLDING CORP.
ATTN: SECRETARY
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant:
_____ (A) for, and to purchase thereunder, ______ shares of Common
Stock of Able Telcom Holding Corp., a Florida corporation
(the "Common Stock"), and herewith, or by wire transfer,
makes payment of $________ therefor; or
_____ (B) in a "cashless" or "net-issue exercise" for, and to
purchase thereunder , ______ shares of Common Stock, and
herewith makes payment therefor with Surrendered Warrant
Shares.
The undersigned requests that the certificates for such shares be issued
in the name of, and
_____ (A) delivered to ____________, whose address is _____________;
or
_____ (B) electronically transmitted and credited to the account of
__________, undersigned's prime broker (Account No. _____)
with Depository Trust Company through its Deposit
Withdrawal Agent Commission system.
Dated:
(Signature must conform to name of holder
as specified on the face of the Warrant)
_________________________________________
(Address)
Tax Identification Number: ________
<PAGE>
FORM OF ASSIGNMENT
(TO BE SIGNED ONLY ON TRANSFER OF WARRANT)
For value received, the undersigned hereby sells, assigns, and transfers unto
_____________ the right represented by the within Warrant to purchase shares of
Common Stock of ABLE TELCOM HOLDING CORP., a Florida corporation, to which the
within Warrant relates, and appoints ____________ Attorney to transfer such
right on the books of ABLE TELCOM HOLDING CORP., a Florida corporation, with
full power of substitution of premises.
Dated: _____________
(Signature must conform to name of holder
as specified on the face of the Warrant)
_________________________________________
(Address)
Signed in the presence of:
___________________________________
EXHIBIT 4.24
ABLE TELCOM HOLDING CORP.
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("Agreement") is entered into as of
February 4, 2000 between ABLE TELCOM HOLDING CORP., a Florida corporation with
offices at 1000 Holcomb Woods Parkway, Suite 440, Roswell, Georgia 30076 (the
"Company") and each of the entities listed under "Investors" on the signature
page hereto (each an "Investor" and collectively the "Investors"), each with
offices at the address listed under such Investor's name on SCHEDULE I hereto.
W I T N E S S E T H:
WHEREAS, pursuant to that certain Convertible Preferred Stock Purchase
Agreement by and between the Company and the Investors dated as of February 4,
2000 (the "Purchase Agreement"), the Company initially has agreed to sell and
issue to the Investors, and the Investors have agreed to purchase from the
Company, an aggregate of 5,000 shares of Series C Preferred Stock (the "Series C
Preferred Stock") at an aggregate price of $15,000,000 on the terms and
conditions set forth therein;
WHEREAS, the Purchase Agreement contemplates that the Series C
Preferred Stock will be convertible into shares (the "Common Shares") of common
stock, $0.001 par value, of the Company ("Common Stock") pursuant to the terms
and conditions set forth in the Articles of Amendment to the Articles of
Incorporation of Able Telcom Holding Corp. (the "Articles of Amendment");
WHEREAS, pursuant to the terms of, and in partial consideration for,
the Investors' agreement to enter into the Purchase Agreement, the Company has
agreed to issue to the Investors warrants exercisable for 200,000 shares of
Common Stock in the form attached as EXHIBIT 1.1B; and
WHEREAS, pursuant to that certain Series B Preferred Stock Exchange
Agreement (the "Exchange Agreement") dated as of February 4, 2000 among certain
of the Investors named therein and the Company, such Investors currently hold
301,787 shares of Common Stock (the "Secondary Conversion Shares") and warrants
(the "Secondary Warrants") exercisable for shares of Common Stock (collectively
with the Secondary Conversion Shares, the "Secondary Common Shares");
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in the Purchase
Agreement and this Agreement, the Company and the Investors agree as follows:
1. CERTAIN DEFINITIONS.
(a) Capitalized terms used herein and not otherwise defined
shall have the meaning ascribed thereto in the Purchase Agreement, Warrants or
the Articles of Amendment. As used in this Agreement, the following terms shall
have the following respective meanings:
<PAGE>
"APPROVED MARKET" shall mean the Nasdaq National Market or the
American Stock Exchange or the New York Stock Exchange.
"BEST EFFORTS" means as to any party obligated to use its Best
Efforts to accomplish a particular objective that the obligated party is
required to make diligent, good faith, prompt, substantial and persistent
efforts as a prudent person desiring to achieve the applicable objective would
use in order to ensure that such objective is achieved as expeditiously as
possible; PROVIDED, HOWEVER, that an obligation to use Best Efforts shall not be
construed to limit the applicability of any remedy for default or delay by such
party under the terms of any Transaction Document, including any applicable
default payments and mandatory redemptions).
"CLOSING" and "CLOSING DATE" shall have the meanings ascribed
to such terms in the Purchase Agreement.
"COMMISSION" or "SEC" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.
"DAY" shall mean calendar day.
"HOLDER" and "HOLDERS" shall include any Investor or the
Investors, respectively, and any permitted transferee of the Secondary Common
Shares, Series C Preferred Stock, Warrants, Warrant Shares or Common Shares or
Registrable Securities which have not been sold to the public to whom the
registration rights conferred by this Agreement have been transferred in
compliance with this Agreement.
"NOTICE OF REDEMPTION" means any written notice by a Holder
with respect to such Holder's redemption of any such shares of Series C
Preferred Stock pursuant to the provisions of the Articles of Amendment.
"REGISTRABLE SECURITIES" shall mean: (i) the Secondary Common
Shares, Common Shares and Warrant Shares issued to any Holder or its permitted
transferee or designee pursuant to the Exchange Agreement or upon conversion of
the Series C Preferred Stock or exercise of the Warrants, as applicable, or upon
any stock split, stock dividend, recapitalization or similar event with respect
to such Secondary Common Shares, Common Shares or Warrant Shares; (ii) any
securities issued or issuable to each Holder upon the conversion, exercise or
exchange of any Secondary Common Shares, Series C Preferred Stock, Warrants,
Warrant Shares, or Common Shares; and (iii) any other security of the Company
issued as a dividend or other distribution with respect to, or upon conversion
or exchange of or in replacement of Registrable Securities.
The terms "REGISTER," "REGISTERED" and "REGISTRATION" shall
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act and applicable rules and
regulations thereunder, and the declaration or ordering of the effectiveness of
such registration statement.
"REGISTRATION DEADLINE" shall mean the earliest date following
the filing of the Company's 1999 Form 10-K with the Commission on which the
Company, using its Best Efforts, is able to secure the effectiveness of the
Registration Statement (defined herein); PROVIDED, HOWEVER, that in no event
shall the Registration Deadline extend beyond October 31, 2000.
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<PAGE>
"REGISTRATION EXPENSES" shall mean all expenses to be incurred
by the Company in connection with each Holder's registration rights under this
Agreement, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel for the Company, "Blue Sky"
fees and expenses, and the expense of any audited financial statements incident
to or required by any such registration (but excluding the compensation of
regular employees of the Company, which shall be paid in any event by the
Company).
"REGISTRATION STATEMENT" shall have the meaning set forth in
Section 2(a) herein.
"REGULATION D" shall mean Regulation D as promulgated pursuant
to the Securities Act, and as subsequently amended.
"SECURITIES ACT" or "ACT" shall mean the Securities Act of
1933, as amended.
"SELLING EXPENSES" shall mean all reasonable underwriting
discounts and selling commissions applicable to the sale of Registrable
Securities and all reasonable fees and disbursements of counsel for Holders not
included within "Registration Expenses".
"SUSPENSION GRACE PERIOD" shall mean five (5) consecutive
Trading Days or ten (10) Trading Days in any 365-day period; PROVIDED, HOWEVER,
that upon receipt by the Holders of a written notice signed by the chief
executive officer or chief financial officer of the Company to the effect set
forth below, the Suspension Grace Period may be extended for a reasonable period
of time, but not in excess of thirty (30) days per 365-day period, (i) in order
to comply with the reasonable request of the lead underwriter in an underwritten
public offering of equity securities of the Company for the account of the
Company, or (ii) if, in connection with any pending material financing,
acquisition or corporate reorganization or other material corporate development
involving the Company, the Company determines in good faith that it must delay
or restate the disclosure of its financial statements contained in the
Registration Statement in order to make such disclosure not materially incorrect
or misleading.
"TRADING DAY" shall mean any day in which the Nasdaq Market or
other Approved Market on which the Common Stock is then listed or quoted is open
for trading; PROVIDED, HOWEVER, that in the event that the Common Stock is not
listed or quoted on an Approved Market, then Trading Day shall mean any weekday
(except any day which shall be a federal legal holiday or a day on which banking
institutions in the State of New York are authorized or required by law or other
governmental action to close).
"TRANSACTION DOCUMENT," individually, and, "TRANSACTION
DOCUMENTS," collectively, shall have the meaning attributable to such term by
the Purchase Agreement.
"WARRANTS" shall mean the warrants in form and substance of
EXHIBIT 1.1B to the Purchase Agreement between the Company and the Investors
dated as of the date hereof.
"WARRANT SHARES" shall mean shares of Common Stock of the
Company issued and issuable upon exercise of the Warrants.
(b) OTHER DEFINITIONS. Each of the following terms is defined
in the Section opposite such term:
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<PAGE>
DEFINED TERM SECTION
--------------------------------- ----------------
AGREEMENT Preamble
ARTICLES OF AMENDMENT Preamble
COMMON SHARES Preamble
COMMON STOCK Preamble
COMPANY Preamble
CONVERSION BENEFIT 2(b)(iii)
CONVERSION DEFICIENCY 2(b)(iv)
CONVERSION NOTICE 2(b)(iv)
CONVERSION PRICE 2(a)(i)
EXCHANGE AGREEMENT Preamble
FAIR MARKET VALUE 2(b)(iv)(B)(II)
FIRST CONVERSION PRICE 2(b)(i)
FORCE MAJEURE 13(l)
INDEMNIFIED PARTY 6(c)
INDEMNIFYING PARTY 6(c)
INTERFERING EVENTS 2(b)
INVESTORS Preamble
MATURITY DATE 2(b)(vii)
NOTICE OF REDEMPTION 2(b)(i)
PREMIUM REDEMPTION PRICE 2(b)(iii)
PURCHASE AGREEMENT Preamble
PURCHASE PRICE 2(b)(iv)(B)(II)
SECONDARY COMMON SHARES Preamble
SECONDARY CONVERSION SHARES Preamble
SECONDARY WARRANTS Preamble
SERIES C PREFERRED STOCK Preamble
SUBSCRIPTION NOTICE 2(b)(iv)
TRIGGERING EVENT REDEMPTION PRICE 2(b)(iv)(B)(I)
2. REGISTRATION REQUIREMENTS. The Company shall use its Best Efforts
(as defined in the Articles of Amendment) to effect the registration of the
Registrable Securities (including without limitation the execution of an
undertaking to file post-effective amendments, appropriate qualification under
applicable blue sky or other state securities laws and appropriate compliance
with applicable regulations issued under the Securities Act) as would permit or
facilitate the sale or distribution of all the Registrable Securities in the
manner (including manner of sale) and in all states reasonably requested by the
Holder on an Approved Market. Such Best Efforts by the Company shall include the
following:
(a) The Company shall, as expeditiously as reasonably possible
after the Closing Date:
(i) Prepare and file a registration statement with the
Commission pursuant to Rule 415 under the Securities Act on Form S-3 under the
Securities Act (or in the event
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<PAGE>
that the Company is ineligible to use such form, such other form as the Company
is eligible to use under the Securities Act) covering the Registrable Securities
("Registration Statement") which Registration Statement (including any
amendments or supplements thereto and prospectuses contained therein) shall not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements therein not
misleading. Such Registration Statement shall, in addition and without
limitation, register (pursuant to Rule 416 under the Securities Act, or
otherwise) such additional indeterminate number of Registrable Securities as
shall be necessary to permit the conversion in full of the Series C Preferred
Stock or exercise of the Warrants (A) to prevent dilution resulting from stock
splits, stock dividends or similar transactions or (B) by reason of changes in
the Conversion Price (as defined in Section 3(b) of the Articles of Amendment).
Thereafter, the Company shall use its Best Efforts to cause such Registration
Statement and other filings to be declared effective as soon as possible, and in
any event on or prior to the Registration Deadline. The number of shares of
Common Stock initially included in such Registration Statement shall be no less
than the total outstanding Secondary Common Shares, plus (x) the number of
shares of Common Stock for which the Series C Preferred Stock are at any time
convertible in full, assuming a Conversion Price of $4.00 and (y) 105% of the
number of Warrant Shares that are then issuable upon the exercise of the
Warrants, in each case, without regard to any limitation on the Investor's
ability to convert the Series C Preferred Stock or exercise the Warrants. The
Company acknowledges that such number of shares of Common Stock to be initially
included in the Registration Statement includes a good faith estimate of the
maximum number of shares issuable upon conversion of the Series C Preferred
Stock and exercise of the Warrants.
(ii) Prepare and file with the SEC such amendments and
supplements to such Registration Statement and the prospectus used in connection
with such Registration Statement as may be necessary to keep the Registration
Statement effective and to comply with the provisions of the Act with respect to
the disposition of all securities covered by such Registration Statement until
such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statement and notify the Holders of the
filing and effectiveness of such Registration Statement and any amendments or
supplements. In the event the number of shares available under a Registration
Statement filed pursuant to this Agreement is insufficient to cover all of the
Registrable Securities issued or issuable upon conversion of the Series C
Preferred Stock and exercise of the Warrants, the Company shall amend the
Registration Statement, or file a new Registration Statement (on the short form
available therefore, if applicable), or both, so as to cover all of the
Registrable Securities, in each case, as soon as practicable, but in any event
within twenty (20) Trading Days after the necessity therefor arises (based on
the market price of the Common Stock and other relevant factors on which the
Company reasonably elects to rely). The Company shall use its Best Efforts to
cause such amendment and/or new Registration Statement to become effective as
soon as practicable following the filing thereof. The provisions of Section
2(b)(i) below shall be applicable with respect to such obligation.
(iii) Furnish to each Holder such numbers of copies of a
current prospectus conforming with the requirements of the Act, copies of the
Registration Statement, any amendment or supplement thereto and any documents
incorporated by reference therein and such other documents as such Holder may
reasonably require in order to facilitate the disposition of Registrable
Securities owned by such Holder and, in the case of the Registration Statement
referred to in Section 2(a)(i), each letter written by or on behalf of the
Company to the SEC or the staff of
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<PAGE>
the SEC, and each item of correspondence from the SEC or the staff of the SEC,
in each case relating to such Registration Statement (other than any portion of
any thereof which contains information for which the Company has sought
confidential treatment). The Company will immediately notify each Investor by
facsimile of the effectiveness of the Registration Statement or any
post-effective amendment. The Company will promptly respond to any and all
comments received from the SEC, with a view towards causing any Registration
Statement or any amendment thereto to be declared effective by the SEC as soon
as practicable and shall promptly file an acceleration request as soon as
practicable following the resolution or clearance of all SEC comments or, if
applicable, following notification by the SEC that the Registration Statement or
any amendment thereto will not be subject to review.
(iv) (a) Register and qualify, or obtain an appropriate
exemption from registration or qualification, the securities covered by such
Registration Statement under such other securities or "Blue Sky" laws of such
jurisdictions as shall be reasonably requested by each Holder (b) prepare and
file in those jurisdictions such supplements (including post-effective
amendments) and supplements to such registrations and qualifications as may be
necessary to maintain the effectiveness thereof, (c) take such other actions as
may be necessary to maintain such registrations and qualifications in effect at
all times, and (iv) take all other actions reasonably necessary or advisable to
qualify the Registrable Securities for sale in such jurisdictions; PROVIDED that
the Company shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service of
process in any such states or jurisdictions, and shall not be required to
register or qualify in any jurisdiction where such registration or qualification
is not permitted or approved by such jurisdiction following the Company's Best
Efforts to obtain such permission or approval.
(v) Notify each Holder immediately of the happening of any
event as a result of which the prospectus (including any supplements thereto or
thereof) included in such Registration Statement, as then in effect, includes an
untrue statement of material fact or omits to state a material fact required to
be stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing, and use its Best Efforts to promptly
update and/or correct such prospectus to correct such untrue statement or
omission, and deliver such number of copies of such supplement or amendment to
each Holder as such Holder may reasonably request.
(vi) Notify each Holder immediately of the issuance by the
Commission or any state securities commission or agency of any stop order
suspending the effectiveness of the Registration Statement or the initiation of
any proceedings for that purpose. The Company shall take all reasonable actions
necessary to prevent the issuance of any stop order and, if any stop order is
issued, to obtain the lifting thereof at the earliest possible time.
(vii) Permit a single firm of counsel, designated as
Holders' counsel by a majority-in-interest of the Registrable Securities
included in the Registration Statement, to review the Registration Statement and
all amendments and supplements thereto within a reasonable period of time prior
to each filing, and shall not file any document in a form to which such counsel
reasonably objects and will not request acceleration of the Registration
Statement without prior notice to such counsel. The sections of the Registration
Statement covering information with respect to the Investors, the Investor's
beneficial ownership of securities of the Company or the
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<PAGE>
Investors' intended method of disposition of Registrable Securities shall,
subject to applicable requirements of the Securities Act and SEC rules
thereunder, conform to the information provided to the Company by each of the
Investors.
(viii) List the Registrable Securities covered by such
Registration Statement with all securities exchange(s) and/or markets on which
the Common Stock is then listed and prepare and file any required filings with
the National Association of Securities Dealers, Inc. or any exchange or market
where the shares of Common Stock are traded.
(ix) If applicable, take all steps necessary to enable
Holders to avail themselves of the prospectus delivery mechanism set forth in
Rule 153 (or successor thereto) under the Act.
(x) The Company shall hold in confidence and not make any
disclosure of information concerning an Investor provided to the Company unless
(a) disclosure of such information is necessary to comply with federal or state
securities laws, (b) the disclosure of such information is necessary to avoid or
correct a misstatement or omission in any Registration Statement, (c) the
release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction, or (d) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Company agrees that
it shall, upon learning that disclosure of such information concerning an
Investor is sought in or by a court of governmental body of competent
jurisdiction or through other means, give prompt notice to such Investor prior
to making such disclosure, and allow the Investor, at its expense, to undertake
appropriate action to prevent disclosure of, or obtain a protective order for,
such information.
(xi) The Company shall provide a transfer agent and
registrar, which may be a single entity, for the Registrable Securities not
later than the effective date of the Registration Statement.
(xii) The Company shall cooperate with the Investors who
hold Registrable Securities being offered and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends with respect to
transferability) representing Registrable Securities to be offered pursuant to
the Registration Statement and enable such certificates to be in such
denominations or amounts, as the case may be, as the managing underwriter or
underwriters, if any, or the Investors may reasonably request and registered in
such names as the managing underwriter or underwriters, if any, or the Investors
may request, and, within three (3) Trading Days after a Registration Statement
which includes Registrable Securities is ordered effective by the SEC, the
Company shall deliver, and shall cause legal counsel selected by the Company to
deliver, to the transfer agent for the Registrable Securities (with copies to
the Investors whose Registrable Securities are included in such Registration
Statement) an instruction in the form attached hereto as EXHIBIT 1 and an
opinion of such counsel in the form attached hereto as EXHIBIT 2.
(xiii) At the reasonable request of the holders of a
majority-in-interest of the Registrable Securities, the Company shall prepare
and file with the SEC such amendments (including post-effective amendments) and
supplements to a Registration Statement and the
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<PAGE>
prospectus used in connection with the Registration Statement as may be
necessary in order to change the plan of distribution set forth in such
Registration Statement.
(xiv) From and after the date of this Agreement, the
Company shall not, and shall not agree to, allow the holders of any securities
of the Company to include any of their securities in any Registration Statement
under Section 2(a) hereof or any amendment or supplement thereto under Section
3(b) hereof without the consent of the holders of a majority-in-interest of the
Registrable Securities.
(xv) The Company shall take all other reasonable actions
necessary to expedite and facilitate disposition by the Investors of Registrable
Securities pursuant to the Registration Statement.
(b) Set forth below in this Section 2(b) are (i) events that
may arise that the Investors consider will interfere with the full enjoyment of
their rights under the Articles of Amendment, the Purchase Agreement and this
Agreement (the "Interfering Events"), and (ii) certain remedies applicable in
each of these events.
Paragraphs (i) through (iv) of this Section 2(b) describe
the Interfering Events, provide a remedy to the Investors if an Interfering
Event occurs and provide that the Investors may require that the Company redeem
outstanding shares of Series C Preferred Stock at a specified price if certain
Interfering Events are not timely cured.
Paragraph (v) provides, INTER ALIA, that if cash payments
required as the remedy in the case of certain of the Interfering Events are not
paid when due, the Company may be required by the Investors to redeem
outstanding shares of Series C Preferred Stock at a specified price.
Paragraph (vi) provides, INTER ALIA, that the Investors
have the right to specific performance.
The preceding paragraphs in this Section 2(b) are meant to
serve only as an introduction to this Section 2(b), are for convenience only,
and are not to be considered in applying, construing or interpreting this
Section 2(b).
(i) DELAY IN EFFECTIVENESS OF REGISTRATION STATEMENT. The
Company agrees that it shall file the Registration Statement complying with the
requirements of this Agreement as expeditiously as possible following the date
of the closing of the Purchase Agreement (the "Closing Date") and shall use its
Best Efforts to cause such Registration Statement to become effective on or
before the Registration Deadline. In the event the Registration Statement has
not been declared effective by the Commission on or before the Registration
Deadline, then the Conversion Price shall be reduced by 10% on the day following
the Registration Deadline and shall be further reduced by an additional 1% on
the last day of each successive 30-day period after the Registration Deadline
until the Registration Statement has been declared effective. For example, if
the Registration Statement does not become effective until 70 days from the
Registration Deadline, the Conversion Price during days 1 through 30 shall be
equal to 90% of the Conversion Price in effect on the Registration Deadline (the
"first Conversion Price"). The Conversion Price from day 31 through day 60 shall
be equal
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to 89% of the first Conversion Price; and from day 61 and thereafter the
Conversion Price shall be equal to 88% of the first Conversion Price. In each
case, the Conversion Price shall be subject to further adjustment as set forth
in the Articles of Amendment.
(ii) NO LISTING; PREMIUM PRICE REDEMPTION FOR DELISTING OF
CLASS OF SHARES. In the event that shares of Common Stock of the Company are
delisted from the Nasdaq National Market (or any other Approved Market where
they are currently listed) at any time following the Closing Date and remain
delisted for more than the Suspension Grace Period, then at the option of each
Holder and to the extent such Holder so elects, the Company shall redeem the
Series C Preferred Stock and/or Registrable Securities held by such Holder, in
whole or in part, in accordance with Sections 4(b), 4(d)(iii) and 4(f) of the
Articles of Amendment; PROVIDED, HOWEVER, that the delisting of the Common Stock
from one Approved Market concurrently with the listing of the Common Stock on
another Approved Market shall not provide a Holder with the right to redeem
Series C Preferred Stock and/or Registrable Securities under this paragraph.
(iii) BLACKOUT PERIODS. At any time after the effective
date of the Registration Statement, in the event that the effectiveness of the
Registration Statement is suspended for more than the Suspension Grace Period,
including without limitation by reason of any suspension or stop order with
respect to the Registration Statement or the fact that an event has occurred as
a result of which the prospectus (including any supplements thereto) included in
such Registration Statement then in effect includes an untrue statement of
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing, then the Company shall pay in cash to each Holder
an amount equal to three percent (3%) of the Liquidation Value for the Series C
Preferred Stock held by such Holder for each 30-day period (prorated for any
partial period) from and after the expiration of the Suspension Grace Period. At
any time after the fifth (5th) Trading Day following the expiration of the
Suspension Grace Period, a Holder shall have the right to have the Company
redeem its Series C Preferred Stock and/or Registrable Securities, in whole or
in part, as follows: (I) in the case of Series C Preferred Stock, such shares
shall be redeemable at a price per share equal to the Triggering Event
Redemption Price and in accordance with Sections 4(b), 4(d)(ii) and 4(f) of the
Articles of Amendment; and (II) in the case of Registrable Securities, such
shares shall be redeemed in accordance with the procedures in Section 4(f) of
the Articles of Amendment at a redemption price (the "Premium Redemption Price")
equal to the greater of (1) 1.2 times the dollar amount that is the product of
(x) the number of shares so to be redeemed pursuant to this clause, and (y) the
Conversion Price as of the date of delivery of the Notice of Redemption (as
defined in Section 3(b) of the Articles of Amendment), or (2) the Conversion
Benefit (as defined in Section 4(b) of the Articles of Amendment).
(iv) CONVERSION DEFICIENCY; PREMIUM PRICE REDEMPTION FOR
CONVERSION DEFICIENCY. In the event that the Company does not have a sufficient
number of shares of Common Stock registered for resale under the Registration
Statement (or which are exempt from the registration requirements under Act
pursuant to Rule 144(k) under the Act) available to satisfy the Company's
obligations to any Holder upon receipt of a Conversion Notice (as defined in the
Articles of Amendment) or Subscription Notice (as defined in the Warrant) or is
otherwise unable or unwilling to issue such shares of Common Stock (including
without limitation by reason of the limit described in Section 10 below) in
accordance with the terms of the Articles of Amendment for any reason after
receipt of a Conversion Notice (each, a "Conversion Deficiency") then:
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(A) The Company shall pay in cash to each Holder an
amount equal to three percent (3%) of the Liquidation Value for the Series C
Preferred Stock held by such Holder for each 30-day period (or portion thereof)
that the Company fails or refuses to issue Common Shares in accordance with the
terms of the Articles of Amendment; and
(B) At any time five (5) days after the commencement
of the running of the first 30-day period described above in clause (A) of this
paragraph (iv), each Holder, at such Holder's option by delivery to the Company
of a Notice of Redemption, shall: (I) in the case of a Conversion Deficiency
with respect to a Conversion Notice, have the right to have the Company either
(1) redeem from such Holder (i) the number shares of Series C Preferred Stock
equal to such Holder's pro rata share of the Deficiency (as defined below) at a
purchase price equal to the Triggering Event Redemption Price as of that
Conversion Date (if the failure to issue Common Shares results from the lack of
a sufficient number thereof), or (ii) all (or such portion as such Holder may
elect) of such Holder's shares of Series C Preferred Stock (if the failure to
issue Common Shares results from any other cause); and (II) in the case of a
Conversion Deficiency with respect to a Subscription Notice, pay such Holder an
amount in cash equal to the product of (1) the Deficiency and (2) the difference
between the "fair market value" (as defined in the Warrant and Secondary
Warrants) as of the Trading Day next immediately preceding the date of exercise
of the Warrant or Secondary Warrants, as applicable, and the Purchase Price (as
defined in the Warrant and Secondary Warrants). With respect to any Conversion
Deficiency relating to a Conversion Notice, the "Deficiency" shall be equal to
the number of Common Shares required to be issued upon receipt of a Conversion
Notice if all outstanding shares of Series C Preferred Stock eligible for
conversion were submitted for conversion at the Conversion Price as provided in
the Articles of Amendment as of the date the Deficiency is determined, less the
number of Common Shares available for issuance upon receipt of such Conversion
Notice. With respect to any Conversion Deficiency relating to a Subscription
Notice, the "Deficiency" shall be equal to the number of shares of Common Stock
required to be issued upon receipt of a Subscription Notice if all outstanding
Warrants or Secondary Warrants, as applicable, eligible for exercise were
exercised at the Purchase Price as of the date the Deficiency is determined,
less the number of shares of Common Stock available for issuance upon receipt of
such Subscription Notice. Any request by a Holder pursuant to this paragraph
(iv)(B) shall be revocable by that Holder at any time prior to redemption of
such shares of Series C Preferred Stock.
(v) PREMIUM PRICE REDEMPTION FOR CASH PAYMENT DEFAULTS.
(A) The Company acknowledges that any failure, refusal
or inability by the Company described in the foregoing paragraphs (i) through
(iv) will cause the Holders to suffer damages in an amount that will be
difficult to ascertain, including without limitation damages resulting from the
loss of liquidity in the Registrable Securities and the additional investment
risk in holding the Registrable Securities. Accordingly, the parties agree that
it is appropriate to include in this Agreement the foregoing provisions for
default payments, discounts and mandatory redemptions in order to compensate the
Holders for such damages. The parties acknowledge and agree that the default
payments, discounts and mandatory redemptions set forth above represent the
parties' good faith effort to quantify such damages and, as such, agree that the
form and amount of such default payments, discounts and mandatory redemptions
are reasonable and will not constitute a penalty.
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(B) Each default payment provided for in the foregoing
paragraphs (ii) through (iv) shall be in addition to each other default payment.
All default payments (which payments shall be pro rata on a per diem basis for
any period of less than thirty (30) days) required to be made in connection with
the above provisions shall be paid in cash at any time upon demand, and whether
or not a demand is made, by the tenth (10th) day of each calendar month for each
partial or full 30-day period occurring prior to that date.
(C) In accordance with Section 3(e)(iv) of the
Articles of Amendment, in the event that the Company fails or refuses to pay any
default payment or honor any penalty or similar amounts when due, at any
Holder's option and request by delivery of a Notice of Redemption the Company
shall purchase all or a portion of the Series C Preferred Stock and/or
Registrable Securities held by such Holder (with any default payment penalty or
similar amounts accruing through the date of such purchase), within five (5)
Trading Days of such request, at a purchase price equal to the Premium
Redemption Price (as defined above); PROVIDED that such Holder may revoke such
request at any time prior to receipt of such payment of such purchase price.
Until such time as the Company purchases such Series C Preferred Stock at the
request of such Holder pursuant to the preceding sentence, at any Holder's
request and option the Company shall as to such Holder pay such amount by adding
and including the amount of such default payment to the Conversion Amount and
the Liquidation Value instead of in cash.
(vi) CUMULATIVE REMEDIES. The default payments and
mandatory redemptions provided for above are in addition to and not in lieu or
limitation of any other rights the Holders may have at law, in equity, including
without limitation the right to specific performance. Each Holder shall be
entitled to specific performance of any and all obligations of the Company in
connection with the registration rights of the Holders hereunder. The parties
hereto agree that default payments and mandatory redemptions applicable under
the circumstances and conditions specified in this Agreement shall be
complementary to, and not cumulative with, any substantially identical default
payments and mandatory redemptions applicable under the same such circumstances
and conditions by the terms of the Articles of Amendment.
(vii) DEFERRAL OF MATURITY DATE. In the event of a failure
of Effective Registration, including without limitation by reason of any of the
circumstances described in the foregoing clauses (i) through (iv) above, then
the Maturity Date (as defined in the Articles of Amendment) shall be deferred by
1.5 days for each day that any of the circumstances in clauses (i), (ii), (iii)
(without regard to the applicability of the Suspension Grace Period), or (iv)
exist.
(c) Subject to Section 2(b) above, the Company may suspend the
use of any prospectus used in connection with the Registration Statement only in
the event, and for such period of time as, such a suspension is required by the
rules and regulations of the Commission. The Company will use its Best Efforts
to cause such suspension to terminate at the earliest possible date.
(d) The Company shall file a Registration Statement with
respect to any newly authorized and/or reserved shares, if necessary to fulfill
its obligations under this Agreement within five (5) Trading Days of any
shareholders meeting authorizing same and shall use its Best Efforts to cause
such Registration Statement to become effective within sixty (60) days of such
shareholders meeting. If the Holders become entitled, pursuant to an event
described in clause (iii) of the definition of Registrable Securities, to
receive any securities in respect of Registrable Securities that
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were already included in a Registration Statement, subsequent to the date such
Registration Statement is declared effective, and the Company is unable under
the securities laws to add such securities to the then effective Registration
Statement, the Company shall promptly file, in accordance with the procedures
set forth herein, an additional Registration Statement with respect to such
newly Registrable Securities. The Company shall use its Best Efforts to (i)
cause any such additional Registration Statement, when filed, to become
effective under the Securities Act, and (ii) keep such additional Registration
Statement effective during the period described in Section 5 below. All of the
registration rights and remedies under this Agreement shall apply to the
registration of such newly reserved shares and such new Registrable Securities,
including without limitation the provisions providing for default payments
contained herein.
(e) If the Holder(s) intend to distribute the Registrable
Securities by means of an underwriting, the Holder(s) shall so advise the
Company. Any such underwriting may only be administered by investment bankers
reasonably satisfactory to the Company. The Company shall only be obligated to
permit one underwritten offering, which offering shall be determined by a
majority-in-interest of the Holders.
(f) In the event of an underwriting pursuant to Section 2(e),
the Company shall enter into such customary agreements for a secondary offering
and take all such other reasonable actions reasonably requested by the Holders
in connection therewith in order to expedite or facilitate the disposition of
such Registrable Securities and in such connection, whether or not an
underwriting agreement is entered into and whether or not the Registrable
Securities are to be sold in an underwritten offering:
(i) make such representations and warranties to the
Holders and the underwriter or underwriters, if any, in form, substance and
scope as are customarily made by issuers to underwriters in secondary offerings;
(ii) use its Best Efforts to cause to be delivered to the
sellers of Registrable Securities and the underwriter or underwriters, if any,
opinions of independent counsel to the Company, on and dated as of the effective
day (or in the case of an underwritten offering, dated the date of delivery of
any Registrable Securities sold pursuant thereto) of the Registration Statement,
and within 90 days following the end of each fiscal year thereafter, which
counsel and opinions (in form, scope and substance) shall be reasonably
satisfactory to the Holders and the underwriter(s), if any, and their counsel
and covering, without limitation, such matters as the due authorization and
issuance of the securities being registered and compliance with securities laws
by the Company in connection with the authorization, issuance and registration
thereof and other matters that are customarily given to underwriters in
underwritten offerings, addressed to the Holders and each underwriter, if any;
(iii) cause to be delivered, immediately prior to the
effectiveness of the Registration Statement (and, in the case of an underwritten
offering, at the time of delivery of any Registrable Securities sold pursuant
thereto), and at the beginning of each fiscal year following a year during which
the Company's independent certified public accountants shall have reviewed any
of the Company's books or records, a "comfort" letter and updates thereof from
the Company's independent certified public accountants addressed to the Holders
and each underwriter, if any, stating that such accountants are independent
public accountants within the
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meaning of the Securities Act and the applicable published rules and regulations
thereunder, and otherwise in customary form and covering such financial and
accounting matters as are customarily covered by letters of the independent
certified public accountants delivered in connection with secondary offerings,
and each such letter and update thereof, if any, shall be reasonably
satisfactory to the Holders;
(iv) if an underwriting agreement is entered into, the
same shall include customary indemnification and contribution provisions to and
from the underwriters and procedures for secondary underwritten offerings;
(v) deliver such documents and certificates as may be
reasonably requested by the Holders of the Registrable Securities being sold or
the managing underwriter or underwriters, if any, to evidence compliance with
clause (i) above and with any customary conditions contained in the underwriting
agreement, if any; and
(vi) deliver to the Holders on the effective day (or in
the case of an underwritten offering, dated the date of delivery of any
Registrable Securities sold pursuant thereto) of the Registration Statement, and
at the beginning of each fiscal quarter thereafter, a certificate in form and
substance as shall be reasonably satisfactory to the Holders, executed by an
executive officer of the Company and to the effect that all the representations
and warranties of the Company contained in the Purchase Agreement are still true
and correct except as disclosed in such certificate; the Company shall, as to
each such certificate delivered at the beginning of each fiscal quarter, update
or cause to be updated each such certificate during such quarter so that it
shall remain current, complete and correct throughout such quarter; and such
updates received by the Holders during such quarter, if any, shall have been
reasonably satisfactory to the Holders.
3. EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration, qualification or compliance with registration
pursuant to this Agreement shall be borne by the Company, and all Selling
Expenses of a Holder shall be borne by such Holder.
4. REGISTRATION ON FORM S-3. The Company shall seek to qualify or
continue to qualify for registration on Form S-3 or any comparable or successor
form or forms, or in the event that the Company is ineligible to use such form,
such form as the Company is eligible to use under the Securities Act.
5. REGISTRATION PERIOD. In the case of the registration effected by the
Company pursuant to this Agreement, the Company will use its Best Efforts to
keep such registration effective until all the Holders have completed the sales
or distribution described in the Registration Statement relating thereto or, if
earlier, until such Registrable Securities may be sold under Rule 144(k)
(PROVIDED that the Company's transfer agent has accepted an instruction from the
Company to such effect).
6. INDEMNIFICATION.
(a) THE COMPANY INDEMNITY. The Company will indemnify each Holder,
each of its officers, directors and partners, and each person controlling each
Holder, within the meaning of Section 15 of the Securities Act and the rules and
regulations thereunder with respect to which
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registration, qualification or compliance has been effected pursuant to this
Agreement, and each underwriter, if any, and each person who controls, within
the meaning of Section 15 of the Securities Act and the rules and regulations
thereunder, any underwriter, against all claims, losses, damages and liabilities
(or actions in respect thereof) arising out of or based on any untrue statement
(or alleged untrue statement) of a material fact contained in any prospectus,
offering circular or other document (including any related registration
statement, notification or the like) incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, or any violation by the Company of the
Securities Act or any state securities law or in either case, any rule or
regulation thereunder applicable to the Company and relating to action or
inaction required of the Company in connection with any such registration,
qualification or compliance, and will reimburse each Holder, each of its
officers, directors and partners, and each person controlling such Holder, each
such underwriter and each person who controls any such underwriter, for any
legal and any other expenses reasonably incurred in connection with
investigating and defending any such claim, loss, damage, liability or action,
PROVIDED that the Company will not be liable in any such case to a Holder to the
extent that any such claim, loss, damage, liability or expense arises out of or
is based on any untrue statement or omission based upon written information
furnished to the Company by such Holder or the underwriter (if any) therefor and
stated to be specifically for use therein. The indemnity agreement contained in
this Section 6(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Company (which consent will not be unreasonably withheld).
(b) HOLDER INDEMNITY. Each Holder will, severally and not jointly,
if Registrable Securities held by it are included in the securities as to which
such registration, qualification or compliance is being effected, indemnify the
Company, each of its directors, officers, partners, and each underwriter, if
any, of the Company's securities covered by such a registration statement, each
person who controls the Company or such underwriter within the meaning of
Section 15 of the Securities Act and the rules and regulations thereunder, each
other Holder (if any), and each of their officers, directors and partners, and
each person controlling such other Holder(s) against all claims, losses, damages
and liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statement therein not
misleading, and will reimburse the Company and such other Holder(s) and their
directors, officers and partners, underwriters or control persons for any legal
or any other expenses reasonably incurred in connection with investigating and
defending any such claim, loss, damage, liability or action, in each case to the
extent, but only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the Company by such Holder
and stated to be specifically for use therein, and PROVIDED that the maximum
amount for which such Holder shall be liable under this indemnity shall not
exceed the net proceeds received by such Holder from the sale of the Registrable
Securities. The indemnity agreement contained in this Section 6(b) shall not
apply to amounts paid in settlement of any such claims, losses, damages or
liabilities if such settlement is effected without the consent of such Holder
(which consent shall not be unreasonably withheld).
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(c) PROCEDURE. Each party entitled to indemnification under this
Article (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim in any litigation resulting therefrom, PROVIDED that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not be unreasonably withheld), and the Indemnified Party
may participate in such defense at such party's expense, and PROVIDED, FURTHER,
that the failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this Article
except to the extent that the Indemnifying Party is materially and adversely
affected by such failure to provide notice. No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
in respect to such claim or litigation. Each Indemnified Party shall furnish
such information regarding itself or the claim in question as an Indemnifying
Party may reasonably request in writing and as shall be reasonably required in
connection with the defense of such claim and litigation resulting therefrom.
7. CONTRIBUTION. If the indemnification provided for in Section 6
herein is unavailable to the Indemnified Parties in respect of any losses,
claims, damages or liabilities referred to herein (other than by reason of the
exceptions provided therein), then each such Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such losses, claims, damages or
liabilities as between the Company on the one hand and any Holder on the other,
in such proportion as is appropriate to reflect the relative fault of the
Company and of such Holder in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative fault of the Company on the one
hand and of any Holder on the other shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to information
supplied by the Company or by such Holder.
In no event shall the obligation of any Indemnifying Party to
contribute under this Section 7 exceed the amount that such Indemnifying Party
would have been obligated to pay by way of indemnification if the
indemnification provided for under Section 6(a) or 6(b) hereof had been
available under the circumstances.
The Company and the Holders agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by PRO RATA
allocation (even if the Holders or the underwriters were treated as one entity
for such purpose) or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately preceding
paragraphs. The amount paid or payable by an Indemnified Party as a result of
the losses, claims, damages and liabilities referred to in the immediately
preceding paragraphs shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such Indemnified
Party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this section, no Holder or underwriter shall
be required to contribute any amount in excess of the amount by which (i) in the
case of any Holder, the net
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proceeds received by such Holder from the sale of Registrable Securities or (ii)
in the case of an underwriter, the total price at which the Registrable
Securities purchased by it and distributed to the public were offered to the
public exceeds, in any such case, the amount of any damages that such Holder or
underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person liable for
or guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
of the Securities Act) shall be entitled to contribution from any person who was
not liable for or guilty of such fraudulent misrepresentation.
8. SURVIVAL. The indemnity and contribution agreements contained in
Sections 6 and 7 shall remain operative and in full force and effect regardless
of (i) any termination of this Agreement or the Purchase Agreement or any
underwriting agreement, (ii) any investigation made by or on behalf of any
Indemnified Party or by or on behalf of the Company, and (iii) the consummation
of the sale or successive resales of the Registrable Securities.
9. INFORMATION BY HOLDERS. Each Holder shall furnish to the Company
such information regarding such Holder and the distribution and/or sale proposed
by such Holder as the Company may reasonably request in writing and as shall be
reasonably required in connection with any registration, qualification or
compliance referred to in this Agreement. The intended method or methods of
disposition and/or sale (Plan of Distribution) of such securities as so provided
by such Investor shall be included without alteration in the Registration
Statement covering the Registrable Securities and shall not be changed without
written consent of such Holder or its designated representative.
10. NASDAQ LIMIT ON STOCK ISSUANCES. Notwithstanding anything to the
contrary herein, the Company shall not be obligated to issue or register with
the SEC any shares of Common Stock to the extent that such issuance or
registration is prohibited by any rule, regulation or policy of Nasdaq or any
exchange or market upon which the Common Stock may be traded.
11. REPLACEMENT CERTIFICATES. The certificate(s) representing the
Common Shares or Warrant Shares held by any Investor (or then Holder) may be
exchanged by such Investor (or such Holder) at any time and from time to time
for certificates with different denominations representing an equal aggregate
number of Common Shares or Warrant Shares, as reasonably requested by such
Investor (or such Holder) upon surrendering the same. No service charge will be
made for such registration or transfer or exchange.
12. TRANSFER OR ASSIGNMENT. Except as otherwise provided herein, this
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The rights granted to the Investors by
the Company under this Agreement to cause the Company to register Registrable
Securities may be transferred or assigned (in whole or in part) to a transferee
or assignee of Series C Preferred Stock or Warrants which transfer has been
effected in compliance with the Articles of Amendment and Warrants, and all
other rights granted to the Investors by the Company hereunder may be
transferred or assigned to any transferee or assignee of any Series C Preferred
Stock or Warrants; PROVIDED that in each case that the Company must be given
written notice by the such Investor at the time of or within a reasonable time
after said transfer or assignment, stating the name and address of said
transferee or assignee and identifying the securities with respect to which such
registration rights are being transferred or assigned; and PROVIDED,
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FURTHER, that the transferee or assignee of such rights agrees in writing to be
bound by the registration provisions of this Agreement.
13. MISCELLANEOUS.
(a) REMEDIES. The Company and the Investors acknowledge and agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent or cure breaches of the
provisions of this Agreement and to enforce specifically the terms and
provisions hereof, this being in addition to any other remedy to which any of
them may be entitled by law or equity.
(b) JURISDICTION. THE COMPANY AND EACH OF THE INVESTORS (I) HEREBY
IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT
COURT, THE NEW YORK STATE COURTS AND OTHER COURTS OF THE UNITED STATES SITTING
IN NEW YORK COUNTY, NEW YORK FOR THE PURPOSES OF ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT AND (II) HEREBY WAIVES, AND AGREES
NOT TO ASSERT IN ANY SUCH SUIT ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT
PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURT, THAT THE SUIT, ACTION OR
PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE OF THE SUIT,
ACTION OR PROCEEDING IS IMPROPER. THE COMPANY AND EACH OF THE INVESTORS CONSENTS
TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY
THEREOF TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES TO IT UNDER THIS
AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT
SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING IN THIS PARAGRAPH SHALL AFFECT OR
LIMIT ANY RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
(c) NOTICES. Any notice or other communication required or
permitted to be given hereunder shall be in writing by facsimile, mail or
personal delivery and shall be effective upon actual receipt of such notice. The
addresses for such communications shall be:
to the Company:
Able Telcom Holding Corp.
1000 Holcomb Woods Parkway
Suite 440
Roswell, Georgia 30076
Facsimile: (770) 993-8703
Attention: Billy V. Ray
President and Chief Executive Officer
with copies to:
Paul, Hastings, Janofsky & Walker LLP
600 Peachtree Street, N.E.
Suite 2400
Atlanta, Georgia 30308
Facsimile: (404) 815-2424
Attention: Wayne H. Shortridge, Esq.
-17-
<PAGE>
to the Investors:
The Palladin Group, L.P.
195 Maplewood Avenue
Maplewood, New Jersey 07040
Facsimile: (973) 313-6491
Attention: Robert L. Chender
with copies to:
Arnold & Porter
555 Twelfth Street, N.W.
Washington, DC 20004
Facsimile: (202) 942-5999
Attention: L. Stevenson Parker, Esq.
Any party hereto may from time to time change its address for notices by giving
at least ten (10) days' written notice of such changed address to the other
parties hereto.
(d) WAIVERS. No waiver by any party of any default with respect to
any provision, condition or requirement of this Agreement shall be deemed to be
a continuing waiver in the future or a waiver of any other provision, condition
or requirement hereof, nor shall any delay or omission of any party to exercise
any right hereunder in any manner impair the exercise of any such right accruing
to it thereafter. The representations and warranties and the agreements and
covenants of the Company and each Investor contained herein shall survive the
Closing.
(e) EXECUTION. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement, it
being understood that all parties need not sign the same counterpart.
(f) PUBLICITY. The Company agrees that it will not disclose, and
will not include in any public announcement, the name of any Investor without
its consent, unless and until such disclosure is required by law or applicable
regulation, and then only to the extent of such requirement.
(g) ENTIRE AGREEMENT. This Agreement, together with the Purchase
Agreement, the Articles of Amendment and the Warrants and the agreements and
documents contemplated hereby and thereby, contains the entire understanding and
agreement of the parties, and may not be modified or terminated except by a
written agreement signed by both parties. In the event of a conflict or
inconsistency between this Agreement and any term of the Articles of Amendment,
the Articles of Amendment shall prevail.
-18-
<PAGE>
(h) GOVERNING LAW; CONSENT OF JURISDICTION. THIS AGREEMENT AND THE
VALIDITY AND PERFORMANCE OF THE TERMS HEREOF SHALL BE GOVERNED BY AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS EXECUTED AND TO BE PERFORMED ENTIRELY IN SUCH STATE AND,
WHERE APPLICABLE, FEDERAL LAW.
(i) SEVERABILITY. The parties acknowledge and agree that the
Investors are not agents, affiliates or partners of each other, that all
representations, warranties, covenants and agreements of the Investors hereunder
are several and not joint, that no Investor shall have any responsibility or
liability for the representations, warrants, agreements, acts or omissions of
any other Investor, and that any rights granted to Investors hereunder shall be
enforceable by each Investor hereunder.
(j) JURY TRIAL. EACH PARTY HERETO WAIVES THE RIGHT TO A TRIAL BY
JURY.
(k) TITLES. The titles used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.
(l) FORCE MAJEURE. The Company shall not be liable for any default
or delay in the performance of its obligations under this Agreement if and only
to the extent such delay or default is caused by Force Majeure (as defined in
the Articles of Amendment); PROVIDED, HOWEVER, that no event of Force Majeure
shall excuse any such default or delay for longer than an aggregate of thirty
(30) days in any calendar year.
[SIGNATURE PAGES FOLLOW]
-19-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
ABLE TELCOM HOLDING CORP.
By:
-------------------------------------------------
Name:
Title:
INVESTORS:
HALIFAX FUND, L.P.
By: The Palladin Group, L.P., as
Investment Manager
By:
-------------------------------------------------
Name: Robert L. Chender
Title: Managing Director
THE GLENEAGLES FUND COMPANY
By: The Palladin Group, L.P., as
Investment Manager
By:
-------------------------------------------------
Name: Robert L. Chender
Title: Managing Director
-20-
<PAGE>
PALLADIN OVERSEAS FUND LIMITED
By: The Palladin Group, L.P., as
Investment Manager
By:
-------------------------------------------------
Name: Robert L. Chender
Title: Managing Director
PALLADIN PARTNERS I, L.P.
By: Palladin Asset Management, LLC,
as Investment Manager
By:
-------------------------------------------------
Name:
Title:
LANCER SECURITIES (CAYMAN) LIMITED
By: The Palladin Group, L.P., as
Investment Manager
By:
-------------------------------------------------
Name: Robert L. Chender
Title: Managing Director
PGEP III, LLC
By: The Palladin Group, L.P., as
Investment Manager
By:
-------------------------------------------------
Name: Robert L. Chender
Title: Managing Director
-21-
<PAGE>
QUATTRO FUND LIMITED
By: Quattro Investors LP
By:
-------------------------------------------------
Name: Andrew Kaplan
Title: Principal
[SIGNATURE PAGES TO ABLE TELECOM HOLDING CORP. REGISTRATION RIGHTS AGREEMENT]
-22-
<PAGE>
SCHEDULE 1
-23-
<PAGE>
EXHIBIT 1
TO REGISTRATION
RIGHTS AGREEMENT
[Company Letterhead]
[Date]
[Name and address of Transfer Agent]
Ladies and Gentlemen:
This letter shall serve as our irrevocable authorization and direction
to you (1) to transfer or re-register (or at the holders request to reissue to
the holder thereof without any restrictive legend) the certificates for the
shares of Common Stock, par value $0.001 per share (the "COMMON STOCK"), of Able
Telcom Holding Corp., a Florida corporation (the "COMPANY") represented by
certificate numbers ____ for an aggregate of ____ shares (the "OUTSTANDING
SHARES") of Common Stock presently registered in the name of [Name of Investor]
(the "INVESTOR") (which shares were previously issued pursuant to the Settlement
Agreement dated February , 2000 among the Company and [Name of Investor] and
other parties thereto, or upon conversion of the Preferred Shares (as
hereinafter defined) or exercise of the Warrants (as hereinafter defined)), upon
surrender of such certificates to you, notwithstanding the legend appearing on
such certificates, (2) to issue shares (the "CONVERSION SHARES") of Common Stock
to or upon the order of the registered holder from time to time of shares of
Series C Convertible Preferred Stock of the Company (the "PREFERRED SHARES")
upon surrender to you of a properly completed and duly executed Conversion
Notice notwithstanding the legend appearing on such certificates and (3) to
issue shares (the "WARRANT SHARES") of Common Stock to or upon the order of the
registered holder from time to time of the Warrants of the Company (the
"WARRANTS") upon surrender to you of a properly completed and duly executed
Subscription Notice and such Warrants notwithstanding the legend appearing on
such Warrants. The transfer or re-registration of the certificates for the
Outstanding Shares by you should be made at such time as you are requested to do
so by the record holder of the Outstanding Shares. The certificate issued upon
such transfer or re-registration should be registered in such name as requested
by the holder of record of the certificate surrendered to you and should not
bear any legend which would restrict the transfer of the shares represented
thereby. In addition, you are hereby directed to remove any stop-transfer
instruction relating to the Outstanding Shares. Certificates for the Conversion
Shares and Warrant Shares should not bear any restrictive legend and should not
be subject to any stop-transfer restriction.
-24-
<PAGE>
Pursuant to applicable securities laws or certain agreements between
the Company and the Investor, the Investor may be prohibited during certain
limited periods of time from selling its Outstanding Shares or other shares of
Common Stock issuable upon conversion of the Preferred Shares and exercise of
the Warrants under the Registration Statement; PROVIDED, HOWEVER, that such
Investor may continue to sell such securities pursuant to an exemption from
registration under the Securities Act of 1933, as amended (the "SECURITIES
ACT"). The Company may, during such periods, deliver a notice to you advising
you to refrain from transferring any Outstanding Shares pursuant to such
Registration Statement, PROVIDED that such notice shall not prohibit the
transfer of such shares pursuant to an exemption from registration under the
Securities Act during such periods.
Contemporaneous with the delivery of this letter, the Company is
delivering to you a letter of ____________________ as to registration of the
Outstanding Shares and the Conversion Shares under the Securities Act of 1933,
as amended.
Should you have any questions concerning this matter, please contact
me.
Very truly yours,
ABLE TELECOM HOLDING CORP.
By:
-------------------------------------------------
Name:
Title:
Enclosures:
cc: [Name of Investor]
-25-
<PAGE>
EXHIBIT 2
TO REGISTRATION
RIGHTS AGREEMENT
[Date]
[Name and address
of Transfer Agent]
RE: ABLE TELCOM HOLDING CORP.
Ladies and Gentlemen:
We are counsel to Able Telcom Holding Corp., a Florida corporation (the
"COMPANY"), and we understand that [Name of Investor] (the "HOLDER") has
purchased from the Company shares of the Company's Series C Convertible
Preferred Stock (the "PREFERRED STOCK") and warrants (the "WARRANTS") that are
convertible or exercisable into the Company's Common Stock, par value $0.001 per
share (the "COMMON STOCK"). The Preferred Stock and Warrants were purchased by
the Holder pursuant to a Preferred Stock Purchase Agreement, dated as of
February , 2000, between the Holder and the Company (the "AGREEMENT") or a
Settlement Agreement between the Holder and the Company. Pursuant to a
Registration Rights Agreement, dated as of February , 2000, between the Company
and the Holder (the "REGISTRATION RIGHTS AGREEMENT"), the Company agreed with
the Holder, among other things, to register the Registrable Securities (as that
term is defined in the Registration Rights Agreement) under the Securities Act
of 1933, as amended (the "SECURITIES ACT"), upon the terms provided in the
Registration Rights Agreement. In connection with the Company's obligations
under the Registration Rights Agreement, on _______, 20 , the Company filed a
Registration Statement on Form S-[ ] (File No. 333-___________) (the
"REGISTRATION STATEMENT") with the Securities and Exchange Commission relating
to the Registrable Securities, which names the Holder as a selling stockholder
thereunder.
[Other introductory language to be inserted]
Based on the foregoing, we are of the opinion that the Registrable
Securities have been registered under the Securities Act.
-26-
<PAGE>
[Other appropriate language to be included.]
Very truly yours,
cc: [Name of investor]
-27-
EXHIBIT 21
<TABLE>
<S> <C> <C> <C> <C>
--------------------
ABLE TELCOM
HOLDING CORP.
- -------------------------------------------------------------------------------------------------------------
NETWORK NETWORK TRANSPORTATION CONSTRUCTION COMMUNICATIONS
SERVICES DEVELOPMENT SERVICES DEVELOPMENT
- -------------------------------------------------------------------------------------------------------------
Adesta Adesta ICP, Inc. Adesta Georgia Electric Able Telcom
Communications, Inc. Transportation, Company International, Inc.
formerly Inc. formerly
MFS Network MFS Transportation
Technologies, Inc. Systems, Inc.
- -------------------------------------------------------------------------------------------------------------
TransTech, Inc. Patton Management Able Telcom CA
formerly Corp.
MFS TransTech, Inc.
---------------------------------------------------------------
Southern Aluminum Transportation Able Telcom Do
& Steel Corp. Safety Contractors, Brasil, LTDA
Inc.
---------------------------------------------------------------
Specialty Able Able Wireless, Inc.
Electronic Telecommunications
Systems, Inc. & Power, Inc.
---------------------------------------------------------------
</TABLE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated January 19, 1998, with respect to the 1997 and 1996
financial statements and schedules of Able Telcom Holding Corp. included in the
Annual Report (form 10-K) for the year ended October 31, 1998 which is
incorporated by reference in the Registration Statement (Form S-8, No. 333-04377
pertaining to the 1996 Stock Option Plan of Able Telcom Holding Corp.).
West Palm Beach, Florida Ernst & Young LLP
February 11, 2000
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
reports included in this Form 10-K, into the Company's previously filed
Registration Statement File No. 333-04377.
Omaha, Nebraska, Arthur Andersen LLP
February 11, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-START> NOV-01-1998
<PERIOD-END> OCT-31-1999
<CASH> 16,568
<SECURITIES> 0
<RECEIVABLES> 748,485
<ALLOWANCES> (3,032)
<INVENTORY> 0
<CURRENT-ASSETS> 167,874
<PP&E> 47,790
<DEPRECIATION> (19,987)
<TOTAL-ASSETS> 66,356
<CURRENT-LIABILITIES> 166,772
<BONDS> 0
0
16,322
<COMMON> 12
<OTHER-SE> 431
<TOTAL-LIABILITY-AND-EQUITY> 262,033
<SALES> 418,565
<TOTAL-REVENUES> 418,565
<CGS> 365,060
<TOTAL-COSTS> 420,449
<OTHER-EXPENSES> 58,555
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9512
<INCOME-PRETAX> (14,562)
<INCOME-TAX> (14,424)
<INCOME-CONTINUING> (1,884)
<DISCONTINUED> 0
<EXTRAORDINARY> (3,067)
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<NET-INCOME> (18,060)
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