SCHEDULE 14A
(Rule 14(a)-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14a INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for use of the Commission
[X] Definitive proxy statement only (as permitted by Commission only
[ ] Definitive additional materials (as permitted by Rule 14a-6(e)(2))
[ ] Soliciting material under Rule 14a-12
COX TECHNOLOGIES, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
________________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
________________________________________________________________________________
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
________________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
________________________________________________________________________________
5) Total fee paid:
________________________________________________________________________________
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
1) Amount Previously Paid:__________________________________________________
2) Form, Schedule or Registration Statement No.:____________________________
3) Filing Party:____________________________________________________________
4) Date Filed:______________________________________________________________
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
AND PROXY STATEMENT
Cox Technologies, Inc.
69 McAdenville Road
Belmont, NC 28012-2434
TO OUR SHAREHOLDERS:
The Board of Directors of Cox Technologies, Inc. (the "COMPANY") has called
a Special Meeting of Shareholders to consider and vote on a proposal to issue
and sell 12,500,000 shares of common stock to an affiliate of certain executive
officers and directors of the Company in a private placement (the "PROPOSED
OFFERING"). The shares of common stock would be sold in the Proposed Offering at
a price of $0.06 per share and would represent approximately 32.6% of our issued
and outstanding stock after the consummation of the Proposed Offering.
The terms of the Proposed Offering were negotiated and approved by the
Special Committee of the Company's Board of Directors comprised of the Company's
three outside directors and subsequently approved by the Board of Directors
(with the interested directors abstaining). Before negotiating or approving the
terms of the Proposed Offering, the Special Committee retained Ensemble
Consulting LLC ("ENSEMBLE"), a company that provides financial valuations in
business transactions, to provide a valuation of the Company. Ensemble provided
the Special Committee with a valuation of the Company that established a per
share valuation range of $0.0398 - $0.0676. Ensemble has also provided the
Special Committee with its opinion dated January 16, 2003 (the "FAIRNESS
OPINION") to the effect that, as of that date and based upon and subject to the
assumptions made, matters considered and limitations on the review described in
the written opinion, the consideration to be paid by the purchaser in the
Proposed Offering is fair, from a financial point of view, to the shareholders
of the Company. You should carefully read the Fairness Opinion that is attached
as Appendix A to the accompanying Proxy Statement.
The material features of the Proposed Offering are as follows:
* Technology Investors, LLC ("TI"), an affiliate of Mr. Brian D. Fletcher
and Mr. Kurt C. Reid (each of whom is an executive officer and director of the
Company), would be the sole purchaser of the common stock in the Proposed
Offering. Immediately following the closing of the Proposed Offering, TI,
together with Messrs. Fletcher and Reid and their affiliates, collectively will
own and control beneficially an aggregate of 15,514,299 shares of common stock,
or approximately 37.9% of our then issued and outstanding common stock,
including 2,581,333 shares of our common stock that TI may obtain by converting
its existing promissory note.
* The purchase price for the shares to be issued in the Proposed Offering
is $0.06 per share, for a total purchase price of $750,000.
* The proposed per share purchase price is above the last trading price of
the Company's common stock both on the day before we announced the transaction
($0.03 per share on January 17, 2003), and on January 30, 2003 ($0.05 per
share).
* The proposed per share purchase price of $0.06 is $0.0076, or 11% below
the upper end of the range provided by Ensemble in its final valuation of the
Company, and Ensemble has provided the Special Committee with its Fairness
Opinion.
For more detailed information regarding the proposed transaction, including
the background of the Proposed Offering, see the section entitled "THE PROPOSAL"
in the enclosed Proxy Statement.
As a result of the Company's financial condition, RBC Centura Bank
("CENTURA"), our principal lender, has required that we reduce the principal
amount due under our loans by an additional $450,000 by March 15, 2003. This
reduction is in addition to our normal monthly principal payments due on the
loans and the payment to Centura of the $91,000 payment that the Company
received on January 30, 2003 from the purchaser of the oilfield subleases. Most
of the capital to be raised in the Proposed Offering will be used to reduce our
debt to Centura, and the balance will be used for working capital purposes.
Given the state of the economy and the current fund-raising climate, we do
not believe there is any viable funding alternative to this Proposed Offering.
However, please be aware there are some risks involved if the stock issuance is
approved, including, without limitation, the following:
* Your percentage of voting power will decrease;
* This issuance may result in a "change in control";
* There may be a possible effect on the market price of our shares; and
* Through this transaction, Messrs. Fletcher and Reid will become
significant shareholders. If the Proposed Offering is approved, TI,
together with Messrs. Fletcher and Reid and their affiliates,
collectively will own and control beneficially an aggregate of
15,514,299 shares of common stock, or approximately 37.9% of our then
issued and outstanding common stock, including 2,581,333 shares of our
common stock that TI may obtain by converting its existing promissory
note. Messrs. Fletcher and Reid also hold two of the six seats on the
Board of Directors, thus controlling one-third of the Board.
You should carefully consider each of these risks, which are discussed in
more detail beginning on page 4 of the Proxy Statement under the heading "EFFECT
AND RISKS OF SHAREHOLDER APPROVAL."
OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE PROPOSED OFFERING.
Your vote is important, regardless of the number of shares you own. Please
vote as soon as possible to make sure that your shares are represented at the
Special Meeting. To vote your shares, please complete and return the enclosed
proxy card. You may also cast your vote in person at the Special Meeting.
Very truly yours,
/s/ James L. Cox
Dr. James L. Cox
Chairman, President and
Chief Executive Officer
ii
COX TECHNOLOGIES, INC.
69 McAdenville Road
Belmont, North Carolina 28012-2434
(704) 825-8146
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 12, 2003
To the Shareholders of Cox Technologies, Inc.:
Notice is hereby given that a special meeting of shareholders (the "SPECIAL
MEETING") of Cox Technologies, Inc. (the "Company") will be held on Wednesday,
March 12, 2003, at 9:00 a.m., local time, at the Holiday Inn Airport, 2707
Little Rock Road, Charlotte, North Carolina, for the following purposes:
1. To consider and vote upon a proposal to approve a Stock Purchase
Agreement, dated as of January 20, 2003, by and between the Company and
Technology Investors, LLC ("TI"), an affiliate of certain executive officers and
directors of the Company, pursuant to which 12,500,000 newly issued shares of
our common stock will be purchased by TI at a price of $0.06 per share; and
2. To transact such other business as may properly come before the Special
Meeting and any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this notice.
Our Board of Directors has fixed the close of business on Friday, January
17, 2003, as the record date for determining the shareholders entitled to notice
of, and to vote at, the Special Meeting and at any adjournment or postponement
thereof.
By Order of the Board of Directors,
/s/ James L. Cox
Dr. James L. Cox
Chairman, President and Chief Executive Officer
Belmont, North Carolina
February 6, 2003
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE PROPOSAL.
ALL OF OUR SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING IN
PERSON. HOWEVER, WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING IN
PERSON, YOU ARE URGED TO MARK, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD AS
PROMPTLY AS POSSIBLE IN THE POSTAGE-PREPAID ENVELOPE PROVIDED TO ENSURE YOUR
REPRESENTATION AND THE PRESENCE OF A QUORUM AT THE SPECIAL MEETING. IF YOU SEND
IN YOUR PROXY CARD AND THEN DECIDE TO ATTEND THE SPECIAL MEETING TO VOTE YOUR
SHARES IN PERSON, YOU MAY STILL DO SO. YOUR PROXY IS REVOCABLE BY COMPLYING WITH
THE PROCEDURES SET FORTH IN THE ATTACHED PROXY STATEMENT.
TABLE OF CONTENTS
Information Concerning Solicitation and Voting.................................1
General.....................................................................1
How You Can Vote............................................................1
Required Votes..............................................................2
Revocation of Proxies.......................................................2
Expense of Solicitation.....................................................2
Shareholder Proposals.......................................................2
The Proposal...................................................................3
Introduction................................................................3
The Proposed Offering.......................................................3
Effect and Risks of Shareholder Approval....................................4
Effect of Failure to Obtain Shareholder Approval............................5
Dissenters' Rights..........................................................5
Vote Required...............................................................5
Why We Are Seeking Shareholder Approval.....................................5
Board Determination.........................................................6
Board Recommendation........................................................6
Reasons for the Proposed Offering..............................................7
Need for Loan Reduction.....................................................7
Company Evaluation of Financing Alternatives................................8
Opinion of Ensemble Consulting LLC.........................................12
Recent Developments...........................................................13
Description of Stock Purchase Agreement.......................................15
Overview...................................................................15
Closing....................................................................15
Representations and Warranties by the Company..............................15
Representations and Warranties by TI.......................................15
Conditions to the Company's Obligation to Close............................15
Conditions to TI's Obligation to Close.....................................16
Piggyback Registration Rights..............................................16
Expenses...................................................................16
Indemnification............................................................16
Amendment and Waiver.......................................................16
Common Stock Ownership by Certain Beneficial Owners and Management............17
Other Matters.................................................................18
Appendix A - Fairness Opinion of Ensemble Consulting LLC
Appendix B - Stock Purchase Agreement
COX TECHNOLOGIES, INC.
69 McAdenville Road
Belmont, North Carolina 28012-2434
(704) 825-8146
PROXY STATEMENT
FOR THE SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 12, 2003
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors (the
"BOARD OF DIRECTORS" or the "BOARD") of Cox Technologies, Inc., a North Carolina
corporation (the "COMPANY"), for use at the special meeting of shareholders to
be held on Wednesday, March 12, 2003, at 9:00 a.m., local time (the "SPECIAL
MEETING"), or at any adjournment or postponement thereof, for the purposes set
forth herein and in the accompanying Notice of Special Meeting. The Special
Meeting will be held at the Holiday Inn Airport, 2707 Little Rock Road,
Charlotte, North Carolina. Unless the context requires otherwise, all references
in the Proxy Statement to the Company refer to Cox Technologies, Inc. and its
subsidiaries. This Proxy Statement and the accompanying proxy card are first
being mailed to all shareholders entitled to vote at the Special Meeting on or
about February 6, 2003.
Only shareholders of record at the close of business on Friday, January 17,
2003 (the "RECORD DATE") are entitled to vote at the meeting. At the close of
business on the Record Date, the Company had outstanding 25,839,094 shares of
common stock, which shares constitute the only class of stock of the Company
entitled to notice of, and to vote at, the Special Meeting. As of the same date,
the Company had approximately 2,054 shareholders of record.
HOW YOU CAN VOTE
All proxies that are properly executed and received prior to the meeting
will be voted at the meeting. If a shareholder specifies how the proxy is to be
voted on any of the business to come before the meeting, the proxy will be voted
in accordance with such specification. If no specification is made, the proxy
will be voted for the Proposal (as defined below).
The National Association of Securities Dealers, Inc. has specific rules
relating to the voting authority of brokers who hold shares in street name for
customers, when such brokers have not yet received instructions from beneficial
owners. With respect to the Proposal presented to the shareholders, no broker
may vote shares held for customers without specific instruction from such
customers. A majority of the total outstanding shares will constitute a quorum
at the meeting. Abstentions and broker non-votes are counted for purposes of
determining the presence or absence of a quorum for the transaction of business.
REQUIRED VOTES
The affirmative vote of the holders of a majority of the shares present or
represented by proxy (excluding shares held or controlled by Mr. Fletcher or Mr.
Reid) is required to approve the Proposal.
The present executive officers and directors of the Company, excluding
Messrs. Fletcher and Reid, are entitled to vote shares of the Company's common
stock representing approximately 16.8% of the outstanding shares of voting
stock. The present executive officers and directors have indicated their intent
to vote in favor of the Proposal.
REVOCATION OF PROXIES
Any proxy may be revoked by the person giving it at any time before its use
by:
* delivering to the Secretary of the Company a written notice of
revocation;
* duly executing and delivering to the Company a proxy bearing a
later date; or
* attending the Special Meeting and voting in person.
Attendance at the Special Meeting will not, by itself, revoke a proxy.
EXPENSE OF SOLICITATION
The cost of soliciting proxies will be borne by the Company, including
expenses incurred in connection with preparing and mailing this Proxy Statement.
The Company will request brokers and nominees to obtain voting instructions of
beneficial owners of stock registered in their name and will reimburse them for
related expenses, including charges for forwarding proxy material to the
beneficial owners of shares held in the name of a nominee. The Company may also
retain the services of a proxy solicitation firm. The Company has not made any
arrangements to do so as of the date of this Proxy Statement, and does not
presently have estimates as to the cost of such services. The Company expects to
solicit proxies primarily by mail, but certain officers and employees of the
Company may also solicit in person, by telephone, telegram or other means
without additional compensation for their services other than their regular
salaries.
SHAREHOLDER PROPOSALS
The 2003 Annual Meeting of Shareholders is tentatively scheduled to be held
on August 29, 2003. Any shareholder desiring to have a proposal included in the
Company's Proxy Statement for its 2003 Annual Meeting of Shareholders must
deliver such proposal no later than March 31, 2003.
Shareholders should send their proposals to the attention of the Company's
Secretary at the Company's corporate office, 69 McAdenville Road, Belmont, North
Carolina 28012-2434.
2
THE PROPOSAL
INTRODUCTION
At the Special Meeting, our shareholders will be asked to consider and
approve one proposal (the "PROPOSAL"): the approval of a Stock Purchase
Agreement (the "STOCK PURCHASE AGREEMENT"), dated January 20, 2003, by and
between the Company and Technology Investors, LLC ("TI"), and the issuance of
12,500,000 shares of common stock pursuant to the Stock Purchase Agreement. A
copy of the Stock Purchase Agreement is attached as Appendix B to this Proxy
Statement. This Special Meeting is being held because the Stock Purchase
Agreement includes a provision requiring shareholder approval of the Stock
Purchase Agreement as a condition to closing. See the section entitled "THE
PROPOSED OFFERING" for a more detailed description of the Proposal. See the
section entitled "WHY WE ARE SEEKING SHAREHOLDER APPROVAL" for a more detailed
explanation of the reasons for holding the Special Meeting.
THE PROPOSED OFFERING
GENERAL TERMS. We are seeking your approval of the Stock Purchase Agreement
and the transactions contemplated by the Stock Purchase Agreement, including the
issuance of shares of the Company's common stock at a purchase price of $0.06
per share (the "PROPOSED OFFERING") to TI. TI is an affiliate of Mr. Brian D.
Fletcher and Mr. Kurt C. Reid, each of whom is an executive officer and a
director of the Company (TI and Messrs. Fletcher and Reid are collectively
referred to herein as the "PRINCIPAL Shareholders"). The proposed purchase price
of $0.06 per share is above the last trading price of our common stock the day
before we announced the transaction ($0.03 per share on January 17, 2003). The
proposed purchase price also is above the last trading price of our shares of
common stock as of a recent date ($0.05 per share as of January 30, 2003). The
aggregate number of shares of common stock to be issued to TI in connection with
the Proposed Offering will be 12,500,000, or approximately 32.6% of the issued
and outstanding stock following the Proposed Offering. It is currently
contemplated that the closing of the Proposed Offering will occur on or about
March 14, 2003 assuming the Proposal is approved by the shareholders at the
Special Meeting and that all other conditions to closing have been satisfied.
REASONS FOR THE PROPOSED OFFERING. RBC Centura Bank ("CENTURA") is the
Company's principal lender. As previously disclosed in the Company's filings
with the Securities and Exchange Commission ("SEC"), and as discussed in this
Proxy Statement under the heading "REASONS FOR THE PROPOSED OFFERING - NEED FOR
LOAN REDUCTION," the Company and Centura have on several occasions modified and
extended the maturity dates of the loans. As a condition to the most recent
modification and extension, the Company is required to reduce the outstanding
principal under the loans by an additional $450,000 on or before March 15, 2003
(the "LOAN REDUCTION"). The Loan Reduction is in addition to our normal monthly
principal payments due on the loans and the payment to Centura of the $91,000
payment that the Company received on January 30, 2003 from the purchaser of the
oilfield subleases. The payment of these items to Centura would reduce the
principal amount outstanding on the loans to $1,215,000 by March 15, 2003. The
Company had net income from operations of $20,154 for the six months ending
October 31, 2002. Management believes the Company needs to raise additional
capital in the Proposed Offering to meet Centura's required Loan Reduction. The
Company does not believe there is any viable funding alternative to this
Proposed Offering.
USE OF PROCEEDS. The gross proceeds to be received in connection with the
Proposed Offering will be $750,000, and the net proceeds after expenses will be
approximately $670,000. We intend to use $450,000 of the net proceeds from the
Proposed Offering to accomplish the Loan Reduction, and the balance for working
capital and for such other general corporate purposes as our Board of Directors
3
may determine from time to time. The Board of Directors will have complete
discretion over the use of proceeds. See the section entitled "EFFECT AND RISKS
OF SHAREHOLDER APPROVAL."
TECHNOLOGY INVESTORS, LLC. TI is an "accredited investor" under Rule 501 of
Regulation D promulgated by the SEC under the Securities Act of 1933, as amended
(the "SECURITIES ACT"). Messrs. Fletcher and Reid, each of whom is an executive
officer and director of the Company, serve as co-managers of TI and share voting
and disposition powers with respect to common stock owned or purchased by TI.
EFFECT AND RISKS OF SHAREHOLDER APPROVAL
In connection with the Proposed Offering, we intend to issue to TI
12,500,000 shares of our common stock. Together with the 432,966 shares of our
common stock that are already owned by the Principal Shareholders, the Principal
Shareholders and their affiliates collectively will own and control beneficially
an aggregate of 15,514,299 shares of common stock, or approximately 37.9% of our
then issued and outstanding common stock, including 2,581,333 shares of our
common stock that TI may obtain by converting its existing promissory note.
Shareholders should consider the following factors that may affect them, as well
as the other information contained in this proxy statement, in evaluating the
proposal to approve the Proposed Offering.
SHAREHOLDERS WILL EXPERIENCE SUBSTANTIAL DILUTION OF VOTING POWER. If the
Proposed Offering is approved, you will experience a substantial dilution of
your voting power. If a shareholder owned 1.00% of the issued and outstanding
shares of the Company the day before the consummation of the Proposed Offering,
that shareholder would own approximately 0.67% of the issued and outstanding
shares of the Company after the consummation of the Proposed Offering.
OUR FUTURE EARNINGS PER SHARE WILL BE DILUTED. If the Proposed Offering is
approved and completed, there will be 12,500,000 shares issued by the Company.
The increase in the number of shares issued and outstanding will have the effect
of diluting the Company's future earnings per share.
THE PRINCIPAL SHAREHOLDERS WILL BENEFICIALLY OWN A SIGNIFICANT PERCENTAGE
OF THE COMPANY, AND THERE IS A RISK THAT A CHANGE OF CONTROL MAY OCCUR. Upon the
completion of the Proposed Offering, the Principal Shareholders and their
affiliates collectively will own and control beneficially an aggregate of
15,514,299 shares of common stock, or approximately 37.9% of our then issued and
outstanding common stock, including 2,581,333 shares of our common stock that TI
may obtain by converting its existing promissory note. As significant
shareholders, the Principal Shareholders may be able to influence matters
submitted to our shareholders for a vote. Most actions submitted to shareholders
require at least a majority of the shareholders' approval; however, if the
Principal Shareholders voted similarly, they would only need approximately 12.1%
of the issued and outstanding shares to vote in the same manner in order to have
control over most matters submitted to the shareholders.
DISCRETION IN USE OF PROCEEDS. Other than the Loan Reduction, we cannot
specify with certainty the amounts we will spend on particular uses from the net
proceeds we will receive from the Proposed Offering. Our Board of Directors will
have broad discretion in the application of the net proceeds. Our Board of
Directors currently intends to use the net proceeds as described in "USE OF
PROCEEDS." The failure by our Board of Directors to apply these funds
effectively could have an adverse effect on our business.
POSSIBLE EFFECT ON MARKET PRICE. Sales by TI of a substantial number of
shares of our common stock in the public market, or the perception that such
sales might occur, could have a material adverse effect on the price of our
common stock. Such sales, however, are prohibited under the securities laws for
4
at least one year following the purchase of the shares, absent an exemption
from, or registration under, the Securities Act.
EFFECT OF FAILURE TO OBTAIN SHAREHOLDER APPROVAL
Since the closing of the Proposed Offering has been expressly conditioned
on the Company's securing approval of the Proposal from its shareholders, if we
are unable to obtain such shareholder approval and cannot consummate the
Proposed Offering, the Company would have to pursue other financial and
operational alternatives in order to raise more capital to accomplish the Loan
Reduction and to achieve our business objectives. Given the state of the
economy, the March 15, 2003 deadline for accomplishing the Loan Reduction and
the current fund-raising climate, we do not believe there is any viable funding
alternative to this Proposed Offering. Even if such an alternative does become
available, that proposal may be on terms substantially less favorable to us.
If we are unsuccessful in obtaining additional capital for the Loan
Reduction and working capital, the Company may not be able to continue operating
as a going concern.
DISSENTERS' RIGHTS
Under North Carolina law, shareholders are not entitled to dissenters'
rights with respect to the transactions contemplated by this Proposal.
VOTE REQUIRED
The minimum vote that will constitute shareholder approval of this Proposal
is the affirmative vote of a majority of the total votes present in person or
represented by proxy at the Special Meeting (excluding shares held or controlled
by Mr. Fletcher or Mr. Reid).
WHY WE ARE SEEKING SHAREHOLDER APPROVAL
Shareholder approval of the transaction is being solicited to avoid the
appearance of a "conflict of interest" that may arise because (i) the purchaser
of the Company's common stock in connection with this Proposed Offering is
already a significant shareholder of the Company, (ii) that shareholder is
controlled by two individuals, each of whom is an executive officer and director
of the Company, and (iii) the terms of the Proposed Offering were largely
negotiated by such individuals and a Special Committee (the "SPECIAL COMMITTEE")
of the Company's Board of Directors (see "COMPANY EVALUATION OF FINANCING
ALTERNATIVES").
Under North Carolina corporate law, a "conflict of interest" transaction is
one in which a director or directors of the corporation has a direct or indirect
financial interest. North Carolina law provides that a conflict of interest
transaction is not voidable by the corporation solely because of the director's
interest in the transaction if ANY one of the following is true:
* the material facts of the transaction and the director's interest
were disclosed or known to the board of directors or a committee
of the board of directors and the board of directors or committee
authorized, approved or ratified the transaction;
* the material facts of the transaction and the director's interest
were disclosed or known to the shareholders entitled to vote and
such shareholders authorized, approved or ratified the
transaction; or
5
* the transaction was fair to the corporation.
The Board of Directors believes it has complied with all three of the
above-listed circumstances. Throughout this process, Messrs. Fletcher and Reid
have discussed the material facts of the Proposed Offering with the other
members of the Board of Directors, and the Board of Directors (with Messrs.
Fletcher and Reid abstaining) have approved the Proposed Offering. The Board of
Directors is also disclosing to the Company's shareholders the material facts of
this transaction and requesting that the shareholders approve the transaction.
Finally the Board of Directors believes that the terms of the Proposed Offering
are fair to the Company. See "THE PROPOSED OFFERING" for greater detail
regarding the terms of the transaction.
By fulfilling any one of the above-listed circumstances (and the Board of
Directors believes it has fulfilled all three), the Board of Directors wishes to
insulate itself and the Company from any charge of a lack of fair dealing with
the Company's shareholders. Also, by conditioning the consummation of the
Proposed Offering upon the approval by the Company's shareholders, the Board of
Directors seeks to provide the shareholders with the final authority to
determine the fairness of the Proposed Offering.
BOARD DETERMINATION
Our Board of Directors has determined that the consummation of the Proposed
Offering will be in our best interest and in the best interest of our
shareholders because receipt of the proceeds from the Proposed Offering will
enable us to accomplish the Loan Reduction and infuse additional needed capital
into the Company.
The Company had net losses from operations of $4,826,969 for the fiscal
year ended April 30, 2002, $3,537,597 of which was recognized as a loss on
impairment when certain goodwill and non-depreciable assets were determined to
be impaired. Our current capital levels have impeded our ability to grow and
become profitable. We intend to use the capital to be raised through the
Proposed Offering accomplish the Loan Reduction and to focus on the Company's
strengths, address its weaknesses and generally enhance its overall
profitability.
BOARD RECOMMENDATION
The Board of Directors of the Company has carefully considered the Proposed
Offering and recommends that the shareholders of the Company vote "FOR" approval
of the Proposal. Messrs. Fletcher and Reid have abstained from this
recommendation because of their interest in the consummation of the Proposed
Offering.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE PROPOSAL.
6
REASONS FOR THE PROPOSED OFFERING
NEED FOR LOAN REDUCTION
On July 13, 2000 the Company entered into a five-year term loan ("TERM
LOAN") with its primary lender, Centura in the amount of $1,190,000. The Company
used the proceeds of the Term Loan to retire short-term debt of approximately
$1,177,000 and the remainder was used for working capital.
Initial principal payments of $9,920, in addition to accrued interest, were
due monthly from August 2, 2000 to July 2, 2001. The rate of interest on the
Term Loan is Centura's prime rate plus 0.625% per annum. Thereafter, principal
payments of $22,312.50, in addition to accrued interest, are due monthly until
July 13, 2005.
The Company also established a revolving line of credit with Centura for
working capital needs in the amount of up to $1,000,000 ("REVOLVING LOAN"),
subject to a maximum percentage of eligible trade accounts receivable and
inventories. The rate of interest on the Revolving Loan is Centura's prime rate
plus 0.25% per annum and is due monthly beginning in August 2000.
The principal of the Revolving Loan was due on September 2, 2001. On
October 30, 2001 the Company executed a note modification agreement with Centura
that extended the maturity date of the Revolving Loan to November 2, 2001. On
November 29, 2001, the Company executed (a) an amendment to the original
Revolving Loan Agreement, (b) a new security agreement and (c) a note
modification agreement for the Term Note and for the Revolving Loan that were
effective October 30, 2001 (collectively "MODIFIED AGREEMENTS"). These Modified
Agreements extended the maturity date of the Revolving Loan to January 31, 2002
and changed the rate that interest will accrue on the Term Note and the
Revolving Loan from prime rate plus 0.625% per annum and prime rate plus 0.25%
per annum, respectively, to 30-day LIBOR plus 500 basis points per annum. These
Modified Agreements also stated that Centura would forbear exercise of its
rights and remedies under the Modified Agreements until January 31, 2002, so
long as the Company continued to pay the principal and interest on the Term Note
and pay interest on the Revolving Loan. On February 21, 2002 the Company
executed documents with Centura, effective January 31, 2002, that amended the
Modified Agreements to extend the maturity dates of the Revolving Loan and the
Term Loan to July 31, 2002.
The Company had borrowed $800,000 under the Revolving Loan at December 31,
2002.
Centura also agreed to finance the lease of two major pieces of production
equipment related to the manufacturing of the Vitsab(R) product. The Company has
advanced approximately $842,000 in progress payments on the cost of both pieces
of equipment, of which $464,000 was advanced directly by Centura. Through
January 31, 2002, the Company had accrued and paid approximately $57,000 of
interest related to the progress payments made by Centura on behalf of the
Company. Pursuant to the lease agreement relating to the equipment, the Company
was to receive the amount of its progress payments upon delivery and acceptance
of the equipment and the closing of the lease. If needed, Centura had agreed to
loan the Company the total amount of progress payments made by the Company for a
minimum of 90 days at an interest rate of prime plus 1% per annum.
The cost of the equipment related to the first lease is approximately
$1,000,000, with monthly lease payments of $17,040, including interest at
approximately 9.35% for a period of 84 months. The cost of the equipment related
to the second lease is approximately $80,000, with monthly lease payments of
$1,685, including interest at approximately 10.4% for a period of 60 months.
Both leases were to commence upon the delivery of the equipment. Effective March
7
13, 2001, the Company and Centura agreed to combine both leases into one lease
agreement. The combined lease was to commence upon the delivery of the
equipment. As a result of the indefinite delay in the design and construction of
the equipment, the Company and Centura agreed to execute documents on February
21, 2002 that converted the $464,000 advanced under the lease by Centura to a
five-year term loan ("LEASE LOAN"), effective January 31, 2002. The executed
documents also incorporated the note into the Modified Agreements. The interest
rate on the note is the 30-day LIBOR plus 500 basis points per annum, with
monthly payments of $7,700 plus accrued interest. The maturity date of the note
is July 31, 2002.
Effective July 31, 2002, the Company executed documents with Centura that
extended the maturity date of the Term Loan, the Revolving Loan and the Lease
Loan ("LOANS") to October 31, 2002 and decreased the amount available on the
Revolving Loan from $1,000,000 to the then outstanding balance of $800,000. The
Company began discussions with Centura and a group of asset-based lenders in an
attempt to modify the Loans before October 31, 2002 to extend the maturity
dates. As a result, the Term Loan and Lease Loan were classified as current
portion of long-term debt.
Effective December 1, 2002, the Company executed documents with Centura
that extended the maturity date of the Loans to March 15, 2003. Under this new
arrangement, the Company will continue paying the current monthly principal
payments plus accrued interest on the Loans during this forbearance period. This
extension was intended to give the Company additional time to procure additional
debt or equity funding to allow the Company to decrease the amount owed to
Centura by an additional $450,000. The Company is required to reduce the amount
of principal outstanding under the Loans to $1,215,000, including the Loan
Reduction, by March 15, 2003. The Loan Reduction is in addition to our normal
monthly principal payments due on the Loans and the payment to Centura of the
$91,000 payment that the Company received on January 30, 2003 from the purchaser
of the oilfield subleases. If this target is obtained, Centura has agreed to
amortize the remaining balance over a fixed period of time not to exceed 42
months. Centura has also indicated their intent to decrease the rate of interest
accruing on the new loan as the Company meets certain target balances.
The Company has agreed to certain covenants, including prohibiting the
payment of dividends, with respect to the Loans.
The Company derives cash from operations, equity sales, and borrowing from
long- and short-term lending sources to meet its cash requirements. At present,
the cash flow from operations is not adequate to meet cash requirements and
commitments of the Company, including, but not limited to the commitment to make
the Loan Reduction. In addition to making the Loan Reduction, the purpose of the
Proposed Offering is to address our liquidity issues, support our balance sheet
and support our business development efforts.
COMPANY EVALUATION OF FINANCING ALTERNATIVES
As we have developed and implemented our business strategy, we recognized
that to achieve our operating goals we would need to address our liquidity issue
and strengthen our balance sheet. For these reasons, the Company has been
actively seeking additional capital for over a year.
Given the state of the economy and the fund-raising climate during that
period, no equity financing proposals, other than proposals from TI, and few
debt financing proposals have been available to the Company and, as explained
below, those proposals were on onerous terms. Throughout the period, the Board
of Directors and the Special Committee reviewed the Company's financing
alternatives and, balancing the onerous terms against the immediacy of the
Company's cash needs, declined all possible investments in or loans to the
8
Company prior to the Proposed Offering. A more thorough description of the
fund-raising efforts of the Company during that period follows.
On March 8, 2002, after the quarterly Board Meeting, Mr. Robert D. Voigt, a
director, met with Messrs. Fletcher and Reid to discuss the Company's need for
additional capital. Throughout March 2002, informal discussions between Mr.
Voigt and Messrs. Fletcher and Reid were held relating to the growing capital
needs of the Company. Also discussed was the possibility of an equity investment
in the Company by TI. No formal proposals were presented.
On April 12, 2002, Company representatives met with representatives of
Centura. The purpose of the meeting was to determine the extent to which Centura
would extend or modify the Loans should the Company receive an investment from
TI. On April 22, 2002, Centura informally indicated that it would extend the
maturity of the Loans from July 31, 2002 to July 31, 2003 if the Company would
pay down the Term Loan by at least $250,000 and raise additional working capital
of at least $200,000. Centura also indicated a willingness to decrease the
interest rates on the Loans by 50 basis points.
On April 29, 2002, the Company received the first financing proposal from
TI (the "FIRST TI PROPOSAL"). The First TI Proposal included three different
financing alternatives. All three financing alternatives included the following
items:
(i) The Company would agree to grant TI a security interest in all
its assets junior to the security interest of Centura, to secure
the $2,500,000 convertible loan dated March 10, 2000 (the
"ORIGINAL TI LOAN") and any new debt issued that was related to
this proposal. The Original TI Loan matures on March 10, 2005 and
accrues interest at 10% per annum. The Original TI Loan can be
converted into the Company's common stock at a conversion rate of
$1.25 per share.
(ii) All shares issued would be unregistered shares but would carry
piggyback registration rights.
(iii) TI would loan $200,000 to the Company through a convertible
promissory note. The Company would deposit the proceeds into an
account at Centura to satisfy their working capital requirement.
The loan would accrue interest at 10% per annum and the maturity
date would be July 31, 2003. The conversion rate would be
$0.05135 per share based on 50% of the average closing price of
the Company's common stock between February 12, 2002 and April
26, 2002. Interest would accrue until the loan was paid or until
it was converted into the Company's common stock.
Under financing alternative one, TI would purchase $250,000 in shares of
the Company's common stock at $0.1027 per share, or 100% of the average closing
price of the Company's common stock between February 12, 2002 and April 26,
2002. The conversion price of the Original TI Loan would be adjusted downward to
$0.12324 per share. This would be a 20% premium above the average closing price
of the Company's common stock between February 12, 2002 and April 26, 2002. In
addition, the maturity date of the Original TI Loan would be changed to mature
at $1,000,000 increments beginning March 10, 2005.
Under financing alternative two, TI would loan $250,000 to the Company
through a convertible promissory note. The loan would accrue interest at 10% per
annum and the maturity date would be March 10, 2005. The conversion rate would
be $0.1027 per share, or 100% of the average closing price of the Company's
common stock between February 12, 2002 and April 26, 2002. The conversion price
for $2,500,000 of the Original TI Loan would be adjusted downward to $0.12324
per share. This would be a 20% premium above the average closing price of the
9
Company's common stock between February 12, 2002 and April 26, 2002. The
conversion price for the accrued interest component of the loan would remain at
$1.25 per share.
Under financing alternative three, TI would loan $250,000 to the Company
through a convertible promissory note. The loan would accrue interest at 10% per
annum and the maturity date would be March 10, 2005. The conversion rate would
be $0.05135 per share, or 50% of the average closing price of the Company's
common stock between February 12, 2002 and April 26, 2002. The conversion price
for $1,300,000 of the Original TI Loan would be adjusted downward to $0.12324
per share. This would be a 20% premium above the average closing price of the
Company's common stock between February 12, 2002 and April 26, 2002. The
conversion price for the balance of the principal plus the accrued interest
component of the loan would remain at $1.25 per share.
On May 2, 2002, the Board of Directors met to consider the First TI
Proposal. Because Messrs. Fletcher and Reid were affiliated with TI and were
executive officers and directors of the Company, the Special Committee,
comprised of the Company's three outside directors, Ben R. Rudisill, II, Dr.
George M. Pigott and Robert D. Voigt, was appointed at that meeting of the Board
of Directors, with Mr. Voigt serving as Chairman. The purpose of the Special
Committee was to consider the First TI Proposal. At this meeting, the Special
Committee asked Mr. Jack G. Mason, the Company's chief financial officer, to
prepare a financial analysis of the First TI Proposal.
On May 8, 2002, the Company received from Messrs. Fletcher and Reid, a list
of 17 potential financing sources that had been contacted regarding potential
investment in the Company, all of whom had declined the opportunity.
On May 13, 2002, Mr. Mason completed and delivered to the members of the
Special Committee, an analysis of the First TI Proposal. On May 17, 2002, the
Special Committee met to consider the First TI Proposal. After the meeting, the
Special Committee met with a representative of Centura who indicated that the
Loans would not be accelerated as long as the Company continued to make timely
principal and interest payments. The Special Committee concluded that it would
not accept any of the financing alternatives proposed in the First TI Proposal
because of the requirement that the conversion price of the Original TI Loan be
reduced, and that the Company grant TI a security interest in all its assets
junior to the security interest of Centura, to secure the Original TI Loan and
any new debt issued that was related to the proposal. In addition, since Centura
indicated that it would not accelerate the Loans, the Special Committee did not
think it was prudent at that time to dilute the current shareholder ownership to
raise additional capital.
On May 30, 2002, Mr. Fletcher contacted Mr. Voigt to inform him that TI
desired to present a revised proposal (the "SECOND TI PROPOSAL") to the Special
Committee that addressed the Special Committee concerns over the dilution of the
current shareholder ownership. On June 6, 2002, the Special Committee met and
Messrs. Fletcher and Reid presented the Second TI Proposal to the Special
Committee. Under the Second TI Proposal, TI would loan $250,000 to the Company
through a convertible promissory note. The loan would accrue interest at 10% per
annum and would mature five years from the issuance date. The conversion rate
would be $0.06875 per share, or a 37.5% discount below the then current market
price of $0.11 per share. This was the same discount used in calculating the
conversion price for the Original TI Loan. All shares issued would be
unregistered shares but would carry piggyback registration rights. The Company
would agree to grant TI a security interest in all its assets junior to the
security interest of Centura, to secure the Original TI Loan and any new debt
issued that was related to the proposal. The conversion rate of the Original TI
Loan would not be adjusted under the Second TI Proposal. Mr. Mason was asked by
the Special Committee to prepare an analysis comparing the dilution on Company
stock ownership of the First TI Proposal and the Second TI Proposal.
10
On June 20, 2002, meetings of the Special Committee and of the full Board
of Directors were held. The Special Committee decided to reject the Second TI
Proposal because of the dilution to the current shareholders and the requirement
that the Original TI Loan and the proposed TI loan be secured. Following those
meetings, a letter was sent from Mr. Voigt to TI informing them of the decision.
The letter also stated that the Special Committee planned to seek alternative
financing from other sources outside of the Company. On July 5, 2002, an
investment package was sent to six potential institutional investors. For
various reasons, including the Company's current poor financial condition, all
declined to invest.
On July 24, 2002, the Company received an email from a Centura
representative indicating that the state and federal examiners had severely
downgraded the creditworthiness of the Loans because of the going concern
designation contained in the Company's financial statements, the Company's
continued losses, its declining net worth and the lack of sufficient collateral.
As a result, Centura only agreed to extend the maturity of the Loans to October
31, 2002, and the amount available under the Revolving Loan was immediately
reduced to the current outstanding balance of $800,000. On July 25, 2002, the
Special Committee engaged Loansmith, Inc., a loan broker, to assist in finding
an asset-based lender. Centura also provided the Company with a list of
potential asset-based lenders that it had used in the past.
Due to the downgrade of the Loans, management met with a representative of
Centura on August 26, 2002. At the meeting, the Centura representative indicated
that it was Centura's objective to either formulate an exit strategy for Centura
to get out of the Loans, which could include foreclosure, or to formulate a
rehabilitation plan that would allow the Loans to be upgraded.
After several discussions and meetings with the Company, Centura's
representative told the Company that he believed the Loans could be
rehabilitated and he informed the Company of the conditions under which Centura
would extend the maturity dates of the Loans past October 31, 2002. Those
conditions were for the Company to present a plan by October 31, 2002
satisfactory to Centura that involved a pay down of the Loans of approximately
$700,000 as quickly as possible. The Company was told that if it was not able to
offer a satisfactory plan for pay down of the Loans, Centura would have to take
other actions, which could include foreclosure of the Loans.
From August to October, seven asset-based lenders were contacted regarding
a possible loan to the Company. Two of those asset-based lenders did not submit
proposals. All of the proposals contained terms that the Company's management
believed to be detrimental to the Company. On October 8, 2002, the Board of
Directors met to discuss the first three proposals submitted. Later that day,
the Board of Directors also met with a representative of Centura who agreed to
allow the Company additional time to investigate raising capital through an
equity financing rather than a loan from an asset-based lender due to the high
interest cost and other fees associated with this type of debt financing.
On October 15, 2002, a final update of loan proposals submitted from five
asset-based lenders and a worksheet to compare those proposals was distributed
to the Board of Directors. On October 18, 2002, the Board of Directors met to
discuss the five asset-based loan proposals submitted. The Special Committee
believed that the onerous terms contained in the proposals exposed the Company
to substantial risk without solving the Company's need for adequate working
capital. Because of this, the Board of Directors decided not to accept any of
the asset-based lender proposals and to pursue the terms of an equity financing.
The Company's independent accounting firm and corporate counsel were solicited
for names of investment bankers to opine on price and structure of potential
equity financings and to compare those possibilities with the asset-based loans
proposals. Six investment banks were contacted with regard to the project. Three
investment banks submitted proposals.
11
On October 22, 2002, Centura agreed to extend the maturity date of the
Loans to February 15, 2003 if the Company paid the $450,000 Loan Reduction in
addition to (i) our normal monthly principal payments due on the Loans and (ii)
the payment to Centura of the $91,000 payment that the Company received on
January 30, 2003 from the purchaser of the oilfield subleases. Centura later
extended the maturity date to March 15, 2003 to give the Company time to prepare
the appropriate documentation necessary to obtain shareholder approval of the
Proposed Offering.
On November 1, 2002, the Special Committee accepted the proposal from
Ensemble to provide valuation and fairness opinion services. On November 21,
2002, the Special Committee received the first draft valuation report from
Ensemble. On November 26, 2002, the Special Committee received a second draft of
Ensemble's valuation report. On December 4, 2002, the Special Committee met to
discuss the valuation report. At that meeting, the Special Committee asked
Ensemble to perform some additional revenue sensitivity analyses.
On December 13, 2002, the Special Committee received Ensemble's third draft
valuation report including revenue sensitivity analysis and some modifications
resulting from receipt of actual financial results for the quarter ended October
31, 2002. On December 17, 2002, the Special Committee met to discuss the third
draft valuation report. Based on the valuation range in the third draft
valuation report ($0.0367 per share at the low end of the range and $0.0563 per
share at the high end of the range), the Special Committee approved continued
negotiation with TI for an investment at a price per share of $0.06 and
affirmatively decided that if an adequate deal could be negotiated with TI, the
Company should not pursue an asset-based loan. On that date, the Company and
Centura also executed documents, effective December 1, 2002, extending the
maturity of the Loans to March 15, 2003, to give the Company additional time to
raise capital to accomplish the Loan Reduction.
Negotiation and preparation of legal documents, including the Stock
Purchase Agreement, continued through the first two weeks of January 2003. On
January 16, 2003 a meeting of the Special Committee was held. At that meeting
Ensemble delivered its Fairness Opinion. In the materials supporting the
Fairness Opinion, the per share valuation range increased to $0.0398 - $0.0676
as a result of some minor debt reduction by the Company and the recent upward
movement in the stock market. After discussing these issues, the Special
Committee approved the Stock Purchase Agreement and the transactions
contemplated by the Stock Purchase Agreement. The Board of Directors met later
on January 16, 2003 and unanimously approved the Stock Purchase Agreement and
the transactions contemplated by the Stock Purchase Agreement (with Messrs.
Fletcher and Reid abstaining). At that meeting, the Board of Directors also set
the Record Date and took all actions necessary to submit the Proposal to the
shareholders at the Special Meeting with the Board's recommendation that
shareholders vote for the Proposal.
OPINION OF ENSEMBLE CONSULTING LLC
The Company retained Ensemble to act as financial advisor to the Special
Committee, and, if requested, to render to the Special Committee an opinion as
to the fairness to the shareholders of the Company, from a financial point of
view, of the consideration to be received by the Company in the Proposed
Offering.
Ensemble delivered to the Board of Directors on January 16, 2003 the
Fairness Opinion to the effect that, as of that date and based upon and subject
to the assumptions, factors and limitations set forth in the Fairness Opinion
and described below, the proposed consideration to be received by the Company in
the Proposed Offering was fair, from a financial point of view, to the
shareholders of the Company. A copy of the Fairness Opinion is attached to this
document as Appendix A and is incorporated by reference into this Proxy
Statement.
12
While Ensemble rendered its Fairness Opinion and provided certain valuation
analyses to the Special Committee, Ensemble was not requested to and did not
make any recommendation to the Special Committee as to the specific amount of
consideration to be received by the Company in the Proposed Offering, which was
determined through negotiations between the Special Committee and TI. The
Fairness Opinion, which was directed to the Special Committee, addresses only
the fairness, from a financial point of view, of the consideration payable to
the Company in the Proposed Offering, does not address the underlying business
decision to proceed with the Proposed Offering, or the relative merits of the
Proposed Offering compared to any alternative business strategy or transaction
in which the Company might engage and does not constitute a recommendation to
any of the Company's shareholders as to how to vote on the Proposal.
In arriving at its opinion, Ensemble's review included:
* The Stock Purchase Agreement;
* The Company's annual reports on Form 10-K for the fiscal years ended
April 30, 1998, 1999, 2000, 2001 and 2002, and quarterly reports on
Form 10-Q for the quarters ended July 31, 2001, October 31, 2001,
January 31, 2002, July 31, 2002 and October 31, 2002;
* The Company's forecasted financial results for the three fiscal years
ended April 30, 2003, 2004 and 2005;
* Publicly available business and financial information relative to the
Company;
* Various third party information about the Company including stock
reports; and
* Publicly available information on companies that are publicly traded
and have been acquired in a merger or acquisition transaction, which
Ensemble deemed to be comparable to the Company.
In addition, Ensemble visited the Company's headquarters and conducted
discussions with selected members of the Company's senior management (excluding
Messrs. Fletcher and Reid) concerning the financial condition, operating
performance and balance sheet characteristics of the Company.
In conducting its investigation and analyses, and in arriving at its
opinion expressed herein, Ensemble took into account such accepted financial and
investment banking procedures and considerations as it has deemed relevant,
including the review of: (i) historical and projected revenues, operating
earnings, net income and capitalization of the Company and certain other
publicly held companies in businesses believed to be comparable to the
Company's; (ii) the current and projected financial position and results of
operations of the Company; (iii) the historical market prices and trading
activity of the common stock of the Company; (iv) financial and operating
information concerning selected business combinations deemed comparable in whole
or in part; (v) the general condition of the securities markets; and (vi) such
other factors as were deemed appropriate.
RECENT DEVELOPMENTS
Following the approval of the Stock Purchase Agreement by the Special
Committee and the Board of Directors, Mr. Robert D. Voigt and Dr. George M.
Pigott, both directors of the Company, resigned from the Board effective January
17, 2003. Mr. Voigt recently moved from North Carolina and informed the Board of
Directors that he intended to resign following completion of the Special
Committee's work on the Proposed Offering. Dr. Pigott informed the Board that,
as a result of living on the West Coast and being unable to personally attend
13
Board meetings, he felt that the Company would be better served if it could
replace him with a local director who could be more active on the Board. Both
Mr. Voigt and Dr. Pigott voted to approve the Stock Purchase Agreement and
indicated that the Proposal had no influence on their decision to submit their
resignations. Mr. Ben R. Rudisill, II, a director of the Company, has informed
the Board that he intends to continue serving on the Board. The Company intends
to recruit additional qualified independent directors to serve on the Board.
14
DESCRIPTION OF STOCK PURCHASE AGREEMENT
The following summary of the material terms and provisions of the Stock
Purchase Agreement is qualified in its entirety by reference to the Stock
Purchase Agreement. A copy of the Stock Purchase Agreement is attached as
APPENDIX B to this Proxy Statement and is considered part of this Proxy
Statement. While we believe that these descriptions cover the material terms of
the Stock Purchase Agreement, the following summaries may not contain all of the
information that is important to you.
OVERVIEW. The Stock Purchase Agreement provides that, upon the terms and
conditions set forth in the Stock Purchase Agreement, TI will purchase
12,500,000 shares of our common stock for a price of $0.06 per share, or
$750,000.
CLOSING. The purchase of the common stock in the Proposed Offering will be
consummated at a closing (the "CLOSING") to be held as soon as practicable after
satisfaction of all the conditions to Closing, including approval by
shareholders at the Special Meeting. If the Proposal is approved at the Special
Meeting, and if all other conditions to Closing have then been satisfied, it is
anticipated that the Closing will occur on or about March 14, 2003.
REPRESENTATIONS AND WARRANTIES BY THE COMPANY. The Stock Purchase Agreement
contains various representations and warranties by the Company relating to,
among other things, the following:
* the corporate organization, existence and good standing of the
Company;
* the Company's corporate power and authority to execute the Stock
Purchase Agreement and to complete the Proposed Offering;
* exemption of registration of the common stock to be purchased in the
Proposed Offering;
* compliance with laws and the Company's Articles of Incorporation and
By-laws;
* the accuracy of our financial statements;
* absence of brokers;
* filings and reports with the SEC and accuracy and completeness of such
filings and reports;
* taxes; and
* accuracy and completeness of information in the Stock Purchase
Agreement and other written statements furnished TI by the Company.
REPRESENTATIONS AND WARRANTIES BY TI. The Stock Purchase Agreement contains
various representations and warranties by TI relating to, among other things,
the following:
* the organization, existence and good standing of TI;
* TI's power and authority to execute the Stock Purchase Agreement and
to complete the Proposed Offering;
* TI's investment intent with respect to the shares of common stock to
be purchased in the Proposed Offering;
* TI's status as an accredited investor; and
* absence of brokers;
15
CONDITIONS TO THE COMPANY'S OBLIGATION TO CLOSE. The Stock Purchase
Agreement contains various conditions to the Company's obligation to Close the
Proposed Offering including, among other things, the following:
* approval of the Proposal by the shareholders at the Special Meeting;
* receipt by the Company of a copy of resolutions of the co-managers of
TI approving the Stock Purchase Agreement, the execution of the Stock
Purchase Agreement and the consummation of transactions contemplated
by the Stock Purchase Agreement;
* receipt by the Company of a certified copy of TI's Operating
Agreement;
* absence of suits, actions or proceedings seeking to restrain or
prohibit the transactions contemplated by the Stock Purchase
Agreement; and
* receipt by the Company of the purchase price for the shares in the
Proposed Offering.
CONDITIONS TO TI'S OBLIGATION TO CLOSE. The Stock Purchase Agreement
contains various conditions to TI's obligation to Close the Proposed Offering
including, among other things, the following:
* approval of the Proposal by the shareholders at the Special Meeting;
* receipt by TI of a copy of resolutions of the Board of Directors or
Special Committee of the Board of Directors of the Company approving
the Stock Purchase Agreement, the execution of the Stock Purchase
Agreement and the consummation of transactions contemplated by the
Stock Purchase Agreement;
* receipt by TI of a certified copy of the Company's Articles of
Incorporation and By-laws;
* receipt by TI of a copy of all necessary consents and approvals;
* absence of suits, actions or proceedings seeking to restrain or
prohibit the transactions contemplated by the Stock Purchase
Agreement;
* absence of any change or development that could reasonably be expected
to have a material adverse effect on the business, operations,
prospects or financial condition of the Company since January 20,
2003; and
* receipt by TI of the certificates representing the shares of common
stock purchased in the Proposed Offering.
PIGGYBACK REGISTRATION RIGHTS. The Stock Purchase Agreement contains
provisions entitling TI to have their shares purchased in the Proposed Offering
included in other registration statements filed by the Company covering the
public offering of common stock of the Company. The exercise of these piggyback
registration rights will be subject to notice requirements and volume
limitations that might be imposed by the underwriters of the applicable
offering.
EXPENSES. Subject to limited exceptions, the Company has agreed to
reimburse TI for up to $15,000 in reasonable attorneys fees and expenses
incurred by TI in connection with the Stock Purchase Agreement and any other
related documents.
INDEMNIFICATION. The Stock Purchase Agreement contains customary provisions
that obligate each party to indemnify the other party against specified
liabilities.
AMENDMENT AND WAIVER. Any provision of the Stock Purchase Agreement may be
waived or amended upon written instruction signed by both the Company and TI.
16
COMMON STOCK OWNERSHIP BY CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Set forth below is the number of shares of Common Stock of the Company
owned by certain beneficial owners, the directors, the Chief Executive Officer,
the other executive officers named in the Summary Compensation Table, and the
directors and executive officers as a group, on January 10, 2003.
PERCENT OF
NAME SHARES (1) CLASS
- ---- --------------- ----------
Dr. James L. Cox............................................ 8,028,108 (2) 21.0%
Brian D. Fletcher........................................... 4,299,316 (3) 11.3%
Dr. George M. Pigott........................................ 17,300 (4) *
Kurt C. Reid................................................ 4,296,316 (5) 11.2%
Ben R. Rudisill, II......................................... 15,000 (6) *
Robert D. Voigt............................................. 21,000 (7) *
Jack G. Mason............................................... 260,000 (8) *
Technology Investors, LLC................................... 2,581,333 (9) 6.8%
Vitsab, AG.................................................. 3,124,835 (10) 8.2%
Directors and executive officers as a group (10 persons).... 17,091,351 (11) 44.7%
- ----------
* Indicates beneficial ownership of less than 1% of the shares of Common
Stock of the Company outstanding on January 10, 2003.
(1) Includes shares, if any, held by each person's spouse.
(2) Dr. Cox owns 3,280,279 shares directly, 1,005,829 shares are owned by a
trust over which Dr. Cox has investment and voting power, and 12,000 shares
held by parent. Includes a warrant to purchase 2,500,000 shares. Includes
options to purchase 1,230,000 shares exercisable within 60 days of January
10, 2003.
(3) Mr. Fletcher owns 217,983 shares directly. Includes options to purchase
1,500,000 shares exercisable within 60 days of January 10, 2003. Includes
2,581,333 shares beneficially owned through Technology Investors, LLC.
(4) Dr. Pigott owns 2,300 shares directly. Includes options to purchase 15,000
shares exercisable within 60 days of January 10, 2003.
(5) Mr. Reid owns 214,983 shares directly. Includes options to purchase
1,500,000 shares exercisable within 60 days of January 10, 2003. Includes
2,581,333 shares beneficially owned through Technology Investors, LLC.
(6) Mr. Rudisill has options to purchase 15,000 shares exercisable within 60
days of January 10, 2003.
(7) Mr. Voigt owns 6,000 shares directly. Includes options to purchase 15,000
shares exercisable within 60 days of January 10, 2003.
(8) Mr. Mason owns 10,000 shares directly. Includes options to purchase 250,000
shares exercisable within 60 days of January 10, 2003.
(9) The address for Technology Investors, LLC is 191 Bridgeport Drive,
Mooresville, North Carolina.
(10) The address for Vitsab, AG is Blumenshrasse 12, CH 8572-Berg, Switzerland.
Does not include shares held in street name.
(11) Includes warrants and options to purchase 12,318,166 shares exercisable
within 60 days of January 10, 2003.
17
OTHER MATTERS
Our Board of Directors knows of no other business that will be presented to
the Special Meeting. If any other business is properly brought before the
Special Meeting, proxies in the enclosed form will be voted in respect thereof
as the proxy holders deem advisable.
It is important that the proxies be returned promptly and that your shares
be represented. Shareholders are urged to mark, date, execute and promptly
return the accompanying proxy card in the enclosed envelope.
18
COX TECHNOLOGIES, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR SPECIAL MEETING ON MARCH 12, 2003
The undersigned shareholder of Cox Technologies, Inc. (the "COMPANY")
acknowledges receipt of Notice of the Special Meeting of Shareholders and Proxy
Statement, each dated February 6, 2003, and the undersigned revokes all prior
proxies and appoints JAMES L. COX and JACK G. MASON, or each of them, as proxies
for the undersigned, each with the power of substitution or resubstitution, to
vote all shares of common stock of the Company that the undersigned would be
entitled to vote at the Special Meeting of Shareholders to be held at the
Holiday Inn Airport, 2707 Little Rock Road, Charlotte, North Carolina at 9:00
a.m., local time, on March 12, 2003, and any postponement or adjournment
thereof, and instructs said proxies to vote as follows:
1. To approve the Stock Purchase Agreement and the transaction contemplated
thereby, including the proposed private placement of an issuance to Technology
Investors, LLC of 12,500,000 shares of our common stock, at a price of $0.06 per
share.
FOR AGAINST ABSTAIN
2. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
Please sign on reverse side
(continued from other side)
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE SPECIFICATIONS MADE. IF NO
SPECIFICATIONS ARE MADE, THIS PROXY WILL BE VOTED FOR THE PROPOSAL. ON ANY OTHER
MATTERS THAT MAY PROPERLY COME BEFORE THE SPECIAL MEETING, THIS PROXY WILL BE
VOTED IN ACCORDANCE WITH THE BEST JUDGMENT OF THE PROXIES. THIS PROXY MAY BE
REVOKED AT ANY TIME PRIOR TO ITS EXERCISE.
PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY CARD PROMPTLY, USING THE ENCLOSED
ENVELOPE.
Dated this __ day of ___________, 2003
--------------------------------------------
(Signature of Shareholder)
--------------------------------------------
(Signature of Shareholder)
Please sign exactly as your name or names appears on your
stock certificate. When signing as attorney, executor,
administrator, trustee or guardian, please give full title
as such. If shares are held jointly, EACH holder must sign.
APPENDIX A
Fairness Opinion of Ensemble Consulting LLC
January 16, 2003
Special Committee of the Board of Directors
Cox Technologies, Inc.
69 McAdenville Road
Belmont, NC 28012-2434
RE: OPINION OF FINANCIAL ADVISOR
Gentlemen:
We understand that Cox Technologies, Inc. ("Cox Technologies" or the "Company"),
a North Carolina corporation, proposes to enter into a stock purchase agreement
dated January 20, 2003 and hereinafter referred to as the "Stock Purchase
Agreement" with Technology Investors, LLC, a North Carolina limited liability
company (the "Purchaser"), pursuant to which the Purchaser will purchase from
the Company, and the Company will sell to the Purchaser (i) twelve million five
hundred thousand (12,500,000) shares of common stock for an aggregate purchase
price of $750,000 ("Consideration") (herein referred to as "the Transaction").
The Special Committee of the Board of Directors of the Company has requested our
opinion (the "Opinion") as to the fairness, from a financial point of view, of
the Consideration to be paid by the Purchaser in connection with the
Transaction. The Opinion does not address the Company's underlying business
decision to effect the Transaction. We have not been requested to, and did not,
solicit third party indications of interest in acquiring all or any part of the
Company. Furthermore, we have not negotiated the Transaction or advised you with
respect to alternatives to it.
In connection with this Opinion, we have made such reviews, analyses and
inquiries, as we have deemed necessary and appropriate under the circumstances.
Among other things, we have completed the following:
1. Reviewed Cox Technologies' annual reports on Form 10-K for the fiscal years
ended April 30, 1998; 1999; 2000; 2001 and 2002 and quarterly reports on Form
10-Q for the quarters ended July 31, 2001; October 31, 2001; January 31, 2002;
July 31, 2002 and October 31, 2002;
2. Interviewed selected senior management and board members of Cox Technologies,
Inc. to discuss the Transaction, the operations, financial condition, future
prospects and performance of the Company;
Special Committee of the Board of Directors
January 16, 2003
Page 2
3. Reviewed the financial terms and conditions contained in the January 15th,
2003 draft of the Stock Purchase Agreement between the Company and the Purchaser
and assumed the final form of the Stock Purchase Agreement dated January 20,
2003 would not vary in any respect material to our analysis;
4. Reviewed the Company's forecasted financial results for the three fiscal
years ended April 30, 2003; 2004 and 2005;
5. Reviewed various other information from the Company including marketing
pieces and press releases;
6. Reviewed various third party information about the Company including stock
reports;
7. Reviewed the historical market prices and trading activity of the common
stock of the Company;
8. Reviewed publicly available information on companies that are publicly traded
and/or have been acquired in a merger or acquisition transaction, which we
deemed comparable to the Company; and
9. Conducted such other analyses, studies and investigations, as we deemed
appropriate under the circumstances for rendering the opinion expressed herein.
Except as expressly set forth above, we were not provided and did not review any
documentation, preliminary or otherwise, regarding the valuation of the
individual assets of the Company.
We have relied upon and assumed, without independent verification, that the
financial forecasts and projections provided to us have been reasonably prepared
and reflect the best currently available estimates and judgments of the future
financial results and condition of the Company, and that there has been no
material change in the assets, financial condition, business or prospects of the
Company since the date of the most recent financial statements made available to
us.
We have not independently verified the accuracy and completeness of the
information supplied to us with respect to the Company and do not assume any
responsibility with respect to it. We have not made any physical inspection or
independent appraisal of any of the properties or assets of the Company. Our
opinion is necessarily based on business, economic, market and other conditions
as they exist and can be evaluated by us at the date of this letter.
It is understood that this Opinion is for the information of the Special
Committee of the Board of Directors in connection with its evaluation of the
Transaction and does not constitute a recommendation to the Purchaser or any
holder of shares of common stock of Cox Technologies, Inc. as to whether to
enter into the Stock Purchase Agreement or to take other action in connection
with the Transaction. This Opinion is delivered to you subject to the
conditions, scope of engagement, limitations and understandings set forth in
this Opinion and our engagement letter dated November 7, 2002 (the "Engagement
Letter") with the Board of Directors, and subject to the understanding that the
obligations of Ensemble Consulting LLC in the transaction are solely corporate
obligations, and no officer,
Special Committee of the Board of Directors
January 16, 2003
Page 3
director, employee, agent, shareholder or controlling person of Ensemble
Consulting LLC shall be subjected to any personal liability whatsoever to any
person, nor will any such claim be asserted by or on behalf of you or your
affiliates unless permitted by the Engagement Letter. This letter speaks only as
of its date and we are under no obligation and do not undertake any obligation
to update the Opinion at any time after the date hereof.
In arriving at this opinion, we did not attribute any particular weight to any
analysis or factor considered by it, but rather made qualitative judgments as to
the significance and relevance of each analysis and factor. Accordingly, we
believe that our analyses must be considered as a whole and that selecting
portions of our analyses, without considering all analyses, would create an
incomplete view of the process underlying the Opinion.
Based upon the foregoing, and in reliance thereon, it is our opinion that the
Consideration to be paid by the Purchaser in connection with the Transaction is
fair to the shareholders of Cox Technologies, Inc. from a financial point of
view.
Sincerely,
/s/ Justine E. Tobin
ENSEMBLE CONSULTING LLC
APPENDIX B
Stock Purchase Agreement
STOCK PURCHASE AGREEMENT
DATED AS OF
JANUARY 20, 2003
BY AND BETWEEN
COX TECHNOLOGIES, INC.
AND
TECHNOLOGY INVESTORS, LLC
TABLE OF CONTENTS
Page No.
ARTICLE I. DEFINITIONS.........................................................1
ARTICLE II. CLOSING............................................................3
2.1. Authorization of Purchased Securities...................................3
2.2. Purchase of Purchased Securities........................................3
2.3. Closing.................................................................4
ARTICLE III. PURCHASER'S REPRESENTATIONS.......................................4
3.1. Investment Intention....................................................4
3.2. Accredited Investor.....................................................4
3.3. Corporate Existence.....................................................4
3.4. Corporate Power; Authorization; Enforceable Obligations.................4
3.5. Brokers.................................................................5
ARTICLE IV. COMPANY'S REPRESENTATIONS, WARRANTIES AND COVENANTS................5
4.1. Capitalization..........................................................5
4.2. Authorization and Issuance of the Purchased Securities..................5
4.3. Securities Laws.........................................................5
4.4. Corporate Existence; Compliance with Laws...............................5
4.5. Corporate Power: Authorization: Enforceable Obligations.................6
4.6. Financial Statements....................................................6
4.7. Taxes...................................................................7
4.8. Brokers.................................................................7
4.9. Required Filings........................................................7
4.10. Full Disclosure.........................................................7
4.11. Absence of Changes......................................................7
ARTICLE V. CONDITIONS PRECEDENT TO CLOSING.....................................8
5.1. Conditions Precedent to Purchaser's Obligation to Close.................8
5.2. Conditions Precedent to Company's Obligation to Close...................9
ARTICLE VI. SECURITIES LAW MATTERS.............................................9
6.1. Legends.................................................................9
6.2. Transfer of Restricted Securities......................................10
6.3. Registration Rights....................................................11
ARTICLE VII. EXPENSES.........................................................11
ARTICLE VIII. LIMITATION ON CLAIMS OF PURCHASER; INDEMNIFICATION..............12
8.1. Limitation.............................................................12
8.2. Indemnification by the Company.........................................12
8.3. Indemnification by the Purchaser.......................................13
8.4. Exculpation............................................................13
ARTICLE IX. MISCELLANEOUS.....................................................14
9.1. Notices................................................................14
9.2. Binding Effect; Benefits...............................................15
9.3. Amendment..............................................................15
9.4. Successors and Assigns; Assignability..................................15
9.5. Section and Other Headings.............................................15
9.6. Severability...........................................................15
9.7. Entire Agreement.......................................................15
9.8. Counterparts...........................................................16
9.9. Publicity..............................................................16
9.10. Governing Law..........................................................16
9.11. No Strict Construction.................................................16
SCHEDULE 1.0 SEC Filings
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "AGREEMENT"), dated as of January
20, 2003, by and between Cox Technologies, Inc., a North Carolina corporation
(the "COMPANY"), and Technology Investors, LLC, a North Carolina limited
liability company (the "PURCHASER").
The Company has agreed to issue and sell to Purchaser, and Purchaser
has agreed to purchase from the Company, upon the terms and conditions
hereinafter provided, twelve million five hundred thousand (12,500,000) shares
of the Company's Common Stock (the "COMMON STOCK"), for an aggregate purchase
price of $750,000.
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, and for other good and valuable consideration, the
receipt of which is hereby acknowledged, it is agreed as follows:
ARTICLE I.
DEFINITIONS
"AUDITED FINANCIALS" shall have the meaning set forth in Section 4.6
hereof.
"BUSINESS DAY" shall mean any day that is not a Saturday, a Sunday or
a day on which banks are required or permitted to be closed in the State of
North Carolina.
"ARTICLES OF INCORPORATION" shall mean the Company's Articles of
Incorporation, as the same may be amended from time to time.
"CLOSING" or "CLOSING DATE" shall each have their respective meanings
set forth in Section 2.3 hereof.
"COMMON STOCK" shall have the meaning set forth in the recitals.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, and all rules and regulations promulgated thereunder.
"FINANCIALS" shall have the meaning set forth in Section 4.6 hereof.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time.
"GOVERNMENTAL AUTHORITY" shall mean any nation or government, any
state or other political subdivision thereof, and any agency, department or
other entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"KNOWLEDGE" shall mean the actual knowledge of an executive officer of
the Company.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on the
business, assets, operations, prospects or financial condition of the Company.
"PERSON" shall mean any individual, sole proprietorship, partnership,
limited liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, entity or
government (whether federal, state, county, city, municipal or otherwise,
including, without limitation, any instrumentality, division, agency, body or
department thereof).
"PURCHASED SECURITIES" shall mean the Common Stock purchased by the
Purchaser at the Closing pursuant to Section 2.2 of this Agreement.
"RESTRICTED SECURITIES" shall mean (i) the Purchased Securities issued
hereunder, and (ii) any securities issued and exchanged with respect to the
securities referred to in clause (i) by way of a stock dividend or stock split
or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization. As to any particular Restricted
Securities, such securities shall cease to be Restricted Securities when they
have been (a) effectively registered under the Securities Act and disposed of in
accordance with the registration statement covering them, (b) been distributed
to the public through a broker, dealer or market maker pursuant to Rule 144 (or
any similar provision then in force) under the Securities Act or become eligible
for sale pursuant to Rule 144(k) (or any similar provision then in force) under
the Securities Act or (c) been otherwise transferred and new certificates for
them not bearing the Securities Act legend set forth in Section 6.1 have been
delivered by Company in accordance with Section 6.2. Whenever any particular
securities cease to be Restricted Securities, the holder thereof shall be
entitled to receive from Company, without expense, new securities of like tenor
not bearing a Securities Act legend of the character set forth in Section 6.1.
"SEC" shall mean the U.S. Securities and Exchange Commission, or any
successor thereto.
"SEC FILINGS" shall mean the following documents that have been filed
with the SEC, copies of which are attached hereto as Schedule 1.0: (i) the
annual report of the Company on Form 10-K for the fiscal year ended April 30,
2002, (ii) the quarterly reports of the Company on Form 10-Q for the quarterly
periods ended October 31, 2002 and July 31, 2002, (iii) the current reports of
the Company on Form 8-K, dated September 30, 2002, September 5, 2002 and
February 11, 2002 and (iv) the definitive proxy statement of the Company dated
July 29, 2002.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended,
and all rules and regulations promulgated thereunder.
-2-
"STOCK" shall mean all shares, options, warrants, general or limited
partnership interests, limited liability company membership interest,
participations or other equivalents (regardless of how designated) of or in a
corporation, partnership, limited liability company or equivalent entity whether
voting or nonvoting, including, without limitation, common stock, preferred
stock, or any other equity security (as such term is defined in Rule 3a11-1 of
the General Rules and Regulations promulgated by the SEC under the Exchange
Act).
"TRANSACTION DOCUMENTS" shall mean this Agreement and all certificates
and other documents related to the transactions contemplated by this Agreement.
"UNAUDITED FINANCIALS" shall have the meaning set forth in Section 4.6
hereof.
References to this "AGREEMENT" shall mean this Stock Purchase
Agreement, including all amendments, modifications and supplements and any
exhibits or schedules to any of the foregoing, and shall refer to the Agreement
as the same may be in effect at the time such reference becomes operative.
Any accounting term used in this Agreement shall have, unless
otherwise specifically provided herein, the meaning customarily given such term
in accordance with GAAP, and all financial computations hereunder shall be
computed, unless otherwise specifically provided herein, in accordance with GAAP
consistently applied. That certain terms or computations are explicitly modified
by the phrase "in accordance with GAAP" shall in no way be construed to limit
the foregoing. The words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement, as a whole, including the schedules
hereto, as the same may from time to time be amended, modified or supplemented,
and not to any particular section, subsection or clause contained in this
Agreement. Wherever from the context it appears appropriate, each term stated in
either the singular or plural shall include the singular and the plural, and
pronouns stated in the masculine, feminine or neuter gender shall include the
masculine, the feminine and the neuter.
ARTICLE II.
CLOSING
2.1. AUTHORIZATION OF PURCHASED SECURITIES. Prior to the Closing, the
Company shall have duly authorized the issuance and sale of the Purchased
Securities.
2.2. PURCHASE OF PURCHASED SECURITIES. Subject to the terms and conditions
set forth in this Agreement, on the Closing Date (as defined below), the
Purchaser will purchase from the Company, and the Company will sell to Purchaser
(i) twelve million five hundred thousand (12,500,000) shares of Common Stock for
a purchase price of $0.06 per share (the "PER SHARE PRICE") for an aggregate
purchase price of $750,000 (the "PURCHASE PRICE"). The Purchase Price will be
payable in full by Purchaser on the Closing Date in cash by wire transfer of
immediately available funds to an account designated by the Company.
-3-
2.3. CLOSING. The closing of the purchase and sale of the Purchased
Securities (the "CLOSING") shall take place within five (5) Business Days
following the receipt of stockholder approval of the transaction contemplated by
this Agreement (the "CLOSING DATE") at the offices of Morris, Manning & Martin,
LLP, 6000 Fairview Road, Suite 1125, Charlotte, NC 28210, or such other place as
shall be mutually agreed to by the parties hereto. On the Closing Date, the
Company will deliver to the Purchaser the items listed in SECTION 5.1 against
delivery by the Purchaser of the Purchase Price by payment of cash by wire
transfer of immediately available funds to the Company.
ARTICLE III.
PURCHASER'S REPRESENTATIONS
As of the Closing, the Purchaser makes the following representations
and warranties to the Company, each and all of which shall survive the execution
and delivery of this Agreement and the Closing hereunder:
3.1. INVESTMENT INTENTION. The Purchaser is purchasing the Purchased
Securities for its own account, for investment purposes and not with a view to
the distribution thereof. The Purchaser will not, directly or indirectly, offer,
transfer, sell, assign, pledge, hypothecate or otherwise dispose of any of the
Purchased Securities (or solicit any offers to buy, purchase, or otherwise
acquire any of the Purchased Securities), except in compliance with the
Securities Act.
3.2. ACCREDITED INVESTOR. The Purchaser is an "accredited investor" (as
that term is defined in Rule 501 of Regulation D under the Securities Act) and
by reason of its business and financial experience, it has such knowledge,
sophistication and experience in business and financial matters as to be capable
of evaluating the merits and risks of the prospective investment, is able to
bear the economic risk of such investment and it is able to afford a complete
loss of such investment.
3.3. CORPORATE EXISTENCE. The Purchaser is a North Carolina limited
liability company duly organized, validly existing and in good standing under
the laws of its jurisdiction of formation.
3.4. CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. The
execution, delivery and performance by the Purchaser of the Transaction
Documents to be executed by it: (i) are within the Purchaser's power; (ii) have
been duly authorized by all necessary action; (iii) are not in contravention of
any provision of the Purchaser's governing documents; and (iv) will not violate
any law or regulation, or any order or decree of any court or governmental
instrumentality binding on the Purchaser. The Purchaser has full power and
authority to perform its obligations under the Transaction Documents. The
Transaction Documents to which the Purchaser is a party have each been duly
executed and delivered by the Purchaser and constitute the legal, valid and
binding obligations of the Purchaser, enforceable against it in accordance with
their respective terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally, and subject, as to enforceability, to general
principles of equity, including principles of commercial reasonableness, good
-4-
faith and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity).
3.5. BROKERS. No broker or finder acting on behalf of the Purchaser brought
about the consummation of the transactions contemplated pursuant to this
Agreement and the Purchaser has no obligation to any Person in respect of any
finder's or brokerage fees (or any similar obligation) in connection with the
transactions contemplated by this Agreement.
ARTICLE IV.
COMPANY'S REPRESENTATIONS, WARRANTIES AND COVENANTS
As of the Closing, the Company makes the following representations,
warranties and covenants to each Purchaser, each and all of which shall survive
the execution and delivery of this Agreement and each Closing hereunder. The
Company shall have no liability to the Purchaser for any breach of the
representations and warranties set forth herein if, as of the date hereof or the
Closing Date, either Brian D. Fletcher or Kurt C. Reid had actual knowledge of
facts that would make the representations and warranties set forth herein
untrue.
4.1. CAPITALIZATION. All issued and outstanding Stock of the Company is
duly authorized, validly issued, fully paid and non-assessable.
4.2. AUTHORIZATION AND ISSUANCE OF THE PURCHASED SECURITIES. The issuance
of the Purchased Securities has been duly authorized by all necessary corporate
action on the part of the Company and, upon delivery to the Purchaser of
certificates therefor against payment in accordance with the terms hereof, the
Purchased Securities will be validly issued and fully paid and nonassessable,
free and clear of all pledges, liens, encumbrances and preemptive rights.
4.3. SECURITIES LAWS. In reliance on the representations of the Purchaser
contained in SECTION 3.1 and SECTION 3.2, the offer, issuance, sale and delivery
of the Purchased Securities, as provided in this Agreement, are exempt from the
registration requirements of the Securities Act and all applicable United States
state securities laws, and are otherwise in compliance with such laws. No
information contained in the SEC Filings contains any untrue statement of a
material fact, or omits to state a material fact necessary to make the
statements contained therein not misleading in light of the circumstances under
which made.
4.4. CORPORATE EXISTENCE; COMPLIANCE WITH LAWS. The Company (i) is a
corporation duly organized, validly existing and in good standing under the laws
of the State of North Carolina; (ii) has the requisite corporate power and
authority and the legal right to own, pledge, mortgage or otherwise encumber and
operate its properties, to lease the property it operates under lease, and to
conduct its business as now being conducted in all material respects; (iii) has,
or has applied for, all material licenses, permits, consents or approvals from
or by, and has made all material filings with, and has given all material
notices to, all Governmental Authorities having jurisdiction, to the extent
required for such ownership, operation and conduct; (iv) is in compliance with
its Articles of Incorporation and by-laws in all material respects; and (v) to
-5-
the Knowledge of the Company, is in compliance with all applicable provisions of
applicable laws, except for such non-compliance which would not have a Material
Adverse Effect.
4.5. CORPORATE POWER: AUTHORIZATION: ENFORCEABLE OBLIGATIONS. The
execution, delivery, and performance by the Company of this Agreement, the other
Transaction Documents to which it is a party and all instruments and documents
to be delivered by the Company, the issuance and sale of the Purchased
Securities and the consummation of the other transactions contemplated by any of
the foregoing: (i) are within the Company's corporate power and authority; (ii)
have been duly authorized by all necessary or proper corporate action; (iii) are
not in contravention of any provision of the Company's Articles of Incorporation
or by-laws; (iv) will not violate any law or regulation, or any order or decree
of any court or governmental instrumentality; and (v) will not conflict with or
result in the breach or termination of, constitute a default under or accelerate
any performance required by, any indenture, mortgage, deed of trust, lease,
agreement or other instrument to which the Company is a party or by which the
Company or any of their property is bound. This Agreement and the other
Transaction Documents have been duly executed and delivered by the Company and
constitute legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally, and subject, as
to enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity).
4.6. FINANCIAL STATEMENTS.
(a) The audited financial statements of the Company, dated as of
April 30, 2002 (the "AUDITED FINANCIALS"), have been prepared in accordance with
the books and records of the Company, present fairly the financial condition of
the Company as of the respective dates indicated and the results of operations
for the respective periods indicated, and have been prepared in accordance with
GAAP applied on a consistent basis. The unaudited financial statements of the
Company, dated as of October 31, 2002 (the "UNAUDITED FINANCIALS"), have been
prepared in accordance with the books and records of the Company, and present
fairly the financial condition of the Company as of the respective dates
indicated and the results of operations for the respective periods indicated,
subject to the lack of footnote disclosure and changes resulting from normal
year-end adjustments. The Audited Financials and Unaudited Financials shall be
referred to herein collectively as the "FINANCIALS."
(b) Except as set forth in the SEC Filings, the Company has no
material obligations, contingent or otherwise, including, without limitation,
liabilities for charges, long-term leases or long-term commitments that are not
reflected in the Financials, other than those incurred since October 31, 2002 in
the ordinary course of business (none of which is a liability resulting from
breach of contract, breach of warranty, tort, infringement, or any claim or
lawsuit).
-6-
4.7. TAXES. All federal, state, local and foreign tax returns, reports and
statements required to be filed by the Company have been timely filed with the
appropriate Governmental Authority except where the failure to file such report
or statement would not have a Material Adverse Effect and all such returns,
reports and statements are true, correct and complete in all material respects.
All charges and other impositions due and payable as set forth in such returns,
reports and statements for the periods covered by such returns, reports and
statements have been paid prior to the date on which any fine, penalty, interest
or late charge may be added thereto for nonpayment thereof or any such fine,
penalty, interest or late charge has been paid. To the Knowledge of the Company,
proper and accurate amounts have been withheld by the Company from its employees
for all periods in full and complete compliance with the tax, social security
and unemployment withholding provisions of applicable federal, state, local and
foreign law and such withholdings have been timely paid to the respective
governmental agencies.
4.8. BROKERS. No broker or finder acting on behalf of the Company brought
about the consummation of the transactions contemplated pursuant to this
Agreement and the Company has no obligation to any Person in respect of any
finder's or brokerage fees (or any similar obligation) in connection with the
transactions contemplated by this Agreement. The Company is solely responsible
for the payment of all such finder's or brokerage fees.
4.9. REQUIRED FILINGS. As of the date hereof, the Company has made all
required filings under the Securities Act and Exchange Act, and, to the
Knowledge of the Company, all information contained in such filings is true and
correct in all material respects and does not contain any untrue information or
omit to state a material fact necessary to make any statements contained in such
filings not misleading in light of the circumstances under which they were made.
4.10. FULL DISCLOSURE. To the Knowledge of the Company, no information
contained in this Agreement, any other Transaction Document, the Financials or
any written statement furnished by or on behalf of the Company pursuant to the
terms of this Agreement contains any untrue statement of a material fact or
omits to state a material fact necessary to make the statements contained herein
or therein not misleading in light of the circumstances under which they were
made.
4.11. ABSENCE OF CHANGES. For the period commencing on October 31, 2002 and
ending on the date of this Agreement: (a) the Company has not entered into any
transaction which was not in the ordinary course of business; (b) there has been
no materially 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, have had a Material Adverse Effect; (c) there has been no damage to,
destruction of or loss of physical property (whether or not covered by
insurance) which has had a Material Adverse Effect; (d) there has been no
resignation or termination of employment of any key officer, consultant or
employee of the Company, and the Company has no Knowledge of the impending
resignation or termination of employment of any such officer, consultant or
employee that, if consummated, would have a Material Adverse Effect; and (e)
there has not been any change, except in the ordinary course of business, in the
contingent obligations of the Company, by way of guaranty, endorsement,
indemnity, warranty or otherwise, that has had a Material Adverse Effect.
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ARTICLE V.
CONDITIONS PRECEDENT TO CLOSING
5.1. CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATION TO CLOSE. The
obligation of the Purchaser to purchase the Purchased Securities pursuant to
SECTION 2.2 hereof at the Closing is subject to the condition that, on and as of
the Closing Date, (i) the Purchaser shall have received from the Company the
following items, each dated the Closing Date unless otherwise indicated, in form
and substance satisfactory to the Purchaser, or (ii) the following actions or
events shall have occurred, unless waived by the Purchaser.
(a) Resolutions of the stockholders, the Company's Board of
Directors and the Special Committee of the Company's Board of Directors,
certified by the Secretary or Assistant Secretary of the Company as of the
Closing Date, to be duly adopted and in full force and effect on such date,
authorizing (i) the consummation of each of the transactions contemplated by
this Agreement and (ii) officers to execute and deliver this Agreement and each
other Transaction Document to which it is a party.
(b) A copy of the Company's Articles of Incorporation and
bylaws, certified by the Secretary or Assistant Secretary of the Company as true
and correct as of the Closing Date.
(c) A copy of all third party consents and approvals, if any,
that are necessary for the consummation of the transactions contemplated hereby
or that are required in order to prevent a breach of or default under, a
termination or modification of, or acceleration of the terms of, any contract,
agreement or document required to be listed in the SEC Filings, in each case on
terms and conditions reasonably satisfactory to the Purchaser.
(d) No suit, action or other proceeding shall be pending against
the Company before any court or governmental regulatory body or authority in
which it is sought to restrain or prohibit the transactions contemplated hereby,
or that could reasonably be expected to have a Material Adverse Effect, and no
injunction, judgment, order, decree or ruling with respect thereto shall be in
effect.
(e) Since January 20, 2003:
(i) there shall have been no change or development that
could reasonably be expected to have a Material Adverse Effect;
and
(ii) concurrently with the Closing, the Company's lender
shall have entered into an amendment to its loan agreement with
the Company to provide for an amortization of the Company's
current indebtedness to such lender over a period of not less
than forty-one (41) months.
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(f) The Purchased Securities shall have been delivered to the
Purchaser.
(g) The Company shall have reimbursed the Purchaser for fees and
expenses incurred in connection with the preparation, execution and delivery of
the Transaction Documents and in connection with obtaining the funds necessary
to meet Purchaser's obligations hereunder, provided that such amount of
reimbursement does not exceed fifteen thousand dollars ($15,000) in the
aggregate.
5.2. CONDITIONS PRECEDENT TO COMPANY'S OBLIGATION TO CLOSE. The obligation
of the Company to issue and sell the Purchased Securities pursuant to Section
2.2 hereof at the Closing is subject to the condition that, on and as of the
Closing Date, (i) the Company shall have received from the Purchaser the
following items, each dated the Closing Date unless otherwise indicated, in form
and substance satisfactory to the Company, or (ii) the following actions or
events shall have occurred, unless waived by the Company.
(a) A certificate of a co-manager of the Purchaser attesting to
the due authorization of (i) the execution and delivery of the Transaction
Documents and (ii) the consummation of all transactions contemplated thereby.
(b) A copy of the Purchaser's Articles of Organization and its
Operating Agreement, certified by the Secretary or Assistant Secretary of the
Company as true and correct as of the Closing Date.
(c) No suit, action or other proceeding shall be pending against
the Purchaser before any court or governmental regulatory body or authority in
which it is sought to restrain or prohibit the transactions contemplated hereby,
or that could reasonably be expected to have a Material Adverse Effect, and no
injunction, judgment, order, decree or ruling with respect thereto shall be in
effect.
(d) The Company shall have obtained the consent and approval of
its Board of Directors and its shareholders to enter into and execute the
Transaction Documents and to engage in any and all transactions contemplated
therein.
(e) The Purchase Price shall have been delivered to the
Company's bank account.
ARTICLE VI.
SECURITIES LAW MATTERS
6.1. LEGENDS.
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(a) Each certificate representing the Purchased Securities shall
bear a legend substantially in the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE EITHER OWNED BY A
PERSON OR PERSONS WHO MAY BE CONSIDERED AN AFFILIATE FOR PURPOSES OF
RULE 144 OF THE SECURITIES ACT OF 1933 (THE "ACT") OR HAVE NOT BEEN
REGISTERED UNDER THE ACT. NO TRANSFER OF THESE SHARES OR ANY INTEREST
THEREIN MAY BE MADE EXCEPT PURSUANT TO RULE 144 OR AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT, UNLESS THE ISSUER HAS RECEIVED
AN OPINION OF COUNSEL SATISFACTORY TO IT THAT SUCH TRANSFER DOES NOT
REQUIRE REGISTRATION UNDER THE ACT.
6.2. TRANSFER OF RESTRICTED SECURITIES.
(a) Restricted Securities are transferable only pursuant to (i)
public offerings registered under the Securities Act, (ii) Rule 144 or Rule 144A
of the SEC (or any similar rule or rules then in force) if such rule is
available and (iii) subject to the conditions specified in subparagraph (b)
below, any other legally available means to transfer.
(b) In connection with the transfer of any Restricted Securities
(other than a transfer described in clause (i) or (ii) of subparagraph (a)
above), the holder thereof shall deliver written notice to the Company
describing in reasonable detail the transfer or proposed transfer, together with
an opinion of counsel which (to the Company's reasonable satisfaction) is
knowledgeable in securities law matters to the effect that such transfer of
Restricted Securities may be effected without registration of such Restricted
Securities under the Securities Act. In addition, if the holder of the
Restricted Securities delivers to the Company an opinion of counsel that no
subsequent transfer of such Restricted Securities shall require registration
under the Securities Act, the Company shall promptly upon such contemplated
transfer deliver new certificates or instruments, as the case may be, for such
Restricted Securities which do not bear the Securities Act legend set forth in
SECTION 6.1. If the Company is not required to deliver new certificate or
instruments, as the case may be, for such Restricted Securities not bearing such
legend, the holder thereof shall not transfer the same until the prospective
transferee has confirmed to the Company in writing its agreement to be bound by
the conditioned contained in this SECTION 6.2.
(c) Upon the request of a holder of Restricted Securities, the
Company shall promptly supply to such holder or such holder's prospective
transferees all information regarding the Company required to be delivered in
connection with a transfer pursuant to Rule 144 or 144A of the SEC.
(d) If any Restricted Securities become eligible for sale
pursuant to Rule 144(k), the Company shall, upon the request of the holder of
such Restricted Securities, remove the legend set forth in SECTION 6.1 from the
certificates or instruments, as the case may be, representing such Restricted
Securities.
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6.3. REGISTRATION RIGHTS. If the Company at any time proposes for any
reason to register any of its Common Stock under the Securities Act (other than
on Form S-4 or Form S-8 promulgated under the Securities Act or any successor
forms thereto or other than in connection with an exchange offer or offering
solely to the Company's stockholders), it shall promptly give written notice to
the Purchaser of its intention to so register the Common Stock. Within ten (10)
days after delivery of any such notice by the Company, the Purchaser may request
in writing to include in such registration the Purchased Securities held by the
Purchaser (which request shall specify the number of Purchased Securities
proposed to be included in such registration). Upon receipt of such Purchaser
request, the Company shall use its commercially reasonable efforts to include
all such requested Purchased Securities in such registration on the same terms
and conditions as the securities otherwise being sold in such registration;
PROVIDED, HOWEVER, that if the managing underwriter advises the Company that the
inclusion of such Purchased Securities proposed to be included in such
registration would interfere with the successful marketing (including pricing)
of the Common Stock proposed to be registered by the Company, then all shares of
Common Stock proposed to be registered by the Company shall be included in the
registration before any Purchased Securities are included in the registration.
The underwriter may then determine if any Purchased Securities will be included
in the registration; PROVIDED, HOWEVER, that the Company shall not include in
the registration any shares requested to be registered by third parties (such
shares, "THIRD PARTY SHARES") unless it includes in such registration a
percentage of Purchased Shares (expressed as a percentage of total registered
shares) that is equal to or greater than the percentage of Third Party Shares
(expressed as a percentage of total registered shares) included in such
registration. The Purchaser may exercise its rights under this SECTION 6.3 on an
unlimited number of occasions. The Company shall pay all expenses of any
registration effected under this SECTION 6.3.
ARTICLE VII.
EXPENSES
The Company agrees to reimburse the Purchaser for all fees and
expenses incurred in connection with the preparation, execution and delivery of
the Transaction Documents and in connection with obtaining the funds necessary
to meet Purchaser's obligations hereunder; PROVIDED, HOWEVER, that such fees and
expenses shall not exceed $15,000 in the aggregate; PROVIDED, FURTHER, that, in
the event the Closing is not consummated and no shares of Common Stock are
issued to the Purchaser in connection with this Agreement, the Company shall
have no obligation to reimburse the Purchaser for any attorneys' fees or
expenses, unless the Closing is not consummated as a result of (i) the Company's
failure to meet the conditions precedent set forth in SECTION 5.1(d) or SECTION
5.1(e) above, (ii) the failure of the Company's lender, concurrently with the
Closing, to enter into an amendment to its loan agreement with the Company to
provide for an amortization of the Company's current indebtedness to such lender
over a period of not less than forty-one (41) months, (iii) the failure of the
Company's stockholders to approve the issuance and sale of the Purchased
Securities, (iv) the commencement of voluntary or involuntary bankruptcy
proceedings by or against the Company or (v) the occurrence of a Disaster Event
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(as defined below) that has a Material Adverse Effect. For purposes of this
Agreement, a "DISASTER EVENT" shall mean any type of disaster that affects the
Company's corporate headquarters, including, but not limited to, fire, power
outage, flood, winter storm or similar act of God, or an act of terrorism, that
prevents such corporate headquarters from operating for any period of twenty
(20) consecutive Business Days between the date of this Agreement and the
Closing Date.
ARTICLE VIII.
LIMITATION ON CLAIMS OF PURCHASER; INDEMNIFICATION
8.1. LIMITATION.
(a) The Purchaser shall not bring any action or claim against
the Company for damages for a breach of any representation, warranty or covenant
contained herein by the Company until such damages exceed $25,000, at which time
the Purchaser may bring an action for all claims. Notwithstanding the foregoing
sentence, the Purchaser may bring a claim for fee and expense reimbursement
under SECTION 5.1(g) or under Article VII of this Agreement, subject to the
terms, limitations and restrictions set forth therein.
(b) The Company shall not bring any action or claims against the
Purchaser for damages for a breach of any representation, warranty or covenant
contained herein by the Purchaser until such damages exceed $25,000, at which
time the Company may bring an action for all claims.
8.2. INDEMNIFICATION BY THE COMPANY. The Company will indemnify and hold
harmless Purchaser and Purchaser's officers, directors, agents, employees,
subsidiaries, partners, managers, members, stockholders, attorneys, accountants
and controlling persons (collectively, the "PURCHASER INDEMNIFIED PERSONS"), and
will reimburse the Purchaser Indemnified Persons for any loss, liability, claim,
damage, expense (including costs of investigation and defense and reasonable
attorneys' fees and expenses) or diminution of value, whether or not involving a
third-party claim (collectively, "DAMAGES"), arising from or in connection with:
(a) any material breach of any representation or warranty,
covenant or agreement of the Company in this Agreement or in any other
certificate, document, writing or instrument delivered by the Company pursuant
to this Agreement, except to the extent that (i) Brian Fletcher or Kurt Reid had
actual knowledge of facts or circumstances that would make the representation or
warranty untrue, or (ii) the representation, warranty, covenant or agreement was
breached through the act or omission of either Mr. Fletcher or Mr. Reid;
(b) any brokerage or finder's fees or commissions or similar
payments based upon any agreement or understanding made, or alleged to have been
made, by any person with the Company in connection with the Purchased Shares,
unless such agreement or understanding was made or alleged to have been made on
behalf of the Company by either Mr. Fletcher or Mr. Reid;
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(c) any willful misconduct or gross negligence of the Company,
other than the willful misconduct or gross negligence of either Mr. Fletcher or
Mr. Reid; or
(d) any action by a shareholder of the Company relating to the
transaction contemplated by this Agreement.
8.3. INDEMNIFICATION BY THE PURCHASER. The Purchaser will indemnify and
hold harmless the Company and the Company's officers, directors, agents,
employees, subsidiaries, partners, stockholders, attorneys, accountants and
controlling persons, in all cases other than Mr. Fletcher and Mr. Reid
(collectively, the "COMPANY INDEMNIFIED PERSONS"), and will reimburse the
Company Indemnified Persons for any Damages arising from or in connection with
(a) any material breach of any representation or warranty,
covenant or agreement of the Purchaser in this Agreement or in any certificate,
document, writing or instrument delivered by the Purchaser pursuant to this
Agreement; or
(b) any brokerage or finder's fees or commissions or similar
payments based upon any agreement or understanding made, or alleged to have been
made by any person with the Purchaser in connection with the Purchased Shares.
8.4. EXCULPATION. Any party from whom indemnification is sought in SECTION
8.2 and SECTION 8.3 of this Agreement shall not be liable to the extent that it
is finally judicially determined that such Damages resulted primarily from the
willful misconduct or gross negligence of the party seeking indemnification.
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ARTICLE IX.
MISCELLANEOUS
9.1. NOTICES. Whenever it is provided herein that any notice, demand,
request, consent, approval, declaration or other communication shall or may be
given to or served upon any of the parties by another, or whenever any of the
parties desires to give or serve upon another any such communication with
respect to this Agreement, each such notice, demand, request, consent, approval,
declaration or other communication shall be in writing and either shall be
delivered in person with receipt acknowledged or by registered or certified
mail, return receipt requested, postage prepaid, or by telecopy and confirmed by
telecopy answerback addressed as follows:
If to Purchaser:
Technology Investors, LLC
191 Bridgeport Drive
Mooresville, North Carolina 28117
Attn: Brian D. Fletcher
Telecopy No.: (704) 896-8602
with a copy to:
Scott Cooper
Rayburn, Cooper & Durham
227 West Trade Street
Charlotte, North Carolina 28202
Telecopy No.: (704) 377-1897
If to the Company:
Cox Technologies, Inc.
69 McAdenville Road
Belmont, North Carolina 28012
Attn: Jack G. Mason
Telecopy No.: (704) 825-4498
with a copy to:
Morris, Manning & Martin, L.L.P.
6000 Fairview Road
Suite 1125
Charlotte, North Carolina 28210
Attn: Jeffrey S. Hay
Telecopy No.: (704) 556-9554
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or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been duly given or served on the date on which personally delivered,
with receipt acknowledged, telecopied and confirmed by telecopy answerback, or
three (3) Business Days after the same shall have been deposited with the United
States mail.
9.2. BINDING EFFECT; BENEFITS. Except as otherwise provided herein, this
Agreement shall be binding upon and inure to the benefit of the parties to this
Agreement and their respective successors and permitted assigns. Nothing in this
Agreement, express or implied, is intended or shall be construed to give any
person other than the parties to this Agreement or their respective successors
or assigns any legal or equitable right, remedy or claim under or in respect of
any agreement or any provision contained herein.
9.3. AMENDMENT. No amendment or waiver of any provision of this Agreement
or any other Transaction Document nor consent to any departure by the Company
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the Company and the Purchaser, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given. No action taken pursuant to this Agreement, including, without
limitation, any investigation by or on behalf of any party, shall be deemed to
constitute a waiver by the party taking such action, of compliance with any
representations, warranties, covenants or agreements contained herein. The
waiver by any party hereto of a breach of any provision of this Agreement shall
not operate or be construed as a waiver of any preceding or succeeding breach
and no failure by either party to exercise any right or privilege hereunder
shall be deemed a waiver of such party's rights or privileges hereunder or shall
be deemed a waiver of such party's rights to exercise the same at any subsequent
time or times hereunder.
9.4. SUCCESSORS AND ASSIGNS; ASSIGNABILITY. All covenants contained herein
shall bind and inure to the benefit of the parties hereto and their respective
successors and assigns (including any subsequent holder of any of the Purchased
Securities or any Common Stock issuable upon exercise of the Purchased
Securities).
9.5. SECTION AND OTHER HEADINGS. The section and other headings contained
in this Agreement are for reference purposes only and shall not affect the
meaning or interpretation of this Agreement.
9.6. SEVERABILITY. In the event that any one or more of the provisions
contained in 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 or provisions in every other respect and
the remaining provisions of this Agreement shall not be in any way impaired.
9.7. ENTIRE AGREEMENT. This Agreement and the agreements and documents
referred to herein contain the entire agreement and understanding between the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, whether written or oral, relating to such subject
matter in any way.
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9.8. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
9.9. PUBLICITY. Neither the Purchaser nor the Company shall issue any press
release or make any public disclosure regarding the transactions contemplated
hereby unless such press release or public disclosure is approved by the other
party in advance. Notwithstanding the foregoing, each of the parties hereto may,
in documents required to be filed by it with the SEC or other regulatory bodies,
make such statements with respect to the transactions contemplated hereby as
each may be advised by counsel is legally necessary or advisable, and may make
such disclosure as it is advised by its counsel is required by law.
9.10. GOVERNING LAW. This Agreement shall be governed by, construed and
enforced in accordance with, the laws of the State of North Carolina without
regard to the principles thereof relating to conflict of laws. Service of
process on the parties in any action arising out of or relating to this
Agreement shall be effective if mailed to the parties in accordance with Section
9.1 hereof. The parties hereto waive all right to trial by jury in any action or
proceeding to enforce or defend any rights under this Agreement.
9.11. NO STRICT CONSTRUCTION. The language used in this Agreement shall be
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction shall be applied against any party.
* * * * *
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IN WITNESS WHEREOF, the Company and the Purchaser have executed this
Stock Purchase Agreement as of the day and year first above written.
COX TECHNOLOGIES, INC.
By: /s/ James L. Cox
------------------------------------
Name: James L. Cox
Its: President and Chief Executive
Officer
TECHNOLOGY INVESTORS, LLC
By: /s/ Brian D. Fletcher
------------------------------------
Name: Brian D. Fletcher
Its: Co-Manager
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SCHEDULE 1.0
SEC Filings