<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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, 1997
--------------------
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 (IRS Employer
incorporation or organization) Identification No.)
1382 Bell Avenue, Tustin, CA 92780
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(714) 258-5600
- --------------------------------------------------------------------------------
(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 July 27,
1997 was 34,217,655.
<PAGE> 2
THE CERPLEX GROUP, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I --- FINANCIAL INFORMATION
Condensed Consolidated Balance Sheets.................................. 4
Condensed Consolidated Statements of Operations........................ 5
Condensed Consolidated Statement of Stockholders' Deficiency........... 6
Condensed Consolidated Statements of Cash Flows........................ 7
Notes to Condensed Consolidated Financial Statements................... 8
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 13
PART II --- OTHER INFORMATION
Legal Proceedings...................................................... 19
Changes in Securities.................................................. 19
Defaults Upon Senior Securities........................................ 19
Submission of Matters to a Vote of Security Holders.................... 19
Other Information...................................................... 19
Exhibits and Reports on Form 8-K....................................... 23
SIGNATURE................................................................... 24
</TABLE>
2
<PAGE> 3
THE CERPLEX GROUP, INC.
PART I
FINANCIAL INFORMATION
3
<PAGE> 4
THE CERPLEX GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
-------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 21,788 $ 23,782
Accounts receivable, net 17,023 19,539
Inventories 8,987 17,326
Net assets of discontinued operations -- 1,681
Prepaid expenses and other current assets 5,116 8,146
------- ---------
Total current assets 52,914 70,474
Property, plant and equipment, net 23,836 28,039
Goodwill -- 4,953
Other long-term assets 1,367 2,028
------- ---------
Total assets $ 78,117 $ 105,494
======= =========
LIABILITIES & STOCKHOLDERS' DEFICIENCY
Current liabilities:
Notes payable to banks $ 35,897 $ 6,000
Notes payable 4,826 5,026
Accounts payable 15,117 19,498
Accrued and other current liabilities 28,083 25,347
Income taxes payable -- 1,729
------- ---------
Total current liabilities 83,923 57,600
------- ---------
Long-term debt, less current portion 18,114 56,817
Long-term obligations 6,214 6,214
COMMITMENTS AND CONTINGENCIES
SUBSEQUENT EVENTS
Stockholders' deficiency:
Preferred stock, par value $0.001; 3,066,340 shares authorized,
none outstanding. 8,000 shares Series B Convertible Preferred
Stock of which 657 and 7,197 are issued and outstanding as of
June 30, 1997 and December 31, 1996, respectively; aggregate
liquidation preference of $1,314 and $14,394 as of June 30, 1997
and December 31, 1996, respectively 657 7,197
Common stock, par value $0.001 per share; 60,000,000 and 30,000,000
shares authorized as of June 30, 1997 and December 31, 1996,
respectively; 34,217,655 and 14,110,949 issued and outstanding
as of June 30, 1997 and December 31, 1996, respectively 34 14
Additional paid-in capital 58,646 51,648
Notes receivable from stockholders -- (139)
Unearned compensation -- (73)
Accumulated deficiency (88,774) (74,414)
Cumulative translation adjustment (697) 630
------- ---------
Total stockholders' deficiency (30,134) (15,137)
------- ---------
Total liabilities and stockholders' deficiency $ 78,117 $ 105,494
======= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE> 5
THE CERPLEX GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
--------------------------- -------------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $ 39,266 $ 51,339 $ 85,606 $ 92,185
Cost of sales 37,465 40,370 76,076 74,285
-------- -------- -------- --------
Gross profit 1,801 10,969 9,530 17,900
Selling, general and administrative expenses 10,993 8,870 20,121 15,860
Restructuring charge 4,307 -- 4,307 --
-------- -------- -------- --------
Operating income (loss) (13,439) 2,099 (14,898) 2,040
Equity in earnings from joint venture -- -- -- 357
Gain on sale of PCS 6,607 -- 6,607 --
Gain on sale of InCirT Division -- 450 -- 450
Other (income) expense, net 422 (288) 998 (221)
Interest expense, net 1,709 1,658 3,956 3,169
-------- -------- -------- --------
Income (loss) before income taxes (8,963) 1,179 (13,245) (101)
Provision for income taxes 394 477 1,115 770
-------- -------- -------- --------
Net income (loss) $ (9,357) $ 702 $(14,360) $ (871)
======== ======== ======== ========
Net income (loss) per common share $ (0.30) $ 0.05 $ (0.60) $ (0.07)
======== ======== ======== ========
Weighted average common and common equivalent
shares outstanding 31,678 14,846 23,742 13,286
======== ======== ======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements
5
<PAGE> 6
THE CERPLEX GROUP, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY
(in thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>
Convertible
Preferred Stock Common Stock Additional Total
---------------- ------------------- Paid-In Accumulated Stockholders'
Shares Amount Shares Amount Capital Other Deficiency Deficiency
------ ------- ----------- ------ ---------- ----- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 7,197 $ 7,197 14,110,949 $ 14 $ 51,648 $ 418 $ (74,414) $ (15,137)
Stock options exercised -- -- 10,665 -- -- -- -- --
Conversion of Preferred Stock (1,608) (1,608) 2,955,038 3 1,605 -- -- --
Net loss -- -- -- -- -- -- (5,003) (5,003)
Amortization of unearned compensation -- -- -- -- -- 18 -- 18
Translation adjustment -- -- -- -- -- (945) -- (945)
------ ------- ---------- ----- -------- ----- --------- -----------
Balance at March 31, 1997 5,589 5,589 17,076,652 17 53,253 (509) (79,417) (21,067)
Stock options exercised -- -- 5,887 -- -- -- -- --
Conversion of Preferred Stock (4,932) (4,932) 17,135,116 17 4,915 -- -- --
Net loss -- -- -- -- -- -- (9,357) (9,357)
Amortization of unearned compensation -- -- -- -- -- 55 -- 55
Translation adjustment -- -- -- -- -- (382) -- (382)
Reduction of notes receivable from
shareholder -- -- -- -- -- 139 -- 139
Repricing of Warrants -- -- -- -- 103 -- -- 103
Issuance of Warrants -- -- -- -- 375 -- -- 375
------ ------- ---------- ----- -------- ----- --------- ---------
Balance at June 30, 1997 657 $ 657 34,217,655 $ 34 $ 58,646 $(697) $ (88,774) $ (30,134)
====== ======= ========== ===== ======== ===== ========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements
6
<PAGE> 7
THE CERPLEX GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------
1997 1996
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(14,360) $ (871)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization 4,639 3,878
Amortization of unearned compensation 73 35
Foreign currency transaction (gain) loss (204) 28
Equity in earnings of joint venture -- (357)
Distribution of earning of joint venture -- 3,090
Non-cash charges related to restructure 4,307 --
Gain on sale of InCirT Division -- (450)
Gain on sale of PCS (6,607) --
Decrease (increase) in:
Accounts receivable 356 4,153
Inventories 5,847 (854)
Prepaid expenses and other current assets 2,888 6,335
Other long-term assets (747) (1,364)
Net assets of discontinued operations 1,681 1,250
Increase (decrease) in:
Accounts and notes payable (6,903) 1,854
Accrued and other current liabilities 6,203 (8,605)
Income taxes payable (1,708) (549)
-------- --------
Net cash provided by (used in) operating activities (4,535) 7,573
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of plant and equipment, net (701) (450)
Acquisition of businesses, net of cash acquired* -- 5,147
Proceeds from sale of InCirT Division -- 5,500
Proceeds from sale of PCS 13,750 --
-------- --------
Net cash used in investing activities 13,049 10,197
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of preferred stock -- 7,911
Proceeds from issuance of common stock -- 47
Repricing/issuance of warrants 478 --
Decrease in notes receivable from stockholders 139 (3)
Principal payments of long-term debt -- (304)
Net payments of borrowings (9,361) (2,000)
Other (12) --
-------- --------
Net cash provided by (used in) financing activities (8,756) 5,651
-------- --------
Effect of exchange rate changes on cash (1,752) (22)
-------- --------
Net increase (decrease) in cash and cash equivalents (1,994) 23,399
Cash and cash equivalents at beginning of period 23,782 3,807
-------- --------
Cash and cash equivalents at end of period $ 21,788 $ 27,206
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the quarter for:
Interest $ 3,555 $ 3,319
======== ========
Income taxes $ 2,617 $ 25
======== ========
Acquisition of business*
Amount paid $ -- $ (8,977)
Cash acquired $ -- 14,124
-------- --------
$ -- $ 5,147
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
7
<PAGE> 8
THE CERPLEX GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------
(a) ORGANIZATION, BASIS OF REPORTING AND PRINCIPLES OF CONSOLIDATION
The Cerplex Group, Inc. (the "Company") was incorporated in California in
May 1990 and reincorporated in Delaware in November 1993. The Company is a
leading independent provider of electronic parts repair and logistics services
for a wide range of electronic equipment for the computer and peripheral,
telecommunications and office automation markets. The Company's key service
offerings are depot repair, logistics services and spare parts management and
sales, as well as a variety of ancillary services. The consolidated financial
statements include the accounts of the Company and its wholly-owned
subsidiaries. All significant intercompany transactions and accounts have been
eliminated in consolidation.
(b) CASH AND CASH EQUIVALENTS
The Company considers all highly liquid debt instruments with original
maturities of three months or less to be cash equivalents.
In May 1996, the Company acquired Cerplex SAS. As part of the acquisition,
sufficient cash was provided 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.
Accordingly, the cash of Cerplex SAS is generally not available for financing
operations outside of Cerplex SAS. The cash balance of Cerplex SAS at June 30,
1997 was $16.8 million.
(c) INVENTORIES
Inventories are stated at the lower of cost (determined by the
weighted-average method) or market.
(d) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation for the
plant in the United Kingdom is provided utilizing the straight line method over
the estimated useful life of twenty-five years. Depreciation for equipment is
provided utilizing the straight-line method over the estimated useful lives
(primarily three to five years) of the respective assets. Leasehold improvements
are amortized using the straight-line method over the shorter of the lease term
or useful life.
(e) OTHER ASSETS
Long-term investments are recorded at cost. The Company periodically
assesses whether there has been an other than temporary decline in the market
value below cost of the investment. Any such decline is charged to earnings
resulting in the establishment of a new cost basis for the investment. Debt
issuance costs incurred to obtain financing are capitalized and amortized using
the straight-line method over the estimated life of the related debt. The
Company has adopted Statement of Financial Accounting Standards ("SFAS") No.
115, "Accounting for Certain Investments in Debt and Equity Securities." The
Company's reported other investments are classified as available-for-sale under
SFAS 115. Accordingly, any unrealized holding gains and losses, net of taxes,
are excluded from income and recognized as a separate component of equity
(deficiency) until realized. Realized gains, realized losses and decline in
value, judged to be other than temporary, are included in other income.
8
<PAGE> 9
THE CERPLEX GROUP, INC.
(f) GOODWILL
Goodwill, which represents the excess of purchase price over fair value of
net assets acquired, is amortized on a straight-line basis over the expected
periods to be benefited. The Company assesses the recoverability of this
intangible asset by determining whether the amortization of the goodwill balance
over its remaining life can be recovered through projected undiscounted future
cash flows. The amount of goodwill impairment, if any, is measured based on
projected discounted future cash flows using a discount rate reflecting the
Company's average cost of funds.
(g) FOREIGN CURRENCY TRANSLATION
Assets and liabilities of foreign subsidiaries are translated at
quarter-end rates of exchange and net sales and expenses are translated at the
average rates of exchange for the year. Translation gains and losses are
excluded from the measurement of net income or loss and are recorded as a
separate component of stockholders' deficiency. Gains and losses resulting from
foreign currency transactions are included in net income.
(h) INCOME TAXES
Provisions are made for the amount of income taxes on the reported
operations of each year. Tax credits are treated as reductions of the applicable
Federal income tax provisions in the years earned. On a quarterly basis, the
Company provides for state and foreign income taxes based on an estimate of the
effective rate for the entire year.
(i) REVENUE RECOGNITION
Sales are recognized upon shipment of product to customers. Sales relating
to deferred service contracts are recognized over the related contract terms on
a straight-line basis.
(j) INCOME (LOSS) PER SHARE
Net income (loss) per share is computed using the weighted average number
of common shares and dilutive common equivalent shares outstanding. Common stock
equivalents consist of preferred stock, stock options and warrants, which were
computed using the treasury stock method. Net loss per share excludes the effect
of common stock equivalents, because their effect would be anti-dilutive.
In 1997, Financial Accounting Standards No. 128 ("FAS 128") Earnings Per
Share was issued. FAS 128 is effective for earnings per share calculations for
periods ending after December 15, 1997. At that time the Company will be
required to change the method currently used to compute earnings per share and
to restate all prior periods, as needed. The effects of this change are not
expected to have a material effect on income (loss) per common share.
(k) FINANCIAL STATEMENT ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period.
9
<PAGE> 10
THE CERPLEX GROUP, INC.
NOTE 2 - BASIS OF PRESENTATION
- ------------------------------
In the opinion of the Company's management, the accompanying unaudited
condensed consolidated financial statements contain all normal recurring
adjustments necessary to present fairly the financial position as of June 30,
1997 and consolidated statement of operations and statement of cash flows for
the six months ended June 30, 1997 and 1996. Results of operations for the three
and six months ended June 30, 1997 are not necessarily indicative of results to
be expected in the future.
Although the Company believes that the disclosures in the accompanying
financial statements are adequate to make the information presented not
misleading, certain information and footnote information normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the rules and regulations
of the Securities and Exchange Commission, and these financial statements should
be read in conjunction with the Company's Form 10-K for the year ended December
31, 1996.
The Company's fiscal year is the 52 or 53 week period ending on the
Saturday 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. Certain reclassifications have been made to the 1996 consolidated
financial statements and the financial statements for the six-month period
ended June 30, 1997 to conform to the most recent 1997 presentation.
NOTE 3 - CONVERSIONS OF SERIES B PREFERRED STOCK
- ------------------------------------------------
Due in part to the decreases in the trading price of the Company's Common
Stock, the conversion rights of the Series B Preferred Stock have resulted in,
and may in the future result in, dilution to the holders of Common Stock and
could impact adversely the ability of the Company to consummate an equity
financing. The stockholders approved an increase in the Company's authorized
Common Stock from 30,000,000 to 60,000,000 shares at the Annual Stockholders'
Meeting held on June 10, 1997.
NOTE 4 - 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). 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. Revenues and
income before taxes of Cerplex SAS for the six months ended June 30, 1997 were
$29.3 million and $3.9 million, respectively. Revenues and income before taxes
for the five week period ending June 30, 1996, were $5.3 million and $1.0
million, respectively.
10
<PAGE> 11
THE CERPLEX GROUP, INC.
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 of $500,000 as
negative goodwill, which is being amortized into income over a five year period.
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>
In Thousands, except per share data Pro Forma
----------------------------------- ----------
<S> <C>
Net Sales $ 126,653
Income from continuing operations 323
Net income per share from continuing operations .02
</TABLE>
NOTE 5 - SALES OF INCIRT DIVISION AND PCS SUBSIDIARY
- ------------------------------------------------------
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 InCirT Division was $450,000.
On April 11, 1997, the Company sold Peripheral Computer Support, Inc.
("PCS"), a subsidiary of the Company, for $14.5 million in cash and the
cancellation of $500,000 of indebtedness. Of such amount, $8.25 million was used
to pay down bank debt, $500,000 was placed into escrow, and approximately
$750,000 was used to pay expenses associated with the transaction. The escrow
deposit will be used to pay or reimburse any losses or tax liabilities, as
defined in the Purchase Agreement and Tax Allocation Agreement, respectively, or
any other amounts incurred by the purchaser or PCS in connection with the sale.
Subject to resolution of certain pending tax audit issues with PCS, the Company
is entitled to any amounts remaining in the escrow deposit on the first
anniversary of the closing date. The gain on the sale of PCS was $6.6 million.
NOTE 6 - RESTRUCTURING COSTS
- ------------------------------
During the second quarter of 1997, the Company's Board of Directors
authorized and committed management to implement a consolidation and cost
reduction plan to reduce North America staffing levels by 16%, eliminating 125
positions. As part of the restructure, the Company closed its Poughkeepsie, New
York operations, relocating it to the Lawrence, Massachusetts. In addition, the
Company plans to consolidate its Redmond, Washington and Tustin, California
operations, transferring their service programs to the Company's hub-based
operations in northern and southern California, Kentucky, and Massachusetts. As
a result of these actions, the Company recorded a restructuring charge of $4.3
million, primarily for severance and termination benefits, lease termination
costs and write-down of plant and equipment related to vacated facilities.
NOTE 7 - GOODWILL
- -------------------
During the second quarter of 1997, the Company wrote-off $1.1 million of
goodwill as a result of continued declining sales based at its Leeds, England
operation and $3.2 million in connection with the sale of PCS. The Company also
wrote-down an additional $0.5 million in goodwill as a result of facility
closures.
11
<PAGE> 12
THE CERPLEX GROUP, INC.
NOTE 8 - SUBSEQUENT EVENTS
- --------------------------
On August 11, 1997, the Company entered into an agreement to sell all of
the assets of Modcomp/Cerplex L.P. to CSP, Inc. for approximately $8.2 million.
The closing of the transaction is subject to the fulfillment of certain closing
conditions which the Company believes will be fulfilled by the end of August,
1997.
Effective August 6, 1997, the Company entered into the Sixth Amendment to
its Senior Credit Agreement, which reduced the maximum amount available under
the revolver and changed the lending rate. See Management Discussion and
Analysis for further discussion.
12
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THE CERPLEX GROUP, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
This report may contain 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, spare
parts sales and management, and logistics. The Company's net sales have
increased substantially over the last few years, primarily as a result of
acquisitions. The Company is no longer permitted under the terms of its credit
facility to engage in acquisitions. The Company's results of operations have
been adversely affected over the last two years due to a variety of factors
discussed below.
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. 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 liquidation of end-of-life programs has
been accounted for as discontinued operations.
The results of operations for 1996 and the first quarter of 1997 reflected,
to a large degree, the resolution of several matters that have been adversely
impacting the Company. Specifically, the Company closed its unprofitable Texas
operations and reached a settlement with the SpectraVision bankruptcy; it
established reserves for the impairment of assets, and incurred additional
losses on common stock received in settlement of various transactions; it closed
its training operations and approved the consolidation of certain operations,
resulting in restructuring charges and asset write-downs; and, due to changes in
the Company's business, or the business of third parties, the Company recorded
charges for inventory write-downs, uncollectible receivables and other assets.
The financial problems of SpectraVision, Novadyne and other clients resulted in
write-offs of receivables and assets by the Company during 1995, 1996 and 1997
of over $16 million, which adversely affected the Company's results of
operations.
RESULTS OF OPERATIONS
- ---------------------
The following table sets forth items from the Company's Condensed
Consolidated Statements of Operations as a percentage of net sales.
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
1997 1996 1997 1996
--------- --------- -------- --------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 95.4 78.6 88.9 80.6
Gross margin 4.6 21.4 11.1 19.4
Selling, general & administrative 27.8 17.3 23.5 17.2
Restructuring charge 11.0 -- 5.0 --
Operating income (loss) (34.2) 4.1 (17.4) 2.2
</TABLE>
13
<PAGE> 14
THE CERPLEX GROUP, INC.
NET SALES
Net sales for the three and six month periods ended June 30, 1997 decreased
$12.1 million and $6.6 million, respectively, to $39.3 million and $85.6
million, respectively, over the net sales for the corresponding periods of 1996.
The decrease in net sales of 23.5% and 7.1% in the three and six month periods
of 1997 compared to the corresponding periods of the prior year is primarily
attributable to the April 1997 sale of Peripheral Computer Support, Inc. ("PCS")
a decrease in net sales in the Company's North American operations, particularly
in relation to spare parts sales, the April 1, 1996 sale of the InCirT Division,
and the closing of Certech Technology, Inc., the Company's Texas subsidiary.
These actions were partially offset by the May 1996 purchase of Cerplex SAS and
April 1996 acquisition of the remaining 51% interest in Modcomp/Cerplex.
GROSS PROFIT
Gross profit as a percentage of net sales for the three and six month
periods ended June 30, 1997 were 4.6% and 11.1%, respectively, compared to 21.4%
and 19.4% during the corresponding periods of the prior year. The gross profit
ratio during the three and six month periods ended June 30, 1997 decreased
primarily as a result of a $4.2 million write-down of excess/obsolete inventory,
property, plant and equipment and other assets in the second quarter of 1997. In
addition, there was a decrease in margins due to inefficiencies due to lower
overall sales volumes in the Company's North America depot repair and spare
parts businesses.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses as a percentage of net sales
for the three and six month periods ended June 30, 1997 increased to 27.8% and
23.5%, respectively, from 17.3% and 17.2% 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 the write-down of $600,000 in
other assets and plant and equipment resulting from plant consolidations, the
write-down of $1.6 million of goodwill, an increase in staffing of information
systems personnel and higher legal and consulting expenses related to bank debt
restructuring.
RESTRUCTURING CHARGES
In the second quarter of 1997, the Company recorded a restructuring charge
of $4.3 million, primarily for severance and termination benefits, lease
termination costs and write-down of plant and equipment.
EQUITY IN EARNINGS FROM JOINT VENTURE & OTHER EXPENSES
Equity in earnings of joint venture relates to the Company's ownership
interest in Modcomp/Cerplex. As discussed in the Company's financial statements,
Note 4 - Acquisitions, the Company acquired the remaining 51% of 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.
On April 11, 1997, the Company sold PCS, a subsidiary of the Company, for
$14.5 million in cash and the cancellation of $500,000 of indebtedness. Of such
amount, $8.25 million was used to pay down bank debt, $500,000 was placed into
escrow, and approximately $750,000 was used to pay expenses associated with the
transaction. The gain on the sale of PCS was $6.6 million.
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.
14
<PAGE> 15
THE CERPLEX GROUP, INC.
INTEREST EXPENSE
Interest expense for the three and six month periods ended June 30, 1997
increased $51,000 and $787,000 as a result of increased amortization of loan
fees, debt discount and warrants, and a higher weighted average interest rate.
Average borrowings outstanding were $58.2 million during the six month period
ended June 30, 1997, compared to $65.5 million during the six month period ended
June 30, 1996. The effective interest rate on credit facilities increased to
10.86% during the six month period ended June 30, 1997, from 9.68% during the
six month period ended June 30, 1996.
INCOME TAXES
Income tax expense for the six months ended June 30, 1997 and 1976, is
primarily related to income taxes on earnings of the Company's operations in
Europe at an effective tax rate of 34%. 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.
15
<PAGE> 16
THE CERPLEX GROUP, INC.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
SENIOR CREDIT FACILITY
The Company's senior credit agreement was established in October 1994 (the
"Credit Agreement") with a group of banks led by Wells Fargo Bank (the
"Lenders"). During part of 1996 and part of 1997, the Company was in default of
various covenants in the Credit Agreement, which resulted in a series of waivers
and amendments to the agreement. In April 1996, the Company entered into an
amended Credit Agreement that reduced the maximum amount under the line of
credit from $60.0 million to $48.0 million and required reductions in the total
commitments to $47.0 million by September 30, 1996, to $45.0 million by December
31, 1996 and to $43.0 million by March 31, 1997. The interest rate on the
Agreement was increased to prime plus 2.25% and the maturity accelerated from
October 1997 to March 31, 1997. In consideration for the amendment, the Company
provided the lenders with warrants to purchase 125,000 shares of common stock at
$6 per share and paid certain commitment fees and out-of-pocket expenses.
In November 1996, the Company entered into amendments to the Credit
Agreement. As compensation for the amendments, the company repriced the 125,000
warrants issued in April 1996 from $6.00 per share to $2.50 per share.
In April 1997, the agreement was again amended to provide for borrowings
comprising a revolver and a term loan. The revolver had a maximum amount
available of $6.0 million. The interest rate on the revolver was the prime
lending rate plus 2.25%. The term loan was for $38.9 million and carried an
interest rate of prime lending rate plus 3.125%. In addition, the Company must
use to pay down the term loan 66.67% of all cumulative cash flow in excess of
$9.0 million during 1997, and generally 66.67% of all proceeds from asset, stock
investment and subsidiary sales, as well as 25% of the proceeds of any equity
offerings. The Company reduced the term loan and the revolver by an aggregate of
approximately $8.25 million on April 11, 1997 in connection with the sale of
PCS. The amended Credit Agreement expires May 1, 1998. In consideration for the
amendment to the Credit Agreement, the Company was required to provide the
lenders with warrants to purchase 750,000 shares of the Company's common stock
at an exercise price of $0.60, and to pay certain commitment fees and
out-of-pocket expenses. In addition, the warrants issued April 1996 were
repriced to an exercise price of $0.60. The April 1997 Credit Agreement included
revised covenants for profitability, current ratio, minimum tangible net worth,
leverage and working capital.
In June 1997, the Company and the Lenders entered into another
amendment to the Credit Agreement which eliminated or revised certain
covenants. On August 6, 1997, the Credit Agreement was again amended to reduce
the maximum amount available under the revolver to $4,886,984. The interest
rate on revolving loans outstanding on August 6, 1997 was changed to the prime
lending rate plus 2.00% per annum; however, the interest rate for all new
revolving loans after August 6, 1997 will be 15%. The term loan was also
reduced to $31,371,520 and now carries an interest rate at the prime lending
rate plus 3.125%. In the event the Company fails to pay all outstanding
obligations under the Credit Agreement by September 30, 1997 the interest rates
under the term loan and revolver increase by 1% per month, effective September
1, 1997, for each month which such obligations are not paid in full up to a
maximum of 4%. In addition, the mandatory pay down of the term loans and/or the
revolving loans with the proceeds of any equity offering has been reduced from
25% to 20%, although the first $1,500,000 of any equity offers must be used to
permanently reduce the term loans and/or the revolver. Under the new agreement,
$6,000,000 of the net proceeds from the sale of Modcomp shall be used to pay
down the term loans, $2,000,000 (or the remainder, whichever is less) of such
proceeds shall be applied to the revolver, and one half of the remainder shall
again be used to pay down the term loans. Subject to certain limitations, the
Company may reborrow up to $2,000,000 of the Modcomp proceeds used to pay down
the revolver. The sixth amendment to the Credit Agreement also resulted in
revised financial covenants. The sixth amendment to the Credit Agreement is
subject to certain post-effective date deliveries which must be supplied on or
before August 14, 1997, including, without limitation, the issuance of warrants
to the Lenders to purchase 1,235,313 shares of Common Stock at $0.59 per share
and the execution of an amendment with the holders of the Company's Senior
Subordinated Notes.
SUBORDINATED NOTES
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 installments in November 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.
16
<PAGE> 17
THE CERPLEX GROUP, INC.
During part of 1996 and 1997, the Company was in default of various
covenants under the Note Purchase Agreement, which resulted in a series of
waivers and amendments. In April 1996, the Company entered into an amendment to
the Note Purchase Agreements which 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 Subordinated
Note Holders 1,000,000 warrants to purchase common stock at $6.00 per share. The
warrants issued pursuant to the amended Note Purchase Agreements, and the
amended Credit Agreement discussed above, were recorded at fair market value
with such amount amortized as a charge against income over the period of the
warrants. In November 1996, the Company entered into amendments to the Note
Purchase Agreements which revised certain financial covenants. As compensation
for the amendments, the company repriced the warrants issued in April 1996 from
$6.00 per share to $2.50 per share.
In April 1997, the Note Purchase Agreement was again amended revising
certain covenants. Interest is now payable semi-annually instead of quarterly.
The term of the Agreement is unchanged from the prior Agreement. In
consideration for the amendment, the Company repriced the warrants issued in
April 1996 to the April 4, 1997 market price of $0.60 per share.
On June 30, 1997, the Company received waivers with respect to various
provisions of the Amended and Restated Note Purchase Agreement. Such waivers
have been twice extended and presently run through August 14, 1997. The Company
is currently negotiating with the subordinated note holders to amend the
Amended and Restated Note Purchase Agreement, although there is no assurance
that any such agreement will be reached. Failure to reach an agreement will
result in a default under the Company's Senior Credit Agreement.
MISCELLANEOUS
Effective April 1, 1996, the Company sold its contract manufacturing
operations in Tustin, California for $3.5 million cash and restricted Common
Stock valued at approximately $2.0 million at the time of the acquisition. The
Company was required to use $2.0 million of the proceeds from the sale 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% 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. 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 is generally not available to Cerplex for
financing operations outside of Cerplex SAS.
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 Preferred Stock is convertible
into Common Stock of the Company at the option of each holder at the lower of
$5.07 per share or 80% of the average closing bid price over a ten-day period
ending three days prior to the date of conversion. The Series B Preferred 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 divided to the holders of Series B Preferred Stock
based upon the number of shares of Common Stock into which each share of Series
B Preferred Stock is convertible. As of June 30, 1997, 7,343 shares of the
Series B Preferred Stock had been converted into 20,725,147 shares of Common
Stock.
On April 11, 1997, the Company sold Peripheral Computer Support, Inc.
("PCS"), a subsidiary of the Company, for $14.5 million in cash and the
cancellation of $500,000 of indebtedness. Of such amount, $8.25 million was used
to pay down bank debt, $500,000 was placed into escrow, and approximately
$750,000 was used to pay expenses associated with the transaction.
On August 11, 1997, the Company entered into an agreement to sell all of
the assets of Modcomp/Cerplex L.P. to CSP, Inc. for approximately $8.2 million.
The closing of the transaction is subject to the fulfillment of certain closing
conditions which the Company believes will be fulfilled by the end of August,
1997. Proceeds will be used to repay the term loan and revolver under the
Company's Credit Agreement. Although approximately $2,000,000 may be available
under the revolver for future borrowings, there can be no assurance that the
sale of Modcomp will be consummated in a timely manner, if at all.
The Company or its subsidiaries are required to pay BT 1.8 million pounds
in 1999 or earlier if certain sales volumes are reached in connection with the
purchase of BT's plant in Enfield, England.
17
<PAGE> 18
THE CERPLEX GROUP, INC.
The Company acquired inventory consisting of used telephones from Lucent
Technologies, Inc. ("Lucent"). At December 31, 1996, the Company had $5.9
million of inventory, production cost commitments and assets related to the
telephones acquired from Lucent. In June 1996, the Company executed a promissory
note bearing interest at 9.75% in the amount of $4.6 million payable on
September 15, 1996 in favor of Lucent, reflecting a portion of the amount
invoiced to the Company by Lucent (the "Lucent Note"). Lucent has invoiced the
company for an additional $0.6 million. Due to the quality of the inventory and
the lack of availability of spare parts to effect repairs, the Company believes
it has claims against Lucent. The Company currently does not intend to pay the
Lucent note or other Lucent invoices. If the Company is required to pay the
Lucent Note and other Lucent invoices in full, it would have a material adverse
effect on the Company's financial resources. On October 7, 1996, the Company
filed a lawsuit against Lucent in the Orange County Superior Court seeking to
have the Lucent Note declared invalid. On November 6, 1996, Lucent filed a
cross-complaint seeking payment of the Lucent Note, alleging damages for breach
of contract and seeking a constructive trust on any proceeds from the sale of
the telephones. The Company's failure to have the Lucent Note declared invalid,
or the loss to Lucent of any of the material claims asserted against the
Company, could materially and adversely affect the Company.
In October 1996, the Company entered into a transaction with Atwood
Richards, Inc. ("ARI") pursuant to which the Company was obligated to continue
to repair and refurbish the remaining telephones in inventory through December
31, 1996, and deliver 100% of the repaired product to ARI. The Company received
trade credits for approximately $4.5 million in goods and services. The trade
credits received from ARI may be used to acquire various goods and services.
There can be no assurance that the Company will be able to use the trade credits
in the near term, if at all.
The Company's primary sources for liquidity are cash flow from operations
and its ability to reduce working capital requirements and, potentially, are
subject to the sale of Modcomp and borrowings under the revolver under the
Credit Agreement. The Company's ability to remain in compliance with, and borrow
additional funds under the Credit Agreement remain subject to the Company
amending its Note Purchase Agreement prior to August 14, 1997, consummating the
sale of Modcomp and remaining in compliance with the terms of the Credit
Agreement and Note Purchase Agreement. There can be no assurance that the
foregoing will occur or that such borrowing capacity and cash flow from
operations will be adequate to meet the Company's obligations in the future.
18
<PAGE> 19
THE CERPLEX GROUP, INC.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
- --------------------------
Refer to disclosure set forth in Part I, Item 3 (Legal Proceedings) of the
Company's Annual Report on Form 10-K for the 1996 fiscal year.
ITEM 2. CHANGES IN SECURITIES
- ------------------------------
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
- ----------------------------------------
During portions of 1996 and 1997, the Company was in default under its
senior Credit Agreement. The Company has renegotiated and amended such agreement
to cure such defaults, subject to the Company fulfilling certain conditions
subsequent by August 14, 1997. See "Liquidity and Capital Resources" herein
for a more detailed discussion.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
At the Company's Annual Meeting of Stockholders held on June 10, 1997 (the
"Meeting"), the following matters were submitted and voted on by stockholders
and were adopted:
A. The approval of an amendment of the Company's Restated Certificate of
Incorporation to increase the number of authorized shares of Common
Stock from 30,000,000 to 60,000,000 shares.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN BROKER NON-VOTE
--- ------- ------- ---------------
<S> <C> <C> <C>
20,300,026 21,295 0 0
</TABLE>
B. The election of Richard C. Davis, Robert Finzi, Jerome Jacobson,
Patrick S. Jones, William A. Klein and Myron Kunin as directors of the
Company to serve until the next Meeting of Stockholders and until their
respective successors have been elected and qualified was carried.
<TABLE>
<CAPTION>
NAME FOR WITHHELD
---- --- --------
<S> <C> <C>
Richard C. Davis 20,317,753 3,568
Robert Finzi 20,317,753 3,568
Jerome Jacobson 20,301,126 20,195
Patrick S. Jones 20,317,753 3,568
William A. Klein 20,301,126 20,195
Myron Kunin 20,301,126 20,195
</TABLE>
C. The approval of a series of amendments to the Company's Restated 1993
Stock Option Plan (the "1993 Plan"), including without limitation (a)
an increase in the number of shares of Common Stock available for
issuance under the 1993 Plan by an additional 4,000,000 shares and (b)
increases in the number of shares subject to the periodic stock option
grants made to non-employee directors pursuant to the Automatic Option
Grant Program of such 1993 Plan.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN BROKER NON-VOTE
--- ------- ------- ---------------
<S> <C> <C> <C>
20,300,726 20,595 0 0
</TABLE>
D. The ratification of KPMG Peat Marwick LLP as the Company's independent
auditor for the current fiscal year.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN BROKER NON-VOTE
--- ------- ------- ---------------
<S> <C> <C> <C>
20,298,430 20,195 2,696 0
</TABLE>
ITEM 5. OTHER INFORMATION
- --------------------------
(a) RISK FACTORS
This report may contain 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
differences include, but are not limited to, those discussed below.
LOSSES AND ACCUMULATED DEFICIT. For the six month period ended June 30,
1997, the Company reported a net loss of $14.4 million, including an operating
loss of $14.9 million. As of June 30, 1997, the Company had an accumulated
deficit of $88.8 million. There can be no assurance that the Company will reduce
its operating losses or 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.
DEPENDENCE ON KEY CUSTOMERS. During 1996, Rank Xerox, IBM, BT and Digital
Equipment Corporation accounted for approximately 17%, 12%, 11%, and 4% of
revenues, respectively. In the six month period ended June 30, 1997, these
customers accounted for approximately 30%, 6%, 10%, and 10% of revenues,
respectively. During 1995 and 1996, IBM significantly decreased orders for
certain programs which materially and adversely affected the Company and its
results of operations. 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. During the first half of 1997,
sales to IBM decreased 68% from the first half of 1996. Sales to BT
significantly decreased during 1996 to approximately $21.4 million representing
a 36% decrease from 1995. During the first half of 1997, sales to BT decreased
29% from the first half of 1996. 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.
19
<PAGE> 20
THE CERPLEX GROUP, INC.
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 and its existing operations may be adversely
affected. The Company's financial condition and limited capital has adversely
impacted the Company's relationship with certain customers and may adversely
impact its relationship with customers in the future. During portions of 1996
and 1997, the Company was in default under its senior credit agreement and
subordinated note agreement. The Company has renegotiated amendments to its
senior credit facility and is negotiating amendments to its subordinated note
agreement. The terms of the senior credit agreement provide for a limited
borrowing base which will be further reduced through May 1998. The Company is
required to use a portion of cash generated from operations, and from sales of
assets to further reduce its borrowing base under the senior credit agreements.
The interest rate payable by the Company has increased significantly and will be
subject to significant further increases in the event the Company does not repay
the senior credit agreement in full by September 30, 1997. 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. The Company is required to maintain or fulfill certain
covenants and obligations in order to maintain its credit facility. No assurance
can be given that the Company will be able to fulfill such obligations and
covenants or to otherwise maintain its current credit facilities or that
additional financing will be available or, if available, will be on acceptable
terms.
IMPACT OF SERIES B PREFERRED STOCK. In June 1996, the Company issued 8,000
shares of Series B Preferred Stock at $1,000 per share in a private placement.
The Series B Preferred Stock is convertible into Common Stock of the Company at
the option of each holder at the lower of $5.07 per share or 80% of the average
closing bid price over a ten-day period ending three days prior to the date of
conversion. The Series B Preferred Stock has certain rights, privileges and
preferences, including preferential voting rights and 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 Preferred Stock
based upon the number of shares of Common Stock into which each share of Series
B Preferred Stock is convertible. As of June 30, 1997, 7,343 shares of the
Series B Preferred Stock had been converted into approximately 20,725,147 shares
of Common Stock. Due in part to the decreases in the trading price of the
Company's Common Stock, the conversion rights of the Series B Preferred Stock
have resulted in, and may in the future result in, dilution to the holders of
Common Stock.
DISPUTE WITH LUCENT TECHNOLOGIES. The Company acquired inventory consisting
of used telephones from Lucent. At December 31, 1996, the Company had $5.9
million of inventory, production cost commitments and assets, related to the
telephones acquired from Lucent, which were subsequently sold to a Company that
specializes in worldwide corporate bartering. In June 1996, the Company executed
a promissory note bearing interest at 9.75% in the amount of $4.6 million
payable on September 15, 1996 in favor of Lucent, reflecting a portion of the
amount invoiced to the Company by Lucent. Lucent has invoiced the Company for an
additional $0.6 million. Due to the quality of the inventory and the lack of
availability of spare parts to effect repairs, the Company believes it has
claims against Lucent. The Company currently does not intend to pay the Lucent
note or other Lucent invoices. If the Company is required to pay the Lucent note
and other Lucent invoices in full, it would have a material adverse effect on
the Company's financial resources. On October 7, 1996, the Company filed a
lawsuit against Lucent in the Orange County Superior Court seeking to have the
Lucent note declared invalid. On November 6, 1996, Lucent filed a
cross-complaint seeking payment of the Lucent Note, alleging damages for breach
of contract and seeking a constructive trust on any proceeds from the sale of
the telephones. The Company's failure to have the Lucent note declared invalid,
or the loss to Lucent of any of the material claims asserted by the Company,
could materially and adversely affect the Company.
20
<PAGE> 21
THE CERPLEX GROUP, INC.
RISK OF EXCESS AND UNUSABLE INVENTORY; DECREASED VALUE OF ASSETS. At June
30, 1997, inventory constituted approximately 11% of the Company's assets. Any
decrease in the demand for the Company's repair services could result in an
additional portion of the Company's inventory becoming excess, obsolete or
otherwise unusable. During the last few years, the Company wrote down a
significant amount of inventory and a significant amount of other assets,
including receivables, securities and goodwill. Changes in the Company's
business, as well as the business of third parties, could adversely affect the
value of assets remaining, possibly resulting in write-offs. The existence,
amounts and timing of any such additional write-offs will be dependent upon
various factors including, without limitation, the volume and profitability of
future operations, market conditions as well as the operations of the
above-mentioned third parties. In addition, the Company became entitled to
receive an aggregate of approximately 370,000 shares of Common Stock of Pen
Interconnect, Inc. in connection with the sale of its InCirT division which were
valued at $5.40 per share. The trading price of such shares has subsequently
decreased substantially and the Company wrote off $1.1 million in the fourth
quarter of 1996 and $0.5 million in the second quarter of 1997. There can be no
assurance that the Company will not be required to write down additional amounts
of its investment with respect to such shares in the future. In October 1996,
the Company entered into an agreement to sell its phone inventory purchased from
Lucent to Atwood Richards, Inc. ("ARI"). The consideration paid to the Company
from ARI was up to $7.5 million in trade credits. The Company has no prior
experience in using trade credits and there can be no assurance the Company will
realize the value of the trade credits. The Company wrote down the value of the
trade credits on the Company's financial statements at the end of 1996 to $3
million. There can be no assurance that the Company will not be required to
write down significant amounts of its inventory or other assets in the future,
which could have a material adverse effect on the Company's business and results
of operations.
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. 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 and 1996, 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
original equipment manufacturers ("OEM's") and third party maintainers ("TPM's")
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 OEM's and TPM'S. In
addition to competing with OEM's and TPM'S, 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.
21
<PAGE> 22
THE CERPLEX GROUP, INC.
EXPANSION OF INTERNATIONAL SALES. During the six months ended June 30,
1997, approximately 64% of the Company's sales were international. During 1996,
approximately 41% of the Company's sales were international. 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 result 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 transactions requiring capital will be limited by the Company's lack
of working capital and by the terms of the Company's senior credit facility and
subordinated notes. The Company is no longer permitted under the terms of its
credit facility to engage in acquisitions. There can be no assurance that the
Company will be able to acquire additional repair programs or complementary
businesses in the future 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 experienced declining sales. Net sales from end-of-life programs
declined from approximately $33 million in 1994 to $20 million in 1995 and
further declined to $9.2 million in 1996. Sales from end-of-life program during
1997 were not material. 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 is focusing on targeted
customers in specific industries. 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 July 31, 1997, the officers, directors, principal stockholders
and their affiliates owned greater than a majority 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, determine the outcome of most
corporate actions requiring stockholder approval and otherwise 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 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. In April 1997, William A. Klein acquired 3,663,898 shares of Common
Stock upon the conversion of Series B Preferred Stock, Richard C. Davis acquired
166,667 shares of Common Stock upon the conversion of Series B Preferred Stock
and the Sprout Growth, II L.P. acquired 7,563,333 shares of Common Stock upon
the conversion of Series B Preferred Stock. In addition, DLJ Capital Corporation
converted 231 shares of Preferred Stock into 770,000 shares of Common Stock.
22
<PAGE> 23
THE CERPLEX GROUP, INC.
DEPENDENCE ON KEY PERSONNEL. The Company's future success depends, to a
large extent, upon the efforts and abilities of key employees. Competition for
qualified 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. During the last year, the Company has lost the services of several of
its key executive officers and members of management.
The Company hired a new chief executive officer on July 8, 1997.
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. On February 20, 1997, the Company was removed from
the NASDAQ National Market System and commenced trading on the NASDAQ OTC
Bulletin Board. There can be no assurance of an active trading market for the
Company's Common Stock. In addition, 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.
ITEM 16. EXHIBITS.
a) Exhibits.
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2.1 Agreement of Merger dated as of August 30, 1993, Incorporated herein by reference to
by and among Cerplex Incorporated, Diversified Exhibit 2.1 to the Company's
Manufacturing Services, Inc. ("DMS"), EMServe, Registration Statement on Form S-1
Inc. ("EMServe"), InCirT Technology Incorporated (File No. 33-75004) which was
("InCirT") and Testar, Inc. ("Testar"). declared effective by the Commission
on April 8, 1994.
2.2 Agreement and Plan of Merger dated November 12, Incorporated herein by reference to
1993, between The Cerplex Group Subsidiary, Inc. Exhibit 2.2 to the Company's
and 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 Incorporated herein by reference to
with and into The Cerplex Group Subsidiary, Inc. Exhibit 2.2 to the Company's
dated as of 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, Incorporated herein by reference to
1993 by and between Certech Technology, Inc., a Exhibit 2.4 to the Company's
wholly-owned subsidiary of the Registrant Registration Statement on Form S-1
("Certech"), and 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, Incorporated herein by reference to
1994, by and among The Cerplex Group, Inc., Exhibit 2 to the Form 8-K filed July
Cerplex Limited, BT Repair Services Limited and 29, 1994.
BT.
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 29, 1994.
Limited and BT.
2.7 Formation and Contribution Agreement effective Incorporated herein by reference to
December 1, 1994 by and among Modcomp/Cerplex Exhibit 2.7 to the Company's Annual
L.P., Modular Computer Systems, Inc., Cerplex Report on Form 10-K for the fiscal
Subsidiary, Inc. and 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 Exhibit 2.8 to the Company's Annual
Computer Systems, Inc. Report on Form 10-K for the fiscal
year ended January 1, 1995.
2.9 Limited Partnership Agreement of Modcomp/Cerplex Incorporated herein by reference to
L.P. effective December 1, 1994. Exhibit 2.8 to the Company's Annual
Report on Form 10-K for the fiscal year
ended January 1, 1995.
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THE CERPLEX GROUP, INC.
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2.10 Put/Call Option Agreement effective December 1, Incorporated herein by reference to
1994 by and among Cerplex Subsidiary, Inc., The Exhibit 2.8 to the Company's Annual
Cerplex Group, Inc., Modular Computer Systems, Report on Form 10-K for the fiscal
Inc. and Modcomp Joint Venture Inc. year ended January 1, 1995.
2.11 Stock Purchase Agreement dated as of June 29, 1995 Incorporated herein by reference to
by and among The Cerplex Group, Inc., Tu Nguyen Exhibit 2.11 to the Company's
and Phuc Le. Quarterly 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 Exhibit 2.12 to the Company's
Venture, Inc., AEG Aktiengesellschaft, the Annual Report on Form 10-K for the
Company, Cerplex Subsidiary, Inc. and fiscal year ended December 31, 1995.
Modcomp/Cerplex L.P.
2.13 Stock Purchase Agreement dated as of May 24, Incorporated herein by reference to
1996, by and among The Cerplex Group, Inc., Exhibit 2.13 to the Company's
Cerplex Limited, Rank Xerox - The Document Current Report on Form 8-K dated
Company SA and Rank Xerox Limited (conformed May 24, 1996.
copy to original).
2.14 Contract of Warranty dated as of May 24, 1996, by Incorporated herein by reference to
and among The Cerplex Group, Inc., Cerplex Exhibit 2.14 to the Company's
Limited, Rank Xerox - The Document Company SA Current Report on Form 8-K dated
and Rank Xerox Limited (conformed copy to the May 24, 1996.
original).
2.15 Supply and Services Agreement dated as of May 24, Incorporated herein by reference to
1996, by and among The Cerplex Group, Inc., Exhibit 2.15 to the Company's
Cerplex Limited, Rank Xerox - The Document Current Report on Form 8-K dated
Company SA and Rank Xerox Limited (conformed May 24, 1996.
copy to the original).
2.16 Stock Purchase Agreement dated March 28, 1997 Incorporated herein by reference to
relating to all of the outstanding stock of Peripheral Exhibit 2.13 to the Company's
Computer Support, Inc. among the Company, PCS Annual Report on Form 10-K for the
Acquisition Co., Inc., and Lincolnshire Equity fiscal year ended December 31, 1996.
Partners, L.P.
2.17 Asset Purchase Agreement dated August 6, 1997 by Filed herein.
and among the Company, Cerplex Subsidiary, Inc.,
Modcomp Joint Venture, Inc., Modcomp/Cerplex
L.P. and CSP Inc.
3.1 Restated Certificate of Incorporation of the Incorporated herein by reference to
Registrant. Exhibit 3.1 to the Company's
Registration Statement on From S-1
(File No. 33-75004) which was
declared effective by the Commission
on April 8, 1994.
</TABLE>
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<PAGE> 25
THE CERPLEX GROUP, INC.
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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.
3.3 Certificate of Amendment of the Restated Certificate Filed herein.
of Incorporation of the Registrant (filed June 16,
1997).
4.1 Stock Purchase Agreement dated as of November 19, Incorporated herein by reference to
1993 by and among the Registrant, the stockholders Exhibit 4.1 to the Company's
of the Registrant identified in Part A of Schedule I Registration Statement on Form S-1
thereto and the purchasers of shares of the (File No. 33-75004) which was
Registrant's Series A Preferred Stock identified in declared effective by the Commission
Schedule I thereto (including the Schedules thereto; on April 8, 1994.
Exhibits omitted).
4.2 Registration Rights Agreement dated as of November Incorporated herein by reference to
19, 1993, by and among the Registrant, the investors Exhibit 4.2 to the Company's
listed on Schedule A thereto and the security holders Registration Statement on Form S-1
of the Registrant listed on Schedule B thereto, (File No. 33-75004) which was
together with Amendment No. 1. declared effective by the Commission
on April 8, 1994.
4.3 Co-Sale Agreement dated as of November 19, 1993, Incorporated herein by reference to
by and among the Registrant, the managers listed on Exhibit 4.3 to the Company's
Schedule A thereto and the investors listed on Registration Statement on Form S-1
Schedule B thereto. (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, Incorporated herein by reference to
by and among the Registrant and the purchasers Exhibit 4.4 to the Company's
listed in Annex 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 Registrant Exhibit 4.5 to the Company's
and Donaldson, Lufkin & Jenrette Securities Registration Statement on Form S-1
Corporation. (File No. 33-75004) which was
declared effective by the Commission
on April 8, 1994.
4.6 Observation Rights Agreement dated as of November Incorporated herein by reference to
19, 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>
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<PAGE> 26
THE CERPLEX GROUP, INC.
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4.7 Observation Rights Agreement dated as of November Incorporated herein by reference to
19, 1993, between the Registrant and certain note Exhibit 4.7 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.
4.8 Note Purchase Agreement dated as of November 19, Incorporated herein by reference to
1993, by and among the Registrant and The Exhibit 4.8 to the Company's
Northwestern Mutual Life Insurance Company, John Registration Statement on Form S-1
Hancock Mutual Life Insurance, Registrant and Bank (File No. 33-75004) which was
of Scotland London Nominees Limited. declared effective by the Commission
on April 8, 1994.
4.9 Amendment No. 2 to Registration Rights Agreement Incorporated herein by reference to
dated as of April 6, 1994, by and among the Exhibit 4.9 to the Company's
Registrant and 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 Incorporated herein by reference to
of October 27, 1994, by and among the Company, Exhibit 4.10 to the Company's
Northwestern Mutual Life Insurance Company, John Annual Report on Form 10-K for the
Hancock Mutual Life Insurance Company and North fiscal year ended March 31, 1995.
Atlantic Smaller Companies Trust P.L.C.
(collectively, the "Noteholders").
4.11 Waiver and Amendment Agreement dated April 15, Incorporated herein by reference to
1996 by and among Company, The Northwestern Exhibit 4.11 to the Company's
Mutual Life Insurance Company, John Hancock Annual Report on Form 10-K for the
Mutual Life Insurance Company and North Atlantic fiscal year ended December 31, 1995.
Smaller Companies Investment Trust PLC.
4.12 Warrant Agreement dated as of April 15, 1996 by Incorporated herein by reference to
and among Company, The Northwestern Mutual Life Exhibit 4.12 to the Company's
Insurance Company, John Hancock Mutual Life Annual Report on Form 10-K for the
Insurance Company and North Atlantic Smaller fiscal year ended December 31, 1995.
Companies Investment Trust PLC.
4.13 First Amendment to Warrant Agreement dated April Incorporated herein by reference to
15, 1996 by and among Company and each of the Exhibit 4.13 to the Company's
holders of warrants listed on Schedule A thereto, Annual Report on Form 10-K for the
with respect to that certain Warrant Agreement dated fiscal year ended December 31, 1995.
November 19, 1993.
4.14 First Amendment to Observation Rights Agreement Incorporated herein by reference to
dated as of April 15, 1996 between Company and Exhibit 4.14 to the Company's
certain note purchasers. Annual Report on Form 10-K for the
fiscal year ended December 31, 1995.
</TABLE>
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THE CERPLEX GROUP, INC.
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4.15 Third Amendment to Registration Rights Agreement Incorporated herein by reference to
dated as of April 15, 1996 by and among Company, Exhibit 4.15 to the Company's
the investors of Company listed on Schedule A Annual Report on Form 10-K for the
thereto and the security holders of Company listed on fiscal year ended December 31, 1995.
Schedule B thereto.
4.16 Warrant Agreement dated April 15, 1996 by and Incorporated herein by reference to
among Company, Wells Fargo Bank, National Exhibit 4.16 to the Company's
Association, Sumitomo Bank of California, BHF Annual Report on Form 10-K for the
Bank Aktiengesellschaft and Comerica Bank- fiscal year ended December 31, 1995.
California.
4.17 Stock Purchase Agreement dated June 10, 1996 by Incorporated herein by reference to
and among the Company and the investors listed on Exhibit 4.17 to the Company's
Schedule A thereto. Quarterly Report on Form 10-Q filed
August 14, 1996.
4.18 Fourth Amendment to Registration Rights Agreement Incorporated herein by reference to
dated June 10, 1996 by and among Company, the Exhibit 4.18 to the Company's
investors listed on Schedule A thereto, the security Quarterly Report on Form 10-Q filed
holders of Company listed on Schedule B thereto, the August 14, 1996.
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 to the Company's
Quarterly Report on Form 10-Q
filed August 14, 1996.
4.20 Waiver and Amendment Agreement dated October Incorporated herein by reference to
31, 1996 by and among the company and the Exhibit 4.17 to the Company's
Noteholders. Annual Report on Form 10-K for the
fiscal year ended December 31, 1996.
4.21 Waiver and Amendment Agreement dated December Incorporated herein by reference to
9, 1996 by and among the company and the Exhibit 4.18 to the Company's
Noteholders. Annual Report on Form 10-K for the
fiscal year ended December 31, 1996.
4.22 Side Letter dated March 28, 1997 by and among the Incorporated herein by reference to
Company and the Noteholders. Exhibit 4.19 to the Company's
Annual Report on Form 10-K for the
fiscal year ended December 31, 1996.
4.23 Amended and Restated Note Purchase Agreement Incorporated herein by reference to
dated April 9, 1997 by and among the Company and Exhibit 4.20 to the Company's
the Noteholders. Annual Report on Form 10-K for the
fiscal year ended December 31, 1996.
4.24 Second Amendment to Warrant Agreement dated Incorporated herein by reference to
April 9, 1997, by and among the Company and each Exhibit 4.21 to the Company's
of the holders of warrants listed on Schedule A Annual Report on Form 10-K for the
thereto, which Second Amendment amends the fiscal year ended December 31, 1996.
Warrant Agreement dated November 19, 1993 as
amended by the First Amendment to Warrant
Agreement dated April 15, 1996.
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THE CERPLEX GROUP, INC.
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4.25 Second Amendment to Warrant Agreement dated Incorporated herein by reference to
April 9, 1997 by and among the Company and each Exhibit 4.22 to the Company's
of the holders of warrants listed on Schedule A Annual Report on Form 10-K for the
thereto, which Second Amendment amends the fiscal year ended December 31, 1996.
Warrant Agreement dated April 15, 1996, as
amended by a Waiver and Amendment Agreement
dated October 31, 1996.
4.26 Amended and Restated Warrant Agreement dated Incorporated herein by reference to
April 9, 1997 by and among the Company; Wells Exhibit 4.23 to the Company's
Fargo Bank, National Association; BHF-Bank Annual Report on Form 10-K for the
Aktiengesellschaft; and Citibank, N.A. fiscal year ended December 31, 1996.
4.27 Fifth Amendment to Registration Rights Agreement Filed herein.
dated as of April 9, 1997 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 the
parties listed on Schedule D thereto.
4.28 Waiver Agreement dated as of June 30, 1997 among Filed herein.
the Company and the Noteholders.
4.29 Side letter dated July 10, 1997 by and among the Filed herein.
Company and the Noteholders.
4.30 Side letter dated August 6, 1997 by and among the Filed herein.
Company and the Noteholders.
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 Incorporated herein by reference to
1990 Plan. Exhibit 10.2 to the Company's
Registration Statement on Form S-1
(File No. 33-75005) which was
declared effective by the Commission
on April 8, 1994.
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.
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THE CERPLEX GROUP, INC.
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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 Incorporated herein by reference to
employees) 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 Incorporated herein by reference to
and 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 Incorporated herein by reference to
(the "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.
10.10 Form of Stock Option Agreement, together with Incorporated herein by reference to
Addenda, 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 Task Agreement dated December 1, 1991, by Incorporated herein by reference to
and between International Business Machines Exhibit 10.11 to the Company's
Incorporated ("IBM") and the Registrant, together Registration Statement on Form S-1
with Amendment to Master Agreement and Task (File No. 33-75004) which was
Order. declared effective by the Commission
on April 8, 1994.
</TABLE>
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THE CERPLEX GROUP, INC.
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10.12 Master Agreement dated May 6, 1992 by and Incorporated herein by reference to
between IBM and the Company. Exhibit 10.12 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.
10.13 Technology Services Agreement effective March 1, Incorporated herein by reference to
1993, by and between Novadyne Computer Systems, Exhibit 10.13 to the Company's
Inc. ("Novadyne") and Cerplex Incorporated (a Registration Statement on Form S-1
California corporation and a predecessor of the (File No. 33-75004) which was
Registrant), together with Amendments Nos. 1 and declared effective by the Commission
2. on April 8, 1994.
10.14 Technology Services Agreement effective December Incorporated herein by reference to
17, 1993, by and between Spectradyne, Inc. Exhibit 10.14 to the Company's
("Spectradyne") 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 Repair Services Agreement dated January 1, 1994 by Incorporated herein by reference to
and between Bull HN Information Systems, Inc. and Exhibit 10.24 to the Company's
the Registrant. Registration Statement on Form S-1
(File No. 33-75004) which was
declared effective by the Commission
on April 8, 1994.
10.16 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.
10.17 Lease Agreement dated April 1, 1992 by and Incorporated herein by reference to
between Henry G. Page Jr., and Diversified Exhibit 10.16 to the Company's
Manufacturing Services, Inc. ("DMS"). Registration Statement on Form S-1
(File No. 33-75004) which was
declared effective by the Commission
on April 8, 1994.
10.18 Sublease dated January 1, 1994 by and between Bull Incorporated herein by reference to
and Cerplex Group, Inc. (a Massachusetts Exhibit 10.17 to the Company's
corporation). Registration Statement on Form S-1
(File No. 33-75004) which was
declared effective by the Commission
on April 8, 1994.
10.19 Standard Industrial/Commercial Single-Tenant Lease Incorporated herein by reference to
- Net dated November 29, 1990 by and among Exhibit 10.18 to the Company's
Kilroy Building 73 Partnership, Cerplex Incorporated Registration Statement on Form S-1
and InCirT, together with Amendment No. 1 (File No. 33-75004) which was
declared effective by the Commission
on April 8, 1994.
</TABLE>
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THE CERPLEX GROUP, INC.
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10.20 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.
10.21 Sublease dated March 1, 1993 by and between Incorporated herein by reference to
Novadyne and the Registrant together with Lease Exhibit 10.20 to the Company's
Amendment dated July 22, 1991 by and between Registration Statement on Form S-1
McDonnell Douglas Realty Company and Novadyne. (File No. 33-75004) which was
declared effective by the Commission
on April 8, 1994.
10.22 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 Registration Statement on Form S-1
("Cartwright"), together with Addendum and (File No. 33-75004) which was
Sublease dated September 6, 1991 by and between declared effective by the Commission
Cartwright and the Registrant. on April 8, 1994.
10.23 Sublease dated July 30, 1992 by and between Incorporated herein by reference to
Cartwright 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.
10.24 Credit Agreement dated as of October 12, 1994 (the Incorporated herein by reference to
"Credit Agreement") among The Cerplex Group, Exhibit 10.24 to the Company's
Inc., as Borrower; the lenders listed therein, as Annual Report on Form 10-K for the
Lenders; and Wells Fargo Bank, National fiscal year ended January 1, 1995.
Association, as Administrative Agent; and those
certain exhibits, schedules and collateral documents
to such Credit Agreement.
10.25 Limited Waiver dated as of November 14, 1995 Incorporated herein by reference to
("Waiver") by and among The Cerplex Group, Inc. Exhibit 10.25 to the Company's
(the "Company"), the financial institutions listed on Quarterly Report on Form 10-Q for
the signature pages thereof ("Lenders"), and Wells the quarter ended October 1, 1995.
Fargo Bank, 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, Exhibit 10.26 to the Company's
1995). Quarterly Report on Form 10-Q for
the quarter ended October 1, 1995.
</TABLE>
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THE CERPLEX GROUP, INC.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER TITLE METHOD OF FILING
- ------- ----- ----------------
<S> <C> <C>
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 Incorporated herein by reference to
15, 1996 by and among Company, the lenders whose Exhibit 10.28 to the Company's
signatures appear on the signature pages thereof, as Annual Report on Form 10-K for the
Lenders; Wells Fargo Bank, National Association, as fiscal year ended December 31, 1995.
Administrative Agent; and the Subsidiaries for
certain limited purposes.
10.29 Promissory Noted dated June 21, 1996 payable by Incorporated herein by reference to
the Company to Lucent Technologies. Exhibit 10.29 to the Company's
Quarterly Report on Form 10-Q for
the quarter ended June 30, 1996.
10.30 Limited Waiver dated as of October 31, 1996 by and Incorporated herein by reference to
among the Company, Lenders and Administrative Exhibit 10.29 to the Company's
Agent, and for certain limited purposes, the Quarterly Report on Form 10-Q for
Subsidiaries, Modcomp/Cerplex L.P., Modcomp the quarter ended September 29,
Joint Venture, Inc., Modular Computer Services, 1996.
Inc., Modular Computer Systems GmbH and
Modcomp France S.A., which waiver is made with
reference to the credit Agreement.
10.31 Extension and Forbearance Agreement dated March Incorporated herein by reference to
31, 1997 by and among the Company, the financial Exhibit 10.31 to the Company's
institutions listed on the signature pages thereof and Annual Report on Form 10-K for the
Wells Fargo Bank, National Association. fiscal year ended December 31, 1996.
10.32 Second Amendment to Credit Agreement dated Incorporated herein by reference to
November 30, 1996 (the "Second Amendment") by Exhibit 10.32 to the Company's
and among the Company, the financial institutions Annual Report on Form 10-K for the
listed on the signature pages thereof ("Lenders") and fiscal year ended December 31, 1996.
Wells Fargo Bank, National Association, as
administrative agent for the Lenders, and for certain limited
purposes, Certech Technology, Inc., Cerplex Mass., Inc.,
Cerplex Limited, Apex Computer Company, Cerplex Subsidiary,
Inc., Peripheral Computer Support, Inc., Modcomp/Cerplex, L.P.,
Modcomp Joint Venture, Inc., Modular Computer Services, Inc.,
Modular Computer Systems GmbH and Modcomp France S.A., which
Second Amendment amends the Credit Agreement dated October 12,
1994, as amended.
</TABLE>
32
<PAGE> 33
THE CERPLEX GROUP, INC.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER TITLE METHOD OF FILING
- ------- ----- ----------------
<S> <C> <C>
10.33 Third Amendment to Credit Agreement dated April Incorporated herein by reference to
9, 1997 (the "Third Amendment") by and among the Exhibit 10.33 to the Company's
Company, the financial institutions listed on the Annual Report on Form 10-K for the
signature pages thereof ("Lenders") and Wells Fargo fiscal year ended December 31, 1996.
Bank, National Association, as administrative agent
for the Lenders, and for certain limited purposes, Certech
Technology, Inc., Cerplex Mass., Inc., Cerplex Limited, Apex
Computer Company, Cerplex Subsidiary, Inc., Peripheral Computer
Support, Inc., Modcomp/Cerplex, L.P., Modcomp Joint Venture,
Inc., Modular Computer Services, Inc., Modular Computer Systems
GmbH and Modcomp France S.A., which Third Amendment amends the
Credit Agreement dated October 12, 1994, as amended.
10.34 Fourth Amendment to Credit Agreement and Limited Incorporated herein by reference to
Waiver dated as of May 30, 1997 and entered into Exhibit 10.34 to the Company's
by and among the Company, the financial institutions Registration Statement on Form S-2
listed on the signature pages thereof ("Lenders") and (Registration No. 333-28425).
Wells Fargo Bank, National Association, as
administrative agent for the Lenders, and for certain limited
purposes, Certech Technology, Inc., Cerplex Mass., Inc.,
Cerplex Limited, Apex Computer Company, Cerplex Subsidiary,
Inc., Modcomp/Cerplex L.P., Modcomp Joint Venture, Inc.,
Modular Computer Services, Inc., Modular Computer Systems GmbH
and Modcomp France S.A.
10.35 Fifth Amendment to Credit Agreement and Limited Filed herein.
Waiver dated June 30, 1997 by and among the
Company, the financial institutions listed on the
signature pages thereof ("Lenders") and Wells Fargo
Bank, National Association, as administrative agent
for the Lenders and, for certain limited purposes,
certain subsidiaries of the Company.
10.36 Sixth Amendment to Credit Agreement and Consent Filed herein.
dated August 6, 1997 by and among the Company,
the financial institutions listed on the signature pages
thereof ("Lenders") and Wells Fargo Bank, National
Association as administrative agent for the Lenders
as administrative agent for the Lenders and, for
certain limited purposes, certain subsidiaries of the
Company.
27.1 Financial Data Schedule. Filed herein.
</TABLE>
b. Reports on Form 8-K for the quarter ended June 28, 1997
None.
33
<PAGE> 34
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.
Date: August 12, 1997
THE CERPLEX GROUP, INC.
/s/ ROBERT W. HUGHES
------------------------------
Robert W. Hughes
Senior Vice President
and Chief Financial Officer
(Principal Accounting Officer)
34
<PAGE> 35
EXHIBIT INDEX
QUARTER ENDED JUNE 28, 1997
<TABLE>
<CAPTION>
Sequential
Exhibit Description of Exhibits Page No.
- ------- ----------------------- ----------
<S> <C> <C>
2.17 Asset Purchase Agreement dated August 6, 1997 by and among the
Company, Cerplex Subsidiary, Inc., Modcomp Joint Venture, Inc.,
Modcomp/Cerplex L.P. and CSP, Inc.
3.3 Certificate of Amendment of the Restated Certificate of Incorporation
of the Registrant (filed June 16, 1997).
4.27 Fifth Amendment to Registration Rights Agreement dated as of April 9,
1997 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 the parties
listed on Schedule D thereto.
4.28 Waiver Agreement dated as of June 30, 1997 among the Company and the
Noteholders.
4.29 Side letter dated July 10, 1997 by and among the Company and the
Noteholders.
4.30 Side letter dated August 6, 1997 by and among the Company and the
Noteholders.
10.35 Fifth Amendment to Credit Agreement and Limited Waiver dated June 30,
1997 by and among the Company, the financial institutions listed on
the signature pages thereof ("Lenders") and Wells Fargo Bank, National
Association, as administrative agent for the lenders ("Wells") and,
for certain limited purposes, certain subsidiaries of the Company.
10.36 Sixth Amendment to Credit Agreement and Consent dated August 6, 1997
by and among the Company, the Lenders, Wells and, for certain limited
purposes, certain subsidiaries of the Company.
27.1 Financial Data Schedule.
</TABLE>
<PAGE> 36
SCHEDULE I - CONDENSED FINANCIAL INFORMATION
CERPLEX S.A.S
(A SUBSIDIARY OF THE CERPLEX GROUP, INC.)
CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
December 31,
1996
------------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 18,412
Accounts receivable, net 1,307
Inventories 3,014
Prepaid expenses and other current assets 325
---------
Total current assets 23,058
Property, plant and equipment, net 12,005
Other long-term assets (102)
---------
Total assets $ 34,961
=========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 7,525
Accrued and other current liabilities 10,398
Income taxes payable 1,719
---------
Total current liabilities 19,642
Long-term obligations 6,214
Stockholders' equity:
Common stock 6,134
Retained earnings 3,098
Cumulative translation adjustment (127)
---------
Total stockholders' equity 9,105
---------
Total liabilities and stockholders' equity $ 34,961
=========
</TABLE>
<PAGE> 37
CERPLEX S.A.S
(A SUBSIDIARY OF THE CERPLEX GROUP, INC.)
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Seven
Months Ended
December 31,
1996 (1)
-------------
<S> <C>
Net sales $33,443
Cost of sales 25,862
-------
Gross profit 7,581
Selling, general and administrative expenses 3,275
-------
Operating income 4,306
Other expense, net 11
Interest income, net (329)
-------
Income before income taxes 4,624
Provision for income taxes 1,526
=======
Net income $ 3,098
=======
</TABLE>
(1) Cerplex S.A.S. was acquired in June 1996.
<PAGE> 38
CERPLEX S.A.S
(A SUBSIDIARY OF THE CERPLEX GROUP, INC.)
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Seven
Months Ended
December 31,
1996 (1)
------------
<S> <C>
Cash flows from operating activities:
Net income $ 3,098
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 399
Foreign currency transaction loss 22
Decrease (increase) in:
Accounts receivable (1,220)
Inventories (2,715)
Prepaid expenses and other 7,888
Other long-term assets 836
Increase (decrease) in:
Accounts payable 3,022
Accrued and other current liabilities (4,346)
Income taxes payable 1,759
-------
Net cash provided by operating activities 8,743
-------
Cash flows from investing activities:
Purchase of plant and equipment, net (178)
-------
Net cash used in investing activities (178)
-------
Cash flows from financing activities:
Investment from affiliates 102
-------
Net cash provided from financing activities 102
-------
Effect of exchange rate changes on cash (381)
-------
Net increase in cash and cash equivalents 8,286
Cash and cash equivalents at beginning of period 10,126
=======
Cash and cash equivalents at end of period $18,412
=======
</TABLE>
(1) Cerplex S.A.S. was acquired in June 1996.
<PAGE> 1
EXHIBIT 2.17
EXECUTION COPY
ASSET PURCHASE AGREEMENT
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
1. GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Schedules and Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.3 U.S. Dollars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2. PURCHASE AND SALE OF THE ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.1 Purchase and Sale of the Assets . . . . . . . . . . . . . . . . . . . . . . 6
2.2 Consideration for Assets. . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.3 Delivery of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.4 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.5 Closing Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.6 Liabilities Assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.7 Liabilities Not Assumed . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.8 Allocation of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . 8
2.9 Instruments of Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3. REPRESENTATIONS AND WARRANTIES BY SELLING ENTITIES . . . . . . . . . . . . . . . . . 8
3.1 Organization, Good Standing and Qualification . . . . . . . . . . . . . . . 8
3.2 Capital Stock and Ownership of Subsidiaries . . . . . . . . . . . . . . . . 9
3.3 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.4 No Conflict; No Consents or Approvals . . . . . . . . . . . . . . . . . . . 10
3.5 Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.6 No Termination of Relationships . . . . . . . . . . . . . . . . . . . . . . 11
3.7 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.8 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.9 Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.10 Equipment Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.11 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.12 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.13 Insurance Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.14 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.15 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.16 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.17 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.18 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.19 U.S. Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . 16
3.20 Foreign Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . 17
3.21 Indebtedness and Guaranties . . . . . . . . . . . . . . . . . . . . . . . . 18
3.22 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.23 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.24 Certain Business Relationships . . . . . . . . . . . . . . . . . . . . . . . 19
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
3.25 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.26 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.27 Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.28 Officers and Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.29 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.30 Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4. REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . . . . . . . . . . . . . . 20
4.1 Due Incorporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.2 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.3 No Conflict; No Consents or Approvals . . . . . . . . . . . . . . . . . . . 21
5. COVENANTS OF THE SELLING ENTITIES . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.1 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.2 Absence of Material Changes . . . . . . . . . . . . . . . . . . . . . . . . 21
5.3 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.4 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.5 Continued Truth of Representations and Warranties of . . . . . . . . . . . 23
5.6 Continuing Obligation to Inform . . . . . . . . . . . . . . . . . . . . . . 23
5.7 Exclusive Dealing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.8 Consents and Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.9 Access to Financial, Operating and Other Information . . . . . . . . . . . . 24
5.10 Relinquishment of Intellectual Property . . . . . . . . . . . . . . . . . . 24
6. COVENANTS OF BUYER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.1 Continued Truth of Representations and Warranties of Buyer . . . . . . . . . 24
6.2 Continuing Obligation to Inform . . . . . . . . . . . . . . . . . . . . . . 25
6.3 Consents and Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.4 Taxes and Other Obligations . . . . . . . . . . . . . . . . . . . . . . . . 25
6.5 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.6 Assignment Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7. CLOSING CONDITIONS AND DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.1 Conditions to Obligations of Buyer . . . . . . . . . . . . . . . . . . . . . 25
7.2 Conditions to Obligations of the Selling Entities. . . . . . . . . . . . . . 27
8. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.1 Indemnification of Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.2 Limitations on Indemnification . . . . . . . . . . . . . . . . . . . . . . . 28
8.3 Third-Party Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.4 Indemnification of Selling Entities. . . . . . . . . . . . . . . . . . . . 30
8.5 Exclusive Remedy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9. TERMINATION AND CERTAIN WAIVERS AND DAMAGE . . . . . . . . . . . . . . . . . . . . . 30
10.1 Survival of Representations, Etc. . . . . . . . . . . . . . . . . . . . . . 31
10.2 Benefit of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
10.3 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.4 Construction of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.5 Each Party to Bear Own Costs . . . . . . . . . . . . . . . . . . . . . . . . 31
10.6 Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.7 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
10.8 Entire Agreement; Waivers . . . . . . . . . . . . . . . . . . . . . . . . . 32
10.9 Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
10.10 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
10.11 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
10.12 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.13 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.14 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.15 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.16 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.17 No Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . 34
</TABLE>
iii
<PAGE> 5
EXHIBITS
A Escrow Agreement
B. Allocation of Purchase Price
C. Bill of Sale
D. Assignment and Assumption Agreement
E. Form of Certificate of Modcomp Officers
SCHEDULES
2.1 Assets
3 Selling Entities' Officers and Employees
3.1 Jurisdictions Authorized to Do Business
3.2 Capital Stock and Ownership of Subsidiaries
3.2.5 Financing Statements
3.4 No Conflict; No Consent or Approvals
3.7 Financial Statements
3.8 Tax Matters
3.9 Real Property
3.10 Equipment Leases
3.12 Intellectual Property
3.12.3 Infringement
3.12.4 Exceptions
3.13 Insurance Policies
3.14 Contracts
3.15 Litigation
3.16 Compliance with Law
3.17 No Material Adverse Change
3.18 Labor Matters
3.19 U.S. Employee Benefit Plans
3.20 Foreign Employee Benefit Plans
3.21 Indebtedness and Guaranties
3.22 Environmental Matters
3.23 Permits
3.24 Certain Business Relationships
3.26 Bank Accounts
3.28 Officers
iv
<PAGE> 6
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is entered into as of
August 6, 1997, by and among The Cerplex Group, Inc., a Delaware corporation
("Cerplex"), Cerplex Subsidiary, Inc., a Delaware corporation ("Cerplex Sub"),
Modcomp Joint Venture, Inc., a Delaware corporation ("MJVI"), Modcomp/Cerplex,
L.P., a Delaware limited partnership ("Modcomp"; Cerplex, Cerplex Sub, MJVI and
Modcomp are hereinafter referred to collectively as the "Selling Entities"),
and CSP Inc., a Massachusetts corporation ("Buyer").
RECITALS
WHEREAS, Cerplex owns all of the issued and outstanding shares of
capital stock of Cerplex Sub and MJVI. Cerplex Sub and MJVI are the sole
general and limited partners of Modcomp; and
WHEREAS, Modcomp desires to sell to Buyer, and Buyer desires to
purchase from Modcomp, all of the assets of Modcomp (including all of the
capital stock of the Subsidiaries which is owned by Modcomp) on the terms and
conditions set forth herein.
WHEREAS, the parties desire that 12:01 a.m. June 30, 1997 (the
"Effective Date") be the date as of which the Purchase Price (as defined
herein) will be determined and the Business (as defined herein) will be run for
the benefit of Buyer from and after such date;
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter set forth and other good and valuable consideration, the parties
hereto, on the basis of, and in reliance upon, the representations, warranties,
covenants, obligations and agreements set forth in this Agreement, and upon the
terms and subject to the conditions contained herein, hereby agree as follows:
1. GENERAL
1.1 Definitions. The terms defined in this Section 1.1, whenever
used in this Agreement, shall have the following meanings for all purposes of
this Agreement:
1.1.1 "Agreement" shall have the meaning given such
term in the Recitals.
1.1.2 "Assets" shall have the meaning given such
term in Section 2.1.
<PAGE> 7
1.1.3 "Assumed Liabilities" shall mean (a) all
liabilities of the Subsidiaries other than any contract, commitment or
agreement to which a Subsidiary is a party and is not listed in Schedule 3.14
but otherwise falls within the definition of "Contract" in Section 3.14;
provided, however, such contract, commitment or agreement shall be an Assumed
Liability hereunder if after the Closing, Buyer or a Subsidiary assumes any
related assets or elects to receive, retain or use related benefits arising
therefrom; (b) all liabilities reflected in the Closing Balance Sheet; (c) all
obligations from and after the Effective Date under the Contracts or, subject
to Section 2.7.5, any other contract, commitment or agreement to which Modcomp
is a party; and (d) all other liabilities and obligations arising from the
conduct of the Business from and after the Effective Date which have not arisen
as a result of a breach of a covenant set forth in either Section 5.1 or 5.2,
except for Excluded Liabilities.
1.1.4 "Business" means the business carried on by
Modcomp and the Subsidiaries on the date of this Agreement.
1.1.5 "Buyer" shall have the meaning given such
term in the Recitals.
1.1.6 "CERCLA" shall have the meaning given such
term in Section 3.22.1.
1.1.7 "Cerplex" shall have the meaning given such
term in the Recitals.
1.1.8 "Cerplex Sub" shall have the meaning given
such term in the Recitals.
1.1.9 "Closing" shall have the meaning given such
term in Section 2.4.
1.1.10 "Closing Balance Sheet" shall have the
meaning given such term in Section 2.5.
1.1.11 "Closing Balance Sheet Date" shall mean June
27, 1997.
1.1.12 "Closing Date" shall mean the date set forth
in Section 2.4.
1.1.13 "Code" means the U.S. Internal Revenue Code
of 1986, as amended.
1.1.14 "Contracts" shall have the meaning given such
term in Section 3.14.
1.1.15 "Deadline" shall have the meaning given such
term in Section 9.1.
1.1.16 "Deposit" shall have the meaning given such
term in Section 2.2.1.
1.1.17 "Disclosure Schedule" means all the Schedules
delivered by Cerplex pursuant to Section 3 of this Agreement and made a part
hereof.
2
<PAGE> 8
1.1.18 "Effective Date" shall have the meaning given
such term in the third Recital of this Agreement.
1.1.19 "Encumbrances" means liens, pledges, charges,
encumbrances, and any other security interests whatsoever.
1.1.20 "Environmental Law" shall have the meaning
given such term in Section 3.22.1.
1.1.21 "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended.
1.1.22 "ERISA Affiliate" means any entity which is
or was a member of (i) a controlled group of corporations (as defined in
Section 414(b) of the Code), (ii) a group of trades or businesses under common
control (as defined in Section 414(c) of the Code), or (iii) an affiliated
service group (as defined in Section 414(m) of the Code or the regulations
under Section 414(0) of the Code).
1.1.23 "Excluded Liabilities" shall have the meaning
given such term in Section 2.7.
1.1.24 "Financial Statements" means (i) the Closing
Balance Sheet, (ii) the audited consolidated balance sheet of Modcomp and the
Subsidiaries as of December 29, 1996, and the audited consolidated statements
of operations and cash flows of Modcomp and the Subsidiaries for the twelve
(12) months ended December 29, 1996, and (iii) the unaudited consolidated
income statement of Modcomp and the Subsidiaries for the six (6) month period
ended June 27, 1997, prepared by Cerplex and attached as Schedule 3.7.
1.1.25 "Foreign Plans" shall have the meaning given
such term in Section 3.20.2.
1.1.26 "Foreign Subsidiary" and "Foreign
Subsidiaries" mean, respectively, each of, and all of, the following
wholly-owned subsidiaries of Modcomp: Modcomp Canada, Ltd., a Canada
corporation; Modular Computer Systems GmbH, a Germany corporation; Modcomp
France S.A., a France corporation; and Modcomp C.A., a Venezuela corporation.
1.1.27 "Foreign Retirement Plan" shall have the
meaning given such term in Section 3.20.1.
1.1.28 "Foreign Welfare Plan" shall have the meaning
given such term in Section 3.20.2.
1.1.29 "FTC" means Federal Trade Commission.
1.1.30 "GAAP" shall have the meaning given such term
in Section 3.5.
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1.1.31 "Governmental Body" shall have the meaning
given such term in Section 3.15.
1.1.32 "HSR Act" means the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended.
1.1.33 "Indemnifiable Claims" shall have the meaning
given such term in Section 8.2.1.
1.1.34 "Intellectual Property" shall have the
meaning given such term in Section 3.12.2.
1.1.35 "IRS" means the U.S. Internal Revenue
Service.
1.1.36 "Laws and Regulations" shall have the meaning
given such term in Section 3.16.1.
1.1.37 "Leased Real Estate" shall mean the real
property listed on Schedule 3.9.
1.1.38 "Losses" shall have the meaning given such
term in Section 8.1.
1.1.39 "Material Adverse Effect" shall mean any
fact, event or occurrence, the existence of which would have a material adverse
effect on the business, assets, properties, financial condition or results of
operations of the Business taken as a whole and, in the case of contracts,
where a termination thereof or a default thereunder would result in loss,
damage, costs, fines and penalties of more than $50,000.
1.1.40 "Materials of Environmental Concern" shall
have the meaning given such term in Section 3.22.2.
1.1.41 "MJVI" shall have the meaning given such term
in the Recitals.
1.1.42 "Modcomp" shall have the meaning given such
term in the Recitals.
1.1.43 "Modcomp Florida" shall mean Modular Computer
Services, Inc., a Florida corporation and a wholly-owned subsidiary of Modcomp.
1.1.44 "Permits" means all material permits,
licenses, registrations, certificates, orders, approvals, franchises, variances
and similar rights issued by or obtained from any Governmental Body.
1.1.45 "Permitted Encumbrance" means any lien,
pledge, charge, encumbrance, or any other security interest which (i) arises
from current taxes or assessments not yet due and payable or the validity of
which is being contested in good faith by appropriate
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proceedings and which have been properly reflected in the Closing Balance
Sheet, or (ii) which is a purchase money security interest arising in the
ordinary course of business.
1.1.46 "Person" means an individual, firm,
corporation, division, partnership, joint venture, unincorporated association,
government agency or political subdivision thereof, or other entity.
1.1.47 "Plans" shall have the meaning given it in
Section 3.19.1.
1.1.48 "Prevailing Party" shall have the meaning
given such term in Section 10.11.
1.1.49 "Proprietary Rights" means all (i) patents,
patent applications, patent disclosures and all related continuation,
continuation-in-part, divisional, reissue, re-examination, utility, model,
certificate of invention and design patents, patent applications, registrations
and applications for registrations, (ii) trademarks, service marks, logos,
trade names and corporate names and registrations and applications for
registration thereof and the goodwill associated therewith, (iii) copyrights
and registrations and applications for registration thereof, (iv) mask works
and registrations and applications for registration thereof, (v) computer
software, data and documentation, (vi) trade secrets and confidential business
information, whether patentable or nonpatentable, and know how, manufacturing
and product processes and techniques, research and development information,
copyrightable works, financial, marketing and business data, pricing and cost
information, business and marketing plans and customer and supplier lists and
information, (vii) other proprietary rights relating to any of the foregoing
(including without limitation remedies against infringements thereof and rights
of protection of interest therein under the laws of all jurisdictions) and
(viii) copies and tangible embodiments thereof.
1.1.50 "Purchase Price" shall have the meaning given
such term in Section 2.2.
1.1.51 "Retirement Plans" shall have the meaning
given such term in Section 3.19.1.
1.1.52 "Sellers' Knowledge" shall have the meaning
given such term in Section 3.
1.1.53 "Shares" means all of the issued and
outstanding shares of capital stock owned by Modcomp in each of the
Subsidiaries.
1.1.54 "Subsidiary" or "Subsidiaries" means any or
all of the Foreign Subsidiaries of Modcomp and Modcomp Florida.
1.1.55 "Taxes" means any and all federal, state,
local and foreign income, profits, franchise, sales, value added, use, stamp
duty, employment, payroll, transfer,
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occupation, real property, personal property, severance, production, excise,
gross receipts, license, stamp, premium, customs, duties, capital stock,
windfall profit, environmental, withholding, social security (or similar),
unemployment, disability, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated and other taxes of any kind whatsoever
(including any interest, additions to tax and penalties with respect to any
such tax), including without limitation all sales, value added, use, transfer
and other non-income taxes, fees and duties (including any interest, additions
to tax and penalties with respect thereto) imposed in connection with the
consummation of the transactions contemplated hereunder.
1.1.56 "Tax Returns" means all reports, returns,
declarations, statements or other information required to be supplied to a
Governmental Body or taxing authority in connection with Taxes.
1.1.57 "Third-Party Claim" shall have the meaning
given such term in Section 8.4.1.
1.2 Schedules and Exhibits. A "Schedule" which is identified in
this Agreement means part of the Disclosure Schedule prepared by the Selling
Entities and delivered to Buyer pursuant to this Agreement. An "Exhibit" is an
agreement or other document attached hereto and made a part hereof.
1.3 U.S. Dollars. Unless otherwise indicated herein or on the
Schedules, all references to amounts in dollars ($) shall mean dollars of the
United States of America.
2. PURCHASE AND SALE OF THE ASSETS
2.1 Purchase and Sale of the Assets. At the Closing of the
transactions contemplated by this Agreement, Modcomp shall exchange, sell,
transfer and deliver to Buyer, and Buyer shall purchase from Modcomp, the
Assets, free from any Encumbrance other than Permitted Encumbrances. The
Assets consist of the Shares and all other assets (including, without
limitation, cash, cash equivalents and accounts receivable), properties and
rights, tangible or intangible, used in the Business and owned by Modcomp or a
Subsidiary. The Assets (other than the Shares) are listed on Schedule 2.1
hereto.
2.2 Consideration for Assets. The aggregate purchase price (the
"Purchase Price") for the exchange, sale, transfer and delivery of the Assets
(including the Shares) shall be an amount equal to (i) Eight Million five
hundred and forty thousand dollars ($8,540,000) minus (ii) the amount of the
French Tax Liability (as defined hereinafter), if any, and shall be paid as
follows:
2.2.1 One Million Dollars ($1,000,000) (the "Deposit") by
wire transfer of immediately available funds which Buyer will deposit with
State Street Bank and Trust Company (the "Escrow Agent") concurrently with the
execution of this Agreement as an earnest money deposit. The Escrow Agent
shall hold and dispose of the Deposit and any income earned thereon pursuant to
the provisions of an Escrow Agreement of even date herewith among the Escrow
Agent, Cerplex and Buyer in form and substance as set forth in Exhibit A hereto
(the
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"Escrow Agreement"). The parties agree that, subject to Sections 9.1 and 9.2,
they will deliver joint escrow instructions to the Escrow Agent instructing the
Escrow Agent to deliver at the Closing by wire transfer of immediately
available funds the Deposit and any income earned thereon to one or more
accounts designated by Cerplex and approved by Wells Fargo Bank, National
Association; and
2.2.2 At the Closing, Buyer shall pay to Cerplex, by wire
transfer of immediately available funds to one or more accounts designated by
Cerplex and approved by Wells Fargo Bank, National Association, an amount equal
to (i) Seven Million Five Hundred and Forty Thousand Dollars ($7,540,000) minus
(ii) the amount of accrued tax liability (the "French Tax Liability"), if any,
of Modcomp France, S.A. that was not accrued in accordance with generally
accepted accounting principles, as of the Effective Date. The parties agree
that the amount of the French Tax Liability shall be finally and conclusively
determined by the Paris affiliate of KPMG Peat Marwick, whose written statement
as to the amount thereof shall be delivered to Cerplex and to Buyer at least
two business days before the Closing Date.
2.3 Delivery of Assets. At the Closing, Cerplex shall deliver to
Buyer, in addition to those items set forth in Section 5, stock certificates
(if applicable for Foreign Subsidiaries) representing all of the Shares, duly
endorsed in favor of Buyer or accompanied by stock powers duly executed in
favor of and in a form reasonably acceptable to Buyer and its counsel, free
from any Encumbrance (other than Permitted Encumbrances), together with a bill
of sale representing the transfer of the Assets and any other assignments,
licenses and instruments of transfer provided for in Section 2.9.
2.4 Closing. The closing of the transactions contemplated hereby
(the "Closing") shall take place at 11:00 a.m. at the offices of Brobeck,
Phleger & Harrison LLP, in Newport Beach, California (unless the parties agree
in writing to a different time and location) on August 22, 1997 (the "Closing
Date").
2.5 Closing Balance Sheet. The parties hereby acknowledge and
agree that the balance sheet prepared by Cerplex as of the Effective Date and
attached hereto in Schedule 3.7 (the "Closing Balance Sheet") is true and
correct in all material respects and shall be final and binding upon, the
parties hereto.
2.6 Liabilities Assumed. On the Closing Date, subject to the
terms and conditions set forth herein, the Selling Entities shall assign or
cause to be assigned to Buyer, and the Buyer shall assume, perform and in due
course discharge, the Assumed Liabilities. At the Closing, the assumption of
the Assumed Liabilities by Buyer shall be evidenced by the execution and
delivery of the parties of an Assignment and Assumption Agreement substantially
in the form attached hereto as Exhibit D.
2.7 Liabilities Not Assumed. Any liability of Modcomp which is
not an Assumed Liability (other than liabilities specifically assumed by Buyer
hereunder) shall be referred to as an "Excluded Liability". Modcomp shall
remain solely responsible for payment of or performance of all Excluded
Liabilities, whether accrued or contingent, known or unknown. The Buyer shall
not assume any Excluded Liability, including, without limitation, any of the
following:
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2.7.1 Any liability of Modcomp associated with the conduct
of the Business prior to the Effective Date which has not been reflected on or
reserved against in the Closing Balance Sheet other than Assumed Liabilities
which are not required to be included in the Closing Balance Sheet in
accordance with generally accepted accounting principles;
2.7.2 Any and all taxes of Modcomp attributable to any
period prior to the Effective Date to the extent not reflected on or reserved
against on the Closing Balance Sheet;
2.7.3 Any claims against or liabilities or obligations of
any pension or employee benefit plan, program, or policy of Modcomp not
specifically assumed by Buyer pursuant to this Agreement and any claims for
compensation or benefits of any nature whatsoever, severance pay, termination
pay or pay in lieu of notice made by any employees of Modcomp with respect to
services performed or terminations occurring prior to the Effective Date (other
than payments required in connection with a breach of Buyer's obligations
pursuant to Section 6.5);
2.7.4 Any obligation of Modcomp under the Limited
Partnership Agreement of Modcomp/Cerplex, L.P., effective December 1, 1994, as
amended to date, including, without limitation, any obligation to pay Cerplex
management fees thereunder; and
2.7.5 Any contract, commitment or agreement to which
Modcomp is a party which is not listed in Schedule 3.14 but otherwise falls
within the definition of "Contract" in Section 3.14; provided, however, such
contract, commitment or agreement shall be an Assumed Liability hereunder if
Buyer assumes any related assets or elects to receive, retain or use related
benefits arising therefrom.
2.8 Allocation of Purchase Price. The total amount of the
Purchase Price shall be allocated among the Assets (including the Shares) in
the manner set forth in Exhibit B. It is acknowledged by the parties that such
allocation was arrived at by arm's length negotiation, appropriately reflects
the fair market value of the Assets (including the Shares), will be binding on
the parties for federal and state income tax purposes in connection with the
purchase and sale of the Assets (including the Shares), and will be
consistently reflected by the parties in their respective tax returns.
Cerplex, Modcomp and Buyer shall each file a Form 8594 (Asset Acquisition
Statement) with the Internal Revenue Service consistent with such allocation.
2.9 Instruments of Transfer. The transfer of the Assets
(including the Shares) to be transferred to Buyer at the Closing shall be
effected by bills of sale, assignments, licenses and such other instruments of
transfer as shall be required to transfer to Buyer full title to the Assets
(including the Shares), free and clear of Encumbrances other than Permitted
Encumbrances. All of such documents shall be in form and substance reasonably
acceptable to Buyer and its counsel.
3. REPRESENTATIONS AND WARRANTIES BY SELLING ENTITIES
The Selling Entities hereby, jointly and severally, make the following
representations and warranties to Buyer, except as set forth in the Disclosure
Schedule. All references herein to
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"Sellers' Knowledge" shall mean solely to the knowledge of the officers or
employees of the Selling Entities, identified in Schedule 3 of the Disclosure
Schedule or to matters as to which any Cerplex officer reasonably should have
been expected to have knowledge of in the course of preparing the Disclosure
Schedule; provided, however, as to any Modcomp officer or employee listed in
Schedule 3, the Selling Entities shall be entitled to rely upon written
representations delivered to the Selling Entities and Buyer from such officer
or employee as to their knowledge. Such representations shall be in form and
substance substantially similar to those set forth in Exhibit E.
3.1 Organization, Good Standing and Qualification. Each of the
Selling Entities and the Subsidiaries is a corporation or partnership duly
incorporated or otherwise duly organized, validly existing and in good standing
(in such jurisdictions where such concept is applicable) under the laws of its
respective jurisdiction of incorporation or organization as set forth on
Schedule 3.1. Each of the Selling Entities and each of the Subsidiaries has
all requisite corporate power and authority to own or lease its properties and
carry on its business as presently conducted. Except as set forth in Schedule
3.1, each Subsidiary is licensed or qualified to transact business in the
jurisdictions listed therein. The jurisdictions listed on Schedule 3.1 are the
only jurisdictions in which the nature of the properties owned or leased by
Modcomp or the Subsidiaries or the business transacted by them requires them to
be so licensed or qualified.
3.2 Capital Stock and Ownership of Subsidiaries.
3.2.1 The total number of shares of capital stock, and the
classes and par values thereof, which each Subsidiary is authorized to issue,
the number of such shares which are issued and outstanding and the number of
such outstanding shares owned, directly or indirectly, legally or beneficially
by Cerplex or any Subsidiary, the number of shares of each Subsidiary owned by
other stockholders and the identities of such other stockholders, are set forth
in Schedule 3.2. The ownership of the general and limited partnership
interests of Modcomp is as set forth in Schedule 3.2.
3.2.2 Except as set forth in Schedule 3.2, there are not
outstanding any (i) securities of any Subsidiary convertible into or
exchangeable for any shares of capital stock, partnership interests or other
securities of any such Subsidiary; (ii) subscriptions, options, warrants or
other rights, contingent or otherwise, obligating any Subsidiary to issue or
purchase or entitling any third party to acquire from any Subsidiary any shares
of capital stock, partnership interests or other securities of any such
Subsidiary; or (iii) other than this Agreement, any agreements or
understandings with respect to the voting, sale, transfer or other contractual
restriction on shares of capital stock or partnership interests of any
Subsidiary.
3.2.3 The outstanding shares of capital stock of each
Subsidiary have been duly authorized and validly issued, are fully paid,
non-assessable and free of preemptive rights.
3.2.4 The shares of capital stock of each Subsidiary will,
as of the Closing, be free and clear of all Encumbrances. The transfer of the
Shares to Buyer pursuant to this
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Agreement will vest in Buyer good title to the Shares, free and clear of all
Encumbrances, except for those created by Buyer.
3.2.5 Modcomp has, or at the Closing will have, valid title
to the Assets, free and clear of all Encumbrances other than Permitted
Encumbrances. Except as set forth on Schedule 3.2.5, no financing statement
under the Uniform Commercial Code or similar law naming any Selling Entity or
Subsidiary as a debtor has been filed in any jurisdiction, and no Selling
Entity or Subsidiary is bound under any agreement or arrangement authorizing
the filing of such financing statements.
3.3 Authority.
3.3.1 The Selling Entities have all requisite right, power,
capacity and authority to enter into, deliver and perform this Agreement and
any other agreement or document contemplated hereby. The Selling Entities have
all requisite right, power, capacity and authority to consummate the
transactions contemplated hereby, and this Agreement has been duly and validly
executed and delivered by each of the Selling Entities.
3.3.2 Assuming due authorization, execution and delivery by
Buyer, this Agreement is legal, valid and binding upon and enforceable against
each of the Selling Entities in accordance with its terms.
3.4 No Conflict; No Consents or Approvals.
3.4.1 Neither the execution and delivery by the Selling
Entities of this Agreement or any agreement, instrument or document
contemplated hereby, nor the consummation of the transactions contemplated
herein or therein by the Selling Entities will (i) conflict with, result in a
violation or breach of or constitute a default under (or would result in a
violation, breach or default with the giving of notice or the passage of time
or both) (A) the certificate of incorporation or bylaws (or other similar
charter or governing documents) of any of the Selling Entities, (B) any
contract, commitment or agreement described in Schedule 3.14, or (C) assuming
compliance with the HSR Act (to the extent applicable) and any other similar
applicable law in a foreign jurisdiction, any law, statute, ordinance, writ,
injunction, decree, rule, regulation or court or administrative order by which
any of the Selling Entities or any Subsidiary (or any of the properties or
assets of the respective businesses of the Subsidiaries) is subject or bound,
except, in the case of (B) and (C), such violations, breaches or defaults which
would not, in the aggregate, have a Material Adverse Effect; (ii) except as set
forth in Schedule 3.4, result in the creation or imposition of, or give any
party other than Buyer the right to create or impose, any Encumbrance on the
Assets (including the Shares) or (iii) terminate, modify or cancel, or give any
other party the right to terminate, modify or cancel, or require any notice,
consent or waiver under, any contract, commitment or agreement described in
Schedule 3.14, except for such terminations, modifications or cancellations (or
rights of termination, modification or cancellation) or such requirements of
notice, consent or waiver as to which requisite consents or waivers have been
obtained or which would not, in the aggregate, have a Material Adverse Effect.
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3.4.2 Except for requirements of the HSR Act (to the extent
applicable) and any other similar applicable law in a foreign jurisdiction and
except as disclosed on Schedule 3.4, none of the Selling Entities or
Subsidiaries is required to submit any notice, report or other filing with or
to any Governmental Body in connection with the execution, delivery or
performance of this Agreement by the Selling Entities and the consummation of
the transactions contemplated hereby by the Selling Entities or any Subsidiary.
3.4.3 No litigation, claim, administrative proceeding or
other proceeding or governmental investigation is pending or, to the Sellers'
Knowledge, threatened which would prevent or delay the execution, delivery or
performance of this Agreement or any agreement, instrument or document
contemplated hereby to be executed and delivered by the Selling Entities or the
consummation by the Selling Entities of the transactions contemplated hereby or
thereby.
3.5 Undisclosed Liabilities. Except as disclosed in this
Agreement or the Disclosure Schedule, to the Sellers' Knowledge, the
Subsidiaries have no material liability or obligation, whether known or
unknown, fixed, contingent or otherwise, liquidated or unliquidated and whether
due or to become due, of a nature required by U.S. generally accepted
accounting principles ("GAAP") to be reflected in a corporate balance sheet or
disclosed in the notes thereto or which is otherwise a "loss contingency" as
defined in Statement of Financial Accounting Standards No. 5 of the Financial
Accounting Standards Board, except for:
3.5.1 liabilities and obligations set forth or adequately
provided for in the Closing Balance Sheet; and
3.5.2 liabilities and obligations incurred in the ordinary
course of business since the Effective Date that have not been discharged.
3.6 No Termination of Relationships. As of the date hereof, to
the Sellers' Knowledge no Selling Entity or Subsidiary has received any written
or oral notice, or has knowledge of any facts which would lead it to conclude
that any relationship between a Subsidiary and any material distributor,
customer or supplier to such Subsidiary is likely to be terminated or
materially adversely affected as a result of the execution of this Agreement or
the consummation of the transactions contemplated hereby.
3.7 Financial Statements. Attached hereto as Schedule 3.7 are the
Financial Statements. The Closing Balance Sheet presents fairly the financial
condition of the Business as of the date thereof and the statements at December
29, 1996 and for the twelve (12) months then ended, and at the Closing Balance
Sheet Date and for the six (6) month period then ended, included in the
Financial Statements (including any notes thereto) present fairly the results
of operations and cash flows of the Business as of the dates and for the
periods indicated therein. The Financial Statements have been prepared in
accordance with GAAP applied on a consistent basis, except that unaudited
statements do not contain notes thereto and are subject to normal year-end
adjustments.
3.8 Tax Matters. Except as set forth in Schedule 3.8: all
material Tax Returns relating to, or including items attributable to, the
Business that were required to be filed by
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Modcomp and the Subsidiaries (taking into account all extensions) on or before
the date hereof have been filed and are accurate and correct in all material
respects, and all Taxes shown to be due on such Tax Returns have been paid. No
deficiencies for Taxes with respect to the Business (or for which any
Subsidiary may be liable) have been proposed or assessed by any taxing
authority or other Governmental Body against any of the Subsidiaries or any
current or prior affiliates thereof. The unpaid Taxes of the Subsidiaries
relating to the Business for taxable periods through the Closing Balance Sheet
Date do not exceed the aggregate amount of the reserves and accruals for Taxes
set forth on the Closing Balance Sheet. All Taxes relating to the Business
which are or were required by law to be withheld or collected have been duly
withheld or collected and, to the extent required, have been paid to the proper
Governmental Body.
3.9 Real Property. Neither Modcomp nor the Subsidiaries own or
hold title to any real property. Schedule 3.9 lists and describes briefly all
real property leased or subleased as of the date hereof to Modcomp or a
Subsidiary and lists the term of such lease. The Selling Entities have
delivered to, or made available for inspection by Buyer correct and complete
copies of the leases and subleases (as amended to date) listed in Schedule 3.9.
Except as set forth on Schedule 3.9, with respect to each such lease and
sublease, to the Sellers' Knowledge:
3.9.1 the lease or sublease is legal, valid, binding,
enforceable in accordance with its terms and in full force and effect with
respect to Modcomp or one of the Subsidiaries;
3.9.2 consummation of the transactions contemplated herein
will not conflict with, result in violation or breach of, or constitute a
default under or would result in a violation, breach or default (with the
giving of notice or the passage of time or both), any lease or sublease listed
on Schedule 3.9; and
3.9.3 neither Modcomp nor any Subsidiary nor any other
party is in breach or default under any such lease or sublease, and no event
has occurred which, with notice and/or lapse of time, would constitute such a
breach or default.
3.10 Equipment Leases. Schedule 3.10 contains a list of all
equipment leases of Modcomp or the Subsidiaries involving an annual expense per
lease in excess of $100,000 to which Modcomp or a Subsidiary is a lessee.
Except as set forth on Schedule 3.10, with respect to each equipment lease
listed therein, to the Sellers' Knowledge:
3.10.1 the lease is legal, valid, binding, enforceable in
accordance with its terms and in full force and effect with respect to Modcomp
or the Subsidiary which is a party thereto and, with respect to every other
party thereto;
3.10.2 the consummation of the transactions contemplated
herein will not conflict with, result in a violation or breach of or constitute
a default under (or would result in a violation, breach or default with the
giving of notice or the passage of time or both) any lease listed on Schedule
3.10; and
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3.10.3 no Subsidiary is in breach or default under any such
lease, and no event has occurred which, with notice and/or lapse of time, would
constitute such a breach or default by such Subsidiary.
3.11 Accounts Receivable. All accounts receivable reflected on the
Closing Balance Sheet are valid receivables, arose in the ordinary course of
business and are subject to no setoffs or counterclaims. All accounts
receivable reflected in the financial or accounting records of the Business
that have arisen since the Closing Balance Sheet Date are valid receivables,
arose in the ordinary course of business and are subject to no setoffs or
counterclaims.
3.12 Intellectual Property.
3.12.1 Schedule 3.12 contains a list of all of the following
to the extent owned by or licensed to Modcomp or any Subsidiary and used in the
Business (other than non-custom third-party software which is commercially
available and not material to the Business): (i) patents and patent
applications; (ii) trademarks, tradenames and service marks and registrations
thereof and applications therefor; (iii) registered copyrights and applications
for copyright registration; and (iv) licenses relating to any of the foregoing.
Schedule 3.12 identifies the owner of each item listed thereon and, in the case
of registrations and applications, the application or registration number.
Schedule 3.12(v) contains a non-exhaustive list of proprietary systems
developed by Modcomp.
3.12.2 To the Sellers' Knowledge, Modcomp or one or more of
the Subsidiaries owns or has the right to use, subject to the provisions of the
license agreements set forth in Schedule 3.12, all Proprietary Rights used or
held for use in connection with the operation of the Business including, but
not limited to, the Proprietary Rights identified in Schedule 3.12
(collectively, the "Intellectual Property"). To the Sellers' Knowledge, on the
Closing Date, Buyer or one of the Subsidiaries will own or have the right to
use, subject to the provisions of the license agreements set forth in Schedule
3.12(iv), the Intellectual Property (other than items of Intellectual Property
disposed of prior to the Closing in the ordinary course of business), and
except for such Intellectual Property the absence or inability to use of which
would not have a Material Adverse Effect.
3.12.3 Except as set forth in Schedule 3.12.3, to the
Sellers' Knowledge none of the activities or business presently conducted by
Modcomp or the Subsidiaries or conducted by the Subsidiaries at any time since
January 1, 1996 infringes or violates, or constitutes a misappropriation of,
any Proprietary Rights of any other person or entity, except for such
infringements, violations or misappropriation which would not, in the
aggregate, have a Material Adverse Effect. Except as set forth in Schedule
3.12.3, to the Sellers' Knowledge neither Modcomp nor any Subsidiary has
received any complaint, claim or notice alleging any such infringement,
violation or misappropriation.
3.12.4 The Selling Entities have supplied to, or made
available for inspection by, Buyer correct and complete copies of all licenses,
sublicenses or other agreements (as amended to date) pursuant to which Modcomp
or any Subsidiary uses the Intellectual Property, all of which are listed on
Schedule 3.12(iv). Except as set forth in Schedule 3.12.4, with respect to
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each such item of Intellectual Property: (i) the license, sublicense or other
agreement covering such item is legal, valid and binding with respect to one of
the Subsidiaries and, to the Sellers' Knowledge, with respect to every other
party thereto; and (ii) neither Modcomp nor any Subsidiary nor, to the Sellers'
Knowledge, any other party is in material breach or default under any such
license, sublicense or other agreement, and no event has occurred which, with
notice and/or lapse of time, would constitute such a material breach or default
or permit termination, modification or acceleration thereunder, except such
breaches, defaults, terminations, modifications or accelerations which would
not, in the aggregate, have a Material Adverse Effect.
3.13 Insurance Policies.
3.13.1 Schedule 3.13 sets forth a list of all material
policies of fire, theft, casualty, liability, burglary, fidelity, workers
compensation, business interruption, environmental, product liability,
automobile and other forms of insurance which are in effect with respect to the
Business as of the date hereof. Except as set forth in Schedule 3.13, no
Selling Entity or Subsidiary has received any notice from the insurer under any
such policy disclaiming coverage, reserving material rights with respect to a
particular claim or such policy in general, or canceling or materially amending
any such policy.
3.13.2 All premiums due and payable for such insurance
policies have been duly paid, and such policies or extensions or renewals
thereof in such amounts will be outstanding and duly in full force without
interruption until the Closing Date.
3.14 Contracts. To the Sellers' Knowledge, Schedule 3.14 contains
a complete and accurate list of the following contracts, commitments and
agreements to which Modcomp or a Subsidiary is a party (the "Contracts"):
3.14.1 all contracts, leases, or commitments, whether
entered into in the ordinary course of business or not involving an obligation
to purchase, lease or deliver goods or services of an amount or value in excess
of $100,000 each;
3.14.2 all forms of employment contracts with employees and
each employment contract, and each other contract, agreement or commitment to
or with individual employees, agents, representatives or consultants other than
contracts which may be terminated without notice or penalty;
3.14.3 any arrangement under which any Subsidiary has
created, incurred, assumed or guaranteed indebtedness (including capitalized
lease obligations) which will be in effect as of the Closing involving more
than $100,000;
3.14.4 each sales representative, distributorship or other
agreement providing for the distribution or marketing of products under which
revenue to any Subsidiary during 1996 exceeded $100,000; and
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3.14.5 any other arrangement under which the consequences of
a default or termination would have a Material Adverse Effect, or which gives
or could give any other party thereto the right to cause the transactions
contemplated by this Agreement to be rescinded following consummation, or which
involves more than $100,000.
The Selling Entities have delivered to Buyer a correct and complete
copy of each Contract to which Modcomp is a party. Buyer acknowledges that the
Selling Entities have made available to Buyer a correct and complete copy of
each Contract to which one or more of the Subsidiaries is a party. The parties
agree and acknowledge that the Limited Partnership Agreement of
Modcomp/Cerplex, L.P., effective December 1, 1994, as amended to date, shall
not be deemed a Contract hereunder and Buyer shall not have any liability
relating to any obligations arising thereunder. With respect to each Contract:
(i) the Contract is legal, valid, binding and enforceable in accordance with
its terms and in full force and effect with respect to the Subsidiary which is
a party thereto; (ii) except as set forth on Schedule 3.14, each Contract to
which Modcomp is a party is assignable to Buyer without the consent or approval
of or any payment to any party except such written arrangements in respect of
which such consents or approvals have been obtained; and (iii) to the Sellers'
Knowledge, neither Modcomp nor any Subsidiary is in breach or default, and no
event has occurred which, with notice and/or lapse of time, would constitute
such a breach or default by Modcomp or a Subsidiary or permit termination,
modification or acceleration, under any Contract by the other party thereto,
except such breaches, defaults, terminations modifications or accelerations
which would not, in the aggregate, have a Material Adverse Effect.
3.15 Litigation. Schedule 3.15 describes all suits, actions,
proceedings, investigations, claims, complaints and accusations pending (and
which notice thereof has been served) or, to the Sellers' Knowledge, threatened
or pending (and which notice thereof has not been served) against Modcomp or
any of the Subsidiaries, their properties or assets, the Shares, or the
officers or directors of any of the Subsidiaries, and to which any Subsidiary
is or would be a party in any court or before any industrial tribunal or
arbitration panel of any kind or before or by any federal, provincial, state,
local, foreign, regulatory or other government, governmental agency,
department, commission, board, bureau, instrumentality, authority or body
("Governmental Body"). There is no outstanding order, writ, injunction,
decree, judgment or award by any court, arbitration panel, industrial tribunal
or Governmental Body against Modcomp or any of the Subsidiaries.
3.16 Compliance with Law. To the Sellers' Knowledge, except as set
forth in Schedule 3.16:
3.16.1 Modcomp and each Subsidiary have, in all material
respects, complied and are in compliance, in all material respects, with all
U.S. and foreign laws, rules, decrees, regulations, ordinances and orders
("Laws and Regulations") which affect or relate to this Agreement, the
transactions contemplated hereby or the conduct of the Business or the Assets;
3.16.2 Modcomp and each Subsidiary have filed with the
proper authorities all material statements and reports required to be filed by
all applicable Laws and Regulations relating to the Business or Assets; and
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3.16.3 Neither Modcomp nor any Subsidiary has received
written notice alleging any violation of any material Laws and Regulations
relating to the Business or the Assets.
3.17 No Material Adverse Change. Except as set forth in Schedule
3.17 and except as otherwise contemplated by this Agreement, since the Closing
Balance Sheet Date there has not been any change in the business, assets,
properties, financial condition or results of operations of each of the
Subsidiaries which would have a Material Adverse Effect.
3.18 Labor Matters.
3.18.1 Except as set forth in Schedule 3.18, (i) no
Subsidiary is a party to any collective bargaining agreement or national labor
union agreement, (ii) no Subsidiary has experienced any strikes, material
grievances, material claims of unfair labor practices or other material
collective bargaining disputes, with respect to the Business in 1996; and (iii)
there is no organizational effort presently being made or threatened by or on
behalf of any labor union with respect to any employees of any Subsidiary.
3.18.2 With respect to the Business, there are not in
existence and there are not threatened any: (i) work stoppages or strikes
involving the employees of each of the Subsidiaries; (ii) material grievance,
arbitration proceedings or proceedings before any governmental industrial
tribunal arising out of collective bargaining agreements or national labor
union agreements; or (iii) material unfair labor practice complaints filed
against any of the Subsidiaries.
3.18.3 To the Sellers' Knowledge, neither Modcomp nor any
Subsidiary has received written or oral notification alleging violation of any
federal, state, foreign and municipal laws respecting employment and employment
practices, terms and conditions of employment, or wages and hours related to
the Business.
3.19 U.S. Employee Benefit Plans.
3.19.1 Schedule 3.19 lists all employee benefit plans and
all material written plans, agreements or arrangements relating to the Business
and involving direct compensation, including without limitation insurance
coverage, disability benefits, bonus, deferred compensation, incentive
compensation, severance or termination pay, post-retirement compensation,
change in control compensation, death benefit, stock purchase, phantom stock,
stock appreciation and stock option plans or arrangements maintained or
contributed to by or on behalf of the Subsidiaries or any of their respective
affiliates applicable to the employees of the Subsidiaries employed in the U.S.
(the "Plans"). Each of the Plans that is an "employee pension benefit plan" as
such term is defined in Section 3(2) of ERISA (collectively, the "Retirement
Plans") and any corresponding trust intended to qualify under Sections 401(a)
and 301(a) of the Code do so qualify. Each of the Plans has been administered,
in all material respects, in compliance with its terms and the requirements of
all applicable Laws and Regulations, including without limitation ERISA and the
Code, and all material required contributions to each Plan have been made.
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3.19.2 To the Sellers' Knowledge, neither any Subsidiary,
any ERISA Affiliate nor any trustee or administrator of any Plan, has engaged
in a "prohibited transaction," as defined in Section 4975 of the Code, or a
transaction prohibited by Section 406 of ERISA, that would give rise to any
material tax or penalty under such Section 4975 to any Subsidiary.
3.19.3 To the Sellers' Knowledge, neither any Subsidiary nor
any ERISA Affiliate of any Subsidiary has ever maintained an employee benefit
plan subject to Section 412 of the Code or Title IV of ERISA that would subject
any Subsidiary to any material liability resulting from an accumulated funding
deficiency (as defined for purposes of Section 412 of the Code) or termination
respecting such employee benefit plan.
3.19.4 To the Sellers' Knowledge, neither any Subsidiary nor
any ERISA Affiliate contributes to or has an obligation to contribute to a
"multiemployer plan" as defined in Section 4001(a)(3) of ERISA on behalf of
Employees. No complete withdrawal or partial withdrawal (as defined for
purposes of Sections 4203 and 4203 of ERISA, respectively) has occurred with
respect to a multiemployer plan that would subject any Subsidiary to liability
from such complete withdrawal or partial withdrawal.
3.19.5 Except as set forth in Schedule 3.19, to the Sellers'
Knowledge there are no material unfunded obligations under any Plan providing
benefits after termination of employment to any employee or former employee of
any Subsidiary (or to any beneficiary of any such employee or former employee),
including but not limited to retiree health coverage and deferred compensation,
but excluding continuation of health coverage required to be continued under
Section 4980B of the Code and insurance conversion privileges under state law.
3.19.6 Except as set forth in Schedule 3.19, to the Sellers'
Knowledge no act or omission has occurred and no condition exists with respect
to any employee benefit plan or program that would reasonably be expected to
subject any Subsidiary to any material fine, penalty, tax or liability of any
kind.
3.20 Foreign Employee Benefit Plans. Schedule 3.20 lists:
3.20.1 each material non-governmental retirement plan
maintained or contributed to by or on behalf of the Subsidiaries (or any of
their respective affiliates) applicable to employees of the Business located
outside of the U.S. (a "Foreign Retirement Plan") and
3.20.2 each non-governmental, non-industry welfare benefit
plan maintained or contributed to by or on behalf of the Subsidiaries (or any
of their respective affiliates) applicable to employees of the Business located
outside of the U.S. and which, in the case of this clause 3.20.2, obligates or
may reasonably be expected to obligate the Business to pay more than $100,000
annually (a "Foreign Welfare Plan"). Except as set forth in Schedule 3.20,
each such Foreign Retirement Plan and Foreign Welfare Plan (collectively, the
"Foreign Plans") has been administered, in all material respects, in compliance
with its terms and the requirements of all applicable Laws and Regulations, and
all required contributions to each Foreign Plan have been made. Except as set
forth in Schedule 3.20, to the Sellers' Knowledge, there are no inquiries or
investigations by any foreign Governmental Body, and no termination proceedings
against any
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Foreign Plan (or any Subsidiary, with respect thereto) or the assets thereof
that would have a Material Adverse Effect. Except as set forth in Schedule
3.20, there are no actions, suits or claims (other than claims for benefits)
pending (and which notice thereof has been served) or, to the Sellers'
Knowledge, threatened or pending (and which notice thereof has not been
served), against any Foreign Plan (or any Subsidiary, with respect thereto) or
the assets thereof that would have a Material Adverse Effect. Except as set
forth in Schedule 3.20, to the Sellers' Knowledge there are no material
unfunded obligations under any Foreign Plan providing benefits after
termination of employment to any employee or former employee of the Business.
3.21 Indebtedness and Guaranties. Schedule 3.21 sets forth a true
and complete list, including the names of the parties thereto, of all material
debt instruments, loan agreements, indentures, guaranties or other written
obligations to which one or more of the Subsidiaries is a party and will remain
a party following the Closing and which relates to the Business or Assets and
involves: (i) indebtedness for borrowed money; (ii) money loaned to others; or
(iii) the performance of any obligation relating to the Business.
3.22 Environmental Matters.
3.22.1 Except as set forth in Schedule 3.22, to the Sellers'
Knowledge each Subsidiary has complied in all material respects with all
Environmental Laws relating to the Business. Except as set forth in Schedule
3.15, to the Sellers' Knowledge there is no pending or threatened civil or
criminal litigation, written notice of violation, formal administrative
proceeding or investigation, inquiry or information request by any Governmental
Body relating to any Environmental Law involving or relating to the respective
businesses of the Subsidiaries. For purposes of this Agreement, "Environmental
Law" means any applicable federal, state, foreign or local law, statute, rule
or regulation or the common law relating to the environment, including without
limitation any statute, regulation or order pertaining to (i) treatment,
storage, disposal, generation or transportation of hazardous substances or
solid, or hazardous waste; (ii) air, water and noise pollution; (iii)
groundwater and soil contamination; (iv) the release or threatened release into
the environment of hazardous substances, or solid or hazardous waste, including
without limitation emissions, discharges, injections, spills, escapes or
dumping of pollutants, contaminants or chemicals; (v) the protection of
wildlife, marine sanctuaries and wetlands, including without limitation all
endangered and threatened species; (vi) above ground or underground storage
tanks, vessels and containers; (vii) abandoned, disposed or discarded barrels,
tanks, vessels, containers and other closed receptacles; and (viii)
manufacture, processing, use, distribution, treatment, storage, disposal,
transportation or handling of pollutants, contaminants, chemicals or
industrial, toxic or hazardous substances or oil or petroleum products or solid
or hazardous waste. As used herein, the terms "release" and "environment"
shall have the meaning set forth in the U.S. federal Comprehensive
Environmental Response Compensation and Liability Act of 1980 ("CERCLA").
3.22.2 Except as set forth in Schedule 3.22, to the Sellers'
Knowledge there have been no releases of any Materials of Environmental Concern
in a quantity reportable under Environmental Laws into the environment at any
parcel of real property or any facility currently owned or operated by any
Subsidiary. With respect to any such releases in a reportable quantity of
Materials of Environmental Concern, to the Sellers' Knowledge each Subsidiary
has given
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all required notices to Governmental Bodies. Except as set forth in Schedule
3.22, to the Sellers' Knowledge there have been no releases of Materials of
Environmental Concern at parcels of real property or facilities owned, operated
or controlled by any Subsidiary that would reasonably be expected to have a
Material Adverse Effect. For purposes of this Agreement, "Materials of
Environmental Concern" means any chemicals, pollutants or contaminants,
hazardous substances (as such term is defined under CERCLA), solid wastes and
hazardous wastes (as such terms are defined under the U.S. Federal Resources
Conservation and Recovery Act), radioactive materials, toxic materials, oil or
petroleum and petroleum products.
3.23 Permits. Schedule 3.23 sets forth a list of all material
Permits (including without limitation Permits issued or required under
Environmental Laws and Permits relating to the occupancy or use of owned or
leased real property) issued to or held by any Subsidiary relating to the
Business. Each such listed Permit is in full force and effect and no
suspension or cancellation of such listed Permit is threatened.
3.24 Certain Business Relationships. Except as disclosed in
Schedule 3.24, neither Cerplex nor any affiliate of Cerplex (i) owns any
property or right, tangible or intangible, which is used in the Business; (ii)
has any claim or cause of action against any Subsidiary or the assets of
Modcomp or any Subsidiary; or (iii) except in the ordinary course of business
in conjunction with product sales, owes any money to any Subsidiary. Schedule
3.24 describes all contracts, commitments and agreements among or between
Cerplex, any affiliate of Cerplex, and/or any Subsidiary relating to the
Business which will be in effect following the Closing.
3.25 Books and Records. The books, records, accounts, ledgers and
files with respect to each Subsidiary are accurate and complete in all material
respects and have been maintained in accordance with good business and
bookkeeping practices in all material respects. The books and records of each
Subsidiary, including without limitation its books of account, stock
certificate books, stock ledgers and/or share registers, are complete and
correct in all material respects.
3.26 Bank Accounts. Schedule 3.26 sets forth a complete list of
all bank accounts or other accounts with depository institutions, brokerage
firms or other financial service companies maintained by each of the
Subsidiaries and includes a description or listing of the cash or assets
contained in such account and the names of each person authorized to effect
withdrawals therefrom or direct the transfer or investment of any such cash or
assets.
3.27 Personal Property. Except as set forth in Schedule 3.9,
each material item of tangible personal property included in the Assets or
owned by the Subsidiaries is in good operating condition and repair in light of
its age, ordinary wear and tear excepted, and is suitable for the purpose for
which it is being used in the Business as currently operated.
3.28 Officers and Directors. Schedule 3.28 sets forth all of the
executive officers and directors of the Subsidiaries.
3.29 Disclosure. To the Selling Entities' knowledge, no
representation or warranty made by the Selling Entities in this Agreement, or
any Schedule or Exhibit hereto, or made in
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any certificate furnished by the Selling Entities to Buyer pursuant hereto,
contains any misstatement of a material fact or omits to state any material
fact necessary to make the statements contained herein and therein, in light of
the circumstances under which they were made, not misleading.
3.30 Value. The Purchase Price is at least reasonably equivalent
to the value of the Assets transferred to the Buyer hereunder.
4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Selling Entities that the
statements contained in this Section 4 are true and correct.
4.1 Due Incorporation. Buyer is a corporation duly incorporated,
validly existing and in good standing under the laws of its jurisdiction of
organization. Buyer has the corporate power to own its properties and to carry
on its business as now being conducted and is duly qualified to do business and
is in good standing in each jurisdiction in which the failure to be so
qualified and in good standing would have a Material Adverse Effect on Buyer.
4.2 Authority.
4.2.1 Buyer has all requisite corporate right, power,
capacity and authority to enter into, deliver and perform this Agreement and
any other agreement or document necessary to perform this Agreement. Buyer has
all requisite corporate right, power, capacity and authority to consummate the
transactions contemplated hereby, and this Agreement has been duly and validly
executed and delivered pursuant to all necessary corporate action on the part
of Buyer.
4.2.2 Assuming due authorization, execution and delivery by
each of the Selling Entities, this Agreement is legal, valid and binding upon
and enforceable against Buyer in accordance with its terms.
4.3 No Conflict; No Consents or Approvals.
4.3.1 Neither the execution and delivery by Buyer of this
Agreement or any agreement, instrument or document contemplated hereby, nor the
consummation of the transactions contemplated herein or therein by Buyer nor
compliance by Buyer with any of the provisions hereof will conflict with,
result in a violation or breach of, or constitute a default under (or would
result in a violation, breach or default with the giving of notice or the
passage of time or both) (i) the certificate of incorporation or bylaws of
Buyer, (ii) any material contract, agreement, indenture, note, license or other
instrument or obligation of Buyer or (iii) any law, statute, ordinance, writ,
injunction, decree, rule, regulation or court or administrative order by which
Buyer (or any of the properties or assets of Buyer) is subject or bound.
4.3.2 Buyer is not required to submit any notice, report or
other filing with or to any Governmental Body in connection with the execution,
delivery or performance of this Agreement or any agreement, instrument or
document contemplated hereby to be executed and
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delivered by Buyer and the consummation of the transactions contemplated hereby
or thereby by Buyer.
4.3.3 No litigation, claim, administrative proceeding or
other proceeding or governmental investigation is pending or, to Buyer's
knowledge, threatened which would prevent or delay the execution, delivery or
performance of this Agreement or any agreement, instrument or document
contemplated hereby to be executed and delivered by Buyer or the consummation
by Buyer of the transactions contemplated hereby.
5. COVENANTS OF THE SELLING ENTITIES
5.1 Conduct of Business. Prior to the Closing Date, each
Subsidiary shall carry on its Business diligently and substantially in the same
manner as heretofore, including compliance with all governmental rules and
regulations and maintenance and renewal of all material governmental licenses
and permits, and shall not make or institute any unusual or new methods of
purchase, sale, shipment or delivery, lease management, accounting or
operation, except as agreed to in writing by Buyer. All of the property of
each Subsidiary shall be used, operated, repaired and maintained in a normal
business manner consistent with past practice.
5.2 Absence of Material Changes. During the period from the date
of this Agreement and continuing until the earlier of the termination of this
Agreement or the Closing Date, except as expressly contemplated by this
Agreement, the Selling Entities shall not allow, cause or permit Modcomp or any
of its Subsidiaries to do, cause or permit any of the following, without the
prior written consent of Buyer.
5.2.1 Material Contracts. Enter into any contract or
commitment, or violate, amend or otherwise modify or waive any of the terms of
any of its Contracts, other than in the ordinary course of business consistent
with past practice and in no event shall such contract, commitment, amendment,
modification or waiver be in excess of $25,000;
5.2.2 Issuance of Securities. Issue, deliver or sell or
authorize the issuance, delivery or sale of, or purchase any shares of its
capital stock or securities convertible into, or subscriptions, rights,
warrants or options to acquire, or other agreements or commitments of any
character obligating it to issue any such shares or other convertible
securities.
5.2.3 Intellectual Property. Transfer to any person or
entity any rights to its Intellectual Property other than in the ordinary
course of business consistent with past practice;
5.2.4 Exclusive Rights. Enter into or amend any agreements
pursuant to which any other party is granted exclusive marketing or other
exclusive rights of any type or scope with respect to any of its products or
technology;
5.2.5 Dispositions. Sell, lease, license or otherwise
dispose of or encumber any of its properties or assets except in the ordinary
course of business consistent with past practice;
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5.2.6 Indebtedness. Incur any indebtedness for borrowed
money or guarantee any such indebtedness or issue or sell any debt securities
or guarantee any debt securities of others except for any such indebtedness of
a Subsidiary to another Subsidiary;
5.2.7 Leases. Enter into any operating lease;
5.2.8 Payment of Obligations. Pay, discharge or satisfy
any claim, liability or obligation (absolute, accrued, asserted or unasserted,
contingent or otherwise) (i) arising other than in the ordinary course of
business, (ii) other than the payment, discharge or satisfaction of liabilities
reflected or reserved against in the Financial Statements or (iii) except in
connection with the consummation of the transactions contemplated herein;
5.2.9 Capital Expenditures. Make any capital expenditures,
capital additions or capital improvements except in the ordinary course of
business and consistent with past practice;
5.2.10 Insurance. Materially reduce the amount of any
material insurance coverage provided by existing insurance policies;
5.2.11 Employee Benefit Plans; New Hires; Pay Increases.
Adopt or amend any employee benefit or stock purchase or option plan, or hire
any new employee (except that it may hire a replacement for any current
employee if it first provides Buyer advance notice regarding such hiring
decision), pay any special bonus or special remuneration to any employee or
director, or increase the salaries or wage rates of its employees;
5.2.12 Severance Arrangements. Grant any severance or
termination pay (i) to any director or officer or (ii) to any other employee
except (A) payments made pursuant to standard written agreements outstanding on
the date hereof and included in the Disclosure Schedules or (B) grants which
are made in the ordinary course of business in accordance with its standard
past practice;
5.2.13 Lawsuits. Commence a lawsuit other than (i) for the
routine collection of bills, (ii) in such cases where it in good faith
determines that failure to commence suit would result in the material
impairment of a valuable aspect of its business, provided that it consults with
Buyer prior to the filing of such a suit, or (iii) for a breach of this
Agreement;
5.2.14 Acquisitions. Acquire or agree to acquire by merging
or consolidating with, or by purchasing a substantial portion of the assets of,
or by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof, or otherwise
acquire or agree to acquire any assets which are material, individually or in
the aggregate, to its business or acquire or agree to acquire any equity
securities of any corporation, partnership, association or business
organization, or enter into any negotiations or discussions regarding any of
the foregoing;
5.2.15 Distributions. Pay any dividend or make any
distribution to any of the Selling Entities other than Modcomp.
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5.2.16 Other. Take or agree in writing or otherwise to
take, any of the actions described in Sections 5.2.1 through 5.2.15 above, or
any action which would make any of the Selling Entities' representations or
warranties contained in this Agreement untrue or incorrect or prevent any of
the Selling Entities from performing or cause any of the Selling Entities not
to perform their respective covenants hereunder.
5.3 Taxes. From and after the date hereof and until the Closing
Date, each Selling Entity and Subsidiary shall, on a timely basis, file all Tax
Returns and pay any and all Taxes which shall become due or shall have accrued
on account of the operation of the Business on or prior to the Closing Date.
5.4 Compliance with Laws. From and after the date hereof and
until the Closing Date, each Selling Entity and Subsidiary shall comply in all
material respects with all Laws and Regulations which are applicable to it or
to the conduct of the Business and will perform and comply in all material
respects with the Contracts.
5.5 Continued Truth of Representations and Warranties of Selling
Entities. No Selling Entity or Subsidiary will take any action which would
result in any of the representations, warranties, covenants and agreements set
forth in this Agreement becoming untrue, incorrect or unsatisfied in any
material respect until the Closing Date. At the Closing, the Selling Entities
shall update and deliver to Buyer the Disclosure Schedule (updated from the
execution date through the Closing Date) set forth herein to be delivered by
such party; provided, however, no such update shall affect the liability of the
Selling Entities with respect to the representations and warranties given in
Section 3.
5.6 Continuing Obligation to Inform. From time to time prior to
Closing, the Selling Entities shall promptly deliver or cause to be delivered
to Buyer supplemental information concerning events subsequent to the date
hereof which would render any statement, representation or warranty in this
Agreement or any information contained in any Schedule hereto inaccurate or
incomplete in any material respect at any time after the date hereof until the
Closing Date.
5.7 Exclusive Dealing. From and after the date hereof and until
the Closing Date, no Selling Entity will, directly or indirectly, through any
officer, director, stockholder, employee, agent, subsidiary or otherwise (a)
solicit, initiate or encourage submission of proposals or offers from any
person relating to any acquisition or purchase of all or a material portion of
the assets of any of the Subsidiaries, or any equity interest in a Subsidiary
or any equity investment, merger, consolidation or business combination with a
Subsidiary, or (b) participate, or authorize, directly or indirectly, any other
person to participate, in any negotiations with third parties regarding any of
the foregoing.
5.8 Consents and Best Efforts. From and after the date hereof,
the Selling Entities will take and complete all reasonable actions required
hereunder, and the Selling Entities will cooperate with Buyer as is necessary,
to obtain all applicable consents, approvals and agreements of, and to give all
notices and make all filings with, any third parties as may be necessary to
authorize, approve or permit the full and complete sale, conveyance, assignment
or transfer of
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the Assets. In addition, subject to the terms and conditions herein provided,
the Selling Entities covenant and agree to use their reasonable best efforts to
take or cause to be taken all things necessary, proper or advisable under
applicable Laws and Regulations to consummate and make effective the
transactions contemplated hereby.
5.9 Access to Financial, Operating and Other Information. From
and after the date hereof and until the Closing Date, the Selling Entities will
give Buyer, its counsel, financial advisors, auditors and other authorized
representatives reasonable access during normal business hours to the offices,
properties, books and records of the Subsidiaries and Modcomp. To the extent
not previously provided, the Selling Entities will furnish to Buyer, its
counsel, financial advisors, auditors and other authorized representatives such
financial and operating data and all other information related to the Business
as such persons may reasonably request and will instruct the Selling Entities'
employees, counsel and financial advisors to cooperate with Buyer in its
investigation of the Business; provided that no investigation pursuant to this
section shall affect any representation or warranty given by the Selling
Entities.
5.10 Relinquishment of Intellectual Property. From and after the
Closing Date, the Selling Entities shall cease all use, dissemination and
exploitation of the Intellectual Property. Within one month after the Closing
Date, Modcomp will either dissolve or change its name so that it no longer
includes the word "Modcomp".
6. COVENANTS OF BUYER
6.1 Continued Truth of Representations and Warranties of Buyer.
Buyer will not take any action which would result in any of the
representations, warranties, covenants and agreements set forth in this
Agreement to be untrue or incorrect in any material respect at any time.
6.2 Continuing Obligation to Inform. From time to time prior to
Closing, Buyer shall promptly deliver or cause to be delivered to Cerplex
supplemental information concerning events subsequent to the date hereof which
would render any statement, representation or warranty in this Agreement
inaccurate or incomplete in any material respect at any time after the date
hereof until the Closing Date.
6.3 Consents and Best Efforts. As soon as practicable, Buyer will
take and complete all reasonable action required hereunder, and Buyer will
cooperate with the Selling Entities as is necessary, to obtain all applicable
consents, approvals and agreements of, and to give all notices and make all
filings with, any third parties as may be necessary to authorize, approve or
permit the full and complete sale, conveyance, assignment or transfer of the
Shares. In addition, subject to the terms and conditions herein provided,
Buyer covenants and agrees to use its reasonable best efforts to take or cause
to be taken all things necessary, proper or advisable under applicable Laws and
Regulations to consummate and make effective the transactions contemplated
hereby.
6.4 Taxes and Other Obligations. Buyer agrees to be responsible
for, and to timely pay, any and all stamp, duty, transfer and other taxes
arising out of this Agreement or the
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<PAGE> 30
transactions contemplated hereby. Buyer agrees that, from and after the time
of the Closing, Buyer and the Subsidiaries shall be responsible for, and shall
discharge as they become due, any and all Assumed Liabilities, whether
occurring on, prior to, or subsequent to the Closing.
6.5 Employees. At the Closing, the Buyer shall make an offer of
employment to all Modcomp employees who are listed on Schedule 3.14.2 (as such
Schedule exists as of Effective Date) under the heading, "Commitments to U.S.A.
Individual Employees" and any additional employees hired pursuant to Section
5.2.11. The terms of said offers of Buyer to each such employee shall include
the payment of compensation and benefits which are substantially equivalent in
the aggregate to the compensation and benefits being provided to such employee
immediately prior to the Closing Date.
6.6 Assignment Fees. Buyer shall pay all fees, costs and expenses
(including attorney fees) incurred in connection with the transfer and
assignment of any trademarks from Modcomp to Buyer as contemplated by this
Asset Purchase Agreement.
7. CLOSING CONDITIONS AND DOCUMENTS
7.1 Conditions to Obligations of Buyer. The obligations of Buyer
under this Agreement are subject to the conditions that, on or before the
Closing Date:
7.1.1 All of the terms, covenants and conditions of this
Agreement to be complied with and performed by the Selling Entities on or
before the Closing Date shall have been duly complied with and performed in all
material respects and the covenants of the Selling Entities set forth in
Sections 5.2.11 and 5.2.15 have been duly complied with and performed in all
respects;
7.1.2 All of the representations and warranties of the
Selling Entities contained in Section 3 hereof shall be true and correct in all
material respects as though given on the Closing Date;
7.1.3 Cerplex shall have delivered to Buyer a certificate
executed by an executive officer of Cerplex, dated as of the Closing Date, to
the effect that the conditions set forth in subsections 7.1.1 and 7.1.2 have
been satisfied;
7.1.4 Modcomp shall have delivered to Buyer certificates
for the Shares which shall constitute all of the issued and outstanding capital
stock owned by Modcomp with respect to the Subsidiaries;
7.1.5 Modcomp shall have delivered to Buyer a Bill of Sale
in the form attached hereto as Exhibit C and such other instruments as Buyer
may reasonably request to effect the assignment and transfer of the Assets
(including the Shares) to Buyer;
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<PAGE> 31
7.1.6 Modcomp shall have delivered to Buyer an Assignment
and Assumption Agreement in the form attached hereto as Exhibit D and such
other instruments as Buyer may reasonably request to effect the assignment of
Modcomp's contract rights to Buyer;
7.1.7 Cerplex shall have delivered to Buyer an opinion of
counsel dated as of the Closing Date in form and substance reasonably
acceptable to Buyer;
7.1.8 Cerplex shall have delivered to Buyer opinions of
foreign counsel dated as of the Closing Date in form and substance reasonably
acceptable to Buyer;
7.1.9 Cerplex shall have delivered a certificate of the
Secretary of each of the Selling Entities certifying as to the incumbency of
officers and corporate resolutions to effect the transactions contemplated
herein;
7.1.10 Buyer shall have received evidence reasonably
satisfactory to it, of the termination of all loan agreements and security
agreements relating to the Assets of Modcomp (including the Shares), of the
termination and release of all liens and security interests in the Assets
(including the Shares) and of the termination of any UCC financing statements
with respect to the Assets (including the Shares) sufficient to permit Buyer to
acquire the Assets (including the Shares) free and clear of any and all
Encumbrances other than Permitted Encumbrances;
7.1.11 Modcomp shall have received the consent of Penn
Florida Realty, L.P. regarding the assignment and assumption by the Buyer of
those certain Leases for approximately 35,314 (Building 1) square feet of space
at 1650 W. McNab Road, Fort Lauderdale, Florida and approximately 42,169
(Building 1A) square feet of space at 1650 W. McNab Road, Fort Lauderdale,
Florida; and
7.1.12 All of the agreements and documents necessary to
effect and perfect the Selling Entities' ownership of, or license to, all of
their right, title, and interest in and to the Intellectual Property, including
without limitation the Intellectual Property listed in Schedule 3.12, and to
transfer such rights therein to Buyer, shall be duly and legally executed and
either recorded in all relevant jurisdictions (if applicable) or delivered to
Buyer, unless Buyer agrees in writing, to receive any such documents or
agreements after the Closing Date.
7.1.13 All consents, approvals, notices or waivers required
to transfer and assign the Contracts, the leases set forth in Schedule 3.9 and
the licenses set forth in Schedule 3.12(iv) to Buyer shall be obtained unless
Buyer agrees to waive the Selling Entities' obligations under this Section
7.1.13.
7.2 Conditions to Obligations of the Selling Entities. The
obligations of the Selling Entities under this Agreement are subject to the
conditions that, on or before the Closing Date:
7.2.1 All of the terms, covenants and conditions of this
Agreement to be complied with and performed by Buyer on or before the Closing
Date shall have been duly complied with and performed in all material respects;
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<PAGE> 32
7.2.2 Buyer shall have delivered to Cerplex a certificate
executed by an executive officer of Buyer, dated as of the Closing Date, to the
effect that the conditions set forth in Section 7.2.1 have been satisfied;
7.2.3 Buyer shall have delivered to Cerplex an opinion of
counsel, dated as of the Closing Date, in form and substance reasonably
acceptable to the Selling Entities;
7.2.4 Buyer shall have delivered the Purchase Price to
Cerplex pursuant to the provisions of Section 2.2.2 hereof and the Escrow Agent
shall have delivered the undisputed portion of the Deposit pursuant to the
provisions of Section 2.2 hereof;
7.2.5 Buyer shall have delivered a certificate of the
Secretary of Buyer certifying as to the incumbency of officers and corporate
resolutions to effect the transactions contemplated herein;
7.2.6 If required, the filing of the notice required by,
and expiration of the applicable waiting period under, the HSR Act shall have
occurred, and the parties shall not have received any notice from the FTC or
any other Governmental Body, of an intent to contest consummation of any of the
transactions of intent contemplated herein; and
7.2.7 Buyer shall have executed and delivered to Cerplex an
Assignment and Assumption Agreement in the form attached hereto as Exhibit D
and such other instruments as the Selling Entities may reasonably request to
effect the assumption by Buyer of the Assumed Liabilities.
8. INDEMNIFICATION
8.1 Indemnification of Buyer. The Selling Entities, jointly and
severally, shall indemnify, and hold Buyer harmless against, any and all debts,
obligations and other liabilities (whether absolute, accrued, contingent, fixed
or otherwise, or whether known or unknown, or due or to become due or
otherwise), monetary damages, fines, fees, penalties, interest obligations,
deficiencies, losses and expenses (including without limitation amounts paid in
settlement, interest, court costs, reasonable fees and expenses of attorneys,
accountants, financial advisors and other experts, and other expenses of
litigation) ("Losses") incurred or suffered by Buyer or the Subsidiaries
resulting from, relating to or constituting any misrepresentation or breach of
warranty or breach of any covenant or agreement of any of the Selling Entities
contained in this Agreement.
8.2 Limitations on Indemnification.
8.2.1 The obligation of the Selling Entities to indemnify
Buyer for Losses arising under Section 8.1 shall be limited as to amount, as
follows:
(a) Cerplex shall not be required to indemnify
Buyer for any claim hereunder which is not an Indemnifiable Claim. An
"Indemnifiable Claim" with respect to
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<PAGE> 33
either Buyer or the Selling Entities shall mean any Loss arising from any
single circumstance which exceeds $5,000;
(b) To the extent that the aggregate amount of
Losses from Indemnifiable Claims exceeds $250,000, Cerplex shall indemnify
Buyer for such Losses in excess of such $250,000. It is understood that such
indemnity will include the first $5,000 (or portion thereof) of an
Indemnifiable Claim if such $5,000 (or portion thereof) is not required to meet
such $250,000 deductible.
8.2.2 Notwithstanding any other provision to the contrary,
Cerplex shall not be liable for total aggregate Losses in excess of $2,000,000.
8.2.3 The Selling Entities shall not be required to
indemnify Buyer for any indemnifiable liability or reimbursement under this
Section 8 to the extent Buyer has actually been reimbursed by a third-party
insurer in respect of the underlying loss; provided, however, that the
limitation set forth in this subsection 8.2.3 shall in no way affect any claim,
by way of subrogation or otherwise, that any such third-party insurer may have
against the Selling Entities. In any case in which Buyer has a reasonable
claim under third-party insurance for all or a portion of an indemnifiable
liability or reimbursement from the Selling Entities hereunder, Buyer agrees to
file a claim for recovery of such liability or reimbursement (or portion
thereof) and to take any and all other reasonable actions with respect thereto.
To the extent that such claim (or any portion thereof) is not paid by such
third-party insurer within 60 days of the date of filing of such claim, then,
with respect to such claim (or portion thereof), the obligation of the Selling
Entities to indemnify Buyer shall be the same as if Buyer had no such
insurance; provided, however, that if Buyer is ultimately paid for such claim
and the Selling Entities previously reimbursed Buyer for such indemnifiable
liability or reimbursement, then Buyer shall immediately remit to the Selling
Entities the amount of insurance proceeds received pursuant to such claim to
the extent Buyer was reimbursed by the Selling Entities therefor.
8.2.4 Buyer shall not be entitled to make any claim for
indemnification arising under Section 8.1 after the date which is twelve (12)
months after the Closing Date (the "Cut-off Date") and the representations and
warranties of Cerplex contained herein or in any certificates, schedules or
other documents delivered prior to or at the Closing shall expire with, and be
terminated and extinguished on, the Cut-off Date; provided, however, that
indemnification claims may be made with respect to (a) any breach of a
representation or warranty contained in Section 3.22 or 3.24 at any time prior
to the third anniversary of the Closing, (b) any breach of a representation or
warranty contained in Section 3.8 at any time prior to the expiration of the
applicable statute of limitations (as the same may be extended from time to
time), and (c) any breach of a representation contained in Section 3.2 at any
time, and each such representation and warranty shall survive the Closing until
such time as indemnification claims can no longer be validly made with respect
thereto. If a claim for indemnification is asserted in good faith prior to the
Cut-off Date (or such later date as provided in this Section 8.2.3), then
(notwithstanding the expiration of such time period) such claim and, if such
claim is based on the alleged breach of a representation or warranty, such
representation or warranty shall survive until the resolution of such claim.
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8.3 Third-Party Claims.
8.3.1 In the event that any legal proceedings shall be
instituted or any claim or demand shall be asserted by any Person in respect of
which indemnification may be sought by Buyer from the Selling Entities under
the provisions of this Section 8 (a "Third-Party Claim") Buyer shall cause
written notice of the assertion of any Third-Party Claim of which it has
knowledge that is covered by this indemnity to be forwarded promptly to
Cerplex; provided that the failure of Buyer to give timely notice shall not
affect rights to indemnification hereunder except to the extent that the
Selling Entities have been damaged by such failure. Cerplex shall have the
right, at its option and at its own expense, to be represented by counsel of
its choice and to participate in the defense, negotiation and/or settlement of
any Third-Party Claim.
8.3.2 In connection with any Third-Party Claim, Cerplex, at
the sole cost and expense of Cerplex, may, upon written notice to Buyer, assume
the defense of any such Third-Party Claim if (i) Cerplex acknowledges in
writing the obligation of Cerplex to indemnify in accordance with the terms of
this Agreement Buyer with respect to such Third-Party Claim, (ii) the
Third-Party Claim seeks monetary damages solely and (iii) an adverse resolution
of the Third-Party Claim would not have a Material Adverse Effect on the
goodwill or reputation of the Business, on the future conduct of the Business
by Buyer (or on Buyer) or on the Tax or accounting policies or positions of
Buyer or the Subsidiaries; provided, however, that Buyer may participate in any
such proceeding with counsel of its choice and at its own expenses; and
provided further, however, that if Cerplex assumes control of such defense and
Buyer reasonably concludes that Cerplex and Buyer have conflicting interests or
different defenses available with respect to such action, suit or proceeding,
the reasonable fees and expenses of counsel to Buyer shall be considered
"Losses" for purposes of this Agreement. The party controlling the defense
shall keep the other party advised of the status of such action, suit or
proceeding and the defense thereof and shall consider in good faith
recommendations made by the other party with respect thereto. If Cerplex
assumes control of any Third Party Claim as provided herein, Buyer shall make
available to Cerplex all records and other materials in its possession
pertaining to the defense of such Third Party Claim.
8.3.3 Buyer shall not agree to any settlement of such
action, suit or proceeding without the prior written consent of Cerplex, which
shall not be unreasonably withheld, unless Buyer waives any right to indemnity
therefor by Cerplex.
8.3.4 The parties hereto agree to cooperate fully with each
other in connection with the defense, negotiation or settlement of any
Third-Party Claim.
8.3.5 After final judgment or award shall have been
rendered by a court, arbitration board or administrative agency of competent
jurisdiction and the expiration of the time in which to appeal therefrom, or a
settlement shall have been consummated, or Buyer and Cerplex shall have arrived
at a mutually binding agreement with respect to each separate matter
indemnified by Cerplex, Buyer shall forward to Cerplex notice of any sums due
and owing by Cerplex with respect to such matter and Cerplex shall pay all of
the sums so owing to Buyer by check within 10 days after the date of such
notice.
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8.4 Indemnification of Selling Entities. The Buyer shall
indemnify and hold the Selling Entities harmless against any and all Losses
incurred or suffered by the Selling Entities resulting from any
misrepresentation or breach of any covenant or agreement by Buyer or failure by
Buyer to pay or otherwise discharge any Assumed Liability or to cause the
payment by the Subsidiaries of their respective liabilities which are expressly
assumed by the Buyer pursuant to this Agreement.
8.5 Exclusive Remedy. The sole and exclusive remedy of any party
with respect to any monetary Loss suffered or incurred by such party shall be
to seek indemnity pursuant to the provisions of this Section 8.
9. TERMINATION AND CERTAIN WAIVERS AND DAMAGE
9.1 If the Closing fails to occur on or by August 29, 1997 (the
"Deadline") due to the breach or default of Buyer, then the Deposit shall be
deemed liquidated damages to Cerplex, the Escrow Agent shall deliver the
Deposit (and any income thereon) to Cerplex (subject to the terms and
conditions of the Escrow Agreement) and neither party shall have any further
rights or obligations hereunder. If the Closing fails to occur on or prior to
the Deadline due to the breach or default of the Selling Entities, then Buyer,
in its sole discretion, may terminate this Agreement and all of each party's
respective obligations and duties hereunder at any time during the ten (10)
days following the Deadline by delivering written notice thereof to the Selling
Entities and, upon such termination, the Escrow Agent shall refund the Deposit
(and any income thereon) to Buyer (subject to the terms and conditions of the
Escrow Agreement); provided, however, such termination by Buyer shall in no
event affect any other rights Buyer may have to seek monetary damages for
breach of contract. If the Closing under this Agreement fails to occur on or
before the Deadline due to no breach or default of Buyer or the Selling
Entities under this Agreement, then any party hereto may terminate this
Agreement and all of each parties' respective obligations and duties hereunder
by delivering written notice thereof to the other parties, and upon such
termination, the Escrow Agent shall refund the Deposit (including any income
thereon) to Buyer (subject to the terms and conditions of the Escrow
Agreement). The parties agree that the liquidated damages provision set forth
above is reasonable, considering all of the circumstances existing as of the
date of this Agreement and the anticipation that proof of actual damages would
be extremely difficult and costly.
9.2 Notwithstanding anything to the contrary in this Agreement, if
prior to the Closing, any one or more of the Selling Entities or Subsidiaries
makes an assignment for the benefit of creditors or files a petition for
bankruptcy or reorganization under any federal or state law, or is the subject
of such a petition filed by a third party, and whether such filing is voluntary
or involuntary (any such event being referred to as a "Bankruptcy Event"), then
this Agreement shall automatically terminate, and the Deposit (and any income
thereon) shall be delivered to Buyer upon notice by Buyer to the Escrow Agent.
The Selling Entities acknowledge and agree that in case of a Bankruptcy Event,
the Deposit (and any income thereon) is and shall be the property of the Buyer
and shall not constitute any part of the estate of any Selling Entity.
10. GENERAL PROVISIONS
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10.1 Survival of Representations, Etc. All representations and
warranties contained herein or in any certificate or instrument delivered
pursuant to this Agreement or the transactions contemplated hereby shall
survive for a period of twelve (12) months following the Closing, except that
(i) representations and warranties in Sections 3.22 and 3.24 shall survive for
three (3) years from the Closing, (ii) representations and warranties in
Section 3.8 shall survive until the execution of the applicable statute of
limitations (as the same may be extended from time to time) and (iii)
representations and warranties in Section 3.2 shall survive without any time
limitation. All statements contained in the Schedules hereto or in any
certificate delivered pursuant to the transactions contemplated hereby shall be
deemed to be representations and warranties of the Selling Entities or Buyer
contained herein.
10.2 Benefit of Counsel. Each of the parties hereto has
obtained the advice of legal counsel prior to entering into this Agreement.
Each of the parties hereto executes this Agreement with full knowledge of its
significance and with the express intention of effecting its legal
consequences.
10.3 Further Assurances. At the request of any of the parties
hereto, and without further consideration, the other parties agree to execute
such documents and instruments and to do such further acts as may be necessary
or desirable to effectuate the transactions contemplated hereby.
10.4 Construction of Agreement. This Agreement is the product of
negotiation and preparation by and among each party and their respective
attorneys. Therefore, the parties acknowledge and agree that this Agreement
shall not be deemed prepared or drafted by one party or another and should be
construed accordingly.
10.5 Each Party to Bear Own Costs. Buyer and the Selling Entities
shall each pay all of their own respective costs and expenses incurred or to be
incurred in negotiating and preparing this Agreement and in carrying out the
transactions contemplated by this Agreement.
10.6 Brokers and Finders. Each of the parties hereto shall pay,
and shall hold the other party harmless from, any and all fees, costs and
expenses incurred, or to be incurred, by such party with respect to such
party's use of or dealings with a broker or finder (including, without
limitation, any commissions or finder's fees) in connection with the
transactions contemplated by this Agreement.
10.7 Headings. The subject headings of the Sections of this
Agreement are included for purposes of convenience only, and shall not affect
the construction or interpretation of any of its provisions.
10.8 Entire Agreement; Waivers. This Agreement and the Exhibits
and Schedules hereto, which are incorporated herein by reference, constitute
the entire agreement between the parties pertaining to the contemporaneous
agreements, representations, and understandings of the parties. No supplement,
modification, or amendment of this Agreement shall be binding unless executed
in writing by all parties. No waiver of any of the provisions of this
Agreement shall be deemed, or shall constitute, a waiver of any other
provision, whether or not similar, nor
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shall any waiver constitute a continuing waiver. No waiver shall be binding
unless executed in writing by the party making the waiver.
10.9 Third Parties. Nothing in this Agreement, whether express or
implied, is intended to confer any rights or remedies under or by reason of
this Agreement on any persons other than the parties to it and their respective
successors and assigns, nor is anything in this Agreement intended to relieve
or discharge the obligation or liability of any third person to any party to
this Agreement, nor shall any provision give any third persons any right of
subrogation or action over against any party to this Agreement.
10.10 Successors and Assigns. This Agreement shall be binding on,
and shall inure to the benefit of, the parties to it and their respective
heirs, legal representatives, successors, and assigns, although the parties'
obligations to pay or receive funds hereunder are not assignable. Subject to
the above sentence, Buyer shall be entitled to assign its rights, but not its
obligations, hereunder to any wholly- owned subsidiary of Buyer.
10.11 Notices. All notices, requests, demands, and other
communications under this Agreement shall be in writing and shall be deemed to
have been duly given on the date of service if served personally on the party
to whom notice is to be given, or on the third day after mailing if mailed to
the party to whom notice is to be given, by first class mail, registered or
certified, postage prepaid, and properly addressed as follows:
To Buyer: CSP, Inc.
40 Linnell Circle
Billerica, MA 01821
Attn: President
With a copy to: Foley, Hoag & Eliot LLP
One Post Office Square
Boston, MA 02109
Attn: Dean Hanley, Esq.
To the Selling Entities at: The Cerplex Group, Inc.
1382 Bell Avenue
Tustin, CA 92780
Attn: Chief Financial Officer
With a copy to: Brobeck, Phleger & Harrison LLP
4675 MacArthur Court
Suite 1000
Newport Beach, CA 92660
Attn: Frederic A. Randall, Jr.
Any party may change its address for purposes of this paragraph by giving
notice of the new address to each of the other parties in the manner set forth
above.
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10.12 Attorneys' Fees. If any party to this Agreement shall bring
any action (whether in a court of law or through any alternate dispute
resolution), counterclaim or appeal for any relief against the other,
declaratory or otherwise, to enforce the terms hereof or to declare rights
hereunder (including any dispute arising over the Escrow Agreement), the
Prevailing Party shall be entitled to recover its reasonable attorneys' fees
and costs, including any fees and costs incurred in bringing and prosecuting
such an action, counterclaim or appeal and/or enforcing any order, judgment,
ruling or award granted as part of such action. The "Prevailing Party" shall
be determined by the court, arbitrator or other person deciding such action,
counterclaim or appeal, and such court, arbitrator or other person shall either
designate one or none of the parties as the Prevailing Party. For purposes of
this Section 10.12, the Selling Entities shall be collectively referred to as a
"party". If neither party is deemed the Prevailing Party hereunder, then each
party shall bear its own costs and expenses in connection with such action,
counterclaim or appeal.
10.13 Governing Law. The terms of this Agreement shall be governed
by the laws of the State of California without reference to the choice of law
principles thereof.
10.14 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
10.15 Severability. All provisions contained herein are severable
and in the event that any of them shall be held to be to any extent invalid or
otherwise unenforceable by any court of competent jurisdiction, such provision
shall be construed as if it were written so as to effectuate to the greatest
possible extent the parties' expressed intent; and in every case the remainder
of this Agreement shall not be affected thereby and shall remain valid and
enforceable, as if such affected provision were not contained herein.
10.16 Publicity. Except for any public disclosure which Cerplex or
Buyer in good faith believes is required by law or applicable stock exchange
rules, no party shall issue any press release or make any public statement
regarding the transactions contemplated hereby, without the prior written
approval of the other party, which shall not be unreasonably withheld;
provided, however that if public disclosure is required by such law or
applicable stock exchange rule, the party subject to such law or rule shall use
its best efforts to inform the other party or parties prior to the issuance of
any such press release or public statement. The parties hereto shall issue a
mutually acceptable press release as soon as practicable after the execution of
this Agreement and as soon as practicable after the Closing.
10.17 No Third-Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any person other than the parties hereto and their
respective successors and permitted assigns.
[Signature Page to Follow]
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SIGNATURE PAGE FOR ASSET PURCHASE AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed this
Asset Purchase Agreement as of the date first above written.
CSP INC.
By: /s/
---------------------------------------------
Its:
--------------------------------------------
THE CERPLEX GROUP, INC.
By: /s/
---------------------------------------------
Its: Chief Executive Officer
CERPLEX SUBSIDIARY, INC.
By: /s/
---------------------------------------------
Its: Chief Financial Officer
MODCOMP JOINT VENTURE, INC.
By: /s/
---------------------------------------------
Its: President
MODCOMP/CERPLEX, L.P.
By: /s/
---------------------------------------------
Its: President of Modcomp Joint Venture, Inc.,
as general partner of Modcomp/Cerplex, L.P.
By: /s/
---------------------------------------------
Chief Financial Officer of Cerplex Subsidiary,
Inc., as general partner of Modcomp/Cerplex, L.P.
34
<PAGE> 1
EXHIBIT 3.3
CERTIFICATE OF AMENDMENT
OF THE
RESTATED CERTIFICATE OF INCORPORATION
OF
THE CERPLEX GROUP, INC.
It is hereby certified that:
1. That the name of the corporation is The Cerplex Group, Inc.
2. The Certificate of Incorporation of the corporation is hereby
amended by deleting Paragraph A of Article IV and by substituting in lieu of
said paragraph the following new paragraph:
"ARTICLE IV
A. Classes of Stock. The corporation is
authorized to issue two classes of stock to be designated,
respectively, "Common Stock" and "Preferred Stock." The total
number of shares which the corporation is authorized to issue
is Sixty Five Million (65,000,000) shares. Sixty Million
(60,000,000) shares shall be Common Stock, par value $.001 per
share, and Five Million (5,000,000) shares shall be Preferred
Stock, par value $.001 per share."
3. The amendment of the Certificate of Incorporation herein
certified has been duly adopted in accordance with the provisions of Sections
228 and 242 of the General Corporation Law of the State of Delaware.
Signed and attested to on June 12, 1997.
THE CERPLEX GROUP, INC.
By: /s/
----------------------------------------
William A. Klein,
Chairman, President and Chief Executive
Officer
Attest:
/s/
- ----------------------------------------
Frederic A. Randall,
Secretary
<PAGE> 1
EXHIBIT 4.27
FIFTH AMENDMENT TO
REGISTRATION RIGHTS AGREEMENT
THIS FIFTH AMENDMENT TO REGISTRATION RIGHTS AGREEMENT (this
"Amendment") is made as of the 9th day of April, 1997, 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 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."
A. The Company, the Investors, the Stockholders, the Bank
Holders, the Series B Preferred Holders and certain other investors and
stockholders are parties to 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 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
"Original Bank Warrants") to purchase Common Stock (as such term is defined in
the Existing Registration Rights Agreement) to the Bank Holders; the number of
such Original Bank Warrants is subject to reduction, as more particularly
provided for in the Bank Warrant Agreement.
C. Pursuant to a Third Amendment to Credit Agreement (the "Bank
Third Amendment") dated as of April 9, 1997 among the Company, Wells Fargo
Bank, National Association, as administrative agent, and the Bank Holders and
the Amended and Restated Warrant Agreement (the "Amended Bank Warrant
Agreement") dated as of April 9, 1997 among the Company and the Bank Holders,
the Company is issuing seven hundred fifty thousand (750,000) warrants (the
"Additional Bank Warrants," and, together with the Original Bank Warrants, the
"Bank Warrants") to purchase Common Stock to the Bank Holders; the number of
such Additional Bank Warrants is subject to reduction, as more particularly
provided for in the Amended Bank Warrant Agreement.
D. The Company has requested that the Existing Registration
Rights Agreement be amended to include the Additional Bank Warrants, as more
particularly provided herein.
<PAGE> 2
E. The Company, the Investors, the Stockholders, the Bank Holders
and the Series B Preferred Holders agreed to amend the Existing Registration
Rights Agreement as set forth herein.
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.
As used in this Amendment, the following terms have the respective
meanings specified below:
"Additional Bank Warrants" -- Recital C.
"Amended Bank Warrant Agreement" -- Recital C.
"Amendment, this" -- the introductory sentence.
"Bank Amendment and Waiver Agreement" -- Recital B.
"Bank Holders" -- the introductory sentence.
"Bank Third Amendment" -- Recital C.
"Bank Warrant Agreement" -- Recital B.
"Bank Warrants" -- Recital C.
"Company" -- the introductory sentence.
"Existing Registration Rights Agreement" -- Recital A.
"Investors" -- the introductory sentence.
"Original Bank Warrants" -- Recital B.
"Stockholders" -- the introductory sentence.
SECTION 2. AMENDMENTS.
2.1 Amendments to Section 1.1 of the Existing Registration Rights
Agreement
2
<PAGE> 3
(a) Section 1.1 of the Existing Registration Rights Agreement is
hereby amended by amending and restating the following definitions, in their
entirety, as set forth below:
The term "Bank Holders" means (a) each of the banks
set forth on Schedule C hereto for so long as they hold any Bank
Warrants issued on April 15, 1996 (the "Original Bank Warrants") or on
April 9, 1997 (the "Additional Bank Warrants") or any Common Stock
issued pursuant to the exercise of such Bank 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 Bank Warrant, or the Common Stock issued upon the exercise of
such Bank Warrant, which Bank Warrant derived from an Original Bank
Warrant or an Additional Bank Warrant, shall be included in this
definition, provided that any holder of shares of Common Stock issued
upon the exercise of any Original Bank Warrant, any Additional Bank
Warrant or any Bank Warrant that derived from such Original Bank
Warrant or Additional Bank Warrant which shares have been, or derive
from shares that have 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 Bank Holders shall be made
upon a vote or a majority in interest of holders of the aforesaid Bank
Warrants and the aforesaid Common Stock on the basis of the number of
shares of Common Stock issuable pursuant to such Bank Warrants and the
number of shares of such Common Stock then held. Rights of
successors, assigns and transferees of Bank Holders are subject to
compliance with the requirements of Section 1.13.
The term "Bank Warrants" means those certain warrants
issued by the Company to each of the banks set forth on Schedule C
hereto on April 15, 1996 pursuant to that certain Warrant Agreement
dated as of April 15, 1996 and those certain warrants issued by the
Company to each of the banks set forth on Schedule C hereto on April
9, 1997 pursuant to that certain Amended and Restated Warrant
Agreement dated as of April 9, 1997 and all warrants exchanged
therefor or otherwise subsequently issued in respect thereof under
said Amended and Restated Warrant Agreement.
2.2 Addition of Schedule C to Existing Registration Rights Agreement
Schedule C to the Existing Registration Rights Agreement is hereby
deleted and Schedule C hereto replaced therefor.
SECTION 3. MISCELLANEOUS.
3.1 Additional Bank Holder to Become Party
Citibank, N.A. 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
3
<PAGE> 4
amended by this Amendment. For purposes of the avoidance of doubt, such Bank
Holder acknowledges that
(a) the Bank Warrants are separate and distinct from the
"Warrants" (as such term is defined in the Existing Registration
Rights Agreement) and the 1996 Warrants; and
(b) the Bank Holders are not "Investors" (as such term is
defined in the Existing Registration Rights Agreement) and are not
entitled to any of the rights of the Investors under the Existing
Registration Rights Agreement, as amended hereby, and are not "Warrant
Group Holders" (as such term is defined in the Existing Registration
Rights Agreement) and are not entitled to any of the rights of Warrant
Group Holders under the existing Registration Rights Agreement, as
amended hereby.
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 and delivery
hereof by (i) each of the Investors, (ii) sixty-seven percent in interest of
the Stockholders, (iii) each of the Bank Holders, (iv) sixty-seven percent in
interest of the Series B Preferred Holders and (v) the Company.
3.5 Section Headings
The titles of the sections hereof appear as a matter of convenience
only, do not constitute a part of this Amendment and shall not affect the
construction hereof.
4
<PAGE> 5
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 /s/
-------------------------------------------
Name:
Title:
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
By /s/
-------------------------------------------
Name:
Title:
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
By /s/
-------------------------------------------
Name:
Title:
NORTH ATLANTIC SMALLER COMPANIES INVESTMENT
TRUST PLC
By /s/
-------------------------------------------
Name:
Title:
[Signature page to the FIFTH AMENDMENT TO REGISTRATION RIGHTS AGREEMENT among
THE CERPLEX GROUP, INC. and the Bank Holders, Investors, Stockholders and
Series B Preferred Holders listed therein.]
5
<PAGE> 6
Each of the undersigned Bank Holders agrees to be bound
by the terms and conditions of the Existing Registration
Rights Agreement, as amended by this Fifth Amendment
to Registration Rights Agreement
WELLS FARGO BANK, NATIONAL ASSOCIATION
By: /s/
---------------------------------------
Name:
Title:
BHF - BANK AKTIENGESELLSCHAFT
By: /s/
---------------------------------------
Name:
Title:
By: /s/
---------------------------------------
Name:
Title:
CITIBANK, N.A.
By: /s/
---------------------------------------
Name:
Title:
[Signature page to FIFTH AMENDMENT TO REGISTRATION RIGHTS AGREEMENT among THE
CERPLEX GROUP, INC. and the Bank Holders, Investors, Stockholders and Series B
Preferred Holders listed therein.]
6
<PAGE> 7
Each of the undersigned Stockholders agrees to be bound
by the terms and conditions of the Existing Registration
Rights Agreement, as amended by this Fifth Amendment
to Registration Rights Agreement
/s/
- --------------------------------------
Name: William A. Klein
Address: 1382 Bell Avenue
Tustin, California 92680
/s/
- --------------------------------------
Name: Richard C. Davis
Address: 1382 Bell Avenue
Tustin, California 92680
/s/
- --------------------------------------
Name: Myron Kunin
Address: Regis Corporation
7201 Metro Boulevard
Minneapolis, MN 55439
/s/
- --------------------------------------
Name: Theodore J. Wisniewski
Address: 1382 Bell Avenue
Tustin, California 92680
[Signature page to FIFTH AMENDMENT TO REGISTRATION RIGHTS AGREEMENT among THE
CERPLEX GROUP, INC. and the Bank Holders, Investors, Stockholders and Series B
Preferred Holders listed therein.]
7
<PAGE> 8
Each of the undersigned Investors agrees to be bound
by the terms and conditions of the Existing Registration
Rights Agreement, as amended by this Fifth Amendment
to Registration Rights Agreement
SPROUT GROWTH II, L.P.
By: DLJ Capital Corporation, Managing General Partner
By: /s/
--------------------------------------
Robert Finzi, Attorney-in-Fact
DLJ CAPITAL CORPORATION
By: /s/
--------------------------------------
Robert Finzi, Attorney-in-Fact
BESSEMER VENTURE PARTNERS III L.P.
By: Deer III & Co., General Partner
By: /s/
--------------------------------------
Robert H. Buescher, General Partner
By: /s/
--------------------------------------
Robert H. Buescher, Attorney-in-Fact
[Signature page to FIFTH AMENDMENT TO REGISTRATION RIGHTS AGREEMENT among THE
CERPLEX GROUP, INC. and the Bank Holders, Investors, Stockholders and Series B
Preferred Holders listed therein.]
7
<PAGE> 9
Each of the undersigned Series B Preferred Holders agrees to be bound
by the terms and conditions of the Existing Registration
Rights Agreement, as amended by this Fifth Amendment
to Registration Rights Agreement
SCORPION OFFSHORE INVESTMENT FUND
By: /s/
--------------------------------------
Name: Ralph J. Long, Jr.
Title: Chief Financial Officer, Standard Pacific Capital LLC,
as Investment Advisor to Scorpion Offshore Investment Fund
THE & TRUST
By: /s/
--------------------------------------
Name: Ralph J. Long, Jr.
Title: Chief Financial Officer, Standard Pacific Capital LLC, as
Investment Advisor to The & Trust
CHESTNUT PACIFIC LTD. PARTNERS
By: /s/
--------------------------------------
Name: Ralph J. Long, Jr.
Title: Chief Financial Officer, Standard Pacific Capital LLC, as
Investment Advisor to Chestnut Pacific Ltd. Partners
STANDARD GLOBAL EQUITY PARTNERS L.P.
By: /s/
--------------------------------------
Name: Ralph J. Long, Jr.
Title: Chief Financial Officer, Standard Pacific Capital LLC, as
General Partner of Standard Global Equity Partners L.P.
[Signature page to FIFTH AMENDMENT TO REGISTRATION RIGHTS AGREEMENT among THE
CERPLEX GROUP, INC. and the Bank Holders, Investors, Stockholders and Series B
Preferred Holders listed therein.]
8
<PAGE> 10
STANDARD PACIFIC CAPITAL OFFSHORE FUND LTD.
By: /s/
--------------------------------------
Name: Ralph J. Long, Jr.
Title: Chief Financial Officer, Standard Pacific Capital LLC, as
Investment Advisor to Standard Pacific Capital Offshore Fund
Ltd.
COMMON FUND EQUITY FUND
By: /s/
--------------------------------------
Name: Ralph J. Long, Jr.
Title: Chief Financial Officer, Standard Pacific Capital LLC, as
Investment Advisor to Common Fund Equity Fund
WHITMAN PARTNERS, L.P.
By: /s/
--------------------------------------
Name: Douglas F. Whitman
Title: General Partner
[Signature page to FIFTH AMENDMENT TO REGISTRATION RIGHTS AGREEMENT among THE
CERPLEX GROUP, INC. and the Bank Holders, Investors, Stockholders and Series B
Preferred Holders listed therein.]
10
<PAGE> 11
SCHEDULE A
Schedule of Investors
Warrant Investors
The Northwestern Mutual Life Insurance Company
720 East Wisconsin Avenue
Milwaukee. Wisconsin 53202
John Hancock Mutual Life Insurance Company
John Hancock Place
200 Clarendon Street
Boston, Massachusetts 02117
North Atlantic Smaller Companies Trust PLC
c/o 1.0. Hambro & Co., Ltd. 30 Queen Anne's Gate
London, England SWIH9AL
Independent Equity Group
Sprout Growth II, L,P.
DLJ Capital Corp.
Deepak Kamra
Bessemer Venture Partners II L.P.
Neill H. Brownstein
Robert H. Buescher
C. Samantha Chen
Rodney A. Cohen
Richard R. Davis
Adam P. Godfrey
Barbara M. Heragan
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. Danhakl
Hoyt L. Davidson
Thompson Dean
Peter K. Deeks
Ralph L. DeGroff, Jr.
Anthony M. DeLuise
Schedule A-1
<PAGE> 12
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
Joseph Navin, III
Michael R. Nicolais
Peter J. Nolan
Steven G. Puccinelli
Larry E. Reeder
Elan Adiel Schultz
James T. Sington
Jon R. Stone
Steven F. Strandberg
Kenneth A. Tucker
R. Scott Turricchi
Warren Woo
Kirk B. Wortman
Schedule A-2
<PAGE> 13
SCHEDULE B
Schedule of Stockholders
Catherine Bartholomew
Frank Cameron
Tom Cherry
Roberta Claborn
David O. Creasman
Raymond Cruz
Richard C. Davis
Randle Dewees
Edward Diaz
Susan Eaton
Harry Edmiston
Dennis Fandrich
Jon Gill
Jacqueline Gillett
Gary Graff
Nelson Guillory
Peggy Hams
Jerome Jacobson
James Jones
Roberta Kean
Jennifer Klein
Melissa Klein
William A. Klein
Myron Kunin
Pollianna Lewis
Van Nguyen
Richard Ollech
Thomas D. Pipkin
Juanita Pitts
Keith Rathbone
Richard Richardson
Vincent E. Simpson
Grover Smith
Joyce Valdez
Earnest Vernon
Alan Weaver
Theodore J. Wisniewski
Schedule B-1
<PAGE> 14
SCHEDULE C
Schedule of Bank Holders
Wells Fargo Bank, National Association
BHF - Bank Aktiengesellschaft
Citibank, N.A.
Schedule C-1
<PAGE> 15
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.
Schedule D-1
<PAGE> 1
EXHIBIT 4.28
WAIVER AGREEMENT
WAIVER AGREEMENT (this "Agreement"), dated as of June 30, 1997,
by and among THE CERPLEX GROUP, INC., a Delaware corporation (together with its
successors and assigns, the "Company"), THE NORTHWESTERN MUTUAL LIFE INSURANCE
COMPANY, JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY and NORTH ATLANTIC SMALLER
COMPANIES INVESTMENT TRUST PLC (collectively, the "Noteholders").
RECITALS:
A. The Company has entered into those certain separate
Amended and Restated Note Purchase Agreements, each dated as of April 9, 1997
(collectively, the "Note Purchase Agreement"), with each of the Noteholders,
pursuant to which the Company and the Noteholders agreed to, among other
things, the amendment and restatement of an aggregate principal amount of
$17,250,000 of the Company's Senior Subordinated Notes Due November 19, 2001
(as amended and restated, the "Notes").
B. The Noteholders are the current holders of 100% of the
Notes outstanding as of the Effective Date.
C. The Company has notified the Noteholders of certain
actual and potential Defaults and Events of Default under Section 6.18, Section
6.19, Section 6.20 and Section 6.21 of the Note Purchase Agreement (the
"Noticed Events of Default") and has requested that the Noteholders waive the
Noticed Events of Default.
D. The Noteholders are agreeable, subject to the terms
and conditions set forth below, to granting the aforesaid waivers as set forth
herein.
E. Unless otherwise expressly provided for herein,
capitalized terms used herein and defined in the Note Purchase Agreement are
used herein with the meanings ascribed to them in the Note Purchase Agreement.
AGREEMENT:
NOW, THEREFORE, for valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1
<PAGE> 2
SECTION 1. WAIVER.
Subject to the satisfaction of the conditions set forth in
Section 3, the Noteholders hereby waive, on the Effective Date, each of the
Noticed Events of Default and agree that the effectiveness of each of Section
6.18, Section 6.19, Section 6.20 and Section 6.21 of the Note Purchase
Agreement shall be temporarily suspended from and including the Effective Date
to and including the earlier to occur of (i) the date that any holder of Senior
Debt takes any action in respect of any default or any event of default under
any Senior Credit Document and (ii) July 10, 1997 (the "Reinstatement Date").
On and after the Reinstatement Date, each of Section 6.18, Section 6.19,
Section 6.20 and Section 6.21 of the Note Purchase Agreement shall be in full
force and effect. Except for the foregoing express waivers and suspensions,
the terms of this Agreement shall not operate as a waiver of, or otherwise
prejudice, the rights, remedies or powers of the Noteholders under the Note
Purchase Agreement, under the Notes or under applicable law and all of such
rights, remedies and powers are hereby expressly reserved.
SECTION 2. WARRANTIES AND REPRESENTATIONS.
To induce the Noteholders to enter into this Agreement, the
Company warrants and represents to the Noteholders that as of the Effective
Date:
2.1 CORPORATE ORGANIZATION AND AUTHORITY.
The Company:
(a) is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware;
(b) has all legal and corporate power and authority to
own and operate its Properties and to carry on its business as now conducted
and as presently proposed to be conducted;
(c) has all licenses, certificates, permits, franchises
and other governmental authorization necessary to own and operate its
Properties and to carry on its business as now conducted and as presently
proposed to be conducted, except where the failure to have such licenses,
certificates and permits, either individually or in the aggregate, would not
have, and could not reasonably be expected to have, a Material Adverse Effect;
and
(d) has duly qualified or has been duly licensed, and is
authorized to do business and is in good standing, as a foreign corporation in
each state except where the failure to be so qualified or licensed and
authorized and in good standing, either individually or in the aggregate, would
not have, and could not reasonably be expected to have, a Material Adverse
Effect.
2
<PAGE> 3
2.2 COMPLIANCE WITH LAW.
The Company:
(a) is not in violation of any law, ordinance,
governmental rule or regulation to which it is subject; and
(b) has not failed to obtain any license, certificate,
permit, franchise or other governmental authorization necessary to the
ownership of its Property or to the conduct of its business;
which violation or failure to obtain, either individually or in the aggregate,
would have, or could reasonably be expected to have, a Material Adverse Effect.
2.3 LEGAL AND AUTHORIZED; OBLIGATIONS ARE ENFORCEABLE.
(a) AUTHORIZATION. The execution and delivery by
the Company of this Agreement and the performance by the Company of its
obligations hereunder are within the corporate powers of the Company and do not
conflict with, result in any breach of the provisions of, constitute a default
under, or result in the creation of any Lien upon any Property of the Company
under the provisions of, any agreement, charter instrument, bylaw or other
instrument to which it is a party or by which it or any of its Property may be
bound.
(b) OBLIGATIONS ARE LEGAL AND ENFORCEABLE. The
execution and delivery by the Company of this Agreement have been duly
authorized by all necessary action on the part of the Company, and this
Agreement has been executed and delivered by one or more duly authorized
officers of the Company. This Agreement constitutes a legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except that the enforceability thereof may be:
(i) limited by applicable bankruptcy,
reorganization, arrangement, insolvency, moratorium or other similar
laws affecting the enforceability of creditors' rights generally;
(ii) subject to the availability of
equitable remedies; and
(iii) with respect to indemnity and
contribution, limited by state or federal laws relating to Securities
or by the public policy underlying such laws.
2.4 NO DEFAULTS.
(a) NO OTHER DEFAULTS. No Defaults or Events of
Default exist, other than the Noticed Events of Default. No Senior Nonpayment
Default exists that has not
3
<PAGE> 4
been waived and no Senior Nonpayment Default Notice has been issued by any
holder of Senior Debt. No event has occurred and no condition exists that,
upon the execution, delivery and effectiveness of this Agreement would
constitute a Default or an Event of Default other than in respect of the
Noticed Events of Default.
(b) CHARTER INSTRUMENT, OTHER AGREEMENTS. The
Company is not in violation in any respect of any term of any charter
instrument or bylaw. Except with respect to the failure of the Company to pay
the promissory note payable to Lucent Technologies, Inc., the Company is not in
violation in any material respect of any term in any agreement or other
instrument to which it is a party or by which it or any of its Property may be
bound, which would have, or could reasonably be expected to have, a Material
Adverse Effect.
2.5 NO OTHER PAYMENTS.
Other than the restructure fee due to the holders of Senior
Debt on June 30, 1997 pursuant to Subsection 2.3C of the Wells Fargo Credit
Agreement, the Company has made no payment, or given any other consideration,
to any Noteholder or to any holder of Senior Debt to induce any of such Persons
to enter into this Agreement or the Credit Agreement Waiver contemplated by
Section 3.2.
SECTION 3. CONDITIONS.
The waiver by the Noteholders set forth in Section 1 shall
become effective upon the satisfaction of the following conditions (the
"Effective Date"):
3.1 EXECUTION AND DELIVERY OF THIS AGREEMENT.
The Company and the Required Holders shall have executed and
delivered counterparts of this Agreement.
3.2 WAIVER BY HOLDERS OF SENIOR DEBT.
The Company and each holder of Senior Debt whose consent is
required therefor pursuant to the terms of the Senior Credit Documents shall
have executed and delivered waivers with respect to all defaults and all events
of default which exist under such Senior Credit Documents (including, without
limitation, each of such events that relate to each of the Noticed Events of
Default). The Company shall have delivered to each Noteholder a copy of the
Fifth Amendment to Credit Agreement and Limited Waiver (the "Credit Agreement
Waiver") entered into among the Company and the holders of Senior Debt, in the
form of the execution draft of the Credit Agreement Waiver previously delivered
to each Noteholder, together with a certification by a Senior Officer of the
Company stating that such copy is a true and correct copy and such Credit
Agreement Waiver cures or waives all defaults and all events of default which
exist under the Senior Credit Documents.
4
<PAGE> 5
3.3 NO DEFAULT; REPRESENTATIONS AND WARRANTIES TRUE.
After giving effect to Section 1 hereof, no Default or Event
of Default under the Note Purchase Agreement shall exist and the warranties and
representations set forth in Section 2 hereof shall be true and correct on the
Effective Date.
3.4 EXPENSES.
The Company shall have paid all costs and expenses of the
Noteholders relating to this Agreement (including, without limitation, any fees
and disbursements of their special counsel).
3.5 WAIVER BY HOLDERS OF SENIOR DEBT.
The waiver by the Noteholders set forth in Section 1 shall be
of no force or effect, and the Effective Date shall be deemed not to have
occurred, if the Company shall pay or cause to be paid, directly or indirectly,
any remuneration, whether by way of supplemental or additional interest, fee or
otherwise, to any creditor (including, without limitation, any holder of Senior
Debt, other than the restructure fee due to the holders of Senior Debt on June
30, 1997 pursuant to Subsection 2.3C of the Wells Fargo Credit Agreement) as
consideration for, or as an inducement to, such creditor entering into any
forbearance, waiver, amendment or similar agreement, unless such renumeration
is concurrently paid, on the same terms, ratably to each Noteholder.
3.6 PROCEEDING SATISFACTORY.
All proceedings taken in connection with this Agreement shall
be satisfactory to the Noteholders and their special counsel. The Noteholders
and their special counsel shall have received copies of such documents and
papers as they may reasonably request in connection therewith, in form and
substance satisfactory to them.
SECTION 4. MISCELLANEOUS.
4.1 GOVERNING LAW.
THIS AGREEMENT SHALL BE CONSTRUED, INTERPRETED AND ENFORCED IN
ACCORDANCE WITH, AND GOVERNED BY, INTERNAL NEW YORK LAW.
4.2 DUPLICATE ORIGINALS.
Two or more duplicate originals of this Agreement may be
signed by the parties, each of which shall by an original but all of which
together shall constitute one and the same instrument. This Agreement may be
executed in one or more counterparts and shall be effective when at least one
counterpart shall have been executed by each party
5
<PAGE> 6
hereto, and each set of counterparts which, collectively, show execution by
each party hereto shall constitute one duplicate original.
4.3 EFFECT OF THIS AGREEMENT.
Except as specifically provided in this Agreement, no terms or
provisions of the Note Purchase Agreement have been modified or changed by this
Agreement and the terms and provisions of the Note Purchase Agreement shall
continue in full force and effect. This Agreement and the waivers contained
herein shall have and be in effect on and after the Effective Date.
4.4 WAIVERS AND AMENDMENTS OF THIS AGREEMENT.
Neither this Agreement nor any term hereof may be changed,
waived, discharged or terminated orally, or by any action or inaction, but only
by an instrument in writing signed by the party against which enforcement of
the change, waiver, discharge or termination is sought.
4.5 SECTION HEADINGS.
The titles of the sections hereof appear as a matter of
convenience only, do not constitute a part of this Agreement and shall not
affect the construction hereof.
4.6 COSTS AND EXPENSES.
On the Effective Date, the Company shall pay all costs and
expenses of the Noteholders related hereto, including, but not limited to, the
statement for fees and disbursements of the Noteholders' special counsel
presented to the Company on the Effective Date for matters in connection with
this Agreement. The Company will also pay upon receipt of any statement
thereof, each additional statement for fees and disbursements of the
Noteholders' special counsel rendered after the Effective Date in connection
with this Agreement. The obligations of the Company under this Section 4.6
shall survive the payment or prepayment of the Notes and the termination of the
Note Purchase Agreement.
4.7 SURVIVAL.
All warranties, representations, certifications and covenants
made by the Company hereunder, or in any certificate or other instrument
delivered pursuant hereto or thereto, shall be considered to have been relied
upon by the Noteholders and shall survive the execution of this Agreement
regardless of any investigation made by or on behalf of the Noteholders. All
statements in any such certificate or other instrument shall constitute
warranties and representations of the Company hereunder.
[Remainder of Page Intentionally Blank. Next Page is Signature Page.]
6
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement 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__________________________
Name:
Title:
THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY
By:_________________________
Name:
Title:
JOHN HANCOCK MUTUAL LIFE
INSURANCE COMPANY
By:_________________________
Name:
Title:
NORTH ATLANTIC SMALLER COMPANIES
INVESTMENT TRUST PLC
By:_________________________
Name:
Title:
[Signature page to the Waiver Agreement among The Cerplex Group, Inc.
and the Noteholders listed therein]
7
<PAGE> 1
EXHIBIT 4.29
THE CERPLEX GROUP, INC.
July 10, 1997
VIA FACSIMILE TRANSMISSION
To the Persons on the Distribution List
Attached Hereto
Ladies and Gentlemen:
We refer to that certain Waiver Agreement (the "Waiver
Agreement"), dated as of June 30, 1997, among The Cerplex Group, Inc., The
Northwestern Mutual Life Insurance Company, John Hancock Mutual Life Insurance
Company and North Atlantic Smaller Companies Investment Trust plc. Capitalized
terms are used herein with the meanings assigned thereto in the Waiver
Agreement.
We hereby request that you amend the Waiver Agreement by
deleting the date "July 10, 1997" set forth in clause (ii) of the first
sentence of Section 1 of the Waiver Agreement and substituting "August 8, 1997"
therefor.
We hereby represent to each of you that (after giving effect
to the Waiver Agreement, as amended hereby) no Default or Event of Default
under the Note Purchase Agreement exists as of the date hereof and that the
warranties and representations set forth in Section 2 of the Waiver Agreement
are true and correct as of the date hereof.
The aforesaid amendment shall become effective upon the
execution of a counterpart of this letter by each of you and upon the Limited
Waiver, dated as of July 10, 1997, among the Company and the holders of Senior
Debt becoming effective.
Except as specifically provided in this letter, no terms or
provisions of the Waiver Agreement have been modified or changed by this
letter.
8
<PAGE> 2
If you are in agreement with the foregoing, please execute the
copy of this letter attached hereto and return it (via facsimile transmission)
to your counsel, Hebb & Gitlin (860-278-8968).
Sincerely,
THE CERPLEX GROUP, INC.
By_________________________
Name:
Title:
AGREED and CONSENTED TO:
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
By:________________________________________
Name:
Title:
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
By:________________________________________
Name:
Title:
NORTH ATLANTIC SMALLER COMPANIES INVESTMENT TRUST PLC
By:________________________________________
Name:
Title:
<PAGE> 1
EXHIBIT 4.30
THE CERPLEX GROUP, INC.
August 6, 1997
VIA FACSIMILE TRANSMISSION
To the Persons on the Distribution List
Attached Hereto
Ladies and Gentlemen:
We refer to that certain Waiver Agreement (the "Waiver
Agreement"), dated as of June 30, 1997, among The Cerplex Group, Inc. (the
"Company"), The Northwestern Mutual Life Insurance Company, John Hancock Mutual
Life Insurance Company and North Atlantic Smaller Companies Investment Trust
plc. (collectively, the "Noteholders"), as modified by that certain letter
agreement (the "Letter Agreement" and together with the Waiver Agreement, the
"Amended Waiver Agreement"), dated July 10, 1997, among the Company and the
Noteholders. Capitalized terms are used herein with the meanings assigned
thereto in the Amended Waiver Agreement.
The Company hereby requests that you amend the Amended Waiver
Agreement by deleting the date "August 8, 1997" set forth in clause (ii) of the
first sentence of Section 1 of the Amended Waiver Agreement and substituting
"August 14, 1997" therefor.
The Company hereby represents to each of you that (after
giving effect to the Amended Waiver Agreement, as further amended hereby) no
Default or Event of Default under the Note Purchase Agreement exists as of the
date hereof and that the warranties and representations set forth in Section 2
of the Waiver Agreement are true and correct as of the date hereof.
The aforesaid amendment shall become effective upon the
execution of a counterpart of this letter by each of you and upon the Sixth
Amendment to Credit Agreement and Consent (the "Bank Amendment"), dated as of
August 6, 1997, among the Company and the holders of Senior Debt becoming
effective.
Except as specifically provided in this letter, no terms or
provisions of the Amended Waiver Agreement have been modified or changed by
this letter.
In addition to the foregoing request, the Company also hereby
requests that you consent to the sale of the assets of Modcomp/Cerplex L.P., a
Delaware limited
<PAGE> 2
partnership ("Modcomp"), including, without limitation, the sale of the capital
stock of the Subsidiaries (as such term is defined in Schedule A hereto) of
Modcomp (collectively, the "Asset Sale") to CSP, Inc., a Massachusetts
corporation ("Buyer"), and the application of the proceeds of the Asset Sale in
accordance with the terms set forth in Schedule A to this letter. Your
execution of a copy of this letter shall evidence your (i) release of any
interest in or encumbrance on the assets being sold pursuant to the Asset Sale
and (ii) agreement that the foregoing consent shall be effective as of August
6, 1997 and may be relied upon by the Company and the Buyer (to whom the
Company will deliver an executed copy of this letter) and their respective
agents and attorneys in consummating such sale.
If you are in agreement with the foregoing, please execute the
copy of this letter attached hereto and return it (via facsimile transmission)
to your counsel, Hebb & Gitlin (860-278-8968).
Sincerely,
THE CERPLEX GROUP, INC.
By_________________________
Name:
Title:
<PAGE> 3
AGREED and CONSENTED TO:
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
By:________________________________________
Name:
Title:
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
By:________________________________________
Name:
Title:
NORTH ATLANTIC SMALLER COMPANIES INVESTMENT TRUST PLC
By:________________________________________
Name:
Title:
<PAGE> 4
SCHEDULE A
The Asset Sale will be consummated pursuant to the terms of an
Asset Purchase Agreement dated as of August 6, 1997, by and among the Company,
Modcomp, the Buyer, Cerplex Subsidiary, Inc., a Delaware corporation, and
Modcomp Joint Venture, Inc., a Delaware corporation. The assets will include
all of the assets currently used in Modcomp's business, including the shares of
capital stock owned by Modcomp in the following subsidiaries of Modcomp
(collectively, the "Subsidiaries"):
Modcomp Canada Ltd., a Canadian corporation
Modular Computer Systems GmbH, a German corporation
Modcomp France, S.A., a French corporation
Modcomp C.A., a Venezuela corporation
Modular Computer Services, Inc., a Florida corporation
The purchase price will be approximately $8,300,000. The proceeds from the
Asset Sale will be distributed as follows: (i) to the prepayment, in the
aggregate amount of $6,000,000, of Term Loans under and as defined in the Wells
Fargo Credit Agreement, (ii) to the prepayment, in the amount of $2,000,000, of
Revolving Loans under and as defined in the Wells Fargo Credit Agreement, and
(iii) any remaining net proceeds in excess of $8,000,000, 50% to the prepayment
of Term Loans under and as defined in the Wells Fargo Credit Agreement and 50%
to the Company. The $2,000,000 prepayment described in the foregoing clause
(ii) may be reborrowed by the Company on and prior to September 1, 1997, as set
forth in the Bank Amendment. The closing of the Asset Sale is tentatively
scheduled for August 22, 1997.
<PAGE> 1
EXHIBIT 10.35
EXECUTION COPY
THE CERPLEX GROUP, INC.
FIFTH AMENDMENT
TO CREDIT AGREEMENT AND LIMITED WAIVER
This FIFTH AMENDMENT TO CREDIT AGREEMENT AND LIMITED WAIVER
(this "AMENDMENT") is dated as of June 30, 1997 and entered into by and among
THE CERPLEX GROUP, INC., a Delaware corporation ("COMPANY"), the FINANCIAL
INSTITUTIONS LISTED ON THE SIGNATURE PAGES HEREOF ("LENDERS") and WELLS FARGO
BANK, NATIONAL ASSOCIATION, as administrative agent for Lenders
("ADMINISTRATIVE AGENT"), and, for purposes of Section 5 hereof, CERTECH
Technology, Inc., Cerplex Mass., Inc., Cerplex Limited, Apex Computer Company,
Cerplex Subsidiary, Inc., Modcomp/Cerplex L.P., Modcomp Joint Venture, Inc.,
Modular Computer Services, Inc., Modular Computer Systems GmbH and Modcomp
France S.A. (collectively, "GUARANTORS"), and is made with reference to that
certain Credit Agreement dated as of October 12, 1994, as amended by that
certain First Amendment to Credit Agreement and Limited Waiver dated as of
April 15, 1996, that certain Second Amendment to Credit Agreement and Limited
Waiver dated as of November 30, 1996, that certain Third Amendment to Credit
Agreement dated as of April 9, 1997 (the "THIRD AMENDMENT") and that certain
Fourth Amendment to Credit Agreement and Limited Waiver dated as of May 30,
1997 (as so amended, the "CREDIT AGREEMENT"), by and among Company, Lenders,
Administrative Agent and Guarantors. Capitalized terms used herein without
definition shall have the same meanings herein as set forth in the Credit
Agreement.
RECITALS
WHEREAS, Company has notified Lenders that it is in default of
certain provisions of the Credit Agreement; and
WHEREAS, Lenders have agreed to amend certain provisions of
the Credit Agreement and to waive certain provisions of the Credit Agreement
until July 10, 1997;
NOW, THEREFORE, in consideration of the premises and the
agreements, provisions and covenants herein contained, the parties hereto agree
as follows:
<PAGE> 2
SECTION 1. AMENDMENTS TO THE CREDIT AGREEMENT
SECTION 1.1 AMENDMENTS TO SECTION 2: AMOUNTS AND TERMS OF COMMITMENTS AND
LOANS.
A. Subsection 2.4A(iii)(d) of the Credit Agreement is hereby
amended to read in its entirety as follows:
"(d) [INTENTIONALLY OMITTED]"
B. Subsection 2.4A(iii)(i) of the Credit Agreement is hereby
amended by deleting the phrase "subsections 2.4A(iii)(a)-(f)" contained therein
and substituting the phrase "subsections 2.4A(iii)(a)-(c), (e) and (f)"
therefor.
C. Subsection 2.4A(iv)(b) of the Credit Agreement is hereby
amended by deleting the phrase "subsections 2.4A(iii)(a)-(d)" contained therein
and substituting the phrase "subsections 2.4A(iii)(a)-(c)" therefor.
SECTION 1.2 AMENDMENTS TO SECTION 6: COMPANY'S AFFIRMATIVE COVENANTS.
A. Subsection 6.16 of the Credit Agreement is hereby amended to
read in its entirety as follows:
"6.16 NEW LEADERSHIP; FINANCIAL ADVISOR. Company shall hire a new
chief executive officer no later than July 3, 1997 and shall continue to retain
the services of such chief executive officer through the Commitment Termination
Date. In addition, Company shall continue to retain the services of a
financial advisor, satisfactory to Lenders, through the Commitment Termination
Date."
SECTION 2. WAIVER
Subject to the terms and conditions set forth herein and in
reliance on the representations of Company herein contained, Lenders hereby
waive compliance with the provisions of (i) subsection 4.2B(i) of the Credit
Agreement to the extent necessary to exclude the representations in subsection
5.14 of the Credit Agreement for the purpose of permitting Company to borrow an
amount equal to $386,984.14 on June 30, 1997; provided that such amount shall
be applied directly by Administrative Agent to pay interest due and payable to
Lenders on that date and the second installment of the Third Amendment
restructure fee due on that date without being first credited to an account of
Company; (ii) subsection 7.6 of the Credit Agreement for the period commencing
June 30, 1997 and ending July 10, 1997; and (iii) subsection 8.14 of the Credit
Agreement to the extent necessary to permit Company to consummate the sale of
the Pen Interconnect stock held by Company on or prior to July 10, 1997.
<PAGE> 3
Company hereby agrees that it shall have no right to borrow
under the Credit Agreement prior to July 11, 1997, other than as provided in
the preceding paragraph. The waiver set forth herein shall be of no further
force and effect in the event that (i) Company submits a Notice of Borrowing
under the Credit Agreement prior to July 11, 1997, other than in connection
with the borrowing permitted under the preceding paragraph, or (ii) Company
makes any payment on or sets apart any sum for any payment on any Subordinated
Indebtedness.
SECTION 3. CONDITIONS TO EFFECTIVENESS
This Amendment shall become effective only upon the
satisfaction of all of the following conditions precedent (the date of
satisfaction of such conditions being referred to herein as the "FIFTH
AMENDMENT EFFECTIVE DATE"):
A. On or before the Fifth Amendment Effective Date, Administrative
Agent shall have received for each Lender counterparts hereof duly executed on
behalf of Company, Administrative Agent, Lenders and each Guarantor.
B. Administrative Agent shall have received:
1. A certificate from the corporate secretary or an
assistant secretary of Company certifying that there have been no
amendments to the Certificate of Incorporation or Bylaws of Company
since _____, 199_;
2. Resolutions of Company's Board of Directors approving
and authorizing the execution, delivery, and performance of this
Amendment, certified as of the Fifth Amendment Effective Date by its
corporate secretary or an assistant secretary as being in full force
and effect without modification or amendment; and
3. Signature and incumbency certificates of the officers
of Company and of the Subsidiaries of Company executing this Amendment.
C. Lenders and their respective counsel shall have received
originally executed copies of one or more favorable written opinions of
Brobeck, Phleger & Harrison LLP, counsel for Company, in form and substance
reasonably satisfactory to Administrative Agent and its counsel, dated as of
the Fifth Amendment Effective Date.
D. On or before the Fifth Amendment Effective Date, all corporate
and other proceedings taken or to be taken in connection with the transactions
contemplated hereby and all documents incidental thereto not previously found
acceptable by Administrative Agent, acting on behalf of Lenders, and its
counsel shall be satisfactory in form and substance to Administrative Agent and
such counsel, and Administrative Agent and such counsel shall have received all
such counterpart
<PAGE> 4
originals or certified copies of such documents as Administrative Agent may
reasonably request.
E. Company shall deliver to Administrative Agent a waiver, in form
and substance satisfactory to Lenders, of the Note Purchase Agreement duly
executed by the parties to the Note Purchase Agreement required to execute such
waiver.
SECTION 4. COMPANY'S REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Amendment and to
amend the Credit Agreement in the manner provided herein, Company represents
and warrants to each Lender that the following statements are true, correct and
complete:
A. CORPORATE POWER AND AUTHORITY. Company has all requisite
corporate power and authority to enter into this Amendment and to carry out the
transactions contemplated by, and perform its obligations under, the Credit
Agreement as amended by this Amendment (the "AMENDED AGREEMENT").
B. AUTHORIZATION OF AGREEMENTS. The execution and delivery of
this Amendment and the performance of the Amended Agreement have been duly
authorized by all necessary corporate action on the part of Company, as the
case may be.
C. NO CONFLICT. The execution and delivery by Company of this
Amendment and the performance of the Amended Agreement do not and will not (i)
violate any provision of any law or any governmental rule or regulation
applicable to Company or any of its Subsidiaries, the Certificate or Articles
of Incorporation or Bylaws of Company or any of its Subsidiaries or any order,
judgment or decree of any court or other agency of government binding on
Company or any of its Subsidiaries, (ii) conflict with, result in a breach of
or constitute (with due notice or lapse of time or both) a default under any
Contractual Obligation of Company or any of its Subsidiaries, (iii) result in
or require the creation or imposition of any Lien upon any of the properties or
assets of Company or any of its Subsidiaries (other than any Liens created
under any of the Loan Documents in favor of Administrative Agent on behalf of
Lenders), or (iv) require any approval of stockholders or any approval or
consent of any Person under any Contractual Obligation of Company or any of its
Subsidiaries.
D. GOVERNMENTAL CONSENTS. The execution and delivery by Company
of this Amendment and the performance by Company of the Amended Agreement do
not and will not require any registration with, consent or approval of, or
notice to, or other action to, with or by, any federal, state or other
governmental authority or regulatory body.
E. BINDING OBLIGATION. This Amendment and the Amended Agreement
have been duly executed and delivered by Company and are the legally valid and
<PAGE> 5
binding obligations of Company, enforceable against Company in accordance with
their respective terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or limiting creditors'
rights generally or by equitable principles relating to enforceability.
F. INCORPORATION OF REPRESENTATIONS AND WARRANTIES FROM CREDIT
AGREEMENT. The representations and warranties contained in Section 5 of the
Credit Agreement, other than representations contained in subsection 5.14 of
the Credit Agreement, are and will be true, correct and complete in all
material respects on and as of the Fifth Amendment Effective Date to the same
extent as though made on and as of that date, except to the extent such
representations and warranties specifically relate to an earlier date, in which
case they were true, correct and complete in all material respects on and as of
such earlier date. As of the date hereof, Company is not in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in the Note Purchase Agreement and no condition exists
that, with the giving of notice or the lapse of time or both, would constitute
such a default.
G. ABSENCE OF DEFAULT. No event has occurred and is continuing or
will result from the consummation of the transactions contemplated by this
Amendment that would constitute an Event of Default or a Potential Event of
Default.
SECTION 5. ACKNOWLEDGEMENT AND CONSENT
Company is a party to the Company Collateral Documents, in each
case as amended through the Fifth Amendment Effective Date, pursuant to which
Company has created Liens in favor of Administrative Agent on certain
Collateral to secure the Obligations. Guarantors are a party to the Guaranty
and the Subsidiary Collateral Documents, in each case as amended through the
Fifth Amendment Effective Date, pursuant to which each Guarantor has (i)
guarantied the Obligations and (ii) created Liens in favor of Administrative
Agent on certain Collateral to secure the obligations of such Guarantor under
the Guaranty. Company and Guarantors are collectively referred to herein as
the "CREDIT SUPPORT PARTIES", and the Guaranty, the Company Collateral
Documents and the Subsidiary Collateral Documents are collectively referred to
herein as the "CREDIT SUPPORT DOCUMENTS".
Each Credit Support Party hereby acknowledges that it has
reviewed the terms and provisions of the Credit Agreement and this Amendment
and consents to the amendment of the Credit Agreement effected pursuant to this
Amendment. Each Credit Support Party hereby confirms that each Credit Support
Document to which it is a party or otherwise bound and all Collateral
encumbered thereby will continue to guaranty or secure, as the case may be, to
the fullest extent possible the payment and performance of all "Obligations,"
"Guarantied Obligations" and "Secured Obligations," as the case may be (in each
case as such terms are defined in the applicable Credit Support Document),
including, without limitation, the payment and performance of all such
"Obligations," "Guarantied Obligations" or "Secured Obligations," as the case
may
<PAGE> 6
be, in respect of the Obligations of Company now or hereafter existing under or
in respect of the Amended Agreement and the Notes defined therein.
Each Credit Support Party acknowledges and agrees that any of
the Credit Support Documents to which it is a party or otherwise bound shall
continue in full force and effect and that all of its obligations thereunder
shall be valid and enforceable and shall not be impaired or limited by the
execution or effectiveness of this Amendment. Each Credit Support Party
represents and warrants that all representations and warranties contained in
the Amended Agreement and the Credit Support Documents to which it is a party
or otherwise bound are true, correct and complete in all material respects on
and as of the Fifth Amendment Effective Date to the same extent as though made
on and as of that date, except to the extent such representations and
warranties specifically relate to an earlier date, in which case they were
true, correct and complete in all material respects on and as of such earlier
date.
Each Credit Support Party (other than Company) acknowledges and
agrees that (i) notwithstanding the conditions to effectiveness set forth in
this Amendment, such Credit Support Party is not required by the terms of the
Credit Agreement or any other Loan Document to consent to the amendments to the
Credit Agreement effected pursuant to this Amendment and (ii) nothing in the
Credit Agreement, this Amendment or any other Loan Document shall be deemed to
require the consent of such Credit Support Party to any future amendments to
the Credit Agreement.
SECTION 6. MISCELLANEOUS
A. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE OTHER
LOAN DOCUMENTS.
1. On and after the Fifth Amendment Effective Date, each
reference in the Credit Agreement to "this Agreement", "hereunder",
"hereof", "herein" or words of like import referring to the Credit
Agreement, and each reference in the other Loan Documents to the
"Credit Agreement", "thereunder", "thereof" or words of like import
referring to the Credit Agreement shall mean and be a reference to the
Amended Agreement.
2. Without limiting the generality of the provisions of
subsection 10.6 of the Credit Agreement, the waiver set forth shall be
limited precisely as written and relates solely to the noncompliance by
Company with the provisions of subsections 4.2B(i), 7.6 and 8.14 of the
Credit Agreement in the manner and to the extent described above.
Nothing in this Amendment shall be deemed to:
(a) constitute a waiver of compliance by Company
with respect to (i) subsection 4.2B(i), 7.6 or 8.14 of the
Credit Agreement in any
<PAGE> 7
other instance or (ii) any other term, provision or condition
of the Credit Agreement or any other instrument or agreement
referred to therein; or
(b) prejudice any right or remedy that
Administrative Agent or any Lender may now have (except to the
extent such right or remedy was based upon existing defaults
that will not exist after giving effect to this Amendment) or
may have in the future under or in connection with the Credit
Agreement or any other instrument or agreement referred to
therein.
3. Except as specifically amended by this Amendment, the
Credit Agreement and the other Loan Documents shall remain in full
force and effect and are hereby ratified and confirmed.
B. FEES AND EXPENSES. Company acknowledges that all costs, fees
and expenses as described in subsection 10.2 of the Credit Agreement incurred
by Administrative Agent and its counsel with respect to this Amendment and the
documents and transactions contemplated hereby shall be for the account of
Company.
C. HEADINGS. Section and subsection headings in this Amendment
are included herein for convenience of reference only and shall not constitute
a part of this Amendment for any other purpose or be given any substantive
effect.
D. APPLICABLE LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA,
WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
E. COUNTERPARTS. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and
attached to a single counterpart so that all signature pages are physically
attached to the same document.
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
THE CERPLEX GROUP, INC.
By: /s/
----------------------------------------
Title:
-------------------------------------
CERTECH TECHNOLOGY, INC. (for purposes of
Section 5 only) as a Credit Support Party
By: /s/
----------------------------------------
Title:
-------------------------------------
CERPLEX MASS., INC. (for purposes of Section
5 only) as a Credit Support Party
By: /s/
----------------------------------------
Title:
-------------------------------------
CERPLEX LIMITED (for purposes of Section 5
only) as a Credit Support Party
By: /s/
----------------------------------------
Title:
-------------------------------------
APEX COMPUTER COMPANY (for purposes of
Section 5 only) as a Credit Support Party
By: /s/
----------------------------------------
Title:
-------------------------------------
S-1
<PAGE> 9
CERPLEX SUBSIDIARY, INC. (for purposes of
Section 5 only) as a Credit Support Party
By: /s/
----------------------------------------
Title:
-------------------------------------
MODCOMP/CERPLEX L.P. (for purposes of
Section 5 only) as a Credit Support Party
By: Cerplex Subsidiary, Inc., as general
partner
By: /s/
----------------------------------------
Title:
-------------------------------------
MODCOMP JOINT VENTURE, INC. (for purposes of
Section 5 only) as a Credit Support Party
By: /s/
----------------------------------------
Title:
-------------------------------------
MODULAR COMPUTER SERVICES, INC. (for
purposes of Section 5 only) as a Credit
Party
By: /s/
----------------------------------------
Title:
-------------------------------------
MODULAR COMPUTER SYSTEMS GMBH (for purposes
of Section 5 only) as a Credit Support Party
By: /s/
----------------------------------------
Title:
-------------------------------------
S-2
<PAGE> 10
MODCOMP FRANCE S.A. (for purposes of Section
5 only) as a Credit Support Party
By: /s/
----------------------------------------
Title:
-------------------------------------
WELLS FARGO BANK, NATIONAL ASSOCIATION,
INDIVIDUALLY AND AS ADMINISTRATIVE AGENT
By: /s/
----------------------------------------
Title:
-------------------------------------
BHF-BANK AKTIENGESELLSCHAFT, AS A LENDER
By: /s/
----------------------------------------
Title:
-------------------------------------
By: /s/
----------------------------------------
Title:
-------------------------------------
CITIBANK, N.A., AS A LENDER
By: /s/
----------------------------------------
Title:
-------------------------------------
S-3
<PAGE> 1
EXHIBIT 10.36
E X E C U T I O N C O P Y
THE CERPLEX GROUP, INC.
SIXTH AMENDMENT
TO CREDIT AGREEMENT AND CONSENT
This SIXTH AMENDMENT TO CREDIT AGREEMENT AND CONSENT (this
"AMENDMENT") is dated as of August 6, 1997 and entered into by and among THE
CERPLEX GROUP, INC., a Delaware corporation ("COMPANY"), the FINANCIAL
INSTITUTIONS LISTED ON THE SIGNATURE PAGES HEREOF ("LENDERS") and WELLS FARGO
BANK, NATIONAL ASSOCIATION, as administrative agent for Lenders
("ADMINISTRATIVE AGENT"), and, for purposes of Section 6 hereof, CERTECH
Technology, Inc., Cerplex Mass., Inc., Cerplex Limited, Apex Computer Company,
Cerplex Subsidiary, Inc., Modcomp/Cerplex L.P., Modcomp Joint Venture, Inc.,
Modular Computer Services, Inc., Modular Computer Systems GmbH and Modcomp
France S.A. (collectively, "GUARANTORS"), and is made with reference to that
certain Credit Agreement dated as of October 12, 1994, as amended by that
certain First Amendment to Credit Agreement and Limited Waiver dated as of
April 15, 1996, that certain Second Amendment to Credit Agreement and Limited
Waiver dated as of November 30, 1996, that certain Third Amendment to Credit
Agreement dated as of April 9, 1997, that certain Fourth Amendment to Credit
Agreement and Limited Waiver dated as of May 30, 1997 and that certain Fifth
Amendment to Credit Agreement and Limited Waiver dated as of June 30, 1997 (as
so amended, the "CREDIT AGREEMENT"), by and among Company, Lenders,
Administrative Agent and Guarantors. Capitalized terms used herein without
definition shall have the same meanings herein as set forth in the Credit
Agreement.
RECITALS
WHEREAS, Company and Lenders had agreed to amend certain
provisions of the Credit Agreement;
NOW, THEREFORE, in consideration of the premises and the
agreements, provisions and covenants herein contained, the parties hereto agree
as follows:
<PAGE> 2
SECTION 1. AMENDMENTS TO THE CREDIT AGREEMENT
SECTION 1.1 AMENDMENTS TO SECTION 1: DEFINITIONS.
A. Subsection 1.1 of the Credit Agreement is hereby amended by
deleting the definitions of "BORROWING BASE," "BORROWING BASE CERTIFICATE,"
"ELIGIBLE ACCOUNTS RECEIVABLE" and "FOREIGN ACQUISITIONS" contained therein.
B. Subsection 1.1 of the Credit Agreement is hereby further
amended by deleting the definition of "PRIME RATE" contained therein and
substituting the following therefor:
"'PRIME RATE' means the rate that Citibank, N.A. announces at
its principal office in New York from time to time as its prime lending
rate, as in effect from time to time. The Prime Rate is a reference
rate and does not necessarily represent the lowest or best rate
actually charged to any customer. Citibank, N.A. or any other Lender
may make commercial loans or other loans at rates of interest at, above
or below the Prime Rate."
C. Subsection 1.1 of the Credit Agreement is hereby further
amended by adding the following definitions in the appropriate alphabetical
order:
"'COMMON STOCK' means the common stock, $0.01 par value per
share, of Company."
"'CONSOLIDATED NET CASH FLOW FROM NORTH AMERICAN OPERATIONS'
means, for any period, the gross receipts for such period minus all
disbursements (excluding Consolidated Interest Expense for such period)
for such period, all as determined on a consolidated basis for Company
and its Domestic Subsidiaries (excluding Modcomp Joint Venture, Inc.
and its Subsidiaries)."
"'SIXTH AMENDMENT EFFECTIVE DATE' means August 6, 1997."
Section 1.2 Amendments to Section 2: Amounts and Terms of Commitments and
Loans.
A. Subsection 2.1A of the Credit Agreement is hereby amended to
read in its entirety as follows:
"A. COMMITMENTS. Subject to the terms and conditions of
this Agreement and in reliance upon the representations and warranties
of Company herein set forth, each Lender hereby severally agrees to
make the Loans described in subsections 2.1A(i) and 2.1A(ii).
(i) Term Loans. Each Lender severally agreed to
convert Loans outstanding on the Third Amendment Effective Date
and the
<PAGE> 3
amount of all unreimbursed drawings under letters of credit
issued hereunder prior to the Third Amendment Effective Date in
an aggregate amount not exceeding its Pro Rata Share of the
aggregate amount of the Term Loan Commitments to be used for
the purposes identified in subsection 2.5A. The amount of each
Lender's Term Loan Commitment is set forth opposite its name on
Schedule 2.1 annexed hereto and the aggregate amount of the
Term Loan Commitments as of the Sixth Amendment Effective Date
is $31,371,520; provided that the Term Loan Commitments of
Lenders shall be adjusted to give effect to any assignments of
the Term Loan Commitments pursuant to subsection 10.1B.
Amounts borrowed under this subsection 2.1A(i) and subsequently
repaid or prepaid may not be reborrowed. All Term Loans and
all other amounts owed hereunder with respect to the Term Loans
and the Term Loan Commitments shall be paid in full no later
than the Commitment Termination Date.
(ii) Revolving Loans. Each Lender severally
agrees, subject to the limitations set forth below with respect
to the maximum amount of Revolving Loans permitted to be
outstanding from time to time, to lend to Company from time to
time to but excluding the Commitment Termination Date an
aggregate amount not exceeding its Pro Rata Share of the
aggregate amount of the Revolving Loan Commitments to be used
for the purposes identified in subsection 2.5A. On the Third
Amendment Effective Date, outstanding Loans in the aggregate
principal amount of $6,000,000 were deemed to be Revolving
Loans. As of the Sixth Amendment Effective Date, the Revolving
Loan Commitments shall be reduced to $4,886,984. The amount of
each Lender's Revolving Loan Commitment as of the Sixth
Amendment Effective Date is set forth opposite its name on
Schedule 2.1 annexed hereto; provided that the Revolving Loan
Commitments of Lenders shall be adjusted to give effect to any
assignments of the Revolving Loan Commitments pursuant to
subsection 10.1B; and provided, further that the amount of the
Revolving Loan Commitments shall be reduced from time to time
by the amount of any reductions thereto made pursuant to
subsection 2.4A. Each Lender's Revolving Loan Commitment shall
expire on the Commitment Termination Date and all Revolving
Loans and all other amounts owed hereunder with respect to the
Revolving Loans and the Revolving Loan Commitments shall be
paid in full no later than that date. Amounts borrowed under
this subsection 2.1A(ii) may be repaid and reborrowed up to but
excluding the Commitment Termination Date.
Anything contained in this Agreement to the contrary
notwithstanding, the Revolving Loans and the Revolving Loan Commitments
shall be subject to the limitation that (i) in no event shall the Total
Utilization of Revolving Loan Commitments at any time exceed the
Revolving Loan Commitments then in
<PAGE> 4
effect, (ii) in no event shall the Total Utilization of Revolving Loan
Commitments (a) at any time during the period commencing on the date of
any prepayment pursuant to subsection 2.4(iii)(d) and ending August 10,
1997 exceed the sum of $4,886,984 minus the Net Asset Sale Proceeds
that are applied on such date to the prepayment of Revolving Loans plus
the lesser of (1) 50% of the Net Asset Sale Proceeds from any Asset
Sale relating to Modcomp or its Subsidiaries that are applied to the
prepayment of Revolving Loans and (2) $1,000,000, (b) at any time
during the period commencing August 11, 1997 and ending August 31, 1997
exceed the sum of the amount set forth in clause (a) plus the lesser of
(1) 25% of the Net Asset Sale Proceeds from any Asset Sale relating to
Modcomp or its Subsidiaries that are applied to the prepayment of
Revolving Loans and (2) $500,000, and (c) at any time on and after
September 1, 1997 exceed the sum of the amounts set forth in clauses
(a) and (b) plus the lesser of (1) 25% of the Net Asset Sale Proceeds
from any Asset Sale relating to Modcomp or its Subsidiaries that are
applied to the prepayment of Revolving Loans and (2) $500,000 and (iii)
in no event may the Total Utilization of Revolving Loan Commitments
exceed $4,886,984 minus the Net Asset Sale Proceeds that are applied on
the date of any prepayment of Revolving Loans pursuant to subsection
2.4(iii)(d) until Company shall have (a) issued the New Warrants, (b)
entered into a Sixth Amendment to Registration Rights Agreement, (c)
filed a Post-Effective Amendment to its Registration Statement on Form
S-2 with respect to the shares of Common Stock underlying the New
Warrants and (d) complied with subsection 6.22."
B. Subsection 2.1B of the Credit Agreement is hereby amended by
adding the following as the final paragraph thereof:
"In the event that Company fails to comply with subsection 6.20
within 10 days after a request by Administrative Agent, Company shall
be deemed to have given a timely Notice of Borrowing to Administrative
Agent requesting Lenders to make Loans on the 11th day following such
request in an amount equal to the amount necessary to bring Company
into compliance with subsection 6.20."
C. Subsection 2.2A of the Credit Agreement is hereby amended to
read in its entirety as follows:
"A. RATE OF INTEREST. Subject to the provisions of
subsections 2.2B, 2.6 and 2.7, (i) each Revolving Loan made on or after
the Sixth Amendment Effective Date shall bear interest on the unpaid
principal amount thereof from the date made through maturity (whether
by acceleration or otherwise) at the rate of 15% per annum, (ii) each
Revolving Loan outstanding on the Sixth Amendment Effective Date shall
bear interest on the unpaid principal amount thereof from the date made
through maturity (whether by acceleration or otherwise) at the sum of
the Base Rate plus 2.00% per annum and (iii) each Term Loan shall bear
interest on the unpaid principal amount thereof from the
<PAGE> 5
date made through maturity (whether by acceleration or otherwise) at
the sum of the Base Rate plus 3.125% per annum."
D. Subsection 2.2B of the Credit Agreement is hereby amended to
read in its entirety as follows:
"B. ADDITIONAL INTEREST. In the event that Company fails
to prepay in full all outstanding Obligations on or prior to September
30, 1997, each Loan shall bear interest on the unpaid principal amount
thereof from September 1, 1997, or if such Loan is made after September
1, 1997 the date made, through maturity (whether by acceleration or
otherwise) at the interest rate otherwise payable under this Agreement
with respect to such Loan plus an additional 1% per annum up to a
maximum of 4% for each month following the month ended August 31, 1997
that all outstanding Obligations are not prepaid in full."
E. Subsection 2.2C of the Credit Agreement is hereby amended to
read in its entirety as follows:
"C. INTEREST PAYMENTS. Subject to the provisions of
subsection 2.2E, interest on each Loan shall be payable in arrears on
and to the last day of each month; provided, however, that the payment
in respect of July 31, 1997 shall be due and payable on August 10,
1997, upon any prepayment of that Loan (to the extent accrued on the
amount being prepaid) and at maturity (including final maturity)."
F. Subsections 2.4A(iii)(b), (d), (f) and (g) of the Credit
Agreement are hereby amended to read in their entirety as follows:
"(b) Prepayments and Reductions Due to Issuance of Securities.
On the date of receipt by Company of the Cash proceeds (any such
proceeds net of underwriting discounts and commissions and other
reasonable costs and expenses associated therewith, being "NET
SECURITIES PROCEEDS") from the issuance of any Securities of Company
after the Sixth Amendment Effective Date, Company shall prepay the
Loans, and/or the Revolving Loan Commitments shall be permanently
reduced, in an aggregate amount equal to the greater of (i) 20% of such
Net Securities Proceeds or (ii) $1,500,000; provided, however, that in
the event the Net Securities Proceeds of any such issuance are less
than $1,500,000, Company shall prepay the Loans, and/or the Revolving
Loan Commitments shall be permanently reduced, in an aggregate amount
equal to 100% of such Net Securities Proceeds."
"(d) Prepayments From the Sale of Modcomp. On the date of
receipt by Company or any of its Subsidiaries of any Net Asset Sale
Proceeds from any Asset Sale relating to Modcomp or its Subsidiaries,
Company shall (1) prepay the Term Loans in an aggregate amount equal to
$6,000,000, (2) prepay the Revolving Loans in an aggregate amount equal
to the lesser of (A) $2,000,000
<PAGE> 6
and (B) the remaining portion of such Net Asset Sale Proceeds and (3)
prepay the Term Loans in an aggregate amount equal to 50% of any
remaining portion of such Net Asset Sale Proceeds in excess of
$8,000,000."
"(f) Prepayments From the Sale of Pen Interconnect Stock. On
the date of receipt by Company or any of its Subsidiaries of any Net
Asset Sale Proceeds from the sale of the stock of Pen Interconnect,
Company shall prepay the Loans, and/or the Revolving Loan Commitments
shall be permanently reduced, in an amount equal to the amount by which
the sum of (i) such Net Asset Sale Proceeds plus (ii) the royalty
payments received by Company from Cerplex SAS in respect of October 31,
1997 exceed $600,000."
"(g) Prepayments From Royalties. On the date of receipt by
Company thereof, Company shall prepay the Loans, and/or the Revolving
Loan Commitments shall be permanently reduced, in an amount equal to
(i) the amount by which the sum of (A) the royalty payments received by
Company from Cerplex SAS in respect of October 31, 1997 plus (B) the
Net Asset Sale Proceeds from the sale of the stock of Pen Interconnect
exceed $600,000, (ii) 100% of all other royalty payments received by
Company from Cerplex SAS and (iii) 100% of all dividend payments paid
to Company by Cerplex SAS."
G. Subsection 2.4A(iv)(b) of the Credit Agreement is hereby
amended by adding the following as the final sentence thereof:
"Any Applied Amount required to be applied as a mandatory
prepayment of the Loans pursuant to subsection 2.4(iii)(d) shall be applied as
set forth in subsection 2.4(iii)(d)."
SECTION 1.3 AMENDMENTS TO SECTION 5: COMPANY'S REPRESENTATIONS AND
WARRANTIES.
Subsection 5.14 of the Credit Agreement is hereby amended to read in
its entirety as follows:
"[Intentionally omitted]"
SECTION 1.4 AMENDMENTS TO SECTION 6: COMPANY'S AFFIRMATIVE COVENANTS.
A. Clause (xxii) of subsection 6.1 of the Credit Agreement is
hereby amended to read in its entirety as follows:
"(xxii) Cash Flow Forecast: (a) on the last day of each fiscal
month, commencing September 30, 1997, (a) the North American Operations
Consolidated Quarterly Cash Forecast (Base Forecast) for the immediately
succeeding thirteen week period showing estimated Consolidated Net Cash Flow
From North American Operations on a weekly basis during such period, prepared
on a basis consistent with the North American Operations Consolidated Quarterly
Cash Forecast (Base
<PAGE> 7
Forecast) delivered on July 9, 1997 and attached hereto as Annex 1, certified
by the chief financial officer of Company, and (b) on August 8, 1997, on August
28, 1997 and 5 Business Days after the last day of each fiscal month
thereafter, commencing September 30, 1997, a statement of actual Consolidated
Net Cash Flow From North American Operations for the period commencing July 3,
1997 and ending August 3, 1997, for the period commencing August 4, 1997 and
ending August 24, 1997 and the four-week or five-week (as applicable) period
then ended, respectively, all in reasonable detail and certified by the chief
financial officer of Company."
B. Section 6 of the Credit Agreement is hereby amended by adding
the following as new subsections 6.19, 6.20, 6.21 and 6.22 thereof:
"6.19 POST-SIXTH AMENDMENT EFFECTIVE DATE DELIVERIES.
On or before August 14, 1997,
A. Company shall have issued to Lenders warrants to
purchase 1,235,313 shares of Common Stock (the "NEW WARRANTS"), representing,
together with all other warrants held by Lenders, warrants to purchase 5.1% of
the Common Stock on a fully diluted basis as of the Sixth Amendment Effective
Date, with an exercise price equal to $0.59 per share and Company shall have
entered into a warrant agreement providing for the issuance of the New
Warrants. Except for the exercise price, the terms and conditions of the New
Warrants and the warrant agreement shall, in all material respects, be
identical to the terms and conditions of the Original Warrants (as defined in
the Restated Warrant Agreement referred to below), the Additional Warrants (as
defined in the Restated Warrant Agreement referred to below) and the Amended
and Restated Warrant Agreement dated as of April 9, 1997 (the "RESTATED WARRANT
AGREEMENT"), including, without limitation, the antidilution provisions set
forth in Section 4 of the Restated Warrant Agreement. The New Warrants,
together with the Original Warrants, the Additional Warrants, the Option
Warrants and the Conversion Warrants shall hereinafter collectively be referred
to as the "WARRANTS" and individually as a "WARRANT". Company and Lenders
agree that, notwithstanding any language to the contrary contained in the
Original Warrants or the Additional Warrants, no additional warrants shall be
issuable thereunder as a result of the issuance of the New Warrants on the
Sixth Amendment Effective Date. The Warrant Agreement shall also contain
covenants substantially similar to the following:
(i) If during any calendar quarter while a Warrant is
outstanding, (a) options or other rights to acquire shares of Common Stock
("EMPLOYEE OPTION SHARES") are issued to any employees, officers or directors
of Company or any of its Subsidiaries (including shares issued to Stephen
Hopkins as consideration for his services as President and Chief Executive
Officer of Company) and the aggregate number of such Employee Option Shares
plus all other Employee Option Shares subject to options or other rights issued
on or prior to such date exceeds 7,302,121 shares, which number represents 15%
of the Common Stock on a fully diluted basis
<PAGE> 8
as of the Sixth Amendment Effective Date (as such number may be adjusted from
time to time to reflect any subdivision or combination of shares of Common
Stock, the "EMPLOYEE OPTION THRESHOLD"), or (b) options or other rights to
acquire shares of Common Stock ("DIRECTOR OPTION SHARES") are issued to any
directors of Company who were members of Company's Board of Directors as of the
Sixth Amendment Effective Date and the aggregate number of such Director Option
Shares plus all other Director Option Shares subject to options or other rights
issued on or prior to such date exceeds 1,460,424 shares, which number
represents 3% of the Common Stock on a fully diluted basis as of the Sixth
Amendment Effective Date (as such number may be adjusted from time to time to
reflect any subdivision or combination of shares of Common Stock, the "DIRECTOR
OPTION THRESHOLD"), Company shall, as of the first day of the next succeeding
calendar quarter, issue additional warrants (the "OPTION WARRANTS") to the
holders of the Warrants on a pro rata basis covering that number of shares
equal to the product of 5.1% (the "DILUTION PERCENTAGE") multiplied by the
number of the Employee Option Shares or Director Option Shares, as the case may
be, issued during such period (or, with respect to the first calendar quarter
that the number of Employee Option Shares or Director Option Shares exceeds the
Employee Option Threshold or the Director Option Threshold, as the case may be,
the amount of such excess). To the extent that the Director Option Threshold
is exceeded and Option Warrants are issued in accordance with the formula set
forth above, the Employee Option Threshold shall be increased by the amount of
such excess. The Option Warrants shall, in all material respects, be identical
to the New Warrants, except that the exercise price of the Option Warrants
shall be the average closing bid price of a share of Common Stock during the
calendar quarter in respect of which the adjustment is being made. In the
event that any of the Warrants are exercised after the Sixth Amendment
Effective Date, the Dilution Percentage shall be reduced proportionately. In
the event that any option or right with respect to which an adjustment was made
pursuant to this paragraph terminates or expires unexercised during any
calendar quarter, the number of Option Warrants shall be reduced
proportionately as of the end of such calendar quarter. In addition, in the
event of any consolidation, merger, sale or conveyance of Company as an
entirety or reclassification of the Common Stock, Company shall make the
adjustments provided for in this paragraph in respect of any issuances that
occurred during the period from the date of the last determination to the date
of such event. For purposes of this paragraph, rights purchased from Company
to acquire shares of Common Stock and rights purchased from Persons other than
Company to acquire shares of Common Stock, in each case in a bona fide
arm's-length transaction for consideration at least equal to the Reference
Price (as defined in the Original Warrants), and any shares of the Series B
Preferred Stock held by any employees, officers or directors of Company or any
of its Subsidiaries on the Sixth Amendment Effective Date shall not constitute
Employee Option Shares or Director Option Shares.
(ii) If, at any time on or after the Sixth Amendment
Effective Date and while a Warrant is outstanding, all or any portion of the
principal amount of the Subordinated Notes is converted into shares of Common
Stock and the Market Price (as defined below) of a share of Common Stock
following such conversion is less than
<PAGE> 9
the Measurement Price (as defined below) of a share of Common Stock prior to
such conversion, Company shall issue additional warrants (the "CONVERSION
WARRANTS") to the holders of the Warrants on a pro rata basis covering that
number of shares equal to the product of the difference between the Market
Price and the Measurement Price multiplied by the total number of shares
issuable upon exercise of the Warrants held by such holders divided by the
Market Price. For the purpose of this paragraph (ii), "MARKET PRICE" shall
mean the average closing bid price for a share of Common Stock for the five
trading days after the filing of a Current Report Form 8-K with respect to such
conversion and (ii) "MEASUREMENT PRICE" shall mean the average closing bid
price of a share of Common Stock for the five trading days prior to the public
announcement of such conversion. The date on which the Current Report on Form
8-K is filed or of the public announcement shall not be considered a trading
day. The Conversion Warrants shall, in all material respects, be identical to
the New Warrants, except that the exercise price of the Conversion Warrants
shall be the Market Price per share.
(iii) In the event that any shares of the 657 shares of the
Series B Preferred Stock of Company outstanding on the Sixth Amendment
Effective Date are converted into shares of Common Stock during any calendar
quarter at a conversion ratio that is greater than or less than 2500 shares of
Common Stock for each share of Series B Preferred Stock, then the number of
shares of Common Stock issuable upon the exercise of the New Warrants shall be
increased or decreased, as the case may be, effective upon the first day of the
next succeeding calendar quarter, by the difference between the number of
shares of Common Stock into which such shares of Series B Preferred Stock of
Company were converted and the number of shares of Common Stock into which such
shares of Series B Preferred Stock were projected to be converted for purposes
of calculating the number of New Warrants originally issued. In addition, in
the event of any consolidation, merger, sale or conveyance of Company as an
entirety or reclassification of the Common Stock, Company shall make the
adjustments provided for in this paragraph in respect of any conversion that
occurred during the period from the date of the last determination to the date
of such event.
B. Company shall have entered into a Sixth Amendment to
Registration Rights Agreement in form and substance satisfactory to Lenders.
C. Company shall have filed a Post-Effective Amendment to
its Registration Statement on Form S-2 with respect to the shares of the Common
Stock underlying the New Warrants issued to Lenders on the Sixth Amendment
Effective Date, and shall use its best efforts to cause such Post-Effective
Amendment to become effective as soon as possible thereafter.
<PAGE> 10
"6.20 LEGAL FEES
Company shall, at all times, on and after the sale of Modcomp
and its Subsidiaries maintain on deposit with counsel for Administrative Agent
a $50,000 retainer fee.
"6.21 AMENDMENT FEE
Company shall pay to Administrative Agent for distribution to
each Lender, in proportion to that Lender's Pro Rata Share, an amendment fee in
an amount equal to $200,000, payable on the earlier of the Commitment
Termination Date and the date on which all outstanding Obligations are prepaid
in full."
"6.22 AGREEMENT WITH SUBORDINATED DEBT
On or prior to August 14, 1997, Company shall deliver to
Administrative Agent an agreement duly executed by the parties to the Note
Purchase Agreement, in form and substance satisfactory to Lenders, (i) that the
August 19, 1997 interest payment on the Subordinated Notes will accrue but not
be payable in cash or other property and shall instead be added to the
principal amount of the Subordinated Notes, (ii) amending clause (a) of the
definition of `Senior Debt' in the Note Purchase Agreement to provide that only
prepayments accompanied by permanent reductions in the Loans or Commitments
shall reduce the principal amount of the Wells Fargo Credit Agreement Debt (as
defined in the Note Purchase Agreement) that constitutes "Senior Debt" for
purposes of the Note Purchase Agreement" and (iii) amending the financial
covenants contained in the Note Purchase Agreement to correspond to the changes
made herein to subsection 7.6 of the Credit Agreement.
SECTION 1.5 AMENDMENTS TO SECTION 7: COMPANY'S NEGATIVE COVENANTS.
A. Subsection 7.6 of the Credit Agreement is hereby amended to
read in its entirety as follows:
"A. LIQUIDITY RATIO. Company shall not permit the ratio of (i)
Consolidated Current Assets to (ii) Consolidated Current Liabilities as of the
last day of any fiscal quarter of Company set forth below to be less than the
correlative amount indicated:
<TABLE>
<CAPTION>
PERIOD MINIMUM LIQUIDITY RATIO
------ -----------------------
<S> <C>
Fiscal quarter ended June 30, 1997 0.57:1.00
Fiscal quarter ended September 30, 1997 0.52:1.00
Fiscal quarter ended December 31, 1997 0.54:1.00
Fiscal quarter ended March 31, 1998 and thereafter 0.55:1.00
</TABLE>
"B. MAXIMUM LEVERAGE RATIO. Company shall not permit the ratio of
Consolidated Total Liabilities as of the last day of any fiscal quarter of
Company to
<PAGE> 11
Consolidated Tangible Net Worth for the period set forth below then ended to be
greater than (i.e., less negative but not positive) the correlative amount
indicated:
<TABLE>
<CAPTION>
PERIOD MAXIMUM LEVERAGE RATIO
------ ----------------------
<S> <C>
Fiscal quarter ended June 30, 1997 (7.27):1.00
Fiscal quarter ended September 30, 1997 (6.48):1.00
Fiscal quarter ended December 31, 1997 (6.78):1.00
Fiscal quarter ended March 31, 1998 and thereafter (7.07):1.00
</TABLE>
"C. MINIMUM CONSOLIDATED TANGIBLE NET WORTH. Company shall not
permit Consolidated Tangible Net Worth at any time during any period set forth
below to be less than the correlative amount indicated plus 100% of any Net
Securities Proceeds from the issuance of any Securities of Company after the
Third Amendment Effective Date:
<TABLE>
<CAPTION>
MINIMUM CONSOLIDATED TANGIBLE
-----------------------------
PERIOD NET WORTH
------ ---------
<S> <C>
June 30, 1997 through September 29, 1997 $ (15,464,000)
September 30, 1997 through December 30, 1997 (15,115,000)
December 31, 1997 through March 30, 1998 (14,392,000)
March 31, 1998 and thereafter (13,592,000)
</TABLE>
"D. MINIMUM PROFITABILITY. Company shall not permit Consolidated
Net Income (excluding any gain on the sale of PCS) for any period set forth
below to be less than the correlative amount indicated:
<TABLE>
<CAPTION>
PERIOD MINIMUM PROFITABILITY
------ ---------------------
<S> <C>
Fiscal quarter ended June 30, 1997 $(16,359,000)
Fiscal quarter ended September 30, 1997 (1,208,000)
Fiscal quarter ended December 31, 1997 (588,000)
Fiscal quarter ended March 31, 1998 (141,000)
</TABLE>
"E. MINIMUM PROFITABILITY FROM NORTH AMERICAN AND CORPORATE
OPERATIONS. Company shall not permit Consolidated Net Income From North
American and Corporate Operations for any period set forth below to be less
than the correlative amount indicated:
<TABLE>
<CAPTION>
PERIOD MINIMUM PROFITABILITY
------ ---------------------
<S> <C>
Fiscal quarter ended June 30, 1997 $ (15,521,000)
Fiscal quarter ended September 30, 1997 (1,873,000)
Fiscal quarter ended December 31, 1997 (1,387,000)
Fiscal quarter ended March 31, 1998 (1,367,000)
</TABLE>
<PAGE> 12
"F. MINIMUM CONSOLIDATED CASH FLOW. Company shall not permit
Consolidated Net Cash Flow From North American Operations for the period
commencing July 3, 1997 and ending August 3, 1997, the period commencing August
4, 1997 and ending August 24, 1997 or any four-week or five-week (as
applicable) period ending on the last day of any fiscal month thereafter to be
less than (i) Consolidated Net Cash Flow From North American Operations for the
same period as reflected on the North American Operations Consolidated
Quarterly Cash Forecast (Base Forecast) most recently delivered by Company
pursuant to subsection 6.1(xxii) minus (ii) $250,000."
SECTION 1.6 AMENDMENTS TO SECTION 8: EVENTS OF DEFAULT.
A. Subsection 8.3 of the Credit Agreement is hereby amended by
adding the phrase ", 6.19 or 6.22" after the phrase "6.17" contained therein.
B. Subsection 8.14 of the Credit Agreement is hereby amended
by deleting the phrase "or Company shall fail to consummate the sale of the Pen
Interconnect stock held by Company on or prior to June 30, 1997;" contained
therein.
SECTION 1.7 AMENDMENTS TO EXHIBITS AND SCHEDULES.
A. Exhibit V of the Credit Agreement is hereby deleted and
Exhibit V hereto substituted therefor.
B. Exhibit XVII of the Credit Agreement is hereby deleted.
C. Schedule 2.1 of the Credit Agreement is hereby deleted and
Schedule 2.1 hereto substituted therefor.
SECTION 2. CONSENT
Pursuant to subsection 7.7 of the Credit Agreement, Lenders
hereby consent to the sale to CSP Inc., a Massachusetts corporation, of all or
substantially all of the assets of Modcomp, including all of the capital stock
of all Subsidiaries of Modcomp, pursuant to the terms of that certain Asset
Purchase Agreement dated as of August 6, 1997 (the "PURCHASE AGREEMENT") in the
form provided to Lenders with such changes thereto as shall not individually or
in the aggregate be material and adverse to Company; provided that (i) such
sale occurs on or prior to September 1, 1997, (ii) the Purchase Price (as
defined in the Purchase Agreement) is not less than $8,200,000, (iii) the Net
Asset Sale Proceeds from such sale are at least $7,500,000 and (iv) the Net
Asset Sale Proceeds, including amounts held in escrow, are wired at the closing
of such sale to an account designated by Administrative Agent for application
to the Loans as provided pursuant to subsection 2.4A(iii)(d). Effective upon
consummation of the sale pursuant to the Purchase Agreement, and payment to the
account designated by Administrative Agent of $7,500,000, Lenders agree that
all security interests and Liens in the capital stock and assets of Modcomp and
its
<PAGE> 13
Subsidiaries shall terminate and be released and all obligations under the
guaranties of such entities shall be irrevocably terminated and hereby
authorize Administrative Agent to take all necessary and appropriate action on
behalf of Lenders to effect such release and termination.
Pursuant to subsection 7.7 of the Credit Agreement, Lenders
also hereby consent to the sale of the stock of Pen Interconnect; provided that
the Net Asset Sale Proceeds from such Asset Sale are at least $350,000 and such
sale occurs on or prior to December 31, 1997.
SECTION 3. ACKNOWLEDGMENT RE LIMITED WAIVER
Lenders hereby acknowledge that pursuant to the Limited Waiver
dated as of July 10, 1997 (the "LIMITED WAIVER"), Lenders waived compliance
with the provisions of (i) subsection 2.2C of the Credit Agreement to the
extent necessary to permit the payment of interest due and payable on July 31,
1997 to be made on or prior to August 8, 1997; (ii) subsection 7.6 of the
Credit Agreement for the period commencing July 10, 1997 and ending August 8,
1997; and (iii) subsection 8.14 of the Credit Agreement to the extent necessary
to permit Company to consummate the sale of the Pen Interconnect stock held by
Company on or prior to August 8, 1997. Company hereby acknowledges that
pursuant to the Limited Waiver it shall have no right to borrow under the
Credit Agreement prior to August 9, 1997 and that the Limited Waiver is of no
further force and effect in the event that (a) Company submits a Notice of
Borrowing under the Credit Agreement prior to August 9, 1997 or (b) Company
makes any payment on or sets apart any payment on any Subordinated
Indebtedness.
SECTION 4. CONDITIONS TO EFFECTIVENESS
This Amendment shall become effective only upon the
satisfaction of all of the following conditions precedent (the date of
satisfaction of such conditions being referred to herein as the "SIXTH
AMENDMENT EFFECTIVE DATE"):
A. On or before the Sixth Amendment Effective Date, Administrative
Agent shall have received for each Lender counterparts hereof duly executed on
behalf of Company, Administrative Agent, each Lender and each Guarantor.
B. Administrative Agent shall have received:
1. Resolutions of Company's Board of Directors approving
and authorizing the execution, delivery, and performance of this
Amendment and the Warrant Agreement, certified as of the Sixth
Amendment Effective Date by its corporate secretary or an assistant
secretary as being in full force and effect without modification or
amendment; and
<PAGE> 14
2. Signature and incumbency certificates of the officers
of Company executing this Amendment and the Warrant
Agreement.
C. On or before the Sixth Amendment Effective Date, Lenders and
their respective counsel shall have received originally executed copies of one
or more favorable written opinions of Brobeck, Phleger & Harrison LLP, counsel
for Company, in form and substance reasonably satisfactory to Administrative
Agent and its counsel.
D. On or before the Sixth Amendment Effective Date, Lenders and
their respective counsel shall have received duly executed copies of a waiver
of the provisions of the Note Purchase Agreement through August 14, 1997, in
form and substance satisfactory to Lenders.
SECTION 5. COMPANY'S REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Amendment and to
amend the Credit Agreement in the manner provided herein, Company represents
and warrants to each Lender that the following statements are true, correct and
complete:
A. CORPORATE POWER AND AUTHORITY. Company has all requisite
corporate power and authority to enter into this Amendment and to carry out the
transactions contemplated by, and perform its obligations under, the Credit
Agreement as amended by this Amendment (the "AMENDED AGREEMENT").
B. AUTHORIZATION OF AGREEMENTS. The execution and delivery of
this Amendment and the performance of the Amended Agreement have been duly
authorized by all necessary corporate action on the part of Company, as the
case may be.
C. NO CONFLICT. The execution and delivery by Company of this
Amendment and the performance of the Amended Agreement do not and will not (i)
violate any provision of any law or any governmental rule or regulation
applicable to Company or any of its Subsidiaries, the Certificate or Articles
of Incorporation or Bylaws of Company or any of its Subsidiaries or any order,
judgment or decree of any court or other agency of government binding on
Company or any of its Subsidiaries, (ii) conflict with, result in a breach of
or constitute (with due notice or lapse of time or both) a default under any
Contractual Obligation of Company or any of its Subsidiaries, (iii) result in
or require the creation or imposition of any Lien upon any of the properties or
assets of Company or any of its Subsidiaries (other than any Liens created
under any of the Loan Documents in favor of Administrative Agent on behalf of
Lenders), or (iv) require any approval of stockholders or any approval or
consent of any Person under any Contractual Obligation of Company or any of its
Subsidiaries.
<PAGE> 15
D. GOVERNMENTAL CONSENTS. The execution and delivery by Company
of this Amendment and the performance by Company of the Amended Agreement do
not and will not require any registration with, consent or approval of, or
notice to, or other action to, with or by, any federal, state or other
governmental authority or regulatory body.
E. BINDING OBLIGATION. This Amendment and the Amended Agreement
have been duly executed and delivered by Company and are the legally valid and
binding obligations of Company, enforceable against Company in accordance with
their respective terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or limiting creditors'
rights generally or by equitable principles relating to enforceability.
F. INCORPORATION OF REPRESENTATIONS AND WARRANTIES FROM CREDIT
AGREEMENT. The representations and warranties contained in Section 5 of the
Credit Agreement, other than subsection 5.14, are and will be true, correct and
complete in all material respects on and as of the Sixth Amendment Effective
Date to the same extent as though made on and as of that date, except to the
extent such representations and warranties specifically relate to an earlier
date, in which case they were true, correct and complete in all material
respects on and as of such earlier date.
G. ABSENCE OF DEFAULT. No event has occurred and is continuing or
will result from the consummation of the transactions contemplated by this
Amendment that would constitute an Event of Default or a Potential Event of
Default.
SECTION 6. ACKNOWLEDGEMENT AND CONSENT
Company is a party to the Company Collateral Documents, in each
case as amended through the Sixth Amendment Effective Date, pursuant to which
Company has created Liens in favor of Administrative Agent on certain
Collateral to secure the Obligations. Guarantors are a party to the Guaranty
and the Subsidiary Collateral Documents, in each case as amended through the
First Amendment Effective Date, pursuant to which each Guarantor has (i)
guarantied the Obligations and (ii) created Liens in favor of Administrative
Agent on certain Collateral to secure the obligations of such Guarantor under
the Guaranty. Company and Guarantors are collectively referred to herein as
the "CREDIT SUPPORT PARTIES", and the Guaranty, the Company Collateral
Documents and the Subsidiary Collateral Documents are collectively referred to
herein as the "CREDIT SUPPORT DOCUMENTS".
Each Credit Support Party hereby acknowledges that it has
reviewed the terms and provisions of the Credit Agreement and this Amendment
and consents to the amendment of the Credit Agreement effected pursuant to this
Amendment. Each Credit Support Party hereby confirms that each Credit Support
Document to which it is a party or otherwise bound and all Collateral
encumbered thereby will continue to guaranty or secure, as the case may be, to
the fullest extent possible the payment and
<PAGE> 16
performance of all "Obligations," "Guarantied Obligations" and "Secured
Obligations," as the case may be (in each case as such terms are defined in the
applicable Credit Support Document), including, without limitation, the payment
and performance of all such "Obligations," "Guarantied Obligations" or "Secured
Obligations," as the case may be, in respect of the Obligations of Company now
or hereafter existing under or in respect of the Amended Agreement and the
Notes defined therein.
Each Credit Support Party acknowledges and agrees that any of
the Credit Support Documents to which it is a party or otherwise bound shall
continue in full force and effect and that all of its obligations thereunder
shall be valid and enforceable and shall not be impaired or limited by the
execution or effectiveness of this Amendment. Each Credit Support Party
represents and warrants that all representations and warranties contained in
the Amended Agreement and the Credit Support Documents to which it is a party
or otherwise bound are true, correct and complete in all material respects on
and as of the Sixth Amendment Effective Date to the same extent as though made
on and as of that date, except to the extent such representations and
warranties specifically relate to an earlier date, in which case they were
true, correct and complete in all material respects on and as of such earlier
date.
Each Credit Support Party (other than Company) acknowledges and
agrees that (i) notwithstanding the conditions to effectiveness set forth in
this Amendment, such Credit Support Party is not required by the terms of the
Credit Agreement or any other Loan Document to consent to the amendments to the
Credit Agreement effected pursuant to this Amendment and (ii) nothing in the
Credit Agreement, this Amendment or any other Loan Document shall be deemed to
require the consent of such Credit Support Party to any future amendments to
the Credit Agreement.
SECTION 7. GENERAL RELEASE
A. Except with respect to the matters, rights and
obligations specified in Section 7B hereof, each Loan Party for itself and on
behalf of its parent, subsidiary and affiliate corporations, past or present,
and each of them, as well as each of their respective directors, officers,
agents, employees, servants, shareholders, representatives, attorneys,
administrators, executors, heirs, assigns, predecessors and successors in
interest, and each of them (collectively, the "RELEASORS") hereby releases and
forever discharges each Lender and each of its parents, subsidiaries and
affiliates, past or present, and each of them, as well as each of their
respective directors, officers, agents, employees, servants, shareholders,
representatives, attorneys, administrators, executors, heirs, assigns,
predecessors and successors in interest, and all other persons, firms or
corporations with whom any of the former have been, are now, or may hereafter
be affiliated, and each of them (collectively, the "RELEASEES"), from and
against any and all claims, demands, liens, agreements, contracts, covenants,
actions, suits, causes of action in law or equity, obligations, controversies,
debts, costs, expenses, damages, judgments, orders and liabilities of whatever
kind or nature in
<PAGE> 17
law, equity or otherwise, whether known or unknown, fixed or contingent,
suspected or unsuspected by the Releasors, and whether concealed or hidden,
which Releasors now own or hold or have at any time heretofore owned or held,
which are based upon or arise out of or in connection with any matter, cause or
thing existing at any time prior to the date hereof or anything done, omitted
or suffered to be done or omitted at any time prior to the date hereof
(collectively the "RELEASED MATTERS").
B. Notwithstanding anything hereunder to the contrary,
this Release shall not release or alter any obligation arising subsequent to
the date hereof to comply with the terms and conditions of the Credit Agreement
and the other Loan Documents. It is expressly understood and agreed that it is
the intent of the Loan Parties to forever release certain claims against
Lenders, including, but not limited to, any claims related to the actions and
omissions of Releasees prior to the date hereof, but that nothing herein shall
affect the obligations of the Releasees arising subsequent to the date hereof,
including, but not by way of limitation, compliance subsequent to the date
hereof with all terms and conditions of the Credit Agreement and the other Loan
Documents.
C. Without limiting the generality of the foregoing, each
Loan Party for itself and on behalf of the other Releasors expressly releases
any and all past, present and future claims in connection with the Released
Matters, about which the Releasors do not know or suspect to exist in their
favor, whether through ignorance, oversight, error, negligence or otherwise,
and which, if known, would materially affect such Loan Party's decision to
enter into this Release, and to this end each Loan Party for itself and on
behalf of each of the other Releasors waives all rights under Section 1542 of
the Civil Code of California, which states in full as follows:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR."
Each Loan Party knowingly and willingly waives the provisions of Section 1542
and acknowledges and agrees that this waiver is an essential and material term
of this Release. Each Loan Party has reviewed this Release with such Loan
Party's legal counsel, and such Loan Party understands and acknowledges the
significance and consequence of this Release and of the specific waiver of
Section 1542 of the Civil Code of California.
D. Each Loan Party represents, warrants and agrees that
in executing and entering into this Release, such Loan Party is not relying and
has not relied upon any representation, promise or statement made by anyone
which is not recited, contained or embodied in the Credit Agreement or the
other Loan Documents. Each Loan Party understands and expressly assumes the
risk that any fact not recited, contained or embodied therein may turn out
hereafter to be other than, different from, or contrary to the facts now known
to such Loan Party or believed by such
<PAGE> 18
Loan Party to be true. Nevertheless, each Loan Party intends by this Release
to release fully, finally and forever all Released Matters and agrees that this
Release shall be effective in all respects notwithstanding any such difference
in facts, and shall not be subject to termination, modification or rescission
by reason of any such difference in facts.
E. Each Loan Party hereby represents and warrants that it
has not heretofore assigned or transferred or purported to assign or transfer
to any person or entity all or any part of or any interest in any Released
Matter. Each Loan Party agrees to indemnify and hold harmless the Releasees
against any claim, contention, demand, cause of action, obligation and
liability of any nature, character or description whatsoever, including the
payment of attorney's fees and costs actually incurred, whether or not
litigation is commenced, which may be based upon or which may arise out of or
in connection with any such assignment or transfer or purported assignment or
transfer of any Released Matter against any Releasee.
F. This Release constitutes and is intended to constitute
the entire agreement between each Loan Party and each Lender concerning the
subject matter hereof. No covenants, agreements, representations or warranties
of any kind whatsoever concerning the subject matter hereof have been made by
any Loan Party or any Lender except as set forth herein. All prior discussions
and negotiations with respect to the subject matter hereof are superseded by
this Release.
G. If any provision of this Release is determined by a
court of competent jurisdiction to be invalid or unenforceable, in whole or in
part, the remaining provisions, and any partially invalid or unenforceable
provisions, to the extent valid and enforceable, shall nevertheless be binding
and valid and enforceable.
H. This Release shall inure to the benefit of the
Releasees and be binding upon the Releasors and, in each case, their respective
partners, officers, directors, shareholders, employees, agents, independent
contractors and their successors, assigns, heirs, executors, administrators and
representatives of each of the foregoing.
I. This Release is not to be construed and does not
constitute an admission of any liability by any person or entity for any
purpose.
SECTION 8. MISCELLANEOUS
A. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE OTHER
LOAN DOCUMENTS.
1. On and after the Sixth Amendment Effective Date, each
reference in the Credit Agreement to "this Agreement", "hereunder",
"hereof", "herein" or words of like import referring to the Credit
Agreement, and each reference in the other Loan Documents to the
"Credit Agreement",
<PAGE> 19
"thereunder", "thereof" or words of like import referring to the Credit
Agreement shall mean and be a reference to the Amended Agreement.
2. Except as specifically amended by this Amendment, the
Credit Agreement and the other Loan Documents shall remain in full
force and effect and are hereby ratified and confirmed.
B. FEES AND EXPENSES. Company acknowledges that all costs, fees
and expenses as described in subsection 10.2 of the Credit Agreement incurred
by Administrative Agent and its counsel with respect to this Amendment and the
documents and transactions contemplated hereby shall be for the account of
Company.
C. HEADINGS. Section and subsection headings in this Amendment
are included herein for convenience of reference only and shall not constitute
a part of this Amendment for any other purpose or be given any substantive
effect.
D. APPLICABLE LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA,
WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
E. COUNTERPARTS. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and
attached to a single counterpart so that all signature pages are physically
attached to the same document.
<PAGE> 20
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
THE CERPLEX GROUP, INC.
By:
-----------------------------------------
Title:
--------------------------------------
CERTECH TECHNOLOGY, INC. (for purposes
of Section 6 only) as a Credit Support Party
By:
-----------------------------------------
Title:
--------------------------------------
CERPLEX MASS., INC. (for purposes of Section
6 only) as a Credit Support Party
By:
-----------------------------------------
Title:
--------------------------------------
CERPLEX LIMITED (for purposes of Section 6
only) as a Credit Support Party
By:
-----------------------------------------
Title:
--------------------------------------
APEX COMPUTER COMPANY (for purposes of
Section 6 only) as a Credit Support Party
By:
-----------------------------------------
Title:
--------------------------------------
S-1
<PAGE> 21
CERPLEX SUBSIDIARY, INC. (for purposes of
6 only) as a Credit Support Party
By:
-----------------------------------------
Title:
--------------------------------------
MODCOMP/CERPLEX L.P. (for purposes of Section
6 only) as a Credit Support Party
By: Cerplex Subsidiary, Inc., as general
partner
By:
-----------------------------------------
Title:
--------------------------------------
MODCOMP JOINT VENTURE, INC. (for purposes of
Section 6 only) as a Credit Support Party
By:
-----------------------------------------
Title:
--------------------------------------
MODULAR COMPUTER SERVICES, INC. (for purposes
of Section 6 only) as a Credit Support Party
By:
-----------------------------------------
Title:
--------------------------------------
MODULAR COMPUTER SYSTEMS GMBH (for purposes
of Section 6 only) as a Credit Support Party
By:
-----------------------------------------
Title:
--------------------------------------
S-2
<PAGE> 22
MODCOMP FRANCE S.A. (for purposes of Section
6 only) as a Credit Support Party
By:
-----------------------------------------
Title:
--------------------------------------
WELLS FARGO BANK, NATIONAL ASSOCIATION,
INDIVIDUALLY AND AS ADMINISTRATIVE AGENT
By:
-----------------------------------------
Title:
--------------------------------------
CITIBANK, N.A., AS A LENDER
By:
-----------------------------------------
Title:
--------------------------------------
S-3
<PAGE> 23
EXHIBIT V
[FORM OF COMPLIANCE CERTIFICATE]
COMPLIANCE CERTIFICATE
THE UNDERSIGNED HEREBY CERTIFY THAT:
(1) I am the duly elected [Title] of THE CERPLEX GROUP,
INC., a Delaware corporation ("COMPANY");
(2) I have reviewed the terms of that certain Credit
Agreement dated as of October 12, 1994, as amended, supplemented, amended and
restated or otherwise modified to the date hereof (said Credit Agreement, as so
amended, supplemented, amended and restated or otherwise modified, being the
"CREDIT AGREEMENT"; the terms defined therein and not otherwise defined in this
Certificate (including Attachment No. 1 annexed hereto and made a part hereof)
being used in this Certificate as therein defined), by and among Company, the
financial institutions listed therein as Lenders and WELLS FARGO BANK, NATIONAL
ASSOCIATION, as Administrative Agent, and the terms of the other Loan
Documents, and I have made, or have caused to be made under my supervision, a
review in reasonable detail of the transactions and condition of Company and
its Subsidiaries during the accounting period covered by the attached financial
statements; and
(3) The examination described in paragraph (2) above did
not disclose, and I have no knowledge of, the existence of any condition or
event which constitutes an Event of Default or Potential Event of Default
during or at the end of the accounting period covered by the attached financial
statements or as of the date of this Certificate[, except as set forth below].
[Set forth [below] [in a separate attachment to this
Certificate] are all exceptions to paragraph (3) above listing, in detail, the
nature of the condition or event, the period during which it has existed and
the action which Company has taken, is taking, or proposes to take with respect
to each such condition or event:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
_______________________________________________________________________________]
The foregoing certifications, together with the computations
set forth in Attachment No. 1 annexed hereto and made a part hereof and the
financial statements delivered with this Certificate in support hereof, are
made and delivered this
V-1
<PAGE> 24
__________ day of _____________, 199_ pursuant to subsection 6.1(iii) of the
Credit Agreement.
The undersigned officer is executing this Compliance
Certificate in his or her capacity as a corporate officer and absent knowing
and intentional misrepresentation shall have no personal liability should any
statement or representation made herein prove to be inaccurate.
THE CERPLEX GROUP, INC.
By:
-----------------------------------------
Title:
--------------------------------------
V-2
<PAGE> 25
ATTACHMENT NO. 1
TO COMPLIANCE CERTIFICATE
This Attachment No. 1 is attached to and made a part of a
Compliance Certificate dated as of ____________, 199_ and pertains to the
period from ____________, 199_ to ____________, 199_. Subsection references
herein relate to subsections of the Credit Agreement.
A. INDEBTEDNESS
1. Indebtedness permitted under subsection 7.1(vii): $___________
2. Maximum permitted under subsection 7.1(vii): $___________
B. CONTINGENT OBLIGATIONS
1. Notional amount of Interest Rate Agreements
permitted under subsection 7.4(iii): $___________
2. Maximum permitted under subsection 7.4(iii): $___________
3. Notional amount of Interest Rate Agreements
permitted under subsection 7.4(v): $___________
4. Maximum permitted under subsection 7.4(v): $___________
C. LIQUIDITY RATIO
1. Consolidated Current Assets: $___________
2. Consolidated Current Liabilities: $___________
3. Ratio of (1) to (2): ____:1.00
4. Minimum ratio required under subsection 7.6A: ____:1.00
D. MAXIMUM LEVERAGE RATIO
1. Consolidated Total Liabilities: $___________
2. Consolidated Tangible Net Worth: $___________
3. Ratio of (1) to (2): ____:____
4. Maximum ratio required under subsection 7.6B: ____:1.00
V-3
<PAGE> 26
E. MINIMUM CONSOLIDATED TANGIBLE NET WORTH
1. Consolidated Tangible Net Worth: $___________
2. Minimum required under subsection 7.6C: $___________
F. MINIMUM PROFITABILITY
1. Consolidated Net Income (excluding PCS): $___________
2. Minimum Consolidated Net Income required under
subsection 7.6D: $___________
G. MINIMUM PROFITABILITY FROM NORTH AMERICAN AND CORPORATE OPERATIONS
1. Consolidated Net Income From North American
and Corporate Operations: $___________
2. Minimum Consolidated Net Income From North
American and Corporate Operations required
under subsection 7.6E: $___________
H. MINIMUM CONSOLIDATED CASH FLOW
1. Consolidated Net Cash Flow From North
American Operations: $___________
2. Base Forecast: $___________
3. $250,000 $___________
4. Minimum Consolidated Cash Flow required
under subsection 7.6F: $___________
I. CONSOLIDATED CAPITAL EXPENDITURES
1. Consolidated Capital Expenditures for Fiscal
Year-to-date: $___________
2. Maximum amount of Consolidated Capital
Expenditures permitted under subsection 7.8: $___________
J. DEPOSIT ACCOUNTS
Deposit Account No. Balance
V-4
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 21,788
<SECURITIES> 0
<RECEIVABLES> 17,023
<ALLOWANCES> 0
<INVENTORY> 8,987
<CURRENT-ASSETS> 52,914
<PP&E> 23,836
<DEPRECIATION> 0
<TOTAL-ASSETS> 78,117
<CURRENT-LIABILITIES> 83,923
<BONDS> 0
0
657
<COMMON> 34
<OTHER-SE> (30,825)
<TOTAL-LIABILITY-AND-EQUITY> 78,117
<SALES> 85,606
<TOTAL-REVENUES> 85,606
<CGS> 76,076
<TOTAL-COSTS> 100,504
<OTHER-EXPENSES> (5,609)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,956
<INCOME-PRETAX> (13,245)
<INCOME-TAX> 1,115
<INCOME-CONTINUING> (14,360)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (14,360)
<EPS-PRIMARY> (.60)
<EPS-DILUTED> 0
</TABLE>
