-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, OMNgqbLYHcm3UGT9Rj+3k6k5fNFhrZ5okLA06jhxGlt8oaVgsgoOzOOjDIi7ItI3 uksbfXztp1Ab7uCUhFoJ1g== 0000928385-95-000153.txt : 19950531 0000928385-95-000153.hdr.sgml : 19950531 ACCESSION NUMBER: 0000928385-95-000153 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 19 CONFORMED PERIOD OF REPORT: 19950228 FILED AS OF DATE: 19950526 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BCT INTERNATIONAL INC / CENTRAL INDEX KEY: 0000351541 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-PAPER AND PAPER PRODUCTS [5110] IRS NUMBER: 222358849 STATE OF INCORPORATION: DE FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-10823 FILM NUMBER: 95542829 BUSINESS ADDRESS: STREET 1: 3000 NE 30TH PL 5TH FL CITY: FT LAUDERDALE STATE: FL ZIP: 33306 BUSINESS PHONE: 3055631224 MAIL ADDRESS: STREET 1: 3000 NE 30TH PL STREET 2: 5TH FL CITY: FORT LAUDERDALE STATE: FL ZIP: 33306 FORMER COMPANY: FORMER CONFORMED NAME: BUSINESS CARDS TOMORROW INC DATE OF NAME CHANGE: 19881017 FORMER COMPANY: FORMER CONFORMED NAME: GOOD TACO CORP DATE OF NAME CHANGE: 19860318 10-K 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended February 28, 1995 Commission file no. 0-10823 ----------------- ------- BCT INTERNATIONAL, INC. (Exact name of registrant as specified in its charter) DELAWARE 22-2358849 - ------------------------------- ------------------------------------ (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation of organization) 3000 NE 30th Place, Fifth Floor, Fort Lauderdale, Florida 33306 ---------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (305) 563-1224 -------------- Securities registered pursuant to Section 12 (b) of the Act: NONE ---- Securities registered pursuant to Section 12 (g) of the Act: COMMON STOCK, par value $.04 per share -------------------------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]. Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of Registrant's voting stock held by non- affiliates of Registrant, at May 15 , 1995 was approximately $14,914,198. The number of shares outstanding of Registrant's Common Stock, par value $.04 per share, at May 15 , 1995 was 4,778,740. DOCUMENTS INCORPORATED BY REFERENCE NONE ---- This document consists of 53 pages. The Index to exhibits appears on pages 25 through 26. Item 1. Business - ------- -------- (a) General ------- BCT International, Inc. (the "Company") is a holding company with two wholly-owned subsidiaries: Business Cards Tomorrow, Inc., a Florida corporation directly owned by the Company ("BCT"); and BCT Delray, Inc., a Florida corporation directly owned by BCT ("BCT Delray"). BCT operates the Business Cards Tomorrow system, the world's largest wholesale printing chain. Since its founding in 1975, the system has grown to include 98 "Business Cards Tomorrow Plants" (the "Plants") specializing in trade thermography production in 37 states and Canada. All but two of the Plants are owned by franchisees; one Plant is owned by BCT Delray, which acquired the Plant in June 1993, and the other Plant is held by BCT, which acquired the Plant in December 1994. BCT's operations also include the Pelican Paper Products Division which supplies paper products to the BCT Plants. The Company operates in a single industry segment: the franchising, ownership and operation of and sale of paper products to trade thermography production facilities, i.e., the BCT Plants. (b) Narrative description of the business ------------------------------------- Business Cards Tomorrow, Inc. - ----------------------------- General ------- The Plants typically operate through the placement of business card and stationery catalogs with commercial and retail "quick" printers, office superstores, forms brokers, office supply companies and stationers in the Plants' trade areas. These catalogs are utilized by printers, office superstores, forms brokers, office supply companies and stationers to secure orders from their customers for thermographed printed products. Such orders are normally picked up daily by the Plants' route drivers, who also deliver products previously ordered. The Plants specialize in the "fast turnaround" of their products, delivering some items, such as business cards printed in black ink, in one business day, with most products being delivered within one week of the date of order. While most Plants receive at least some orders by mail and fax, this normally does not constitute a major portion of a Plant's business. Thermography is a specialized printing process that gives a raised printing effect similar to engraving and requires specialized equipment and operating techniques. Most commercial and "quick" printers and office superstores choose not to invest in this specialized equipment, preferring to subcontract this type of work to wholesale "trade" printing companies such as Business Cards Tomorrow Plants that specialize in thermography. BCT supplies business card, stationery, rubber stamp and wedding invitation and social stationery catalogs to its Plants and also sells them the paper products featured in the catalogs through its Pelican Paper Products division ("PPP"). PPP is a supplier of paper products for the BCT Plants. PPP purchases raw paper directly from paper mills and paper brokers and utilizes the services of converters to convert the raw material to finished paper products. PPP utilizes three public storage facilities located strategically throughout the United States to house and ship out paper products to the Plants. BCT markets its franchise operations to potential franchisees through major business newspapers as well as printing trade publications. The development of a specific market is determined by a number of different criteria, including resources available, customer base and operating efficiencies. In order for BCT to penetrate franchise markets, it has assembled an experienced staff, certain members of which have expertise in franchise development. BCT has developed the BCT franchise network primarily through the sale of franchises to third parties. BCT Delray and BCT each own and operate a Plant (the "Company Plants"). BCT Plants are located throughout the Continental U.S. and Hawaii and Canada. As demographics change and develop, the potential for new markets may expand. As of May 1995, BCT has identified between 30 - 45 franchise markets available for sale. Page 1 BCT derives revenues from five principal sources: royalties, which are based on a percentage of sales from the BCT Plants; franchise fees from newly franchised Plants and resale fees from the resale of operating Plants; sales of paper products to franchisees; catalog and miscellaneous equipment and parts sales classified as printing sales; and gross revenue from the Company Plants. As of May 1, 1995, 98 BCT Plants are in operation in 37 states and Canada. The current number of Plants compares with 97 and 92 Plants in operation on May 1, 1994 and 1993, respectively. Total BCT system sales reached approximately $80,000,000 for fiscal 1995, an average of $824,000 per franchise, compared to total and average sales of $74,000,000 and $792,000 for fiscal 1994, and $69,000,000 and $750,000 for fiscal 1993, respectively. BCT receives either a 5% or 6% royalty fee based on gross BCT Plant sales for original 15 - 25 year contracts. The royalty fee is dependent on the initial franchise agreement date. Generally, agreements dated through mid-1986 carry 5% royalties. Thereafter, the 6% royalty applies. Certain franchise agreements are up for renewal. The Company has developed a renewal royalty scale for these Plants. See "Franchises" below for a detailed description. For fiscal years ended 1995, 1994 and 1993, continuing franchise royalties comprised approximately 34%, 31% and 33% of total revenue, respectively. Pelican Paper Products sales to the franchisees for fiscal years ended 1995, 1994 and 1993 were approximately 59%, 57% and 55% of total revenue, respectively. Raw Materials ------------- The primary raw materials of the BCT Plants are paper products which are readily available from numerous industry suppliers. It is common practice within the paper industry to place minimum order levels when ordering specific materials. In addition, the need to maintain a complete stock of raw materials for all items listed in BCT's catalogs requires significant continuing inventory investment. Consequently, PPP frequently carries higher levels of inventory than what is required according to PPP's customer demands. While BCT, through PPP, sells paper products to its franchised Plants and the Company Plants, the Plants are under no obligation to purchase these products from BCT and all such products are available from other suppliers. The paper industry does suffer periodic shortages of specific paper products as well as price fluctuations caused by supply and demand changes, but these shortages and price fluctuations typically affect all similar types of printers in an industry such as "trade" thermographers and can generally be mitigated through the use of alternate supply sources in the industry and substitution with similar products. Any increases in the cost of paper from the mills is generally passed on to the Plants. It is not considered by BCT as very likely that any of its Plants would be out of operation for any significant period of time due to an unavailability of raw materials resulting from major supply or price changes in the paper industry. Franchises ---------- BCT's franchise agreements with individual franchised Plants are typically for a 15-to-25 year period and are renewable for additional 10-year periods. The right to renew is contingent upon the franchisee not being in default under any material term of the franchise agreement. BCT may terminate a franchise agreement under certain circumstances where the franchisee is in material default under the franchise agreement and has not cured such default(s) after notice from BCT. BCT's existing franchise agreements with individual Plants have an average remaining term of approximately 16 years. Beginning in fiscal 1996, certain franchise agreements are up for renewal. There are 16 Plants that come up for renewal in 1996 - 1998, and in the subsequent 10 years, three Plants come up for renewal. In fiscal 1995, management established a program to induce early renewal of its franchise agreements. The Company began negotiating with each renewal candidate as to the terms of its renewed franchise agreement. The renewal royalty scale that the Company initiated is as follows:
Gross Sales For Royalty Each Quarter Percentage ------------ ---------- $0 to $375,000 5.0 % $375,001 to $500,000 4.5 % $500,001 to $750,000 4.0 % $750,001 or more 3.5 %
Page 2 The renewal royalty scale is based on total sales, not incremental sales. For example, if a Plant increases quarterly sales from $350,000 to $380,000, its aggregate royalty will decrease from $17,500 ($350,000 x .05) to $17,100 ($380,000 x .045). This renewal scale is designed to provide a strong incentive for growth of Plant revenues beyond the $1.5 million annual level. For the fiscal year ended 1995, average Plant sales were $824,000. It is not anticipated that this renewal royalty scale will have an adverse effect on the Company's royalty revenues. As of February 28, 1995, a new franchisee is required to pay an initial fee of $85,000, which consists of a $35,000 franchise fee and a $50,000 opening package fee, and an ongoing royalty of 6% of the gross sales of the franchised Plant. Additionally, a new franchisee must obtain an initial equipment and furnishings package at a cost of approximately $175,000. This package may be purchased from BCT or from other sources as long as it meets the standards of performance established by BCT. Each franchisee is typically expected to obtain his own financing, but BCT may aid the franchisee in obtaining such financing. In fiscal 1993, BCT accepted interest-bearing term notes from franchisees as a condition of the sale of their franchises. BCT did not finance any sales of franchises in fiscal 1995 and 1994. Each new BCT franchisee is required to attend a two week training session at BCT's National Training Center in Fort Lauderdale, Florida. This training consists of equipment orientation and business management, marketing and sales techniques required to operate a successful Plant. Upon completion of the initial training, BCT furnishes a qualified field representative for a period of ten days to instruct the franchisee in the operation of his Plant, advise in the hiring of personnel and assist in the establishment of standard operating procedures. BCT also provides ongoing support to its franchisees through periodic regional seminars, annual conventions, and visits from Company management and field representatives. During fiscal 1993, management strengthened its operational support of the franchisees by ensuring that each franchisee would receive operational visits annually. These visits are scheduled on a priority basis depending on the relative needs of the franchisees. An operational visit consists of an overview of the Plant's production, sales and marketing efforts and financial performance. Wedding Invitations and Social Stationery Catalog ------------------------------------------------- BCT introduced its Wedding Invitations and Social Stationery Catalog in February 1993. The introduction of this product line enables the BCT franchise system to directly compete, product line by product line, with its two major national competitors. See "competition". BCT is utilizing its Company Plants and three franchised Plants to refine the implementation of this product line. The artwork for the designs is proprietary to BCT, which has prevented competitors from replicating the Catalog. BCT anticipates a staged implementation of this product line over a three-year period. A thorough marketing study of the Wedding Invitations and Social Stationery Catalog and its product line has been initiated by the Company to assist it in repositioning the Catalog. The Plants will also place the Catalog with commercial and retail "quick" printers, office superstores, office supply companies and stationers in the Plants' trade areas. Presently, this represents the Catalog's primary market. The marketing study will also address the Catalog's existing primary market and perhaps the expansion of it. Orders will be generated, received, produced and delivered similarly to the business card and stationery orders. BCT's decision to enter the wedding and social industry market was based in large part on the size and growth of this market. According to the September 2, 1991 issue of Forbes Magazine, the wedding industry is a $32 billion annual business with wedding invitations and ensembles comprising approximately $700 million annually. The May 1993 issue of Quick Print Magazine stated that the average printer brokers $7,200 in wedding invitations yearly. Company Plants -------------- BCT, through its wholly-owned subsidiary BCT Delray, acquired its first Company Plant in June 1993, in Delray Beach, Florida, (the Delray Company Plant). In December 1994, BCT acquired another Company Plant in Honolulu, Hawaii. BCT intends to make additional acquisitions of franchised Plants in future years as appropriate opportunities arise. BCT utilizes the Company Plants as its test sites for the improvement of the BCT operating system as well as the testing of new products. Page 3 Rubber Stamps Tomorrow ---------------------- During fiscal 1989, BCT introduced its "Rubber Stamps Tomorrow" ("RST") franchise concept. In January 1990, after 15 months of evaluation, it was determined that RST could not be developed as a stand alone franchise concept but was a valuable additional product line for the BCT system. As a result, BCT entered into an agreement with the company that initially developed and test marketed the RST concept to purchase all tradename, trademark, service mark and related rights as they pertain to the Rubber Stamps Tomorrow name. Effective September 1, 1994, BCT incorporated the RST program into the BCT operating system, requiring all franchised Plants to implement the RST program as part of their franchise. Each participating BCT Plant is required to pay an ongoing royalty of 5% to 6% of the gross sales of rubber stamp products depending upon the initial franchise agreement date. Competition ----------- The Company and its franchisees compete with other franchisors, franchisees and independent operators in the graphic arts industry, some of whom may be better established and/or have greater resources than the Company and its franchisees. While the Company believes that its BCT franchise system is the leading supplier of thermographed business cards to printers throughout the United States (supported by the May 1993 Quick Print Magazine "Supply and Services Survey," indicating a 23% market share in the brokered printing category for business cards), there can be no assurances that competitors will not imitate or improve upon the Company's business strategy. BCT's major national competitors are Regency Thermographers and Carlson Craft; however, BCT's franchisees also compete with numerous local and regional operations. BCT's franchisees compete primarily on the basis of turnaround time, quality and close customer contact. Trade and Service Marks ----------------------- The Company has received federal registration of the names "Business Cards Tomorrow" and "BCT International, Inc." and the BCT commercial logo, as well as the names and commercial marks for "Typesetting Express", "Engraving Tomorrow", "Thrift-T-Cards", "Thermo-Rite", and "Rubber Stamps Tomorrow". Research and Development ------------------------ The Company performs ongoing research and development seeking improvements in the operating procedures and products of its franchises. These activities are primarily done at the Delray Company Plant and at the Company's corporate headquarters. Also, the Company often requests individual franchisees to perform tests of various equipment, materials or techniques in an actual production environment. In fiscal 1993, the Company began a new research and development project known as Advanced Management Operating System ("AMOS"). In order for individual BCT Plants to expand to a multi-million dollar sales level, a system must be created to provide control over the expanded production, thus resulting in increased profitability. The integral components of the AMOS system are as follows: composition; verification; computer generated grouping; job tracking; integration of accounts receivable and collections; and generation of advanced management reports. The Company has utilized the services of experienced computer system design consultants; to expedite the completion of the test phase and make AMOS operational. In March of 1995, the AMOS test phase was completed, and AMOS is fully operational. The BCT Plants will be leasing the AMOS software, at a nominal monthly rate from the computer system design consultants. To date, the Company has incurred expenses totalling $518,000 for the research and development of AMOS. During fiscal 1995, 1994 and 1993, the Company spent approximately $279,000, $367,000 and $283,000 on research and development, respectively. Government Regulation --------------------- The Federal Trade Commission has adopted rules relating to the sales of franchises and disclosure requirements to potential franchise purchasers. Additionally, various states have adopted laws regulating franchise sales and operations. As a franchisor, the Company is required to comply with these federal and state regulations and believes that it is not operating in violation of any of these regulations. Page 4 Employees --------- The Company has 69 employees, all of whom are located at either (i) the Company's corporate headquarters in Fort Lauderdale, Florida, (ii) the Company's printing facility in Fort Lauderdale, Florida, or (iii) the Company Plants in Delray Beach, Florida and Honolulu, Hawaii. Financial Information Relating to Foreign and Domestic Operations -----------------------------------------------------------------
February 28, February 28, February 28, 1995 1994 1993 ------------ ------------ ------------ Revenue: Foreign operations $ 779,000 $ 717,000 $ 642,000 Domestic operations $12,765,000 $12,404,000 $10,050,000 Operating Profit: Foreign operations $ 112,000 $ 103,000 $ 40,000 Domestic operations $ 919,000 $ 665,000 $ 738,000 Identifiable Assets: Foreign operations $ 251,000 $ 352,000 $ 61,000 Domestic operations $ 9,767,000 $ 7,429,000 $ 5,682,000
Item 2. Properties - ------- ---------- The Company's corporate headquarters are located at 3000 NE 30th Place, Fifth Floor, Fort Lauderdale, Florida, and occupy approximately 8,200 square feet. The lease on this facility continues to October 1997 at a monthly rental of approximately $8,400. In May 1995, PPP leased 1,200 square feet of space on the Fourth Floor of the same building. The lease on this facility continues to October 1997 at a monthly rental of approximately $1,200. A Company Plant is located in Delray Beach, Florida, in a facility containing approximately 6,000 square feet, which is leased for a monthly rental of $3,000. The lease on this facility continues through April 2000. Another Company Plant is located in Honolulu, Hawaii, in a facility containing approximately 4,200 square feet, which is leased for a monthly rental of $5,000. The lease on this facility continues through May 1997. The Company also leases approximately 7,560 square feet of space in Fort Lauderdale, at a monthly rental of approximately $5,000, for use as a Company printing and training facility. The lease on this facility continues through February 1997. Management believes that the Company's existing facilities are adequate for the foreseeable future and that additional suitable facilities will be available at commercially reasonable rates. Page 5 Item 3. Legal Proceedings - ------- ----------------- (a) Varrieur v. BCT International, Inc. ----------------------------------- On April 28, 1989, Douglas B. Varrieur, a former officer and director of the Company, filed suit against the Company in the Circuit Court for Hillsborough County, Florida. Varrieur's complaint was based on the Company's April 19, 1989 termination for cause of his five-year employment agreement with the Company dated August 4, 1988 (the "Employment Agreement"). The Employment Agreement provided for an annual salary of $104,000 together with certain other benefits and was entered into in connection with the Company's acquisition on that date of a controlling interest in Print Shack International, Inc. ("Print Shack"), from Varrieur and certain other Print Shack shareholders. Pursuant to the Employment Agreement, Varrieur served as an executive officer of the Company and Print Shack. Print Shack generated massive losses for the Company and was shut down in fiscal 1991. Varrieur's complaint is based on his allegation that the Company did not have good cause to terminate his employment and therefore breached the Employment Agreement. The original complaint contained four counts: Count I sought unspecified money damages based on the alleged breach of the Employment Agreement; Count II sought specific performance of the Employment Agreement, i.e., that Varrieur be reinstated; Count III sought cancellation and rescission of the August 4, 1988, agreement pursuant to which the Company acquired Varrieur's 44% interest in Print Shack (the "Stock Purchase Agreement"); and Count IV sought a declaratory judgment to the effect that the three-year non- competition covenant of the Employment Agreement is unenforceable. The court dismissed with prejudice all of Varrieur's initial claims, except for Count I. In the fall of 1993, Varrieur amended his complaint to assert a claim (new Count III) for an alleged breach by the Company of its agreement to indemnify him and his wife against personal liability arising from debts of Print Shack. This claim was based on a suit filed by a Print Shack creditor against the Company, the Varrieurs as guarantors and others based on a promissory note issued by Print Shack. The Company assumed full responsibility for defending this action and settled it in January 1994, thereby extinguishing the subject debt. Varrieur is seeking, pursuant to his indemnification claim, to recover damages in excess of $1,750 in the form of legal fees, together with unspecified damages allegedly arising from damage to his credit. Discovery proceedings began in May 1990 and have continued on a sporadic basis. In November 1994, Varrieur moved to set the case for jury trial. In March 1995, the court denied Varrieur's motion, finding that he had previously waived his right to jury trial. In April 1995, Varrieur appealed the court's decision denying him a jury trial. The Company intends to vigorously contest Varrieur's claim, including the pending appeal. Based on the facts available to it and the advice of counsel, the Company believes that it had good cause for terminating Varrieur, and that Varrieur's claim is without merit. It is the opinion of the Company's management and counsel that the likelihood that Varrieur's claim will have a material adverse effect on the consolidated financial position and results of operations of the Company is remote. (b) Garrett v. American Franchise Group, Inc. and William A. Wilkerson. ------------------------------------------------------------------ On July 1, 1992, Michael J. Garrett, the Company's former chief financial officer, who was terminated in May 1992, filed suit in the Circuit Court for Broward County, Florida, against the Company and its directors. The complaint alleged that Garrett was wrongfully discharged in violation of the Florida Whistle-blowers Act of 1986, Florida Statutes Section 112.3187 (the "Act"). The ------- -------- complaint also alleged that the Company owed Garrett $14,580 in back pay accrued through the date of termination. On July 21, 1992, the Defendants filed a motion to dismiss Garrett's claim under the Act with prejudice on the grounds that the Act applied only to public employees. In addition, the Defendants moved for an award of attorney's fees pursuant to the Act. On September 29, 1992, the parties, acting through their respective counsel, entered into a stipulation of settlement pursuant to which Garrett dismissed with prejudice his claim under the Act, together with any and all other claims which he might have arising from the termination of his employment, and the Defendants dismissed with prejudice their claim for attorney's fees. Page 6 On December 4, 1992, Garrett, acting through new counsel, served an amended complaint against the Company and its Chairman and CEO, William A. Wilkerson. Garrett sought damages in excess of $500,000 from the Company based on his employment agreement dated January 1, 1986, which he claimed was still in effect. He also sought unspecified damages against Wilkerson for allegedly tortiously interfering with his business relationship with the Company by allegedly making false representations to induce the Company's Board of Directors to terminate Garrett. The Company moved to dismiss the amended complaint with prejudice on the grounds that (i) Garrett's employment agreement expired on January 1, 1991, and (ii) the stipulation barred Garrett from asserting any further claims arising from his termination. At the December 29, 1992 hearing on the Company's motion to dismiss, Garrett's new counsel argued that Garrett's original counsel did not have authority to enter into the stipulation. The court dismissed with prejudice Garrett's claim against the Company based on the employment agreement, finding that the agreement had expired by its terms in 1991. The court denied the motion to dismiss with respect to the claim against Wilkerson, indicating that evidence would need to be taken with respect to the stipulation. On January 28, 1993, Garrett served a second amended complaint against the Company and Wilkerson, restating his claims for back pay and tortious interference and adding two new counts: (i) a count seeking a declaratory judgment to the effect that the stipulation is unenforceable based on the alleged lack of authority of Garrett's initial counsel, alleged fraud by the Company's counsel, and certain procedural grounds; and (ii) a claim for wrongful discharge under Section 448.102, Florida Statutes, which prohibits the discharge ------- -------- of private employees based on their threats to disclose or refusal to participate in violations of law. Pursuant to this claim, Garrett sought reinstatement to his former position, together with back pay and benefits and attorney's fees. On February 12, 1993, the Company filed its answer denying all of Garrett's material allegations and further asserting as affirmative defenses (i) that Garrett had been paid all compensation accrued through the date of termination, and (ii) that all of Garrett's claims, except for his claim for back pay accrued through termination, were barred by the stipulation. On November 8, 1993, the court held a non-jury trial on Garrett's declaratory judgment count, pursuant to which Garrett sought a judgment to the effect that the settlement stipulation was unenforceable. On November 15, 1993, the court entered a final declaratory judgment in favor of the Company and Wilkerson, holding that the stipulation was enforceable and operated to bar all claims by Garrett arising from the termination of his employment. On December 2, 1993, the Company and Wilkerson moved, based on the declaratory judgment, to dismiss with prejudice Garrett's principal remaining counts, i.e., Count III seeking to hold Wilkerson liable for allegedly fraudulently inducing the Company's Board of Directors to terminate Garrett, and Count IV seeking back pay and reinstatement based on Section 448.102. On April 14, 1994, the motion to dismiss by the Company and Wilkerson was granted, and Counts III and IV of the second amended complaint were dismissed with prejudice. On May 2, 1994, Garrett filed his notice of appeal of the trial court's decision. The trial court's decision in favor of the Company and Wilkerson was affirmed by the appellate court on January 25, 1995. The Company has paid the undisputed portion of Garrett's back pay claim so that his claim is now limited to a disputed amount of approximately $7,700. The Company intends to vigorously contest Garrett's remaining claim for back pay, which it believes to be without merit and in any event not material. Item 4. Submission of Matters to a Vote of Securities Holders - ------- ----------------------------------------------------- No matters were submitted to a vote of securities holders, through the solicitation of proxies or otherwise, during the fiscal quarter ended February 28, 1995. Item 5. Market for Registrant's Common Stock and Related Security Holder - ------- ---------------------------------------------------------------- Matters ------- The Company's Common Stock is traded in the National Association of Securities Dealers Automated Quotation System ("NASDAQ") Stock Market's National Market under the symbol "BCTI". Page 7 The following table sets forth, for the quarters indicated, the high and low closing bid prices in the NASDAQ Small Cap Market for a share of common stock as reported by NASDAQ through February 15, 1995, and the closing price for the common stock as reported on the NASDAQ National Market since February 15, 1995. The NASDAQ quotations through February 15, 1995 represent prices between dealers, do not include retail markups, markdowns or commissions, and may not represent actual transactions.
Fiscal Quarters High Low ----------------------- ------ ------ 1994 First Quarter $3.38 $2.75 Second Quarter $3.50 $2.62 Third Quarter $2.62 $1.87 Fourth Quarter $3.31 $2.00 1995 First Quarter $3.38 $2.50 Second Quarter $3.38 $2.63 Third Quarter $5.63 $3.25 Fourth Quarter $5.38 $4.38 1996 First Quarter (through May 15, 1995) $5.38 $4.62
On May 15, 1995, the closing price per share of common stock, as reported by NASDAQ, was $5.00. There is currently no established public trading market for any securities of the Company other than the common stock. The approximate number of holders of record of the Company's common stock as of May 15, 1995 was 1,023. During the fiscal years ended February 28, 1995, 1994, and 1993, no cash dividends were declared on the outstanding Common Stock. The declaration of dividends on Common Stock was prohibited by the loan covenants with the Company's bank. The Company's loan with the bank was satisfied in February 1994. The Company has no plans to pay any dividends on the common stock. Page 8
Item 6. Selected Financial Data 000's - ------------------------------- omitted -------- CONTINUING OPERATIONS FEB. 28, FEB. 28, FEB. 28, FEB. 29, FEB. 28, for the fiscal year ended: 1995 1994 1993 1992 1991 -------- -------- -------- -------- -------- REVENUES: Continuing Franchisee Fees and Commissions $ 4,540 $ 4,004 $ 3,517 $2,993 $ 2,675 Paper Sales 7,926 7,537 5,849 5,045 4,713 Printing Sales 508 514 675 574 351 Sales of Franchises 466 957 573 189 328 Interest and Other Income 104 109 78 108 106 ------- ------- ------ ------ ------- 13,544 13,121 10,692 8,909 8,173 ------- ------- ------ ------ ------- EXPENSES: Cost of Paper Sales 6,512 6,238 5,198 4,457 4,178 Cost of Printing Sales 385 290 338 364 196 Cost of Franchises Sold 326 691 402 122 186 Selling, General and Administrative 4,664 4,137 3,158 3,501 2,791 Research and Development Costs 279 367 283 123 68 Depreciation and Amortization 286 338 239 215 241 Interest and Other 61 292 296 424 237 ------- ------- ------ ------ ------- 12,513 12,353 9,914 9,206 7,897 ------- ------- ------ ------ ------- Subordinated Debenture Conversion Expense --- --- --- 331 --- Loss on Disposal of Rental Properties --- --- --- 75 642 Income tax benefit 124 93 --- --- --- ------- ------- ------ ------ ------- Income (Loss) From Continuing Operations 1,155 861 778 (703) (366) Extraordinary Item: Gain on early extinguishment of debt --- --- 53 --- --- DISCONTINUED OPERATIONS: Loss from Operations of Discontinued Subsidiary --- --- --- --- (456)(1) Loss on Disposal of Net Asset of Subsidiary including Provision of $38 for Operating Losses During Phase Out Period --- --- --- --- (1,258)(1) ------- ------- ------ ------ ------- Net Income (Loss) $ 1,155 $ 861 $ 831 $ (703) $(2,080) ======= ======= ====== ====== =======
(1) During fiscal 1991, the Company disposed of the PrintShack subsidiary. Page 9 Item 6. Selected Financial Data (continued) 000's omitted (except for per - ------- ------------------------------------------------- share data)
For the fiscal year ended: FEB. 28, 1995 FEB. 28, 1994 FEB. 28, 1993 FEB. 29, 1992 FEB. 28, 1991 ------------- ------------- ------------- ------------- ------------- Earnings (loss) per Common Share: Income (loss) from continuing operations Primary $ .18 $ .17 $ .27 $ (.29) $ (.19) Fully diluted .18 .10 .19 $ (.29) (.19) Extraordinary Item: Primary --- --- .02 --- --- Fully diluted --- --- .01 --- --- Discontinued Operations: Primary --- --- --- --- (.88) Fully diluted --- --- --- --- (.88) Net Income (loss) ------- ------ ------ ------ ------- Primary $ .18 $ .17 $ .29 (.29) (1.07) ------- ------ ------ ------ ------- Fully Diluted $ .18 $ .10 $ .20 (.29) (1.07) ======= ====== ====== ====== ======= Total Assets $10,018 $7,781 $5,743 $5,137 $ 5,445 Long-term debt $ 48 $ 459 $2,073 $2,619 $ 3,004 Preferred stock $ 810 $1,622 $ 765 $ --- $ --- Net Working Capital $ 5,542 $1,067 $1,153 $ 22 $ 11 Stockholders' Equity (2) $ 7,759 $2,290 $1,247 $ 299 $ 24
(2) During the five fiscal years ended February 28, 1995, no cash dividends have been declared on the common stock outstanding. Page 10 Item 7. Management's Discussion and Analysis of Financial Condition and Results - ------- ----------------------------------------------------------------------- of Operations ------------- Fiscal 1995 Compared to Fiscal 1994 - ----------------------------------- Total revenue for fiscal 1995 increased by $423,000 or 3% over the prior fiscal year. Royalty revenue increased by $536,000 or 13%; paper sales increased by $389,000 or 5%; revenue from the Company Plants increased by $189,000 or 29%; and revenue from franchise Plant sales decreased by $491,000 or 51%, reflecting the sale of two franchises. The decline in franchise Plant sales is not indicative of a lack of marketable territories. The Company is aggressively seeking experienced franchise sales staff to strengthen its franchise sales department. Cost of goods sold as a percentage of revenues for fiscal 1995, at 54%, was consistent with the comparable percentage for fiscal 1994. Cost of goods sold includes a $100,000 reserve for slow-moving inventory related to the Wedding and Social Stationery Catalog. The Company has engaged a marketing consultant to assist management in the repositioning of its Wedding and Social Stationery Catalog and product line. Selling, general, and administrative expenses represented 34% and 31% of gross revenues in fiscal 1995 and 1994, respectively. The primary causes of the increase in selling, general and administrative expenses as a percentage of revenues were the increased expenses associated with (i) the Company Plants' operations (a $233,000 or 27% increase over the prior year's level) and (ii) the Company's formalization of its marketing department. The costs associated with the marketing department in fiscal 1995 increased by $153,000 (58%) from the prior year's level. With the retirement of the Company's convertible subordinated debentures and various notes payable, interest expense decreased by $231,000 or 79%, during fiscal 1995. The Company had income from continuing operations of $1,155,000 for fiscal 1995, which compared favorably to income of $861,000 for fiscal 1994. Fiscal 1994 Compared to Fiscal 1993 - ----------------------------------- Total revenue for fiscal 1994 increased $2,429,000 or 23% over the prior fiscal year. Royalty revenue increased by $487,000 or 14%; paper sales increased by $1,037,000 or 18%; revenue from the Company Plant, which opened in June 1993, totaled $651,000; and revenue from franchise Plant sales increased by $383,000 or 67%, reflecting the sale of five new franchises and three additional territories. The revenue growth also reflects the use of the new business card catalog by 95% of the franchisees, the impact of the Company obtaining two large national accounts, the purchase of all the Canadian sub- franchise agreements and the commencement of operations of the Company Plant. Cost of goods sold as a percentage of revenues for fiscal 1994, at 55%, was consistent with the comparable percentage for fiscal 1993. Selling, general and administrative expenses represented 31% and 30% of gross revenues in fiscal 1994 and 1993, respectively. The primary increase in the selling, general and administrative expenses related to expenses associated with the operations of the Company Plant. The Company incurred nonrecurring legal expenses in the amount of approximately $100,000 in fiscal 1994. In fiscal 1994, the Company continued to expend significant funds for research and development. The increase in these costs from the prior year was $84,000 or 30%. The Company had income from continuing operations of $861,000 for fiscal 1994, which compared favorably to an income of $778,000 for fiscal 1993. Page 11 Liquidity and Capital Resources - ------------------------------- As of March 31, 1994, upon the completion of the Series B convertible preferred stock private placement, the Company had received net proceeds of $1,973,000 and issued 2,225,000 shares of the Series B convertible preferred stock at $1.00 per share. At February 28, 1994, a principal amount of $1,682,000 was outstanding under the Company's Series A 11% convertible subordinated debentures (the "Debentures"). A total of $1,180,000 of the preferred stock proceeds was utilized to pay off the Debentures; $402,000 of the Debentures were converted to Common Stock, and $100,000 of the Debentures owned by the Company's Chairman were exchanged for preferred stock. See Item 13: "Certain Relationships and Related Transactions". The balance of the private placement proceeds was used for general working capital. Through February 28, 1995, the Company made capital expenditures of approximately $261,000, most of which were dedicated to the computerized automation of the Company's accounting and inventory management system as well as the networking of the Company's corporate office computer system. The Company anticipates that it will require an additional $100,000 to complete the automation program for PPP during fiscal 1995. The Company's Wedding Invitations and Social Stationery Catalog (The "Social Catalog") continues to be performing at less than original plan; only 2,823 catalogs ($127,000) have been sold since inception. Because of the slow implementation of this catalog by its franchisees, during fiscal 1995 the Company engaged a marketing consultant to perform comprehensive research on the Social Catalog. To date, two of the three stages of research have been completed. It is apparent from the research completed to date that the Social Catalog program needs to be modified. At February 28, 1995, a $100,000 reserve was recorded for the Social Catalog, the net investment in Social Catalog inventories at February 28, 1995 approximates $122,000. In December 1994, the Company, through its demand conversion of the Series B preferred stock and exercise of the Series B preferred stock warrants, received a capital infusion of $1,938,000, which is net of a $86,000 commission to its investment banker and $15,000 in redemption fees to those warrantholders who did not exercise. These proceeds are being invested in cash equivalents and marketable equity securities pending utilization for revenue-generating opportunities. During fiscal 1995, the Company utilized working capital as well as investment income to make debt payments totalling $352,000, which satisfied, among other debts, a $285,000 note due to the Company's bank. The Company plans to continue to improve its working capital and cash positions during fiscal 1996 by focusing its efforts on increasing cash collections and developing new product lines while containing capital expenditures and keeping inventories at their current levels. The Company believes that internally generated funds will be sufficient to satisfy the Company's working capital and capital expenditure requirements for the foreseeable future; however, there can be no assurance that external financing will not be needed or that, if needed, it will be available on commercially reasonable terms. Item 8. Financial Statements and Supplementary Data - ------- ------------------------------------------- The financial statements and schedules listed in the accompanying Index to consolidated financial statements and schedules on page F-1 are filed as a part of this report. Item 9. Disagreements on Accounting and Financial Disclosure - ------- ---------------------------------------------------- None Page 12 Item 10. Directors and Executive Officers of the Registrant - -------- --------------------------------------------------
Date Elected Name Age Position Or Appointed ------------ --------- ---------- ------------ William Wilkerson 53 Chairman of the Board and January 1978 Chief Executive Officer A. George Cann 38 Chief Operating Officer and May 1995 President of BCT Donna M. Pagano-Leo 34 Chief Financial Officer, Treasurer and October 1992 Secretary May 1995 Thomas J. Cassady 73 Director April 1988 Robert F. Bond 54 Director May 1980 Raymond J. Kiernan 70 Director December 1983 John N. Galardi 57 Director August 1990 Henry A. Johnson 60 Director February 1975 Bill LeVine 75 Director May 1992
William Wilkerson has been Chairman of the Board and a Director of the Company since January 1986. In May 1988, he accepted the additional responsibility of Chief Executive Officer. He was President and Chief Executive Officer of Business Cards Tomorrow, Inc. (a Florida corporation) from January 1978 to January 1982 and Chairman from January 1982 to January 1986. A. George Cann was appointed as President of Business Cards Tomorrow, Inc. in April 1995. Previously, Mr. Cann worked in the Kinko's organization for 13 years in various capacities. Since December 1987, he has been President and a principal shareholder of Kinko's Grand Rapids, Inc., the owner and operator of three Kinko's copy center stores in Michigan. Mr. Cann's role with Kinko's Grand Rapids, Inc., has been limited to that of a passive investor since he joined the Company. From February 1991 through September 1994, Mr. Cann held the position of Vice President of Operations and Product Development at Kinko's Service Corporation, Ventura, California. From June 1990 through February 1991, he was a Director of Kinko's Service Corporation. From May 1990 through February 1991, he was Regional Manager in Michigan for K-Graphics, Inc., a multi-state owner and operator of Kinko's stores. Donna M. Pagano-Leo joined the Company in August 1992 and became Vice President/Chief Financial Officer and Treasurer of the Company in October 1992. In May 1995, Ms. Leo was elected as the Company's secretary. Ms. Leo is a certified public accountant, a member of the Florida Institute of Certified Public Accountants and the American Institute of Certified Public Accountants, and has worked in public accounting since 1983. Prior to joining the Company, Ms. Leo served as an audit manager with the accounting firm of Price Waterhouse LLP for seven years and as a staff accountant with the accounting firm of Arthur Young & Co. for two years. Thomas J. Cassady became a Director of the Company in April 1988 and has been a Director of Photo Control Corporation, Minneapolis, Minnesota, since February 1978. Mr. Cassady is a veteran of more than 30 years in the financial and securities field, having served as President and Chief Administrative Officer of Merrill, Lynch, Pierce, Fenner and Smith, Inc., until his retirement in 1978. Page 13 Robert F. Bond has been a Director of the Company since May 1980 and was Secretary/Treasurer from February 1981 to August 1988 and Chairman of the Board from January 1985 to January 1986. Since 1985, Mr. Bond has been a principal in First Madison Group, an investment banking firm in Montville, New Jersey. Raymond J. Kiernan has been a Director of the Company since December 1983 and has been a Director of Fleet Bank of New York, Fleet Trust Company and Fleet Trust Company of Florida since 1983. In 1979, Mr. Kiernan retired from his position as a Vice President and Division Director of Merrill, Lynch, Pierce, Fenner & Smith, Inc. He is a former Governor of the National Association of Securities Dealers. In April 1995, he retired his Directorship position of Fleet Bank of New York. John N. Galardi became a Director of the Company in August 1990. He has been a franchisor for more than 30 years and is the Chairman of the Board of Galardi Group, Inc., a restaurant holding company based in Newport Beach, California, which operates 350 fast food restaurants. In addition, Mr. Galardi is an investor in several other private businesses. Henry A. Johnson, founder of BCT, has been a Director of the Company since January 1986. From January 1986 until October 1988, he was Senior Vice President/Operations of the Company. In October 1988, he resigned his position with the Company and became Senior Vice President/Operations of BCT. In February 1989, he accepted the additional responsibilities of Executive Vice President of BCT. Previously, he was Senior Vice President/Operations for Business Cards Tomorrow, Inc. (a Florida corporation), from January 1978. In March 1990, he retired from his position with BCT; however, he has continued to provide consulting services to BCT. Since March 1991, Mr. Johnson has opened and operated a private printing business, Colorful Copies, located in Las Vegas, Nevada. Bill LeVine became a Director of the Company in May 1992. Mr. LeVine is the pioneer of the quick printing industry. He founded Postal Instant Press (PIP Printing) in 1967 and served as its Chairman, Chief Executive Officer and President until January 1988. Since that time, he has focused on private investments. Since 1992, Mr. LeVine has been a Board of Director of Fast Frame, Inc. Mr. LeVine has been a Director of First Business Bank, Los Angeles, California, since 1982, and Rentrak Corporation, formerly National Video, Portland, Oregon, since 1987. Compliance with Section 16 (a) of the Exchange Act The Company has reviewed the Forms 3 and 4 and amendments thereto furnished to it pursuant to SEC Rule 16a-3(e) during its most recent fiscal year and Form 5 and amendments thereto furnished to the Company with respect to its most recent fiscal year. Based solely on such review, the Company has identified each person who, at any time during the fiscal year, was a director, officer or beneficial owner of more than 10% of the Company's Common Stock and failed to file on a timely basis, as disclosed in the above-described Forms, reports required by the Securities Exchange Act of 1934 during the most recent fiscal year or prior fiscal years. The following table sets forth for each such person the number of late reports and the number of transactions that were not reported on a timely basis. The Company is not aware of any failure to file a required Form, as all known delinquencies were cured.
NUMBER OF LATE NAME POSITION NUMBER OF LATE REPORTS REPORTED TRANSACTIONS - ----------- -------------------- ---------------------- --------------------- Bond Director 1 2 Wilkerson Chairman of Board 1 1 LeVine Director 1 1 Bronson 10% Beneficial Owner 2 7
Page 14 Item 11. Executive Compensation - -------- ---------------------- (a) Board Compensation Committee Report on Executive Compensation The Compensation Committee of the Board of Directors, which is comprised of non-employee directors, has overall responsibility to review and recommend broad-based compensation plans for executive officers of the Company and its BCT subsidiary to the Board of Directors. One of the members of the Compensation Committee, Mr. LeVine, has invested significant sums of money in the Company. (See Item 13. "Certain Relationships and Related Transactions"). Pursuant to recently adopted rules designed to enhance disclosure of companies' policies toward executive compensation, set forth below is a report submitted by Messrs. Kiernan, Galardi and LeVine in their capacity as the Board's Compensation Committee addressing the Company's compensation policies for fiscal 1995 as they affected Mr. William A. Wilkerson, Chairman of the Board and Chief Executive Officer and Mr. Peter T. Gaughn, President of BCT, Chief Operating Officer and Secretary. Mr. Gaughn resigned from the Company in January 1995. Compensation Policies For Executive Officers The executive compensation program is based on a philosophy which aligns compensation with business strategy, Company values and management initiatives. The principles underlying this compensation philosophy are: the linkage of executive compensation to the enhancement of shareholder value; maintenance of a compensation program that will attract, motivate and retain key executives critical to the long-term success of the Company; creation of a performance oriented environment by rewarding performance leading to the attainment of the Company's goals; evaluation of competitiveness of salary and equity incentive opportunities; and determination of the adequacy and propriety of the annual bonus plan, including structure and performance measures. Relationship of Performance Under Compensation Plans Compensation paid Messrs. Wilkerson and Gaughn in fiscal 1995, as reflected in the following Tables, consisted of base salary. The Compensation Committee is awaiting the audited results for fiscal 1995 prior to determining any annual bonus to Mr. Wilkerson. In addition, as indicated in the Tables, in fiscal 1995 the Compensation Committee awarded stock options to Mr. Wilkerson. The Company's executive compensation policies are oriented toward utilization of objective performance criteria. The principal measures of performance that are utilized by the Compensation Committee are targeted versus actual operating budget and income growth. Subjective performance criteria are utilized to only a limited degree. Annual Bonus Arrangements The Company's annual bonuses to its executive officers, as indicated above, are based on both objective and subjective performance criteria. Objective criteria include actual versus target annual operating budget performance and actual versus target annual income growth. Target annual income growth and target annual operating budgets utilized for purposes of evaluating annual bonuses are based on business plans which have been approved by the Board of Directors. Subjective performance criteria encompass evaluation of each officer's initiative and contribution to overall corporate performance, the officer's managerial ability, and the officer's performance in any special projects that the officer may have undertaken. Performance under the subjective criteria was determined at the end of fiscal 1995 after informal discussions with other members of the Board. Page 15 Mr. Wilkerson's Fiscal 1995 Compensation During fiscal 1993, the Compensation Committee approved a seven year employment contract for Mr. Wilkerson for fiscal years beginning in fiscal 1994. All of Mr. Wilkerson's fiscal 1995 compensation was paid pursuant to this contract. The agreement calls for minimum annual remaining salary amounts during the employment term as follows:
Year Ending February 28/29 Amount - ---------------------------- -------- 1996 $275,000 1997 $300,000 1998 $300,000 1999 $300,000 2000 $300,000
In the event that Mr. Wilkerson is substantially incapacitated during the term of his employment for a period of 90 days in the aggregate during any twelve month period, the Company has the right to terminate his employment. Under such termination, Mr. Wilkerson will receive one-half of his salary in effect on the date of termination for the remaining term of the agreement. Additionally, in the event of Mr. Wilkerson's death during his employment, his designated beneficiary or his estate shall be paid one-half of his salary in effect on the date of his death for the remaining term of the agreement. The performance considerations utilized by the Compensation Committee in determining the terms of Mr. Wilkerson's employment contract were as follows: . His hiring of a new and successful management team. . His ability to lead the Company to substantial and increasing profitability. . His implementation of a new franchisee credit and collection policy achieving maximum collectibility. . His development of new and positive investment banking and market maker relationships. . His success in maintaining the Company's NASDAQ listing under difficult circumstances through conversion of subordinated debentures, a preferred stock offering and increased profitability. . The Company's overall performance in fiscal 1993 yielding substantial revenue and income growth and substantially surpassing goals set forth in the targeted operating budget. Mr. Wilkerson's fiscal 1995 and 1996 salary was kept at $275,000, which is the minimum level prescribed for those years in his employment contract. Mr. Gaughn's Fiscal 1995 Compensation Mr. Gaughn's fiscal 1995 compensation reflects a cost of living salary increase of 5%. Mr. Gaughn resigned his position in January 1995. SUBMITTED BY THE COMPENSATION COMMITTEE OF THE COMPANY'S BOARD OF DIRECTORS: RAYMOND J. KIERNAN JOHN N. GALARDI BILL LEVINE Page 16 (c) Compensation Tables The following tables set forth the compensation received for services in all capacities to the Company during its fiscal years ended February 28, 1995, 1994 and 1993, by the two executive officers of the Company as to whom the total salary and bonus in the most recent year exceeded $100,000. Page 17 BCT INTERNATIONAL, INC. ----------------------- SUMMARY COMPENSATION TABLE -------------------------- FISCAL YEARS 1995, 1994 AND 1993 -------------------------------- 000'S OMITTED -------------
LONG-TERM COMPENSATION ANNUAL COMPENSATION AWARDS - ----------------------------------------------------------------------------------------------------- FORM OF PAYMENT FISCAL --------------- NAME POSITION YEAR SALARY BONUS CASH SHARES OPTIONS - ---- ---------- ------ ------ ------- ------ ------ ------- W.A. Wilkerson Chairman of 1995 $287(1) $ 23(2) $310 --- 200 the Board and 1994 $237(1) $ 2(2) $239(2) --- --- Chief Executive 1993 $187 $--- $187 --- 2 Officer P.T. Gaughn Chief Operating 1995 $106 $ 25(3) $131 --- --- Officer, 1994 $109 $--- $109 --- 10 Secretary 1993 $ 99 $--- $ 99 --- 12 and President of Subsidiary(4)
(1) Salary for fiscal 1995 and 1994 includes a $12 car allowance. (2) Bonus for fiscal 1994 of $25 was determined in July 1993, of which $2 was paid in fiscal 1994 and the remainder was paid in fiscal 1995. (3) Bonus for fiscal 1993 of $25 was determined in July 1993 and was paid in fiscal 1995. (4) Mr. Gaughn resigned from his positions with the Company in January of 1995. Page 18 BCT INTERNATIONAL, INC. ----------------------- AGGREGATED OPTION EXERCISES AND YEAR-END ---------------------------------------- OPTION VALUES FOR FISCAL 1995 ----------------------------- 000'S OMITTED -------------
NUMBER OF VALUE OF UNEXERCISED IN-THE-MONEY OPTIONS AT OPTIONS AT SHARES 2/28/95 (#) 2/28/95 ($) ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/ NAME POSITION EXERCISE # REALIZED ($) UNEXERCISABLE UNEXERCISABLE - ---------------------- ----------- ----------- ------------ ------------- ------------- W.A. Wilkerson Chairman of --- $ --- 309 / 0 $813 / 0 the Board and Chief Executive Officer P.T. Gaughn Chief Operating --- $ --- 70 / 0 $102 / 0 Officer, Secretary and President
Page 19 BCT INTERNATIONAL, INC. ----------------------- EXECUTIVE MANAGEMENT COMPENSATION --------------------------------- OPTION GRANTS IN FISCAL YEAR 1995 --------------------------------- 000'S OMITTED -------------
POTENTIAL REALIZABLE VALUE AT ASSUMED % OF TOTAL ANNUAL RATES OF OPTIONS STOCK PRICE OPTIONS GRANTED TO EXERCISE EXPIRATION APPRECIATION NAME POSITION GRANTED EMPLOYEES PRICE DATE FOR OPTION TERM - ------------------- --------------- ------- ---------- -------- ---------- ----------------- 5% ($) 10% ($) W.A. Wilkerson Chairman of the Board and Chief Executive 200 100% $3.375 8/24/04 $1,100/$1,750 Officer P.T. Gaughn Chief Operating Officer, Secretary and --- --- --- --- $ --- /$ --- President of Subsidiary
Page 20 (d) Other Compensation Arrangements Outside directors of the Company receive director's fees of $750 per month plus $750 for each Board of Directors meeting attended and $500 for each committee meeting attended. Item 12. (a) Security Ownership of Certain Beneficial Owners and Management - ------------ -------------------------------------------------------------- The following table sets forth as of May 15, 1995, information with respect to the only persons known to the Company to be beneficial owners of more than 5% of the Company's outstanding common stock (excluding treasury stock), as well as the beneficial ownership of all directors and officers of the Company individually and all directors and officers as a group. Based on the information available to the Company, except as set forth in the accompanying footnotes, each person has sole investment and voting power with respect to the shares of common stock indicated. At May 15, 1995, 4,778,740 shares of common stock were outstanding. Page 21
PERCENT OF NUMBER OF SHARES OUTSTANDING NAME BENEFICIALLY OWNED (1) COMMON STOCK - ---- ---------------------- ------------ Certain Beneficial Owners: Steven N. Bronson 673,194 (2) 13.44% Barber & Bronson, Inc. 2101 West Commercial Blvd., Suite 1500 Fort Lauderdale, Florida 33309 Officers and Directors: William A. Wilkerson 1,327,387 ( 3) 25.90% Bill LeVine 685,032 ( 4) 13.14% Henry A. Johnson 151,847 ( 5) 3.15% Robert F. Bond 101,250 ( 6) 2.07% Raymond J. Kiernan 81,500 ( 7) 1.68% Thomas J. Cassady 26,250 ( 8) 0.55% John N. Galardi 30,062 ( 9) 0.63% A. George Cann 11,000 (10) 0.23% Donna M. Pagano-Leo 24,000 (11) 0.50% Officers and Directors as a group (9 persons) 2,438,329 (12) 41.57%
- ------------------------- (1) This column sets forth shares of Common Stock which are deemed to be "beneficially owned" by the persons named in the table under Rule 13D-3 of the Securities and Exchange Commission ("SEC"). (2) Includes 228,750 shares covered by currently exercisable warrants. (3) Includes 346,250 shares covered by currently exercisable stock options and warrants. (4) Includes 371,621 shares covered by currently convertible Series A Convertible Preferred Stock, and 61,250 shares covered by currently exercisable stock options. (5) Includes 43,750 shares covered by currently exercisable stock options. (6) Includes 101,250 shares covered by currently exercisable stock options. (7) Includes 80,000 shares covered by currently exercisable stock options. (8) Includes 23,750 shares covered by currently exercisable stock options. (9) Includes 25,000 shares covered by currently exercisable stock options. (10) Includes 10,000 shares covered by currently exercisable stock options. (11) Includes 24,000 shares covered by currently exercisable stock options. (12) Includes 1,086,871 shares covered by currently exercisable stock options and warrants and currently convertible Series A Preferred Stock. Page 22 (b) Security Ownership of Management (Preferred Stock) -------------------------------------------------- The following table sets forth as of May 15, 1995, information with respect to each class of equity securities of the Company other than Common Stock beneficially owned by each of the directors and officers of the Company individually and all directors and officers as a group.
Name of Number of Shares Percent Title of Class Beneficial Owner Beneficial Owned of Class - ---------------------- ---------------- ---------------- --------- Series A Convertible Bill LeVine 550,000 67.9% Preferred Stock Director
Item 13. Certain Relationships and Related Transactions - -------- ---------------------------------------------- On February 28, 1994, the Company's Chairman and Chief Executive Officer William A. Wilkerson purchased 75,000 shares of the Company's Series B Convertible Preferred Stock at a price of $1.00 per share pursuant to the Company's private placement of such stock. He paid the $75,000 purchase price by applying the $73,065 balance of a note owed to him by the Company, together with $1,935 cash. The Series B convertible preferred stock carried a 9% annual dividend, was scheduled to be redeemed in three years (March 1997) and was convertible into common stock at a price of $2.25 per share. The conversion ratio was based on the market price of the Company's common stock at the time of the commencement of the private placement offering of the Series B convertible preferred stock. The 75,000 shares of Series B convertible preferred stock were accompanied by three-year warrants issued to Mr. Wilkerson entitling him to purchase 33,333 shares of common stock at an exercise price of $3.00 per share. On March 31, 1994, Mr. Wilkerson exchanged his $100,000 principal amount of the Company's 11% convertible subordinated debentures, due March 31, 1994, for 100,000 additional shares of the Series B Preferred Stock, together with 44,444 additional warrants. In October 1994, the Company executed a commitment letter with a bank for a $200,000 unsecured line of credit, with an interest rate of prime + 1.5% and an expiration date of July 1, 1995. Draws against this line of credit are for capital projects and must be preapproved by the bank. This line of credit is personally guaranteed by Mr. Wilkerson. On November 1, 1994, Mr. Wilkerson converted his 175,000 shares of Series B convertible preferred stock into 77,778 shares of the Company's common stock, pursuant to the Company's exercise of its option to convert the entire Series after six months in the event that the common stock traded at or above $3.50 for 20 consecutive trading days. In connection with the conversion of the Series B convertible preferred stock, the Company exercised its option to redeem 77,778 Series B Warrants held by Mr. Wilkerson for $3,889 ($.05 each) on December 8, 1994. On August 24, 1994 the Board of Directors awarded Messrs. Wilkerson and Bond 200,000 and 15,000, respectively, immediately-exercisable non-qualified stock options, at an exercise price of $3.375 (the market price on the date of grant). In March 1991, the Company entered into a consulting agreement with BCT's founder and Director Henry A. Johnson, who had retired as an officer of the Company during fiscal 1991. Under this agreement, Mr. Johnson has provided such consulting services as are requested by the Board and/or the Company's chief executive officer, in exchange for fees of $50,000 per year, payable in equal monthly installments. In May 1992, the agreement was formalized pursuant to a written consulting contract with an expiration date of February 29, 1996. On May 7, 1992, Mr. LeVine was appointed to the Company's Board of Directors. On that date, he purchased 550,000 shares of the Company's Series A convertible preferred stock at a price of $1 per share. The Series A preferred stock carries a cumulative annual dividend of 12%, is scheduled to be redeemed in five years (May 1997), and is convertible into common stock at a ratio of 1.48 shares of preferred stock per share of common stock. The conversion ratio was based on the market price of the common stock at the time of the transaction. In connection with his appointment to the Board and his purchase of the Series A preferred stock, Mr. LeVine was granted 10-year options to purchase 51,250 shares of common stock at a price of $1.48 per share (the market price on the date of grant). Page 23 On February 28, 1994, Mr. LeVine purchased 500,000 shares of the Company's Series B convertible preferred stock at a price of $1 per share. Accompanying the 500,000 shares were three-year warrants entitling Mr. LeVine to acquire upon exercise 222,222 shares of the Company's common stock at an exercise price of $3.00 per share. On November 1, 1994, Mr. LeVine's 500,000 shares of Series B convertible preferred stock were forcibly converted by the Company into 222,222 shares of the Company's common stock. In connection with this conversion, the Company redeemed 222,222 Series B warrants held by Mr. LeVine for $11,111 ($.05 each) on December 8, 1994. Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K - -------- --------------------------------------------------------------- (a) Financial Statements and Financial Statement Schedules (1) Financial Statements - beginning on page F-1; Report of Independent Certified Public Accountants - page F-2 Consolidated Balance Sheets at February 28, 1995 and February 28, 1994 - page F-3 Consolidated Statements of Operations for the fiscal years ended February 28, 1995, February 28, 1994, and February 28, 1993 - pages F-4 and F-5. Consolidated Statements of Changes in Stockholders' Equity for the fiscal years ended February 28, 1995, February 28, 1994, and February 28, 1993 - pages F-6 through F-8 Consolidated Statements of Cash Flows for the fiscal years ended February 28, 1995, February 28, 1994, and February 28, 1993 - pages F-9 and F-10 Notes to Consolidated Financial Statements - pages F-11 through F-23 (2) Financial Statement Schedules For the Years Ended February 28, 1995, February 28, 1994, and February 28, 1993: Schedule VIII - Valuation and Qualifying Accounts - page F-24 Schedule X - Supplementary Income Statement Information page F-25 All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto. (b) Reports of Form 8-K The Company did not file any report on Form 8-K during the last quarter of fiscal 1995. Page 24 (c) Exhibits 3.1 Certificate of Incorporation of the Company, as amended. 3.2 By-Laws of the Company, as amended, as filed with the SEC as Exhibit 3.1 to the Company's 1984 Registration Statement on Form S-1, are incorporated herein by reference. 4.1 Certificate of Designations, Preferences and Rights of Series A Convertible Preferred Stock, as filed with the SEC as Exhibit 4.2 to the Company's report on Form 10-K for the fiscal year ended February 29, 1992, is incorporated herein by reference. 4.2 Certificate of Designations, Preferences and Rights of Series B Convertible Preferred Stock, as filed with the SEC as Exhibit 4.2 to the Company's report on Form 10-K for the fiscal year ended February 28, 1994, is incorporated herein by reference. 10.1 Agreement dated May 7, 1992, between the Company and Bill LeVine, as filed with the SEC as Exhibit 10.7 to the Company's report on Form 10-K for the fiscal year ended February 29, 1992, is incorporated herein by reference. 10.2 Form of March 1994 subscription agreement for Series B Convertible Preferred Stock as filed with the SEC as Exhibit 10.4 to the Company's report on Form 10-K for the fiscal year ended February 29, 1994, is incorporated herein by reference. 10.3 Consulting Agreement dated March 1, 1992, between the Company and Henry A. Johnson, as filed with the SEC as Exhibit 10.10 to the Company's report on Form 10-K for the fiscal year February 29, 1992, is incorporated herein by reference. 10.4 Employment Agreement dated March 1, 1993 between the Company and William A. Wilkerson, as filed with the SEC as Exhibit 10.9 to the Company's report on Form 10-K for the fiscal year ended February 28, 1993, is incorporated herein by reference. 10.5 Agreement dated January 1, 1993 between Business Cards Tomorrow, Inc. and Hence/EDP, as filed with the SEC as Exhibit 10.12 to the Company's report on Form 10-K for the fiscal year ended February 28, 1993, is incorporated herein by reference. 10.6 Note Agreement and Security Agreement dated May 27, 1993 between BCT Delray, Inc. and Carney Bank, as filed with the SEC as Exhibit 10.19 to the Company's report on Form 10-K for the fiscal year ended February 28, 1993, is incorporated herein by reference. 10.7 Purchase and Sale Agreement dated April 12, 1993 between Business Cards Tomorrow, Inc. and David Falk, as filed with the SEC as Exhibit 10.13 to the Company's report on Form 10-K for the fiscal year ended February 28, 1993, is incorporated herein by reference. 10.8 Purchase and Sale Agreement dated March 10, 1993 between Business Cards Tomorrow, Inc. and A.B. & W. H. Enterprises, Inc., as filed with the SEC as Exhibit 10.14 to the Company's report on Form 10-K for the fiscal year ended February 28, 1993, is incorporated herein by reference. 10.9 Assignment of Contract dated May 12, 1993 between Business Cards Tomorrow, Inc. and T.K.O. Enterprises, Inc., as filed with the SEC as Exhibit 10.15 to the Company's report on Form 10-K for the fiscal year ended February 28, 1993, is incorporated herein by reference.
Page 25 10.10 Guaranty dated May 12, 1993 between Business Cards Tomorrow, Inc. and A.B. & W. H. Enterprises, Inc., as filed with the SEC as Exhibit 10.16 to the Company's report on Form 10-K for the fiscal year ended February 28, 1993, is incorporated herein by reference. 10.11 Agreement dated February 1, 1994 between the Company and Barber & Bronson, Inc. as filed with the SEC as Exhibit 10.18 to the Company's report on Form 10-K for the fiscal year ended February 28, 1994, is incorporated herein by reference. 10.12 Agreement dated May 24, 1993 between the Company and American Equipment Leasing, Inc. as filed with the SEC as Exhibit 10.19 to the Company's report on Form 10-K for the fiscal year ended February 28, 1994, is incorporated herein by reference. 10.13 Line of Credit Agreement dated October 5, 1994 between the Company and Intercontinental Bank. 10.14 Employment letter dated March 2, 1995 between the Company and A. George Cann.
Page 26 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. BCT INTERNATIONAL, INC. (Registrant) DATE: May 24, 1995 By: /s/ William Wilkerson ----------------------- ----------------------- William Wilkerson Chairman of the Board & Chief Executive Officer DATE: May 24, 1995 By: /s/ Donna M. Pagano-Leo ------------------------ -------------------------- Donna M. Pagano-Leo Vice President, Treasurer & Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of Registrant and in the capacities and on the dates indicated. /s/ William Wilkerson /s/ Henry A. Johnson - -------------------------------- ------------------------ William Wilkerson Henry A. Johnson Chairman of the Board & Director Director Date: May 24, 1995 Date: May 24, 1995 /s/ Robert F. Bond /s/ Raymond J. Kiernan - -------------------------------- ------------------------ Robert F. Bond Raymond J. Kiernan Director Director Date: May 24, 1995 Date: May 24, 1995 /s/ Thomas J. Cassady /s/ Bill LeVine - -------------------------------- ------------------------ Thomas J. Cassady Bill LeVine Director Director Date: May 24, 1995 Date: May 24, 1995 /s/ John N. Galardi - -------------------------------- John N. Galardi Director Date: May 24, 1995 Page 27 BCT INTERNATIONAL, INC. ----------------------- INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES --------------------------------------------------------
Financial Statements: Page Numbers - -------------------- ------------ Report of Independent Certified Public Accountants F-2 Consolidated Balance Sheets at February 28, 1995 and February 28, 1994 F-3 Consolidated Statements of Operations for the fiscal years ended February 28, 1995, February 28, 1994 and February 28, 1993 F-4 to F-5 Consolidated Statements of Changes in Stockholders' Equity for the fiscal years ended February 28, 1995, February 28, 1994 and February 28, 1993 F-6 to F-8 Consolidated Statements of Cash Flows for the fiscal years ended February 28, 1995, February 28, 1994 and February 28, 1993 F-9 to F-10 Notes to Consolidated Financial Statements F-11 to F-23 Schedules: - --------- For the fiscal years ended February 28, 1995, February 28, 1994 and February 28, 1993: VIII Valuation and Qualifying Accounts F-24 X Supplementary Income Statement Information F-25
All other schedules are omitted because they are not applicable or the required information is shown in the consolidated financial statements or notes thereto. F-1 Page 28 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS -------------------------------------------------- To the Board of Directors and Stockholders of BCT International, Inc. In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of BCT International, Inc. and its subsidiaries at February 28, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended February 28, 1995, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. /s/ Price Waterhouse LLP ------------------------ PRICE WATERHOUSE LLP Fort Lauderdale, Florida May 15, 1995 F-2 Page 29 BCT INTERNATIONAL, INC. CONSOLIDATED BALANCE SHEETS
February 28, 1995 February 28, 1994 ---------------------- ----------------------- 000's omitted ASSETS ------- Current Assets: Cash and cash equivalents $ 1,299 $ 80 Short-term investments 1,071 --- Restricted cash --- 738 Accounts and notes receivable, net of allowance for doubtful accounts of $337 ($229 in 1994) and deferred interest of $18 ($23 in 1994) 2,305 1,603 Receivables from employees 76 57 Inventory, net of reserve of $105 ($5 in 1994) 1,863 1,867 Assets held for sale 216 --- Prepaid expense and other current assets 25 51 Net deferred tax asset 88 81 -------- -------- Total current assets 6,943 4,477 -------- -------- Accounts and notes receivable, net of allowance for doubtful accounts of $551 ($607 in 1994) 259 483 Property and equipment at cost, net of accumulated depreciation and amortization of $313 ($217 in 1994) 640 593 Net deferred tax asset 1,466 1,340 Deposits and other assets 131 136 -------- -------- 2,496 2,552 Excess of purchase price over fair value of net assets acquired, less accumulated amortization of $1,533 ($1,426 in 1994) --- 108 Trademark, net of accumulated amortization of $24 ($19 in 1994) 170 173 Intangible assets, net of accumulated amortization of $113 ($50 in 1994) 409 471 ------- --------- $10,018 $ 7,781 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY - --------------------------------------- Current Liabilities: Accounts payable $ 928 $ 1,236 Notes payable 162 103 Convertible subordinated debentures --- 1,582 Convertible subordinated debentures - related party --- 100 Accrued liabilities 287 276 Accrued payroll 24 113 ------- -------- Total current liabilities 1,401 3,410 Notes payable 48 459 -------- -------- Total liabilities 1,449 3,869 -------- -------- Commitments and contingencies (Note 9) --- --- -------- --------- Preferred stock, Series A, 12% cumulative, $1 par value, mandatorily redeemable, 810 shares authorized, issued and outstanding 810 810 Preferred stock, Series B, 9% cumulative, $1 par value, mandatorily redeemable, 2,500 shares authorized, 0 shares issued and outstanding (825 shares in 1994) --- 812 -------- -------- 810 1,622 -------- -------- Stockholders' equity: Common stock, $.04 par value, authorized 25,000, issued and outstanding 4,785 shares (3,008 shares in 1994) 191 120 Paid in capital 11,110 6,625 Accumulated deficit (3,054) ( 3,981) -------- ---------- 8,246 2,764 Less: Treasury stock, at cost, 224 shares (219 shares in 1994) (488) ( 474) -------- ---------- Total stockholders' equity 7,759 2,290 -------- ---------- $10,018 $ 7,781 ======== ==========
The accompanying notes are an integral part of these consolidated financial statements. F-3 Page 30 BCT INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF OPERATIONS
For the For the For the Fiscal year ended Fiscal year ended Fiscal year ended February 28, 1995 February 28, 1994 February 28, 1993 ----------------- ----------------- ----------------- 000's omitted ----------------- Revenues: Continuing franchise fees and commissions $ 4,540 $ 4,004 $3,517 Paper sales 7,926 7,537 5,849 Printing sales 508 514 675 Sales of franchises 466 957 573 Miscellaneous 104 109 78 ------- ------- ------ 13,544 13,121 10,692 ------- ------- ------ Expenses: Cost of paper sales 6,512 6,238 5,198 Cost of printing sales 385 290 338 Cost of franchises sold 326 691 402 Goodwill amortization 108 197 180 Selling, general and administrative 4,664 4,137 3,158 Research and development costs 279 367 283 Depreciation and amortization 178 141 59 Interest 60 270 259 Interest - related party 1 22 37 ------- ------- ------ 12,513 12,353 9,914 ------- ------- ------ Income before income taxes and extraordinary item 1,031 768 778 Income tax benefit 124 93 --- ------- ------- ------ Income before extraordinary item 1,155 861 778 Extraordinary item: Gain on early extinguishment of debt --- --- 53 ------- ------- ------ Net income $ 1,155 $ 861 $ 831 ======= ======= ======
The accompanying notes are an integral part of these consolidated financial statements. F-4 Page 31 BCT INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (continued)
For the For the For the Fiscal year ended Fiscal year ended Fiscal year ended February 28, 1995 February 28, 1994 February 28, 1993 ----------------- ----------------- ----------------- 000's omitted (except per share data) - ------------- Primary: Average number of shares outstanding 3,410 2,765 2,791 Common stock equivalents 1,661 689 495 ------ ------ ------ Totals 5,071 3,454 3,286 ====== ====== ====== Fully diluted: Average number of shares outstanding 3,410 2,765 2,791 Common stock equivalents and dilutive securities 3,184 2,312 2,205 ------ ------ ------ Totals 6,594 5,077 4,996 ====== ====== ====== Earnings per - ------------ common share: - ------------- Operations: Primary $ .18 $ .17 $ .27 Fully diluted .18 .10 .19 Extraordinary item: Primary --- --- .02 Fully diluted --- --- .01 Net income Primary $ .18 $ .17 $ .29 ====== ====== ====== Fully diluted $ .18 $ .10 $ .20 ====== ====== ======
The accompanying notes are an integral part of these consolidated financial statements. F-5 Page 32 BCT INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
000's omitted ------------- Common Stock --------------------- Less: Less: Number of Par Paid In Accumulated Treasury Notes Shares Value Capital Deficit Stock Receivable Total ----------- ------- ------- ----------- -------- ---------- -------- Balance March 1, 1992 2,908 $116 $6,293 $ (5,503) $ (449) $ (158) $ 299 Issuance of shares in lieu of salaries and bonuses to employees 73 3 105 --- --- --- 108 Issuance of shares to the Chairman of the Board for the exercise of options in the amount of $81 65 2 79 --- --- --- 81 Purchase of minority stockholders fractional shares (4) --- (6) --- --- --- (6) Cancellation of common stock for notes receivable from stockholders (86) (3) (155) --- --- 158 --- Issuance of shares for the exercise of options in the amount of $7 2 --- 7 --- --- --- 7 Dividend declared on Series A Convertible Preferred Stock --- --- --- (73) --- --- (73) Net income --- --- --- 831 --- --- 831 ------- ------- -------- -------- ---------- -------- ------- Balance February 28, 1993 2,958 118 6,323 (4,745) (449) (---) 1,247
The accompanying notes are an integral part of these consolidated financial statements. F-6 Page 33 BCT INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (continued)
000's omitted ------- Common Stock ------------------- Less Less: Number of Par Paid In Accumulated Treasury Notes Shares Value Capital Deficit Stock Receivable Total -------- ------ ------- ----------- -------- ---------- ----- Cancellation of common stock for notes receivable from employees (8) --- --- --- (25) --- (25) Conversion of $175 of subordinated convertible debentures with a conversion rate of $3.00 58 2 173 --- --- --- 175 Tax benefit from exercise of employee stock options and stock compensation awards --- --- 76 --- --- --- 76 Issuance of warrants --- --- 53 --- --- --- 53 Dividend declared on Series A Convertible Preferred Stock --- --- --- (97) --- --- (97) Net income --- --- --- 861 --- --- 861 ------- ------ ----- ------ ----- ------ ----- Balance February 28, 1994 3,008 120 6,625 (3,981) (474) --- 2,290 Cancellation of common stock for note receivable from an employee (5) --- --- --- (14) --- (14) Cancellation of common stock of an employee (59) (2) (15) --- --- --- (17) Conversion of $252 of subordinated convertible debentures with a conversion rate of $3.00 84 3 249 --- --- --- 252
The accompanying notes are an integral part of these consolidated financial statements. F-7 Page 34 BCT INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (continued)
000's omitted ------- Common Stock --------------- Less: Less: Number of Par Paid In Accumulated Treasury Notes Shares Value Capital Deficit Stock Receivable Total --------- ----- ------- ----------- -------- ---------- ----- Conversion of $150 of subordinated convertible debentures with a conversion rate $2.27 66 3 147 --- --- --- 150 Exercise of 10 stock options with an exercise price of $1.25 10 --- 12 --- --- --- 12 Exercise of 6 warrants with an exercise price of $2.92 3 --- 9 --- --- --- 9 Issuance of warrants --- --- 38 --- --- --- 38 Accretion of commission paid on Series B convertible preferred stock --- --- (78) --- --- --- (78) Conversion of 2,225 of Series B convertible preferred stock to common stock with a conversion rate of $1.25 989 40 2,185 --- --- --- 2,225 Exercise of 689 Series B convertible preferred stock warrants with an exercise price of $3.00 689 27 2,039 --- --- --- 2,066 Cost associated with exercise of Series B convertible preferred stock warrants --- --- (86) --- --- --- (86) Redemption of 300 Series B convertible preferred stock warrants with a redemption price of $.05 --- --- (15) --- --- --- (15) Net income --- --- --- 1,155 --- --- 1,155 Dividend declared on convertible preferred stock --- --- --- (228) --- --- (228) ----- ------ ------- ------- ------ ------- ------ Balance February 28, 1995 4,785 $191 $11,110 $(3,054) (488) --- $7,759 ===== ====== ======= ======== ====== ======= ======
The accompanying notes are an integral part of these consolidated financial statements. F-8 Page 35 BCT INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
For the For the For the Fiscal year ended Fiscal year ended Fiscal year ended February 28, 1995 February 28, 1994 February 28, 1993 ------------------ ------------------ ------------------ 000's omitted ------------------ Cash flows from operating activities: Net income $ 1,155 $ 861 $ 831 Adjustments to reconcile net income to net cash provided by operating activities: Income tax benefit (594) (502) --- Income tax expense 470 409 --- Depreciation and amortization 286 338 239 Cost assigned to warrants issued 38 53 --- Provision for doubtful accounts 352 196 242 Reserve for inventory 100 --- --- Fair value of shares issued in lieu of salaries --- --- 108 Gain on early extinguishment of debt --- --- (53) Changes in operating assets and liabilities (Increase) in accounts and notes receivable (355) (439) (337) Decrease (increase) in inventory 4 (278) (412) Decrease (increase) in prepaid expenses and other assets 20 (7) (67) (Decrease) increase in accounts payable (308) 413 (184) (Decrease) increase in other accrued liabilities (78) (62) 29 -------- ------ ------ Net cash provided by operating activities 1,090 982 396 -------- ------ ------ Cash flows from investing activities: Payment for short-term investments (1,071) --- --- Capital expenditures for property and equipment (261) (359) (201) Proceeds from disposition of equipment --- 4 --- Acquisition of Canadian Master Area Franchise Agreement --- (120) --- Acquisition of Company Plant --- (50) --- -------- ------ ------ Net cash used for investing activities (1,332) (525) (201) -------- ------ ------ Cash flows from financing activities: Issuance of Series A Convertible Preferred Stock --- --- 550 Issuance of Series B Convertible Preferred Stock 1,300 738 --- Investment banker fee associated with Series B Convertible Preferred Stock (65) --- --- Restricted cash --- (738) --- Dividend payments on Series A Preferred Stock (97) (97) (58) Dividend payments on Series B Preferred Stock (131) --- --- Exercise of Series B Convertible Preferred Stock 2,066 --- --- Investment banker fee associated with Series B warrants (86) --- --- Redemption of nonexercised Series B warrants (15) --- --- Repurchase of Common Stock --- --- (6) Exercise of stock options and warrants 21 --- --- Issuance of Common Stock --- --- 7 Proceeds from borrowings --- 310 --- Proceeds from borrowings - related party --- --- 23 Repayments on borrowings (352) (584) (437) Repayments on borrowings - related party --- (89) (106) Redemption of convertible subordinated debentures (1,180) --- (98) -------- ------ ------ Net cash provided by (used for) financing activities 1,461 (460) (125) -------- ------ ------ Net increase (decrease) in cash and cash equivalents 1,219 (3) 70 Cash and cash equivalents at beginning of year 80 83 13 -------- ------ ------ Cash and cash equivalents at end of year $ 1,299 $ 80 $ 83 ======== ====== ======
The accompanying notes are an integral part of these consolidated financial statements. F-9 Page 36 BCT INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) 000's omitted -------------
For the For the For the Fiscal year ended Fiscal year ended Fiscal year ended February 28, 1995 February 28, 1994 February 28, 1993 ----------------------- ------------------------ ------------------------- Supplemental disclosures: - ------------------------- Interest paid during the year $85 $278 $299 --- ---- ---- Income taxes paid during the year $18 $ 17 $ - --- ---- ----
Noncash activities: - ------------------ In fiscal 1993, the Company issued 73 shares of common stock in lieu of salaries to certain officers and key employees. The fair value ascribed to the common stock and additional paid in capital is $3 and $105, respectively. In fiscal 1993, a major supplier converted $200 of a note payable into $200 of Series A convertible preferred stock. In fiscal 1993, the Chairman of the Board of the Company exercised stock options with an aggregate exercise price of $81 by reducing an $81 obligation due to him from the Company. In fiscal 1993, notes receivable due from directors in the amount of $158 were satisfied through the cancellation of 86 shares of common stock of the Company that collateralized these notes receivable. The value ascribed to the common stock and additional paid in capital is $3 and $155, respectively. In fiscal 1994, 60 shares of Series A convertible preferred stock were issued in exchange for assets purchased. In fiscal 1994, $175 of convertible debentures were converted into 58 shares of common stock. In fiscal 1994, notes receivable due from employees in the amount of $25 were satisfied through the cancellation of 8 shares of common stock of the Company that collateralized these notes receivable. The value ascribed to the common stock and additional paid in capital is $0 and $25, respectively. In fiscal 1994, the Company issued debt of $300 relating to the acquisition of BCT Delray and the Canadian Area Master Franchise Agreement. In fiscal 1994, the Chairman of the Board exchanged $73 of notes payable into Series B convertible preferred stock. In fiscal 1995, $252 and $150 of subordinated convertible debentures were converted into 84 and 66 shares of common stock, respectively. In fiscal 1995, a note receivable due from an employee in the amount of $17 was satisfied through the return of 5 shares of common stock of the Company which collateralized this note. In fiscal 1995, the Chairman of the Board exchanged $100 of convertible debentures for 100 shares of Series B convertible preferred stock together with 44 additional warrants. In fiscal 1995, 2,225 shares of Series B convertible preferred stock were converted into 989 shares of the Company's common stock. The accompanying notes are an integral part of these consolidated financial statements. F-10 Page 37 BCT INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (000's omitted) NOTE 1: BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - ------- ------------------------------------------------------- Business BCT International Inc. (the Company), franchises wholesale thermography printing Plants through its wholly-owned subsidiary, Business Cards Tomorrow, Inc. (BCT), for which it receives initial franchise fees and continuing royalties. BCT, through its wholly-owned subsidiary BCT Delray, Inc. (BCT Delray), acquired its first Company Plant in fiscal 1994. A second Company Plant was acquired by BCT in fiscal 1995. The Company also sells paper stock and catalogs to its franchisees and the Company Plants. At February 28, 1995, the Company has 98 thermography printing Plants in operation, 96 of which are franchised. The total number of Plants was 97 in 1994 and 92 in 1993. Principles of Consolidation The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiary, BCT, and BCT's wholly-owned subsidiary BCT Delray. All significant intercompany transactions have been eliminated. Short-Term Investments Short-term interest bearing investments are those with maturities of less than one year but greater than three months when purchased and are readily convertible to cash. The short-term investments are classified as held to maturity and are stated at amortized cost, which approximates fair value. Inventory Inventory, consisting primarily of paper products, printing supplies and catalogs for sale to its franchisees and the Company Plants, is stated at the lower of cost (first in, first out method) or market. Property and Equipment Property and equipment is recorded at cost. Depreciation is provided on the straight-line method over the estimated useful life of the asset. Leasehold improvements are amortized over the lives of the respective leases or the estimated useful lives of the improvements, whichever is shorter. Costs of major additions and improvements are capitalized and expenditures for maintenance and repairs which do not extend the life of the assets are expensed. Upon the sale or disposition of property and equipment, the cost and related accumulated depreciation is eliminated from the accounts, and any resultant gain or loss is credited or charged to operations. Assets Held for Sale Assets held for sale consist of the net assets of the Company Plant in Honolulu, Hawaii, and are carried at the lower of cost or market value. Excess of Purchase Price Over Fair Value of Net Assets Acquired Excess of purchase price over fair value of net assets acquired from the reverse acquisition on December 31, 1985 with The Good Taco Corporation was being amortized over a period of fifteen years through 2001. The excess purchase price was ascribed to the acquisition of a public company and to the acquisition of $3,360 of tax net operating loss carryforwards. At February 28, 1995, the asset has been reduced to no value. F-11 Page 38 Trademark The trademark is amortized using the straight-line method over 40 years. Intangible Assets Intangible assets consist of Canadian franchise rights and goodwill acquired in fiscal 1994 with the Canadian Master Area Franchise Agreement and goodwill acquired in fiscal 1994 with the purchase of the Company Plant. The acquisition of the Canadian Master Area Franchise Agreement enabled the Company to cancel the area agreement with the seller and purchase all of the Canadian sub-franchise agreements. The purchase price was $230, of which $120 was paid in cash at closing, and the remaining $110 was paid in 11 consecutive monthly installments of $6 with a final balloon payment of $44. The amortization period for the Canadian acquisition intangible assets is 19 years, which represents the remaining life of the franchise agreements acquired. In June 1993, in connection with the strategy of beginning to operate Company Plants, the Company purchased franchise stores at a net cost of $300. The goodwill associated with this acquisition totalled $239. The amortization period for the assets related to the purchase of the Company Plants is 5 years. Sales of Franchises Revenue from the sales of individual franchises, including the initial equipment package, is recognized upon the opening of the related franchise and when all significant services have been substantially performed. Revenue from the sale of an area franchise is recognized when all significant services relating to the sale have been completed. Continuing Franchise Royalties, Paper and Printing Revenues Continuing franchise royalties, paper and printing revenues are recognized monthly when earned. Collectibility of these revenues is assessed on a regular basis. The allowance for doubtful accounts is established through a provision for losses charged to selling, general and administrative expense. Accounts receivable are charged off against the allowance for doubtful accounts when management believes that collectibility is unlikely. The allowance is an amount that management believes will be adequate to absorb possible losses in existing accounts and notes receivable that may become uncollectible. Research and Development Research and development costs include costs for new product development which are charged to operations as incurred. Income Taxes In February 1993, the Company prospectively adopted Statement of Financial Accounting Standards No. 109 (FAS 109), Accounting for Income Taxes. FAS 109 is --------------------------- an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company's financial statements or tax returns. In estimating future tax consequences, FAS 109 generally considers all expected future events other than enactments of changes in the tax law or rates. The change to FAS 109 in 1993 had no significant effect on the fiscal 1993 financial statements. F-12 Page 39 Earnings Per Common Share Primary earnings per common share are calculated by dividing net earnings applicable to common stock by the weighted average number of Common Stock shares outstanding and common stock equivalents which consist of stock options and stock warrants. On a fully-diluted basis, net earnings, weighted average shares outstanding and common stock equivalents are adjusted to assume the conversion of convertible subordinated debentures and preferred stock from the date of issue. Cash and Cash Equivalents For the purposes of reporting cash flows, cash and cash equivalents include investments with maturities of ninety days or less at purchase date. Presentation and Reclassification All dollar and share amounts, except amounts related to per share data, are expressed in thousands of dollars. Certain items in the 1994 and 1993 consolidated financial statements have been reclassified for comparative purposes. NOTE 2: SHORT-TERM INVESTMENTS - ------ ---------------------- Short term investments consist of the following at February 28, 1995:
Carrying Value Market U.S. Treasury Bill, face value of $75, due May 25, 1995 $ 74 $ 74 U.S. Treasury Bill, face value of $1,000, due June 1, 1995 985 985 ------- ------- 1,059 1,059 Accrued interest 12 12 ------- ------- $ 1,071 $ 1,071 ======= =======
F-13 Page 40 NOTE 3: ACCOUNTS AND NOTES RECEIVABLE - ------- ----------------------------- Accounts and notes receivable consist of the following:
February 28, February 28, 1995 1994 ------------- ------------- Continuing franchise fees receivable $1,231 $ 997 Paper sales receivable from franchisees 1,147 807 Notes receivable from sale of franchises, interest at 8 1/2% to 10%, due in monthly installments through 1997 148 139 Notes receivable due from franchisees, interest at 10% to 12 1/2%, payable in monthly installments through 1998 605 770 Company Plant accounts receivable from customers 86 88 Miscellaneous 253 144 ------ ------ 3,470 2,945 Less - allowance for doubtful accounts (888) (836) and deferred interest (18) (23) ------ ------ 2,564 2,086 Less - amount not expected to be collected within one year, net of $551 allowance for doubtful accounts ($607 in 1994) (259) (483) ------ ------ $2,305 $1,603 ------ ------
In the normal course of business, to meet the financing needs of its franchisees, the Company extends credit to its franchisees throughout the United States and Canada. Although the Company has a diversified receivable portfolio, a substantial portion of the franchisees' ability to honor their commitments to the Company is reliant upon the economic stability of the market in the franchisee's particular geographic area. The Company's exposure to loss in the event of nonperformance by the franchisees is represented by the contractual amount of the notes and accounts receivables and the franchise equipment leases guaranteed by the Company (see Note 9). The Company controls the credit risk of its receivables through credit approvals, limits and monitoring procedures. The Company may require collateral or other security to support the receivables with credit risk. F-14 Page 41 At February 28, 1995, approximately $170 ($503 in 1994) of accounts and notes receivable, although currently due, are classified into long term accounts and notes receivable, based upon historic payment performance of the franchisees. A significant portion of the allowance for doubtful accounts relates to these accounts and notes receivable. Amounts included in long term notes receivable include the following contractual payment terms: 1996 - $112, 1997 - $296, 1998 - $164, 1999 - $180. Bad debt expense for the years ended February 28, 1995, February 28, 1994 and February 28, 1993, was approximately $352, $196 and $242, respectively. Interest income is recognized on a cash basis for those accounts and notes receivables with specific reserves. Interest income for all other accounts and notes receivable are recognized on an accrual basis. NOTE 4: PROPERTY AND EQUIPMENT - ------- ---------------------- Major classifications of property and equipment are as follows:
Estimated useful February 28, February 28, lives 1995 1994 (in years) ------------- ------------ ---------- Leasehold improvements $ 53 $ 53 5 - 32 Machinery and equipment 181 141 3 - 20 Dies and artwork 118 118 25 Videos 37 37 5 Furniture, fixtures and other equipment 104 99 5 - 10 Computers 407 311 5 Franchisee software 48 46 3 Auto 5 5 5 ----- ----- 953 810 Less - accumulated depreciation and amortization (313) (217) ----- ----- $ 640 $ 593 ===== =====
F-15 Page 42 NOTE 5: CONVERTIBLE SUBORDINATED DEBENTURES AND NOTES PAYABLE - ------- ----------------------------------------------------- Convertible subordinated debentures and notes payable consist of the following:
February 28, February 28, 1995 1994 ------------- ------------- Series A - 11% convertible subordinated debentures, interest payable quarterly, due March 31, 1994 $ --- $ 1,682 ======== ======= Note payable to bank, secured by receivables, property, equipment and inventory, monthly principal and interest payments, interest at 8% --- 285 Note payable to prior owner of Company Plant secured by equipment, monthly principal and interest payments of $4, interest at 8% per annum, due May 28, 1998 131 166 Unsecured amount due to Continental Stamps West, interest imputed at 13%, principal and interest due in monthly installments of $4 through February 1997 79 111 -------- ------- 210 562 Less - amount due after one year (162) (103) -------- ------- $ 48 $ 459 ======== =======
In October 1994, the Company executed a commitment letter with a bank for a $200 unsecured line of credit, with an interest rate of prime + 1.5% and an expiration date of July 1, 1995. Advances against this line of credit are for capital projects and must be preapproved by the bank. This line of credit is guaranteed by the Company's Chairman of the Board. No advances were outstanding under this line of credit at February 28, 1995. Convertible subordinated debentures - ----------------------------------- In fiscal 1990, the Company issued $2,580 of Series A 11% convertible subordinated debentures, $600 of which replaced a $600 note payable to the Chairman of the Board. The convertible subordinated debentures were due March 31, 1994, interest was payable each calendar quarter, and the debentures were convertible into common stock at a rate of $3.00 per share. Further, upon conversion, each share of common stock was to be accompanied by the issuance of a three-year warrant, with two warrants required to purchase one share of common stock at an exercise price of $7.00 per share. During fiscal 1992, to induce the conversion of the debentures, the Company temporarily reduced the conversion price from $3.00 to $1.25 per share of common stock. Further, the exercise price for the warrants was reduced from $7.00 to $2.92 per share. The revised conversion agreement was effective from July 31, 1991 through September 30, 1991. In conjunction with the induced conversion, $573 of debentures were converted to increase the Company's equity position; $500 of these debentures were converted by the Company's Chairman of the Board. This induced conversion resulted in subordinated debenture conversion expense in the approximate amount of $331. This expense represents the fair value of the shares transferred in excess of shares issuable pursuant to the original conversion terms. On May 15, 1992, $150 of the debentures were redeemed by the Company in a privately negotiated transaction at an aggregate redemption price of $98. During fiscal 1994, an additional $175 of debentures were converted pursuant to the original terms. At February 28, 1994, $1,682 principal amount of debentures remained outstanding. Of these debentures, $532 were convertible into 177 common shares at $3.00 per share plus 177 warrants. In fiscal 1995, $252 of these debentures were converted into 84 shares of common stock and 84 warrants, and the Chairman of the Board converted $100 of these debentures into Series B convertible preferred stock. The remaining $180 of these debentures was satisfied at the maturity date with proceeds from the private placement of Series B convertible preferred stock (see Note 6 - Preferred Stock). F-16 Page 43 The remaining $1,150 of the debentures outstanding at February 28, 1994 were subject to anti-dilutive provisions upon the occurrence of certain events. The conversion price was subject to reduction for the grant of options and warrants and the issuance of additional shares of common stock and convertible securities with a price less than the then current conversion price. As of February 28, 1994, the conversion price of these debentures had been reduced from $3.00 to $2.27 per share, resulting in 506 shares of common stock issuable upon conversion. Furthermore, the warrant exercise price had been reduced from $7.00 to $4.46 per share. On March 17, 1994, $150 of these debentures were converted into 66 shares of common stock, together with 66 warrants. The remaining $1,000 of these debentures were satisfied at the maturity date with proceeds from the private placement of Series B convertible preferred stock (See Note 6 - Preferred Stock). Scheduled maturities after February 28, 1995, for notes payable are as follows:
Fiscal Notes Year Payable ------ ------- 1996 $ 168 1997 42 ------- $ 210 =======
F-17 Page 44 NOTE 6: PREFERRED STOCK - ------- --------------- Effective May 1992, 750 shares of Series A Convertible Preferred Stock, $1.00 par value, were authorized and issued by the Company. In January 1994, 60 additional shares of Series A preferred stock were authorized and issued, bringing the total to 810 shares. Dividends on these shares are cumulative and accrue from the date of original issue at a 12% rate per annum, payable quarterly on the first day of each January, April, July and October. Dividends in arrears are non-interest bearing. Dividends must either be fully paid or declared and aggregated for payment prior to the declaration of dividends on the common shares. The Series A preferred stock is non-voting except as it relates to any action affecting the terms of the priority of the preferred stock. Upon the event of a voluntary or involuntary liquidation, the holders of the Series A preferred stock will be entitled to receive $1.00 per share plus all accrued and unpaid dividends. The Series A preferred stock is convertible into common stock at a ratio of 1.48 shares of preferred stock for each share of common stock. The Company has the option to require conversion of the preferred stock beginning two years after the date of issuance if the common stock closing price or last reported sales price is at least $7.00 per share for 10 consecutive business days. If the preferred stock is not converted within five years of issuance, the Company must redeem the stock at $1.00 per share plus all accrued and unpaid dividends. Effective February 17, 1994, 2,500 shares of Series B convertible preferred stock, $1.00 par value, were authorized by the Company for sale in a private placement offering at a $1.00 price per share. A total of 2,225 shares were sold in the offering. The net proceeds of the offering, which totalled $1,973, were used by the Company (i) to pay off the outstanding 11% convertible subordinated debentures due on March 31, 1994 of $1,180 and (ii) for general working capital. Dividends on the Series B convertible preferred stock were cumulative and accrued from the date of original issue at a 9% rate per annum, payable quarterly on the first day of each January, April, July and October. Total Series B dividends declared and paid to holders were $129. Upon the event of a voluntary liquidation, the holders of the Series B preferred stock were entitled to receive $1.00 per share plus all accrued and unpaid dividends. The Series B preferred stock was convertible into common stock at a ratio of 2.25 shares of preferred stock per share of common stock. The Company had the right to require conversion of the Series B preferred stock into common stock six months after the date of issuance in the event the common stock's closing bid price or last sale price was at or above $3.50 per share for 20 consecutive trading days. The Company exercised this right on November 1, 1994. As a result, the Series B preferred stock totalling 2,225 shares was converted into 989 shares of the Company's common stock. The holders of the Series B convertible preferred stock received one warrant for each 2.25 shares of preferred stock purchased, entitling the holder to purchase one share of the Company's common stock for three years from the date of issuance at an exercise price of $3.00 per share. Contemporaneous with the Company's forced conversion of the Series B preferred stock into common stock, the holders were required to either exercise their Series B Warrants or have them redeemed by the Company. Effective December 8, 1994, 689 warrants were exercised at $3.00 per warrant and the Company issued 689 shares of its common stock, yielding gross proceeds to the Company of $2,067. A commission of $86 was paid to an investment banker in connection with the exercise of these warrants and was offset against additional paid in capital. The Company redeemed the 300 remaining Series B warrants at a price of $.05 each or $15. The original commission of $78 paid in connection with the sale of the Series B preferred stock was fully accreted to additional paid in capital upon the conversion of Series B preferred stock into common stock. On February 28, 1994, 825 shares of Series B convertible preferred stock were issued and outstanding. A commission of $13 was paid with respect to one investor, and the Chairman of the Board converted the remaining balance of a note owed to him by the Company in the amount of $73 plus $2 of cash into $75 of the Series B convertible preferred stock. Consequently, the Company received $738 of cash (restricted cash on the balance sheet due to escrow of the funds) in exchange for the 825 preferred shares issued. The $13 commission reduced the purchase price of the outstanding Series B convertible preferred stock. This difference was accreted utilizing the interest method and the accreted amount was offset against additional paid in capital. In fiscal 1995, an additional 1,400 shares of Series B convertible preferred stock were issued. The Company received $1,300 in cash for these shares and the Chairman of the Company exchanged $100 of the 11% convertible subordinated debentures for 100 shares of Series B convertible preferred stock. A further commission of $65 was paid to the investment bankers and reduced the value of the Series B convertible preferred stock. This difference was accreted utilizing the interest method and the accreted amount was offset against additional paid in capital. F-18 Page 45 NOTE 7: STOCKHOLDERS' EQUITY - ------- -------------------- Common Stock - ------------ On November 16, 1993, the Company's shareholders voted to increase the number of shares authorized from 6,250 shares to 25,000 shares. Stock Options - ------------- Stock options outstanding, exercisable and exercise price for the three years ended February 28, 1995 are as follows:
Options Outstanding Price Range Aggregate ----------- ------------- --------- At March 1, 1992 689 $1.25 to $3.13 $1,132 Options granted 278 $1.48 to $3.50 630 Options exercised (67) $1.25 to $2.75 (88) Options cancelled --- --- --- ----- ---------------- ------ At February 28, 1993 900 $1.25 to $3.50 1,674 Options granted 115 $2.38 274 Options exercised --- --- --- Options cancelled (9) $1.25 to $1.48 (12) ----- ---------------- ------ At February 28, 1994 1,006 $1.25 to $3.50 1,936 Options granted 215 $3.38 727 Options exercised (10) $1.25 (12) Options cancelled (31) $1.25 to $2.38 (53) Options expired (16) $3.00 (48) ----- ---------------- ------ At February 28, 1995 1,164 $1.25 to $3.50 $2,550 ===== ================ ====== Options exercisable At February 28, 1995 1,116 $1.25 to $3.50 $2,412 ===== ================ ======
F-19 Page 46 Warrants - -------- As of February 28, 1995, there were outstanding warrants for the purchase of 694 shares of common stock, 37 of which are held by the Chairman of the Board. The exercise price and the dates are as follows:
Title of Issue Aggregate Amount Date from which Price at which Called for of Securities Called Warrants Last Warrants by Warrants for by Warrants are Exercisable Exercise Date are Exercisable --------------- -------------------- ---------------- ------------- --------------- Issued during 1985 merger 31 March 6, 1985 March 5, 1995 $1.32 to $2.75 Issued during 1985 merger 38 September 8, 1986 September 7, 1996 $1.25 Converted Subordinated 175 August 30, 1991 - July 26, 1997 $4.46 to $7.00 Debentures March 31, 1994 Issued to Investment Banker 150 May 31, 1993 May 31, 1998 $3.13 Issued to Investment Banker 300 February 1, 1994 February 1, 1999 $2.00 to $4.00 --- Warrants outstanding 694 ===
As of February 28, 1995, 289 warrants issued in conjunction with convertible subordinated debentures had expired and 6 of these warrants were exercised yielding $9. The 989 warrants issued in conjunction with the Series B convertible preferred stock were called for exercise at $3.00 per share or redemption at $.05 each by the Company on November 1, 1994. Of the 989 warrants, 689 were exercised yielding gross proceeds of $2,066, and the remaining 300 were redeemed by the Company for $15. As of February 28, 1994, the following warrants were issuable in conjunction with the convertible subordinated debentures: Issuable in conjunction with Convertible Subordinated Debentures 88 July 26, 1994 July 26, 1997 $7.00 Issuable in conjunction with Convertible Subordinated Debentures 89 March 31, 1994 March 31, 1997 $7.00 Issuable in conjunction with Convertible Subordinated Debentures 301 March 31, 1994 March 31, 1997 $4.46 Issuable in conjunction with Investment Banking agreement dated February 1, 1994 225 May 1, 1994 November 1, 1999 $2.00 to $4.00 --- 703 ===
As of February 28, 1995, the above warrants were either issued or cancelled. F-20 Page 47 NOTE 8: INCOME TAXES - ------- ------------ The components of the provision for (benefit from) income taxes for the years ended February 28, 1995, 1994 and 1993 are as follows:
1995 1994 1993 ------ ------ ------ Current Provision: Federal $ 26 $ 16 $ --- State --- 20 --- ----- ----- ----- Total current 26 36 --- Deferred provision (benefit) (150) (205) --- Tax benefit from exercise of employee stock options and stock compensation awards credited to paid in capital --- 76 --- ----- ----- ----- Total (benefit) $(124) $ (93) $ --- ----- ----- -----
The Company's net deferred tax asset is comprised of the following:
February 28, 1995 February 28, 1994 February 28, 1993 ------------------ ------------------ ----------------- Deferred Tax Asset - Current: Bad debt reserve $ 132 $ 175 $ 109 Other 44 27 108 ------- -------- -------- Total Deferred Tax Asset 176 202 217 ------- -------- -------- Valuation Allowance (88) (121) (217) ------- -------- -------- Deferred Tax Liabilities - Current: Other --- --- --- ------- -------- -------- Total Deferred Tax Liability --- --- --- ------- -------- -------- Net Deferred Tax Asset - Current $ 88 $ 81 $ --- ======= ======== ======== Deferred Tax Asset - Non-Current: Bad debt reserve $ 215 $ 151 $ 134 Net operating loss carryovers 2,747 3,213 3,501 Fixed assets --- --- --- Other 34 22 --- ------- -------- -------- Total Deferred Tax Asset 2,996 3,386 3,635 ------- -------- -------- Valuation Allowance (1,466) (2,010) (3,620) ------- -------- ------- Deferred Tax Liabilities - Non-Current: Fixed assets (64) (36) (15) ------- -------- ------- Total Deferred Tax Liability (64) (36) (15) ------- -------- ------- Net Deferred Tax Asset - Non-Current $ 1,466 $ 1,340 $ --- ======= ======== ======= Net Deferred Tax Asset - Total $ 1,554 $ 1,421 $ --- ======= ======== =======
F-21 Page 48 The net change in the valuation allowance for the deferred tax asset was a decrease of $577 and $1,706 and $388 for the fiscal years ended February 28, 1995, 1994 and 1993, respectively. For the year ended February 28, 1993, the reduction in the valuation allowance related primarily to the reduction in the net deferred tax asset. For fiscal year ended February 28, 1994, $288, of the reduction in the valuation allowance related to the utilization of acquired net operating loss carryforwards which reduced goodwill. The remaining reduction in the valuation allowance of $1,418 relates to management's change in judgment about the realizability of the related deferred tax asset in future years. Of this amount, $928 related to the valuation allowance for acquired net operating losses which reduced goodwill and the remaining decrease of $490 in the valuation allowance reduced tax expense. For fiscal year ended February 28, 1995, the decrease of $577 in the valuation allowance reduced tax expense of $577. Net operating loss carryforwards for Federal income tax purposes total approximately $7,300 at February 28, 1995. The net operating loss carryforward includes $540 with certain limitations. Net operating losses expire as follows:
Year of Expiration Amount ------------ ------- 1998 $ 7 2000 1,238 2001 1,723 2002 1,327 2003 294 2005 1,721 2006 962 2007 12 2008 16 ------ $7,300 ======
For Federal income tax purposes, the Company has approximately $19 of general business credit carryovers which expire at various dates through 2001. If certain substantial changes in the Company's ownership should occur, there would be an annual limitation on the amount of carryforward which could be utilized. The difference between the statutory and effective tax rates are as follows:
1995 1994 1993 ---- ---- ---- Amount Rate Amount Rate Amount Rate ------ ----- ------- ----- ------ ---- Tax at statutory rate $ 351 34% $ 269 35% $283 34% Non-deductible amortization of purchase price over fair value of net assets 37 3 acquired (8) (1) 65 8 61 7 Other --- --- (4) (1) 6 1 State income tax, net of federal benefit 47 5 51 7 38 4 Alternative minimum tax 26 3 16 2 --- --- Decrease in Federal and state valuation allowance (577) (56) (490) (62) (388) (46) ----- --- ---- --- ---- --- $(124) (12)% $(93) (11)% $ -- --% ===== === ==== === ==== ===
F-22 Page 49 NOTE 9: COMMITMENTS AND CONTINGENCIES - ------- ----------------------------- The Company is a party to various litigation matters, including a matter with a prior officer of the Company. In the opinion of management, potential losses, if any, on the various matters will not have a material impact on the financial condition or results of operation of the Company. The Company's corporate offices and office equipment are leased under noncancellable lease agreements. The leases initially expire at various dates through 2000, and contain options for renewals. There are provisions in the leases for rent increases based on cost of living increases under certain conditions. The following are the approximate minimum annual noncancellable rentals to be paid under the provisions of the leases:
Fiscal Year Lease Commitments ------------ ----------------- 1996 275 1997 285 1998 128 1999 35 2000 41 ---- $764 ====
Rental expense amounted to the following approximate amounts for the corresponding periods:
For the year ended Amount ------------------ ------ February 28, 1995 $193 February 28, 1994 $175 February 28, 1993 $245
At February 28, 1995, the Company has guaranteed the payment of equipment lease obligations for certain of its franchisees for an aggregate amount of approximately $1,450. In March 1993, the Company entered into an employment agreement with the Chairman of the Board. The term of the employment contract is seven years. The agreement calls for minimum annual salary amounts during the term of this contract as follows:
Year Ending February 28, Amount ------------------------ ------ 1996 $275 1997 $300 1998 $300 1999 $300 2000 $300
In the event that the Chairman of the Board is substantially incapacitated during the term of his employment for a period of 90 days in the aggregate during any twelve month period, the Company has the right to terminate his employment. Upon termination, the Chairman of the Board will receive one-half of his salary in effect on the date of termination for the remaining term of the agreement. Additionally, in the event of the Chairman's death during his employment, his designated beneficiary or his estate shall be paid one-half of his salary in effect on the date of his death for the remaining term of the agreement. In March 1991, the Company entered into a consulting agreement with a Director (and founder of BCT), who had retired as an officer of the Company during fiscal 1991. Under this agreement, consulting services are required in exchange for fees of $50 per year, payable in equal monthly installments. In May 1992, this agreement was formalized pursuant to a consulting contract with an expiration date of February 29, 1996. F-23 Page 50 BCT INTERNATIONAL, INC. ----------------------- 000's omitted SCHEDULE VIII - ------------- VALUATION AND QUALIFYING ACCOUNTS ---------------------------------
Column A Column B Column C Column D Column E Additions --------------------- Balance at Charged to Balance at beginning costs and end of of year expenses Other Deductions year --------- ---------- -------- ---------- ---------- For the year ended February 28, 1995 Allowance for doubtful accounts $ 836 $352 $ --- $ (300) (1) $ 888 ====== ==== ======= ======= ====== Deferred tax assets valuation allowance $2,131 $--- $ --- $ (577) $1,554 ====== ==== ======= ======= ====== For the year ended February 28, 1994 Allowance for doubtful accounts $ 647 $196 $ --- $ (7) (1) $ 836 ====== ==== ======= ======= ====== Deferred tax assets valuation allowance $3,837 $--- $ --- $(1,706) (3) $2,131 ====== ==== ======= ======= ====== For the year ended February 28, 1993 Allowance for doubtful accounts $ 738 $242 $ --- $ (333) (1) $ 647 ====== ==== ======= ======= ====== Deferred tax assets valuation allowance $ --- $--- $ 3,837 (2) $ --- $3,837 ====== ==== ======= ======= ======
Allowance for doubtful accounts at February 28, 1995 of $888 is comprised of $337 related to current receivables and $551 to long-term receivables. (1) Write off of uncollectible receivables. (2) A deferred tax asset value (3) The excess of purchase price over fair value of net assets acquired was reduced by $1,216, of the valuation allowance, since this reduction represents the utilization of the acquired operating loss carryforwards. F-24 Page 51 SCHEDULE X BCT INTERNATIONAL, INC. ----------------------- 000's omitted ------------- SUPPLEMENTARY INCOME STATEMENT INFORMATION ------------------------------------------ COLUMN A --------
Item February 28, 1995 February 28, 1994 February 28, 1993 ----- ----------------- ----------------- ----------------- Advertising Costs $156 $162 $152 ==== ==== ==== Amortization of excess cost over value of net assets acquired $108 $193 $180 ==== ==== ==== Amortization of intangible assets $ 68 $ 22 $--- ==== ==== ====
F-25 Page 52 EX-3.1 2 CERTIFICATION OF INCORPORATION EXHIBIT 3.1 State of Delaware Office of Secretary of State I, MICHAEL RATCHFORD, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF INCORPORATION OF "THE GOOD TACO CORPORATION" FILED IN THIS OFFICE ON THE SEVENTH DAY OF APRIL, A.D. 1981, AT 9 O'CLOCK A.M. Secretary of State Authentication: *3469563 Date: 06/02/1992 CERTIFICATE OF INCORPORATION OF THE GOOD TACO CORPORATION FIRST: The name of the corporation is: THE GOOD TACO CORPORATION. SECOND: The address of its registered office in the State of Delaware is 410 South State Street in the City of Dover, County of Kent. The name of the registered agent at such address is UNITED CORPORATE SERVICES, INC. THIRD: The nature of the business or purpose to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. FOURTH: The total number of shares of stock which the corporation shall have authority to issue is 8,000,000 shares of common stock, par value $.01 per share. FIFTH: The name and mailing address of the incorporator is as follows: Name: Sharon Anson Mailing Address: c/o Reavis & McGrath 345 Park Avenue New York, New York 10154 SIXTH: The corporation reserves the right to amend, alter, change or repeal any provision contained in this certificate of incorporation, in the manner now or hereafter prescribed by statute, and all rights and powers conferred herein upon stockholders and directors are granted subject to this reservation. THE UNDERSIGNED, being the incorporator hereinbefore named, for the purpose of forming a corporation pursuant to the General Corporation Law of the State of Delaware, does make this certificate, hereby declaring and certifying that this is my act and deed and the facts herein stated are true and accordingly have hereunto set my hand this 6th day of April, 1981. Sharon Anson, Incorporator STATE OF NEW YORK STATE OF NEW YORK BE IT REMEMBERED that on this 6th day of April 1981, personally came before me a Notary Public for the State of New York, Sharon Anson, the party to the foregoing certificate of incorporation, known to me personally to be such, and she acknowledged the said certificate to be her act and deed and that the facts stated therein are true. GIVEN under my hand and seal of office the day and year aforesaid. Notary Public Susan B. Tillem Notary Public, State of New York No. 463-4370 Qualified in Newman County Certificate Filed in New York Commission Expires March 30, 1983 State of Delaware Office of Secretary of State I, MICHAEL RATCHFORD, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF MERGER OF DELAWARE & FOREIGN CORPORATIONS OF "THE GOOD TACO CORPORATION" FILED IN THIS OFFICE ON THE SECOND DAY OF JUNE, A.D. 1981, AT 9 O'CLOCK A.M. Secretary of State Authentication: *3469565 Date: 06/02/1992 CERTIFICATE OF MERGER OF THE GOOD TACO CORPORATION (a Florida Corporation) INTO THE GOOD TACO CORPORATION (a Delaware Corporation) THE GOOD TACO CORPORATION, the undersigned corporation, does hereby certify: FIRST: The name and state of incorporation of each of the constituent corporations of the merger is as follows: The Good Taco Corporation (a Delaware corporation) The Good Taco Corporation (a Florida corporation) SECOND: An Agreement and Plan of Merger between the parties to the merger has been approved, adopted, certified, executed and acknowledged by each of the constituent corporations in accordance with the requirements of subsection (c) of section 252 of the General Corporation Law of the State of Delaware. THIRD: The name of the corporation surviving the merger is THE GOOD TACO CORPORATION, a Delaware corporation. FOURTH: The certificate of incorporation of THE GOOD TACO CORPORATION, a Delaware corporation, shall be the certificate of incorporation of the surviving corporation. FIFTH: The executed Agreement and Plan of Merger is on file at the principal place of business of the surviving corporation. The address of the principal place of business is 1851 South Dixie Highway, Pompano Beach, Florida 33060. SIXTH: A copy of the Agreement and Plan of Merger will be furnished on request and without cost to any stockholders of either constituent corporation. SEVENTH: The authorized capital stock of each foreign corporation which is a party to the merger is as follows: Number of Authorized Par Value Corporation Class Shares per Share - ----------- ----- ------ --------- THE GOOD TACO CORPO- Common Stock 3,357,200 $.01 par value RATION (a Florida corporation) Dated: May 15, 1981 THE GOOD TACO CORPORATION (a Delaware corporation) By: Richard F. Lynch President ATTEST: By: Robert F. Bond Secretary State of Delaware Office of Secretary of State I, MICHAEL RATCHFORD, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT OF "THE GOOD TACO CORPORATION" FILED IN THIS OFFICE ON THE NINTH DAY OF NOVEMBER, A.D. 1982, AT 9 O'CLOCK A.M. Secretary of State Authentication: 3469567 Date: 06/02/1992 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION THE GOOD TACO CORPORATION (Pursuant to Section 242 of the General Corporation Law of the State of Delaware) THE GOOD TACO CORPORATION, a corporation organized and existing under the General Corporation Law of the State of Delaware (hereinafter called the "Corporation"), DOES HEREBY CERTIFY: FIRST: That at a meeting of the Board of Directors of the Corporation held by conference telephone on September 8, 1982, resolutions were duly adopted setting forth a proposed amendment to the Certificate of Incorporation of the Corporation, declaring said amendment to be advisable and directing that said amendment be considered by the stockholders of the Corporation entitled to vote in respect thereof. SECOND: That thereafter, pursuant to the By-Laws of the Corporation, the annual meeting of stockholders of the Corporation was duly held upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware on September 21, 1982, at which meeting the necessary number of shares as required by statute and the Certificate of Incorporation of the Corporation were voted in favor of said amendment. THIRD: That said amendment would amend the Certificate of Incorporation of the Corporation by adding new Article SEVENTH: "SEVENTH" The Board of Directors is expressly authorized and empowered to alter, amend or repeal the by-laws of the Corporation, subject to the power of the stockholders of the corporation to alter or repeal any or all by-laws made by the Board of Directors." FOURTH: That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be hereunto affixed and this certificate to be signed by its President and attested by its Secretary this 21 day of September, 1982. THE GOOD TACO CORPORATION By: Richard F. Lynch President (Corporate Seal) Attest By: Robert F. Bond Secretary STATE OF FLORIDA COUNTY OF BROWARD Be it remembered that on this 22 day of September, 1982, personally came before me Richard F. Lynch, President of The Good Taco Corporation, a corporation organized under the laws of the State of Delaware, party to the foregoing certificate, known to me personally to be such, and acknowledged the said certificate to be the act and deed of said corporation and that the facts stated therein are true; that the signature of the President is his own proper handwriting; that the seal affixed is the common or corporate seal of the said corporation; and that his act of sealing, executing and delivering said certificate was duly authorized by resolution of the board of directors of the said corporation. Given under my hand and seal of office the day and year aforesaid. Bette J. McKinley Notary Public Notary Public, State of Florida My Commission Expires May 2, 1985 Notarial Seal STATE OF FLORIDA COUNTY OF BROWARD Be it remembered that on this 22 day of September, 1982, personally came before me Robert F. Bond, Secretary of The Good Taco Corporation, a corporation organized under the laws of the State of Delaware, party to the foregoing certificate, known to me personally to be such, and acknowledged the said certificate to be the act and deed of said corporation and that the facts stated therein are true; that the signature of the Secretary is his own proper handwriting; that the seal affixed is the common or corporate seal of the said corporation; and that his act of attesting said certificate was duly authorized by resolution of the board of directors of the said corporation. Given under my hand and seal of office the day and year aforesaid. Bette J. McKinley Notary Public Notary Public, State of Florida My Commission Expires May 2, 1985 State of Delaware Office of Secretary of State I, MICHAEL RATCHFORD, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT OF "THE GOOD TACO CORPORATION" FILED IN THIS OFFICE ON THE SECOND DAY OF AUGUST, A.D. 1984, AT 9 O'CLOCK A.M. Secretary of State Authentication: *3469569 Date: 06/02/1992 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF THE GOOD TACO CORPORATION (Pursuant to Section 242 of the General Corporation Law of the State of Delaware) THE GOOD TACO CORPORATION, a corporation incorporated and existing under the laws of the State of Delaware (hereinafter called the "Corporation"), DOES HEREBY CERTIFY that: FIRST: At a meeting of the Board of Directors of the Corporation held on May 2, 1984, resolutions were duly adopted setting forth a proposed amendment to the Certificate of Incorporation of the Corporation, declaring said amendment to be advisable and directing that the amendment be considered at the next annual meeting of the stockholders of the Corporation. SECOND: The annual meeting of stockholders of the Corporation was duly called and held upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware on June 25, 1984, at which meeting the necessary number of shares as required by Section 242 of the General Law of the State of Delaware and the Certificate of Incorporation of the Corporation were voted in favor of said amendment. THIRD: Said amendment would amend the Certificate of Incorporation of the Corporation by adding Article EIGHTH to the Corporation's Certificate of Incorporation as follows: EIGHTH: (a) The number of directors constituting the whole Board shall be as fixed from time to time by vote of a majority of the whole Board; provided, however, that the number of directors shall not be less than three and that the number shall not be reduced so as to shorten the term of any director at the time in office. The number of directors constituting the whole Board shall hereafter be five until otherwise fixed by a majority of the whole Board in accordance with the preceding sentence. (b) The Board of Directors shall be divided into three classes, designated Class I, Class II and Class III, as nearly equal in number as the then total number of directors constituting the whole Board permits, with the term of office of one class expiring each year. At the annual meeting of stockholders in 1984, directors of Class I shall be elected to hold office for a term expiring at the next succeeding annual meeting, directors of Class II shall be elected to hold office for a term expiring at the second succeeding annual meeting, and directors of Class III shall be elected to hold office for a term expiring at the third succeeding annual meeting. At each meeting of stockholders the successors to the class of directors whose term shall then expire shall be elected to hold office for a term expiring at the third succeeding annual meeting. At each annual meeting of stockholders the successors to the class of directors whose term shall then expire shall be elected to hold office for a term expiring at the third succeeding annual meeting. Any vacancies in the Board of Directors for any reason, and any newly created directorships resulting from any increase in the directors, may be filled by the Board of Directors, acting by a majority of the directors then in office, or by a sole remaining director. Any directors so chosen shall hold office, until the next election of the class for which such directors shall have been chosen and until their successors shall be elected and qualified, subject, however, to prior death, resignation, retirement, disqualification or removal from office. Any newly created or eliminated directorships resulting from an increase or decrease in the authorized number of directors shall be apportioned by the Board of Directors among the three classes of directors so as to maintain such classes as nearly equal as possible. FOURTH: That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be hereunto affixed and this certificate to be signed by its President and attested by its Secretary this 1st day of August, 1984. THE GOOD TACO CORPORATION By: Richard F. Lynch President (Corporate Seal) Attest: By: Robert F. Bond Secretary State of Delaware Office of Secretary of State I, MICHAEL RATCHFORD, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF OWNERSHIP & MERGER OF "THE GOOD TACO CORPORATION" FILED IN THIS OFFICE ON THE TWENTY- SEVENTH DAY OF JANUARY, A.D. 1986, AT 9 O'CLOCK A.M. Secretary of State Authentication: *3469571 Date: 06/02/1992 CERTIFICATE OF OWNERSHIP Pursuant to Section 253 of the Delaware General Corporation Law, the undersigned hereby certify that The Good Taco Corporation, a Delaware corporation (the "Company"), owns 100% of the stock of GTC Acquisition Corp., a Florida corporation ("GTC"), and that the attached is a true and correct copy of the resolution adopted on the 10th day of January, 1986, by the Board of Directors of the Company providing for the merger of the Company and GTC and the change of the name of the Company as the surviving corporation to "Business Cards Tomorrow, Inc." Dated: January 20, 1986 THE GOOD TACO CORPORATION By: Its President And: Its Assistant Secretary STATE OF FLORIDA COUNTY OF BROWARD I, Nancy J. Smith, a notary public, do hereby certify that on this 20th day of January 1986, personally appeared before me Alton E. Day, who being by me first duly sworn, declared that he is the President, who signed the foregoing document as an officer of the said corporation, and that the statements therein contained are true. Nancy J. Smith Notary Public of Florida My Commission Expires: Notary Public, State of Florida My Commission Expires November 29, 1986 STATE OF FLORIDA COUNTY OF BROWARD I, Nancy J. Smith, a notary public, do hereby certify that on this 20th day of January 1986, personally appeared before me Michael J. Garrett, who being by me first duly sworn, declared that he is the Assistant Secretary, who signed the foregoing document as an officer of the said corporation, and that the statements therein contained are true. Nancy J. Smith Notary Public of Florida My Commission Expires: Notary Public, State of Florida My Commission Expires November 29, 1986 RESOLUTION OF THE BOARD OF DIRECTORS OF THE GOOD TACO CORPORATION RESOLVED, that The Good Taco Corporation, a Delaware corporation (the "Company") hereby consent to the following action in accordance with Section 141(f) of the Delaware General Corporation Law: WHEREAS, the Company now owns all the stock of GTC Acquisition Corp., a stock corporation organized under the laws of the State of Florida ("Subsidiary") and engaged in business similar and incidental to that of the Company; and WHEREAS, it is deemed advisable that the Company merge with Subsidiary in order that all the estate, property, rights, privileges, and franchises of Subsidiary shall vest in and be possessed by the Company, be it RESOLVED, That the Company merge with Subsidiary and assume all its obligations, the Company to be the surviving corporation; RESOLVED FURTHER, That the name of the Company as the surviving corporation shall be changed to "Business Cards Tomorrow, Inc.;" and RESOLVED FURTHER, That the President or Vice President and the Secretary or Assistant Secretary of the Company are hereby authorized and directed to make and execute, in the name and under the corporate seal of the Company, a certificate of ownership of all the stock of the Subsidiary, and of the adoption and date of adoption of these resolutions, and to file such certificate in the office of the Secretary of State for the State of Delaware, and to do all other acts and things that may be necessary to carry out and effectuate the purpose of these resolutions. IN WITNESS WHEREOF, I have affixed by name as Assistant Secretary and have caused the corporate seal of said Corporation to be hereunto affixed as of the 10th day of January, 1986. ASSISTANT SECRETARY State of Delaware Office of Secretary of State I, MICHAEL RATCHFORD, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF RENEWAL OF "BUSINESS CARDS TOMORROW, INC." FILED IN THIS OFFICE ON THE TWENTY-FIRST DAY OF NOVEMBER, A.D. 1986, AT 10 O'CLOCK A.M. Secretary of State Authentication: *3469573 Date: 06/02/1992 Certificate for Renewal and Revival of Charter Business Cards Tomorrow, Inc., a corporation organized under the laws of Delaware, the certificate of incorporation of which was filed in the office of the Secretary of State on the 7th day of April 1981, and recorded in the office of the Recorder of Deeds for _______ County, the charter of which was voided for non-payment of taxes, now desires to procure a restoration, renewal and revival of its charter, and hereby certifies as follows: 1. The name of this corporation is Business Cards Tomorrow, Inc. 2. The registered office in the State of Delaware is located at 410 S. State Street, City of Dover, Zip Code 19901 County of Kent the name and address of its registered agent is United Corporate Services, Inc. 410 S. State Street, Dover, DE 19901. 3. The date when the restoration, renewal, and revival of the charter of this company is to commence is the twenty-eighth day of February, same being prior to the date of the expiration of the charter. This renewal and revival of the charter of this corporation is to be perpetual. 4. This corporation was duly organized and carried on the business authorized by its charter until the first day of March A.D. 1986, at which time its charter became inoperative and void for non-payment of taxes and this certificate for renewal and revival is filed by authority of the duly elected directors of the corporation in accordance with the laws of the State of Delaware. IN TESTIMONY WHEREOF, and in compliance with the provisions of Section 312 of the General Corporation Law of the State of Delaware, as amended, providing for the renewal, extensions and restoration of charters, Alton E. Day the last and acting President, and Robert F. Bond, the last and acting Secretary of Business Cards Tomorrow, Inc., have hereunto set their hands to this certificate this 20th day of November, 1986 ALTON E. DAY LAST AND ACTING PRESIDENT ATTEST: ROBERT F. BOND LAST AND ACTING SECRETARY State of Delaware Office of Secretary of State I, MICHAEL RATCHFORD, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT OF "BUSINESS CARDS TOMORROW, INC." FILED IN THIS OFFICE ON THE SIXTH DAY OF MARCH, A.D. 1987, AT 9 O'CLOCK A.M. Secretary of State Authentication: *3469575 Date: 06/02/1992 CERTIFICATE OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION OF BUSINESS CARDS TOMORROW, INC. Business Cards Tomorrow, Inc., a corporation organized and existing under the General Corporation Law of the State of Delaware (the "Corporation"), CERTIFIES: The amendment of the Corporation's Certificate of Incorporation, set forth in the following resolution, approved by the Board of Directors and Shareholders of the Corporation, was adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware: RESOLVED, that the number of shares of common stock of the Corporation authorized to be issued by increased from 8,000,000 shares to 25,000,000 shares, and that Article Fourth of the Corporation's Certificate of Incorporation shall be amended to read as follows: FOURTH: The total number of shares of stock which the corporation shall have authority to issue is 25,000,000 shares of common stock, par value $.01 per share. IN WITNESS WHEREOF, Business Cards Tomorrow, Inc. has caused this Certificate to be signed and attested by its duly authorized officers this 24 day of March, 1987. BUSINESS CARDS TOMORROW, INC. By: Alton E. Day, President Attest: Michael J. Garrett, Assistant Secretary STATE OF FLORIDA COUNTY OF BROWARD BEFORE ME, the undersigned authority, personally appeared Alton E. Day and Michael J. Garrett, who are well known to me to be the persons described in and who subscribed to the above Certificate of Amendment to the Certificate of Incorporation, and they did freely and voluntarily acknowledge before me, according to law, that they made and subscribed the same for the use and purpose therein mentioned and set forth. IN WITNESS WHEREOF, I have hereunto set my hand and official seal, at Fort Lauderdale in said County and State this 24 day of March, 1987. Nancy J. Fryman Notary Public, State of Florida My commission expires: November 29, 1990 Bonded through Notary Public Underwriters State of Delaware Office of Secretary of State I, Michael Harkins, Secretary of State of the State of Delaware, do hereby certify the attached is a true and correct copy of the Certificate of Amendment of Business Cards Tomorrow, Inc. filed in this office on the sixth day of October, A.D. 1988, at 9 o'clock a.m. Michael Harkins, Secretary of State Authentication: 11890834 Date: 10/14/1988 CERTIFICATE OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION OF BUSINESS CARDS TOMORROW, INC. Pursuant to Section 242 of the Delaware General Corporation Law, the undersigned adopts the following Amendment to its Certificate of Incorporation: 1. The name of the Corporation is Business Cards Tomorrow, Inc. 2. The following amendment to the Certificate of Incorporation was adopted by the Shareholders of the Corporation on October 3, 1988, in the manner prescribed by Sections 211 and 242 of the Delaware General Corporation Law: Article I The name of this Corporation shall be American Franchise Group, Inc. 3. The number of shares of the Corporation issued and outstanding at the time of adoption was 7,386,786 shares of common stock, $.01 par value, and the number of shares voting in favor of the Amendment was 6,336,112 shares. Dated October 3, 1988. BUSINESS CARDS TOMORROW, INC. By: Alton E. Day President By: Michael J. Garrett Assistant Secretary STATE OF FLORIDA COUNTY OF BROWARD BEFORE ME, the undersigned authority, personally appeared Alton E. Day and M. J. Garrett, who are well known to me to be the persons described in and who subscribed the above Certificate of Amendment to the Certificate of Incorporation, and they did freely and voluntarily acknowledge before me according to the law that they made and subscribed the same for the use and purpose therein mentioned and set forth. IN WITNESS WHEREOF, I have hereunto set my hand and official seal, at Fort Lauderdale in said County and State this 3 day of October, 1988. Nancy J. Fryman Notary Public, State of Florida My commission expires: November 29, 1990 Bonded through Notary Public Underwriters Exhibit 22 SUBSIDIARIES OF THE REGISTRANT
NAME OF STATE OF DOING PERCENT SUBSIDIARY INCORPORATION BUSINESS AS OWNED - ------------------------------- ------------- ----------------------------- -------- Business Cards Tomorrow, Inc. Florida Business Cards Tomorrow, Inc. 100%
State of Delaware Office of Secretary of State I, MICHAEL RATCHFORD, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT OF "AMERICAN FRANCHISE GROUP, INC." FILED IN THIS OFFICE ON THE SIXTH DAY OF MAY, A.D. 1992, AT 10 O'CLOCK A.M. Secretary of State Authentication: *3469583 Date: 06/02/1992 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION AMERICAN FRANCHISE GROUP, INC., (the "Company"), a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: FIRST: That by unanimous written consent of the Board of Directors of the Company on May 5, 1992, resolutions were duly adopted pursuant to Section 141(f) of the Delaware General Corporation Law setting forth a proposed amendment of the Certificate of Incorporation of the Company, declaring said amendment to be advisable and calling a meeting of the stockholders of the Company for consideration thereof. The resolution setting forth the proposed amendment is as follows: RESOLVED, that the Company be authorized to issue 5,000,000 shares of preferred stock, $1.00 par value, and that Article Fourth of the Company's Certificate of Incorporation shall be amended to read as follows: FOURTH: The total number of shares of stock which the corporation shall have authority to issue is 25,000,000 shares of common stock, par value $.01 per share, and 5,000,000 shares of preferred stock, par value $1.00 per share. Authority is hereby expressly granted to and vested in the board of directors of the corporation to provide for the issue of the preferred stock in one or more series and in connection therewith to fix by resolutions providing for the issue of such series the number of shares to be included in such series and the designations and voting powers, full or limited, or no voting powers, and the preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions thereof, of such series of the preferred stock which are not fixed by the certificate of incorporation, to the full extent now or hereafter permitted by the laws of the state of Delaware. Without limiting the generality of the grant of authority contained in the preceding sentence, the board of directors is authorized to determine any or all of the following, and the shares of each series may vary from the shares of any other series in any or all of the following respects: 1. The number of shares of such series (which may subsequently be increased, except as otherwise provided by the resolutions of the board of directors providing for the issue of such series, or decreased to a number not less than the number of shares then outstanding) and the distinctive designation thereof; 2. The dividend rights, if any, of such series, the dividend preferences if any, as between such series and any other class or series of stock, whether and the extent to which shares of such series shall be entitled to participate in dividends with shares of any other series or class of stock, whether and the extent to which dividends on such series shall be cumulative, and any limitations, restrictions or conditions on the payment of such dividends; 3. The time or times during which, the price or prices at which, and any other terms or conditions on which the shares of such series may be redeemed, if redeemable; 4. The rights of such series, and the preferences, if any, as between such series and any other class or series of stock, in the event of any voluntary or involuntary liquidation, dissolution or winding up of the corporation and whether and the extent to which shares of any such series shall be entitled to participate in such event with any other class or series of stock; 5. The voting powers, if any, in addition to the voting powers prescribed by law of shares of such series, and the terms of exercise of such voting powers; 6. Whether shares of such series shall be convertible into or exchangeable for shares of any other series or class of stock, or any other securities, and the terms and conditions, if any, applicable to such right; and 7. The terms and conditions, if any, of any purchase, retirement or sinking fund which may be provided for the shares of such series. SECOND: The thereafter, on May 5, 1992, pursuant to resolution by written consent of the holders of a majority of the issued and outstanding shares of the common stock of the Company in accordance with Section 228 of the Delaware General Corporation Law, the necessary number of shares as required by statute were voted in favor of the amendment, and written notice of such action has been given to the Company's nonconsenting stockholders in accordance with Section 228. THIRD: That said amendment was duly adopted in accordance with the provisions of Section 242 of the Delaware General Corporation Law. FOURTH: That the capital of the Company shall not be reduced under or by reason of said amendment. Dated: May 5, 1992 AMERICAN FRANCHISE GROUP, INC. By: William A. Wilkerson, President ATTEST: Ellen Tannenbaum Assistant Secretary State of Delaware Office of Secretary of State I, MICHAEL RATCHFORD, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT OF "AMERICAN FRANCHISE GROUP, INC." FILED IN THIS OFFICE ON THE TWELFTH DAY OF MAY, A.D. 1992, AT 10:50 O'CLOCK A.M. Secretary of State Authentication: *3469591 Date: 06/02/1992 State of Delaware Secretary of State Division of Corporations Filed 10:50 a.m. 05/12/1992 9211335071-911871 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION AMERICAN FRANCHISE GROUP, INC., (the "Company"), a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: FIRST: That at a meeting of the Board of Directors of the Company on May 7, 1992, resolutions were duly adopted setting forth a proposed amendment of the Certificate of Incorporation of the Company, declaring said amendment to be advisable and calling a meeting of the stockholders of the Company for consideration thereof. The resolution setting forth the proposed amendment is as follows: RESOLVED, that Article Fourth of the Company's Certificate of Incorporation shall be amended to read as follows: FOURTH: The total number of shares of stock which the corporation shall have authority to issue is 6,250,000 shares of common stock, par value $.04 per share, and 5,000,000 shares of preferred stock, par value $1.00 per share. Authority is hereby expressly granted to and vested in the board of directors of the corporation to provide for the issue of the preferred stock in one or more series and in connection therewith to fix by resolutions providing for the issue of such series the number of shares to be included in such series and the designations and voting powers, full or limited, or no voting powers, and the preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions thereof, of such series of the preferred stock which are not fixed by the certificate of incorporation, to the full extent now or hereafter permitted by the laws of the state of Delaware. Without limiting the generality of the grant of authority contained in the preceding sentence, the board of directors is authorized to determine any or all of the following, and the shares of each series may vary from the shares of any other series in any or all of the following respects: 1. The number of shares of such series (which may subsequently be increased, except as otherwise provided by the resolutions of the board of directors providing for the issue of such series, or decreased to a number not less than the number of shares then outstanding) and the distinctive designation thereof; 2. The dividend rights, if any, of such series, the dividend preferences if any, as between such series and any other class or series of stock, whether and the extent to which shares of such series shall be entitled to participate in dividends with shares of any other series or class of stock, whether and the extent to which dividends on such series shall be cumulative, and any limitations, restrictions or conditions on the payment of such dividends; 3. The time or times during which, the price or prices at which, and any other terms or conditions on which the shares of such series may be redeemed, if redeemable; 4. The rights of such series, and the preferences, if any, as between such series and any other class or series of stock, in the event of any voluntary or involuntary liquidation, dissolution or winding up of the corporation and whether and the extent to which shares of any such series shall be entitled to participate in such event with any other class or series of stock; 5. The voting powers, if any, in addition to the voting powers prescribed by law of shares of such series, and the terms of exercise of such voting powers; 6. Whether shares of such series shall be convertible into or exchangeable for shares of any other series or class of stock, or any other securities, and the terms and conditions, if any, applicable to such right; and 7. The terms and conditions, if any, of any purchase, retirement or sinking fund which may be provided for the shares of such series. SECOND: The thereafter, on May 11, 1992, pursuant to resolution by written consent of the holders of a majority of the issued and outstanding shares of the common stock of the Company in accordance with Section 228 of the Delaware General Corporation Law, the necessary number of shares as required by statute were voted in favor of the amendment, and written notice of such action has been given to the Company's nonconsenting stockholders in accordance with Section 228. THIRD: That said amendment was duly adopted in accordance with the provisions of Section 242 of the Delaware General Corporation Law. FOURTH: That the capital of the Company shall not be reduced under or by reason of said amendment. Dated: May 11, 1992 AMERICAN FRANCHISE GROUP, INC. By: William A. Wilkerson, President ATTEST: Ellen Tannenbaum Assistant Secretary CERTIFICATE OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION OF BCT INTERNATIONAL, INC. BCT International, Inc., a corporation organized and existing under the General Corporation Law of the State of Delaware (the "Corporation"), CERTIFIES: The amendment to the Corporation's Certificate of Incorporation, set forth in the following resolution, approved by the Board of Directors and Shareholders of the Corporation, was adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware: RESOLVED, that the number of shares of common stock of the Corporation authorized to be issued be increased from 6,250,000 shares to 25,000,000 shares, and that Article Fourth of the Corporation's Certificate of Incorporation shall be amended to read as follows: FOURTH: The total number of shares of stock which the corporation shall have authority to issue is 25,000,000 shares of common stock, par value $.04 per share, and 5,000,000 shares of preferred stock, par value $1.00 per share. IN WITNESS WHEREOF, BCT International, Inc., has caused this Certificate to be signed and attested by its duly authorized officers this 25th day of May, 1994. BCT INTERNATIONAL, INC. By: Peter T. Gaughn, Vice President and Chief Operating Officer Attest: Laura Sennett, Assistant Secretary EX-3.2 3 BY-LAWS EXHIBIT 3.2 THE GOOD TACO CORPORATION BY LAWS ARTICLE I OFFICERS Section 1. The registered office shall be in the City of Dover, State of Delaware. Section 2. The Corporation may also have offices at such other places both within and without the State of Delaware as the board of directors may from time to time determine or the business of the corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS Section 1. All meetings of the stockholders for the election of directors shall be held at such place as may be fixed from time to time by the board of directors, or at such other place either within or without the State of Delaware as shall be designated from time to time by the board of directors and stated in the notice of the meeting. Meetings of stockholders for any other purpose may be held at such time and place, within or without the State of Delaware, as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof. Section 2. Annual meetings of stockholders, commencing with the year 1982, shall be held on June 30, if not a legal holiday, and if a legal holiday, then on the next business day following, at 10:30 A.M., or at such other date and time as shall be designated from time to time by the board of directors and stated in the notice of the meeting, at which they shall elect such class of board of directors whose term shall expire at that annual meeting, and transact such other business as may properly be brought before the meeting. Section 3. Written notice of the annual meeting stating the place, date and hour of the meeting shall be given to each stockholder entitled to vote at such meeting not less than ten nor more than sixty days before the date of the meeting. Section 4. The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or; if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. Section 5. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute or by the certificate of incorporation, may be called by the chairman of the board, if any, and shall Page 1 be called by the president or secretary at the request in writing of a majority of the board of directors, or at the request in writing of stockholders owning one-third in amount of the entire capital stock of the corporation issued and outstanding and entitled to vote. Such request shall state the purpose or purposes of the proposed meeting. Section 6. Written notice of a special meeting stating the place, date and hour of the meeting and the purpose or purposes for which the meeting is called, shall be given not less than ten nor more than sixty days before the date of the meeting, to each stockholder entitled to vote at such meeting. Section 7. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice. Section 8. The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the certificate of incorporation. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally notified. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. Section 9. When a quorum is present at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which by express provision of the statutes or of the certificate of incorporation, a different vote is required, in which case such express provision shall govern and control the decision of such question. Section 10. Unless otherwise provided in the certificate of incorporation each stockholder shall at every meeting of the stockholders be entitled to one vote in person or by proxy for each share of the capital stock having voting power held by such stockholder, but no proxy shall be voted on after three years from its date, unless the proxy provides for a longer period. Section 11. Unless otherwise provided in the certificate of incorporation, any action required to be taken at any annual or special meeting of stockholders of the corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior written notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. Page 2 ARTICLE III DIRECTORS Section 1. The number of directors shall be fixed as provided in the certificate of incorporation. Section 2. Directors shall be elected and vacancies filled as provided in the certificate of incorporation. Unless otherwise restricted by the certificate of incorporation or these by-laws, if there are no directors in office, then an election of directors may be held in the manner provided by statute and if, at the time of filling any vacancy or any newly created directorship, the directors then in office shall constitute less than a majority of the whole board (as constituted immediately prior to any such increase), the Court of Chancery may, upon application of any stockholder or stockholders holding at least ten percent of the total number of the shares at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office. Section 3. The business of the corporation shall be managed by or under the direction of its board of directors which may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the certificate of incorporation or by these by-laws directed or required to be exercised or done by the stockholders. MEETINGS OF THE BOARD OF DIRECTORS Section 4. The board of directors of the corporation may hold meetings, both regular and special, either within or without the State of Delaware. Section 5. The first meeting of the board of directors following the election of any class of directors shall be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the board of directors, or as shall be specified in a written waiver signed by all of the directors. Section 6. Regular meetings of the board of directors may be held without notice at such time and at such place as shall from time to time be determined by the board. Section 7. Special meetings of the board may be called by the chairman of the board or the president on two days' notice to each director, personally, by mail, by telephone or by telegram; special meetings shall be called by the president or secretary in like manner and on like notice on the written request of two directors. Section 8. At all meeting so the board a majority of the directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the board of directors, except as may be otherwise specifically provided by statute or by the certificate of incorporation. If a quorum shall not be present at any meeting of the board of directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement of the meeting, until a quorum shall be present. Page 3 Section 9. Unless otherwise restricted by the certificate of incorporation or these by-laws, any action required or permitted to be taken at any meeting of the board of directors or of any committee thereof may be taken without a meeting, if all members of the board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the board or committee. Section 10. Unless otherwise restricted by the certificate of incorporation or these by-laws, members of the board of directors, or any committee designated by the board of directors, may participate in a meeting of the board of directors, or any committee, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting. COMMITTEES OF DIRECTORS Section 11. The board of directors may, by resolution passed by a majority of the whole board, designate one or more committees, each committee to consist of one or more of the directors of the corporation. The board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the board of directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the board of directors, shall have and may exercise all the powers and authority of the board of directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it; but no such committee shall have such power or authority in reference to amending the certificate of incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the corporation's property and assets, recommending to the stockholders a dissolution of the corporation or a revocation of a dissolution, or amending the by-laws of the corporation; and, unless the resolution or the certificate of incorporation expressly so provide, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the board of directors. Section 12. Each committee shall keep regular minutes of its meetings and report the same to the board of directors when required. COMPENSATION OF DIRECTORS Section 13. Unless otherwise restricted by the certificate of incorporation or these by-laws, the board of directors shall have the authority to fix the compensation of directors. The directors may be paid their expenses, if any, of attendance at each meeting of the board of directors and may be paid a fixed sum for attendance at each meeting of the board of directors or a stated salary as director. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings. Page 4 REMOVAL OF DIRECTORS Section 14. Any directors or the entire board of directors may be removed, only for cause, by the holders of a majority of the outstanding shares entitled to vote at an election of directors. INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS; INSURANCE Section 15. (a) Any person who was or is a party, or is threatened to be made a party to any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative, and whether or not brought by or in the right of the corporation, by reason of the fact that he is or was a director, officer, employee, or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, or other enterprise (the "Indemnified Party"), shall be indemnified by the corporation, unless the conduct of such person is finally adjudged to have been grossly negligent or to constitute willful misconduct, against expenses (including attorneys' fees), judgments, fines, and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding, including any appeal thereof. Expenses (including attorneys' fees) incurred in defending a civil or criminal action, suit, or proceeding shall be paid by the corporation in advance of the final disposition of such action, suit, or proceeding upon receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the corporation as authorized hereby. Any such indemnification hereunder shall continue as to a person who has ceased to be a director, officer, employee or agent, and shall inure to the benefit of the heirs, executors, and administrators of such person. (b) Any indemnification under subsection (a) of this section (unless ordered by a court) shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in subsection (a) of this section. Such determination shall be made by the board of directors by a majority vote of a quorum, which may include directors who are or were or may become parties to such action, suit or proceeding, or by independent legal counsel in a written opinion. (c) In order to provide for just and equitable contribution in any case in which any Indemnified Party makes a claim for indemnification pursuant to this section but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time of appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that this section provides for indemnification in such case or that contribution may be required on the part of any Indemnified Party in circumstances for which indemnification is provided under this Section, then, and in each such case, the corporation and such Indemnified Party, shall contribute to the aggregate losses, claims, damages, expenses, or liabilities to which they may be subject (after contribution from others) in such proportion so that such Indemnified Party is responsible for the portion represented by the percentage that his annual salary or other compensation paid to the Indemnified Party Page 5 bears to the total annual revenues of the corporation and the corporation is responsible for the remaining portion. However, in any such case, no Indemnified Party shall be required to contribute any amount in excess of his annual salary or other compensation, and all the Indemnified Parties, taken together as a group, shall not be required to contribute any amount in excess of their aggregate annual salaries or other compensation. (d) The indemnification provided by this section shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. This section is intended to create the broadest rights of indemnification and contribution permitted under law for those seeking such indemnification or contribution. (e) The corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under the provisions of this section. (f) For the purposes of this section, references to "the corporation" include all constituent corporations absorbed in a consolidation or merger as well as the resulting or surviving corporation so that any person who is or was a director, officer, employee or agent of such a constituent corporation or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise shall stand in the same position under the provision of this section with respect to the resulting or surviving corporation as he would if he had served the resulting or surviving corporation in the same capacity. ARTICLE IV NOTICES Section 1. Whenever, under the provisions of the statutes or of the certificate of incorporation or of these by-laws, notice is required to be given to any director or stockholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, addressed to such director or stockholder, at his address as it appears on the records of the corporation, with postage thereon pre-paid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Notice to directors may also be given by telegram. Section 2. Whenever any notice is required to be given under the provisions of the statutes or of the certificate of incorporation or of these by-laws, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent thereto. Page 6 ARTICLE V OFFICERS Section 1. The officers of the corporation shall be chosen by the board of directors and shall be a president, a secretary and a treasurer. The corporation may also have a chairman of the board and/or such other executive officers chosen by the board of directors, including vice-presidents, and one or more assistant secretaries and assistant treasurers. Any number of offices may be held by the same person, unless the certificate of incorporation or these by- laws otherwise provide. Section 2. The board of directors at its first meeting after each annual meeting of stockholders shall choose a president, a secretary and a treasurer. Section 3. The board of directors may appoint, and may empower the president to appoint, such other officers and agents as it shall deem necessary who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the board. Section 4. The salaries of all executive officers of the corporation shall be fixed by the board of directors. Section 5. The officers of the corporation shall hold office until their successors are chosen and qualify. Any officer elected or appointed by the board of directors may be removed at any time by the actions of such board. Any vacancy occurring in any office of the corporation shall be filled by the board of directors. CHAIRMAN OF THE BOARD Section 6. The chairman of the board, if there shall be such an officer, shall, if present, preside at all meetings of the board of directors, and exercise and perform such other powers and duties as may be from time to time assigned to him by the board of directors or prescribed by the by-laws. THE PRESIDENT Section 7. The president shall be the chief executive officer of the corporation, shall preside at all meetings of the stockholders and the board of directors, shall have general and active management of the business of the corporation and shall see that all orders and resolutions of the board of directors are carried into effect. Section 8. The president shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the board of directors to some other officer or agent of the corporation. THE VICE PRESIDENT Section 9. In the absence of the president or in the event of his inability or refusal to act, the vice president, if there shall be such an officer, (or in the event there be more than one vice president, the vice presidents in the order designated by the directors, or in the absence of any designation, then in the order of their election) Page 7 shall perform the duties of the president, and when so acting shall have all the powers of and be subject to the restrictions upon the president. The vice presidents shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. THE SECRETARY AND ASSISTANT SECRETARY Section 10. The secretary shall attend all meetings of the board of directors and all meetings of the stockholders and record all the proceedings of the meetings of the corporation and of the board of directors in a book to be kept for that purpose and shall perform like duties for the standing committees when required. He shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the board of directors, and shall perform such other duties as may be prescribed by the board of directors or president, under whose supervision he shall be. He shall have custody of the corporate seal of the corporation and he, or an assistant secretary, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by his signature or by the signature of such assistant secretary. The board of directors may give general authority to any other officer to affix the seal of the corporation and to attest the affixing by his signature. Section 11. The assistant secretary, or if there be more than one, the assistant secretaries in the order determined by the board of directors (or if there be no such determination, then in the order of their election) shall, in the absence of the secretary or in the event of his inability or refusal to act, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. THE TREASURER AND ASSISTANT TREASURERS Section 12. The treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the board of directors. The books of account shall at all times be open to inspection by any director. Section 13. He shall disburse the funds of the corporation as may be ordered by the board of directors, taking proper vouchers for such disbursements, and shall render to the president and the board of directors, at its regular meetings, or when the board of directors so requires, an account of all his transactions as treasurer and of the financial condition of the corporation. Section 14. If required by the board of directors, he shall give the corporation a bond (which shall be renewed every six years) in such sum and with such surety or sureties as shall be satisfactory to the board of directors for the faithful performance of the duties of his office and for the restoration to the corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the corporation. Section 15. The assistant treasurer or if there shall be more than one, the assistant treasurers in the order determined by the board of directors (or if there be no such determination, then in the order of their Page 8 election), shall, in the absence of the treasurer or in the event of his inability or refusal to act, perform the duties and exercise the powers of the treasurer and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. ARTICLE VI CERTIFICATE OF STOCK Section 1. Every holder of stock in the corporation shall be entitled to have a certificate signed by, or in the name of the corporation by, the chairman or vice chairman of the board of directors, or the president or a vice president and the treasurer or an assistant treasurer, or the secretary or an assistant secretary of the corporation, certifying the number of shares owned by him in the corporation. Certificates may be issued for partly paid shares and in such case upon the face or back of the certificates issued to represent any such partly paid shares, the total amount of the consideration to be paid therefor, and the amount paid thereon shall be specified. Section 2. Any or all of the signatures on the certificate may be facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such an officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. Every certificate authenticated by a facsimile of a signature must be countersigned by a transfer agent or transfer agent or transfer clerk, as registrar of transfers before issuance. LOST CERTIFICATES Section 3. The board of directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate or stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the board of directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates or his legal representative, to advertise the same in such a manner as it shall require and/or to give the corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost, stolen or destroyed. TRANSFERS OF STOCK Section 4. Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. Page 9 FIXING RECORD DATE Section 5. In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the board of directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meetings, nor more than sixty days prior to any other action. A determination of stockholders of record entitled to notice of or to vote a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the board of directors may fix a new record date for the adjourned meeting. REGISTERED STOCKHOLDERS Section 6. The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware. ARTICLE VII GENERAL PROVISIONS DIVIDENDS Section 1. Dividends upon the capital stock of the corporation subject to the provisions of the certificates of incorporation, if any, may be declared by the board of directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the certificate of incorporation. Section 2. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the directors shall think conducive to the interest of the corporation, and the directors may modify or abolish any such reserve in the manner in which it was created. ANNUAL STATEMENT Section 3. The board of directors shall present at each annual meeting, and at any special meeting of the stockholders when called for by vote of the stockholders, a full and clear statement of the business and condition of the corporation. Page 10 CHECKS Section 4. All checks or demands for money and notes of the corporation shall be signed by such officer or officers or such other person or persons as the board of directors may from time to time designate. FISCAL YEAR Section 5. The fiscal year of the corporation shall be fixed by resolution of the board of directors. SEAL Section 6. The corporate seal shall have inscribed thereon the name of the corporation, the year of its organization and the words "Corporate Seal, Delaware". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or otherwise reproduced. ARTICLE VIII AMENDMENTS Section 1. These by-laws may be altered, amended or replaced or new by-laws may be adopted by the stockholders or by the board of directors, when such power is conferred upon its board of directors by the certificate of incorporation, at any regular meeting of the stockholders or of the board of directors or at any special meeting of the stockholders or of the board of directors if notice of such alteration, amendment, repeal or adoption of new by-laws be contained in the notice of such special meeting. If the power to adopt, amend or repeal by- laws is conferred upon the board of directors by the certificate of incorporation, it shall not divest or limit the power of the stockholders to adopt amend or repeal by-laws. Page 11 EX-4.1 4 SERIES A CERTIFICATION EXHIBIT 4.1 State of Delaware Office of Secretary of State I, MICHAEL RATCHFORD, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF STOCK DESIGNATION OF "AMERICAN FRANCHISE GROUP, INC." FILED IN THIS OFFICE ON THE EIGHTH DAY OF MAY, A.D. 1992, AT 9 O'CLOCK A.M. Secretary of State Authentication: *3443710 Date: 05/08/1992 State of Delaware Secretary of State Division of Corporations Filed 09:00 a.m. 05/08/1992 921295166 - 911871 CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF SERIES A CONVERTIBLE PREFERRED STOCK OF AMERICAN FRANCHISE GROUP, INC. AMERICAN FRANCHISE GROUP, INC., a corporation organized and existing under the General Corporation Law of the State of Delaware (the "Company"), in accordance with Section 151(g) of the General Corporation Law of the State of Delaware DOES HEREBY CERTIFY: That, pursuant to authority conferred upon the Company's Board of Directors by the Certificate of Incorporation, as amended, of the Company, said Board of Directors, at a duly noted and held meeting on 5/7/92 in accordance with Section 141(f) of the Delaware General Corporation Law, on May 7, 1992, adopted a resolution providing for the authorization and issuance of a series of shares of convertible preferred stock, and that a copy of such resolution is as follows: RESOLVED, that pursuant to the authority vested in the Board of Directors of the Company in accordance with the provisions of its Certificate of Incorporation, as amended, a series of preferred stock of the Company be and it hereby is created, such series of preferred stock to be designated "Series A Convertible Preferred Stock," said series to consist of 750,000 shares of the par value of $1.00 per share, of which the preferences, voting powers and relative, participating, option and other special rights, and the qualifications, limitations or restrictions thereof, shall be as follows: 1. Designation and Number of Shares. Shares of the series shall be designated -------------------------------- and known as the "Series A Convertible Preferred Stock" of the Company (the "Preferred Stock"). The Series A shall consist of 750,000 shares. Shares of the Series A which are retired, purchased or otherwise acquired by the Company shall be canceled and shall revert to authorized but unissued preferred stock, undesignated as to series and subject to reissuance by the Company as shares of preferred stock of any one or more series. 2. Dividends. --------- 2A. General Dividend Obligation. The Company shall pay to the holders of the --------------------------- Preferred Stock, when and as declared by the Company's Board of Directors out of the funds of the Company legally available for the payment of dividends under the General Corporation Law of the State of Delaware, a dividend at the times and in the amounts provided for in this paragraph 2. 2B. Calculation of Dividends. Dividends on each share of Preferred Stock shall ------------------------ be calculated cumulatively on a quarterly basis from the date of the original issuance, whether or not such dividends shall have been declared and whether or not there shall be profits, surplus or other funds of the Company legally available for the payment of dividends. 2C. Payment of Dividends. When, as and if declared by the Company's Board of -------------------- Directors, and subject to any restrictions now or hereafter existing in any agreement relating to any indebtedness of the Company, dividends shall be payable quarterly on the first day of each January, April, July and October (or the immediately preceding business day if such first day is a Saturday, Sunday or legal holiday), commencing July 1, 1992, at a rate of $.12 per year and $.03 per quarter. 2D. Priority. As long as any shares of Preferred Stock shall be outstanding, -------- no dividend, whether in cash or property, shall be paid or declared, nor shall any other distribution be made, on the Common Stock of the Company or any other equity security of the Company (the common stock and any other such equity security shall be referred to individually as a "Security" and collectively as the "Securities") nor shall shares of Common Stock or any other Security be purchased, redeemed, or otherwise acquired for value by the Company, unless all dividends on the Preferred Stock for all past quarterly dividend periods and for the then current quarterly period shall have been paid or declared and a sum sufficient for the payment thereof set apart therefor. The provisions of this paragraph 2D shall not, however, apply to a dividend payable in the Common Stock of the Company or any other Security or to the acquisition of shares of the Common Stock of the Company or any other Security in exchange for shares of any other Security. 3. Liquidation, Dissolution, etc. Upon any liquidation, dissolution or winding ----------------------------- up of the Company, whether voluntary or involuntary, the holders of the Preferred Stock shall be entitled, before any distribution or payment is made upon any Securities, to be paid out of the assets of the Company available for distribution to its stockholders an amount in cash equal to the aggregate of the par value plus all accrued but unpaid dividends (the "Liquidation Value") of all shares of Preferred Stock outstanding, whereupon the holders of such shares shall not be entitled to any further payment. If, upon such liquidation, dissolution or winding up, the assets of the Company to be distributed among the holders of the shares of Preferred Stock shall be insufficient to permit payment to such holders of the aggregate amount which they are entitled to be paid, then the entire assets of the Company to be distributed to such holders shall be distributed pro rata based upon the aggregate Liquidation Value of such shares held by each holder. Upon any such liquidation, dissolution or winding up after the holders of the Preferred Stock shall have been paid in full the amount to which they shall be entitled, the remaining assets of the Company may be distributed to the holders of Securities. Written notice of such liquidation, dissolution or winding up, stating a payment date, the amount of the payment and the place where the amounts distributable shall be payable, shall be mailed to the record holders of shares of Preferred Stock at the addresses for such record holders shown on the Company's stock transfer records by certified or registered mail, return receipt requested, not less than 60 days prior to the payment date stated in such written notice. Neither the consolidation or merger of the Company into or with any other corporation or corporations, nor the sale or transfer by the Company of all or any part of its assets, nor the reduction of the capital stock of the Company, shall be deemed to be a liquidation, dissolution or winding up of the Company within the meaning of the provisions of this paragraph 3. 4. Conversion. ---------- 4A. Conversion Procedure. -------------------- (i) For five years after the date of issuance, all or any of the issued and outstanding shares of Preferred Stock may be converted at the option of the holder thereof into the Company's common stock, $.01 par value (the "Common Stock"), at a ratio of .37 shares of Preferred Stock for each share of Common Stock (the "Conversion Ratio"). The number of shares of Common Stock into which the Preferred Stock may be converted (the "Conversion Stock") shall be subject to adjustment from time to time, in accordance with this paragraph 4, to prevent dilution of the conversion rights. (ii) The Company may require conversion of the Preferred Stock at the Conversion Ratio beginning two years after the date of issuance in the event that the closing bid price or last sale price of the Common Stock as reported by the NASDAQ Stock Market is at or above $1.75 per share for 10 consecutive trading days. In order to accomplish the foregoing involuntary conversion, the Company must send notice of same to the holders of the Preferred Stock at their addresses shown on the Company's stock transfer records by certified mail, return receipt requested, within five business days after the end of the above- described 10-day period. The Conversion Ratio, as well as the $1.75 per share trigger price (the "Trigger Price"), shall be subject to adjustment, in accordance with this paragraph 4, to prevent dilution of the conversion rights. (iii) The voluntary conversion described in clause (i) above shall be effected by the surrender of the certificate representing the Preferred Stock to be converted at the principal office of the Company (or such other office of the Company as the Company may designate by notice in writing to the holder of the shares) at any time during its usual business hours, together with written notice by the holder of such shares stating that such holders desires to convert the shares, or a stated number of the shares, represented by such certificate or certificates, which notice shall also specify the name or names (with addresses) and denominations in which the certificate or certificates for Conversion Stock shall be issued and shall include instructions for delivery thereof. Such conversion shall be deemed to have been effected as of the close of business on the date on which such certificate or certificates shall have been surrendered and such notice shall have been received, and at such time (the "Conversion Time") the rights of the holders of the Preferred Stock (or specified portion thereof) as such shall cease, and the person or persons in whose name or names any certificate or certificates for shares of Conversion Stock are to be issued upon such conversion shall be deemed to have become the holder or holders of record of the shares of Conversion Stock represented thereby. (iv) The involuntary conversion described in clause (ii) above shall be effective as of the close of business on the date of the mailing of the notice thereof to the holders (for purposes of such conversion, the "Conversion Time"). The holder shall have 10 business days following the date of receipt of the notice of conversion within which to specify and deliver to the Company a different name or names (with addresses) and/or denominations for the issuance of the Conversion Stock. In the event that the Company does not timely receive such specification, all of the Conversion Stock shall be issued in the name of the Preferred Stock holder. At the Conversion Time, the rights of the holders of the Preferred Stock as such shall cease and the person or persons in whose name or names any certificate or certificates of Conversion Stock are to be issued upon such conversion shall be deemed to have become the holder or holders of record of the shares of Conversion Stock represented thereby. (v) As soon as practicable after the Conversion Time (and in no event more than 30 days after the Conversion Time with respect to the certificate(s) specified in clauses (a) and (c) below, or more than 10 days after the Conversion Time with respect to the payment specified in clause (b) below), the Company shall deliver to the converting holder, or, with respect to the certificate(s) specified in clause (a) below, as specified by such converting holder: (a) a certificate or certificates representing the number of shares of Conversion Stock issuable by reason of such conversion; (b) payment of cash in lieu of any fractional share of Conversion Stock otherwise issuable by reason of such conversion as calculated pursuant to paragraph 4B(ii) below; and (c) a certificate representing any shares of Preferred Stock which shall have been represented by the certificate or certificates which shall have been delivered to the Company in connection with such conversion but which shall not have been converted. 4B. Additional Conversion Terms and Conditions. The Company covenants and ------------------------------------------ agrees that: (i) The Company will at all times reserve and keep available out of its authorized but unissued shares of Common Stock or its treasury shares, or otherwise, solely for the purpose of issue upon the conversion of the shares of Preferred Stock as provided in this paragraph 4, such number of shares of Conversion Stock as shall then be issuable upon the conversion of all outstanding shares of Preferred Stock. The Company covenants that all shares of Conversion Stock which shall be so issuable shall, when issued, be duly and validly issued, fully paid and non-assessable and free from all taxes, liens and charges. The Company will take all action which may be necessary to ensure that all such shares of conversion Stock may be so issued without violation of any applicable law or regulation or any requirements of any domestic stock exchange (except for official notice of issuance which will be immediately transmitted by the Company upon issuance) upon which shares of Conversion Stock or other shares of the same class may be listed. (ii) The company shall not be required to issue any fractions of shares of Common Stock upon conversions of Preferred Stock. If any interest in a fractional share of Common Stock would otherwise be deliverable upon the conversion of any Preferred Stock, the Company shall make adjustment for such fractional share interest by payment of an amount in cash equal to the same fraction of the market value of a full share of Common Stock of the Company. For such purpose, the market value of a share of Common Stock shall be the average of the bid and asked price of a share of Common Stock on the NASDAQ Stock Market on the day immediately preceding the date upon which such shares are surrendered for conversion. If the Common Stock shall not at the time be traded on the NASDAQ Stock Market, such market value of the Common Stock shall be the prevailing market value of the Common Stock on any other securities exchange or in the open market, as determined by the Company, which determination shall be conclusive. (iii) In the event that the Company shall at any time subdivide or combine in a greater or lesser number of shares the outstanding shares of Common Stock, the number of shares of Common Stock issuable upon conversion of the Preferred Stock shall be proportionately increased (and the Trigger Price decreased) in the case of subdivision or decreased (and the Trigger Price increased) in the case of a combination, effective in either case at the close of business on the date when such subdivision or combination shall become effective. (iv) In the event that the Company shall be recapitalized, consolidated with or merged into any other corporation, or shall sell or convey to any other corporation all or substantially all of its property as an entirety, provision shall be made as part of the terms of such recapitalization, consolidation, merger, sale or conveyance so that any holder of Preferred Stock may thereafter receive in lieu of the Common Stock otherwise issuable to him upon conversion of his Preferred Stock, but at the conversion ratio stated in this paragraph 4, the same kind and amount of securities or assets as may be distributable upon such recapitalization, consolidation, merger, sale or conveyance, with respect to the Common Stock of the Company. (v) In the event that the Company shall at any time pay to the holders of Common Stock a dividend in Common Stock, the number of shares of Common Stock issuable upon conversion of the Preferred Stock shall be proportionately increased (and the Trigger Price decreased), effective at the close of business on the record date for determination of the holders of Common Stock entitled to such dividend. (vi) The foregoing adjustments shall be made successively if more than one event listed in subparagraphs (iii), (iv) and (v) shall occur. (vii) The issuance of certificates for shares of Common Stock upon conversion of the Preferred Stock shall be made without charge for any tax in respect of such issuance. However, if any certificate is to be issued in a name other than that of the holder of record of the Preferred Stock so converted, the person or persons requesting the issuance thereof shall pay to the Company the amount of any tax which may be payable in respect of any transfer involved in such issuance, or shall establish to the satisfaction of the Company that such tax has been paid or is not due and payable. 5. Redemption. Five years after the date of issuance thereof, to the extent ---------- that it has not been previously converted, the Preferred Stock shall be redeemed by the Company at a price of $1.00 per share, together with all accrued but unpaid dividends, payable to the holder at his address listed on the Company's stock transfer books. Effective at the end of such five-year period, the Preferred Stock shall be canceled and the Company's sole obligation to the holders shall be to pay such redemption price, together with all accrued but unpaid dividends, out of the funds legally available therefor. 6. Voting Rights. The Preferred Stock shall have no voting rights, except that ------------- so long as any shares of Preferred Stock are outstanding, the consent of the holders of at least a majority (or any greater amount then required by law) of the shares of such stock at the time outstanding, given in person or by proxy, either in writing or by a vote at a meeting of the holders of the Preferred Stock called for the purpose, shall be necessary for authorizing or effecting the amendment, alteration or repeal of any of the provisions of the Certificate of Incorporation or By-Laws of the Company, as amended to date and presently in effect, or of this resolution, so as to affect adversely the preferences, priority, rights, powers or privileges of the Preferred Stock as such or the holders thereof as such. 7. Governing Law. This Certificate shall be governed by and construed in ------------- accordance with the laws of the State of Delaware. Dated: May 7, 1992 AMERICAN FRANCHISE GROUP, INC. By: William A. Wilkerson Attest: Ellen Tannenbaum EX-4.2 5 SERIES B CERTIFICATION EXHIBIT 4.2 State of Delaware Office of Secretary of State I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF DESIGNATION OF "BCT INTERNATIONAL, INC.", FILED IN THIS OFFICE ON THE TWENTY- FIFTH DAY OF FEBRUARY, A.D. 1994, AT 11:27 O'CLOCK A.M. A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE KENT COUNTY RECORDER OF DEEDS FOR RECORDING. William t. Quillen, Secretary of State Authentication: 7045456 Date: 03/03/94 State of Delaware Secretary of State Division of Corporations Filed 11:27 a.m. 02/25/1994 944028554-911871 CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF SERIES B CONVERTIBLE PREFERRED STOCK OF BCT INTERNATIONAL, INC. BCT INTERNATIONAL, INC., a corporation organized and existing under the General Corporation Law of the State of Delaware (the "Company"), in accordance with Section 151 (g) of the General Corporation Law of the State of Delaware. DOES HEREBY CERTIFY: That, pursuant to authority conferred upon the Company's Board of Directors by the Certificate of Incorporation, as amended, of the Company, said Board of Directors, pursuant to action at a meeting duly noticed and held on February 17, 1994, a resolution providing for the authorization and issuance of the Company's Series B Convertible Preferred Stock, and that a copy of such resolution is as follows: RESOLVED, that pursuant to the authority vested in the Board of Directors of the Company in accordance with the provisions of its Certificate of Incorporation, as amended, a series of preferred stock of the Company be and it hereby is created, such series of preferred stock to be designated "Series B Convertible Preferred Stock", said series to consist of 2,500,000 shares of the par value of $1.00 per share, of which the preferences, voting powers and relative, participating, option and other special rights, and the qualifications, limitations or restrictions thereof, shall be as follows: 1. Designation and Number of Shares. Shares of the series shall be designated -------------------------------- and known as the "Series B Convertible Preferred Stock" of the Company (the "Preferred Stock"). The Series B shall consist of 2,500,000 shares. Shares of the Series B which are retired, purchased or otherwise acquired by the Company shall be cancelled and shall revert to authorized but unissued preferred stock, undesignated as to series and subject to reissuance by the Company as shares of preferred stock of any one or more series. 2. Dividends. --------- 2A. General Dividend Obligation. The Company shall pay to the holders of --------------------------- the Preferred Stock, when and as declared by the Company's Board of Directors out of the funds of the Company legally available for the payment of dividends under the General Corporation Law of the State of Delaware, a dividend at the times and in the amounts provided for in this paragraph 2. 2B. Calculation of Dividends. Dividends on each share of Preferred Stock ------------------------ shall be calculated cumulatively on a quarterly basis from the date of the original issuance, whether or not such dividends shall have been declared and whether or not there shall be profits, surplus or other funds of the Company legally 1 available for the payment of dividends. 2C. Payment of Dividends. When, as and if declared by the Company's -------------------- Board of Directors, and subject to any restrictions now or hereafter existing in any agreement relating to any indebtedness of the Company, dividends shall be payable quarterly on the first day of each January, April, July and October (or the immediately preceding business day if such first day is a Saturday, Sunday or legal holiday), commencing July 1, 1994, at a per share rate of $.09 per year and $.0225 per quarter. 2D. Priority. As long as any shares of Preferred Stock shall be -------- outstanding, no dividend, whether in cash or property, shall be paid or declared, nor shall any other distribution be made, on the Common Stock of the Company or any other equity security of the Company other than the Company's Series A Convertible Preferred Stock consisting of 810,000 shares (the "Series A Stock") (the Common Stock and any other such equity security [excluding the Series A Stock] shall be referred to individually as a "Security" and collectively as the "Securities") nor shall shares of Common Stock or any other Security be purchased, redeemed, or otherwise acquired for value by the Company, unless all dividends on the Preferred Stock for all past quarterly dividend periods and for the then current quarterly period shall have been paid or declared and a sum sufficient for the payment thereof set apart therefor. The provisions of this paragraph 2D shall not, however, apply to a dividend payable in the Common Stock of the Company or any other Security or to acquisition of share of the Common Stock of the Company or any other Security in exchange for shares of any other Security. 3. Liquidation, Dissolution, etc. Upon any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, the holders of the Preferred Stock shall be entitled, before any distribution or payment is made upon any Securities, to be paid out of the assets of the Company available for distribution to its stockholders an amount in cash equal to the aggregate of the par value plus all accrued but unpaid dividends (the "Liquidation Value") of all shares of Preferred Stock outstanding, whereupon the holders of such shares shall not be entitled to any further payment. If, upon such liquidation, dissolution or winding up, the assets of the Company to be distributed among the holders of the shares of Preferred Stock shall be insufficient to permit payment to such holders of the aggregate amount which they are entitled to be paid, then the entire assets of the Company to be distributed to such holders shall be distributed pro rata based upon the a ggregate Liquidation Value of such shares -------- held by each holder. Upon any such liquidation, dissolution or winding up after the holders of the Preferred Stock shall have been paid in full the amount to which they shall be entitled, the remaining assets of the Company may be distributed to the holders of Securities. Written notice of such liquidation, dissolution or winding up, stating a payment date, the amount of the payment and the place where the amounts distributable shall be payable, shall be mailed to the record holders of shares of Preferred Stock at the addresses for such record holders shown on the Company's stock transfer records by certified or registered mail, return receipt requested, not less than 60 days prior to the payment date stated in such written notice. Neither the consolidation or merger of the Company into or with any other corporation or corporations, nor the sale or transfer by the Company of all or any part of its assets, nor the reduction of the capital stock of the Company, shall be deemed to be a liquidation, dissolution or winding up of the Company within the meaning of the provisions of this paragraph 3. 2 4. Conversion. ---------- 4A. Conversion Procedure. -------------------- (i) For three years after the date of issuance, all or any of the issued and outstanding shares of Preferred Stock may be converted at the option of the holder thereof into the Company's common stock, $.04 par value (the "Common Stock"), at a ratio of 2.25 shares of Preferred Stock for each share of Common Stock (the "Conversion Ratio"). The number of shares of Common Stock into which the Preferred Stock may be converted (the "Conversion Stock") shall be subject to adjustment from time to time, in accordance with this paragraph 4, to prevent dilution of the conversion rights. (ii) The Company may require conversion of the Preferred Stock at the Conversion Ratio beginning six months after the date of issuance in the event that the closing bid price or last sale price of the Common Stock as reported by the NASDAQ Stock Market is at or above $3.50 per share for 20 consecutive trading days. In order to accomplish the foregoing involuntary conversion, the Company must send notice of same to the holders of the Preferred Stock at their addresses shown on the Company's stock transfer records by certified mail, return receipt requested, within five business days after the end of the above-described 20-day period. The Conversion Ratio, as well as the $3.50 per share trigger price (the "Trigger Price"), shall be subject to adjustment, in accordance with this paragraph 4, to prevent dilution of the conversion rights. (iii) The voluntary conversion described in clause (i) above shall be effected by the surrender of the certificate representing the Preferred Stock to be converted at the principal office of the Company (or such other office of the Company as the Company may designate by notice in writing to the holder of the shares) at any time during its usual business hours together with written notice by the holder of such shares stating that such holder desires to convert the shares, or a stated number of the shares, represented by such certificate or certificates, which notice shall also specify the name or names (with addresses) and denominations in which the certificate or certificates for Conversion Stock shall be issued and shall include instructions for delivery thereof. Such conversion shall be deemed to have been effected as if the close of business on the date on which such certificate or certificates shall have been surrendered and such notice shall have been received, and at such time (the "Conversion Time") the rights of the holders of the Preferred Stock (or specified portion thereof) as such shall cease, and the person or persons in whose name or names any certificate or certificates for shares of Conversion Stock are to be issued upon such conversion shall be deemed to have become the holder or holders of record of the shares of Conversion Stock represented thereby. (iv) The involuntary conversion described in clause (ii) above shall be effective as of the close of business on the date of the mailing of the notice thereof to the holders (for purposes of such conversion, the "Conversion Time"). The holder shall have 10 business days following the date of receipt of the notice of conversion within which to specify and deliver to the Company a different name or names (with addresses) and/or denominations for the issuance of 3 the Conversion Stock. In the event that the Company does not timely receive such specification, all of the Conversion Stock shall be issued in the name of the Preferred Stock holder. At the Conversion Time, the rights of the holders of the Preferred Stock as such shall cease and the person or persons in whose name or names any certificate or certificates of Conversion Stock are to be issued upon such conversion shall be deemed to have become the holder or holders of record of the shares of Conversion Stock represented thereby. (v) As soon as practicable after the Conversion Time (and in no event more than 30 days after the Conversion Time with respect to the certificate(s) specified in clauses (a) and (c) below, or more than 10 days after the Conversion Time with respect to the payment specified in clause (b) below), the Company shall deliver to the converting holder, or, with respect to the certificate(s) specified in clause (a) below, as specified by such converting holder: (a) a certificate or certificates representing the number of shares of Conversion Stock issuable by reason of such conversion; (b) payment of cash in lieu of any fractional share of Conversion Stock otherwise issuable by reason of such conversion as calculated pursuant to paragraph 4B(ii) below; and (c) a certificate representing any shares of Preferred Stock which shall have been represented by the certificate or certificates which shall have been delivered to the Company in connection with such conversion but which shall not have been converted. 4B. Additional Conversion Terms and Conditions. The Company covenants ------------------------------------------ and agrees that: (i) The Company will at all times reserve and keep available out of its authorized but unissued shares of Common Stock or its treasury shares, or otherwise, solely for the purpose of issue upon the conversion of the shares of Preferred Stock as provided in this paragraph 4, such number of shares of Conversion Stock as shall then be issuable upon the conversion of all outstanding shares of Preferred Stock. The Company covenants that all shares of Conversion Stock which shall be so issuable shall, when issued, be duly and validly issued, fully paid and non-assessable and free from all taxes, liens and charges. The Company will take all action which may be necessary to ensure that all such shares of Conversion Stock may be so issued without violation of any applicable law or regulation or any requirements of any domestic stock exchange (except for official notice of issuance which will be immediately transmitted by the Company upon issuance) upon which shares of Conversion Stock or other shares of the same class may be listed. (ii) The Company shall not be required to issue any fractions of shares of Common Stock upon conversions of Preferred Stock. If any interest in a fractional share of Common Stock would otherwise be deliverable upon the conversion of any Preferred Stock, the Company shall make adjustment for such fractional share interest by payment of an amount in cash equal to the same fraction of the market value of a full share of Common Stock of the Company. For such purpose, the market value of a share of Common Stock shall be the average of the bid and asked price of 4 a share of Common Stock on the NASDAQ Stock Market on the day immediately preceding the date upon which such shares are surrendered for conversion. If the Common Stock shall not at the time be traded on the NASDAQ Stock Market, such market value of the Common Stock on any other securities exchange or in the open market, as determined by the Company, which determination shall be conclusive. (iii) In the event that the Company shall at any time subdivide or combine in a greater or lesser number of shares the outstanding shares of Common Stock, the number of share of Common Stock issuable upon conversion of the Preferred Stock shall be proportionately increased (and the Trigger Price decreased) in the case of subdivision or decreased (and the Trigger Price increased) in the case of a combination effective in either case at the close of business on the date when such subdivision or combination shall become effective. (iv) In the event that the Company shall be recapitalized, consolidated with or merged into any other corporation, or shall sell or convey to any other corporation all or substantially all of its property as an entirety, provision shall be made as part of the terms of such recapitalization, consolidation, merger, sale or conveyance so that any holder of Preferred Stock may thereafter receive in lieu of the Common Stock otherwise issuable to him upon conversion of his Preferred Stock, but at the Conversion Ratio stated in this paragraph 4, the same kind and amount of securities or assets as may be distributable upon such recapitalization, consolidation, merger, sale or conveyance, with respect to the Common Stock of the Company. (v) In the event that the Company shall at all time pay to the holders of Common Stock a dividend in Common Stock, the number of shares of Common Stock issuable upon conversion of the Preferred Stock shall be proportionately increased (and the Trigger Price decreased), effective at the close of business on the record date for determination of the holders of Common Stock entitled to such dividend. (vi) The foregoing adjustments shall be made successively if more than one event listed in subparagraphs (iii), (iv) and (v) shall occur. (vii) The issuance of certificates for shares of Common Stock upon conversion of the Preferred Stock shall be made without charge for any tax in respect of such issuance. However, if any certificate is to be issued in a name other than that of the holder of record of the Preferred Stock so converted, the person or persons requesting the issuance thereof shall pay to the Company the amount of any tax which may be payable in respect of any transfer involved in such issuance, or shall establish to the satisfaction of the Company that such tax has been paid or is not due and payable. 5. Redemption. Three years after the date of issuance thereof, to the extent ---------- that it has not been previously converted and to the extent that it has not been previously converted and to the extent that funds are legally available therefor, the Preferred Stock shall be redeemed by the Company at a price of $1.00 per share, together with all accrued but unpaid dividends, payable to the holder at his address listed on the Company's stock transfer books. Effective at the end of such three-year period, the Preferred Stock shall be 5 cancelled and the Company's sole obligation to the holder shall be to pay such redemption price, together with all accrued but unpaid dividends, out of the funds legally available therefor. 6. Voting Rights. The Preferred Stock shall have no voting rights, except ------------- that so long as any shares of Preferred Stock are outstanding, the consent of the holders of at least a majority (or any greater amount then required by law) of the shares of such stock at the time outstanding, given in person or by proxy either in writing or by a vote at a meeting of the holders of the Preferred Stock called for the purpose, shall be necessary for authorizing or effecting the amendment, alteration or repeal of any of the provisions of the Certificate of Incorporation or By-Laws of the Company as amended to date and presently in effect, or of this resolution, so as to affect adversely the preferences, priority, rights, powers or privileges of the Preferred Stock as such or the holders thereof as such. 7. Registration Rights. The registration rights set forth in this paragraph 7 ------------------- are granted in consideration of the holder's acceptance of the Preferred Stock and of the terms and conditions defining and limiting such rights as set forth in this paragraph 7. By accepting the Preferred Stock, the holder accepts such terms and conditions and agrees to be bound thereby. If at any time or times after the date hereof the Company shall determine to register (including pursuant to a demand of any other stockholder or security holder of the Company exercising registration rights) any of its Common Stock under the Securities Act of 1933, as amended (the "Act"), other than on Forms S- 8 or S-4 or their then respective equivalents, the company will promptly give written notice thereof to the then holders of the Preferred Stock and the last registered holders of Preferred Stock which has been converted and will use its best efforts to effect the registration under the Act, pursuant to the contemplated registration statement, of the Common Stock underlying the Preferred Stock and the Class B warrants (the "Warrants") issued together therewith (the "Underlying Stock") which such holders (collectively the "Selling Holders") may request in writing delivered to the Company within 15 days after the notice given by the Company if such Selling Holders in such request to the Company shall have requested the registration of at least 20% of the Underlying Stock; provided, however, that in the case of the registration of Common Stock by the Company pursuant to an underwritten public offering, the Company shall not be required to register Underlying Stock which the principal underwriter of any such underwritten offering shall refuse in writing to include in such offering on the grounds that such inclusion would materially affect the offering. If some but not all of the Underlying Stock requested to be registered is not included in any such registration by reason of any such refusal by the underwriter, all Selling Holders who have requested participation in the offering may participate in the offering on a pro rata basis in proportion to the amount of Underlying Stock as to which they have in each instance requested participation. All expenses of registration and offering, except the fees of special counsel to any Selling Holder, shall be borne by the Company, except that each such Selling Holder shall bear all underwriting commissions and expenses of the underwriter attributable to his or its Underlying Stock being registered. Notwithstanding the foregoing, the Company's above-described obligation to register the Underlying Stock shall be limited to the first two public offerings of Common Stock by the Company after the date hereof in which at least 50% of the Underlying Stock requested to be registered is in fact registered or with respect to which less than 20% of the Underlying Stock is timely requested to be registered. Notwithstanding the foregoing, in the event that either (1) the Company requires conversion of the Preferred 6 Stock pursuant to paragraph 4A(ii) hereof or (2) within six months after the date of issuance or as of no less than one year after the date of issuance, holders of at least 50% of the Preferred Stock have voluntarily converted such stock pursuant to paragraph 4A(i) hereof, then upon a written request delivered to the Company by the Selling Holders, the Company shall use its best efforts to effect the registration under the Act of the Underlying Stock requested to be registered provided that the Selling Holders in such request shall have requested the registration of at least 50% of the Underlying Stock. All expenses of registration and offering, except the fees of special counsel to any Selling Holder, shall be borne by the Company, except that each such Selling Holder shall bear all underwriting commissions and expenses of the underwriter attributable to his or its Underlying Stock being registered. Notwithstanding the foregoing, the Company shall not be required to effect a registration under this paragraph 7 to the extent that, in the unqualified opinion of counsel for the Company, the selling Holders may then sell the Underlying Stock as to which they had requested registration under the provisions of the Act without registration under the Act. Whenever the Company is required hereunder to register Underlying Stock, it agrees that it shall also do the following: A. Prepare for filing and file with the Securities and Exchange Commission such amendments and supplements to said registration statement and the prospectuses used in connection therewith as may be necessary to keep said registration statement effective and to comply with the provisions of the Act with respect to the sale of securities covered by said registration statement for the period necessary (but in no event more than nine months) to complete the proposed public offering; B. Promptly furnish to each Selling Holder such copies of preliminary and final prospectuses and such other documents as said holder may reasonably request to facilitate the public offering of his Underlying Stock, and notify each Selling Holder if such prospectuses become inaccurate in any material respect and furnish updated or corrected prospectuses as soon as possible thereafter; C. Use its best efforts to register or qualify the Underlying Stock covered by said registration statement under the securities or "blue sky" laws of such jurisdictions as any Selling Holder may reasonably request; provided, however, that the Company shall not be obligated to qualify to do business in any jurisdiction where it is not now so qualified or take any action which would subject it to the service of process in suits other than those arising out of the offer or sale of the securities covered by the registration statement in any jurisdiction where it is not now so subject; D. Promptly furnish to each Selling Holder copies of (i) an opinion of counsel for the Company, dated the effective date of the registration statement, and (ii) "comfort" letters signed by the Company's independent public accountants who have examined and reported on the Company's financial statements included 7 in the registration statement, to the extent permitted by the standards of the American Institute of Certified Public Accountants, covering substantially the same matters with respect to the registration statement (and the prospectus included therein) and (in the case of the accountants' "comfort" letters) with respect to events subsequent to the date of the financial statements, as are customarily covered in opinions of issuer's counsel and in accountants' "comfort" letters delivered to the underwriters in an underwritten public offering of securities, to the extent that the Company is required to deliver or cause the delivery of such opinion or "comfort" letters to the underwriters in an underwritten public offering of securities; E. Permit each Selling Holder or his counsel or other representatives to inspect and copy such corporate documents and records as may reasonably be requested by them; and F. Promptly furnish to each Selling Holder a copy of all appropriate material documents filed with and correspondence from or to the Securities and Exchange Commission in connection with the offering of the holder's securities. Incident to any registration statement hereunder, the Company will indemnify and hold harmless each underwriter, each Selling Holder and each controlling person thereof against all claims, losses, damages and liabilities, joint or several, including legal and other expenses incurred in investigating or defending against the same, arising out of any untrue statement of a material fact contained therein or any omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or arising out of any violation by the Company of the Act, any state securities or "blue sky" laws or any rule or regulation thereunder in connection with such registration, except insofar as the same may have been caused in writing to the Company by such holder expressly for use therein. Promptly, and in any event within 20 days, after receipt by any Selling Holder or any underwriter or any person controlling any of them of written notice of the assertion or commencement of any action in respect of which indemnity may be sought against the Company, such Selling Holder, underwriter or controlling person, as the case may be, will notify the Company in writing of such assertion or commencement, and, subject to the provisions hereinafter stated, the Company shall assume the defense of such action (including the employment of counsel, who shall be counsel reasonably satisfactory to such Selling Holder or such underwriter or such controlling person, as the case may be) and the payment of all costs and expenses related thereto, insofar as such action shall relate to any alleged liability in respect of which indemnity may be sought against the Company. Such Selling Holder or any underwriter or any such controlling person shall have the right to employ separate counsel in any such action and to participate in the defense thereof, provided that the Company shall have the right to control any such litigation, but the fees and expenses of such counsel shall not be at the expense of the Company unless the employment of such counsel has been specifically authorized by the Company. The Company shall not be liable to indemnify any person for any settlement of any such action effected without the Company's consent. With respect to any untrue statement or omission in the information furnished in writing to the Company by any Selling Holder expressly for use in any registration statement referred to herein, such holder will indemnify the Company and the underwriters, their respective directors and officers, the other Selling Holders, and each person controlling any of them against all claims, losses, damages and liabilities, including 8 legal and other expenses incurred in investigating or defending the same, to which any of them may become subject. Promptly, and in any event within 20 days, after receipt of written notice of the assertion or commencement of any action in respect of which indemnity may be sought against such Selling Holder, the Company will notify such holder in writing of such assertion or commencement, and such holder shall, subject to the provisions hereinafter stated, assume the defense of such action (including the employment of counsel, who shall be counsel reasonably satisfactory to the Company) and the payment of expenses insofar as such action shall relate to the alleged liability in respect of which indemnity may be sought against such holder. The company and each such other Selling Holder, underwriter, director, officer or controlling person shall have the right to employ separate counsel in any such action and to participate in the defense thereof, provided that the indemnifying Selling Holder shall have the right to control any such litigation, but the fees and expenses of such counsel shall not be at the expense of such Selling Holder unless employment of such counsel has been specifically authorized by such holder. Such Selling Holder shall not be liable to indemnify any person for any settlement of any such action effected without such holder's consent. The holder of each certificate for Preferred Stock and any of its respective transferees may transfer the registration rights granted under this paragraph 7 to any person, provided that the Company is given written notice by the holder -------- at the time of such transfer stating the name and address of the transferee and identifying the Underlying Stock with respect to which the rights are being transferred and, provided further that the transferee agrees in writing to be ---------------- bound by all the terms and conditions of this paragraph 7. At any time the Company is requested to include Underlying Stock of any holder in a registration statement pursuant to this paragraph 7, such holder shall promptly provide to the Company such information relating to such holder or his Underlying Stock as the Company shall reasonably request for use in or in the preparation of such registration statement. 8. Governing Law. This certificate shall be governed by and construed in ------------- accordance with the laws of the State of Delaware. Dated: February 24, 1994 BCT INTERNATIONAL,INC. By: Peter Gaughn -------------------- Vice President Attest: Laura Sennett -------------------------- Assistant Secretary EX-10.1 6 AGREEMENT EXHIBIT 10.1 AGREEMENT - --------- AGREEMENT dated as of May 7, 1992, between American Franchise Group, Inc., a Delaware corporation (the "Company"), and the 1982 LeVine Prevocable Trust ("Investor"). WHEREAS, pursuant to a certain preferred stock purchase agreement of even date (the "Stock Purchase Agreement"), Investor is purchasing from the Company at a price of $1.00 per share 550,000 shares of the Company's Series A Convertible Preferred Stock (the "Preferred Stock"); and WHEREAS, the parties wish to memorialize certain further agreements and understandings among them relating to their business relationship. NOW THEREFORE, in consideration of the mutual convenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follow: 1. On the date hereof, Investor shall purchase the Preferred Stock pursuant to execution and delivery to the Company of the Stock Purchase Agreement, together with the purchase price provided for therein, whereupon the Company shall immediately issue the Preferred Stock to him. 2. The Company will use its best efforts to cause its directors to promptly appoint Investor to the Company's Board of Directors and to nominate Investor and use their best efforts to cause Investor to be elected to the Board of Directors by the Company's shareholders, for so long as Invester continues to hold at least 50% of the Preferred Stock being purchased by Investor hereunder and is is willing to serve. During LeVine's tenure as a director, Company to obtain and maintain Director's liability insurance. 3. On the date hereof, the Company shall grant to Investor a five-year option, evidenced by the Company's standard non-qualified stock option agreement to purchase 185,000 shares of the Company's $.01 par value Common Stock at an exercise price equal to the average of the closing bid and asked prices of the Company's Common Stock on this date. 4. For so long as Investor owns at least 50% of the Preferred Stock being purchased by Investor hereunder, the Company shall cause its officers and directors to refrain from directly or indirectly buying or selling any of the Company's securities except to the extent that any such transaction is previously approved by an independent committee of the Company's Board of Directors established for the purpose of reviewing such transactions. IN WITNESS WHEREOF, the parties have executed this agreement as of the date first above written. AMERICAN FRANCHISE GROUP, INC By: William A. Wilkerson ------------------------------- William A. Wilkerson, Chairman Bill LeVine Trustee ----------------------------------- The 1982 LeVine Revocable Trust EX-10.2 7 SUB AGREEMENT EXHIBIT 10.2 PLEASE READ CAREFULLY BEFORE SIGNING ------------------------------------ SUBSCRIPTION AGREEMENT BCT International, Inc. 3000 N.E. 30th Place Fort Lauderdale, Florida 33306-1957 PURCHASE OF _______ SHARE OF PREFERRED STOCK OF BCT INTERNATIONAL, INC. ------------------------------------------ Gentlemen: The undersigned (individually or collectively, as the case may be, referred to as "Investor") hereby represents, warrants, covenants and agrees to the following: 1. Subscription; Offering. Investor hereby agrees to purchase ______ shares ---------------------- (the "Shares") of Series B Convertible Preferred Stock, $1.00 par value (the "Preferred Stock"), of BCT International, Inc. (the "Company") at a price of $1.00 per Share and upon the terms and conditions set forth herein. The purchase price shall be tendered immediately upon execution of this Agreement by Investor. This Agreement shall become effective when it has been executed and delivered, together with the purchase price, by Investor and accepted by the Company. This subscription is made pursuant to a private offering by the Company of up to 2,500,000 shares of Preferred Stock. The net proceeds of the Offering will be used by the Company (i) to pay off some or all of the Company's Series A Convertible Subordinated Debentures due March 31, 1994, the principal amount of which is $1,777,000 as of February 1, 1994, and (ii) to the extent that Offering proceeds remain available after the Debentures are paid in full, for general working capital. A Commission equal to 5% of the gross proceeds of the Offering will be paid to the Company's placement agent, Barber & Bronson, Inc., Fort Lauderdale, Florida ("BBI"), to the extent that such proceeds are procured through BBI. Simultaneous with the issuance of the Shares, Investor shall receive Class B warrants (the "Warrants") to purchase ______ shares of the Company's $.04 par value common stock (the "Common Stock"), representing one Warrant for each 2.25 Shares of Preferred Stock purchased. BBI will also receive a commission equal to 5% of the gross proceeds of the exercise of Warrants by investors procured through BBI. See section 5 below for a description of the Preferred Stock and the Warrants. 2. Investment Purpose. Investor hereby represents that the Shares and ------------------ Warrants are being acquired solely for his account and for investment purposes only, within the meaning of the Securities Act of 1993 and the rules and regulations thereunder, as amended (the "1933 Act"), and that he has no plan, intention, contract, understanding, agreement or arrangement with any person to sell, assign, pledge, hypothecate or otherwise transfer to any person the Shares, the Warrants or any part thereof. 3. Risk Factors. Investor understands that his investment in the Shares and ------------ Warrants is speculative and involves a high degree of risk. Investor has sufficient knowledge and experience in financial and business matters so as to be capable of evaluating the merits and risks of investments generally and of his investment 1 in the Shares and Warrants in particular and is ABLE TO BEAR THE ECONOMIC RISK OF THIS INVESTMENT WITH FULL UNDERSTANDING THAT HE MAY LOSE HIS ENTIRE INVESTMENT. In particular, Investor recognizes and understands that: (a) Equity Risk. The Shares are equity, and not debt, instruments, and ----------- therefore the Company is not legally required to pay dividends and/or redeem the Shares in the event that, at the time of a scheduled payment, (i) the Company's capital surplus and/or profits are insufficient or (ii) in the good faith judgment of the Company's Board of Directors, the Company has insufficient funds with which to make the payment given the Company's other needs. In the event of a liquidation of the Company, all of the Company's creditors and Senior Preferred Stock holders (see item 3(b) below) must be paid in full before any payments may be made on account of the Shares. Under Delaware law, dividends may be paid only out of the Company's capital surplus or profits from the then current or prior fiscal year, and stock may be redeemed only to the extent that the Company's capital is not impaired and the redemption payment will not impair capital. (b) Subordination to Senior Preferred Stock. Payment of dividends on the --------------------------------------- Preferred Stock as well as redemption payments and payments on liquidation of the Company are subordinate to the prior payment of all amounts due on the Company's $1.00 par value Series A Convertible Preferred Stock, which consists of 810,000 shares (750,000 issued in May 1992 and 60,000 issued in February 1994) bearing a 12% annual dividend payable quarterly, with redemption scheduled for five years from the date of issuance (the Senior Preferred Stock"). (c) Operating History. Although the Company has operated profitably since the ----------------- beginning of the fiscal year ended February 28, 1993, reversing major losses in the fiscal year ended in February 1992, 1991, respectively, this recent improvement in the Company's operating results may not be indicative of future results. Further, the Company continues to suffer from a shortage of liquidity and working capital due to its growth and other factors, and there can be no assurances that this shortage will be eliminated. (d) Control. The Company's current officers and director own a majority of the ------- Company's Common Stock, and, accordingly, for the forseeable future those persons will be able to continue to elect the entire Board of Directors and otherwise control the Company. (e) Lack of Public Market for Preferred Stock. No public trading market is ----------------------------------------- expected to develop for the Preferred Stock. The sale, transfer or other disposition of the Preferred Stock or underlying Common Stock and Warrants is substantially restricted and may not be made unless the securities are registered under the 1933 Act unless their resale is exempt therefrom. (f) Thin Public Market for Common Stock. Although the Company's Common Stock ----------------------------------- is publicly traded on the NASDAQ Stock Market, the Common Stock historically has registered low trading volume and, consequently, the price of the Common Stock has been quite volatile. Further, pursuant to NASDAQ rules, the Company's Common Stock could be delisted in the event that its equity, stock price or certain other indicators fail to meet minimum NASDAQ standards. A delisting would severely reduce the already limited liquidity of the Common Stock. 2 4. Disclosure. Investor acknowledges that the executive officers and ---------- directors of the Company have provided him with access to all material books and records of the Company, including but not limited to all material contracts and accounting records of the Company, and otherwise have provided him with access to such information concerning the Company and its affairs as is necessary in order for him to evaluate the merits and risks of his investment in the Shares and Warrants. Investor also acknowledges that the Company has given him the opportunity to ask questions of and receive answers from the directors and the executive officers of the Company and other persons acting on their behalf concerning the terms and conditions of the offer to him of the Shares and Warrants and to obtain any additional information concerning the Company, to the extent that the directors, executive officers and others possess such information or can acquire it without unreasonable effort or expense so that he can verify the accuracy of the information given to him at the time of the offer and his purchase of the Shares and Warrants. Investor further acknowledges receipt of, and confirms that he has reviewed and understood, the following documents relating to the Company: (i) 1993 Annual Report to Shareholders; (ii) 1993 Form 10-K as filed with the Securities and Exchange Commission; (iii) 1993 annual proxy statement; and (iv) Form 10-Q Reports as filed with the Securities and Exchange Commission for the quarters ended May 31, August 31 and November 30, 1993. 5. Description of Preferred Stock and Warrants. Investor understands the ------------------------------------------- rights of holders of the Preferred Stock and Warrants, which are set forth in the Certificate of Designations, Preferences and Rights of the Preferred Stock attached hereto as Exhibit "A" and the form of Warrant attached hereto as Exhibit "B" both of which Investor has read and understood. These rights are summarized as follows: (a) Dividend Rights. Holders of shares of Preferred Stock are entitled to --------------- receive, when and as declared by the Company's Board of Directors out of the funds of the Company legally available for the payment of dividends, cash dividends at the rate of $.09 per share (9%) per annum, payable quarterly on the 1st day of each of January, April, July and October. Dividends on the Preferred Stock are cumulative and accrue from the date of original issue. No interest will be paid by the Company on dividends in arrears. No cash dividend may be declared and paid or set apart for payment upon the Company's Common Stock until any past quarterly dividend on the Preferred Stock has been fully paid or declared and set apart for payment. (b) Voting Rights. The Preferred Stock will have no voting rights, except with ------------- respect to action affecting the terms or priority of the Preferred Stock, in which case a majority vote of the outstanding Preferred Stock, voting as a class, will be required to approve such action. (c) Liquidation Rights. In the event of a voluntary or involuntary liquidation ------------------ of the Company, the holders of Preferred Stock will be entitled to receive $1.00 per share plus all accrued and unpaid dividends before any distribution is made to the holders of the Company's Common Stock or any other class or series of stock ranking junior to the Preferred Stock as to distribution of assets. (d) Preemptive Rights. Holders of Preferred Stock will have no preemptive ----------------- right to purchase any securities of the Company. (e) Conversion; Redemption. The Preferred Stock will be convertible into the ---------------------- Company's Common Stock at a ratio of 2.25 shares of Preferred Stock for each share of Common Stock (the "Conversion Ratio"). The Company may require conversion at the conversion ratio beginning six months after the date of issuance in the event that the Common Stock's closing bid price or last sale price as reported by NASDAQ is at or above 3 $3.50 per share for 20 consecutive trading days. If the Preferred Stock is not converted within three years of issuance, it shall be redeemed by the Company at a price of $1.00 per share, plus all accrued and unpaid dividends, to the extent that funds are legally available therefor. (f) Subordination to Senior Preferred Stock. No payments (whether dividend, --------------------------------------- redemption or liquidation payments) may be made on account of the Preferred Stock if at the time scheduled for such payments any amount is due but unpaid with respect to the Senior Preferred Stock. (g) Warrants. Each Warrant shall entitle Investor to purchase one share of -------- Common Stock for three years from the date of issuance at an exercise price of $3.00 per share. The Warrants may be redeemed by the Company, at its option, beginning six months after the date of issuance, at a price of $.05 each in the event that the Common Stock's closing bid price or last sale price is at or above $3.50 for 20 consecutive trading days. 6. Restrictions on Transfer. Investor is aware of the fact that neither the ------------------------ Shares nor the Common Stock into which they are convertible (the "Conversion Stock") nor the Warrants or the Common Stock issuable upon their exercise have been registered nor is registration contemplated under the 1933 Act, and accordingly, that such Shares, Warrants and underlying securities must be held until they are subsequently registered under said Act or unless, in the opinion of counsel for the Company, a sale or transfer may be made without registration thereunder. Investor agrees that any certificate evidencing the Shares, Warrants or underlying securities will bear a legend restricting the transfer thereof consistent with the foregoing and that a notation will be made in the records of the Company restricting the transfer thereof consistent with the foregoing. 7. Private Offering. Investor acknowledges that neither the Company nor any ---------------- person acting on behalf of the Company offered to sell the Shares or Warrants by means of any form of general advertising, including but not limited to media advertising or seminars. 8. Suitability of Investment. Investor, after carefully reviewing the merits ------------------------- and risks of his proposed investment in the Shares and Warrants, including those risks described in the Disclosure Documents and herein, together with those risks particular to his personal situation, has determined that this investment is suitable for him. Investor has adequate financial resources for an investment of this character, and at this time Investor could bear a complete loss of his investment. Further, Investor will continue to have, after making his investment in the Shares and Warrants, adequate means of providing for his current needs, the needs of those dependent on him, and possible personal contingencies and will have no need to liquidate his investment in the Shares and Warrants for an indefinite period of time. Investor's overall commitment to investments which are not readily marketable is not disproportionate to Investor's net worth. 9. Unregistered Offering. Investor understands that the Shares and Warrants --------------------- are not being registered, and the Company has no intention of registering the Shares and Warrants under, the 1933 Act on the basis that the offering of the Shares and Warrants is exempt from registration under the 1933 Act as a "transaction by an issuer not involving any public offering" and that reliance on such exemption is predicated, in part, on Investor's representations and warranties contained in this Subscription Agreement and those of other purchasers of the Shares and Warrants. In the view of the SEC, the statutory basis for the exemption claimed by the Company in connection with the offering of Shares and Warrants would not be present if, 4 notwithstanding Investor's representations and warranties (or the representations and warranties of other subscribers), Investor has (or they have) the intention of acquiring the Shares or Warrants for resale upon the occurrence or nonoccurrence of some predetermined event. 10. Absence of Official Evaluation. Investor understands that no federal or ------------------------------ state agency has made any findings or determinations as to the fairness of the terms of an investment in the Shares and Warrants nor any recommendation or endorsement of a purchase of the Shares and Warrants. 11. Residence. If Investor is an individual, his principal residence is in --------- the country and state or other jurisdiction indicated, and his citizenship is as indicated at Item I.5, page 2, of the Purchaser Questionnaire. If Investor is a corporation, partnership, trust, estate, or other entity, its principal office is in the country and state or other jurisdiction indicated at Item III.4, page 3, of the Purchaser Questionnaire. Investor has no intention of changing his residence, citizenship, or principal office to any other country or state or jurisdiction. 12. Accpetance. Investor acknowledges that the Company shall, in its sole ---------- discretion, have the right to accept or reject his subscription, in whole or in part, for any reason or for no reason. If Investor's subscription is accepted by the Company, he shall, and he hereby agrees to, execute any and all additional documents necessary in the opinion of the Company to complete his subscription and acquisition of the Shares and Warrants. 13. Purchaser Questionnaire. Investor understands that acceptance of his ----------------------- subscription is based, in part, on the information set forth in the Purchaser Questionnaire attached hereto. Investor represents that the information set forth in the Purchaser Questionnaire is true, correct, and complete at the date hereof and agrees to notify the Company immediately of any material change in such information. Investor understands that the information furnished in response to such questionnaire is intended to enable the Company to discharge its responsibilities under the private placement exemption of the 1933 Act and certain state securities laws and that the Company will rely upon such information. Investor understands and agrees that, although the Company will use its best efforts to keep the information provided in the Questionnaire strictly confidential, the Company may present the Questionnaire and the information provided in answers to it to such parties as he may deem advisable if called upon to establish the availability under any federal or state securities laws of an exemption from registration or if the contents thereof are relevant to any issue in any action, suit or proceeding to which the Company is a party, or by which the Company is or may be bound. 14. Entity as Investor. If the Investor is a corporation, partnership, trust ------------------ or other entity (i) it is authorized and qualified to make its investment in the Shares and Warrants by the Articles (or Certificate) of Incorporation and Bylaws of the corporation or by the trust or partnership agreement, as the case may be; (ii) it has not been formed for the specific purpose of acquiring an interest in the Shares and Warrants and it has substantial business activities in addition to the investment in the Shares and Warrants; (iii) it has not been in existence for less than 90 days prior to the date hereof; (iv) the person signing this Subscription Agreement on behalf of such entity has been duly authorized by such entity to do so; and (v) on a consolidated basis, it meets the net worth requirements, as evidenced in its most recent financial statement, 5 for an investment in the Shares and Warrants. An Investor corporation, upon request of the Company or counsel to the Company, shall furnish the Company a true and correct copy of the provisions of the corporation's Articles (or Certificate) of Incorporation or Bylaws, or both, authorizing the corporation to make such investment, and shall supply herewith a copy (certified by the secretary or other authorized officer) of appropriate corporate resolutions authorizing the specific investment. In the case of a trust or partnership, the trustee or managing partner, as the case may be, shall supply herewith a true and correct copy of the provisions of the trust instrument or partnership agreement authorizing the trustee or managing partner to make such investment on behalf of the trust or partnership. If the Investor is an individual retirement account or annuity, Keogh plan, or pension, profit sharing, retirement, or other employee benefit plan within the meaning of Title I of the Employee Retirement Income Security Act of 1974 (a "Plan"), the Investor has so advised the Company by checking the following _______ [check if applicable] and the undersigned's decision to invest in the Shares and Warrants was made by a duly authorized person who is independent of the Company and its affiliates, and who did not receive any advise or recommendation from the Company or its affiliates based upon the particular facts and circumstances of the Plan or its beneficiaries. 15. Nonreliance. Investor is not relying on the Company or any of its ----------- officers, directors or agents with respect to the tax and/or economic effect if his investment in the Shares and Warrants. Except as set forth in the Disclosure Documents or herein, no representations or warranties have been made to Investor by the Company or any agent, employee or affiliate thereof and in entering into this transaction Investor is not relying upon information other than that contained in the Disclosure Documents or herein and the results of his own independent investigation. 16. Prohibitions on Cancellation Termination, Revocation, Transferability and ------------------------------------------------------------------------- Assignment. Investor hereby acknowledges and agrees that, except as may be - ---------- specifically provided herein or by applicable law, he is not entitled to cancel, terminate, or revoke this Subscription Agreement or his subscription set forth herein, and this Subscription Agreement shall survive his death or disability or any assignment of his Shares and Warrants. He further agrees that he may not transfer or assign his rights under this Subscription Agreement, and transferability of the Shares and Warrants will be restricted. 17. Indemnification of the Company. Investor agrees to indemnify and hold ------------------------------ harmless the Company and its officers, directors, employees, agents, representatives and affiliates against any and all loss, liability, claim, damage, and expenses whatsoever (including, but not limited to, any and all attorneys' fees and expenses reasonably incurred in investigating, preparing, or defending against any litigation commenced or threatened, or any claim whatsoever, through all appeals) arising out of or based upon any false representation or warranty by Investor or breach or failure by Investor to comply with any covenant or agreement made by him herein or in any other document furnished by him in connection with his subscription to purchase the Shares and Warrants. 18. Representation of Florida Resident. If Investor is a Florida resident, he ---------------------------------- agrees as follows: the Shares and Warrants referred to in this Subscription Agreement are being sold to and acquired by him in a transaction exempt from registration under Section 517.061 (11), Florida Statutes. He understands that ------- -------- the offering of Shares and Warrants has not been registered under said statute and that he has the privilege to void his purchase of the Shares and Warrants within three days after the first tender of consideration is made 6 by him to the Company or within three days after the availability of this privilege is communicated to him, whichever occurs later. 19. Notification, Discharge, Termination. Neither this Subscription Agreement ------------------------------------ nor any provisions hereof may be modified, discharged, or terminated except by an instrument in writing signed by the party against whom any waiver, change, discharge, or termination is sought. 20. Notices. Any notice, demand, or other communication that any party hereto ------- may be required, or may elect, to give to anyone interested hereunder shall be in writing and shall be sufficiently given if (a) deposited, postage prepaid, in United States mail, registered or certified, return receipt requested, addressed to such address as may be given herein; or (b) delivered personally or by fax at such address. 21. Separate Signature Pages. This Subscription Agreement may be executed ------------------------ through the use of separate signature pages or in any number of counterparts, and each of such counterparts shall, for all purposes, constitute one agreement binding on all the parties, notwithstanding that all parties are not signatories to the same counterpart. 22. Successors and Assigns. Except as otherwise provided herein, this ---------------------- Subscription Agreement shall be binding upon and inure to the benefit of Investor and his heirs, executors, administrators, successors, legal representatives, and assigns. If Investor is more than one person, the obligations of Investor shall be joint and several and the agreements, representations, warranties, and acknowledgments herein contained shall be deemed to be made by and be binding upon each such person and his heirs, executors, successors, administrators, legal representatives and assigns. 23. Survival of Representations, Warranties, Covenants and Agreements. The ----------------------------------------------------------------- representations, warranties, covenants and agreements contained herein shall survive Investor's payment for the Shares, acceptance by the Company of his subscription to purchase the Shares, and the delivery of the Shares and Warrants. 24. Entire Agreement. This Subscription Agreement contains the entire ---------------- agreement of the parties, and there are no representations, covenants, or other agreements except as stated or referred to herein. 25. Governing Law. This Subscription Agreement shall be governed by and ------------- construed in accordance with the laws of the State of Florida, both substantive and remedial. 26. Severability. If any provision of this Subscription Agreement shall be ------------ held to be void or unenforceable under the laws of any jurisdiction governing its construction or enforcement, this Subscription Agreement shall not be void or vitiated thereby, but shall be construed to be in force with the same effect as though such provision were omitted. 27. Section Headings. The section headings contained herein are for reference ---------------- purposes only and shall not in any way affect the meaning or interpretation of this Subscription Agreement. 28. Gender. Whenever (i) the singular or plural number, or (ii) the ------ masculine, feminine or neuter gender is used herein, it shall equally include the others and shall apply jointly and severally, where the context so requires. 7 29. Subscription Procedure. To subscribe for the Shares the Investor must fill ---------------------- in the following blanks and complete, execute and deliver this Subscription Agreement and the following specified documents to the Company: a. Number of Shares purchased:____________________. b. Number of Warrants acquired:___________________. c. Please indicate how to register the Shares and Warrants. i._____________________________ investor's name alone. ii.____________________________ Tenants in Common. (All parties must sign all required documents). iii.___________________________ Other (please indicate)__________. d. The Purchaser Questionnaire must be completed and returned. e. A check in the amount of $________, payable to the Company, must be delivered with this completed Agreement. IN WITNESS WHEREOF, the undersigned has executed this Subscription Agreement this ____ day of ____________, 1994. ENTITY SUBSCRIBER SIGN HERE: INDIVIDUAL SUBSCRIBER SIGN HERE: ___________________________________ __________________________________ Name of Subscriber Signature __________________________________ Name of Subsccriber By:________________________________ Address:__________________________ ___________________________________ __________________________________ Name and Title of Person Signing __________________________________ Fax No.___________________________ Address:___________________________ Social Security Number ___________________________________ __________________________________ ___________________________________ Fax No.____________________________ 8 Tax Indentification Number ____________________________________ __________________________________ Signature of Joint Subscriber (if purchased as tenants in common, joint tenants, tenants by the entirety or community property) __________________________________ Name of Joint Subscriber Address:__________________________ __________________________________ __________________________________ Fax No.___________________________ Social Security Number __________________________________ 9 ACCEPTANCE - ---------- The subscriber of ______________________ to purchase ______________________ Shares of Series B Convertible Preferred Stock of BCT INTERNATIONAL, INC., is hereby accepted this _______ day of ____________, 1994. BCT INTERNATIONAL, INC. By:___________________________ 10 EX-10.3 8 CONSULTING AGMT EXHIBIT 10.3 Draft 5/27/92 CONSULTING AGREEMENT - -------------------- AGREEMENT entered into as of the 1st day of March, 1992, between American Franchise Group, Inc., a Delaware corporation (together with its subsidiaries, the "Company"), and Henry A. Johnson ("Consultant"). WHEREAS, since March 1, 1991, Consultant has provided consulting services to the Company pursuant to an oral agreement, and the Company desires that Consultant continue to provide consulting services to the Company pursuant hereto and Consultant is agreeable to providing such services. NOW THEREFORE, in consideration of the premises and the mutual promises set forth herein, the parties hereto agree as follows: 1. For a period of 48 months from the date hereof (the "Consulting Period"), Consultant shall serve as a consultant to the Company on all matters pertaining to his knowledge of the Company's business and operations. Consultant's services shall include consultation with, and advice to, directors, officers and employees of the Company for the purpose of making Consultant's knowledge and experience available to those persons in connection with the fulfillment of their duties to the Company. 2. During the Consulting Period, the Company shall be entitled to Consultant's services for reasonable times when and to the extent requested by, and subject to the direction of the Chief Executive Officer of the Company and the President of the Company's Business Cards Tomorrow, Inc., subsidiary. 3. Consultant's services shall be rendered only at the Company's office at 3000 N.E. 30th Place, Fort Lauderdale, Florida (the "Office") or from Consultant's home at 1941 Napoleon Drive, Las Vegas, Nevada 89115, unless by mutual agreement from time to time arrangements are made for those services to be rendered elsewhere. Reasonable travel and living expenses necessarily incurred by Consultant to render services at locations other than the office or his home shall be reimbursed by the Company promptly upon receipt of proper statements with regard to the nature and amount of those expenses. Those statements shall be furnished to the Company monthly at the end of each calendar month of the Consulting Period during which any of those expenses are incurred. 4. As compensation for the consulting services provided for in Sections 1-3 above, the Company shall pay to Consultant a monthly consulting fee of $4,166.67, which shall be paid on the 10th day of each month during the Consulting Period, with the first such payment due on March 10, 1992, and the last such payment due on February 10, 1996. 5. Consultant agrees that, during the Consulting Period and thereafter, he will not disclose to anyone any trade secrets of the Company or any confidential or non-public information relating to the Company's business, operations or prospects. 6. Consultant acknowledges that it would be extremely difficult, if not impossible, to measure accurately the damages to the Company from any breach by Consultant of Section 5 of this Agreement, and that the injury to the Company from any such breach would be incalculable and irremediable. Accordingly, Consultant agrees that upon any breach of Section 5 of this Agreement, the Company's remedy at law would be inadequate, and the Company shall be entitled as a matter of right to institute legal proceedings in any court of competent jurisdiction and receive an injunction restraining the further and continued breach of Section 5 of this Agreement, and recovery of all damages to the Company incurred, by reason of conducting the activity in violation of Section 5 of this Agreement. 7. In any legal or equitable action brought with respect to this Agreement (including, but not limited to, suit for injuctive relief for a breach of the terms and provisions of Section 5 of this Agreement), the prevailing party shall be entitled to recover all of its reasonable attorneys' fees and costs in connection therewith, including those incurred at the pre- trial, trial and appellate levels. 8. This Agreement shall be binding upon and inure to the benefit of the parties hereto, their respective legal representative and to any successor to the Company, which successor shall be deemed substituted for the Company under the terms of this Agreement. 9. Any notice, request, instruction, legal process or other document to be given hereunder shall be in writing and shall be delivered personally, against receipt, or by registered or certified mail, return receipt requested, as set forth below: If to Consultant: Henry A. Johnson 1941 Napoleon Drive Las Vegas, NV 89115 If to Company: William A. Wilkerson Chief Executive Officer American Franchise Group, Inc. 3000 N.E. 30th Place Fort Lauderdale, FL 33306-1957 10. This instrument contains the entire agreement between the parties hereto with repect to the provision of consulting services by Consultant. 11. This Agreement shall be construed and enforced in accordance with the laws of the State of Florida. 12. The invalidity or unenforceability of any provision hereof shall in no way effect the validity or enforceability of any other provision. 13. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which shall be considered one and the same instrument. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. HENRY A. JOHNSON --------------------------------------- Henry A. Johnson AMERICAN FRANCHISE GROUP, INC. By: WILLIAM A. WILKERSON ------------------------------------ Chairman & Chief Executive Officer EX-10.4 9 EMPLOYMENT AGMT Exhibit 10.4 EMPLOYMENT AGREEMENT - -------------------- THIS AGREEMENT is made and entered into as of March 1, 1993, by and between BCT International, Inc., a Delaware corporation (together with its subsidiaries, "BCT") and William A. Wilkerson ("Employee"). W I T N E S S E T H: - ------------------- WHEREAS, BCT desires to secure the services of Employee, and Employee desires to furnish such services to BCT upon the terms and conditions set forth in this Agreement; and WHEREAS, Employee, by reason of the nature of Employee's duties, will be provided access to BCT's trade secrets and other confidential information and BCT desires to maintain the confidentiality of the same. NOW THEREFORE, in consideration of the mutual covenants contained herein, the parties hereto agree as follows: 1. Duties. BCT hereby employees Employee, and Employee agrees to serve BCT, as ------ its Chairman of the Board and Chief Executive Officer, or in a comparable position, for the term set forth below in paragraph 3. During the entire term of his employment, Employee shall be the chief executive officer of BCT, responsible for overall management and supervision of all the operations of BCT. Employee agrees to carry out such employment in a good and professional manner and to the reasonable satisfaction of BCT. Employee shall serve under the direction and supervision of the Board of Directors of BCT (the "Board"). Employee, in his discretion, may perform a substantial portion of his services from locations other than BCT's principal office, provided that the use of such locations does not materially impair the performance of his duties. 2. Compensation. BCT covenants and agrees that, in consideration of the ------------ services performed hereunder, it will pay to Employee at its regular and customary intervals a minimum annual salary during the term of this Agreement as follows: Year ending February 28, 1994 $225,000 Year ending February 28, 1995 $275,000 Year ending February 29, 1996 $275,000 Year ending February 28, 1997 $300,000 Year ending February 28, 1998 $300,000 Year ending February 28, 1999 $300,000 Year ending February 29, 2000 $300,000
Employee shall also be eligible for such bonuses and additional salary increases as the Board deems appropriate in its sole discretion. 3. Term. The term of Employees employment hereunder shall be through February ---- 29, 2000, subject to the termination provisions set forth in paragraphs 7, 8 and 9 hereof. 4. Benefits. Employee shall be entitled to the following benefits during the -------- period of his employment hereunder: (a) BCT shall provide Employee with an automobile of his choice, and shall pay for appropriate insurance thereon, for use by Employee in connection with his employment; provided, however, that BCT's monthly expense for this benefit shall not exceed an amount deemed reasonable by the Board. (b) BCT shall pay the reasonable cost of an annual physical examination of Employee. (c) BCT shall pay the reasonable cost of preparation of Employee's annual personal income tax returns. (d) Employee shall be entitled, in accordance with BCT's general policies for senior management, to participation in any pension, stock option, employee stock ownership and profit sharing plans, incentive/performance awards, paid vacation, health, casualty, disability and life insurance and other employment benefits as are made available from time to time by the Board. (e) BCT shall reimburse Employee for all reasonable out-of-pocket expenses incurred by him in connection with the performance of his duties hereunder upon the presentation of appropriate documentation therefor in accordance with BCT's regular procedures. 5. Disability. In the event that Employee shall be incapacitated by reason of ---------- mental or physical disability or otherwise during the term of his employment such that he is substantially prevented from performing his principal duties and services hereunder for a period of 90 consecutive days, or for shorter period aggregating 90 days during any twelve-month period, BCT thereafter shall have the right to terminate Employee's employment under this Agreement by sending written notice of such termination to Employee or his legal representative and thereupon his employment hereunder shall immediately terminate. Upon such termination, Employee shall be entitled to receive and shall be paid by BCT one- half of his salary in effect on the date of termination for the remaining term of this Agreement, paid at BCT's regular and customary intervals for the payment of salaries. Employee shall accept such payment in full discharge and release of BCT of and from any further obligations under this Agreement. 6. Death. In the event of Employee's death during the term of his employment, ----- his designated beneficiary or, if no such beneficiary shall have been designated by employee, the estate of employee, shall be entitled to receive and shall be paid by BCT one-half of Employee's salary in effect on the date of his death for the remaining term of this Agreement, paid at BCT's regular and customary intervals for the payment of salaries, in full discharge and release of BCT of and from any further obligations under this Agreement. 7. Termination for Cause. --------------------- (a) BCT shall have the right to terminate the employment of Employee hereunder for cause at any time if: (i) Employee shall be convicted by a court of competent and final jurisdiction of any crime (whether or not involving BCT) which constitutes a felony in the jurisdiction involved or shall be habitually drunk or intoxicated in public or otherwise act in such a manner as to materially adversely reflect upon the reputation of BCT; or (ii) Employee shall commit any material act of fraud, embezzlement or similar conduct against or shall breach a material fiduciary obligation to BCT; or (iii) Employee shall fail or refuse to perform in any material respect any of his duties and responsibilities as required by this Agreement, provided that termination of Employee's employment pursuant to this subparagraph 7(a) (iii) shall not constitute valid termination for cause unless Employee shall first have received written notice from the Board stating specifically the nature of such failure or refusal and affording Employee at least 30 days to correct the complained of act or omission. (b) In the event that the employment of Employee shall be terminated by BCT for cause pursuant to subparagraph 7(a)(i) or (ii) hereof, Employee shall be entitled to receive the salary provided for in paragraph 2 hereof through the date of such termination. In the event that the employment of Employee shall be terminated by BCT for cause pursuant to subparagraph 7(a)(iii) hereof, Employee shall be entitled to receive the salary provided for in paragraph 2 hereof for one month after the date of termination. Employee shall accept payment pursuant to this subparagraph 7(b) in full discharge and release of BCT of and from any further obligations under this Agreement. Nothing contained in this paragraph 7 shall constitute a waiver or release by BCT of any rights or claims it may have against Employee pursuant to paragraph 10 hereof or for actions or omissions which may give rise to an event causing termination of this Agreement pursuant to this paragraph 7. 8. Termination Without Cause. ------------------------- (a) BCT may terminate Employee's employment hereunder without cause at any time upon 30 days prior written notice, provided that in such event Employee shall be paid his minimum salary in accordance with paragraph 2 through the date set forth in paragraph 3, at BCT's regular and customary intervals for the payment of salaries. In addition, during such period Employee shall continue to receive his benefits described in paragraph 4 as in effect at the date of termination. Employee shall accept such payments and benefits in full discharge and release of BCT of and from any further obligations under this Agreement. (b) For purposes of this Agreement, the following events shall be deemed, at Employee's option, which must be exercised by written notice delivered to BCT within 30 days following occurrence of the event in question, a termination of Employee's employment hereunder without cause: (i) The location at which Employee's primary responsibilities are to be carried out is moved to any location more than 25 miles from the present location of BCT without the prior written approval of Employee. (ii) Employee's responsibilities are substantially changed without the prior written approval of Employee. (iii) Employee is instructed by the Board to implement or abide by a material decision which is made in bad faith inconsistent with the purpose and intent of this Agreement and the Board fails to rescind such decision within 10 days after Employee's written objection to such order. 9. Termination by Employee. Employee may terminate his employment hereunder, ------------------------ subject to the restrictive covenants hereinafter stated, upon giving 60 days prior written notice to BCT, in which event Employee's salary and benefits, as set forth in paragraphs 2 and 4, shall be continued through the date of termination. Employee shall accept such salary and benefits in full discharge and release of BCT of and from any further obligations under this Agreement. 10. Restrictive Convenants. ---------------------- (a) Employee recognizes and acknowledges that confidential information may exist, from time to time, with respect to the business of BCT. Accordingly, Employee agrees that he will not, during or after term of employment hereunder, except if required in connection with his duties hereunder, disclose any confidential information relating to the business of BCT to any individual or entity. The provisions of this paragraph 10(a) shall not apply to information which is or shall become generally known to the public or the trade (except by reason of Employee's breach of his obligations hereunder), information which is or shall become available in trade or other publications (except by reason of Employee's breach of his obligations hereunder), and information which Employee is required to disclose by order of a court of competent jurisdiction (but only to the extent specifically ordered by such court and, when reasonably possible, if Employee shall give BCT prior notice of such intended disclosure so that it has the opportunity to seek a protective order if it deems appropriate). (b) As used in this Agreement, "confidential information" shall mean studies, plans, reports, surveys, analyses, sketches, drawings, notes, records, unpublished memoranda or documents, and all other nonpublic information relating to BCT's activities, including, without limitation, all methods, processes, techniques, shop practices, equipment, research data, marketing and sales information, personnel data, customer lists, supplier lists, franchisee lists, employee lists, financial data, and all other techniques, know-how and trade secrets which presently or in the future are in the possession of BCT. "Confidential information" shall not include general knowledge, expertise or skills gained by Employee with respect to the industry in which BCT operates. (c) For so long as he is employed hereunder, Employee shall not engage (either as principal, agent or consultant, or through any corporation, firm or organization in which he may be an officer, director, employee, controlling stockholder, partner, member or with which he is otherwise affiliated) directly or indirectly in any activity or business anywhere which is competitive with BCT. In addition, unless he is terminated without cause pursuant to paragraph 8 hereof, Employee will not so engage in any such competitive activity for a period of three years after termination. Employee acknowledges that this paragraph shall not be construed to limit in any way Employee's obligations regarding use or disclosure of confidential information as set forth above in paragraph 10(a). (d) All memoranda, notes, records, reports, software, sketches, photographs, drawings, plans, papers, or other documents or computer-stored information made or compiled by or made available to Employee in the course of employment with BCT, including all copies thereof, are and shall be the sole and exclusive property of BCT and shall be promptly delivered and returned to BCT by Employee immediately upon termination of employment with BCT. 11. Injunction. Employee acknowledges that the services to be rendered by him ---------- are of a special, unique and extraordinary character and that, in connection with such services, he will have access to confidential information vital to BCT's business. Accordingly, Employee consents and agrees that if he violates any of the provisions of paragraph 10 hereof, BCT would sustain irreparable harm and, therefore, in addition to any other remedies which may be available to it, BCT shall be entitled to apply to any court of competent jurisdiction for an injunction restraining Employee from committing or continuing any such violation of this Agreement. Nothing in this Agreement shall be construed as prohibiting BCT from pursuing any other remedy or remedies including, without limitation, recovery of damages. 12. Modification or Elimination of Restrictions. In the event that any of the ------------------------------------------- restrictions contained in paragraph 10 hereof shall be held to be in any way an unreasonable restriction on Employee, then the court so holding may reduce the territory and/or period of time in which such restriction operates, or modify or eliminate any such restriction to the extent necessary to render such paragraphs enforceable. 13. Arbitration; Litigation. Except for the relief provided for in paragraphs ----------------------- 11 and 12, any controversy or claim arising out of or relating to this Agreement or the breach or validity of any part hereof shall be settled solely through binding arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association, and judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. The arbitrator shall have substantial knowledge and experience in the operation of companies doing business in fields similar to BCT's. The arbitration shall be conducted in Broward County, Florida. Expenses of the arbitration, including the arbitrator's fees, shall be shared equally by the parties, with the prevailing party entitled to reimbursement by the non-prevailing party. In addition, the prevailing party shall be entitled to recover from the non- prevailing party its reasonable attorney's fees and expenses incurred in connection with such arbitration and any litigation arising hereunder. 14. Employee's Address. Upon termination, with or without cause, of his ------------------ employment hereunder and for a period of one year thereafter, Employee shall advise BCT of his home and business addresses and the identity of his employer, including any changes therein. 15. Entire Agreement; Amendment. This Agreement represents the entire --------------------------- agreement between the parties with respect to the subject matter hereof and shall not be modified or affected by any prior offer, proposal, statement or representation, oral or written, made by or fore either party. Whenever the masculine pronoun is used, it includes the feminine pronoun, and the singular includes the plural, and vice versa, where the context requires. This Agreement may not be amended or modified except by an instrument in writing signed by BCT and Employee. 16. Severability, Successors and Assigns. Should any provision or clause ------------------------------------ hereof be held to be invalid, such invalidity shall not affect any other provision or clause hereof which can be given effect without such invalid provision. This Agreement shall inure to the benefit of and be binding upon BCT, its successors and assigns and upon Employee and his heirs, executors, administrators, or other legal representatives. 17. Laws Applicable. This Agreement shall be governed by and construed in --------------- accordance with the laws of the State of Florida. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the year and date first above written. BCT INTERNATIONAL, INC. By: Raymond J. Kiernan William A. Wilkerson EX-10.5 10 AGREEMENT BUS CARDS Exhibit 10.5 ESCROW AGREEMENT AND INSTRUCTIONS THIS ESCROW AGREEMENT is made by and between Business Cards Tomorrow, Inc. ("Customer") and Hence EDP ("Hence") with reference to the Customer enhanced software system ACT2/Ingrid Area Composition & Typesetting system ("ACT 2"), and the Agreement dated 5/6/93 ("the License/Sublicense Agreement") between Customer and Hence. To carry out the terms of the License/Sublicense Agreement, especially paragraph 14 thereof, Customer and Hence hereby give the following instructions to D. Steve Cameron, Esq., 9430 Olympic Boulevard, Beverly Hills, California 90212 ("Escrow Agent"): 1. Upon the execution of the License/Sublicense Agreement, Hence will deposit in escrow with Escrow Agent the source code in machine readable form for ACT 2 and the custom software modifications, enhancements, and additions thereto for Customer's use (the resultant package to be called ACT 2 with Customer enhancements). 2. The source code deposited by Hence in escrow with Escrow Agent shall be maintained by Escrow Agent for the sole benefit of Hence or its successors or assigns, including Hence's President, Douglas W. Stout ("Stout"), provided that Hence, its successors, assigns or Stout, is/are able to comply in all material respects with Hence's obligations under the License/Sublicense Agreement. 3. As compensation in full for Escrow Agent's performance of all his services hereunder, Hence shall pay to Escrow Agent a fixed fee of $100 per annum. Except as may be determined by the Court pursuant to paragraph 4 below, all expenses incurred by Escrow Agent in the performance of its duties hereunder shall be for its own account, and Customer shall not be responsible therefor. 4. In the event Hence, its successors, assigns or Stout is/are unable to comply in all material respects with Hence's obligations under the License/Sublicense Agreement, (i.e. Hence is in default of a material provision of the License/Sublicense Agreement or Hence has ceased doing business) Escrow Agent, on the written demand of Customer pursuant to paragraph 14 of the License/Sublicense Agreement shall deliver the source code to an authorized representative of Customer. Escrow Agent shall not be or become liable for damages or otherwise to Hence or to any person or entity as a result of its compliance with Customer's demands pursuant to said paragraph 14. 5. Escrow Agent shall act hereunder as an escrow holder only and is not responsible or liable in any manner whatever for the sufficiency, correctness, genuineness or validity of the source code deposited with it in escrow, or with respect to the rights or liabilities of any person or entity executing this escrow agreement and instruction or the License/Sublicense Agreement. 6. Escrow Agent shall not be liable for any error or judgment or for any act done or omitted by it in good faith, or for any mistake of fact or law except for its own willful misconduct, and Escrow Agent shall have no duties to anyone except Customer and Hence with respect to this escrow agreement and escrow instructions. 7. No notices or demand to Escrow Agent shall be of any effect unless in writing. No change of these instruction shall be of any effect unless in writing signed by Customer and Hence, and no such writing shall be of any effect unless given to Escrow Agent. 8. All notices and writings to be given hereunder shall be delivered in person or forwarded by fax or ordinary mail addressed to Customer, Hence and/or Escrow Agent at such addresses and fax numbers as may be designated by them in writing to the other parties. 9. This escrow agreement and instructions shall be binding on the personal representatives and successors and assigns of the parties hereto, and shall be interpreted in accordance with the laws of the State of California. 10. Unless sooner terminated or canceled by Customer upon 30 days written notice to Hence and Escrow Agent, the term of this escrow agreement and instructions shall commence on the execution of the License/Sublicense Agreement and continue for a period of 60 days after the termination, cancellation, or expiration of the License/Sublicense Agreement. 11. This escrow agreement and instructions constitute the sole escrow agreement and instructions between the parties and supersede all prior understandings, writings, or other communications among the parties as to an escrow agreement and instructions under the License/Sublicense Agreement. Dated: BUSINESS CARDS TOMORROW, INC. By: Dated: 5/6/93 Hence EDP By: Dated: 4/6/93 D. Steve Cameron SOURCE LICENSE AGREEMENT This Agreement is made by and between Hence EDP (hereinafter HENCE), 2021 Sperry Avenue Suite 20, Ventura, California 93003, and the following licensee (hereinafter LICENSEE). Licensee: Business Cards Tomorrow, Inc. Address: 3000 Northeast 30th Place, Fifth Floor, Fort Lauderdale, FL 33306 RECITALS HENCE is the owner of all rights and interest in and to the Licensed Source Program(s) together with all of the related materials and documentation set forth in Schedule "A" to this Agreement, and other related material which HENCE may from time-to-time make available. Such programs and related materials are hereinafter collectively referred to as the "Licensed Source Program". LICENSEE desires to acquire from HENCE the non-exclusive right to use the Licensed Source Program on the terms set forth in this Agreement. 1. LICENSE GRANT AND LIMITATIONS. (a) HENCE hereby grants and LICENSEE hereby accepts a non-transferable, non- assignable, and non-exclusive right and license to use the Licensed Source Program solely in LICENSEE's business and in that of its wholly owned subsidiaries and divisions. (b) This Agreement shall become effective from the date on which it is accepted by HENCE and will remain in effect until terminated by HENCE or by LICENSEE as set forth in this Agreement. (c) HENCE retains title to the Licensed Source Program, and such additional software programs and related materials and documentation which HENCE may from time-to-time make available. HENCE retains all rights and copyrights, trademarks, service marks, or other proprietary markings. (d) In using the Licensed Source Program, the LICENSEE shall reproduce and include thereon HENCE's copyright notice, trademark, service mark, or other proprietary markings, together with any confidential legends. 2. LICENSEE'S OBLIGATIONS. (a) LICENSEE may use the Licensed Source Program and all resultant software, developments, improvements or modifications only in its own businesses and that of its wholly owned subsidiaries and divisions. (b) LICENSEE shall perform all installation, training, and maintenance with respect to the Licensed Source Program. (c) LICENSEE acknowledges and agrees that the Licensed Source Program, as well as all resultant software, developments, improvements or modifications, together with all related materials and documentation, is a trade secret that is to remain the property of HENCE. LICENSEE shall not disclose any such information to any third party other than to its wholly owned subsidiaries and divisions pursuant to the terms of this Agreement. LICENSEE shall instruct all personnel to keep such information confidential. (d) Except for the use by Licensee and its wholly owned subsidiaries and divisions, LICENSEE shall not copy, or permit anyone else, to copy, in whole or in part, the Licensed Source Program, including data or program files provided by HENCE under this Agreement without the expressed written consent of HENCE. (e) LICENSEE agrees that any disclosure of the Licensed Source Program in contravention of the terms of this Agreement constitutes a material breach of this Agreement and shall terminate the license granted by this Agreement. LICENSEE further agrees that it shall be strictly liable for all damages to HENCE that result from any such improper disclosure of the Licensed Source Program. (f) LICENSEE shall not use the Licensed Source Program, or any resultant software, developments, improvements or modifications to compete with HENCE. Any such use shall constitute a material breach of this Agreement, and LICENSEE shall be strictly liable for all damages to HENCE as a result. 3. CONSIDERATION FOR SOURCE LICENSE. (a) The consideration to be paid by LICENSEE for the Licensed Source Program is $250,000.00. (b) LICENSEE shall pay all sales, use, excise or other taxes that may be imposed by virtue of this Agreement or upon the use of the Licensed Source Program. 4. REPLACEMENT COPIES. HENCE shall send or transmit to LICENSEE, within ten working days after written notice by LICENSEE, a replacement copy of any Licensed Source Program that is lost or damaged. 5. WARRANTY (a) HENCE hereby warrants its ownership and marketing rights to the Licensed Source Program, and that the Licensed Source Program as delivered by HENCE is capable operating in conformance with the Licensed Source Program's applicable description. (b) EXCEPT AS SPECIFICALLY PROVIDED IN THIS PARAGRAPH, HENCE MAKES NO WARRANTIES EITHER EXPRESS OR IMPLIED AS TO ANY MATTER WHATSOEVER, INCLUDING, WITHOUT LIMITATIONS, THE CONDITION OF THE LICENSED SOURCE PROGRAM, ITS MERCHANTABILITY, OR ITS FITNESS FOR ANY PARTICULAR USE. 6. INDEMNITY (a) If notified promptly in writing of any judicial action brought against LICENSEE based on an allegation that LICENSEE's use of the Licensed Source Program infringes a United States patent or copyright, any rights of a third party or constitutes misuse or misappropriation of a trade secret ("Infringement"), HENCE will defend such action at its expense and will pay the costs and damages awarded in any such action or the costs of settling such action, provided that HENCE shall have the sole control of the defense of any such action and all negotiations for its settlement or compromise, In the event that a final injunction shall be obtained against LICENSEE's use of the Licensed Source Program by reason of Infringement, or in HENCE's opinion be likely to become the subject of a claim of Infringement, HENCE may at its option and expense either: (i) secure for LICENSEE the right to continue to use the Licensed Source Program as contemplated hereunder; or (ii) replace or modify the licensed Program to make its use hereunder non-infringing while being capable of performing the same function. If neither option is reasonably available to Hence, then this Agreement may be terminated at the option of either party hereto without further obligation or liability. (b) HENCE shall have no liability for any claim of infringement based on LICENSEE's use or combination of the Licensed Source Program with products or data of the type for which the Licensed Source Program was neither designed nor intended. 7. LIMITATIONS OF LIABILITY (a) HENCE SHALL NOT BE LIABLE FOR LOSS OF PROFIT, LOSS OF BUSINESS, OR OTHER FINANCIAL LOSS WHICH MAY BE CAUSED BY, DIRECTLY OR INDIRECTLY, THE INADEQUACY OF THE LICENSED SOURCE PROGRAM FOR ANY PURPOSE OR USE THEREOF OR BY ANY DEFECT OR DEFICIENCY THEREIN. (b) LICENSEE agrees that, except as provided in Paragraph 5 (Warranties), HENCE's liability for damages, if any, shall not exceed the consideration paid to HENCE by LICENSEE under this Agreement. No action, regardless of form, arising out of any transaction under this Agreement may be brought by either party more than one year after the injured party has knowledge of the occurrence which gives rise to the cause of such action. 8. TERMINATION (a) Basis for termination by HENCE: HENCE shall have the right without obligation or liability to LICENSEE: (i) to terminate this Agreement if LICENSEE fails to pay the full consideration due under this Agreement; or (ii) if LICENSEE commits any other breach of this Agreement, and, if remediable, fails to remedy such a breach within thirty (30) days after written notice by HENCE of such a breach; or (iii) if LICENSEE ceases business; or (iv) if a petition in bankruptcy is filed by or against LICENSEE; or (v) if a receiver, trustee in bankruptcy or other similar officer is appointed to take charge of all or part of LICENSEE's property. LICENSEE's obligation to pay the full consideration for the Licensed Source Program shall survive the termination of this Agreement by HENCE. (b) Basis for Termination by LICENSEE: LICENSEE shall have the right, without further obligation or liability to HENCE, except as specified in Paragraph 2 (LICENSEE's Obligations), and Paragraph 8(a) (Termination) to terminate this Agreement if HENCE commits any breach of this Agreement and fails to remedy such breach within thirty (30) days after written notice by LICENSEE of such breach. (c) Disposition of Licensed Source Program on Termination: LICENSEE's obligation to pay the full consideration shall survive the termination of this Agreement. Upon the expiration or termination of this Agreement for any reason, the license and all other rights granted hereunder to LICENSEE shall immediately cease, and LICENSEE shall immediately: (I) return the Licensed Source Program to HENCE together with all documentation, notes and other material respecting the License Program; (ii) purge all copies of the Licensed Source Program or any portion thereof from all systems and from any computer storage medium or device on which LICENSEE has placed or permitted others to place the Licensed Source Program; and (iii) give HENCE a written certification that through its best efforts and to the best of its knowledge, LICENSEE has complied with all of its obligations under Paragraph 8(c). 9. GENERAL PROVISIONS (a) Unless otherwise provided by this Agreement, any notice required or permitted by this Agreement to either party shall be deemed to have been duly given if in writing and delivered personally, sent via facsimile, or mailed by first-class mail, postage prepaid and addressed to HENCE and LICENSEE at the address contained in this Agreement or at such other addresses as HENCE and LICENSEE may give from time to time. (b) LICENSEE shall not assign this Agreement or its rights hereunder without the prior written consent of HENCE. Any attempt to make such an assignment without HENCE's consent shall be void. (c) HENCE and LICENSEE agree that this Agreement shall be modified only by a written agreement duly executed by persons authorized to execute agreements on their behalf. (d) HENCE and LICENSEE agree that no failure to exercise, and no delay in exercising any right, power, or privilege under this Agreement on the part of either party shall operate as a waiver of any right, power, or privilege hereunder. HENCE and LICENSEE further agree that no single or partial non exercise of any right, power, or privilege under this Agreement shall preclude further exercise thereof. (e) If any legal action or proceeding is necessary to enforce the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys' fees in addition to any other relief to which that party may be entitled. This provision shall be construed as applicable to the entire Agreement. (f) If any or part of this Agreement is found or deemed by a court of competent jurisdiction to be invalid or unenforceable, that part shall be severable from the remainder of this Agreement and shall not cause the invalidity of unenforceability of the remainder of this Agreement. (g) This Agreement shall be deemed to have been made in, and shall be construed pursuant to, the laws of the State of California. (h) HENCE and LICENSEE acknowledge and agree that this Agreement is the complete and exclusive statement of the mutual understanding of the parties and that it supersedes and cancels all previous written and oral agreements and communication relating to the subject matter of this Agreement. Accepted By: HENCE Name: Douglas W. Stout Title: President Date: 5/6/93 LICENSEE Name: Kurt Nielsen Title: VP R & D Date: 4/15/93 EXHIBIT B PROGRAM LICENSE AGREEMENT PERPETUAL LICENSE This Agreement is made by and between Hence EDP (hereinafter HENCE), 2021 Sperry Avenue Suite 20, Ventura, California 93003, and the following licensee (hereinafter CUSTOMER). Licensee: Business Cards Tomorrow, Inc. Address: 3000 Northeast 30th Place, Fifth Floor, Fort Lauderdale, FL 33306 1. PROGRAM LICENSE (a) HENCE hereby grants and Customer hereby accepts a perpetual non- transferable, non-assignable, and non-exclusive right and license to use the Licensed Program(s) together with all of the related materials and documentation set forth in Schedule "A" to this Agreement, and other related materials which HENCE may from time-to-time make available. Such programs and related materials are hereinafter collectively referred to as the licensed Program. (b) The use of the Licensed Program shall be limited to installation and use on a single Central Processing Unit (CPU) designated by model, serial number and location, or a Local Area Network of CPU's (LAN) designated by model, serial number (of network) and location, as set forth in Schedule "B" to this Agreement. If the Licensed Program will be used on more than one CPU or LAN, an additional license will be required for each CPU or LAN. The CPU or LAN is hereinafter called SYSTEM. (c) CUSTOMER shall have the right to transfer the location of the SYSTEM or transfer the Licensed Program to a different System from time-to-time, including temporary transfers due to malfunctions of the designated SYSTEM, provided, however, that prior written notice shall be furnished to HENCE for any permanent transfer and that the Licensed Program shall not be installed and used on more than one SYSTEM at a time. (d) The rights and license granted CUSTOMER to use the Licensed Program are restricted solely and exclusively to the CUSTOMER (or a declared subsidiary or affiliate of CUSTOMER and identified to HENCE as a subsidiary or affiliate in Schedule "B"), and may not be assigned, sub-licensed or subleased or otherwise made available for use by third parties. For purposes of this Agreement, use is defined as copying any portion of the Licensed Program's instructions or data from storage units or media into a CPU for processing. (e) CUSTOMER shall have no right to assign this Agreement without prior written consent of HENCE, except that CUSTOMER shall have the right upon prior written notice to HENCE to assign without such consent to any company succeeding to all or substantially all of CUSTOMER's business and assets, provided that such assignee shall sign an agreement with HENCE acknowledging said assignment and the acceptance of all terms, conditions, and obligations of this Agreement as imposed on CUSTOMER herein. In the event of such assignment, CUSTOMER's rights under this Agreement shall be terminated, and CUSTOMER's obligations under this Agreement shall be discharged, except for the protection, security and non- disclosure obligations assumed by CUSTOMER on signing this Agreement. 2. TERM This Agreement is effective from the date on which it is accepted by HENCE and will remain in effect until terminated by HENCE or by CUSTOMER as set forth in this Agreement. 3. CONSIDERATION The consideration for this Agreement is $40,000.00, plus installation fees outlined in Schedule E, payable as follows: (a) The sum of $20,000.00 in lawful money of the United States of signing of this Agreement by CUSTOMER. (b) The sum of $20,000.00 in lawful money of the United States 30 days after installation and training. (c) Fees for optional installation and training (Schedule E) will be separately invoiced and will be payable 30 days after installation and training. 4. INSTALLATION AND TRAINING (a) The Licensed Program will be delivered 30 to 60 days after execution of this Agreement by HENCE. If an INSTALLATION and TRAINING option are outlined in Schedule E, HENCE will install the Licensed Program on CUSTOMER's designated SYSTEM, and perform any necessary modifications required to permit the full use thereof by CUSTOMER in accordance with that option. CUSTOMER will provide all necessary computer time. (b) INSTALLATION is scheduled for May 1, 1993 and will take place then unless both parties agree to a difference schedule prior to that date. (c) After installation, HENCE will conduct training at the CUSTOMER site, on the operation and use of the Licensed Program. 5. PROGRAMMING SERVICES (a) HENCE shall, at no cost to CUSTOMER, correct Licensed Program errors detected by CUSTOMER during the period ended 180 days after the completion of the installation, provided that the error can be recreated with the latest release of the Licensed Program. (b) If HENCE is called upon by CUSTOMER to correct an error, and such error is found to be caused by CUSTOMER's misuse of the Licensed Program, CUSTOMER supplied data, SYSTEM or operator failure of any other cause not inherent in the Licensed Program, HENCE reserves the right to charge CUSTOMER for such service on a time and materials basis, at HENCE's standard rates then in effect. 6. PERMISSION TO COPY OR MODIFY LICENSED PROGRAM (a) CUSTOMER shall not copy, or permit anyone else to copy, in whole or part, the Licensed Program, including data or program files provided by HENCE under this Agreement without the express written consent of HENCE. (b) CUSTOMER agrees that any disclosure of the Licensed Program to a third party constitutes a material breach of this Agreement and shall terminate the license granted by this agreement in addition to the other methods of termination set forth in Paragraph 12 of this Agreement. (c) CUSTOMER further agrees that it shall be strictly liable for all damages to HENCE that result from any disclosure of the Licensed Program to any third party. (d) CUSTOMER may not modify any portion of the Licensed Program, without express written consent of HENCE. 7. REPLACEMENT COPIES HENCE shall send or transmit to CUSTOMER, within 3 working days after notice by CUSTOMER, a replacement copy of any Licensed Program that is lost or damaged. The cost for such replacement will be limited to the costs of the storage media, computer time and deliver or telephone line time. 8. PROTECTION AND SECURITY (a) The ideas and expressions thereof contained in the Licensed Program are acknowledged to be proprietary information belonging to HENCE. The Licensed Program is provided by HENCE to CUSTOMER in confidence and solely for the private use of CUSTOMER as expressly provided herein. (b) CUSTOMER shall not provide, disclose, or permit to be disclosed all or any part of the Licensed Program except as necessary for the authorized use thereof. (c) CUSTOMER shall adopt and follow reasonable procedures to maintain the confidentiality of the Licensed Program, and agrees to take appropriate action, by agreement or otherwise, with its employees or other persons permitted access to the Licensed Program, and to satisfy its obligations under this Agreement particularly with respect to use, copying modification, protection and security of the Licensed Program. (d) CUSTOMER acknowledges that HENCE retains title of the Licensed Program and that HENCE shall be free to license the Licensed Program to any other person, firm, corporation or governmental entity at any time for any purpose whatsoever. 9. WARRANTY (a) HENCE hereby warrants its ownership and marketing rights to the Licensed Program, and that the Licensed Program as delivered by HENCE, if properly installed in accordance with HENCE's instructions, is capable operating in conformance with the Licensed Program's applicable description as set forth during training and in Schedule "C" (Options and Enhancements). (b) EXCEPT AS SPECIFICALLY PROVIDED IN THIS SECTION, HENCE MAKES NO WARRANTIES EITHER EXPRESS OR IMPLIED AS TO ANY MATTER WHATSOEVER, INCLUDING, WITHOUT LIMITATIONS, THE CONDITION OF THE LICENSED PROGRAM, ITS MERCHANTABILITY, OR ITS FITNESS FOR ANY PARTICULAR USE. 10. INDEMNITY (a) If notified promptly in writing of any judicial action brought against CUSTOMER based on an allegation that CUSTOMER's use of the Licensed Program infringes a United States patent or copyright, any rights of a third party or constitutes misuse or misappropriation of a trade secret ("Infringement"), HENCE will defend such action at its expense, will keep customer advised of the proceedings and will pay the costs and damages awarded in any such action or the costs of settling such action, provided that HENCE shall have the sole control of the defense of any such action and all negotiations for its settlement or compromise. In the event that a final injunction shall be obtained against CUSTOMER's use of the Licensed Program by reason of Infringement, or in HENCE's opinion be likely to become the subject of a claim of Infringement, HENCE may at its option and expense either: (i) secure for CUSTOMER the right to continue to use the Licensed Program as contemplated hereunder; or (ii) replace or modify the licensed Program to make its use hereunder non-infringing while being capable of performing the same function. If neither option is reasonably available to Hence, then this Agreement may be terminated at the option of either party hereto without further obligation or liability other than as provided in Section 12 (Termination) hereof except that HENCE shall promptly refund to CUSTOMER that portion of the License fee payable hereunder, obtained by multiplying said price by a fraction, the denominator of which is 36 months, and the numerator of which is 36 months less the number of full months since execution of this Agreement by HENCE. (b) Any modification or attempted modification of the Licensed Program by CUSTOMER or any failure by CUSTOMER to implement any improvements or updates to the Licensed Program as supplied by HENCE shall void this indemnity unless CUSTOMER has obtained prior written authorization from HENCE permitting such modification, attempted modification or failure to implement. HENCE shall have no liability for any claim of infringement based on CUSTOMER's use or combination of the Licensed Program with products or data of the type for which the Licensed Program was neither designed nor intended. 11. LIMITATIONS OF LIABILITY (a) HENCE SHALL NOT BE LIABLE OR LOSS OF PROFIT, LOSS OF BUSINESS, OR OTHER FINANCIAL LOSS WHICH MAY BE CAUSED BY, DIRECTLY OR INDIRECTLY, THE INADEQUACY OF THE LICENSED PROGRAM FOR ANY PURPOSE OR USE THEREOF OR BY ANY DEFECT OR DEFICIENCY THEREIN. (b) CUSTOMER agrees that, except as provided in Paragraph 10 (Indemnity), HENCE's liability for damages, if any, shall not exceed the charges paid to HENCE by CUSTOMER for use of the Licensed Program under this Agreement. No action, regardless of form, arising out of any transaction under this Agreement may be brought by either party more than one year after written notification by the injured party that he has knowledge of the occurrence which gives rise to the cause of such action. 12. TERMINATION (a) Basis for termination by HENCE. HENCE shall have the right without obligation or liability to CUSTOMER: (i) to terminate this Agreement if CUSTOMER is delinquent in making payments of any sum due under this Agreement and continues to be delinquent for a period of sixty (60) days after the last day payment is due, provided, however, a written notice is given to CUSTOMER by HENCE of the expiration date of the aforementioned sixty (60) day delinquency period at least ten (10) days prior to the occurrence of said expiration date; or (ii) to terminate this Agreement if CUSTOMER commits any other breach of this Agreement and fails to remedy such a breach within thirty (30) days after written notice by HENCE of such a breach. CUSTOMER'S obligation to pay all accrued charges shall survive the termination of this Agreement. HENCE's termination of this Agreement and repossession of the Licensed Program shall be without prejudice to any other remedies that HENCE may lawfully have. (b) Basis for Termination by CUSTOMER. CUSTOMER shall have the right, without further obligation or liability to HENCE, except as specified in Section 8 (Protection and Security), and 12(c) (Disposition of Licensed Program on Termination) to terminate this Agreement if HENCE commits any breach of this Agreement and fails to remedy such breach within thirty (30) days after written notice by CUSTOMER of such breach, in which event, HENCE shall reimburse CUSTOMER in the same manner as for the removal of the Licensed Program due to infringement under Section 10 (Indemnity). (c) Disposition of Licensed Program on Termination. Upon the expiration or termination of this Agreement for any reason, the license and all other rights granted hereunder to CUSTOMER shall immediately cease, and CUSTOMER shall immediately: (i) return the Licensed Program to HENCE together with all documentation, notes and other material respecting the License Program; (ii) purge all copies of the Licensed Program or any portion thereof from all systems and from any computer storage medium or device on which CUSTOMER has placed or permitted others to place the Licensed Program; and (iii) give HENCE a written certification that through its best efforts and to the best of its knowledge, CUSTOMER has complied with all of its obligations under Section 12(c). 13. SALES AND USE TAXES There shall be added to the charges applicable under this Agreement amounts equal to any taxes, however designated, levied or based on such charges or upon this Agreement or services rendered in connection with any of the foregoing, or any taxes or amounts in lieu thereof paid or payable by HENCE in respect of the foregoing, exclusive of ordinary personal property taxes assessed against or payable by HENCE and taxes based upon net income. 14. SUBSEQUENT MAINTENANCE (a) HENCE agrees to provide continuing maintenance and enhancements for an hourly fee based on HENCE's rates which are outlined in Section "D" (Maintenance Fees) of this License. HENCE reserves the right to change this fee or rate from time to time and agrees to give CUSTOMER written notification 90 days before such an increase. (b) Response time for maintenance will depend on HENCE's workload of other clients with similar requirements, but the highest priority will be given to a situation where CUSTOMER is inoperative because the LICENSED PROGRAM is failing. 15. GENERAL PROVISIONS (a) This Agreement and all matters relating to it or obligations arising in respect to it shall be governed by the laws by the State of California. Venue for all disputes arising from this Agreement shall be Los Angeles, California. (b) Any waiver of HENCE of any particular breach hereunder by CUSTOMER shall not constitute a continuing waiver or a waiver of any other breach or default, and any waiver of CUSTOMER of any particular breach hereunder by HENCE shall not constitute a continuing waiver or a waiver of any other breach or default. (c) Any provisions in this Agreement that may be invalid or illegal in any State shall fall by itself in that State, but shall in no way be held to invalidate any of the remaining provisions otherwise not invalid or illegal. (d) This Agreement expresses the entire understanding of the parties with reference to the subject matter hereof, and no representations or agreements modifying or supplementing the terms of the Agreement shall be valid unless in writing signed by a person authorized to sign agreements on behalf of each party. (e) The term "this Agreement" as used herein includes any future written Agreements, modifications, amendments, or supplements made in accordance herewith. (f) The foregoing terms and conditions shall prevail, regardless of any variations in the terms and conditions of any order submitted by CUSTOMER. (g) If any legal action or proceeding is necessary to enforce the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys' fees in addition to any other relief to which that party may be entitled. This provision shall be construed as applicable to the entire Agreement. Accepted By: HENCE Name: Douglas W. Stout Title: President Date: 5/6/93 LICENSEE Name: Kurt Nielsen Title: VP R & D Date: 4/15/93 SCHEDULE A LICENSED PROGRAM The Licensed Programs and related materials to be provided by HENCE to CUSTOMER under this Agreement are as follows: Standard ACT 2 System, including all software outlined by the Hence EDP ACT 2 User's Manual. SCHEDULE B DESIGNATED SYSTEM FOR LICENSED PROGRAM 1. NAME OF INSTALLATION: 2. LOCATION: 3. SYSTEM MANUFACTURER, TYPE, AND MODEL NUMBER: (To be determined) 4. SYSTEM SERIAL NUMBER: (To be determined) 5. OPERATING SYSTEM: (Novell NetWare, version to be determined) SCHEDULE C OPTIONS & ENHANCEMENTS Standard ACT 2 System, any additional options or enhancements will be determined and priced during integration. SCHEDULE D MAINTENANCE FEES SCHEDULE E INSTALLATION & TRAINING Installation and training in accordance with preceding Agreement between Hence EDP and BCT. EXHIBIT C EX-10.6 11 NOTE AGREEMENT Exhibit 10.6
- --------------------------------------------------------------------------------------------------------------------------------- BCT Delray, Inc. Carney Bank Loan Number 2030357-03 - ------------------------------ --------------- 1395 NW 17th Avenue 1101 N. Congress Avenue Date 5/27/93 - ------------------------------ ---------------------- Delray Bch, FL 33445 Boynton Beach, FL 33426 Maturity Date 5/27/98 - ------------------------------ ------------- BORROWER'S NAME AND ADDRESS LENDER'S NAME AND ADDRESS Loan Amount $ 310,000.00 "I" includes each borrower above, "You" means the lender, its -------------- jointly and severally. successors and assigns. Renewal Of ------------------------------------------------------------------------------------------------------------------------------- I promise to pay to you, or your order, at your address listed above the PRINCIPAL, sum of **Three Hundred Ten Thousand and xx/100********************************** Dollars $ 310,000.00
[X] Single Advance: I have received all of this principal sum. No additional advances are contemplated under this note. [_] Multiple Advance: The principal sum shown above is the maximum amount of principal I can borrow under this note. As of today I have received the amount of $___________ and future principal advances are contemplated. [_] Conditions: The conditions for future advances are ____________________ _______________________________________________________________________ _______________________________________________________________________ [_] Open-End Credit: You and I agree that I may borrow up to the maximum amount of principal more than one time. This feature is subject to all other conditions and expires no later than________________________. [_] Closed-end Credit: You and I agree that I may borrow up to the maximum only one time (and subject to all other conditions). PURPOSE: The purpose of this loan is Business: Equipment Purchases ------------------------------------------- INTEREST: I agree to pay interest on the principal balance(s) owing from time to time as stated in this section. Interest will be calculated on a _______________ 360/Actual ----------------------------------------------- [_] Fixed Rate: I agree to pay interest at the fixed, simple rate of 8.50 % per year. ______ [_] Variable Rate: I agree to pay interest at the initial simple rate of ________% per year. This rate may change as stated below. [_] Index Rate: The future rate will be ________ the following index rate:___________________________________ ______________________________________________ ______________________________________________ [_] No Index: The future rate will not be subject to any internal or external index. It will be entirely in your control. [_] Frequency and Timing: The rate on this note may increase as often as ____________________________________ An increase in the interest rate will take effect _________________________________________ [_] Limitations: The rate on this note will not at any time (and no matter what happens to any index rate used) go above or below these limits. [_] Maximum Rate: The rate will not go above 25% --------- [_] Minimum Rate: The rate will not go below _________ POST-MATURITY RATE: I agree to pay interest on the unpaid balance owing after maturity and until paid in full as stated below. [_] on the same fixed or variable rate basis in effect before maturity (as indicated above). [_] at a rate equal to 25% -------------. [X] ADDITIONAL CHARGES: In addition to interest, I [_] have paid [X] agree to pay the following additional charges ___________________ See Settlement Statement -------------------------------------------------------- PAYMENTS: I agree to pay this note as follows: [_] Interest: I agree to pay accrued interest _____________________________ _____________________________________________________________ [_] Principal: I agree to pay the principal ______________________________ ____________________________________________________________ [X] Installments: I agree to pay this note in 60 payments. The first ---- payment will be in the amount of $ 4929.39 and will ----------- be due on June 27, 1993 . A payment of $ 4929.39 ----------------- ----------- will be due on the 27th day of each month thereafter. ------ ------- The final payment of the entire unpaid balance of principal interest will be due May 27, 1988 . -------------- [_] Effect of Variable Rate: An increase in the interest rate will have the following effect on the payments: [_] The amount of each scheduled payment will be increased. [_] The amount of the final payment will be increased. [_] ___________________________________________________________________ ADDITIONAL TERMS: ________________________________________________________________________________ SECURITY: I give you a security interest in the following: (1) any property of mine; whether I own it now or in the future, which is in your possession (This includes, but is not limited to, property I give you for safekeeping, collection, or exchange, and all dividends and distributions from the property.); (2) the property described below, together with all parts, accessories, repairs, improvements and accessions to the property and all proceeds and products from the property. [X] Inventory: All Inventory wherover it is located which I own now or may own in the future, which I will sell or lease, or which has been or will be supplied under contracts of service, or which are raw materials, work in process, or materials used or consumed in my business. [X] Equipment: All equipment which I own now or may own in the future including, but not limited to, all machinery, vehicles, furniture, fixtures, manufacturing equipment, farm machinery and equipment, show equipment, office and recordkeeping equipment, and parts and tools. Any equipment described in a list or schedule which I give to you will also be included in the secured property, but such a list is not necessary for a valid security interest in my equipment. [_] Farm Products: All farm products which I own now or may own in the future including, but limited to: (a) all poultry and livestock and their young, along with their products and produce. (b) all crops, annual or perennial, and all products of the crops; and (c) all feed, seed, fertilizer, medicines, and other supplies used or produced in my farming operations. [X] Accounts, Instruments, Documents, Chattel Paper and Other Rights to Payment: All rights I have I have now or may have in the future payment of money including, but not limited to: (a) payment for goods sold or leased or for services rendered, whether or not I have earned such payment by performance; and (b) rights to payment arising out of all present and future debt instruments, chattel paper and loans and obligations receivable. The above include any rights and interests (including all liens and security interests) which I may have by law or agreement against any account debtor or obligor of mine. [X] General Intangibles: All general intangibles I own now or may own in the future including, but limited to, tax refunds, applications for patents, patents copyrights, trademarks, trade secrets, good will, trade names, customer lists, permits and franchises, and the right to use my name. [_] Additional Property: Described as follows: Description of real estate if the above property is crops, timber, minerals (Including oil or gas) or fixtures:_____________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ Name of record owner, if not me:________________________________________________ [_] If checked, this security agreement should be filed in the real estate records. - -------------------------------------------------------------------------------- Any person who signs within this box does so to give you a security interest in the property described above. This person does not promise to pay the note. Signed Date - -------------------------------------------------------------------------------- I will use the property listed as security above for: [_] farming operations [X] business purposes [_] ______________________________________________________ [X] If checked, this note is secured by a separate Security Agreement ----------------------------- ________________________________________________________________________________ dated May 27, 1993. (Failure to list a prior security agreement here does not -------------- mean that the agreement does not secure this note.) SIGNATURES: I AGREE TO THE TERMS SET OUT ON THE FRONT AND BACK OF THIS AGREEMENT, I have received a copy of this document on today's date. BCT Delray, Inc. X ______________________________________________________________________________ Peter Gaughn, President -------------------------------------------------------------------------- X ______________________________________________________________________________ -------------------------------------------------------------------------- X ______________________________________________________________________________ -------------------------------------------------------------------------- SECURITY AGREEMENT DATE May 27, 1993 --------------------------
- ---------------------------------------------------------------------------------------- DEBTOR BCT Delray Inc SECURED Carney Bank PARTY - ---------------------------------------------------------------------------------------- BUSINESS OR RESIDENCE 1395 NW 17th Avenue ADDRESS 11O1 N Congress Avenue ADDRESS - ---------------------------------------------------------------------------------------- CITY CITY STATE & Delay Beach, FL 33445 STATE & Boynton Beach, FL 33426 ZIP CODE ZIP CODE - ----------------------------------------------------------------------------------------
1. SECURITY INTEREST AND COLLATERAL. To secure the payment and performance of each and every debt,liability and obligation of every type and description which Debtor may now or at any time hereafter owe to Secured Party (whether such debt, liability or obligation now exists or is hereafter created or incurred, and whether it is or may be direct or indirect, due to become due, absolute or contingent, primary or secondary, liquidated or unliquidated, or joint, several or joint and several; all such debts, liabilities and obligations being herein collectively referred to as the "Obligations"), Debtor hereby grants Secured party a security interest (herein called the "Security Interest") in the follwing property (herein called the "Collateral") (check applicable boxes and complete information): (a) INVENTORY: [X] All inventory of Debtor, whether now owned or hereafter acquired and wherever located. (b) EQUIPMENT, FARM PRODUCTS AND CONSUMER GOODS: [_] All equipment of Debtor, whether now owned or hereafter acquired, including but not limited to all present and future machinery, vehicles, furniture, fixtures, manufacturing equipment, farm machinery and equipment,shop equipment, office and recordkeeping equipment, parts and tools, and the goods described in any equipment schedule or list herewith or hereafter furnished to Secured Party by Debtor (but no such schedule or list need be furnished in order for the security interest granted herein to be valid as to all of Debtor's equipment). [_] All farm products of Debtor, whether now owned or hereafter acquired, including but not limited to (I) all poultry and livestock and their young, products thereof and produce thereof, (ii) all crops, whether annual or perennial, and the products thereof, and (iii) all feed, seed, fertilizer, medicines and other supplies used or produced by Debtor in farming operations. The real estate concerned with the above described crops growing or to be grown is: _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ and the name of the record owner is:___________________________________ [_] The following goods or types of goods:_________________________________ _______________________________________________________________________ _______________________________________________________________________ (c) ACCOUNTS AND OTHER RIGHTS TO PAYMENTS: [X] Each and every right of Debtor to the payment of money, whether such right to payment arises out of a sale, lease or other disposition of goods or other property by Debtor, out of a rendering of services by Debtor, out of a loan by Debtor, out of the overpayment of taxes or other liabilities of Debtor, or otherwise arises under any contract or agreement, whether such right to payment is or is already earned by performance, and howsoever such right to payment may be evidenced, together with all other rights and interests (including all liens sercurity interests) which Debtor may at any time have by law or agreement against any account debtor or other obligor obligated to make any such payment or agianst any of the property of such account debtor or other obligor; all including but not limited to all present and future debt instruments, chattel papers, accounts, and loans and obligations receivable. [_] _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ (d) GENERAL INTANGIBLES [X] All general intangibles of Debtor, whether now owned or hereafter acquired, including, but not limited to, applications for patents, copyrights, trademarks, trade secrets, good will, tradenames, customer lists, permits and franchises, the right to use Debtor's name, and tax refunds. together with all substitutions and replacements for and products of any of the foregoing property and, in the case of all tangible Collateral, together with all accessions and, except in the case of consumer goods, together with (I) all accessories, attachments, parts, equipment and repairs now or hereafter attached or affixed to be used in connection with any such goods, and (ii) all warehouse receipts, bills of lading and other documents of title now hereafter covering such goods. 2. REPRESENTATIONS, WARRANTIES AND AGREEMENTS. Debtor represents, warrants and agrees that: (a) Debtor is [_] an individual, [_] a partnership, [X] a corporation and, if Debtor is an individual, the Debtor's residence is at the address of Debtor shown at the beginning of this Agreement. (b) The Collateral will be used primarily for [_] personal, family or household purposes; [_] farming operations; [X] business purposes. (c) [_] If any part or all of the tangible Collateral will become so related to particular real estate as to become a fixture, the real estate concerned is:________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ And the name of the record owner is:_______________________________________ (d) Debtor's chief executive office is located at______________________________ or, if left blank, at the address of Debtor shown at the beginning of Agreement. ___________________________________________________________________________ THIS AGREEMENT CONTAINS ADDITIONAL PROVISIONS SET FORTH ON PAGE 2 OF THIS DOCUMENT, ALL OF WHICH ARE MADE A PART HEREOF. Carney Bank BCT Delray, Inc. - -------------------------------------- --------------------------------------- Secured Party's Name Debtor's Name By Thomas McKenna By Peter Gaughn ------------------------------------ ------------------------------------- Title: Senior Vice President Title: President -------------------------------- --------------------------------- By ____________________________________ Title:_________________________________ EX-10.7 12 PURCHASE AGMT EXHIBIT 10.7 PURCHASE AND SALE AGREEMENT This Agreement, made and entered into this date, by and between David Falk, hereinafter referred to as ("Seller"), and Business Cards Tomorrow, Inc., a Delaware corporation, hereinafter referred to as ("Purchaser"). W I T N E S S E T H: Whereas, the Seller owns a Business Cards Tomorrow Franchise business located at 1545 Donna Road, West Palm Beach, Florida 33409, which the Purchaser is desirous of purchasing. Now Therefore, in consideration of the mutual benefits accruing to the respective parties under the provisions of this Agreement, it is hereby agreed as follows: 1. SALE OF THE BUSINESS: The Seller shall sell and the Purchaser shall purchase, free from all encumbrances, except as hereinafter set forth, the assets of the above mentioned Business Cards Tomorrow Franchise business, as per the attached inventory. 2. PURCHASE PRICE: The total purchase price is: $261,689.00 payable as follows: a) Cash at closing, plus or minus incidental prorations 50,000.00 b) Purchase money mortgage/security agreement on the assets being sold in the sum of: 190,000.00 (as per e) below) c) Buyer to assume existing leases and notes 21,689.00 $261,689.00
d) Seller to take back a purchase money mortgage/security agreement in the sum of $190,000.00, at eight (8%) percent interest, payable in consecutive equal monthly installments of $3,852.52 for a period of five (5) years. Purchaser to pay for documentary stamps and recording costs of mortgage. (See addendum page.) e) Purchaser to pay for the inventory on hand at time of closing; at a mutually agreeable price. f) Purchase is purchasing the equipment, as per the attached list, in "AS IS" condition. 3. CONTINGENCIES: a) Consent of the Lessor to the assignment of the lease to the Purchaser, in writing, which lease is attached hereto. b) Subject to approval of this agreement by the Board of Directors of BCT International, Inc. c) See Addendum Page 4. REPRESENTATIONS BY SELLER: The Seller represents and warrants in connection with the operation of the business being sold that: a) The business is not a party to any lawsuits, claims or proceedings in connection with the business and Seller will hold harmless Purchaser from any claims which arise from acts or conditions committed or permitted by Seller prior to closing. b) That it has good and marketable title, free and clear of all liens and encumbrances except for those which Purchaser is taking subject to or assuming. ADDENDUM PAGE TO PURCHASE AND SALE AGREEMENT DAVID FALK, AND BUSINESS CARDS TOMORROW, INC. Dated: April, 1993 Paragraph 2. d), add: The Security Agreement shall secure all of the items set out on the attached Equipment Inventory and Assets list, and replacements thereof. In the event that any of these items are to be replaced, the Seller will subordinate for the Purchaser to any institutional lender. In the event that Purchaser wants to sell off any of the equipment, consent must be obtained from Seller, which will not be unreasonably withheld. Further, consent will not be unreasonably withheld by Purchaser for items Seller wants to retain. Paragraph 3. c) Subject to David and Barbara Falk being accepted to BCT's HMO or PPO Health Plan or any substitute plan. The Falks will pay the cost of insurance plus two (2) percent for administrative fees. This coverage cannot be canceled in the first year without the Falk's consent. During the remaining term of this Agreement, the Falks will be given the same right and guarantees as any other employee at BCT International, Inc. with regard to its health plan. Paragraph 8. a) 1) Directly or indirectly engage in, solicit or accept any wholesale printing of business cards, social invitations, announcements, stationery, rubber stamps, ink supplies to any person, customers of seller or give any other person, corporation, partnership or other entity the information, right, power or authority to do the same, and has herefore been conduced by Seller anywhere in Indian River, Broward or Palm Beach Counties. Paragraph 8. a) 4): Delete Further, BCT International, Inc. agrees to pay no more than $4,629.00 for accrued vacation owed to BCT #2's employees at time of closing. c) That there are no violations of any municipal, state or federal laws or ordinances to the best of Seller's knowledge in connection with the assets or their use. d) Seller agrees that it will conduct the business from the date of this Agreement to the date of closing in substantially the same manner as it has been conducted in the past and in accordance with all the applicable laws and regulations, and that it has not entered into any transactions other than in the ordinary course of business. e) All equipment, fixtures, furnishings and machinery being sold pursuant to this Agreement, shall be in good working condition at the time of closing. f) Seller acknowledges that there are no brokerage fees due. g) Seller agrees to continue to operate the plant, doing business as usual, until the transfer of assets herein. h) Seller represents that all equipment being sold herewith are free and clear, with no leases or notes. 5. SELLER'S RESPONSIBILITIES: At the closing, Seller shall deliver to the Purchaser, the following instruments and documents: a) Bill of Sale. This Bill of Sale to be delivered at the closing will transfer all assets herein being sold free from all debts and encumbrances, except for those which Purchaser is taking subject to or assuming, and will contain the usual warranties and affidavit of title. b) Instrument of Assignment: The Assignment to be delivered at the closing will transfer Seller's right to all transferable insurance policies, leases, contracts, licenses and goodwill. c) Seller's Affidavit of Creditors of the Business. d) Seller's Affidavit that all federal withholding and employment taxes, state sales and use taxes and any other taxes due and owing to any of the Business's employees, or any other debts due and owing by the Business, have been paid through the date of the closing of the within transaction. 6. Seller agrees to remain on call for the Business for a term of up to four (4) weeks, after the closing, at Purchaser's Option, to assist and facilitate the smooth and efficient transfer of the Business. Seller shall receive 7. BULK SALES: The parties shall comply with all applicable provisions of the Uniform Commercial Code relating to bulk transfers as adopted in the State of Florida, inclusive of the following: a) Seller shall furnish the Purchaser, at least fifteen (15) days prior to the date of closing, with a list of existing creditors. Such list shall be signed and sworn to be the Seller and shall contain the names and business addresses of all of the Seller's creditors, with the amount, when known, and also the names of all persons who are known to the Seller to assert claims against it even though such claims are disputed. b) The Seller and the Purchaser shall prepare a schedule of all items of property being transferred in sufficient detail to identify such items. 8. COVENANT NOT TO COMPETE: a) The Seller, DAVID FALK, does hereby covenant and agree that upon closing of this transaction, he will not, participant in a partnership, sole proprietorship, corporation or other entity, or as an operator, investor, shareholder, partner, director, employee, consultant, manager, advisor or in any other capacity whatsoever, either directly or indirectly, for a term of five (5) years from the date of closing, do any other following acts: 1) (See Addendum Page) 2) Directly or indirectly divulge, communicate, use to the detriment of Purchaser, or for the benefit of any other person or persons, or misuse in any way, any confidential information or trade secrets relating to the Business, including, but not limited to, personnel information, secret processes, know- how, customer lists, recipes, formulas, or other technical data. Covenantors acknowledge and agree that any information or data they have acquired regarding any of these matters or items were received in confidence. 3) Directly or indirectly induce, request or advise any present employee of Seller or Purchaser to lease the employ of such parties. 4) (See Addendum Page) 5) Directly or indirectly request or advise any present or future customers or suppliers of the Business heretofore operated by Seller to withdraw, curtail or cancel any of their business or other relationships with Purchaser. b) The parties hereto acknowledge that the restrictions contained herein are reasonable restraints upon Seller and further acknowledge that any violation of the terms of this covenant not to compete could have a substantial detrimental effect on Purchaser's Business and its ability to meet its obligations both as set forth herein and as otherwise incurred. Seller has carefully considered the nature and extent of the restrictions imposed upon him and the rights of remedies conferred upon him under the provisions of this covenant not to compete, and hereby acknowledges and agrees that the same are reasonable in time and territory , are designated to eliminate competition which would otherwise be unfair to Purchaser, do not stifle Sellers' sole means of support, are fully required to protect the legitimate interest of Purchaser and do not confer a benefit upon Purchaser disproportionate to the detriment of Seller. c) Seller agrees that any damages resulting from violation by him of any of the covenants contained in this Paragraph will be impossible to ascertain and for that reason, agree that Purchaser shall be entitled to an injunction without the necessity of posting bond, from any court of competent jurisdiction restraining any violation of any or all of said covenant either directly or indirectly and such right to injunction shall be cumulative and in addition to whatever other remedies Purchaser may have. Seller acknowledges that this provision has been called to his attention and he understands it is a material covenant and that without his agreement to these provisions this Agreement and all documents executed pursuant hereto would not have been entered into be Purchaser. It is hereby further recognized and agreed that in the event of any litigation at law or in equity with respect to any breach of this covenant not to compete, the Purchaser shall be entitled to recover any and all reasonable attorneys' fees and other costs of litigation, through appeals, from Seller. d) If any portion of the covenants contained in this Paragraph is held to be unreasonable, arbitrary or against public policy, the covenants herein shall be considered severable and shall be divisible both as to time and as to geographical areas; and each month of the specified period shall be deemed to be a separate period of time. In the event any court determines the specified time period or geographical areas to be unreasonable, arbitrary or against public policy, a lesser time period or geographical area and not against the public policy may be enforced against Seller. e) The existence of any claim or cause of action by Seller against the Purchaser, whether predicted upon this Agreement or otherwise, shall not constitute a defense to the enforcement by the Purchaser of the foregoing convenants, but shall be litigated separately. f) Nothing hereby contained shall be construed or interpreted as restricting Seller from engaging in the retail printing business, including the sale, but not the production, of thermography work. 9. RISK OF LOSS: All risk of loss up to the time of closing shall be borne by the Seller. If any loss or damage, whether due to fire, storm, flood, riot, explosion or other casualty, exceeds TWENTY (20%) PERCENT of the purchase price, the Purchaser shall have the option to cancel this Agreement by giving notice to the Seller. Upon such cancellation, the Purchaser shall be entitled to the return of all monies paid or deposited pursuant to this Agreement and all obligations under this Agreement shall thereupon terminate. 10. CLOSING. The closing of this transaction shall be held in the offices of BCT International, Inc. on or about May 15, 1993. Each of the parties hereto shall execute and deliver at closing all instruments and documents reasonably required to effectuate the terms and conditions of this Agreement. 11. PRORATIONS, DEPOSITS AND EXPENSES OF SALE. The purchase price shall be adjusted for prorations of rent, insurance, utilities, licenses, vacation pay, bonuses, and similar items being transferred to the Purchaser, which amounts shall be paid by Seller. Transferable deposits and the deposit on the Lease to the premises shall be credited to the Seller. The Seller shall have the right to the refund of any non-transferable deposits and Purchaser shall be responsible for making his own deposits therefore. 12. TAKING OF INVENTORIES: On the date prior to the closing date, representatives of Seller and Purchaser shall jointly count the inventory for the purpose of confirming that said inventory is in accordance with the requirements of the representations of Seller as set forth in this Agreement. In valuing the inventory, the Seller's current cost for the purchase of said items shall be utilized for determining the value less any applicable discounts. Any business conducted during or subsequent to the time such physical inventory is taken, shall be for the benefit of Purchaser. 13. ACCOUNTS RECEIVABLE: Purchaser shall act as Seller's agent in receiving accounts due Seller, if Seller shall furnish to Purchaser at closing a complete list of such receivables and a request in writing at closing that Purchaser so act. Purchaser's only duty with regard to such accounts receivables shall be to include such receivables in its weekly and monthly statements sent to its customers and to remit, on the first and third Fridays of the month to Seller, any monies received at the Business premises of Purchaser on account of such receivables. It is agreed between Purchaser and Seller that cash receipts are to be applied to invoices as designated by the remitter and, where no designation is made, the receipt is to be applied to the oldest open invoice(s) for the applicable customer, unless it can be reasonably determined that said payment was not to be applied to the oldest open invoice but to a more current invoice. Seller shall retain the right to contact customers, as necessary, to collect amounts owing to the Seller and may use agents and pursue legal action as may be required. Purchaser shall neither settle nor compromise any of the accounts receivable due the Seller. Purchaser shall be under no obligation to bring any legal action against any customer of Seller who does not make timely payments to purchaser of any of such accounts receivable due Seller. 14. ATTORNEY'S FEES AND COSTS: In connection with any litigation arising out of this Agreement, the prevailing party shall be entitled to recover all costs incurred, including reasonable attorneys' fees, inclusive of those costs and fees or any appellate action. 15. DEFAULT BY PURCHASER: If Purchaser fails to perform any of the covenants of this Agreement, all monies paid pursuant to this Agreement by the Purchaser as aforesaid shall be retained by or for the account of Seller, as consideration for the execution of this Agreement and as agreed liquidated damages in full settlement of any and all claims for damages. 16. DEFAULT BY SELLER: If Seller fails to perform any of covenants of this Agreement, the Purchaser shall have the right of enforcing this Agreement by specific performance or at his option, the right of recovery of all monies paid, without thereby waiving any action for damages resulting from Seller's breach. 17. BINDING EFFECT: This Agreement shall be binding upon and inure to the benefit of the heirs, administrators, executors, successors, and assigns of each of the parties hereto. 18. INVALIDITY: If any terms or provisions of this Agreement or the application thereof to any person or circumstances shall, to any extent, be invalid or unenforceable, the remainder of this Agreement or the application of such terms or provision to the persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby and each term and provision of this Agreement shall be valid and enforced to the fullest extent permitted by law. 19. GOVERNING LAW: The terms and provisions of this Agreement shall be governed by the laws of the State of Florida. 20. CAPTIONS: Captions and headings to the various paragraphs of this Agreement are for convenience only, and carry no legal effect and shall in no way effect the interpretation or construction of the paragraphs of this Agreement. IN WITNESS WHEREOF, the undersigned have set their hands and seals this 12th day of April, 1993. Witnessed by: Cynthia Falk David Falk Seller BUSINESS CARDS TOMORROW, INC., a Delaware corporation BY: Peter Gaughn President Equipment Inventory and Assets Front Office: 1 utility shelf 1 desk - 54" x 24" 2 desks - 48" x 30" 1 desk - 60" x 30" 1 desk - 60" x 30" with 43" x 18" return 1 Minolta copier - Model 450Z with cabinet 1 Wyse 286 computer with monitor and Okidata 320 printer 1 printer stand 1 4-drawer lateral file cabinet 2 72-bin shelves 3 bookcases 1 utility table 5 secretarial chairs Owners Office (front): 1 couch 1 60" x 30" desk 1 teak credenza 1 4-drawer file cabinet 1 executive chair Pre-Press Department: 3 computer/terminal stands 2 AST 386 computers with Designview monitors 1 Dest scanner 1 QMS 815 printer 1 30" x 60" desk (cut down to computer height) 1 Sharp SF8300 compier with cabinet 1 48" x 30" tables 2 72" x 30" tables 2 light tables 1 table waxer 4 secretarial chairs 2 draftsman chairs 1 Model 4000 Ps 1 stat camera Proofreading Room: 1 72" x 30" table 2 chairs 1 under-counter refrigerator 1 coffeemaker Press Room: 1 96" x 30" table 3 60" x 24" workbenches 3 AB Dick 360 presses 2 T-51 2-color heads 2 Therm-O-type Thermographers 1 Embossograph Thermographer 1 Itek 615S Platemaker 1 time clock with card rack 2 stack wagons 19 36" x 18" shelves 7 48" x 24" shelves 1 102" x 25" industrial shelving 1 Therm-O-Type SL 12 slitter 1 Therm-O-Type Quad 12 slitter/scorer 1 Shrink Wrap System 4 48" x 24" work tables/cabinets 2 24" x 24" work tables/cabinets 1 metal supply cabinet 1 Seypa 92-4 (Royal Zenith) 36" paper cutter Stamp Dept: 1 60" x 24" workbench 4 36" x 18" shelves 1 48" x 24" worktables - cabinet 1 72" x 30" table 1 Merigraph stamp unit 1 Craftsman drill press 1 Craftsman 12" band saw 1 washout sink Ink Dept./Storage area: 8 36" x 18" shelves 1 102" x 25" industrial shelves 1 ink table 1 electronic scale 1 calculator (Sharp QS 1604) 1 60" x 30" desk 1 desk chair 4 misc. chairs Back Offices: 2 4-drawer file cabinets 2 48" x 30" desks 1 Secretarial desk with return 1 286 computer with monitor 1 72" x 36" desk 1 executive chair Merlin Telephone System: 7 10-button phones 3 34-button phones 3 misc. calculators Franchise Agreement of May 27, 1975 as amended September 10, 1976 Telephone Numbers EX-10.8 13 PURCHASE AGMT EXHIBIT 10.8 PURCHASE AND SALE AGREEMENT This Agreement, made and entered into this date, by and between BRAMOW ENTERPRISES, INC., a Florida corporation, hereinafter referred to as ("Seller"), and Business Cards Tomorrow, Inc., a Delaware corporation, hereinafter referred to as ("Purchaser"). W I T N E S S E T H: Whereas, the Seller owns a Business Cards Tomorrow Franchise business located at 3023 N.W. 60th Street, Fort Lauderdale, Florida, which the Purchaser is desirous of purchasing. Now Therefore, in consideration of the mutual benefits accruing to the respective parties under the provisions of this Agreement, it is hereby agreed as follows: 1. SALE OF THE BUSINESS: The Seller shall sell and the Purchaser shall purchase, free from all encumbrances, except as hereinafter set forth, the assets of the above mentioned Business Cards Tomorrow Franchise business, as per the attached inventory. 2. PURCHASE PRICE: The total purchase price is: $197,955.00 payable as follows: a) Down payment to be held in escrow and released at 50,000.00 closing by: David Feldman, P.A., plus or minus incidental prorations b) Purchase money mortgage/security agreement on the assets being sold in the sum of: 147,955.00 (as per e) below) $197.955.00 c) Purchaser to issue credit for BCT catalogs recently purchased by the Seller. 170 catalogs. d) Seller to pay a $4,000.00 transfer fee, payable as follows: Cash at closing $ 2,202.00 Security deposit refund from landlord $ 1,798.00
If the security deposit is less, than the month's Note payment, then same with be adjusted accordingly. e) Seller to take back a purchase money mortgage/security agreement in the sum of $147,955.00, at eight (8%) percent interest, payable in consecutive equal monthly installments of $3,000.00 for a period of five (5) years. Purchaser to pay for documentary stamps and recording costs of mortgage. Payment due 1st of month, 7 day grace period. Late penalty $100. f) Purchaser to pay for the inventory on hand at time of closing; at a mutually agreeable price. g) Purchase is purchasing the equipment, as per the attached list, in "AS IS" condition. 3. CONTINGENCIES: a) Consent of the Lessor to the assignment of the lease to the Purchaser, in writing, which lease is attached hereto. b) Subject to approval of this agreement by the Board of Directors of BCT International, Inc. 4. REPRESENTATIONS BY SELLER: The Seller represents and warrants in connection with the operation of the business being sold that: a) The business is not a party to any lawsuits, claims or proceedings in connection with the business and Seller will hold harmless Purchaser from any claims which arise from acts or conditions committed or permitted by Seller prior to closing. b) That it has good and marketable title, free and clear of all liens and encumbrances except for those which Purchaser is taking subject to or assuming. c) That there are no violations of any municipal, state or federal laws or ordinances to the best of Seller's knowledge in connection with the assets or their use. d) Seller agrees that it will conduct the business from the date of this Agreement to the date of closing in substantially the same manner as it has been conducted in the past and in accordance with all the applicable laws and regulations, and that it has not entered into any transactions other than in the ordinary course of business. e) All equipment, fixtures, furnishings and machinery being sold pursuant to this Agreement, shall be in good working condition at the time of closing. f) Seller acknowledges that there are no brokerage fees due. g) Seller agrees to continue to operate the plant, doing business as usual, until the transfer of assets herein. h) Seller represents that all equipment being sold herewith are free and clear, with no leases or notes. 5. SELLER'S RESPONSIBILITIES: At the closing, Seller shall deliver to the Purchaser, the following instruments and documents: a) Bill of Sale. This Bill of Sale to be delivered at the closing will transfer all assets herein being sold free from all debts and encumbrances, except for those which Purchaser is taking subject to or assuming, and will contain the usual warranties and affidavit of title. b) Instrument of Assignment: The Assignment to be delivered at the closing will transfer Seller's right to all transferable insurance policies, leases, contracts, licenses and goodwill. c) Seller's Affidavit of Creditors of the Business. d) Seller's Affidavit that all federal withholding and employment taxes, state sales and use taxes and any other taxes due and owing to any of the Business's employees, or any other debts due and owing by the Business, have been paid through the date of the closing of the within transaction. 6. Seller agrees to remain at the Business for a term of up to ( ) weeks, after the closing, at Purchaser's Option, to assist and facilitate the smooth and efficient transfer of the Business. Seller shall receive 7. BULK SALES: The parties shall comply with all applicable provisions of the Uniform Commercial Code relating to bulk transfers as adopted in the State of Florida, inclusive of the following: a) Seller shall furnish the Purchaser, at least fifteen (15) days prior to the date of closing, with a list of existing creditors. Such list shall be signed and sworn to be the Seller and shall contain the names and business addresses of all of the Seller's creditors, with the amount, when known, and also the names of all persons who are known to the Seller to assert claims against it even though such claims are disputed. b) The Seller and the Purchaser shall prepare a schedule of all items of property being transferred in sufficient detail to identify such items. 8. COVENANT NOT TO COMPETE: a) The Seller, Seller's Stockholder, ARNOLD BRAMOW, STANLEY BRAMOW, and WILLIAM HOFFMAN, individually, and Guarantors, hereinafter sometimes collectively referred to as ("Covenantors" or individually as "Covenantor") do hereby covenant and agree that upon closing of this transaction, they will not, individually or collectively, as a participant in a partnership, sole proprietorship, corporation or other entity, or as an operator, investor, shareholder, partner, director, employee, consultant, manager, advisor or in any other capacity whatsoever, either directly or indirectly, for a term of seven (7) years from the date of closing, do any other following acts: 1) Directly or indirectly engage in the wholesale or retain thermography printing business or in the same or similar business as is presently and has heretofore been conducted by Seller anywhere in Dade, Broward or Palm Beach Counties. 2) Directly or indirectly divulge, communicate, use to the detriment of Purchaser, or for the benefit of any other person or persons, or misuse in any way, any confidential information or trade secrets relating to the Business, including, but not limited to, personnel information, secret processes, know- how, customer lists, recipes, formulas, or other technical data. Covenantors acknowledge and agree that any information or data they have acquired regarding any of these matters or items were received in confidence. 3) Directly or indirectly induce, request or advise any present employee of Seller or Purchaser to lease the employ of such parties. 4) Directly or indirectly engage in, solicit or accept any business from any present customer of Seller or give any other person, corporation, partnership or other entity the information, right, power or authority to do same. 5) Directly or indirectly request or advise any present or future customers or suppliers of the Business heretofore operated by Seller to withdraw, curtail or cancel any of their business or other relationships with Purchaser. b) The parties hereto acknowledge that the restrictions contained herein are reasonable restraints upon Covenantors and further acknowledge that any violation of the terms of this covenant not to compete could have a substantial detrimental effect of Purchaser's Business and its ability to meet its obligations both as set forth herein and as otherwise incurred. Covenantors have carefully considered the nature and extent of the restrictions imposed upon him and the rights of remedies conferred upon him under the provisions of this covenant not to compete, and hereby acknowledges and agrees that the same are reasonable in time and territory, are designated to eliminate competition which would otherwise be unfair to Purchaser, do not stifle Covenantors' sole means of support, are fully required to protect the legitimate interest of Purchaser and do not confer a benefit upon Purchaser disproportionate to the detriment of Covenantors. c) Covenantors, jointly and severally, agree that any damages resulting from violation by him of any of the covenants contained in this Paragraph will be impossible to ascertain and for that reason, agree that Purchaser shall be entitled to an injunction without the necessity of posting bond, from any court of competent jurisdiction restraining any violation of any or all of said covenant either directly or indirectly and such right to injunction shall be cumulative and in addition to whatever other remedies Purchaser may have. Covenantors acknowledge that this provision has been called to their attention and they understands it is a material covenant and that without their agreement to these provisions this Agreement and all documents executed pursuant hereto would not have been entered into by Purchaser. It is hereby further recognized and agreed that in the event of any litigation at law or in equity with respect to any breach of this covenant not to compete, the Purchaser shall be entitled to recover any and all reasonable attorneys' fees and other costs of litigation, through appeals, jointly and severally, from Covenantors. d) If any portion of the covenants contained in this Paragraph is held to be unreasonable, arbitrary or against public policy, the covenants herein shall be considered severable and shall be divisible both as to time and as to geographical areas; and each month of the specified period shall be deemed to be a separate period of time. In the event any court determines the specified time period or geographical areas to be unreasonable, arbitrary or against public policy, a lesser time period or geographical area and not against the public policy may be enforced against Covenantors. e) The existence of any claim or cause of action by Covenantor against the Purchaser, whether predicted upon this Agreement or otherwise, shall not constitute a defense to the enforcement by the Purchaser of the foregoing convenants, but shall be litigated separately. f) Nothing hereby contained shall be construed or interpreted as restricting Seller from engaging in the retail printing business, including the sale, but not the production, of thermography work. 9. RISK OF LOSS: All risk of loss up to the time of closing shall be borne by the Seller. If any loss or damage, whether due to fire, storm, flood, riot, explosion or other casualty, exceeds TWENTY (20%) PERCENT of the purchase price, the Purchaser shall have the option to cancel this Agreement by giving notice to the Seller. Upon such cancellation, the Purchaser shall be entitled to the return of all monies paid or deposited pursuant to this Agreement and all obligations under this Agreement shall thereupon terminate. 10. CLOSING. The closing of this transaction shall be held in the offices of no later than April 30th, 1994 at 5:00 p.m. Each of the parties hereto shall execute and deliver at closing all instruments and documents reasonably required to effectuate the terms and conditions of this Agreement. 11. PRORATIONS, DEPOSITS AND EXPENSES OF SALE. The purchase price shall be adjusted for prorations of rent, insurance, utilities, licenses, vacation pay, bonuses, and similar items being transferred to the Purchaser, which amounts shall be paid by Seller. Transferable deposits and the deposit on the Lease to the premises shall be credited to the Seller. The Seller shall have the right to the refund of any non-transferable deposits and Purchaser shall be responsible for making his own deposits therefore. 12. TAKING OF INVENTORIES: On the date prior to the closing date, representatives of Seller and Purchaser shall jointly count the inventory for the purpose of confirming that said inventory is in accordance with the requirements of the representations of Seller as set forth in this Agreement. In valuing the inventory, the Seller's current cost for the purchase of said items shall be utilized for determining the value less any applicable discounts. Any business conducted during or subsequent to the time such physical inventory is taken, shall be for the benefit of Purchaser. 13. ACCOUNTS RECEIVABLE: Purchaser shall act as Seller's agent in receiving accounts due Seller, if Seller shall furnish to Purchaser at closing a complete list of such receivables and a request in writing at closing that Purchaser so act. Purchaser's only duty with regard to such accounts receivables shall be to include such receivables in its weekly and monthly statements sent to its customers and to remit, on the first and third Fridays of the month to Seller, any monies received at the Business premises of Purchaser on account of such receivables. It is agreed between Purchaser and Seller that cash receipts are to be applied to invoices as designated by the remitter and, where no designation is made, the receipt is to be applied to the oldest open invoice(s) for the applicable customer, unless it can be reasonably determined that said payment was not to be applied to the oldest open invoice but to a more current invoice. Seller shall retain the right to contact customers, as necessary, to collect amounts owing to the Seller and may use agents and pursue legal action as may be required. Purchaser shall neither settle nor compromise any of the accounts receivable due the Seller. Purchaser shall be under no obligation to bring any legal action against any customer of Seller who does not make timely payments to purchaser of any of such accounts receivable due Seller. 14. ATTORNEY'S FEES AND COSTS: In connection with any litigation arising out of this Agreement, the prevailing party shall be entitled to recover all costs incurred, including reasonable attorneys' fees, inclusive of those costs and fees or any appellate action. 15. DEFAULT BY PURCHASER: If Purchaser fails to perform any of the covenants of this Agreement, all monies paid pursuant to this Agreement by the Purchaser as aforesaid shall be retained by or for the account of Seller, as consideration for the execution of this Agreement and as agreed liquidated damages in full settlement of any and all claims for damages. 16. DEFAULT BY SELLER: If Seller fails to perform any of covenants of this Agreement, the Purchaser shall have the right of enforcing this Agreement by specific performance or at his option, the right of recovery of all monies paid, without thereby waiving any action for damages resulting from Seller's breach. 17. BINDING EFFECT: This Agreement shall be binding upon and inure to the benefit of the heirs, administrators, executors, successors, and assigns of each of the parties hereto. 18. INVALIDITY: If any terms or provisions of this Agreement or the application thereof to any person or circumstances shall, to any extent, be invalid or unenforceable, the remainder of this Agreement or the application of such terms or provision to the persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby and each term and provision of this Agreement shall be valid and enforced to the fullest extent permitted by law. 19. GOVERNING LAW: The terms and provisions of this Agreement shall be governed by the laws of the State of Florida. 20. CAPTIONS: Captions and headings to the various paragraphs of this Agreement are for convenience only, and carry no legal effect and shall in no way effect the interpretation or construction of the paragraphs of this Agreement. IN WITNESS WHEREOF, the undersigned have set their hands and seals this 10th day of March, 1993. Witnessed by: BRAMOW ENTERPRISES, INC., a Florida corporation ARNOLD BRAMOW, Individually STANLEY BRAMOW, Individually WILLIAM HOFFMAN, Individually BUSINESS CARDS TOMORROW, INC., a Florida corporation BY: Peter Gaughn President EX-10.9 14 ASSIGNMENT Exhibit 10.9 ASSIGNMENT OF CONTRACT KNOW ALL MEN BY THESE PRESENCE, that BUSINESS CARDS TOMORROW, INC., a Florida corporation, party of the first part, also referred to as Assignor, in consideration of the sum of ($10.00) ten dollars and other valuable considerations to paid by party of the second part, T.K.O. Enterprises, Inc. referred to as Assignee, at or before the ensealing and delivery of these presence, the receipt whereof is hereby acknowledged, party of the first part does hereby grant, bargain, sell, assign, transfer and set over unto the said party of the second part, her heirs and assigns, forever, a certain Purchase and Sale Agreement bearing date 10th Day of March A.D. 1993, made and entered into by party of the first part and BRAMOW ENTERPRISES, INC., a Florida corporation, ARNOLD BRAMOW, individually, STANLEY BRAMOW, Individually, and WILLIAM HOFFMAN, Individually, a copy of which is attached hereto and made a part hereof. A portion of the consideration of this assignment being that the party of the second party herein assumes all the obligations of the Purchaser under the terms and conditions under the aforedescribed contract and to hold harmless and indemnify assignor from any breach or wrong doing incidental to the contract herein being assigned. This indemnification includes but is not limited to, any attorney's fees incurred in the defense or enforcement of any provisions of the aforementioned contract or assignment. To Have and to Hold the same unto the said party of the second part, and its heirs and assigns forever. In Witness Whereof, the said parties have hereunto set their hands and seals this 12 day of May A.D. 1993. Signed, sealed and delivered in presence of us. BUSINESS CARDS TOMORROW, INC., a Florida corporation By: Peter T. Gaughn (Seal) President T.K.O. ENTERPRISES, INC. By: Lillian Roberts, President STATE OF FLORIDA COUNTY OF BROWARD The foregoing instrument was sworn to and subscribed before me this 12th day of May 1993, by Peter Gaughn, as President and on behalf of Business Cards Tomorrow, Inc., a Florida corporation, to me personally known (x), who produced his/her driver's license ( )/passport ( ), as identification and who did take an oath. Diana S. Munroe Notary Public My Commission Expires: Official Notary Seal Diana S. Munroe Notary Public State of Florida Commission No. CC205111 My Commission Exp. May 29, 1996 STATE OF FLORIDA COUNTY OF BROWARD The foregoing instrument was sworn to and subscribed before me this 12th day of May 1993, by LILLIAN ROBERTS*, to me personally known ( ), who produced his/her driver's license ( )/passport ( ), as identification and who did take an oath. *LILLIAN ROBERTS, PRESIDENT, T.K.O. ENTERPRISES, INC. Notary Public My Commission Expires: This Instrument prepared by: Address This instrument was prepared by: David Feldman, Attorney Financial Federal Building 407 Lincoln Road, NE PH Miami Beach, Florida 33139 (305) 534-4721 EX-10.10 15 GUARANTY Exhibit 10.10 Exhibit 10.10 Guaranty FOR GOOD AND VALUABLE CONSIDERATIONS received, the undersigned, BUSINESS CARDS TOMORROW, INC., a Florida corporation ("Guarantor"), hereby unconditionally represents, promises, and guaranties the following: 1. Identification of Guarantor: The Guarantor is a solvent, duly organized, - ------------------------------- and validly existing corporation organized under the laws of the State of Florida with its principal office and mailing address in the State of Florida being: 3000 N.E. 30th Place, Fort Lauderdale, Florida 33306. 2. Consideration: The Guarantor has received good and valuable considerations - ----------------- for this Guaranty. 3. Obligation Guarantor: The Guarantor unconditionally guaranties to A.B. and - ------------------------ W.H. ENTERPRISES, INC. f/k/a BRAMOW ENTERPRISES, INC., a Florida corporation, including any successors and assigns ("Payee"), the prompt and full payment in currency of the United States of America at the address for the Payee set forth below, or at such other place and/or such other person as the Payee may designate in writing to the Guarantor, all principal, interest, attorney's fees and costs, and any other sums which may become due, under that certain Promissory Note of T.K.O. Distributors, Inc., a Florida corporation ("Maker") and all performances and obligations of the Maker under that certain Security Agreement of the Maker and the Payee of even date ("Security Agreement") (collectively all payments and performances due to Payee are the "Obligations"). The address for the Payee, for the purposes of this Guaranty, is: 20281 E. Country Club Drive #2308, North Miami Beach, Florida 33180. 4. Term of Guaranty: This Guaranty shall continue until such time that the - -------------------- Obligations, and all performances due hereunder of the Guarantor, are satisfied in full. 5. Bankruptcy of Borrower: In the event that any payments received by the - -------------------------- Payee from the Borrower under the Obligations must be returned due to bankruptcy or similar law, the Guarantor hereby also unconditionally guarantees the payment of such returned amounts to the Payee. 6. Waiver by the Payee: No waiver of Payee with respect to the Guarantor or - ----------------------- the Maker will be valid unless in writing, and signed by the Payee, and no such waiver shall be deemed a waiver of any other. 7. Subordination: The Guarantor subordinates any debts existing now or coming - ----------------- into effect in the future of the Maker to the Guarantor to the prompt and full satisfaction of the Obligations due to the Payee. 8. Remedies of Payee: Payee shall have the right to proceed against the - --------------------- Guarantor upon the expiration of a fifteen (15) day grace period to cure, which is commenced by written notice to Guarantor prior to any action of any nature against the Maker, in the event of any default of the Obligations by the Maker and/or Guarantor. 9. Governing State: The Guarantor hereby acknowledges that this Guaranty shall - ------------------- be governed exclusively by the laws of the State of Florida with the sole venue for any suit, action, or proceeding with respect to this Guaranty to be at a court of competent jurisdiction in Broward County, Florida, without any reference, with respect to the foregoing, to conflict of law principles. 10. Miscellaneous: Guarantor shall not take any act or permit any act which - ------------------ would cause any default by the Maker of the Obligations, any default of any of the Obligations shall be deemed a default by the Guarantor of this Guaranty, the Payee shall be entitled to reasonable attorneys' fees and costs, trial level through any appeals, if any, in the event of any defaults of the Obligations and/or this Guaranty in addition to other remedies and damages, there is no other agreement or instrument which voids or diminishes the Obligations of the Guarantor hereunder, and Guarantor shall provide immediate written notice to Payee of any change in address of Guarantor. Obligations of the Guarantor hereunder if not paid when due shall accrue interest at the maximum rate permitted under the law. IN WITNESS WHEREOF, the undersigned Guarantor has executed this Guaranty as of the 12 day of May 1993. Witnesses: Beverly J. Perraud BUSINESS CARDS TOMORROW, INC. By: Peter T. Gaughn Its: President EX-10.11 16 AGREEMENT Exhibit 10.11 BCT International, Inc. Bill Wilkerson/President 3000 N.E. 30th Place Ft. Lauderdale, FL 33306 Dear Mr. Wilkerson: AGREEMENT made as of the 1st day of Feb., 1994 be and between BCT International, Inc. ("BCT", "the Company"), having an office for the transaction of business located at 3000 N.E. 30th Place, Ft. Lauderdale, FL 33306 and Barber & Bronson, Inc. ("BBCO"), having an office for the transaction of business located at 2101 West Commercial Blvd., Suite 1500, Fort Lauderdale, FL 33309. WHEREAS, BCT is a public company and desires to obtain the investment banking, financial and advisory services of BBCO. WHEREAS, BBCO desires to provide to investment banking, financial and advisory services required by BCT. WITNESSETH: NOW, THEREFORE, the parties agree as follows: 1. BBCO is hereby hired and engaged as investment banker and as a financial advisor to BCT as it relates to any and all corporate finance matters or other corporate business that BCT deems appropriate and consistent with standard investment banking and financial advisory relationships. BBCO shall promptly and expeditiously provide competent investment banking and advisory services during the term of this agreement to BCT. 2. The term of this agreement shall be for three (3) years from Feb. 1, 1994. BCT agrees that it will not enter into similar agreements during the term of this agreement without the written consent of BBCO. Either party may cancel this agreement upon 30 days' prior written notice. 3. BCT agrees to pay to BBCO the sum of $3,500.00 per month, commencing on March 1, 1994, the first day of the month thereafter, for the term of this agreement. BCT agrees to pay on a pre-approved basis all expenses such as travel and any other expenses BBCO and BCT deem appropriate for BBCO to provide such services to BCT. 4. In consideration of the services to be rendered by BBCO and the sum of $300.00, BCT hereby grants to grant BBCO five (5) year Warrants (which Warrants may only be assigned to stockholders, officers, and directors of BBCO) to purchase shares of the Company's common stock exercisable on a scaled basis as follows: 4.1. 100,000 Warrants exercisable at $2.00; 4.2. 100,000 Warrants exercisable at $3.00; 4.3. 100,000 Warrants exercisable at $4.00. The Warrants shall be delivered to: Eric P. Littman, Esquire, 1428 Brickell Avenue, Suite 202, Miami, Florida 33131 and shall be held in escrow by him and released as follows: 25% upon receipt; 25% three months from the date of receipt; 25% six months from the date of receipt and the remaining 25% nine months from the date of receipt. In the event that BBCO goes out of business or this agreement is terminated prior to the delivery of all the warrants out of escrow, the escrow agent shall return to BCT all undistributed warrants After the expiration of one year from Feb. 1, 1994, BBCO shall have the right to request two registrations or qualifications of the shares underlying the Warrants with the Securities and Exchange Commission at the sole expense of BCT, so long as BBCO exercises a minimum of 100,000 warrants at each time of request. In such registration(s), BCT may register other shares at its sole discretion. 5. The Company currently has approximately $1,770,000 of Convertible Subordinated Debentures outstanding. BBCO shall use its best efforts to replace the current outstanding Convertible Subordinated Debentures as follows: BBCO, as placement agent for the Company, will use its best efforts to sell, in a Private Placement to Accredited Investors only, investing in units of $25,000 each, up to $2,000,000 of the Company's securities, which securities shall be in the form of a 9%, $1.00 per share Preferred Stock, with such security having (1) a term of 3 years with dividends payable quarterly at the rate of 9% per annum; (2) a conversion feature such that it is convertible into common stock at the ratio of 1 share of common stock for every 2.25 shares of preferred stock; (3) for each share so converted, an additional warrant to purchase common stock of the Company at a price of at least $3.00 per share; and (4) a provision allowing it to be called by BCT if BCT's common stock trades at a bid price of $3.00 for twenty consecutive trading days. The common stock provided for in the Private Placement shall have piggy-back registration rights; and shall be callable. Pursuant to standard terms which will be agreed upon by the Company and BBCO. BBCO shall be entitled to a 5% placement fee and to be reimbursed for all its expenses for the Private Placement. The Company shall be responsible for the costs of the Private Placement, including all legal fees of it and BBCO. The proceeds from the Private Placement will be used to retire the outstanding Convertible Subordinated Debentures and, if any funds remain, the remainder of the funds shall be used for working capital. The Company shall have the right to place its own investors in the Private Placement and BBCO shall not be entitled to a placement fee for investors which are not BBCO clients. In the event that $2,000,000 is not raised in the Private Placement, BBCO agrees to act as the placement agent in a regulation D private placement upon terms to be agreed upon with BCT. During the term of this agreement with respect to other public offering(s), and/or private placements, underwriters compensation will be determined on a deal by deal basis and BBCO reserves the right to participate in the underwriting group. 6. If BBCO initiates or introduces a merger or acquisition for BCT that BCT accepts and completes, BBCO shall be entitled to receive and BCT agrees to pay BBCO in cash and/or non-cash consideration (at BBCO's option) upon the successful completion, a fee of: 5% of the first $3,000,000 of the consideration paid in the Transaction; 4% of the consideration in excess of $3,000,000 and up to $4,000,000; 3% of the consideration in excess of $4,000,000 and up to $5,000,000; 2% of the consideration in excess of $5,000,000; In an instance where BBCO raises capital for BCT to complete an acquisition or merger, compensation will be determined on a deal to deal basis. In the event of prospective financing, merger or acquisition transactions both BCT and BBCO will enter into standard Investment Banking Engagement Agreements pertaining to those specific transactions as subsequently negotiated between the parties. 7. BBCO and BCT shall comply with all applicable laws, including without limitation, the rules and regulations of the National Association of Securities Dealers, Inc. 8. BCT agrees to indemnify and hold BBCO and its associates harmless from and against all losses, claims damages, liabilities, costs and expenses arising out of statements or claims made by any officer or director of BCT or any statement or claim made by others authorized in writing on their behalf. This indemnification shall survive the term of this agreement until expiration of all applicable statutes of limitations. 9. BBCO agrees to indemnify and hold BCT and its associates harmless from and against all losses, claims damages, liabilities, costs and expenses arising out of acts, statements or claims made by any salesman, officer or director of BBCO or any statements or claims made by authorized others in its behalf. This indemnification shall survive the term of this agreement until expiration of all applicable statutes of limitations. 10. This agreement shall be construed and enforced according to the laws of Florida and shall be binding upon each of the parties hereto and their respective successors, assignees and designees; provided, however, that no party hereto shall assign its rights or delegate its duties hereunder without the prior written consent of the other party. IN WITNESS WHEREOF, the parties have executed this agreement as of the date first above written. BCT International, Inc. By: Bill Wilkerson CEO Barber & Bronson, Inc. By: Steven N. Bronson President EX-10.12 17 AGREEMENT Exhibit 10.12 Canyon Capital, Inc. 24012 Calle De La Plata, Suite 310 P.O. Box 3710 Laguna Hills, Ca. 92654 Attention: Thomas O'Connor, President American Commercial Credit Corp. P.O. Box 13428 Reading, Pa. 19612 Attention: A.A. Haberberger, President RE: Operating Agreement/Recourse and Remarketing Agreement Gentlemen: Background: Reference is made to a "Recourse and Remarketing Agreement" dated November 14, 1986 ("Remarketing Agreement") and an "Operating Agreement" dated the same date ("Operating Agreement") entered into between Canyon Capital, Inc. ("Canyon") and Business Cards Tomorrow, Inc. ("BCT"). The Operating Agreement was amended by letter agreement between Canyon and BCT dated November 20, 1986. For purposes of this letter agreement, the Remarketing Agreement and the Operating Agreement shall sometimes be referred to collectively as the "Agreements". The Agreements relate to equipment purchased by Canyon from BCT ("Equipment"), which Equipment was purchased for the sole purpose of leasing said Equipment under full payout finance leases ("Leases") between Canyon and the respective lessees thereunder ("Lessees"), and concern various matters related to the purchase of the Equipment. These matters include but are not limited to: the furnishing of credit information by BCT to Canyon regarding prospective Lessees; Canyon's agreement to purchase equipment and provide financing to licensees of BCT, said financing to be provided within the discretion of Canyon; establishment of a loss reserve pool ("Pool"); procedures for additional funds to be provided to the Pool both by Canyon and by BCT; procedures to be followed in the event of a default by a Lessee, including Canyon being entitled to draw funds from the Pool and having a limited right of indemnification from BCT; remarketing procedures in the event of Equipment coming off lease at the end of the term, or Equipment being repossessed, including compensation payable to BCT. BCT understands that Canyon is about to be purchased by American Commercial Credit Corp. ("ACCC") and subsequently merged into ACCC, and that ACCC is requesting the assurance of BCT of its continued performance under the Agreements, notwithstanding the merger between ACCC and Canyon and any future termination of the Operating Agreement. BCT has agreed to do so under the terms and conditions of this letter agreement. Accordingly, subject to the consummation of the purchase of Canyon by ACCC, it is agreed between BCT, Canyon and ACCC as follows: 1. Future Purchase of Equipment. ACCC agrees that for a period of no less than six months after closing of its purchase of Canyon, ACCC and its affiliate, AEL Leasing Co., Inc., ("AEL") shall purchase Equipment from BCT for purposes of leasing same under finance leases to franchisees of BCT, in their discretion, all subject to the credit and business standards (including amounts of concentration) which were employed by Canyon over the past year in the purchase of Equipment and furnishing of financing to franchisees of BCT. 2. Acknowledgment of BCT Performance. BCT acknowledges that it shall be bound by its obligations under the terms of the Agreements with regard to those Leases (and Equipment subject thereof) existing as of the date of this letter, and/or entered subsequently to the date of this letter between Canyon, ACCC and AEL and the Lessees thereunder, in which BCT is the supplier of the Equipment (whether the Lessee shall be the original user of the Equipment or has assumed the Lease) notwithstanding any future termination of the "Operating Agreement" between Canyon/ACCC and BCT. 3. Obligations Accrued as to Existing Lessees. BCT further acknowledges that the obligations of BCT under the Agreements be deemed to have accrued with regard to those Leases (and Equipment subject thereof) existing as of the date of this letter, and/or entered subsequently to the date of this letter between Canyon, ACCC and AEL and the Lessees thereunder, shall continue to exist in full force and effect with regard to those Lessees following any termination of the Operating Agreement by either party, including but not limited to the obligations of remarketing of Equipment and indemnification of ACCC/AEL in the event of default by the Lessee, until the obligations of all such Lessees under said Leases shall have been satisfied in full. 4. AEL and ACCC Obligations and Rights. AEL and ACCC shall be entitled to the benefits of the Agreement, and shall be bound by the obligations of the agreement as such obligations applied by Canyon, as if they were original signatories to the Agreements. 5. No Existing Default by Canyon. BCT hereby acknowledges that Canyon is in compliance with all of the terms and conditions of the Agreements as of the date of this letter, and further that there is no event or condition new existing, or which, if it continued to exist uncured, would constitute a default or event of default by Canyon under the terms of the Agreements. BCT understands that ACCC is specifically relying on this paragraph. 6. Pool Amount. The amount of the Pool as of the date hereof is the sum of $70,283.88. Canyon and BCT agree that this shall be deemed to be the correct amount of the Pool, and that neither shall owe any additional funds on account of any amounts that may have been payable prior to the date hereto, and that no amounts shall be payable except for future contributions payable at the time of the entry of Leases, or future quarterly contributions by Canyon. 7. Ownership of Pool/Periodic Evaluation of Pool Amount. This will confirm that the Pool shall at all times by the property of BCT, subject to the security interest in the Pool in favor of Canyon. Further, this shall confirm that two years from the date of this letter, and every two year anniversary thereafter of this letter, the parties shall evaluate the amount of the Pool. It is agreed that the ratio of outstandings of Leases to the amount of the Pool at the time of each evaluation shall be no less than the ratio of outstandings on Leases to the amount of the Pool as of the date of this letter. As of the date of this letter, the amount of outstandings on Leases is $1,586,331.10, which is a ratio of 22.57:1 in relation to the current amount of the Pool. To the extent that the ratio shall be less than 22.57:1, monies will be remitted to BCT such that the ratio shall become 22.57:1. If the ratio is greater than the current ratio, then no funds will be remitted. 8. Entire Agreement. Except as expressly modified by the terms of this letter, the Agreements shall remain in full force and effect. This represents the entire agreement between the parties with regard to the Agreements, and supersedes all other discussions, letters, memorandums and other agreements. If you are in agreement with the terms of this letter, please signify by countersigning where provided below. Agreed: May 24, 1993 Canyon Capital, Inc. BCT International, Inc. American Commercial Credit Corp. EX-10.13 18 LINE OF CREDIT EXHIBIT 10.13 Intercontinental Bank 8211 West Broward Blvd. Plantation, Florida 33324 October 5, 1994 Mr. William Wilkerson Chairman & CEO BCT International, Inc. 3000 N.E. 30th Place Fifth Floor Fort Lauderdale, Florida 33306 Dear Bill: Intercontinental Bank has agreed to lend BCT International, Inc. under the following terms and conditions: BORROWER: BCT International, Inc.; GUARANTOR: William A. Wilkerson AMOUNT: $200,000; TYPE: Advised line of credit, subject to bank approval for each draw requested; INTEREST RATE: Citibank prime rate plus 1.5%, floating; FEES AND COSTS: Out of Pocket expenses; MATURITY: July 1, 1995; COLLATERAL: Unsecured REPORTING REQUIREMENTS: Borrower will provide 10Q's and 10K's at issue time, and analysis of accounts receivable on a quarterly basis; COMMITMENT EXPIRATION: This commitment must be executed and returned to the undersigned not later than October 11, 1994, or this commitment will be null and void.; LOAN CLOSING: This loan must be closed by November 1, 1994 or this commitment executed will be null and void. Please return a copy of this commitment with an original signature to the undersigned at your earliest convenience. Sincerely yours, John R. Morris Vice President Terms and conditions as hereinabove written agreed to this 6th day of October, 1994. BCT International, Inc. William A. Wilkerson - ----------------------------------- William A. Wilkerson, Chairman/CEO Guarantor: William A. Wilkerson - ----------------------------------- William A. Wilkerson 2 EX-10.14 19 EMPLOYMENT LETTER EXHIBIT 10.14 BCT International, Inc. 3000 N.E. 30th Place, 5th Floor Ft. Lauderdale, FL 33306 March 2, 1995 Mr. A. George Cann Dear George: This letter will memorialize our conversations concerning your employment with BCT. TITLE: President of Business Cards Tomorrow, Inc. BASE SALARY: $125,000 per year BONUS: To participate in the incentive plan adopted by the Compensation Committee providing for bonuses based on operating profit for officers of the Company and BCT. The Bonus pool equals 50% of the first $100,000 over targeted operating income and 25% of additional profits over targeted operating income. STOCK OPTIONS: 40,000 Stock Options with a three year vesting schedule 10,000 vested immediately BENEFITS: Blue Cross/Blue Shield Health Insurance, 401K plan -after 1 year employment, ten (10) paid holidays, and ten (10) paid sick days. In addition, during the first three years of employment with the Company, if you were to be terminated, then the Company is obligated to pay your present salary at the time for a period for six months. William A. Wilkerson - ------------------------------------ William A. Wilkerson, Chairman/CEO -----END PRIVACY-ENHANCED MESSAGE-----