<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________________ to ____________________
Commission file number 0-23602
--------------------------
THE CERPLEX GROUP, INC.
---------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 33-0411354
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1382 Bell Avenue, Tustin, CA 92780
---------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(714) 258-5600
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(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
--- ---
The number of shares outstanding of the Registrant's Common Stock on August 8,
1996 was 13,405,384.
<PAGE> 2
THE CERPLEX GROUP, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART 1 - FINANCIAL INFORMATION
Consolidated Balance Sheets . . . . . . . . . . . . . . . . 4
Consolidated Statements of Operations . . . . . . . . . . . 5
Consolidated Statement of Stockholders' Equity . . . . . . 6
Consolidated Statements of Cash Flows . . . . . . . . . . . 7
Notes to Consolidated Financial Statements . . . . . . . . 8
Management's Discussion and Analysis . . . . . . . . . . . 11
PART II - OTHER INFORMATION
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . 17
Changes in Securities . . . . . . . . . . . . . . . . . . . 17
Defaults Upon Senior Securities . . . . . . . . . . . . . . 17
Submission of Matters to a Vote of Security Holders . . . . 17
Other Information . . . . . . . . . . . . . . . . . . . . . 18
Exhibits and Reports on Form 8-K . . . . . . . . . . . . . 22
SIGNATURE . . . . . . . . . . . . . . . . . . . . . . . . . . 32
EXHIBIT INDEX . . . . . . . . . . . . . . . . . . . . . . . . . . 33
</TABLE>
2
<PAGE> 3
PART I
FINANCIAL INFORMATION
3
<PAGE> 4
THE CERPLEX GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
June 30 December 31
1996 1995
-------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 27,206 $ 3,807
Accounts receivable, net 28,252 30,102
Inventories 28,819 27,789
Net assets of discontinued operations 1,347 2,597
Prepaid expenses and other 4,924 2,267
-------- --------
Total current assets 90,548 66,562
Property, plant and equipment, net 28,919 17,988
Investment in joint venture 7,723
Goodwill 5,817 6,647
Other long-term assets 4,452 2,973
-------- --------
Total assets $129,736 $101,893
======== ========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts and notes payable $ 22,716 $ 17,024
Accrued liabilities 25,246 13,622
Short-term borrowings 45,446
Current portion of long-term debt 247 536
Income taxes payable 1,599 2,161
-------- ---------
Total current liabilities 95,254 33,343
-------- ---------
Long-term debt, less current portion 17,946 68,382
Other long-term liabilities 6,214
Stockholders' Equity:
Preferred Stock, par value $.001; 3,066,340 shares
authorized; 8,000 shares designated Series B Preferred
Stock, all of which are issued and outstanding,
aggregate liquidation preference of $16,000 7,911
Common Stock, par value $.001;
30,000,000 shares authorized; 13,402,467
and 13,127,680 issued and outstanding in
1996 and 1995, respectively 13 13
Additional paid-in capital 50,611 47,528
Notes receivable from stockholders (229) (226)
Unearned compensation (108) (143)
Accumulated deficit (47,897) (47,026)
Cumulative translation adjustment 21 22
-------- --------
Total stockholders' equity 10,322 168
-------- --------
Total liabilities and stockholders' equity $129,736 $101,893
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE> 5
THE CERPLEX GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended June 30 Six months ended June 30
-------------------------- ------------------------
1996 1995 1996 1995
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Net sales $51,339 $32,488 $92,185 $66,489
Cost of sales 40,370 26,479 74,285 54,438
------- ------- ------- -------
Gross profit 10,969 6,009 17,900 12,051
Selling, general & administrative expenses 8,582 5,235 15,639 9,312
------- ------- ------- -------
Operating income 2,387 774 2,261 2,739
Equity in earnings from joint venture 644 357 1,159
Gain on sale of InCirT Division 450 450
Interest expense, net 1,658 1,221 3,169 2,445
------- ------- ------- -------
Income (loss) from continuing operations
before taxes 1,179 197 (101) 1,453
Income taxes 477 27 770 494
------- ------- ------- -------
Income (loss) from continuing operations 702 170 (871) 959
------- ------- ------- -------
Discontinued operations, net of income taxes:
Income from operations 112 153
Estimated loss from liquidation of
discontinued operations
------- ------- ------- -------
Income from discontinued operations 112 153
------- ------- ------- -------
Net income (loss) $ 702 $ 282 $ (871) $ 1,112
======= ======= ======= =======
Income (loss) per share:
Continuing operations $ .05 $ .01 $ (.07) $ .07
Discontinued operations .01 .01
------- ------- ------- -------
Net income (loss) per share $ .05 $ .02 $ (.07) $ .08
======= ======= ======= =======
Weighted average common and common
equivalent shares outstanding 14,846 14,414 13,286 14,412
======= ======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements
5
<PAGE> 6
THE CERPLEX GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(in thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>
Additional Total
Preferred Stock Common Stock Paid-In Accumulated Stockholders'
Shares Amount Shares Amount Capital Other Deficit Equity
------ ------ ---------- ------ ---------- ----- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 13,127,680 $ 13 $47,528 $(347) $(47,026) $ 168
Stock options and warrants exercised 151,930 18 18
Notes receivable from stockholders (3) (3)
Net loss (1,573) (1,573)
Amortization of unearned compensation 18 18
Translation adjustment (129) (129)
----- ------ ---------- ---- ------- ----- -------- -------
Balance at March 31, 1996 13,279,610 13 47,546 (461) (48,599) (1,501)
Issuance of Series B Convertible
Preferred Stock 8,000 $7,911 7,911
Issuance of warrants 3,037 3,037
Stock options and warrants exercised 122,857 28 28
Net income 702 702
Amortization of unearned compensation 17 17
Translation adjustment 128 128
----- ------ ---------- ---- ------- ----- -------- -------
Balance at June 30, 1996 8,000 $7,911 13,402,467 $ 13 $50,611 $(316) $(47,897) $10,322
===== ====== ========== ==== ======= ===== ======= =======
</TABLE>
See accompanying notes to consolidated financial statements
6
<PAGE> 7
THE CERPLEX GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30
-------------------------
1996 1995
---------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (871) $ 1,112
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation and amortization 3,878 4,263
Amortization of contract rights 389
Amortization of unearned compensation 35 35
Foreign currency transaction (gain) loss 28 (117)
Equity in earnings of joint venture (357) (1,159)
Distribution of earnings of joint venture 3,090
Gain on sale of InCirT Division (450)
Decrease (increase) in:
Accounts receivable 4,153 1,006
Inventories (854) (6,118)
Prepaid expenses and other 6,335 103
Investment in other long-term assets (1,364) (672)
Net assets of discontinued operations 1,250
(Decrease) increase in:
Accounts and notes payable 1,854 (728)
Accrued liabilities (8,605) 592
Income taxes payable (549) 275
------- -------
Net cash provided by (used in) operating activities 7,573 (1,019)
------- -------
Cash flows from investing activities:
Purchase of plant and equipment (450) (2,358)
Acquisition of businesses, net of cash acquired* 5,147 (4,500)
Proceeds from sale of InCirT Division 5,500
------- -------
Net cash used in investing activities 10,197 (6,858)
------- -------
Cash flows from financing activities:
Proceeds from long-term debt, net 8,009
Proceeds from issuance of preferred stock 7,911
Proceeds from issuance of stock, net 47 21
Decrease in notes receivable from stockholders (3) (7)
Principal payments of long-term debt (304) (1,347)
Principal payments of short term borrowings (2,000)
------- -------
Net cash provided by (used in) financing activities 5,651 6,676
------- -------
Effect of exchange rate changes on cash (22) 72
------- -------
Net increase (decrease) in cash and cash equivalents 23,399 (1,129)
Cash and cash equivalents at beginning of period 3,807 9,442
------- -------
Cash and cash equivalents at end of period $27,206 $ 8,313
======= =======
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $ 3,319 $ 1,930
======= =======
Income taxes $ 25 $ 326
======= =======
*Acquisition of Businesses
Amount paid $(8,977) $(4,500)
Cash Acquired 14,124
------- -------
$ 5,147 $(4,500)
======= =======
</TABLE>
See accompanying notes to consolidated financial statements
7
<PAGE> 8
THE CERPLEX GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying financial information has been prepared in accordance
with the instructions to Form 10-Q and therefore does not necessarily include
all information and footnotes necessary for a fair presentation of financial
position, results of operations and cash flows in conformity with generally
accepted accounting principles.
The Company's fiscal year is the 52 or 53 week period ending on the
Sunday closest to December 31. For purposes of presentation, the Company has
indicated its accounting quarter and year end as June 30 and December 31,
respectively.
In the opinion of management, the financial information for the three
and six-month periods ended June 30, 1996 and 1995, and at June 30, 1996
reflects all adjustments (which include only normal, recurring adjustments)
necessary for a fair presentation thereof.
During 1995, the Company discontinued its end-of-life programs, a
segment of the business, through a liquidation of remaining operations. Prior
period financial results have been restated to reflect the discontinuance of
this segment of the Company.
NOTE 2 - INCOME (LOSS) PER SHARE
Net income (loss) per share has been computed using the weighted average
number of common shares and dilutive common equivalent shares outstanding
during each period presented. Common equivalent shares consist of convertible
preferred stock, stock options and warrants, which were computed using the
treasury stock method.
NOTE 3 - INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------- ------------
(000's)
<S> <C> <C>
Spare and repair parts $17,685 $18,001
Work-in-process 5,763 6,402
Finished goods 5,371 3,386
------- -------
$28,819 $27,789
======= =======
</TABLE>
8
<PAGE> 9
THE CERPLEX GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - ISSUANCE OF CONVERTIBLE PREFERRED STOCK AND WARRANTS
In June 1996, the Company issued 8,000 shares of Series B Preferred
Stock ("Series B Stock") at $1,000 per share in a private placement. The
Series B Stock is convertible into Common Stock of the Company at the lower of
$5.07 per share or 80% of the average equivalent closing bid price over a
ten-day period ending three days prior to the date of conversion. The Series B
Stock will automatically convert into Common Stock on the earlier of five-years
from the date of issuance or such date as the Company's Common Stock has traded
above $19.13 per share for a specified period of time. The Series B Stock has
certain rights, privileges and preferences, including a $2,000 per share
preference in the event of a sale of the company. The Board of Directors may
not pay dividends to the holders of the Company's Common Stock unless and until
the Board has paid an equivalent dividend to the holders of Series B Stock
based upon the number of shares of Common Stock into which each share of Series
B Stock is convertible. In addition, in the event the Company fails to effect
the registration of the Common Stock issuable upon conversion of the Series B
Stock by November 8, 1996, the holders of Series B Stock shall be entitled to
receive a dividend at the rate of $0.83 1/3 per share per day for each day
after such deadline until the shares are so registered, up to $500 per share.
In April 1996, the Company issued 1,000,000 detachable warrants in
connection with amendments to the Note Purchase Agreements related to its
Senior Subordinated Notes and issued 125,000 detachable warrants in connection
with an amendment to the Credit Agreement. The warrants provide the holders
the right to purchase 1,125,000 shares of common stock at $6 per share. As a
result of the issuance of the warrants, the Company discounted the book value
of the debt outstanding and increased paid-in capital by the fair market value
of the warrants ($3.0 million). The discount is being amortized as additional
interest expense over the period of the related debt on the interest method.
NOTE 5 - ACQUISITIONS
In May 1996, the Company acquired Rank Xerox Limited's subsidiary,
Cerplex SAS, for $6.1 million, including estimated taxes, registration fees,
legal, accounting and other out-of-pocket expenses of $1.2 million. Cerplex
SAS is the legal successor to Rank Xerox et Compagnie ("Rank Xerox SNC"), which
was transformed immediately prior to the acquisition from societe en nom
collectif (a type of partnership) into a societe par actions simplifee (a form
of limited liability company), at which time its name was changed to Cerplex
SAS. Cerplex SAS performs repair and refurbishment services primarily for
large copiers in the northern region of France, near Lille. Based on the
allocation of the purchase price to the fair value of the assets and
liabilities (including long term liabilities for taxes and employment related
matters) related to the acquisition, the Company reduced other long-term assets
by the amount of negative goodwill ($1.5 million) in accordance with APB #16,
Business Combinations. As part of the acquisition, RXL provided sufficient
cash to fund certain liabilities of Cerplex SAS. Under the terms of the Stock
Purchase Agreement, the Company has agreed to certain financial covenants over
a four-year period that limit the amount of dividends and payments in the
nature of corporate charges paid by Cerplex SAS; the maintenance of Cerplex
SAS' current ratio greater than one; and restrictions on guarantees with
respect to Cerplex and its subsidiaries (excluding Cerplex SAS). Accordingly,
the cash of Cerplex SAS ($19.6 million at June 30, 1996) is generally not
available to Cerplex for financing operations outside of Cerplex SAS. In
addition, Cerplex SAS entered into a four-year Supply and Services Agreement
with RXL to provide repair and refurbishment services with guaranteed levels of
production hours (at standard
9
<PAGE> 10
THE CERPLEX GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
rates) that decline over the period of the contract. Revenues and income
before taxes of Cerplex SAS during the five week period ended June 30, 1996
were $5.3 million and $1.0 million, respectively.
In April 1996, the Company acquired the remaining 51% interest in
Modcomp/Cerplex L.P. ("Modcomp/Cerplex") for $2.8 million. Modcomp/Cerplex is
a supplier of real-time computer systems, products and services for the process
control industry. As a result of the acquisition of the remaining interest in
Modcomp/Cerplex, the Company consolidated the results of operations and
financial position of this entity effective April 1, 1996. Prior to April 1,
1996, the Company recorded its 49% interest in Modcomp/Cerplex on the equity
method of accounting. The fair value of the assets and liabilities acquired
exceeded the purchase price by approximately $2.0 million, resulting in
negative goodwill. In accordance with APB #16, Business Combinations, the
Company reduced other long-term assets to zero and recorded the remaining
amount as negative goodwill ($500,000) which is being amortized into income
over a five year period. Revenues and income before taxes of Modcomp/Cerplex
during the three months ended June 30, 1996 were $10.2 million and $1.2
million, respectively.
Assuming the above acquisitions occurred at the beginning of 1996, the
pro forma results of operations of the Company for the six months ended June
30, 1996 would have been as follows:
<TABLE>
<CAPTION>
Pro Forma
--------
<S> <C>
In Thousands
Net Sales $126,653
Income from continuing operations 323
Net income per share from continuing operations .02
</TABLE>
NOTE 6 - SALE OF INCIRT DIVISION
Effective April 1, 1996, the Company sold its contract manufacturing
division in Tustin, California ("InCirT Division") to Pen Interconnect for $3.5
million in cash and approximately $2.0 million in restricted common stock. The
gain on the sale of the InCirT Division was $450,000.
10
<PAGE> 11
THE CERPLEX GROUP, INC.
AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This report contains forward-looking statements which involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in the forward-looking statements. Factors that might cause
such differences include, but are not limited to, those discussed under "Item
5. Other Information (a) Risk Factors."
OVERVIEW
The Company is an independent provider of electronic parts repair and
logistics services worldwide. During the third quarter of 1995, the Board of
Directors approved a Liquidation Plan to discontinue its end-of-life programs,
a segment of the Company, through liquidation of these operations. Net sales
of end-of life programs contributed 26% and 71% of consolidated net sales
during 1994 and 1993, respectively. In its end-of-life programs, the Company
assumed all responsibilities for the support and repair of products which are
no longer manufactured or are being phased out of manufacturing. Generally,
when the Company undertook an end-of-life program, it acquired substantially
all of the unique test equipment, repair equipment and inventories needed to
support the program. Services provided by the Company under end-of-life
programs include repair, provision of spare parts for a defined period of time,
plant return and parts reclamation, engineering and document control,
warehousing, and vendor certification and management. The Company no longer
undertakes these programs. The Company's continuing operations are focused on
depot repair, logistics services, technical help desk, training,
remanufacturing and remarketing, and spare parts services.
The liquidation of end-of-life programs has been accounted for as
discontinued operations and prior period financial statements have been
restated to reflect the discontinuance of this segment of the business.
RESULTS OF OPERATIONS
Results of Continuing Operations
The following table sets forth items from the Company's Consolidated
Statement of Operations as a percentage of net sales.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1996 1995 1996 1995
----- ----- ----- -----
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Costs of sales 78.6 81.5 80.6 81.9
Gross margin 21.4 18.5 19.4 18.1
Selling, general and administrative 16.7 16.1 17.0 14.0
Operating income (loss) 4.7 2.4 2.4 4.1
</TABLE>
11
<PAGE> 12
THE CERPLEX GROUP, INC.
AND SUBSIDIARIES
Net sales for the three and six month periods ended June 30, 1996
increased $18.9 million and $25.7 million, respectively, to $51.3 million and
$92.2 million, respectively, over the net sales for the corresponding periods
of 1995. The increase in net sales of 58.0% and 38.6% in the three and six
month periods of 1996 compared to the corresponding periods of the prior year
is primarily attributed to the acquisitions of the remaining 51% interest in
Modcomp/Cerplex and Cerplex SAS in April and May 1996, and Peripheral Computer
Support, Inc. ("PCS") in May 1995. The increase in sales from acquisitions
was partially offset from sale of the InCirT Division, effective April 1, 1996,
and lower sales of repair services from British Telecommunications plc and
Wang.
Gross profit as a percentage of net sales for the three and six month
periods ended June 30, 1996 were 21.4% and 19.4%, respectively, compared to
18.5% and 18.1% during the corresponding periods of the prior year. The gross
profit ratio during the three and six month periods ended June 30, 1996
increased as a result of the higher gross margin ratios of Modcomp/Cerplex and
Cerplex SAS since the acquisition dates of these operations. The increase in
the gross profit as a percentage of sales was partially offset by lower gross
profit from the performance on certain contracts which the Company is currently
winding down and the impact of facility consolidations in California which was
substantially completed at June 30, 1996. See further discussion below
regarding North American Operations.
Selling, general and administrative expenses as a percentage of net
sales for the three and six month periods ended June 30, 1996 increased to
16.7% and 17.0%, respectively, from 16.1% and 14.0% during the corresponding
periods of the prior year. The increase in selling, general and administrative
expenses as a percentage of net sales is primarily due to increased corporate
overhead related to the Company's expanded corporate staff and increased
selling, general and administrative expenses related to PCS and
Modcomp/Cerplex.
Income (Loss) from Continuing Operations
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
In Thousands
Operating income (loss) $ 2,387 $ 774 $ 2,261 $ 2,739
Equity in earnings of joint venture 644 357 1,159
Gain on sale of InCirT Division 450 450
Interest expense, net (1,658) (1,221) (3,169) (2,445)
------- ------- ------- -------
Income (loss) from continuing
operations $ 1,179 $ 197 $ (101) $ 1,453
======= ======= ======= =======
</TABLE>
During the quarter ended June 30, 1996, the Company recorded an
operating profit primarily as a result of the acquisition of Modcomp/Cerplex
and Cerplex SAS. The Company's North American Operations have been adversely
impacted by the performance on certain contracts which the Company is currently
winding down and the impact of facility consolidations in California. As of
June 30, 1996, the Company's North American operations have reduced facility
space by 75,000 square feet, primarily in California, and reduced 160
positions. These reductions were made as part of the Company's efforts to
consolidate locations as a result of changing volume of work.
12
<PAGE> 13
THE CERPLEX GROUP, INC.
AND SUBSIDIARIES
In June 1996, the Company announced its plan to close its Texas
operations at the end of August 1996. The Company's principal customer in
Texas, SpectraVision, has been operating under Chapter 11 of the U.S.
Bankruptcy Code since June 1995. During the second quarter ended June 30,
1996, SpectraVision filed its proposed plan of reorganization which, among
other things, would result in the Company receiving stock for its pre-petition
bankruptcy claims in a new company to be formed with On Command Video, a unit
of Ascent Entertainment Group. As a result of the changing requirements of
SpectraVision, the Company was informed that no additional orders of new
products would be made thereby resulting in a substantial decline in
anticipated sales from the Company's Texas operations during the three months
ending September 30, 1996. Furthermore, based on discussions with
SpectraVision, the Company's contract will likely be terminated as part of the
bankruptcy proceedings. As a result of the foregoing, the Company expects to
record operating losses related to these operations during the three months
ending September 30, 1996, and incur a restructuring charge resulting from the
closure of these operations. Such losses cannot be determined at this time due
to uncertainty over the estimated proceeds from the sale of assets (including
inventory and property and equipment), recovery of pre-petition claims and
resolution of obligations under lease commitments.
Equity in earnings of joint venture relates to the Company's ownership
interest in Modcomp/Cerplex. As discussed in Note 5 - Acquisitions, the
Company acquired the remaining 51% in Modcomp/Cerplex effective April 1, 1996.
As a result, the Company consolidated the results of operations and financial
position of this entity effective April 1, 1996. Prior to April 1, 1996, the
Company recorded its 49% interest in Modcomp/Cerplex on the equity method of
accounting.
Effective April 1, 1996, the Company sold its contract manufacturing
division in Tustin, California to Pen Interconnect for $3.5 million in cash and
approximately $2.0 million in restricted common stock. The gain on the sale of
the InCirT Division was $450,000.
Interest expense for the three and six month periods ended June 30,
1996 increased $437,000 and $724,000 as a result of increased average
borrowings under the Company's credit facilities and a higher weighted average
interest rate. Average borrowings outstanding were $65.5 million during the
six month period ended June 30, 1996 compared to $57.3 million during the six
month period ended June 30, 1995. The effective interest rate on credit
facilities increased to 9.68% during the six month period ended June 30, 1996
from 8.53% during the six months ended June 30, 1995.
Income Taxes
Income tax expense for the six months ended June 30, 1996 is primarily
related to income taxes on earnings of the Company's operations in Europe at an
effective tax rate of 38%. The Company has not recorded an income tax benefit
related to operating losses in the United States, and, accordingly, a full
valuation allowance for deferred tax assets has continued to be maintained due
to uncertainties surrounding their realization. The Company's effective tax
rate for the six month period ended June 30, 1995 was 32.5%.
13
<PAGE> 14
THE CERPLEX GROUP, INC.
AND SUBSIDIARIES
Discontinued Operations
During 1995, the Company discontinued its end-of-life programs, a
segment of the business, through a liquidation of remaining operations. During
the six month period ended June 30, 1996, net sales of discontinued operations
were $6.7 million. No gain or loss on discontinued operations was recorded
during the six month period ended June 30, 1996.
LIQUIDITY AND CAPITAL RESOURCES
On October 12, 1994, the Company obtained a $60 million revolving line
of credit ("Credit Facility") from a group of banks led by Wells Fargo Bank.
The Credit Facility replaced the Company's $10 million credit line with
CoastFed Business Credit Corp. ("CoastFed"). The Company used $6.1 million to
retire the CoastFed line and $11.0 million to retire an outstanding note
payable to IBM. The Credit Facility matures in October 1997 and generally
provides for borrowings based on the Company continuing to meet certain
financial covenants for leverage, cash flow, tangible net worth and liquidity
ratio as defined in the Credit Agreement. The interest rate on the Credit
Facility as of December 31, 1995 was 8.81% based upon a blend of LIBOR and
prime lending rates. Borrowings under the Credit Facility are secured by all
of the Company's assets, including the assets and stock of the Company's
subsidiaries. At December 31, 1995, the Company was not in compliance with the
contractual obligations and financial covenants of the Credit Agreement. The
financial covenants which the Company was not in compliance were liquidity
ratio, minimum cash flow coverage, maximum leverage ratio, minimum net worth,
and minimum past due accounts receivable.
In April 1996, the Company entered into an amended Credit Agreement
that reduces the maximum amount available under the line of credit from $60
million to $48 million and requires reductions in commitments to $47 million at
September 30, 1996, $45 million at December 31, 1996, and $43 million at March
15, 1997. The interest rate on the Credit Facility has been increased to prime
plus 2.25% and maturity date has been accelerated from October 1997 to March
31, 1997. In consideration for the amendment to the Credit Agreement, the
Company was required to provide the lenders warrants to purchase 125,000 shares
of common stock at $6 per share and pay certain commitment fees and
out-of-pocket expenses. The amended Credit Agreement includes revised
covenants for liquidity, leverage, net worth, profitability and collateral, and
requires additional reductions in outstanding borrowings (generally determined
on the basis of percentage of proceeds) in the event of the sale of assets and
issuance of additional equity or certain excess cash flow as such terms are
defined in the amended Credit Agreement. Due to the impact of the Company's
Texas operations, Lucent Note and other factors, there can be no assurance the
Company will continue to be in compliance with the provisions of the Credit
Agreement.
In November 1993, the Company sold $17.3 million in principal amount
of its Series A 9.0% (changed to 9.5% in October 1994) Senior Subordinated
Notes and $5.7 million in principal amount of its Series B 9.0% Senior
Subordinated Notes with 920,000 detachable warrants to purchase common stock.
The detachable warrants were issued at the option price of $.01 per share
resulting in an original issue discount of $3.6 million on the Series B 9.0%
Senior Subordinated Notes. The Series A Senior Subordinated Notes accrued
interest at the rate of 9.5% per annum, payable quarterly, with principal
amount thereof payable in three equal installments on November 9, in the years
1999, 2000 and 2001. The Company is subject to certain financial and other
covenants which include restrictions on the incurrence of additional debt,
payment of any dividends and certain other cash disbursements as well as the
maintenance of certain financial ratios as defined in the Note Purchase
Agreements pursuant to which
14
<PAGE> 15
THE CERPLEX GROUP, INC.
AND SUBSIDIARIES
the Senior Subordinated Notes were sold to the Company. At December 31, 1995,
the Company was not in compliance with the contractual obligations and
financial covenants of the Note Purchase Agreements. The financial covenants
which the Company was not in compliance were maximum leverage ratio, minimum
net worth and minimum fixed charge ratio.
In April 1996, the Company entered into an amendment to the Note
Purchase Agreements that revised the covenants for maximum leverage, net worth
and fixed charges. In consideration for the amendment to the Note Purchase
Agreements, the Company was required to provide the Senior Note Holders
warrants to purchase 1,000,000 shares of common stock at $6 per share. As a
result of the issuance of the warrants, the Company discounted the book value
of the debt outstanding and increased paid-in capital by the fair market value
of the warrants ($3.0 million). The discount is being amortized as additional
interest expense over the period of the related debt on the interest method
The Company's primary sources for liquidity is cash flow from
operations and its ability to reduce working capital requirements. The Company
does not have available capacity under its Credit Agreements and is required to
reduce borrowings during 1996 and repay the remaining borrowings at March 1997.
Accordingly, additional funds will be needed to finance the Company's
operations from the sale of assets, reduction in working capital, and/or
obtaining additional equity or long-term debt. There can be no assurance that
additional funds will be available when needed or, if available, that the terms
of such transactions will not adversely affect the Company's results of
operations.
Effective April 1, 1996, the Company sold its contract manufacturing
operations in Tustin, California for $3.5 million cash and approximately $2.0
million in restricted Common Stock. The Company was required to use $2.0
million of the proceeds from the sale of the of the InCirT Division to repay a
portion of the borrowings under the Credit Agreement. In April 1996, the
Company received a distribution from its earnings of Modcomp/Cerplex of $3.0
million which was used to acquire the remaining 51% interest of this
partnership.
In May 1996, the Company acquired Rank Xerox Limited's subsidiary
Cerplex SAS for $6.1 million, including estimated taxes, registration fees,
legal, accounting and other out-of-pocket expenses of $1.2 million. Cerplex
SAS is the legal successor to Rank Xerox et Compagnie ("Rank Xerox SNC"), which
was transformed immediately prior to the acquisition from societe en nom
collectif ( a type of partnership) into a societe par actions simplifee (a form
of limited liability company), at which time its name was changed to Cerplex
SAS. Under the terms of the Stock Purchase Agreement, the Company has agreed to
certain financial covenants over a four-year period that limit the amount of
dividends and payments in the nature of corporate charges paid by Cerplex SAS;
the maintenance of Cerplex SAS' current ratio greater than one; and
restrictions on guarantees with respect to Cerplex and its subsidiaries
(excluding Cerplex SAS). Accordingly, the cash of Cerplex SAS ($19.6 million
at June 30, 1996) is generally not available to Cerplex for financing
operations outside of Cerplex SAS. In addition, Cerplex SAS entered into a
four-year Supply and Services Agreement with RXL to provide repair and
refurbishment services with guaranteed levels of production hours (at standard
rates) that decline over the period of the contract. The Company financed the
acquisition of Cerplex SAS through a portion of the proceeds from the sale of
InCirT and issuance of convertible Series B Stock.
In June 1996, the Company issued 8,000 shares of Series B Stock at
$1,000 per share in a private placement. The Series B Stock is convertible
into Common Stock of the Company at the lower of $5.07 per share or 80% of the
average equivalent closing bid price over a ten-day period ending three days
prior to the date of conversion. The Series B Stock will automatically convert
into Common Stock on
15
<PAGE> 16
THE CERPLEX GROUP, INC.
AND SUBSIDIARIES
the earlier of five-years from the date of issuance or such date as the
Company's Common Stock has traded above $19.13 per share for a specified period
of time. The Series B Stock has certain rights, privileges and preferences,
including a $2,000 per share preference in the event of a sale of the company.
The Board of Directors may not pay dividends to the holders of the Company's
Common Stock unless and until the Board has paid an equivalent dividend to the
holders of Series B Stock based upon the number of shares of Common Stock into
which each share of Series B Stock is convertible. In addition, in the event
the Company fails to effect the registration of the Common Stock issuable upon
conversion of the Series B Stock by November 8, 1996, the holders of Series B
Stock shall be entitled to receive a dividend at the rate of $0.83 1/3 per
share per day for each day after such deadline until the shares are so
registered, up to $500 per share.
In June 1996, the Company converted $4.6 million of invoices received
from Lucent Technology ("Lucent") into a note payable ("Lucent Note"). The
Lucent Note accrues interest at 9.75% and is due September 15, 1996. The
Lucent Note relates to the Company's purchase of excess telephones which are
repaired by a subcontractor and re-marketed in certain geographic areas
designated in the purchase agreement. As a result of the condition of the
telephones and lack of availability of spare parts, the costs of repair have
escalated and the re-marketing activities have extended beyond the time
anticipated. At June 30, 1996, the Company had $4.0 million of inventory
related to this program which must be sold at prices above such amount to
generate cash sufficient to pay the note to Lucent. At the present time, cash
flow from the sale of the repaired telephones will not be adequate to repay the
Lucent Note when it becomes due. The Company intends to negotiate a price
reduction, pricing concessions or other products to be performed and/or an
extension of the due date of the Lucent Note, however, there is no assurance
that a favorable outcome to these negotiations will be obtained. Failure of
the Company to pay the Lucent Note when it becomes due would result in an event
of default under the Company's Credit Agreement. Furthermore, there is no
assurance that if such extension is obtained, that parts will be available to
complete production in a timely manner or that the sale prices will be adequate
to generate the cash required to meet the payments due to Lucent.
The Company is committed to pay BT L1.8 million (approximately $2.9
million as of June 30, 1996) in 1999 or earlier if certain sales volumes are
reached and to pay a former shareholder of PCS up to $1.0 million over the next
two years.
16
<PAGE> 17
THE CERPLEX GROUP, INC.
AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
On June 11, 1996 the Company consummated a private placement of 8,000
shares of Series B Stock, as more fully described in Note 4 to the Consolidated
Financial Statements. Certain of the rights, preferences and privileges of the
Series B Stock which may affect the rights of the holders of Common Stock are
as follows:
(i) Voting. Each holder of Series B Stock shall be entitled to
vote with the holders of Common Stock on an as-converted basis as a single
class on all matters presented for stockholder vote.
(ii) Dividends. Holders of Series B Stock are entitled to receive
dividends as may be declared from time to time by the Board of Directors. The
Board may not pay dividends to the holders of the Company's Common Stock unless
and until the Board has paid an equivalent dividend to the holders of Series B
Stock based upon the number of shares of Common Stock into which each share of
Series B Stock is convertible as of the record date for the payment of the
dividend. In the event the Company should fail to effect a registration
covering the resale of the Common Stock issuable upon conversion of the Series
B Stock by November 8, 1996, the holders of Series B Stock shall be entitled to
receive a dividend at the rate of $0.83 1/3 per share per day for each day
after such deadline until the shares are so registered, up to $500 per share.
(iii) Liquidation Preference. In the event of any liquidation,
dissolution or winding up of the Company, the holders of Series B Stock are
entitled to receive, prior and in preference to any distribution of any assets
of the Company to the holders of Common Stock, the amount of $2,000 per share
plus all accrued or declared but unpaid dividends.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
During portions of 1995 and the beginning of 1996, the Company was in
default under its senior Credit Agreement. The Company has re- negotiated and
amended such agreement to cure such defaults. See "Liquidity and Capital
Resources" herein for a more detailed discussion.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
17
<PAGE> 18
THE CERPLEX GROUP, INC.
AND SUBSIDIARIES
ITEM 5. OTHER INFORMATION
(A) RISK FACTORS
Losses and Accumulated Deficit. For the six month period ended June
30, 1996 and the year ended December 31, 1995, the Company reported a net loss
of $871,000 and $39.4 million, respectively. As of June 30, 1996, the Company
had an accumulated deficit of $47.9 million. In addition, the Company expects
to record operating losses from its Texas operations during the three months
ended September 30, 1996, and incur a restructuring charge resulting from the
closure of these operations which could result in an unprofitable quarter for
the Company. Furthermore, there can be no assurance that the Company will
operate profitably in the future. Continued losses could materially and
adversely affect the Company's business and the value of, and the market for,
the Company's equity securities.
Future Capital Needs; Uncertainty of Additional Financing. The
Company's ability to maintain its current revenue base and to grow its business
is dependent on the availability of adequate capital. Without sufficient
capital, the Company's growth may be limited. During portions of 1995 and the
beginning of 1996, the Company was in default under its senior credit agreement
and subordinated note agreements. While the Company has re-negotiated such
agreements, the terms of the senior credit facility have resulted in a reduced
borrowing base which will be further reduced over the next nine months. Due to
the impact of the Company's Texas operations, Lucent Note and other factors,
there can be no assurance the Company will continue to be in compliance with
the provisions of the Credit Agreement. The Company is required to use a
portion of cash generated from operations, from sales of assets and from sales
of equity securities to further reduce its borrowing base under the senior
credit facility. As a result, the Company currently has limited capital. In
addition, the terms of such agreements restrict the Company's ability to incur
additional indebtedness and could adversely affect the Company's ability to
obtain additional financing. General market conditions and the Company's
future performance (including its ability to generate profits and positive
cash flow) will also impact the Company's financial resources. The failure of
the Company to obtain additional capital when needed could have a material
adverse effect on the Company's business and future prospects. No assurance
can be given that the Company will be able to maintain its current credit
facilities or that additional financing will be available or, if available,
will be on acceptable terms.
Risk of Excess and Unusable Inventory. The Company is required to
maintain inventories to support its customers. At the end of 1995, inventory
constituted approximately 27% of the Company's assets. Any decrease in the
demand for the Company's repair services could result in a substantial portion
of the Company's inventory becoming excess, obsolete or otherwise unusable,
which would have a material adverse effect on the Company's business. During
both 1994 and 1995, the Company wrote down a significant amount of inventory.
There can be no assurance that the Company will not be required to write down
significant amounts of its inventory in the future.
Dependence on Key Customers. During the six months ended June 30,
1996, BT, IBM, SpectraVision and Rank Xerox accounted for approximately 13%,
11%, 6% and 6%, respectively, of continuing operations. During 1995, IBM and
SpectraVision significantly decreased orders for certain programs which
materially and adversely affected the Company and its results of operations.
SpectraVision is currently operating under Chapter 11 of the U.S. Bankruptcy
Code, and a subsidiary of the Company is performing services for SpectraVision
under a contract which, based on discussions
18
<PAGE> 19
THE CERPLEX GROUP, INC.
AND SUBSIDIARIES
with SpectraVision, will likely be terminated as part of the bankruptcy
proceedings. A significant portion of the Company's net sales attributable to
IBM in 1995 were from discontinued operations, and, as such, the Company
expects net sales attributable to IBM to continue to account for a decreasing
percentage of the Company's net sales. Also, IBM has informed the Company that
it has changed its strategy for spare parts and, as a result, will not renew an
agreement (which accounted for approximately 8% of the Company's 1995 net sales
from continuing operations) with the Company for such services which expires in
September 1996. Although the Company will not provide spare parts under this
agreement, after September 1996, the Company believes it will continue to
provide services to IBM under other programs. There can be no assurance that
major customers of the Company will not terminate any or all of their
arrangements with the Company; significantly change, reduce or delay the amount
of services ordered from the Company; or significantly change the terms upon
which the Company and these customers do business. Any such termination,
change, reduction or delay could have a material adverse effect on the
Company's business.
Dependence on Customers in the Electronics Industry. The Company is
dependent upon the continued growth, viability and financial stability of its
customers and potential customers in the electronics industry, particularly the
computer industry. The computer industry has been characterized by rapid
technological change, compressed product life cycles and pricing and margin
pressures. Improvements in technology and quality of hardware products or
other factors may result in a reduced need for parts and systems repairs in the
future which may adversely affect the Company's business. The factors
affecting segments of the electronics industry in general, and the Company's
OEM customers in particular, could have an adverse effect on the Company's
business. During 1995, several of the Company's customers experienced severe
financial difficulty resulting in significant losses to the Company as a result
of write downs of receivables and other assets. There can be no assurance that
existing customers or future customers will not experience financial
difficulty, which could have a material adverse effect on the Company's
business.
Reliance on Short-Term Purchase Orders. The Company's customer
contracts are typically subject to termination on short notice at the
customer's discretion and purchase orders under such contracts typically only
cover services over a 90-day period. The termination of any material contracts
or any substantial decrease in the orders received from major customers could
have a material adverse effect on the Company's business.
Competition. The Company competes with the in-house repair centers of
OEMs and TPMs for repair services. There is no assurance that these entities
will choose to outsource their repair needs. In certain instances, these
entities compete directly with the Company for the services of unrelated OEMs
and TPMs. In addition to competing with OEMs and TPMs, the Company also
competes for depot repair business with a small number of independent
organizations similar in size to the Company and a large number of smaller
companies. Many of the companies with which the Company competes have
significantly greater financial resources than the Company. There can be no
assurance that the Company will be able to compete effectively in its target
markets.
Management of Growth. The Company's growth has placed, and will
continue to place, a strain on the Company's managerial, operational and
financial resources. These resources may be further strained by the
geographically dispersed operations of the Company and the future addition of
acquired depots or businesses, if any. The Company's ability to manage growth
effectively will require it to continue to improve its operational, financial
and management information systems; to develop the
19
<PAGE> 20
THE CERPLEX GROUP, INC.
AND SUBSIDIARIES
management skills of its managers and supervisors; and to train, motivate and
effectively manage its employees. The Company's failure to effectively manage
growth, including acquired operations, could have a material adverse effect on
the Company's business.
Expansion of International Sales. During the six month period ended
June 30, 1996, approximately 21% of the Company's business was in Europe and
the Company intends to continue to expand its European operations. There can
be no assurance that the Company will be able to successfully market, sell and
deliver its products and services in these markets. In addition to the
uncertainty as to the Company's ability to expand its international presence,
there are certain risks inherent in doing business on an international level,
such as unexpected changes in regulatory requirements, export restrictions,
tariffs and other trade barriers, difficulties in staffing and managing foreign
operations, longer payment cycles, problems in collecting accounts receivable,
political instability, fluctuations in currency exchange rates and potentially
adverse tax consequences, which could adversely impact the success of the
Company's international operations. There can be no assurance that one or more
of such factors will not have a material adverse effect on the Company's
international operations and, consequently, on the Company's business,
operating results and financial condition.
Dependence on Acquisition Strategy. Certain of the Company's repair
programs resulted in decreasing net sales as the installed base of the
particular products under such programs decreases over time. An important
component of the Company's strategy to maintain its revenue and to grow its
business has been the acquisition of repair programs and complementary
businesses. Competition for these types of transactions is likely to
intensify. The Company's ability to effect any significant transactions
requiring capital will be limited by the terms of the Company's senior credit
facility. There can be no assurance that the Company will be able to acquire
additional repair programs or complementary businesses or, if acquired, that
such operations will prove to be profitable.
Discontinued Operations; Change in Strategy. In September 1995,
Cerplex adopted a plan to discontinue its end-of-life programs, a line of
business which historically generated a significant percentage of the Company's
total sales, but which in recent years experienced declining sales. Net sales
from end-of-life programs declined from approximately $56 million in 1993 to
$33 million in 1994 to $20 million in 1995. The net loss from discontinued
operations for the year ended December 31, 1995 was $17.4 million. There can
be no assurance that the Company will not incur additional losses from these
operations. In connection with discontinuing its end-of-life business, the
Company changed certain elements of its business strategy and is undergoing
changes in management and operations, is developing a direct sales force and
terminating the majority of its outside sales representatives, is reducing its
emphasis on inventory acquisitions and focusing on targeted customers in
specific industries. While the Company believes such changes will enhance the
Company's opportunities, there can be no assurance that such changes will
positively impact the Company's business and results of operations in the short
or long term.
Risk Associated with the Ability of Existing Stockholders to Control
the Company. As of June 30, 1996, the officers, directors, principal
stockholders and their affiliates owned approximately 52% of the outstanding
Common Stock. Although there are currently no voting agreements or similar
arrangements among such stockholders, if they were to act in concert, they
would be able to elect a majority of the Company's directors, to determine the
outcome of most corporate actions requiring stockholder approval and otherwise
to control the business affairs of the Company. The Board of Directors of the
Company has the authority under the Company's Restated Certificate of
Incorporation to issue shares of the
20
<PAGE> 21
THE CERPLEX GROUP, INC.
AND SUBSIDIARIES
Company's authorized Preferred Stock in one or more series and to fix the
rights, preferences, privileges and restrictions granted to or imposed upon any
unissued shares of Preferred Stock. The issuance of Preferred Stock may
adversely affect the voting and dividend rights, rights upon liquidation and
other rights of the holders of Common Stock. The issuance of Preferred Stock
and the control by existing stockholders, if they were to act in concert, may
have the effect of delaying, deferring or preventing a change in control of the
Company.
Dependence on Key Personnel. The Company's continued success depends,
to a large extent, upon the efforts and abilities of key managerial employees,
particularly the Company's executive officers. Competition for qualified
management personnel in the industry is intense. The loss of services of
certain of these key employees could have a material adverse effect on the
Company's business.
No Assurance of Public Market for Common Stock; Possible Volatility of
Stock Price. Prior to the Company's initial public offering, there was no
public market for the Common Stock, and there can be no assurance that an
active trading market will be sustained. The trading price of the Common Stock
has been, and in the future could be, subject to significant fluctuations in
response to variations in quarterly operating results, the gain or loss of
significant contracts, changes in management or new products or services by the
Company or its competitors, general trends in the industry and other events or
factors. In addition, the stock market has experienced extreme price and
volume fluctuations which have particularly affected the market price for many
companies in similar industries and which have often been unrelated to the
operating performance of these companies. These broad market fluctuations may
adversely affect the market price of the Company's Common Stock.
21
<PAGE> 22
THE CERPLEX GROUP, INC.
AND SUBSIDIARIES
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER TITLE METHOD OF FILING
- ------ ----- ----------------
<S> <C> <C>
2.1 Agreement of Merger dated as of August 30, 1993, by and Incorporated herein by reference to
among Cerplex Incorporated, Diversified Manufacturing Exhibit 2.1 to the Company's
Services, Inc. ("DMS"), EMServe, Inc. ("EMServe"), Registration Statement on Form S-1
InCirT Technology Incorporated ("InCirT") and Testar, (File No. 33-75004) which was declared
Inc. ("Testar"). effective by the Commission on April
8, 1994.
2.2 Agreement and Plan of Merger dated November 12, 1993, Incorporated herein by reference to
between The Cerplex Group Subsidiary, Inc. and Exhibit 2.2 to the Company's
Registrant (conformed copy to original). Registration Statement on Form S-1
(File No. 33-75004) which was declared
effective by the Commission on April
8, 1994.
2.3 Certificate of Ownership and Merger of Registrant with Incorporated herein by reference to
and into The Cerplex Group Subsidiary, Inc. dated as of Exhibit 2.3 to the Company's
November 12, 1993. Registration Statement on Form S-1
(File No. 33-75004) which was declared
effective by the Commission on April
8, 1994.
2.4 Asset Purchase Agreement effective December 17, 1993 by Incorporated herein by reference to
and between Certech Technology, Inc., a wholly-owned Exhibit 2.4 to the Company's
subsidiary of the Registrant ("Certech"), and Registration Statement on Form S-1
Spectradyne, Inc. ("Spectradyne"). (File No. 33-75004) which was declared
effective by the Commission on April
8, 1994.
2.5 Purchase and Sale Agreement dated as of July 29, 1994, Incorporated herein by reference to
by and among The Cerplex Group, Inc., Cerplex Limited, Exhibit 2 to the Form 8-K filed July
BT Repair Services Limited and British 29, 1994.
Telecommunications plc.
2.6 Contract for repair, calibration and warehousing of Incorporated herein by reference to
certain items of BT Equipment dated as of July 29, Exhibit 10 to the Form 8-K filed July
1994, among The Cerplex Group and Cerplex Limited and 29, 1994.
BT.
</TABLE>
22
<PAGE> 23
THE CERPLEX GROUP, INC.
AND SUBSIDIARIES
<TABLE>
<S> <C> <C>
2.7 Formation and Contribution Agreement effective December Incorporated herein by reference to
1, 1994 by and among Modcomp/Cerplex L.P., Modular Exhibit 2.7 to the Company's Annual
Computer Systems, Inc., Cerplex Subsidiary, Inc. and Report on Form 10-K for the fiscal
The Cerplex Group, Inc. year ended January 1, 1995.
2.8 Contingent Promissory Note dated December 1, 1994 Incorporated herein by reference to
issued by Modcomp/Cerplex L.P. to Modular Computer Exhibit 2.8 to the Company's Annual
Systems, Inc. Report on Form 10-K for the fiscal
year ended January 1, 1995.
2.9 Limited Partnership Agreement of Modcomp/Cerplex L.P. Incorporated herein by reference to
effective December 1, 1994. Exhibit 2.9 to the Company's Annual
Report on Form 10-K for the fiscal
year ended January 1, 1995.
2.10 Put/Call Option Agreement effective December 1, 1994 by Incorporated herein by reference to
and among Cerplex Subsidiary, Inc., The Cerplex Group, Exhibit 2.10 to the Company's Annual
Inc., Modular Computer Systems, Inc. and Modcomp Joint Report on Form 10-K for the fiscal
Venture Inc. year ended January 1, 1995.
2.11 Stock Purchase Agreement dated as of June 29, 1995 by Incorporated herein by reference to
and among The Cerplex Group, Inc., Tu Nguyen and Exhibit 2.11 to the Company's Quarterly
Phuc Le. Report on Form 10-Q for the quarter
ended October 1, 1995.
2.12 Letter Agreement dated April 5, 1996 by and among Incorporated herein by reference to
Modular Computer Systems, Inc., Modcomp Joint Venture, Exhibit 2.12 to the Company's Annual
Inc., AEG Aktiengesellschaft, the Company, Cerplex Report on Form 10-K for the fiscal
Subsidiary, Inc. and Modcomp/Cerplex L.P. year ended December 31, 1995.
3.1 Restated Certificate of Incorporation of the Incorporated herein by reference to
Registrant. Exhibit 3.1 to the Company's
Registration Statement on Form S-1
(File No. 33-75004) which was declared
effective by the Commission on April
8, 1994.
3.2 Bylaws of the Registrant Incorporated herein by reference to
Exhibit 3.2 to the Company's
Registration Statement on Form S-1
(File No. 33-75004) which was declared
effective by the Commission on April
8, 1994.
</TABLE>
23
<PAGE> 24
THE CERPLEX GROUP, INC.
AND SUBSIDIARIES
<TABLE>
<S> <C> <C>
3.3 Certificate of Designation of Preferences of Series B Filed herein.
Preferred Stock of The Cerplex Group, Inc.
4.1 Stock Purchase Agreement dated as of November 19, 1993 Incorporated herein by reference to
by and among the Registrant, the stockholders of the Exhibit 4.1 to the Company's
Registrant identified in Part A of Schedule I thereto Registration Statement on Form S-1
and the purchasers of shares of the Registrant's Series (File No. 33-75004) which was declared
A Preferred Stock identified in Schedule I thereto effective by the Commission on April
(including the Schedules thereto; Exhibits omitted). 8, 1994.
4.2 Registration Rights Agreement dated as of November 19, Incorporated herein by reference to
1993, by and among the Registrant, the investors listed Exhibit 4.2 to the Company's
on Schedule A thereto and the security holders of the Registration Statement on Form S-1
Registrant listed on Schedule B thereto, together with (File No. 33-75004) which was declared
Amendment No.1. effective by the Commission on April
8, 1994.
4.3 Co-Sale Agreement dated as of November 19, 1993, by and Incorporated herein by reference to
among the Registrant, the managers listed on Schedule A Exhibit 4.3 to the Company's
thereto and the investors listed on Schedule B thereto. Registration Statement on Form S-1
(File No. 33-75004) which was declared
effective by the Commission on April
8, 1994.
4.4 Warrant Agreement dated as of November 19, 1993, by and Incorporated herein by reference to
among the Registrant and the purchasers listed in Annex Exhibit 4.4 to the Company's
1 thereto. Registration Statement on Form S-1
(File No. 33-75004) which was declared
effective by the Commission on April
8, 1994.
4.5 Placement Agent Warrant Purchase Agreement dated Incorporated herein by reference to
as of November 19, 1993, between the Registration and Exhibit 4.5 to the Company's Registration
certain stock purchasers. Statement on Form S-1 (File No. 33-75004)
which was declared effective by the
Commission on April 8, 1994.
4.6 Observation Rights Agreement dated as of November 19, Incorporated herein by reference to
1993, between the Registrant and certain stock Exhibit 4.6 to the Company's
purchasers. Registration Statement on Form S-1
(File No. 33-75004) which was declared
effective by the Commission on April
8, 1994.
</TABLE>
24
<PAGE> 25
THE CERPLEX GROUP, INC.
AND SUBSIDIARIES
<TABLE>
<S> <C> <C>
4.7 Observation Rights Agreement dated as of November 19, Incorporated herein by reference to
1993, between the Registrant and certain note purchasers. Exhibit 4.7 to the Company's Registration
Statement on Form S-1 (File No. 33-75004)
which was declared effective by the
Commission on April 8, 1994.
4.8 Note Purchase Agreement dated as of November 19, 1993, Incorporated herein by reference to
by and among the Registrant and The Northwestern Mutual Exhibit 4.8 to the Company's
Life Insurance Company, John Hancock Mutual Life Registration Statement on Form S-1
Insurance, Registrant and Bank of Scotland London (File No. 33-75004) which was declared
Nominees Limited. effective by the Commission on April
8, 1994.
4.9 Amendment No. 2 to Registration Rights Agreement dated Incorporated herein by reference to
as of April 6, 1994, by and among the Registrant and Exhibit 4.9 to the Company's
certain of its Securities holders. Registration Statement on Form S-1
(File No. 33-75004) which was declared
effective by the Commission on April
8, 1994.
4.10 Amendment to Note Purchase Agreement, dated as of Incorporated herein by reference to
October 27, 1994, by and among the Company, Exhibit 4.10 to the Company's Annual
Northwestern Mutual Life Insurance Company, John Report on Form 10-K for the fiscal
Hancock Mutual Life Insurance Company and North year ended December 31, 1995.
Atlantic Smaller Companies Trust P.L.C. (collectively,
the "Noteholders").
4.11 Waiver and Amendment Agreement dated April 15, 1996 by Incorporated herein by reference to
and among Company, The Northwestern Mutual Life Exhibit 4.11 to the Company's Annual
Insurance Company, John Hancock Mutual Life Insurance Report on Form 10-K for the fiscal
Company and North Atlantic Smaller Companies year ended December 31, 1995.
Investment Trust PLC.
4.12 Warrant Agreement dated as of April 15, 1996 by and Incorporated herein by reference to
among Company, The Northwestern Mutual Life Insurance Exhibit 4.12 to the Company's Annual
Company, John Hancock Mutual Life Insurance Company and Report on Form 10-K for the fiscal
North Atlantic Smaller Companies Investment Trust PLC. year ended December 31, 1995.
4.13 First Amendment to Warrant Agreement dated April 15, Incorporated herein by reference to
1996 by and among Company and each of the holders of Exhibit 4.13 to the Company's Annual
warrants listed on Schedule A thereto, with respect to Report on Form 10-K for the fiscal
that certain Warrant Agreement dated November 19, 1993. year ended December 31, 1995.
First Amendment to Observation Rights Agreement dated Incorporated herein by reference to
</TABLE>
25
<PAGE> 26
THE CERPLEX GROUP, INC.
AND SUBSIDIARIES
<TABLE>
<S> <C> <C>
4.14 First Amendment to Observation Rights Agreement dated Incorporated herein by reference to
as of April 15, 1996 between Company and certain note Exhibit 4.14 to the Company's Annual
purchasers. Report on Form 10-K for the fiscal
year ended December 31, 1995.
4.15 Third Amendment to Registration Rights Agreement dated Incorporated herein by reference to
as of April 15, 1996 by and among Company, the Exhibit 4.15 to the Company's Annual
investors of Company listed on Schedule A thereto and Report on Form 10-K for the fiscal
the security holders of Company listed on Schedule B year ended December 31, 1995.
thereto.
4.16 Warrant Agreement dated April 15, 1996 by and among Incorporated herein by reference to
Company, Wells Fargo Bank, National Association, Exhibit 4.16 to the Company's Annual
Sumitomo Bank of California, BHF Bank Report on Form 10-K for the fiscal
Aktiengesellschaft and Comerica Bank-California. year ended December 31, 1995.
4.17 Stock Purchase Agreement dated June 10, 1996 by and Filed herein.
among the Company and the investors listed on Schedule
A thereto.
4.18 Fourth Amendment to Registration Rights Agreement dated Filed herein.
June 10, 1996 by and among the Company, the investors
listed on Schedule A thereto, the security holders of
the Company listed on Schedule B thereto, the banks
listed on Schedule C thereto and each of the parties
listed on Schedule D thereto.
4.19 Certificate of Designation of Preferences of Series B Incorporated herein by reference to
Preferred Stock of The Cerplex Group, Inc. Exhibit 3.3 filed herein.
10.1 The Registrant's 1990 Stock Option Plan (the "1990 Incorporated herein by reference to
Plan"). Exhibit 10.1 to the Company's
Registration Statement on Form S-1
(File No. 33-75004) which was declared
effective by the Commission on April
8, 1994.
10.2 Form of Stock Option Agreement pertaining to the 1990 Incorporated herein by reference to
Plan. Exhibit 10.2 to the Company's
Registration Statement on Form S-1
(File No. 33-75004) which was declared
effective by the Commission on April
8, 1994.
</TABLE>
26
<PAGE> 27
THE CERPLEX GROUP, INC.
AND SUBSIDIARIES
<TABLE>
<CAPTION>
<S> <C> <C>
10.3 Form of Stock Purchase Agreement pertaining to the Incorporated herein by reference to
1990 Plan. Exhibit 10.3 to the Company's Registration
Statement on Form S-1 (File No. 33-75004)
which was declared effective by the
Commission on April 8, 1994.
10.4 The Registrant's 1993 Stock Option Plan (the "1993 Incorporated herein by reference to
Plan"). Exhibit 10.4 to the Company's
Registration Statement on Form S-1
(File No. 33-75004) which was declared
effective by the Commission on April
8, 1994.
10.5 Form of Stock Option Agreement (grants to employees) Incorporated herein by reference to
pertaining to the 1993 Plan. Exhibit 10.5 to the Company's
Registration Statement on Form S-1
(File No. 33-75004) which was declared
effective by the Commission on April
8, 1994.
10.6 Form of Stock Option Agreement (grants to directors and Incorporated herein by reference to
certain officers) pertaining to the 1993 Plan. Exhibit 10.6 to the Company's
Registration Statement on Form S-1
(File No. 33-75004) which was declared
effective by the Commission on April
8, 1994.
10.7 Form of Stock Purchase Agreement for Installment Incorporated herein by reference to
Options pertaining to the 1993 Plan. Exhibit 10.7 to the Company's
Registration Statement on Form S-1
(File No. 33-75004) which was declared
effective by the Commission on April
8, 1994.
10.8 Form of Stock Purchase Agreement for Immediately Incorporated herein by reference to
Exercisable Options pertaining to the 1993 Plan. Exhibit 10.8 to the Company's
Registration Statement on Form S-1
(File No. 33-75004) which was declared
effective by the Commission on April
8, 1994.
10.9 The Registrant's Restated 1993 Stock Option Plan (the Incorporated herein by reference to
"Restated Plan"). Exhibit 10.9 to the Company's
Registration Statement on Form S-1
(File No. 33-75004) which was declared
effective by the Commission on April
8, 1994.
</TABLE>
27
<PAGE> 28
THE CERPLEX GROUP, INC.
AND SUBSIDIARIES
<TABLE>
<S> <C> <C>
10.10 Form of Stock Option Agreement, together with Addenda, Incorporated herein by reference to
pertaining to the Restated Plan. Exhibit 10.10 to the Company's
Registration Statement on Form S-1
(File No. 33-75004) which was declared
effective by the Commission on April
8, 1994.
10.11 Master Agreement dated May 6, 1992 by and between IBM Incorporated herein by reference to
and the Company. Exhibit 10.11 to the Company's
Registration Statement on Form S-1
(File No. 33-75004) which was declared
effective by the Commission on April
8, 1994.
10.12 Master Task Agreement dated December 1, 1991, by and Incorporated herein by reference to
between International Business Machines Incorporated Exhibit 10.12 to the Company's
("IBM") and the Registrant, together with Amendment to Registration Statement on Form S-1
Master Agreement and Task Order. (File No. 33-75004) which was declared
effective by the Commission on April
8, 1994.
10.13 Technology Services Agreement effective March 1, 1993, Incorporated herein by reference to
by and between Novadyne Computer Systems, Inc. Exhibit 10.12 to the Company's
("Novadyne") and Cerplex Incorporated (a California Registration Statement on Form S-1
corporation and a predecessor of the Registrant), (File No. 33-75004) which was declared
together with Amendments Nos. 1 and 2. effective by the Commission on April
8, 1994.
10.14 Technology Services Agreement effective December 17, Incorporated herein by reference to
1993, by and between Spectradyne, Inc. ("Spectradyne") Exhibit 10.13 to the Company's
and the Registrant. Registration Statement on Form S-1
(File No. 33-75004) which was declared
effective by the Commission on April
8, 1994.
10.15 Form of Indemnity Agreement Incorporated herein by reference to
Exhibit 10.15 to the Company's
Registration Statement on Form S-1
(File No. 33-75004) which was declared
effective by the Commission on April
8, 1994.
10.16 Lease Agreement dated April 1, 1992 by and between Incorporated herein by reference to
Henry G. Page Jr., and Diversified Manufacturing Exhibit 10.16 to the Company's
Services, Inc. ("DMS"). Registration Statement on Form S-1
(File No. 33-75004) which was declared
effective by the Commission on April
8, 1994.
</TABLE>
28
<PAGE> 29
THE CERPLEX GROUP, INC.
AND SUBSIDIARIES
<TABLE>
<S> <C> <C>
10.17 Sublease dated January 1, 1994 by and between Bull and Incorporated herein by reference to
Cerplex Group, Inc. (a Massachusetts corporation). Exhibit 10.17 to the Company's
Registration Statement on Form S-1
(File No. 33-75004) which was declared
effective by the Commission on April
8, 1994.
10.18 Standard Industrial/Commercial Single-Tenant Lease - Incorporated herein by reference to
Net dated November 29, 1990 by and among Kilroy Exhibit 10.18 to the Company's
Building 73 Partnership, Cerplex Incorporated and Registration Statement on Form S-1
InCirT, together with Amendment No. 1. (File No. 33-75004) which was declared
effective by the Commission on April
8, 1994.
10.19 Lease dated December 17, 1993 by and between Incorporated herein by reference to
Spectradyne and Certech. Exhibit 10.19 to the Company's
Registration Statement on Form S-1
(File No. 33-75004) which was declared
effective by the Commission on April
8, 1994.
10.20 Sublease dated March 1, 1993 by and between Novadyne Incorporated herein by reference to
and the Registrant together with Lease Amendment dated Exhibit 10.20 to the Company's
July 22, 1991 by and between McDonnell Douglas Realty Registration Statement on Form S-1
Company and Novadyne. (File No. 33-75004) which was declared
effective by the Commission on April
8, 1994.
10.21 Standard Industrial/Commercial Lease - Net dated Incorporated herein by reference to
September 4, 1991 by and between Proficient Food Exhibit 10.21 to the Company's
Company and W.C. Cartwright Corporation ("Cartwright"), Registration Statement on Form S-1
together with Addendum and Sublease dated September 6, (File No. 33-75004) which was declared
1991 by and between Cartwright and the Registrant. effective by the Commission on April
8, 1994.
10.22 Sublease dated July 30, 1992 by and between Cartwright Incorporated herein by reference to
and DMS. Exhibit 10.22 to the Company's
Registration Statement on Form S-1
(File No. 33-75004) which was declared
effective by the Commission on April
8, 1994.
10.23 Repair Services Agreement dated January 1, 1994 by and Incorporated herein by reference to
between Bull HN Information Systems, Inc. and the Exhibit 10.14 to the Company's
Registrant. Registration Statement on Form S-1
(File No. 33-75004) which was declared
effective by the Commission on April
8, 1994.
</TABLE>
29
<PAGE> 30
THE CERPLEX GROUP, INC.
AND SUBSIDIARIES
<TABLE>
<S> <C> <C>
10.24 Credit Agreement dated as of October 12, 1994 (the Incorporated herein by reference to
"Credit Agreement") among The Cerplex Group, Inc., as Exhibit 10.24 to the Company's Annual
Borrower; the lenders listed therein, as Lenders; and Report on Form 10-K for the fiscal
Wells Fargo Bank, National Association, as year ended January 1, 1995.
Administrative Agent; and those certain exhibits,
schedules and collateral documents to such Credit
Agreement.
10.25 Limited Waiver dated as of November 14, 1995 ("Waiver") Incorporated herein by reference to
by and among The Cerplex Group, Inc. (the "Company"), Exhibit 10.25 to the Company's
the financial institutions listed on the signature Quarterly Report on Form 10-Q for the
pages thereof ("Lenders"), and Wells Fargo Bank, quarter ended October 1, 1995.
National Association, as administrative agent for the
Lenders ("Administrative Agent"), and for certain
limited purposes, Certech Technology, Inc., Cerplex
Mass., Inc., Cerplex Limited, Apex Computer Company,
Cerplex Subsidiary, Inc. and Peripheral Computer
Support, Inc. (the "Subsidiaries"), which Waiver is
made with reference to the Credit Agreement.
10.26 The Cerplex Group, Inc. Restated 1993 Stock Option Incorporated herein by reference to
Plan (Restated and Amended as of January 13, 1995). Exhibit 10.26 to the Company's
Quarterly Report on Form 10-Q for the
quarter ended October 1, 1995.
10.27 The Cerplex Group, Inc. Automatic Stock Option Incorporated herein by reference to
Agreement. Exhibit 10.27 to the Company's
Quarterly Report on Form 10-Q for the
quarter ended October 1, 1995.
10.28 First Amendment to Credit Agreement dated April 15, Incorporated herein by reference to
1996 by and among Company, the lenders whose signatures Exhibit 10.28 to the Company's Annual
appear on the signature pages thereof, as Lenders; Report on Form 10-K for the fiscal
Wells Fargo Bank, National Association, as year ended December 31, 1995.
Administrative Agent; and the Subsidiaries for certain
limited purposes.
10.29 Promissory Note dated June 21, 1996 payable by the Filed herein.
Company to Lucent Technologies.
11.1 Statement Regarding Computation of Net Income (Loss) Filed herein.
Per Share.
</TABLE>
30
<PAGE> 31
THE CERPLEX GROUP, INC.
AND SUBSIDIARIES
(B) REPORTS ON FORM 8-K
(1) On April 8, 1996, the Company filed a current report on Form 8-K
regarding acquisition of the remaining fifty-one percent (51%) of
Modcomp/Cerplex L.P., a Delaware limited partnership from AEG
Aktiengesellschaft.
(2) On May 24, 1995, the Company filed a current report on Form 8-K
regarding the acquisition of Cerplex SAS., a French Company ("Cerplex SAS")
from Rank Xerox Limited, an English Company. On August 6, 1996, the Company
filed a current Form 8-K/A related to the financial statements information
required under Item 7 (A) and (B) of Form 8-K regarding this acquisition.
(3) On June 11, 1996, the Company filed a current report on Form 8-K
regarding the completion of an $8 million private placement of Series B
Preferred Stock, bringing the Company back into compliance with the NASD's
requirements for continued listing on the Nasdaq National Market.
31
<PAGE> 32
THE CERPLEX GROUP, INC.
AND SUBSIDIARIES
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 thereunto duly authorized.
THE CERPLEX GROUP, INC.
Date: August 13, 1996 /s/ JAMES R. ECKSTAEDT
------------------------------------
James R. Eckstaedt
Senior Vice President and Chief
Financial Officer
(Principal financial and
chief accounting officer)
32
<PAGE> 33
THE CERPLEX GROUP, INC.
AND SUBSIDIARIES
EXHIBIT INDEX
QUARTER ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
Exhibit Sequential
No. Description of Exhibits Page No.
- ------- ----------------------- ----------
<S> <C>
3.3 Certificate of Designation of Preferences of
Series B Preferred Stock of The Cerplex Group, Inc.
4.17 Stock Purchase Agreement dated June 10, 1996 by and
among the Company and the investors listed on Schedule
A thereto.
4.18 Fourth Amendment to Registration Rights Agreement
dated June 10, 1996 by and among the Company, the
investors listed on Schedule A thereto, the security holders
of the Company listed on Schedule B thereto, the banks listed
on Schedule C thereto and each of the parties listed on
Schedule D thereto.
10.29 Promissory Note dated June 21, 1996 payable by the
Company to Lucent Technologies.
11.1 Computation of Net Income (Loss) Per Share.
27.1 Financial Data Schedule.
</TABLE>
33
<PAGE> 1
Exhibit 3.3
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 06/10/1996
960167477 - 2352159
CERTIFICATE OF DESIGNATION
OF PREFERENCES OF SERIES B PREFERRED STOCK OF
THE CERPLEX GROUP, INC.
a Delaware Corporation
The undersigned, James T. Schraith and Frederic A. Randall, Jr.,
hereby certify that:
(a) They are the duly elected and acting President and Secretary,
respectively, of The Cerplex Group, Inc., a Delaware corporation (the
"Corporation").
(b) Pursuant to the authority conferred upon the Board of Directors
of the Corporation by paragraph B of Article IV of the Corporation's Certificate
of Incorporation (the "Certificate"), the Board of Directors of the Corporation
on June 7, 1996 adopted the following resolutions creating a series of preferred
stock designated as Series B Preferred Stock;
WHEREAS, the Certificate provides for a class of shares known as
Preferred Stock, issuable from time to time in one or more series; and
WHEREAS, the Board of Directors of the Corporation is authorized by
the Certificate to determine the powers, rights, preferences, qualifications,
limitations and restrictions granted to or imposed upon any wholly unissued
series of Preferred Stock, to fix the number of shares constituting any such
series, and to determine the designation thereof, or any of them;
WHEREAS, the Board of Directors of the Corporation desires, pursuant
to its authority as aforesaid, to determine and fix the powers, rights,
preferences, qualifications, limitations and restrictions relating to Series B
Preferred Stock and the number of shares constituting, and the designation of,
such series:
NOW, THEREFORE, BE IT RESOLVED, that pursuant to the authority
vested in the Board of Directors of the Corporation in accordance with the
provisions of the Certificate, the series of Preferred Stock is hereby created,
and the Board of Directors hereby fixes and determines the designation of, the
number of shares constituting, and the rights, preferences, privileges and
restrictions relating to, such series of Preferred Stock as follows:
1. Designation. The series of Preferred Stock of the Corporation
shall be designated as "Series B Preferred Stock," $0.001 par value.
2. Authorized-Number. The number of shares constituting the Series B
Preferred Stock shall be Eight Thousand (8,000) shares. The Board of Directors
is authorized to decrease
<PAGE> 2
the number of shares of any series of preferred stock prior or subsequent to the
issue of that series, but not below the number of shares of such series then
outstanding. In case the number of shares of any series shall be so decreased,
the shares constituting such decrease shall resume the status which they had
prior to the adoption of the resolution originally fixing the number of shares
of such series.
3. Dividend Rights. Subject to the prior rights of holders of all
classes of stock at the time outstanding having prior rights as to dividends,
the holders of the Series B Preferred Stock shall be entitled to receive, when
and as declared by the Board of Directors, out of any assets of the corporation
legally available therefor, such dividends as may be declared from time to time
by the Board of Directors. The Board of Directors shall not pay any dividend to
the holders of the Common Stock unless and until it has paid an equivalent
dividend, based upon the number of shares of Common Stock into which each share
of Series B Preferred Stock is convertible as of the record date for the payment
of the dividend, to the holders of the Series B Preferred Stock. In addition to
the foregoing, in the event the Corporation should fail to register the shares
of Common Stock into which the Series B Preferred Stock are convertible under
the Securities Act of 1933, as amended, within one hundred fifty (150) days
following the closing of that certain Stock Purchase Agreement dated June 10,
1996 by and between the Corporation and the holders of Series B Preferred Stock
(the "Original Issue Date"), as provided in that certain Fourth Amendment to
Registration Rights Agreement between the Corporation, the holders of Series B
Preferred Stock and certain other securityholders of the Corporation entered
into on the Original Issue Date, the holders of Series B Preferred Stock shall
be entitled to receive a dividend at the rate of $0.83 1/3 per share (as
adjusted for any stock dividends, combinations or splits with respect to such
shares) per day for each day after one hundred fifty (150) days following the
Original Issue Date during which the shares of Common Stock issuable upon
conversion of the shares of Series B Preferred Stock are not so registered,
which dividends shall accrue beginning one hundred fifty (150) days following
the Original Issue Date until such shares of Common Stock are so registered.
Such dividend shall be payable quarterly on the first day of each calendar
quarter commencing with the first calendar quarter ending after one hundred
fifty (150) days following the Original Issue Date. The foregoing
notwithstanding, (i) such dividends shall not be payable if the failure to
register the shares of Common Stock issuable upon conversion of the shares of
Series B Preferred Stock is a direct result of the actions of the holders of
Series B Preferred Stock, and (ii) the aggregate amount of dividends payable on
each share of Series B Preferred Stock pursuant to the foregoing shall not
exceed $500 per share (as adjusted for any stock dividends, combinations or
splits with respect to such shares).
4. Liquidation Preference.
(A) In the event of any liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, subject to the rights of any
series of Preferred Stock which may from time to time come into existence, the
holders of the Series B Preferred Stock shall be entitled to receive, prior and
in preference to any distribution of any of the assets or surplus funds of the
Corporation to the holders of the Common Stock by reason of their ownership
thereof, the amount of $2,000 per share (as adjusted for any stock dividends,
combinations or splits with respect to such shares) plus all accrued or declared
but unpaid
2
<PAGE> 3
dividends on such share (the "Liquidation Preference") for each share of Series
B Preferred Stock then held by such holder. If upon the occurrence of any such
event, the assets and funds thus distributed among the holders of Series B
Preferred Stock shall be insufficient to permit the payment to such holders of
the full aforesaid preferential amounts, then, subject to the rights of any
series of Preferred Stock which may from time to time come into existence,
entire assets and funds of the Corporation legally available for distribution
shall be distributed ratably upon the holders of Series B Preferred Stock in
proportion to the product of the Liquidation Preference of each such share and
the number of such shares owned by each such holder.
(B) After the distributions described in Section 4(A) above have
been paid, subject to the rights of any series of Preferred Stock which may from
time to time come into existence, the remaining assets of the Corporation
available or distribution to stockholders shall be distributed among the holders
of Common Stock pro rata based upon the number of shares of Common Stock held by
each stockholder.
(C) For purposes of this Section 4, (i) any acquisition of the
Corporation by means of merger or other form of corporate reorganization in
which outstanding shares of the Corporation are exchanged for securities or
other consideration issued, or caused to be issued, by the acquiring corporation
or its subsidiary (other than a mere reincorporation transaction) in which in
excess of 50% of the Corporation's voting power is transferred to a person or
persons different from those who held such prior to such transaction or (ii) a
sale of all or substantially all of the assets of the Corporation or (iii) any
other transaction or series of related transactions by the Corporation in which
in excess of 50% of the Corporation's voting power is transferred to a person or
persons different from those who held such securities prior to such transaction,
shall be treated as a liquidation, dissolution or winding up of the Corporation
and shall entitle the holders of Series B Preferred Stock to receive at the
closing in cash, securities of other property (valued as provided in Section
4(D) below) the Liquidation Preference.
(D) Whenever the distribution provided for in this Section 4
shall be payable in securities or property other than cash, the value of such
distribution shall be as follows:
(i) Securities not subject to investment letters or other
similar restrictions on free marketability;
(A) If traded on a securities exchange (which shall
include the Nasdaq National Market), the value shall be deemed to
be the average of the closing prices of the securities on such
exchange over the 30-day trading period ending three (3) days
prior to the closing,
(B) If traded over-the-counter, the value shall be deemed
to be the average of the closing bid or sale prices (whichever
are applicable) over the 30-day trading period ending three (3)
days prior to the closing as reported in pink sheets or other
publications reasonably selected by the Board of Directors; and
3
<PAGE> 4
(C) If there is no public market, the value shall be the
fair market value thereof, as determined in good faith by the
Board of Directors of the Corporation.
(ii) The method of valuation of securities subject to
investment letter or other restrictions on free marketability (other
than restrictions arising solely by virtue of a stockholder's status as
an affiliate or former affiliate) shall be to make an appropriate
discount from the market value determined as above in (i) (A), (B) or
(C) to reflect the approximate fair market value thereof, as determined
in good faith by the Board of Directors of the Corporation.
5. Redemption. Except as provided in Section 6(C) below, the Series
B Preferred Stock is not redeemable.
6. Conversion. The holders of Series B Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
(A) Right to Convert. Each share of Series B Preferred Stock
shall be convertible into shares of Common Stock at any time commencing ninety
(90) days after the Original Issue Date subject to the following terms and
provisions:
(i) The Series B Preferred Stock shall be convertible in
minimum amounts of at least twenty-five (25) preferred shares.
(ii) Each share of Series B Preferred Stock shall be
convertible into the number of shares of Common Stock equal to
$1,000.00 (the "Original Issue Price") divided by the Conversion
Price (as defined below). The Conversion Price shall be the lower
of:
(1) 80% of the average closing bid price of the Common
Stock for the ten (10) trading days ending three (3) days
prior to the date of the notice of conversion delivered as
provided in Section 6(D) below; or
(2) $5.07 (as adjusted for any stock dividends,
combinations or splits with respect to such shares of Common
Stock).
(B) Automatic Conversion. Each share of Series B Preferred Stock
shall automatically be converted into the number of shares of Common Stock,
determined as provided in Section 6(A) above, upon the earlier to occur of (i)
five (5) years following the Original Issue Date, or (ii) five (5) days after
written notification to the holders of the Series B Preferred Stock by the
Corporation that the price of the Common Stock for thirty (30) consecutive
trading days has exceeded $19.13 per share, as adjusted for stock dividends,
combinations or splits. Such price shall be calculated as follows:
4
<PAGE> 5
(i) If traded on a securities exchange (which shall include
the Nasdaq National Market), the value shall be deemed to be the
closing sales price of the securities on such exchange for each
trading day during the applicable 30-day trading period; and
(ii) If traded over-the-counter, the value shall be deemed to
be the closing bid or sales price (whichever are applicable) for
each trading day during over the applicable 30-day trading period.
(C) Limitation on Conversion; Redemption.
(i) Anything hereunder to the contrary notwithstanding, the
Corporation shall not be required to issue upon conversion of the Series B
Preferred Stock more than an aggregate of 2,679,484 shares of Common Stock (the
"Nasdaq Cap"), if the issuance of a larger number of shares would constitute a
breach of the Corporation's obligations under its agreements with the National
Association of Securities Dealers, Inc. (the "NASD") or the Bylaws of the NASD.
Subject to the obligation of the Corporation to effect certain redemptions and
the exception as provided below, if further issuances of shares of Common Stock
upon the conversion of shares of Series B Preferred Stock would constitute a
breach of the Corporation's obligations under any applicable agreement with the
NASD or the NASD Bylaws because all of the shares permitted to be issued under
the Nasdaq Cap shall have been previously issued, and so long thereafter as such
limitation shall continue to be applicable, and any shares of Series B Preferred
Stock are submitted for conversion, such shares shall receive an amount equal to
the Liquidation Preference for such shares as provided in Section 4(A) above in
lieu of the shares of Common Stock which would otherwise be issued upon such
conversion. Payment of such cash amounts shall be made within five (5) business
days following the date of the notice of conversion as provided in Section 6(D)
below. In the event the Corporation for any reason should fail to make any such
payment within such five (5) day period, the unpaid amount shall bear interest
at the rate of 1/10 of one percent (0.1%) per day, or the maximum rate permitted
by law, whichever is lower. The amount of shares of Common Stock subject to the
Nasdaq Cap shall be adjusted for stock dividends, combinations or splits. In the
event the Nasdaq Cap should continue to be applicable to the issuance of shares
of Common Stock upon conversion of the shares of Series B Preferred Stock ninety
(90) days following the Original Issue Date, the Corporation shall redeem the
minimum number of shares of Series B Preferred Stock such that the Corporation's
agreements with the NASD or the Bylaws of the NASD regarding the Nasdaq Cap will
not be breached upon the conversion of the remaining shares of Series B
Preferred Stock outstanding following such redemption. In such event, the
redemption price to be paid by the Corporation shall be equal to the Liquidation
Preference as provided in Section 4(a) above. Any redemption effected pursuant
to the preceding provisions shall require no more than ten (10) days notice and
the redemption dates shall be on or before one hundred five (105) days following
the Original Issue Date. Any such redemption shall be effected pro rata among
the holders of Series B Preferred Stock. If the funds of the Corporation legally
available for redemption of Series B Preferred Stock are insufficient to redeem
the number of shares to be so redeemed as provided above, those funds which are
legally available will be used to redeem the maximum possible number of such
shares ratably among the holders of such shares to be redeemed. At any time
thereafter when additional funds of the Corporation are legally available for
the redemption of shares of Series B Preferred Stock, such funds will
immediately be used
5
<PAGE> 6
to redeem the balance of the shares which the Corporation has become obligated
to redeem as provided above but which have not been redeemed. If for any reason
any shares of Series B Preferred Stock are not redeemed on the date when such
shares were to have been so redeemed, as provided above, the unpaid redemption
price which should have been paid shall bear interest until fully paid at the
rate of 1/10 of one percent (0.1%) per day, or the maximum rate permissible by
law, whichever is lower.
(ii) Notwithstanding anything to the contrary in Section
6(C)(ii) above, if the redemption of any of the shares of Series B Preferred
Stock, or the payment of any Liquidation Preference in lieu of the delivery of
shares of Common Stock as provided above, would violate covenants of any
agreement of the Company with its secured lenders existing as of the Original
Issue Date, the shares of Series B Preferred Stock will not be redeemed unless
the lenders consent to the redemption or payment of the Liquidation Preference.
If for any reason the Corporation (A) (i) fails to issue and deliver shares of
Common Stock upon conversion, or (ii) fails to pay the Liquidation Preference in
lieu of issuing and delivering shares of Common Stock upon conversion; or (B)
fails to redeem shares of Series B Preferred Stock as a result of the Nasdaq Cap
remaining in effect one hundred five (105) days after the Original Issue Date as
provided above, then in either such event, anything herein to the contrary
notwithstanding, the Corporation shall issue and deliver shares of Common Stock
upon conversion of Series B Preferred Stock. The shares of Series B Preferred
Stock not redeemed shall remain outstanding and entitled to all the rights and
preferences provided herein.
(D) Mechanics of Conversion. Before any holder of Series B
Preferred Stock shall be entitled to convert the same into shares of Common
Stock, he shall give written notice (which may be by mail, postage prepaid or by
facsimile transmission) to the Corporation at its principal corporate office, of
the election to convert the same and shall state therein the number of shares to
be converted and the name or names in which the certificate or certificates for
shares of Common Stock are to be issued. Promptly thereafter the holder shall by
messenger or overnight delivery surrender the certificate or certificates
representing the shares to be converted, duly endorsed, at the office of the
Corporation or of any transfer agent for such shares, or at such other place
designated by the Corporation. The Corporation shall, as soon as practicable
after receipt of such notice, issue and deliver to or upon the order of such
holder of the Series B Preferred Stock, or to the nominee or nominees of such
holder, against delivery of the certificates representing the shares which have
been converted, a certificate or certificates for the number of shares of Common
Stock to which such holder shall be entitled as aforesaid. The Corporation shall
use its best efforts to effect such issuance within 48 hours of the receipt of
the certificates representing the shares to be converted and shall transmit the
certificates by messenger or overnight delivery service to the address
designated by such holder. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date such notice of conversion
is given, or in the case of automatic conversion pursuant to Section 6(B), the
effective date of automatic conversion as provided in Section 6(B), and the
person or persons entitled to receive the shares of Common Stock issuable upon
such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock as of such date.
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(E) Adjustments to Conversion Ratio for Stock Dividends and for
Combinations or Subdivisions of Common Stock. In the event that the Corporation
at any time or from time to time after the purchase date of the Series B
Preferred shall declare or pay, without consideration, any dividend on the
Common Stock payable in Common Stock or in any right to acquire Common Stock for
no consideration, or shall effect a subdivision of the outstanding shares of
Common Stock into a greater number of shares of Common Stock (by stock split,
reclassification or otherwise than by payment of a dividend in Common Stock or
in any right to acquire Common Stock), or in the event the outstanding shares of
Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, then the number of
shares of Common Stock into which the Series B Preferred Stock can be converted
shall be proportionately decreased or increased, as appropriate. In the event
that the Corporation shall declare or pay, without consideration, any dividend
on the Common Stock payable in any right to acquire Common Stock for no
consideration then the Corporation shall be deemed to have made a dividend
payable in Common Stock in an amount of shares equal to the maximum number of
shares issuable upon exercise of such rights to acquire Common Stock.
(F) Adjustments for Reclassification and Reorganization. If the
Common Stock issuable upon conversion of the Series B Preferred Stock shall be
changed into the same or a different number of shares of any other class or
classes of stock, whether by capital reorganization, reclassification or
otherwise (other than a subdivision or combination of shares provided for in
Section 6(E) above or a merger or other reorganization referred to in Section
4(C) above), the number of shares of such other class or classes of stock into
which the Series B Preferred Stock shall be convertible shall, concurrently with
the effectiveness of such reorganization or reclassification, be proportionately
adjusted so that the Series B Preferred Stock shall be convertible into, in lieu
of the number of shares of Common Stock which the holders would otherwise have
been entitled to receive, a number of shares of such other class or classes of
stock equivalent to the number of shares of Common Stock that would have been
subject to receipt by the holders upon conversion of the Series B Preferred
Stock immediately before that change.
(G) Rights Offerings. In the event the Corporation shall issue
and distribute to all holders of Common Stock in any manner on or after the date
of the filing of this Certificate of Designation any rights to subscribe for, or
any rights or options to purchase, Common Stock or any stock or other securities
convertible into or exchangeable for Common Stock (such convertible or
exchangeable stock or securities being herein called "Convertible Securities"),
whether or not such rights or options or the right to convert or exchange any
such Convertible Securities are immediately exercisable, which rights or options
do not result in any adjustment to the number of shares of Common or other
classes of stock into which the Series B Preferred Stock can be converted under
either Section 6(E) or Section 6(F) above, then the Corporation shall issue and
distribute such rights or options to the holders of Series B Preferred Stock to
the same extent as though they were holders, at the time of such distribution,
of that number of shares of Common Stock into which the shares of Series B
Preferred Stock held by each holder could be then be converted as of the record
date for the issuance of such Convertible Securities.
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(H) No Impairment. This Corporation will not, by amendment of its
Certificate of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Corporation, but will at all times in good faith assist in the carrying out of
all the provisions of this Section 6 and in the taking of all such actions as
may be necessary or appropriate in order to protect the conversion rights of the
holders of the Series B Preferred Stock against impairment.
(I) No Fractional Shares and Certificate as to Adjustments.
(i) No fractional shares shall be issued upon conversion of
the Series B Preferred Stock, and the number of shares of Common Stock to be
issued shall be rounded to the nearest whole share. Whether or not fractional
shares are issuable upon such conversion shall be determined on the basis of the
total number of shares of Series B Preferred Stock the holder is then converting
into Common Stock and the number of shares of Common Stock issuable upon such
aggregate conversion.
(ii) Upon the occurrence of each adjustment or readjustment
of the number of shares of Common Stock into which the Series B Preferred Stock
can be converted pursuant to this Section 6, the Corporation, at its expense,
shall promptly compute such adjustment or readjustment in accordance with the
terms hereof and prepare and furnish to each holder of Series B Preferred Stock
a certificate setting forth such adjustment or readjustment and showing in
detail the facts upon which such adjustment or readjustment is based. The
Corporation shall, upon the written request at any time of any holder of Series
B Preferred Stock, furnish or cause to be furnished to such holder a like
certificate setting forth (A) such adjustment and readjustment, (B) the
conversion ratio at the time in effect, and (C) the number of shares of Common
Stock and the amount, if any, of other property which at the time would be
received upon the conversion of the Series B Preferred Stock.
(J) Notices of Record Date. In the event of any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, the Corporation
shall mail to each holder of Series B Preferred Stock, at least twenty (20) days
prior to the date specified therein, a notice specifying the date on which any
such record is to be taken for the purpose of such dividend, distribution or
right, and the amount and character of such dividend, distribution or right.
(K) Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock solely for the purpose of effecting the
conversion of the Series B Preferred Stock such number of its shares of Common
Stock as shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Series B Preferred Stock; and if at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the
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conversion of all the then outstanding Series B Preferred Stock, in addition to
such other remedies as shall be available to the holder of such Series B
Preferred Stock, the Corporation will take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purposes.
(L) Notices. Any notice required by the provisions of this
Section 6 to be given to the holders of Series B Preferred Stock shall be deemed
given at the time deposited in the United States mail, postage prepaid, and
addressed to each holder of record at his address appearing on the books of the
Corporation. Any notice to be given to the Corporation by a holder of Series B
Preferred Stock shall be given as provided in Section 6(D) above.
7. Voting Rights.
(A) Except as otherwise provided by law, each holder of shares of
Series B Preferred Stock shall be entitled to vote with the holders of Common
Stock on an as-converted basis (assuming for the purpose of this Section 7(A)
that the Conversion Price is determined according to Section 6(A)(ii)(2) above)
as a single class on all matters presented for stockholder vote, and shall be,
entitled to notice of any stockholders' meeting in accordance with the Bylaws of
the Corporation. Fractional votes, as determined on an aggregate conversion
basis for each holder, shall not, however, be permitted and any fractional
voting rights resulting from the conversion of Series B Preferred Stock into
Common Stock shall be rounded to the nearest whole number (with one-half being
rounded upward).
8. Protective Provisions. Notwithstanding anything to the contrary
in the foregoing provisions and for so long as at least 800 shares of Series B
Preferred Stock remain issued and outstanding, the Corporation shall not without
first obtaining the approval (by vote or written consent) of the holders of at
least a majority of the voting power of the then outstanding shares Series B
Preferred Stock, voting together as one class:
(A) alter or change the rights, preferences or privileges of the
shares of Series B Preferred Stock;
(B) create (by new authorization reclassification,
recapitalization, designation or otherwise) or issue any class or series of
stock or any other securities convertible into equity securities of the
Corporation having a preference over the Series B Preferred Stock with respect
to voting, dividends or upon liquidation;
(C) increase the authorized number of shares of the Series B
Preferred Stock; or,
(D) amend this Section 8.
9. Status of Converted Stock. In the event any Series B Preferred
Stock shall be converted pursuant to Section 6 hereof, the shares so converted
shall be promptly cancelled after the conversion thereof. All such shares shall
upon their cancellation become authorized but
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unissued shares of Preferred Stock and may be reissued as part of a new series
of Preferred Stock to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance set forth
herein.
RESOLVED FURTHER, that the Chairman of the Board, the Chief
Executive Officer, the President or any Vice President, and the Secretary, the
Chief Financial Officer, the Treasurer, or any Assistant Secretary or Assistant
Treasurer of this Corporation are each authorized to execute, verify, and file a
Certificate of Designation of Preferences in accordance with Delaware law.
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IN WITNESS WHEREOF, the undersigned have executed this certificate
and do affirm the foregoing as true under penalty of perjury this 7th day of
June, 1996.
___________________________________________
James T. Schraith, President
___________________________________________
Frederic A. Randall, Jr., Secretary
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Exhibit 4.17
STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made and entered into as of this 10th day of June,
1996 between The Cerplex Group, Inc., a Delaware corporation (the "Company") and
the investors listed on Schedule A attached hereto (individually an "Investor"
and collectively the "Investors").
WHEREAS, the Company intends to sell to the Investors, and the
Investors desire to purchase from the Company, shares of Series B Preferred
Stock convertible into Common Stock; and
WHEREAS, concurrently with the execution of this Agreement, the Company
and the Investors have entered into an agreement in the form attached hereto as
Exhibit A granting certain registration rights to the Investors (the
"Registration Rights Agreement"), such agreement being entered into by the
parties hereto and concurrently herewith.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
conditions set forth below, and in reliance on the representations and
warranties herein provided, the parties intending to be legally bound agree as
follows:
1. Purchase and Sale.
(a) The Purchase. Subject to the terms and conditions of this
Agreement, each Investor agrees, severally, to purchase at the Closing, and the
Company agrees to sell and issue to each Investor at the Closing, at a price per
share of $1,000.00, that number of shares of the Company's Series B Preferred
Stock (the "Preferred Stock"), set forth opposite each Investor's name on
Schedule A hereto for the aggregate purchase price set forth therein. The
Company intends to sell a maximum of 8,000 shares of the Preferred Stock for an
aggregate maximum purchase price equal to $8,000,000.
(b) The Closing. The purchase and sale of the Preferred Stock
shall take place at the offices of Stradling, Yocca, Carlson & Rauth, 660
Newport Center Drive, Suite 1600, Newport Beach, California, at 11:00 a.m. on
June 10, 1996, or at such other time and place as the Company and Investors
acquiring in the aggregate more than half the shares of the Preferred Stock sold
pursuant hereto mutually agree upon orally or in writing (which time and place
are designated as the "Closing"). At the Closing, the Company shall deliver to
each Investor a certificate registered in such Investor's name, representing the
Preferred Stock which such Investor is purchasing against delivery to the
Company by such Investor of a check or wire transfer in the amount of the
purchase price therefor payable to the Company's order.
2. Conditions to Obligations.
(a) Conditions to the Investors' Obligations. The obligation
of the Investors to purchase and pay for the Preferred Stock contemplated by
Section 1 at the Closing shall be subject to the satisfaction of each of the
following conditions precedent, the waiver of which shall not be effective
against any Investor who does not consent in writing thereto:
<PAGE> 2
(i) Representations and Warranties. Each of the
representations and warranties of the Company set forth in Section 3 shall be
true and correct as if made at the Closing.
(ii) Performance. The Company shall have performed and
complied with all agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it on or before
the Closing.
(iii) Certificate of Designation of Preferences. The
Certificate of Designation of Preferences of Series B Preferred Stock
substantially in the form of Exhibit B attached hereto (the "Certificate of
Designation") shall have been duly adopted by the Board of Directors of the
Company and filed with the Delaware Secretary of State.
(iv) Compliance Certificate. The Chief Executive Officer,
Chief Operating Officer or Chief Financial Officer of the Company shall deliver
to each Investor at the Closing a certificate certifying that the conditions
specified in subsections (i) and (ii) of this section 2(a) have been fulfilled.
(v) Opinion of Counsel to the Company. Each Investor shall
have received from Brobeck, Phleger & Harrison, counsel for the Company, an
opinion dated as of the Closing, substantially in the form set forth in Exhibit
C attached hereto.
(vi) Qualifications. All authorizations, approvals, or
permits, if any, of any governmental authority or regulatory body of the United
States or of any state that are required in connection with the lawful issuance
and sale of the Preferred Stock to the Investors pursuant to this Agreement
shall have been duly obtained and shall be effective on and as of the Closing,
except for any post-sale filings that may be required under federal and state
securities laws.
(vii) Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated at the Closing and
all documents incident thereto shall be reasonably satisfactory in form and
substance to each Investor and the Investors' counsel, and they shall have
received all such counterpart original and certified or other copies of such
documents as they may reasonably request.
(viii) Registration Rights Agreement. The Company and each
Investor shall have entered into a Registration Rights Agreement in the form
attached hereto as Exhibit A and all third party consents to the execution and
delivery of the Registration Rights Agreement shall have been obtained.
(ix) Irrevocable Proxies/Voting Agreements. The Investors
shall have received from stockholders holding more than fifty percent (50%) of
the outstanding voting capital stock of the Company Irrevocable Proxies/Voting
Agreements substantially in the form of Exhibit D attached hereto with respect
to the proposal to be considered to authorize the issuance of Preferred Stock as
provided in Section 5(f) below.
(b) Conditions to the Company's Obligations. The obligations
of the Company to each Investor under this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions by that
Investor, any one or more of which may be waived by the Company:
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<PAGE> 3
(i) Representations and Warranties. Each of the
representations and warranties of the Investor set forth in Section 4 shall be
true and correct as if made at the Closing.
(ii) Payment of Purchase Price. The Investor shall have
delivered payment of the aggregate purchase price of the Preferred Stock to be
purchased by such Investor.
(iii) Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated at the Closing and
all documents incident thereto shall be reasonably satisfactory in form and
substance to the Company and the Company's counsel, and they shall have received
all such counterpart original and certified or other copies of such documents as
they may reasonably request.
(iv) Performance. The Investor shall have performed and
complied with all agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it on or before
the Closing.
(v) Qualifications. All authorizations, approvals, or
permits, if any, of any governmental authority or regulatory body of the United
States or of any state that are required in connection with the lawful issuance
and sale of the Preferred Stock to the Investors pursuant to this Agreement
shall have been duly obtained and shall be effective on and as of the Closing,
except for any post-sale filings that may be required under federal and state
securities laws.
3. Representations and Warranties of the Company. Except as set
forth on the Schedule of Exceptions attached hereto as Schedule B, specifically
identifying the relevant subparagraph hereof, which exceptions shall be deemed
to be representations and warranties as if made hereunder, the Company hereby
represents and warrants to each Investor that:
(a) Corporate Power. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and is qualified to do business as a foreign corporation in each
jurisdiction where failure to qualify would have a materially adverse effect on
the financial condition, assets, liabilities, prospects, business or properties
of the Company (a "Material Adverse Effect"). The Company has full power and
authority to own its properties, to carry on its business as presently conducted
and to carry out the transactions contemplated hereby.
(b) Authorization. The Company has full power to execute,
deliver and perform this Agreement and the Registration Rights Agreement, and
this Agreement and the Registration Rights Agreement have been duly executed and
delivered by the Company and are the legal, valid and, assuming due execution by
the other parties hereto, binding obligations of the Company, enforceable in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws affecting creditors'
rights generally, and to general equitable principles. The execution, delivery
and performance of this Agreement and the Registration Rights Agreement,
including the sale, issuance and delivery of the Preferred Stock, have been duly
authorized by all necessary corporate actions of the Company and its
stockholders.
(c) Valid Issuance of Preferred and Common Stock. The shares
of Preferred Stock being purchased by the Investors hereunder, when issued, sold
and delivered in accordance with the terms hereof for the consideration
expressed herein, will be duly and validly issued, and, based in part upon the
representations of the Investors in this Agreement, will be issued in
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<PAGE> 4
compliance with the registration and qualification requirements of all
applicable federal and state securities laws and such shares of Preferred Stock
will be fully paid and non-assessable. The rights, privileges and preferences of
the Preferred Stock will be as stated in the Company's Certificate of
Designation, attached hereto as Exhibit B. The shares of Common Stock issuable
upon conversion of the Preferred Stock purchased under this Agreement have been
duly and validly reserved for issuance and, upon issuance in accordance with the
terms of the Certificate of Designation, shall be duly and validly issued, fully
paid and nonassessable, and issued in compliance with the registration and
qualification requirements of all applicable securities laws, as presently in
effect, of the United States and each of the states whose securities laws govern
the issuance of any of the Preferred Stock hereunder.
(d) Governmental Approvals. Based in part on the
representations made by the Investors in Section 4, no authorization, consent,
approval, license, exemption of or filing or registration with any court or
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, under any applicable laws, rules or regulations presently
in effect, is or will be necessary for, or in connection with, the offer,
issuance, sale, execution and delivery by the Company of the Preferred Stock or
for the performance by the Company of its obligations under this Agreement,
except for filings under applicable securities laws which will be made by the
Company within the prescribed periods.
(e) Litigation. There is no litigation or governmental
proceeding or investigation pending or, to the best knowledge of the Company,
threatened against the Company which would have a Material Adverse Effect or
which would materially and adversely affect the execution and delivery of this
Agreement or the performance by the Company of its obligations hereunder.
(f) Subsidiaries; Charter Documents. Except as set forth in
the Schedule of Exceptions, the Company has no active subsidiaries and does not
otherwise directly or indirectly control any other business entity. The Company
has furnished the Investors with copies of its Certificate of Incorporation and
Bylaws, as currently in effect, together with any amendments or Certificates of
Designation thereto as of the date hereof. The documents so furnished are true,
correct and complete copies of the existing original documents, and contain all
modifications, amendments, deletions and revocations.
(g) Financial Statements. The Company has delivered to the
Investors copies of the Company's Quarterly Reports on Form 10-Q for the quarter
ended March 31, 1996 and the Annual Report on Form 10-K for the year ended
December 31, 1995, containing audited consolidated balance sheets, statements of
income and changes in financial position for the Company for the fiscal year
ended December 31, 1995 (the "Financial Statements"). The Financial Statements
are complete and correct in all material respects, have been prepared in
accordance with generally accepted accounting principles, consistently applied,
and fairly present the financial position of the Company as of each such date
and the results of operations for each such periods then ended.
(h) Absence of Certain Developments. Since March 31, 1996,
there has been no (i) material adverse change in the condition, financial or
otherwise, of the Company or its assets, liabilities, properties, business,
operations or prospects generally, (ii) declaration, setting aside or payment of
any dividend or other distribution with respect to the capital stock of the
Company, (iii) loss, destruction or damage to any property of the Company,
whether or not insured, or the occurrence of any other event, which has or is
likely to have a Material Adverse Effect, (iv) material
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<PAGE> 5
change in the compensation to officers or directors, (v) any material
transactions with any insiders or affiliates of the Company or (vi) the entering
into or termination of any material agreements by the Company. The Company has
not failed to disclose to the Investors any material facts, or omitted to state
any material facts necessary in order to make the statements made, in light of
the circumstances under which they were made, not misleading.
(i) Absence of Undisclosed Liabilities. Except for liabilities
arising in the ordinary course of its business, since March 31, 1996 the Company
has no material accrued or contingent liability which is reasonably likely to
occur arising out of any transaction or state of facts existing prior to the
date hereof.
(j) Business. The Company has all necessary franchises,
permits, governmental licenses and other governmental rights and privileges
necessary to permit it to own its properties and to conduct its present
business, except where the failure to do so would not have a Material Adverse
Effect. The Company is not in violation of any law, regulation, authorization or
order of any public authority relevant to the ownership of its properties or the
carrying on of its present business, except where such violation would not have
a Material Adverse Effect.
(k) Non-Contravention. The execution, delivery and performance
by the Company of this Agreement and the Registration Rights Agreement does not
and will not (i) contravene or conflict with the Certificate of Incorporation,
as amended, or Bylaws of the Company, or (ii) contravene or conflict with or
constitute a violation of any provision of any law, regulation, judgment,
injunction, order or decree binding upon or applicable to the Company, or (iii)
any contract, agreement or instrument to which the Company is a party or by
which any of its properties or assets is subject, in any manner which would
materially and adversely affect the Investors' rights or their ability to
realize the intended benefits under this Agreement or the Registration Rights
Agreement, or which would have a Material Adverse Effect.
(l) Filings. The Company has filed all reports required to be
filed with the Commission under the Securities Exchange Act of 1934 (the "1934
Act"), including (i) the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995, (ii) its Quarterly Reports on Form 10-Q for its
fiscal quarters ending March 31, 1995, June 30, 1995, September 30, 1995 and
March 31, 1996, and (iii) all of its other reports (including without limitation
reports on Form 8-K, statements, schedules and registration statements filed
with the Commission since December 31, 1994). As of its filing date, no such
report or statement filed pursuant to the 1934 Act contained any untrue
statement of a material fact or omitted to state any material fact necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading.
(m) Registration Rights Agreement. The Company has entered
into the Registration Rights Agreement with each Investor as provided in Section
2(a)(ix), and, other than the registration rights described in the Schedule of
Exceptions, no other registration rights currently exist.
(n) Indemnification. The Company maintains provisions in its
Certificate of Incorporation or Bylaws, as amended, for the indemnification of
its officers and directors to the fullest extent permitted by law.
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(o) Insurance. The Company has in full force and effect fire
and casualty insurance policies, with extended coverage, sufficient in amount
(subject to reasonable deductibles) to allow it to replace any of its properties
that might be damaged or destroyed. The Company has in full force and effect
products liability insurance in amounts customary for companies similarly
situated.
(p) Tax Returns, Payments and Elections. The Company has filed
all tax returns and reports as required by law. These returns and reports are
true and correct in all material respects. The Company has paid all taxes and
other assessments due, except those contested by it in good faith which are
listed in the Schedule of Exceptions. The Company has not elected pursuant to
the Internal Revenue Code of 1986, as amended ("Code"), to be treated as a
collapsible corporation pursuant to Section 341(f) or Section 1362(a) of the
Code, nor has it made any other elections pursuant to the Code (other than
elections which relate solely to methods of accounting, depreciation or
amortization) which would have a Material Adverse Effect.
(q) Environmental and Safety Laws. The Company is not in
violation of any applicable statute, law, or regulation relating to the
environment or occupational health and safety, which could have a Material
Adverse Effect and, based on the Company's business as currently conducted, no
material expenditures are or will be required in order to comply with any such
existing statute, law, or regulation.
(r) Patents and Trademarks. To the best of its knowledge, the
Company has sufficient title and ownership of, or has obtained licenses on terms
which will not result in any Material Adverse Effect, all patents, trademarks,
service marks, trade names, copyrights, trade secrets, information, proprietary
rights and processes necessary for its business as now conducted without any
conflict with or infringement of the rights of others. There are no outstanding
material options, licenses, or agreements of any kind relating to the foregoing
other than in the ordinary course of business, nor is the Company bound by or a
party to any material options, licenses or agreements of any kind with respect
to the patents, trademarks, service marks, trade names, copyrights, trade
secrets, licenses, information, proprietary rights and processes of any other
person or entity other than in the ordinary course of business. All material
agreements pursuant to which the Company is either the licensor or licensee of
any patent, patent application, copyright, trademark, service mark, trade secret
or other intellectual property are identified on the Schedule of Exceptions. All
third party licenses referred to above are in full force and effect and neither
the Company nor any other party thereto are in material breach or default under
any provisions of any such license. The Company has not received any
communications alleging that the Company has violated or, by conducting its
business as proposed, would violate any of the patents, trademarks, service
marks, trade names, copyrights or trade secrets or other proprietary rights of
any other person or entity, the infringement or violation of which would have a
Material Adverse Effect. The Company is not aware that any of its employees are
obligated under any contract (including licenses, covenants or commitments of
any nature) or other agreement, or subject to any judgment, decree or order of
any court or administrative agency, that would interfere with the use of their
respective best efforts to promote the interests of the Company or that would
conflict with the Company's business as proposed to be conducted. The Company
does not believe it is or will be necessary to utilize any inventions of any of
its employees (or people it currently intends to hire) made prior to their
employment by the Company.
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(s) Capitalization. The authorized, issued and outstanding
Capital Stock of the Company is as set forth on the Schedule of Exceptions.
Except as set forth on the Schedule of Exceptions, there are no outstanding
rights of first refusal, preemptive rights, or other rights, options, warrants,
conversion rights, or other agreements either directly or indirectly for the
purchase or acquisition from the Company of any shares of its Capital Stock.
(t) Employee Benefit Plans. The Schedule of Exceptions
contains a true and complete list of all of the defined benefit plans of the
Company. Each defined benefit plan of the Company is in compliance with the
applicable provisions of the Employee Retirement Income Security Act ("ERISA"),
except where the noncompliance would not have a Material Adverse Effect. Each of
the Company defined benefit plans which is intended to constitute a qualified
plan within the meaning of Section 401 of the Internal Revenue Code of 1986, as
amended, is so qualified and has been determined by the Internal Revenue Service
to be so qualified. All contributions due and payable to or under the Company's
defined benefit plans have been made.
(u) Labor Relations. None of the employees of the Company is
represented by a labor union and no petition has been filed or proceedings
instituted by any employee or group of employees with any labor relations board
seeking recognition of a bargaining representative. There are no controversies
or disputes pending between the Company and its employees, except for
controversies and disputes with individual employees arising in the ordinary
course of business which have not had and will not have, individually or in the
aggregate a Material Adverse Effect.
(v) Material Contracts and Agreements. Except as set forth in
the Schedule of Exceptions, the Company does not have any material contract,
agreement, lease or other commitment, written or oral, absolute or contingent.
All material contracts, agreements and instruments to which the Company is a
party are valid, binding and in full force and effect in all material respects
without any material breach by any party thereto.
4. Representations, Warranties and Covenants of the Investor.
Each Investor hereby represents, warrants and covenants to the Company as
follows:
(a) Investment Experience. The Investor is an "accredited
investor" within the meaning of Rule 501 under the Securities Act of 1933, as
amended (the "1933 Act"), and, in the case of any Investor which is a
partnership or other legal entity, was not organized for the specific purpose of
acquiring the Preferred Stock. Such Investor has sufficient knowledge and
experience in investing in companies similar to the Company in terms of the
Company's stage of development so as to be able to evaluate the risks and merits
of its investment in the Company and it is able financially to bear the risks
thereof.
(b) Purchase for Own Account. The Investor is acquiring the
Preferred Stock for investment for its own account and not with the view to, or
for resale in connection with, any distribution thereof. Such Investor has no
present intention of selling, granting any participation in, or otherwise
distributing the same. Such Investor does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer, or grant
participations to such person or to any third person, with respect to any of the
Preferred Stock. The Investor understands that the shares of Preferred Stock
have not been registered under the 1933 Act by reason of an exemption from the
registration provisions of the 1933 Act which depends upon, among other things,
the bona fide nature of its investment intent as expressed herein.
7
<PAGE> 8
(c) Restricted Securities. The Investor understands that the
Preferred Stock, and any Common Stock issuable upon conversion thereof, may not
be sold, transferred, or otherwise disposed of without registration under the
1933 Act, or an exemption therefrom, and that in the absence of an effective
registration statement covering the Preferred Stock, and Common Stock issuable
upon conversion thereof, or an available exemption from registration under the
1933 Act, the Preferred Stock, and any Common Stock issuable upon conversion
thereof, must be held indefinitely. In the absence of an effective registration
statement covering the Preferred Stock or any Common Stock issuable upon
conversion thereof, the Investor will sell, transfer, or otherwise dispose of
the Preferred Stock, and any Common Stock issuable upon conversion thereof, only
in a manner consistent with its representations and agreements set forth herein.
(d) Information. The Investor believes it has received all of
the information it considers necessary or appropriate for deciding whether to
purchase the Preferred Stock. The Investor further represents that it has had an
opportunity to ask questions and receive answers from the Company regarding the
terms and conditions of the offering of the Preferred Stock. The foregoing,
however, does not limit or modify the representations and warranties of the
Company in Section 3 of this Agreement or the right of the Investor to rely
thereon.
(e) Legend. It is understood that the certificates evidencing
the Preferred Stock, and any Common Stock issued upon conversion thereof, may
bear substantially the following legends:
(i) THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT
TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE
144 OF SUCH ACT.
(ii) Any legend required by the laws of the State of
California or any other applicable jurisdiction.
(f) Voting. The Investor hereby agrees to vote his, her or its
voting capital stock of the Company for any proposal to authorize the issuance
and authorization of the Preferred Stock and the conversion thereof into shares
of Common Stock.
5. Covenants of the Company. Without limiting any other
covenants and provisions hereof, the Company covenants and agrees that:
(a) The Company will provide each Investor with copies of the
Company's Quarterly Reports on Form 10-Q, Annual Reports on Form 10-K and Annual
Reports to Stockholders within twenty (20) days of the filing of such documents
with the Commission; provided, however, that such obligation shall terminate as
to any Investor upon the earlier of (i) the sale, disposition or conversion into
Common Stock of all of such Investor's Preferred Stock or (ii) such time as such
Investor holds less than 500 shares of Preferred Stock and/or an equivalent
number of shares of Common Stock which are issuable upon conversion of 500
shares of Preferred Stock.
8
<PAGE> 9
(b) The Company will permit each Investor who holds at least
500 shares of Preferred Stock and/or an equivalent number of shares of Common
Stock which are issuable upon conversion of 500 shares of Preferred Stock, at
such Investor's expense, to visit and inspect the Company's properties, to
examine its books, accounts and records and to discuss the Company's affairs,
finances and accounts with its officers, all at such reasonable times as may be
requested by the Investor; provided, however, that the Company shall not be
obligated pursuant to this Section 5(b) to provide access to any information
which it reasonably considers to be a trade secret or similar confidential
information and, provided further, that all obligations under this Section 5(b)
shall terminate as to any Investor upon the earlier of (i) the sale, disposition
or conversion into Common Stock of all of such Investor's Preferred Stock or
(ii) such time as such Investor holds less than 500 shares of Preferred Stock.
(c) The Company will maintain provisions in its Certificate of
Incorporation or Bylaws for the indemnification of its officers and directors to
the fullest extent permitted by law for so long as any representative of any of
the Investors serves on the Company's Board of Directors.
(d) The Company will use its best efforts to obtain and keep
directors' and officers' liability insurance in the amount of at least
$3,000,000 if such coverage is available at commercially reasonable rates. Such
coverage will be kept in place for so long as any representative of any of the
Investors serves on the Company's Board of Directors.
(e) The Company will use the proceeds from the sale of the
Preferred Stock for repayment of existing indebtedness in the approximate amount
of twenty-five percent (25%) of the proceeds, and the remainder for general
corporate purposes.
(f) The Company shall include in its proxy materials for its
next scheduled annual meeting of stockholders, a proposal to authorize the
issuance of the Preferred Stock, and the conversion thereof into shares of
Common Stock to satisfy the requirements of the Bylaws of the National
Association of Securities Dealers, Inc.
6. Miscellaneous.
(a) No Waiver: Cumulative Remedies. No failure or delay on the
part of the Investors or the Company in exercising any right, power or remedy
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy hereunder.
The remedies herein provided are cumulative and not exclusive of any remedies
provided by law.
(b) Amendments, Waivers and Consents. Except as otherwise
expressly provided in this Agreement, changes in or additions to this Agreement
may be made, and compliance with any covenant or provision herein or therein set
forth may be omitted or waived (either generally or in a particular instance and
either retroactively or prospectively), so long as the Company and the holders
of at least a majority of the then outstanding shares of Preferred Stock issued
hereunder and/or an equivalent number of then outstanding shares of Common Stock
which have been issued upon conversion of shares of Preferred Stock which are
held by the Investors and/or transferees of an Investor other than pursuant to a
public sale, so agree in writing. Any amendment or waiver effected in accordance
with this paragraph shall be binding upon each Investor and their transferees.
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<PAGE> 10
Any waiver or consent may be given subject to satisfaction of conditions stated
therein and any waiver or consent shall be effective only to the extent
expressly set forth therein.
(c) Addresses for Notices. All notices, requests, demands and
other communications provided for hereunder to be sent to the Investors shall be
in writing (including telegraphic communication) and mailed, telecopied or
delivered to the applicable party at the addresses indicated on Schedule A
hereto. Any such notices, requests, demands or other communications to the
Company shall be sent to:
The Cerplex Group, Inc.
1382 Bell Avenue
Tustin, California 92680
Attention: Bruce D. Nye
with a copy to:
Brobeck, Phleger & Harrison
4675 MacArthur Court, Suite 1000
Newport Beach, California 92660-1836
Attention: Frederic A. Randall, Jr., Esq.
Any party to this Agreement may change its address by written notice to the
other party complying as to delivery with the terms of this Section. All such
notices, requests, demands and other communications shall, when delivered by
courier, mailed or telecopied, respectively, be effective when delivered to the
courier, deposited in the mails or sent on the telecopier, respectively,
addressed as aforesaid.
(d) Fees, Costs and Expenses. Irrespective of whether the
Closing is effected, the Company shall pay all costs and expenses that it incurs
with respect to the negotiation, execution, delivery and performance of this
Agreement. If the Closing is effected, the Company shall, at the Closing,
reimburse the reasonable fees of Stradling, Yocca, Carlson & Rauth, special
counsel for the Investors, not to exceed an aggregate of $25,000, and shall upon
receipt of a bill therefor, reimburse the out of pocket expenses of such
counsel. If any action at law or in equity is necessary to enforce or interpret
the terms of this Agreement or the Certificate of Designation, the prevailing
party shall be entitled to reasonable attorney's fees, costs and necessary
disbursements in addition to any other relief to which such party may be
entitled.
(e) Binding Effect, Assignment. Except as otherwise
specifically provided for herein, the terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective successors and
assigns of the parties (including transferees of any of the shares sold
hereunder). Nothing in this Agreement, express or implied, is intended to confer
upon any party other than the parties hereto or their respective successors and
assigns any rights, remedies, obligations, or liabilities under or by reason of
this Agreement, except as expressly provided in this Agreement.
(f) Survival of Representations and Warranties. All
representations and warranties made in this Agreement shall survive the
execution and delivery hereof, the Closing
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<PAGE> 11
hereunder, and any examination made by the Investors for a period of eighteen
(18) months following the Closing.
(g) Prior Agreements. This Agreement constitutes the entire
agreement between the parties and supersedes any prior understandings or
agreements concerning the subject matter hereof.
(h) Severability. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision.
(i) Public Disclosure. The Company shall consult with the
holders of a majority of the outstanding Preferred Stock prior to making the
initial public disclosure concerning the transactions contemplated hereby.
(j) Governing Law. This Agreement shall be governed by and
construed in accordance with, the laws of the State of California without giving
effect to principles of conflict of laws.
(k) Headings. Section and subsection headings in this
Agreement are included herein for convenience of reference only and shall
not-constitute a part of this Agreement for any other purpose.
(l) Counterparts. This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument, and either of the parties hereto may execute this Agreement by
signing any such counterpart.
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<PAGE> 12
IN WITNESS WHEREOF, the Company and the Investors have caused this
Agreement to be executed by their respective officers thereunto duly authorized,
as of the date first above written.
THE CERPLEX GROUP, INC.
By:
------------------------------------
Title:
---------------------------------
SPROUT GROWTH II, L.P.
By: DLJ Capital Corporation
Its: General Managing Partner
By:
--------------------------------
Robert Finzi, Attorney-in-Fact
DLJ CAPITAL CORPORATION
By:
------------------------------------
SCORPION OFFSHORE INVESTMENT
FUND
By:
------------------------------------
Title:
---------------------------------
THE & TRUST
By:
------------------------------------
Title:
---------------------------------
12
<PAGE> 13
CHESTNUT PACIFIC LTD. PARTNERS
By:
------------------------------------
Title:
---------------------------------
STANDARD GLOBAL EQUITY PARTNERS
L.P.
By:
------------------------------------
Title:
---------------------------------
STANDARD PACIFIC CAPITAL
OFFSHORE FUND LTD.
By:
------------------------------------
Title:
---------------------------------
COMMON FUND EQUITY FUND
By:
------------------------------------
Title:
---------------------------------
----------------------------------------
MALCOLM FAIRBAIRN
----------------------------------------
EMILY FAIRBAIRN
----------------------------------------
ANDREA MARTIN
----------------------------------------
NITIN T. MEHTA
13
<PAGE> 14
PEAK INVESTMENT LIMITED
PARTNERSHIP
By:
------------------------------------
Title:
---------------------------------
PLEIADES INVESTMENT PARTNERS
By:
------------------------------------
Title:
---------------------------------
WHITMAN PARTNERS, L.P.
By:
------------------------------------
Title:
---------------------------------
MAHUMA N.V.
By:
------------------------------------
Title:
---------------------------------
14
<PAGE> 15
SCHEDULE A
SCHEDULE OF INVESTORS
<TABLE>
<CAPTION>
Shares of Series B Aggregate Purchase
Investor Preferred Stock Price
-------- ------------------ ------------------
<S> <C> <C>
Sprout Growth II, L.P.
3000 Sand Hill Road
Building 4, Suite 270
Menlo Park, CA 94025
Attn: Robert Finzi 2,269 $ 2,269,000
DLJ Capital Corporation
3000 Sand Hill Road
Building 4, Suite 270
Menlo Park, CA 94025
Attn: Robert Finzi 231 $ 231,000
Scorpion Offshore Investment Fund
c/o Standard Pacific Capital LLC
600 California Street, 18th Floor
San Francisco, CA 94108
Attn: Daniel S. Martin 1,575 $ 1,575,000
The & Trust
c/o Standard Pacific Capital LLC
600 California Street, 18th Floor
San Francisco, CA 94108
Attn: Daniel S. Martin 103 $ 103,000
Chestnut Pacific Ltd. Partners
c/o Standard Pacific Capital LLC
600 California Street, 18th Floor
San Francisco, CA 94108
Attn: Daniel S. Martin 183 $ 183,000
Standard Global Equity Partners L.P.
c/o Standard Pacific Capital LLC
600 California Street, 18th Floor
San Francisco, CA 94108
Attn: Daniel S. Martin 373 $ 373,000
Standard Pacific Capital Offshore Fund Ltd.
c/o Standard Pacific Capital LLC
600 California Street, 18th Floor
San Francisco, CA 94108
Attn: Daniel S. Martin 157 $ 157,000
</TABLE>
15
<PAGE> 16
<TABLE>
<S> <C> <C>
Common Fund Equity Fund
c/o Standard Pacific Capital LLC
600 California Street, 18th Floor
San Francisco, CA 94108
Attn: Daniel S. Martin 109 $ 109,000
Malcolm and Emily Fairbairn
16117 Sunset Boulevard, Apt. 203
Pacific Palisades, CA 90272 100 $ 100,000
Andrea Martin
84 Willowbrook Road
Longmeadow, MA 01106 10 $ 10,000
Nitin T. Mehta
58 Greenoaks Drive
Atherton, CA 94027 200 $ 200,000
Peak Investment Limited Partnership
One Financial Center, Suite 1600
Boston, MA 02111
Attn: Peter H. Kamin 1,000 $ 1,000,000
Pleiades Investment Partners
c/o Peak Investment Limited Partnership
One Financial Center, Suite 1600
Boston, MA 02111
Attn: Peter H. Kamin 300 $ 300,000
Whitman Partners, L.P.
c/o Whitman Capital
One Sansome Street, 18th Floor
San Francisco, CA 94104
Attn: Douglas F. Whitman 1,332 $ 1,332,000
Mahuma N.V.
c/o Whitman Capital
One Sansome Street, 18th Floor
San Francisco, CA 94104
Attn: Douglas F. Whitman 58 $ 58,000
TOTALS: 8,000 $ 8,000,000
===== ===========
</TABLE>
16
<PAGE> 17
SCHEDULE B
SCHEDULE OF EXCEPTIONS
<PAGE> 18
EXHIBIT A
(FOURTH AMENDMENT TO REGISTRATION RIGHTS AGREEMENT)
<PAGE> 19
EXHIBIT B
(CERTIFICATE OF DESIGNATION)
<PAGE> 20
EXHIBIT C
(LEGAL OPINION OF BROBECK, PHLEGER & HARRISON)
<PAGE> 1
Exhibit 4.18
EXECUTION COPY
FOURTH AMENDMENT TO
THE REGISTRATION RIGHTS AGREEMENT
THIS FOURTH AMENDMENT TO THE REGISTRATION RIGHTS AGREEMENT (this
"Amendment") is made effective as of the 10th day of June, 1996, by and among
The Cerplex Group, Inc., a Delaware corporation (the "Company"), the investors
listed on Schedule A hereto, each of which is herein referred to as an
"Investor" and collectively as the "Investors," the security holders of the
Company listed on Schedule B hereto, each of which is herein referred to as a
"Stockholder" and collectively as the "Stockholders," the banks listed on
Schedule C hereto, each of which is herein referred to as a "Bank Holder" and
collectively as the "Bank Holders" and each of the parties listed on Schedule D
hereto, each of which is herein referred to as a "Series B Preferred Holder" and
collectively as the "Series B Preferred Holders."
RECITALS:
A. The Company, the Investors, the Stockholders, and certain other
investors and stockholders entered into a Registration Rights Agreement dated
November 19, 1993 (as in effect prior to the effectiveness of this Amendment,
the "Existing Registration Rights Agreement").
B. Pursuant to a Waiver and Amendment Agreement, dated as of April
15, 1996, among The Northwestern Mutual Life Insurance Company, John Hancock
Mutual Life Insurance Company and North Atlantic Smaller Companies Investment
Trust PLC (each individually, a "Warrant Group Holder" and collectively, the
"Warrant Group Holders") and the Company, and a Warrant Agreement dated as of
April 15, 1996, among the Warrant Group Holders and the Company, the Company
issued one million (1,000,000) warrants (the "1996 Warrants") to purchase Common
Stock (as such term is defined in the Existing Registration Rights Agreement) to
the Warrant Group Holders.
C. Pursuant to a First Amendment to Credit Agreement and Limited
Waiver (the "Bank Amendment and Waiver Agreement"), dated as of April 15, 1996,
among the Company, Wells Fargo Bank, National Association, as Administrative
Agent, and the Bank Holders and a Warrant Agreement (the "Bank Warrant
Agreement"), dated as of April 15, 1996, among the Company and the Bank Holders,
the Company issued one hundred twenty-five thousand (125,000) warrants (the
"Bank Warrants") to purchase Common Stock (as such term is defined in the
Existing Registration Rights Agreement) to the Bank Holders.
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EXECUTION COPY
D. Pursuant to the Third Amendment to the Existing Registration
Rights Agreement, dated as of April 15, 1996, by and among the Company, the
Investors, the Stockholders and the Bank Holders, the shares of Common Stock
issuable upon exercise of the Bank Warrants and the 1996 Warrants have been made
subject to the Existing Registration Rights Agreement.
E. The Company and the Series B Preferred Holders (as defined
herein) are parties to the Stock Purchase Agreement of even date herewith (the
"Series B Agreement") pursuant to which Series B Preferred Holders have
purchased an aggregate of 8,000 shares of the Company's Series B Preferred
Stock; and in order to induce the Company and the Series B Preferred Holders to
enter into the Series B Agreement, the Series B Preferred Holders and the
Company hereby agree that the Existing Registration Rights Agreement as hereby
amended shall govern the rights of the Series B Preferred Holders to cause the
Company to register shares of Common Stock issuable to the Series B Preferred
Holders upon the conversion of the Series B Preferred Stock and certain other
matters set forth herein.
F. The parties to the Existing Registration Rights Agreement wish to
amend the terms thereof to (i) permit the Bank Holders certain additional rights
hereunder and (ii) permit the Series B Preferred Holders certain rights.
AGREEMENT:
NOW THEREFORE, for valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. DEFINED TERMS
Terms used herein without definition shall have the meaning given
such terms in the Existing Registration Rights Agreement. The terms specified
below are hereby incorporated, as applicable, into the Existing Registration
Rights Agreement. As used in this Amendment, the following terms have the
respective meanings specified below:
"ADDITIONAL SHARES" -- has the meaning given such term in Section
1.2(b) of the Existing Registration Rights Agreement, as amended
hereby
"AMENDMENT, THIS" -- means this Fourth Amendment to the Existing
Registration Rights Agreement
"DEFICIENCY" -- has the meaning given such term in Section 1.2(f) of
the Existing Registration Rights Agreement, as amended hereby
2
<PAGE> 3
EXECUTION COPY
"EFFECTIVENESS PERIOD" -- has the meaning given such term in Section
1.19(a) of the Existing Registration Rights Agreement, as amended
hereby
"EXCESS SHARES" -- has the meaning given such term in Section 1.2(f)
of the Existing Registration Rights Agreement, as amended hereby
"EXISTING REGISTRATION RIGHTS AGREEMENT" -- Recital A
"NASD" means the National Association of Securities Dealers, Inc.
"NON-INITIATING HOLDER" -- has the meaning given such term in
Section 1.2(b) of the Existing Registration Rights Agreement, as
amended hereby
"NON-REQUESTING HOLDER" -- has the meaning given such term in
Section 1.12(f) of the Existing Registration Rights Agreement, as
amended hereby
"SELLING GROUP" -- shall have the meaning given such term in Section
1.6
"SERIES B AGREEMENT" -- Recital E
"SHELF REGISTRATION" -- has the meaning given such term in Section
1.19(a) of the Existing Registration Rights Agreement, as amended
hereby
"SHORTAGE" -- shall have the meaning given such term in Section
1.2(b) of the Existing Registration Rights Agreement, as amended
hereby
"SHORTFALL" -- has the meaning given such term in Section 1.2(b) of
the Existing Registration Rights Agreement, as amended hereby
"SPROUT" -- means (a) (x) The Sprout Group, and any affiliates
thereof, Sprout Growth II, L.P., or (y) DLJ Capital Corporation or
any subsidiaries or affiliates thereof, as the case may be, for so
long as it holds any warrants on the date hereof issued pursuant to
the Existing Registration Rights Agreement (the "Original Sprout
Warrants") or any Common Stock issued pursuant to the exercise of
such Warrants and (b) any successors thereto or direct or successive
transferees thereof; it being the intention of the parties hereto
that any successive holder of a warrant, or the Common Stock issued
upon the exercise of such warrant, which warrant derived from an
Original Sprout Warrant, shall be included in this definition,
provided that any holder of shares of Common Stock issued upon the
exercise of any Original Sprout Warrant or any warrant that derived
from such Original Sprout Warrant which shares have been, or derive
from shares that have been, publicly sold pursuant to a registration
statement filed under the Act or
3
<PAGE> 4
EXECUTION COPY
pursuant to Rule 144 shall, to the extent of its holdings of such
shares, be excluded from this definition. Rights under this
Agreement of successors, assigns and transferees of Sprout Holders
are subject to compliance with the requirements of Section 1.13 of
the Existing Registration Rights Agreement.
SECTION 2. AMENDMENTS
2.1 AMENDMENTS TO SECTION 1.1 OF THE EXISTING REGISTRATION RIGHTS
AGREEMENT
(A) Section 1.1 of the Existing Registration Rights Agreement is
hereby amended by amending and restating the following definition, in its
entirety, as set forth below:
(Q) The term "Registrable Securities" means
(i) the Common Stock currently issued to the Investors and
the Stockholders,
(ii) all Common Stock issued or issuable to the Investors,
the Stockholders, the Bank Holders and the Series B Preferred
Holders upon exercise or conversion, as the case may be, of the
Warrants, the Bank Warrants, other warrants, options or the Series B
Preferred Stock held by them, and
(iii) all Common Stock issued (or issuable upon the exercise
or conversion, as the case may be, of any Warrant, any Bank Warrant,
any other warrant, option or the Series B Preferred Stock, any right
or any other security, which Warrant, Bank Warrant, Series B
Preferred Stock, other warrant, right, any other security or option
is itself issued) as a dividend or other distribution with respect
to, or in exchange for or in replacement of, the shares of Common
Stock referenced in (i) and (ii) above,
excluding in all cases, however, any Registrable Securities sold by
a person in a transaction in which his rights under this Section 1
are not assigned.
(B) The following definitions are hereby added to Section 1.1 of the
Existing Registration Rights Agreement so as to preserve the alphabetical
ordering of the definitions set forth therein.
The term "Series B Preferred Holders" means (a) each of
the entities, or persons, as the case may be, set forth on Schedule
D hereto, for so long as they hold any shares of Series B Preferred
Stock or any Common Stock issued pursuant to the conversion of such
shares and (b) any successors thereto or direct or successive
transferees thereof; it being the intention of the parties hereto
that any successive holder of Series B Preferred
4
<PAGE> 5
EXECUTION COPY
Stock, or the Common Stock issued upon the conversion of such Series
B Preferred Stock, shall be included in this definition, provided
that any Holder of shares of Common Stock issued upon the conversion
of any share of Series B Preferred Stock that has been, or derives
from any share that has been, publicly sold pursuant to a
registration statement filed under the Act or pursuant to Rule 144
shall, to the extent of its holdings of such shares, be excluded
from this definition.
Any decisions to be made by the Series B Preferred
Holders shall be made upon a vote of a majority in interest of
Series B Preferred Holders on the basis of the number of shares of
Common Stock issuable upon conversion of Series B Preferred Stock
and the number of shares of such Common Stock then held. Rights of
successors, assigns and transferees of Series B Preferred Holders
are subject to compliance with the requirements of Section 1.13.
The term "Series B Preferred Stock" means that certain
series of Preferred Stock designated Series B, having par value of
$0.001 per share, enjoying the rights and privileges set forth in
that Certificate of Designation of the Company as in effect on the
date hereof.
2.2 AMENDMENTS TO SECTION 1.2
(A) Section 1.2(a) of the Existing Registration Rights Agreement is
hereby amended by deleting the word "and" at the end of clause (ii), by deleting
the period at the end of clause (iii) and replacing it with a semi-colon, and by
adding the following clauses after clause (iii):
(iv) the Bank Holders may request one (1) registration under this
Section 1.2; and
(v) the Series B Preferred Holders may request one (1)
registration under this Section 1.2.
(B) Section 1.2(b) of the Existing Registration Rights Agreement is
hereby amended to delete the first full paragraph and such paragraph is restated
in its entirety as follows:
If the Initiating Demand Holder in respect of any
registration requested under this Section 1.2 intends to distribute
the Registrable Securities covered by its request by means of an
underwriting, it shall so advise the Company as a part of its
request made pursuant to subsection 1.2(a) and the Company shall
include such information in the written notice referred to in
subsection 1.2(a)(A). The underwriter will be one or more
underwriting firms of recognized national standing selected, after
consultation with the Initiating Demand Holder, by the Company and
shall be acceptable to the Initiating
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EXECUTION COPY
Demand Holder, which shall not unreasonably withhold its acceptance
of such underwriters, provided that any Original Warrantholder,
Independent Equity Group Holder or Series B Preferred Holder that
constitutes, in whole or part, the Initiating Demand Holder may
require the managing underwriter so selected above to invite not
more than one (1) underwriter selected by such Original
Warrantholder, Independent Equity Group Holder or Series B Preferred
Holder to join the selling syndicate in respect of such
registration. In such event, the right of any Holder to include his
Registrable Securities in such registration shall be conditioned
upon such Holder's participation in such underwriting and inclusion
in the underwriting of the Registrable Securities of such Holder in
such registration (unless otherwise mutually agreed by the
Initiating Demand Holder and such Holder) to the extent provided
herein. All Holders proposing to distribute their securities through
such underwriting shall (together with the Company as provided in
subsection 1.4(e)) enter into an underwriting agreement in customary
form with the underwriter or underwriters selected for such
underwriting, all as contemplated by subsection 1.4(e).
Notwithstanding any other provision of this Section 1.2, if the
underwriter advises the Initiating Demand Holder that the number of
securities requested to be included in such registration exceeds the
number that can be sold in such offering within a price range
acceptable to the Initiating Demand Holder (such advice to state the
basis of such opinion and the approximate number of shares of
Registrable Securities that may be included in such offering without
such effect), then the Initiating Demand Holder shall so advise all
Holders of Registrable Securities which would otherwise be included
in such registration pursuant hereto, and the number of shares of
Registrable Securities that may be so included shall be allocated as
follows:
(i) All of the Registrable Securities of the
Initiating Demand Holder and each member (or who derived
their ownership of Registrable Securities after the date
hereof from such Holder) of the applicable group (as set
forth in Section 1.2(a)(i) through and including
1.2(a)(v) (a "group") to which such Holder belongs,
shall first be included in such registration; provided,
however, in the event the number of Registrable
Securities requested to be included in such Registration
by the Holders in such group exceeds the number of
shares which may be included in such registration, such
allocation shall be made among the Holders of such group
pro rata based upon the number of Registrable Securities
owned by each such Holder. For the purposes of
determining to which group Sprout belongs any Original
Sprout Warrant received, or the Common Stock received
upon the exercise thereof, shall, if applicable, be
included in the Independent Equity Group and any shares
of Series B Preferred Stock, or Common Stock received
upon the conversion thereof, shall be included, if
applicable, with those of the Series B Preferred
Holders; and
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(ii) in the event that the number of
Registrable Securities includable in such registration
exceeds the number of Registrable Securities includable
therein pursuant to the foregoing clause (i) (such
securities "Additional Shares"), then in such case, such
Additional Shares shall be allocated to the Holders of
Registrable Securities which are not members of the
group to which the Initiating Demand Holder belongs but
which have requested inclusion in the registration (the
"Non- Initiating Holders") on a pro rata basis (as
nearly as practicable) based on the number of
Registrable Securities held by each. In the event this
clause (ii) is applicable, and for purposes of effecting
the calculations provided for herein, the number of
Registrable Securities owned by all of the Primary
Stockholders as a group shall be deemed to be equal to
the number of Registrable Securities owned by the
Investors as a group (not counting for this purpose any
Investor that is a member of the group to which the
Initiating Demand Holder belongs and any Common Stock
issued, or issuable, upon conversion of the Series B
Preferred Stock owned by Sprout). As such, each Primary
Stockholder who is a Non- Initiating Holder shall be
deemed for the purposes of the computations in this
paragraph to own a proportionately smaller number of
shares. In addition, to the extent the Registrable
Securities in respect of the 1996 Warrants result in an
allocation of Additional Shares to the Independent
Equity Group under this clause (ii) that is less than it
would have been if there had been no issuance of 1996
Warrants (such deficiency is referred to herein as the
"Shortfall"), the Primary Stockholders will be deemed,
for purposes of this clause (ii), to have assigned to
the Independent Equity Group a number of Additional
Shares that would have otherwise been allocated to such
Primary Stockholders equal to 50% of such Shortfall.
The number of shares of Registrable Securities to be included in
such underwriting shall not be reduced unless all other securities
(including, without limitation, any securities of the Company or any
other person then included in such registration, as contemplated by
the immediately succeeding sentence) are first entirely excluded
from the underwriting. The Company will not register securities for
sale for the account of any person other than Holders of Registrable
Securities participating in such registration and the Company in
connection with any registration pursuant to this Section 1.2 unless
it shall have obtained the prior written consent of the Initiating
Demand Holder or unless the requirements of Section 1.14 have been
fully satisfied in respect of such other securities. Upon receipt of
such consent, the Company will notify each Holder of Registrable
Securities requesting participation in such registration of such
consent.
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(c) Section 1.2(d) of the Existing Registration Rights Agreement is
hereby amended so that clause "(ii)" shall be renumbered as clause "(iii)" and
the following clause shall be added as clause "(ii)":
A registration statement effected pursuant to Section
1.19 shall not preclude a request or a demand under Section 1.2 or a
registration, public offering or distribution in respect thereof.
The Holders acknowledge and agree that upon the receipt from a
Holder of a request under Section 1.2, no other request under this
Section 1.2 or Section 1.12 need be honored by the Company pending
the discharge or withdrawal of such request, and the first such
request under this Section 1.2 or Section 1.12, as the case may be,
shall preempt all other such requests until such time as the
procedures and processes that commence upon the receipt of such
request shall have been completed in a manner consistent with the
intent hereof or such request is withdrawn.
2.3 AMENDMENT TO SECTION 1.3 OF THE EXISTING REGISTRATION RIGHTS
AGREEMENT
Section 1.3 of the Existing Registration Rights Agreement is hereby
amended to add "(i)" before the word "If" in the first sentence of Section 1.3
and to add the following paragraph as Section 1.3(b):
(b) In the event that the Company has filed,
or files, a registration statement within thirty (30) days of
receipt of a notice under Section 1.2 or 1.12, pursuant to this
Section 1.3, then the Company shall not be required to honor any
demand under Section 1.2 or 1.12 until the earlier of (i) one
hundred twenty days following the date of such notice or (ii) such
date as the Company is no longer using its best efforts to effect
such offering (including, without limitation, the date the Company
withdraws such registration statement).
2.4 AMENDMENT TO SECTION 1.4(E) OF THE EXISTING REGISTRATION RIGHTS
AGREEMENT
Section 1.4(e) of the Existing Registration Rights Agreement is
hereby amended to add ", Bank Holders or Series B Preferred Holders" after the
word "Investors" but before the word "shall" in the last sentence of Section
1.4(e).
2.5 AMENDMENT TO SECTION 1.6 OF THE EXISTING REGISTRATION RIGHTS
AGREEMENT
Section 1.6 of the Existing Registration Rights Agreement is hereby
amended so that all of the words from "All expenses" up to, but not including
"provided, however," are deleted and replaced with the following:
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All expenses other than underwriting discounts and
commissions incurred in connection with registrations, filings or
qualifications pursuant to Section 1.2, Section 1.12 and Section
1.19, including (without limitation) all registration, filing and
qualification fees of the Act and any other securities or Blue Sky
laws, printers and accounting fees, fees and disbursements of
counsel for the Company and the Stockholders and the reasonable and
customary fees and disbursements of one counsel for the selling
Investors, Bank Holders and Series B Preferred Holders
(collectively, the "Selling Group") (excluding, however, any fees
and disbursements for special counsel for the Holders other than
such one counsel for the Selling Group; the Selling Group shall
appoint its counsel by a two-thirds vote of the Registrable
Securities of those Holders who are members of the Selling Group
then participating in such registration) shall be borne and paid by
the Company (which right in favor of the Holders is assignable by
the Holders as provided in Section 1.13);
2.6 AMENDMENT TO SECTION 1.7 OF THE EXISTING REGISTRATION RIGHTS
AGREEMENT
Section 1.7 of the Existing Registration Rights Agreement is hereby
amended so that the words "selling Investors" are deleted and replaced with the
words "Selling Group" and the words "such Investors" are replaced with "members
of the Selling Group."
2.7 AMENDMENT TO SECTION 1.8 OF THE EXISTING REGISTRATION RIGHTS
AGREEMENT
Section 1.8 of the Existing Registration Rights Agreement shall be
deleted and restated in its entirety as follows:
1.8 Underwriting Requirements.
(a) In connection with any offering involving an underwriting
of securities of the Company referred to in Section 1.3, the Company
shall not be required under said Section 1.3 to include any of the
Holders' Registrable Securities in such underwriting unless such
Holders accept the terms of the underwriting as agreed upon between
the Company and the underwriters selected by it (or by other persons
entitled to select the underwriters), and then only in such quantity
as such underwriters determine in their sole discretion will not
jeopardize the success of the offering by the Company. If the total
amount of securities (other than securities to have been originally
offered under such offering by the Company for its own account or
for the account of persons other than the Holders) requested by
holders of such securities (including Registrable Securities
requested by the Holders) to be included in such offering (with
respect to any such offering, the "piggyback securities") exceeds
the amount of securities that the underwriters determine in their
sole discretion can be sold without jeopardizing the success of the
sale of such originally offered securities, then the Company shall
be
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required to include in such offering only that number of such
piggyback securities, including Registrable Securities, which the
underwriters reasonably determine in their sole discretion will not
jeopardize the success of the sale of said originally offered
securities (the piggyback securities to be so included in such
offering to be apportioned among the Holders (or who derived their
ownership of Registrable Securities after the date hereof from
Holders) on a pro rata basis, in proportion (as nearly as
practicable) to the amount of Registrable Securities owned by each
such Holder to the piggyback securities, provided, however, that for
purposes of such determination, the number of Registrable Securities
owned by all of the Primary Stockholders as a group shall be deemed
to be equal to the number of Registrable Securities owned by the
Investors as a group (not counting for this purpose any Series B
Preferred Stock, or Common Stock issued or issuable upon the
conversion thereof, owned by Sprout). As such, each Primary
Stockholder shall be deemed for the purposes of such calculations to
own a proportionately smaller number of shares. In addition, to the
extent the Registrable Securities in respect of the 1996 Warrants
result in an allocation of piggyback securities to the Independent
Equity Group under this Section 1.8 that is less than it would have
been if there had been no issuance of 1996 Warrants (such deficiency
is referred to herein as the "Shortage"), the Primary Stockholders
will be deemed, for purposes of this Section 1.8, to have assigned
to the Independent Equity Group a number of piggyback securities
that would have otherwise been allocated to such Primary
Stockholders equal to 50% of such Shortage.
2.8 AMENDMENT TO SECTION 1.10(A) OF THE EXISTING REGISTRATION RIGHTS
AGREEMENT
Section 1.10(a) of the Existing Registration Rights Agreement is
amended so that the phrase ", Bank Holders or Series B Preferred Holders" is
included in the first parenthetical after the word "Investors" and before the
comma which follows the word "Investors."
2.9 AMENDMENT TO SECTION 1.12 OF THE EXISTING REGISTRATION RIGHTS
AGREEMENT
(a) Section 1.12(a) of the Existing Registration Rights Agreement is
hereby amended and restated in its entirety as follows:
1.12 Form S-3 Registration. (a) One or more Holders (such
Holders are, with respect to each request made by them under this
Section 1.12, referred to collectively as a "Requesting Holder") may
make written requests of the Company to effect a registration on
Form S-3 and any related qualification or compliance with respect to
all or a part of the Registrable Securities owned by such Requesting
Holder, provided that such Requesting Holder belongs to one or more
of the following: the Northwestern Group Holders, the Hancock Group
Holders, the Independent Equity Group Holders, the Primary
Stockholders, Bank Holders or Series B Preferred Holders.
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(b) Section 1.12 of the Existing Registration Rights Agreement is
hereby amended to include the following as "Section 1.12(g)":
A registration statement effected pursuant to Section
1.19 shall not preclude a request or a demand under Section 1.12 or
a registration, public offering or distribution in respect thereof.
The Holders acknowledge and agree that upon the receipt from a
Holder of a request under Section 1.12, no other request under this
Section 1.12 or Section 1.2 need be honored by the Company pending
discharge or withdrawal of such request, and the first such request
under this Section 1.12 or Section 1.2, as the case may be, shall
preempt all other such requests until such time as the procedures
and processes that commence upon the receipt of such request shall
have been completed in a manner consistent with the intent hereof or
such request is withdrawn.
(c) Section 1.12(b)(ii)(D) of the Existing Registration Rights
Agreement is amended to add the following language after "Section 1.12" and
before the ";
provided, however, that in no event shall a registration effected
pursuant to Section 1.12(a) be counted for the purposes of this
Section 1.12(b)(ii)(D) if such firmly underwritten registration
statement on Form S-3 was initiated by a Bank Holder or a Series B
Preferred Holder as a "Requesting Holder" under Section 1.12.
(d) Section 1.12(b)(ii)(E) of the Existing Registration Rights
Agreement is hereby amended so that "five (5)" is deleted and replaced with
"seven (7)."
(e) Section 1.12(b)(ii)(F) of the Existing Registration Rights
Agreement shall be amended:
(F) if the Company has, within the 90-day period preceding the
date of such request, already effected an underwritten registration
statement.
(f) Section 1.12(f)(i) and (ii) are hereby amended and restated in
their entirety as follows:
(i) All of the Registrable Securities of the Requesting Holder
and each member (or who derived their ownership of Registrable
Securities after the date hereof from such Holder) of the applicable
group (as set forth in Section 1.12(a) (a "group")) to which such
Holder belongs, shall first be included in such registration;
provided, however, in the event the number of Registrable Securities
requested to be included in such Registration by the Holders in such
group exceeds the number of shares which may be included in such
registration, such allocation shall be made among the Holders of
such group pro rata based upon the number of Registrable Securities
owned by each such
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Holder. For the purposes of determining to which group Sprout
belongs any Original Sprout Warrant received, or the Common Stock
received upon the exercise thereof, shall, if applicable, be
included in Independent Equity Group and any shares of Series B
Preferred Stock, or Common Stock received upon the conversion
thereof, shall be included, if applicable, with those of the Series
B Preferred Holders; and
(ii) in the event that the number of Registrable
Securities includable in such registration exceeds the number of
Registrable Securities includable therein pursuant to the foregoing
clause (i) (such securities "Excess Shares"), then in such case,
such Excess Shares shall be allocated to the Holders of Registrable
Securities which are not members of the group to which the
Requesting Holder belongs but which have requested inclusion in the
registration (the "Non-Requesting Holders") on a pro rata basis (as
nearly as practicable) based on the number of Registrable Securities
held by each. In the event this clause (ii) is applicable, and for
purposes of effecting the calculations provided for herein, the
number of Registrable Securities owned by all of the Primary
Stockholders as a group shall be deemed to be equal to the number of
Registrable Securities owned by the Investors as a group (not
counting for this purpose any Investor that is a member of the group
to which the Requesting Holder belongs and any Common Stock issued,
or issuable, upon conversion of the Series B Preferred owned by
Sprout). As such, each Primary Stockholder who is a Non-Requesting
Holder shall be deemed for the purposes of the computations in this
paragraph to own a proportionately smaller number of shares. In
addition, to the extent the Registrable Securities in respect of the
1996 Warrants result in an allocation of Excess Shares to the
Independent Equity Group under this clause (ii) that is less than it
would have been if there had been no issuance of 1996 Warrants (such
deficiency is referred to herein as the "Deficiency"), the Primary
Stockholders will be deemed, for purposes of this clause (ii), to
have assigned to the Independent Equity Group a number of Excess
Shares that would have otherwise been allocated to such Primary
Stockholders equal to 50% of such Deficiency.
2.10 AMENDMENT TO SECTION 1.14 OF THE EXISTING REGISTRATION RIGHTS
AGREEMENT
Section 1.14 of the Existing Registration Rights Agreement is hereby
amended so that the phrase "without the prior written consent of the Investors
holding two-thirds of the Registrable Securities held by Investors," is replaced
with the phrase "without the prior written consent of the Investors and Series B
Preferred Holders collectively holding two-thirds of the aggregate Registrable
Securities held by the Investors and the Series B Preferred Holders."
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2.11 MODIFICATION OF SECTION 1.15 OF THE EXISTING REGISTRATION RIGHTS
AGREEMENT
Section 1.15 is hereby modified to delete the phrase "in the case of a
nonunderwritten offering."
2.12 ADDITION OF SECTION 1.19 TO EXISTING REGISTRATION RIGHTS AGREEMENT
The following paragraphs are hereby added to the Existing Registration
Rights Agreement:
1.19 Shelf Registration.
(a) (i) The Company shall file, not later than one
hundred fifty (150) days after the date hereof, a "shelf" registration
statement (the "Shelf Registration") covering the securities then
constituting Registrable Securities (other than shares held by Holders
who are permitted, as of June 10, 1996, to sell all their shares during
a three (3)-month period under Rule 144 of the Act and the Registrable
Securities of Holders who have decided not to participate in a
registration under this Section 1.19) on any appropriate form, which
shall state that the subject Registrable Securities are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Act.
The Company shall use its reasonable best efforts to have the Shelf
Registration declared effective as soon as practicable after its filing
and to keep the Shelf Registration continuously effective and current
for a period of three (3) years following the date hereof or, if
earlier, until all Registrable Securities included therein have been
sold or can be sold within three months under Rule 144 of the Act. If
necessary, the Company shall cause to be filed, and shall use its
reasonable best efforts to have declared effective as soon as
practicable following filing, additional "shelf" registration
statements or amendments as necessary to maintain such effectiveness
for such period. It is understood, however, that the Shelf Registration
may be required to be amended or suspended for reasonable periods of
time from time to time due to a variety of matters, including corporate
developments undertaken by the Company in good faith and for valid
business reasons such as the acquisition of third parties or the
divestiture of assets which developments may require notice to the
holders pursuant to Section 1.19(vii). The Holders acknowledge that
during these periods they may not be entitled to sell under the
registration statement filed pursuant to this Section 1.19.
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(ii) Within ten (10) days of the filing of a
registration statement pursuant to this Section 1.19, the Company shall
give written notice of such fact to all Holders (and shall deliver a
copy of such registration statement to all Holders). Within ten (10)
days of the receipt thereof, each Holder which desires its Registrable
Securities to be included in such registration statement shall provide
notice of such desire to the Company, and shall indicate the number of
Registrable Securities it holds that it wishes to be included in such
registration statement.
(b) The Holders acknowledge that the procedures section
in the subsequent subparagraph (c) of this Section 1.19 (the
"Procedures") shall be applicable only to the shelf registration
described in the foregoing Subsection (a) and that to the extent that
any other provisions of this Agreement conflict with the Procedures by
reason of the application of this Section 1.19, the Procedures shall
govern such Shelf Registration.
(c) The Company, in connection with its obligation under
Section 1.19, shall:
(i) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and current for the period specified in Section
1.19(a) and comply with the provisions of the Act with respect to the
disposition of all securities covered by such registration statement in
accordance with the Holders intended method of disposition set forth in
such registration statement for such period.
(ii) Make every reasonable effort to obtain the
withdrawal of any order or other action suspending the effectiveness of
any such registration statement or suspending the qualification or
registration (or exemption therefrom) of the Registrable Securities for
sale in any jurisdiction.
(iii) As soon as practicable after public disclosure
of any matters described in subsection (a) of this Section 1.19 and in
accordance with the Company's obligations under the 1934 Act, the Act
or the rules of the NASD or otherwise, or as soon as practicable after
the happening of any other event that makes any statement made in such
registration statement or registration statements or in any related
prospectus, prospectus supplement, amendment or document incorporated
therein by reference untrue in any material respect or that requires
the making of any changes in such registration statement or
registration statements or in any such prospectus, supplement,
amendment or other such document so that it will not contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the
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statements therein (in the case of any prospectus in the light of the
circumstances under which they were made) not misleading, prepare a
supplement or post-effective amendment to such registration statement
or to the related prospectus or any document incorporated therein by
reference, or file any other required document so that, as thereafter
delivered to the purchasers of the Registrable Securities being sold
thereunder, such prospectus shall not contain an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading.
(iv) Furnish to each Holder of Registrable Securities
covered by such registration statement such number of copies of such
registration statement, each amendment and supplement thereto (in each
case including all exhibits thereto and documents incorporated by
reference therein), the prospectus included in such registration
statement (including each preliminary prospectus) and such other
documents as such Holder may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by such Holder.
(v) Promptly notify each Holder of Registrable
Securities covered by such registration statement of any stop order
issued or threatened by the SEC and take all reasonable actions
required to prevent the entry of such stop order or to remove it if
entered.
(vi) Use its best efforts to (i) register or qualify
the Registrable Securities under such other securities or blue sky laws
of such jurisdictions in the United States as any Holder of Registrable
Securities covered by such registration statement shall reasonably
request and (ii) cause such Registrable Securities to be registered
with or approved by such other governmental agencies or authorities as
may be necessary by virtue of the business and operations of the
Company and to do any and all other acts and things that may be
reasonably necessary or advisable to enable such Holder to consummate
the disposition of the Registrable Securities owned by such Holder;
provided that the Company will not be required to (A) qualify generally
to do business in any jurisdiction where it would not otherwise be
required to qualify but for this paragraph (vi), (B) subject itself to
taxation in any such jurisdiction or (C) consent to general service of
process in any such jurisdiction.
(vii) Promptly notify each Holder of Registrable
Securities covered by such registration statement at any time when a
prospectus relating thereto is required to be delivered under the Act,
of the occurrence of any event as a result of which the prospectus
contained in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing,
and the Company will prepare a supplement or
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amendment to such prospectus so that, as thereafter delivered to the
purchasers of such Registrable Securities, such prospectus will not
contain an untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading and promptly make available to each
such Holder any such supplement or amendment.
(viii) Use its best efforts to cause all such
Registrable Securities to be listed on each securities exchange on
which similar securities issued by the Company are then listed, if any.
(ix) The Company may require each Holder of
Registrable Securities included in such registration statement to
promptly furnish in writing to the Company such information regarding
distribution of the Registrable Securities as the Company may from time
to time reasonably request and such other information as may be legally
required in connection with such.
(d) The following provisions of the Existing Registration
Rights Agreement shall be deemed deleted and inapplicable to a
registration statement effected under this Section 1.19: Section
1.4(i), Section 1.4(k), Section 1.4(m) and Section 1.10. In addition,
in such event, the words "such drafts" in Section 1.4 shall be deemed
deleted in such event, with respect to any Shelf Registration.
2.13 ADDITION OF SECTION 1.20 TO THE EXISTING REGISTRATION RIGHTS
AGREEMENT
The following paragraph is hereby added as Section 1.20 of the Existing
Registration Rights Agreement:
The Company agrees not to utilize its rights under any of
Sections 1.2(c) or 1.12(b)(ii)(C) based upon a registration and/or
public sale or distribution of Registrable Securities effected under
Section 1.12 or Section 1.19, in the case of Section 1.2, or Section
1.2 or Section 1.19 in the case of Section 1.12.
2.14 AMENDMENT TO SECTION 2.7 OF THE EXISTING REGISTRATION RIGHTS
AGREEMENT
Section 2.7 of the Existing Registration Rights Agreement is hereby
amended so that the phrase "the Series B Preferred Holders" is added to the
third sentence of Section 2.7 after each occurrence of the phrase "the
Independent Equity Group Holders."
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2.15 ADDITION OF SCHEDULE D TO EXISTING REGISTRATION RIGHTS
AGREEMENT
Schedule D hereto is hereby added to the Existing Registration Rights
Agreement as Schedule D.
SECTION 3. MISCELLANEOUS
3.1 SERIES B PREFERRED HOLDERS TO BECOME PARTIES
Each Series B Preferred Holder by executing this Amendment shall become
a party to, and shall be obligated and bound by the provisions of, the Existing
Registration Rights Agreement, as amended by this Amendment.
3.2 GOVERNING LAW. This Amendment shall be governed by and construed
under the laws of the State of New York as applied to agreements among New York
residents entered into and to be performed entirely within New York.
3.3 DUPLICATE ORIGINALS. Two or more duplicate originals of this
Amendment may be signed by the parties, each of which shall be an original but
all of which together shall constitute one and the same instrument. This
Amendment may be executed in one or more counterparts and shall be effective
when at least one counterpart shall have been executed by each party hereto, and
each set of counterparts which, collectively, show execution by each party
hereto shall constitute one duplicate original.
3.4 EFFECT OF THIS AMENDMENT. Except as specifically provided in this
Amendment, no terms or provisions of the Existing Registration Rights Agreement
have been modified or changed by this Amendment and the terms and provisions of
the Existing Registration Rights Agreement, as amended hereby, shall continue in
full force and effect. This Amendment and the amendments contained herein shall
have and be in effect on and after the date hereof upon the execution by the
Company and the required number of each of the Investors, Stockholders, Bank
Holders and Series B Preferred Holders.
3.5 SECTION HEADINGS. The titles of the section hereof appear as a
matter of convenience only, do not constitute a part of this Amendment and shall
not affect the construction thereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed on their behalf by a duly authorized officer or agent thereof, as the
case may be, as of the date first above written.
THE CERPLEX GROUP, INC.
By:_______________________________________
James T. Schraith, President
Address: 1382 Bell Avenue
Tustin, California 92680
STOCKHOLDERS:
__________________________________________
William A. Klein
Address: 1382 Bell Avenue
Tustin, California 92680
__________________________________________
Richard C. Davis
Address: 1382 Bell Avenue
Tustin, California 92680
__________________________________________
Myron Kunin
Address: Regis Corporation
7201 Metro Boulevard
Minneapolis, MN 55439
[Signature Page to the FOURTH AMENDMENT TO THE 1993 REGISTRATION RIGHTS
AGREEMENT among THE CERPLEX GROUP, INC. and the Investors, Stockholders, Banks
and Series B Preferred Holders listed therein.]
<PAGE> 19
STOCKHOLDERS (CONTINUED)
___________________________________________
Theodore J. Wisniewski
Address: 1382 Bell Avenue
Tustin, California 92680
[Signature Page to the FOURTH AMENDMENT TO THE 1993 REGISTRATION RIGHTS
AGREEMENT among THE CERPLEX GROUP, INC. and the Investors, Stockholders, Banks
and Series B Preferred Holders listed therein.]
<PAGE> 20
INVESTORS:
SPROUT GROWTH II, L.P.
By: DLJ Capital Corporation, Managing
General Partner
By: ___________________________________
Robert Finzi, Attorney-in-Fact
DLJ CAPITAL CORPORATION
By: ___________________________________
Robert Finzi, Attorney-in-Fact
CANAAN VENTURE LIMITED PARTNERSHIP
By: Canaan Management Limited
Partnership, General Partner
By: Canaan Venture Partners L.P.,
General Partner
By: ___________________________________
General Partner
CANAAN VENTURE OFFSHORE LIMITED
PARTNERSHIP C.V.
By: Canaan Management Limited
Partnership, General Partner
By: Canaan Venture Partners L.P.,
General Partner
By: ___________________________________
General Partner
[Signature Page to the FOURTH AMENDMENT TO THE 1993 REGISTRATION RIGHTS
AGREEMENT among THE CERPLEX GROUP, INC. and the Investors, Stockholders, Banks
and Series B Preferred Holders listed therein.]
<PAGE> 21
BESSEMER VENTURE PARTNERS III L.P.
By: Deer III & Co., General Partner
By: ____________________________________
Robert H. Buescher, General Partner
By: ____________________________________
Robert H. Buescher, Attorney-in-Fact
BANK HOLDERS:
WELLS FARGO BANK, NATIONAL
ASSOCIATION
By: ________________________________
Name: __________________________
Title: _________________________
SUMITOMO BANK OF CALIFORNIA
By: ________________________________
Name: __________________________
Title: _________________________
BHF - BANK AKTIENGESELLSCHAFT
By: ________________________________
Name: __________________________
Title: _________________________
COMERICA BANK CALIFORNIA
By: ________________________________
Name: __________________________
Title: _________________________
[Signature Page to the FOURTH AMENDMENT TO THE 1993 REGISTRATION RIGHTS
AGREEMENT among THE CERPLEX GROUP, INC. and the Investors, Stockholders, Banks
and Series B Preferred Holders listed therein.]
<PAGE> 22
WARRANT GROUP HOLDERS:
THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY
By: ________________________________
Name: __________________________
Title: _________________________
JOHN HANCOCK MUTUAL LIFE INSURANCE
COMPANY
By: ________________________________
Name: __________________________
Title: _________________________
NORTH ATLANTIC SMALLER COMPANIES
TRUST PLC
By: ________________________________
Name: __________________________
Title: _________________________
[Signature Page to the FOURTH AMENDMENT TO THE 1993 REGISTRATION RIGHTS
AGREEMENT among THE CERPLEX GROUP, INC. and the Investors, Stockholders, Banks
and Series B Preferred Holders listed therein.]
<PAGE> 23
EXECUTION COPY
Schedule A
SCHEDULE OF INVESTORS
Warrant Group Holders
The Northwestern Mutual Life Insurance Company
720 East Wisconsin Avenue
Milwaukee, WI 53202
John Hancock Mutual Life Insurance Company
John Hancock Place
200 Clarendon Street
Boston, Massachusetts 02117
North Atlantic Smaller Companies Trust PLC
c/o J.O. Hambro & Co., Ltd.
30 Queen Anne's Gate
London, England SW1H9AL
Independent Equity Group
Name
Sprout Growth II, L.P.
DLJ Capital Corp.
Canaan Venture Limited Partnership
Canaan Venture Offshore Limited
Partnership
Deepak Kamra
Neill H. Brownstein
Robert H. Buescher
Michael I. Barach
Christopher Gabrieli
Brimstone Island Co., L.P.
William T. Burgin
G. Felda Hardymon
Gabrieli Family Foundation
John K. Rodakis
Gautam A. Prakash
David J. Cowan
Rachel J. Erickson
<PAGE> 24
EXECUTION COPY
Bessemer Venture Partners III, L.P.
C. Samantha Chen
Rodney A. Cohen
Richard R. Davis
Adam P. Godfrey
Barbara M. Henagan
Robert D. Lindsay
Bradford Mills
Thomas F. Ruhm
Ward W. Woods, Jr.
Leo & Nicole Arnaboldi, JTWROS
Perry H. Braun
Norman H. Brown, Jr.
John G. Danhalk
Hoyt L. Davidson
Thompson Dean
Peter K. Deeks
Ralph L. DeGroff, Jr.
Anthony M. DeLuise
David L. Dennis
Thomas S. DePre
Robert E. Diemar
Robert Finzi
Daniel K. Flatley
Mark K. Gormley
Joyce I. Greenberg
Thomas G. Greig, III
James D. Hann & Bonnie J. Hann, JTWROS
Douglas M. Hayes
Stephen J. Ketchum
Richard E. Kroon
Frederick C. Lane
Mark Lanigan
Steven E. Lebow
Brian McLoughlin
Kenneth David Moelis & Julie Lynn Moelis
Trustees Under The Moelis Family Trust
John Joseph Navin, III
Michael R. Nicolais
Peter J. Nolan
Steven G. Puccinelli
Larry E. Reeder
Elan Adiel Schultz
James T. Sington
Jon R. Stone
<PAGE> 25
EXECUTION COPY
Steven F. Strandberg
Kenneth A. Tucker
R. Scott Turricchi
Warren Woo
Kirk B. Wortman
<PAGE> 26
EXECUTION COPY
Schedule B
SCHEDULE OF STOCKHOLDERS
Catherine Bartholomew
Frank Cameron
Tom Cherry
Roberta Claborn
David O. Creasman
Raymond Cruz
Randle Dewees
Edward Diaz
Susan Eaton
Harry Edmiston
Dennis Fandrich
Jon Gill
Jacqueline Gillett
Gary Graff
Nelson Guillory
Peggy Hams
James Jones
Roberta Kean
Jennifer Klein
Melissa Klein
Pollianna Lewis
Van Nguyen
Richard Ollech
Thomas D. Pipkin
Juanita Pitts
Keith Rathbone
Richard Richardson
Vincent Simpson
Grover Smith
Joyce Valdez
Richard C. Davis
Davis Children's Trust (Trustee: Beth J. Pearce)
Jerome Jacobson
William A. Klein
Myron Kunin
Alan Weaver
Theodore J. Wisniewski
<PAGE> 27
EXECUTION COPY
Schedule C
SCHEDULE OF BANKHOLDERS
Wells Fargo Bank, N.A.
Sumitomo Bank of California
BHF - Bank Aktiengesellschaft
Comerica Bank - California
<PAGE> 28
EXECUTION COPY
Schedule D
SCHEDULE OF SERIES B PREFERRED HOLDERS
Sprout Growth II, L.P.
DLJ Capital Corporation
Scorpion Offshore Investment Fund
The & Trust
Chestnut Pacific Ltd. Partners
Standard Global Equity Partners L.P.
Standard Pacific Capital Offshore Fund Ltd.
Common Fund Equity Fund
Malcolm and Emily Fairbairn
Andrea Martin
Nitin T. Mehta
Peak Investment Limited Partnership
Pleiades Investment Partners
Whitman Partners, L.P.
Mahuma, N.V.
<PAGE> 29
EXECUTION COPY
<PAGE> 1
EXHIBIT 10.29
$4,570,551.27 June 21, 1996
FOR VALUE RECEIVED, I, we promise to pay LUCENT TECHNOLOGIES, or
order, Four Million Five Hundred Seventy Thousand Five Hundred Fifty-One and
27/100 DOLLARS payable in installments at the time or times stated in the
SCHEDULE OF PAYMENTS hereon, at: P. O. Box 18099B, St. Louis, MO 63160 or at the
office of the legal holder of this note, with interest at the rate of 9.75
percent per annum, after date, payable monthly on the principal and collection
charges.
If any installment of this note is not paid at the time and place
specific herein, the entire amount unpaid shall be due and payable forthwith at
the election of the holder of this note, without any notice whatever.
The acceptance of any installment hereof by the payee after the time
when it becomes due as herein set forth shall not be held to establish a custom,
or waive any rights of the payee to enforce payment of any installment herein.
And to secure the payment of said amount the makers and endorsers
hereon do hereby authorize, irrevocably any attorney of any Court of Record to
appear for the undersigned in such court in term time or vacation at any time
after maturity, and confess a judgment without process in favor of the holder of
this note, for such amount as may appear to be unpaid thereon, together with
costs and 20% attorney fees, and to waive and release all errors which may
intervene in any such proceedings and consent to immediate execution upon such
judgment, hereby ratifying and confirming all that my said attorney may do by
virtue hereof, and the endorsers hereon for value received do further guarantee
payment of this note at maturity or at any time thereafter waiving presentment,
demand, protest and notice of non-payment.
Cerplex Group, Inc. Tustin, CA
COMPANY NAME CITY & STATE
_____________________________________________________
Bruce Nye, Vice President/Chief Financial Officer
(Seal)
<PAGE> 2
SCHEDULE OF PAYMENTS
<TABLE>
<CAPTION>
Total
Installment
DATE DUE Principal Interest Due
<S> <C> <C> <C>
06/28/96 $ 0.00 $141,849.89 $ 141,849.89
07/15/96 $ 0.00 $ 17,160.49 $ 17,160.49
08/15/96 $ 0.00 $ 34,320.98 $ 34,320.98
09/15/96 $4,570,551.27 $ 34,320.98 $4,604,872.25
</TABLE>
2
<PAGE> 1
EXHIBIT 11.1
THE CERPLEX GROUP, INC.
EXHIBIT TO CONSOLIDATED FINANCIAL STATEMENTS
COMPUTATION OF NET INCOME (LOSS) PER SHARE
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended June 30 Six months ended June 30
-------------------------- ------------------------
1996 1995 1996 1995
-------- -------- ---------- ---------
<S> <C> <C> <C> <C>
WEIGHTED AVERAGE COMMON AND
COMMON SHARES EQUIVALENT SHARES
OUTSTANDING
Average common stock outstanding 13,398 13,079 13,286 13,070
Dilutive Convertible Preferred
Stock options and warrants - based
on the treasury stock method using
the average price(1) 1,448 1,335 1,342
-------- -------- -------- --------
Total 14,846 14,414 13,286 14,412
======== ======== ======== ========
COMPOSITION OF NET INCOME
Income (loss) from continuing operations $ 702 $ 170 $ (871) $ 959
Income from discontinued operations 112 153
-------- -------- -------- --------
Net Income $ 702 $ 282 $ (871) $ 1,112
======== ======== ======== ========
PER SHARE DATA
Continuing operations $ .05 $ .01 $ (.07) .07
Discontinued operations .01 .01
-------- -------- -------- --------
Net income per share $ .05 $ .02 $ (.07) $ .08
======== ======== ======== ========
</TABLE>
(1) Stock options and warrants were not assumed to be converted under the
treasury stock method for the six month period ended June 30, 1996
because their effect would be anti-dilutive.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 27,206
<SECURITIES> 0
<RECEIVABLES> 28,252
<ALLOWANCES> 0
<INVENTORY> 28,819
<CURRENT-ASSETS> 90,548
<PP&E> 28,919
<DEPRECIATION> 0
<TOTAL-ASSETS> 129,736
<CURRENT-LIABILITIES> 95,254
<BONDS> 0
0
7,911
<COMMON> 13
<OTHER-SE> 2,398
<TOTAL-LIABILITY-AND-EQUITY> 129,736
<SALES> 0
<TOTAL-REVENUES> 92,185
<CGS> 0
<TOTAL-COSTS> 74,285
<OTHER-EXPENSES> 15,639
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,169
<INCOME-PRETAX> (101)
<INCOME-TAX> 770
<INCOME-CONTINUING> (871)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (871)
<EPS-PRIMARY> (.07)
<EPS-DILUTED> 0
</TABLE>
