FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 28, 1996
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from Not Applicable to
------------------------- ---------------
Commission File Number 0-17840
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HANDEX CORPORATION
---------------------
(Exact name of registrant as specified in its charter)
Delaware 22-2941704
- - -------------------------------- ---------------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
500 Campus Drive, Morganville, New Jersey 07751
-------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(908) 536-8500
-----------------
(Registrant's telephone number, including area code)
----------------------------------------------------
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
---- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Number of shares of common stock outstanding at October 31, 1996: 6,873,012
----------
1
PART I: FINANCIAL INFORMATION
--------------------------------
Item 1. Financial Statements
--------------------------------
HANDEX CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
September 28, 1996 and December 30, 1995
September 28, December 30,
1996 1995
------- -------
Assets (unaudited)
--------
Current assets:
Cash and cash equivalents $ 6,965,354 3,821,474
Marketable securities 300,000 2,775,000
Accounts receivable, net 18,390,130 15,208,497
Inventories 559,840 352,196
Refundable income tax -- 666,060
Deferred income tax assets 737,351 705,453
Prepaid expenses and other
current assets 707,155 541,084
Net assets of discontinued
operations (Note 3) 2,997,000 10,300,000
------------- -------------
Total current assets 30,656,830 34,369,764
Property, plant and equipment, net 6,122,050 3,744,971
Other non-current assets 1,903,453 1,575,999
Intangible assets 15,824,486 16,121,258
------------- -------------
$54,506,819 55,811,992
============= =============
See accompanying notes to condensed consolidated financial statements.
HANDEX CORPORATION AND SUBSIDIARIES
2
Condensed Consolidated Balance Sheets
September 28, 1996 and December 30, 1995
September 28, December 30,
1996 1995
------ ------
(unaudited)
Liabilities and Stockholders' Equity
- - ------------------------------------
Current liabilities:
Current installments of long-term
obligations $ 1,325,285 447,227
Accounts payable 1,381,802 905,923
Accrued expenses 6,467,511 4,238,206
Income taxes payable 238,209 --
------------- -------------
Total current liabilities 9,412,807 5,591,356
Long-term obligations, excluding
current installments 2,270,466 649,941
Deferred income tax liability 161,438 142,401
Stockholders' equity:
Preferred stock, without par value,
2,000,000 shares authorized, no
shares issued -- --
Common stock, $.01 par value,
15,000,000 shares authorized;
issued 7,056,212 shares in 1996
and 7,050,212 shares in 1995 70,562 70,502
Additional paid-in capital 24,399,562 24,349,542
Retained earnings 19,490,109 26,306,375
Treasury stock at cost - 185,000
shares in 1996 and 1995 (1,298,125) (1,298,125)
------------- -------------
Total stockholders' equity 42,662,108 49,428,294
------------- -------------
$ 54,506,819 55,811,992
============= =============
See accompanying notes to condensed consolidated financial statements.
3
<TABLE>
HANDEX CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Opera
Nine and Three Months ended September 28, 1996 and Se
(Unaudited)
<CAPTION>
Nine Months Ended Three Mon
--------------------- -----------
September 28, September 30, September 28,
1996 1995 1996
----- ----- -----
<S> <C> <C> <C>
Revenues $ 29,578,358 16,753,893 10,484,343
Cost of revenues 14,614,479 9,222,834 5,230,727
Gross profit 14,963,879 7,531,059 5,253,616
Selling, general and
administrative expenses 13,732,162 7,935,347 4,763,488
Provision for loss in a
joint venture and
asset write-off -- 811,748 --
-------------- -------------- --------------
Operating income (loss) 1,231,717 (1,216,036) 490,128
Interest income (expense), net (102,806) 118,349 (52,467)
-------------- -------------- --------------
Income (loss) from continuing
operations before
income taxes 1,128,911 (1,097,687) 437,661
Provision for income taxes 506,533 (450,093) 177,581
(benefit) -------------- -------------- --------------
Income (loss) from
continuing operations 622,378 (647,594) 260,080
Discontinued operations (Note 3)
Income (loss) from operations
of the discontinued environmental
segment (less applicable income
taxes for nine months of $75,290
for 1996 and $574,420 for 1995;
$201,392 and $59,193) for the
1996 and 1995 quarters (135,641) 648,582 181,240
Loss on disposal of the
environmental segment (7,303,000) -- (7,303,000)
-------------- -------------- --------------
Income (loss) from discontinued
operations (7,438,641) 648,582 (7,121,760)
-------------- -------------- --------------
Net income (loss) $ (6,816,263) 988 (6,861,680)
============== ============== ==============
4
Earnings (loss) per share from
continuing operations $ 0.09 (0.09) 0.04
Earnings (loss) per share from
discontinued operations $ (1.08) 0.09 (1.04)
-------------- -------------- --------------
Earnings (loss) per share $ (0.99) -- (1.00)
============== ============== ==============
Weighted average number of shares
outstanding 6,867,858 6,865,212 6,871,212
See accompanying notes to condensed consolidated finan
</TABLE>
5
6
HANDEX CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
Nine Months ended September 28, 1996 and September 30, 1995
(Unaudited)
1996 1995
------ ------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (6,816,263) 988
Adjustments to reconcile net income
(loss) to net cash provided by
operating
activities:
Depreciation and amortization 2,008,416 1,252,403
Loss on equipment/software write-off -- 161,748
Deferred income taxes (12,861) 88,040
Cash provided (used) from the
change in:
Accounts receivable (2,999,139) (1,647,871)
Inventories (190,250) 19,389
Prepaid expenses and other
current assets (166,071) (46,266)
Other assets (251,855) 93,025
Accounts payable 226,895 (226,272)
Accrued expenses 3,027,577 1,045,215
Income tax payable/refundable 904,269 (439,020)
Discontinued operations - non cash
charges and working capital changes 7,064,702 1,180,767
-------------- --------------
Net cash provided by operating
activities 2,795,420 1,482,146
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities -- (4,000,000)
Redemption of marketable securities 2,475,000 5,190,000
Additions to property, plant and
equipment:
Continuing operations (3,599,056) (2,604,533)
Discontinued operations (736,906) (1,164,782)
Cash from acquired joint venture 57,615 --
Excess of cost over net assets of
acquired company (60,183) (266,358)
-------------- --------------
Net cash used in investing activities: (1,863,530) (2,845,673)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 53,680 --
Proceeds from debt obligations 2,818,172 585,659
Principal payments on debt obligations (656,262) (594,663)
Other (3,600) (14,289)
-------------- --------------
Net cash provided (used in) by
financing activities 2,211,990 (23,293)
-------------- --------------
Net increase (decrease) in cash and cash
equivalents 3,143,880 (1,386,820)
7
Cash and cash equivalents
at beginning of period 3,821,474 2,895,478
-------------- --------------
Cash and cash equivalents at
end of period $ 6,965,354 1,508,658
============== ==============
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION
Cash was paid for:
Interest $ 227,708 71,415
-------------- --------------
Income taxes $ 51,697 548,461
-------------- --------------
See accompanying notes to condensed consolidated financial statements.
HANDEX CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
For the Nine and Three Months Ended September 28, 1996 and September 30, 1995
(Unaudited)
Note 1 In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments (all of which
are normal and recurring in nature) necessary to present fairly the
financial position of the Company at September 28, 1996 and the results
of operations for the nine and three month periods ended September 28,
1996 and September 30, 1995. The statements should be read in
conjunction with the financial statements and notes thereto included in
the Company's annual report for the year ended December 30, 1995.
Note 2 The unaudited condensed consolidated financial statements include the
assets and liabilities as of September 28, 1996, and the results of
operations for the nine and three month periods ended September 28,
1996, of New Horizons Computer Learning Center of Cleveland, Ltd.,
L.L.C., a joint venture in which the Company retained a minority
interest through December 30, 1995. Following the bankruptcy of the
majority member's parent corporation, the Company assumed control of and
provided the financing and management of the day to day operations of
the venture. As a result, management believes that the consolidation of
the assets, liabilities and results of operations of the venture
beginning in 1996, is appropriate.
Note 3 On November 4, 1996, the Company signed a definitive agreement to sell
its environmental business to a corporation formed by a group which
includes current members of its Florida subsidiary's management team.
Under the agreement, the group will purchase the stock of the Company's
environmental subsidiaries with a net asset value of $10.3 million for
$4.6 million in cash and other consideration, including a promissory
note and preferred stock in the amount of $3.7 million and $2.0 million,
respectively. Assets of the discontinued segment in excess of $10.3
million, consisting principally8of accounts receivable, will be
retained by the Company. The Company's estimate of the loss on disposal
of the segment is $7.3 million and consists of valuation reserves on the
promissory note and preferred stock in the amount of $2,960,000 and
$1,600,000, respectively, goodwill write-off of $1,777,000 and
transaction costs of $966,000. There is no expected tax benefit from
this loss.
The discontinued operations had net operating revenues of $33,382,000
and $35,078,000, a net loss of $135,000 and net income of $649,000 for
the nine months ended September 28, 1996 and September 30, 1995,
respectively. For fiscal 1995, the discontinued operations had net
operating revenues of $46,521,000 and net income of $450,000 The sale
is subject to stockholder approval and is expected to be completed by
the end of fiscal 1996.
The components of net assets of discontinued operations included in the
accompanying balance sheets at September 28, 1996 and December 30, 1995
(1995 amounts are shown as they were historically classified) are as
follows:
1996 1995
------ ------
Current assets:
Accounts receivable $11,289,410 14,793,000
Inventories 142,371 187,295
Prepaid expenses and toher current assets 263,491 386,767
------------- -------------
Total current assets 11,695,272 15,367,062
Current liabilities
Accounts payable 3,778,703 6,990,915
Accrued expenses 2,734,840 3,656,410
------------- -------------
Total current liabilities 6,513,543 10,647,325
------------- -------------
Total 5,181,729 4,719,737
------------- -------------
Non-current assets:
Property, plant and equipment 5,253,373 5,898,153
Other assets 492,112 312,175
------------- -------------
Total non-current assets 5,745,485 6,210,328
------------- -------------
Deferred income tax liability 627,214 630,065
------------- -------------
Net assets 10,300,000 10,300,000
Reserve for loss on disposal 7,303,000 --
------------- -------------
Net assets of discontinued operations $ 2,997,000 10,300,000
============= =============
Note 4 Certain items on the 1995 financial statements have been reclassified to
conform to the 1996 presentation.
9
PART I. FINANCIAL INFORMATION
--------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
--------------------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
-----------------------------------------------
ENVIRONMENTAL BUSINESS SEGMENT
- - ------------------------------
Since 1992, the environmental services industry has been affected by
significant changes in the statutory regulations that govern environmental
clean-ups, the entry of small, low-cost service providers and the ever
increasing level of cost consciousness on the part of its customers, all of
which combined to heighten the level of competition in an already crowded
marketplace. These forces have combined to significantly slow the growth in
revenues and to lower margins. With no clear signs of change that will reverse
the trends of recent years, the Company has decided to focus its efforts and
resources on the computer education segment. On November 4, 1996, the Company
signed a definitive agreement to sell its environmental business to a group of
investors which includes among others, current members of its Florida
subsidiary's management team. The sale is subject to stockholder approval and is
expected to be completed by the end of fiscal year 1996.
EDUCATIONAL BUSINESS SEGMENT
- - -----------------------------
New Horizons conducts two distinct businesses, one which operates company-owned
computer training centers, and the other which supplies systems of instructions
and sales and management concepts concerning computer training to independent
franchisees.
Revenues for the training centers operated by New Horizons consist primarily of
training fees and sales of courseware materials. Cost of sales consists
primarily of instructors' salaries and benefits, facilities costs such as rent,
utilities and classroom equipment, courseware, and computer hardware, software
and peripherals. Selling, general and administrative expenses consist primarily
of costs associated with sales and marketing, advertising, accounting and
finance support and sales executives.
Revenues for the franchising operation consist primarily of initial franchise
fees associated with the sale of a franchise, royalty and advertising fees based
on a percentage of franchisee gross training revenues, and percentage royalties
received on the gross sales of courseware. Cost of sales consists primarily of
costs associated with franchise support personnel who provide system guidelines
and advice on daily operating issues including sales, marketing, instructor
training and general business problems. Selling, general and administrative
expenses consist primarily of technical support, courseware development,
accounting and finance support, national account sales support, and advertising
expenses.
RESULTS OF OPERATIONS
------------------------
The operating results for both segments of the business have been restated to
reflect in the educational segment's (continuing) operating results, corporate
expenses and interest income which were10previously reported in the
environmental segment's (discontinued) results prior to its being designated a
discontinued operation.
DISCONTINUED OPERATIONS-ENVIRONMENTAL
- - -------------------------------------
On November 4, 1996, the Company signed a definitive agreement to sell its
environmental business to a corporation formed by a group that includes among
others, current members of its Florida subsidiary's management team. The sale,
which is subject to stockholder approval, is expected to be completed by the end
of fiscal 1996. Under the agreement, the group will purchase the stock of the
Company's environmental subsidiaries with a net asset value of $10.3 million for
$4.6 million in cash and other consideration, including a promissory note and
preferred stock in the amount of $3.7 million and $2.0 million, respectively.
Assets of the discontinued segment in excess of $10.3 million, consisting
principally of accounts receivable, will be retained by the Company. The
Company's estimate of the loss on disposal of the segment is $7.3 million and
consists of valuation reserves on the promissory note and the preferred stock in
the amount of $2,960,000 and $1,600,000, respectively, goodwill write-off of
$1,777,000 and transaction costs of $966,000. There is no expected tax benefit
from this loss.
The Company's environmental subsidiaries operate out of 18 locations in 14
states and had net operating revenues of $46.5 million and net income of
$450,000 for fiscal 1995 and net operating revenues of $33.3 million and a net
loss of $135,000 for the first nine months of 1996. The operating results of the
environmental business have been accounted for as a discontinued operation.
Appropriate provisions were recorded in the 1996 quarter for the estimated loss
on discontinued operations.
CONTINUING OPERATIONS-EDUCATIONAL
- - ---------------------------------
REVENUES
- - --------
Revenues increased $4,477,000 or 74.5% for the third quarter of 1996 and
$12,824,000 or 76.5% for the first nine months of 1996 compared with the same
periods for 1995. Revenues at company-owned locations and from its franchising
operations for the 1996 periods were significantly higher compared with the same
periods in 1995. System-wide revenues for the third quarter rose to $51,817,000
from $27,610,000 for the same period in 1995, and to $138,073,000 for the first
nine months of 1996, from $70,554,000 for the same period in 1995. System-wide
revenues include revenues from both franchised locations and company-owned
training centers.
Revenues for both periods in 1996 included the results of the Cleveland
training center which the Company began consolidating effective the beginning of
fiscal 1996 when the company assumed full control of the operations.
COST OF REVENUES
- - -----------------
Cost of revenues increased $1,873,000 or 55.8% for the third quarter of 1996 and
increased $5,392,000 or 58.5% for the first nine months of 1996 compared to the
same periods in 1995. As a percentage of revenues, cost of revenues declined to
49.9% for the 1996 quarter and to 49.4% for the first nine months of 1996, from
55.9% and 55.0% respectively, for the same periods in 1995. The increase in
costs of revenues was due primarily to11higher training, courseware and
depreciation expenses and costs associated with the Cleveland operations. The
decline in cost of revenues as a percentage of revenues was due principally to
the higher level of revenues.
GROSS PROFIT
- - ------------
Gross profit increased $2,604,000 or 98.3% for the third quarter of 1996 and
increased $7,433,000 or 98.7% for the first nine months of 1996 compared with
the same periods for 1995. As a percentage of revenues, gross profit rose to
50.1% for the 1996 quarter and to 50.6% for the first nine months of 1996, from
44.1% and 45.0% respectively for the same periods in 1995. The increase in
gross profit both in absolute dollars and as a percentage of revenues was due
principally to the significant growth in training and franchising revenues.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
- - --------------------------------------------
Selling, general and administrative expenses increased $1,020,000 or 27.2% for
the third quarter of 1996 and increased $4,985,000 or 57.0% for the first nine
months of 1996, compared with the same periods for 1995. As a percentage of
revenues, selling, general and administrative expenses declined to 45.4% for the
1996 quarter and to 46.4% for the first nine months of 1996 from 62.3% and 52.2%
respectively, for the same periods for 1995. The increase in selling, general
and administrative expenses, both in absolute dollars and as a percentage of
revenues, was due principally to increased spending in the areas of sales and
marketing, national advertising, the implementation of a Major Accounts Program,
franchise support for domestic and international operations and expenses
associated with the Cleveland operations. In addition, selling, general and
administrative expenses for the 1995 periods included a provision for an
investment loss and an asset write-off in the aggregate of $812,000.
Selling, general and administrative expenses for both the 1996 and 1995 periods
have been restated to include certain corporate expenses which were previously
reported in the discontinued environmental segment.
INTEREST INCOME/(EXPENSE)
- - -------------------------
Interest income represents amounts which were previously reported in the
discontinued environmental segment. Interest income decreased $4,000 or 8.3% for
the 1996 quarter and $65,000 or 34.2% for the first nine months of 1996 compared
with the same periods for 1995. As a percentage of revenues, interest income
declined to .4% for both the quarter and the first nine months of 1996, from .8%
and 1.1% respectively, for the same periods in 1995. The decline in interest
income, both in absolute dollars and as a percentage of revenues was due mainly
to the utilization of the cash reserves to satisfy the working capital needs of
the discontinued environmental segment.
Interest expense increased $77,000 or 350.8% for the 1996 quarter and increased
$156,000 or 219.3% for the first nine months of 1996, compared with the same
periods in 1995. As a percentage of revenues, interest expense rose to .9% for
the 1996 quarter and to .8% for the first nine months of 1996, from .4% for both
periods in 1995. The rise in interest expense, both in absolute dollars and as a
percentage of revenues, was due mainly to purchases of equipment under capital
lease arrangements.
INCOME TAXES
- - -------------
12
The provision for income taxes as a percentage of income before income taxes was
40.6% for the 1996 quarter compared with a provision for income tax benefit of
36.9% for 1995. For the first nine months of 1996, the provision for income
taxes as a percentage of income before income taxes was 44.9% compared with a
provision for income tax benefit of 41.0%. The increase in the provision for
income taxes (benefits) as a percentage of income (loss) before income taxes was
due principally to higher foreign income taxes and lower tax-free interest
income.
NET INCOME (LOSS)
- - -----------------
Net income for the 1996 quarter was $260,000 compared to a net loss of $672,000
for 1995. For the first nine months of 1996, net income was $622,000 compared
with a net loss of $648,000 for 1995. Included in the 1995 results were both a
provision for a loss in an investment and an asset write-off in the aggregate of
$812,000.
LIQUIDITY AND CAPITAL RESOURCES
- - -------------------------------
As of September 28, 1996, the Company's working capital was $21,244,000, and its
cash, cash equivalents and short-term investments totaled $7,265,000. Working
capital as of September 28, 1996 reflected a decrease of $7,534,000 from
$28,778,000 as of December 30, 1995. The decrease was due principally to the
reserve for the loss on the disposal of the environmental segment.
The Company currently maintains an unsecured credit facility with a commercial
bank providing aggregate availability of $5.5 million. Amounts outstanding under
that facility bear interest at the bank's prime rate or LIBOR, at the Company's
election. The facility is scheduled to expire on June 30, 1998. In light of the
pending sale of the environmental business, the Company is considering reducing
the borrowing availability under or terminating this facility. The Company is
also exploring alternative credit arrangements to support the operations of its
educational business.
In connection with the sale of the environmental business, the Company will
receive cash proceeds of approximately $4.6 million. The Company presently
intends to use those proceeds to support the expansion of its educational
business.
The nature of the computer education and training industry requires substantial
cash commitments for the purchase of computer equipment, software and training
facilities. During the first nine months of 1996, New Horizons spent
approximately $3,600,000 on capital items and anticipates spending up to
$4,200,000 during 1996.
Management believes that its current working capital position, cash flows from
operations, the expected proceeds from the sale of its environmental business,
along with its credit facility, will be adequate to support its current and
anticipated capital expenditures and its strategies to grow its computer
education and training business.
Form 10Q-Part II: Other Information
--------------------------------------
Item 6. Exhibits and Reports on Form 8-K
- - ------- ---------------------------------
(a) Exhibit Index
13
Exhibit
Number Description of Documents
-------- -------------------------
4.1 Specimen Certificate for Share of Common Stock, $.01 par value, of the
Registrant(1)
4.2 Unsecured Revolving Loan Agreement(4)
4.3 First Amendment to Unsecured Revolving Loan Agreement (7)
4.4 Working Capital Line of Credit Note (7)
10.1 Key Employees Stock Option Plan of the Registrant(1)
10.2 Amendment No. 1 to Key Employees Stock Option Plan of the Registrant (7)
10.3 Form of Stock Option Agreement executed by recipients of options under
Key Employees Stock Option Plan(6)
10.4 Stock Option Agreement dated August 6, 1992, between the Registrant and
Thomas J. Bresnan (7)
10.5 Outside Directors Stock Option Plan of the Registrant(1)
10.6 Amendment No. 1 to the Outside Directors Stock Option Plan of the
Registrant(7)
10.7 Form of Stock Option Agreement executed by recipients of options under
the Outside Directors Stock Option Plan(7)
10.8 Amended and Restated 401(k) Profit Sharing Trust and Plan of the
Registrant(1)
10.9 Amendment No. 1 to the Registrant's Amended and Restated 401(k) Profit
Sharing Trust and Plan(2)
10.10 Amendment No. 2 to the Registrant's Amended and Restated 401(k) Profit
Sharing Trust and Plan(3)
10.11 Amendment No. 3 to the Registrant's Amended and Restated 401(k) Profit
Sharing Trust and Plan(6)
10.12 Form of Indemnity Agreement with Directors and Officers of the
Registrant(6)
10.13 Employment Agreement dated August 3, 1992, between the Registrant and
Thomas J. Bresnan (7)
EXHIBIT INDEX (CONTINUED)
Exhibit
Number Description of Documents
-------- -------------------------
10.14 Lease Agreement dated April 26, 1988, between Jocama Construction Inc.
and the Registrant(1)
10.15 Addenda to the Lease Agreement dated April 6, 1988 between Jocama
Construction and the Registrant (8)
14
10.16 Indenture of Lease dated June 17, 1987, between Xednah Investments and
Handex of Florida, as amended (1)
10.17 Lease Agreement dated March 25, 1991, between Handex of New England,
Inc.
and Metro Park Marlboro Realty Trust, as amended (6)
10.18 Lease Agreement dated January 20, 1992, between Handex of Maryland, Inc.
and Winmeyer Commons II Limited Partnership (6)
10.19 Lease Agreement dated March 1, 1995, between New Horizons Learning
Center
of Metropolitan New York, Inc. and Mid City Associates, guaranteed by
the
Registrant (10)
10.20 Lease Agreement dated February 24, 1995, between New Horizons Computer
Learning Center of Cleveland LTD., LLC, and Realty One Property
Management, guaranteed by the Registrant (10)
10.21 Consulting Agreement between the Registrant and The Nassau Group, Inc.
Dated December 17, 1993 (9)
10.22 Warrants for the purchase of 25,00 0 shares of Common Stock $.01 par
value
per share of the Registrant issued to The Nassau Group, Inc. On
December 17, 1993 (9)
10.23 Warrants for the purchase of 40,000 shares of Common Stock $.01 par
value
per share of the Registrant issued to The Nassau Group, Inc. On
August 15, 1994. (10)
10.24 Asset Purchase Agreement, dated as of August 15, 1994, by and among
New Horizons Computer Learning Centers, Inc. a Delaware Corporation,
New Horizons Learning Center, Inc., a California Corporation and
Michael A. Brinda (11)
10.25 Stock Purchase Agreement dated as of August 15, 1994, by and among
New Horizons Education Corporation, a Delaware Corporation and
Michael A. Brinda (11)
10.26 Lease Agreement dated April 5, 1995, between New Horizons Computer
Learning Center of Chicago, Inc., and the Equitable Life Assurance
Society of the United States (12)
EXHIBIT INDEX (CONTINUED)
Exhibit
Number Description of Documents
------- -------------------------
10.27 Lease Agreement dated March 7, 1996, between New Horizons Computer
Learning Centers, Inc. and Mani Brothers, LLC (13)
10.28 Contract for the sale of real estate dated January 15, 1996, between
Handex of Florida, Inc. and Xednah Investments (13)
10.29 New Horizons Education Corporation 401(k) Profit Sharing Trust and
Plan (13)
10.30 Amendment No. 4 to the Registrant's Amended and Restated 401(k) Profit
Sharing Trust and Plan (13) 15
10.31 Stock Purchase Agreement dated November 4, 1996 between the
Registrant and ECB, Inc. and certain exhibits thereto.*
15.0 Letter from Independent Certified Public Accountants*
27.0 Financial Data Schedule*
99.1 Directors and Officers and Company Indemnity Policy(5)
- - ------------------------------------------------------------
(1) Incorporated herein by reference to the appropriate exhibits to the
Registrant's Registration Statement on Form S-1 (File No. 33-28798).
(2) Incorporated herein by reference to the appropriate exhibit to the
Registrant's Annual Report on Form 10-K for the year ended December 31,
1989.
(3) Incorporated herein by reference to the appropriate exhibit to the
Registrant's Quarterly Report on Form 10-Q for the period ended March 31,
1990.
(4) Incorporated herein by reference to the appropriate exhibit to the
Registrant's Quarterly Report or Form 10-Q for the period ended June 30,
1990.
(5) Incorporated herein by reference to the appropriate exhibit to the
Registrant's Annual Report on Form 10-K for the year ended December 31,
1990.
(6) Incorporated herein by reference to the appropriate exhibit to the
Registrant's Annual Report on Form 10-K for the year ended December 31,
1991.
(7) Incorporated herein by reference to the appropriate exhibit to the
Registrant's Annual Report on Form 10-K for the year ended December
31,1992.
(8) Incorporated herein by reference to the appropriate exhibit to the
Registrant's Quarterly Report on Form 10-Q for the period ended July 3,
1993.
(9) Incorporated herein by reference to the appropriate exhibit to the
Registrant's Annual Report on Form 10-K for the year ended January 1, 1994.
(10) Incorporated herein by reference to the appropriate exhibit to the
Registrant's Form 8-K dated August 15, 1994.
(11) Incorporated herein by reference to the appropriate exhibit to the
Registrant's Annual Report on Form 10-K for the year ended December 31,
1994.
(12) Incorporated herein by reference to the appropriate exhibit to the
Registrant's Quarterly Report on Form 10-Q for the period ended April 1,
1995.
(13) Incorporated herein by reference to the appropriate exhibit to the
Registrant's Annual Report on Form 10-K for the year ended December 30,
1995.
* Filed herewith.
(b) Reports on Form 8-K
None
SIGNATURE
--------------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
16 HANDEX CORPORATION
(Registrant)
Date: November 12, 1996 By: /s/ John T. St. James
---------------------------- ----------------------------
John T. St. James
(Duly authorized officer and
Principal Financial Officer)
17
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> SEP-28-1996
<CASH> 6,965,354
<SECURITIES> 300,000
<RECEIVABLES> 18,390,130
<ALLOWANCES> 0
<INVENTORY> 559,840
<CURRENT-ASSETS> 30,656,830
<PP&E> 9,314,643
<DEPRECIATION> 3,192,593
<TOTAL-ASSETS> 54,506,819
<CURRENT-LIABILITIES> 9,412,807
<BONDS> 2,270,466
0
0
<COMMON> 70,562
<OTHER-SE> 42,591,546
<TOTAL-LIABILITY-AND-EQUITY> 54,506,819
<SALES> 29,578,358
<TOTAL-REVENUES> 29,578,358
<CGS> 14,614,479
<TOTAL-COSTS> 28,346,641
<OTHER-EXPENSES> 124,869
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (227,675)
<INCOME-PRETAX> 1,128,911
<INCOME-TAX> 506,533
<INCOME-CONTINUING> 622,378
<DISCONTINUED> (7,438,641)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,816,263)
<EPS-PRIMARY> (.99)
<EPS-DILUTED> (.99)
</TABLE>
STOCK PURCHASE AGREEMENT
DATED
NOVEMBER 4, 1996
BETWEEN
HANDEX CORPORATION
AND
ECB, INC.
TABLE OF CONTENTS
------------------
PAGE
DEFINITIONS................................................1
1. SALE AND TRANSFER OF SHARES; CLOSING.......................9
1 SHARES................................................9
2 CONSIDERATION........................................10
3 CLOSING..............................................10
4 CLOSING OBLIGATIONS..................................10
5 ADJUSTMENT AMOUNT....................................12
6 ADJUSTMENT PROCEDURE.................................12
2. REPRESENTATIONS AND WARRANTIES OF SELLER..................12
1 ORGANIZATION AND GOOD STANDING.......................13
2 AUTHORITY; NO CONFLICT...............................13
3 CAPITALIZATION.......................................14
4 FINANCIAL STATEMENTS.................................14
5 BOOKS AND RECORDS....................................15
6 TITLE TO PROPERTIES; ENCUMBRANCES....................15
7 TAXES................................................16
8 NO MATERIAL ADVERSE CHANGE...........................17
9 EMPLOYEE BENEFITS....................................17
10 COMPLIANCE WITH LEGAL REQUIREMENTS;
GOVERNMENTAL AUTHORIZATIONS..........................22
11 LEGAL PROCEEDINGS; ORDERS............................23
12 ABSENCE OF CERTAIN CHANGES AND EVENTS................24
13 CONTRACTS; NO DEFAULTS...............................25
14 INSURANCE............................................27
15 ENVIRONMENTAL MATTERS................................28
16 LABOR RELATIONS; COMPLIANCE..........................30
17 INTELLECTUAL PROPERTY................................30
18 DISCLOSURE...........................................33
19 RELATIONSHIPS WITH RELATED PERSONS...................33
20 BROKERS OR FINDERS...................................34
21 SUFFICIENCY OF ASSETS................................34
22 CURRENT CLIENTS......................................34
23 INVENTORY............................................34
24 NO UNDISCLOSED LIABILITIES...........................34
25 EMPLOYEES............................................35
26 INVESTMENT INTENT....................................35
3. REPRESENTATIONS AND WARRANTIES OF BUYER...................35
1 ORGANIZATION AND GOOD STANDING.......................35
2 AUTHORITY; NO CONFLICT...............................35
3 INVESTMENT INTENT....................................36
4 CERTAIN PROCEEDINGS..................................36
5 BROKERS OR FINDERS...................................36
6 UNDISCLOSED KNOWLEDGE................................37
7 CAPITALIZATION; LIABILITIES; SOLVENCY................37
4. COVENANTS OF SELLER PRIOR TO CLOSING DATE.................38
1 ACCESS AND INVESTIGATION.............................38
2 OPERATION OF THE BUSINESSES OF THE
ACQUIRED COMPANIES...................................38
3 NEGATIVE COVENANT....................................38
4 REQUIRED APPROVALS...................................38
5 NOTIFICATION.........................................39
6 NO NEGOTIATION.......................................39
7 BEST EFFORTS.........................................39
5. COVENANTS OF BUYER PRIOR TO CLOSING DATE..................39
1 REQUIRED APPROVALS...................................39
2 BEST EFFORTS.........................................40
3 NEGATIVE COVENANT....................................40
6. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE.......40
1 ACCURACY OF REPRESENTATIONS..........................40
2 SELLER'S PERFORMANCE.................................40
3 CONSENTS.............................................40
4 ADDITIONAL DOCUMENTS.................................41
5 NO PROCEEDINGS.......................................41
6 NO CLAIM REGARDING STOCK OWNERSHIP OR
SALE PROCEEDS........................................41
7 NO PROHIBITION.......................................41
7. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE......41
1 ACCURACY OF REPRESENTATIONS..........................41
2 BUYER'S PERFORMANCE..................................42
3 ADDITIONAL DOCUMENTS; CONSENTS.......................42
4 NO PROCEEDINGS OR PROHIBITION........................42
8. TERMINATION...............................................42
1 TERMINATION EVENTS...................................42
2 EFFECT OF TERMINATION................................43
9. INDEMNIFICATION; REMEDIES.................................44
1 SURVIVAL............................................44
2 INDEMNIFICATION AND PAYMENT OF DAMAGES
BY SELLER...........................................44
3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY
SELLER--ENVIRONMENTAL MATTERS.......................44
4 INDEMNIFICATION AND PAYMENT OF DAMAGES
BY BUYER............................................45
5 TIME AND KNOWLEDGE LIMITATIONS......................46
6 LIMITATIONS ON AMOUNT--SELLER.......................46
7 LIMITATIONS ON AMOUNT--BUYER........................46
8 RIGHT OF SET-OFF....................................47
9 PROCEDURE FOR INDEMNIFICATION--THIRD
PARTY CLAIMS........................................47
10 PROCEDURE FOR INDEMNIFICATION--OTHER CLAIMS.........48
11 EXCLUSIVE REMEDY....................................49
12 DISPUTE RESOLUTION..................................49
10. GENERAL PROVISIONS AND COVENANTS TO BE PERFORMED
AFTER CLOSING.............................................50
1 EXPENSES............................................50
2 PUBLIC ANNOUNCEMENTS................................50
3 CONFIDENTIALITY.....................................50
4 NOTICES.............................................50
5 FURTHER ASSURANCES..................................51
6 WAIVER..............................................52
7 ENTIRE AGREEMENT AND MODIFICATION...................52
8 DISCLOSURE SCHEDULE.................................52
9 ASSIGNMENTS, SUCCESSORS, AND NO
THIRD-PARTY RIGHTS..................................52
10 SEVERABILITY........................................53
11 SECTION HEADINGS; CONSTRUCTION......................53
12 TIME OF ESSENCE.....................................53
13 GOVERNING LAW.......................................53
14 COUNTERPARTS........................................53
15 CORPORATE NAME; TRADEMARKS..........................53
16 TAX RETURNS, PAYMENTS AND ELECTIONS.................53
17
18
19
SELLER'S DISCLOSURE SCHEDULE
Schedule 3.1 Acquired Companies
Schedule 3.2 Conflicts/Violations Preventing Transfer
Schedule 3.3 Contracts to Acquire Interest in Other Entities
Schedule 3.4 Financial Statements Not Consistent With GAAP
Schedule 3.6 Real Estate, Real Property Leases and Equipment Leases
Schedule 3.7(a) Payment or Provision For Payment of Taxes
Schedule 3.7(b) Audits of Tax Returns Since 12/31/93
Schedule 3.7(c) Adequacy of Tax Reserves
Schedule 3.7(d) Completeness of Returns, Target Affiliates
Schedule 3.9(i) Company Plans and Company Other Benefits
Schedule 3.9(ii) ERISA Affiliate Plans
Schedule 3.9(iii) Post Retirement Benefit Obligations
Schedule 3.9(iv) Costs of Undisclosed Plans
Schedule 3.9(vi) Compliance Obligations
Schedule 3.10 Compliance: Legal Requirements and Governmental Obligations
Schedule 3.11(a) Legal Proceedings - Against Seller, et al.
Schedule 3.11(b) Legal Proceedings - By Seller, et al.
Schedule 3.11(c) Legal Proceedings - Orders Seller Subject To
Schedule 3.11(d) Legal Proceedings - Seller in Compliance with Orders
Schedule 3.12 Absence of Certain Changes and Events
Schedule 3.13(a) Applicable Contracts
Schedule 3.13(a)(v) Applicable Contracts - Form of Employee Agreement
Schedule 3.13(b) Applicable Contracts - No Rights Under Material Applicable
Contracts
Schedule 3.13(c) Applicable Contract - Material Applicable Contracts Validity
Schedule 3.13(d) Applicable Contracts - Material Applicable Contracts
Compliance
Schedule 3.13(e) Applicable Contracts - No Renegotiation
Schedule 3.13(f) Applicable Contracts - Consideration in Violation
Schedule 3.14(b) Insurance - Status
Schedule 3.15 Environmental Matters
Schedule 3.16 Labor Matters
Schedule 3.17(b) Intellectual Property - Relating to Applicable Contracts
Schedule 3.17(c) Intellectual Property - Employees Restricted
Schedule 3.17(d) Intellectual Property - Patents
Schedule 3.17(e) Intellectual Property - Trademarks
Schedule 3.17(f) Intellectual Property - Copyrights
Schedule 3.17(g) Intellectual Property - Trade Secrets
Schedule 3.19 Relationships with Related Persons
Schedule 3.21 Sufficiency of Assets
Schedule 3.22 Current Clients - Possible Terminations
Schedule 3.25 Employees
Schedule 10.4 Indemnification by Buyer
BUYER'S SCHEDULES
Schedule 4.2 Authority; No Conflict
Schedule 4.7(b) Capitalization; Liabilities; Solvency
EXHIBITS
2.2(b) -- Promissory Note
2.2(c) -- Terms of Preferred Shares
2.2(d) -- Warrant A
2.2(e) -- Warrant B
2.4(a)(ii) -- Receivables Collection Agreement
2.4(a)(v) -- Subordination Agreement
2.4(a)(vi) -- Completion Assistance Agreement
2.4(a)(vii) -- Shareholders Agreement
2.4(b)(v) -- Sublease
2.4(b)(viii) -- Corporate Guaranty and Pledge Agreement
2.4(b)(ix) -- Pledge Agreement
2.4(b)(x) -- Nonrecourse Individual Guaranty and Pledge Agreement
2.6(a) -- Financial Calculations
7.4(a) -- Form of Calfee, Halter & Griswold legal opinion
7.4(b) -- Form of Gary T. Gann legal opinion
8.3(a) -- Form of Cobb Cole & Bell legal opinion
10.8 -- Claims Escrow Agreement
88/HANDEX/199843.15
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is made as of November 4, 1996,
by ECB, INC., a Florida corporation ("Buyer"), and HANDEX CORPORATION, a
Delaware Corporation ("Seller").
RECITALS
Seller desires to sell, and Buyer desires to purchase, all of the issued
and outstanding shares (the "Shares") of capital stock of Handex Environmental,
Inc., a Delaware corporation (the "Company"), for the consideration and on the
terms set forth in this Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1:
"Acquired Assets"--all assets, properties and rights of the Acquired
Companies, whether tangible or intangible, real, personal or mixed, including
the Net Acquired Current Assets and Net P, P & E, but exclusive of the Retained
Contracts, Retained Miscellaneous Assets and Retained Trade Receivables.
"Acquired Companies"--the Company and its Subsidiaries, collectively.
"Adjustment Amount"--as defined in Section 2.5.
"Applicable Contract"--any Contract other than a Retained Contract (a)
under which any Acquired Company has any rights, (b) under which any Acquired
Company has become subject to any obligation or liability, or (c) by which any
Acquired Company or any of the assets owned or used by it is bound.
"Balance Sheet"--as defined in Section 3.4.
"Best Efforts"--the efforts that a prudent Person desirous of achieving a
result would use in similar circumstances to cause such result to be achieved as
expeditiously as practicable; provided, however, that an obligation to use Best
Efforts under this Agreement does not require the Person subject to that
obligation to take actions that would result in a materially adverse change in
the benefits to such Person of this Agreement and the Contemplated Transactions.
"Breach"--a "Breach" of a representation, warranty, covenant, obligation,
or other provision of this Agreement or any instrument delivered pursuant to
this Agreement will be deemed to have occurred if there is or has been (a) any
inaccuracy in or breach of, or any failure to perform or comply with, such
representation, warranty, covenant, obligation, or other provision, or (b) any
claim (by any Person) or other occurrence or circumstance that is or was
inconsistent with such representation, warranty, covenant, obligation, or other
provision, and the term "Breach" means any such inaccuracy, breach, failure,
claim, occurrence, or circumstance.
"Buyer"--as defined in the first paragraph of this Agreement.
"Buyer's Closing Documents" --as defined in Section 4.2(a).
"Buyer's Shareholders"--as defined in Section 4.7.
"Claims Escrow Agreement"--as defined in Section 10.8.
"Closing"--as defined in Section 2.3.
"Closing Date"--the date and time as of which the Closing actually takes
place.
"Company"--as defined in the Recitals of this Agreement.
"Completion Assistance Agreement"--as defined in Section 2.4(a)(vi).
"Consent"--any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"Contemplated Transactions"--all of the transactions contemplated by this
Agreement, including:
the sale of the Shares by Seller to Buyer;
issuance of the Promissory Note, Preferred Shares and Warrants by
Buyer to Seller;
the execution, delivery, and performance of the Deposit Escrow
Agreement, Completion Assistance Agreement, Receivables Collection Agreement,
Sublease, Shareholders Agreement, Subordination Agreement, Pledge Agreement;
Corporate Guaranty and Pledge Agreement; and the Nonrecourse Individual Guaranty
and Pledge Agreement; and
the performance by Buyer and Seller of their respective covenants and
obligations under this Agreement.
"Contract"--any agreement, contract, obligation, promise, or undertaking
(whether written or oral and whether express or implied) that is legally
binding.
"Corporate Guaranty and Pledge Agreement"--as defined in Section
2.4(b)(viii).
"Damages"--as defined in Section 10.2.
"Deposit Escrow Agreement"--the Deposit Escrow Agreement of even date
herewith between Seller, Buyer and SouthTrust Asset Management Company of
Florida, N.A.
"Disclosure Schedule"--the Schedules delivered by Seller to Buyer
concurrently with the execution and delivery of this Agreement.
"Eligible Receivables"--accounts receivable of the Acquired Companies
against which Buyer may borrow at least 75% of the face value on the Closing
Date.
"Encumbrance"--any charge, claim, community property interest, condition,
equitable interest, lien, option, pledge, security interest, right of first
refusal, or restriction of any kind, including any restriction on use, voting,
transfer, receipt of income, or exercise of any other attribute of ownership.
"Environment"--soil, land surface or subsurface strata, surface waters
(including navigable waters, ocean waters, streams, ponds, drainage basins, and
wetlands), groundwaters, drinking water supply, stream sediments, air (including
indoor air), plant and animal life, and any other environmental medium or
natural resource.
"Environmental, Health, and Safety Liabilities"--any cost, damages,
expense, liability, obligation, or other responsibility arising from or under
Environmental Law or Occupational Safety and Health Law and consisting of or
relating to:
(a) any environmental, health, or safety matters or conditions (including
on-site or off-site contamination, occupational safety and health, and
regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and response,
investigative, remedial, or inspection costs and expenses arising under
Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law or Occupational
Safety and Health Law for cleanup costs or corrective action, including any
investigation, cleanup, removal, containment, or other remediation or response
actions ("Cleanup") required by applicable Environmental Law or Occupational
Safety and Health Law (whether or not such Cleanup has been required or
requested by any Governmental Body or any other Person) and for any natural
resource damages; or
(d) any other compliance, corrective, investigative, or remedial measures
required under Environmental Law or Occupational Safety and Health Law.
The terms "removal," "remedial," and "response action," include the types
of activities covered by the United States Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. S9601 et seq., as amended ("CERCLA").
"Environmental Law"--any Legal Requirement that requires or relates to:
(a) advising appropriate authorities, employees, and the public of
intended or actual releases of pollutants or hazardous substances or materials,
violations of discharge limits, or other prohibitions and of the commencements
of activities, such as resource extraction or construction, that could have
significant impact on the Environment;
(b) preventing or reducing to acceptable levels the release of pollutants
or hazardous substances or materials into the Environment;
(c) reducing the quantities, preventing the release, or minimizing the
hazardous characteristics of wastes that are generated;
(d) assuring that products are designed, formulated, packaged, and used
so that they do not present unreasonable risks to human health or the
Environment when used or disposed of;
(e) protecting resources, species, or ecological amenities;
(f) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil, or other potentially
harmful substances;
(g) cleaning up pollutants that have been released, preventing the threat
of release, or paying the costs of such clean up or prevention; or
(h) making responsible parties pay private parties, or groups of them,
for damages done to their health or the Environment, or permitting self-
appointed representatives of the public interest to recover for injuries done to
public assets.
"ERISA"--the Employee Retirement Income Security Act of 1974 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"Facilities"--any real property, leaseholds, or other interests currently
or formerly owned or operated by any Acquired Company and any buildings, plants,
structures, or equipment (including motor vehicles, tank cars, and rolling
stock) currently or formerly owned or operated by any Acquired Company.
"GAAP"--generally accepted United States accounting principles, applied on
a basis consistent with the basis on which the Balance Sheet and the other
financial statements referred to in Section 3.4(a) were prepared.
"Governmental Authorization"--any approval, consent, license, permit,
waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
"Governmental Body"--any:
(a) nation, state, county, city, town, village, district, or other
jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other government;
(c) governmental or quasi-governmental authority of any nature (including
any governmental agency, branch, department, official, or entity and any court
or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing authority or
power of any nature.
"Hazardous Activity"--the distribution, generation, handling, importing,
management, manufacturing, processing, production, refinement, Release, storage,
transfer, transportation, treatment, or use (including any withdrawal or other
use of groundwater) of Hazardous Materials in, on, under, about, or from the
Facilities or any part thereof into the Environment.
"Hazardous Materials"--any waste or other substance that is listed,
defined, designated, or classified as, or otherwise determined to be, hazardous,
radioactive, or toxic or a pollutant or a contaminant under or pursuant to any
Environmental Law, including any admixture or solution thereof, and specifically
including petroleum and all derivatives thereof or synthetic substitutes
therefor and asbestos or asbestos-containing materials.
"Intellectual Property Assets"--as defined in Section 3.22.
"Interim Balance Sheet"--as defined in Section 3.4.
"IRC"--the Internal Revenue Code of 1986 or any successor law, and
regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
"IRS"--the United States Internal Revenue Service or any successor agency,
and, to the extent relevant, the United States Department of the Treasury.
"Knowledge"--an individual will be deemed to have "Knowledge" of a
particular fact or other matter if (a) such individual is actually aware of such
fact or other matter or (b) a prudent individual could be expected to discover
or otherwise become aware of such fact or other matter in the course of
performing his duties.
A Person (other than an individual) will be deemed to have "Knowledge" of a
particular fact or other matter if any individual who is serving, as of the date
of this Agreement, as a director, officer, partner, executor, or trustee of such
Person (or in any similar capacity) has, or at any time had, Knowledge of such
fact or other matter.
"Legal Requirement"--any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty in effect on
the date of this Agreement or on the Closing Date.
"Material Applicable Contract"--the Applicable Contracts listed or required
to be listed on Schedule 3.13(a) including such Applicable Contracts as are
disclosed on other Schedules.
"Minimum Net Acquired Current Assets"--Five Million Ninety-Eight Thousand
Two Hundred Sixty-Eight Dollars ($5,098,268).
"Minimum Net P, P & E"--Five Million Two Hundred Thirty Seven Thousand
Dollars ($5,237,000) less Eighty Thousand Dollars ($80,000) per month (or a
prorated fraction thereof for a period less than a month) between December 31,
1996 and the Closing Date.
"Net Acquired Balance Sheet Assets"--the Net Acquired Current Assets and
Net Acquired P, P & E.
"Net Acquired Current Assets"--the following assets of the Acquired
Companies: Eligible Receivables aggregating Eight Million Six Hundred Sixty-
Seven Thousand Dollars ($8,667,000); inventories; prepaid expenses; other
current and miscellaneous assets (other than the Retained Contracts Retained
Miscellaneous Assets); less the following liabilities of the Acquired Companies:
accounts payable; payroll and sales taxes payable; payroll; and other accrued
liabilities, all as more fully described on Exhibit 2.6(a).
"Net Acquired P, P & E"--the property, plant and equipment, net of reserves
for depreciation, of the Acquired Companies.
"Nonrecourse Individual Guaranty and Pledge Agreement--as defined in
Section 2.4(b)(x).
"Occupational Safety and Health Law"--any Legal Requirement designed to
provide safe and healthful working conditions and to reduce occupational safety
and health hazards.
"Order"--any award, decision, injunction, judgment, order, ruling,
subpoena, consent decree, or verdict entered, issued, made, or rendered by any
court, administrative agency, or other Governmental Body or by any arbitrator.
"Ordinary Course of Business"--an action taken by a Person will be deemed
to have been taken in the "Ordinary Course of Business" only if such action is
consistent with the past practices of such Person and is taken in the ordinary
course of the normal day-to-day operations of such Person.
"Organizational Documents"--(a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) the partnership agreement and
any statement of partnership of a general partnership; (c) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership; (d) any charter or similar document adopted or filed in connection
with the creation, formation, or organization of a Person; and (e) any amendment
to any of the foregoing.
"Person"--any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
"Permitted Transfers"--any transfer by any Acquired Company to Seller of
the Retained Contracts, Retained Miscellaneous Assets or Retained Trade
Receivables.
"Plan"--as defined in Section 3.13.
"Pledge Agreement"--as defined in Section 2.4(b)(ix).
"Preferred Shares"--as defined in Section 2.2(c).
"Proceeding"--any action, arbitration, audit, hearing, investigation,
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 arbitrator.
"Promissory Note"--as defined in Section 2.2(b).
"Receivables Collection Agreement"--as defined in Section 2.4(a)(ii).
"Related Person"--with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by such
individual or one or more members of such individual's Family;
(c) any Person in which such individual or members of such individual's
Family hold (individually or in the aggregate) a Material Interest; and
(d) any Person with respect to which such individual or one or more
members of such individual's Family serves as a director, officer, partner,
executor, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is directly or
indirectly controlled by, or is directly or indirectly under common control with
such specified Person;
(b) any Person that holds a Material Interest in such specified Person;
(c) each Person that serves as a director, officer, partner, executor, or
trustee of such specified Person (or in a similar capacity);
(d) any Person in which such specified Person holds a Material Interest;
(e) any Person with respect to which such specified Person serves as a
general partner or a trustee (or in a similar capacity); and
(f) any Related Person of any individual described in clause (b) or (c).
For purposes of this definition, (a) the "Family" of an individual includes
(i) the individual, (ii) the individual's spouse, (iii) any other natural person
who is related to the individual or the individual's spouse within the second
degree, and (iv) any other natural person who resides with such individual, and
(b) "Material Interest" means direct or indirect beneficial ownership (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934) of voting
securities or other voting interests representing at least 2% of the outstanding
voting power of a Person or equity securities or other equity interests
representing at least 2% of the outstanding equity securities or equity
interests in a Person.
"Release"--any spilling, leaking, emitting, discharging, depositing,
escaping, leaching, dumping, or other releasing into the Environment, whether
intentional or unintentional.
"Representative"--with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants, and financial advisors.
"Retained Contracts"--the contracts with customers identified in the
Completion Assistance Agreement, including all work-in-process related thereto.
"Retained Miscellaneous Assets"--the following assets of the Acquired
Companies, which Buyer acknowledges may be transferred to Seller at any time on
or before the Closing Date: cash; marketable securities; loans receivable from
officers, cash value of life insurance; refundable taxes and prepaid directors
fees, all as more fully described on Exhibit 2.6(a).
"Retained Receivables"--all of the trade accounts receivable and other
receivables of the Acquired Companies other than the Eligible Receivables
included in the Net Acquired Current Assets, as well as all claims relating to
the matters described in Schedule 3.11(b), which Buyer acknowledges may be
transferred to Seller at any time on or before the Closing Date.
"Securities Act"--the Securities Act of 1933 or any successor law, and
regulations and rules issued pursuant to that Act or any successor law.
"Seller"--as defined in the first paragraph of this Agreement.
"Seller's Closing Documents"--as defined in Section 3.2(a).
"Shareholders Agreement"--as defined in Section 2.4(a)(vii).
"Shares"--as defined in the Recitals of this Agreement.
"Solvent"--as to any Person, means such Person (i) owns property, real,
personal and mixed, whose aggregate fair saleable value is greater than the
amount required to pay all of its liabilities, including contingent liabilities,
(ii) is able to pay all of its liabilities as such liabilities mature and (iii)
has sufficient capital to carry on its business and all business and
transactions in which it is about to engage.
"Southcoast"--Southcoast Capital Corporation.
"Southcoast Warrant"--as defined in the Warrants.
"SouthTrust"--SouthTrust Bank of Alabama, N.A.
"Subordination Agreement"--as defined in Section 2.4(a)(v).
"Subsidiary"--with respect to any Person (the "Owner"), any corporation or
other Person of which securities or other interests having the power to elect a
majority of that corporation's or other Person's board of directors or similar
governing body, or otherwise having the power to direct the business and
policies of that corporation or other Person (other than securities or other
interests having such power only upon the happening of a contingency that has
not occurred) are held by the Owner or one or more of its Subsidiaries.
"Tax"--any tax (including any income tax, capital gains tax, value-added
tax, sales tax, property tax) levy, assessment, tariff, duty (including any
customs duty), deficiency, or other fee, and any related charge or amount
(including any fine, penalty, interest, or addition to tax), imposed, assessed,
or collected by or under the authority of any Governmental Body or payable
pursuant to any tax-sharing agreement or any other Contract relating to the
sharing or payment of any such tax, levy, assessment, tariff, duty, deficiency,
or fee.
"Tax Return"--any return (including any information return), report,
statement, schedule, notice, form, or other document 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 or in connection with the administration, implementation, or
enforcement of or compliance with any Legal Requirement relating to any Tax.
"Threat of Release"--a substantial likelihood of a Release that may require
action in order to prevent or mitigate damage to the Environment that may result
from such Release.
"Threatened"--a claim, Proceeding, dispute, action, or other matter will be
deemed to have been "Threatened" if any demand or statement has been made
(orally or in writing) or any notice has been given (orally or in writing) or if
any other event has occurred, that would lead a prudent Person to conclude that
such a claim, Proceeding, dispute, action, or other matter is likely to be
asserted, commenced, taken, or otherwise pursued in the future.
"Warrants"--collectively Warrant A and Warrant B as described in Sections
2.2(d) and 2.2(e).
SALE AND TRANSFER OF SHARES; CLOSING
SHARES
Subject to the terms and conditions of this Agreement, at the
Closing, Seller will sell and transfer the Shares to Buyer, and Buyer will
purchase the Shares from Seller.
CONSIDERATION
As consideration for the Shares, Buyer will pay or deliver, or cause
to be paid or delivered, to Seller, the following:
(a) Four Million Six Hundred Thousand Dollars ($4,600,000);
(b) a promissory note payable to Seller in the original principal
amount of Three Million Seven Hundred Thousand Dollars ($3,700,000) ("Promissory
Note") having the terms, including provision for addition of the Adjustment
Amount, as set forth in Exhibit 2.2(b);
(c) 2,000 shares of Series A Preferred Stock ("Preferred Shares") of
Buyer having the terms set forth in Exhibit 2.2(c);
(d) a Warrant to acquire 300,000 shares of Common Stock in Buyer at a
price of $1.32 per Share and having the terms set forth in Exhibit 2.2(d)
("Warrant A");
(e) a Warrant to acquire 85,000 shares of Common Stock in Buyer at a
price of $1.60 per share and having the terms set forth in Exhibit 2.2(e)
("Warrant B"); and
(f) one third (1/3) of the Redemption Value of Amoco Marketing
Environmental Services Company (as defined in the Amended and Restated Articles
of Incorporation of such company) when paid or available to be paid to Buyer (or
its successors or assigns).
CLOSING
The purchase and sale (the "Closing") provided for in this Agreement
will take place at the offices of Seller at 500 Campus Drive, Morganville, New
Jersey 07751, at 11:00 a.m. (local time) on December 27, 1996, or at such other
time and place as the parties may agree. Subject to the provisions of Section
9, failure to consummate the purchase and sale provided for in this Agreement on
the date and time and at the place determined pursuant to this Section 2.3 will
not result in the termination of this Agreement and will not relieve any party
of any obligation under this Agreement.
CLOSING OBLIGATIONS
At the Closing:
(a) Seller will deliver to Buyer:
a certificate representing the Shares, duly endorsed (or
accompanied by duly executed stock power), for transfer to Buyer;
the Receivables Collection Agreement in the form of Exhibit
2.4(a)(ii) executed by Seller;
a certificate executed by Seller representing and warranting
to Buyer that each of Seller's Closing Documents were duly executed and
delivered and that each of Seller's representations and warranties in this
Agreement is accurate in all respects as of the Closing Date as if made on the
Closing Date (giving full effect to any supplements to the Disclosure Schedule
that were delivered by Seller to Buyer prior to the Closing Date in accordance
with Section 5.5);
a Trademark Assignment of the two service marks for "Handex"
held by Seller in form satisfactory for filing with the United States Patent and
Trademark Office; and The Subordination Agreement with Buyer and SouthTrust in
the form of Exhibit 2.4(a)(v) executed by Seller;
(vi) the Completion Assistance Agreement in the form of Exhibit
2.4(a)(vi) executed by Seller; and
(vii) the Shareholders Agreement among Seller, Buyer and
Buyer's Shareholders in the form of Exhibit 2.4(a)(vii) executed by Seller.
(b) Buyer will deliver to Seller:
(i) Four Million Six Hundred Thousand Dollars ($4,600,000) by
wire transfer to an account specified by Seller;
(ii) the Promissory Note, Preferred Shares and Warrants;
(iii) the Completion Assistance Agreement;
(iv) a certificate executed by Buyer to the effect that each of
Buyer's Closing Documents was duly executed and delivered and that each of
Buyer's representations and warranties in this Agreement is accurate in all
respects as of the Closing Date as if made on the Closing Date;
(v) a Sublease for a portion of the premises located at 500
Campus Drive, Morganville, New Jersey in the form of Exhibit 2.4 (b)(v),
provided that the landlord consents to the sublease if such consent is required;
(vi) the Receivables Collection Agreement executed by Buyer;
(vii) the Subordination Agreement executed by Buyer and
SouthTrust;
(viii) the Corporate Guaranty and Pledge Agreement in the form
of Exhibit 2.4(b)(viii) executed by each of the Acquired Companies;
(ix) the Pledge Agreement in the form of Exhibit 2.4(b)(ix)
executed by Buyer;
(x) the Nonrecourse Individual Guaranty and Pledge Agreement
from Buyer's Shareholders in the form of Exhibit 2.4(b)(x); and
(xi) the Shareholders Agreement executed by Buyer, Buyer's
Shareholders and Southcoast.
ADJUSTMENT AMOUNT
The Adjustment Amount (which may be a positive or negative number)
will be equal to (a) the Net Acquired Balance Sheet Assets of the Acquired
Companies, minus (b) Ten Million Three Hundred Thirty-Five Thousand Two Hundred
Sixty-Eight Dollars ($10,335,268).
ADJUSTMENT PROCEDURE
Seller will prepare and will cause KPMG Peat Marwick, LLP, the
Company's certified public accountants, to audit a determination of the Net
Acquired Balance Sheet Assets of the Acquired Companies as of the Closing Date
("Closing Financial Determination"). Such determination shall be made in
accordance with GAAP consistent with the accounting methods, principles, and
conventions historically applied by Seller and used in determining Exhibit
2.6(a) hereto. Seller will deliver the Closing Financial Determination to Buyer
within sixty days after the Closing Date. If within thirty days following
delivery of the Closing Financial Determination, Buyer has not given Seller
notice of its objection to the Closing Financial Determination (such notice must
contain a statement of the basis of Buyer's objection), then the Net Acquired
Balance Sheet Assets reflected in the Closing Financial Determination will be
used in computing the Adjustment Amount. If Buyer gives such notice of
objection, then the issues in dispute will be submitted to Price, Waterhouse
LLP, certified public accountants (the "Accountants"), for resolution. If
issues in dispute are submitted to the Accountants for resolution, (i) each
party will furnish to the Accountants such workpapers and other documents and
information relating to the disputed issues as the Accountants may request and
are available to that party or its Subsidiaries (or its independent public
accountants), and will be afforded the opportunity to present to the Accountants
any material relating to the determination and to discuss the determination with
the Accountants; (ii) the determination by the Accountants, as set forth in a
notice delivered to both parties by the Accountants, will be binding and
conclusive on the parties; and (iii) Buyer and Seller will each bear the fees of
the Accountants for such determination in inverse proportion to the respective
amounts of the Adjustment Amount which are resolved in its favor.
On the tenth business day following the final determination of
the Adjustment Amount, any positive Adjustment Amount shall be paid by Buyer to
Seller in the manner prescribed by the Promissory Note and any negative
Adjustment Amount shall be paid by Seller to Buyer by cash if the Net Acquired
P, P & E is less than the Minimum Net P, P & E and/or by cash and/or assignment
of Eligible Receivables if the Net Acquired Current Assets is less than the
Minimum Net Acquired Current Assets.
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
ORGANIZATION AND GOOD STANDING
Schedule 3.1 of the Disclosure Schedule contains a complete and
accurate list for each Acquired Company of its name, its jurisdiction of
organization, other jurisdictions in which it is authorized to do business, and
its capitalization (including the identity of each stockholder and the number of
shares held by each). Each Acquired Company is validly existing and in good
standing under the laws of its jurisdiction of organization, with full corporate
or limited liability company power and authority to conduct its business as it
is now being conducted, to own or use the properties and assets that it purports
to own or use, and to perform all its obligations under Applicable Contracts.
Each Acquired Company is duly qualified to do business as a foreign corporation
or limited liability company and is in good standing under the laws of each
state or other jurisdiction in which either the ownership or use of the
properties owned or used by it, or the nature of the activities conducted by it,
requires such qualification.
Seller has made available to Buyer copies of the Organizational
Documents of each Acquired Company as currently in effect.
AUTHORITY; NO CONFLICT
Subject to the Consent of the stockholders of Seller required by
applicable Legal Requirements, this Agreement constitutes the legal, valid, and
binding obligation of Seller, enforceable against Seller in accordance with its
terms. Upon the execution and delivery by Seller of the Receivables Collection
Agreement, Subordination Agreement, Completion Assistance Agreement, Sublease
and Shareholders Agreement (collectively, the "Seller's Closing Documents"), the
Seller's Closing Documents will constitute the legal, valid, and binding
obligations of Seller, enforceable against Seller in accordance with their
respective terms. Seller has the corporate power and authority to execute and
deliver this Agreement and the Seller's Closing Documents and to perform its
obligations under this Agreement and the Seller's Closing Documents.
Except as set forth in Schedule 3.2 of the Disclosure Schedule,
neither the execution and delivery of this Agreement by Seller nor the
consummation or performance of any of the Contemplated Transactions by Seller
will, directly or indirectly (with or without notice or lapse of time):
contravene, conflict with, or result in a violation of
(A) any provision of the Organizational Documents of the Acquired Companies, or
(B) any resolution adopted by the board of directors or the stockholders of any
Acquired Company;
contravene, conflict with, or result in a violation of, or
give any Governmental Body or other Person the right to challenge any of the
Contemplated Transactions or to exercise any remedy or obtain any relief under,
any Legal Requirement or any Order to which any Acquired Company or Seller, or
any of the assets owned or used by any Acquired Company, is subject;
contravene, conflict with, or result in a violation of any of
the terms or requirements of, or give any Governmental Body the right to revoke,
withdraw, suspend, cancel, terminate, or modify, any Governmental Authorization
that is held by any Acquired Company or that otherwise relates to the business
of, or any of the assets owned or used by, any Acquired Company;
cause any Acquired Company to become subject to, or to
become liable for the payment of, any Tax;
cause any of the assets owned by any Acquired Company to be
reassessed or revalued by any taxing authority or other Governmental Body;
contravene, conflict with, or result in a violation or
breach of any provision of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of, or
to cancel, terminate, or modify, any Material Applicable Contract; or
result in the imposition or creation of any Encumbrance upon or
with respect to any of the assets owned or used by any Acquired Company.
Except as set forth in Schedule 3.2 of the Disclosure Schedule,
neither Seller nor any Acquired Company is or will be required to give any
notice to or obtain any Consent from any Person in connection with the execution
and delivery of this Agreement or the consummation or performance of any of the
Contemplated Transactions.
CAPITALIZATION
The authorized equity securities of the Company consist of Three
Thousand (3,000) shares of common stock, par value $.01 per share, of which One
Hundred (100) shares are issued and outstanding and constitute the Shares.
Seller is and will be on the Closing Date the record and beneficial owner and
holder of the Shares, free and clear of all Encumbrances. With the exception of
the Shares (which are owned by Seller), all of the outstanding equity securities
and other securities of each Acquired Company are owned of record and
beneficially by one or more of the Acquired Companies, free and clear of all
Encumbrances. No legend or other reference to any purported Encumbrance appears
upon any certificate representing equity securities of any Acquired Company
other than the standard reference to the restrictions imposed by the Securities
Act. All of the outstanding equity securities of each Acquired Company have
been duly authorized and validly issued and are fully paid and nonassessable.
There are no Contracts relating to the issuance, sale, or transfer of any equity
securities or other securities of any Acquired Company. None of the outstanding
equity securities or other securities of any Acquired Company was issued in
violation of the Securities Act or any other Legal Requirement. Except as set
forth in Schedule 3.3 of the Disclosure Schedule, no Acquired Company owns, or
has any Contract to acquire, any equity securities or other securities of any
Person (other than Acquired Companies) or any direct or indirect equity or
ownership interest in any other business.
FINANCIAL STATEMENTS
Seller has delivered to Buyer: (a) an audited consolidated balance
sheet of Seller as at January 1, 1994 (including the notes thereto), and the
related consolidated statement of income, changes in stockholders' equity, and
cash flow for the fiscal year then ended, together with the report thereon of
KPMG Peat Marwick, independent certified public accountants; (b) unaudited
consolidated balance sheets of the Acquired Companies as at December 31, 1994
and December 30, 1995 (the "Balance Sheet") and the related unaudited
consolidated statements of income for each of the fiscal years then ended; and
(c) an unaudited consolidated balance sheet of the Acquired Companies as at
August 24, 1996 (the "Interim Balance Sheet") and the related unaudited
statement of income for the thirty-four weeks then ended. Such financial
statements fairly present the financial condition and the results of operations,
and, where provided, changes in stockholders' equity and cash flow as at the
respective dates of and for the periods referred to in such financial
statements, all in accordance with GAAP, except as set forth in such statements
or on Schedule 3.4 and subject, in the case of interim financial statements, to
normal recurring year-end adjustments (the effect of which will not,
individually or in the aggregate, be materially adverse) and, in the case of all
unaudited financial statements, to the absence of notes; the financial
statements referred to in this Section 3.4 reflect the consistent application of
such accounting principles throughout the periods involved, except as disclosed
in such financial statements, the notes to such financial statements or Schedule
3.4. No financial statements of any Person other than the Acquired Companies
are required by GAAP to be included in the consolidated financial statements of
the Company.
BOOKS AND RECORDS
The books of account, minute books, stock record books, and other
records of the Acquired Companies, all of which have been made available to
Buyer, are complete and correct in all material respects and have been
maintained in accordance with sound business practices and the requirements of
Section 13(b)(2) of the Securities Exchange Act of 1934, as amended (regardless
of whether or not the Acquired Companies are subject to that Section), including
the maintenance of an adequate system of internal controls. The minute books of
the Acquired Companies contain accurate and complete records of all meetings
held of, and corporate actions taken by, the stockholders, the Boards of
Directors, and committees of the Boards of Directors of the Acquired Companies,
and no meeting of any such stockholders, Board of Directors, or committee has
been held for which minutes have not been prepared and are not contained in such
minute books. At the Closing, all of those books and records will be in the
possession of the Acquired Companies.
TITLE TO PROPERTIES; ENCUMBRANCES
Schedule 3.6 of the Disclosure Schedule contains a complete and
accurate list of all real property, leaseholds, or other interests therein owned
by any Acquired Company (the "Property"). Seller has delivered or made
available to Buyer copies of the deeds and other instruments (as recorded) by
which the Acquired Companies acquired such Property, and copies of all title
insurance policies, opinions, abstracts, and surveys in the possession of Seller
or the Acquired Companies and relating to such Property ("Title Evidence"). The
Acquired Companies own (with good and marketable title in the case of real
property, subject only to the matters permitted by the following sentence) all
the properties and assets (whether real, personal, or mixed and whether tangible
or intangible) that they purport to own located in premises owned or operated by
the Acquired Companies or reflected as owned in the books and records of the
Acquired Companies, including all of the properties and assets reflected in the
Interim Balance Sheet (except for assets held under capitalized leases disclosed
or not required to be disclosed in Schedule 3.6 of the Disclosure Schedule and
property and assets sold since the date of the Interim Balance Sheet). All
material properties and assets reflected in the Interim Balance Sheet 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 (a) mortgages or security
interests shown on the Interim Balance Sheet as 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, (b) mortgages or
security interests incurred in connection with the purchase of property or
assets after the date of the Interim Balance Sheet (such mortgages and security
interests being limited to the property or assets so acquired), with respect to
which no default (or event that, with notice or lapse of time or both, would
constitute a default) exists, (c) liens for current taxes not yet due, and
(d) with respect to real property, (i) 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 of
any Acquired Company, (ii) zoning laws and other land use restrictions that do
not impair the present or anticipated use of the property subject thereto and
(iii) reservations, restrictions, conditions, easements and other exceptions of
record or described or referenced in the Title Evidence. Except as provided in
the Title Evidence, all improvements owned by the Acquired Companies lie wholly
within the boundaries of the Property and do not encroach upon the property of,
or otherwise conflict with the property rights of, any other Person.
TAXES
The Acquired Companies have filed or caused to be filed all Tax
Returns that are or were required to be filed by or with respect to any of them,
either separately or as a member of a group of corporations, pursuant to
applicable Legal Requirements, except for such Tax Returns for which a timely
request for an extension for filing has been made. Seller has made available to
Buyer copies of all such Tax Returns filed since December 31, 1993. Seller or
the Acquired Companies have paid, or made provision (as disclosed in Schedule
3.7 of the Disclosure Schedule) for the payment of, all Taxes that have become
due pursuant to those Tax Returns or otherwise, or pursuant to any assessment
received by Seller or any Acquired Company, except such Taxes, if any, as are
listed in Schedule 3.7 of the Disclosure Schedule and are being contested in
good faith and as to which adequate reserves (determined in accordance with
GAAP) have been provided in the Interim Balance Sheet.
Schedule 3.7 of the Disclosure Schedule contains a complete and
accurate list of all audits of all United States federal and state income Tax
Returns of each Acquired Company subject to such Taxes since December 31, 1993,
including a reasonably detailed description of the nature and outcome of each
audit. All deficiencies proposed as a result of such audits have been paid,
reserved against, settled, or, as described in Schedule 3.7 of the Disclosure
Schedule, are being contested in good faith by appropriate proceedings.
Schedule 3.7 of the Disclosure Schedule describes all adjustments to the United
States federal income Tax Returns filed by any Acquired Company or any group of
corporations including any Acquired Company for all taxable years since December
31, 1993, and the resulting deficiencies proposed by the IRS. Except as
described in Schedule 3.7 of the Disclosure Schedule, neither Seller nor any
Acquired Company has given or been requested to give waivers or extensions (or
is or would be subject to a waiver or extension given by any other Person) of
any statute of limitations relating to the payment of Taxes of any Acquired
Company or for which any Acquired Company may be liable.
Except as set forth on Schedule 3.7 the charges, accruals, and
reserves with respect to Taxes on the respective books of each Acquired Company
are adequate (determined in accordance with GAAP) and are at least equal to that
Acquired Company's liability for Taxes. There exists no proposed tax assessment
against any Acquired Company except as disclosed in the Balance Sheet or in
Schedule 3.7 of the Disclosure Schedule. No consent to the application of
Section 341(f)(2) of the IRC has been filed with respect to any property or
assets held, acquired, or to be acquired by any Acquired Company. All Taxes
that any Acquired Company is or was required by Legal Requirements to withhold
or collect have been duly withheld or collected and, to the extent required,
have been paid to the proper Governmental Body or other Person.
All Tax Returns filed by (or that include on a consolidated
basis) any Acquired Company are true, correct, and complete. There is no tax
sharing agreement that will require any payment by any Acquired Company after
the date of this Agreement. No Acquired Company is, or within the five-year
period preceding the Closing Date has been, an "S" corporation. During the
consistency period (as defined in Section 338(h)(4) of the IRC with respect to
the sale of the Shares to Buyer), no Acquired Company or target affiliate (as
defined in Section 338(h)(6) of the IRC with respect to the sale of the Shares
to Buyer) has sold or will sell any property or assets to Buyer or to any member
of the affiliated group (as defined in Section 338(h)(5) of the IRC) that
includes Buyer. Schedule 3.7 of the Disclosure Schedule lists all such target
affiliates.
NO MATERIAL ADVERSE CHANGE
Since the date of the Interim Balance Sheet, there has not been any
material adverse change in the business, operations, properties, assets, or
condition of the Acquired Companies, taken as a whole, and, excluding changes in
general economic or industry conditions, no event has occurred or circumstance
arisen that will, or that could reasonably be expected to, result in such a
material adverse change.
EMPLOYEE BENEFITS
As used in this Section 3.9, the following terms have the
meanings set forth below.
"Company Other Benefit Obligation" means an Other Benefit Obligation
owed, adopted, or followed by an Acquired Company or an ERISA Affiliate of an
Acquired Company.
"Company Plan" means all Plans of which an Acquired Company or an
ERISA Affiliate of an Acquired Company is or was a Plan Sponsor, or to which an
Acquired Company or an ERISA Affiliate of an Acquired Company otherwise
contributes or has contributed, or in which an Acquired Company or an ERISA
Affiliate of an Acquired Company otherwise participates or has participated.
All references to Plans are to Company Plans unless the context requires
otherwise.
"ERISA Affiliate" means, with respect to an Acquired Company, any
other person that, together with the Company, would be treated as a single
employer under IRC S 414.
"Multi-Employer Plan" has the meaning given in ERISA S 3(37)(A).
"Other Benefit Obligations" means all obligations, arrangements, or
customary practices, whether or not legally enforceable, to provide benefits,
other than salary, as compensation for services rendered, to present or former
directors, employees, or agents, other than obligations, arrangements, and
practices that are Plans. Other Benefit Obligations include consulting
agreements under which the compensation paid does not depend upon the amount of
service rendered, sabbatical policies, severance payment policies, and fringe
benefits within the meaning of IRC S 132.
"PBGC" means the Pension Benefit Guaranty Corporation, or any
successor thereto.
"Pension Plan" has the meaning given in ERISA S 3(2)(A).
"Plan" has the meaning given in ERISA S 3(3).
"Plan Sponsor" has the meaning given in ERISA S 3(16)(B).
"Qualified Plan" means any Plan that meets or purports to meet the
requirements of IRC S 401(a).
"Title IV Plans" means all Pension Plans that are subject to Title IV
of ERISA, 29 U.S.C. S1301 et seq., other than Multi-Employer Plans.
"VEBA" means a voluntary employees' beneficiary association under IRC
S 501(c)(9).
"Welfare Plan" has the meaning given in ERISA S 3(1).
(i) Schedule 3.9(i) of the Disclosure Schedule contains a
complete and accurate list of all Company Plans and Company Other Benefit
Obligations, and identifies as such all Company Plans that are Qualified Plans.
(ii) Schedule 3.9(ii) of the Disclosure Schedule contains a
complete and accurate list of (A) all ERISA Affiliates of each Acquired Company,
and (B) all Plans of which any such ERISA Affiliate is or was a Plan Sponsor, in
which any such ERISA Affiliate participates or has participated, or to which any
such ERISA Affiliate contributes or has contributed.
(iii) Schedule 3.9(iii) of the Disclosure Schedule sets forth a
calculation of the liability of the Acquired Companies for post-retirement
benefits other than pensions, made in accordance with Financial Accounting
Statement 106 of the Financial Accounting Standards Board, regardless of whether
any Acquired Company is required by this Statement to disclose such information.
(iv) Schedule 3.9(iv) of the Disclosure Schedule sets forth the
financial cost of all obligations owed under any Company Plan or Company Other
Benefit Obligation that is not subject to the disclosure and reporting
requirements of ERISA.
Seller has delivered or made available to Buyer, or will deliver
or make available to Buyer within ten days of the date of this Agreement:
all documents that set forth the terms of each Company Plan
and Company Other Benefit Obligation and of any related trust, including but not
limited to (A) all Qualified Plan Documents and related trust agreements
together with any and all amendments thereto, (B) all plan descriptions and
summary plan descriptions of Company Plans for which Seller or the Acquired
Companies are required to prepare, file, and distribute plan descriptions and
summary plan descriptions, and (C) all summaries and descriptions furnished to
participants and beneficiaries regarding Company Plans and Company Other Benefit
Obligations for which a plan description or summary plan description is not
required;
all personnel, payroll, and employment manuals and policies,
and collective bargaining agreements;
a written description of any Company Plan or Company Other
Benefit Obligation that is not otherwise in writing;
all registration statements filed with, the United States
Department of Labor or with any other governmental agency with respect to any
Company Plan;
all insurance policies purchased by or to provide benefits
under any Company Plan;
all contracts with third party administrators, investment
managers, consultants, and other independent contractors that relate to any
Company Plan or Company Other Benefit Obligation;
all reports submitted within the four years preceding the date
of this Agreement by third party administrators, actuaries, investment managers,
consultants, or other independent contractors with respect to any Company Plan
or Company Other Benefit Obligation;
all notifications to employees or former employees of their
rights under ERISA S601 et seq. and IRC S4980B;
the Form 5500 filed in each of the most recent three plan
years [with respect to each Company Plan], including all schedules thereto and
the opinions of independent accountants;
all material notices that were given by any Acquired Company
or any ERISA Affiliate of an Acquired Company or any Company Plan to the IRS,
the PBGC, pursuant to statute, within the four years preceding the date of this
Agreement, including notices that are expressly mentioned elsewhere in this
Section 3.9;
all notices that were given by the IRS, the PBGC, or the
Department of Labor to any Acquired Company, any ERISA Affiliate of an Acquired
Company, or any Company Plan within the four years preceding the date of this
Agreement; and
the most recent IRS determination letter for each Plan of the
Acquired Companies that is a Qualified Plan.
Except as set forth in Schedule 3.9(vi) of the Disclosure
Schedule:
The Acquired Companies have performed all of their
respective obligations under all Company Plans and Company Other Benefit
Obligations. The Acquired Companies have made appropriate entries in their
financial records and statements for all obligations and liabilities under such
Plans and Other Benefit Obligations that have accrued but are not due.
No statement, either written or oral, has been made by any
Acquired Company to any Person with regard to any Plan or Other Benefit
Obligation that was not in accordance with the Plan or Other Benefit Obligation
and that could have an adverse economic consequence to any Acquired Company or
to Buyer.
The Acquired Companies, with respect to all Company Plans and
Company Other Benefits Obligations are, and each Company Plan and Company Other
Benefit Obligation is, in compliance with ERISA, the IRC, and other applicable
Laws including the provisions of such Laws expressly mentioned in this Section
3.9 and with any applicable collective bargaining agreement.
No transaction prohibited by ERISA S 406 and no
"prohibited transaction" under IRC S 4975(c) have occurred with respect to any
Company Plan.
Neither Seller nor any Acquired Company has any
liability to the IRS with respect to any Plan, including any liability imposed
by Chapter 43 of the IRC.
Neither Seller nor any Acquired Company has any
liability to the PBGC with respect to any Plan or has any liability under ERISA
S 502.
All filings required by ERISA and the IRC as to each
Plan have been timely filed, and all notices and disclosures to participants
required by either ERISA or the IRC have been timely provided.
All contributions and payments made or accrued with
respect to all Company Plans and Company Other Benefit Obligations are
deductible under IRC S 162 or S 404. No amount of any Company Plan's income, or
any asset of any Company Plan, is subject to tax as unrelated business taxable
income.
Each Company Plan can be terminated within thirty days,
without payment of any additional contribution or amount and without the vesting
or acceleration of any benefits promised by such Plan other than as required by
ERISA or the IRC.
Since January 1, 1994, there has been no establishment or
amendment of any Company Plan or Company Other Benefit Obligation.
To the Knowledge of Seller and the Acquired Companies, no
event has occurred that could result in a material increase in premium costs of
Company Plans and Company Other Benefit Obligations that are insured, or a
material increase in benefit costs of such Plans and Obligations that are self-
insured.
Other than claims for benefits submitted by participants or
beneficiaries, no claim against, or legal proceeding involving, any Company Plan
or Company Other Benefit Obligation is pending or, to the Knowledge of Seller or
the Acquired Companies, is Threatened.
No Company Plan is a stock bonus, pension, or profit-sharing
plan within the meaning of IRC S 401(a).
Each Qualified Plan of each Acquired Company is qualified in
form and operation under IRC S 401(a); each trust for each such Plan is exempt
from federal income tax under IRC S501(a). No event has occurred or
circumstance exists that will or could give rise to disqualification or loss of
tax-exempt status of any such Plan or trust.
No Acquired Company or any ERISA Affiliate of an Acquired
Company has ever established, maintained, or contributed to, or otherwise
participated in, or had an obligation to maintain, contribute to, or otherwise
participate in, any Title IV Plan.
No Acquired Company or any ERISA Affiliate of an Acquired
Company has ever established, maintained, or contributed to, or otherwise
participated in, or had an obligation to maintain, contribute to, or otherwise
participate in, any VEBA.
No Acquired Company or any ERISA Affiliate of an Acquired
Company has ever established, maintained, or contributed to or otherwise
participated in, or had an obligation to maintain, contribute to, or otherwise
participate in, any Pension Plan subject to the requirements of ERISA S302 and
IRC S412.
No Acquired Company or any ERISA Affiliate of an Acquired
Company has ever established, maintained, or contributed to or otherwise
participated in, or had an obligation to maintain, contribute to, or otherwise
participate in, any Multi-Employer Plan.
Except to the extent required under ERISA S 601 et seq. and IRC
S4980B, no Acquired Company provides health or welfare benefits for any retired
or former employee or is obligated to provide health or welfare benefits to any
active employee following such employee's retirement or other termination of
service.
Each Acquired Company has the right to modify and terminate
benefits to retirees (other than pensions) with respect to both retired and
active employees.
Seller and all Acquired Companies have complied with the
provisions of ERISA S601 et seq. and IRC S4980B.
No payment that is owed or may become due to any director,
officer, employee, or agent of any Acquired Company will be non-deductible to
the Acquired Companies or subject to tax under IRC S280G or S4999; nor will any
Acquired Company be required to "gross up" or otherwise compensate any such
person because of the imposition of any excise tax on a payment to such person.
The consummation of the Contemplated Transactions will not
result in the payment, vesting, or acceleration of any benefit.
COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS
Except as set forth in Schedule 3.10 of the Disclosure Schedule:
each Acquired Company is in compliance with the Legal
Requirements applicable to it or to the conduct or operation of its business or
the ownership or use of any of its assets;
no event has occurred or circumstance exists that (with or
without notice or lapse of time) (A) would, or could reasonably be expected to,
constitute or result in a violation by any Acquired Company of, or a failure on
the part of any Acquired Company to comply with, any Legal Requirement, or (B)
would, or could reasonably be expected to, give rise to any obligation on the
part of any Acquired Company to undertake, or to bear all or any portion of the
cost of, any remedial action of any nature; and
no Acquired Company has received, at any time since January
1, 1995, any notice or other communication (whether oral or written) from any
Governmental Body or any other Person regarding (A) any actual, alleged,
possible, or potential violation of, or failure to comply with, any Legal
Requirement, or (B) any actual, alleged, possible, or potential obligation on
the part of any Acquired Company to undertake, or to bear all or any portion of
the cost of, any remedial action of any nature.
Each Governmental Authorization held by any Acquired Company is
valid and in full force and effect. Except as set forth in Schedule 3.10 of the
Disclosure Schedule:
each Acquired Company is in compliance with all of the terms
and requirements of each Governmental Authorization;
no event has occurred or circumstance exists that (with or
without notice or lapse of time) would, or could reasonably be expected to (A)
constitute or result directly or indirectly in a violation of or a failure to
comply with any term or requirement of any Governmental Authorization or (B)
result directly or indirectly in the revocation, withdrawal, suspension,
cancellation, or termination of, or any modification to, any Governmental
Authorization;
no Acquired Company has received, at any time since January 1,
1995, any notice or other communication (whether oral or written) from any
Governmental Body or any other Person regarding (A) any actual, alleged,
possible, or potential violation of or failure to comply with any term or
requirement of any Governmental Authorization, or (B) any actual, proposed,
possible, or potential revocation, withdrawal, suspension, cancellation,
termination of, or modification to any Governmental Authorization; and
all applications required to have been filed for the renewal
of the Governmental Authorizations have been duly filed on a timely basis with
the appropriate Governmental Bodies, and all other filings required to have been
made with respect to such Governmental Authorizations have been duly made on a
timely basis with the appropriate Governmental Bodies.
The Governmental Authorizations held by the Acquired Companies
collectively constitute all of the Governmental Authorizations necessary to
permit the Acquired Companies to lawfully conduct and operate their businesses
in the manner they currently conduct and operate such businesses and to permit
the Acquired Companies to own and use their assets in the manner in which they
currently own and use such assets.
LEGAL PROCEEDINGS; ORDERS
Except as set forth in Schedule 3.11(a) of the Disclosure
Schedule, there is no pending Proceeding:
that has been commenced against any Acquired Company or to
the Knowledge of Seller and the Acquired Companies that otherwise could
reasonably be expected to materially adversely affect the business of the
Acquired Companies taken as a whole; or
that has been commenced against Seller or any Acquired
Company that challenges, or that may have the effect of preventing, delaying,
making illegal, or otherwise interfering with, any of the Contemplated
Transactions.
To the Knowledge of Seller and the Acquired Companies, no such
Proceeding has been Threatened. Seller has made available to Buyer copies of
all pleadings, audit letters and statements prepared by legal counsel to support
public disclosures required by Legal Requirements relating to each Proceeding
listed in Schedule 3.11(a) of the Disclosure Schedule.
Except as set forth in Schedule 3.11(b) of the Disclosure
Schedule, there is no pending Proceeding commenced by any Acquired Company.
Except as set forth in Schedule 3.11(c) of the Disclosure
Schedule:
there is no Order to which any of the Acquired Companies, or
any of the assets owned or used by any Acquired Company, is subject;
Seller is not subject to any Order that relates to the
business of, or any of the assets owned or used by, any Acquired Company; and
to the Knowledge of Seller and the Acquired Companies, no
employee of any Acquired Company is subject to any Order that prohibits such
employee from engaging in or performing his normal duties on behalf of the
business of any Acquired Company.
Except as set forth in Schedule 3.11(d) of the Disclosure
Schedule:
each Acquired Company is in compliance with all of the terms
and requirements of each Order to which it, or any of the assets owned or used
by it, is subject;
no event has occurred or circumstance exists that may
constitute or result in (with or without notice or lapse of time) a violation of
or failure to comply with any term or requirement of any Order to which any
Acquired Company, or any of the assets owned or used by any Acquired Company, is
subject; and
no Acquired Company has received, at any time since January 1,
1995, any notice or other communication (whether written or oral) from any
Governmental Body or any other Person regarding any actual, alleged, possible,
or potential violation of, or failure to comply with, any term or requirement of
any Order to which any Acquired Company, or any of the assets owned or used by
any Acquired Company, is or has been subject.
ABSENCE OF CERTAIN CHANGES AND EVENTS
Except for the Permitted Transfers and as set forth in Schedule 3.12
of the Disclosure Schedule, since the date of the Interim Balance Sheet, the
Acquired Companies have conducted their businesses only in the Ordinary Course
of Business and there has not been any:
change in any Acquired Company's authorized or issued capital
stock; grant of any stock option or right to purchase shares of capital stock of
any Acquired Company; issuance of any security convertible into such capital
stock; grant of any registration rights; purchase, redemption, retirement, or
other acquisition by any Acquired Company of any shares of any such capital
stock; or declaration or payment of any dividend or other distribution or
payment in respect of shares of capital stock;
amendment to the Organizational Documents of any Acquired
Company;
payment or increase by any Acquired Company of any bonuses,
salaries, or other compensation to any stockholder, director, officer, or
(except in the Ordinary Course of Business) employee or entry into any
employment, severance, or similar Contract with any director, officer, or
employee;
adoption of, or increase in the payments to or benefits under,
any profit sharing, bonus, deferred compensation, savings, insurance, pension,
retirement, or other employee benefit plan for or with any employees of any
Acquired Company;
damage to or destruction or loss of any asset or property of any
Acquired Company, whether or not covered by insurance, materially and adversely
affecting the properties, assets, business, financial condition, or prospects of
the Acquired Companies, taken as a whole;
entry into, termination of, or receipt of notice of termination
of (i) any license, distributorship, dealer, sales representative, joint
venture, credit, or similar agreement, or (ii) any Contract or transaction
involving a total remaining commitment by any Acquired Company of at least
$150,000.00;
sale, lease or other disposition of any asset or property of any
Acquired Company or imposition of any Encumbrance on any material asset or
property of any Acquired Company, other than in the Ordinary Course of Business;
cancellation or waiver of any claims or rights with a value to
any Acquired Company in excess of $50,000.00;
material change in the accounting methods used by any Acquired
Company; or
agreement, whether oral or written, by any Acquired Company to do
any of the foregoing.
CONTRACTS; NO DEFAULTS
Schedule 3.13(a) of the Disclosure Schedule contains a complete
and accurate list as of the date of this Agreement, and Seller has made
available to Buyer true and complete copies, of:
each Applicable Contract that involves performance of
services or delivery of goods or materials by one or more Acquired Companies of
a remaining amount or value in excess of $150,000.00;
each Applicable Contract that involves performance of
services or delivery of goods or materials to one or more Acquired Companies of
a remaining amount or value in excess of $50,000.00;
each Applicable Contract that was not entered into in the
Ordinary Course of Business and that involves expenditures or receipts of one or
more Acquired Companies in excess of $25,000.00;
each lease, rental or occupancy agreement, license,
installment and conditional sale agreement, and other Applicable Contract
affecting the ownership of, leasing of, title to, use of, or any leasehold or
other interest in, any real or personal property (except personal property
leases and installment and conditional sales agreements having a value per item
or aggregate payments of less than $50,000.00 and with terms of less than one
year);
each licensing agreement or other Applicable Contract with
respect to patents, trademarks, copyrights, or other intellectual property,
other than agreements with current or former employees in a form substantially
similar to Exhibit 3.13(a)(v) of the Disclosure Schedule, consultants, or
contractors regarding the appropriation or the non-disclosure of any of the
Intellectual Property Assets;
each collective bargaining agreement and other Applicable
Contract to or with any labor union or other employee representative of a group
of employees;
each joint venture, partnership, and other Applicable Contract
(however named) involving a sharing of profits, losses, costs, or liabilities by
any Acquired Company with any other Person;
each Applicable Contract containing covenants that in any way
purport to restrict the business activity of any Acquired Company or limit the
freedom of any Acquired Company to engage in any line of business or to compete
with any Person;
each Applicable Contract providing for payments to or by any
Person based on sales, purchases, or profits, other than direct payments for
goods;
each power of attorney that is currently effective and
outstanding;
each Applicable Contract entered into other than in the Ordinary
Course of Business that contains or provides for an express undertaking by any
Acquired Company to be responsible for consequential damages;
each Applicable Contract for capital expenditures in excess of
$50,000.00;
each written warranty, guaranty, and or other similar
undertaking with respect to contractual performance extended by any Acquired
Company other than in the Ordinary Course of Business; and
each amendment, supplement, and modification (whether oral or
written) in respect of any of the foregoing.
Except as provided herein or as set forth in Schedule 3.13(b) of
the Disclosure Schedule:
Seller (and no Related Person of Seller) does not have and
will not acquire any rights under, any Material Applicable Contract that relates
to the business of, or any of the assets owned or used by, any Acquired Company;
and
to the Knowledge of Seller and the Acquired Companies, no
agent or employee is bound by any Contract that purports to limit the ability of
such agent or employee to (A) engage in the business of any Acquired Company, or
(B) assign to any Acquired Company or to any other Person any rights to any
invention, improvement, or discovery.
Except as set forth in Schedule 3.13(c) of the Disclosure
Schedule, each Material Applicable Contract is in full force and effect and is
valid and enforceable in accordance with its terms.
Except as set forth in Schedule 3.13(d) of the Disclosure
Schedule:
each Acquired Company is in compliance with all applicable
terms and requirements of each Material Applicable Contract under which such
Acquired Company has or had any obligation or liability or by which such
Acquired Company or any of the assets owned or used by such Acquired Company is
or was bound.
each other Person that has or had any obligation or
liability under any Material Applicable Contract under which an Acquired Company
has any rights is in compliance with all applicable terms and requirements of
such Contract;
no event has occurred or circumstance exists that (with or
without notice or lapse of time) would, or could reasonably be expected to, give
any other Person the right to exercise any remedy under, or to accelerate the
maturity or performance of, or to cancel, terminate, or modify, any Material
Applicable Contract; and
no Acquired Company has given to or received from any other
Person, at any time since October 8, 1996, any notice or other communication
(whether written or oral) regarding any actual, alleged, possible, or potential
violation or breach of, or default under, any Material Applicable Contract.
Except as set forth on Schedule 3.13(e), there are no
renegotiations of, attempts to renegotiate, or outstanding rights to renegotiate
any material amounts paid or payable to any Acquired Company under current or
completed Applicable Contracts with any Person and, to the Knowledge of Seller
and the Acquired Companies, no such Person has made written demand for such
renegotiation.
Except as set forth in Schedule 3.13(f), the Material Applicable
Contracts relating to the sale, design, manufacture, or provision of products or
services by the Acquired Companies have been entered into in the Ordinary Course
of Business and have been entered into without the commission of any act alone
or in concert with any other Person, or any consideration having been paid or
promised, that is or would be in violation of any Legal Requirement.
INSURANCE
Seller has made available to Buyer:
true and complete copies of all policies of insurance to
which any Acquired Company is a party or under which any Acquired Company is or
has been covered at any time within the six (6) years preceding the date of this
Agreement;
true and complete copies of all pending applications for
policies of insurance which would cover any Acquired Company; and
any statement by the auditor of Seller's financial statements
with regard to the adequacy of Seller's coverage or of the reserves for claims.
Except as set forth on Schedule 3.14(b) of the Disclosure
Schedule:
All policies to which any Acquired Company is a party or
that provide coverage to any Acquired Company:
are valid, outstanding, and enforceable;
will be in full force and effect at the time of
consummation of the Contemplated Transactions; and
except as disclosed on Schedule 3.14(b)(i)(C), do not
provide for any retrospective premium adjustment or other experienced-based
liability on the part of any Acquired Company.
Neither Seller nor any Acquired Company has received (A) any
refusal of coverage or any notice that a defense will be afforded with
reservation of rights, or (B) any notice of cancellation or any other indication
that any insurance policy is no longer in full force or effect or will not be
renewed or that the issuer of any policy is not willing or able to perform its
obligations thereunder.
Seller or the Acquired Companies have paid all premiums due,
and have otherwise performed all of their respective obligations, under each
policy to which any Acquired Company is a party or that provides coverage to any
Acquired Company.
Seller or the Acquired Companies have given notice to the
insurer of all claims relating to an Acquired Company that may be insured
thereby.
ENVIRONMENTAL MATTERS
Except as set forth in Schedule 3.15 of the Disclosure Schedule:
Each Acquired Company is, and at all times has been, in full
compliance with, and has not been and is not in violation of or liable under,
any Environmental Law. Neither Seller nor any Acquired Company has any basis to
expect, nor has any of them or any other Person for whose conduct they are
responsible received, any actual or Threatened order, notice, or other
communication from (i) any Governmental Body or private citizen acting in the
public interest, or (ii) the current or prior owner or operator of any
Facilities, of any actual or potential violation or failure to comply with any
Environmental Law, or of any actual or Threatened obligation to undertake or
bear the cost of any Environmental, Health, and Safety Liabilities with respect
to any of the Facilities or any other properties or assets (whether real,
personal, or mixed) in which Seller or any Acquired Company has had an interest,
or with respect to any property or Facility at or to which Hazardous Materials
were generated, manufactured, refined, transferred, imported, used, or processed
by Seller, any Acquired Company, or any other Person for whose conduct they are
responsible, or from which Hazardous Materials have been transported, treated,
stored, handled, transferred, disposed, recycled, or received.
There are no pending or, to the Knowledge of Seller and the
Acquired Companies, Threatened claims, Encumbrances, or other restrictions of
any nature, resulting from any Environmental, Health, and Safety Liabilities or
arising under or pursuant to any Environmental Law, with respect to or affecting
any of the Facilities or any other properties and assets (whether real,
personal, or mixed) in which any Acquired Company has or had an interest.
Neither Seller nor any Acquired Company has Knowledge of any
basis to expect, nor has any of them or any Person for whose conduct they are
responsible, received, any citation, directive, inquiry, notice, Order, summons,
warning, or other communication that asserts actual, or potential violation or
failure to comply with any Environmental Law, or of any alleged, actual, or
potential obligation to undertake or bear the cost of any Environmental, Health,
and Safety Liabilities with respect to any of the Facilities or any other
properties or assets (whether real, personal, or mixed) in which Seller or any
Acquired Company had an interest, or with respect to any property or Facility to
which Hazardous Materials generated, manufactured, refined, transferred,
imported, used, transported or processed by any Acquired Company, or any Person
for whose conduct they are responsible have been transported, treated, stored,
handled, transferred, disposed, recycled, or received or at any property
geologically or hydrologically adjoining the Facilities or any such other
property or assets.
None of the Acquired Companies nor any Person for whose conduct
they are responsible, have any Environmental, Health, and Safety Liabilities
with respect to the Facilities or, to the Knowledge of Seller and the Acquired
Companies, with respect to any other properties and assets (whether real,
personal, or mixed) in which any Acquired Company (or any predecessor), has or
had an interest or at any property geologically or hydrologically adjoining the
Facilities or any such other property or assets.
Except in compliance with applicable Legal Requirements, there
are no Hazardous Materials present on or in the Environment at the Facilities
or, to the Knowledge of Seller and the Acquired Companies, at any geologically
or hydrologically adjoining property, including any Hazardous Materials
contained in barrels, above or underground storage tanks, landfills, land
deposits, dumps, equipment (whether moveable or fixed) or other containers,
either temporary or permanent, and deposited or located in land, water, sumps,
or any other part of the Facilities or such adjoining property, or incorporated
into any structure therein or thereon. Neither Seller nor any Acquired Company
nor any Person for whose conduct they are responsible has permitted or
conducted, or is aware of, any Hazardous Activity conducted with respect to the
Facilities or any other properties or assets (whether real, personal, or mixed)
in which any Acquired Company has or had an interest except in compliance with
applicable Legal Requirements.
Except in compliance with applicable Legal Requirements, there
has been no Release or, to the Knowledge of Seller and the Acquired Companies,
any Threat of Release, of any Hazardous Materials at or from the Facilities or
at any other locations where any Hazardous Materials were generated,
manufactured, refined, transferred, produced, imported, used, or processed from
or by the Facilities, or from or by any other properties and assets (whether
real, personal, or mixed) in which any Acquired Company has or had an interest
or, to the Knowledge of Seller and the Acquired Companies, at any geologically
or hydrologically adjoining property.
Seller has made available to Buyer true and complete copies and
results of any reports, studies, analyses, tests, or monitoring possessed or
initiated by Seller or any Acquired Company pertaining to Hazardous Materials or
Hazardous Activities in, on, or under the Facilities, or concerning compliance
by or any Acquired Company with Environmental Laws.
LABOR RELATIONS; COMPLIANCE
Except as set forth in Schedule 3.16 of the Disclosure Schedule,
since January 1, 1994, no Acquired Company has been or is a party to any
collective bargaining or other labor Contract. Since January 1, 1994, there has
not been, there is not presently pending or existing, and to the Knowledge of
Seller and any Acquired Company there is not Threatened, (a) any strike,
slowdown, picketing, work stoppage, or employee grievance process, (b) any
Proceeding against or affecting any Acquired Company relating to the alleged
violation of any Legal Requirement pertaining to labor relations or employment
matters, including any charge or complaint filed by an employee or union with
the National Labor Relations Board, the Equal Employment Opportunity Commission,
or any comparable Governmental Body, organizational activity, or other labor or
employment dispute against any of the Acquired Companies, or (c) any application
for certification of a collective bargaining agent. To Seller's Knowledge, no
event has occurred or circumstance exists that would, or could reasonably be
expected to, provide the basis for any work stoppage or other labor dispute.
There is no lockout of any employees by any Acquired Company, and no such action
is contemplated by any Acquired Company. Each Acquired Company has complied
with all Legal Requirements relating to employment, equal employment
opportunity, nondiscrimination, immigration, wages, hours, benefits, collective
bargaining, the payment of social security and similar taxes, occupational
safety and health, and plant closing. No Acquired Company is liable for the
payment of any compensation, damages, taxes, fines, penalties, or other amounts,
however designated, for failure to comply with any of the foregoing Legal
Requirements.
INTELLECTUAL PROPERTY
Intellectual Property Assets--The term "Intellectual Property
Assets" includes:
the name "Handex," all fictional business names, trading
names, registered and unregistered trademarks, service marks, and applications
(collectively, "Marks");
all patents and patent applications (collectively,
"Patents");
all copyrights in both published works and unpublished works
(collectively, "Copyrights");
all rights in mask works (collectively, "Rights in Mask
Works");
all proprietary know-how, trade secrets, and other
confidential information (collectively, "Trade Secrets") owned, used, or
licensed as licensee by any Acquired Company.
Agreements--Schedule 3.17(b) of the Disclosure Schedule contains
a complete and accurate list and summary description, including any royalties
paid or received by the Acquired Companies, of all Applicable Contracts relating
to the Intellectual Property Assets to which any Acquired Company is a party or
by which any Acquired Company is bound, except for any license implied by the
sale of a product and perpetual, paid-up licenses for commonly available
software programs with a value of less than $10,000.00 under which an Acquired
Company is the licensee. To Seller's Knowledge, there are no outstanding or
Threatened disputes or disagreements with respect to any such agreement.
Know-How Necessary for the Business
The Intellectual Property Assets are all those necessary for
the operation of the Acquired Companies' businesses as they are currently
conducted by the Acquired Companies. One or more of the Acquired Companies is
the owner of all right, title, and interest in and to each of the Intellectual
Property Assets, free and clear of all Encumbrances, and has the right to use
without payment to a third party all of the Intellectual Property Assets, except
as set forth in Schedule 3.17(b) of the Disclosure Schedule.
Except as set forth in Schedule 3.17(c) of the Disclosure
Schedule, to the Knowledge of Seller and the Acquired Companies, no employee of
any Acquired Company has entered into any Contract, including any
confidentiality agreement, that restricts or limits in any way the scope or type
of work in which the employee may be engaged or requires the employee to
transfer, assign, or disclose information concerning his work to anyone other
than one or more of the Acquired Companies.
Patents
Schedule 3.17(d) of the Disclosure Schedule contains a
complete and accurate list and summary description of all Patents. One or more
of the Acquired Companies is the owner of all right, title, and interest in and
to each of the Patents, free and clear of all Encumbrances.
All of the issued Patents are currently in compliance with
formal legal requirements (including payment of filing, examination, and
maintenance fees and proofs of working or use) and are valid and enforceable.
No Patent has been or is now involved in any interference,
reissue, reexamination, or opposition proceeding. To Seller's Knowledge, there
is no potentially interfering patent or patent application of any third party.
To Seller's knowledge, no Patent is infringed or has been
challenged or threatened in any way. To Seller's knowledge, none of the
products manufactured and sold, nor any process or know-how used, by any
Acquired Company infringes or is alleged to infringe any patent or other
proprietary right of any other Person.
Trademarks
Schedule 3.17(e) of Disclosure Schedule contains a complete
and accurate list and summary description of all Marks. Except for the logo and
stylized name "Handex" which is currently registered to Seller, one or more of
the Acquired Companies is the owner of all right, title, and interest in and to
each of the Marks, free and clear of all Encumbrances.
All Marks that have been registered with the United States
Patent and Trademark Office are currently in compliance with all formal legal
requirements (including the timely post-registration filing of affidavits of use
and incontestability and renewal applications), are valid and enforceable.
No Mark is now involved in any opposition, invalidation, or
cancellation and, to Seller's Knowledge, no such action is Threatened with the
respect to any of the Marks.
To Seller's Knowledge, there is no potentially interfering
trademark or trademark application of any third party.
To Seller's Knowledge, no Mark is infringed or has been
challenged or threatened in any way. To Seller's Knowledge, none of the Marks
used by any Acquired Company infringes or is alleged to infringe any trade name,
trademark, or service mark of any third party.
Copyrights
Schedule 3.17(f) of the Disclosure Schedule contains a
complete and accurate list and summary description of all Copyrights registered
with the United States copyright office. One or more of the Acquired Companies
is the owner of all right, title, and interest in and to each of the Copyrights,
free and clear of all Encumbrances.
All registered Copyrights are currently in compliance with
formal legal requirements and are valid and enforceable.
To Seller's knowledge, no Copyright is infringed or has been
challenged or threatened in any way. To Seller's knowledge, none of the subject
matter of any of the Copyrights infringes or is alleged to infringe any
copyright of any third party or is a derivative work based on the work of a
third party.
Trade Secrets
Except asset forth on Schedule 3.17(g), Seller and the
Acquired Companies have taken reasonable precautions to protect the
confidentiality of all Trade Secrets.
One or more of the Acquired Companies has good title and an
absolute (but not necessarily exclusive) right to use the Trade Secrets. To
Seller's knowledge, no Trade Secret is subject to any adverse claim or has been
challenged or threatened in any way.
DISCLOSURE
No representation or warranty of Seller in this Agreement and no
statement in the Disclosure Schedule omits to state a material fact necessary to
make the statements herein or therein, in light of the circumstances in which
they were made, not misleading.
No notice given pursuant to Section 5.5 will contain any untrue
statement or omit to state a material fact necessary to make the statements
therein or in this Agreement, in light of the circumstances in which they were
made, not misleading.
(c) There is no fact of which Seller has Knowledge that has specific
application to Seller or any Acquired Company (other than general economic or
industry conditions) and that materially adversely affects or materially
threatens, the assets, business, financial condition, or results of operations
of the Acquired Companies (on a consolidated basis) that has not been set forth
in this Agreement or the Disclosure Schedule.
RELATIONSHIPS WITH RELATED PERSONS
Except as set forth on Schedule 3.19 of the Disclosure Schedule, no
Seller nor any Related Person of Seller or of any Acquired Company has, or since
the first day of the next to last completed fiscal year of the Acquired
Companies has had, any interest in any property (whether real, personal, or
mixed and whether tangible or intangible), used in or pertaining to the Acquired
Companies' businesses. Neither Seller nor any Related Person of Seller or of
any Acquired Company is, or since the first day of the next to last completed
fiscal year of the Acquired Companies has owned (of record or as a beneficial
owner) an equity interest or any other financial or profit interest in, a Person
that has (i) had business dealings or a material financial interest in any
transaction with any Acquired Company other than business dealings or
transactions conducted in the Ordinary Course of Business with the Acquired
Companies at substantially prevailing market prices and on substantially
prevailing market terms, or (ii) engaged in competition with any Acquired
Company with respect to any line of the products or services of such Acquired
Company (a "Competing Business") in any market presently served by such Acquired
Company. Except as set forth in Schedule 3.19 of the Disclosure Schedule,
neither Seller nor any Related Person of Seller or of any Acquired Company is a
party to any Contract with, or has any claim or right against, any Acquired
Company.
BROKERS OR FINDERS
Seller and its agents have incurred no obligation or liability,
contingent or otherwise, for brokerage or finders' fees or agents' commissions
or other similar payment in connection with this Agreement, except to The Nassau
Group, Inc.
SUFFICIENCY OF ASSETS
To the Knowledge of Seller and the Acquired Companies, the buildings,
plants, structures, and equipment of the Acquired Companies are in all material
respects structurally sound, in good operating condition and repair, and
adequate for the uses to which they are being put, and none of such buildings,
plants, structures, or equipment is in need of maintenance or repairs except for
ordinary, routine maintenance and repairs that are not material in nature or
cost. Except for (i) assets, properties and rights to be transferred by Seller
to the Acquired Companies after the Closing Date, (ii) matters disclosed on
Schedule 3.21 of the Disclosure Schedule, and (iii) working capital and the
financing to be provided by Buyer, the Acquired Assets are sufficient for the
continued conduct of the Acquired Companies' businesses after the Closing in
substantially the same manner as conducted prior to the Closing.
CURRENT CLIENTS
Except for the Contemplated Transactions, Seller has no Knowledge
that any event has occurred that could, or could reasonably be expected to,
cause any customer which has purchased in excess of One Million Dollars
($1,000,000) of products or services from one or more of the Acquired Companies
since January 1, 1994 to terminate its existing business relationship with such
Acquired Company. Buyer acknowledges that Seller makes no representation or
warranty whatsoever with respect to the revenues to be derived by the Acquired
Companies for services rendered to any customer after the Closing Date.
INVENTORY
All inventory of the Acquired Companies, whether or not reflected in
the Interim Balance Sheet, consists of a quality and quantity usable and salable
in the Ordinary Course of Business, except for obsolete items and items of
below-standard quality, all of which have been written off or written down to
net realizable value in the Interim Balance Sheet or on the accounting records
of the Acquired Companies as of the Closing Date, as the case may be. All
inventories not written off have been priced at the lower of cost or market on a
first in, first out basis. The quantities of each item of inventory (whether
raw materials, work-in-process, or finished goods) are not excessive, but are
reasonable in the present circumstances of the Acquired Companies.
NO UNDISCLOSED LIABILITIES
To the Knowledge of Seller the Acquired Companies have no liabilities
or obligations of any nature (whether known or unknown and whether absolute,
accrued, contingent or otherwise) except for (i) liabilities or obligations
reflected or reserved against in the Balance Sheet or in the Interim Balance
Sheet and current liabilities incurred in the Ordinary Course of Business since
the respective dates thereof, (ii) liabilities or obligations contemplated by
this Agreement or referred to in the Disclosure Schedule, and (iii) liabilities
or obligations not required to be disclosed pursuant to Section 3 of this
Agreement or which otherwise do not constitute a breach of this Agreement.
EMPLOYEES
Schedule 3.25 of the Disclosure Schedule contains a complete and
accurate list of the following information for each employee of the Acquired
Companies as of October 18, 1996, including each employee on leave of absence or
layoff status: employer; name; job title and current compensation. The books
and records of the Acquired Companies, which have been provided to Buyer,
reflect the following information on each employee: any change in compensation
since commencement of employment; vacation accrued; and service credited for
purposes of vesting and eligibility to participate under any Acquired Company's
pension, retirement, profit-sharing, thrift-savings, deferred compensation,
stock bonus, stock option, cash bonus, employee stock ownership (including
investment credit or payroll stock ownership), severance pay, insurance,
medical, welfare, or vacation plan, other Employee Pension Benefit Plan or
Employee Welfare Benefit Plan, or any other employee benefit plan or any
Director Plan. Schedule 3.25 of the Disclosure Schedule also contains a
complete and accurate list of the following information for each retired
employee or director of the Acquired Companies, or their dependents, receiving
benefits or scheduled to receive benefits in the future: name, pension benefit,
pension option election, retiree medical insurance coverage, retiree life
insurance coverage, and other benefits.
INVESTMENT INTENT
Seller is acquiring the Promissory Note, Preferred Shares and
Warrants for its own account and not with a view to their distribution within
the meaning of Section 2(11) of the Securities Act. Seller is an "accredited
investor" as such term is defined in Rule 401(a) under the Securities Act.
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
ORGANIZATION AND GOOD STANDING
Buyer is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Florida. Buyer is not required to be
qualified to do business as a foreign corporation in any other state. Buyer has
delivered to Seller true and complete copies of the Organizational Documents of
Buyer.
AUTHORITY; NO CONFLICT
This Agreement and the Deposit Escrow Agreement constitute the
legal, valid, and binding obligations of Buyer, enforceable against Buyer in
accordance with their respective terms. Upon the execution and delivery by
Buyer and each of the Acquired Companies which is a party thereto of the
Promissory Note, Preferred Shares, Warrants, Completion Assistance Agreement,
Receivables Collection Agreement, Subordination Agreement, Corporate Guaranty
and Pledge Agreement, Pledge Agreement, Sublease and Shareholders Agreement
(collectively, the "Buyer's Closing Documents"), the Buyer's Closing Documents
will constitute the legal, valid, and binding obligations of Buyer and each of
the Acquired Companies which is a party thereto, enforceable in accordance with
their respective terms. Buyer has the corporate power and authority to execute
and deliver this Agreement and the Buyer's Closing Documents to which it is a
party and to perform its obligations thereunder. Each of the Acquired Companies
which is a party to a Buyer's Closing Document has the corporate power and
authority to execute and deliver such document and to perform its obligations
thereunder.
Except as set forth in Schedule 4.2, neither the execution and
delivery of this Agreement by Buyer nor the consummation or performance of any
of the Contemplated Transactions will give any Person the right to prevent,
delay, or otherwise interfere with any of the Contemplated Transactions pursuant
to:
any provision of Buyer's Organizational Documents;
any resolution adopted by the board of directors or the
stockholders of Buyer;
any Legal Requirement or Order to which Buyer may be
subject; or
any Contract to which Buyer is a party or by which Buyer may
be bound.
Except as set forth in Schedule 4.2, Buyer is not and will not be
required to obtain any Consent from any Person in connection with the execution
and delivery of this Agreement or the consummation or performance of any of the
Contemplated Transactions.
INVESTMENT INTENT
Buyer is acquiring the Shares for its own account and not with a view
to their distribution within the meaning of Section 2(11) of the Securities Act.
CERTAIN PROCEEDINGS
There is no pending Proceeding that has been commenced against Buyer
and that challenges, or may have the effect of preventing, delaying, making
illegal, or otherwise interfering with, any of the Contemplated Transactions.
To Buyer's Knowledge, no such Proceeding has been Threatened.
BROKERS OR FINDERS
Buyer and its officers and agents have incurred no obligation or
liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement, except
to Southcoast and New Street Investments LP.
UNDISCLOSED KNOWLEDGE
Neither Buyer nor any of its Representatives has Knowledge of any
Breach by Seller of the representations, warranties, covenants and obligations
of Seller in this Agreement, the Disclosure Schedule or any supplement to the
Disclosure Schedule which Buyer has not disclosed to Seller in writing.
CAPITALIZATION; LIABILITIES; SOLVENCY
(a) The authorized equity securities of Buyer consist of (i)
1,540,000 shares of Common Stock, par value $.01 per share ("Common Shares") and
(b) 3,000 shares of Series A Preferred Stock, par value $.01 per share and
stated value $1,000 per share. 819,000 Common Shares are currently issued and
outstanding ("Initial Shares") and owned of record and beneficially as follows:
Roger Eatman - 314,666.66; George Bannon - 314,666.66; and S.C. Culbreath, Jr. -
189,666.66 ("Buyer's Shareholders"). Buyer's Shareholders' ownership of their
respective Initial Shares is free and clear of all Encumbrances except the
Nonrecourse Individual Guaranty and Pledge Agreement and Shareholders Agreement.
The Initial Shares have been duly authorized, validly issued and fully paid for
in cash at a price per share of not less than Eighty-Eight Cents ($0.88) and are
nonassessable. The common shareholders' equity of Buyer resulting from issuance
of the Initial Shares is at least Five Hundred Thousand Dollars ($500,000).
Except for the Warrants and the Excluded Shares (as defined in the Warrants),
there are no Contracts relating to the issuance of additional equity securities
of Buyer. The Common Shares of Buyer issuable upon exercise of the Warrants
have been validly reserved for issuance by Buyer and, upon such issuance, will
be duly authorized, validly issued, fully paid and nonassessable Common Shares
of Buyer. Upon issuance of the Preferred Shares to Seller, such shares will be
duly authorized, validly issued, fully paid and nonassessable. Except for the
Preferred Shares, the Warrants, the Southcoast Warrant and the Shareholders
Agreement, neither Buyer nor any of Buyer's Shareholders is a party to any
Contract pursuant to which it is or may become obligated to purchase or redeem
any shares of its capital stock or which restricts the transfer or affects the
voting rights of any shares of its capital stock.
(b) Schedule 4.7(b) sets forth an unaudited pro forma balance sheet
of Buyer as of the Closing Date, which balance sheet gives effect to the
Contemplated Transactions and the financing to be provided by SouthTrust. Such
balance sheet is a fair and accurate presentation of Buyer's financial condition
as of the Closing Date. Except as set forth on such pro forma balance sheet or
elsewhere on Schedule 4.7(b), Buyer will have no liabilities or obligations of
any nature (whether known or unknown and whether accrued, contingent or
otherwise) as of the Closing Date. Schedule 4.7(b) also contains a true and
complete copy of the commitment letter from SouthTrust relating to the financing
to be provided thereby in connection with the Contemplated Transactions.
(c) Buyer is now, and after giving effect to the SouthTrust financing
and the Contemplated Transactions, will be, Solvent.
COVENANTS OF SELLER PRIOR TO CLOSING DATE
ACCESS AND INVESTIGATION
Between the date of this Agreement and the Closing Date, Seller will,
and will cause each Acquired Company and its Representatives to furnish or make
available to Buyer and Buyer's Representatives such additional financial,
operating, and other data and information as Buyer may reasonably request in
light of the data and information previously furnished or made available to
Buyer.
OPERATION OF THE BUSINESSES OF THE ACQUIRED COMPANIES
Between the date of this Agreement and the Closing Date, Seller will,
and will cause each Acquired Company to:
conduct the business of such Acquired Company only in the
Ordinary Course of Business;
use their Best Efforts to preserve intact the current business
organization of such Acquired Company, keep available the services of the
current employees, and agents of such Acquired Company, and maintain the
relations and good will with suppliers, customers, landlords, creditors,
employees, agents, and others having business relationships with such Acquired
Company;
confer with Buyer concerning operational matters of a material
nature and obtain Buyer's Consent (which shall not be unreasonably withheld) to
any sale or other disposition of any asset or property included in Net P, P & E.
pay any undisputed debts or trade accounts payable that have been
outstanding more than sixty (60) days.
otherwise respond to Buyer concerning the status of the business,
operations, and finances of such Acquired Company.
NEGATIVE COVENANT
Except as otherwise expressly permitted by this Agreement, between
the date of this Agreement and the Closing Date, Seller will not, and will cause
each Acquired Company not to, without the prior consent of Buyer, take any
affirmative action, or fail to take any reasonable action within their or its
control, as a result of which any of the changes or events listed in Section
3.12 is likely to occur.
REQUIRED APPROVALS
As promptly as practicable after the date of this Agreement, Seller
will, and will cause each Acquired Company to, make all filings required by
Legal Requirements to be made by them in order to consummate the Contemplated
Transactions. Between the date of this Agreement and the Closing Date, Seller
will, and will cause each Acquired Company to, (a) cooperate with Buyer with
respect to all filings that Buyer elects to make or is required by Legal
Requirements to make in connection with the Contemplated Transactions, and (b)
cooperate with Buyer in obtaining all consents identified in Schedule 4.2.
NOTIFICATION
Between the date of this Agreement and the Closing Date, Seller will
promptly notify Buyer in writing if Seller becomes aware of any fact or
condition that causes or constitutes a Breach of any of Seller's representations
and warranties as of the date of this Agreement, or if Seller becomes aware of
the occurrence after the date of this Agreement of any fact or condition that
would (except as expressly contemplated by this Agreement) cause or constitute a
Breach of any such representation or warranty had such representation or
warranty been made as of the time of occurrence or discovery of such fact or
condition. Should any such fact or condition require any change in the
Disclosure Schedule if the Disclosure Schedule were dated the date of the
occurrence or discovery of any such fact or condition, Seller will promptly
deliver to Buyer a supplement to the Disclosure Schedule specifying such change.
During the same period, each Seller will promptly notify Buyer of the occurrence
of any Breach of any covenant of Seller in this Section 5 or of the occurrence
of any event that may make the satisfaction of the conditions in Section 7
impossible or unlikely.
NO NEGOTIATION
Until such time, if any, as this Agreement is terminated pursuant to
Section 9, Seller will not, and will cause each Acquired Company and each of
their Representatives not to, directly or indirectly solicit proposals from, or
negotiate with, any Person (other than Buyer) relating to any transaction
involving the sale of the business conducted by the Acquired Companies.
BEST EFFORTS
Between the date of this Agreement and the Closing Date, Seller will
use its Best Efforts to cause the conditions in Sections 7 and 8 to be
satisfied.
COVENANTS OF BUYER PRIOR TO CLOSING DATE
REQUIRED APPROVALS
As promptly as practicable after the date of this Agreement, Buyer
will, and will cause each of its Related Persons to, make all filings required
by Legal Requirements to be made by them to consummate the Contemplated
Transactions. Between the date of this Agreement and the Closing Date, Buyer
will, and will cause each Related Person to, cooperate with Seller with respect
to all filings that Seller elects or to make or is required by Legal
Requirements to make in connection with the Contemplated Transactions, and (ii)
cooperate with Seller in obtaining all consents identified in Schedule 3.2 of
the Disclosure Schedule; provided that this Agreement will not require Buyer to
incur any burden to obtain a Governmental Authorization.
BEST EFFORTS
Except as set forth in the proviso to Section 6.1, between the date
of this Agreement and the Closing Date, Buyer will use its Best Efforts to cause
the conditions in Sections 7 and 8 to be satisfied.
NEGATIVE COVENANT
Except as otherwise expressly permitted by this Agreement, between
the date of this Agreement and the Closing Date, Buyer will not, without the
prior consent of Seller, amend any of Buyer's Organizational Documents.
CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to purchase the Shares and to take the other actions
required to be taken by Buyer at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may
be waived by Buyer, in whole or in part):
ACCURACY OF REPRESENTATIONS
All of Seller's representations and warranties in this Agreement
(considered collectively), and each of these representations and warranties
(considered individually), must be accurate in all material respects as of the
Closing Date as if made on the Closing Date, without giving effect to any
supplement to the Disclosure Schedule, except where such representations and
warranties are expressly made as of a particular date and with respect to
matters contemplated or permitted by this Agreement
Each of Seller's representations and warranties in Sections 3.3,
3.4, 3.8, and 3.19 must be accurate in all respects as of the Closing Date as if
made on the Closing Date, without giving effect to any supplement to the
Disclosure Schedule, except where such representations and warranties are
expressly made as of a particular date and with respect to matters contemplated
or permitted by this Agreement.
SELLER'S PERFORMANCE
All of the covenants and obligations that Seller are required to
perform or to comply with pursuant to this Agreement at or prior to the Closing
(considered collectively), and each of these covenants and obligations
(considered individually), must have been duly performed and complied with in
all material respects.
Each document required to be delivered pursuant to Section 2.4
must have been delivered, and each of the other covenants and obligations in
Sections 5.4 and 5.7 must have been performed and complied with in all respects.
CONSENTS
Each of the Consents identified in subparts 1 and 2 of Schedule 3.2
of the Disclosure Schedule, and each Consent identified in Schedule 4.2, must
have been obtained and must be in full force and effect.
ADDITIONAL DOCUMENTS
Each of the following documents must have been delivered to Buyer:
an opinion of Calfee, Halter & Griswold, dated the Closing Date,
in the form of Exhibit 7.4(a); and
an opinion of Gary T. Gann, Esq., dated the Closing Date, in the
form of Exhibit 7.4(b).
NO PROCEEDINGS
Since the date of this Agreement, there must not have been commenced
or Threatened against Buyer, or against any Person affiliated with Buyer, any
Proceeding involving any challenge to, or that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions.
NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS
There must not have been made or Threatened by any Person any claim
asserting that such Person (a) is the holder or the beneficial owner of, or has
the right to acquire or to obtain beneficial ownership of, any stock of, or any
other voting, equity, or ownership interest in, any of the Acquired Companies,
or (b) is entitled to all or any portion of the consideration for the Shares.
NO PROHIBITION
Neither the consummation nor the performance of any of the
Contemplated Transactions by Buyer will, directly or indirectly (with or without
notice or lapse of time), materially contravene, or conflict with, or result in
a material violation of, or cause Buyer to suffer any material adverse
consequence under any Legal Requirement or Order that has been published,
introduced, or otherwise formally proposed by or before any Governmental Body
after the date of this Agreement.
CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE
Seller's obligation to sell the Shares and to take the other actions
required to be taken by Seller at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may
be waived by Seller, in whole or in part):
ACCURACY OF REPRESENTATIONS
Buyer's representations and warranties in the Deposit Escrow
Agreement and in Sections 4.1, 4.2(a) and 4.7(a) of this Agreement must be
accurate in all respects as of the date of this Agreement and as of the Closing
Date as if made on the Closing Date. All of Buyer's other representations and
warranties in this Agreement (considered collectively), and each of such other
representations and warranties (considered individually), must be accurate in
all material respects as of the Closing Date as if made on the Closing Date.
BUYER'S PERFORMANCE
All of the covenants and obligations that Buyer is required to
perform or to comply with pursuant to this Agreement at or prior to the Closing
(considered collectively), and each of these covenants and obligations
(considered individually), must have been performed and complied with in all
material respects.
Buyer must have delivered each of the documents required to be
delivered by Buyer pursuant to Section 2.4, must have made the payments required
to be made by Buyer pursuant to Sections 2.4(b)(i) and the covenants and
obligations in Section 6.2 must have been satisfied in all respects.
ADDITIONAL DOCUMENTS; CONSENTS
Buyer must have caused the following documents to be delivered to
Seller:
an opinion of Cobb Cole & Bell, dated the Closing Date, in the
form of Exhibit 8.4(a); and
the Nonrecourse Individual Guaranty and Pledge Agreement executed
by each of Buyer's Shareholders.
Seller shall have obtained the Consent of its stockholders required
by applicable Legal Requirements.
NO PROCEEDINGS OR PROHIBITION
Since the date of this Agreement, there must not have been commenced
or Threatened against Seller, or against any Person affiliated with Seller, any
Proceeding (a) involving any challenge to, or that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions. Neither the consummation nor the performance of any
of the Contemplated Transactions by Seller will, directly or indirectly (with or
without notice or lapse of time), materially contravene, or conflict with, or
result in a material violation of, any Legal Requirement or Order that is
published, introduced, or otherwise proposed by or before any Governmental Body
after the date of this Agreement.
TERMINATION
TERMINATION EVENTS
This Agreement may, by notice given prior to or at the Closing, be
terminated:
by either Buyer or Seller if a material Breach of any provision
of this Agreement has been committed by the other party and such Breach has not
been waived or cured;
(i) by Buyer if any of the conditions in Section 7 has not been
satisfied as of the Closing Date or if satisfaction of such a condition is or
becomes impossible (other than through the failure of Buyer to comply with its
obligations under this Agreement) and Buyer has not waived such condition on or
before the Closing Date; or (ii) by Seller, if any of the conditions in Section
8 has not been satisfied of the Closing Date or if satisfaction of such a
condition is or becomes impossible (other than through the failure of Seller to
comply with their obligations under this Agreement) and Seller have not waived
such condition on or before the Closing Date;
by mutual consent of Buyer and Seller;
by either Buyer or Seller if the Closing has not occurred (other
than through the failure of any party seeking to terminate this Agreement to
comply fully with its obligations under this Agreement) on or before January 27,
1997, or such later date as the parties may agree upon; or
by Seller if deemed necessary by Seller in order for its
directors to comply with their fiduciary duties under applicable Legal
Requirements.
EFFECT OF TERMINATION
Each party's right of termination under Section 9.1 is in addition to
any other rights it may have under this Agreement or otherwise, and the exercise
of a right of termination will not be an election of remedies. If this
Agreement is terminated pursuant to Section 9.1, all further obligations of the
parties under this Agreement will terminate, except (i) the obligations in
Sections 11.1 and 11.3 will survive; (ii) if this Agreement is terminated by a
party because of the Breach of the Agreement by the other party or because one
or more of the conditions to the terminating party's obligations under this
Agreement is not satisfied as a result of the other party's failure to comply
with its obligations under this Agreement, the terminating party's right to
pursue all legal remedies will survive such termination unimpaired; and (iii) if
this Agreement is terminated by Seller pursuant to Section 9.1(e) Seller shall
pay Southcoast and Buyer termination fees of Three Hundred Thousand Dollars
($300,000) and Three Hundred Thousand Dollars ($300,000), respectively.
INDEMNIFICATION; REMEDIES
SURVIVAL
All representations, warranties, covenants, and obligations in this
Agreement, the Disclosure Schedule, the supplements to the Disclosure Schedule,
the certificates delivered pursuant to Sections 2.4(a)(iii) and 2.4(b)(iv), and
any other certificate or document delivered pursuant to this Agreement will
survive the Closing.
INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLER
Seller will indemnify and hold harmless Buyer, the Acquired
Companies, and their respective Representatives, stockholders, controlling
persons, and affiliates (collectively, the "Indemnified Persons") for, and will
pay to the Indemnified Persons the amount of, any loss, liability, claim,
damage, expense (including costs of investigation and defense and reasonable
attorneys' fees), whether or not involving a third-party claim (collectively,
"Damages"), resulting from:
any Breach of any representation or warranty made by Seller in
this Agreement, the Disclosure Schedule or any of the other agreements and
instruments contemplated hereby as if such representation or warranty were made
on and as of the Closing Date without giving effect to any supplement to the
Disclosure Schedule, other than any such Breach that is disclosed in a
supplement to the Disclosure Schedule and is expressly identified in the
certificate delivered pursuant to Section 2.4(a)(iii) as having caused the
condition specified in Section 7.1 not to be satisfied;
any Breach by Seller of any covenant or obligation of Seller in
this Agreement or in any of the other agreements or instruments contemplated
hereby;
any product shipped or manufactured by, or any services provided
by, any Acquired Company prior to the Closing Date;
the matters disclosed in Schedules 3.7(a), 3.11(a) and 3.11(b) of
the Disclosure Schedule; or
any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with either Seller or any Acquired
Company (or any Person acting on their behalf) in connection with any of the
Contemplated Transactions.
INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLER-- ENVIRONMENTAL
MATTERS
In addition to the provisions of Section 10.2, Seller will indemnify
and hold harmless Buyer, the Acquired Companies, and the other Indemnified
Persons for, and will pay to Buyer, the Acquired Companies, and the other
Indemnified Persons the amount of, any Damages (including costs of Cleanup,
containment, or other remediation) resulting from:
any Environmental, Health, and Safety Liabilities arising out of
or relating to: (i) (A) the ownership, operation, or condition at any time on or
prior to the Closing Date of the Facilities or any other properties and assets
(whether real, personal, or mixed and whether tangible or intangible) in which
Seller or any Acquired Company has or had an interest, or (B) any Hazardous
Materials that were present on the Facilities or such other properties and
assets at any time on or prior to the Closing Date; or (ii) (A) any Hazardous
Materials, wherever located, that were, or were allegedly, generated,
transported, stored, treated, Released, or otherwise handled by Seller or any
Acquired Company, or by any Person for whose conduct they are responsible at any
time on or prior to the Closing Date, (B) any Hazardous Activities that were,
or were allegedly, conducted by Seller or any Acquired Company or by any Person
for whose conduct they are responsible; or
any bodily injury (including illness, disability, and death, and
regardless of when any such bodily injury occurred, was incurred, or manifested
itself), personal injury, property damage (including trespass, nuisance,
wrongful eviction, and deprivation of the use of real property), or other damage
of or to any Person, including any employee or former employee of any Acquired
Company or by any Person for whose conduct they are responsible in any way
arising from or allegedly arising from any Hazardous Activity conducted or
allegedly conducted with respect to the Facilities or the operation of the
Acquired Companies prior to the Closing Date, or from Hazardous Material that
was (i) present or suspected to be present on or before the Closing Date on or
at the Facilities (or present on any other property, if such Hazardous Material
emanated from any of the Facilities and was present on any of the Facilities on
or prior to the Closing Date) or (ii) Released by Seller or allegedly Released
by Seller or any Acquired Company or by any Person for whose conduct they are or
may be held responsible, at any time on or prior to the Closing Date.
Seller will be entitled to control any Cleanup, any related
Proceeding, and, except as provided in the following sentence, any other
Proceeding with respect to which indemnity may be sought under this Section
10.3. The procedure described in Section 10.9 will apply to any claim solely
for monetary damages relating to a matter covered by this Section 10.3.
INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER
Buyer will indemnify and hold harmless Seller and its Representatives
and will pay to Seller and such Representatives the amount of any Damages
resulting from: (a) any Breach of any representation or warranty made by Buyer
in this Agreement, Buyer's Schedules or any of the other agreements and
instruments contemplated hereby; (b) any Breach by Buyer of any covenant or
obligation of Buyer in this Agreement or in any of the other agreements and
instruments contemplated hereby; (c) any claim by any Person for brokerage or
finder's fees or commissions or similar payments based upon any agreement or
understanding alleged to have been made by such Person with Buyer (or any Person
acting on its behalf) in connection with any of the Contemplated Transactions;
(d) any product shipped or manufactured by, or any services provided by Buyer or
any Acquired Company after the Closing Date; and (e) the obligations of the
Acquired Companies for which Seller is or may be responsible set forth on
Schedule 10.4 of the Disclosure Schedule.
TIME AND KNOWLEDGE LIMITATIONS
If the Closing occurs, Seller will have no liability (for
indemnification or otherwise) with respect to any representation or warranty, or
covenant or obligation to be performed and complied with prior to the Closing
Date, other than those in Sections 3.3, 3.7, 3.9, or 3.15 unless on or before
December 31, 1998 Buyer notifies Seller of a claim specifying the factual basis
of that claim in reasonable detail to the extent then known by Buyer; a claim
with respect to Sections 3.7 and 11.16 must be made within sixty (60) days after
expiration of the time period, including any extensions thereof, within which
any Tax may be assessed against any Acquired Company; a claim with respect to
Section 3.15 or Section 10.3 must be made on or before December 31, 2003; and a
claim with respect to Section 3.3, or a claim for indemnification or
reimbursement not based upon any representation or warranty or any covenant or
obligation to be performed and complied with by Seller prior to the Closing
Date, may be made at any time. If the Closing occurs, Buyer will have no
liability (for indemnification or otherwise) with respect to any representation
or warranty, or covenant or obligation to be performed and complied with prior
to the Closing Date, other than in Sections 4.2(a) and 4.7(a), unless on or
before December 31, 1998 Seller notifies Buyer of a claim specifying the factual
basis of that claim in reasonable detail to the extent then known by Seller; a
claim with respect to Section 4.2(a) or Section 4.7(a), or a claim for
indemnification or reimbursement not based upon any representation or warranty
or any covenant or obligation to be performed or complied with by Buyer prior to
the Closing Date, may be made at any time.
If the Closing occurs, Seller will have no liability (for
indemnification or otherwise) with respect to any Breach of any representation,
warranty or covenant or obligation of Seller in this Agreement or any instrument
or other agreement delivered pursuant to this Agreement if Buyer or its
Representatives had Knowledge of such Breach on or before the Closing Date.
LIMITATIONS ON AMOUNT--SELLER
Seller will have no liability (for indemnification or otherwise) with
respect to the matters described in clause (a), (b) (to the extent relating to
any Breach prior to the Closing Date) or (c) of Section 10.2 until the total of
all Damages with respect to such matters exceeds Two Hundred Thousand Dollars
($200,000), and then only for the amount by which such Damages exceed Two
Hundred Thousand Dollars ($200,000), or (b) to the extent the total of all
Damages with respect to such matters exceeds the sum of (x) One Million Three
Hundred Thousand Dollars ($1,300,000), (y) the aggregate principal balance which
would be payable under the Promissory Note as of the date of Buyer's notice
asserting a claim for indemnification (regardless of whether a greater or lesser
amount is actually then payable) and (z) amounts payable to Seller upon
redemption or liquidation of the Preferred Shares (other than for accrued
dividends). However, this Section 10.6 will not apply to any claims with
respect to Sections 3.3, 3.7, 3.9 or 11.16.
LIMITATIONS ON AMOUNT--BUYER
Buyer will have no liability (for indemnification or otherwise) with
respect to the matters described in clause (a), (b) (to the extent relating to
Breach prior to the Closing Date), (d) or (e) of Section 10.4 until the total of
all Damages with respect to such matters exceeds Fifty Thousand Dollars
($50,000), and then only for the amount by which such Damages exceed Fifty
Thousand Dollars ($50,000).
RIGHT OF SET-OFF
Buyer may set off any amount to which it may be entitled under this
Section 10 against amounts of principal otherwise payable under the Promissory
Note or against amounts due Seller upon redemption or liquidation of the
Preferred Shares (other than for accrued dividends), provided it has given
notice to Seller of its claim for indemnification as provided for herein and its
intent to set-off amounts payable under the Promissory Note and/or Preferred
Shares and either (a) Seller has acknowledged Buyer's right of set-off and the
amount thereof or (b) Buyer's right to indemnification through such set-off and
the amount thereof has been otherwise determined in accordance with the terms of
this Agreement; otherwise, Buyer shall, at such time as the payment is due
Seller under the Promissory Note and/or Preferred Shares, (x) execute and
deliver to Seller the Claims Escrow Agreement set forth as Exhibit 10.8 after
being advised by Seller of the name and address (in Florida) of a national bank
or trust company having a place of business in Florida, and (y) pay the set-off
amount into the escrow established by the Claims Escrow Agreement to be held and
distributed in accordance therewith. The exercise of such right of set-off by
Buyer in good faith, whether or not ultimately determined to be justified, will
not constitute an event of default under the Promissory Note or failure to
comply with the terms of the Preferred Shares. Subject to the last sentence of
Section 10.6 and to Section 10.11, Buyer acknowledges that its exclusive
recourse against Seller (for indemnification or otherwise) with respect to the
matters described in clauses (a), (b) (to the extent relating to any Breach
prior to the Closing Date) or (c) of Section 10.2 after payment by Seller of One
Million Three Hundred Thousand Dollars ($1,300,000) with respect thereto shall
be such right of set-off, and that if Buyer is unable to pay the amounts due
under the Promissory Note and Preferred Shares neither Buyer nor its successors
or assigns shall have any recourse against Seller for claims in excess of such
cash payments by Seller. Notwithstanding the preceding sentence, if a claim for
which Buyer is entitled to indemnification shall arise after payments of
principal have been made under the Promissory Note or payments have been made
upon redemption or liquidation of the Preferred Shares and any such payments
remaining thereunder shall be insufficient to satisfy such claim, Buyer's
recourse against Seller shall, to the extent of all such prior payments, be
reinstated.
PROCEDURE FOR INDEMNIFICATION--THIRD PARTY CLAIMS
Promptly after receipt by an indemnified party under Section
10.2, 10.4, or (to the extent provided in the last sentence of Section 10.3)
Section 10.3 of notice of any Threatened or actual Proceeding against it, such
indemnified party will, if a claim is to be made against an indemnifying party
under such Section, give notice to the indemnifying party of the commencement of
such claim, but the failure to notify the indemnifying party will not relieve
the indemnifying party of any liability that it may have to any indemnified
party, except to the extent that the indemnifying party demonstrates that the
defense of such action is prejudiced by the indemnifying party's failure to give
such notice.
Except as provided in Sections 10.3, 10.10 and 11.16(g), if any
Proceeding referred to in Section 10.9(a) is Threatened or brought against an
indemnified party and it gives notice to the indemnifying party of the
commencement of such Proceeding, the indemnifying party will be entitled to
participate in such Proceeding and, to the extent that it wishes (unless (i) the
indemnifying party is also a party to such Proceeding and the indemnified party
determines in good faith that joint representation would be inappropriate, or
(ii) the indemnifying party fails to provide reasonable assurance to the
indemnified party of its financial capacity to defend such Proceeding and
provide indemnification with respect to such Proceeding), to assume the defense
of such Proceeding with counsel reasonably satisfactory to the indemnified party
and, after notice from the indemnifying party to the indemnified party of its
election to assume the defense of such Proceeding, the indemnifying party will
not, as long as it diligently conducts such defense, be liable to the
indemnified party under this Section 10 for any fees of other counsel or any
other expenses with respect to the defense of such Proceeding, in each case
subsequently incurred by the indemnified party in connection with the defense of
such Proceeding, other than reasonable costs of investigation. If the
indemnifying party assumes the defense of a Proceeding, (i) it will be
conclusively established for purposes of this Agreement that the claims made in
that Proceeding are within the scope of and subject to indemnification; (ii) no
compromise or settlement of such claims may be effected by the indemnifying
party without the indemnified party's consent unless (A) there is no finding or
admission of any violation of Legal Requirements or any violation of the rights
of any Person and no effect on any other claims that may be made against the
indemnified party, and (B) the sole relief provided is monetary damages that are
paid in full by the indemnifying party; and (iii) the indemnified party will
have no liability with respect to any compromise or settlement of such claims
effected without its consent. If notice is given to an indemnifying party of
any Threatened or actual Proceeding and the indemnifying party does not, within
twenty days after the indemnified party's notice is given, give notice to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party will be bound by any determination made in such Proceeding or
any compromise or settlement effected by the indemnified party.
Seller hereby consents to the non-exclusive jurisdiction of any
court in which a Proceeding is brought against any Indemnified Person for
purposes of any claim that an Indemnified Person may have under this Agreement
with respect to such Proceeding or the matters alleged therein, and agrees that
process may be served on Seller with respect to such a claim anywhere in the
world.
PROCEDURE FOR INDEMNIFICATION--OTHER CLAIMS
A claim for indemnification for any matter not involving a third-
party claim may be asserted by notice to the party from whom indemnification is
sought. Any such notice shall be given within a reasonable time after the party
has knowledge of the facts which give or may give rise to such claim; provided,
however, that failure to notify the indemnifying party will not relieve the
indemnified parties of any liability it may have a to the indemnified party,
except to the extent that the indemnifying party demonstrates that the defense
of such action is prejudiced by the indemnifying party's failure to give such
notice. With respect to the matters described in Section 10.2(d), Seller shall
have exclusive control of the defense and settlement thereof, and Buyer shall,
and shall cause each of the Acquired Companies to, cooperate with Seller in any
manner reasonably necessary for Seller to resolve such matters, including but
not limited to, and at no charge to Seller, (i) making available then current
employees with knowledge of such matters to serve as witnesses and/or to discuss
the matters with Seller's designated counsel and other representatives, (ii)
maintaining records of the last known addresses of former employees who have
knowledge of such matters, (iii) making available any and all applicable
documents relating to any such matters and (iv) preserving any and all
applicable documents unless and until Seller notifies Buyer that such matters
have been resolved by settlement or otherwise.
EXCLUSIVE REMEDY
The indemnification provisions of this Section 10 set forth the sole
and exclusive remedy of Buyer against Seller with respect to any claim for
Damages based upon, arising out of, or otherwise in respect of this Agreement
and the Contemplated Transactions, except claims for fraud or willful
misrepresentation.
DISPUTE RESOLUTION
The parties shall attempt to resolve any dispute between them
arising out of or relating to this Section 10 in accordance with the procedures
specified in this Section 10.12.
The parties shall attempt in good faith to resolve any dispute
arising out of or relating to this Agreement promptly by negotiation between
executives who have authority to settle the controversy and who are at a higher
level of management than the persons with direct responsibility for
administration of this Agreement. Any party may give the other party written
notice of any dispute not resolved in the normal course of business. Within 15
days after delivery of the notice, the receiving party shall submit to the other
a written response. The notice and the response shall include (i) a statement
of each party's position and a summary of arguments supporting that position,
and (ii) the name and title of the executive who will represent that party and
of any other person who will accompany the executive. Within 30 days after
delivery of the disputing party's notice, the executives of both parties shall
meet at a mutually acceptable time and place, and thereafter as often as they
reasonably deem necessary, to attempt to resolve the dispute. All reasonable
requests for information made by one party to the other will be honored.
If the matter has not been resolved within 60 days of the
disputing party's notice, or if the parties fail to meet within 30 days, either
party shall initiate mediation of the controversy or claim as provided hereinaf-
ter.
All negotiations pursuant to this clause are confidential and
shall be treated as compromise and settlement negotiations for purposes of the
Federal Rules of Evidence and state rules of evidence.
If the dispute has not been resolved by negotiation as provided
herein, the parties shall endeavor to settle the dispute by mediation under the
Center for Public Resources ("CPR") Model Procedure for Mediation of Business
Disputes in effect on the date of this Agreement. The neutral third party will
be selected from the CPR Panels of Neutrals, with the assistance of CPR, unless
the parties agree otherwise.
GENERAL PROVISIONS AND COVENANTS TO BE PERFORMED AFTER CLOSING
EXPENSES
Except as otherwise expressly provided in this Agreement, each party
to this Agreement will bear its respective expenses incurred in connection with
the preparation, execution, and performance of this Agreement and the
Contemplated Transactions, including all fees and expenses of agents,
representatives, counsel, and accountants. Buyer will pay all amounts payable
to Southcoast Securities Corporation and New Street Investments LP in connection
with this Agreement and the Contemplated Transactions. Buyer will also
reimburse Seller for the cost of the audit of the Closing Financial
Determination to the extent such cost exceeds that which would be incurred by
Seller in auditing such items in connection with its customary fiscal year end
audit; provided, however, that Buyer's reimbursement for such cost shall in no
event exceed Twenty-Five Thousand Dollars ($25,000). Seller will pay all
amounts payable to The Nassau Group, Inc. in connection with this Agreement and
the Contemplated Transactions. In the event of termination of this Agreement,
the obligation of each party to pay its own expenses will be subject to any
rights of such party arising from a breach of this Agreement by another party.
PUBLIC ANNOUNCEMENTS
Before the Closing Date neither Buyer nor Seller shall make any
statement to employees or the public regarding the matters contemplated herein
without the consent of the other, except that (a) Buyer and Seller may each
continue such communications with their respective employees, customers,
suppliers, franchisees, lenders, lessors, shareholders, and other particular
groups as may be necessary or legally required for the prompt consummation of
the transactions contemplated by this Agreement, and (b) Seller may make such
public announcements as it deems legally advisable, it being agreed, however,
that Seller shall use reasonable efforts to notify Buyer in advance of any such
announcements.
CONFIDENTIALITY
Between the date of this Agreement and the Closing Date, Buyer
shall, and shall cause its Representatives, including George H. Bannon and Roger
Eatman, to be bound by the letter dated February 21, 1996 from Curtis Lee Smith,
Jr. to S.C. Culbreth, a copy of which is attached as Exhibit 11.3, with the
following amendments: (a) clauses (ii) and (iii) shall be deleted from paragraph
4 and (b) paragraph 7 shall be supplemented with the following language at the
end thereof "or solicit or cause to be solicited any customer of Company which
is currently doing business with Company or which has done so within the last
two (2) years."
NOTICES
All notices, consents, waivers, and other communications under this
Agreement must be in writing and will be deemed to have been duly given when (a)
delivered by hand (with written confirmation of receipt), (b) sent by telecopier
(with written confirmation of receipt), provided that a copy is mailed by
regular mail, or (c) when received by the addressee, if sent by a nationally
recognized overnight delivery service (receipt requested), in each case to the
appropriate addresses and telecopier numbers set forth below (or to such other
addresses and telecopier numbers as a party may designate by notice to the other
parties):
Seller:
Handex Corporation
500 Campus Drive
Morganville, New Jersey 07751
Attention: President
Facsimile No.: 908-536-0289
with a copy to:
Scott R. Wilson, Esq.
Calfee, Halter & Griswold
1400 McDonald Investment Center
800 Superior Avenue
Cleveland, Ohio 44114-2688
Facsimile No.: (216) 241-0816
Buyer:
ECB, Inc.
30941 Suneagle Drive
Mt. Dora, Florida 32757
Attention: President
Facsimile No.: (352) 735-5990
with a copy to:
Jonathan D. Kaney, Jr., Esq.
Cobb Cole & Bell
150 Magnolia Avenue
Daytona Beach, Florida 32115
Facsimile No.: (904) 238-7003
FURTHER ASSURANCES
The parties agree (a) to furnish upon request to each other such
further information, (b) to execute and deliver to each other such other
documents, and (c) to do such other acts and things, all as the other party may
reasonably request for the purpose of carrying out the intent of this Agreement
and the documents referred to in this Agreement.
WAIVER
Except as otherwise expressly provided herein, the rights and
remedies of the parties to this Agreement are cumulative and not alternative.
Neither the failure nor any delay by any party in exercising any right, power,
or privilege under this Agreement or the documents referred to in this Agreement
will operate as a waiver of such right, power, or privilege, and no single or
partial exercise of any such right, power, or privilege will preclude any other
or further exercise of such right, power, or privilege or the exercise of any
other right, power, or privilege. To the maximum extent permitted by applicable
law, (a) no claim or right arising out of this Agreement or the documents
referred to in this Agreement can be discharged by one party, in whole or in
part, by a waiver or renunciation of the claim or right unless in writing signed
by the other party; (b) no waiver that may be given by a party will be
applicable except in the specific instance for which it is given; and (c) no
notice to or demand on one party will be deemed to be a waiver of any obligation
of such party or of the right of the party giving such notice or demand to take
further action without notice or demand as provided in this Agreement or the
documents referred to in this Agreement.
ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements between the parties
with respect to its subject matter and constitutes (along with the documents
referred to in this Agreement) a complete and exclusive statement of the terms
of the agreement between the parties with respect to its subject matter. This
Agreement may not be amended except by a written agreement executed by the party
to be charged with the amendment.
DISCLOSURE SCHEDULE
The disclosures made in any Disclosure Schedule, and those in any
supplement thereto, shall be deemed made with respect to any other Disclosure
Schedule to which they may relate notwithstanding the absence of a specific
cross-reference thereto.
ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS
Seller may assign its rights under this Agreement and, subject to
the terms thereof, transfer the Promissory Note, Preferred Shares and Warrants
to any Person. Buyer may not assign any of its rights under this Agreement
without the prior consent of Seller. Subject to the preceding sentences, this
Agreement will apply to, be binding in all respects upon, and inure to the
benefit of the successors and permitted assigns of the parties. Nothing
expressed or referred to in this Agreement will be construed to give any Person
other than the parties to this Agreement any legal or equitable right, remedy,
or claim under or with respect to this Agreement or any provision of this
Agreement. This Agreement and all of its provisions and conditions are for the
sole and exclusive benefit of the parties to this Agreement and their successors
and permitted assigns.
SEVERABILITY
If any provision of this Agreement is held invalid or unenforceable
by any court of competent jurisdiction, the other provisions of this Agreement
will remain in full force and effect. Any provision of this Agreement held
invalid or unenforceable only in part or degree will remain in full force and
effect to the extent not held invalid or unenforceable.
SECTION HEADINGS; CONSTRUCTION
The headings of Sections in this Agreement are provided for
convenience only and will not affect its construction or interpretation. All
references to "Section" or "Sections" refer to the corresponding Section or
Sections of this Agreement. All words used in this Agreement will be construed
to be of such gender or number as the circumstances require. Unless otherwise
expressly provided, the word "including" does not limit the preceding words or
terms.
TIME OF ESSENCE
With regard to all dates and time periods set forth or referred to
in this Agreement, time is of the essence.
GOVERNING LAW
This Agreement will be governed by the laws of the State of Florida
without regard to conflicts of laws principles.
COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original copy of this Agreement and all of which,
when taken together, will be deemed to constitute one and the same agreement.
CORPORATE NAME; TRADEMARKS
If the Closing occurs, Selling will, within thirty days thereafter,
change its corporate name to one which does not include the word "Handex".
TAX RETURNS, PAYMENTS AND ELECTIONS
Seller will take all steps necessary and cause the Acquired
Companies to take all steps necessary to terminate any Tax sharing Contract
between Seller and any of the Acquired Companies as of the Closing Date and such
Tax sharing Contracts will have no further effect for any taxable year (whether
current, future or past).
Seller will include the income of the Acquired Companies
(including any deferred income triggered into income by IRC Reg. S1.1502-13 and
IRC Reg. S1.1502-14 and any excess lose accounts taken into income under IRC
Reg. S1.1502-19) on Seller's Tax Returns for all periods through the Closing
Date and pay any Taxes attributable to such income. The income of the Acquired
Companies will be apportioned to the period up to and including the Closing Date
and the period after the Closing Date by closing the books of the Acquired
Companies as of the end of the Closing Date.
For all periods ending on or before the Closing Date, Seller
will timely prepare and file all Tax Returns, after taking into account any
applicable filing extensions, that are or were required to be filed with respect
to the Acquired Companies pursuant to applicable Legal Requirements.
Buyer agrees to indemnify Seller for any additional tax owed by
Seller (including tax owed by Seller due to this indemnification payment)
resulting from any transaction not in the ordinary course of business of the
Acquired Companies occurring on the Closing Date after Buyer's purchase of the
Shares. Buyer and Seller agree to report all transactions not in the ordinary
course of business occurring on the Closing Date after Buyer's purchase of the
Shares on Buyer's federal income tax return to the extent permitted by IRC Reg.
S1.1502-76(b)(1)(B).
At Seller's request, Buyer will cause any of the Acquired
Companies to make or join with Seller in making any Tax election if the making
of such election does not have a material adverse impact on the Buyer (or any of
the Acquired Companies) for any Tax period after Buyer's purchase of the Shares.
Buyer will, and the Buyer will cause the Acquired Companies to,
maintain all books and records of the Acquired Companies relating to the Taxes
and Tax Returns of Seller and the Acquired Companies for so long as Seller shall
have any responsibility or liability therefor. Seller will maintain all books
and records in its possession which relate to the Taxes and Tax Returns of the
Acquired Companies for so long as the Buyer or the Acquired Companies shall have
any responsibility or liability therefor.
Further, Seller and Buyer hereby grant to the other and its
Representatives, and Buyer will cause each Acquired Company to grant Seller and
its Representatives, the right to inspect and make copies of all such books and
records to the extent reasonably necessary for Buyer or Seller to accurately
determine its liability for any Taxes and to prepare or amend its Tax Returns.
With respect to the fiscal period ending on the Closing Date, Buyer also
specifically agrees to cause the Acquired Companies to furnish such information
as shall be necessary for Seller to accurately prepare and timely file the Tax
Returns referenced in Section 11.16(b) above.
If any Proceeding referred to in Section 10.9(a) is Threatened
or brought against Buyer or any Acquired Company relating to Taxes for any
period through the Closing Date it shall give notice to Seller of the
commencement of such Proceeding, whereupon Seller shall be entitled, upon notice
to the Person from which notice was received, to assume exclusive control of the
defense and settlement of such Proceeding. In the event Seller assumes defense
of such Proceeding it will be conclusively established for purposes of this
Agreement that the claims made in that Proceeding are within the scope of and
subject to indemnification by Seller and that neither Buyer nor any of the
Acquired Companies will have any liability with respect to any compromise,
settlement or adjudication of such claims. Notwithstanding anything to the
contrary expressed herein, Seller will not settle or otherwise resolve any issue
which may affect the liability for Taxes of the Buyer and the Acquired Companies
for any period subsequent to the Closing with respect to which the Buyer and the
Acquired Companies have any responsibility for payments thereof, without Buyer's
consent, which consent shall not be unreasonably withheld.
If the parties hereto agree that it is in their mutual best
interest, Buyer and Seller will join in making an election under Section
338(h)(10) of the Code (and any corresponding elections under state, local, or
foreign tax law) (collectively a "338(h)(10) Election") with respect to the
purchase and sale of the Shares. If the 338 (h)(10) Election is made, the
parties agree that (i) the Consideration specified in Section 2.2 and the
liabilities of the Acquired Companies (plus other relevant items) will be
allocated to the assets of the Acquired Companies for Tax purposes as shown on
Schedule 11.17 attached hereto and (ii) Buyer, the Acquired Companies and Seller
will file all Tax Returns (including amended returns and claims for refund) and
information reports in a manner consistent with such allocation.
Except for Taxes, included as a liability in the Net Acquired
Current Assets, Seller will indemnify and hold the Buyer harmless against (i)
any and all liability assessed against the Buyer or any the Acquired Companies
for any Taxes for which Seller has responsibility under this Section 11.16, (ii)
any liability for Taxes assessed against the Buyer or the Acquired Companies
with respect to any period ending on or before the Closing Date by reason of the
Buyer or the Acquired Companies being severally liable for Income Taxes pursuant
to Treasury Reg. Section 1.1502-6 or any analogous State or local provisions,
and (iii) any other liability assessed against the Buyer or the Acquired
Companies for Taxes of the Seller for, or which relate to, periods ending on or
before the Closing Date.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
Buyer: ECB, INC. Seller: HANDEX CORPORATION
By: By:
------------------------------ -----------------------
- - --
Title: Title:
------------------------------- -------------------------
88/HANDEX/199843.15
Exhibit 2.2(b){PRIVATE }
The Security represented by this Promissory Note has not
(i) been registered pursuant to the Securities Act of 1933, as amended
(the "Act"), or any state securities law or (ii) qualified under the
Trust Indenture Act of 1939, as amended (the "Trust Indenture Act").
This Note may not be sold, transferred or otherwise disposed of (in
whole or in part) unless the same is registered and qualified in
accordance with the Act, the Trust Indenture Act and any applicable
state securities law, or it is established to the reasonable
satisfaction of the Maker (as defined below) that such registrations
and qualifications are not required.
Payment of the indebtedness represented by this Promissory
Note is subject to certain restrictions imposed by the Subordination
Agreement dated among ECB, Inc., Handex Corporation and
SouthTrust Bank of Alabama, N.A.
PROMISSORY NOTE
Date of Issuance: , 199 $3,700,000.00
FOR VALUE RECEIVED, ECB, INC., a Florida corporation (the "Maker"), hereby
promises to pay to the order of HANDEX CORPORATION, a Delaware corporation
("Holder"), at 500 Campus Drive, Morganville, NJ 07751, or such other place as
the Holder shall hereafter specify in writing, the principal amount of Three
Million Seven Hundred Thousand Dollars ($3,700,000.00), as such may be adjusted
in accordance with the terms hereof, together with interest thereon calculated
from the date hereof in accordance with the provisions of this Note.
This Note is issued pursuant to that certain Stock Purchase Agreement,
dated of even date herewith, by and between the Company and Holder (the
"Purchase Agreement"), and is secured by the Pledge Agreement, Corporate
Guaranty and Pledge Agreement and Nonrecourse Individual Guaranty and Pledge
Agreement contemplated thereby and as defined therein. Unless otherwise
indicated herein, capitalized terms used in this Note have the same meanings set
forth in Exhibit A attached hereto. The holder of this Note and the Maker are
entitled to the benefits of the Purchase Agreement and Loan Documents and may
exercise the remedies provided for hereby or thereby or otherwise available in
respect of this Note.
1. Payments of Principal and Interest.
-----------------------------------
1.1 Payment of Interest. Interest (computed on the basis of a 360-
day year and the actual number of days elapsed) shall accrue from the date
hereof on the unpaid principal balance from time to time outstanding at a rate
per annum equal to six percent (6%). Interest for the period ending December
31, 1997 shall not be payable in cash, but shall accrue and be added to the
principal amount hereof. Thereafter, interest shall be paid quarterly in
arrears, commencing March 31, 1998, and thereafter on the last day of each
March, June, September and December until the entire unpaid principal balance is
paid in full. In the event any payment of principal or interest is not made
when due, such unpaid amount shall thereafter accrue interest at a rate per
annum which is equal to the greater of eight percent (8%) or the prime or base
rate announced by SouthTrust Bank of Alabama, N.A. ("SouthTrust") or its
successor from time to time, changing when and as such prime or base rate
changes.
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1.2 Payment of Principal. The principal amount of this Note shall be
paid in four (4) annual installments, commencing April 30, 1999 (the "Annual
Principal Payment"). Each Annual Principal Payment shall be in an amount equal
to twenty-five percent (25%) of Maker's Free Cash Flow for its fiscal year
ending on the preceding December 31. For purposes of this Note, "Free Cash
Flow" shall mean Maker's consolidated earnings before interest, depreciation and
amortization less (i) incremental increases in working capital, (ii) cash
interest expense on all Debt for borrowed money, and (iii) scheduled
amortization of the principal of all Debt for borrowed money, all as determined
from the annual audited financial statements required by Section 5.5 below.
Notwithstanding the foregoing, each Annual Principal Payment shall be, at a
minimum, in an amount equal to the following:
April 30, 1999 - $250,000
April 30, 2000 - $500,000
April 30, 2001 - $750,000
April 30, 2002 - $2,200,000 plus interest for Year
1 added to principal
1.3 Adjustment of Principal Amount. The original principal amount of
the Note as adjusted pursuant to Section 1.1 above shall also be adjusted in
accordance with Adjustment Amount as provided for by the Purchase Agreement.
Any such adjustment shall be made to the final installment of principal due
hereunder. Upon determination of the final amount of any such adjustment this
Note shall be surrendered and exchanged for an identical Note except for the new
principal amount payable thereunder.
1.4 Time of Payment. If any payment of principal or interest on this
Note shall become due on a Saturday, Sunday or a bank or legal holiday under the
laws of the State of Florida, such payment shall be made on the next succeeding
business day and such extension of time shall in such case be included in
computing interest in connection with such payment.
1.5 Optional Prepayment. The Maker may prepay this Note at any time
in whole or in part without penalty or premium. Any such prepayment shall first
be applied to accrued but unpaid interest, with the remainder to be applied to
unpaid installments of principal in the reverse order of maturity.
1.6 Mandatory Prepayment. The Maker shall prepay the outstanding
principal amount and all accrued but unpaid interest on this Note in full upon
the occurrence of a Qualifying Public Offering.
1.7 Set-Off. Holder acknowledges that payments of principal (but not
interest) due hereunder are subject to the rights of set-off provided to Maker
under the terms of the Purchase Agreement.
1.8 Waiver. The Makers hereby waives demand, presentment, protest
and notice of dishonor of this Note.
2. Security.
2.1 Maker. This Note is secured by Maker pursuant to the Pledge
Agreement.
2.2 Corporate Guarantors. This Note is jointly and severally
guaranteed by each of the Acquired Companies (as defined in the Purchase
Agreement) in accordance with the Corporate Guaranty and Pledge Agreement.
2.3 Individual Guarantors. This Note is guaranteed by Messrs. George
Bannon, Roger Eatman and S.C. Culbreath, Jr. in accordance with the Nonrecourse
Individual Guaranty and Pledge Agreement.
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3. Subordination. Payment of this Note shall be subordinated to
payment of all indebtedness for borrowed money which the Maker and the Acquired
Companies now have or may hereafter incur to commercial banks or other financial
institutions ("Senior Lenders"), including any renewals, extensions and
refinancings thereof in whole or in part ("Senior Debt"). Holder hereby
expressly acknowledges and agrees that payment of this Note is initially
subordinated to payment of the Senior Debt described in that certain Loan and
Security Agreement entered into on the date hereof by and between the Maker, the
Acquired Companies and SouthTrust Bank of Alabama, N.A. (the "Bank"), as amended
from time to time, in accordance with the terms of that certain Subordination
Agreement (the "Subordination Agreement") entered into on the date hereof among
Holder, Maker and the Bank. Holder agrees to execute and deliver to any other
Senior Lender a subordination agreement containing substantially the same terms
and conditions as those set forth in the Subordination Agreement with the Bank.
4. Representations and Warranties. Maker hereby incorporates by
reference and restates the representations and warranties set forth in Section
4.2 and Section 4.7 of the Purchase Agreement and agrees that such
representations and warranties shall survive until this Note is indefeasibly
satisfied in full.
5. Affirmative Covenants. Maker agrees and covenants that until
this Note has been paid in full Maker shall, and shall cause each of the
Acquired Companies to:
5.1 Insurance. Maintain insurance with insurance companies
reasonably satisfactory to Holder on such of its properties, in such amounts and
against such risks as is customarily maintained in similar businesses operating
in the same vicinity, and shall file with Holder upon request, from time to
time, a detailed list of the insurance then in effect, stating the names of the
insurance companies, the amounts and rates of the insurance, dates of expiration
thereof, and the properties and risks covered thereby, and, within ten (10) days
after notice in writing from Holder shall obtain such additional insurance as
Holder may reasonably request. All such policies shall name Holder as a named
insured (subject to the prior claims of Senior Lenders) and provide that any
losses payable thereunder shall (pursuant to loss payable clauses, in form and
content acceptable to Holder, to be attached to each policy) be payable to
Holder, as its interests may appear after payment of the Senior Debt. Maker
shall furnish to Holder insurance certificates, in form and substance
satisfactory to Holder, evidencing compliance by it with the terms of this
Section and, upon the request of Holder at any time, Maker shall furnish Holder
with photostatic copies of the policies required by the terms of this Section.
Maker will cause each insurer under each of the policies to agree (either by
endorsement upon such policy or by letter addressed to Holder) to give Holder at
least thirty (30) days' prior written notice of the cancellation of such
policies in whole or in part or the lapse of any coverage thereunder. Maker
agrees that it will not take any action or fail to take any action which action
or inaction would result in the invalidation of any insurance policy required
hereunder. At least ten (10) days prior to the date the premiums on each such
policy or policies shall become due and payable, Maker shall furnish to Holder
evidence of the payment of such premiums. Maker shall furnish to Holder such
evidence of insurance as Holder may require.
5.2 Corporate Existence; Qualification. Maintain its corporate
existence and, in each jurisdiction in which the character of the property owned
by it or in which the transaction of its business makes its qualification
necessary, maintain good standing.
5.3 Taxes. During its fiscal year, accrue all current tax
liabilities of all kinds, all required withholding of income taxes of employees,
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all required old age and unemployment contributions, all required payments to
employee benefit plans, and pay the same when they become due.
5.4 Compliance with Laws. Comply with all Requirements of Law,
including Environmental Regulations, and pay all taxes, assessments, charges,
claims for labor, supplies, rent, and other obligations which, if unpaid, might
give rise to a Lien against its assets or properties, except claims being
contested in good faith by appropriate proceedings (provided it promptly
notifies Holder in writing of such contest), and against which adequate reserves
have been set up. Specifically, Maker shall pay when due all taxes and
assessments upon this Note, including, without limitation, any stamp taxes or
intangibles taxes imposed by virtue of the transactions outlined herein.
5.5 Annual Financial Statement. Simultaneous with the delivery
thereof to any Senior Lender and in any event within 120 days after the close of
each fiscal year, furnish Holder with annual audited consolidated financial
statements of Maker consisting of balance sheets, income statements, statements
of cash flow and such other statements as Holder may reasonably request,
prepared in accordance with GAAP consistently applied for the fiscal year
involved and for the preceding fiscal year and certified as correct by
independent certified public accountants reasonably acceptable to Holder.
5.6 Interim Financial Statements. Within 30 days after the close of
each calendar month, furnish Holder with unaudited monthly and year-to-date
consolidated financial statements of Maker, consisting of balance sheets, income
statements, statements of cash flow and a listing of all contingent liabilities
of Maker for the periods involved and such other statements as Holder may
reasonably request, prepared in accordance with GAAP applied on a basis
consistent with the financial statement(s) previously furnished to Holder, taken
from the books and records of Maker, and certified as correct by the Chief
Financial Officer of Maker.
5.7 Certificates: Other Information. Maker shall furnish to Holder:
(a) concurrently with the delivery of the financial statements
referred to in Section 5.5 ("Annual Financial Statements"), a certificate from
its accountants stating that after reviewing the financial statements, the
accountants do not know of any default or Event of Default by Maker under this
Note;
(b) concurrently with the delivery of the financial statements
referred to in Section 5.5 and Section 5.6, a certificate from the President and
Chief Financial Officer (i) containing computations confirming Maker's
compliance with Section 5.14 ("Financial Covenants"); (ii) stating that after
diligent investigation, they have determined that Maker during the period has
observed or performed all of its covenants in this Note, and (iii) stating that
the officers do not know of any default or Event of Default by Maker under this
Note; and
(c) all other information regarding the affairs of Maker that
Holder from time to time reasonably requests.
5.8 Payments on Note and Other Debt. Duly and punctually pay the
principal and interest on this Note, and pay all other Debt currently or
hereafter incurred in accordance with the terms of such Debt.
5.9 Conduct of Business. Conduct its business as now conducted and
do all things necessary to preserve, renew, and keep in full force and effect
its rights, patents, permits, licenses, franchises, and trade names necessary to
continue its business, and comply with all Contractual Obligations applicable to
it and its business and properties.
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5.10 Maintenance of Properties. Keep its properties in good repair,
working order and condition, reasonable wear and tear excepted, and from time to
time make all needed and proper repairs, renewals, replacements, additions, and
improvements thereto and comply with the provisions of all leases to which it is
a party or under which it occupies property so as to prevent any loss or
forfeiture thereof or thereunder.
5.11 Notice to Holder. Promptly notify Holder of: (a) any default or
Event of Default, (b) the acceleration of the maturity of any Debt or
Contractual Obligation; (c) a default in the performance of, or compliance with,
any Requirement of Law, Environmental Regulation or Contractual Obligation; (d)
any litigation, dispute, or proceeding that is pending or known by its officers
to be threatened and that might involve a claim for damages or a request for
injunctive, enforcement, or other relief that, if granted, might reasonably be
expected to have a material adverse effect; (e) a change in either the name or
the principal place of its business or the office where its books and records
are kept; (f) any change in its accounting methods, policies, or practices for
financial reporting purposes or any material change in its accounting methods,
policies, or practices for tax reporting purposes; and (g) a material adverse
change in its business, operations, assets, property, or condition (financial or
other). Each notice provided pursuant to this section shall include a statement
of an officer setting forth details of the occurrence referred to in the notice
and stating what action is proposed to be taken with respect to it.
5.12 Collection of Accounts. Diligently pursue collection of all
accounts receivable and other amounts due from others, including Affiliates.
5.13 Financial Covenants. Maintain, on a consolidated basis, at all
times: (a) total Tangible Net Worth of not less than $2,000,000 beginning on
December 31, 1997 and increasing by $500,000 on each December 31 thereafter; (b)
a ratio of Debt to Tangible Net Worth of not more than 7 to 1 from January 1,
1998 through December 31, 1998, 6 to 1 from January 1, 1999 through December 31,
1999, 5 to 1 from January 1, 2000 through December 31, 2000, 4 to 1 from January
1, 2001 through December 31, 2001; (c) Debt Service Coverage of not less than
1.4 to 1 beginning July 1, 1997; (d) a ratio of Current Assets to Current
Liabilities of not less than 1 to 1 beginning July 1, 1997; and (e) Fixed Charge
Coverage of not less than 1 to 1 beginning July 1, 1997; provided, however, that
if at any time the Bank shall amend its covenants with Maker which correspond to
those in the preceding clauses (c) and (e) to ratios more favorable to Maker
than therein set forth, such clauses shall thereupon be deemed amended so as to
conform with those of the Bank.
5.14 Board Meetings. Notify Holder at least seven (7) days in advance
of all meetings of the Board of Directors of Maker or the taking of any action
by written consent, and permit a representative of Holder to attend such meeting
or comment on the action to be taken by written consent. Maker agrees to
reimburse Holder for all reasonable out-of-pocket expenses incurred by Holder in
attending any Board meeting of Maker.
6. Negative Covenants. Until this Note has been paid in full,
without the prior written consent of Holder, Maker shall not, and shall cause
each of the Acquired Companies not to:
6.1 Indebtedness. Create, incur, assume, or suffer to exist any Debt
or obligation for money borrowed, or guarantee, or endorse, or otherwise be or
become contingently liable in connection with the obligations of any person,
firm, or corporation (including any affiliate), except:
6.1.1 Indebtedness for taxes not at the time due and payable
or which are being actively contested in good faith by appropriate proceedings
and against which adequate reserves have been established;
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6.1.2 Contingent liabilities arising out of the endorsement
of negotiable instruments in the ordinary course of collection or similar
transactions in the ordinary course of business;
6.1.3 Debt, other than for borrowed money, incurred in the
ordinary course of business, including that evidenced by trade promissory notes
with a maturity of less than one year;
6.1.4 Debt to third parties for purchase money borrowing
incurred in connection with the purchase of capital assets used in the business
not to exceed $750,000 during any fiscal year of Maker;
6.1.5 Debt for money borrowed from Holder;
6.1.6 Senior Debt; and
6.1.7 Debt which is subordinated to the Note in a manner
satisfactory to the Holder ("Subordinated Debt").
6.2 Liens and Security Interests. Create, incur, assume, or suffer
to exist any Liens on any of its property or assets, now owned or hereafter
acquired, except:
6.2.1 Liens for taxes not yet due or which are being
contested in good faith by appropriate proceeding and against which adequate
reserves have been set up (excluding any Lien imposed pursuant to any of the
provisions of ERISA),
6.2.2 Other Liens incidental to the conduct of its business
or the ownership of its property and assets and created by operation of law so
long as the obligations secured thereby are not past due;
6.2.3 Purchase money Liens created to secure the indebtedness
permitted by Section 6.1.4;
6.2.4 Liens in favor of Holder; and
6.2.5 Liens in favor of Senior Lenders.
6.3 Dividends and Distributions. Declare any dividends on any shares
of any class of its capital stock, or apply any of its property or assets to the
purchase, redemption or other retirement of, or set apart any sum for the
payment of any dividends on, or for the purchase, retirement of, or make any
other distribution by reduction of capital or otherwise in respect of, any
shares of any class of capital stock of Maker; provided, however, that this
Section shall not preclude Maker's compliance with the terms of the Series A
Preferred Stock, Warrant A and Warrant B issued to Holder pursuant to the
Purchase Agreement, the SouthCoast Warrant (as defined in Warrant A and Warrant
B) or a repurchase by Maker of Excluded Shares (as defined in Warrant A and
Warrant B) from employees of Maker or its Affiliates other than Messrs. George
Bannon, Roger Eatman and S.C. Culbreath ("Original Shareholders").
6.4 Affiliate Transactions. Purchase, acquire or lease property
from, or sell, transfer or lease any property to, any Affiliate, except for
transactions with Envirolab, Inc., a Florida corporation, which are conducted on
terms no less favorable to Borrower than are available from other sources.
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6.5 Loans or Advances. Make loans or advances or pay any management
or similar fees to any Person.
6.6 Capital Expenditures. Make or commit to make any capital
expenditures in any fiscal year exceeding the prior fiscal year's depreciation
expense, including, for purposes of such calculation, the pro forma expense
which would result from any acquisition made by Maker.
6.7 Prepayment of Debt. Prepay any Debt, except Senior Debt, Debt to
Holder and permitted payments with respect to Subordinated Debt; provided,
however, that this provision shall not preclude taking ordinary trade discounts
on purchases made in the ordinary course of business.
6.8 Lease Transactions. Enter into any sale and lease-back
arrangement.
6.9 Amendments. Amend any instrument evidencing a Lien other than as
may be required by a Senior Lender.
6.10 Salaries. Increase the salary and fringe benefits of any officer
or director by more than 10% in any fiscal year from the amount paid in the
previous fiscal year.
6.11 Subordinated Debt. Make any payment (principal or interest) with
respect to Subordinated Debt, or with respect to any Debt that would be
Subordinated Debt but for the absence of a subordination agreement in effect
with respect thereto, except that Borrower shall be entitled to make payments
with respect to such Debt to the extent expressly permitted in any subordination
agreement in effect with respect thereto, but only during such time as no
default or Event of Default exists hereunder.
6.12 Change in Business. Enter into any business which is
substantially different from the business or businesses in which it is presently
engaged.
6.13 Accounts. Except as may be required or permitted by Senior
Lenders, sell, assign, or discount any of its accounts, instruments, chattel
paper, or any promissory notes held by it other than discount of such accounts,
chattel paper, or notes in the ordinary course of business for collection.
6.14 Subsidiaries. Acquire, form or dispose of any Subsidiaries, or
permit any Subsidiary to issue capital stock except to its Owner. Maker shall
maintain one hundred percent direct or indirect ownership of each Acquired
Company.
7. Events of Default.
Without further notice or demand, which are hereby waived, the entire
unpaid principal balance of, and all interest accrued on, this Note shall, at
the option of the Holder hereof, become forthwith due and payable upon the
occurrence of one or more of the events of default listed below (the "Events of
Default"), and, subject to the rights of any Senior Lender, Holder shall have
the right to take any action and/or pursue any remedy at law or equity to
collect the payments due under this Note:
(a) the Maker or any Acquired Company fails to make a payment
due hereunder within ten (10) days after the date on which such payment is due;
(b) any representation or warranty made by the Maker herein or
any Acquired Company, or in the Purchase Agreement or the Loan Documents shall
prove to be false or misleading in any material respect when made;
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(c) the Maker or any Acquired Company defaults in the due
observance or performance of any covenant, condition or agreement of the Maker
or any Acquired Company contained herein or in the Purchase Agreement, or the
Loan Documents which default continues without waiver or cure for thirty (30)
days;
(d) an event of default occurs and is continuing without waiver
or cure under any Debt owed by Maker or any Acquired Company to Senior Lenders,
including the Debt to the Bank, or under any other Debt in excess of $100,000;
(e) if a final judgment for the payment of money in excess of
$100,000 shall be rendered against the Maker or any Acquired Company which is
not satisfied or stayed pending appeal for a period of thirty (30) days;
(f) the Maker or any Acquired Company makes an assignment for
the benefit of creditors or admits in writing its inability to pay its debts
generally as they become due; or an order, judgment or decree is entered
adjudicating the Maker or any Acquired Company bankrupt or insolvent; or any
order for relief with respect to the Maker or any Acquired Company is entered
under the Bankruptcy Code; or the any Acquired Company petitions or applies to
any tribunal for the appointment of a custodian, trustee, receiver or liquidator
of the Maker or any Acquired Company, or of any substantial part of the assets
of the Maker or any Acquired Company, or commences any proceeding relating to
the Maker or any Acquired Company under any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution or liquidation law of
any jurisdiction; or any such petition or application is filed, or any such
proceeding is commenced, against the Maker or any Acquired Company and either
(A) the Maker or any Acquired Company by affirmative written act indicates its
approval thereof, consent thereto or acquiescence therein or (B) such petition,
application or proceeding is not stayed or dismissed within sixty (60) days;
(g) any event or transaction, including, without limitation, an
issuance or sale of common shares of Maker or shares of any other class or
series of capital stock of Maker or Convertible Securities that would or could
result in the Original Shareholders (i) having the right to vote less than
fifty-one percent (51%) of the total voting power of Maker for the election of
its directors after such issuance or sale, or (ii) owning less than twenty-five
percent (25%) of the total number of Maker's Fully Diluted Outstanding common
shares unless Holder shall consent to such event or transaction, which consent
shall not be unreasonably withheld; or
(h) the sale, or other disposition (including disposition by
merger or consolidation) of substantially all of the assets of Maker and the
Acquired Companies, unless Holder shall consent to such transaction, which
consent will not be unreasonably withheld.
8. Amendment. Except as otherwise expressly provided herein and subject
to the terms of the Purchase Agreement and Subordination Agreement, the
provisions of this Note may be amended, modified or supplemented only by a
writing signed by Maker and Holder.
9. Cancellation. After all principal, accrued interest and additional
interest, if any, at any time owed on this Note has been paid in full, this Note
shall be surrendered to the Maker for cancellation and will not be reissued.
10. Usury Laws. It is the intention of the Maker and Holder hereof to
conform strictly to all applicable usury laws now or hereafter in force, and any
interest payable under this Note shall be subject to reduction to the amount not
in excess of the maximum legal amount allowed under the applicable usury laws as
now or hereafter construed by the courts having jurisdiction over such matters.
If such interest does exceed the maximum legal rate, it shall be deemed a
mistake and such excess shall be canceled automatically and, if theretofore
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paid, rebated to the Maker or credited on the principal amount of this Note, or
if this Note has been repaid, then such excess shall be rebated to the Maker.
11. Severability. Whenever possible, each provision of this Note shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Note is held to be prohibited by or invalid under
applicable law in any jurisdiction, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating any other
provision of this Note.
12. Governing Law. This Note is being delivered and is intended to be
performed entirely in the State of Florida and shall be construed and enforced
in accordance with the laws of such state without regard to its conflict of laws
principles.
13. Waiver of Jury Trial. THE MAKER HEREBY WAIVES TRIAL BY JURY IN ANY
LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF
THIS NOTE, OR ANY INSTRUMENT OR DOCUMENT DELIVERED PURSUANT HERETO OR IN
CONNECTION HEREWITH, OR ANY OTHER CLAIM OR DISPUTE HOWSOEVER ARISING, BETWEEN
THE MAKER AND THE HOLDER. THE MAKER CONFIRMS THAT THE FOREGOING WAIVER IS
INFORMED AND FREELY MADE.
IN WITNESS WHEREOF, the Maker has caused this Note to be executed by
its proper corporate officers the day and year first above written.
ECB, INC.
By:
-------------------------------
Its:
-------------------------------
(the "Maker")
EXHIBIT A
For purposes of the above Promissory Note the following terms shall
have the meanings thereafter ascribed to them:
Affiliate--any director or officer who directly, indirectly or
beneficially, owns 20% or more of the capital stock of a Person, or 20% of the
voting stock or rights of a Person, or any member of the immediate family of any
such officer, director, or stockholder, or any corporation or other entity which
is controlled by, controls, or is under common control with a Person.
Capitalized Lease Obligations--any Debt represented by obligations
under a lease that is required to be capitalized for financial reporting
purposes in accordance with GAAP, and the amount of such Debt shall be the
capitalized amount of such obligations determined in accordance with GAAP.
Cash Capital Expenditures--expenditures made from cash or from loan
proceeds for the acquisition of any fixed assets or improvements, replacements,
substitutions, or additions thereto which have a useful life of more than one
year, including the direct or indirect acquisition of such assets by way of
increased product or service charges, offset items, or otherwise.
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Contractual Obligation--any provision of any security issued by a
Person or of any agreement, instrument, or undertaking to which such Person is a
party or by which it is or any of its property is bound.
Convertible Securities--evidences of indebtedness, shares of stock or
other securities that are convertible into or exchangeable for, with or without
payment of additional consideration in cash or property, or options, warrants or
other rights that are exercisable for, Common Shares that, when issued, would
constitute additional common shares, either immediately or upon the occurrence
of a specified date or a specified event.
Current Assets--at any date means the amount at which all of the
current assets of the Maker would be properly classified as current assets shown
on a balance sheet at such date in accordance with GAAP, except that amounts due
from Affiliates and Subsidiaries and investments in Affiliates and Subsidiaries
shall be excluded.
Current Liabilities--at any date means the amount at which all of the
current liabilities of the Maker would be properly classified as current
liabilities on a balance sheet at such date in accordance with GAAP.
Debt--the sum of (i) indebtedness for borrowed money or for the
deferred purchase price of property or services, (ii) Capitalized Lease
Obligations, and (iii) all other items which in accordance with GAAP would be
included in determining total liabilities as shown on a balance sheet of a
Person as at the date as of which Debt is to be determined.
Debt Service Coverage--a ratio in which the numerator is the sum of
the net income (after provision for federal and state taxes and excluding any
extraordinary income) of the Maker calculated based upon the 12-month period
preceding the applicable date, plus the interest expenses of the Maker for said
period, plus the sum of non-cash expenses or allowances for the Maker for such
period (including amortization or write-down of intangible assets, depreciation,
depletion, and deferred taxes and expenses), and the denominator is the sum of
the current portion of the long-term debt and current portion of Capitalized
Lease Obligations of Maker as of the applicable date, plus the interest expenses
of Maker plus any payments by Maker as dividends on any shares of its capital
stock for the 12-month period preceding the applicable date.
Environmental Regulations--all federal, state, and local laws, rules,
regulations, ordinances, programs, permits, guidances, orders, and consent
decrees relating to the environment or to public health, safety, and
environmental matters, including the Resource Conversation and Recovery Act, the
Comprehensive Environmental Response Compensation and Liability Act of 1980, the
Toxic Substances Control Act, the Clean Water Act, the Clean Air Act, the River
and Harbor Act, the Water Pollution Control Act, the Marine Protection Research
and Sanctuaries Act, the Deep-Water Port Act, the Safe Drinking Water Act, the
Superfund Amendments and Reauthorization Act of 1986, the Federal Insecticide,
Fungicide and Rodenticide Act, the Mineral Lands and Leasing Act, the Surface
Mining Control and Reclamation Act, the Oil Pollution Act of 1990, state and
federal super lien and environmental cleanup programs and laws, U.S. Department
of Transportation regulations laws regulating hazardous, radioactive and toxic
materials and underground petroleum products storage tanks, and all similar
state, federal, and local laws and regulations.
Fixed Charge Coverage--a ratio in which the numerator is the sum of
the net income of the Maker (after provision for federal and state taxes) for
the 12-month period preceding the applicable date, plus the interest, lease, and
rental expenses of the Maker for said period, plus the sum of non-cash expenses
or allowances for such period (including amortization or write-down of
intangible assets, the net addition or net decrease in the loan loss reserves
for customer accounts, depreciation, depletion, and deferred taxes and expenses)
and the denominator is the sum of Cash Capital Expenditures, plus the current
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portion of the long term debt of the Maker as of the application date, plus the
current portion of Capitalized Lease Obligations of the Maker as of the
applicable date, plus any payments made by the Maker of dividends on any shares
of its capital stock and cash expenditures of the Maker made for the redemption
of any class of its capital stock during the 12-month period preceding the
applicable date, plus the interest, lease, and rental expenses for the 12-month
period preceding the applicable date.
Fully Diluted Outstanding--when used with reference to common shares
of Maker, at any date as of which the number of shares thereof is to be
determined, all common shares outstanding at such date and the maximum number of
common shares issuable in respect of Convertible Securities and options and
warrants to purchase common shares or Convertible Securities outstanding on such
date (whether or not the rights to convert, exchange or exercise thereunder are
presently exercisable).
GAAP--generally accepted accounting principles in the United States of
America as defined by the Financial Accounting Standards Board or its successor,
as in effect from time to time consistently applied.
Governmental Authority--means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions pertaining to
government.
Lien--any interest in property (real, personal, or mixed, and tangible
or intangible) securing an obligation owed to, or a claim by, a Person other
than the owner of the property, whether such interest is based on the common
law, statute or contract, and including a security interest, security title or
Lien arising from a security agreement, mortgage deed of trust, deed to secure
debt, encumbrance, pledge, conditional sale or trust receipt or a lease,
consignment or bailment for security purposes. The term "Lien" shall include
covenants, conditions, restrictions, leases, and other encumbrances affecting
any property. For the purpose of this Agreement, a Person shall be deemed to be
the owner of any property which it has acquired or holds subject to a
conditional sale agreement or other arrangement pursuant to which title to the
Property has been retained by or vested in some other Person for security
purposes.
Loan--the credit in the original principal amount of $3,700,000
extended by Handex to ECB evidenced by this Promissory Note (and as such may be
amended, supplemented, replaced, substituted, extended, renewed or otherwise
modified).
Loan Documents--this Promissory Note, the Pledge Agreement, the
Corporate Guaranty and Pledge Agreement, the Nonrecourse Individual Guaranty and
Pledge Agreement and each and every other instrument executed and delivered to
evidence the Loan or to evidence security for the Loan and any and all other
agreements, instruments, and documents heretofore, now or hereafter, executed by
Maker or an Acquired Company in respect to the transactions contemplated by this
Promissory Note, all as the same may be amended, supplemented, replaced,
substituted, extended, renewed or otherwise modified.
Person--an individual, partnership, corporation, joint stock company,
firm, land trust, business trust, unincorporated organization, limited liability
company, or other business entity, or a government or agency or political
subdivision thereof.
Qualifying Public Offering--shall mean either (i) the first public
offering of shares of the Maker's common stock pursuant to a registration
statement filed with the Securities and Exchange Commission as a result of which
the Maker receives net proceeds equal to or greater than Ten Million Dollars
($10,000,000) or (ii) any public offering of shares of common stock by the Maker
or by the holders thereof after its first public offering, regardless of size.
-11-
Requirement of Law--as to any Person, the articles of incorporation
and bylaws or other organizational or governing documents of the Person, and any
law, treaty, rule or regulation, or determination of an arbitrator or a court or
other Governmental Authority, in each case applicable to or binding on the
Person or any of its property or to which the Person or any of its property is
subject.
Subsidiary--with respect to any Person (the "Owner"), any corporation
or other Person of which securities or other interests having the power to elect
a majority of that corporation's or other Person's board of directors or similar
governing body, or otherwise having the power to direct the business and
policies of that corporation or other Person (other than securities or other
interests having such power only upon the happening of a contingency that has
not occurred) are held by the Owner or one or more of its Subsidiaries.
Tangible Net Worth--the aggregate of the (a) par or stated value of
all outstanding capital stock; (b) capital surplus; and (c) retained earnings,
less (t) amounts due from Affiliates; (u) any surplus resulting from any write-
up of assets subsequent to the date of this Promissory Note; (v) deferred assets
(including deferred development costs) other than prepaid insurance and prepaid
taxes; (w) goodwill or other amounts representing the excess of the purchase
price of assets or stock over the value assigned to them on the books, (x) the
book value of any patents, trademarks, trade names, copyrights, noncompete
agreements, franchises, experimental expenses, and other intangible assets; (y)
the amount paid for any treasury stock that is not already reflected as a
reduction of the capital surplus or retained earnings accounts; and (z) any
other amounts classified as intangible assets under GAAP.
88/18746AAH.CLN
-12-
Exhibit 2.2(c){PRIVATE }
TERMS OF SERIES A PREFERRED STOCK
There shall be a series of Preferred Stock designated as Preferred
Stock, Series A (the "Series A preferred Stock"), with a par value of One Cent
($.01) per share and a stated value of One Thousand Dollars ($1,000.00) per
share. The authorized number of shares constituting such series shall be Three
Thousand (3,000).
-1-
Voting Rights.
Holders of outstanding shares of Series A Preferred Stock shall
not be entitled to vote such shares for any purpose, except (a) as provided for
in this Paragraph 1, and (b) as specifically required by the Florida Business
Corporation Act.
So long as Three Hundred (300) or more shares of Series A
Preferred Stock are outstanding the holders thereof shall be entitled to elect
one (1) Director of the Corporation by majority vote of such holders voting as a
separate class.
So long as any shares of Series A Preferred Stock are
outstanding the Corporation shall not, without the approval of a majority of the
holders of such shares voting as a separate class, increase or decrease the
authorized number of shares of Series A Preferred Stock or authorize or issue
any shares of capital stock or securities convertible into any shares of capital
stock ranking senior to or on parity with the Series A Preferred Stock with
respect to liquidation or payment of dividends. Notwithstanding anything to the
contrary expressed herein, the Corporation may issue without the approval of the
holders of Series A Preferred Stock as a separate class, shares of Series A
Preferred Stock authorized herein.
-2-
Dividend Rights.
The Holders of outstanding shares of Series A Preferred Stock
shall be entitled to receive, when, as and if declared by the Board of Directors
out of funds legally available for that purpose, dividends payable as provided
for in this Paragraph 2.
Dividends with respect to the shares of Series A Preferred Stock
shall be payable in cash on January 15, April 15, June 15 and September 15 of
each year ("Dividend Payment Date") commencing on the first Dividend Payment
Date after the date upon which each such share of Series A Preferred Stock was
originally issued ("Issuance Date"), and continuing so long as any shares of
Series A Preferred Stock remain outstanding.
Dividends payable with respect to the shares of Series A
Preferred Stock on each Dividend Payment Date shall be a per share amount equal
to the product of (i) the stated value of One Thousand Dollars ($1,000) per
share, plus Accrued Dividends, (ii) the Dividend Rate then applicable, and (iii)
the Dividend Period Fraction applicable with respect to such Dividend Payment
Date (all as defined below).
"Accrued Dividends" with respect to any shares of Series A
Preferred Stock means, as of any given time, the then Full Cumulative Dividends
less the amount of all dividends theretofore paid with respect to the relevant
shares of Series A Preferred Stock.
"Full Cumulative Dividends" means with respect to any shares of
Series A Preferred Stock (whether or not in any Dividend Period, or any part
thereof, in respect of which such term is used there shall have been net profits
or net assets legally available for the payment of such dividends, and without
regard to the restrictions with respect to the payment of dividends set forth in
any agreement to which the Corporation is a party or by which it is bound) that
amount which shall be equal to all dividends whether or not earned or declared
or paid upon the relevant shares as provided herein for the period of time
elapsed from the Issuance Date to the most recent Dividend Payment Date or, in
the case of any shares to be redeemed, the applicable redemption date.
As used herein, the term "Dividend Rate" means a per annum rate
equal to eight percent (8%); provided, however, that with respect to each
Dividend Payment Date after the occurrence and during the continuation of a
Redemption Default, the Dividend Rate shall be increased to a per annum rate
equal to fifteen percent (15%).
As used in all Paragraphs hereof, with respect to each Dividend
Payment Date, the term "Dividend Period Fraction" means 0.25; provided, however,
that (i) with respect to the first Dividend Payment Date after the Issuance
Date, the term "Dividend Period Fraction" means the product of 0.25 and the
quotient of (A) the actual number of days elapsed from the Issuance Date to, but
not including, the first Dividend Payment Date, divided by (B) ninety (90) days
and, (ii) with respect to any Redemption Date that is not a Dividend Payment
Date, the term "Dividend Period Fraction" means the product of 0.25 and the
quotient of (A) the actual number of days elapsed from the Dividend Payment Date
immediately preceding such Redemption Date to, but not including, the Redemption
Date, divided by (B) ninety (90) days.
Dividends shall be paid to the holders of record at the close of
business upon the date specified by the Board of Directors at the time such
dividend is declared; provided, however, that such record date shall not be more
than ten (10) days prior to the applicable Dividend Payment Date. Such divi-
dends shall cumulate on each share from the Issuance Date (whether or not there
shall be net profits or net assets of the Corporation legally available for the
payment of such dividends, and without regard to the restrictions with respect
to the payment of dividends set forth in any agreement to which the Corporation
-3-
is a party or by which it is bound) and shall cumulate from day to day whether
or not earned or declared, to the date on which such share is redeemed and the
full Redemption Price therefor is paid pursuant to Paragraph 5 hereof. To the
extent dividends are not paid, the holders of shares of Series A Preferred Stock
shall continue to have the right to receive the unpaid balance of the dividends
when declared by the Board of Directors. Accrued Dividends shall not bear
interest.
The Corporation shall not:
declare or pay any dividend whatsoever whether in cash
property or otherwise with respect to the Common Shares or shares of any
other class of capital stock ranking junior with respect to liquidation or
payment of dividends to the shares of Series A Preferred Stock (collec-
tively, the "Junior Stock") unless the Corporation shall, on or before the
proposed date for payment of such dividend, have declared on the
outstanding shares of Series A Preferred Stock and paid (or, if the
Corporation cannot determine to whom or where to pay the dividends, set
apart for payment in a separate account) all Accrued Dividends as of the
most recent Dividend Payment Date which has occurred; and
make any distribution on any Junior Stock or set aside
any assets for any such purposes, nor shall any Junior Stock be purchased,
redeemed or otherwise acquired if the Corporation shall not, on or before
the proposed date on which any such Junior Stock is to be purchased,
redeemed or otherwise acquired, have fully redeemed all outstanding shares
of Series A Preferred Stock at the full Redemption Price in accordance with
the provisions hereof on or before the proposed date for payment of such
dividend; provided, however, that the restriction set forth in this clause
(b) shall not prohibit the Corporation from purchasing Junior Stock from
employees or former employees of the Corporation or its subsidiaries or
affiliates who are not holders of such Junior Stock on the date shares of
Series A Preferred Stock are first issued.
Each fractional Senior Preferred Share outstanding shall be
entitled to a ratably proportionate amount of all dividends to which each
outstanding full share of shares of Series A Preferred Stock is entitled
pursuant to this Paragraph 2, and all of such dividends with respect to such
outstanding fractional shares shall be fully cumulative and shall accrued
(whether or not declared) and shall be payable in the same manner and at such
times as provided for in this Paragraph 2 with respect to dividends on each
outstanding full share of Series A Preferred Stock.
If, at any time, the Corporation shall pay a dividend on the
shares of Series A Preferred Stock which is less than the full amount of the
Full Cumulative Dividends payable with respect to the shares of Series A
Preferred Stock, then such dividend shall be distributed pro rata in
accordance with the amount of dividends that the holders of each outstanding
share of Series A Preferred Stock would be entitled to receive if all dividends
payable on such shares were paid in full.
-4-
Liquidation Rights.
Upon the dissolution, liquidation or winding up of the affairs of
the Corporation, whether voluntary or involuntary, the holders of shares of
Series A Preferred Stock shall be entitled to receive from the Corporation's
assets available for distribution to shareholders cash in the amount of One
Thousand Dollars ($1,000) per share plus all Accrued Dividends, before any
payment or distribution shall be made to the holders of Common Shares or other
shares of Junior Stock. If, upon any liquidation, dissolution or winding up of
the affairs of the Corporation, the amounts payable under this paragraph (i) to
the holders of all the outstanding shares of Series A Preferred Stock are not
paid in full, the holders of such shares of Series A Preferred Stock shall share
ratably in any distribution of assets in proportion to the full amounts to which
they would otherwise be respectively entitled.
Neither the sale, conveyance, exchange or transfer (for cash,
shares of stock, securities or other consideration) of all or substantially all
the property and assets of the Corporation, nor the consolidation or merger of
the Corporation with or into any other corporation or corporations, nor the
consolidation or merger of any other corporation or corporations with or into
the Corporation, nor the reorganization of the Corporation, shall be deem ed a
liquidation, dissolution or winding up of the affairs of the Corporation within
the meaning of this Paragraph 3.
After the payment in cash to the holders of shares of Series A
Preferred Stock of the full preferential amount fixed in accordance with the
provisions of subparagraph (i) with respect to the outstanding shares of Series
A Preferred Stock, all of the remaining assets of the Corporation available for
distribution to shareholders shall be distributed to holders of Junior Stock in
accordance with the provisions thereof.
Conversion Rights.
The shares of Series A Preferred Stock shall not be convertible
into Common Shares or any other security of the Corporation.
Redemption Rights.
Mandatory Redemptions. On April 15, 2003, the Corporation shall
redeem all of the then outstanding shares of Series A Preferred Stock at a
redemption price per share equal to One Thousand Dollars ($1,000) plus Accrued
Dividends through the date of such redemption.
Prior to April 15, 2003, the Corporation shall redeem all of the
then outstanding shares of Series A Preferred Stock at a redemption price per
share equal to One Thousand Dollars ($1,000) plus Accrued Dividends through the
date of such redemption upon the occurrence of any of the following events:
any merger or consolidation of the Corporation with
another corporation or entity pursuant to which the Corporation is not the
surviving entity;
the sale or other disposition (including disposi-
tion by merger or consolidation) of substantially all of the assets of
the Corporation and its consolidated subsidiaries or other entities;
any event, including, without limitation, an
issuance or sale of Common Shares or shares of any other class or
series of stock of the Company or Convertible Securities, that would
or could result in the holders of Common Shares who were holders of
such shares on the date shares of Series A Preferred Stock are first
issued (i) having the right to exercise less than 51% of the total
voting power of the Corporation for the election of its directors
-5-
after such issuance or sale or (ii) owning less than twenty-five
percent (25%) of the total number of the Corporation's Fully Diluted
Outstanding Common Shares. For purposes of this paragraph (i),
"Convertible Securities" shall mean evidences of indebtedness, shares
of stock or other securities that are convertible into or exchangeable
for, with or without payment of additional consideration in cash or
property, or options, warrants or other rights that are exercisable
for, Common Shares that, when issued, would constitute Common Shares,
either immediately or upon the occurrence of a specified date or a
specified event, and (ii) "Fully Diluted Outstanding" shall mean, when
used with reference to Common Shares, at any date as of which the
number of shares thereof is to be determined, all Common Shares
outstanding at such date and the maximum number of Common Shares
issuable in respect of Convertible Securities and options and warrants
to purchase Common Shares or Convertible Securities outstanding on
such date (whether or not the rights to convert, exchange or exercise
thereunder are presently exercisable).
either (i) the first public offering of Common Shares
pursuant to a registration statement filed with the Securities and Exchange
Commission or any other federal agency then administering the Securities
Act of 1933, as amended, and other federal securities laws ("IPO"),
provided that the net proceeds to the Corporation as a result of such IPO
are equal to or greater than Ten Million Dollars ($10,000,000) or (ii) any
public offering of Common Shares by the Corporation or holders of Common
Shares subsequent to an IPO.
Optional Redemption. The Corporation may, at the option of the
Board of Directors, at any time redeem all or a portion of the outstanding
shares of Series A Preferred Stock at a redemption price per share equal to One
Thousand Dollars ($1,000) plus Accrued Dividends through the date of such
redemption.
Notice of every redemption pursuant to this Paragraph 5 shall be
sent by first-class mail, postage prepaid, to the holders of the record of the
shares of Series A Preferred Stock at their respective addresses as the same
shall appear on the books of the Corporation. Such notice shall not be mailed
not less than thirty (30) days in advance of the date fixed for such redemption
to the holders of record of the shares of Series A Preferred Stock.
General Requirements. Anything contained in this Paragraph 5
regarding redemption of shares of Series A Preferred Stock to the contrary
notwithstanding, if the redemption price has been paid on or after any
Redemption Date, all rights of the holders of shares of Series A Preferred Stock
as shareholders of the Corporation with respect to those shares of Series A
Preferred Stock to be redeemed, except the right to receive the redemption
price, shall cease and terminate whether or not the certificates for the shares
so redeemed shall have been received by the Corporation. On the redemption
date, the Corporation shall deliver to each holder of shares of Series A
Preferred Stock whose shares are to be redeemed immediately available funds in
an amount equal to the redemption price multiplied by the number of shares of
Series A Preferred Stock to be redeemed from such holder.
Restrictions. The Corporation's right and obligation to redeem
shares of Series A Preferred Stock pursuant to this Paragraph 5 is subject to
the Corporation having available funds which, under Florida law, may legally be
used for such purpose, and to applicable restrictions set forth in any agreement
to which the Corporation is a party or by which it is bound. The Corporation
shall use reasonable efforts to remedy any restriction which would prohibit the
Corporation's right to redeem shares of Series A Preferred Stock, it being
understood, however, that the Corporation need not breach any fiduciary duty
imposed upon it nor incur a material liability or expense.
-6-
Covenants.
The Corporation covenants with the holders of shares of Series A
Preferred Stock as follows:
to furnish, or cause to be furnished, to each holder of shares of
Series A Preferred Stock (i) within one hundred twenty (120) days of the
close of its fiscal year, annual audited consolidated financial statements
of the Corporation consisting of a balance sheet, income statement, and
statement of cash flow, prepared in accordance with generally accepted
accounting principles, consistently applied, as certified by the
independent public accountants for the Corporation (ii) within thirty (30)
days of the close of each fiscal quarter, unaudited quarterly and year-to-
date consolidated financial statements consisting of balance sheets, income
statements and statements of cash flow, prepared in accordance with
generally accepted accounting principles, consistently applied, as
certified by the chief executive or chief financial officer of the
Corporation and (iii) all financial and other reports and information
furnished by the Corporation to holders of shares of Junior Stock;
to take no affirmative corporate action which would have the
effect of interfering with, impeding or otherwise restricting the
right of holders of shares of Series A Preferred Stock from
transferring, assigning or otherwise disposing of any shares of Series
A Preferred Stock.
Miscellaneous.
Any shares of Series A Preferred Stock redeemed or otherwise acquired
by the Corporation in any manner whatsoever shall be deemed retired.
Each certificate representing a share or shares of Series A Preferred
Stock shall state thereon the Issuance Date of such share or shares.
88/HANDEX/18746GGF.939
-7-
Exhibit 2.2(d){PRIVATE }
NEITHER THE WARRANT REPRESENTED BY THIS CERTIFICATE NOR ANY OF THE
SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
STATE SECURITIES LAW. NO TRANSFER OF THE WARRANT REPRESENTED BY THIS
CERTIFICATE OR OF THE SECURITIES ISSUABLE UPON EXERCISE THEREOF TO A
PERSON OTHER THAN AN AFFILIATE OF THE HOLDER THEREOF SHALL BE VALID OR
EFFECTIVE UNLESS (A) SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND IN COMPLIANCE WITH
ANY APPLICABLE STATE SECURITIES LAWS OR (B) THE HOLDER OF THE
SECURITIES PROPOSED TO BE TRANSFERRED SHALL HAVE DELIVERED TO THE
COMPANY EITHER A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE
COMMISSION OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
COMPANY TO THE EFFECT THAT SUCH PROPOSED TRANSFER IS EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND OF ANY APPLICABLE
STATE SECURITIES LAWS OR (C) SUCH TRANSFER IS PURSUANT TO RULE 144 OR
RULE 144A UNDER THE SECURITIES ACT AND SUCH HOLDER(S) SHALL HAVE
DELIVERED TO THE COMPANY A CERTIFICATE IN FORM AND SUBSTANCE
REASONABLY SATISFACTORY TO THE COMPANY SETTING FORTH THE BASIS FOR
APPLYING ANY SUCH RULE TO THE PROPOSED TRANSFER.
PAYMENTS UNDER THIS WARRANT OR WITH RESPECT TO THE SHARES ISSUED UPON
EXERCISE THEREOF ARE SUBJECT TO CERTAIN RESTRICTIONS IMPOSED BY THE
SUBORDINATION AGREEMENT DATED AMONG ECB, INC.,
HANDEX CORPORATION AND SOUTHTRUST BANK OF ALABAMA, N.A.
WARRANT A TO PURCHASE
300,000 SHARES OF COMMON STOCK OF
ECB, INC.
=============
ORIGINAL ISSUE DATE: , 19
THIS IS TO CERTIFY THAT HANDEX CORPORATION, a Delaware corporation, or
registered assigns, is entitled, at any time during the Exercise Period (such
term, and certain other capitalized terms used herein being hereinafter
defined), to purchase from ECB, Inc., a corporation organized under the laws of
the State of Florida (the "Company"), Three Hundred Thousand (300,000) shares
(subject to adjustment as provided herein) of Common Stock of the Company at a
per share purchase price equal to One Dollar and Thirty-Two Cents ($1.32) (the
initial "Current Warrant Price," subject to adjustment as provided herein), all
on the terms and conditions and pursuant to the provisions hereinafter set
forth. This Warrant is issued pursuant to the Stock Purchase Agreement (as
defined herein).
-1-
{PRIVATE } "DEFINITIONS"
As used in this Warrant, the following terms have the respective
meanings set forth below:
"Additional Shares of Common Stock" shall mean all shares of Common
Stock issued by the Company after the Original Issue Date.
"Affiliate" shall mean, as applied to any Person, any other Person
that directly or indirectly controls, is controlled by, or is under common
control with, that Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling", "controlled by"
and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to vote fifty percent (50%) or
more of the securities having voting power for the election of directors of such
Person or otherwise to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities or
by contract or otherwise.
"Applicable Law" shall mean a statute, law (including common law),
treaty, rule, code, ordinance, regulation, permit, license, certificate, order,
judgment, decree, injunction, writ, or other binding determination or like
action of any Governmental Authority, as in effect from time to time.
"Book Value" per share of Common Stock as of any specified date shall
mean the consolidated book value of the Company and its Subsidiaries as of that
date, divided by the number of Fully Diluted Outstanding shares of Common Stock
as of such date. Such book value shall be determined in accordance with GAAP,
except that there shall be no reduction in such book value by reason of any
amount that may be required either as an offset to or reserve against retained
earnings or as a deduction from book value as a result of the existence,
issuance, anticipated exercise of or anticipated cost to the Company of the
repurchase of any of the Warrants.
"Business Day" shall mean a day of the year on which banks are not
required or authorized to close in Florida.
"Call" shall have the meaning set forth in Section 12.3 hereof.
"Change of Control" shall mean any event, including without limitation
an issuance or sale of Additional Shares of Common Stock or shares of any other
class or series of capital stock of the Company or Convertible Securities, that
would or could result in the owners or holders of shares of Common Stock on the
Original Issue Date (i) having the right to exercise less than fifty-one percent
(51%) of the total voting power of the Company for the election of directors
after such issuance or sale or (ii) owning, less than twenty-five percent (25%)
of the Fully Diluted Outstanding Shares of Common Stock.
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency then administering the Securities Act and other federal
securities laws.
"Common Stock" shall mean the Company's Common Shares, $.01 par value.
"Company" shall mean ECB, Inc., a corporation organized under the laws
of the State of Florida, and any successor corporation.
"Company Default" shall mean (a) the breach of any warranty or the
inaccuracy at the time when made of any representation made by the Company
herein or (b) the failure by the Company to comply with any covenant of the
Company contained herein.
-2-
"Consolidated" refers to the consolidation of the accounts of a Person
and its Subsidiaries in accordance with GAAP.
"Convertible Securities" shall mean evidences of indebtedness, shares
of stock or other securities that are convertible into or exchangeable for, with
or without payment of additional consideration in cash or property, or options,
warrants or other rights that are exercisable for, shares of Common Stock that,
when issued, would constitute Additional Shares of Common Stock, either
immediately or upon the occurrence of a specified date or a specified event.
"Current Warrant Price" shall mean, in respect of a share of Common
Stock at any date herein specified, the initial Current Warrant Price set forth
in the preamble of this Warrant as adjusted pursuant to Section 4 hereof.
"Designated Office" shall have the meaning set forth in Section 11
hereof.
"Dilution Fee" shall have the meaning set forth in Section 14 hereof.
"Discounted Earnings Value" shall mean an amount equal to (i) four (4)
times the Consolidated earnings of the Company and its Subsidiaries before
amortization, depreciation, interest and taxes for the preceding twelve months,
less outstanding Indebtedness and the redemption price of any shares of Series A
Preferred Stock of the Company then outstanding, plus the average amount of cash
and marketable securities of the Company for the preceding six months (using
month end balances to obtain such average), divided by (ii) the number of Fully
Diluted Outstanding shares of Common Stock, as of such date.
"Early Redemption Period" shall mean the ten (10) day period following
redemption by the Company at par of all 2,000 of its shares of Series A
Preferred Stock, provided such redemption occurs on or before April 15, 1998.
"Earnings Value" shall mean an amount equal to (i) four and one-half
(4.5) times the Consolidated earnings of the Company and its Subsidiaries before
amortization, depreciation, interest and taxes for the preceding twelve months,
less outstanding Indebtedness and the redemption price of any shares of Series A
Preferred Stock of the Company then outstanding, plus the average amount of cash
and marketable securities of the Company for the preceding six months (using
month end balances to obtain such average), divided by (ii) the number of Fully
Diluted Outstanding shares of Common Stock, as of such date.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
"Excluded Shares" shall mean (i) up to a total of 290,000 shares of
Common Stock issued by the Company either directly or pursuant to options to
senior management employees of the Company other than George Bannon and Roger
Eatman, on or before March 31, 1998 and having a price per share payable in cash
in full of not less than Eighty-Eight Cents ($0.88) per share and/or issued to
such employees after such date and having a price per share payable in cash in
full of not less than One Dollar Seventy-Five Cents ($1.75) per share, (ii) up
to a total of 90,000 shares of Common Stock issued by the Company either
directly or pursuant to options to middle management employees of the Company
and having a price per share payable in cash in full of not less than One Dollar
Seventy-Five Cents ($1.75) per share, and (iii) shares of Common Stock issued
pursuant to the Southcoast Warrant.
"Exercise Notice" shall have the meaning set forth in Section 2.1
hereof.
"Exercise Period" shall mean the period during which this Warrant is
exercisable pursuant to Section 2.1 hereof.
-3-
"Fair Value" per share of Common Stock as of any specified date shall
mean (i), if the Fair Value is being determined in connection with a Qualifying
Public Offering, the Public Offering Price per share of Common Stock as of such
date or (ii) otherwise, the higher of (A) seventy-five percent (75%) of the Book
Value as of the last day of the fiscal quarter last preceding the occurrence of
the event requiring such Fair Value to be determined, and (B) the Earnings Value
or Discounted Earnings Value (whichever applicable) per share of Common Stock as
of such date.
"Fully Diluted Outstanding" shall mean, when used with reference to
Common Stock, at any date as of which the number of shares thereof is to be
determined, all shares of Common Stock Outstanding at such date and the maximum
number of shares of Common Stock issuable in respect of Convertible Securities
and options and warrants to purchase shares of Common Stock or Convertible
Securities outstanding on such date (whether or not the rights to convert,
exchange or exercise thereunder are presently exercisable), including the
maximum number of shares issuable under the Warrants; provided that the maximum
number of shares of Common Stock issuable in respect of Convertible Securities
and options and warrants to purchase shares of Common Stock or Convertible
Securities outstanding on such date shall be adjusted in accordance with the
"treasury stock" method determined under GAAP pursuant to Accounting Principles
Board Opinion 15.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as from time to time in effect.
"Governmental Authority" shall mean any nation or government, any
federal, state, local or other political subdivision thereof and any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Handex" shall mean Handex Corporation, a Delaware corporation, and
any successor entity.
"Holder" shall mean the Person in whose name the Warrant set forth
herein is registered on the books of the Company maintained for such purpose.
"Indebtedness" shall have the meaning given to the term "Debt" in the
Series A Note, other than any and all obligations of the Company to purchase,
redeem, retire, defease or otherwise acquire for value any capital stock of the
Company or any warrants, rights or options to acquire such capital stock,
however valued, and whether or not currently exercisable.
"Initiating Registrable Securityholders" shall mean any Registerable
Securityholders (or their assigns) who in the aggregate are Registrable
Securityholders of not less than seventy-five percent (75%) of the Registrable
Securities, and, after any other Registrable Securityholder or Registrable
Securityholders have joined in a request by Initiating Registrable
Securityholders, shall include such other Registrable Securityholder or
Registrable Securityholders.
"Lien" shall mean any mortgage, deed of trust, pledge, hypothecation,
assignment, conditional sale agreement, deposit arrangement, security interest,
encumbrance, lien (statutory or other), proxy, preference, priority or other
security agreement or preferential arrangement of any kind or nature whatsoever
in respect of any property (whether now owned or hereafter acquired) of a
Person, whether granted voluntarily or imposed by law, and includes the interest
of a lessor under any lease having substantially the same economic effect as any
of the foregoing and the filing of any financial statement or similar notice
(other than a precautionary financing statement filed by a "true" lessor
pursuant to Section 9-408 of the Uniform Commercial Code), naming the owner of
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such property as debtor, under the Uniform Commercial Code or other comparable
law of any jurisdiction.
"Majority Warrant Holders" shall mean the holders of Warrants
exercisable for the purchase of more than fifty percent (50%) of the aggregate
number of shares of Warrant Stock then purchasable upon exercise of all
Warrants.
"Officers' Certificate" shall mean a certificate executed on behalf of
the Company by its Chairman, its President or one of its Vice Presidents and by
its Chief Financial Officer or its Treasurer.
"Opinion of Counsel" shall mean a written opinion of counsel
experienced in securities laws chosen by the holder of this Warrant or Warrant
Stock issued upon the exercise hereof, such opinion and such counsel being
reasonably acceptable to the Company.
"Original Issue Date" shall mean the date on which the Original
Warrant is issued, as set forth on the cover page of this Warrant.
"Original Warrant" shall mean the Warrant originally issued by the
Company to Handex on the Original Issue Date.
"Other Securityholders" shall mean holders of Registrable Securities
under Warrant B and under the Southcoast Warrant.
"Outstanding" shall mean, when used with reference to Common Stock, at
any date as of which the number of shares thereof is to be determined, all
issued shares of Common Stock, except shares then owned or held by or for the
account of the Company or any Subsidiary thereof, and shall include all shares
issuable in respect of outstanding scrip or any certificates representing
fractional interests in shares of Common Stock.
"Person" shall mean an individual, partnership, corporation (including
a business trust), joint stock company, trust, unincorporated association, joint
venture or other entity, or a Governmental Authority.
"Public Offering Price" shall mean the daily market price of a share
of Common Stock of the Company, as of the date of the issuance of Common Stock
in connection with a Qualifying Public Offering. The "daily market price" for
such day shall be (i) the last sale price on such day on the principal stock
exchange on which such Common Stock is then listed or admitted to trading, or
(ii) if such Common Stock is not then listed or admitted to trading on any stock
exchange, the average of the last reported closing bid and asked prices on such
day in the over-the-counter market, (A) as furnished by the National Association
of Securities Dealers Automatic Quotation System or the National Quotation
Bureau, Inc., or (B) if neither such corporation at the time is engaged in the
business of reporting such prices, as furnished by any similar firm then engaged
in such business, or (C) if there is no such firm, as furnished by any member of
the National Association of Securities Dealers, Inc., or any successor
corporation thereto, reasonably selected by the Company.
"Put" shall have the meaning set forth in Section 12.1 hereof.
"Qualifying Public Offering" shall mean either (i) the first public
offering of shares of the Company's Common Stock pursuant to a registration
statement filed with the Commission as a result of which the Company receives
net proceeds equal to or greater than Ten Million Dollars ($10,000,000) or (ii)
any public offering of shares of Common Stock by the Company or by the holders
thereof after its first public offering, regardless of size.
"Redemption Notice" shall have the meaning set forth in Section 12.3
hereof.
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"Redemption Period" shall mean the period beginning on the sixth
anniversary of the Original Issue Date.
"Redemption Price" shall have the meaning set forth in Section 12.3.
"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 effectiveness of such registration statement.
"Registrable Securities" shall mean the issued Warrant Shares that
have not been registered and sold to the public.
"Registrable Securityholder" shall mean any holder of outstanding
Registrable Securities that have not been sold to the public.
"Registration Expenses" shall mean all expenses incurred by the
Company in compliance with Sections 13.1, 13.2 and 13.3 hereof, 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 expenses of any special audits 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).
"Repurchase Notice" shall have the meaning set forth in Section 12.1
hereof.
"Repurchase Period" shall mean the period beginning on the first to
occur of (i) the sixth anniversary of the Original Issue Date, (ii) any merger
or consolidation of the Company with another Person pursuant to which the
Company is not the surviving entity, (iii) the sale or other disposition
(including disposition by merger or consolidation) by the Company or any
Subsidiary of assets (including the stock of any Subsidiary) representing more
than sixty percent (60%) of either (A) the aggregate fair market value of the
assets of the Company and its Subsidiaries determined on a Consolidated basis or
(B) the total revenues of the Company and its Subsidiaries determined on a
Consolidated basis, (iv) a Change of Control, and (v) a Qualifying Public
Offering.
"Repurchase Price" shall have the meaning set forth in Section 12.1
hereof.
"Restricted Common Stock" shall mean shares of Common Stock which are,
or which upon their issuance on the exercise of this Warrant would be, evidenced
by a certificate bearing the first restrictive legend set forth in Section
8.1(a) hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities, all fees and
disbursements of counsel for any Holder, and any blue sky fees and expenses
excluded from the definition of "Registration Expenses."
"Senior Lender" shall mean any commercial bank or other financial
institution from which the Company borrows funds, regardless of the priority, if
any, among such lenders.
"Series A Note" shall mean the Promissory Note referred to in the
Stock Purchase Agreement.
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"Shareholders Agreement" shall mean the Shareholders Agreement
referred to in the Stock Purchase Agreement.
"Southcoast Warrant" shall mean the warrant to acquire 46,200 shares
of Common Stock at Eighty-Eight Cents ($0.88) per share issued by the Company to
Southcoast Securities Corporation.
"State Acts" shall mean any applicable state or local securities acts.
"Stock Purchase Agreement" shall mean the Stock Purchase Agreement
dated as of November 4, 1996 between the Company and Handex, as such agreement
may be amended.
"Subsidiary" shall mean, with respect to any Person, any corporation
or other entity of which securities or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other Persons
performing similar functions are at the time directly or indirectly owned or
controlled by such Person, one or more of the other subsidiaries of such Person
or any combination thereof.
"Transfer" shall mean any disposition of any Warrant or Warrant Stock
or of any interest in either thereof, which would constitute a sale thereof
within the meaning of the Securities Act.
"Warrant B" shall mean the warrant to acquire 85,000 shares of Common
Stock at One Dollar Sixty Cents ($1.60) per share issued by the Company to
Handex.
"Warrant Price" shall mean an amount equal to (i) the number of shares
of Common Stock being purchased upon exercise of this Warrant pursuant to
Section 2.1 hereof, multiplied by (ii) the Current Warrant Price as of the date
of such exercise.
"Warrants" shall mean the Original Warrant and all Warrants issued
upon transfer, division or combination of, or in substitution for, such Original
Warrant or any other such Warrant.
"Warrant Shares" shall mean shares of Warrant Stock.
"Warrant Stock" shall mean the shares of Common Stock issued, issuable
or both (as the context may require) to the holders of Warrants upon the
exercise thereof or issued upon the transfer of such shares until such time as
such shares of Common Stock have either been sold in a public offering pursuant
to a registration statement filed under the Securities Act or sold pursuant to
Rule 144 thereunder.
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{PRIVATE } EXERCISE OF WARRANT
{PRIVATE } Manner of Exercise. From and after the Original Issue
Date and until the later of (a) the sixth anniversary of the Original Issue Date
or (b) the first anniversary of payment in full of the indebtedness due under
the Series A Note, the Holder may from time to time exercise this Warrant, on
any Business Day, for all or any part (exceeding 10%) of the number of shares of
Common Stock then purchasable hereunder.
In order to exercise this Warrant, in whole or in part, the Holder
shall deliver to the Company at the Designated Office (i) a written notice of
the Holder's election to exercise this Warrant (an "Exercise Notice"), which
Exercise Notice shall specify the number of shares of Common Stock to be
purchased, (ii) payment of the Warrant Price and (iii) this Warrant. Such
Exercise Notice shall be in the form of the subscription form appearing at the
end of this Warrant as Annex A , duly executed by the Holder or its duly
authorized agent or attorney. Upon receipt of an Exercise Notice, the Company
shall, as promptly as practicable, and in any event within ten (10) calendar
days thereafter, execute (or cause to be executed) and deliver (or cause to be
delivered) to the Holder a certificate or certificates representing the aggre-
gate number of full shares of Common Stock issuable upon such exercise, together
with cash in lieu of any fraction of a share, as hereafter provided. The stock
certificate or certificates so delivered shall be, to the extent possible, in
such denomination or denominations as such Holder shall reasonably request in
the Exercise Notice and shall be registered in the name of the Holder or such
other name (provided that such Person is permitted to be a transferee hereunder)
as shall be designated in the Exercise Notice. This Warrant shall be deemed to
have been exercised and such certificate or certificates shall be deemed to have
been issued, and the Holder or any other Person so designated to be named
therein shall be deemed to have become a holder of record of such shares for all
purposes, as of the date the items specified in clauses (i) through (iii) above
are received by the Company. If this Warrant shall have been exercised in part,
the Company shall, at the time of delivery of the certificate or certificates
representing the shares of Common Stock being issued, deliver to the Holder a
new Warrant evidencing the rights of the Holder to purchase the unpurchased
shares of Common Stock called for by this Warrant, which new Warrant shall in
all other respects be identical with this Warrant, or, at the request of the
Holder, appropriate notation may be made on this Warrant and the same returned
to the Holder.
Payment of the Warrant Price may be made, at the option of the Holder,
by (i) wire transfer of immediately available funds, (ii) certified or official
bank check and/or (iii) surrender of the right to purchase shares of Warrant
Stock pursuant hereto to the extent such shares have a Fair Value in excess of
the Current Warrant Price.
{PRIVATE } Payment of Taxes. All shares of Common Stock issuable
upon the exercise of this Warrant pursuant to the terms hereof shall be validly
issued, fully paid and non-assessable, issued without violation of any
preemptive rights and free and clear of all Liens (other than any created by
actions of the Holder). The Company shall pay all expenses in connection with,
and all taxes and other governmental charges that may be imposed with respect
to, the issue or delivery thereof, unless such tax or charge is imposed by
Applicable Law upon the Holder, in which case such taxes or charges shall be
paid by the Holder, and the Company shall reimburse the Holder therefor (other
than for net income, personal property or capital gains taxes).
{PRIVATE } Fractional. The Company shall not be required to issue
a fractional share of Common Stock upon exercise of any Warrant. As to any
fraction of a share that the Holder of one or more Warrants, the rights under
which are exercised in the same transaction, would otherwise be entitled to
purchase upon such exercise, the Company shall pay a cash adjustment in respect
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of such final fraction in an amount equal to the same fraction of the Fair Value
of one share of Common Stock on the date of exercise.
{PRIVATE } Continued Validity and Application. A holder of shares
of Warrant Stock issued upon the exercise of this Warrant, in whole or in part,
including any transferee of such shares (other than a transferee who acquires
such shares after the same have been publicly sold pursuant to a registration
statement under the Securities Act or sold pursuant to Rule 144 or Rule 144A
thereunder), shall continue, with respect to such shares, to be entitled to all
rights and to be subject to all obligations that are applicable to such holder
by the terms of this Warrant.
The Company shall, at the time of each exercise of this Warrant, in
whole or in part, upon the request of the holder of the shares of Warrant Stock
issued upon such exercise hereof (including any such transferee), acknowledge in
writing, in form reasonably satisfactory to such holder, its continuing
obligation to afford to such holder such rights referred to in this Section 2.4;
provided, however, that if such holder shall fail to make any such request, such
failure shall not affect the continuing obligation of the Company to afford to
such holder all such rights.
At the time of any exercise of this Warrant or of any transfer of this
Warrant or shares of Warrant Stock pursuant to Section 3 and Section 8 hereof,
as a condition to such exercise or transfer, any Person acquiring this Warrant
or shares of such Warrant Stock in such transaction shall, if so requested by
the Company, acknowledge in writing in a form reasonably satisfactory to the
Company, that such holder will be subject to the continuing obligations referred
to in this Section 2.4.
{PRIVATE } TRANSFER, DIVISION AND COMBINATION
{PRIVATE } Transfer. Subject to compliance with Sections 8 and
12, each transfer of this Warrant and all rights hereunder, in whole or in part,
shall be registered on the books of the Company to be maintained for such
purpose, upon surrender of this Warrant at the Designated Office, together with
a written assignment of this Warrant in the form of Annex B hereto duly executed
by the Holder or its agent or attorney and, if such transfer is not to be made
pursuant to Section 12, funds sufficient to pay any transfer taxes payable upon
the making of such transfer. Upon such surrender and delivery, and, if
required, such payment, the Company shall, subject to Section 8, execute and
deliver a new Warrant or Warrants in the name of the assignee or assignees and
in the denominations specified in such instrument of assignment, and shall issue
to the assignor a new Warrant evidencing the portion of this Warrant not so
assigned and this Warrant shall promptly be cancelled. A Warrant, if properly
assigned in compliance with Section 8, may be exercised by the new Holder for
the purchase of shares of Common Stock without having a new Warrant issued.
{PRIVATE } Division and. Subject to compliance with Section 8,
this Warrant may be divided or combined with other Warrants upon presentation
thereof at the Designated Office, together with a written notice specifying the
names and denominations in which new Warrants are to be issued, signed by the
Holder or its agent or attorney. Subject to compliance with Section 3.1 and
with Section 8 as to any transfer which may be involved in such division or
combination, the Company shall execute and deliver a new Warrant or Warrants in
exchange for the Warrant or Warrants to be divided or combined in accordance
with such notice.
{PRIVATE } Expenses. The Company shall prepare, issue and deliver
at its own expense (other than transfer taxes) any new Warrant or Warrants
required to be issued under this Section 3.
{PRIVATE } Maintenance of. The Company agrees to maintain, at the
Designated Office, books for the registration and transfer of the Warrants.
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{PRIVATE } ANTIDILUTION PROVISIONS; PREEMPTIVE RIGHTS; ADJUSTMENT UPON THE
HAPPENING OF CERTAIN EVENTS.
{PRIVATE } Adjustment of Number of Shares Purchasable and
Exercise. The number of shares of Common Stock for which this Warrant is
exercisable, and the price at which such share may be purchased upon exercise of
this Warrant, shall be subject to adjustment from time to time as is more fully
set forth in this Section 4.
Adjustment of Exercise Price. In the event the Company
shall:
declare a dividend or make a distribution on its
Outstanding Common Stock in Common Stock or Convertible Securities;
subdivide or reclassify any of its Outstanding Common
Stock into a greater number of shares; or
combine or reclassify any of its Outstanding Common Stock
into a smaller number of shares;
then, upon the occurrence of such event or action, the Current Warrant Price
shall be adjusted, effective immediately after the record date for such dividend
or distribution or the effective date of such subdivision, combination or
reclassification, to the price calculated by multiplying the Current Warrant
Price in effect immediately prior to such record date or effective date by a
fraction, the numerator of which is the total number of shares of Common Stock
immediately prior to giving effect to such dividend, distribution, subdivision,
combination or reclassification and the denominator of which is the total number
of shares of Fully Diluted Outstanding shares of Common Stock immediately after
giving effect to such dividend, distribution, subdivision, combination or
reclassification.
Adjustment of Number of Shares Purchasable. Upon any
adjustment of the Current Warrant Price as provided in this Section 4.1, the
holder hereof shall thereafter be entitled to purchase, at the Current Warrant
Price resulting from such adjustment, the number of shares of Common Stock
(calculated to the nearest .001 of a share) obtained by multiplying the Current
Warrant Price in effect immediately prior to such adjustment by the number of
shares of Common Stock issuable on the exercise hereof immediately prior to such
adjustment and dividing the product thereof by the Current Warrant Price
resulting from such adjustment.
Calculation of Adjustment. Any adjustment of the Current
Warrant Price pursuant to this section shall be calculated to $.000001 per share
of Common Stock.
Reorganization, Reclassification or Recapitalization of
Company. In case of any capital reorganization or reclassification or
recapitalization of the capital stock of the Company (other than in the cases
referred to in subsection (a)(i), (ii), or (iii) of this Section 4.1), or in
case of the consolidation or merger of the Company with or into another
corporation, or in case of the sale or transfer of the property of the Company
as an entirety or substantially as an entirety, there shall thereafter be
deliverable upon the exercise of this Warrant or any portion thereof (in lieu of
or in addition to the number of shares of Common Stock theretofore deliverable,
as appropriate) the number of shares of stock or other securities or property to
which the holder of the number of shares of Common Stock which would otherwise
have been deliverable upon the exercise of this Warrant or any portion hereof at
the time would have been entitled upon such capital reorganization or
reclassification of capital stock, consolidation, merger or sale, and at the
same aggregate Current Warrant Price.
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Prior to and as a condition of the consummation of any transaction
described in the preceding sentence, the Company shall cause effective
provisions to be made so that the Holder shall have the right thereafter by
exercising the Warrant to purchase the kind and amount of shares of stock or
other securities or property which would have been receivable upon such
consummation had this Warrant been exercised in full immediately prior thereto.
Any such provisions shall also include adjustments which shall be as nearly
equivalent as practicable to the adjustments as provided for in this Section 4.
Any such adjustment shall be made by and set forth in a supplemental agreement
between the Company and the successor entity which agreement shall bind such
entity, shall be accompanied by an opinion of counsel as to the enforceability
of such agreement and shall be approved by the Majority Warrant Holders, which
approval shall not be unreasonably withheld.
Other Dilutive Events. Except for issuances and sales of
Excluded Shares, in case any event shall occur as to which the other provisions
of this Section 4 are not strictly applicable but the failure to make any
adjustment would not fairly protect the purchase rights represented by this
Warrant in accordance with the essential intent and principles hereof, then the
Holder of this Warrant may request in writing within one hundred twenty (120)
days after it receives notice of such event that the Company examine the
propriety of an adjustment to the Current Warrant Price and number of shares of
Common Stock subject to this Warrant. Unless the Company and the Holder of this
Warrant shall have theretofore mutually agreed upon an adjustment, or that no
adjustment is required, within thirty (30) days after the receipt of such
request, the Company shall appoint a firm of independent public accountants of
recognized national standing (which may be the regularly engaged accountants of
the Company), to give an opinion upon the adjustment, if any, on a basis
consistent with the essential intent and principles established in this Section
4, necessary to preserve, the purchase rights represented by this Warrant. Upon
receipt of such opinion, the Company will promptly mail a copy thereof to the
holder of this Warrant and shall make the adjustments described therein. If
such opinion states that no such adjustment is necessary, the holder hereof
shall reimburse the Company for one-half of the cost and expense of such
opinion. The Company covenants and agrees not to issue or sell shares of Common
Stock or Convertible Securities or grant options to acquire shares of Common
Stock or Convertible Securities to its shareholders as of the date hereof or to
employees of the Company, except as contemplated by the Excluded Shares, and
that any such sale at a price per share of less than Eighty-Eight Cents ($0.88)
shall constitute the basis for an adjustment pursuant to the terms hereof.
Record Date. In case the Company shall take a record of the
holders of the Common Stock for the purpose of entitling them (i) to receive a
dividend or other distribution payable in Common Stock or in Convertible
Securities or (ii) to subscribe for or purchase Common Stock or Convertible
Securities, then all references in this Section 4 to the date of the issue or
sale of the shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution or the
date of the granting of such right of subscription or purchase, as the case may
be, shall be deemed to be references to such record date.
{PRIVATE } Rights. In the event the Company shall effect an
offering of Common Stock pro rata among its stockholders, the holder hereof
shall be entitled, at its option, to elect to participate in each and every such
offering as if this Warrant had been exercised and such holder were, at the time
of any such rights offering, then a holder of that number of shares of Common
Stock to which such holder is then entitled on the exercise hereof.
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{PRIVATE } Preemptive.
General. Subject to the provisions of Section 4.3(b)
hereof, (i) the Company shall notify in writing the Holder of this Warrant or
holder of shares of Warrant Stock issued upon the exercise of this Warrant
(each, a "Preemptive Rights Offeree") of any issuance or sale of Additional
Shares of Common Stock or Convertible Securities and (ii) each Preemptive Rights
Offeree shall, upon the issuance or sale by the Company of Additional Shares of
Common Stock or Convertible Securities, have the right, during the period
beginning at such issuance or sale and ending on the thirtieth (30th) day
following the receipt by the Preemptive Rights Offeree of such notification and
on the same terms and conditions as such issuance or sale, to purchase
additional shares of Common Stock of the Company sufficient to maintain the
percentage of the Fully Diluted Outstanding shares of Common Stock which such
Preemptive Rights Offeree owns, or would be entitled to purchase upon the
exercise of this Warrant (regardless of whether this Warrant is then
exercisable), determined immediately prior to such issuance or sale.
Exceptions to Preemptive Rights. Notwithstanding the
provisions of Section 4.3(a) hereof, the Company shall not be required to
provide the notice or grant the rights provided for in Section 4.3(a) in
connection with:
issuances or sales of Common Stock upon the exercise of
this Warrant;
the issuance of shares of Common Stock pursuant to a
rights offering in which the holder hereof elects to participate under the
provisions of Section 4.2;
the issuance or sale of Common Stock or Convertible
Securities in connection with the acquisition by the Company of a business,
which issuance or sale has been approved by a unanimous vote of the Board of
Directors of the Company; or
the issuance or sale of Excluded Shares.
{PRIVATE } Certificates and Notices.
Adjustments to Current Warrant Price. Upon any adjustment
of the Current Warrant Price, a certificate, signed (i) by the Chairman, the
President or a Vice President and by the Treasurer or an Assistant Treasurer or
the Secretary or an Assistant Secretary of the Company, or (ii) by any
independent firm of certified public accountants of recognized national standing
selected by, and at the expense of, the Company, setting forth in reasonable
detail the events requiring the adjustment and the method by which such
adjustment was calculated, shall be mailed to the holder of this Warrant
specifying the adjusted Current Warrant Price and the number of shares of Common
Stock issuable upon exercise of such holder's Warrant after giving effect to the
adjustment of such number pursuant to subsection (b) of Section 4.1.
Extraordinary Corporate Events. In case at any time while
this Warrant is Outstanding, (i) the Company proposes to pay any dividend
payable in stock to the holders of shares of Common Stock or to make any other
distribution to the holders of shares of Common Stock; (ii) the Company proposes
to offer to the holders of shares of Common Stock rights to subscribe for or
purchase any additional shares of any class of stock or any other rights or
options; (iii) the Company proposes to effect any reclassification of Common
Stock (other than a reclassification involving merely the subdivision or
combination of outstanding shares of Common Stock); (iv) the Company proposes to
effect any capital reorganization, consolidation or merger; (v) the Company
proposes to effect any sale, transfer or other disposition of its property,
assets and business as an entirety or substantially as an entirety; (vi) the
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Company proposes to commence the liquidation, dissolution or winding up of the
Company; or (vii) the Company proposes to issue to any person or persons any
options or other rights to subscribe for or to purchase shares of Common Stock
or any Convertible Securities which would cause such acquiror or acquirors,
collectively, to own, and/or to have the right to obtain ownership, upon
exercise of such options or other rights or upon conversion or exchange of such
Convertible Securities, of an aggregate of 50% or more of the then Fully Diluted
Outstanding shares of Common Stock of the Company; or (viii) any action or
transaction giving rise to a Put right is proposed to occur, then, in each such
case, the Company shall mail to the Holder of this Warrant notice of such
proposed action, which shall specify the date on which the books of the Company
shall close, or a record shall be taken, for determining the holders of Common
Stock entitled to receive such stock dividends or other distribution or such
rights or options, or the date on which such reclassification, reorganization,
consolidation, merger, sale, transfer, other disposition, liquidation,
dissolution, winding up, issuance, sale or other transfer or action shall take
place or commence, as the case may be, and the date as of which it is expected
that holders of Common Stock of record shall be entitled to receive securities
or other property deliverable upon such action, if any such date is to be fixed.
In the case of any action covered by clause (i) or (ii) above, such notice shall
be mailed at least ten (10) days prior to the record date for determining
holders of Common Stock for purposes of receiving such payment or offer. In the
case of any action covered by clause (iii), (iv), (v), (vi) or (vii), such
notice shall be mailed at least thirty (30) days prior to the date upon which
such action takes place or commences, as the case may be, and twenty (20) days
prior to any record date to determine holders of Common Stock entitled to
receive any such securities or other property, and each such notice shall
provide full particulars regarding such action.
Effect of Failure. Failure to file any certificate or
notice or to mail any notice, or any defect in any certificate or notice,
pursuant to this Section 4.4 shall not affect the legality or validity of the
adjustment of the Current Warrant Price, the number of shares of Common Stock
purchasable upon exercise of this Warrant, or any transaction giving rise
thereto.
{PRIVATE }NO IMPAIRMENT; REGULATORY COMPLIANCE COOPERATION; FURTHER
ASSURANCES.
The Company shall not by any action, including, without limitation,
amending its charter documents or through any reorganization, reclassification,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other similar 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 actions as may be necessary or appropriate to protect the
rights of the Holder against impairment. Without limiting the generality of the
foregoing, the Company will (a) not increase the par value (if any) of any
shares of Common Stock issuable upon the exercise of this Warrant above the
amount payable therefor upon such exercise immediately prior to such increase in
par value, (b) take all such action as may be necessary or appropriate in order
that the Company may validly and legally issue fully paid and nonassessable
shares of Common Stock upon the exercise of this Warrant, free and clear of all
Liens (other than those created by actions of the Holder), (c) use its best
efforts to obtain all such authorizations, exemptions or consents from any
Governmental Authority as may be necessary to enable the Company to perform its
obligations under this Warrant and (d) execute, acknowledge and deliver such
other further agreements, instruments and documents and do such further acts as
may be necessary to preserve and maintain in full force and effect this Warrant
and the rights of the Holder herein and to carry out more effectively the
provisions and purposes of this Warrant.
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{PRIVATE } RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION WITH
OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY.
From and after the Original Issue Date, the Company shall at all times
reserve and keep available for issuance upon the exercise of the Warrants such
number of its authorized but unissued shares of Common Stock, free from
preemptive rights, as will be sufficient to permit the exercise in full of all
outstanding Warrants. All shares of Common Stock issuable pursuant to the terms
hereof, when issued upon exercise of this Warrant with payment therefor in
accordance with the terms hereof, shall be duly and validly issued and fully
paid and nonassessable, not subject to preemptive rights and shall be free and
clear of all Liens other than those created by actions of the Holder.
Before taking any action that would result in an adjustment in the
number of shares of Common Stock for which this Warrant is exercisable or in the
Current Warrant Price, the Company shall obtain all such authorizations or
exemptions thereof, or consents thereto, as may be necessary from any
Governmental Authority.
If any shares of Common Stock required to be reserved for issuance
upon exercise of Warrants require registration or qualification with any
Governmental Authority under any federal or state law (otherwise than as
provided in Section 8) before such shares may be so issued, the Company will in
good faith and as expeditiously as possible and at its expense endeavor to cause
such shares to be duly registered.
{PRIVATE } TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS.
In the case of all dividends or other distributions by the Company to
the holders of its Common Stock with respect to which any provision of any
Section hereof refers to the taking of a record of such holders, the Company
will in each such case take such a record and will take such record as of the
close of business on a Business Day. The Company will not at any time, except
upon dissolution, liquidation or winding up of the Company, close its stock
transfer books or warrant transfer books so as to result in preventing or
delaying the exercise or transfer of any Warrant.
{PRIVATE } TRANSFER AND REGISTRATION.
The Holder, by acceptance of this Warrant, agrees to be bound by the
provisions of this Section 8.
{PRIVATE } Restrictive. (a) Except as otherwise provided in this
Section 8, each certificate for Warrant Stock initially issued upon the exercise
of this Warrant, and each certificate for Warrant Stock issued to any subsequent
transferee of any such certificate, shall be stamped or otherwise imprinted with
four legends in substantially the following forms:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR
ANY STATE SECURITIES LAW. NO TRANSFER OF THE SHARES REPRESENTED BY
THIS CERTIFICATE TO A PERSON OTHER THAN AN AFFILIATE OF THE HOLDER
THEREOF SHALL BE VALID OR EFFECTIVE UNLESS (A) SUCH TRANSFER IS MADE
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT, AND IN COMPLIANCE WITH ANY APPLICABLE STATE SECURITIES LAWS OR
(B) THE HOLDER OF THE SECURITIES PROPOSED TO BE TRANSFERRED SHALL HAVE
DELIVERED TO THE COMPANY EITHER A NO ACTION LETTER FROM THE SECURITIES
AND EXCHANGE COMMISSION OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY TO THE EFFECT THAT SUCH PROPOSED TRANSFER
IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
OF ANY APPLICABLE STATE SECURITIES LAWS OR (C) SUCH TRANSFER IS
PURSUANT TO RULE 144 OR RULE 144A UNDER THE SECURITIES ACT AND SUCH
HOLDER(S) SHALL HAVE DELIVERED TO THE COMPANY A CERTIFICATE IN FORM
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AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY SETTING FORTH THE
BASIS FOR APPLYING ANY SUCH RULE TO THE PROPOSED TRANSFER.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE ENTITLED TO THE BENEFIT
OF AND ARE SUBJECT TO THE OBLIGATIONS AND RESTRICTIONS CONTAINED IN
THE WARRANT, PURSUANT TO THE EXERCISE OF WHICH SUCH SHARES WERE
ISSUED. A COPY OF SUCH WARRANT IS ON FILE AND AVAILABLE AT THE
OFFICES OF THE COMPANY. ANY PERSON WHO PURCHASES OR ACQUIRES SUCH
SHARES ACCEPTS SUCH SHARES SUBJECT TO SUCH CONDITIONS.
THE COMPANY WILL MAIL TO THE HOLDERS OF THE SHARES EVIDENCED BY THIS
CERTIFICATE, WITHOUT CHARGE, A COPY OF THE EXPRESS TERMS OF THE SHARES
REPRESENTED BY THIS CERTIFICATE AND OF THE DIFFERENT CLASSES OF SHARES
OR DIFFERENT SERIES WITHIN A CLASS, THE DESIGNATIONS, RELATIVE RIGHTS,
PREFERENCES, AND LIMITATIONS APPLICABLE TO EACH CLASS AND THE
VARIATIONS IN RIGHTS, PREFERENCES, AND LIMITATIONS DETERMINED FOR EACH
SERIES, AND THE AUTHORITY OF THE BOARD OF DIRECTORS TO DETERMINE
VARIATIONS FOR FUTURE SERIES, WITHIN FIVE (5) DAYS AFTER RECEIPT OF A
WRITTEN REQUEST THEREFOR.
THE SHARES OF STOCK EVIDENCED BY THIS CERTIFICATE MAY BE TRANSFERRED
BY THE OWNER HEREOF ONLY BY FULLY COMPLYING WITH THE SHAREHOLDERS
AGREEMENT DATED , 1996, TOGETHER WITH ANY AMENDMENTS
THERETO, A COPY OF WHICH IS ON FILE IN THE OFFICE OF THE CORPORATION.
ANY PERSON WHO PURCHASES OR ACQUIRES SUCH SHARES OF STOCK IN THIS
CORPORATION (INCLUDING BY GIFT OR BY PLEDGE) ACCEPTS SUCH SHARES OF
STOCK SUBJECT TO SUCH CONDITIONS.
Except as otherwise provided in this Section 8, each Warrant
shall be stamped or otherwise imprinted with a legend in substantially the
following form:
NEITHER THE WARRANT REPRESENTED BY THIS CERTIFICATE NOR ANY OF THE
SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
STATE SECURITIES LAW. NO TRANSFER OF THE WARRANT REPRESENTED BY THIS
CERTIFICATE OR OF THE SECURITIES ISSUABLE UPON EXERCISE THEREOF TO A
PERSON OTHER THAN AN AFFILIATE OF THE HOLDER THEREOF SHALL BE VALID OR
EFFECTIVE UNLESS (A) SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND IN COMPLIANCE WITH
ANY APPLICABLE STATE SECURITIES LAWS OR (B) THE HOLDER OF THE
SECURITIES PROPOSED TO BE TRANSFERRED SHALL HAVE DELIVERED TO THE
COMPANY EITHER A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE
COMMISSION OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
COMPANY TO THE EFFECT THAT SUCH PROPOSED TRANSFER IS EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND OF ANY APPLICABLE
STATE SECURITIES LAWS OR (C) SUCH TRANSFER IS PURSUANT TO RULE 144 OR
RULE 144A UNDER THE SECURITIES ACT AND SUCH HOLDER(S) SHALL HAVE
DELIVERED TO THE COMPANY A CERTIFICATE IN FORM AND SUBSTANCE
REASONABLY SATISFACTORY TO THE COMPANY SETTING FORTH THE BASIS FOR
APPLYING ANY SUCH RULE TO THE PROPOSED TRANSFER.
{PRIVATE } Transfers. Neither this Warrant nor any shares of
Restricted Common Stock issued upon the exercise hereof shall be Transferred
other than pursuant to the terms hereof, the Shareholders Agreement, an
effective registration statement under the Securities Act and any applicable
State Acts or an exemption from the registration provisions thereof. Each
certificate, if any, evidencing such shares of Restricted Common Stock issued
upon any such Transfer, other than in a public offering pursuant to an effective
registration statement, shall bear the first restrictive legend set forth in
Section 8.1(a), and each Warrant issued upon such Transfer shall bear the
restrictive legend set forth in Section 8.1(b), unless in the Opinion of Counsel
to the Holder such legend is not required for the purposes of compliance with
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the Securities Act and any applicable State Acts. Holders of the Warrants or
the Restricted Common Stock, as the case may be, shall not be entitled to
Transfer such Warrants or such Restricted Common Stock except in accordance with
this Section 8.2.
{PRIVATE } Termination of Securities Law Restrictions.
Notwithstanding the foregoing provisions of Section 8, the restrictions imposed
by Section 8.2 upon the transferability of the Warrants and the Restricted
Common Stock and the legend requirements of Section 8.1 shall terminate as to
any particular Warrant or share of Restricted Common Stock when the Company
shall have received either a no-action letter from the Commission or an Opinion
of Counsel reasonably satisfactory to the Company that such legend is not
required in order to ensure compliance with the Securities Act. Whenever the
restrictions imposed by Sections 8.1 and 8.2 shall terminate as to this Warrant,
as hereinabove provided, the Holder hereof shall be entitled to receive from the
Company, at the expense of the Company, a new Warrant bearing the following
legend in place of the restrictive legend set forth hereon:
THE RESTRICTIONS ON TRANSFERABILITY OF THE WITHIN WARRANT CONTAINED IN
SECTIONS 8.1 AND 8.2 HEREOF TERMINATED ON , 19 , AND
ARE OF NO FURTHER FORCE OR EFFECT.
All Warrants issued upon registration or transfer, division or combination of,
or in substitution for, any Warrant or Warrants entitled to bear such legend
shall have a similar legend endorsed thereon. Wherever the restrictions imposed
by Sections 8.1 and 8.2 shall terminate as to any share of Restricted Common
Stock, as hereinabove provided, the holder thereof shall be entitled to receive
from the Company, at the Company's expense, a new certificate representing such
Common Stock not bearing the restrictive legend set forth in Section 8.1(a).
{PRIVATE } Listing on Securities Exchange. If the Company shall
list any shares of Common Stock on any securities exchange or on NASDAQ, it
will, at its expense, list thereon, maintain and, when necessary, increase such
listing of, all shares of Warrant Stock issued upon the exercise of this
Warrant.
{PRIVATE } Nominees for Beneficial Owners. In the event that any
Warrant Stock is held by a nominee for the beneficial owner thereof, the
beneficial owner thereof may, at its election, be treated as the holder of such
Warrant Stock for purposes of any request or other action by any holder or
holders of Warrant Stock pursuant to this Agreement or any determination of any
number or percentage of shares of Warrant Stock held by any holder or holders of
Warrant Stock contemplated by this Agreement. If the beneficial owner of any
Warrant Stock so elects, the Company may require assurances reasonably
satisfactory to it of such owner's beneficial ownership of such Warrant Stock.
{PRIVATE } SUPPLYING INFORMATION.
The Company shall cooperate with each holder of a Warrant and each
holder of Warrant Stock in supplying such information as may be reasonably
necessary for such holder to complete and file any information reporting forms
presently or hereafter required by the Commission or any state securities
commissioner as a condition to the availability of an exemption from the
Securities Act or any applicable state securities law for the sale of any
Warrant or shares of Warrant Stock. At all times following the completion of an
initial public offering of shares of Common Stock of the Company, the Company
shall use its best efforts to make public information available so as to afford
the holders of the Warrants and the Warrant Stock the benefits of Rule 144 of
the Commission in connection with resales, as such Rule may be amended from time
to time or any similar rule or regulation hereafter adopted by the Commission.
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{PRIVATE } LOSS OR MUTILATION.
Upon receipt by the Company from any Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and an indemnity reasonably satisfactory to it (it
being understood that the written indemnification agreement of BOCP or any
Affiliate thereof shall be a sufficient indemnity) and, in case of mutilation,
upon surrender and cancellation hereof, the Company will execute and deliver in
lieu hereof a new Warrant of like tenor to such Holder; provided, however, in
the case of mutilation, no indemnity shall be required if this Warrant in
identifiable form is surrendered to the Company for cancellation.
{PRIVATE } OFFICE OF THE COMPANY.
As long as any of the Warrants remain outstanding, the Company shall
maintain an office or agency, which may be the principal executive offices of
the Company (the "Designated Office"), where the Warrants may be presented for
exercise, registration of transfer, division or combination as provided in this
Warrant. Such Designated Office shall initially be the office of the Company at
30941 Suneagle Drive, Mt. Dora, Florida 32757; thereafter, such office shall be
the office of the Company or of an agency designated by the Company in a notice
delivered to the registered holders of all Warrants.
{PRIVATE } REPURCHASE BY THE COMPANY OF WARRANT AND WARRANT STOCK.
{PRIVATE } Obligation to Repurchase Warrant or Warrant Stock. The
Holder of this Warrant and holder of shares of Warrant Stock issued upon
exercise of this Warrant shall have the right to require the Company to
repurchase such Warrant or shares of Warrant Stock in accordance with the terms
of this Section 12.1 and of Section 12.2 (such rights are sometimes referred to
herein as a "Put"). From time to time during the Repurchase Period, the Company
shall, upon written notice from the Holder of this Warrant or a holder of shares
of Warrant Stock issued upon the exercise of this Warrant (the "Repurchase
Notice"), and subject to the provisions of Section 12.2(b) below, repurchase, on
the date and in the manner set forth in Section 12.2 below, from such holder:
all or the portion of this Warrant (exceeding 10% or,
if less than 10%, the entire remainder) designated in such notice for an amount
determined by multiplying (A) the number of shares of Warrant Stock then
purchasable upon exercise of this Warrant (or the portion thereof designated by
the Holder to be repurchased in such notice) by (B) the difference between (I)
the Fair Value per share of Common Stock as of the date of such notice and (II)
the Current Warrant Price per share of Common Stock as of the date of such
notice; and/or
the number of shares of Warrant Stock held by such
holder and designated in such notice for an amount determined by multiplying (A)
the number of shares so designated by (B) the Fair Value per share of Common
Stock as of the date of such notice;
such amount being herein referred to as the "Repurchase Price." Nothing herein
shall preclude the exercise by the Holder of any portion of this Warrant
exercisable at any time prior to any repurchase hereunder.
{PRIVATE } Determination and Payment of Repurchase Price. The
Repurchase Price for any repurchase of Warrants or of Warrant Stock pursuant to
Section 12.1 shall be determined within sixty (60) days of the date of the
Repurchase Notice (with a notice as to any such Repurchase Price being
telecopied to any holder giving such a Repurchase Notice immediately upon
determination thereof), and shall be payable within thirty (30) days following
the date of such determination of the Repurchase Price. On the date of any
repurchase of any portion of this Warrant pursuant to Section 12.1, the Holder
shall assign to the Company such Warrant or portion thereof being repurchased,
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as the case may be, without any representation or warranty (except as to title),
by the surrender of such Warrant at the Designated Office against payment of the
Repurchase Price therefor. On the date of any repurchase pursuant to Section
12.1 of any shares of Warrant Stock issued upon the exercise hereof, each holder
thereof shall transfer to the Company the shares of Warrant Stock being
repurchased, without representation or warranty (except as to title), by the
surrender of a certificate or certificates representing such shares duly
endorsed for transfer or accompanied by a duly-executed stock power against
payment of the Repurchase Price therefor. Payment of the Repurchase Price shall
be made in the following order of priority (a) cash, delivered by means of wire
transfer to an account in a bank located in the United States designated by such
holder for such purpose or a certified or official bank check payable to the
order of such holder, to the extent that the repurchase does not result in the
Company's having a ratio of the sum of long term liabilities, the current
portion of long term Indebtedness and short term Indebtedness to financial
institutions for borrowed money to common stockholder's equity (determined in
accordance with GAAP, consistently applied) in excess of three to one (3:1), (b)
by delivery of shares of Restricted Common Stock provided that there shall first
have been a Qualifying Public Offering and/or (c) by delivery of a promissory
note (i) requiring payment of principal in twenty (20) equal quarterly
installments, (ii) requiring quarterly payment of interest on the unpaid
principal balance at a rate equal to two percent (2%) in excess of the prime
rate announced by Key Bank (Cleveland, Ohio) or its successor from time to time,
changing when and as such prime rate changes (subject, however, to the maximum
rate permitted by applicable law), (iii) which is secured by all of the shares
of Warrant Stock being repurchased (or which would have been repurchased in the
event the Warrant itself is repurchased) and (iv) which is not subordinated to
any other Indebtedness of the Company other than that owing to Senior Lenders;
provided, however, that any subordination of indebtedness shall be on terms
substantially equivalent to those set forth in the Subordination Agreement
referred to in the Series A Note. If less than all of this Warrant is being
repurchased, the Company shall, pursuant to Section 3, cancel such Warrant and
issue in the name of, and deliver to, the Holder hereof a new Warrant for the
portion not being repurchased, and if less than all the shares of Warrant Stock
represented by any certificate are being repurchased, the Company shall issue a
new certificate to the holder representing the shares not being repurchased.
Option to Redeem Warrant or Warrant Stock. The Company shall
have the right to redeem from the Holder of this Warrant and the holders of
shares of Warrant Stock issued upon exercise of this Warrant such Warrant or
shares of Warrant Stock in accordance with the terms of this Section 12.3 and of
Section 12.4 (such rights are sometimes referred to herein as a "Call"). From
time to time during the Early Redemption Period or Redemption Period (whichever
is applicable), the Company shall, upon written notice to the Holder of this
Warrant or a holder of shares of Warrant Stock issued upon the exercise of this
Warrant (the "Redemption Notice"), redeem, on the date and in the manner set
forth in Section 12.4 below, from such holder:
all or the portion of this Warrant designated in such
notice for an amount determined by multiplying (A) the number of shares of
Warrant Stock then purchasable upon exercise of this Warrant (or the portion
thereof designated by the Holder to be repurchased in such notice) by (B) the
difference between (I) the Fair Value per share of Common Stock as of the date
of such notice and (II) the Current Warrant Price per share of Common Stock as
of the date of such notice; and/or
the number of shares of Warrant Stock held by such
holder and designated in such notice for an amount determined by multiplying (A)
the number of shares so designated by (B) the Fair Value per share of Common
Stock as of the date of such notice;
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such amount being herein referred to as the "Redemption Price." Nothing herein
shall preclude the exercise by the Holder of any portion of this Warrant
exercisable at any time prior to any repurchase hereunder.
Determination and Payment of Redemption Price. The Redemption
Price for any redemption of Warrants or of Warrant Stock pursuant to Section
12.3 shall be determined within sixty (60) days of the date of the Redemption
Notice (with a notice as to any such Redemption Price being telecopied to any
holder being given such a Redemption Notice immediately upon determination
thereof), and shall be payable within thirty (30) days following the date of
such determination of the Redemption Price. On the date of any redemption of
any portion of this Warrant pursuant to Section 12.3, the Holder shall assign to
the Company such Warrant or portion thereof being repurchased, as the case may
be, without any representation or warranty (except as to title), by the
surrender of such Warrant at the Designated Office against payment of the
Redemption Price therefor. On the date of any redemption pursuant to Section
12.3 of any shares of Warrant Stock issued upon the exercise hereof, each holder
thereof shall transfer to the Company the shares of Warrant Stock being
repurchased, without representation or warranty (except as to title), by the
surrender of a certificate or certificates representing such shares duly
endorsed for transfer or accompanied by a duly-executed stock power against
payment of the Redemption Price therefor. Payment of the Redemption Price shall
be made at the option of the holder of such Warrant or shares of Warrant Stock
by (i) wire transfer to an account in a bank located in the United States desig-
nated by such holder for such purpose or (ii) a certified or official bank check
payable to the order of such holder. If less than all of this Warrant is being
redeemed, the Company shall, pursuant to Section 3, cancel such Warrant and
issue in the name of, and deliver to, the Holder hereof a new Warrant for the
portion not being redeemed, and if less than all the shares of Warrant Stock
represented by any certificate are being redeemed, the Company shall issue a new
certificate to the holder representing the shares not being redeemed.
REGISTRATION RIGHTS, ETC.
Requested Registration.
Request for Registration. If at any time the Company shall
receive from Initiating Registrable Securityholders a written request that the
Company effect a registration with respect to all or a part of the Registrable
Securities, the Company will:
promptly give written notice of the proposed registration to all
other Registrable Securityholders; and
as soon as practicable, use its diligent best efforts to effect
such registration (including, without limitation, the execution of an
undertaking to file post-effective amendments, appropriate qualification
under applicable State Acts and appropriate compliance with applicable
regulations issued under the Securities Act) as may be so requested and as
would permit or facilitate the sale and distribution of all or such portion
of such Registrable Securities as are specified in such request, together
with all or such portion of the Registrable Securities of any Registrable
Securityholder or Registrable Securityholders joining in such request as
are specified in a written request given by such Registrable Securityholder
or Registrable Securityholders within thirty (30) days after receipt of
such written notice from the Company; provided , however , that the
Company shall not be obligated to effect, or to take any action to effect,
any such registration pursuant to this Section 13.1:
(A) after the Company has effected one (1) such
registration pursuant to this Section 13.1(a) and such registration
has been declared or ordered effective;
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(B) prior to the date five years from the date of initial
issuance of this Warrant;
(C) if the request for registration does not request the
registration of twenty percent (20%) or more of the Warrant Shares;
(D) if the request for registration is made within sixty
(60) days prior to the Company's estimated date of a filing of a
registration statement under the Securities Act, provided the Company
actively and in good faith employs all reasonable efforts to cause
such registration statement to become effective and complies with its
obligations under Section 13.2 below;
(E) unless the Company otherwise consents, if the Company
has not, at least two hundred seventy (270) days prior thereto,
already effected a registration under the Securities Act or is not
otherwise subject to the reporting provisions of the Exchange Act.
The registration statement filed pursuant to the request of the
Initiating Registrable Securityholders may, subject to the provisions of Section
13.1(b) below, include other securities of the Company that are held by officers
or directors of the Company or that are held by parties who, by virtue of
agreements with the Company, are entitled to include their securities in any
such registration.
Underwriting. If the Initiating Registrable Securityholders
intend to distribute the Registrable Securities covered by their request by
means of an underwriting, they shall so advise the Company as a part of their
request made pursuant to this Section 13.1 and the Company shall include such
information in the written notice required by Section 13.1(a)(i) above. The
right of any Registrable Securityholder to registration pursuant to this Section
13.1 shall be conditioned upon such Registrable Securityholder's participation
in such underwriting and the inclusion of such Registrable Securityholder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Initiating Registrable Securityholders and such
Registrable Securityholder) to the extent provided herein. If holders of
securities of the Company who are entitled, by agreement with the Company, to
have securities included in such registration (the "Other Securityholders")
request such inclusion, the Initiating Registrable Securityholders shall, on
behalf of all Registrable Securityholders, offer to include the securities of
such Other Securityholders in the underwriting and may condition such offer on
their acceptance of all applicable provisions of this Section 13. The Company
shall (together with all Registrable Securityholders and Other Securityholders
proposing to distribute their securities through such underwriting) enter into
an underwriting agreement in customary form with the representatives of the
underwriter or underwriters selected for such underwriting by the Company and
reasonably acceptable to a majority in interest of the Initiating Registrable
Securityholders. Notwithstanding any other provision of this Section 13.1, if
the representatives of the underwriter or underwriters determine that marketing
factors make it advisable to impose a limitation on the number of shares to be
underwritten, the securities of the Company (other than Registrable Securities)
held by Other Securityholders shall be excluded from such registration to the
extent so required by such limitation and if a limitation of the number of
shares is still required, the Initiating Registrable Securityholders shall so
advise all Holders of Registrable Securities whose securities would otherwise be
registered pursuant hereto, and the number of shares of Registrable Securities
that may be included in the registration and underwriting shall be allocated
among all such Registrable Securityholders in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities that they had
requested to be included in such registration at the time of filing the
registration statement. If any Registrable Securityholder or Other
Securityholder disapproves of the terms of any such underwriting, he may elect
to withdraw therefrom by written notice to the Company, the representatives of
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the underwriter or underwriters and the Initiating Registrable Securityholders.
The securities so withdrawn shall also be withdrawn from registration. If the
representatives of the underwriter or underwriters have not limited the number
of Registrable Securities or other securities to be underwritten, the Company
may include its securities for its own account in such registration if the
representatives of the underwriter or underwriters so agree and if the number of
Registrable Securities and other securities which would otherwise have been
included in such registration and underwriting will not thereby be limited.
Company Registration.
Notice of Registration. If the Company shall determine to
register any of its securities either for its own account or for the account of
a security holder or holders, other than a registration relating solely to
employee benefit or stock option plans, a registration relating solely to
securities to be issued in connection with the acquisition of any entity or
business, a registration relating solely to a Commission Rule 145 transaction,
or a registration on any registration form that does not permit secondary sales,
the Company will:
promptly give written notice of the proposed registration to
the Holder and each Registrable Securityholder (which shall include a
list of the jurisdictions in which the Company intends to attempt to
qualify such securities under the applicable State Acts); and
include in such registration (and any related qualification
under the applicable State Acts or other compliance), and in any
underwriting involved therein, all the Registrable Securities
specified in a written request or requests, made by any Registrable
Securityholder within fifteen (15) days after receipt of the written
notice from the Company described in clause (i) above, except as set
forth in Section 13.2(b) below.
Underwriting. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Registrable Securityholders as part of the written
notice given pursuant to Section 13.2(a)(i). In such event, the right of any
Registrable Securityholder to registration pursuant to this Section 13.2 shall
be conditioned upon such Registrable Securityholder's participation in such
underwriting and the inclusion of such Registrable Securityholder's Registrable
Securities in the underwriting to the extent provided herein. All Registrable
Securityholders proposing to distribute their securities through such
underwriting shall (together with the Company and the Other Securityholders
proposing to distribute their securities through such underwriting) enter into
an underwriting agreement in customary form with the representatives of the
underwriter or underwriters selected for such underwriting by the Company.
Notwithstanding any other provision of this Section 13.2, if the representatives
of the underwriter or underwriters determine that marketing factors make it
advisable to impose a limitation on the number of shares to be underwritten, the
representatives of the underwriter or underwriters may exclude from such
registration and underwriting some or all of the Registrable Securities that
would otherwise be registered pursuant hereto, and the number of shares that may
be included in the registration and underwriting on behalf of such Registrable
Securityholders and Other Securityholders shall be allocated among such
Registrable Securityholders and Other Securityholders in proportion, as nearly
as practicable, to the respective amounts of Registrable Securities and other
securities that they had requested to be included in such registration at the
time of filing the registration statement. If any Registrable Securityholder or
any Other Securityholder disapproves of the terms of any such underwriting, he
may elect to withdraw therefrom by written notice to the Company and the
representatives of the underwriter or underwriters.
-21-
Registration on Form S-2 or Form S-3. The Company shall use its
best efforts to qualify for the use of Form S-2 and Form S-3 or any comparable
or successor form or forms of the Commission; and to that end the Company shall
register (whether or not required by law to do so) the Common Stock under the
Exchange Act, in accordance with the provisions of the Exchange Act and rules
and regulations thereunder following the effective date of the first
registration of any securities of the Company on Form S-1 or Form S-18 or any
comparable or successor form or forms of the Commission.
Expenses of Registration. The Company shall bear all Registration
Expenses incurred in connection with any registration, qualification and
compliance by the Company pursuant to Sections 13.1, 13.2 and 13.3 hereof. All
Selling Expenses shall be borne by the holders of the securities so registered
pro rata on the basis of the number of their shares so registered.
Registration Procedures. In the case of each registration effected by
the Company pursuant to this Section 13, the Company will keep each Registrable
Securityholder advised in writing as to the initiation of each registration and
as to the completion thereof. The Company will:
(a) to the extent allowed by the Securities Act and the rules and
regulations of the Commission, keep such registration effective for a period of
sixty (60) days or until the Registrable Securityholder or Registrable
Securityholders have completed the distribution described in the registration
statement, whichever first occurs;
(b) furnish such number of prospectuses and other documents incident
thereto as a Registrable Securityholder from time to time may reasonably
request; and
(c) use its best efforts to register or qualify the Registrable
Securities under the State Acts of such jurisdictions as any Registrable
Securityholder may reasonably request; provided, however, that the Company shall
not be obligated to register or qualify such Registrable Securities in any
particular jurisdiction in which the Company would be required to execute a
general consent to service of process in order to effect such registration,
qualification or compliance, unless the Company is already subject to service in
such jurisdiction and except as may be required by the Securities Act or
applicable rules or regulations thereunder.
-22-
Indemnification .
(a) The Company, with respect to each registration, qualification or
compliance effected pursuant to this Section 13, will defend, indemnify and hold
harmless each Registrable Securityholder, each of its officers, directors or
partners, and each party controlling such Registrable Securityholder, and each
underwriter, if any, and each party controlling any such 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 such registration statement, prospectus,
offering circular or other such material documents (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) of 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 Act or any rule or regulation thereunder applicable
to the Company and relating to an action or inaction required of the Company in
connection with any such registration, qualification or compliance, and will
reimburse such Registrable Securityholders, officers, directors, partners,
underwriters or control persons for any legal and other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action; provided , however, that the Company will not be
liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any such untrue statement (or
alleged untrue statement) or omission (or alleged omission) based solely upon
written information furnished to the Company by such Registrable Securityholder
or underwriter, as the case may be, and stated to be specifically for use
therein.
(b) Each Registrable Securityholder and Other Securityholder will, if
Registrable Securities held by him are included in the securities as to which
such registration, qualification or compliance is being effected, defend,
indemnify and hold harmless the Company, each of its officers and directors and
each party controlling the Company, and each underwriter, if any, and each party
controlling any such 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 such registration statement, prospectus, offering circular or other such
material documents (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) of a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
any violation by the Registrable Securityholder or Other Securityholder of the
Securities Act or any State Act or any rule or regulation thereunder applicable
to the Registrable Securityholder or Other Securityholder and relating to an
action or inaction required of the Registrable Securityholder or Other
Securityholder in connection with any such registration, qualification or
compliance, and will reimburse the Company, such officers, directors,
underwriters or control persons for any legal and other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action, in each case only to the extent that any such
claim, loss, damage, liability or expense arises out of or is based on any such
untrue statement (or alleged untrue statement) or omission (or alleged omission)
based solely upon written information furnished to the Company by such
Registrable Securityholder or Other Securityholder, as the case may be, and
stated to be specifically for use therein; provided , however , that the
obligations of such Registrable Securityholders and Other Securityholders
hereunder shall be limited to an amount equal to the proceeds to each such
Registrable Securityholder or Other Securityholder of securities sold as
contemplated herein.
(c) Each party entitled to indemnification under this Section 13.6
(the "Indemnified Party") shall give notice to the party that allegedly is
-23-
obligated hereunder to indemnify the Indemnified Party (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 or any litigation resulting therefrom;
provided, however, 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 unreasonably be
withheld), and the Indemnified Party may participate in such defense at such
party's expense (unless the Indemnified Party shall have been advised by counsel
that actual or potential differing interests or defenses exist or may exist
between the Indemnifying Party and the Indemnified Party, in which case such
expense shall be paid by the Indemnifying Party); 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 Section 13.6. 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 that 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.
Information by Holder. Each holder of Registrable Securities, and
each Other Securityholder holding securities included in any registration, shall
furnish to the Company such information regarding such holder or Other
Registrable Securityholder 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 Section 13.
{PRIVATE } DILUTION FEE.
In the event that the Company at any time after the Original Issue
Date shall pay a dividend or make any other distribution with respect to its
Common Stock (or any other shares of the capital stock of the Company for which
this Warrant becomes exercisable pursuant to Section 4 above) in the form of
cash or other property (other than a stock dividend subject to the provisions of
Section 4.1 above), then the Holder of this Warrant shall be entitled to receive
a dilution fee (a "Dilution Fee") payable in cash on the date of payment of such
dividend or other distribution equal to the number of shares of Warrant Stock
(or such other shares of stock) issuable upon exercise of this Warrant on such
date multiplied by the amount of cash and the fair market value of any other
property distributed with respect to each share of Common Stock (or such other
stock). The fair market value of any such other property shall mean the fair
market value thereof, as determined by the Board of Directors of the Company in
good faith and supported, upon the request of the Majority Warrant Holders, and
at the expense of the Holders, by an opinion of an investment banking or
appraisal firm of recognized national standing selected by the Company and
reasonably acceptable to such Majority Warrant Holders.
{PRIVATE } MISCELLANEOUS.
{PRIVATE } Nonwaiver. No course of dealing or any delay or failure to
exercise any right hereunder on the part of the Company or the Holder shall
operate as a waiver of such right or otherwise prejudice the rights, powers or
remedies of such Person.
{PRIVATE } Notice Generally. All notices and other communications
provided for hereunder shall be in writing and mailed by certified mail, return
receipt requested, telecopied, telegraphed, telexed, cabled, or personally
delivered, at the addresses of the parties hereto (until notice of a change
thereof is delivered as provided herein) as set forth below each party's name as
set forth in Section 11.4 of the Stock Purchase Agreement. All such notices and
communications shall be effective three Business Days after being deposited in
the mails, or on the first Business Day following confirmation of receipt when
telecopied, telegraphed, telexed, cabled or personally delivered.
-24-
{PRIVATE } Indemnification. If the Company fails to make, when due,
any payments provided for in this Warrant, the Company shall pay to the holder
hereof (a) interest at the Default Rate on any amounts due and owing to such
holder or on such unpaid Repurchase Price and (b) such further amounts as shall
be sufficient to cover any costs and expenses including, but not limited to,
reasonable attorneys' fees and expenses incurred by such holder in collecting
any amounts due hereunder. The Company agrees to defend, protect, indemnify and
hold harmless the Holder hereof and its Affiliates and the holders of any
Warrant Stock issued upon the exercise hereof and their Affiliates and their
respective officers, directors, employees and agents from and against any and
all liabilities, obligations, losses, damages, penalties, actions, suits,
judgments, claims, costs, expenses and disbursements of any kind or nature
whatsoever (including, without limitation, the fees and disbursements of counsel
for such indemnified party) in connection with any investigative, administrative
or judicial proceedings (whether or not such indemnified party is a party
thereto) imposed on, incurred by, or asserted against such indemnified party
(whether direct, indirect or consequential) incurred in connection with or
arising from a Company Default.
{PRIVATE } Limitation of Liability. No provision hereof, in the
absence of affirmative action by the Holder to purchase shares of Common Stock,
and no enumeration herein of the rights or privileges of the Holder hereof,
shall give rise to any liability of such Holder for the purchase price of any
Common Stock or as a stockholder of the Company, whether such liability is
asserted by the Company or by creditors of the Company.
{PRIVATE } Remedies. Each holder of Warrants and/or Warrant Stock, in
addition to being entitled to exercise its rights granted by law, including
recovery of damages, shall be entitled to specific performance of its rights
provided under this Warrant. The Company agrees that monetary damages would not
be adequate compensation for any loss incurred by reason of a breach by it of
the provisions of this Warrant and hereby agrees, in an action for specific
performance, to waive the defense that a remedy at law would be adequate.
{PRIVATE } Successors and Assigns. This Warrant and the rights
evidenced hereby shall inure to the benefit of and be binding upon the Company
and the Holder and their respective successors and permitted assigns. The
provisions of this Warrant are intended to be for the benefit of all Holders
from time to time of this Warrant and to the extent applicable, all holders of
shares of Warrant Stock issued upon the exercise hereof (including transferees),
and shall be enforceable by any such holder. The Company shall not have the
right to assign any of its rights and obligations under this Warrant without the
prior written consent of the Holders.
{PRIVATE } Amendment. This Warrant and all other Warrants may be
modified or amended or the provisions hereof waived with the written consent of
the Company and the Majority Warrant Holders, provided that no such Warrant may
be modified or amended if the effect thereof is to (i) reduce the number of
shares of Common Stock for which such Warrant is exercisable, (ii) increase the
price at which such shares may be purchased upon exercise of such Warrant
(before giving effect to any adjustment as provided therein) or (iii) have a
material adverse affect on the rights the Holders without the written consent of
the holder thereof.
{PRIVATE } Severability. In case any provision in or obligation under
this Warrant shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or obligations
or of such provision or obligation in any other jurisdiction, shall not in any
way be affected or impaired thereby.
-25-
{PRIVATE } Headings. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
{PRIVATE } Governing Law. This Warrant shall be governed by, and
construed in accordance with, the laws of the State of Florida.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed and attested by its duly authorized officers.
ECB, INC.
ATTEST:
By:
- - ----------------------- ------------------------
Name:
Title:
Dated: , 1996
------------
88/HANDEX/18746YAF.939
-26-
ANNEX A
-----------
SUBSCRIPTION FORM
---------------------
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant for the purchase of Shares of Common Stock of ECB, Inc. and
herewith makes payment therefor, all at the price and on the terms and
conditions specified in this Warrant and requests that certificates for the
shares of Common Stock hereby purchased (and any securities or other property
issuable upon such exercise) be issued in the name of and delivered to
whose address is and, if
such shares of Common Stock shall not include all of the shares of Common Stock
issuable as provided in this Warrant, that a new Warrant of like tenor and date
for the balance of the shares of Common Stock issuable hereunder be delivered to
the undersigned.
----------------------------
(Name of Registered Owner)
----------------------------
(Signature of Registered Owner)
------------------------------------
(Street Address)
------------------------------------
(City) (State) (Zip Code)
88/HANDEX/18746YAF.939
ANNEX B
----------
ASSIGNMENT FORM
-------------------
FOR VALUE RECEIVED the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under this Warrant, with respect to the number of
shares of Common Stock set forth below:
No. of Shares
Name and Address of Assignee of Common Stock
-27-
- - ---------------------------- ----------------
and does hereby irrevocably constitute and appoint
attorney-in-fact to register such transfer onto the
books of ECB, Inc. maintained for the purpose, with full power of substitution
in the premises.
Dated: Print Name:
-------------- -----------------------
Signature:
-----------------------
Witness:
-----------------------
88/HANDEX/18746YAF.939
-28-
Exhibit 2.2(e){PRIVATE }
NEITHER THE WARRANT REPRESENTED BY THIS CERTIFICATE NOR ANY OF THE
SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
STATE SECURITIES LAW. NO TRANSFER OF THE WARRANT REPRESENTED BY THIS
CERTIFICATE OR OF THE SECURITIES ISSUABLE UPON EXERCISE THEREOF TO A
PERSON OTHER THAN AN AFFILIATE OF THE HOLDER THEREOF SHALL BE VALID OR
EFFECTIVE UNLESS (A) SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND IN COMPLIANCE WITH
ANY APPLICABLE STATE SECURITIES LAWS OR (B) THE HOLDER OF THE
SECURITIES PROPOSED TO BE TRANSFERRED SHALL HAVE DELIVERED TO THE
COMPANY EITHER A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE
COMMISSION OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
COMPANY TO THE EFFECT THAT SUCH PROPOSED TRANSFER IS EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND OF ANY APPLICABLE
STATE SECURITIES LAWS OR (C) SUCH TRANSFER IS PURSUANT TO RULE 144 OR
RULE 144A UNDER THE SECURITIES ACT AND SUCH HOLDER(S) SHALL HAVE
DELIVERED TO THE COMPANY A CERTIFICATE IN FORM AND SUBSTANCE
REASONABLY SATISFACTORY TO THE COMPANY SETTING FORTH THE BASIS FOR
APPLYING ANY SUCH RULE TO THE PROPOSED TRANSFER.
PAYMENTS UNDER THIS WARRANT OR WITH RESPECT TO THE SHARES ISSUED UPON
EXERCISE THEREOF ARE SUBJECT TO CERTAIN RESTRICTIONS IMPOSED BY THE
SUBORDINATION AGREEMENT DATED AMONG ECB, INC.,
HANDEX CORPORATION AND SOUTHTRUST BANK OF ALABAMA, N.A.
WARRANT B TO PURCHASE
85,000 SHARES OF COMMON STOCK OF
ECB, INC.
============
ORIGINAL ISSUE DATE: , 19
---------------------- -----
THIS IS TO CERTIFY THAT HANDEX CORPORATION, a Delaware corporation, or
registered assigns, is entitled, at any time during the Exercise Period (such
term, and certain other capitalized terms used herein being hereinafter
defined), to purchase from ECB, Inc., a corporation organized under the laws of
the State of Florida (the "Company"), Eighty-Five Thousand (85,000) shares
(subject to adjustment as provided herein) of Common Stock of the Company at a
per share purchase price equal to One Dollar and Sixty Cents ($1.60) (the
initial "Current Warrant Price," subject to adjustment as provided herein), all
on the terms and conditions and pursuant to the provisions hereinafter set
forth. This Warrant is issued pursuant to the Stock Purchase Agreement (as
defined herein).
-1-
{PRIVATE } "DEFINITIONS"
As used in this Warrant, the following terms have the respective
meanings set forth below:
"Additional Shares of Common Stock" shall mean all shares of Common
Stock issued by the Company after the Original Issue Date.
"Affiliate" shall mean, as applied to any Person, any other Person
that directly or indirectly controls, is controlled by, or is under common
control with, that Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling", "controlled by"
and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to vote fifty percent (50%) or
more of the securities having voting power for the election of directors of such
Person or otherwise to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities or
by contract or otherwise.
"Applicable Law" shall mean a statute, law (including common law),
treaty, rule, code, ordinance, regulation, permit, license, certificate, order,
judgment, decree, injunction, writ, or other binding determination or like
action of any Governmental Authority, as in effect from time to time.
"Book Value" per share of Common Stock as of any specified date shall
mean the consolidated book value of the Company and its Subsidiaries as of that
date, divided by the number of Fully Diluted Outstanding shares of Common Stock
as of such date. Such book value shall be determined in accordance with GAAP,
except that there shall be no reduction in such book value by reason of any
amount that may be required either as an offset to or reserve against retained
earnings or as a deduction from book value as a result of the existence,
issuance, anticipated exercise of or anticipated cost to the Company of the
repurchase of any of the Warrants.
"Business Day" shall mean a day of the year on which banks are not
required or authorized to close in Florida.
"Call" shall have the meaning set forth in Section 12.3 hereof.
"Change of Control" shall mean any event, including without limitation
an issuance or sale of Additional Shares of Common Stock or shares of any other
class or series of capital stock of the Company or Convertible Securities, that
would or could result in the owners or holders of shares of Common Stock on the
Original Issue Date (i) having the right to exercise less than fifty-one percent
(51%) of the total voting power of the Company for the election of directors
after such issuance or sale or (ii) owning in less than twenty-five percent
(25%) of the Fully Diluted Outstanding Shares of Common Stock.
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency then administering the Securities Act and other federal
securities laws.
"Common Stock" shall mean the Company's Common Shares, $.01 par value.
"Company" shall mean ECB, Inc., a corporation organized under the laws
of the State of Florida, and any successor corporation.
"Company Default" shall mean (a) the breach of any warranty or the
inaccuracy at the time when made of any representation made by the Company
herein or (b) the failure by the Company to comply with any covenant of the
Company contained herein.
-2-
"Consolidated" refers to the consolidation of the accounts of a Person
and its Subsidiaries in accordance with GAAP.
"Convertible Securities" shall mean evidences of indebtedness, shares
of stock or other securities that are convertible into or exchangeable for, with
or without payment of additional consideration in cash or property, or options,
warrants or other rights that are exercisable for, shares of Common Stock that,
when issued, would constitute Additional Shares of Common Stock, either
immediately or upon the occurrence of a specified date or a specified event.
"Current Warrant Price" shall mean, in respect of a share of Common
Stock at any date herein specified, the initial Current Warrant Price set forth
in the preamble of this Warrant as adjusted pursuant to Section 4 hereof.
"Designated Office" shall have the meaning set forth in Section 11
hereof.
"Dilution Fee" shall have the meaning set forth in Section 14 hereof.
"Discounted Earnings Value" shall mean an amount equal to (i) four (4)
times the Consolidated earnings of the Company and its Subsidiaries before
amortization, depreciation, interest and taxes for the preceding twelve months,
less outstanding Indebtedness and the redemption price of any shares of Series A
Preferred Stock of the Company then outstanding, plus the average amount of cash
and marketable securities of the Company for the preceding six months (using
month end balances to obtain such average), divided by (ii) the number of Fully
Diluted Outstanding shares of Common Stock, as of such date.
"Early Redemption Period" shall mean the ten (10) day period following
redemption by the Company at par of all 2,000 of its shares of Series A
Preferred Stock, provided such redemption occurs on or before April 15, 1998.
"Earnings Value" shall mean an amount equal to (i) four and one-half
(4.5) times the Consolidated earnings of the Company and its Subsidiaries before
amortization, depreciation, interest and taxes for the preceding twelve months,
less outstanding Indebtedness and the redemption price of any shares of Series A
Preferred Stock of the Company then outstanding, plus the average amount of cash
and marketable securities of the Company for the preceding six months (using
month end balances to obtain such average), divided by (ii) the number of Fully
Diluted Outstanding shares of Common Stock, as of such date.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
"Excluded Shares" shall mean (i) up to a total of 290,000 shares of
Common Stock issued by the Company either directly or pursuant to options to
senior management employees of the Company other than George Bannon and Roger
Eatman, on or before March 31, 1998 and having a price per share payable in cash
in full of not less than Eighty-Eight Cents ($0.88) per share and/or issued to
such employees after such date and having a price per share payable in cash in
full of not less than One Dollar Seventy-Five Cents ($1.75) per share, (ii) up
to a total of 90,000 shares of Common Stock issued by the Company either
directly or pursuant to options to middle management employees of the Company
and having a price per share payable in cash in full of not less than One Dollar
Seventy-Five Cents ($1.75) per share, and (iii) shares of Common Stock issued
pursuant to the Southcoast Warrant.
"Exercise Notice" shall have the meaning set forth in Section 2.1
hereof.
"Exercise Period" shall mean the period during which this Warrant is
exercisable pursuant to Section 2.1 hereof.
-3-
"Fair Value" per share of Common Stock as of any specified date shall
mean (i), if the Fair Value is being determined in connection with a Qualifying
Public Offering, the Public Offering Price per share of Common Stock as of such
date or (ii) otherwise, the higher of (A) seventy-five percent (75%) of the Book
Value as of the last day of the fiscal quarter last preceding the occurrence of
the event requiring such Fair Value to be determined, and (B) the Earnings Value
or Discounted Earnings Value (whichever applicable) per share of Common Stock as
of such date.
"Fully Diluted Outstanding" shall mean, when used with reference to
Common Stock, at any date as of which the number of shares thereof is to be
determined, all shares of Common Stock Outstanding at such date and the maximum
number of shares of Common Stock issuable in respect of Convertible Securities
and options and warrants to purchase shares of Common Stock or Convertible
Securities outstanding on such date (whether or not the rights to convert,
exchange or exercise thereunder are presently exercisable), including the
maximum number of shares issuable under the Warrants; provided that the maximum
number of shares of Common Stock issuable in respect of Convertible Securities
and options and warrants to purchase shares of Common Stock or Convertible
Securities outstanding on such date shall be adjusted in accordance with the
"treasury stock" method determined under GAAP pursuant to Accounting Principles
Board Opinion 15.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as from time to time in effect.
"Governmental Authority" shall mean any nation or government, any
federal, state, local or other political subdivision thereof and any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Handex" shall mean Handex Corporation, a Delaware corporation, and
any successor entity.
"Holder" shall mean the Person in whose name the Warrant set forth
herein is registered on the books of the Company maintained for such purpose.
"Indebtedness" shall have the meaning given to the term "Debt" in the
Series A Note, other than any and all obligations of the Company to purchase,
redeem, retire, defease or otherwise acquire for value any capital stock of the
Company or any warrants, rights or options to acquire such capital stock,
however valued, and whether or not currently exercisable.
"Lien" shall mean any mortgage, deed of trust, pledge, hypothecation,
assignment, conditional sale agreement, deposit arrangement, security interest,
encumbrance, lien (statutory or other), proxy, preference, priority or other
security agreement or preferential arrangement of any kind or nature whatsoever
in respect of any property (whether now owned or hereafter acquired) of a
Person, whether granted voluntarily or imposed by law, and includes the interest
of a lessor under any lease having substantially the same economic effect as any
of the foregoing and the filing of any financial statement or similar notice
(other than a precautionary financing statement filed by a "true" lessor
pursuant to Section 9-408 of the Uniform Commercial Code), naming the owner of
such property as debtor, under the Uniform Commercial Code or other comparable
law of any jurisdiction.
"Majority Warrant Holders" shall mean the holders of Warrants
exercisable for the purchase of more than fifty percent (50%) of the aggregate
number of shares of Warrant Stock then purchasable upon exercise of all
Warrants.
-4-
"Officers' Certificate" shall mean a certificate executed on behalf of
the Company by its Chairman, its President or one of its Vice Presidents and by
its Chief Financial Officer or its Treasurer.
"Opinion of Counsel" shall mean a written opinion of counsel
experienced in securities laws chosen by the holder of this Warrant or Warrant
Stock issued upon the exercise hereof, such opinion and such counsel being
reasonably acceptable to the Company.
"Original Issue Date" shall mean the date on which the Original
Warrant is issued, as set forth on the cover page of this Warrant.
"Original Warrant" shall mean the Warrant originally issued by the
Company to Handex on the Original Issue Date.
"Other Securityholders" shall mean holders of Registrable Securities
under Warrant A and under the Southcoast Warrant.
"Outstanding" shall mean, when used with reference to Common Stock, at
any date as of which the number of shares thereof is to be determined, all
issued shares of Common Stock, except shares then owned or held by or for the
account of the Company or any Subsidiary thereof, and shall include all shares
issuable in respect of outstanding scrip or any certificates representing
fractional interests in shares of Common Stock.
"Person" shall mean an individual, partnership, corporation (including
a business trust), joint stock company, trust, unincorporated association, joint
venture or other entity, or a Governmental Authority.
"Public Offering Price" shall mean the daily market price of a share
of Common Stock of the Company, as of the date of the issuance of Common Stock
in connection with a Qualifying Public Offering. The "daily market price" for
such day shall be (i) the last sale price on such day on the principal stock
exchange on which such Common Stock is then listed or admitted to trading, or
(ii) if such Common Stock is not then listed or admitted to trading on any stock
exchange, the average of the last reported closing bid and asked prices on such
day in the over-the-counter market, (A) as furnished by the National Association
of Securities Dealers Automatic Quotation System or the National Quotation
Bureau, Inc., or (B) if neither such corporation at the time is engaged in the
business of reporting such prices, as furnished by any similar firm then engaged
in such business, or (C) if there is no such firm, as furnished by any member of
the National Association of Securities Dealers, Inc., or any successor
corporation thereto, reasonably selected by the Company.
"Put" shall have the meaning set forth in Section 12.1 hereof.
"Qualifying Public Offering" shall mean either (i) the first public
offering of shares of the Company's Common Stock pursuant to a registration
statement filed with the Commission as a result of which the Company receives
net proceeds equal to or greater than Ten Million Dollars ($10,000,000) or (ii)
any public offering of shares of Common Stock by the Company or by the holders
thereof after its first public offering, regardless of size.
"Redemption Notice" shall have the meaning set forth in Section 12.3
hereof.
"Redemption Period" shall mean the period beginning on the sixth
anniversary of the Original Issue Date.
"Redemption Price" shall have the meaning set forth in Section 12.3.
-5-
"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 effectiveness of such registration statement.
"Registrable Securities" shall mean the issued Warrant Shares that
have not been registered and sold to the public.
"Registrable Securityholder" shall mean any holder of outstanding
Registrable Securities that have not been sold to the public.
"Registration Expenses" shall mean all expenses incurred by the
Company in compliance with Sections 13.1, 13.2 and 13.3 hereof, 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 expenses of any special audits 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).
"Repurchase Notice" shall have the meaning set forth in Section 12.1
hereof.
"Repurchase Period" shall mean the period beginning on the first to
occur of (i) the sixth anniversary of the Original Issue Date, (ii) any merger
or consolidation of the Company with another Person pursuant to which the
Company is not the surviving entity, (iii) the sale or other disposition
(including disposition by merger or consolidation) by the Company or any
Subsidiary of assets (including the stock of any Subsidiary) representing more
than sixty percent (60%) of either (A) the aggregate fair market value of the
assets of the Company and its Subsidiaries determined on a Consolidated basis or
(B) the total revenues of the Company and its Subsidiaries determined on a
Consolidated basis, (iv) a Change of Control, and (v) a Qualifying Public
Offering.
"Repurchase Price" shall have the meaning set forth in Section 12.1
hereof.
"Restricted Common Stock" shall mean shares of Common Stock which are,
or which upon their issuance on the exercise of this Warrant would be, evidenced
by a certificate bearing the first restrictive legend set forth in Section
8.1(a) hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities, all fees and
disbursements of counsel for any Holder, and any blue sky fees and expenses
excluded from the definition of "Registration Expenses."
"Senior Lender" shall mean any commercial bank or other financial
institution from which the Company borrows funds, regardless of the priority, if
any, among such lenders.
"Series A Note" shall mean the Promissory Note referred to in the
Stock Purchase Agreement.
"Shareholders Agreement" shall mean the Shareholders Agreement
referred to in the Stock Purchase Agreement.
"Southcoast Warrant" shall mean the warrant to acquire 46,200 shares
of Common Stock at Eighty-Eight Cents ($0.88) per share issued by the Company to
Southcoast Securities Corporation.
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"State Acts" shall mean any applicable state or local securities acts.
"Stock Purchase Agreement" shall mean the Stock Purchase Agreement
dated as of November 4, 1996 between the Company and Handex, as such agreement
may be amended.
"Subsidiary" shall mean, with respect to any Person, any corporation
or other entity of which securities or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other Persons
performing similar functions are at the time directly or indirectly owned or
controlled by such Person, one or more of the other subsidiaries of such Person
or any combination thereof.
"Transfer" shall mean any disposition of any Warrant or Warrant Stock
or of any interest in either thereof, which would constitute a sale thereof
within the meaning of the Securities Act.
"Warrant A" shall mean the warrant to acquire 300,000 shares of Common
Stock at One Dollar Thirty-Two Cents ($1.32) per share issued by the Company to
Handex.
"Warrant Price" shall mean an amount equal to (i) the number of shares
of Common Stock being purchased upon exercise of this Warrant pursuant to
Section 2.1 hereof, multiplied by (ii) the Current Warrant Price as of the date
of such exercise.
"Warrants" shall mean the Original Warrant and all Warrants issued
upon transfer, division or combination of, or in substitution for, such Original
Warrant or any other such Warrant.
"Warrant Shares" shall mean shares of Warrant Stock.
"Warrant Stock" shall mean the shares of Common Stock issued, issuable
or both (as the context may require) to the holders of Warrants upon the
exercise thereof or issued upon the transfer of such shares until such time as
such shares of Common Stock have either been sold in a public offering pursuant
to a registration statement filed under the Securities Act or sold pursuant to
Rule 144 thereunder.
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{PRIVATE } "EXERCISE OF WARRANT"
{PRIVATE } "Manner of Exercise". From and after the Original
Issue Date and until the later of (a) the sixth anniversary of the Original
Issue Date or (b) the first anniversary of payment in full of the indebtedness
due under the Series A Note, the Holder may from time to time exercise this
Warrant, on any Business Day, for all or any part (exceeding 10%) of the number
of shares of Common Stock then purchasable hereunder.
In order to exercise this Warrant, in whole or in part, the Holder
shall deliver to the Company at the Designated Office (i) a written notice of
the Holder's election to exercise this Warrant (an "Exercise Notice"), which
Exercise Notice shall specify the number of shares of Common Stock to be
purchased, (ii) payment of the Warrant Price and (iii) this Warrant. Such
Exercise Notice shall be in the form of the subscription form appearing at the
end of this Warrant as Annex A, duly executed by the Holder or its duly
authorized agent or attorney. Upon receipt of an Exercise Notice, the Company
shall, as promptly as practicable, and in any event within ten (10) calendar
days thereafter, execute (or cause to be executed) and deliver (or cause to be
delivered) to the Holder a certificate or certificates representing the aggre-
gate number of full shares of Common Stock issuable upon such exercise, together
with cash in lieu of any fraction of a share, as hereafter provided. The stock
certificate or certificates so delivered shall be, to the extent possible, in
such denomination or denominations as such Holder shall reasonably request in
the Exercise Notice and shall be registered in the name of the Holder or such
other name (provided that such Person is permitted to be a transferee hereunder)
as shall be designated in the Exercise Notice. This Warrant shall be deemed to
have been exercised and such certificate or certificates shall be deemed to have
been issued, and the Holder or any other Person so designated to be named
therein shall be deemed to have become a holder of record of such shares for all
purposes, as of the date the items specified in clauses (i) through (iii) above
are received by the Company. If this Warrant shall have been exercised in part,
the Company shall, at the time of delivery of the certificate or certificates
representing the shares of Common Stock being issued, deliver to the Holder a
new Warrant evidencing the rights of the Holder to purchase the unpurchased
shares of Common Stock called for by this Warrant, which new Warrant shall in
all other respects be identical with this Warrant, or, at the request of the
Holder, appropriate notation may be made on this Warrant and the same returned
to the Holder.
Payment of the Warrant Price may be made, at the option of the Holder,
by (i) wire transfer of immediately available funds, (ii) certified or official
bank check and/or (iii) surrender of the right to purchase shares of Warrant
Stock pursuant hereto to the extent such shares have a Fair Value in excess of
the Current Warrant Price.
{PRIVATE } "Payment of Taxes". All shares of Common Stock
issuable upon the exercise of this Warrant pursuant to the terms hereof shall be
validly issued, fully paid and nonassessable, issued without violation of any
preemptive rights and free and clear of all Liens (other than any created by
actions of the Holder). The Company shall pay all expenses in connection with,
and all taxes and other governmental charges that may be imposed with respect
to, the issue or delivery thereof, unless such tax or charge is imposed by
Applicable Law upon the Holder, in which case such taxes or charges shall be
paid by the Holder, and the Company shall reimburse the Holder therefor (other
than for net income, personal property or capital gains taxes).
{PRIVATE } "Fractional Shares". The Company shall not be required
to issue a fractional share of Common Stock upon exercise of any Warrant. As to
any fraction of a share that the Holder of one or more Warrants, the rights
under which are exercised in the same transaction, would otherwise be entitled
to purchase upon such exercise, the Company shall pay a cash adjustment in
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respect of such final fraction in an amount equal to the same fraction of the
Fair Value of one share of Common Stock on the date of exercise.
{PRIVATE } "Continued Validity and Application". A holder of
shares of Warrant Stock issued upon the exercise of this Warrant, in whole or in
part, including any transferee of such shares (other than a transferee who
acquires such shares after the same have been publicly sold pursuant to a
registration statement under the Securities Act or sold pursuant to Rule 144 or
Rule 144A thereunder), shall continue, with respect to such shares, to be
entitled to all rights and to be subject to all obligations that are applicable
to such holder by the terms of this Warrant.
The Company shall, at the time of each exercise of this Warrant, in
whole or in part, upon the request of the holder of the shares of Warrant Stock
issued upon such exercise hereof (including any such transferee), acknowledge in
writing, in form reasonably satisfactory to such holder, its continuing
obligation to afford to such holder such rights referred to in this Section 2.4;
provided, however, that if such holder shall fail to make any such request, such
failure shall not affect the continuing obligation of the Company to afford to
such holder all such rights.
At the time of any exercise of this Warrant or of any transfer of this
Warrant or shares of Warrant Stock pursuant to Section 3 and Section 8 hereof,
as a condition to such exercise or transfer, any Person acquiring this Warrant
or shares of such Warrant Stock in such transaction shall, if so requested by
the Company, acknowledge in writing in a form reasonably satisfactory to the
Company, that such holder will be subject to the continuing obligations referred
to in this Section 2.4.
{PRIVATE } "TRANSFER, DIVISION AND COMBINATION"
{PRIVATE } "Transfer". Subject to compliance with Sections 8 and
12, each transfer of this Warrant and all rights hereunder, in whole or in part,
shall be registered on the books of the Company to be maintained for such
purpose, upon surrender of this Warrant at the Designated Office, together with
a written assignment of this Warrant in the form of Annex B hereto duly executed
by the Holder or its agent or attorney and, if such transfer is not to be made
pursuant to Section 12, funds sufficient to pay any transfer taxes payable upon
the making of such transfer. Upon such surrender and delivery, and, if
required, such payment, the Company shall, subject to Section 8, execute and
deliver a new Warrant or Warrants in the name of the assignee or assignees and
in the denominations specified in such instrument of assignment, and shall issue
to the assignor a new Warrant evidencing the portion of this Warrant not so
assigned and this Warrant shall promptly be cancelled. A Warrant, if properly
assigned in compliance with Section 8, may be exercised by the new Holder for
the purchase of shares of Common Stock without having a new Warrant issued.
{PRIVATE } "Division and Combination". Subject to compliance with
Section 8, this Warrant may be divided or combined with other Warrants upon
presentation thereof at the Designated Office, together with a written notice
specifying the names and denominations in which new Warrants are to be issued,
signed by the Holder or its agent or attorney. Subject to compliance with
Section 3.1 and with Section 8 as to any transfer which may be involved in such
division or combination, the Company shall execute and deliver a new Warrant or
Warrants in exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice.
{PRIVATE } "Expenses". The Company shall prepare,
issue and deliver at its own expense (other than transfer taxes) any new Warrant
or Warrants required to be issued under this Section 3.
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{PRIVATE } "Maintenance of Books". The Company agrees to
maintain, at the Designated Office, books for the registration and transfer of
the Warrants.
{PRIVATE} "ANTIDILUTION PROVISIONS; PREEMPTIVE RIGHTS; ADJUSTMENT UPON THE
HAPPENING OF CERTAIN EVENTS"
{PRIVATE } "Adjustment of Number of Shares Purchasable and
Exercise Price". The number of shares of Common Stock for which this Warrant is
exercisable, and the price at which such share may be purchased upon exercise of
this Warrant, shall be subject to adjustment from time to time as is more fully
set forth in this Section 4.
Adjustment of Exercise Price. In the event the Company
shall:
declare a dividend or make a distribution on its
Outstanding Common Stock in Common Stock or Convertible Securities;
subdivide or reclassify any of its Outstanding Common
Stock into a greater number of shares; or
combine or reclassify any of its Outstanding Common Stock
into a smaller number of shares;
then, upon the occurrence of such event or action, the Current Warrant Price
shall be adjusted, effective immediately after the record date for such dividend
or distribution or the effective date of such subdivision, combination or
reclassification, to the price calculated by multiplying the Current Warrant
Price in effect immediately prior to such record date or effective date by a
fraction, the numerator of which is the total number of shares of Common Stock
immediately prior to giving effect to such dividend, distribution, subdivision,
combination or reclassification and the denominator of which is the total number
of shares of Fully Diluted Outstanding shares of Common Stock immediately after
giving effect to such dividend, distribution, subdivision, combination or
reclassification.
Adjustment of Number of Shares Purchasable. Upon any
adjustment of the Current Warrant Price as provided in this Section 4.1, the
holder hereof shall thereafter be entitled to purchase, at the Current Warrant
Price resulting from such adjustment, the number of shares of Common Stock
(calculated to the nearest .001 of a share) obtained by multiplying the Current
Warrant Price in effect immediately prior to such adjustment by the number of
shares of Common Stock issuable on the exercise hereof immediately prior to such
adjustment and dividing the product thereof by the Current Warrant Price
resulting from such adjustment.
Calculation of Adjustment. Any adjustment of the Current
Warrant Price pursuant to this section shall be calculated to $.000001 per share
of Common Stock.
Reorganization, Reclassification or Recapitalization of
Company. In case of any capital reorganization or reclassification or
recapitalization of the capital stock of the Company (other than in the cases
referred to in subsection (a)(i), (ii), or (iii) of this Section 4.1), or in
case of the consolidation or merger of the Company with or into another
corporation, or in case of the sale or transfer of the property of the Company
as an entirety or substantially as an entirety, there shall thereafter be
deliverable upon the exercise of this Warrant or any portion thereof (in lieu of
or in addition to the number of shares of Common Stock theretofore deliverable,
as appropriate) the number of shares of stock or other securities or property to
which the holder of the number of shares of Common Stock which would otherwise
have been deliverable upon the exercise of this Warrant or any portion hereof at
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the time would have been entitled upon such capital reorganization or
reclassification of capital stock, consolidation, merger or sale, and at the
same aggregate Current Warrant Price.
Prior to and as a condition of the consummation of any transaction
described in the preceding sentence, the Company shall cause effective
provisions to be made so that the Holder shall have the right thereafter by
exercising the Warrant to purchase the kind and amount of shares of stock or
other securities or property which would have been receivable upon such
consummation had this Warrant been exercised in full immediately prior thereto.
Any such provisions shall also include adjustments which shall be as nearly
equivalent as practicable to the adjustments as provided for in this Section 4.
Any such adjustment shall be made by and set forth in a supplemental agreement
between the Company and the successor entity which agreement shall bind such
entity, shall be accompanied by an opinion of counsel as to the enforceability
of such agreement and shall be approved by the Majority Warrant Holders, which
approval shall not be unreasonably withheld.
Other Dilutive Events. Except for issuances and sales of
Excluded Shares, in case any event shall occur as to which the other provisions
of this Section 4 are not strictly applicable but the failure to make any
adjustment would not fairly protect the purchase rights represented by this
Warrant in accordance with the essential intent and principles hereof, then the
Holder of this Warrant may request in writing within one hundred twenty (120)
days after it receives notice of such event that the Company examine the
propriety of an adjustment to the Current Warrant Price and number of shares of
Common Stock subject to this Warrant. Unless the Company and the Holder of this
Warrant shall have theretofore mutually agreed upon an adjustment, or that no
adjustment is required, within thirty (30) days after the receipt of such
request, the Company shall appoint a firm of independent public accountants of
recognized national standing (which may be the regularly engaged accountants of
the Company), to give an opinion upon the adjustment, if any, on a basis
consistent with the essential intent and principles established in this Section
4, necessary to preserve, the purchase rights represented by this Warrant. Upon
receipt of such opinion, the Company will promptly mail a copy thereof to the
holder of this Warrant and shall make the adjustments described therein. If
such opinion states that no such adjustment is necessary, the holder hereof
shall reimburse the Company for one-half of the cost and expense of such
opinion. The Company covenants and agrees not to issue or sell shares of Common
Stock or Convertible Securities or grant options to acquire shares of Common
Stock or Convertible Securities to its shareholders as of the date hereof or to
employees of the Company, except as contemplated by the Excluded Shares, and
that any such sale at a price per share of less than Eighty-Eight Cents ($0.88)
shall constitute the basis for an adjustment pursuant to the terms hereof.
Record Date. In case the Company shall take a record of the
holders of the Common Stock for the purpose of entitling them (i) to receive a
dividend or other distribution payable in Common Stock or in Convertible
Securities or (ii) to subscribe for or purchase Common Stock or Convertible
Securities, then all references in this Section 4 to the date of the issue or
sale of the shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution or the
date of the granting of such right of subscription or purchase, as the case may
be, shall be deemed to be references to such record date.
{PRIVATE } "Rights Offering". In the event the Company shall
effect an offering of Common Stock pro rata among its stockholders, the holder
hereof shall be entitled, at its option, to elect to participate in each and
every such offering as if this Warrant had been exercised and such holder were,
at the time of any such rights offering, then a holder of that number of shares
of Common Stock to which such holder is then entitled on the exercise hereof.
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{PRIVATE } "Preemptive Rights".
General. Subject to the provisions of Section 4.3(b)
hereof, (i) the Company shall notify in writing the Holder of this Warrant or
holder of shares of Warrant Stock issued upon the exercise of this Warrant
(each, a "Preemptive Rights Offeree") of any issuance or sale of Additional
Shares of Common Stock or Convertible Securities and (ii) each Preemptive Rights
Offeree shall, upon the issuance or sale by the Company of Additional Shares of
Common Stock or Convertible Securities, have the right, during the period
beginning at such issuance or sale and ending on the thirtieth (30th) day
following the receipt by the Preemptive Rights Offeree of such notification and
on the same terms and conditions as such issuance or sale, to purchase
additional shares of Common Stock of the Company sufficient to maintain the
percentage of the Fully Diluted Outstanding shares of Common Stock which such
Preemptive Rights Offeree owns, or would be entitled to purchase upon the
exercise of this Warrant (regardless of whether this Warrant is then exercis-
able), determined immediately prior to such issuance or sale.
Exceptions to Preemptive Rights. Notwithstanding the
provisions of Section 4.3(a) hereof, the Company shall not be required to
provide the notice or grant the rights provided for in Section 4.3(a) in
connection with:
issuances or sales of Common Stock upon the exercise of
this Warrant;
the issuance of shares of Common Stock pursuant to a
rights offering in which the holder hereof elects to participate under the
provisions of Section 4.2;
the issuance or sale of Common Stock or Convertible
Securities in connection with the acquisition by the Company of a business,
which issuance or sale has been approved by a unanimous vote of the Board of
Directors of the Company; or
the issuance or sale of Excluded Shares.
{PRIVATE } "Certificates and Notices".
Adjustments to Current Warrant Price. Upon any adjustment
of the Current Warrant Price, a certificate, signed (i) by the Chairman, the
President or a Vice President and by the Treasurer or an Assistant Treasurer or
the Secretary or an Assistant Secretary of the Company, or (ii) by any
independent firm of certified public accountants of recognized national standing
selected by, and at the expense of, the Company, setting forth in reasonable
detail the events requiring the adjustment and the method by which such
adjustment was calculated, shall be mailed to the holder of this Warrant
specifying the adjusted Current Warrant Price and the number of shares of Common
Stock issuable upon exercise of such holder's Warrant after giving effect to the
adjustment of such number pursuant to subsection (b) of Section 4.1.
Extraordinary Corporate Events. In case at any time while
this Warrant is Outstanding, (i) the Company proposes to pay any dividend
payable in stock to the holders of shares of Common Stock or to make any other
distribution to the holders of shares of Common Stock; (ii) the Company proposes
to offer to the holders of shares of Common Stock rights to subscribe for or
purchase any additional shares of any class of stock or any other rights or
options; (iii) the Company proposes to effect any reclassification of Common
Stock (other than a reclassification involving merely the subdivision or
combination of outstanding shares of Common Stock); (iv) the Company proposes to
effect any capital reorganization, consolidation or merger; (v) the Company
proposes to effect any sale, transfer or other disposition of its property,
assets and business as an entirety or substantially as an entirety; (vi) the
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Company proposes to commence the liquidation, dissolution or winding up of the
Company; or (vii) the Company proposes to issue to any person or persons any
options or other rights to subscribe for or to purchase shares of Common Stock
or any Convertible Securities which would cause such acquiror or acquirors,
collectively, to own, and/or to have the right to obtain ownership, upon
exercise of such options or other rights or upon conversion or exchange of such
Convertible Securities, of an aggregate of 50% or more of the then Fully Diluted
Outstanding shares of Common Stock of the Company; or (viii) any action or
transaction giving rise to a Put right is proposed to occur, then, in each such
case, the Company shall mail to the Holder of this Warrant notice of such
proposed action, which shall specify the date on which the books of the Company
shall close, or a record shall be taken, for determining the holders of Common
Stock entitled to receive such stock dividends or other distribution or such
rights or options, or the date on which such reclassification, reorganization,
consolidation, merger, sale, transfer, other disposition, liquidation,
dissolution, winding up, issuance, sale or other transfer or action shall take
place or commence, as the case may be, and the date as of which it is expected
that holders of Common Stock of record shall be entitled to receive securities
or other property deliverable upon such action, if any such date is to be fixed.
In the case of any action covered by clause (i) or (ii) above, such notice shall
be mailed at least ten (10) days prior to the record date for determining
holders of Common Stock for purposes of receiving such payment or offer. In the
case of any action covered by clause (iii), (iv), (v), (vi) or (vii), such
notice shall be mailed at least thirty (30) days prior to the date upon which
such action takes place or commences, as the case may be, and twenty (20) days
prior to any record date to determine holders of Common Stock entitled to
receive any such securities or other property, and each such notice shall
provide full particulars regarding such action.
Effect of Failure. Failure to file any certificate or
notice or to mail any notice, or any defect in any certificate or notice,
pursuant to this Section 4.4 shall not affect the legality or validity of the
adjustment of the Current Warrant Price, the number of shares of Common Stock
purchasable upon exercise of this Warrant, or any transaction giving rise
thereto.
{PRIVATE}"NO IMPAIRMENT; REGULATORY COMPLIANCE COOPERATION; FURTHER
ASSURANCES"
The Company shall not by any action, including, without limitation,
amending its charter documents or through any reorganization, reclassification,
transfer of assets, consolidation, merger, dissolution, issue or sale of securi-
ties or any other similar 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 actions as may be necessary or appropriate to protect the
rights of the Holder against impairment. Without limiting the generality of the
foregoing, the Company will (a) not increase the par value (if any) of any
shares of Common Stock issuable upon the exercise of this Warrant above the
amount payable therefor upon such exercise immediately prior to such increase in
par value, (b) take all such action as may be necessary or appropriate in order
that the Company may validly and legally issue fully paid and nonassessable
shares of Common Stock upon the exercise of this Warrant, free and clear of all
Liens (other than those created by actions of the Holder), (c) use its best
efforts to obtain all such authorizations, exemptions or consents from any
Governmental Authority as may be necessary to enable the Company to perform its
obligations under this Warrant and (d) execute, acknowledge and deliver such
other further agreements, instruments and documents and do such further acts as
may be necessary to preserve and maintain in full force and effect this Warrant
and the rights of the Holder herein and to carry out more effectively the
provisions and purposes of this Warrant.
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{PRIVATE }"RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION WITH
OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY"
From and after the Original Issue Date, the Company shall at all times
reserve and keep available for issuance upon the exercise of the Warrants such
number of its authorized but unissued shares of Common Stock, free from
preemptive rights, as will be sufficient to permit the exercise in full of all
outstanding Warrants. All shares of Common Stock issuable pursuant to the terms
hereof, when issued upon exercise of this Warrant with payment therefor in
accordance with the terms hereof, shall be duly and validly issued and fully
paid and nonassessable, not subject to preemptive rights and shall be free and
clear of all Liens other than those created by actions of the Holder.
Before taking any action that would result in an adjustment in the
number of shares of Common Stock for which this Warrant is exercisable or in the
Current Warrant Price, the Company shall obtain all such authorizations or
exemptions thereof, or consents thereto, as may be necessary from any
Governmental Authority.
If any shares of Common Stock required to be reserved for issuance
upon exercise of Warrants require registration or qualification with any
Governmental Authority under any federal or state law (otherwise than as
provided in Section 8) before such shares may be so issued, the Company will in
good faith and as expeditiously as possible and at its expense endeavor to cause
such shares to be duly registered.
{PRIVATE } "TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS"
In the case of all dividends or other distributions by the Company to
the holders of its Common Stock with respect to which any provision of any
Section hereof refers to the taking of a record of such holders, the Company
will in each such case take such a record and will take such record as of the
close of business on a Business Day. The Company will not at any time, except
upon dissolution, liquidation or winding up of the Company, close its stock
transfer books or warrant transfer books so as to result in preventing or
delaying the exercise or transfer of any Warrant.
{PRIVATE } "TRANSFER AND REGISTRATION"
The Holder, by acceptance of this Warrant, agrees to be bound by the
provisions of this Section 8.
{PRIVATE } "Restrictive Legends". (a) Except as otherwise
provided in this Section 8, each certificate for Warrant Stock initially issued
upon the exercise of this Warrant, and each certificate for Warrant Stock issued
to any subsequent transferee of any such certificate, shall be stamped or
otherwise imprinted with four legends in substantially the following forms:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR
ANY STATE SECURITIES LAW. NO TRANSFER OF THE SHARES REPRESENTED BY
THIS CERTIFICATE TO A PERSON OTHER THAN AN AFFILIATE OF THE HOLDER
THEREOF SHALL BE VALID OR EFFECTIVE UNLESS (A) SUCH TRANSFER IS MADE
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT, AND IN COMPLIANCE WITH ANY APPLICABLE STATE SECURITIES LAWS OR
(B) THE HOLDER OF THE SECURITIES PROPOSED TO BE TRANSFERRED SHALL HAVE
DELIVERED TO THE COMPANY EITHER A NO ACTION LETTER FROM THE SECURITIES
AND EXCHANGE COMMISSION OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY TO THE EFFECT THAT SUCH PROPOSED TRANSFER
IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
OF ANY APPLICABLE STATE SECURITIES LAWS OR (C) SUCH TRANSFER IS
PURSUANT TO RULE 144 OR RULE 144A UNDER THE SECURITIES ACT AND SUCH
HOLDER(S) SHALL HAVE DELIVERED TO THE COMPANY A CERTIFICATE IN FORM
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AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY SETTING FORTH THE
BASIS FOR APPLYING ANY SUCH RULE TO THE PROPOSED TRANSFER.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE ENTITLED TO THE BENEFIT
OF AND ARE SUBJECT TO THE OBLIGATIONS AND RESTRICTIONS CONTAINED IN
THE WARRANT, PURSUANT TO THE EXERCISE OF WHICH SUCH SHARES WERE
ISSUED. A COPY OF SUCH WARRANT IS ON FILE AND AVAILABLE AT THE
OFFICES OF THE COMPANY. ANY PERSON WHO PURCHASES OR ACQUIRES SUCH
SHARES ACCEPTS SUCH SHARES SUBJECT TO SUCH CONDITIONS.
THE COMPANY WILL MAIL TO THE HOLDERS OF THE SHARES EVIDENCED BY THIS
CERTIFICATE, WITHOUT CHARGE, A COPY OF THE EXPRESS TERMS OF THE SHARES
REPRESENTED BY THIS CERTIFICATE AND OF THE DIFFERENT CLASSES OF SHARES
OR DIFFERENT SERIES WITHIN A CLASS, THE DESIGNATIONS, RELATIVE RIGHTS,
PREFERENCES, AND LIMITATIONS APPLICABLE TO EACH CLASS AND THE
VARIATIONS IN RIGHTS, PREFERENCES, AND LIMITATIONS DETERMINED FOR EACH
SERIES, AND THE AUTHORITY OF THE BOARD OF DIRECTORS TO DETERMINE
VARIATIONS FOR FUTURE SERIES, WITHIN FIVE (5) DAYS AFTER RECEIPT OF A
WRITTEN REQUEST THEREFOR.
THE SHARES OF STOCK EVIDENCED BY THIS CERTIFICATE MAY BE TRANSFERRED
BY THE OWNER HEREOF ONLY BY FULLY COMPLYING WITH THE SHAREHOLDERS
AGREEMENT DATED , 1996, TOGETHER WITH ANY AMENDMENTS
THERETO, A COPY OF WHICH IS ON FILE IN THE OFFICE OF THE CORPORATION.
ANY PERSON WHO PURCHASES OR ACQUIRES SUCH SHARES OF STOCK IN THIS
CORPORATION (INCLUDING BY GIFT OR BY PLEDGE) ACCEPTS SUCH SHARES OF
STOCK SUBJECT TO SUCH CONDITIONS.
Except as otherwise provided in this Section 8, each Warrant
shall be stamped or otherwise imprinted with a legend in substantially the
following form:
NEITHER THE WARRANT REPRESENTED BY THIS CERTIFICATE NOR ANY OF THE
SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
STATE SECURITIES LAW. NO TRANSFER OF THE WARRANT REPRESENTED BY THIS
CERTIFICATE OR OF THE SECURITIES ISSUABLE UPON EXERCISE THEREOF TO A
PERSON OTHER THAN AN AFFILIATE OF THE HOLDER THEREOF SHALL BE VALID OR
EFFECTIVE UNLESS (A) SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND IN COMPLIANCE WITH
ANY APPLICABLE STATE SECURITIES LAWS OR (B) THE HOLDER OF THE
SECURITIES PROPOSED TO BE TRANSFERRED SHALL HAVE DELIVERED TO THE
COMPANY EITHER A NO ACTION LETTER FROM THE SECURITIES AND EXCHANGE
COMMISSION OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
COMPANY TO THE EFFECT THAT SUCH PROPOSED TRANSFER IS EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND OF ANY APPLICABLE
STATE SECURITIES LAWS OR (C) SUCH TRANSFER IS PURSUANT TO RULE 144 OR
RULE 144A UNDER THE SECURITIES ACT AND SUCH HOLDER(S) SHALL HAVE
DELIVERED TO THE COMPANY A CERTIFICATE IN FORM AND SUBSTANCE
REASONABLY SATISFACTORY TO THE COMPANY SETTING FORTH THE BASIS FOR
APPLYING ANY SUCH RULE TO THE PROPOSED TRANSFER.
{PRIVATE } "Transfers". Neither this Warrant nor any shares of
Restricted Common Stock issued upon the exercise hereof shall be Transferred
other than pursuant to the terms hereof, the Shareholders Agreement, an
effective registration statement under the Securities Act and any applicable
State Acts or an exemption from the registration provisions thereof. Each
certificate, if any, evidencing such shares of Restricted Common Stock issued
upon any such Transfer, other than in a public offering pursuant to an effective
registration statement, shall bear the first restrictive legend set forth in
Section 8.1(a), and each Warrant issued upon such Transfer shall bear the
restrictive legend set forth in Section 8.1(b), unless in the Opinion of Counsel
to the Holder such legend is not required for the purposes of compliance with
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the Securities Act and any applicable State Acts. Holders of the Warrants or
the Restricted Common Stock, as the case may be, shall not be entitled to
Transfer such Warrants or such Restricted Common Stock except in accordance with
this Section 8.2.
{PRIVATE } "Termination of Securities Law Restrictions".
Notwithstanding the foregoing provisions of Section 8, the restrictions imposed
by Section 8.2 upon the transferability of the Warrants and the Restricted
Common Stock and the legend requirements of Section 8.1 shall terminate as to
any particular Warrant or share of Restricted Common Stock when the Company
shall have received either a no-action letter from the Commission or an Opinion
of Counsel reasonably satisfactory to the Company that such legend is not
required in order to ensure compliance with the Securities Act. Whenever the
restrictions imposed by Sections 8.1 and 8.2 shall terminate as to this Warrant,
as hereinabove provided, the Holder hereof shall be entitled to receive from the
Company, at the expense of the Company, a new Warrant bearing the following
legend in place of the restrictive legend set forth hereon:
THE RESTRICTIONS ON TRANSFERABILITY OF THE WITHIN WARRANT CONTAINED IN
SECTIONS 8.1 AND 8.2 HEREOF TERMINATED ON , 19 , AND
ARE OF NO FURTHER FORCE OR EFFECT.
All Warrants issued upon registration or transfer, division or combination of,
or in substitution for, any Warrant or Warrants entitled to bear such legend
shall have a similar legend endorsed thereon. Wherever the restrictions imposed
by Sections 8.1 and 8.2 shall terminate as to any share of Restricted Common
Stock, as hereinabove provided, the holder thereof shall be entitled to receive
from the Company, at the Company's expense, a new certificate representing such
Common Stock not bearing the restrictive legend set forth in Section 8.1(a).
{PRIVATE } "Listing on Securities Exchange". If the Company shall
list any shares of Common Stock on any securities exchange or on NASDAQ, it
will, at its expense, list thereon, maintain and, when necessary, increase such
listing of, all shares of Warrant Stock issued upon the exercise of this
Warrant.
{PRIVATE } "Nominees for Beneficial Owners". In the event that
any Warrant Stock is held by a nominee for the beneficial owner thereof, the
beneficial owner thereof may, at its election, be treated as the holder of such
Warrant Stock for purposes of any request or other action by any holder or
holders of Warrant Stock pursuant to this Agreement or any determination of any
number or percentage of shares of Warrant Stock held by any holder or holders of
Warrant Stock contemplated by this Agreement. If the beneficial owner of any
Warrant Stock so elects, the Company may require assurances reasonably
satisfactory to it of such owner's beneficial ownership of such Warrant Stock.
{PRIVATE } "SUPPLYING INFORMATION"
The Company shall cooperate with each holder of a Warrant and each
holder of Warrant Stock in supplying such information as may be reasonably
necessary for such holder to complete and file any information reporting forms
presently or hereafter required by the Commission or any state securities
commissioner as a condition to the availability of an exemption from the
Securities Act or any applicable state securities law for the sale of any
Warrant or shares of Warrant Stock. At all times following the completion of an
initial public offering of shares of Common Stock of the Company, the Company
shall use its best efforts to make public information available so as to afford
the holders of the Warrants and the Warrant Stock the benefits of Rule 144 of
the Commission in connection with resales, as such Rule may be amended from time
to time or any similar rule or regulation hereafter adopted by the Commission.
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{PRIVATE } "LOSS OR MUTILATION"
Upon receipt by the Company from any Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and an indemnity reasonably satisfactory to it (it
being understood that the written indemnification agreement of BOCP or any
Affiliate thereof shall be a sufficient indemnity) and, in case of mutilation,
upon surrender and cancellation hereof, the Company will execute and deliver in
lieu hereof a new Warrant of like tenor to such Holder; provided, however, in
the case of mutilation, no indemnity shall be required if this Warrant in
identifiable form is surrendered to the Company for cancellation.
{PRIVATE } "OFFICE OF THE COMPANY"
As long as any of the Warrants remain outstanding, the Company shall
maintain an office or agency, which may be the principal executive offices of
the Company (the "Designated Office"), where the Warrants may be presented for
exercise, registration of transfer, division or combination as provided in this
Warrant. Such Designated Office shall initially be the office of the Company at
30941 Suneagle Drive, Mt. Dora, Florida 32757; thereafter, such office shall be
the office of the Company or of an agency designated by the Company in a notice
delivered to the registered holders of all Warrants.
{PRIVATE} "REPURCHASE BY THE COMPANY OF WARRANT AND WARRANT STOCK"
{PRIVATE }"Obligation to Repurchase Warrant or Warrant Stock". The
Holder of this Warrant and holder of shares of Warrant Stock issued upon
exercise of this Warrant shall have the right to require the Company to
repurchase such Warrant or shares of Warrant Stock in accordance with the terms
of this Section 12.1 and of Section 12.2 (such rights are sometimes referred to
herein as a "Put"). From time to time during the Repurchase Period, the Company
shall, upon written notice from the Holder of this Warrant or a holder of shares
of Warrant Stock issued upon the exercise of this Warrant (the "Repurchase
Notice"), and subject to the provisions of Section 12.2(b) below, repurchase, on
the date and in the manner set forth in Section 12.2 below, from such holder:
all or the portion of this Warrant (exceeding 10% or,
if less than 10%, the entire remainder) designated in such notice for an amount
determined by multiplying (A) the number of shares of Warrant Stock then
purchasable upon exercise of this Warrant (or the portion thereof designated by
the Holder to be repurchased in such notice) by (B) the difference between (I)
the Fair Value per share of Common Stock as of the date of such notice and (II)
the Current Warrant Price per share of Common Stock as of the date of such
notice; and/or
the number of shares of Warrant Stock held by such
holder and designated in such notice for an amount determined by multiplying (A)
the number of shares so designated by (B) the Fair Value per share of Common
Stock as of the date of such notice;
such amount being herein referred to as the "Repurchase Price." Nothing herein
shall preclude the exercise by the Holder of any portion of this Warrant
exercisable at any time prior to any repurchase hereunder.
{PRIVATE }"Determination and Payment of Repurchase Price". The
Repurchase Price for any repurchase of Warrants or of Warrant Stock pursuant to
Section 12.1 shall be determined within sixty (60) days of the date of the
Repurchase Notice (with a notice as to any such Repurchase Price being
telecopied to any holder giving such a Repurchase Notice immediately upon
determination thereof), and shall be payable within thirty (30) days following
the date of such determination of the Repurchase Price. On the date of any
repurchase of any portion of this Warrant pursuant to Section 12.1, the Holder
shall assign to the Company such Warrant or portion thereof being repurchased,
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as the case may be, without any representation or warranty (except as to title),
by the surrender of such Warrant at the Designated Office against payment of the
Repurchase Price therefor. On the date of any repurchase pursuant to Section
12.1 of any shares of Warrant Stock issued upon the exercise hereof, each holder
thereof shall transfer to the Company the shares of Warrant Stock being
repurchased, without representation or warranty (except as to title), by the
surrender of a certificate or certificates representing such shares duly
endorsed for transfer or accompanied by a duly-executed stock power against
payment of the Repurchase Price therefor. Payment of the Repurchase Price shall
be made in the following order of priority (a) cash, delivered by means of wire
transfer to an account in a bank located in the United States designated by such
holder for such purpose or a certified or official bank check payable to the
order of such holder, to the extent that the repurchase does not result in the
Company's having a ratio of the sum of long term liabilities, the current
portion of long term Indebtedness and short term Indebtedness to financial
institutions for borrowed money to common stockholder's equity (determined in
accordance with GAAP, consistently applied) in excess of three to one (3:1), (b)
by delivery of shares of Restricted Common Stock provided that there shall first
have been a Qualifying Public Offering and/or (c) by delivery of a promissory
note (i) requiring payment of principal in twenty (20) equal quarterly
installments, (ii) requiring quarterly payment of interest on the unpaid
principal balance at a rate equal to two percent (2%) in excess of the prime
rate announced by Key Bank (Cleveland, Ohio) or its successor from time to time,
changing when and as such prime rate changes (subject, however, to the maximum
rate permitted by applicable law), (iii) which is secured by all of the shares
of Warrant Stock being repurchased (or which would have been repurchased in the
event the Warrant itself is repurchased) and (iv) which is not subordinated to
any other Indebtedness of the Company other than that owing to Senior Lenders;
provided, however, that any subordination of indebtedness shall be on terms
substantially equivalent to those set forth in the Subordination Agreement
referred to in the Series A Note. If less than all of this Warrant is being
repurchased, the Company shall, pursuant to Section 3, cancel such Warrant and
issue in the name of, and deliver to, the Holder hereof a new Warrant for the
portion not being repurchased, and if less than all the shares of Warrant Stock
represented by any certificate are being repurchased, the Company shall issue a
new certificate to the holder representing the shares not being repurchased.
Option to Redeem Warrant or Warrant Stock. The Company shall
have the right to redeem from the Holder of this Warrant and the holders of
shares of Warrant Stock issued upon exercise of this Warrant such Warrant or
shares of Warrant Stock in accordance with the terms of this Section 12.3 and of
Section 12.4 (such rights are sometimes referred to herein as a "Call"). From
time to time during the Early Redemption Period or Redemption Period (whichever
is applicable), the Company shall, upon written notice to the Holder of this
Warrant or a holder of shares of Warrant Stock issued upon the exercise of this
Warrant (the "Redemption Notice"), redeem, on the date and in the manner set
forth in Section 12.4 below, from such holder:
all or the portion of this Warrant designated in such
notice for an amount determined by multiplying (A) the number of shares of
Warrant Stock then purchasable upon exercise of this Warrant (or the portion
thereof designated by the Holder to be repurchased in such notice) by (B) the
difference between (I) the Fair Value per share of Common Stock as of the date
of such notice and (II) the Current Warrant Price per share of Common Stock as
of the date of such notice; and/or
the number of shares of Warrant Stock held by such
holder and designated in such notice for an amount determined by multiplying (A)
the number of shares so designated by (B) the Fair Value per share of Common
Stock as of the date of such notice;
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such amount being herein referred to as the "Redemption Price." Nothing herein
shall preclude the exercise by the Holder of any portion of this Warrant
exercisable at any time prior to any repurchase hereunder.
Determination and Payment of Redemption Price. The Redemption
Price for any redemption of Warrants or of Warrant Stock pursuant to Section
12.3 shall be determined within sixty (60) days of the date of the Redemption
Notice (with a notice as to any such Redemption Price being telecopied to any
holder being given such a Redemption Notice immediately upon determination
thereof), and shall be payable within thirty (30) days following the date of
such determination of the Redemption Price. On the date of any redemption of
any portion of this Warrant pursuant to Section 12.3, the Holder shall assign to
the Company such Warrant or portion thereof being repurchased, as the case may
be, without any representation or warranty (except as to title), by the
surrender of such Warrant at the Designated Office against payment of the
Redemption Price therefor. On the date of any redemption pursuant to Section
12.3 of any shares of Warrant Stock issued upon the exercise hereof, each holder
thereof shall transfer to the Company the shares of Warrant Stock being
repurchased, without representation or warranty (except as to title), by the
surrender of a certificate or certificates representing such shares duly
endorsed for transfer or accompanied by a duly-executed stock power against
payment of the Redemption Price therefor. Payment of the Redemption Price shall
be made at the option of the holder of such Warrant or shares of Warrant Stock
by (i) wire transfer to an account in a bank located in the United States desig-
nated by such holder for such purpose or (ii) a certified or official bank check
payable to the order of such holder. If less than all of this Warrant is being
redeemed, the Company shall, pursuant to Section 3, cancel such Warrant and
issue in the name of, and deliver to, the Holder hereof a new Warrant for the
portion not being redeemed, and if less than all the shares of Warrant Stock
represented by any certificate are being redeemed, the Company shall issue a new
certificate to the holder representing the shares not being redeemed.
REGISTRATION RIGHTS, ETC.
INTENTIONALLY LEFT BLANK
Company Registration.
Notice of Registration. If the Company shall determine to
register any of its securities either for its own account or for the account of
a security holder or holders, other than a registration relating solely to
employee benefit or stock option plans, a registration relating solely to
securities to be issued in connection with the acquisition of any entity or
business, a registration relating solely to a Commission Rule 145 transaction,
or a registration on any registration form that does not permit secondary sales,
the Company will:
promptly give written notice of the proposed registration to
the Holder and each Registrable Securityholder (which shall include a
list of the jurisdictions in which the Company intends to attempt to
qualify such securities under the applicable State Acts); and
include in such registration (and any related qualification
under the applicable State Acts or other compliance), and in any
underwriting involved therein, all the Registrable Securities
specified in a written request or requests, made by any Registrable
Securityholder within fifteen (15) days after receipt of the written
notice from the Company described in clause (i) above, except as set
forth in Section 13.2(b) below.
Underwriting. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
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Company shall so advise the Registrable Securityholders as part of the written
notice given pursuant to Section 13.2(a)(i). In such event, the right of any
Registrable Securityholder to registration pursuant to this Section 13.2 shall
be conditioned upon such Registrable Securityholder's participation in such
underwriting and the inclusion of such Registrable Securityholder's Registrable
Securities in the underwriting to the extent provided herein. All Registrable
Securityholders proposing to distribute their securities through such
underwriting shall (together with the Company and the Other Securityholders
proposing to distribute their securities through such underwriting) enter into
an underwriting agreement in customary form with the representatives of the
underwriter or underwriters selected for such underwriting by the Company.
Notwithstanding any other provision of this Section 13.2, if the representatives
of the underwriter or underwriters determine that marketing factors make it
advisable to impose a limitation on the number of shares to be underwritten, the
representatives of the underwriter or underwriters may exclude from such
registration and underwriting some or all of the Registrable Securities that
would otherwise be registered pursuant hereto, and the number of shares that may
be included in the registration and underwriting on behalf of such Registrable
Securityholders and Other Securityholders shall be allocated among such
Registrable Securityholders and Other Securityholders in proportion, as nearly
as practicable, to the respective amounts of Registrable Securities and other
securities that they had requested to be included in such registration at the
time of filing the registration statement. If any Registrable Securityholder or
any Other Securityholder disapproves of the terms of any such underwriting, he
may elect to withdraw therefrom by written notice to the Company and the
representatives of the underwriter or underwriters.
Registration on Form S-2 or Form S-3 . The Company shall use its best
efforts to qualify for the use of Form S-2 and Form S-3 or any comparable or
successor form or forms of the Commission; and to that end the Company shall
register (whether or not required by law to do so) the Common Stock under the
Exchange Act, in accordance with the provisions of the Exchange Act and rules
and regulations thereunder following the effective date of the first
registration of any securities of the Company on Form S-1 or Form S-18 or any
comparable or successor form or forms of the Commission.
Expenses of Registration. The Company shall bear all Registration
Expenses incurred in connection with any registration, qualification and
compliance by the Company pursuant to Sections 13.2 and 13.3 hereof. All
Selling Expenses shall be borne by the holders of the securities so registered
pro rata on the basis of the number of their shares so registered.
Registration Procedures. In the case of each registration effected by
the Company pursuant to this Section 13, the Company will keep each Registrable
Securityholder advised in writing as to the initiation of each registration and
as to the completion thereof. The Company will:
(a) to the extent allowed by the Securities Act and the rules and
regulations of the Commission, keep such registration effective for a period of
sixty (60) days or until the Registrable Securityholder or Registrable
Securityholders have completed the distribution described in the registration
statement, whichever first occurs;
(b) furnish such number of prospectuses and other documents incident
thereto as a Registrable Securityholder from time to time may reasonably
request; and
(c) use its best efforts to register or qualify the Registrable
Securities under the State Acts of such jurisdictions as any Registrable
Securityholder may reasonably request; provided, however, that the Company shall
not be obligated to register or qualify such Registrable Securities in any
particular jurisdiction in which the Company would be required to execute a
general consent to service of process in order to effect such registration,
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qualification or compliance, unless the Company is already subject to service in
such jurisdiction and except as may be required by the Securities Act or
applicable rules or regulations thereunder.
Indemnification.
(a) The Company, with respect to each registration, qualification or
compliance effected pursuant to this Section 13, will defend, indemnify and hold
harmless each Registrable Securityholder, each of its officers, directors or
partners, and each party controlling such Registrable Securityholder, and each
underwriter, if any, and each party controlling any such 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 such registration statement, prospectus,
offering circular or other such material documents (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) of 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 Act or any rule or regulation thereunder applicable
to the Company and relating to an action or inaction required of the Company in
connection with any such registration, qualification or compliance, and will
reimburse such Registrable Securityholders, officers, directors, partners,
underwriters or control persons for any legal and other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action; provided , however, that the Company will not be
liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any such untrue statement (or
alleged untrue statement) or omission (or alleged omission) based solely upon
written information furnished to the Company by such Registrable Securityholder
or underwriter, as the case may be, and stated to be specifically for use
therein.
(b) Each Registrable Securityholder and Other Securityholder will, if
Registrable Securities held by him are included in the securities as to which
such registration, qualification or compliance is being effected, defend,
indemnify and hold harmless the Company, each of its officers and directors and
each party controlling the Company, and each underwriter, if any, and each party
controlling any such 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 such registration statement, prospectus, offering circular or other such
material documents (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) of a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
any violation by the Registrable Securityholder or Other Securityholder of the
Securities Act or any State Act or any rule or regulation thereunder applicable
to the Registrable Securityholder or Other Securityholder and relating to an
action or inaction required of the Registrable Securityholder or Other
Securityholder in connection with any such registration, qualification or
compliance, and will reimburse the Company, such officers, directors,
underwriters or control persons for any legal and other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action, in each case only to the extent that any such
claim, loss, damage, liability or expense arises out of or is based on any such
untrue statement (or alleged untrue statement) or omission (or alleged omission)
based solely upon written information furnished to the Company by such
Registrable Securityholder or Other Securityholder, as the case may be, and
stated to be specifically for use therein; provided, however, that the
obligations of such Registrable Securityholders and Other Securityholders
hereunder shall be limited to an amount equal to the proceeds to each such
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Registrable Securityholder or Other Securityholder of securities sold as
contemplated herein.
(c) Each party entitled to indemnification under this Section 13.6
(the "Indemnified Party") shall give notice to the party that allegedly is
obligated hereunder to indemnify the Indemnified Party (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 or any litigation resulting therefrom;
provided, however, 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 unreasonably be
withheld), and the Indemnified Party may participate in such defense at such
party's expense (unless the Indemnified Party shall have been advised by counsel
that actual or potential differing interests or defenses exist or may exist
between the Indemnifying Party and the Indemnified Party, in which case such
expense shall be paid by the Indemnifying Party); 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 Section 13.6. 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 that 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.
Information by Holder. Each holder of Registrable Securities, and
each Other Securityholder holding securities included in any registration, shall
furnish to the Company such information regarding such holder or Other
Registrable Securityholder 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 Section 13.
{PRIVATE } "DILUTION FEE"
In the event that the Company at any time after the Original Issue
Date shall pay a dividend or make any other distribution with respect to its
Common Stock (or any other shares of the capital stock of the Company for which
this Warrant becomes exercisable pursuant to Section 4 above) in the form of
cash or other property (other than a stock dividend subject to the provisions of
Section 4.1 above), then the Holder of this Warrant shall be entitled to receive
a dilution fee (a "Dilution Fee") payable in cash on the date of payment of such
dividend or other distribution equal to the number of shares of Warrant Stock
(or such other shares of stock) issuable upon exercise of this Warrant on such
date multiplied by the amount of cash and the fair market value of any other
property distributed with respect to each share of Common Stock (or such other
stock). The fair market value of any such other property shall mean the fair
market value thereof, as determined by the Board of Directors of the Company in
good faith and supported, upon the request of the Majority Warrant Holders, and
at the expense of the Holders, by an opinion of an investment banking or
appraisal firm of recognized national standing selected by the Company and
reasonably acceptable to such Majority Warrant Holders.
{PRIVATE } "MISCELLANEOUS"
{PRIVATE }"Nonwaiver". No course of dealing or any delay or failure
to exercise any right hereunder on the part of the Company or the Holder shall
operate as a waiver of such right or otherwise prejudice the rights, powers or
remedies of such Person.
{PRIVATE } "Notice Generally" . All notices
and other communications provided for hereunder shall be in writing and mailed
by certified mail, return receipt requested, telecopied, telegraphed, telexed,
cabled, or personally delivered, at the addresses of the parties hereto (until
-22-
notice of a change thereof is delivered as provided herein) as set forth below
each party's name as set forth in Section 11.4 of the Stock Purchase Agreement.
All such notices and communications shall be effective three Business Days after
being deposited in the mails, or on the first Business Day following
confirmation of receipt when telecopied, telegraphed, telexed, cabled or
personally delivered.
{PRIVATE }"Indemnification". If the Company fails to make, when due,
any payments provided for in this Warrant, the Company shall pay to the holder
hereof (a) interest at the Default Rate on any amounts due and owing to such
holder or on such unpaid Repurchase Price and (b) such further amounts as shall
be sufficient to cover any costs and expenses including, but not limited to,
reasonable attorneys' fees and expenses incurred by such holder in collecting
any amounts due hereunder. The Company agrees to defend, protect, indemnify and
hold harmless the Holder hereof and its Affiliates and the holders of any
Warrant Stock issued upon the exercise hereof and their Affiliates and their
respective officers, directors, employees and agents from and against any and
all liabilities, obligations, losses, damages, penalties, actions, suits,
judgments, claims, costs, expenses and disbursements of any kind or nature
whatsoever (including, without limitation, the fees and disbursements of counsel
for such indemnified party) in connection with any investigative, administrative
or judicial proceedings (whether or not such indemnified party is a party
thereto) imposed on, incurred by, or asserted against such indemnified party
(whether direct, indirect or consequential) incurred in connection with or
arising from a Company Default.
{PRIVATE }"Limitation of Liability". No provision hereof, in the
absence of affirmative action by the Holder to purchase shares of Common Stock,
and no enumeration herein of the rights or privileges of the Holder hereof,
shall give rise to any liability of such Holder for the purchase price of any
Common Stock or as a stockholder of the Company, whether such liability is
asserted by the Company or by creditors of the Company.
{PRIVATE }"Remedies". Each holder of Warrants and/or Warrant Stock,
in addition to being entitled to exercise its rights granted by law, including
recovery of damages, shall be entitled to specific performance of its rights
provided under this Warrant. The Company agrees that monetary damages would not
be adequate compensation for any loss incurred by reason of a breach by it of
the provisions of this Warrant and hereby agrees, in an action for specific
performance, to waive the defense that a remedy at law would be adequate.
{PRIVATE }"Successors and Assigns". This Warrant and the rights
evidenced hereby shall inure to the benefit of and be binding upon the Company
and the Holder and their respective successors and permitted assigns. The
provisions of this Warrant are intended to be for the benefit of all Holders
from time to time of this Warrant and to the extent applicable, all holders of
shares of Warrant Stock issued upon the exercise hereof (including transferees),
and shall be enforceable by any such holder. The Company shall not have the
right to assign any of its rights and obligations under this Warrant without the
prior written consent of the Holders.
{PRIVATE }"Amendment". This Warrant and all other Warrants may be
modified or amended or the provisions hereof waived with the written consent of
the Company and the Majority Warrant Holders, provided that no such Warrant may
be modified or amended if the effect thereof is to (i) reduce the number of
shares of Common Stock for which such Warrant is exercisable, (ii) increase the
price at which such shares may be purchased upon exercise of such Warrant
(before giving effect to any adjustment as provided therein) or (iii) have a
material adverse affect on the rights the Holders without the written consent of
the holder thereof.
{PRIVATE } "Severability". In case any provision
in or obligation under this Warrant shall be invalid, illegal or unenforceable
-23-
in any jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
{PRIVATE }"Headings". The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
{PRIVATE }"Governing Law". This Warrant shall be governed by, and
construed in accordance with, the laws of the State of Florida.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed and attested by its duly authorized officers.
ECB, INC.
ATTEST:
By:
- - --------------------------- -------------------------
Name:
Title:
Dated: , 1996
------------
88/HANDEX/18746FDC.939
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ANNEX A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant for the purchase of Shares of Common Stock of ECB, Inc. and
herewith makes payment therefor, all at the price and on the terms and
conditions specified in this Warrant and requests that certificates for the
shares of Common Stock hereby purchased (and any securities or other property
issuable upon such exercise) be issued in the name of and delivered to
whose address is and, if
such shares of Common Stock shall not include all of the shares of Common Stock
issuable as provided in this Warrant, that a new Warrant of like tenor and date
for the balance of the shares of Common Stock issuable hereunder be delivered to
the undersigned.
-----------------------------------
(Name of Registered Owner)
-----------------------------------
(Signature of Registered Owner)
------------------------------------
(Street Address)
------------------------------------
(City) (State) (Zip Code)
88/HANDEX/18746FDC.939
ANNEX B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under this Warrant, with respect to the number of
shares of Common Stock set forth below:
No. of Shares
Name and address of Assignee of Common Stock
-25-
and does hereby irrevocably constitute and appoint
attorney-in-fact to register such transfer onto the
books of ECB, Inc. maintained for the purpose, with full power of substitution
in the premises.
Dated: Print Name:
--------------- ------------------------
Signature:
------------------------
Witness:
------------------------
88/HANDEX/18746FDC.939
-26-
EXHIBIT 2.4(A)(V) PRIVATE
SUBORDINATION AGREEMENT
This Subordination Agreement is executed by SOUTHTRUST BANK OF ALABAMA,
NATIONAL ASSOCIATION ("Lender"), ECB, INC. ("Parent"), a Florida corporation,
Parent's subsidiaries (collectively, Parent and its current and future
subsidiaries are "Borrowers"), and HANDEX CORPORATION (the "Subordinate
Creditor"), a Delaware corporation, to induce Lender to extend credit to
Borrowers. Lender, Borrowers, and the Subordinate Creditor agree as follows:
BACKGROUND. This Subordination Agreement is executed pursuant to the
Loan and Security Agreement (the "Credit Agreement") between Lender and Borrow-
ers that is dated the same date as this Subordination Agreement. Lender
requires the execution of this Subordination Agreement as a condition precedent
to extending the line of credit and term loan facilities (collectively, the
"Loan") contemplated by the Credit Agreement. Proceeds of the Loan will be used
for Borrowers' working capital and to finance Parent's acquisition of the shares
of common stock of Handex Environmental, Inc. and its subsidiaries from
Subordinate Creditor pursuant to a Stock Purchase Agreement dated November ,
1996 ("Purchase Agreement"). In connection with the Acquisition, Parent has
delivered to Subordinate Creditor its $3,700,000 Promissory Note (the "Seller
Note"), which will be guaranteed by each of Parent's subsidiaries. Parent has
also delivered to Subordinate Creditor 2,000 shares of its Series A Preferred
Stock (the "Preferred Stock"), a warrant to purchase 300,000 shares of its
common stock at $1.32 per share, and a warrant to purchase 85,000 shares of its
common stock at $1.60 per share (collectively, the "Warrants"). The Warrants,
Preferred Stock, and common stock issuable on exercise of the Warrants are all
mandatorily redeemable by Parent at Subordinate Creditor's option under
circumstances described in the documents governing the Warrants and the
Preferred Stock. Unless otherwise expressly indicated, all capitalized terms
used in this Subordination Agreement have the respective meanings attributed to
them in the Credit Agreement, and the definitions of those terms in the Credit
Agreement are incorporated by reference in this Subordination Agreement.
SUBORDINATION. In consideration of the benefits that will inure to
the Subordinate Creditor and Borrowers from the extension of credit by Lender to
Borrowers, and according to the terms and conditions of this Subordi nation
Agreement, the Subordinate Creditor subordinates the liabilities, obligations,
and indebtedness of Borrowers to it under and only under (i) the Seller Note,
(ii) guarantees of the Seller Note, (iii) dividend payment and redemption
obligations under the Preferred Stock, and (iv) redemption and repurchase obliga
tions under the Warrants, and all renewals and extensions of any of the
foregoing (collectively, the "Subordinated Debt") to all liabilities,
obligations, and indebtedness (including interest) of Borrowers to Lender
(including all indebtedness pertaining to the Loan), however and whenever
incurred or evidenced, whether sole, joint, or several, whether due or to become
due, whether now existing or later owed, created, acquired, advanced, or con-
tracted, and whether direct, accrued, unaccrued, primary, secondary, absolute,
contingent, asserted, unasserted, liquidated, or unliquidated, and all renewals
and extensions of any of the foregoing and all costs incurred by Lender in
connection with the collection, enforcement, administration, and interpretation
of any of the foregoing liabilities, obligations, and indebtedness
(collectively, the "Senior Debt").
REPRESENTATION; PRIOR RIGHTS OF SENIOR DEBT. Borrowers and
Subordinate Creditor represent that Subordinate Creditor alone is entitled to
payment of the Subordinated Debt. The Subordinated Debt is subject to the right
of prior payment in full of all the Senior Debt. Except as otherwise provided
in Section 4 of this Subordination Agreement, Borrowers shall not make any
payment to the Subordinate Creditor on account of the Subordinated Debt, or give
the Subordinate Creditor any security or collateral for any of the Sub ordinated
Debt, or apply any assets or property of Borrowers to retire or purchase any of
the Subordinated Debt, unless all the Senior Debt has been fully paid and the
commitment to lend money pursuant to the Credit Agreement terminated. Except as
provided in Section 4 with respect to "Permitted Payments," regardless of the
due date of any Subordinated Debt, the Subordinate Creditor expressly waives all
rights to payment of the Subordinated Debt by Borrowers before Borrowers have
fully paid all the Senior Debt and the commitment to lend money pursuant to the
Credit Agreement terminated. The Subordinate Creditor shall not accept, demand,
or receive from Borrowers any payment or security interest in contravention of
this Subordination Agreement. If a claim is made against Lender for recovery or
repayment of any amount received by it in payment or on account of any Senior
Debt (for example, the avoidance of any payment of a Senior Debt as a preference
under the United States Bankruptcy Code), and if Lender repays all or a portion
of the claim pursuant to a judicial order, decree, or judgment or pursuant to a
settlement or compromise of the claim, the amount repaid or recovered will not
constitute payment of the Senior Debt and will be treated as if it had never
been received by Lender. In addition, the Subordinate Creditor shall not
transfer to a third party who is not a party to this Subordination Agreement any
obligation of Borrowers to the Subordinate Creditor that constitutes a
Subordinated Debt or take any other action designed to secure indirectly from
Borrowers any payment in contravention of this Subordination Agreement.
PERMITTED PAYMENTS; SUBORDINATE CREDITOR'S RIGHTS; TURNOVER OF
PAYMENTS; NOTICE OF DEFAULT; PERMITTED LIENS.
(A) CERTAIN PERMITTED PAYMENTS BEFORE A SENIOR DEBT DEFAULT. This
Subordination Agreement does not prohibit the making or accepting of the
"Permitted Payments" specified below to Subordinate Creditor by Borrowers, if
all of the following conditions precedent and subsequent are satisfied: (A) no
"Senior Debt Default" exists when the payment is made , (B) no Senior Debt
Default would result from the payment, and (C) Borrowers comply with the
financial covenants set forth in Section 6.21 ("Financial Covenants") of the
Credit Agreement each time Borrowers' compliance with those financial covenants
is measured for the period that includes the date on which the payment is made.
For purposes of this section, a "Permitted Payment" includes the following:
(i) payment of regular scheduled accrued interest (at non-
default rates) pursuant to Section 1.1 of the Seller Note for each
month after January 1, 1998;
(ii) payment under the Seller Note of mandatory scheduled
principal payments pursuant to Section 1.2 on and after April 30, 1999
and Section 1.6 (mandatory prepayment on a "Qualified Public
Offering"), and mandatory prepayment of the Seller Note on an Event of
Default under Sections 7(g) or 7(h) of the Seller Note;
(iii) payment of regular accruing dividends (at non-default
rates) on the Parent's Series A Preferred Stock (understood to accrue
at $13,334 per month) for each month after January 1, 1998;
(iv) payment of the mandatory redemption payments with respect
to the Parent's Series A Preferred Stock following (A) April 15, 2003,
-3-
or (B) a "Qualified Public Offering," as described in Section 5(i) of
the Terms of Series A Preferred Stock attached as Exhibit 2.2(c) to the
Purchase Agreement, or (C) any of the events described in Section
5(i)(a), (b), or (c) of the foregoing preferred stock terms; and
(v) payment of the mandatory repurchase payments with respect
to the Warrants following (a) the sixth anniversary of issuance date of
the Warrants or (b) a "Qualified Public Offering," as described in
Sections 12.1 and 12.2 of the Warrants.
For purposes of this Section, a "Senior Debt Default" is a default arising from
Sections 10.1, 10.4, 10.5, 10.6, 10.9, 10.10, 10.12, 10.13, 10.15, 10.16, 10.17,
or 10.18 of the Credit Agreement, or a default under Section 10.3 that arises
from a default under the covenants set forth in Sections 6.1, 6.3, 6.4, 6.10,
6.15, 6.21, or Article 7 of the Credit Agreement. Any of the above payments
accepted by Subordinate Creditor without satisfaction of the specified
conditions precedent and subsequent (regarding the absence of a Senior Debt
Default and compliance with the Financial Covenants in Section 6.21 of the
Credit Agreement) will not be Permitted Payments and will be immediately paid by
the Subordinate Creditor to the Lender in accordance with Section 6 of this
Subordination Agreement.
(B) VOLUNTARY PREPAYMENTS. Without the prior written consent of the
Lender, Borrowers shall not make, and the Subordinate Creditor shall not accept,
any voluntary prepayment of the Subordinated Debt, any voluntary redemption or
repurchase of the Preferred Stock, or any voluntary redemption or repurchase of
the Warrants or securities issuable on exercise of the Warrants.
(C) THE SUBORDINATE CREDITOR'S RIGHTS FOLLOWING A DEFAULT. For 180 days
following its receipt of notice of a Senior Debt Default required to be
delivered pursuant to Section 4(e), the Subordinate Creditor shall not, without
Lender's prior written consent, ask, demand, accelerate, sue for, accept, or
receive any part of the Subordinated Debt. This 180-day period will be
terminated early on any of the following: (i) cure or waiver of the Senior Debt
Default, or (ii) with respect to the Senior Note only, a Qualifying Public
Offering or an Event of Default under Section 7(g) or 7(h) of the Senior Note,
or (iii) with respect to the Preferred Stock only, any event requiring a
mandatory redemption before April 15, 2003, (iv) with respect to the Warrants
only, any event requiring a mandatory repurchase of the Warrants before the
sixth anniversary of their original issuance date, or (v) Lender's acceleration
of the Senior Debt and pursuit of its rights and remedies with respect thereto.
Following the termination or expiration of the 180-day period or the occurrence
of one of the events listed in clauses (ii), (iii), or (iv) above, and
notwithstanding the existence of a Senior Debt Default, Subordinate Creditor may
accelerate and pursue any of its other rights and remedies and collect amounts
due with respect to the Subordinated Debt, subject to Borrower's rights under
the terms and conditions of the Subordinated Debt, all of Lender's rights under
the Credit Agreement and other Loan Documents, and the provisions regarding
turnover of collected amounts of subsection (d) below.
(D) TURNOVER OF PAYMENTS. Notwithstanding any of the foregoing provisions
of subsection (c) regarding Subordinate Creditor's rights on a default, while a
Senior Debt Default exists, and until all of the Senior Debt has been fully paid
and any commitment to lend money pursuant to the Credit Agreement terminated,
Lender will enjoy prior right of payment in all cases and the Subordinate
Creditor immediately shall deliver to Lender any cash and property realized from
Borrowers with respect to the Subordinated Debt in the form received (except for
any assignment or endorsement requested by Lender) for application to the Senior
Debt (whether due or not due), and until so delivered, the Subordinate Creditor
shall hold all that cash and other property pursuant to an express trust for the
-4-
benefit of Lender unless prohibited by law or by an order of any court. If
Subordinate Creditor does turn over to Lender amounts received from Borrower,
the amount turned over will not constitute payment of the Subordinated Debt, and
will be treated as if it had never been received by Subordinate Creditor. A
Senior Debt Default will be deemed to continue until cured or waived as
evidenced by Lender's notice required under Section 4(e) below.
(E) NOTICE REQUIREMENTS. Subordinate Creditor shall promptly notify Lender
of any default with respect to the Subordinate Debt. Lender shall promptly
notify Subordinate Creditor of any Senior Debt Default and of any waiver or cure
thereof. Any failure of Lender to send this notice will not be prejudicial to
Lender with respect to enforcement of its rights under this Subordination
Agreement after the notice date.
(F) PERMITTED LIEN. This Subordination Agreement does not prohibit the
granting of the security interests in the shares of Parent and its subsidiaries
contemplated by the Seller Note nor the taking of any action permitted by the
instruments granting such security interests after the expiration or termination
of the 180-day period specified in (c) above or the occurrence of one of the
events listed in clauses (c) (ii), (iii), or (iv) above, subject to the Subor-
dinate Creditor's obligation to turn over to Lender any proceeds pursuant to
subsection (d). Following any assumption of control over Parent by Subordinate
Creditor, Borrowers shall not make, and Subordinate Creditor shall not accept,
any payment of the Subordinated Debt, until the Senior Debt Default has been
cured or until all of the Senior Debt has been fully paid and any commitment to
lend money pursuant to the Credit Agreement terminated.
LIQUIDATION PROCEEDINGS. In the event of any bankruptcy, insolvency,
receivership, liquidation, reorganization, or other similar proceeding relating
to Borrowers or their creditors, as such, whether or not involving bankruptcy or
insolvency, and subject to the power of a court of competent jurisdiction to
make other equitable provision reflecting the rights conferred on the holders of
the Senior Debt under this Subordination Agreement, (a) all of the Senior Debt
will be paid first in full before any payment or distribution of any kind,
whether in cash, securities, obligations, or other property, is made on account
of the Subordinate Debt, and (b) Lender is entitled to receive for application
and payment on account of the Senior Debt any payment or distribution of any
kind and character (whether in cash, property, or securities) that is payable or
deliverable in any such proceeding in respect of the Subordinated Debt, except
for securities that are subordinate and junior in right of payment to the
payment of all the Senior Debt then outstanding.
PROHIBITED RECEIPTS AND PAYMENTS. Except for certain Permitted
Payments made in accordance with the conditions set forth in section 4(a)
(regarding the absence of a Senior Debt Default and compliance with the
financial covenants in Section 6.21 of the Credit Agreement), if the Subordinate
Creditor receives any cash or other property in payment or on account of any
Subordinated Debt before all of the Senior Debt has been fully paid and any
commitment to lend money pursuant to the Credit Agreement terminated, the
Subordinate Creditor immediately shall deliver the same to Lender in the form
received (except for any endorsement or assignment requested by Lender) for ap-
plication to the Senior Debt (whether due or not due), and, until so
deliverable, the Subordinate Creditor shall hold all that cash and other
property pursuant to an express trust for the exclusive benefit of Lender,
unless otherwise required by law or court order. If Subordinate Creditor does
turn over to Lender amounts received from Borrower, the amount turned over will
not constitute payment of the Subordinated Debt, and will be treated as if it
had never been received by Subordinate Creditor. In the event of the failure of
the Subordinate Creditor to make this assignment or endorsement or the similar
assignment or endorsement required under Section 4(d), Lender, or any of its
-5-
officers or employees on behalf of Lender, is authorized in its own name or in
the name of Subordinate Creditor to make the same, and is hereby appointed the
Subordinate Creditor's attorney-in-fact for those purposes, that appointment
being coupled with an interest and irrevocable.
REVOCATION. This Subordination Agreement constitutes a continuing
agreement of subordination by the Subordinate Creditor, and Lender, without
notice to the Subordinate Creditor, may loan money, extend credit, and make
other financial accommodations to or for the account of Borrowers in reliance on
this Subordination Agreement until the Senior Debt has been fully paid and any
commitment to lend money pursuant to the Credit Agreement terminated.
EVIDENCE OF SUBORDINATED DEBT, PREFERRED STOCK, AND WARRANTS;
REPRESENTATIONS. (a) The Subordinate Creditor and Borrowers agree and warrant
that any instrument, agreement, security, or other writing now or hereafter
evidencing all or any portion of the Subordinate Debt, Preferred Stock, and
Warrants shall bear on its face a clear and conspicuous legend that it is
subject to the terms of this Subordination Agreement. True and complete copies
of all documents relating to
the Subordinate Debt, Preferred Stock, and Warrants in effect as of the date of
this Subordination Agreement have been furnished to Lender.
(b) The execution, delivery, and performance of this Agreement is within the
corporate powers of the Subordinate Creditor, has been duly authorized by all
necessary corporate action of the Subordinate Creditor, and does not contravene
any statute, regulation, rule, order, or judgment, any charter, bylaw, or
preference stock provision of Subordinate Creditor, or any provision of any
mortgage, indenture, contract, or other agreement binding on the Subordinate
Creditor or affecting its properties, which would prohibit, or cause a default
under or in any way prevent the execution, delivery, or carrying out of the
terms of this Subordination Agreement.
(c) Until the Senior Debt has been paid in full and the commitment to lend
money under the Credit Agreement terminated, Borrowers shall not issue any
instrument, security, or other writing evidencing any part of the Subordinated
Debt, Preferred Stock, or Warrants, except for the Seller Note, Warrants and
terms of Series A Preferred Stock, or amend or modify in any respect any such
instrument, security, preference stock provision, or other writing, if the
effect is to (i) increase the amount of indebtedness, stated value, or interest
or dividend rate thereunder or (ii) accelerate the repayment schedule.
SCOPE OF SUBORDINATION. The obligations of the Subordinate Creditor
under this Subordination Agreement will not be affected, released, diminished,
or discharged in any manner by any change or indulgence (including a gratuitous
indulgence not effected by legal modification) made or granted by Lender with
respect to any Senior Debt or by any circumstance whatsoever that might vary the
risk of the Subordinate Creditor under this Subordination Agreement, including
any of the following: (a) a waiver of, or acquiescence in, a default with
respect to any Senior Debt; (b) a settlement or compromise of any Senior Debt or
any collateral for it; (c) the sale, release, or other disposition of any
collateral for any Senior Debt; (d) any invalidity, irregularity, or
unenforceability of all or any portion of the Senior Debt (e) any action,
omission, or delay in the enforcement by Lender of any right or remedy against
Borrowers or others (including any guarantor) or any collateral or security with
respect to any Senior Debt; or (f) a change in the name, location, structure, or
composition of Borrowers, or a merger, consolidation, reorganization, or
dissolution of Borrowers, or any change in the shareholders of Borrowers.
LEGAL PROCEEDINGS. The validity, construction, enforcement, and
interpretation of this Subordination Agreement are governed by the laws of the
-6-
State of Florida and the United States of America, excluding the laws of those
jurisdictions relating to resolution of conflict with laws of other
jurisdictions. Lender, Borrowers, and the Subordinate Creditor consent and
agree that a proper and convenient (although nonexclusive) venue for any
litigation relating to this Subordination Agreement or any agreement or
instrument executed by the parties pursuant to this Subordination Agreement, is
any court in the State of Alabama having subject matter jurisdiction, and each
party waives any defense whether asserted by motion or pleading that the State
of Alabama is an improper or inconvenient venue.
CONTINUED EFFECTIVENESS OF THIS AGREEMENT. In the event of any sale or
transfer of Subordinated Debt, the Subordinate Creditor shall cause the
transferee to execute and deliver to Lender an agreement substantially identical
to this Subordination Agreement providing for the continued subordination of the
Subordinated Debt and for the continued effectiveness of all of the rights of
Lender under this Subordination Agreement (although this provision is not a
waiver of the above prohibition on transfer of the Subordinated Debt).
FURTHER ASSURANCES. At any time and from time to time, on request by
Lender, Borrowers and the Subordinate Creditor shall promptly make, execute, and
deliver to Lender any further amendments, assignments, instruments, or further
assurance or other documents that Lender may deem desirable to (i) negotiate or
assign the documents pertaining to the Loan, or (ii) enable Lender to sell
participations in the Loan.
MISCELLANEOUS. Time is of the essence with respect to the performance by
Borrowers and Subordinate Creditor of their obligations under this Subordination
Agreement. This Subordination Agreement will become effective as of its stated
date of execution, when it has been executed by Lender, Borrowers, and the
Subordinate Creditor. A waiver, amendment, modification, or termination of this
Subordination Agreement will be valid and effective only if it is in writing and
signed by Lender, Borrowers, and Subordinate Creditor. In addition, a written
waiver of a breach of any provision of this Subordination Agreement will not
operate as a waiver of a breach of any other provision or of a succeeding breach
of the same provision or as a waiver of the provision itself. A delay,
omission, or course of dealing on the part of Lender in exercising any right,
power, or remedy will not operate as a waiver of it, and a single or partial
exercise of any right, power, or remedy does not preclude any further exercise
of it or the exercise of any other right, power, or remedy. The exercise or
nonexercise by Lender of any right, power, or remedy does not constitute a
waiver of any breach by the Subordinate Creditor or Borrowers of any provision
of this Subordination Agreement. As used in this Subordination Agreement, (a)
the word "including" is always without limitation, (b) words in the singular
number include words of the plural number and vice versa, and (c) the term
"costs" includes all fines, penalties, interest, internal expenses, amounts paid
in settlement, fees, costs, and expenses of experts, witnesses, collection
agents, and supersedeas bonds, and reasonable attorneys' fees, costs, and
expenses, whether incurred before or after demand for payment or the
commencement of legal proceedings, and whether incurred pursuant to trial,
appellate, mediation, bankruptcy, arbitration, administrative, or judgment-
execution proceedings. This Subordination Agreement inures to the benefit of
Lender and its assigns and successors and is binding on Borrowers, the
Subordinate Creditor and their respective assigns and successors, provided,
however, that Lender shall not assign the Loan, the Credit Agreement, or the
Loan Documents to any person or entity that is not a bank, financial
institution, or investment company without the prior written consent of
Subordinate Creditor.
EXECUTED: , 199 , in
-7-
-------------- --- ----------------------
ECB, INC.
By:
----------------------------
Name:
----------------------------
Title:
---------------------------
Attest:
-------------------------
Secretary
HANDEX ENVIRONMENTAL, INC.
By:
----------------------------
Name:
----------------------------
Title:
---------------------------
Attest:
-------------------------
Secretary
HANDEX ENVIRONMENTAL MANAGEMENT,
INC.
By:
----------------------------
Name:
----------------------------
Title:
---------------------------
Attest:
-------------------------
Secretary
HANDEX OF NEW JERSEY, INC.
By:
----------------------------
Name:
----------------------------
Title:
---------------------------
Attest:
-------------------------
Secretary
-8-
HANDEX OF NEW ENGLAND, INC.
By:
----------------------------
Name:
----------------------------
Title:
---------------------------
Attest:
-------------------------
Secretary
HANDEX OF MARYLAND, INC.
By:
----------------------------
Name:
----------------------------
Title:
---------------------------
Attest:
-------------------------
Secretary
HANDEX OF THE CAROLINAS, INC.
By:
----------------------------
Name:
----------------------------
Title:
---------------------------
Attest:
-------------------------
Secretary
HANDEX OF FLORIDA, INC.
By:
----------------------------
Name:
----------------------------
Title:
---------------------------
Attest:
-------------------------
Secretary
HANDEX OF OHIO, INC.
-9-
By:
----------------------------
Name:
----------------------------
Title:
---------------------------
Attest:
-------------------------
Secretary
HANDEX OF ILLINOIS, INC.
By:
----------------------------
Name:
----------------------------
Title:
---------------------------
Attest:
-------------------------
Secretary
HANDEX OF COLORADO, INC.
By:
----------------------------
Name:
----------------------------
Title:
---------------------------
Attest:
-------------------------
Secretary
HANDEX OF PENNSYLVANIA, LLC
By:
----------------------------
Name:
----------------------------
Title:
---------------------------
Attest:
-------------------------
Secretary
SOUTHTRUST BANK OF ALABAMA,
NATIONAL ASSOCIATION
By:
----------------------------
-10-
Name:
----------------------------
Title:
---------------------------
Attest:
-------------------------
Secretary
HANDEX CORPORATION
By:
----------------------------
Name:
----------------------------
Title:
---------------------------
Attest:
-------------------------
Secretary
bca2(415) 11/12/96 2:00 PM
-11-
Exhibit 2.4(a)(vi){PRIVATE }
COMPLETION ASSISTANCE AGREEMENT
THIS AGREEMENT, dated as of , 19 is made and
entered into by and between Handex Corporation, a Delaware corporation
("Handex"), and ECB, Inc., a Florida corporation ("ECB").
WITNESSETH:
------------
WHEREAS, ECB has today acquired all of the issued and outstanding
shares of Handex Environmental, Inc. ("Environmental") (the "Acquisition") and,
by virtue of such Acquisition, now owns indirectly all of the issued and
outstanding shares of the subsidiaries of Environmental, each of which is
identified on Exhibit A attached hereto and all of which are herein collectively
referred to as the "Subsidiaries;" and
WHEREAS, prior to the closing of the Acquisition the contracts
relating to the work-in-process listed on Exhibit B (the "Retained Contracts")
were transferred by the Subsidiaries indicated on such Exhibit to Environmental,
and in turn transferred by Environmental to Handex so as to provide Handex with
primary responsibility for and control over such work-in-process; and
WHEREAS, Handex has accepted each such assignment and has assumed the
Retained Contracts.
WHEREAS, Handex may not have the equipment and personnel necessary to
perform the remaining work under the Retained Contracts and therefore, may
subcontract for the performance thereof; and
WHEREAS, ECB is willing to perform the Retained Contracts as a
subcontractor to Handex, and Handex is willing to retain ECB to perform only
specified Retained Contracts selected by Handex in its sole discretion.
NOW, THEREFOR, in consideration of the premises and mutual covenants
herein contained, it is agreed as follows:
ECB agrees to render services and otherwise perform, and to cause
the Subsidiaries to render services and otherwise perform in strict accordance
with the Subcontract Agreement (form attached hereto as Exhibit C) to be
executed by ECB and the applicable Subsidiary and Handex for each Retained
Contract Handex selects ECB to perform.
Compensation and other terms shall be as set forth in the
individual Subcontract Agreement.
ECB acknowledges and agrees that all currently unpaid amounts due
under the Retained Contracts, as well as all amounts due hereafter, are the
exclusive property of Handex, and that its sole compensation for services
rendered with respect to such Retained Contracts shall be the payments due under
the preceding paragraph 2.
All work performed by or on behalf of ECB shall be done in a
timely workmanlike and professional manner consistent with the requirements of
each Retained Contract. Handex shall have no control over the method or manner
in which ECB, Environmental and/or any Subsidiary performs such work, it being
expressly understood and agreed that the relationship of ECB to Handex is that
of an independent contractor. The foregoing shall not, however, be construed to
prevent Handex from terminating this Agreement as to any particular Retained
Contract, or all Retained Contracts, in the event of a breach of ECB's
obligations hereunder.
ECB and Handex shall keep full and adequate books of account and
other records reflecting all costs and expenses incurred and proceeds received
with respect to the Retained Contracts. Such books of account and records shall
be made available for inspection by each of the parties upon reasonable request
of the other party at any time and from time to time.
This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto, their respective successors and assigns;
provided, however, that this Agreement shall not be assignable by ECB without
the prior written consent of Handex. This Agreement shall be construed in
accordance with and governed by the laws of the State of New Jersey.
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement
as of the date and year first above written.
HANDEX CORPORATION
By:
----------------------
Its:
----------------------
ECB, INC.
By:
-----------------------
Its:
-----------------------
88/HANDEX/ECB-SUB3.AGR
EXHIBIT A
SUBSIDIARIES
HANDEX OF NEW JERSEY, INC.
HANDEX ENVIRONMENTAL MANAGEMENT, INC.
HANDEX OF NEW ENGLAND, INC.
HANDEX OF ILLINOIS, INC.
HANDEX OF OHIO, INC.
HANDEX OF THE CAROLINAS, INC.
HANDEX OF FLORIDA, INC.
HANDEX OF MARYLAND, INC.
HANDEX OF COLORADO, INC.
HANDEX OF PENNSYLVANIA, L.L.C.
88/HANDEX/ECB-SUB3.AGR
EXHIBIT B
RETAINED CONTRACTS
1. Delaware Solid Waste Authority
2. Browning Ferris Ind., Pelham, NH
3. Browning Ferris Ind., Whispering Pines
4. Browning Ferris Ind., Victoria
5. Browning Ferris Ind., Itasca Gardens
6. ITT Automotive - Madison County
7. Anne Arundel County - Millersville Landfill
8. Kansas Dept of Health - Rush Center SRP
9. Rhone Polenc, Inc.
10. Spring Industries, Inc.
11. PBS&J - Fort Lauderdale
12. William's Construction Co., Inc. - Millersville
13. LILCO
14. Wyoming DEP - Opal
15. Arundel County - Annapolis Landfill
16. Allied Signal
17. General Motors - Garland Road
18. NY - DGS
a. Maspeth Sign Shop
b. Precinct No. 3
c. Busch Terminal
d. Hamilton Asphalt Plant
e. Precinct No. 120
f. Rikers Island
19. Leicester Fornier/GEMME-HNE
20. Macon Dockery Superfund
21. Blake Construction
22. Hyman Shea
23. Star Enterprises, Cedar Grove, NJ
24. Amoco, Paramus, NJ
88/HANDEX/ECB-SUB3.AGR
EXHIBIT C
SUBCONTRACT AGREEMENT
This Agreement is made effective as of this day of December, 1996, by
and between Handex Corporation, a Delaware corporation with it's principal place
of business at 500 Campus Drive, Morganville NJ 07751 ("Handex"), and ECB, Inc.
a Florida Corporation with it's principal place of business at 30941 Suneagle
Drive, Mt. Dora, FL 32757 and Handex of , a
Delaware corporation with an office at
(ECB, Inc. and Handex of collectively referred to
hereinafter as "Subcontractor"), for the purpose of engaging Subcontractor to
perform the work described in Section I below at the rates set forth in Section
II below. ECB, Inc. and Handex of acknowledge that they
shall be jointly and severally responsible for the obligations of Subcontractor
as set forth hereinafter.
I. SCOPE OF WORK - (Description below or attach as Schedule "A")
Subcontractor shall furnish all labor, material, tools, equipment,
supervision and services necessary to prosecute and complete the work
identified and described in Schedule A attached hereto (the "Work"), being
a portion of the work required of Handex under
agreement dated (the
"General Contract"). The Work shall be performed by Subcontractor in a
good and workmanlike manner strictly in accordance with the General
Contract, attached hereto as Exhibit "B" and the terms and conditions
contained herein. Subcontractor shall be bound by all of the terms of this
Agreement, including the General Contract, and Exhibits referenced therein,
and assumes all of the obligations of Handex as stated therein which are
applicable to this Subcontract including provisions of the General Contract
required to be inserted or incorporated into subcontracts. Subcontractor
agrees to complete the work within the time set forth below or in Schedule
"A".
Subcontractor shall also comply with Schedule "C" attached hereto regarding
Handex' minimum safety requirements at the site, and particularly with the
General Contract site - specific health and safety plan. Subcontractor
shall provide appropriate license and certifications as required by
Schedule "D".
II. PRICE. The charges for the work described in Section I shall be:
III. TERMS.
1. SCOPE OF WORK. Subcontractor agrees to perform for Handex the services and
Scope of Work detailed in Section I of this Agreement in a safe manner
protective of all persons including Handex employees, and in full
compliance with all Federal, State and local laws, rules, regulations,
ordinances and orders, the General Contract, and appropriate industry
standards where not in conflict. Subcontractor represents and warrants
that its employees have received all required OSHA training, maintains
medical and other required employee records, and its employees have all
required protective personal safety equipment. Copies of all licenses and
certifications shall be provided to Handex along with this signed
subcontract.
2. COMPENSATION. As full and complete compensation for the work, Handex shall
pay contractor in accordance with the lump sum or rates not to exceed that
set forth in Section II of this Agreement. Section II represents the
contract ceiling price which shall be the maximum compensation payable to
contractor for the work. In no event shall contractor exceed the contract
ceiling price without Handex's prior express written approval.
3. CHANGES. No changes in the Scope of Work shall be performed by
Subcontractor unless Handex shall, in writing, have specifically directed
such work to be performed or deleted such work and a change order shall
have been signed by Handex and contractor.
4. INVOICES AND PAYMENTS
Invoices shall be submitted monthly to:
Handex Corporation
500 Campus Drive
Morganville, NJ 07751
Payment shall be made within (15) days of the date of receipt by Handex of
payment for Subcontractor's Work from its client for each invoice submitted
by Subcontractor and approved for payment in accordance with the General
Contract. Subcontractor shall provide Handex reasonable written
substantiation of the charges set forth on each invoice upon request. It
is understood and agreed that no payment on account shall operate as an
approval of said work or materials, or any part thereof.
5. TAXES. Subcontractor shall pay all Sales Taxes, Use Taxes, Excise Taxes,
Old Age Benefit and Unemployment Compensation Taxes upon the material and
labor furnished under this contract, as required by the Statutes of the
United States Government and the State in which this work is performed.
6. TERMINATION. Handex shall have the right to terminate the services to be
performed hereunder, with or without cause, upon written notice to
Subcontractor. If Handex gives notice of termination, Handex shall be
obligated to pay Subcontractor only those costs and expenses reasonably
incurred through the effective date of termination, and for which Handex is
paid by its client under the General Contract.
7. INSURANCE. Subcontractor shall procure and maintain at its expense during
the term of the services provided hereunder insurance coverage as required
by Schedule "E" and shall provide Handex with a certificate of insurance
prior to starting any work in the amounts and types as set forth in
Schedule "E".
In addition to the additional insureds set forth in Schedule "E",
Subcontractor shall name Handex as an additional insured on such policy(s)
and the policy(s) shall provide for 30 days notice to Handex prior to
termination, for any reason, of the policy(s).
8. INDEMNIFICATION. Subcontractor shall indemnify, hold harmless and defend
Handex, its directors, officers and employees from and against any and all
losses, liabilities, damages, injuries, demands, fines, penalties, claims,
suits, costs, fees and expenses including costs of settlement and
reasonable attorneys' fees to property or person, personal illness, injury
or death including contractor's own employees and contractor's
subcontractors' employees, of whatever type or nature to the same extent
and manner as Handex indemnifies its client under the General Contract, and
for those which shall be caused by, arise out of, or in any manner be
connected with: (i) Subcontractor's, or Subcontractor's subcontractors
violation of any laws, rules, regulations or orders; or, (ii)
Subcontractor's breach of contract or of any warranty or representation
contained herein.
9. NO ASSIGNMENT. This Agreement shall not be assigned by the Subcontractor.
Any attempt to assign the work order shall operate as an instant forfeiture
and repudiation thereof by the Subcontractor and the rights of the parties
shall be determined in the same manner as though the Subcontractor had at
the time of such attempted assignment failed and refused to continue to
perform the contract.
10. INDEPENDENT CONTRACTOR. Subcontractor is an independent contractor in all
respects and under no circumstances shall it be considered an employee of
Handex. All work performed by Subcontractor shall be by Subcontractor's
employees. Subcontractor shall not subcontract to any other person,
corporation or other entity all or any portion of the work.
11. CAPTIONS. The captions herein are for convenience only and are not to be
construed as part of this Agreement, nor shall the same be construed as
defining or limiting in any way the scope or intent of the provisions
hereof.
12. APPLICABLE LAW. The validity, performance and construction of this
Agreement shall be governed by and construed in accordance with the laws of
the State of New Jersey.
13. ENTIRE AGREEMENT. All negotiations and agreements prior to the date of
this work order are merged herein. Subcontractor has read and fully
understands this agreement. This Subcontract and the General Contract are
intended to supplement and complement each other and shall where possible
be thus interpreted. If, however, any provision of this Subcontract
irreconcilably conflicts with a provision of the General Contract, the
provision imposing the greater duty on the Subcontractor shall govern.
Handex Corporation
By:
-----------------------------
Thomas J. Bresnan, President
(SUBCONTRACTOR)
By:
------------------------------------
(Signature and Title)
88/HANDEX/ECB-SUB3.AGR
SCHEDULE A
SCOPE OF WORK
The Subcontractor, its employees, servants, subcontractors and agents shall
provide services to Handex that comply with all industry standards,
applicable federal, state and local laws, rules, regulations or ordinances,
the General Contract and which are performed in a workmanlike manner.
The Subcontractor's attention is specifically directed to the mandatory
provisions of the General Contract, which must be passed through to
Subcontractor.
Subcontractor shall provide Handex with a copy of any: field log book notes
made by Subcontractor or any sub-subcontractor; photographs made by anyone
within the control of Subcontractor; receipts for materials or equipment
used or installed at the Work site; written communications concerning the
project; material sheets documenting the materials of construction of
equipment or materials supplied or installed at the Work site; Bill of
Material for any equipment provided or supplied; manifests, trucking logs,
reports; other correspondence, documents or information related to the Work
as may be required.
General Description of the Work of Subcontractor:
General Contract Technical Specification Section References:
88/HANDEX/ECB-SUB3.AGR
EXHIBIT B
GENERAL CONTRACT PROVISIONS
1.
2.
88/HANDEX/ECB-SUB3.AGR
SCHEDULE C
SAFETY REGULATIONS FOR SUBCONTRACTORS
All safety regulations required by law, Handex and those site specific safety
regulations imposed upon Handex by it's client must be strictly observed by
employees of Subcontractor. Subcontractor's supervisors shall insure that all
of their employees and those of their subcontractors and/or agents are aware of
these regulations and that they are followed. VIOLATORS WILL NOT BE PERMITTED
TO WORK AT THE WORK SITE.
1. SMOKING REGULATIONS
All posted "No Smoking" areas are to be observed. NO butane lighters ("Bic",
"Cricket", etc.) are to be used or carried by any persons engaged in welding,
cutting, or burning activities or while performing Services for Handex at a
project site.
2. SAFETY PERMITS
Permits must be obtained from Handex for the following operations:
a) Burning or Welding Permit - Required in any designated "flammable" or "no
smoking" area and/ or in any tank, vessel, or similarly enclosed space, or on
pipelines, and at any project site of Handex. This permit may be required for
any spark production operation (other than open flame) such as operating
electric power tools (grinder, cutting, etc.), gasoline-driven motors,
jackhammers, etc. One or more men may be required to serve as fire watch during
welding operations.
b. Lockout Permits - Required whenever work is required on or in equipment that,
if accidentally started, could cause injury.
c. Confined Space Permit - Required where any worker must enter a confined
space. Any confined space must be cleaned, ventilated, and purged. Life line,
harnesses, and supplied air breathing equipment may be required. A standby
observer will be required.
d. Other Permits - May be required depending on the nature of the work. Check
with your Handex contact.
NOTE: Our staff will make every effort to supply the required permits as
expeditiously as possible.
3. HOUSEKEEPING
a. Clean work areas are expected. Work areas are to be cleaned daily and all
debris removed.
b. Equipment and supplies must be stored neatly. Aisles, passageways,
roadways, fire and other emergency equipment must be kept clear at all times.
Arrangements for storage of equipment and supplies must be made in advance with
your Handex contact. Handex will not be responsible for theft or other loss.
4. SAFETY SUPPLIES AND PROTECTIVE EQUIPMENT
a. Approved safety glasses and hard hats are required but not provided by
Handex for outside workers. Subcontractors must supply their employees with
glasses and hats and enforce the wearing of them.
b. Complete outer clothing, including long-sleeved shirts and pants, is
required when exposure to hazardous materials is possible. No "T" shirts or
shorts are permitted.
c. Other safety supplies such as gloves, respirator, face shield, goggles, fire
extinguisher, and protective clothing are not provided by Handex for
Subcontractor. Equipment such as ladders, welding equipment, scaffolds,
machinery, tools, vehicles, etc. are not loaned to Subcontractor. Discuss any
special requirements with your Handex contact.
5. EMERGENCY CONDITIONS
a. If required, all contract workers will abide by all emergency instructions
given by any supervisory member of Handex.
b. All injuries sustained at any Handex project site must be reported to your
Handex contact immediately.
6 OTHER GENERAL SAFETY RULES
a. Compressed gas cylinders must be transported, stored, and used in an upright
position. All cylinders shall be secured by a chain, or equivalent, with caps
installed during transit and storage. Cylinder valves shall be closed when work
is completed. Oxygen cylinders shall be stored a minimum of twenty feet (20')
from fuel gas (acetylene, hydrogen, etc.) cylinders.
b. When necessary to work overhead, proper precautions must be taken to prevent
falls of persons or materials. The area shall be cordoned off and proper
warning signs displayed.
c. Flammable liquids shall be stored in and dispensed from approved containers.
d. Ladders must be in good condition and must be made secure near the top.
Scaffolding shall be of substantial construction with guardrail and toe boards
installed.
e. Posted traffic control signs must be observed and vehicles kept in safe
operating condition.
f. Do not shut off or make connections to operating electric, gas, steam, air,
water, or process lines unless authorized to do so.
g. Safety barricades must be put in place at open manholes, floor holes, catch
basins, and excavations. Appropriate lights must be installed if holes are to
be left open during darkness hours.
h. Subcontractor personnel shall not enter any building or area other than the
one in which they are working other than designated toilet facilities.
THE ABOVE RULES ARE SPECIFIED TO PROTECT YOU AND YOUR FELLOW WORKERS AND ARE
REQUIREMENTS FOR WORKING AT HANDEX PROJECT SITES.
88/HANDEX/ECB-SUB3.AGR
SUBCONTRACTOR'S SAFETY DECLARATION
(To be Completed at Projects Start-up)
As the duly authorized and designated representative and agent
of , and for any subcontractor, agent or servant and their
employees, all hereinafter called "Contractor", I hereby certify and agree for
myself and for and on behalf of Contractor that:
Contractor has received an orientation briefing by Handex including, but
not limited to, site-specific safety rules, accident/injury reporting,
emergency procedures and potential hazards in the Contractor's work area
during routine site operations;
Contractor has presently and will continue to instruct all of its agents
and employees in the topics covered at the above orientation, before they
are allowed to work on-site;
Contractor has received a written copy of this site-specific safety rules,
health and safety plans and will insure that its employees comply with
those rules, as well as any applicable federal, state and local health and
safety regulations;
Contractor will provide required respirators and personnel protective
equipment for its employees and agents working on Handex project site;
Contractor employees have been examined within the past 12 months and a
have been medically qualified to perform their work assignments (including
the wearing of respirators and personnel protective equipment), in
accordance with state and federal OSHA regulations;
Contractor employees have received training in appropriate health and
safety topics (including, but not limited to, respiratory protection,
hearing conservation, hazard communication and equipment operations), in
accordance with state and federal OSHA regulations; and
Contractor performs regularly scheduled maintenance on owned or leased
vehicles and equipment, as per state and federal OSHA regulations (29 CFR
1910 and 1926). Known defects will be repaired prior to operation and, as
defects become apparent during equipment operation, the equipment will be
taken out of service until repairs are made.
This declaration is hereby incorporated into the Contractual agreement between
Handex Environmental Management, Inc. and which is
dated .
Contractor's Representative
By:
----------------------------------------
Printed Name: Date
88/HANDEX/ECB-SUB3.AGR
SCHEDULE D
Subcontractor must provide the following, which must be attached hereto
before work begins:
1. Certificate of Insurance.
2. Copy of Subcontractor's License to perform the specific profession (if
applicable).
3. Proof of OSHA Hazardous Waste training (40 hr + 8 hr).
4. Proof of medical monitoring in accordance with OSHA.
5. Proof of compliance with client Drug and Alcohol policy.
In addition, construction/drilling/excavation procedures and/or standards
must be attached hereto, or sufficiently described.
88/HANDEX/ECB-SUB3.AGR
SCHEDULE E
INSURANCE REQUIREMENTS
88/HANDEX/ECB-SUB3.AGR
Exhibit 2.4(a)(vii){PRIVATE }
SHAREHOLDERS AGREEMENT
JAH\CSW\AGRE\207135.10
THIS AGREEMENT, made and entered into as of the day of ,
1996, by and between ECB INC., a Florida corporation, hereinafter referred to as
the "Corporation," GEORGE BANNON ("Bannon"), a resident of Lake County, Florida,
ROGER EATMAN ("Eatman"), a resident of Leon County, Florida and S. C. CULBRETH,
JR., ("Culbreth") a resident of Buncombe County, North Carolina, HANDEX
CORPORATION, ("Handex") a Delaware Corporation, and SOUTHCOAST CAPITAL
CORPORATION ("Southcoast") a Corporation, hereinafter collectively
referred to as the "Shareholders" and individually referred to as "Shareholder."
As used herein, "Shareholder" shall also refer to any future shareholder of the
Corporation who becomes subject to the terms and conditions of this agreement.
WHEREAS, the Corporation has authorized 1,540,000 shares of Voting Common
Stock and 2,000 shares of Series A Preferred Stock; and
WHEREAS, all of the Corporation's issued and outstanding shares of Voting
Common Stock are owned by Bannon, Eatman, and Culbreth (collectively the
"Controlling Shareholders") as follows;
Shareholder Number of Shares
----------- -----------------
Eatman 314,666.66
Bannon 314,666.66
Culbreth 189,666.66
------------
Total 819,000.00
WHEREAS, the Corporation has issued "A" Warrants to Handex to purchase
300,000 shares of the Corporation's Voting Common Stock pursuant to that certain
Warrant of even date herewith, a copy of which is attached as Exhibit "A" and
incorporated by reference, "B" Warrants to Handex to purchase 85,000 shares of
the Corporation's Voting Common Stock pursuant to that certain Warrant of even
date herewith, a copy of which is attached as Exhibit "B" hereto and
incorporated by reference, and Warrants to Southcoast to purchase 46,200 shares
of the Corporation's Voting Common Stock pursuant to that certain Warrant of
even date herewith, a copy of which is attached as Exhibit "C" and incorporated
by reference (the warrants issued by the Corporation are collectively referred
to as the "Warrants" and the agreements regarding the Warrants are collectively
referred to as the "Warrant Agreements"); and
WHEREAS, the Corporation has issued all of the 2,000 shares of Series A
Preferred Stock to Handex; and
WHEREAS, the Corporation intends to grant certain of its employees other
than the Controlling Shareholders (collectively the "Key Employees" and
individually the "Key Employee") the right to purchase shares of unissued Voting
Common Stock (the "Restricted Shares") and as a condition to the grant of such
rights, the key employees shall agree to be bound by the terms and conditions of
this Agreement; and
WHEREAS, the Voting Common Stock, the Series A Preferred Stock, the
Warrants, all shares of Voting Common Stock issued by the Corporation to Handex
and Southcoast upon the effective exercise of the Warrants, and the Restricted
Shares comprise or will comprise all of the capital interests in the Corporation
(individually and collectively referred to as the "Security" or the
"Securities"); and
WHEREAS, the Corporation has entered into that certain Stock Purchase
Agreement of even date herewith (the "Stock Purchase Agreement") to purchase
stock in Handex Environmental, Inc. (the "Transaction") and various other
documents and agreements necessary to consummate the Transaction referred to
therein which are herein referred to collectively as the "Collateral
Agreements"; and
WHEREAS, the Controlling Shareholders have, in connection with the
Transaction, entered into a Nonrecourse Guaranty and Pledge Agreement (the
"Pledge Agreement"); and
JAH\CSW\AGRE\207135.10
WHEREAS, the parties hereto desire to set forth in this agreement the
specific terms and agreements reached between and among them concerning
management of the Corporation and the purchase of a Shareholder's Security in
the Corporation by the Corporation or by other Shareholders upon the occurrence
of certain events; and
WHEREAS, the parties hereto believe it to be in the best interests of the
Shareholders and the Corporation to impose certain restrictions and obligations
on the Securities of the Corporation.
NOW, THEREFORE, for and in consideration of the mutual promises and
covenants of the parties hereto, the sum of Ten Dollars ($10.00) each to the
other cash in hand paid, and other good and valuable consideration, the receipt
and sufficiency of all of which is hereby acknowledged, the parties hereto do
hereby agree as follows:
JAH\CSW\AGRE\207135.10
Control, Agreement Regarding Voting of Shares. Subject to the terms
of the Pledge Agreement, each Controlling Shareholder and Key Employee
personally and for heirs and assigns, separately covenants and promises to each
other and heirs and assigns that in exercising the voting rights of the Voting
Common Stock that the articles and by-laws annexed as Exhibits "E" and "F"
shall not be altered, amended, modified, repealed, rescinded, or changed except
by unanimous agreement among the Controlling Shareholders. To that end, each
Controlling Shareholder and Key Employee gives all further assurances and
covenants that in all matters pertaining to Shareholder voting, whether
preliminary, procedural, or otherwise, he or she shall and will vote such shares
consistently with, and in such manner as to effectuate and carry out, this
intention.
Affairs of the Corporation; Agreements Concerning Management.
----------------------------------------------------------------------
Subject to the terms of the Pledge Agreement, each Controlling
Shareholder and Key Employee, personally and for heirs and assigns, separately
covenants and promises to each other and his heirs and assigns that in
exercising voting rights of the Voting Common Stock, in exercising voting powers
and discretions as a director of the Corporation, and in exercising powers as an
officer of the Corporation, each such party shall in each and every capacity
exercise his voting rights, legal powers, and discretions in favor of the
following:
The directors of the Corporation shall consist of four
members and the Controlling Shareholders shall elect Bannon, Eatman and Culbreth
as members of such board;
The election of the following officers of the Corporation
shall be as follows:
(1) President\Assistant Secretary - Eatman;
(2) Treasurer\Secretary - Bannon;
(3) Assistant Secretary - Culbreth
(b) The Corporation shall purchase and maintain insurance on behalf
of any person who is or was a director or officer of the Corporation, or is or
was serving at the request of the Corporation as a director or officer, against
any liability asserted against him and incurred by him in any such capacity, or
arising out of his or her status as a director or officer.
(c) It is the purpose and intent of this paragraph to specify that
the matters set forth herein shall be adhered to by the Controlling Shareholders
and Key Employees in the conduct of the business and affairs of the Corporation,
unless by unanimous agreement of the Controlling Shareholders a contrary
determination is made. Any corporate action which is approved unanimously by
the Controlling Shareholders shall be valid whether or not express waiver of any
otherwise applicable proscription contained in this agreement shall be made.
To effectuate their intention expressed in this paragraph, the Controlling
Shareholders and Key Employees give unto each other party his or her covenant of
further assurances and agrees that in all affairs of the Corporation he or she
will exercise all voting rights in shares of Voting Common Stock in a manner
which is consistent with the intention expressed herein.
2. Restriction on Transfer. The Shareholders shall not, while this
agreement is in force, sell, assign, encumber, pledge, gift, transfer or
otherwise dispose of any Security in the Corporation now or hereafter owned by
them except pursuant to and in compliance with the terms of this agreement and
the Pledge Agreement. The Controlling Shareholders acknowledge and agree that
this Agreement shall not restrict the rights of Handex to sell or transfer any
Security pursuant to the Pledge Agreement free of the restrictions herein
contained.
3. Capitalization.
(a) At the effective date of this agreement, the Corporation is
authorized to issue 1,540,000 shares of Voting Common Stock all of one class and
having one vote per share and the Corporation has issued, outstanding, fully
paid, and non-assessable the following shares:
JAH\CSW\AGRE\207135.10
Shareholder Number of Shares
----------- ----------------
Bannon 314,666.66
Eatman 314,666.66
Culbreth 189,666.66
-----------
TOTAL 819,000.00
The Corporation and the Controlling Shareholders acknowledge and agree that
no additional shares of Voting Common Stock or other securities convertible into
or exchangeable for, or options, warrants or other rights to acquire shares of
Voting Common Stock will be issued or sold that would or could result in the
Controlling Shareholders and the shares of Voting Common Stock pledged under the
Pledge Agreement having the right to exercise less than fifty-one percent (51%)
of the total voting power of the Corporation for the election of Directors.
At the effective date of this agreement, the Corporation is
authorized to issue 2,000 shares of Series A Preferred Stock, all of one class
and having voting rights as provided in the terms thereof set forth in the
articles of incorporation of the Corporation and the Corporation has issued,
outstanding, fully paid and non-assessable all such shares to Handex.
Options in the Event of Involuntary Transfers of Securities.
--------------------------------------------------------------------
Subject in the case of the Controlling Shareholders to the rights
of Handex under the Pledge Agreement, if a Shareholder owning a Security
(hereinafter called the Involuntary Transferor): (a) files a voluntary petition
under any bankruptcy or insolvency law or a petition for the appointment of a
receiver or makes an assignment for the benefit of creditors, (b) is subjected
involuntarily to such a petition or assignment or to an attachment or other
legal or equitable interest with respect to his Security in the Corporation and
such involuntary petition, assignment, or attachment is not discharged within
one hundred and twenty (120) days after its effective date, or (c) is subjected
to any other possible involuntary transfer of a Security in the Corporation by
legal process, including without limitation, an assignment or transfer pursuant
to a divorce decree (collectively referred to as a "Triggering Event"), the
Corporation shall have the option to purchase any or all of the Securities held
by the Involuntary Transferor (hereinafter referred to as the "Transferor's
Shares") for the purchase price set forth in Paragraph 10 and upon the terms set
forth in Paragraph 11. If the Corporation desires to exercise its option to
purchase any or all of the Transferor's Securities offered for sale to it
pursuant to this paragraph, it shall notify such Involuntary Transferor and the
other Shareholders in writing within sixty (60) days of the Triggering Event
that it intends to exercise its option to purchase the portion of the
Transferor's Securities specified in such notice.
Subject in the case of the Controlling Shareholders to the rights
of Handex under the Pledge Agreement, if the Corporation fails to exercise its
option to purchase any portion of the Transferor's Securities, the other
Shareholders owning Voting Common Stock shall have the option to purchase all
but not less than all of the Transferor's Securities remaining unpurchased at
and for the purchase price and upon the same terms at which the Corporation was
entitled to purchase such shares pursuant to subparagraph (a) above. Each such
Shareholder shall have the option to purchase such Shareholder's "proportionate
share" (as hereinafter defined) of each and every "class" (as defined below) of
the Transferor's Securities not purchased by the Corporation. A Shareholder
shall exercise such Shareholder's option by giving written notice to the
Involuntary Transferor and the other Shareholders within ninety (90) days of the
Triggering Event (as provided in subparagraph (a) above) that such Shareholder
intends to purchase such Shareholder's proportionate share of each and every
class of the Transferor's Securities not purchased by the Corporation.
JAH\CSW\AGRE\207135.10
For purposes of this agreement, the term "proportionate share" means
that portion of each and every class of the Transferor's Securities not
purchased by the Corporation determined by the ratio which the number of shares
of Voting Common Stock of the Corporation owned by each Shareholder who elects
to purchase his proportionate share of the Transferor's Securities pursuant to
this subparagraph (b) bears to the total number of shares of Voting Common Stock
of the Corporation owned by all of the Shareholders who elect to purchase their
proportionate shares of the Transferor's Shares not purchased by the Corporation
pursuant to this subparagraph (b). For example, if only one Shareholder owning
Voting Common Stock elects to purchase such Shareholder's proportionate share of
the Transferor's Shares not purchased by the Corporation pursuant to this
subparagraph (b), then such Shareholder shall be entitled to, and shall be
required to, purchase all of such Transferor's Securities.
Also, for purposes of this agreement, the Voting Common Stock, Series A
Preferred Stock, and Warrants shall each represent a separate "class" of the
Securities.
The closing of a purchase and sale pursuant to this paragraph
shall take place on a date within one hundred twenty (120) days after the
Triggering Event. At closing, the Involuntary Transferor shall resign as a
director or officer of Corporation, if and to the extent that he or she may hold
such office, and shall deliver to the purchaser the Securities acquired pursuant
to this Paragraph 5.
In the event that, at any time or from time to time, any
Securities are transferred to any party pursuant to a Triggering Event, the
transferee shall take such Securities pursuant to all provisions, conditions,
and covenants of this agreement and, as a condition precedent to the transfer of
such shares of Voting Common Stock, the transferee shall agree, for and on
behalf of himself or itself, his or its legal representatives, and his or its
transferees and assigns, in writing to be bound by all provisions of this
agreement as a party hereto and in the capacity of a Shareholder. In the event
that there shall be any transfer to any person or entity in compliance with the
provisions of this section, all references herein to the Shareholders or any
Shareholder shall thereafter be deemed to include such transferee.
Disposition of Securities of the Corporation - Right of First Refusal.
Subject to the terms of the Pledge Agreement, in the event that a Shareholder
(hereinafter referred to as the "Offering Shareholder") desires to dispose of
any or all of his, her or its Securities of the Corporation after having
received a "bona fide offer from a qualified third party purchaser" (as defined
below) to purchase such Securities, the Offering Shareholder shall first offer
in writing such Securities for sale as follows:
(a) If the Offering Shareholder desires to accept said offer of such
third party, the Offering Shareholder shall deliver a copy of said third party's
offer to the Corporation, and to the other Shareholders, together with a written
offer from the Offering Shareholder to sell such Securities to the Corporation
or to other Shareholders in accordance with this agreement. As used herein, a
"bona fide offer from a qualified third party purchaser" shall mean a written
and binding offer from a third party which sets forth the proposed purchase
price and terms of the proposed purchase of the Offering Shareholder's
Securities and which is accompanied by an earnest money deposit in an amount not
less than twenty percent (20%) of the proposed purchase price.
(b) The Corporation shall have the option to purchase any or all of
the Offering Shareholder's Securities (hereinafter referred to as the "Offered
Securities") for the purchase price and upon the terms set forth in said bona
fide offer. If the Corporation desires to exercise its option to purchase any
or all of the Offered Securities, it shall notify such Offering Shareholder and
the other Shareholders in writing within thirty (30) days of the Offering
Shareholder's offer that it intends to exercise its option to purchase the
portion of the Offered Securities specified in such notice.
(c) If the Corporation fails to exercise its option to purchase any
portion of the Offered Securities, the other Shareholders owning Voting Capital
JAH\CSW\AGRE\207135.10
Stock shall have the option to purchase all but not less than all of the Offered
Securities remaining unpurchased at and for the purchase price and upon the same
terms at which the Corporation was entitled to purchase such shares pursuant to
subparagraph (ii) above. Each such Shareholder shall have the option to
purchase such Shareholder's "proportionate share" (as hereinafter defined) of
each and every class of the Offered Securities not purchased by the Corporation.
A Shareholder shall exercise such Shareholder's option by giving written notice
to the Offering Shareholder and the other Shareholders within sixty (60) days of
the Offering Shareholder's offer to sell the Offered Securities that such
Shareholder intends to purchase such Shareholder's proportionate share of each
and every of the Offered Securities not purchased by the Corporation.
(d) If the Corporation and the other Shareholders fail to exercise
their respective options to purchase all of the Offered Securities pursuant to
this paragraph and the Offering Shareholder desires to dispose of his or her
Securities to the third party purchaser, the Offering Shareholder shall be free
to dispose of the Offered Securities to the third party so designated in his
written offer at the price and upon the terms indicated in such written offer
for a period of forty-five (45) days after expiration of the sixty (60) day
period referred to in subparagraph (iii) above during which the other
Shareholders had the option to purchase the Offered Securities provided that,
the Offering Shareholder and the third party purchaser comply with the
following:
(i) In the event that an Offering Shareholder is a Controlling
Shareholder, such Controlling Shareholder hereby covenants and agrees to
exchange all of his shares of Voting Common Stock for an equal number of
Nonvoting Common Stock prior to transferring the Offered Securities to the third
party. In order to effectuate such an exchange, the Shareholders covenant and
agree to exercise their voting rights in the shares of the Corporation in favor
of a plan of recapitalization whereby the Corporation shall authorize and issue
to such Controlling Shareholder a number of shares of Nonvoting Common Stock
equal to number of shares of Voting Common Stock then held by such Controlling
Shareholder.
(ii) Such third party assumes and agrees in writing to be bound
by all of the terms and conditions of this agreement, including any amendments
made on or prior to the date of such purchase.
(e) At the expiration of this forty-five (45) day period, the Offered
Securities shall again become subject to all of the applicable requirements
contained in this agreement before any transfer, sale, assignment, encumbrance,
pledge, gift or other disposition of such Shareholder's Securities.
(f) The closing of a purchase and sale pursuant to this paragraph
shall take place on a date within ninety (90) days after the written offer by
the Offering Shareholder.
2. Drag Along Rights Notwithstanding anything to the contrary expressed
herein but subject to the terms of the Pledge Agreement and the Warrant
Agreements, the Controlling Shareholders may elect (the "Drag Along Election")
at any time during the term of this Agreement to sell all of their shares of
Voting Common Stock to a third party purchaser and to cause a sale of all of the
then issued and outstanding shares of Voting Common Stock of the Corporation to
be made to such third party purchaser in a transaction for value. Any such sale
of all of the issued and outstanding shares of Voting Common Stock of the
Corporation held by all of the Shareholders of the Corporation, other than the
Controlling Shareholders, must be made on the same terms and conditions,
including the price per share, upon which the Controlling Shareholders have
agreed to sell all of their shares of Voting Common Stock.
The Controlling Shareholders may trigger a Drag Along Election by providing
a written notice of such election (the "Drag Along Notice") to all of the
Shareholders owning Voting Common Stock of the Corporation. The Drag Along
Notice shall include the price per share being paid to the Controlling
Shareholders by such third party purchaser and the other material terms and
conditions of such sale. Upon its receipt of a Drag Along Notice, each of the
JAH\CSW\AGRE\207135.10
other Shareholders hereby covenant and agree to take or cause to be taken all
actions and steps to effect such sale as the Controlling Shareholders may deem
necessary, desirable or appropriate, including without limitation, the prompt
delivery to the Controlling Shareholders of duly endorsed stock powers with
respect to all of the shares of Voting Common Stock at such time owned by such
Shareholder.
3. Purchase of Voting Common Stock Upon the Death of Bannon, Eatman, or
Culbreth.
Subject to prior termination of the Pledge Agreement, upon the death
of Bannon, Eatman, or Culbreth, the Corporation shall redeem and the deceased
Shareholder hereby covenants and agrees for and on behalf of his or her personal
representative, heirs, beneficiaries, or other successors to sell, all of the
shares of Voting Common Stock of the Corporation owned by the deceased
Shareholder at the time of his or her death for the purchase price and in
accordance with the terms set forth in Paragraphs 10 and 11(b) hereunder.
4. Purchase of Restricted Shares.
(a) Notwithstanding anything to the contrary expressed herein, the
Key Employees shall not sell, assign, encumber, pledge, gift, transfer or
otherwise dispose of any of the Restricted Shares except in compliance with the
provisions of this paragraph 9.
(b) The Restricted Shares, shall be subject to repurchase by the
Corporation from a Key Employee upon the Key Employee's termination of
employment with the Corporation for any reason other than as provided in
paragraph (c) below, for the purchase price and in accordance with the terms set
forth in Paragraphs 10 and 11 hereunder.
(c) The Corporation shall purchase the Restricted Shares from a Key
Employee upon either: (i) Employee's termination of Employment for cause (as
defined in such Key Employee's employment agreement with the Corporation) or
(ii) upon the Key Employee's voluntary termination of Employment prior to
January 1, 2000. The Corporation shall purchase such shares from the Key
Employee at a price which is equal to the lesser of: (a) the purchase price paid
by the Employee for such Restricted Shares or (b) the formula price set forth
below. For purposes of this Agreement, the formula price shall be an amount per
share equal to the net book value thereof determined as of the last day of the
Corporation's most recently completed fiscal year by the accountant regularly
employed by the Corporation, in accordance with accounting principles normally
used by the accountant in preparing the financial statements of the Corporation,
and the accountant's determination shall be binding and conclusive upon the
parties hereto, their personal representatives and successors, and all other
persons involved.
5. Determination of Purchase Price.
(a) Purchase Price of Voting Common Stock. Except as otherwise
provided herein, the purchase price per share of Voting Common Stock for
purposes of this agreement shall be the "Appraised Value" of such shares
determined by appraisal under the provisions of this Paragraph.
(i) Procedure for Appraisal. For purposes of this agreement,
whenever it is necessary to compute the Appraised Value of shares of Voting
Common Stock, the Appraised Value shall be determined by an appraiser selected
by a majority of the non-selling Shareholders. The value contained in the
written report of the appraiser shall constitute the Appraised Value of the
shares of Voting Common Stock.
(ii) Assumptions. An appraiser making any appraisal pursuant to
this Paragraph shall assume an all-cash sale with respect to the shares of
Voting Common Stock to be sold and shall assume that the restrictions on
transfer specified in this agreement and any applicable federal or state
securities law restrictions on transfer are not applicable to the shares of
Stock. In determining Appraised Value for any sale of shares pursuant to this
agreement, no appraiser shall consider the effect, to the business or business
prospects of the Corporation, of the death of a Shareholder or the termination
of employment of a Shareholder for any other reason. Furthermore, no appraiser
JAH\CSW\AGRE\207135.10
shall consider life insurance proceeds, if any, received by the Corporation in
valuing any shares of Voting Common Stock, and there shall be no control
premiums or minority ownership discounts in valuing any shares of Voting Common
Stock. Any appraiser appointed shall be provided with all available financial
statements of the Corporation and any other information reasonably necessary to
make the appraisal and shall have full access to all books and records of the
Corporation.
(iii) Qualifications. Any appraiser appointed shall be
experienced in appraising businesses similar to Corporation's.
(iv) Cost of Appraisal. The fees and other costs of the
appraisal shall be borne by the Corporation.
(b) Purchase Price for Series A Preferred Stock. The purchase price
for Series A Preferred Stock shall be $1,000 per share plus any unpaid and
accrued dividends in respect of the stock.
(c) Purchase Price for Warrants. The Purchase price for the
respective Warrants shall be determined by the excess of the aggregate fair
market value of the Voting Common Stock subject to the exercise of the Warrants
(determined pursuant to the provisions of subparagraph (a)) over the aggregate
exercise price of the Warrants.
6. Terms of Sale of Securities.
(a) Disposition by a Shareholder.
(i) Unless otherwise provided in this agreement, the purchase
price of Securities sold pursuant to this agreement, except pursuant to
paragraph 8, shall be paid in cash at closing or, at the option of the
purchaser, shall be paid by a cash down payment of not less than ten percent
(10%) of the purchase price at closing with the balance payable in thirty-six
(36) equal monthly installments together with interest on the unpaid principal
balance computed at a rate equal to the interest rate being charged to its prime
customers by the bank with which the Corporation does a majority of its business
as of the date immediately preceding the date of closing.
(ii) The obligation of the purchaser for the deferred portion of
the purchase price (if any) shall be represented by a promissory note containing
the terms described above and providing for the right of prepayment at any time
without premium or penalty. Such promissory note shall be secured by a pledge
of the Securities purchased.
(b) Disposition Upon Death of Controlling Shareholder. Unless
otherwise agreed upon by the Corporation, the purchase price of the Securities
sold pursuant to paragraph 8 above shall be paid by a purchase-money promissory
note providing for principal balance payable in sixty (60) equal monthly
installments together with interest on the unpaid balance computed at a rate
equal to the interest rate being charged to its prime customers by the bank with
which the Corporation does a majority of business as of the date immediately
preceding the date of closing. Such promissory note shall be secured by a
pledge of the Voting Common Stock purchased. The Corporation shall have the
option of making a cash down payment of any amount.
7. Conflict with Restrictive Covenants. Notwithstanding anything to the
contrary expressed in this Agreement, neither Bannon, Eatman nor Culbreth shall
have the right to sell their Voting Common Stock pursuant to paragraphs 5, 6 or
7 herein nor will the Corporation purchase Voting Common Stock upon the death of
Bannon, Eatman or Culbreth pursuant to paragraph 8 herein if such a transaction
would violate the terms of the Series A Preferred Stock, the Pledge Agreement or
any restrictive covenant within the Collateral Agreements regarding the transfer
of such Voting Common Stock.
8. Insufficient Corporate Surplus. If the Corporation shall not have
sufficient surplus at closing hereunder to permit it to lawfully purchase the
Securities pursuant to this agreement, the Shareholders shall promptly take such
measures to vote their respective holdings of the shares of Voting Common Stock
of the Corporation to reduce the capital of the Corporation or to take such
other steps as may be appropriate or necessary in order to enable the
Corporation lawfully to purchase and pay for all of the shares of Voting Common
JAH\CSW\AGRE\207135.10
Stock to be purchased by the Corporation pursuant to this agreement;
notwithstanding the foregoing, the Shareholders shall not be required to
contribute additional capital to the Corporation in order to enable the
Corporation to lawfully purchase the Securities.
9. Transfer in Violation. A sale, gift, transfer, pledge, encumbrance or
other disposition of a Security in violation of any of the provisions of this
agreement shall be null and void.
10. Specific Performance. The Securities of the Corporation cannot be
readily purchased or sold in the open market, and for that reason, among others,
the parties hereto will be irreparably damaged in the event that this agreement
is not specifically enforced. Should any dispute arise concerning the sale,
encumbrance or disposition of the Securities, an injunction may be issued
restraining any sale, encumbrance or disposition pending the determination of
such controversy. In the event of any controversy concerning the right or
obligation to purchase or sell any of the Securities, such right or obligation
shall be enforced in a court of competent jurisdiction by a decree of specific
performance. Such remedy shall, however, be cumulative and not exclusive and
shall be in addition to any other remedy which the parties may have. If any
party hereto, or the personal representative of any deceased Shareholder, shall
institute any action or proceeding to enforce the provisions hereof, that person
against whom such action or proceeding is brought hereby waives the claim or
defense therein that such person has an adequate remedy at law, and such person
shall not urge in any such action or proceeding the claim or defense that such
remedy at law exists.
11. After-Acquired Securities. Whenever any Shareholder or other person
acquires any additional Securities other than the Securities owned by him at the
date of this agreement, or at the time such person becomes bound by the terms of
this agreement, such Securities shall be subject to all the terms of this
agreement.
12. Future Shareholders. Unless otherwise agreed by each of the parties
hereto, the Corporation shall not issue Securities to any person, unless such
person assumes and agrees in writing to be bound by all the terms and conditions
of this agreement, including any amendment to this Agreement made on or prior to
the date of such issuance.
13. Endorsement of Stock Certificates. Upon the execution of this
agreement all certificates for shares of Voting Common Stock of the Corporation
and Series A Preferred Stock shall be surrendered to the Corporation and
endorsed as follows:
The shares of stock in this Corporation may be transferred
by the owner hereof only by fully complying with the
Shareholders Agreement dated , 1996,
together with any amendments thereto, a copy of which is on
file in the office of the Corporation. Any person who
purchases or acquires such shares of stock in this
Corporation (including by gift or by pledge) accepts such
shares of stock subject to such conditions.
After endorsement, the certificates shall be returned to the Shareholders. All
certificates for shares of Voting Common Stock or Series A Preferred Stock of
this Corporation hereafter issued, including those shares of Voting Common Stock
issued upon the effective exercise of the Warrants, shall bear the endorsement
set forth above.
1. Corporation's Exercise of Option. Any decision by the Corporation
regarding its option to purchase hereunder or regarding the price, terms of
purchase, closing date or any other decision hereunder, including but not
limited to decisions regarding whether to enforce the provisions of this
agreement by the bringing of an action or proceeding, shall be made by vote of
the holders of a majority of the outstanding shares of Voting Common Stock of
the Corporation; provided, however, that any Shareholder (or the personal
representative of a deceased Shareholder) whose shares of Voting Common Stock
JAH\CSW\AGRE\207135.10
are the subject of the option or decision shall not have a vote in such
decision, and such shares of Voting Common Stock shall not be included in
determining the number of outstanding shares for purposes of such determination.
2. Termination of Agreement. This agreement shall commence as of the
effective date hereof, and shall continue in full force and effect until
terminated by the mutual agreement of the parties hereto or the cessation of the
Corporation's business, by the bankruptcy, receivership or dissolution of the
Corporation, or upon exercise by Handex of its rights under the Pledge
Agreement. Upon termination of this agreement, the Shareholders shall surrender
to the Corporation the certificates for their shares of Voting Common Stock and
the Corporation shall issue to them in lieu thereof new certificates for an
equal number of shares of Voting Common Stock without the endorsement set forth
in Paragraph 18 hereof.
3. Notices. All notices, offers, acceptances, requests, demands and any
other communications provided for herein shall be given in writing and shall be
sent by United States certified mail, return receipt requested, postage prepaid,
to each party's last known address. Notice shall be deemed effectively given
hereunder when deposited in the United States Mail, postage prepaid, certified,
return receipt requested.
4. Prior Agreements. This agreement supersedes any and all prior
agreements which may exist among the Controlling Shareholders and the
Corporation affecting the shares of Voting Common Stock of the Corporation and
any such prior agreements are hereby terminated.
5. Benefit. This agreement shall be binding upon and inure to the
benefit of the parties, their heirs, legal representatives, successors and
assigns.
6. Completeness of Agreement. This agreement, the Stock Purchase
Agreement, the terms of the Series A Preferred Stock, the Collateral Agreements,
and the Pledge Agreement constitute the entire agreement and understanding among
the parties hereto concerning the subject matter hereof. This agreement may be
amended only by instrument in writing, duly executed with the same formalities
of this document.
7. Attorney's Fees. If any party hereto, including the Corporation,
institutes any action or proceeding to enforce this agreement and such party
prevails in such action or proceeding, then such party shall be entitled to
collect from the nonprevailing party or parties (which may include a transferee
with notice of this agreement) reasonable attorney's fees and the costs and
expenses of such action.
8. Severability. If any provision of this agreement shall be declared
invalid or unenforceable, the invalidity or unenforceability of such provision
shall not affect the remainder of this agreement, and this agreement shall be
construed and enforced as if such invalid or unenforceable provision had not
been contained herein.
9. Survive Closing. The terms, conditions, obligations and covenants in
this agreement shall survive (a) its execution by the parties hereto, (b) the
closing of any transactions contemplated herein, and (c) the execution of all
contracts hereafter entered into between them, except to the extent that such
transactions and contracts may be inconsistent with this agreement.
10. Governing Law. This agreement shall be governed by and construed in
accordance with the laws of the State of Florida.
IN WITNESS WHEREOF, the parties have executed this agreement as of the date
first above written.
Witnesses: ECB, INC., a Florida corporation
By:
- - --------------------------------- ------------------------------
- - ---------------------------------
JAH\CSW\AGRE\207135.10
As to Corporation "Corporation"
- - -------------------------------- ---------------------------------
George Bannon
- - ---------------------------------
- - -------------------------------- ---------------------------------
Roger Eatman
- - --------------------------------
- - -------------------------------- ---------------------------------
S. C. Culbreth, Jr.
- - ---------------------------------
HANDEX CORPORATION, a
Delaware corporation
By:
- - --------------------------------- ------------------------------
- - --------------------------------
SOUTHCOAST CAPITAL CORPORATION,
a corporation
By:
- - -------------------------------- ------------------------------
- - ---------------------------------
As to Shareholders "Shareholders"
JAH\CSW\AGRE\207135.10
FORM 10-Q, PART II
Item 6
Exhibit 15.0
Independent Auditors' Review Report
-----------------------------------
The Board of Directors
Handex Corporation
and Subsidiaries
We have reviewed the condensed consolidated balance sheet of Handex Corporation
and subsidiaries as of September 28, 1996, and the related condensed
consolidated statements of income for the three-month and nine-month periods
ended September 28, 1996 and September 30, 1995, and cash flows for the nine-
month periods ended September 28, 1996 and September 30, 1995. These condensed
consolidated financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements referred to above for
them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Handex Corporation and subsidiaries
as of December 30, 1995, and the related consolidated statements of operations,
stockholders' equity, and cash flows for the year then ended (not presented
herein); and in our report dated February 16, 1996, we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated balance sheet
as of December 30, 1995, is fairly presented, in all material respects, in
relation to the consolidated balance sheet from which it has been derived.
KPMG Peat Marwick
Cleveland, Ohio
November 1, 1996
