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SERIES A REDEEMABLE PREFERRED STOCK
AND
WARRANT
PURCHASE AGREEMENT
AMONG
TRANSEASTERN PROPERTIES OF SOUTH FLORIDA, INC.,
XXXXXX X. XXXXXXX and XXXXX XXXXXXX,
XXXXXX X. XXXXXXX and XXXXX XXXXXXX,
XXXXXX XXXXX, XX. and XXXXX XXXXX
AND
THE SEVERAL INVESTORS NAMED IN SCHEDULE 1
Dated as of June 2, 1993
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TABLE OF CONTENTS
ARTICLE 1.THE PREFERRED STOCK .............................................. 2
Section 1.1 Purchase and Sale of Preferred Stock ..................... 2
Section 1.2 Purchase and Sale of Warrants ............................ 2
Section 1.3 Closing .................................................. 2
Section 1.4 Related Transactions ..................................... 2
ARTICLE 2.REPRESENTATIONS AND WARRANTIES OF THE COMPANY ................... 3
Section 2.1 Organization, Qualifications and Corporate Power ........ 3
Section 2.2 Authorization of Agreements, Etc ........................ 3
Section 2.3 Validity ................................................ 4
Section 2.4 Authorized Capital Stock ................................ 4
Section 2.5 Litigation; Compliance with Law ......................... 5
Section 2.6 Proprietary Information of Third Parties ................ 5
Section 2.7 Title to Properties ..................................... 6
Section 2.8 Leasehold Interests ..................................... 7
Section 2.9 Insurance ............................................... 7
Section 2.10 Taxes .................................................. 8
Section 2.11 Other Agreements ....................................... 8
Section 2.12 Patents, Trademarks, Etc ............................... 10
Section 2.13 Loans and Advances ..................................... 11
Section 2.14 Assumption, Guaranties, Etc. of
Indebtedness of Other Persons .......................... 11
Section 2.15 Significant Customers and Suppliers .................... 11
Section 2.16 Governmental Approvals ................................. 11
Section 2.17 Financial Statements ................................... 11
Section 2.18 Absence of Undisclosed Liabilities ..................... 12
Section 2.19 Absence of Changes ..................................... 12
Section 2.20 Employee Benefit Plans ................................. 13
Section 2.21 Disclosure ............................................. 14
Section 2.22 Brokers ................................................ 14
Section 2.23 Transactions with Affiliates ........................... 14
Section 2.24 Employees .............................................. 14
Section 2.25 U.S. Real Property Holding Corporation ................. 15
Section 2.26 Foreign Corrupt Practices Act .......................... 15
Section 2.27 Environmental Regulations .............................. 15
Section 2.28 Disclosure ............................................. 16
ARTICLE 3.REPRESENTATION AND WARRANTIES OF THE INVESTORS .................. 16
ARTICLE 4.CONDITIONS PRECEDENT TO THE PURCHASE OF THE
PREFERRED STOCK AND WARRANTS BY INVESTORS ....................... 17
i
ARTICLE 5.CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE
COMPANY ......................................................... 19
ARTICLE 6.COVENANTS OF THE COMPANY ........................................ 19
Section 6.1 Financial Statements, Reports, Etc ...................... 19
Section 6.2 Financial Covenants and Ratios .......................... 21
Section 6.3 Corporate Existence ..................................... 22
Section 6.4 Properties, Business, Insurance ......................... 22
Section 6.5 Inspection, Consultation, and Advice .................... 22
Section 6.6 Restrictive Agreements Prohibited ....................... 22
Section 6.7 Transactions with Affiliates ............................ 22
Section 6.8 Expenses of Directors ................................... 23
Section 6.9 Use of Proceeds ......................................... 23
Section 6.10 Board of Directors Meetings ............................ 23
Section 6.11 Compensation ........................................... 23
Section 6.12 Bylaws ................................................. 23
Section 6.13 Maintenance of Ownership of Investments ................ 23
Section 6.14 Distributions by Investments ........................... 23
Section 6.15 Compliance with Laws ................................... 24
Section 6.16 Keeping of Records and Books of Account ................ 24
Section 6.17 Employee Stock Plans ................................... 24
Section 6.18 Fees and Expenses of Investors' Counsel ................ 24
Section 6.19 Indemnification Agreement .............................. 24
Xxxxxxx 0.00 Xxxxxx Xxxxxx Real Property Holding Corporation ........ 24
ARTICLE 7.SPECIAL REDEMPTION RIGHT ........................................ 25
ARTICLE 8.MISCELLANEOUS ................................................... 26
Section 8.1 Expenses ................................................ 26
Section 8.2 Survival of Agreements .................................. 26
Section 8.3 Survival of Agreements .................................. 27
Section 8.4 Brokerage ............................................... 27
Section 8.5 Parties in Interest ..................................... 27
Section 8.6 Notices ................................................. 27
Section 8.7 Governing Law ........................................... 28
Section 8.8 Entire Agreement ........................................ 28
Section 8.9 Counterparts ............................................ 28
Section 8.10 Amendments ............................................. 28
Section 8.11 Severability ........................................... 28
Section 8.12 Titles and Subtitles ................................... 29
Section 8.13 Certain Defined Terms .................................. 29
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CROSS REFERENCE OF DEFINED TERMS
Term Section
---- -------
X. Xxxxxxxx Preamble
affiliate Section 8.12
Agreement Preamble
Articles Section 2.4
Closing Section 1.3
Closing Date Section 1.3
Common Stock Section 2.4(a)
Company Preamble
Company Benefit Plans Section 2.20(a)
Contracts Section 2.11
Cuccis Preamble
Disclosure Schedule Article 2
X. Xxxxxxxx Preamble
Employees Section 2.20(a)
Environmental Permits Section 2.27
ERISA Section 2.20(a)(i)
Expiration Date Section 7.2
Financial Statements Section 2.17
Founder Preamble
General Partnership Interest Section 2.1(b)
Hazardous Materials Section 2.27
Indemnification Agreement Section 1.4
Intellectual Property Section 2.12
Investment Section 2.1(b)
Investor Preamble
IRC Section 6.20
person Section 8.12
Preferred Stock Background
Real Property Section 2.7(a)
Redeemable Warrants and Shares Section 7.2
Securities Act Section 2.11(m)
Series A Directors Section 6.8
Shareholders Agreement Section 1.4
Special Redemption Notice Article 7
Special Redemption Rights Article 7
Total Equity Section 6.2(c)
Warrant Background
Warrant Shares Background
iii
SCHEDULES AND EXHIBITS
Schedule 1 Preferred Stock and Warrant Shares Purchased
Schedule 2 Disclosure Schedule
Schedule 3 Accredited Investor Certificates
Exhibit A Form of Warrant Agreement
Exhibit B Shareholders Agreement
Exhibit C Opinion of Company Counsel
Exhibit D Amended and Restated Articles of Incorporation
Exhibit E Indemnification Agreement
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SERIES A REDEEMABLE PREFERRED STOCK
AND
WARRANT PURCHASE AGREEMENT
THIS SERIES A REDEEMABLE PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
("Agreement") is made and entered into as of June 2, 1993 between TRANSEASTERN
PROPERTIES OF SOUTH FLORIDA, INC., a Florida corporation (the "Company"), XXXXXX
X. XXXXXXX and XXXXX XXXXXXX, residents of the State of Florida (the "X.
Xxxxxxxx"), XXXXXX X. XXXXXXX and XXXXX XXXXXXX, residents of the State of
Florida (the "X. Xxxxxxxx"), XXXXXX XXXXX, XX. and XXXXX XXXXX, residents of the
State of Florida (the "Cuccis"), and the several persons named in the attached
Schedule 1 (such persons are hereinafter referred to individually as an
"Investor," and, collectively as the "Investors"). X. Xxxxxxxx, X. Xxxxxxxx, and
Cuccis are sometimes hereinafter referred to individually as a "Founder" and
collectively as the "Founders."
BACKGROUND
A. The Investors desire to invest in the Company to enable the Company to
pursue acquisition, development, management, and other opportunities
relating to the building and development of residential properties.
B. The Investors desire to purchase (i) an aggregate of 20,000 shares of
the Series A Redeemable Preferred Stock of the Company, par value
$.01, (the "Preferred Stock") at a price of $100.00 per share and (ii)
warrants initially exercisable for 275,000 shares of common stock (the
"Warrant Shares") at an exercise price of $.01 per Warrant Share (the
"Warrants"), on the terms and subject to the conditions set forth in
this Agreement.
C. The Company desires to obtain additional equity capital through the
issuance and sale to the Investors of the Preferred Stock and the
Warrants, on the terms and subject to the conditions set forth in this
Agreement. The Founders are the controlling shareholders of the
Company and will receive a direct benefit from the issuance and sale
by the Company of the Preferred Stock and the Warrants.
AGREEMENT
For and in consideration of the premises and the mutual covenants and
agreements contained in this Agreement and for other good and valuable
consideration, the receipt and legal sufficiency of which is hereby
acknowledged, the parties hereby agree:
ARTICLE 1.
THE PREFERRED STOCK AND THE WARRANTS
SECTION 1.1 PURCHASE AND SALE OF PREFERRED STOCK. The Company agrees to
issue and sell to each Investor, and each Investor agrees to purchase from the
Company, the number of shares of Preferred Stock set forth opposite the name of
such Investor on Schedule 1 hereto under the caption "Preferred Stock Purchased"
at a purchase price of $100.00 per share.
SECTION 1.2 PURCHASE AND SALE OF WARRANTS. The Company agrees to issue and
sell to each Investor, and each Investor agrees to purchase from the Company, a
Warrant to purchase the number of Warrant Shares set forth opposite the name of
such Investor on Schedule 1 hereto under the caption "Warrant Shares Purchased."
Each Warrant shall be substantially in the form of Exhibit A attached hereto.
The purchase price for each Warrant shall be equal to the product of $.001
multiplied by the number of Warrant Shares issuable upon exercise of the
Warrant.
SECTION 1.3 CLOSING. The closing of the purchase and sale of the Preferred
Stock and the Warrants shall take place at the offices of Powell, Goldstein,
Xxxxxx & Xxxxxx, 000 Xxxxxxxxx Xxxxxx, X.X., Xxxxxxx, XX 00000 at 10:00 a.m.,
Eastern Daylight Time, on June 2, 1993, or at such other location, date, and
time as may be agreed upon between the Investors and the Company (such closing
being called the "Closing" and such date and time being called the "Closing
Date"). At the Closing, the Company shall issue and deliver to each Investor a
stock certificate or certificates in definitive form, registered in the name of
each Investor, representing the Preferred Stock and the Warrants being purchased
by each Investor at the Closing. As payment in full for the Preferred Stock and
the Warrants, and against delivery of the certificates evidencing the Preferred
Stock and the Warrants purchased, on the Closing Date, each Investor shall
deliver to the Company a cashier's check payable to the order of the Company, in
the amount set forth opposite the name of such Investor on Schedule 1 under the
heading "Aggregate Purchase Price," or shall transfer such sum to the account of
the Company by wire transfer.
SECTION 1.4 RELATED TRANSACTIONS. At the Closing, the Company, the
Founders, and the Investors (and such other parties as may be necessary) shall
execute and deliver a shareholders agreement among the Company, the X. Xxxxxxxx,
the X. Xxxxxxxx, the Cuccis, and the Investors, in substantially the form of
Exhibit B hereto (the "Shareholders Agreement"). In addition, (a) the Company
and the Founders shall deliver (i) a certificate with respect to the matters
described in Section 4(f) hereof, and (ii) the opinion of Xxxxxx & Xxxxxxx,
counsel to the Company, in substantially the form of Exhibit C hereto, and (b)
the Company shall deliver an indemnification agreement in substantially the form
of Exhibit E hereto (the "Indemnification Agreement") to the Series A Directors
(as hereinafter defined).
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ARTICLE 2.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE FOUNDERS
For the purpose of inducing the Investors to purchase the Shares and the
Warrants, the Company and each Founder represents and warrants to each Investor
that, except as otherwise set forth in the Disclosure Schedule attached hereto
as Schedule 2 (the "Disclosure Schedule") by means of an explicit reference to
the particular representation or warranty as to which exception is taken, which
in each case shall constitute the sole representation and warranty as to which
such exception shall apply:
SECTION 2.1 ORGANIZATION, QUALIFICATIONS AND CORPORATE POWER.
(a) The Company is a corporation duly incorporated, validly existing,
and in good standing under the laws of the State of Florida and is duly licensed
or qualified to transact business as a foreign corporation and is in good
standing in each jurisdiction in which the nature of the business transacted by
it or the character of the properties owned or leased by it requires such
licensing or qualification. The Company has the corporate power and authority to
(i) own and hold its properties and carry on its business as now conducted and
as proposed to be conducted, (ii) execute, deliver, and perform each of this
Agreement, the Warrants, the Shareholders Agreement, and the Indemnification
Agreement, (iii) issue, sell, and deliver the Preferred Stock, and (iv) issue
and deliver the Warrants and the Warrant Shares issuable upon exercise of the
Warrants.
(b) Section 2.1(b) of Schedule 2 contains a true and correct list of
each (i) corporation some or all of the securities of which are held by the
Company (an "Investment"), indicating with respect to each Investment, the
number and type of securities outstanding and the number and type of securities
held by the Company, and (ii) each general or limited partnership owned in whole
or in part by the Company (a "General Partnership Interest"). Except for
Investments and General Partnership Interests listed on Section 2.1(b) of the
Disclosure Schedule, the Company does not (i) own of record or beneficially,
directly or indirectly, (A) any shares of capital stock or securities
convertible into capital stock of any corporation, (B) any debt securities of
any corporation, or (C) any participating interest in or any indebtedness of any
partnership, joint venture, limited liability company, or other non-corporate
business enterprise or (ii) control, directly or indirectly, any other entity.
SECTION 2.2 AUTHORIZATION OF AGREEMENTS, ETC.
(a) The Company is not in violation of or default under any provision
of its Amended and Restated Articles of Incorporation, or Bylaws, of any
provision of any indenture, contract, agreement, mortgage, deed of trust, loan,
commitment, judgment, decree, order, or obligation to which it is a party or by
which any of its properties or assets are bound, or of any provision of any
Federal, state, or local statute, rule, or governmental regulation applicable to
the Company. The execution and delivery by the Company of this Agreement and
each of the other agreements, documents, and instruments contemplated hereby,
the performance by the Company of its obligations hereunder and thereunder, the
issuance, sale, and delivery of the Preferred Stock and the Warrants, and the
issuance and delivery of the Warrant Shares upon exercise of the Warrants, have
been duly authorized by all requisite corporate action on the part of the
Company and its officers, directors, and shareholders and will not result in any
such violation, conflict with, result in a breach of, or constitute (with due
notice or lapse of time or both) a default under any such provision, require any
3
consent or waiver under any such provision, or result in the creation or
imposition of any lien, charge, restriction, claim, or encumbrance of any nature
whatsoever upon any of the properties or assets of the Company. There is no such
provision which materially and adversely affects, or so far as the Company is
presently aware, in the future may materially and adversely affect, the
condition (financial or otherwise), business, property, prospects, assets, or
liabilities of the Company.
(b) The Preferred Stock has been duly authorized and, when issued in
accordance with this Agreement, will be validly issued, fully paid, and
nonassessable. The Warrants have been duly authorized and, when issued in
accordance with this Agreement, will be validly issued. The Preferred Stock and
the Warrants, when issued in accordance with this Agreement, will be free and
clear of all liens, charges, restrictions, claims, and encumbrances imposed by
or through the Company, except as reflected on the certificates evidencing the
Preferred Stock. The Warrant Shares have been duly and validly reserved for
issuance upon exercise of the Warrants, and the Warrant Shares, when so issued,
will be duly authorized, validly issued, fully paid, and nonassessable and will
be free and clear of all liens, charges, restrictions, claims, and encumbrances
imposed by or through the Company, except as reflected on the certificates
evidencing the Warrants and the Warrant Shares. Neither the issuance, sale, and
delivery of the Preferred Stock and the Warrants nor the issuance and delivery
of the Warrant Shares is subject to any preemptive right, right of first
refusal, or other right in favor of any person.
SECTION 2.3 VALIDITY. Each of this Agreement, the Warrants, the
Shareholders Agreement, and the Indemnification Agreement have been duly and
validly executed and delivered by the Company and constitutes the legal, valid,
and binding obligation of the Company, enforceable against the Company in
accordance with its terms.
SECTION 2.4 AUTHORIZED CAPITAL STOCK. Immediately prior to the Closing:
(a) the authorized capital stock of the Company will consist of (i)
Twenty-Nine Thousand (29,000) shares of Series A Redeemable Preferred Stock and
(ii) Five Million (5,000,000) shares of common stock (the "Common Stock").
(b) Seven Hundred Twenty Five Thousand and One (725,001) shares of
Common Stock will be validly issued and outstanding, fully paid and
nonassessable, and no shares of Preferred Stock will be issued and outstanding;
(c) all issued and outstanding shares of Common Stock are owned of
record and beneficially by the persons and in the amounts set forth in Section
2.4 of the Disclosure Schedule;
(d) the relative rights, powers, preferences, qualifications,
limitations, and restrictions in respect of each class of authorized capital
stock of the Company are as set forth in the Company's Amended and Restated
Articles of Incorporation (the "Articles"), a copy of which is attached as
Exhibit D hereto, and all such rights, powers, preferences, qualifications,
limitations, and restrictions are valid, binding, and enforceable and in
accordance with all applicable laws;
(e) except as set forth in Section 2.4 of the Disclosure Schedule, (i)
no person owns of record or is known to the Company to own beneficially any
shares of any equity stock, (ii) no subscription, warrant, option, convertible
security, or other right (contingent or other) to purchase or otherwise acquire
4
equity securities of the Company is authorized or outstanding, and (iii) there
is no commitment by the Company to issue shares, subscriptions, warrants,
options, convertible securities, or other such rights or to distribute to
holders of any of its equity securities any evidence of indebtedness or assets,
except as contemplated by this Agreement; and
(f) except as set forth in the Articles and in the Shareholders
Agreement, the Company has no obligation (contingent or other) to purchase,
redeem, or otherwise acquire any of its equity securities or any interests
therein or to pay any dividend or make any other distribution in respect
thereof. Except as set forth in the Shareholders Agreement, there are no voting
trusts or agreements, preemptive rights, or proxies relating to any securities
of the Company (whether or not the Company is a party thereto). All of the
outstanding securities of the Company were issued in compliance with all
applicable Federal and state securities laws.
SECTION 2.5 LITIGATION; COMPLIANCE WITH LAW. There is no (i) action, suit,
claim, proceeding, or investigation pending or, to the knowledge of the Company
or the Founders, threatened against or affecting the Company, at law or in
equity, or before or by any Federal, state, municipal, or other governmental
department, commission, board, bureau, agency, or instrumentality, domestic or
foreign, (ii) arbitration proceeding relating to the Company pending under
collective bargaining agreements or otherwise, or (iii) governmental inquiry
pending or, to the knowledge of the Company or the Founders, threatened against
or affecting the Company, (including without limitation any inquiry as to the
qualification of the Company to hold or receive any license or permit), and
there is no basis known to the Company of the Founders for any of the foregoing.
The Company is not exposed to any liability which may be materially adverse to
the Company's business, prospects, financial condition, operations, properties,
or affairs. The Company is not subject to any order, writ, injunction, or decree
of any court or of any Federal, state, municipal, or other governmental
department, commission, board, bureau, agency, or instrumentality, domestic or
foreign. There is no action or suit by the Company pending or threatened against
any other person. The Company is in material compliance with all laws, rules,
regulations, and orders applicable to the Company's business, operations,
properties, assets, licenses, and other authorizations required to conduct its
business as conducted and as proposed to be conducted. There is no existing law,
rule, regulation, or order, and neither the Company nor any Founder, after due
inquiry, is aware of any proposed law, rule, regulation, or order, whether
Federal or state, which would prohibit or restrict the Company from, or
otherwise materially adversely affect the Company in, conducting its business in
any jurisdiction in which it is now conducting business or in which it proposes
to conduct business within the foreseeaSection 2.6 Proprietary Information of
Third Parties. After reasonable investigation, neither the Company nor any
Founder is aware that any significant employee or consultant of the Company is
obligated under any contract or other agreement, or subject to any judgment,
decree, or order of any court or administrative agency, that would conflict with
the obligation of such employee to use best efforts to promote the interests of
the Company. To the knowledge of the Company or the Founders, no third party has
claimed or has reason to claim that any person employed by or affiliated with
the Company has (a) violated or may be violating any of the terms or conditions
of any employment, non-competition, or non-disclosure agreement between such
employee and such third party, (b) disclosed or may be disclosing, or utilized
or may be utilizing, any trade secret or proprietary information or
documentation of such third party, or (c) interfered or may be interfering in
the employment relationship between such third party and any of the Company's
present or former employees. No third party has requested information from the
Company which suggests that such a claim might be contemplated. To the knowledge
of the Company and the Founders, no person employed by or affiliated with the
Company has employed or proposes to employ any trade secret or any information
or documentation proprietary to any
5
former employer, and to the knowledge of the Company and the Founders, no person
employed by or affiliated with the Company has violated any confidential
relationship which such person may have had with any third party, in connection
with the development, manufacture, or sale of any product or proposed product,
or the development or sale of any service or proposed service of the Company,
and the Company has no reason to believe there will be any such employment or
violation. To the knowledge of the Company and the Founders, none of the
execution or delivery of this Agreement, or the carrying on of the business of
the Company by its officers, employees, or agentsproposed conduct of the
business of the Company, will conflict with or result in a breach of the terms,
conditions, or provisions of or constitute a default under any contract,
covenant, or instrument under which any such person is obligated.
SECTION 2.7 TITLE TO PROPERTIES.
(a) Section 2.7(a) of the Disclosure Schedule contains a true and
correct list of each tract of real property owned by the Company ("Real
Property") and a summary description of the proposed use thereof and the number
of buildable lots remaining in each tract, and if applicable, a general
description of all improvements and structures located on such tract. Attached
to the Disclosure Schedule are copies of binders for title insurance for each
tract of Real Property. Except as reflected in such title insurance binders, the
Company has good and marketable fee simple title to the Real Property, free and
clear of all mortgages, liens, charges, encumbrances, and purchase options and
other rights to or against such property, other than such minor imperfections of
title, liens, easements, zoning restrictions, or encumbrances, if any, as are
not substantial in character, amount, or extent, and do not, severally or in the
aggregate, detract from the value or interfere with the present uses of the Real
Property, or otherwise impair the business and operations of the Company, except
for claims of subcontractors, laborers, and materialmen which have performed
work or provided services to such property and which are unpaid within normal
payment terms. Copies of all documents evidencing mortgages, liens, charges, or
other encumbrances upon the Real Property and copies of all title insurance
policies insuring the interest of the Company therein are attached to the
Disclosure Schedule.
(b) All improvements on the Real Property conform in all material
respects to all applicable state and local laws, use restrictions, building
ordinances, and health and safety ordinances, and the property is zoned for the
various purposes for which the Real Property and improvements thereon are
presently being used.
(c) The Company, has received no written notice of any pending or
threatened condemnations, planned public improvements, annexation, special
assessments, zoning or subdivision changes, or other adverse claims affecting
the Real Property.
(d) There is no private restrictive covenant or governmental use
restriction (including zoning) known to the Company after reasonable inquiry, on
all or any portion of the Real Property which prohibits the current or
contemplated use of the Real Property.
(e) All licenses, permits, and approvals required for the occupancy
and operation of the Real Property have been obtained and are in full force and
effect and the Company has received no notices of violations in connection with
such items.
6
(f) The Company does not have in its possession any studies or reports
which indicates any defects in the design or construction of any of the
improvements on the Real Property.
(g) There are no past due taxes, assessments, or other charges
affecting the Real Property.
(h) The Company has good and marketable title to all personal
properties and assets owned by it, free and clear of all mortgages, pledges,
security interests, liens, charges, claims, restrictions and other encumbrances,
except liens for current taxes not yet due and payable and minor imperfections
of title, if any, not material in nature or amount and not materially detracting
from the value or impairing the use of the personal property subject thereto or
impairing the operations or proposed operations of the Company. The Company owns
or leases all personal properties and assets necessary to the operation of its
business as now conducted. All of such personal properties and assets are in
good operating condition (normal wear and tear excepted), are reasonably fit for
the purposes for which such personal properties and assets are presently used,
are adequate and usable for the continued operation of the business of the
Company as the same is presently conducted, and none of such personal properties
and assets are in need of maintenance or repairs except for ordinary, routine
maintenance and repairs, the cost of which will not vary materially from
historic patterns.
SECTION 2.8 LEASEHOLD INTERESTS. Each lease or agreement to which the
Company is a party under which it is a lessee of any property, real or personal,
is a valid and subsisting agreement without any default of the Company
thereunder and, to the best of the Company's knowledge, without any default
thereunder of any other party thereto. No event has occurred and is continuing
which, with due notice or lapse of time or both, would constitute a default or
event of default by the Company under any such lease or agreement or, to the
best of the Company's knowledge, by any other party thereto. The Company's
possession of such property has not been disturbed and, to the best of the
Company's knowledge, no claim has been asserted against the Company adverse to
its rights in such leasehold interests.
SECTION 2.9 INSURANCE. All of the properties and business of the Company of
an insurable nature are insured to the extent usually insured by persons or
entities engaged in the same or similar businesses against loss or damage of the
kind customarily insured against by such persons or entities. The Company is not
in default regarding the provisions of any such policy. The Company has not,
since inception, self-insured against any risk ordinarily insured against by
similar businesses. The Company has not received any notice from any of its
insurers that any insurance premiums will be increased in the future or that any
insurance coverage presently in force will not be available in the future on
substantially the same terms as are now in effect. There are no outstanding
requirements or recommendations by any current insurer or underwriter with
respect to the Company which require or recommend changes in the conduct of the
business or require any repairs or other work to be done to the assets and
properties of the Company.
SECTION 2.10 TAXES. The Company has filed or obtained filing extensions for
all tax returns, Federal, state, county, and local, required to be filed by it,
and the Company has paid or established adequate reserves (in accordance with
generally accepted accounting principles) for the payment of all taxes shown to
be due by such returns as well as all other taxes, assessments, and governmental
charges which have become due or payable, including, without limitation, all
taxes which the Company is obligated to withhold from amounts owing to
employees, creditors, and third parties. The Federal income tax returns of the
Company have never been audited by the Internal Revenue Service and no state
income or sales tax returns of the
7
Company have been audited. No deficiency assessment with respect to or proposed
adjustment of the Company's Federal, state, county, or local taxes is pending
or, to the best of the Company's knowledge, threatened. There is no tax lien,
whether imposed by any Federal, state, county, or local taxing authority,
outstanding against the assets, properties, or business of the Company. Neither
the Company nor any of its shareholders has ever filed a consent pursuant to
Section 341(f) of the IRC (as hereinafter defined), relating to collapsible
corporations.
SECTION 2.11 OTHER AGREEMENTS. Except as set forth in Section 2.11 of the
Disclosure Schedule, the Company is not a party to or otherwise bound by any
written or oral contract, obligation, agreement, commitment, restriction, or the
like which individually or in the aggregate could materially adversely affect
the business, prospects, financial condition, operations, property, or affairs
of the Company. Except as set forth in Section 2.11 of Disclosure Schedule, the
Company is not a party to or otherwise bound by any written or oral:
(a) distributor, dealer, manufacturer's representative, advertising or
sales agency contract or agreement which is not terminable on less than ninety
days' notice without cost or other liability to the Company (except for
contracts which, in the aggregate, are not material to the business of the
Company);
(b) contract with any labor union or collective bargaining
organization (and, to the knowledge of the Company or the Founders, no
organizational effort is being made with respect to any of its employees);
(c) contract or other commitment with any supplier containing any
provision permitting any party other than the Company to renegotiate the price
or other terms, or containing any pay-back or other similar provisions upon the
occurrence of a failure by the Company to meet its obligations when due or the
occurrence of any other event;
(d) contract for the future purchase of fixed assets or for the future
purchase of materials, supplies, or equipment in excess of expected normal
operating requirements;
(e) contract for the employment of any officer, employee, or other
person (whether of a legally binding nature or in the nature of informal
understandings) of a full-time or consulting basis, except severance
arrangements not in excess one month's pay and accrued vacation pay;
(f) bonus, pension, profit-sharing, retirement, hospitalization,
insurance, stock purchase, stock option, or other plan, contract or
understanding pursuant to which benefits are provided to any employee of the
Company (other than group insurance plans applicable to employees generally);
(g) loan, note, indenture, agreement, or instrument relating to or
evidencing the borrowing of money or the mortgaging or pledging of, or otherwise
placing a lien or security interest on, any asset of the Company;
(h) guaranty of any obligation for borrowed money or otherwise;
8
(i) voting trust or agreement, shareholders agreement, pledge
agreement, buy-sell agreement, or first refusal or preemptive rights agreement
relating to any securities of the Company (except for the Shareholders
Agreement);
(j) agreement, or group of related agreements with the same party or
any group of affiliated parties under which the Company has advanced or agreed
to advance money or has agreed to lease any property as lessee or lessor;
(k) agreement or obligation (contingent or otherwise) to issue, sell,
or otherwise distribute or repurchase or otherwise acquire or retire any share
of its capital stock or any of its other equity securities, except pursuant to
this Agreement and the Shareholders Agreement;
(l) assignment, license, or other agreement with respect to any form
of intangible property;
(m) agreement under which it has granted any person any rights to
register under the Securities Act of 1933, as amended (the "Securities Act"),
any of its currently outstanding securities or any of its securities which may
hereafter be issued;
(n) agreement under which the Company, the Founders, or any executive
or key employee has limited or restricted its right to compete with any person
in any respect;
(o) agreement providing for disposition of the business, assets, or
shares of the Company, agreements of merger or consolidation to which the
Company is a party or letters of intent with respect to the foregoing;
(p) franchise agreement, or any agreements involving, or letters of
intent with respect to, the acquisition of the business, assets, or shares of
capital stock of any other business;
(q) insurance policies; or
(r) other contract or group of related contracts with the same party
involving more than $10,000 or continuing over a period of more than six (6)
months from the date or dates thereof (including renewals or extensions optional
with another party), which contract or group of contracts is not terminable by
the Company without penalty upon notice of thirty (30) days or less, but
excluding any contract or group of contracts with a customer of the Company for
the sale, lease, or rental of the Company's products or services if such
contract or group of contracts was entered into by the Company in the ordinary
course of business.
The Company has provided counsel to the Investors with copies of and access to
all of the obligations, agreements and the like set forth in Section 2.11 to the
Disclosure Schedule (referred to individually as a "Contract" and collectively
as the "Contracts"). Each of the Contracts are valid, binding and in full force
and effect in all material respects. The Company, and to the knowledge of the
Company and the Founders, each other party thereto has in all material respects
performed all the obligations required to be performed by it to date and has
received no notice of default and is not in default (with due notice or lapse of
time or both) under any of the Contracts. The Company has no present expectation
or intention of not fully performing all its obligations under each of the
Contracts, and the Company has no knowledge of any breach or anticipated breach
9
by the other party to any of the Contracts. There is no Contract that contains
any contractual requirement with which there is a reasonable likelihood that the
Company or any other party thereto will be unable to comply with the terms
thereof. The continuation, validity, and effectiveness of each Contract will in
no way be affected by the consummation of the transactions contemplated by this
Agreement. There exists no actual or, to the best knowledge of the Company, any
threatened termination, cancellation, or limitation of, or any amendment,
modification, or change to any Contract, which would have a material adverse
effect on the business or condition, financial or otherwise, of the Company.
SECTION 2.12 PATENTS, TRADEMARKS, ETC. The Company has sufficient title to
and ownership of, or can obtain on terms which will not adversely affect its
business, all franchises, permits, licenses, and other similar authority
necessary for the conduct of its business as now being conducted and as planned
to be conducted, and it is not in default under any of such franchises, permits,
licenses, and other similar authority. The Company possesses all patents, patent
rights, patent applications, trademarks, trademark applications, service marks,
service xxxx applications, trade names, copyrights, formulae, trade secrets, and
know how (collectively, "Intellectual Property") necessary or desirable to the
conduct of its business as conducted and as proposed to be conducted, and no
claim is pending or, to the knowledge of the Company and the Founders,
threatened to the effect that the operations of the Company infringe upon or
conflict with the asserted rights of any other person under any Intellectual
Property, and, to the knowledge of the Company and the Founders, there is no
basis for any such claim (whether or not pending or threatened). No claim is
pending or threatened to the effect that any such Intellectual Property owned or
licensed by the Company, or which the Company otherwise has the right to use, is
invalid or unenforceable by the Company, and, to the knowledge of the Company
and the Founders, there is no basis for any such claim (whether or not pending
or threatened). The Company is not aware of any third party which is infringing
or violating any of the Intellectual Property of the Company. To the knowledge
of the Company and the Founders, all technical information developed by and
belonging to the Company which has not been patented has been kept confidential.
The Company has not granted or assigned to any other person or entity any of the
Intellectual Property or the right to manufacture, have manufactured, assemble,
or sell the products or proposed products or to provide the services or proposed
services of the CompaSection 2.13 Loans and Advances. The Company does not have
any outstanding loans or advances to any person and is not obligated to make any
such loans or advances, except, in each case, for advances to employees of the
Company in respect of reimbursable business expenses anticipated to be incurred
by them in connection with their performance of services for the Company in the
ordinary course of business, consistent with past practice.
SECTION 2.14 ASSUMPTION, GUARANTIES, ETC. of Indebtedness of Other Persons.
The Company has not assumed, guaranteed, endorsed, or otherwise become directly
or contingently liable on any indebtedness of any other person (including,
without limitation, liability by way of agreement, contingent or otherwise, to
purchase, to provide funds for payment, to supply funds to, or otherwise invest
in the debtor, or otherwise to assure the creditor against loss), except for
guaranties by endorsement of negotiable instruments for deposit or collection in
the ordinary course of business.
SECTION 2.15 SIGNIFICANT CUSTOMERS AND SUPPLIERS. No customer or supplier
which was or has been significant to the Company in the past three (3) years has
terminated, materially reduced or threatened to terminate or materially reduce
its purchases from or provision of products or services to the Company, as the
case may be.
10
SECTION 2.16 GOVERNMENTAL APPROVALS. Subject to the accuracy of the
representations and warranties of the Investors set forth in Article 3 hereof,
no registration, qualification, or filing with, or consent or approval of or
other action by, any Federal, state, or other governmental agency or
instrumentality is or will be necessary for the valid execution, delivery, and
performance by the Company of this Agreement, the offer, issuance, sale and
delivery of the Preferred Stock and the Warrants, the issuance and delivery of
the Warrant Shares upon exercise of the warrants or the consummation of any
other transaction contemplated hereby, other than (i) filings pursuant to state
securities laws (all of which filings have been made as of the date hereof) in
connection with the offer and sale of the Preferred Stock and the Warrants and
(ii) the filing of a notice under Regulation D under the Securities Act.
SECTION 2.17 FINANCIAL STATEMENTS. Attached as Section 2.17 to the
Disclosure Schedule are true, correct, and complete copies of: the audited
Statement of Assets, Liabilities and Shareholders' Equity - Income Tax Basis of
the Company dated December 31, 1992, and an audited Statement of Revenues and
Expenses - Income Tax Basis, and an audited Statement of Changes in Shareholders
Equity - Income Tax Basis for the year then ended, together with notes thereto
and the audit report of KPMG Peat Marwick thereon (collectively, the "Financial
Statements"). The Financial Statements (i) are in accordance with the books and
records of the Company, (ii) present fairly the financial condition of the
Company as of the respective dates indicated and the results of operations for
such periods except that interim period financial statements are subject to
normal year-end audit adjustments, which in the aggregate will not materially or
adversely change such interim financial statements, (iii) have been prepared on
a tax accounting basis consistently applied throughout the periods involved, and
(iv) reflect adequate reserves for all liabilities and losses. The Company has
not received any advice or notification from its independent certified public
accountants that the Company has used any improper accounting practice that
would have the effect of not reflecting or incorrectly reflecting in the
Financial Statements or the books and records of the Company, any properties,
assets, liabilities, revenues, or expenses. The Financial Statements do not
contain any items of special or nonrecurring income, or other income not earned
in the ordinary course of business, except as set forth in the notes to the
Financial Statements. The books, records, and accounts of the Company accurately
and fairly reflect, in reasonable detail, the transactions and the assets and
liabilities of the Company. The Company has not engaged in any transaction,
maintained any bank account, or used any of the funds of the Company, except for
transactions, bank accounts, and funds which have been and are reflected in the
normally maintained books and records of the Company.
SECTION 2.18 ABSENCE OF UNDISCLOSED LIABILITIES. The Company has no
material liabilities or obligations (secured or unsecured, whether accrued,
absolute, direct, indirect, contingent, or otherwise, and whether due or to
become due) that are not fully accrued or reserved against in the Financial
Statements, other than (a) liabilities incurred in the ordinary course of
business subsequent to the date of the Financial Statements and (b) obligations
under contracts and commitments incurred in the ordinary course of business and
not required under generally accepted accounting principles to be reflected in
the Financial Statements, which liabilities and obligations, individually or in
the aggregate, are not material to the financial condition or operating results
of the Company.
SECTION 2.19 ABSENCE OF CHANGES. Since the date of the Financial Statements
and except as reflected therein, (a) there has been no material adverse change
in the condition (financial or otherwise), business, property, assets, or
liabilities of the Company other than changes in the ordinary course of
business, none of which, individually or in the aggregate, has been materially
adverse; (b) the Company has not entered into any material transaction which was
not in the ordinary course of its business; (c) there has been no damage to,
11
destruction of, or loss of physical property (whether or not covered by
insurance) materially adversely affecting the business or operations of the
Company; (d) except as contemplated by this Agreement, the Company has not
declared or paid any dividend on its stock, made any distribution on its stock,
redeemed, purchased, or otherwise acquired any of its stock, granted any options
to purchase shares of its stock; (e) the Company has not increased the
compensation of any of its officers, or the rate of pay of its employees as a
group, except as part of regular compensation increases in the ordinary course
of its business, to an amount in excess of the amounts set forth in the pro
formas previously delivered to the Investors; (f) there has been no resignation
or termination of employment of any key officer or employee of the Company, and
the Company does not know of the impending resignation or termination of
employment of any such officer or employee that if consummated, would have a
material adverse effect on the business of the Company; (g) there has been no
labor dispute involving the Company or its employees and none is pending or to
the knowledge of the Company and the Founders, threatened; (h) there has been no
change, except in the ordinary course of business, in the contingent obligations
of the Company by way of guaranty, endorsement, indemnity, warranty, or
otherwise; (i) there have been no loans made by the Company to its employees,
officers, directors, or partners other than travel advances and office advances
made in the ordinary course of business; and (j) to the knowledge of the Company
and the Founders, there has been no other event or condition of any kind which
might reasonably be expected to result in a material and adverse change in the
Company's condition (financial or otherwise) or business or to impair materially
the ability of the Company to conduct its business as it is currently being
conducted.
SECTION 2.20 EMPLOYEE BENEFIT PLANS.
(a) Section 2.20 of the Disclosure Schedule contains a true and
complete list of all the following agreements or plans which are presently in
effect or which have previously been in effect and which cover employees of the
Company ("Employees"):
(i) Any employee benefit plan as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974 ("ERISA"), and any trust or
other funding agency created thereunder, or under which the Company, with
respect to the Employees, has any outstanding, present, or future obligation or
liability, or under which any Employee or former Employee has any present or
future right to benefits which are covered by ERISA; or
(ii) Any other pension, profit sharing, retirement, deferred
compensation, stock purchase, stock option, incentive, bonus, vacation,
severance, disability, hospitalization, medical, life insurance, or other
employee benefit plan, program, policy, or arrangement, whether written or
unwritten, formal or informal, which the Company, with respect to the Business,
maintains or to which the Company, with respect to the Business, has any
outstanding, present, or future obligations to contribute or make payments
under, whether voluntary, contingent, or otherwise.
The plans, programs, policies, or arrangements which are described in
subparagraph (i) or (ii) above and which are listed on Section 2.20 of the
Disclosure Schedule are hereinafter collectively referred to as the "Company
Benefit Plans." The Company has delivered to the Investors true and complete
copies of all written plan documents and contracts evidencing the Company
Benefit Plans, as they may have been amended to the date hereof, together with
(A) all documents relating to any tax-qualified retirement plan maintained by
the Company, which documents are required to have been filed prior to the date
hereof with governmental authorities for each of the three most recently
completed plan years; (B) attorney's response to an auditor's request for
12
information for each of the three most recently completed plan years; and (C)
financial statements for each Company Benefit Plan for each of the three most
recently completed plan years.
(b) Except for the Company Benefit Plans, the Company does not now
maintain, nor has the Company at any time in the past been obligated to make any
payment or contribution to any pension, retirement, profit-sharing, deferred
compensation, stock purchase, stock option, bonus or incentive plan, any
medical, vision, dental, or other health plan, any life insurance plan,
vacation, severance, disability, or any other employee benefit plan, program,
policy, or arrangement, whether written, unwritten, formal, or informal,
including, without limitation, any "employee benefit plan" as defined in Section
3(3) of ERISA. The Company has not made, entered into, or agreed to any
commitment, whether written or oral, which would obligate the Company to
establish any employee benefit plan, or continue any employment agreement or
employment policy covering Employees. With respect to all "welfare plans," as
defined in Section 3(1) of ERISA, covering Employees or former Employees, there
are no obligations to continue coverage or to make payments to or on behalf of
persons who are or may become retired or terminated Employees or their
beneficiaries, other than as may be required by Sections 601 through 608 of
ERISA.
(c) The Company has complied with the continuation coverage
requirements of Section 1001 of the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended, and ERISA Sections 601 through 608.
SECTION 2.21 DISCLOSURE.
(a) The Company has delivered to the Investors a true and correct copy
of (i) the Articles of Incorporation of the Company, and all amendments thereto
and restatements thereof certified by the appropriate state official; and (ii)
the Bylaws of the Company and all amendments thereto.
(b) The minute books of the Company made available to the Investors
prior to the date hereof, accurately reflect all corporate action taken by the
directors and shareholders of the Company or any committee of the Board of
Directors of the Company and contain true and accurate copies of or originals of
the respective minutes of all meetings or consent actions of the directors, any
committee of the Board of Directors, and the shareholders.
(c) The stock record books of the Company, made available to the
Investors prior to the date hereof, accurately reflect the stock ownership of
the Company, and contain complete and accurate records with respect to the
transfer of all securities issued by the Company and each Investment since
inception.
SECTION 2.22 BROKERS. The Company has no contract, arrangement, or
understanding with any broker, finder, or similar agent with respect to the
transactions contemplated by this Agreement, nor has the Company authorized or
employed any person in connection with the offering or sale of the Preferred
Stock, or the Warrants or any security of the Company similar to the Preferred
Stock or the Warrants.
SECTION 2.23 TRANSACTIONS WITH AFFILIATES. No Founder, director, officer,
employee, or shareholder of the Company, or member of the family of any such
person, or any corporation, partnership, trust, or other entity in which any
such person, or any member of the family of any such person, has a substantial
interest or is an officer, director, trustee, partner, or holder of more than 5%
of the outstanding equity interests thereof is
13
a party to any transaction with the Company, including any contract, agreement
or other arrangement providing for the employment of, furnishing of services by,
rental of real or personal property from or otherwise requiring payments to any
such person or firm.
SECTION 2.24 EMPLOYEES.
(a) No officer or key Employee has advised the Company (orally or in
writing) that he or she intends to terminate employment with the Company. The
Company has complied in all material respects with all applicable laws relating
to the employment of labor, including provisions relating to wages, hours, equal
opportunity, worker health and safety, collective bargaining, and the payment of
Social Security and other taxes, and with ERISA.
(b) The Company does not have any collective bargaining agreement
covering any of its Employees. There is no pending or, to the best knowledge of
the Company, threatened labor dispute involving the Company or any of its
Employees. To the best of the Company's knowledge, the Company has amicable
relations with its Employees.
SECTION 2.25 U.S. REAL PROPERTY HOLDING CORPORATION. [Intentionally
omitted.]
SECTION 2.26 FOREIGN CORRUPT PRACTICES ACT. The Company has not made,
offered or agreed to offer anything of value to any government official,
political party or candidate for government office nor has it taken any action
which would cause the Company to be in violation of the Foreign Corrupt
Practices Act of 1977.
SECTION 2.27 ENVIRONMENTAL REGULATIONS.
(a) Except for failures which will not result in any material
liability or consequences to the Company, the Company has met, and continues to
meet, all applicable local, state, Federal and national environmental
regulations.
(b) The Company has not been notified that it is potentially liable,
has not received any requests for information or other correspondence concerning
any site or facility, and is not otherwise aware that it is considered
potentially liable under the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended, or any similar state law.
(c) The Company has not entered into or received any consent decree,
compliance order, or administrative order relating to environmental protection.
(d) The Company has neither entered into or received nor is the
Company in default under any judgment, order, writ, injunction, or decree of any
federal, state, or municipal court or other governmental authority relating to
environmental protection.
(e) The Company has all permits, licenses, approvals, consents, and
authorizations (the "Environmental Permits") relating to environmental or health
protection which are required under Federal, state, or local laws, rules, and
regulations and is in compliance with all the Environmental Permits (including
any information provided on the applications therefor), and Section 2.27 of the
Disclosure Schedule contains
14
a complete list and description of all such Environmental Permits and attached
to Section 2.27 of the Disclosure Schedule is a true and correct copy of each
such Environmental Permit;
(f) There are no actions, suits, claims, arbitration proceedings, or
complaints pending or, to the Company's knowledge, threatened or under
consideration by any governmental authority, municipality, community, citizen,
or other entity against the Company relating to environmental protection, nor
does the Company have reason to believe that any such actions, suits, claims, or
complaints will be brought against it.
(g) No disposal, releases, burial, or placement of hazardous or toxic
substances, pollutants, contaminants, petroleum, gas products, or
asbestos-containing materials (as any of such terms may be defined under
Federal, state, or local law) (hereinafter collectively referred to as
"Hazardous Materials") has occurred on, in, at, or about any of the Company's
properties or facilities or any other facility or site to which Hazardous
Materials from the Company may have been taken at any time in the past and
Section 2.27 of the Disclosure Schedule contains a list of all facilities to
which Hazardous Materials from the Company have been taken in the past.
(h) To the Company's knowledge, there has been no disposal, releases,
burial, or placement of Hazardous Materials on any property not owned or
operated in the present or the past by the Company which may result or has
resulted in contamination of or beneath any of the Company's properties or
facilities.
(i) There are no above-ground and underground storage tanks on the
Real Property.
(j) No lien has arisen on the Company's properties or facilities under
Federal, state, or local laws, rules, or regulations as they relate to
environmental protection.
(k) No audit or investigation has been conducted as to environmental
matters at any of the Company's properties by any private party (including but
not limited to the Company) or any governmental agency.
SECTION 2.28 DISCLOSURE. Neither this Agreement nor any Schedule or Exhibit
hereto, contains an untrue statement of a material fact or omits a material fact
necessary to make the statements contained herein or therein not misleading.
None of the statements, documents, certificates or other items prepared or
supplied by the Company with respect to the transactions contemplated hereby
contains an untrue statement of a material fact or omits a material fact
necessary to make the statements contained therein not misleading.
ARTICLE 3.
REPRESENTATION AND WARRANTIES OF THE INVESTORS
Each Investor represents and warrants to the Company as to such
Investor only, that:
(a) it is an "accredited investor" within the meaning of Rule 501
under the Securities Act, as indicated on the Investor Certification of such
Investor, annexed hereto as Schedule 3;
15
(b) it has sufficient knowledge and experience to evaluate the risks
and merits of its investment in the Company and it is able financially to bear
the risks thereof;
(c) it has had an opportunity to ask questions of and receive answers
from and to discuss the Company's business, management, and financial affairs
with the Company's management;
(d) the Preferred Stock and the Warrants are being acquired for its
own account for the purpose of investment and not with a view to or for sale in
connection with any distribution thereof;
(e) it was not offered nor made aware of the Company's interest in
issuing the Preferred Stock and the Warrants by any means of public
advertisement or solicitation;
(f) in connection with such Investor's purchase of the Preferred Stock
and the Warrants, it has been solely responsible for its own (i) due diligence
investigation of the Company and (ii) investment decision, and has not engaged
or relied upon any agent or "purchaser representative" to review or analyze the
Company's business and affairs or advise such Investor with respect to the
merits of the investment;
(g) it has full power and authority to execute, deliver, and perform
each of this Agreement, the Shareholders Agreement, the Warrant, and to purchase
the Preferred Stock and the Warrants; and, that each of this Agreement, the
Shareholders Agreement, and Warrant, will constitute the legal, valid, and
binding obligation of the Investor, enforceable against it in accordance with
their respective terms; and
(h) in the event that the Investor proposes to sell the Preferred
Stock or the Warrants pursuant to Rule 144A under the Securities Act, it will
(A) take reasonable steps to obtain the information required by such Rule to
establish a reasonable belief that the prospective purchaser is a "qualified
institutional buyer" as such term is defined in Rule 144A and (B) advise the
prospective purchaser that the Investor is relying on the exemption from the
registration provisions of the Securities Act available pursuant to Rule 144A.
ARTICLE 4.
CONDITIONS PRECEDENT TO THE PURCHASE OF THE
PREFERRED STOCK AND WARRANTS BY INVESTORS
In connection with the purchase of the Preferred Stock and Warrants at
the Closing, the Investors shall be entitled to receive the following
certificates, opinions, and documents or evidence reasonably satisfactory to
them as to the following, each of which requirements may be waived by the
Investors. The Company agrees to use its best efforts to cause each of such
requirements to be satisfied:
(a) The Investors shall have received from Xxxxxx & Xxxxxxx, counsel
for the Company and the Founders, an opinion dated the Closing Date, in form and
scope satisfactory to the Investors and its counsel, in substantially the form
attached hereto as Exhibit D.
16
(b) The representations and warranties contained in Article 2 shall be
true, complete and correct.
(c) The Company shall have performed and complied with all covenants
and agreements contained herein required to be performed or complied with by it
prior to or at the Closing Date.
(d) The Company shall have obtained any and all consents, permits and
waivers and made all filings necessary or appropriate for the consummation of
the transactions contemplated hereby.
(e) All corporate and other proceedings to be taken by the Company in
connection with the transactions contemplated hereby and all documents relating
to such transactions shall be satisfactory in form and substance to the
Investors and its counsel, and the Investors and its counsel shall have received
all such counterpart originals or certified or other copies of such documents as
they reasonably may request. The Company shall have delivered to the Investors a
certificate executed by the President and Treasurer of the Company certifying as
to the fulfillment of the conditions specified in subsections (b), (c), (d) and
(i) of this Article 4.
(f) The Investors and their counsel shall have received copies of the
following documents:
(i) (A) the Articles in the form of Exhibit D hereto, certified
or bearing evidence of filing by the Department of State of the State of
Florida, and (B) a certificate of said Department of State, dated as of a
recent date as to the due incorporation and good standing of the Company,
the payment of all franchise taxes by the Company and listing all documents
of the Company on file with said Department of State;
(ii) a certificate of the Secretary or an Assistant Secretary of
the Company dated the Closing Date and certifying: (A) that attached
thereto is a true and complete copy of the Bylaws of the Company as in
effect on the date of such certification; (B) that attached thereto is a
true and complete copy of all resolutions adopted by the Board of Directors
or the shareholders of the Company authorizing the execution, delivery, and
performance of this Agreement, the Shareholders Agreement, the
Indemnification Agreement, the Warrants, the issuance, sale, and delivery
of the Preferred Stock, and that all such resolutions are in full force and
effect and are all the resolutions adopted in connection with the foregoing
agreements and the transactions contemplated thereby; (C) that the Articles
have not been amended since the date of the last amendment referred to in
the certificate delivered pursuant to clause (i)(B) above; and (D) to the
incumbency and specimen signature of each officer of the Company executing
this Agreement, the Shareholders Agreement, the Indemnification Agreement,
the Warrants, the stock certificates representing the Preferred Stock, and
any certificate or instrument furnished pursuant hereto, and a
certification by another officer of the Company as to the incumbency and
signature of the officer signing the certificate referred to in this clause
(ii); and
(iii) such additional supporting documents and other information
with respect to the operations and affairs of the Company as the Investors
or its counsel reasonably may request.
17
(g) The Investors shall have received the Shareholders Agreement
executed and delivered by each of the Company, each Investor, the X. Xxxxxxxx,
the X. Xxxxxxxx, and the Cuccis.
(h) All shareholders of the Company having any preemptive, first
refusal, or other rights with respect to the issuance of the Preferred Stock or
the Warrants shall have irrevocably waived the same in writing and copies of
such waivers shall have been delivered to Investors's counsel.
ARTICLE 5.
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY
The obligation of the Company to issue and sell the Preferred Stock
and the Warrants to the Investors on the Closing Date is, at its option, subject
to the satisfaction, on or before the Closing Date, of the following conditions:
(a) All representations and warranties of the Investors contained in
Article 3 hereof shall be true and correct on the Closing Date with the same
effect as though such representations and warranties had been made on and as of
such date.
(b) All corporate and other proceedings to be taken by the Investors
in connection with the transactions contemplated hereby, and all documents
incidental thereto, shall be satisfactory in form and substance to the Company
and its counsel.
(c) The Investors shall have delivered to the Company the full
purchase price for the Preferred Stock and the Warrants to be purchased
hereunder.
(d) The Company shall have received the Shareholders Agreement
executed by each Investor.
ARTICLE 6.
COVENANTS OF THE COMPANY
The Company covenants and agrees with the Investors that, unless waived in
accordance with Section 8.9 hereof, so long as any of the Preferred Stock or the
Warrants are outstanding:
SECTION 6.1 FINANCIAL STATEMENTS, REPORTS, ETC. The Company shall furnish
to the Investors:
(a) within one hundred twenty (120) days after the end of each fiscal
year of the Company, an audited balance sheet of the Company, as of the end of
such fiscal year and the related statements of income, shareholders' equity, and
changes in cash flows for such fiscal year, prepared in accordance with
generally accepted accounting principles and certified by a firm of independent
public accountants of recognized national standing selected by the Board of
Directors of the Company;
18
(b) within forty-five (45) days after the end of each fiscal quarter
(other than the last quarter in each fiscal year) a balance sheet of the
Company, and the related statements of income, shareholders' equity, and changes
in cash flows, unaudited but prepared in accordance with generally accepted
accounting principles and certified by the Chief Financial Officer of the
Company, such balance sheet to be as of the end of such quarter and such
statements of income, shareholders' equity and changes in cash flows to be for
such quarter and for the period from the beginning of the fiscal year to the end
of such quarter, in each case with comparative statements for the prior fiscal
year (except for 1992, the Company shall not be required to provide comparative
statements), provided that the Company's obligations under this Section 6.1(b)
shall terminate upon the completion of a firm commitment underwritten public
offering of the Company's securities;
(c) within thirty (30) days after the end of each fiscal month, other
than the last month in each fiscal year and each fiscal quarter, a summary
balance sheet of the Company and a summary income statement of the Company,
unaudited, but prepared in accordance with generally accepted accounting
principles;
(d) at the time of delivery of each annual financial statement
pursuant to Section 6.1(a) hereof, a certificate executed by the Chief Financial
Officer of the Company stating that such officer has caused this Agreement, the
Articles, the Shareholders Agreement, and the Warrants to be reviewed and has no
knowledge of any default by the Company in the performance or observance of any
of the provisions of this Agreement, the Articles, the Shareholders Agreement,
or the Warrants, if such officer has such knowledge, specifying such default and
the nature thereof;
(e) at the time of delivery of each quarterly statement pursuant to
Section 6.1(b) hereof, a management narrative report explaining all significant
variances from forecasts and all significant current developments in staffing,
marketing, sales, and operations;
(f) not less than forty-five (45) days prior to the start of each
fiscal year, capital and operating expense budgets, cash flow projections and
income and loss projections for the Company in respect of such fiscal year, all
itemized in reasonable detail and prepared on a monthly basis and approved by a
majority of the Board of Directors and the Series A Directors (as hereinafter
defined), and, promptly after preparation, any revisions to any of the foregoing
approved by the Board of Directors;
(g) promptly following receipt by the Company, each audit response
letter, accountant's management letter and other written report submitted to the
Company by its independent public accountants in connection with an annual or
interim audit of the books of the Company or any of its subsidiaries;
(h) promptly after the commencement thereof, notice of all actions,
suits, claims, proceedings, investigations, and inquiries of the type described
in Section 2.5 hereof that could materially adversely affect the Company or any
of its subsidiaries;
(i) promptly upon sending, making available or filing the same, all
press releases, reports, and financial statements that the Company sends or
makes available to its shareholders or directors;
(j) within ten (10) business days following the receipt of a request
by the Investors or any subsequent holder of the Preferred Stock or the Warrants
advising the Company that the Investors or
19
such holder proposes to sell all or any part of such securities pursuant to Rule
144A or by a prospective purchaser of the Preferred Stock or the Warrants in a
sale proposed to be made pursuant to Rule 144A, (A) a brief statement of the
nature of the business of the Company and the products and services the Company
offers prepared as of a date within the preceding twelve (12) months, (B) the
Company's most recent (1) balance sheet which shall be as of a date within the
preceding sixteen (16) months, and (2) statements of profit and loss and
retained earnings which shall be as of a date within the twelve (12) months
preceding the date of such balance sheet, provided, however, that if such
balance sheet is not as of a date within the preceding six (6) months, the
balance sheet shall be accompanied by additional statements of profit and loss
and retained earnings for the period from the date of such balance sheet to a
date within the preceding six (6) months and (C) the Company's audited balance
sheet, statements of profit and loss and retained earnings for the two (2)
preceding fiscal years of the Company; and
(k) promptly, from time to time, such other information regarding the
business, prospects, financial condition, operations, property, or affairs of
the Company as the Investors reasonably may request.
SECTION 6.2 FINANCIAL COVENANTS AND RATIOS.
(a) The Company will not permit, at any time, its total shareholders'
equity (including common and preferred stock, capital surplus, additional
paid-in-capital and retained earnings, less the cost of capital stock of the
Company required for the Treasury and other capital accounts, if any) of the
Company at such date, determined in accordance with generally accepted
accounting principles consistently applied ("Total Equity"), to be less than
$1,000,000.
(b) The Company will not have any indebtedness due to any shareholder
except for up to $1,000,000 of indebtedness ("Shareholder Loans"), without the
approval of the Board of Directors and the Series A Director.
(c) The Company will not permit the ratio of (x) its indebtedness from
all sources (excluding indebtedness secured by real estate which is subject to a
binding, valid, and subsisting sale contract with an unaffiliated third party)
minus Shareholder Loans to (y) its Total Equity (excluding the effect, if any,
of the loans described in the previous parenthetical) plus Shareholder Loans to
exceed 2.5:1.0 as of the last day in any fiscal month.
(d) The Company will not acquire, purchase or lease pursuant to a
capitalized lease, fixed assets, equipment, or real estate (excluding building
lots for homes) having an aggregate purchase price of capitalized cost (in the
case of capitalized leases) in excess of $250,000 in any fiscal year provided
that the Company may exceed such amount, in each case with the approval of the
Board of Directors and the Series A Director.
(e) Any covenant violation in this Section 6.2 may be waived at the
discretion of the Series A Director.
SECTION 6.3 CORPORATE EXISTENCE. The Company shall maintain and cause any
Investment in which the Company owns a controlling interest to maintain their
respective separate corporate existences, rights, and franchises in full force
and effect.
20
SECTION 6.4 PROPERTIES, BUSINESS, INSURANCE. The Company shall maintain and
cause any subsidiary to maintain as to their respective properties and
businesses, with financially sound and reputable insurers, insurance against
such casualties and contingencies and of such types and in such amounts as is
customary for companies similarly situated which insurance shall be deemed by
the Company to be sufficient. The Company shall also maintain in effect "key
person" life insurance policies, payable to the Company, on the life of each of
Xxxxxx X. Xxxxxxx and Xxxxxx Xxxxx, Xx. (so long as he remains an employee of
the Company), in the amount of at least $1,000,000. The Company shall not cause
or permit any assignment or change in beneficiary and shall not borrow against
such policy. If requested by the Investors, the Company will add one designee of
the Investors as a notice party for such policy and shall request that the
issuer of such policy provide such designee with ten (10) days notice before
such policy is terminated (for failure to pay premiums or otherwise) or assigned
or before any change is made in the beneficiary thereof.
SECTION 6.5 INSPECTION, CONSULTATION, AND ADVICE. The Company shall permit
and cause any subsidiary to permit any of the Investors and such persons as the
Investors may designate, at the expense of the Company once per year, and if
more often than once per calendar year, with the additional visits at such
Investor's expense, to visit and inspect any of the properties of the Company
and any Investment, examine their books and take copies and extracts therefrom,
discuss the affairs, finances, and accounts of the Company with their officers,
employees, and public accountants and the Company hereby authorizes said
accountants to discuss with such Investors and such designees such affairs,
finances, and accounts), and consult with and advise the management of the
Company as to their affairs, finances, and accounts, all at reasonable times and
upon reasonable notice.
SECTION 6.6 RESTRICTIVE AGREEMENTS PROHIBITED. The Company shall not become
a party to any agreement which by its terms restricts the Company's performance
of this Agreement, the Articles, the Shareholders Agreement, the Indemnification
Agreement, or the Warrants.
SECTION 6.7 TRANSACTIONS WITH AFFILIATES. Except for (a) transactions
contemplated by this Agreement, (b) transactions with the affiliated entities
listed in Section 6.7 of the Disclosure Schedule, provided that the terms of
such transactions are no less favorable to the Company than the terms available
from third parties on an arm's length basis from non-affiliated third parties,
(c) loans by shareholders up to $1,000,000 outstanding at any time, provided
that the security for such loans is limited to the real estate on which the
specific construction activities financed are located and provided further that
the interest rate and terms are no less favorable than the rate and terms
available on an arm's length basis from unaffiliated third parties, or (d) as
otherwise approved by the Board of Directors, the Company shall not enter into
any transaction with any director, officer, employee, or holder or more than 5%
of the outstanding capital stock of any class or series of capital stock of the
Company, member of the family of any such person, or any corporation,
partnership, trust, or other entity in which any such person, or member of the
family of any such person, is a director, officer, trustee, partner, or holder
of more than 5% of the outstanding capital stock thereof, except for
transactions on customary terms related to such person's employment. All
transactions with affiliates shall be reported on a quarterly basis in the
financial reports required by Section 6.1(b) hereof, including, with respect to
each transaction, the affiliate involved, the amount paid to the affiliate in
such quarter, and amounts remaining to be paid to the affiliate by the Comany.
SECTION 6.8 EXPENSES OF DIRECTORS. The Company shall promptly reimburse in
full, each director of the Company who is designated as a nominee for the Board
of Directors pursuant to the rights of the Investors under the Shareholders
Agreement or pursuant to the Articles (the "Series A Directors"), for all of his
21
or her reasonable out-of-pocket expenses incurred in attending each meeting of
the Board of Directors of the Company or any committee thereof. In addition, the
Company shall pay directors fees to each Series A Director in an amount of
$12,000 per annum, in equal quarterly installments commencing June 1993, and
continuing quarterly thereafter until holders of Preferred Stock and Warrant
Shares no longer have the right to designate Series A Directors.
SECTION 6.9 USE OF PROCEEDS. The Company shall use the proceeds from the
sale of the Preferred Stock and the Warrants for repayment of indebtedness not
to exceed $400,000, working capital requirements, and for general corporate
purposes.
SECTION 6.10 BOARD OF DIRECTORS MEETINGS. The Company shall use its best
efforts to ensure that meetings of the Board of Directors of the Company are
held at least four (4) times each year and at least once each quarter.
SECTION 6.11 COMPENSATION. Without the written consent of the Series A
Directors, the Company shall not pay to its management compensation in excess of
that shown on the pro formas previously delivered to the Investors.
SECTION 6.12 BYLAWS. The Company shall at all times cause its Bylaws to
provide that, (a) unless otherwise required by the laws of the State of Florida,
(i) any two (2) directors and (ii) any holder or holders of at least 66% of the
outstanding shares of Common Stock or 25% of the outstanding Preferred Stock,
shall have the right to call a meeting of the Board of Directors or shareholders
and (b) the number of directors fixed in accordance therewith shall in no event
conflict with any of the terms or provisions of the Articles. The Company shall
at all times maintain provisions in its Bylaws or Articles indemnifying all
directors against liability to the maximum extent permitted under the laws of
the State of Florida.
SECTION 6.13 MAINTENANCE OF OWNERSHIP OF INVESTMENTS. The Company shall not
sell or otherwise transfer any shares of capital stock of any Investment, except
to the Company or another Investment, or permit any Investment in which the
Company owns a controlling interest, to issue, sell or otherwise transfer any
shares of its capital stock or the capital stock of any Investment except to the
Company or another Investment.
SECTION 6.14 DISTRIBUTIONS BY INVESTMENTS. The Company shall not permit any
Investment in which the Company owns a controlling interest to purchase or set
aside any sums for the purchase of, or pay any dividend, or make any
distribution on, any shares of its stock, except for dividends or other
distributions payable to the Company or another Investment in which the Company
owns a controlling interest.
SECTION 6.15 COMPLIANCE WITH LAWS. The Company shall comply with all
applicable laws, rules, regulations, and orders, noncompliance with which could
materially adversely affect its business or condition, financial or otherwise.
SECTION 6.16 KEEPING OF RECORDS AND BOOKS OF ACCOUNT. The Company shall
keep adequate records and books of account, in which complete entries will be
made in accordance with generally accepted accounting principles, consistently
applied, reflecting all financial transactions of the Company and in which, for
each fiscal year, all proper reserves for depreciation, depletion, obsolescence,
amortization, taxes, bad debts, and other purposes in connection with its
business shall be made.
22
SECTION 6.17 EMPLOYEE STOCK PLANS. As long as the Investors shall continue
to own any of the Preferred Stock, Warrants, or Warrant Shares, the Company
shall sell shares of or grant options to purchase shares of its capital stock to
Employees, officers, and directors of and consultants to the Company only
pursuant to stock option plans or stock purchase plans which have been adopted
and approved by the Company's Board of Directors and only so long as the Company
has an option to repurchase such shares upon the termination of employment with
the Company of such Employees, officers, directors, and consultants, and the
total number of shares of Common Stock as to which the Company may make such
sales or grant such options shall not exceed 10,000 shares, such number subject
to equitable adjustment for reorganizations, stock splits, stock dividends, and
like events (including shares issued or sold pursuant to (i) any such stock
option plan even though the shares were acquired upon the exercise of stock
options which were granted prior to the date hereof, and (ii) any such stock
purchase plans even though the shares acquired thereunder were purchased prior
to the date hereof). Under no circumstances shall the total number of shares of
the Company's Common Stock issued under any such stock purchase plan, plus any
shares issued or subject to issuance under any such stock option plan, exceed
10,000 shares (such number subject to equitable adjustment for reorganizations,
stock splits, stock dividends, and like events) at any time.
SECTION 6.18 FEES AND EXPENSES OF INVESTORS' COUNSEL. The Company shall pay
the fees not to exceed $30,000, and expenses of Powell, Goldstein, Xxxxxx &
Xxxxxx, Investors' counsel at the closing of the purchase and sale of the
Preferred Stock and Warrants.
SECTION 6.19 INDEMNIFICATION AGREEMENT. The Company will execute and
deliver to each Director an Indemnification Agreement in substantially the form
of Exhibit E hereto and will not take any action to terminate, rescind, or
reduce the scope of the indemnification provided thereby.
SECTION 6.20 UNITED STATES REAL PROPERTY HOLDING CORPORATION. If at any
time in the future the Company shall become a "United States Real Property
Holding Corporation" (as that term is defined in Section 1.897-2(b) of the
Regulations promulgated by the Internal Revenue Service) the Company shall, as
promptly as practicable, notify each foreign investor. Within thirty (30) days
after receipt of a request from a foreign investor, the Company shall prepare
and deliver to such foreign investor the statement required under Regulation
Section 1.897-2(h)(1)(IV) and subject to the succeeding sentence either or both
of the following documents: (i) an affidavit in conformance with the
requirements of Internal Revenue Code ("IRC") Section 1445(b)(3) or (ii) a
notarized statement, executed by an officer having actual knowledge of the
facts, that the shares of Company stock held by such foreign investor are of a
class that is regularly traded on an established securities market, within the
meaning of IRC Section 1445(b)(6). If the Company is unable to provide either of
the documents described in (i) or (ii) above, if requested, it shall promptly
notify such foreign investor in writing of the reasons for such inability.
Finally, upon the request of a foreign investor and without regard to whether
either document described in (i) or (ii) above has been requested, the Company
shall reasonably cooperate with the efforts of such foreign investor to obtain a
"qualifying statement," within the meaning of IRC Section 1445(b)(4) or such
other documents as would excuse a transferee of a foreign investor's interest
from withholding of income tax imposed pursuant to IRC Section 897(a).
23
ARTICLE 7.
SPECIAL REDEMPTION RIGHT
The Company, and with the unanimous written consent of the Board of
Directors, the Founders, or any of them, at any time prior to November 30, 1995
(the "Expiration Date"), shall have the right to redeem Warrants exercisable for
75,000 Warrant Shares, or if Warrants have been exercised such that the then
outstanding Warrants are exercisable for less than 75,000 shares, then the right
to redeem shall encompass (i) the then outstanding Warrants plus (ii) a number
of issued and outstanding Warrant Shares which, when added to the number of
Warrant Shares issuable upon exercise of the then outstanding Warrants, equals
75,000 (such number of Warrants or Warrants and Warrant Shares, as the case may
be, are hereinafter the "Redeemable Warrants and Shares") and 5,455 shares of
Preferred Stock, upon the following terms and conditions (the "Special
Redemption Right"):
(a) If the Company, or, if applicable, the Founders, determine that it
or they desire to exercise the Special Redemption Right, the Company or the
Founders shall deliver a written notice (the "Special Redemption Notice") to
each Investor which specifies (i) that 75,000 Redeemable Warrants and Shares and
5,455 shares of Preferred Stock are to be redeemed by the Company or the
Founders, whichever the case may be, (ii) the number of Redeemable Warrants and
Shares and shares of Preferred Stock to be redeemed from each Investor (as
determined in accordance with subsection (b) hereof), and (iii) the time, date,
and place of the closing of the redemption which shall be a date at least 30
days after the date the Special Redemption Notice is delivered to the Investors,
but in no event after the Expiration Date.
(b) The Special Redemption Notice shall constitute an irrevocable call
option in favor of the Company or the Founders, which ever is applicable, to
purchase from each Investor a number of (i) Redeemable Warrants and Shares equal
to the product of (A) 75,000 multiplied by (B) a fraction, the numerator of
which is the number of Redeemable Warrants and Shares owned of record by such
Investor, and the denominator of which is the total number of then outstanding
Warrant Shares plus the total number of Warrant Shares issuable upon exercise of
all then outstanding Warrants, and (ii) shares of Preferred Stock equal to the
product of (A) 5,455 multiplied by (B) a fraction, the numerator of which is the
number of shares Preferred Stock owned of record by such Investor on the date of
the Special Redemption Notice, and the denominator of which is the total number
of shares of Preferred Stock outstanding on the date of the Special Redemption
Notice (including any Preferred Stock issued as a Preferred Dividend-in-Kind, as
set forth in the Articles).
(c) The purchase price to be paid to each Investor at the closing of
the redemption described in the Special Redemption Notice shall be equal to the
product of the number of Shares of Preferred Stock to be redeemed from such
Investor multiplied by $100 plus an amount which, when added to the Preferred
Dividends (as defined in the Articles) actually paid on the shares of Preferred
Stock being redeemed, would yield to such Investor an annual internal rate of
return of 25%, computed from the date hereof through the date of the closing of
the redemption described in the Special Redemption Notice. For purposes of the
redemption, shares of Preferred Stock shall be redeemed on a first issued, first
redeemed basis, and Warrants shall be redeemed prior to the redemption of
Warrant Shares.
(d) The closing of the purchase of redemption described in the Special
Redemption Notice shall be held at the principal office of the Company in Coral
Springs, Florida on a date at least 30 days
24
after the date the Special Redemption Notice is delivered to the Investors, but
in no event after the Expiration Date. At the closing, the Investors shall
deliver certificates evidencing the Warrants and the Preferred Stock being
redeemed, duly endorsed or accompanied by duly executed stock powers, free and
clear of all liens, claims, charges, or encumbrances, against payment for the
Redeemable Warrants and Shares and the shares of Preferred Stock being redeemed.
At the closing, the Company will, if necessary re-issue certificates evidencing
the balance of the Warrant Shares and shares of Preferred Stock held by such
Investor after the redemption. No Investor shall be obligated to tender the
Redeemable Warrants and Shares and shares of Preferred Stock at the closing of
the redemption described in the Special Redemption Notice, unless the Company
redeems the number of Redeemable Warrants and Shares and shares of Preferred
Stock from each Investor as specified in the Special Redemption Notice or any
amendment thereof which is satisfactory to all Investors.
ARTICLE 8.
MISCELLANEOUS
SECTION 8.1 EXPENSES. Except as provided in Section 6.17 hereof, the
Company shall pay at Closing, all expenses incurred by it and by the Investors
in connection with the negotiation, documentation, and consummation of the
transactions contemplated hereby, whether or not such transactions shall be
consummated.
SECTION 8.2 SURVIVAL OF AGREEMENTS. All covenants, agreements,
representations, and warranties made herein or in the Shareholders Agreement and
the Warrants, or any certificate or instrument delivered to the Investors
pursuant to or in connection with this Agreement, the Shareholders Agreement and
the Warrants shall survive the execution and delivery of this Agreement, the
Shareholders Agreement and the Warrants, and the closing of the transactions
contemplated hereby and thereby, and all statements contained in any certificate
or other instrument delivered by the Company or the Founders hereunder or
thereunder or in connection herewith or therewith shall be deemed to constitute
representations and warranties made by the Company or the Founders,
respectively. All covenants, agreements, representations, and warranties made
herein or in the Shareholders Agreement and the Warrants, or any certificate or
instrument delivered to the Company and the Founders pursuant to or in
connection with this Agreement, the Shareholders Agreement and the Warrants
shall survive the execution and delivery of this Agreement, the Shareholders
Agreement and the Warrants, and the closing of the transactions contemplated
hereby and thereby, and all statements contained in any certificate or other
instrument delivered by the Investors hereunder or thereunder or in connection
herewith or therewith shall be deemed to constitute representations and
warranties made by the Investors.
SECTION 8.3 SURVIVAL OF AGREEMENTS. All covenants, agreements,
representations, and warranties made herein or in the Shareholders Agreement and
the Warrants, or any certificate or instrument delivered to the Company or the
Founders pursuant to or in connection with this Agreement, the Shareholders
Agreement and the Warrants shall survive the execution and delivery of this
Agreement, the Shareholders Agreement and the Warrants, and the closing of the
transactions contemplated hereby and thereby, and all statements contained in
any certificate or other instrument delivered by the Investors hereunder or
thereunder or in connection herewith or therewith shall be deemed to constitute
representations and warranties made by the Investors.
25
SECTION 8.4 BROKERAGE. Except for an advisory fee payable by the Company to
Xxxxxxxxx & Company in the amount of $50,000, each party hereto will indemnify
and hold harmless the others against and in respect of any claim for brokerage
or other commissions relative to this Agreement or to the transactions
contemplated hereby, based in any way on agreements, arrangements or
understandings made or claimed to have been made by such party with any third
party.
SECTION 8.5 PARTIES IN INTEREST. All representations, covenants, and
agreements contained in this Agreement by or on behalf of any of the parties
hereto shall bind and inure to the benefit of the respective successors and
assigns of the parties hereto whether so expressed or not. Without limiting the
generality of the foregoing, all representations, covenants, and agreements
benefiting the Investors shall inure to the benefit of any and all subsequent
holders from time to time of the Preferred Stock or the Warrants.
Notwithstanding the foregoing, the right to purchase the Preferred Stock and the
Warrants hereunder pursuant to Section 1.1 may not be sold, transferred, or
otherwise assigned except to an affiliate of the Investors, a successor to
substantially all the business and assets of the Investors.
SECTION 8.6 NOTICES. All notices, requests, consents, and other
communications required or permitted hereunder shall be in writing and shall be
effective when delivered in person or by a courier service, postage prepaid,
addressed as follows:
(a) if to the Company:
Transeastern Properties of South Florida, Inc.
0000 Xxxxx Xxxx
Xxxxx 000
Xxxxx Xxxxxxx, XX 00000
Attention: President
with a copy (which shall not constitute notice) to:
Xxxxxx & Xxxxxxx
000 Xxxxxxxxx Xxxxxxx Xxxxx Xxxxxxxxx
Xxxxx 000
Xxxx Xxxxx, XX 00000
Attention: Xxxx Xxxxxx, Esq.
(b) if to the Investors: At the address of
such Investor on Schedule 1 hereto
with a copy (which shall not constitute notice) to:
Powell, Goldstein, Xxxxxx & Xxxxxx
000 Xxxxxxxxx Xxxxxx, X.X.
00xx Xxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx XX, Esq.
Facsimile Number (000) 000-0000;
26
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the others.
SECTION 8.7 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida, irrespective of
the choice of law provisions thereof.
SECTION 8.8 ENTIRE AGREEMENT. This Agreement, including the Schedules and
Exhibits hereto, and the other documents delivered pursuant hereto constitute
the full and entire agreement of the parties with respect to the subject matter
hereof and thereof. All Schedules and Exhibits hereto are hereby incorporated
herein by reference.
SECTION 8.9 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
SECTION 8.10 AMENDMENTS. This Agreement may not be amended or modified, and
no provisions hereof may be waived, without the written consent of the Company
and the holders of at least two-thirds of the outstanding shares of Preferred
Stock and Warrant Shares.
SECTION 8.11 SEVERABILITY. If any provision of this Agreement shall be
declared void or unenforceable by any judicial or administrative authority to
the extent possible, it shall be modified in such manner as to be valid, legal,
and enforceable but so as to most nearly retain the intent of the parties and,
if such modification is not possible, such provision shall be severed from this
Agreement, and in either case, the validity and enforceability of any other
provision and of the entire Agreement shall not be affected thereby.
SECTION 8.12 TITLES AND SUBTITLES. The title and subtitles used in this
Agreement are for convenience only and are not to be considered in construing or
interpreting any term or provision of this Agreement.
SECTION 8.13 CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
(a) "affiliate" shall mean, with respect to any person, any person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such other person.
(b) "person" shall mean an individual, corporation, trust,
partnership, joint venture, limited liability company, unincorporated
organization, government agency, or any agency or political subdivision thereof,
or other entity.
27
IN WITNESS WHEREOF, the Company and the Investors have executed this
Agreement as of the day and year first above written.
TRANSEASTERN PROPERTIES OF SOUTH
FLORIDA, INC.
[Corporate Seal] By:
Attest: Title:
Secretary
INVESTORS:
MEZZONEN, S.A.
By: Xxxxxxx Xxxxx, Chief Financial Officer
THE HANDLER FAMILY TRUST DTD 9/12/91
By: Xxxxxxx Xxxxxxx, Trustee
XXXXXXXXXXX XXXXXX
XXXXXX XXXXXXXXX
XXXXX X. XXXXXX
XXXXX X. XXXXXX
By:
Xxxxxxx Xxxxxxx, Attorney-in-fact
under POA dated June 1, 1993
[SIGNATURES CONTINUED ON NEXT PAGE]
28
FOUNDERS
Xxxxxx X. Xxxxxxx
Xxxxx Xxxxxxx
Xxxxxx X. Xxxxxxx
Xxxxx Xxxxxxx
Xxxxxx Xxxxx, Xx.
Xxxxx Xxxxx
29
SCHEDULE 1
TO
SERIES A REDEEMABLE PREFERRED STOCK
AND
WARRANT PURCHASE AGREEMENT
Preferred Warrant Aggregate
Shares Shares Purchase
Investor Name and Address Purchased Purchased Price
------------------------- --------- --------- -----
Mezzonen, S.A.* ....................... 18,250 250,938 $ 1,825,250.94
Savin Xxxxxxx Investment Corp.
0000 Xxxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxxx Xxxxx, XX 00000
Attention: Xxxxxxx Xxxxx,
Chief Investment Advisor
Xxxxxxxxxxx Xxxxxx .................... 350 4,812 $ 35,004.81
Xxxxxxxxx & Company, Inc.
00000 Xxxxx Xxxxxx Xxxxxxxxx
00xx Xxxxx
Xxx Xxxxxxx, XX 00000
Xxxxxx Xxxxxxxxx ...................... 100 1,375 $ 10,001.38
Xxxxxxxxx & Company, Inc.
00000 Xxxxx Xxxxxx Xxxxxxxxx
00xx Xxxxx
Xxx Xxxxxxx, XX 00000
Xxxxx X. Xxxxxx ....................... 200 2,750 $ 20,002.75
Xxxxxxxxx & Company, Inc.
00000 Xxxxx Xxxxxx Xxxxxxxxx
00xx Xxxxx
Xxx Xxxxxxx, XX 00000
Xxxxx X. Xxxxxx ....................... 100 1,375 $ 10,001.38
Xxxxxxxxx & Company, Inc.
00000 Xxxxx Xxxxxx Xxxxxxxxx
00xx Xxxxx
Xxx Xxxxxxx, XX 00000
The Handler Family Trust DTD 9/12/91 .. 1,000 13,750 $ 100,013.75
Xxxxxxxxx & Company, Inc.
00000 Xxxxx Xxxxxx Xxxxxxxxx
00xx Xxxxx
Xxx Xxxxxxx, XX 00000
20,000 275,000 $ 2,000,275.01
* Nominee to register shares for Mezzonen is: Banque Scandinave A. Luxembourg
SCHEDULE 2
TO
SERIES A REDEEMABLE PREFERRED STOCK
AND
WARRANT PURCHASE AGREEMENT
DISCLOSURE SCHEDULE
SCHEDULE 2
Section 2.1 Organization, Qualifications and Corporate Power
(a) The Company owns the following interests in the following entities:
(b) 100 % of Transeastern Finance, Inc. which owns 5.0% of Builder's
Finance, Inc.
Section 2.4 Authorized Capital Stock
As of June 1, 1993, the Company had authorized and outstanding 725,001
shares of common stock, which shares were owned by the following persons:
Xxxxxx X. Xxxxxxx and Xxxxx Xxxxxxx, his wife 241,667 shares
Xxxxxx X. Xxxxxxx and Xxxxx Xxxxxxx, his wife 241,667 shares
Xxxxxx Xxxxx, Xx. and Xxxxx Xxxxx, his wife 241,667 shares
As of June 1, 1993, the Board of Directors of the Company voted to enter
into an arrangement with Xxxxxxx Xxxxxxxx ("Xxxxxxxx"), whereby the Company
would grant to Xxxxxxxx warrants for the purchase of 25,000 shares of the common
stock of the Company in exchange for the performance of certain advertising and
marketing services on behalf of the Company. Such warrants are to be issued no
later than July 15, 1993. The Board of Directors also voted to enter into a
separate arrangement with Xxxxxxxx whereby Xxxxxxxx would be entitled to receive
additional warrants for common stock of the Company for the performance of
future advertising and marketing services for the Company, as may hereafter be
approved by the Board of Directors, and for such other services as Xxxxxxxx may
perform for the Company as may hereafter be approved by the Board of Directors,
to a maximum of 2.5% of the authorized shares of the Company.
Section 2.7 Title to Properties
(a) Attached to this Schedule as Exhibit "2.7(a)" is a listing of the
individual building lots owned by the Company. The Company has
provided counsel to the Investors with copies of all title insurance
policies in favor of the Company with respect to such properties,
together with copies of all mortgages encumbering such properties.
The Company is in the process of planning and/or constructing single
family residences on the majority of such lots under contracts with
purchasers. The lots marked with asterisks are properties on which
the Company has constructed houses for which no sales contracts have
yet been executed ("spec" houses). The lots marked with double
asterisks represent model homes. In addition to the building lots
listed on Exhibit 2.7(a), the Company also owns a parcel of property
which is described as the last parcel of property on Exhibit 2.7(a)
and is referred to as the "Xxxxxx City Property". The Xxxxxx City
Property consists of 36 contiguous lots located in Xxxxxx City,
Florida, comprised of two phases. The first phase of the Xxxxxx City
Property consists of 26 lots and was purchased in April, 1993 for a
purchase price of $750,000. The second phase of the Xxxxxx City
consists of 10 lots and will be purchased for $230,000 and will be
acquired in June, 1993. The Company intends to build homes on all
such lots for sale to individual purchasers under pre-executed
contracts for sale under a program for marketing and advertising for
the entire community.
(b) The Xxxxxx City Property is scheduled to receive final approval of
its plat from Broward County within the next 20 days. A sales
program at the Xxxxxx City Property has already begun, which has
produced contracts for the sale of 10 homes.
(c) Certificates of occupancy have not been obtained for uncompleted
houses in the process of construction on any of the lots.
(d) Certain personal property used by the Company is leased. Copies of
such leases have been provided to Investor's counsel, and are listed
below:
Lease dated July 26, 1990 with Xxxxxx X'Xxxxx Motors for 1990
Mercedes used by Xxxxxx Xxxxxxx Lease with Xxx Xxxxxxxx Chevrolet
for 1993 Chevrolet used by Xxxxxx Xxxxx
Additionally, the Company owns a 1993 Ford Pick-Up Truck which is
financed with Xxxxxxx Bank. The Company is also a party to two
leases with Builder's Design & Leasing Incorporated, whereby the
Company leases certain furniture for use in its office and models.
Section 2.8 Leasehold Interests
The Company has provided the Investor's counsel copies of all leases of
real property to which the Company is a party, as listed in Section 2.11(j)
below.
Section 2.9 Insurance
The Company has provided Investors' counsel with copies of all insurance
policies now held by the Company, as described in Section 2.11(q) below.
Although the Company has received no formal notice from its insurance carriers,
it is anticipated that the cost of the Company's builder's risk insurance will
increase later this year due to an industry-wide increase in South Florida due
to the claims arising from Hurricane Xxxxxx from August, 1992.
Section 2.10 Taxes
In 1992, the Company achieved approximately $400,000 in taxable income
which was not distributed to shareholders. Because the Company had previously
elected treatment as a Sub-Chapter "S" corporation, this income was taxable to
the shareholders, despite the fact that such income had not been distributed to
them. In 1993, the Company has made distributions to Xxxxxx Xxxxxxx, Xxxxxx
Xxxxxxx and Xxxxxx Xxxxx in the approximate amount of $120,000 to enable them to
pay such taxes.
Section 2.11 Other Agreements
(a) The Company is a party to an Exclusive Right of Sale Agreement with
Coral Ridge Properties and an Application and Agreement to become an
Arvida (Weston) Approved Builder. These agreements restrict the
Company in the marketing of homes within such communities. These are
standard agreements
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which all builders in these communities are required to execute,
which provide CRP and Arvida with the right to act as the exclusive
sales agents for homes sold in their respective communities. These
type of arrangements are believed to enhance the marketing of homes
in these communities. The Company has provided the Investors'
counsel with copies of these Agreements.
(b) The Company provides bonus, hospitalization, insurance and certain
other benefits to its employees and officers as described in Section
2.20 below.
(c) Copies of all promissory notes and mortgages or other security
documents securing the payment thereof have been provided to the
Investors' counsel, and are listed on Exhibit "2.11(g)" attached
hereto.
The Company is responsible for the payment of the sums due to the
FDIC in connection with a $255,018.00 loan which was made by First
Commercial Bank of Florida to Xxxxxx Xxxxxxx and Xxxxxx Xxxxx,
individually, at a time when the Company was unable to obtain
sufficient financing in its own name. This loan was made to Xxxxxxx
and Xxxxx individually, who thereupon loaned the money to the
Company for general corporate purposes. First Commercial Bank was
taken over by the FDIC in December, 1990. Following such failure and
takeover, the FDIC refused to renew the line of credit in accordance
with established practice, and commenced such litigation. Agreement
has been reached with the FDIC regarding the resolution of
litigation between the FDIC and Xxxxxxx and Xxxxx regarding such
loan. Pursuant to such agreement, the FDIC will receive $5,000.00
principal payment per month, together with accrued interest at the
Wall Street Journal Prime Rate plus 1.0% on the unpaid principal
balance of such loan. The unpaid principal balance as of the date
hereof is approximately $180,000.00. We are awaiting receipt of the
executed settlement documents in connection with this matter. As the
loan was incurred for the corporate purposes of the Company, the
Company has agreed with Xxxxxxx and Xxxxx to make the payments to
the FDIC as aforesaid. Such agreement between the Company and
Xxxxxxx and Xxxxx has not been reduced to writing.
(d) The Company has provided Investors' counsel with copies of all
leases of real property to which the Company is a party. These
leases are listed as follows:
Lease for office space located at 0000 Xxxxx Xxxx, Xxxxx 000, Xxxxx
Xxxxxxx, Xxxxxxx, attached.
Lease Agreement between the Company, Lessor, and Xxxx Xxx Xxxxxxxx,
Lessee, for property located at 00000 X.X. 00xx Xxxxx, Xxxxx
Xxxxxxx, XX 00000, attached.
Lease Agreement between the Company, Lessor, and Xxxxxx and Xxxxxxxx
Xxxxxx, Lessee, for property located at 0000 Xxxxxxxxxxxx Xxx, Xxxxx
Xxxxxxx, Xxxxxxx 00000.
Lease Agreement between the Company, Lessor, and Coral Ridge Realty,
Inc., Lessee, for property described as Xxx 00, Xxxxx "X",
Xxxxxxxxxx, according to the Plat thereof, as recorded in Plat Book
146, at Page 39, of the Public Record of Broward County, Florida,
together with all appurtenances.
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(e) None other than the Stockholders Agreement to which the Investors
will become a party.
(f) As of the date hereof, the Company is the beneficiary under various
policies of insurance (other than title insurance), as set forth on
Exhibit "2.11(q)" attached hereto. Copies of all such policies have
been provided to counsel for the Investors.
(g) The Company is a party to a written agreement with Xxxx Xxxxx, Inc.,
which is the construction contractor performing certain earth moving
and site preparation work at various of the Company's projects. A
copy of this Agreement is being provided to the Investors' counsel.
Section 2.12 Patents, Trademarks, Etc.
The name "Transeastern" is also used by two other corporations in which
certain of the Founders hold an interest, such corporations being Transeastern
Construction, Inc. and Transeastern-Everglades Properties, Inc. Transeastern
Construction is engaged in the re-modeling and commercial construction business.
Transeastern Everglades is engaged in the development of a warehouse facility at
Port Everglades in Fort Lauderdale, Florida.
Section 2.14 Assumption, Guaranties, Etc. of Indebtedness of Other Persons
Other than the arrangement described in Section 2.11(h) above, the
Company has not guaranteed the indebtedness of any other person or entity, other
than guaranties associated with the endorsement of negotiable instruments given
to the Company as payment for the sale of property by the Company.
Section 2.17 Financial Statements
Financial Statements prepared by Peat Marwick & Xxxxxxxx have previously
been provided to counsel to the Investors.
Section 2.19 Absence of Changes
(a) The acquisition of the Xxxxxx City Property is a departure from the
historic business of the Company, in that such property represents
the first time that the Company has acquired a large block of
contiguous lots for development and sale as a distinct community.
Section 2.20 Employee Benefit Plans
The Company provides group hospitalization coverage for five of its
employees. The limits of such coverage are $2,000,000 per covered person. The
Company pays 100% of the cost of such coverage for Xxxxxx X. Xxxxxxx, Xxxxxx X.
Xxxxxxx and Xxxxxx Xxxxx, Xx. and their families. The Company pays 75% of the
cost of such coverage for Xxxx XxXxxxx and Xxx
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Xxxxxxxx, and 25% of the cost of their families, with 75% to be paid by the
employee. Such coverage is provided by Xxxx Xxxxx Insurance Company.
The Company provides one week paid vacation to employees. There is no
limit on the amount of vacation which officers are entitled to take.
The company provides life insurance coverage on the lives of Xxxxxx X.
Xxxxxxx, Xxxxxx X. Xxxxxxx and Xxxxxx Xxxxx at no cost to such officers. The
beneficiaries of such policies are the Company and the respective officers'
wives.
The Company has no severance policy.
Section 2.21 Disclosure
A true and correct copy of (i) the Articles of Incorporation of the
Company, and all amendments thereto certified by the appropriate state official;
and (ii) the By-laws of the Company and all amendments thereto, have previously
made available to counsel for the Investors.
(a) Minute books of the Company have been made available to counsel for
the Investors prior to the date hereof.
Section 2.23 Transactions with Affiliates
Xxxxxx Xxxxxxx, the brother of Xxxxxx and Xxxxxx Xxxxxxx, has
previously made certain loans to the Company individually and through a
corporation which he owns named B & E Management. As of the date hereof, the
outstanding principal balance due under such loans is $250,000. Such loans are
payable upon the sale of the parcels of real property which serve as collateral
for such loan. Copies of the promissory notes and other loan documents
evidencing this arrangement have been provided to Investors' counsel.
Additionally, from time to time, the Company enters into transactions with
Transeastern Construction, Inc., a corporation whose shares are owned by Art
Xxxxxxx, Xxxxxx Xxxxxxx and Xxxxxx Xxxxx, whereby Transeastern Construction
performs certain construction services for the Company.
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SCHEDULE 6
Section 6.7 Transactions With Affiliates
It is presently anticipated that the Company will do business from time
to time with several entities owned in whole or in part by the Founders. These
entities include:
Xxxxx Road Electric - Electrical Sub-Contractor
Transeastern Painting - Painting Sub-Contractor
Xxxxx Road Title - Title Insurance Company
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SCHEDULE 3
TO
SERIES A REDEEMABLE PREFERRED STOCK
AND
WARRANT PURCHASE AGREEMENT
ACCREDITED INVESTOR CERTIFICATES
EXHIBIT A
TO
SERIES A REDEEMABLE PREFERRED STOCK
AND
WARRANT PURCHASE AGREEMENT
FORM OF WARRANT
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THIS WARRANT HAS BEEN, AND THE WARRANT SHARES ISSUABLE UPON EXERCISE HEREOF WILL
BE, ISSUED AND SOLD IN RELIANCE UPON EXEMPTIONS FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT") AND OF THE FLORIDA INVESTOR
PROTECTION ACT (THE "FLORIDA ACT"). SUCH SECURITIES MAY NOT BE OFFERED FOR SALE,
SOLD, OR TRANSFERRED OTHER THAN (I) PURSUANT TO AN EFFECTIVE REGISTRATION OR AN
EXEMPTION THEREFROM UNDER THE 1933 ACT AND THE FLORIDA ACT, AND (II) UPON
RECEIPT BY THE ISSUER OF EVIDENCE SATISFACTORY TO IT OF COMPLIANCE WITH THE 1933
ACT, THE FLORIDA ACT, AND THE APPLICABLE SECURITIES LAWS OF ANY OTHER
JURISDICTION. THE ISSUER SHALL BE ENTITLED TO REQUIRE AN OPINION OF COUNSEL
SATISFACTORY TO IT WITH RESPECT TO COMPLIANCE WITH THE ABOVE LAWS.
TRANSEASTERN PROPERTIES OF SOUTH FLORIDA, INC.
Original Issue Date: June 2, 1993 Warrant No. 93-____
WARRANT TO PURCHASE COMMON STOCK
THIS CERTIFIES THAT IN CONNECTION WITH, and as an inducement to
____________________ (the "Holder"), to consummate the transactions contemplated
by that certain Series A Redeemable Preferred Stock and Warrant Purchase
Agreement, dated June 2, 1993 among Holder, TRANSEASTERN PROPERTIES OF SOUTH
FLORIDA, INC., a Florida corporation (the "Corporation"), and certain other
parties identified therein (the "Purchase Agreement"), Holder is entitled to
purchase, on the terms and conditions hereinafter set forth, ________ shares of
the Common Stock, $.01 par value, of the Corporation (the "Common Stock"), at a
price $.01 per share (the "Exercise Price"), such number of shares and such
Exercise Price being subject to adjustment upon the occurrence of the
contingencies set forth in this Warrant. Each share of Common Stock as to which
this Warrant is exercisable is a "Warrant Share" and all such shares are
collectively the "Warrant Shares").
SECTION 1. REGISTRATION OF WARRANT. This Warrant is one of a series of
Warrants (collectively, the "Transaction Warrants") issued in connection with
the transaction contemplated by the Purchase Agreement. Each Transaction Warrant
contains identical terms except for the number of Warrant Shares and the
distinctive Warrant number. The Corporation shall register this Warrant, upon
records to be maintained by the Corporation for that purpose, in the name of the
record Holder of this Warrant from time to time. The Corporation shall deem and
treat the registered Holder of this Warrant as the absolute owner hereof for the
purpose of any exercise or any distribution to the Holder hereof, and for all
other purposes, and the Corporation shall not be affected by any notice to the
contrary.
SECTION 2. EXERCISE OF WARRANT.
2.1 TIME OF EXERCISE. This Warrant may be exercised in whole or in part, at
any time or from time to time prior to 5:00 p.m., Eastern Daylight Time, June 1,
2005, unless extended as hereinafter provided. The Corporation shall deliver to
Holder, not less than 30 nor more than 60 days prior to the Expiration Date,
written notice (the "Expiration Notice") which specifies the last date this
Warrant may be exercised. The failure to deliver the Expiration Notice shall
automatically
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extend the Expiration Date until a date which is 30 days after the date the
Expiration Notice shall have been delivered to Holder. The last day this Warrant
can be exercised, whether June 1, 2005 or a later date determined as set forth
above is hereinafter referred to as the "Expiration Date."
2.2 MANNER OF EXERCISE. In order to exercise this Warrant, the registered
Holder hereof shall deliver to the Corporation at its principal office at 0000
Xxxxx Xxxx, Xxxxx 000, Xxxxx Xxxxxxx, Xxxxxxx 00000, Attention: President, or at
such other office as shall be designated by the Corporation in writing pursuant
to Section 12 hereof on or before 5:00 p.m. Eastern Time on the Expiration Date,
(i) a written notice of such registered Holder's election to exercise this
Warrant (the "Exercise Notice"), which notice may be in the form of the Notice
of Exercise attached hereto, properly executed and completed by the registered
Holder or an authorized officer thereof, (ii) a check payable to the order of
the Corporation, in an amount equal to the product of the Exercise Price
MULTIPLIED BY the number of Warrant Shares specified in the Exercise Notice, AND
(iii) this Warrant (the items specified in (i), (ii), and (iii) are collectively
the "Exercise Materials"). Upon timely receipt of the Exercise Materials, the
Corporation shall, as promptly as practicable, and in any event within five (5)
business days after its receipt of the Exercise Materials, execute or cause to
be executed and delivered to such registered Holder a certificate or
certificates representing the number of Warrant Shares specified in the Exercise
Notice, together with cash in lieu of any fraction of a share, as hereinafter
provided, and, (x) if the Warrant is exercised in full, a copy this Warrant
marked "Exercised" or (y) if the Warrant is partially exercised, a copy this
Warrant marked "Partially Exercised" together with a new Warrant on the same
terms for the unexercised balance of the Warrant Shares. All of the certificates
evidencing Warrant Shares shall bear the legend set forth in Section 8.2 hereof.
The stock certificate or certificates shall be registered in the name of the
registered Holder of this Warrant or such other name as shall be designated in
the Exercise Notice. The date on which the Warrant shall be deemed to have been
exercised (the "Exercise Date"), and the date the person in whose name any
certificate for Warrant Shares is issued shall be deemed to have become the
holder of record of such shares, shall be the date the Corporation receives the
Exercise Materials, irrespective of the date of delivery of a certificate or
certificates evidencing the Warrant Shares, except that, if the date on which
the Exercise Materials are received by the Corporation is a date when the stock
transfer books of the Corporation are closed, the Exercise Date shall be the
date the Corporation receives the Exercise Materials, and the date such person
shall be deemed to have become the holder of the Warrant Shares shall be the
next succeeding date on which the stock transfer books are open.
SECTION 3. ADJUSTMENTS TO WARRANT SHARES. The number of Warrant Shares
issuable upon the exercise hereof shall be subject to adjustment in certain
cases as set forth in this Section 3.
3.1 CONSOLIDATION, MERGER, OR SALE. In the event the Corporation is a party
to a consolidation, share exchange, or merger, or the sale of all or
substantially all of the assets of the Corporation to, any person, or in the
case of any consolidation or merger of another corporation into the Corporation
in which the Corporation is the surviving corporation, and in which there is a
reclassification or change of the shares of Common Stock of the Corporation,
this Warrant shall after such consolidation, share exchange, merger, or sale be
exercisable for the kind and number of securities or amount and kind of property
of the Corporation or the corporation or other entity resulting from such share
exchange, merger, or consolidation, or to which such sale shall be made, as
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the case may be (the "Successor Corporation"), to which a holder of the number
of shares of Common Stock deliverable upon the exercise (immediately prior to
the time of such consolidation, share exchange, merger, or sale) of this Warrant
would have been entitled upon such consolidation, share exchange, merger, or
sale; and in any such case appropriate adjustments shall be made in the
application of the provisions set forth herein with respect to the rights and
interests of the registered Holder of this Warrant, such that the provisions set
forth herein shall thereafter correspondingly be made applicable, as nearly as
may reasonably be, in relation to the number and kind of securities or the type
and amount of property thereafter deliverable upon the exercise of this Warrant.
The above provisions shall similarly apply to successive consolidations, share
exchanges, mergers, and sales. Any adjustment required by this Section 3.1(a)
because of a consolidation, share exchange, merger, or sale shall be set forth
in an undertaking delivered to the registered Holder of this Warrant and
executed by the Successor Corporation which provides that the Holder of this
Warrant shall have the right to exercise this Warrant for the kind and number of
securities or amount and kind of property of the Successor Corporation or to
which the holder of a number of shares of Common Stock deliverable upon exercise
(immediately prior to the time of such consolidation, share exchange, merger, or
sale) of this Warrant would have been entitled upon such consolidation, share
exchange, merger, or sale. Such undertaking shall also provide for future
adjustments to the number of Warrant Shares and the Exercise Price in accordance
with the provisions set forth in Section 3 hereof.
3.2 ADJUSTMENTS FOR STOCK DIVIDENDS AND SPLITS. In the event the
Corporation should at any time, or from time to time after the Original Issue
Date, fix a record date for the effectuation of a stock split or subdivision of
the outstanding shares of Common Stock or the determination of holders of Common
Stock entitled to receive a dividend or other distribution payable in additional
shares of Common Stock, or securities or rights convertible into, or entitling
the holder thereof to receive directly or indirectly, additional shares of
Common Stock (hereinafter referred to as "Common Stock Equivalents") without
payment of any consideration by such holder for the additional shares of Common
Stock or the Common Stock Equivalents (including the additional shares of Common
Stock issuable upon exercise or exercise thereof), then, as of such record date
(or the date of such dividend, distribution, split, or subdivision if no record
date is fixed), the number of Warrant Shares issuable upon the exercise hereof
shall be proportionately increased and the Exercise Price shall be appropriately
decreased by the same proportion as the increase in the number of outstanding
Common Stock Equivalents of the Corporation resulting from the dividend,
distribution, split, or subdivision. Notwithstanding the preceding sentence, no
adjustment shall be made to decrease the Exercise Price below $.01 per Share.
3.3 REVERSE STOCK SPLITS. In the event the Corporation should at any time
or from time to time after the Original Issue Date, fix a record date for the
effectuation of a reverse stock split, or a transaction having a similar effect
on the number of outstanding shares of Common Stock of the Corporation, then, as
of such record date (or the date of such reverse stock split or similar
transaction if no record date is fixed), the number of Warrant Shares issuable
upon the exercise hereof shall be proportionately decreased and the Exercise
Price shall be appropriately increased by the same proportion as the decrease of
the number of outstanding Common Stock Equivalents resulting from the reverse
stock split or similar transaction.
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3.4 RECLASSIFICATION. In the event the Corporation should at any time or
from time to time after the Original Issue Date, fix a record date for a
reclassification of its Common Stock, then, as of such record date (or the date
of the reclassification if no record date is set), this Warrant shall thereafter
be convertible into such number and kind of securities as would have been
issuable as the result of such reclassification to a holder of a number of
shares of Common Stock equal to the number of Warrant Shares issuable upon
exercise of this Warrant immediately prior to such reclassification, and the
Exercise Price shall be unchanged.
3.5 SALES OR DEEMED SALES OF CORPORATION SECURITIES.
(a) Prior to the exercise of the special redemption right of the
Company set forth in Section 7 of the Purchase Agreement, if and whenever the
Corporation shall issue or sell any shares of Common Stock or any equity or debt
securities of the Corporation which are convertible into or exchangeable for
shares of Common Stock, then, forthwith upon such issuance or sale, the number
of Warrant Shares issuable upon the exercise of this Warrant shall be adjusted
to a number which is equal to the product of (i) the quotient of (x) the number
of warrant shares issuable upon exercise hereof on the Original Issue Date
divided by (y) 275,000, MULTIPLIED BY (ii) the difference between (1) the
quotient of (x) the number of shares of Fully Diluted Common Stock immediately
after such issuance or sale DIVIDED BY (y) .725 MINUS (2) the number of shares
of Fully Diluted Common Stock immediately after such issuance or sale. As used
herein, the term "Fully Diluted Common Stock" means the outstanding shares of
Common Stock assuming the conversion into Common Stock of all then outstanding
convertible securities (at the then effective conversion prices), and the
exercise of all then outstanding rights, options, and warrants, excluding the
Transaction Warrants.
(b) From and after the exercise of the special redemption right of the
Company set forth in Section 7 of the Purchase Agreement, if and whenever the
Corporation shall issue or sell any shares of Common Stock or any equity or debt
securities of the Corporation which are convertible into or exchangeable for
shares of Common Stock, then, forthwith upon such issuance or sale, the number
of Warrant Shares issuable upon the exercise of this Warrant shall be adjusted
to a number which is equal to [A PRO RATA SHARE OF] the quotient of (x) the
number of shares of Fully Diluted Common Stock immediately after such issuance
or sale DIVIDED BY (y) .80 MINUS the number of shares of Fully Diluted Common
Stock immediately after such issuance or sale.
3.6 NO DILUTION OR IMPAIRMENT. The Corporation will not, by amendment of
its Articles of Incorporation or through reorganization, consolidation, merger,
dissolution, issue, or sale of securities, sale of assets or any other voluntary
action, void or seek to avoid the observance or performance of any of the terms
of the Warrant, but will at all times in good faith assist in the carrying out
of all such terms and in the taking of all such actions as may be necessary or
appropriate in order to protect the rights of the Holder against dilution or
other impairment. Without limiting the generality of the foregoing, the
Corporation (a) will not create a par value of any share of stock receivable
upon the exercise of the Warrant above the amount payable therefor upon such
exercise, and (b) will take all such action as may be necessary or appropriate
in order that the Corporation may validly and legally issue fully paid and
non-assessable shares upon the exercise of the Warrant.
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3.7 NOTICE OF ADJUSTMENT. When any adjustment is required to be made in the
number or kind of shares purchasable upon exercise of the Warrant, or in the
Exercise Price, the Corporation shall promptly notify the Holder of such event
and of the number of shares of Common Stock or other securities or property
thereafter purchasable upon exercise of the Warrants and of the Exercise Price,
together with the computation resulting in such adjustment.
SECTION 4. CASH DIVIDENDS. In the event of any payment of any cash dividend
or any distribution of property (including evidences of indebtedness of the
Corporation, but excluding distributions of Common Stock), either tangible or
intangible, to the holders of the Common Stock, prior to the Exercise Date, the
registered Holder of this Warrant shall be entitled to receive, concurrently
with the holders of the Common Stock, the per share amount of any such dividend
or distribution MULTIPLIED BY the number of Warrant Shares then issuable upon
exercise of this Warrant in the same manner and to the same extent as if the
registered Holder of this Warrant were then the registered owner of such number
of shares of Common Stock. For purposes hereof, the per share amount of any
distribution of property shall be the fair market value thereof as determined by
the Board of Directors in good faith in the resolutions authorizing any such
distribution.
SECTION 5. COVENANTS AS TO COMMON STOCK. The Corporation covenants and
agrees that all Warrant Shares which may be issued will, upon issuance, be
validly issued, fully paid and non-assessable. The Corporation further covenants
and agrees that the Corporation will at all times have authorized and reserved,
free from preemptive rights, a sufficient number of shares of its Common Stock
to provide for the exercise of the Warrant in full.
SECTION 6. NO STOCKHOLDER RIGHTS. This Warrant shall not entitle the Holder
hereof to any voting rights or other rights as a stockholder of the Corporation.
SECTION 7. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE HOLDER TO THE
CORPORATION. The registered Holder of this Warrant, by acceptance of this
Warrant represents, warrants, and covenants to the Corporation as follows:
(a) The Holder is acquiring this Warrant, and agrees that the exercise
of this Warrant and the acceptance of a certificate for Warrant Shares shall
constitute its representation that the Warrant Shares are being acquired, for
its own account for investment and not with a view to the distribution thereof,
subject, however, to Holder's right to transfer this Warrant and the Warrant
Shares in accordance with and subject to the restrictions on such transfer set
forth herein.
(b) The Holder understands that this Warrant and the Warrant Shares
have not been registered under the Securities Act of 1933, as amended (the
"Securities Act") or state securities laws, by reason of their issuance in a
transaction exempt from the registration requirements of the Securities Act and
applicable state securities laws. The Holder acknowledges being informed that
this Warrant and the Warrant Shares must be held indefinitely unless this
Warrant or the Warrant Shares are registered for sale by such Holder under the
Securities Act and applicable state securities laws or an exemption from
registration is available. The Holder understands that a sale of the Warrant
Shares made in reliance upon Rule 144 promulgated under the Securities Act
("Rule 144") can only be made in accordance with the terms and conditions of
Rule 144 and further understands
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that in the event that the exemption from registration provided by such Rule is
not available, compliance with some other exemption under the Securities Act
will be required in the absence of registration.
(c) The Holder agrees not to sell, transfer, pledge or hypothecate
this Warrant or any Warrant Shares unless a Registration statement is effective
for this Warrant or Warrant Shares under the Securities Act or, in the written
opinion of such Holder's counsel (a copy of which opinion shall be addressed to
and delivered to the Corporation, and which counsel and which opinion shall be
reasonably satisfactory to the Corporation), such transaction will not result in
any violation of the registration requirements of the Securities Act or any
applicable state securities law. The Corporation may not, and may instruct its
transfer agent not to, transfer this Warrant or the Warrant Shares unless the
Corporation has been advised by its counsel that the Holder has complied with
the provisions of this Warrant and applicable securities laws relating to the
proposed transfer.
SECTION 8. TRANSFER OF SECURITIES.
8.1 RESTRICTION ON TRANSFER. This Warrant and the Warrant Shares and any
shares of capital stock received in respect thereof, whether by reason of a
stock split or share reclassification thereof, a stock dividend thereon,or
otherwise, shall not be transferable except upon the conditions specified in
Section 7 and this Section 8, which conditions are intended to ensure compliance
with the provisions of the Securities Act and applicable State securities laws
with respect to the transfer of such securities. The Holder of this Warrant, by
acceptance of this Warrant, agrees to be bound by the provisions of Section 7
and this Section 8 and to indemnify and hold harmless the Corporation against
any loss or liability arising from the disposition of this Warrant or the
Warrant Shares issuable upon exercise hereof or any interest in either thereof
in violation of the provisions of this Warrant.
8.2 RESTRICTIVE LEGEND. Each certificate for the Warrant Shares and any
shares of capital stock received in respect thereof, whether by reason of a
stock split or share reclassification thereof, a stock dividend thereon or
otherwise, and each certificate for any such securities issued to subsequent
transferees of any such certificate shall (unless otherwise permitted by the
provisions hereof) be stamped or otherwise imprinted with a legend in
substantially the following form:
Legend for Warrant Shares or other shares of capital stock:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE "SECURITIES") HAVE
BEEN ISSUED AND SOLD IN RELIANCE UPON EXEMPTIONS FROM REGISTRATION
UNDER THE SECURITIES ACT OF 1933 (THE "1933 ACT") AND THE FLORIDA
INVESTOR PROTECTION ACT (THE "FLORIDA ACT") THE SECURITIES MAY NOT BE
OFFERED FOR SALE, SOLD, OR TRANSFERRED OTHER THAN (I) PURSUANT TO AN
EFFECTIVE REGISTRATION OR AN EXEMPTION THEREFROM UNDER THE 1933 ACT
AND THE FLORIDA ACT, AND (II) UPON RECEIPT BY THE ISSUER OF EVIDENCE
SATISFACTORY TO IT OF COMPLIANCE WITH THE 1933 ACT, THE FLORIDA ACT,
AND THE APPLICABLE SECURITIES LAWS OF ANY OTHER JURISDICTION. THE
ISSUER SHALL BE ENTITLED TO REQUIRE AN OPINION OF COUNSEL SATISFACTORY
TO IT WITH RESPECT TO COMPLIANCE WITH THE ABOVE LAWS.
8.3 TRANSFER OF WARRANTS. Subject to the restrictions on transfer specified
in Section 7 and this Section 8, the Warrant is transferable in accordance with
this Warrant, in whole or in part, at the agency or office of the Corporation
referred to in Section 1 hereof, by the Holder
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Execution Copy
hereof in person or by a duly authorized attorney, upon surrender of this
Warrant, with the Form of Assignment attached hereto duly executed by the then
registered Holder of this Warrant or its duly authorized agent. The Corporation
or its transfer agents shall register the transfer of any Warrants transferred
in compliance with Section 7 and this Section 8 upon records to be maintained
for that purpose, upon surrender of this Warrant. Upon any such Registration of
transfer, a new Warrant substantially in the form of this Warrant evidencing the
Warrant so transferred shall be issued to the transferee.
SECTION 9. LOST, STOLEN, MUTILATED, OR DESTROYED WARRANT. If this Warrant
is lost, stolen, mutilated, or destroyed, the Corporation shall issue a new
Warrant of like denomination and tenor as the Warrant so lost, stolen,
mutilated, or destroyed, provided the registered Holder hereof shall deliver a
lost warrant certificated in customary form, including indemnification of the
Corporation.
SECTION 10. FRACTIONAL WARRANT SHARES. The Corporation shall not be
required to issue any fractions of Warrant Shares upon exercise of this Warrant,
but the Corporation shall pay cash in respect of any fractional interest in a
Warrant Share which would otherwise be issuable in an amount equal to the same
fraction of the fair market value per share of the Common Stock on the day of
the exercise, as reasonably determined by the Board of Directors of the
Corporation.
SECTION 11. NOTICE. All notices, requests, demands, and other
communications required or permitted under this Warrant and the transactions
contemplated herein shall be in writing and shall be deemed to have been duly
given, made, and received when personally delivered the day after deposited with
a recognized national overnight delivery service prior to its dead-line for
receiving packages for next day delivery or upon the fifth day after deposited
in the United States registered or certified mail with postage prepaid, return
receipt requested, in each case addressed as set forth below:
If to the Corporation: Transeastern Properties of South Florida, Inc.
0000 Xxxxx Xxxx
Xxxxx 000
Xxxxx Xxxxxxx, XX 00000
Attention: President
If to the Holder hereof, to the address of such Holder appearing on the
books of the Corporation.
SECTION 12. CAPTIONS, SECTION, HEADINGS. Captions and section headings used
herein are for convenience only, and are not a part of this Warrant and shall
not be used in construing it.
SECTION 13. GOVERNING LAW. This Agreement shall be construed and enforced
in accordance with the laws in the State of Florida, irrespective of the choice
of law provisions.
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Execution Copy
IN WITNESS WHEREOF, TRANSEASTERN PROPERTIES OF SOUTH FLORIDA, INC., has
caused this Warrant to be executed in its name by its duly authorized officers
under its corporate seal, and to be dated as of the date first above written.
TRANSEASTERN PROPERTIES OF SOUTH FLORIDA, INC.
By:___________________________________
Xxxxxx Xxxxxxx, President
ATTEST:
___________________________
Secretary
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Execution Copy
FORM OF ASSIGNMENT
[To be signed only upon transfer of unexercised Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto _______________________________ the attached Warrant to purchase the number
of full shares of Common Stock, $____ par value, of Transeastern Properties of
South Florida, Inc., issuable upon exercise of said Warrant, and appoints
________________, Attorney, to transfer such Warrant on the books of
Transeastern Properties of South Florida, Inc., with full power of substitution
in the premises.
Dated: ___________________ _______________________________
[Signature]
_______________________________
_______________________________
[Address]
Signature guaranteed by a member of a national securities exchange or national
bank:
__________________________
NOTICE
The signature above must correspond to the name as written upon the fact of
the within Warrant in every particular, without alteration or enlargement or any
change whatsoever.
Execution Copy
FORM OF NOTICE OF EXERCISE
[To be signed only upon exercise of Warrant]
To: TRANSEASTERN PROPERTIES OF SOUTH FLORIDA, INC.
The undersigned registered Holder of the attached Warrant hereby
irrevocably elects to exercise the Warrant for, and to purchase thereunder, the
full number of whole shares of Common Stock, $____ par value, of Transeastern
Properties of South Florida, Inc., issuable upon exercise of said Warrant and
hereby surrenders said Warrant and delivers to Transeastern Properties of South
Florida, Inc., in immediately available funds, $_________ representing the
Purchase Price for such shares. The undersigned herewith requests that the
certificates for such shares be issued in the name of, and delivered to the
undersigned, whose address is _________________________________ and social
security or tax identification number is ______________.
Dated: _________________________ _________________________________
NOTICE
The signature above must correspond to the name as written upon the fact of
the within Warrant in every particular, without alteration or enlargement or any
change whatsoever.
EXHIBIT B
TO
SERIES A REDEEMABLE PREFERRED STOCK
AND
WARRANT PURCHASE AGREEMENT
FORM OF SHAREHOLDERS AGREEMENT
SHAREHOLDERS AGREEMENT
THIS SHAREHOLDERS AGREEMENT is made and entered into this 2nd day of June,
1993, by and among TRANSEASTERN PROPERTIES OF SOUTH FLORIDA, INC, a Florida
corporation (the "Company"), XXXXXX X. XXXXXXX and XXXXX XXXXXXX, residents of
the State of Florida (the "X. Xxxxxxxx"), XXXXXX X. XXXXXXX and XXXXX XXXXXXX,
residents of the State of Florida (the "X. Xxxxxxxx"), XXXXXX XXXXX, XX. and
XXXXX XXXXX, residents of the State of Florida (the "Cuccis"), MEZZONEN, S.A.
("Mezzonen"), a Luxembourg company, HANDLER FAMILY TRUST DTD 9/12/91 ("HFT"), a
living trust organized and existing pursuant to the laws of the State of
California, XXXXXXXXXXX XXXXXX, a resident of the State of California
("Xxxxxx"), XXXXXX XXXXXXXXX, a resident of the State of California
("Xxxxxxxxx"), XXXXX X. XXXXXX, a resident of the State of California
("Xxxxxx"), and XXXXX X. XXXXXX a resident of the State of California,
("Xxxxxx").
BACKGROUND
A. Each of the X. Xxxxxxxx, the X. Xxxxxxxx, and the Cuccis are the
holders as tenants by the entirety of the number of shares of the Common Stock
(as hereinafter defined) of the Company set forth beside their names on the
signature page hereto; and, the X. Xxxxxxxx, the X. Xxxxxxxx, and the Cuccis,
collectively own all of the Common Stock issued and outstanding on the date
hereof; and
B. Pursuant to a Series A Redeemable Preferred Stock and Warrant Purchase
Agreement (the "Stock Purchase Agreement") Mezzonen, HFT, Xxxxxx, Whittaker,
Eisner, and Xxxxxx, have collectively purchased twenty thousand (20,000) shares
of the Preferred Stock (as hereinafter defined), (or 100%) of the Preferred
Stock issued and outstanding on the date hereof; and
C. The execution and delivery of this Agreement by each of the X.
Xxxxxxxx, the X. Xxxxxxxx, the Cuccis, and the Company is a condition precedent
to the obligation of Mezzonen, HFT, Xxxxxx, Whittaker, Eisner, and Xxxxxx, to
purchase the Preferred Stock pursuant to the Stock Purchase Agreement;
D. The parties hereto wish to state herein their mutual agreements and
obligations and to impose certain restrictions on the rights and benefits with
respect to the disposition of the Shares (as hereinafter defined) now or
hereafter owned by the Shareholders (as defined below), and to set forth certain
agreements with respect to the management of the Company.
AGREEMENT
For and in consideration of the foregoing, the agreements set forth below,
and other good and valuable consideration, the receipt and sufficiency of which
is acknowledged, the parties agree as follows:
1. DEFINITIONS
The following capitalized terms are used in this Agreement with meanings
thereafter ascribed:
1.1 AFFILIATE. When used to indicate a relationship to a specified person,
firm, corporation, partnership, association, or entity, "Affiliate" means any
person, firm, corporation, partnership, association, or entity that, directly or
indirectly or through one or more intermediaries, controls, is controlled by, or
is under common control with such person, firm, corporation, partnership,
association, or entity.
1.2 AGREEMENT. "Agreement" means this Agreement, together with any addenda
and amendments made in the manner described in this Agreement.
1.3 BUSINESS OF THE COMPANY. "Business of the Company" means the business
of acquisition, development, and management of residential properties.
1.4 CAUSE. "Cause" means (a) conduct amounting to fraud or dishonesty
against the Company; (b) willful misconduct or repeated refusal to follow the
reasonable directions of the Board of Directors of the Company; (c) knowing
violation of law in the course of performance of the duties of employment with
the Company; (d) repeated absences from work without a reasonable excuse; (e)
repeated intoxication with alcohol or drugs while on the Company's premises
during regular business hours; (f) a breach or violation of the terms of any
agreement with the Company; (g) an act of disloyalty to the Company,
substantially detrimental to the welfare of the Company; (h) a violation of the
covenants set forth in Section 3 hereof; or (i) a conviction or plea of guilty
or NOLO CONTENDERE to a felony or a crime involving moral turpitude.
1.5 COMMISSION. "Commission" means the Securities and Exchange Commission,
or any other federal agency at the time administering the Securities Act.
1.6 COMMON STOCK. "Common Stock" means the Five Million (5,000,000)
authorized shares of common stock, $.01 par value, of the Company, of which
Seven Hundred and Twenty Five Thousand and One (725,001) shares are issued and
outstanding as of the date hereof.
1.7 COMMON STOCK EQUIVALENTS. "Common Stock Equivalents" means the sum of
(x) the number of shares of Common Stock outstanding, PLUS (y) the number of
shares of Common Stock issuable upon conversion of all outstanding convertible
securities and the exercise of all outstanding warrants, options, and rights.
1.8 COMPETITOR. "Competitor" means a person or entity that is
substantially engaged in a business like or similar to the Business of the
Company. For purposes hereof "substantially engaged" shall mean that the average
annual revenues of such person or entity derived from the conduct of a business
like or similar to the Business of the Company during the three most recent
completed fiscal years of such person or entity (of if such person or entity has
conducted such business for less than three completed fiscal years, then for
such lesser period) is equal to or greater than ten percent (10%) of the average
annual gross revenues of such person or entity over such fiscal years (or lesser
period).
1.9 DISABILITY. "Disability" means (i) the inability of a Management
Shareholder to perform the duties of such Management Shareholder's employment
due to physical or emotional incapacity or illness, where such inability is
expected to be of long-continued and indefinite duration or (ii) such Management
Shareholder shall be entitled to (x) disability retirement benefits under the
2
Federal Social Security Act or (y) recover benefits under any long-term
disability plan or policy maintained by the Company. In the event of a dispute,
the determination of Disability shall be made by the Board of Directors of the
Company and shall be supported by advice of a physician competent in the area to
which such Disability relates.
1.10 DISPOSITION. "Disposition" means any transfer of all or any part of
the rights and incidents of ownership of the Shares, including the right to
vote, and the right to possession of Shares as collateral for indebtedness,
whether such transfer is outright or conditional, INTER VIVOS or testamentary,
voluntary or involuntary, or for or without consideration.
1.11 EFFECTIVE DATE OF TERMINATION. "Effective Date of Termination" means
the effective date of the termination of the employee-employer relationship
between a Management Shareholder and the Company for any reason, including,
without limitation, resignation, discharge (with or without Cause), death,
Disability, or retirement, notwithstanding that severance or similar payments
are made to such Management Shareholder, or if no effective date of termination
of such relationship is established by any notice given by either the Company or
such Management Shareholder (which date established by notice shall not be
retroactive), then the effective date of termination shall be the date such
Management Shareholder last performs the regular duties of such Management
Shareholder's employment or position with the Company, as determined in good
faith by the Board of Directors.
1.12 EXCHANGE ACT. "Exchange Act" means the Securities Exchange Act of
1934, as amended, or any similar federal statute, and the rules and regulations
of the Commission thereunder, all as the same shall be in effect at the time.
1.13 INVESTORS. "Investors" means Mezzonen, HFT, Xxxxxx, Whittaker,
Eisner, and Xxxxxx,.
1.14 FAIR MARKET VALUE. "Fair Market Value" means the quotient of (x) the
fair market value of the Company as of the fiscal quarter ended immediately
prior to an Effective Date of Termination, as determined in good faith by the
Board of Directors of the Company, DIVIDED BY (y) the total number of Common
Stock Equivalents outstanding on the applicable Effective Date of Termination.
In making the determination of the Fair Market Value pursuant to this
subsection, the Board of Directors shall assume that fair market value of the
Company is equal to the amount which would be paid in cash for the Company, as a
going concern, by an unaffiliated third party financial buyer, and may take into
account such additional factors as may be relevant to such valuation, including
without limitation, the absence of a trading market for the Shares, the minority
status of the Shares, and such other facts and circumstances as may be material.
The Board of Directors may, but shall not be obligated to, engage the services
of a reputable, experienced investment banking firm to assist it in the
determination of Fair Market Value. The cost of determining Fair Market Value
shall be borne by the Company.
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1.15 MANAGEMENT SHAREHOLDERS. "Management Shareholders" means,
collectively, Xxxxxx X. Xxxxxxx, Xxxxxx X. Xxxxxxx, and Xxxxxx Xxxxx, Xx.
1.16 PERMITTED DISPOSITION. "Permitted Disposition" means:
(a) a Disposition by a Management Shareholder to which each Shareholder
consents in writing;
(b) a Disposition effected pursuant to the provisions of Sections 2.2,
2.3, 2.6, and 2.7 hereof;
(c) a Disposition by a Management Shareholder to (i) a member of such
Management Shareholder's immediate family, as defined in the regulations
promulgated under Section 16 of the Exchange Act, or to any trust for his or
their benefit, (ii) to any employee of the Company;
(d) a Disposition effected by a Management Shareholder prior to a
Termination of Employment in one of the following transactions: (i) dissolution
or liquidation of the Company, (ii) merger of the Company into another
corporation, or any consolidation, share exchange, combination, reorganization,
or like transaction in which the Company is not the survivor, excluding any such
merger, consolidation, reorganization, or like transaction in which the
Investors or any Affiliate of an Investor is the survivor, (iii) sale or
transfer (other than as security for the Company's obligations) of at least a
majority of the assets of the Company, excluding any such transfer to the
Investors or their Affiliates, (iv) sale or transfer of 50% or more of the
issued and outstanding Shares by the holders thereof in a single transaction or
in a series of related transactions, excluding any such transfer to the
Investors or their Affiliates, (v) a Public Offering (if and to the extent
permitted by the managing underwriter thereof), or (vi) the exercise of the
right of the Company to repurchase the Shares upon a Termination of Employment;
or
(e) a Disposition effected by an Investor, provided the conditions of
Section 2.6(a) hereof are satisfied, if applicable.
The foregoing notwithstanding, no Disposition shall be a Permitted
Disposition unless the transferor shall have obtained the written agreement of
the proposed transferee, that such transferee will be bound by, and the Shares
proposed to be transferred will be subject to, this Agreement. Such written
agreement shall be attached as an addendum to this Agreement and thereby
incorporated as a part of this Agreement, whereupon the proposed transferee
shall have adopted this Agreement, and thereafter shall be a party hereto, and
the term "Shareholders" as used herein shall thereafter mean and include such
transferee.
1.17 PREFERRED STOCK. "Preferred Stock" means the Twenty Nine Thousand
(29,000) authorized shares of Series A Redeemable Preferred Stock, of which
Twenty Thousand (20,000) shares are issued and outstanding as of the date
hereof.
1.18 PRIME RATE. "Prime Rate" means the "prime rate" as published in THE
WALL STREET JOURNAL (Eastern Edition) under its "Money Rates" column and
specified as "[t]he base rate on corporate loans at large U.S. commercial
banks," or, if no longer published as such, the rate of
4
interest announced from time to time by NationsBank, N.A., as its prime rate,
base rate or reference rate. If the Wall Street Journal publishes more than one
"Prime Rate" under its "Money Rates" column, then the Prime Rate shall be the
average of such rates.
1.19 PROPRIETARY INFORMATION. "Proprietary Information" means information
which derives economic value, actual or potential, from not being generally
known and not being readily ascertainable by proper means to other persons who
can obtain economic value from its disclosure or use and which is the subject of
efforts that are reasonable under the circumstances to maintain its secrecy or
confidentiality, but shall not include Excluded Information. Proprietary
Information may include either technical or non-technical data, including
without limitation, (a) any process, machine, pattern, compilation, program,
method, technique, formula, chemical formula, composition of matter, or device
which (1) is not generally known or which a Management Shareholder has a
reasonable basis to believe may not be generally known, (2) is being used or
studied, or may be used or studied, by the Company and is not described in a
printed patent or in any literature already published and distributed externally
by the Company, and (3) is not readily ascertainable from inspection of a
product of the Company; (b) any engineering, technical, or product
specifications including those of features used in any current product of the
Company or which may be so used, or the use of which is contemplated, or may be
contemplated, in a future product of the Company; (c) any application, operating
system, communication system, or other computer software (whether in source or
object code) and all flow charts, algorithms, coding sheets, routines,
subroutines, compilers, assemblers, design concepts, test data, documentation,
or manuals related thereto, whether or not copyrighted, patented or patentable,
related to or used in the Business of the Company; or (d) information concerning
the customers, suppliers, products, pricing strategies of the Company, personnel
assignments and policies of the Company, or matters concerning the financial
affairs and management of the Company or any parent, subsidiary, or affiliate of
the Company; provided however, that Proprietary Information shall not include
any Excluded Information. As used herein, "Excluded Information" means
Proprietary Information (i) which has been voluntarily disclosed to the public
by the Company, (ii) independently developed and disclosed by parties other than
the Company, or (iii) that otherwise enters the public domain through lawful
means or without misappropriation of the Management Shareholders.
1.20 PUBLIC OFFERING. "Public Offering" means one or a series of firmly
underwritten public offerings by the Company, pursuant to registration
statements filed by the Company with the Securities and Exchange Commission,
whereby the Company completes a sale of its Common Stock such that the gross
proceeds to the Company resulting from such sale exceed Five Million Dollars
($5,000,000).
1.21 REGISTRATION EXPENSES. "Registration Expenses" means the expenses so
described in Section 5.5 hereof.
1.22 RESTRICTED STOCK. "Restricted Stock" means all shares of Common Stock
held by the Shareholders, including the shares of Common Stock issued or
issuable upon exercise of the Warrants described in the Stock Purchase
Agreement, excluding in each case securities which have been (a) registered
under the Securities Act pursuant to an effective registration statement filed
thereunder and disposed of in accordance with the registration statement
covering them or (b) publicly sold pursuant to Rule 144 under the Securities
Act.
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1.23 SECURITIES ACT. "Securities Act" means the Securities Act of 1933, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
1.24 SELLING EXPENSES. "Selling Expenses" means the expenses so described
in Section 5.5 hereof.
1.25 SHARES. "Shares" means and include as to each Shareholder, all shares
of the capital stock of the Company, including without limitation the Common
Stock and the Preferred Stock, now or in the future owned of record or
beneficially by such Shareholder (including without limitation, all Common
Stock, Preferred Stock, or other securities of the Company hereafter acquired
pursuant to the exercise of any option, warrant, or other right granted by the
Company to such Shareholder), and all securities of the Company that may be
issued in exchange for or in respect of such capital stock or securities
(including, without limitation, all securities issued or resulting from any
stock dividend, stock split, recapitalization, or merger effected by the
Company).
1.26 SHAREHOLDERS. "Shareholders" means the Management Shareholders and
the Investors.
1.27 TERMINATION OF EMPLOYMENT. "Termination of Employment" means the
termination of the employee-employer relationship between a Management
Shareholder and the Company for any reason, including, without limitation, a
termination by resignation, discharge, death, Disability, or retirement,
notwithstanding that severance or similar payments are made to such Management
Shareholder. The Board of Directors of the Company shall, in its absolute
discretion, determine the effect of all matters and questions relating to a
Termination of Employment, including whether a leave of absence constitutes a
Termination of Employment, or whether a Termination of Employment is for Cause.
1.28 TRANSACTION. "Transaction" means the Company shall consummate (i) a
sale of all or substantially all of the assets of the Company, (ii) the merger
of the Company into another corporation or any consolidation, share exchange,
combination, reorganization, or like transaction in which the Company is not the
survivor or in which persons holding a majority of the Common Stock of the
Company issued and outstanding immediately prior to the consummation of such
transaction and any related transaction hold less than a majority of the shares
of the resulting or surviving corporation, issued and outstanding immediately
after the consummation of such transaction or transactions, or (iii) sale or
transfer of 50% or more of the issued and outstanding common stock of the
Company held by the Investors, excluding any distribution by an Investor to its
partners of such Common Stock, treating as outstanding for the purposes of such
determination all shares of Common Stock issuable upon the conversion of all
then outstanding convertible securities and the exercise of all outstanding
options and warrants, effective the date immediately preceding the consummation
of such sale of assets, merger, consolidation, share exchange, combination,
reorganization, or sale of Common Stock.
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2. SHARE CONTROL
2.1 RESTRICTIONS UPON TRANSFER OF SHARES. Except as otherwise provided in
this Agreement, no Shareholder shall make any Disposition of any Shares owned by
such Shareholder, except a Permitted Disposition as provided in this Agreement.
No Permitted Disposition shall be valid unless the Shareholder shall have
obtained the written agreement of the proposed transferee, including, without
limitation, any pledgee, that such transferee will be bound by, and the Shares
to be transferred will be subject to, this Agreement.
2.2 RIGHT OF FIRST REFUSAL.
(a) If a Shareholder (the "Offering Shareholder"), desiring to make
a transfer of Shares, which is not a Permitted Disposition until the provisions
of this Section 2.2 have been observed, shall receive a bona fide written offer
from a third party that is not a Competitor (the "Proposed Transferee") to
purchase all or part of the Shares then owned by the Offering Shareholder that
the Offering Shareholder desires to accept (an "Offer"), the Offering
Shareholder shall as a condition precedent to accepting the Offer, offer to the
Company, the Investors, and each of the other Shareholders (collectively the
Investors and the other Shareholders are the "Other Shareholders" and
individually an "Other Shareholder"), in the manner set forth below, the right
to purchase, individually or in the aggregate, all of the Shares that are the
subject of the Offer for the same price and the same terms as contained in the
Offer.
(b) Within ten (10) business days after receipt of the Offer, the
Offering Shareholder shall notify the Company and each of the Other Shareholders
in writing of the Offer, stating in such notice (the "Transfer Notice") the
details of the Offer, including (i) the name and address of the Proposed
Transferee, (ii) the number of Shares to which the Offer pertains (the "Offered
Shares"), (iii) the price per share offered by the Proposed Transferee for the
Offered Shares (the "Price"), and (iv) the terms and method of payment. A copy
of the Offer shall be attached to the Transfer Notice. The Transfer Notice shall
constitute an offer (the "Right of First Refusal") by the Offering Shareholder
to sell the Offered Shares to the Company and, if and to the extent that the
Company shall not accept the Right of First Refusal, to the Other Shareholders
at the Price and upon the terms and conditions set forth in the Transfer Notice,
which offer shall be irrevocable for sixty (60) business days from the date the
Transfer Notice is delivered to the Company, subject to satisfaction of the
conditions specified in Section 2.2(f) hereof.
(c) The Company shall have the first option to purchase all or any
portion of the Offered Shares. If the Company desires to purchase all or any
part of the Offered Shares, the Company shall communicate, in writing, its
election to purchase to the Offering Shareholder, which communication shall
state the number of Offered Shares the Company desires to purchase and the Price
and terms of payment (which shall be identical to the terms described in the
Transfer Notice), and shall be delivered in person or mailed to the Offering
Shareholder at the address set forth in the Transfer Notice or if no address is
set forth in the Transfer Notice, at the address reflected in the Company's
stock transfer records (with a copy being contemporaneously delivered to each of
the Other Shareholders) within thirty (30) business days of the date the
Transfer Notice was delivered to the Company. Such communication shall, when
taken in conjunction with the Transfer Notice, be deemed to constitute a valid,
legally binding, and enforceable agreement for the sale and purchase of
7
all or that portion of the Offered Shares which the Company has so elected to
purchase, subject to satisfaction to the conditions specified in Section 2.2(f)
hereof.
(d) If the Company does not exercise its option to purchase all of
the Offered Shares from the Offering Shareholder, each Other Shareholder shall
have an option to purchase all or any portion of the Offered Shares not
purchased by the Company (the "Remaining Shares"), exercisable by giving written
notice of exercise to the Offering Shareholder, each Other Shareholder and the
Company. Such written notice shall state the number of Remaining Shares such
Other Shareholder elects to purchase, and shall be delivered in person or mailed
to the Offering Shareholder, the Company, and all Other Shareholders at the
addresses reflected in the Company's stock transfer records within twenty (20)
business days after the expiration of the thirty (30) day period for exercise of
the Right of First Refusal granted to the Company in Section 2.2(c) above. Such
communication shall, when taken in conjunction with the Transfer Notice, be
deemed to constitute a valid, legally binding, and enforceable agreement for the
sale and purchase of all or that portion of the Offered Shares which the Other
Shareholder has so elected to purchase, subject to the satisfaction of the
conditions specified in Section 2.2(f) of this Agreement, and to the terms set
forth in the remainder of this paragraph. In the event that more than one Other
Shareholder exercises the right to purchase the Remaining Shares, each Other
Shareholder may purchase up to a pro rata portion of the Remaining Shares (based
upon the ratio of the number of Shares owned by each such exercising Other
Shareholder to the number of Shares owned by all exercising Other Shareholders).
In the event that one or more exercising Other Shareholders elects not to
purchase the full pro rata portion of Offered Shares to which such Other
Shareholder is entitled, the exercising Other Shareholders may purchase such
Remaining Shares on a pro rata basis (based upon the ratio of the number of
Shares owned by each exercising Other Shareholder to the number of Shares owned
by all exercising Other Shareholders). This method of allocation shall continue
to apply to options to purchase all of the Offered Shares not purchased by the
Company until all options have been exercised by one or more Other Shareholders
(which exercises shall constitute the valid, legally binding, and enforceable
agreement as provided above), or until the remaining Other Shareholders elect
not to exercise their rights to purchase any additional Remaining Shares.
(e) The closing of the purchase of any Offered Shares by the Company
or Remaining Shares by the Other Shareholders hereunder shall be held at the
principal office of the Company in Coral Springs, Florida. The Company shall
designate a closing date and time, which date shall be not earlier than sixty
(60) nor later than ninety (90) business days after the date of the Transfer
Notice as may be agreed upon by the Company and the Offering Shareholder. At the
closing, the Offering Shareholder shall deliver certificates duly endorsed or
accompanied by duly executed stock powers for the Offered Shares being purchased
pursuant to this Section 2.2 and shall transfer the Offered Shares being
purchased pursuant to this Section 2.2 to the purchasers thereof, free and clear
of all liens, claims, charges, or encumbrances, against payment for the Offered
Shares in accordance with the terms of the Transfer Notice. If the Company shall
be the purchaser of the Offered Shares, the Company shall have the right to set
off against any payment for such Offered Shares the amount by which the Offering
Shareholder shall be indebted to the Company.
(f) Notwithstanding the foregoing, if the Right of First Refusal is
not exercised with respect to all of the Offered Shares within sixty (60) days
after the date of the Transfer Notice, or if the Company and the Other
Shareholders do not purchase all of the Offered Shares within the
8
time period specified in Section 2.2(e), then the Offering Shareholder shall be
under no obligation to sell any Offered Shares to the Company or the Other
Shareholders, and the Offered Shares may be sold by the Offering Shareholder to
the Proposed Transferee at any time within forty-five (45) days after the date
of the expiration of the sixty (60) day time period referred to above. Any such
sale shall be only to the Proposed Transferee at not less than the Price and
upon other terms and conditions not more favorable to the Proposed Transferee
than those specified in the Transfer Notice. No transfer of the Offered Shares
or any portion thereof shall be made to any Competitor.
(g) As a condition precedent to the sale and transfer of any Offered
Shares by the Offering Shareholder, the Offering Shareholder shall obtain (i)
the written agreement of the Proposed Transferee that the Proposed Transferee
will be bound by, and that the Offered Shares transferred to the Proposed
Transferee will be subject to, this Agreement as provided in Section 2.1 above,
except that, notwithstanding any other provision of this Agreement, the Proposed
Transferee shall not be subject to Sections 2.3, 2.6, or 2.7 of this Agreement
and (ii) an opinion of counsel, satisfactory to the Company, that such transfer
of interest does not require registration under the Securities Act, and any
applicable state securities laws. The Company shall not give effect on its books
to any transfer or purported transfer of Offered Shares held or owned by any
Offering Shareholder to the Proposed Transferee unless each and all of the
conditions hereof effecting such transfer shall have been satisfied. If the
transfer by the Offering Shareholder to the Proposed Transferee of that portion
of the Offered Shares as to which the Right of First Refusal has not been
exercised and consummated, is not made within forty-five (45) days after the
date the Offering Shareholder first becomes free to make such transfer, that
right to transfer in accordance with this Section 2.2 shall expire. In such
event the restrictions of this Section 2.2 shall be reinstated as to all Shares
which have not been so transferred, and any subsequent transfer of such Shares,
whether or not to the same Proposed Transferee, must be made strictly in
compliance with the provisions of this Section 2.2.
2.3 COMPANY'S RIGHT TO REPURCHASE SHARES.
(a) Upon the occurrence of a Termination of Employment prior to the
third anniversary of this Agreement, the Company shall have the option to
purchase all or any portion of the Shares owned by the Management Shareholder as
to whom a Termination of Employment has occurred (such Management Shareholder is
hereinafter the "Subject Shareholder") at any time within three (3) months after
the Effective Date of Termination. The purchase price for the Shares owned by
such Subject Shareholder shall be determined on the basis of whether the
Termination of Employment of the Subject Shareholder was for Cause, and if the
Termination of Employment was not for Cause, the amount of time which has
elapsed between the date of this Agreement and the Effective Date of
Termination.
(b) In the event the Termination of Employment of the Subject
Shareholder is for Cause, the purchase price per Share shall be $.01.
(c) In the event the Termination of Employment of the Subject
Shareholder is not for Cause, the aggregate purchase price for all Shares owned
by the Subject Shareholder shall be equal to the sum of (x) the product of (i)
the number of FMV Shares (as set forth on the table below) MULTIPLIED BY (ii)
Fair Market Value PLUS (y) the product of (i) the number of Cost Shares
MULTIPLIED BY (ii) $.01. The number of FMV Shares and the number of Cost Shares
shall be determined by
9
multiplying the applicable percentage from the table set forth below by the
number of Shares owned of record and beneficially (in the case of a Permitted
Disposition described in Section 1.16(c) hereof) by the Subject Shareholder and
rounding to the nearest whole Share.
Percentage of Shares which are:
FMV COST
DATE OF TERMINATION SHARES SHARES
Prior to the first anniversary hereof ................. 0% 100%
On or after the first anniversary hereof through the
day prior to the second anniversary hereof ......... 33.3% 66.6%
On or after the second anniversary hereof through
the day prior to the third anniversary hereof ...... 66.6% 33.3%
On or after the third anniversary hereof .............. 100% 0%
(d) The Company shall exercise its right to purchase, if it chooses
to exercise such right, by giving written notice to the Subject Shareholder (or
the personal representative, executor or administrator of the Subject
Shareholder, as the case may be) within ninety (90) days following the
occurrence of the Termination of Employment. The closing of any purchase of
Shares pursuant to this Section 2.3 shall take place at the principal office of
the Company not earlier than thirty (30) nor later than forty-five (45) days
after the date of the Company's written notice of the exercise of its right to
purchase such Shares pursuant to this Section 2.3.
(e) At the closing, the Subject Shareholder shall deliver all stock
certificates representing the Shares to be purchased, properly endorsed for
transfer, and the Company shall pay the Subject Shareholder the aggregate
purchase price for the Shares (i) one part in cash in an amount equal to 25% of
the total purchase price and (ii) the other part shall be paid by delivery of an
unsecured promissory note of the Company, payable to the order of the Subject
Shareholder (or the personal representative, executor, or administrator of the
Subject Shareholder, as the case may be), and bearing interest at the Prime Rate
in effect on the date of the Closing PLUS three percentage points, with accrued
and unpaid interest being due on each principal installment payment date. The
principal amount of such note shall be payable in (i) eight (8) equal quarterly
installments if the original principal amount of the note is equal to or less
than $1,000,000, (ii) twelve (12) equal quarterly installments if the original
principal amount of the note is greater than $1,000,000 but equal to or less
than $1,500,000; (iii) sixteen (16) equal quarterly installments if the original
principal amount of the note is greater than $1,500,000 but equal to or less
than $2,000,000, or (iv) twenty (20) equal quarterly installments if the
original principal amount of the note is greater than $2,000,000. Payment of
quarterly installments shall commence on the first three month anniversary of
the closing date. The Company shall have the right to set off against the cash
portion of the purchase price paid at Closing the amount of any indebtedness,
including accrued but unpaid interest, then owed by the Subject Shareholder to
the Company.
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2.4 FAILURE TO DELIVER SHARES TO THE COMPANY. If a Shareholder becomes
obligated to sell any Shares to the Company or to the Other Shareholders under
this Agreement (the "Obligated Shareholder") and fails to deliver such Shares in
accordance with the terms of this Agreement, the Company or such Other
Shareholder may, in addition to all other remedies it may have, tender to the
Obligated Shareholder, at the address set forth in the stock transfer records of
the Company, the purchase price for such Offered Shares as is herein specified,
and (i) in the case of shares to be sold to the Company pursuant to this
Agreement, cancel such shares on its books and records whereupon all of the
Obligated Shareholder's right, title, and interest in and to such Shares shall
terminate, (ii) in the case of Shares to be sold to an Other Shareholder under
this Agreement, issue certificates representing such shares to the Other
Shareholder and register the Other Shareholder on its Company's books and
records as the record owner of the shares whereupon all of the Obligated
Shareholder's right, title, and interest in and to such shares shall terminate.
2.5 COMPANY'S INABILITY TO PURCHASE. If the Company shall become obligated
under either Sections 2.2 or 2.3 hereof to purchase the Shares of a Shareholder
and the Company at such time is unable to fulfill its obligations hereunder by
reason of the Company's commitments to creditors, the Company may assign its
rights or delegate its obligations hereunder to one or more other Shareholders
or Investors of the Company who may then perform all of the obligations of the
Company, and exercise all rights of the Company, with respect to the purchase of
such Shares; provided, however, such assignment and delegation shall not relieve
the Company of its obligations hereunder (including, without limitation, the
obligation to pay for the purchased Shares) upon the failure of such assignee or
delegatee to perform such obligations.
2.6 COMEALONG AND TAKEALONG RIGHTS OF MANAGEMENT SHAREHOLDERS.
(a) In the event an Investor proposes to sell, or otherwise dispose
of for value, more than twenty-five (25%) percent in value of the Warrants and
Warrant Shares owned by such Investor to (1) a third party, or, (2) directly or
indirectly, to the Company (for the purposes of this Section 2.6(a), a
"Transferee"), other than a transfer by an Investor that is a distribution or
partial distribution, without new consideration, of all or any part of the
Warrants and Warrant Shares owned by such Investor to the partners of such
Investor (for the purposes of this Section 2.6(a), the Warrants and Warrant
Shares to be sold are hereinafter referred to as the "Transfer Shares"), such
Investor shall require the Transferee, as a condition precedent to the
consummation of the sale or disposition of the Transfer Shares of such Investor
to the Transferee, to offer to acquire on the same terms as the proposed sale or
disposition from each Management Shareholder a number of Shares equal to the
product of (i) the number of Shares owned of record by such Management
Shareholder MULTIPLIED BY (ii) a fraction, the numerator of which is the number
of Transfer Shares such Investor proposes to sell or otherwise dispose of to the
Transferee, and the denominator of which is the total number of Shares owned
beneficially and of record by such Investor (for the purposes of this Section
2.6(a), such number of Shares is hereinafter referred to as the "Allocation
Shares"). For purposes of determining the numerator and denominator of the
fraction described in the preceding sentence, the number of Transfer Shares to
be sold by such Investor and the number of Shares owned of record or
beneficially by such Investor shall be determined on a Common Stock Equivalents
basis. Such Investor shall give written notice (for the purposes of this Section
2.6(a), the "Co-Sale Notice") to each Management Shareholder which shall
describe fully the terms of the proposed sale or disposition, the number of
Transfer Shares of such Investor to be sold or otherwise disposed of, and the
number of Allocation
11
Shares of each Management Shareholder eligible for co-sale, the name and address
of the Transferee, and the proposed closing date of the purchase and sale. The
Co-Sale Notice shall be signed by such Investor and by the Transferee and shall
be an irrevocable offer, open for thirty (30) days after receipt, of both
parties to acquire, as provided above, all Allocation Shares. Each Management
Shareholder shall have thirty (30) days after receipt of the Co-Sale Notice to
accept such offer as to all or a portion of the Allocation Shares and notify the
Transferee and such Investor in writing of the number of Allocation Shares, if
any, such Management Shareholder wishes to sell to the Transferee. Such Investor
may not consummate the proposed sale or disposition to the Transferee unless (x)
the sale of Allocation Shares pursuant to the co-sale right of each Management
Shareholder who timely accepts the offer of the Transferee is consummated or (y)
each Management Shareholder waives the right of co-sale as to all or part of the
Allocation Shares or (z) the irrevocable offer expires without acceptance by any
Management Shareholder after the thirty (30) day period. Such Investor and the
Transferee shall keep each Management Shareholder fully informed of the progress
of the sale proposed in the Co-Sale Notice.
(b) In the event a Management Shareholder proposes to sell, or
otherwise dispose of for value, more than twenty five (25%) percent in number of
the Shares owned by such Management Shareholder (1) to a third party other than
a transaction described in Section 1.16(c) or 1.16(d) or (2) directly or
indirectly, to the Company (for the purposes of this Section 2.6(b), a
"Transferee"), after compliance with the provisions of Section 2.2 hereof (for
the purposes of this Section 2.6(b), the Shares to be sold are hereinafter
referred to as the "Transfer Shares"), such Management Shareholder shall require
the Transferee, as a condition precedent to the consummation of the sale or
disposition of the Transfer Shares of such Management Shareholder to the
Transferee, to offer to acquire on the same terms as the proposed sale or
disposition from each Investor a number of outstanding Warrant Shares and
Warrant Shares issuable upon exercise of outstanding Warrants (defined as the
"Warrant Share Equivalents") equal to the product of (i) the number of Warrant
Share Equivalents owned of record by such Investor MULTIPLIED BY (ii) a
fraction, the numerator of which is the number of Transfer Shares such
Management Shareholder proposes to sell or otherwise dispose of to the
Transferee, and the denominator of which is the total number of Shares owned
beneficially and of record by such Management Shareholder (for the purposes of
this Section 2.6(b), such number of Warrant Share Equivalents is hereinafter
referred to as the "Allocation Shares"). For purposes of determining the
numerator and denominator of the fraction described in the preceding sentence,
the number of Transfer Shares to be sold by such Management Shareholder and the
number of Shares owned of record or beneficially by such Management Shareholder
shall be determined on a Common Stock Equivalents basis. Such Management
Shareholder shall give written notice (for the purposes of this Section 2.6(b),
the "Co-Sale Notice") to each Investor which shall describe fully the terms of
the proposed sale or disposition, the number of Transfer Shares of such
Management Shareholder to be sold or otherwise disposed of, and the number of
Allocation Shares of each Investor eligible for co- sale, the name and address
of the Transferee, and the proposed closing date of the purchase and sale. The
Co-Sale Notice shall be signed by such Management Shareholder and by the
Transferee and shall be an irrevocable offer, open for thirty (30) days after
receipt, of both parties to acquire, as provided above, all Allocation Shares.
Each Investor shall have thirty (30) days after receipt of the Co-Sale Notice to
accept such offer as to all or a portion of the Allocation Shares and notify the
Transferee and such Management Shareholder in writing of the number of
Allocation Shares, if any, such Investor wishes to sell to the Transferee. Such
Management Shareholder may not consummate the proposed sale or disposition to
the Transferee unless (x) the sale of Allocation Shares pursuant to the
12
co-sale right of each Investor who timely accepts the offer of the Transferee is
consummated or (y) each Investor waives the right of co-sale as to all or part
of the Allocation Shares or (z) the irrevocable offer expires without acceptance
by any Investor after the thirty (30) day period. Such Management Shareholder
and the Transferee shall keep each Investor fully informed of the progress of
the sale proposed in the Co-Sale Notice.
(c) In the event that the Investors, at any time after June 1, 1996,
negotiate in good faith a term sheet, letter of interest, or letter of intent
for the sale of all Preferred Stock, Warrants, and Warrant Shares owned by the
Investors as a group and all Shares owned by the Management Shareholders to a
non-affiliated buyer (such buyer is for the purposes of this Section 2.6(c), a
"Buyer") on terms acceptable to the Investors, in a transaction which is not an
offering which requires registration under the Act, the Investors shall notify
the Company and each of the Management Shareholders in writing of their receipt
of a term sheet, letter of interest, or letter of intent from a Buyer, stating
in such notice (the "Section 2.6(c) Notice") the details of the proposed
transaction, including (i) the name and address of the Buyer, (ii) the number of
Warrant Shares or rights to obtain Warrant Shares to be sold or transferred by
the Investors in the proposed transaction (which shall be all of the Warrants
and Warrant Shares held by the Investors), (iii) the number of shares of
Preferred Stock to be sold or transferred to the Buyer in the proposed
transaction (which shall be all of the Preferred Stock held by the Investors),
(iv) the total purchase price ("Total Proceeds") to be paid by the Buyer for all
outstanding shares of Preferred Stock, all outstanding Warrants, and all
outstanding Warrant Shares held by the Investors and all shares of Common Stock
by the Management Shareholders and their affiliates proposed to be sold or
transferred to the Buyer in the proposed transaction, (v) the allocation of the
Total Proceeds between the Preferred Stock on one hand and all outstanding
shares of the Common Stock and all outstanding Warrants and Warrant Shares on
the other, which allocation shall be made as follows: first, $100 per
outstanding share of Preferred Stock PLUS any accrued and unpaid Dividends on
each outstanding share of Preferred Stock, and second, the balance shall be
allocated equally per share to the then outstanding Common Stock, Warrants, and
Warrant Shares on a Common Stock Equivalent basis, such that each outstanding
share of Common Stock held by a Management Shareholder, and each Warrant Share
that is outstanding or issuable upon the exercise of an outstanding Warrant,
receives an identical per share allocation of the Total Proceeds, and (vi) the
terms and method of payment by the Buyer of the consideration to be paid for the
Preferred Stock, Common Stock, Warrants, and Warrant Shares to be sold or
transferred to the Buyer. A copy of the term sheet, letter of interest, or
letter of intent, shall be attached to the Section 2.6(c) Notice. The Management
Shareholders, acting by the vote of a majority of the Shares held by the
Management Shareholders, shall have thirty (30) days from receipt of the Section
2.6(c) Notice to consider the proposed transaction and (x) to deliver to the
Company and to each Investor, a Call Notice, which obligates the Company and the
Management Shareholders (on a joint and several basis) to redeem all outstanding
Preferred Stock, Warrants, and Warrant Shares then held by the Investors for the
same amount of consideration which the Investors would have received in the
proposed transaction, as specified in the Section 2.6(c) Notice in accordance
with subsection (v) of this Section 2.6(c), or (y) participate in the proposed
transaction, by each Management Shareholder selling to the Buyer, all Shares
owned by such Management Shareholder for the same consideration per share of
Common Stock held by a Management Shareholder as the consideration to be
received by the Investors for each Warrant Share outstanding or issuable upon
exercise of a Warrant, as specified in the Section 2.6(c) Notice, in accordance
with subsection (v) of this Section 2.6(c). In the event the Management
Shareholders holding a majority of the Shares held by Management Shareholders
elect,
13
within such thirty (30) day period, to pursue the alternative described in
subsection (x) in the preceding sentence and thereby decline to participate in
the proposed transaction, the Company and the Management Shareholders shall
deliver a Call Notice within such thirty (30) day period, which shall constitute
an irrevocable call option from the Company and the Management Shareholders (on
a joint and several basis) on the Preferred Stock and on the Warrants and
Warrant Shares held by the Investors for the amount of consideration which the
Investors would have received in the proposed transaction as specified in the
Section 2.6(c) Notice in accordance with subsection (v) of this Section 2.6(c).
Delivery of the Call Notice within such thirty (30) day period shall terminate
any obligation of the Management Shareholders to sell any Shares to the Buyer.
The closing of the transaction contemplated by the Call Notice by the Company
and the Management Shareholders shall be held at the principal office of the
Company in Coral Springs, Florida. The Company shall designate a closing date
and time, which date shall be not later than one hundred fifty (150) days after
the date of the Section 2.6(c) Notice as may be agreed upon by the Company and
Investors. At the closing of the transactions contemplated by the Call Notice,
the Investors shall deliver certificates duly endorsed or accompanied by duly
executed stock powers for the Preferred Stock, Warrants, and Warrant Shares
being purchased pursuant to this Section 2.6(c) and shall transfer the Preferred
Stock, Warrants, and Warrant Shares being purchased pursuant to this Section
2.6(c) to the purchasers thereof, free and clear of all liens, claims, charges,
or encumbrances, against payment for the Preferred Stock, Warrants, and Warrant
Shares, against payment of the amount of consideration payable therefor, payable
in cash or cash and notes, in each case having a value equal to the amount of
consideration which the Investors would have received in the proposed
transaction as specified in the Section 2.6(c) Notice in accordance with
subsection (v) of this Section 2.6(c). If on the other hand, the Management
Shareholders holding a majority of Shares owned by all Management Shareholders
fail to deliver a Call Notice within such thirty (30) day period, the Management
Shareholders shall have an irrevocable obligation to sell to the Buyer, on the
same terms and conditions as the Investors for the consideration specified in
the Section 2.6(c) Notice as aforesaid. The Investors shall keep the Management
Shareholders fully informed as to the status of the proposed transaction and
permit the Management Shareholders to participate in all negotiations with the
Buyer after the expiration of the thirty (30) day period which commences on the
date the Company receives the Section 2.6(c) Notice (assuming no Call Notice is
delivered to the Investors. The Investors and the Management Shareholders will,
in such event, use best efforts to consummate the proposed transaction with the
Buyer. The right of first refusal provided in Section 2.2 hereof shall be
inapplicable to any sale effected under this Section 2.6(c).
2.7 PURCHASE UPON DEATH.
Prior to a Public Offering, upon the death of any of Xxxxxx X. Xxxxxxx
("AJF"), Xxxxxx X. Xxxxxxx ("EWF") or Xxxxxx Xxxxx, Xx. ("XXXXX"), the Company
shall purchase from the surviving spouse of such individuals, or from the estate
of such individuals if their respective spouses shall not have survived them,
all Shares then owned by such individuals, either jointly with their respective
spouses or in their individual names. The Purchase Price for such Shares shall
be the par value thereof. The Company shall maintain life insurance policies on
the lives of each of AJF, EWF, and XXXXX in the amount of $1,000,000 each. The
beneficiaries of such policies shall be the spouses of the respective
individuals. Each of the spouses of such individuals, by their signatures hereto
agree to sell all Shares to the Company in accordance with the terms hereof. All
of the aforementioned individuals shall cause their respective last xxxxx and
testaments to be modified to
14
include an agreement for the sale of all Shares owned by such individuals to the
Company. In the event that the Company shall fail to maintain such policies or
if the proceeds thereof shall not be paid to the respective spouses, the
agreement of the spouses to such sale shall lapse.
3. RESTRICTIVE COVENANTS.
3.1 COVENANT NOT TO COMPETE. Each Management Shareholder separately
covenants and agrees with the Company that, for so long as such Management
Shareholder is employed by the Company, and for a period of one (1) year
following the termination, for whatever reason, of such employment, such party
will not, either directly or indirectly, on such party's own behalf or in the
service of others in the territorial United States:
(a) engage in the Business of the Company as an officer, director,
executive, managerial employee, consultant to, representative of, agent of,
partner, or stockholder of a Competitor (other than as owner of less than five
(5%) percent of the outstanding voting securities of an entity whose voting
securities are traded or quoted on a national securities exchange or the
National Association of Securities Dealers Automated Quotation System);
(b) solicit or attempt to solicit for the benefit of a Competitor,
the Business of the Company from any person, firm, or entity that was a customer
of the Company while Management Shareholder was an employee of the Company; or
(c) hire, solicit, or induce away, or attempt to hire, solicit, or
induce away, for the benefit of a Competitor any person employed by the Company,
whether such employment is at will or for a stated period.
3.2 PROPRIETARY INFORMATION.
(a) Each Management Shareholder acknowledges and agrees that all
Proprietary Information, and all physical embodiments thereof, are confidential
to and shall be and remain the sole and exclusive property of the Company and
that any Proprietary Information produced by the Management Shareholder during
the period of the Management Shareholder's employment by the Company shall be
considered "work for hire" as such term is defined in 17 U.S.C. Section 101, ET.
SEQ., the ownership and, if applicable, the copyright of which shall be vested
solely in the Company. Each Management Shareholder agrees (i) immediately to
disclose to the Company all Proprietary Information developed in whole or part
by such Management Shareholder during the term of such Management Shareholder's
employment by the Company, and (ii) at the request and expense of the Company,
to do all things and sign all documents or instruments reasonably necessary in
the opinion of the Company to eliminate any ambiguity as to the exclusive rights
of the Company in such Proprietary Information including, without limitation,
providing to the Company such Management Shareholder's full cooperation in any
litigation or other proceeding to establish, protect, or obtain such exclusive
rights. Upon request by the Company, and in any event upon Termination of
Employment, such Management Shareholder shall promptly deliver to the Company,
and shall not retain or transmit to any other party or parties, all property
belonging to the Company including, without limitation, all Proprietary
Information (and all embodiments thereof) then in such Management Shareholder's
custody, control, or possession.
15
(b) Each Management Shareholder agrees that all Proprietary
Information received or developed by such Management Shareholder as a result of
such Management Shareholder's employment or association with the Company will be
held in trust and kept in the strictest confidence, that such Management
Shareholder will protect such Proprietary Information from disclosure, and that
such Management Shareholder will not use, reproduce, distribute, disclose, or
otherwise disseminate, by electronic or other means, the Proprietary Information
or any physical embodiments thereof, except in connection with such Management
Shareholder's employment hereunder, without the Company's prior written consent.
The obligations of confidentiality contained in this Agreement with respect to
all Proprietary Information will apply during such Management Shareholder's
employment by the Company and at any and all times after expiration or
termination (for whatever reason) of such employment.
3.3 ENFORCEMENT. In the event of final adjudication of a breach or
contemplated breach of the covenants and agreements set forth in Sections 3.1
and 3.2 above, the Company shall have the right, in addition to all other rights
or remedies available to it at law or in equity, to set off against and deduct
from any monies then payable or thereafter to become payable to the breaching
Shareholder pursuant to Section 2 hereof, the amount of any damages suffered or
incurred by the Company as a result of such breach. In addition, the Company
shall be entitled to preliminary and permanent injunctive relief against the
breaching Shareholder to prevent or enjoin an actual or threatened breach of
such covenants and agreements or the continuation thereof by such Shareholder.
4. CORPORATE GOVERNANCE
4.1 VOTING AGREEMENTS AND RIGHTS.
(a) For so long as this Agreement remains in effect, and no
Two-Dividend Default, as defined in the Amended and Restated Articles of
Incorporation of the Company as in effect on the date hereof has occurred, each
Shareholder agrees to vote all Shares the voting of which is under the control
of such Shareholder in the following manner:
(i) To maintain a Board of Directors consisting of four (4)
members, unless otherwise agreed to by all Shareholders in writing;
(ii) To cause AJF to be elected as a Director of the Company
for so long as AJF is a holder of Common Stock;
(iii) To cause two persons designated in writing by the
Management Shareholders holding a majority of the Shares held by the
Management Shareholders and their Affiliates (the "Management Shareholder
Nominees") to be elected as Directors of the Company; and
(iv) To cause a person designated in writing by the Investors
holding a majority of the outstanding shares of Preferred Stock and
Warrant Shares (the "Investor Nominee") to be elected as a director of the
Company.
16
(b) As of the date hereof, the Management Shareholder Nominees are
EWF and XXXXX and the Investor Nominee is Xxxxxxxxxxx Xxxxxx. This designation
shall remain in effect until a new designation is delivered in writing to the
Corporation and each party to this Agreement. A new designation shall be
effective when delivered. The Management Shareholders and the Investors will
each use reasonable efforts to notify all other Shareholders at least three (3)
days prior to any meeting (or written action in lieu of a meeting) of
stockholders of the Company at or by which directors are to be elected, if the
director nominee will change from the Nominee set forth in this sub section (b).
(c) The Investor Nominee shall be appointed to fill the vacancy
created on the Board of Directors by the filing of the Company's Amended and
Restated Articles of Incorporation with the Department of State of the State of
Florida effective upon the execution of this Agreement.
(d) In the event that either a Management Shareholder Nominee or the
Investor Nominee shall cease to serve as a director of the Company for any
reason, the Management Shareholders or the Investors, which ever is applicable,
shall have the right to appoint a successor nominee. The Shareholders shall use
their best efforts to ensure that such successor nominee is duly appointed and
elected to fill such vacancy in the manner provided in the Bylaws of the
Company.
(e) From and after the occurrence of a Two-Dividend Default, the
Investors and the Management Shareholders shall have the voting rights set forth
in the Amended and Restated Articles of Incorporation.
4.2 LIMITATION ON CERTAIN ACTIONS.
(a) The Shareholders agree that, with regard to any matter which
requires stockholder action, or which the Board of Directors desires to obtain
stockholder consent, the action by the Shareholders shall be taken (i) by
written consent in lieu of a meeting and such written consent action is approved
in writing by the holders of a majority of the then outstanding shares of
Preferred Stock consenting as a separate class, in accordance with the Bylaws of
the Company or (ii) a meeting of Shareholders duly called and held in accordance
with the Bylaws of the Company.
(b) The Shareholders agree that no action shall be taken by the
Board of Directors unless such action is taken (i) by written consent in lieu of
a meeting or (ii) at a meeting duly called and held in accordance with the
Bylaws of the Company.
(c) The Shareholders agree that no dividend shall be payable on or
with respect to the Common Stock without the written consent of the Director or
Directors nominated by the Investors.
4.3 RIGHT TO PURCHASE NEW SECURITIES. The Company hereby grants to each
Shareholder the right to purchase a pro rata share of any New Securities, as
hereinafter defined (the "Purchase Right"), which the Company may, from time to
time, propose to sell and issue. A pro rata share, for purposes of this Purchase
Right, is a fraction, the numerator of which is the number of Common Stock
Equivalents then held by a Shareholder, and the denominator of which is the
total number of Common Stock Equivalents then outstanding.
17
(a) Except as set forth below, "New Securities" shall mean any
shares of capital stock of the Company including Common Stock and Preferred
Stock, whether now authorized or not, and any rights, options, or warrants to
purchase said shares of Common Stock or Preferred Stock, and securities of any
type that are, or may become, convertible into said shares of Common Stock or
Preferred Stock. Notwithstanding the foregoing, "New Securities" does not
include: (i) securities offered to the public generally pursuant to a
registration statement filed pursuant to the Securities Act, or pursuant to
Regulation A under the Securities Act; (ii) securities issued pursuant to the
acquisition of another corporation by the Company by a merger, share exchange,
the purchase of substantially all of the assets, or other reorganization whereby
the Company or its shareholders own not less than fifty-one percent (51%) of the
voting power of the surviving or successor corporation; (iii) shares of Common
Stock or related options convertible into such Common Stock issued to employees
of, officers, and directors of the Company pursuant to any plan or arrangement
approved by the Board of Directors of the Company; (iv) securities issued
pursuant to any rights or agreements including without limitation convertible
securities, options, and warrants, provided that the Purchase Right under this
Section 4.3 applies with respect to the initial sale of New Securities or the
grant by the Company of such rights or agreements; (v) securities issued in
connection with any stock split, stock dividend, or recapitalization by the
Company; (vi) securities issued pursuant to the anti-dilution provisions of any
now or hereafter outstanding option, warrant, right, or convertible security; or
(vii) as a dividend in kind on the Preferred Stock.
(b) In the event the Company proposes to undertake an issuance of
New Securities, it shall give each Shareholder written notice of its intention,
describing the type of New Securities, and the price and terms upon which the
Company proposes to issue the New Securities. Each Shareholder shall have
fifteen (15) days from the date of receipt of any such notice to agree to
purchase up to its respective pro rata portion of shares of such New Securities
for the price and upon the terms specified in the notice by giving written
notice to the Company of such Shareholder's intentions and stating therein the
quantity of New Securities to be purchased by such Shareholder.
(c) In the event a Shareholder fails to exercise the Purchase as
provided herein within said fifteen (15) day period, the Company shall have
ninety (90) days thereafter to sell or enter into a written agreement (pursuant
to which the sale of New Securities covered thereby shall be completed, if at
all, within sixty (60) days from the date of said agreement) to sell the New
Securities not elected to be purchased by the Shareholders at a price and upon
such terms which are no more favorable to the purchaser of such New Securities
than specified in the Company's notice to the Shareholders. In the event the
Company has not sold the New Securities or entered into a written agreement to
sell the New Securities within said ninety (90) day period (or completed the
sale of the New Securities within sixty (60) days from the date of said
agreement, as provided above), the Company shall not thereafter issue or sell
any New Securities without first offering such securities in the manner provided
in this Section 4.3.
(d) The Right to Purchase New Securities granted to a Shareholder
under this Section 4.3 shall expire upon the first to occur of the following:
(i) the closing of the first public offering of the Common Stock of the Company
to the general public which is effected pursuant to a registration statement
filed with, and declared effective by, the Commission under the Securities Act
or (ii) the date such Shareholder no longer owns any Shares.
18
5. REGISTRATION RIGHTS.
5.1 DEMAND REGISTRATION. Investors holding not less than one-half of the
shares of Restricted Stock then held by Investors, may request the Company to
register under the Securities Act not less than one-half of all shares of
Restricted Stock then held by the Investors as a group for sale in the manner
specified in such notice (shares of Restricted Stock issuable upon exercise of
any option, warrant, or right which is then immediately exercisable and shares
of Restricted Stock issuable upon conversion of any convertible security which
is then immediately convertible, shall be deemed held by such Investor for the
purposes of this Section 5.1). Notwithstanding anything to the contrary
contained herein, no request may be made under this Section 5.1 within six
months after the effective date of a registration statement filed by the Company
covering a firm commitment underwritten public offering in which the Investors
shall have been entitled to join pursuant to Sections 5.2 or 5.3 hereof, and in
which there shall have been effectively registered all shares of Restricted
Stock as to which registration shall have been requested by such Investors. If
the Company receives a notice from an Investor or Investors that imposes on the
Company the registration obligations of this Section 5.1, and if, in the
reasonable opinion of the Board of Directors of the Company the general market
conditions are not appropriate at the time for an offering, the Company may, at
its option, delay the commencement of the performance of the Company's
obligation pursuant to this Section 5.1 for up to one hundred twenty (120) days.
If an Investor specifies in the notice, that the method of disposition of the
Restricted Stock shall be an underwritten public offering, the Investor may
designate the managing underwriter of such offering, subject to the approval of
the Company, which approval shall not be unreasonably withheld or delayed. The
Company shall be obligated to register Restricted Stock pursuant to this Section
5.1 on two occasions only (irrespective of the number of Investors requesting
such registration), PROVIDED, HOWEVER, that such obligation shall be deemed
satisfied only when a registration statement covering shares of Restricted
Stock, for sale in accordance with the method of disposition specified by the
requesting Investor, shall have become effective and, if such method of
disposition is a firm commitment underwritten public offering, such shares shall
have been sold pursuant thereto. The Company shall be entitled to include in any
registration statement referred to in this Section 5.1 for sale in accordance
with the method of disposition specified by the requesting Investor, shares of
Common Stock to be sold by the Company for its own account, except as and to the
extent that in the opinion of the managing underwriter (if such method of
disposition shall be an underwritten public offering), such inclusion would
adversely affect the marketing of the Restricted Stock to be sold. Except for
registration statements on Forms S-4 or S-8, or any successor thereto, the
Company will not file with the Commission any other registration statement with
respect to its Common Stock, whether for its own account or that of other
stockholders, from the date of receipt of a notice from the requesting Investor
pursuant to this Section 5.1 until the completion of the period of distribution
of the registration contemplated thereby.
5.2 PIGGYBACK REGISTRATION. If the Company at any time proposes to
register any of its securities under the Securities Act for sale to the public,
whether for its own account or for the account of other security holders or both
(except with respect to registration statements on Forms S-4 or S-8 or another
form not available for registering the Restricted Stock for sale to the public),
each such time it will give written notice to each Shareholder of its intention
so to do. Upon the written request of Shareholders received by the Company
within 30 days after the giving of any such notice by the Company, to register
such number of shares of Restricted Stock held by each Shareholder (or
19
by persons taking from such Shareholder pursuant to a Permitted Disposition)
specified in such written request, the Company will cause the Restricted Stock
as to which registration shall have been so requested to be included in the
securities to be covered by the registration statement proposed to be filed by
the Company, all to the extent requisite to permit the sale or other disposition
by each Shareholder (in accordance with its written request) of such Restricted
Stock so registered. In the event that any registration pursuant to this Section
5.2 shall be, in whole or in part, an underwritten public offering of Common
Stock, the number of shares of Restricted Stock to be included in such an
underwriting may be reduced if and to the extent that the managing underwriter
shall be of the opinion that such inclusion would adversely affect the marketing
of the securities to be sold by the Company therein. In the event such a
reduction is necessary, (i) all Shareholders proposing to sell Restricted Stock
in the offering shall bear the reduction on a pro-rata basis, based on the
number of shares of Restricted Stock each Shareholder proposed to offer for sale
in the Offering, or (ii) Shareholders holding a majority of the Shares may elect
to withdraw from such registration all shares of Restricted Stock held by
Shareholders as to which registration was requested. Notwithstanding the
foregoing provisions, the Company may withdraw any registration statement
referred to in this Section 5.2 without thereby incurring any liability to any
Shareholder.
5.3 REGISTRATION ON FORM S-3. If at any time a Shareholder shall request
that the Company file a registration statement on Form S-3 or any successor
thereto for a public offering of shares of Restricted Stock then held by such
Shareholder and the Company is a registrant entitled to use Form S-3 or any
successor thereto to register such shares, then the Company shall use its best
efforts to register under the Securities Act on Form S-3 or any successor
thereto, for public sale in accordance with the method of disposition specified
in such notice, the number of shares of Restricted Stock specified in such
notice. Whenever the Company is required by this Section 5.3 to use its best
efforts to effect the registration of Restricted Stock, each of the procedures
and requirements of Section 5.4 hereof shall apply to such registration,
PROVIDED, HOWEVER, that there shall be no limitation on the number of
registrations on Form S-3 which may be requested and obtained under this Section
5.3, and PROVIDED, FURTHER, HOWEVER, that the Company shall not be required to
effect (i) more than one such registration in each six month period and (ii) any
registration under this Section 5.3 that would require the Company to expedite
the preparation or audit of its financial statements.
5.4 REGISTRATION PROCEDURES. If and whenever the Company is required by
the provisions of Section 5.1, 5.2, or 5.3 hereof to use its best efforts to
effect the registration of any shares of Restricted Stock under the Securities
Act, the Company will, as expeditiously as possible:
(a) prepare and file with the Commission a registration statement
(which, in the case of an underwritten public offering pursuant to Section 5.1
or 5.2 hereof, shall be on Form X-0, Xxxx X-0, any successor forms thereto, or
other form of general applicability satisfactory to the managing underwriter
selected as herein provided) with respect to such securities and use its best
efforts to cause such registration statement to become and remain effective for
the period of the distribution contemplated thereby (determined as hereinafter
provided);
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
the period of distribution and comply with the provisions
20
of the Securities Act with respect to the disposition of all Restricted Stock
covered by such registration statement in accordance with the intended method of
disposition set forth in such registration statement for such period;
(c) furnish to each Shareholder and to each underwriter such number
of copies of the registration statement and the prospectus included therein
(including each preliminary prospectus) as such persons reasonably may request
in order to facilitate the public sale or other disposition of the Restricted
Stock covered by such registration statement;
(d) use its best efforts to register or qualify the Restricted Stock
covered by such registration statement under the securities or "blue sky" laws
of such jurisdictions as the Shareholders, or, in the case of an underwritten
public offering, the managing underwriter reasonably shall request, PROVIDED,
HOWEVER, that the Company shall not for any such purpose be required to qualify
generally to transact business as a foreign corporation in any jurisdiction
where it is not so qualified or to consent to general service of process in any
such jurisdiction;
(e) use its best efforts to list the Restricted Stock covered by
such registration statement with any securities exchange or NASDAQ on which the
Common Stock of the Company is then listed or quoted;
(f) notify each selling Shareholder at any time when a prospectus
relating to Restricted Stock is required to be delivered under the Securities
Act of the happening of any event as a result of which the prospectus included
in such registration statement contains an untrue statement of a material fact
or omits any fact necessary to make the statements therein not misleading, and,
at the request of any such Shareholder, the Company will prepare a supplement or
amendment to such prospectus so that, as thereafter delivered to the purchasers
of such Restricted Stock, such prospectus will not contain an untrue statement
of a material fact or omit to state any fact necessary to make the statements
therein not misleading; provided that the 180-day period described below will be
tolled from the time a prospectus contains such a statement or omission until a
prospectus correcting such statement or omission has been delivered to the
Shareholders and may be delivered to the purchasers of such Restricted Stock in
compliance with the Securities Act;
(g) notify the selling Shareholders immediately, and confirm the
notice in writing, (1) when the registration statement becomes effective, (2) of
the issuance by the Commission of any stop order or of the initiation, or the
threatening, of any proceedings for that purpose, (3) of the receipt by the
Company of any notification with respect to the suspension of qualification of
the Restricted Stock for sale in any jurisdiction or of the initiation, or the
threatening, of any proceedings for that purpose, and (4) of the receipt of any
comments, or requests for additional information, from the Commission or any
state regulatory authority. If the Commission or any state regulatory authority
shall enter such a stop order or order suspending qualification at any time, the
Company will promptly use its best reasonable efforts to obtain the lifting of
such order; and
(h) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its security
holders as soon as reasonably practicable, but not later than 15 months after
the effective date of the registration statement, an earnings statement covering
a period of at least 12 months beginning after the effective date of the
21
registration statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act.
For purposes hereof, the period of distribution of Restricted Stock
in a firm commitment underwritten public offering shall be deemed to extend
until each underwriter has completed the distribution of all securities
purchased by it, and the period of distribution of Restricted Stock in any other
registration shall be deemed to extend until the earlier of the sale of all
Restricted Stock covered thereby or 180 days after the effective date thereof.
In connection with each registration hereunder, each Shareholder
will furnish to the Company in writing such information with respect to it as a
stockholder as reasonably shall be necessary in order to assure compliance with
federal and applicable state securities laws.
In connection with each registration pursuant to Section 5.1, 5.2,
or 5.3 hereof covering an underwritten public offering, the Company and each
Shareholder agree to enter into a written agreement with the managing
underwriter selected in the manner herein provided in such form and containing
such provisions as are customary in the securities business for such an
arrangement between such underwriter and companies of the Company's size and
investment stature.
5.5 EXPENSES. All reasonable expenses incurred by the Company in complying
with Section 5.1, 5.2, or 5.3 hereof, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel and independent public accountants for the Company, fees and expenses
(including counsel fees) incurred in connection with complying with state
securities or "blue sky" laws, fees of the National Association of Securities
Dealers, Inc., transfer taxes, fees of transfer agents and registrars, costs of
insurance, and fees and disbursements of one counsel for the sellers of
Restricted Stock , but excluding any Selling Expenses, are called "Registration
Expenses". All underwriting discounts and selling commissions applicable to the
sale of Restricted Stock are called "Selling Expenses".
(a) The Company shall pay all Registration Expenses attributable to
the shares of Restricted Stock of Shareholders included in the Registration in
connection with each registration statement under Section 5.1, 5.2, or 5.3
hereof.
(b) All Selling Expenses in connection with each registration
statement under Section 5.1, 5.2, or 5.3 hereof shall be borne by the
Shareholders and any other selling stockholder in proportion to the number of
shares sold by each Shareholder, or by such other selling stockholders.
5.6 INDEMNIFICATION AND CONTRIBUTION.
(a) In the event of a registration of any of the Restricted Stock
under the Securities Act pursuant to Section 5.1, 5.2, or 5.3 hereof, the
Company will indemnify and hold harmless each Shareholder, its directors and its
officers (provided any such Shareholder is a seller of Restricted Stock
thereunder), each underwriter of such Restricted Stock thereunder, and each
other person, if any, who controls such Shareholder, its directors and its
officers or underwriter within the meaning of the Securities Act, against any
losses, claims, damages, or liabilities, joint or several, to which such
Shareholder, its directors and officers, such underwriter or such person may
become
22
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which any shares of Restricted
Stock were registered under the Securities Act pursuant to Section 5.1, 5.2, or
5.3 hereof, any preliminary prospectus or final prospectus contained therein, or
any amendment or supplement thereof, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
will reimburse each such Shareholder, its directors and officers, each such
underwriter and each such person for any legal or other expenses reasonably
incurred by any of them in connection with investigating or defending any such
loss, claim, damage, liability, or action, provided, however, that the Company
will not be liable in any such case if and to the extent that any such loss,
claim, damage, or liability arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission so made in
conformity with information furnished by such Shareholder, its directors and its
officers, such underwriter and such person in writing specifically for use in
such registration statement or prospectus.
(b) In the event of a registration of any of the shares of
Restricted Stock under the Securities Act pursuant to Section 5.1, 5.2, or 5.3
hereof, each Shareholder including Shares of Restricted Stock in such
Registration, severally but not jointly, will indemnify and hold harmless the
Company, each person, if any, who controls the Company within the meaning of the
Securities Act, each officer of the Company who signs the registration
statement, each director of the Company, each underwriter, and each person who
controls any underwriter within the meaning of the Securities Act, against all
losses, claims, damages, or liabilities, joint or several, to which the person
may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in the registration statement under which any shares of
Restricted Stock were registered under the Securities Act pursuant to Section
5.1, 5.2, or 5.3 hereof, any Preliminary Prospectus, or final Prospectus
contained therein, or any amendment thereof or supplement thereto, or arise out
of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse the Company and each such officer,
director, underwriter, and controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability, or action, provided, however, that each
such Shareholder will be liable hereunder in any such case if and only to the
extent that any such loss, claim, damage, or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in reliance upon and in conformity with information pertaining to
such Shareholder, as such, respectively, furnished in writing to the Company by
such Shareholder specifically for use in such registration statement or
prospectus, and provided, further, however, that the respective liability of
each Shareholder hereunder shall be limited to the proportion of any such loss,
claim, damage, liability, or expense which is equal to the proportion that the
public offering price of the shares sold by such Shareholder, under such
registration statement bears to the total public offering price of all
securities sold thereunder, but not in any event to exceed the proceeds received
by such Shareholder from the sale of shares of Restricted Stock or covered by
such registration statement. In no event will any Shareholder be required to
enter into any agreement or undertaking in connection with any registration
under this Agreement providing for any
23
indemnification or contribution obligation on the part of such Shareholder
greater than such Shareholder's obligation under this Section 5.
(c) Promptly after receipt by an indemnified party hereunder of
notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing thereof, but the omission so to notify
the indemnifying party shall not relieve it from any liability which it may have
to such indemnified party other than under this Section 5 and shall only relieve
it from any liability which it may have to such indemnified party under this
Section 5 if and to the extent the indemnifying party is prejudiced by such
omission. In case any such action shall be brought against any indemnified party
and it shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate in and, to the extent it
shall wish, to assume and undertake the defense thereof with counsel
satisfactory to such indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election so to assume and undertake the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under this Section 5.6 for any legal expenses subsequently incurred by
such indemnified party in connection with the defense thereof other than
reasonable costs of investigation and of liaison with counsel so selected,
provided, however, that, if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be reasonable defenses available to it
which are different from or additional to those available to the indemnifying
party or if the interests of the indemnified party reasonably may be deemed to
conflict with the interests of the indemnifying party, the indemnified party
shall have the right to select a separate counsel and to assume such legal
defenses and otherwise to participate in the defense of such action, with the
expenses and fees of such separate counsel and other expenses related to such
participation to be reimbursed by the indemnifying party as incurred.
(d) In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which either (i) any holder of
Restricted Stock exercising rights under this Agreement, or any controlling
person of any such holder, makes a claim for indemnification pursuant to this
Section 5 but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 5 provides for
indemnification in such case, or (ii) contribution under the Securities Act may
be required on the part of any such selling holder or any such controlling
person in circumstances for which indemnification is provided under this Section
5 then, and in each such case, the Company and such holder will contribute to
the aggregate losses, claims, damages, or liabilities to which they may be
subject (after contribution from others) in such proportion so that such holder
is responsible for the portion represented by the percentage that the public
offering price of its Restricted Stock offered by the registration statement
bears to the public offering price of all securities offered by such
registration statement, and the Company is responsible for the remaining
portion; provided, however, that, in any such case, (A) no such holder will be
required to contribute any amount in excess of the proceeds received from sale
of Restricted Stock offered by it pursuant to such registration statement; and
(B) no person or entity guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) will be entitled to contribution
from any person or entity who was not guilty of such fraudulent
misrepresentation.
24
5.7 CHANGES IN COMMON STOCK. If, and as often as, there is any change in
the Common Stock by way of a stock split, stock dividend, combination or
reclassification, or through a merger, consolidation, reorganization or
recapitalization, or by any other means, appropriate adjustment shall be made in
the provisions hereof so that the registration rights granted in this Section 5
shall continue with respect to the Common Stock as so changed.
5.8 RULE 144 REPORTING. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit the
sale of the Restricted Stock to the public without registration, at all times
after ninety (90) days after any registration statement covering a public
offering of securities of the Company under the Securities Act shall have become
effective, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act;
(b) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act; and
(c) furnish to each Shareholder of Restricted Stock forthwith upon
request a written statement by the Company as to its compliance with the
reporting requirements of such Rule 144 and of the Securities Act and the
Exchange Act, a copy of the most recent annual or quarterly report of the
Company, and such other reports as such Shareholder may reasonably request in
availing itself of any rule or regulation of the Commission allowing such
Shareholder to sell any Restricted Stock without registration.
5.9 TRANSFER OF REGISTRATION RIGHTS. The rights to cause the Corporation
to register securities granted the Shareholders under Section 5 hereof may be
assigned to a transferee or assignee in connection with any transfer or
assignment of Restricted Stock provided that: (i) such transfer may otherwise be
effected in accordance with applicable securities laws, and (ii) such assignee
or transferee acquires at least one-half of the shares of Restricted Stock
(appropriately adjusted for stock split or recapitalization) then held by such
Shareholder. Notwithstanding the foregoing, the rights to cause the Company to
register securities may be assigned to any shareholder, partner, or affiliate of
an Investor without compliance with item (ii) above, provided written notice
thereof is promptly given to the Company.
5.10 STANDOFF AGREEMENT. Each Shareholder agrees, so long as such
Shareholder holds at least five percent (5%) of the Company's outstanding voting
equity securities, in connection with the Company's initial public offering,
upon request of the Company or the underwriters managing any underwritten
offering of the Company's securities, not to sell, make any short sale of, loan,
grant any option for the purchase of, or otherwise dispose of any Restricted
Stock (other than those included in the registration) without the prior written
consent of the Company or such underwriters, as the case may be, for such period
of time (not to exceed ninety (90) days from the effective date of such
registration as may be requested by the underwriters; provided that the
officers, directors, and all five percent or greater shareholders of the Company
also agree to such restrictions.
25
6. GENERAL PROVISIONS
6.1 TERM. This Agreement shall terminate and be of no force and effect,
unless extended as provided herein, upon the first to occur of (a) the passage
of twenty (20) years from the date of this Agreement, (b) the effective date of
a written agreement signed by all of the parties hereto providing for the
termination of this Agreement, or (c) the effective date of a Public Offering.
6.2 LEGEND. During the term of this Agreement, each certificate
representing the Shares shall bear the following legend, or a similar legend
deemed by the Company to constitute an appropriate notice of the provisions
hereof and the applicable security laws (any such certificate not having such
legend shall be surrendered upon demand by the Company and so endorsed):
On the face of the certificate:
"TRANSFER OF THIS STOCK IS RESTRICTED IN ACCORDANCE WITH CONDITIONS PRINTED ON
THE REVERSE OF THIS CERTIFICATE."
On the reverse:
"THE SHARES OF STOCK EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO AND
TRANSFERRABLE ONLY IN ACCORDANCE WITH THAT CERTAIN SHAREHOLDERS AGREEMENT BY AND
AMONG TRANSEASTERN PROPERTIES OF SOUTH FLORIDA, INC. (THE "COMPANY") AND THE
STOCKHOLDERS THEREOF, DATED JUNE 2, 1993, A COPY OF WHICH IS ON FILE AT THE
PRINCIPAL OFFICE OF THE COMPANY IN CORAL SPRINGS, FLORIDA. NO TRANSFER OR PLEDGE
OF THE SHARES EVIDENCED HEREBY MAY BE MADE EXCEPT IN ACCORDANCE WITH AND SUBJECT
TO THE PROVISIONS OF SAID AGREEMENT. BY ACCEPTANCE OF THIS CERTIFICATE, ANY
HOLDER, TRANSFEREE OR PLEDGEE HEREOF AGREES TO BE BOUND BY ALL OF THE PROVISIONS
OF SAID AGREEMENT."
"SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED BY THE
HOLDER FOR INVESTMENT PURPOSES ONLY AND NOT FOR RESALE, TRANSFER OR
DISTRIBUTION, HAVE BEEN ISSUED PURSUANT TO EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF APPLICABLE STATE AND FEDERAL SECURITIES LAWS, AND MAY NOT BE
OFFERED FOR SALE, SOLD OR TRANSFERRED OTHER THAN PURSUANT TO EFFECTIVE
REGISTRATION UNDER SUCH LAWS, OR IN TRANSACTIONS OTHERWISE IN COMPLIANCE WITH
SUCH LAWS, AND UPON EVIDENCE SATISFACTORY TO THE COMPANY OF COMPLIANCE WITH SUCH
LAWS, AS TO WHICH THE COMPANY MAY RELY UPON AN OPINION OF COUNSEL SATISFACTORY
TO THE COMPANY."
Each Shareholder shall promptly surrender the certificates representing his/her
Shares to the Company so that the Company may affix the foregoing legends
thereto. A copy of this Agreement shall be kept on file in the principal office
of the Company in Coral Springs, Florida. Upon termination of all applicable
restrictions set forth herein and upon tender to the Company of the appropriate
stock certificates, the Company shall reissue to the holder of such stock
certificates new stock certificates which shall contain only the second
paragraph of the restrictive legend set forth above. The parties to this
Agreement intend that the legend conform to the applicable provisions of the
Uniform Commercial Code of Florida and the Florida Business Corporation Act.
This legend may be modified from time to time by the Board of Directors of the
Company to conform to such statutes or to this Agreement.
26
6.3 EXTENSION OF TERM. This Agreement may be extended for additional ten
(10) year periods if all Shareholders bound by this Agreement at the time of the
extension so agree in writing.
6.4 CONTINUATION OF EMPLOYMENT. Nothing in this Agreement shall create an
obligation on the Company to continue the employment of a Shareholder with the
Company or any Affiliate of the Company.
6.5 SPECIFIC ENFORCEMENT. The Shareholders expressly agree that they will
be irreparably damaged if this Agreement is not specifically enforced. Upon a
breach or threatened breach of the terms, covenants and/or conditions of this
Agreement by any Shareholder, any other Shareholder shall, in addition to all
other remedies available with respect to such breach, be entitled to a temporary
or permanent injunction, without showing any actual damage, and/or a decree for
specific performance, in accordance with the provisions hereof.
6.6 NOTICES. All notices, requests, consents, and other communications
required or permitted hereunder shall be in writing and shall be effective when
delivered in person or one day after deposit with a nationally recognized
overnight delivery carrier properly addressed and prior to its deadline for
receipt of overnight packages, or five days after deposit in the U.S. Mails,
certified or registered mail, return receipt requested, postage prepaid, in each
case addressed as follows (or at such other address for the parties as shall be
specified by like notice):
(a) if to the Company:
Transeastern Properties of South Florida, Inc.
0000 Xxxxx Xxxx
Xxxxx 000
Xxxxx Xxxxxxx, Xxxxxxx
Attn: President
with a copy (which shall not constitute notice) to:
Xxxxxx & Xxxxxxx
185 Northwest Spanish Xxxxx Xxxxxxxxx
Xxxxx 000
Xxxx Xxxxx, Xxxxxxx 00000
Attn: Xxxx Xxxxxx, Esq.
(b) if to a Shareholder, to the Shareholder's address as
reflected in the stock records of the Company or as the Shareholders
shall designate to the Company in writing, with a copy (which shall
not constitute notice) to Powell, Goldstein, Xxxxxx & Xxxxxx,
Sixteenth Floor, 000 Xxxxxxxxx Xxxxxx, X.X., Xxxxxxx, XX 00000,
Attn: Xxxxxxx X. Xxxxxxx XX, Esq.
27
(c) if to an Investor, to the Investor's address as reflected
in the stock records of the Company or as the Investors shall
designate to the Company in writing, with a copy (which shall not
constitute notice) to Powell, Goldstein, Xxxxxx & Xxxxxx, Sixteenth
Floor, 000 Xxxxxxxxx Xxxxxx, X.X., Xxxxxxx, XX 00000, Attn: Xxxxxxx
X. Xxxxxxx XX, Esq.
6.7 ASSIGNMENT. This Agreement shall not be assignable by any of the
parties hereto without the written consent of the other parties.
6.8 GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the internal laws of the State of Florida, irrespective of the
choice of law provisions thereof.
6.9 AMENDMENT. This Agreement may be amended, supplemented or interpreted
at any time, but only by a written instrument executed by all the parties
hereto.
6.10 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
6.11 ENTIRE AGREEMENT. This Agreement, together with other documents
delivered pursuant hereto or incorporated by reference herein, contain the
entire agreement between the parties hereto concerning the transactions
contemplated herein and supersede all prior agreements or understandings between
the parties hereto relating to the subject matter hereof. No oral
representation, agreement, or understanding made by any party hereto shall be
valid or binding upon such party or any other party hereto.
6.12 EFFECT OF OTHER LAWS AND AGREEMENTS. The rights and obligations of
the parties under this Agreement shall be subject to any restrictions on the
purchase of stock which may be imposed by the Florida Business Corporation Act
or any agreement now or hereafter entered into between the Company and any
financial institution with respect to loans or other financial accommodations
made to the Company. Nothing contained herein shall be deemed to limit the
obligations and duties imposed upon officers and directors in accordance with
state and federal laws.
6.13 FURTHER ASSURANCE. Each party hereto shall do and perform, or cause
to be done and performed, all such further acts and things and shall execute and
deliver all such other agreements, certificates, instruments and documents as
any other party hereto may reasonably request in order to carry out the intent
and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
6.14 CAPTIONS AND SECTION HEADINGS. Except as used in Section 1, captions
and section headings used herein are for convenience only and are not a part of
this Agreement and shall not be used in construing it.
28
6.15 WAIVER. Any waiver by any party hereto of any of his or its rights
hereunder shall be without prejudice of his or its future assertion of any such
rights, and any delay in exercising any rights shall not operate as a waiver
thereof.
6.16 SEVERABILITY OF PROVISIONS. If any one or more of the provisions of
this Agreement shall be determined to be invalid, illegal or unenforceable in
any respect for any reason, the validity, legality and enforceability of any
such provision in every other respect and of the remaining provision of this
Agreement shall not be impaired in any way.
6.17 SPECIFIC PERFORMANCE. In any action or proceeding to specifically
enforce the provisions of this Agreement, any person (including the Company)
against whom such action or proceeding is brought hereby waives the claim or
defense therein that the plaintiff or claimant has an adequate remedy at law,
and such person shall not urge in any such action or proceeding the claim or
defense that such remedy at law exists. The provisions of this paragraph shall
not prevent any party from seeking a remedy at law in connection with any breach
of this Agreement.
6.18 SHAREHOLDER OBLIGATIONS. The obligations of the Shareholders
hereunder are several and not joint.
29
IN WITNESS WHEREOF, this Agreement has been executed as of the date
and year first above written.
TRANSEASTERN PROPERTIES OF SOUTH
FLORIDA, INC.
By:
Name:
Title:
[CORPORATE SEAL]
Attest:
Secretary
INVESTORS:
MEZZONEN, S.A.
By: Xxxxxxx Xxxxx, Chief Financial Officer
THE HANDLER FAMILY TRUST DTD 9/12/91
By: Xxxxxxx Xxxxxxx, Trustee
XXXXXXXXXXX XXXXXX
XXXXXX XXXXXXXXX
XXXXX X. XXXXXX
XXXXX X. XXXXXX
By:
Xxxxxxx Xxxxxxx, Attorney-in-Fact
under POA dated June 1, 1993
[SIGNATURES CONTINUED ON NEXT PAGE]
30
SHAREHOLDERS:
SHARES OF
COMMON STOCK:
241,667 (SEAL)
Xxxxxx X. Xxxxxxx
and
(SEAL)
Xxxxx Xxxxxxx
241,667 (SEAL)
Xxxxxx X. Xxxxxxx
and
(SEAL)
Xxxxx Xxxxxxx
241,667 (SEAL)
Xxxxxx Xxxxx, Xx.
and
(SEAL)
Xxxxx Xxxxx
31
EXHIBIT C
TO
SERIES A REDEEMABLE PREFERRED STOCK
AND
WARRANT PURCHASE AGREEMENT
AMENDED AND RESTATED ARTICLES OF INCORPORATION
EXHIBIT D
TO
SERIES A REDEEMABLE PREFERRED STOCK
AND
WARRANT PURCHASE AGREEMENT
FORM OF OPINION OF COMPANY COUNSEL
MAY __, 1993
The parties named in the attached Schedule I
c/o Xxxxxxx X. Xxxxxxx XX, Esq.
Powell, Goldstein, Xxxxxx & Xxxxxx
000 Xxxxxxxxx Xxxxxx X.X.
Xxxxxxx, XX 00000
Ladies and Gentlemen:
We have acted as counsel to Transeastern Properties of South Florida, Inc.,
a Florida corporation (the "Company"), in connection with (i) the preparation of
(a) the Series A Redeemable Preferred Stock and Warrant Purchase Agreement,
dated as of June 1, 1993, by and among the parties named in Schedule I hereto
(the "Purchasers") and the Company (the "Agreement") and (b) the Warrants, dated
as of June 1, 1993 by and among the parties named in Schedule I hereto (the
"Warrant Purchasers") and the Company (the "Warrant Agreement"); and (ii) the
sale and issuance of 20,000 shares of the Series A Redeemable Preferred Stock,
$.01 par value, of the Company (the "Shares") pursuant to the Agreement and (b)
the sale and delivery of warrants to purchase up to 275,000 shares of the Common
Stock, $.01 par value of the Company (the "Warrants") pursuant to the Agreement.
This opinion is rendered pursuant to Article 4(a) of the Agreement. Capitalized
terms used in this opinion letter and the attachments hereto and not otherwise
defined herein shall have the meanings assigned to such terms in the Agreement.
In connection with the foregoing, we have examined:
1. An executed copy of each of the Agreement, the Warrants, the
Indemnification Agreement and the Shareholders Agreement among the Company,
the Purchasers and the other parties listed therein (the "Shareholders
Agreement") collectively, the "Transaction Agreements";
2. The Amended and Restated Articles of Incorporation, of the Company,
filed with the Florida Department of State on May __, 1993, and the Bylaws
of the Company, certified by the Secretary of the Company on May __, 1993
(collectively, the "Charter"); and
3. The corporate proceedings of the Company relating to the execution
and delivery of the Agreement, the Warrants, the Indemnification Agreement
and the Shareholders Agreement, and the consummation of the transactions
provided for therein.
In all such examinations, we have assumed the genuineness of all signatures
(other than signatures on behalf of the Company), the authenticity of all
document submitted to us as originals, and the conformity to authentic original
documents of all documents submitted to us as certified, conformed or
photostatic copies. As to questions of fact material to our opinions, we have
relied on certificates of public officials, the representations and warranties
of Company set forth in the Agreement, and on certificates of officers of the
Company.
The use herein of the words "to the best of our knowledge", "known to us"
or similar language means that, during the course of our representation of the
Company, no information has come to the attention of any attorney in this Firm
involved in these transactions or otherwise regularly engaged in representing
the Company which would give us actual knowledge of the existence of any of the
documents or facts so qualified. Whenever we have made "due inquiry" as to
matters set forth herein, such inquiry was confined to reviewing documents
provided to us by the Company in the course of our representation in response to
inquiries as to such matters as we have deemed appropriate in order to render
the opinions hereinafter set forth, a review of documents of which we otherwise
have actual knowledge, to the extent we deemed such documents material and
relevant to the opinions hereinafter set forth, and obtaining certificates of
officers of the Company as to certain facts which we deemed material and
relevant to our opinion, and we have relied, with your permission, upon such
certificates in rendering this opinion.
Based on the foregoing, and subject to the further qualifications,
assumptions, and limitations hereinafter set forth, we are of the opinion that:
1. The Company is a corporation in good standing (as defined herein)
under the laws of the State of Florida. The Company is qualified to do
business as a foreign corporation and is in good standing in each state
where, based upon the nature of the business transacted by the Company or
the ownership or lease by the Company of real or personal property, the
failure to be so qualified would have a material and adverse effect on the
business or condition of the Company. The Company has no subsidiaries.
2. The Company has all requisite power to (i) own, lease, and operate
its properties and to carry on its business as currently conducted and as
proposed to be conducted, (ii) execute, deliver, and perform each of the
Transaction Agreements, (iii) issue, sell, and deliver the Shares and the
Warrants, and (iv) issue and deliver the Warrant Shares upon the exercise
of the Warrants.
3. Each of the Transaction Agreements has been duly authorized,
executed, and delivered by the Company, and if a party thereto, each holder
of Common Stock of the Company, and constitutes the legal, valid, and
binding obligations of the Company and if a party thereto, each holder of
Common Stock of the Company, enforceable in accordance with their
respective terms (subject, to enforcement of remedies, to the discretion of
courts in awarding equitable relief and to applicable bankruptcy,
reorganization, insolvency, moratorium, and similar laws affecting
creditors' rights or debtors' relief generally).
4. The execution and delivery by the Company of the Transaction
Agreements, and the performance by the Company of its obligations
thereunder, the issuance, sale, and delivery of the Shares and the
Warrants, and the issuance and delivery of the Warrant Shares upon exercise
of the Warrants, and of the Conversion Shares upon conversion of the Shares
and the Warrant Shares, will not violate any provision of law, the Charter,
any order of any court or other agency of government known to us and
binding upon the Company or its assets, or any indenture, agreement, or
other instrument known to us by which the Company or any of its properties
or assets is bound, or conflict with, result in a breach of or constitute
(with due notice or lapse of time or both) a default under any such
indenture, agreement, or other instrument, or result in the creation or
imposition of any lien, charge, restriction, claim, or encumbrance of any
nature whatsoever upon any of the properties or assets of the Company.
5. The authorized capital stock of the Company consists of (i) 29,000
shares of Series A Redeemable Preferred Stock, $.01 par value and (ii)
5,000,000 shares of Common Stock, $.01 par value. Immediately prior to the
Closing, 725,000 shares of Common Stock will be validly issued, fully paid
and nonassessable, and none of the Series A Redeemable Preferred Stock will
be outstanding. Immediately prior to the Closing, the shareholders of
record and holders of record of subscriptions, warrants, options,
convertible securities, and other rights (contingent or other) to purchase
or otherwise acquire equity securities of the Company, and the number of
shares of Common Stock and the number of such subscriptions, warrants,
options, convertible securities, and other such rights held by each, will
be as set forth in Schedule 2 to the Agreement. The designations, power,
preferences, rights, qualifications, limitations, and restrictions in
respect of each class or series of authorized capital stock of the Company
are as set forth in the Charter, and all such designations, powers,
preferences, rights, qualifications, limitations, and restrictions are
valid, binding, and enforceable and in accordance with all applicable laws
(subject, as to enforcement, to the discretion of courts in awarding
equitable relief, and to applicable bankruptcy, reorganization, insolvency,
moratorium, and similar laws affecting creditors' rights and debtors'
relief generally). Except as set forth in Schedule 2 to the Agreement, to
our knowledge, immediately prior to the Closing, no subscription, warrant,
option, convertible security, or other right (contingent or other) to
purchase or acquire equity securities of the Company was authorized or
outstanding and there was no commitment by the Company to issue shares,
subscriptions, warrants, options, convertible securities, or other such
rights or to distribute to holders of any of its equity securities any
evidence of indebtedness or asset. Except as set forth in Schedule 2 to the
Agreement, to our knowledge, the Company has no obligation (contingent or
other) to purchase, redeem, or otherwise acquire any of its equity
securities or any interest therein or to pay any dividend or make any other
distribution in respect thereof.
6. The Shares, the Warrants, and the Warrant Shares have been duly
authorized. The issuance, sale, and delivery of the Shares and the Warrants
and the issuance, sale, and delivery of the Warrant Shares upon exercise of
the Warrants have been duly authorized by all required corporate action;
assuming payment of the purchase price therefor as provided in the
Agreement, the Shares and the Warrants have been validly issued and are
fully paid, and nonassessable; to our knowledge, the Shares and the
Warrants are free and clear of all liens, charges, restrictions, claims,
and encumbrances imposed by the Company, except as set forth in the
Shareholders Agreement; and the Warrant Shares have been duly reserved for
issuance upon conversion of the Warrants, and, when so issued, will be
validly issued, fully paid, and nonassessable with no personal liability
attaching to the ownership thereof and, to our knowledge, will be free and
clear of all liens, charges, restrictions, claims, and encumbrances imposed
by or through the Company except as set forth in the Shareholders
Agreement. Neither the issuance, sale, or delivery of the Shares or the
Warrants, nor the issuance or delivery of the Warrant Shares, is subject to
any preemptive right or right of first refusal of shareholders of the
Company arising under law or the Charter or Bylaws of the Company which has
not been waived, or, to our knowledge, to any contractual right of first
refusal or other right in favor of any person.
7. Except as described in Schedule 2 to the Agreement, to our
knowledge, there is no (A) action, suit, claim, proceeding, or
investigation pending or threatened against or affecting the Company at law
or in equity, or before or by the Federal, state, municipal, or other
governmental department, commission, board, bureau, agency, or
instrumentality, domestic or foreign, (B) arbitration proceeding relating
to the Company pending under collective bargaining agreements, or (C)
governmental inquiry pending or threatened against or affecting the Company
(including, without limitation, any inquiry as to the qualification of the
Company to hold or receive any license or permit). To our
knowledge, the Company is not subject to any order, writ, injunction, or
decree of any court or of any Federal, state, municipal, or other
governmental department, commission, board, bureau, agency, or
instrumentality, domestic or foreign.
8. To our knowledge, no third party has claimed that any person
employed by or affiliated with the Company has violated or may be violating
any of the terms or conditions of his employment, noncompetition, or
nondisclosure agreement with such third party, or disclosed or may be
disclosing or utilized or may be utilizing any trade secret or proprietary
information or documentation of such third party or interfered or may be
interfering in the employment relationship between such third party and any
of its present or former employees.
9. No registration or filing with, and no consent or approval of, or
other action by any Federal, state, or other governmental agency or
instrumentality is or will be necessary for the valid execution, delivery,
and performance by the Company of the Transaction Agreements, the issuance,
sale, and delivery of the Shares and the Warrants, or the issuance, sale,
and delivery of the Warrant Shares upon exercise of the Warrants, other
than filings under the Securities Act and applicable state securities laws,
which filings, to the extent required to be made prior to the date hereof,
have ben made, and to the extent required to be made following the date
hereof, we assume will be timely made by the Company .
10. The issuance, sale, and delivery of the Shares and Warrants sold to
the Purchasers under the circumstances contemplated by the Agreement are
exempt from the registration requirements of the Securities Act, and the
issuance, sale, and delivery of the Warrant Shares upon exercise of the
Warrants will be exempt from such requirements.
11. To our knowledge, all of the outstanding shares of the Company's
capital stock have been issued in compliance with applicable exemptions
from the registration requirements of the Securities Act.
We also advise you that during the course of our representation of the
Company in connection with the transactions provided for in the Agreement,
nothing has come to our attention which would reasonably lead us to believe that
the Agreement and the Schedules thereto contains, as of the date hereof, any
untrue statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
Very truly yours,
XXXXXX & XXXXXXX
Attachments
