COMMON STOCK PURCHASE AGREEMENT
COMMON STOCK PURCHASE AGREEMENT made as of this 13th day of February 1996,
by and among MIC TECHNOLOGY CORPORATION, a Texas corporation (the "Company"),
AEROFLEX INCORPORATED, a Delaware corporation (the "Purchaser"), and the persons
whose signatures appear at the foot hereof (individually a "Stockholder" and
collectively the "Stockholders").
W I T N E S S E T H:
WHEREAS, the Stockholders in the aggregate own all of the outstanding
Common Stock, no par value per share (the "Common Stock"), and all outstanding
warrants to purchase Common Stock (the "Stockholder Warrants") of the Company;
and
WHEREAS, the Purchaser and the Stockholders have agreed to the sale by the
Stockholders to the Purchaser of all of the outstanding Common Stock and
Stockholder Warrants of the Company upon the terms and conditions hereinafter
set forth;
NOW, THEREFORE, in consideration of the covenants, warranties and mutual
agreements herein set forth, and in reliance upon the representations and
warranties contained herein, the parties do hereby agree as follows:
1. Purchase and Sale of Stock and Stockholder Warrants.
In reliance on the representations and warranties contained herein and
subject to all of the terms and conditions hereof, each of the Stockholders
hereby severally (and not jointly) agrees to sell, assign, transfer and deliver
to the Purchaser, and the Purchaser hereby agrees to purchase from the
Stockholders, on the Closing Date, all of the issued and outstanding Common
Stock held by each of the Stockholders (the "Stock") and all of the outstanding
Stockholder Warrants held by certain of the Stockholders.
2. Purchase Price.
2.1 Purchase Price. In full consideration of the sale of the Stock and
the Stockholder Warrants to the Purchaser, and subject to the terms and
conditions hereinafter set forth, the Purchaser hereby agrees (i) at the Closing
(A) to pay to the Stockholders' Representative, Thirty Five Million Four Hundred
Ninety-Seven Thousand Ninety-Eight Dollars ($35,497,098) by wire transfer in
immediately available funds to be allocated among the Stockholders in the
amounts set forth on Schedule 4.4 (B) to deposit with the Escrow Agent an
additional Five Hundred and Ninety Thousand Dollars ($590,000) which together
with the Deposit (as defined in Section 2.3) shall equal Nine Hundred Fifty
Thousand Dollars ($950,000) (the "Escrow Fund"), to be distributed to the
Stockholders as provided in the Escrow Agreement and, if distributed, to be
allocated among the Stockholders, in the amounts set forth on Schedule 4.4; (C)
to issue 100,000 Warrants in the form of Exhibit F-1 to the Stockholders in the
denominations and registered in the names specified on Schedule 4.4; and (D) to
issue 300,000 Warrants in the form of Exhibit F-2 and 300,000 shares of the
Purchaser's Common Stock in the denominations and registered in the names
specified by Purchaser as set forth in the Allocation Agreement delivered to the
Stockholders' Representative on the date of this Agreement; and (ii) on the
Contingent Payment Date, to pay the Contingent Payment as provided in Section
2.2 hereof. The exercise price of the 100,000 Warrants in the form of Exhibit
F-1 shall be the average closing price per share of the Purchaser's Common Stock
on the New York Stock Exchange during the ten (10) trading days ending on the
second trading day immediately preceding the Closing Date (as defined below). In
the event Purchaser exercises the option to extend the Closing Date and
termination date as provided in Section 3.1(b) by increasing the Deposit to Five
Hundred Thousand Dollars ($500,000) then at the Closing the additional amount
delivered to the Escrow Agent under Section 2.1(i)(B) shall be Four Hundred
Fifty Thousand Dollars ($450,000)
2.2 Contingent Payment
(a) Amount. If the aggregate Gross Profit Dollars (as hereinafter
defined) of the Company during the Measurement Period (as hereinafter defined)
are $24,000,000 or more, the Purchaser shall pay to the Stockholders on a date
(the "Contingent Payment Date") within ninety (90) days after the end of the
Measurement Period an amount (the "Contingent Payment") equal to Four Million
Dollars ($4,000,000). The Contingent Payment shall be allocated among the
Stockholders in the amounts as set forth in Schedule 4.4 hereto.
(b) Certain Definitions.
(i) "Cost of Sales" means Cost of Sales as determined in the audited
Financial Statements of the Company as of October 31, 1995, and shall be
calculated for the Measurement Period in the same manner as Cost of Sales has
been historically determined by the Company. Consistent with the foregoing, Cost
of Sales (A) shall not include any amount charged to depreciation or
amortization expense; and (B) shall not include the cost of ten percent (10%) of
the gold, ten percent (10%) of the ceramics, and twenty-five percent (25%) of
other sputtering materials incurred during the Measurement Period which amounts
shall be appropriately charged to development expense.
(ii) "Gross Profit Dollars" means Net Sales less Cost of Sales;
(iii) "Measurement Period" means the eighteen month period from March 1,
1996 to August 31, 1997, provided if Purchaser exercises the option to extend
the Closing Date and termination date as provided in Section 3.1(b) then the
eighteen month period shall be from April 1, 1996 to September 30, 1997.
(iv) "Net Sales" means Gross Sales of the Company's products and services
less returns, price and quantity adjustments and other credits historically
reflected as sales adjustments by the Company, and shall be calculated for the
Measurement Period in the same manner as has been historically determined by the
Company.
(c) Certain Undertakings
(i) From and after the Closing and during the Measurement
Period, the Purchaser agrees with the Stockholders as follows:
(A) Purchaser shall, in good faith, use its best
efforts to operate the Company in a commercially reasonable manner.
(B) The Company shall remain a separate corporation
and direct or indirect wholly-owned subsidiary of the Purchaser until the end
of the Measurement Period.
(C) Purchaser shall make available to the Company
(x) sufficient working capital and (y) sufficient capital to enable the Company
to make capital equipment investments of up to $4,000,000 in the first twelve
months of the Measurement Period and up to $2,000,000 in the next twelve months
of the Measurement Period, in the case of both (x) and (y) in an amount
sufficient so as not to impair the Company's ability to achieve Gross Profit
Dollars of $24,000,000 or more during the Measurement Period. The cost of any
working capital or other equity or debt capital shall not be included in Cost of
Sales.
(D) Revenues will be recognized in accordance with
GAAP. The Company shall not cause shipments to be made in advance of customers
requested delivery dates. The Company will not defer shipments in order to
avoid payment of the Contingent Payment.
(E) From and after the Closing and during the
Measurement Period, the Purchaser shall consistently apply all of the
Company's accounting policies as such policies are reflected in the
Company's October 31, 1995 audited Financial Statements.
(ii) Within sixty (60) days after the end of
the first six month period and the end of the second six month period during
the Measurement Period, the Purchaser shall provide the Stockholders'
Representative with a detailed schedule reflecting the calculation of Gross
Profit Dollars for such periods and such backup for the determination,
including the ability to meet with the Company's officers as the
Stockholders' Representative may reasonably request.
(d) Payment and Audit Right.
(i) The parties hereto agree that within sixty
(60) days after the end of the Measurement Period, the Purchaser shall
determine Gross Profit Dollars and advise the Stockholders' Representative
in writing (the "Contingent Payment Notice") of such determination and shall
provide the Stockholders' Representative with such information as is
reasonably necessary to enable him to confirm such determination. The
Purchaser shall deliver the Contingent Payment to the Stockholders within
ninety (90) days after the end of the Measurement Period in accordance with
written instructions provided to the Purchaser by the Stockholders'
Representative.
(ii) If the Stockholders disagree with the
Purchaser's determination of Gross Profit Dollars, the Stockholders shall be
entitled within thirty (30) days after receipt of the Contingent Payment Notice
to commence, or cause to be commenced, an audit of the Company's underlying
accounting records. Such audit will be conducted by an independent national
("Big Six") accounting firm selected by the Stockholders and approved by the
Purchaser (such approval not to be unreasonably withheld). Such audit shall be
conducted after reasonable notice and during the Purchaser's normal business
hours. Within thirty (30) days after such audit, such firm shall advise
the Purchaser and the Stockholders' Representative of such firm's
determination of Gross Profit Dollars and, if different from the
determination by Purchaser, the Purchaser's President and the Stockholders'
Representative shall meet and in good faith seek to reach agreement on
the determination of Gross Profit Dollars. If such agreement is not reached
within fifteen (15) days, then the Purchaser and the Stockholders shall select
a new, mutually acceptable independent national ("Big Six") accounting firm
to review the determination of Gross Profit Dollars (which second firm
shall have access to the Company's accounting records and the records of the
first accounting firm related to the determination of Gross Profit Dollars) and
such second firm's decision shall be binding on the Purchaser and the
Stockholders. If the Purchaser and the Stockholders cannot agree upon a second
accounting firm, an accounting firm shall be selected by the first accounting
firm. All costs and expenses of the first such accounting firm and of the second
such accounting firm shall be paid (A) by the Stockholders if the final
determination of Gross Profit Dollars is less than $24,000,000, and (B) by the
Purchaser if the final determination of Gross Profit Dollars is $24,000,000 or
more.
2.3 Deposit. Upon execution of this Agreement, the Purchaser shall
deposit Three Hundred Sixty Thousand Dollars ($360,000) (the "Deposit") with the
Escrow Agent, which shall be held and disbursed by the Escrow Agent in
accordance with and subject to the terms of the Escrow Agreement and Section 8.2
of this Agreement. The Deposit shall be increased by One Hundred Forty Thousand
Dollars ($140,000) if Purchaser exercises the option to extend the Closing Date
and termination date as provided in Section 3.1(b).
All of the foregoing, including the Deposit, shall be collectively referred
to hereinafter as the "Purchase Price." The cash portion of the Purchase Price,
the Deposit and the Contingent Payment shall be allocated among the Stockholders
as set forth in Schedule 4.4 hereto.
3. The Closing.
3.1 Place and Date; Option to Extend.
(a) The closing of the transactions contemplated by this
Agreement shall take place in New York, New York at such place as the parties
may agree upon in writing, on March 25, 1996, (or at such earlier time as the
Purchaser wants to close). The closing is referred to in this Agreement as the
"Closing" and the date of the closing is referred to herein as the "Closing
Date".
(b) Purchaser may at Purchaser's option extend the Closing Date
and date of termination under Section 8.1(b)(i) and 8.1(c)(i) from March 25,
1996, to April 4, 1996 by delivering prior to the close of business New York
Time on March 25, 1996, both written notice of such extension to the
Stockholders' Representative and wire transfer of One Hundred and Forty Thousand
Dollars ($140,000) to the Escrow Agent to increase the Deposit to Five Hundred
Thousand Dollars ($500,000).
3.2 Documents to be delivered by the Stockholders and the Company.
(a) Upon execution of this Agreement, the Stockholders shall
execute and deliver to the Custodian as set forth in the Custody Agreement and
Irrevocable Election to Sell in the form of Exhibit A-1 attached hereto (i) duly
issued certificates representing all of the Stock duly endorsed in blank, with
blank stock powers attached and with all required stock transfer stamps attached
and signatures guaranteed by a commercial bank or trust company or a member firm
of a national securities exchange; (ii) all of the stock options set forth on
Schedule 4.4 hereto (the "Options"), together with duly executed notices of
exercise; (iii) an Irrevocable Power of Attorney in the form of Exhibit A-2,
(iv) instruments contributing to the capital of the Company and canceling
promissory notes with principal amounts outstanding of $200,000 by Xxxxxxxx X.
Xxxxxx and $80,000 by Xxxxxxx X. Xxxxxxxx, and (v) the Stockholder Warrants.
(b) At the date of this Agreement the executed Escrow Agreement
among the Company, the Stockholders, the Purchaser and the Escrow Agent, in the
form attached hereto as Exhibit E shall be delivered to each party.
(c) At the date of this Agreement a copy of resolutions of the
Board of Directors of the Company authorizing the execution, delivery and
performance of this Agreement, the Employment Agreements, the Escrow Agreement
and the Non-Competition Agreements by the Company and a certificate of its
secretary or assistant secretary, dated the date of this Agreement, to the
effect that such resolutions were duly adopted and are in full force and effect
shall be delivered to the Custodian;
(d) At the date of this Agreement the executed Employment
Agreements among the Purchaser, the Company and Messrs. Xxxxx X. Xxxxxxxx,
Xxxxx X. Xxxxxxx and Xxxxxxx X. Xxxx, in the forms agreed to by such
parties and the executed Noncompetition Agreements among the Purchaser,
the Company and Messrs. Xxxxxxx X. Xxxxx, Xxxxxx Management Company, Xxxxxxx X.
Xxxxxxxx and Xxxxxxxx X. Xxxxxx, in the form attached hereto as Exhibit B shall
be delivered to the Custodian.
(e) At the Closing, the Stockholders or the Company, as the
case may be, shall deliver to the Purchaser the following:
(i) the executed Employment Agreements among the Purchaser, the Company and
Messrs. Xxxxx X. Xxxxxxxx, Xxxxx X. Xxxxxxx and Xxxxxxx X. Xxxx, in the forms
agreed to by such parties and delivered to the Custodian on the date of
execution of this Agreement;
(ii) the executed Noncompetition Agreements between the, Company and
Messrs. Xxxxxxx X. Xxxxx, Xxxxxx Management Company, Xxxxxxx X. Xxxxxxxx and
Xxxxxxxx X. Xxxxxx, in the form attached hereto as Exhibit B and delivered to
the Custodian on the date of execution of this Agreement;
(iii) a certificate of the Company's secretary or its assistant secretary
dated the Closing Date to the effect that the resolutions referred to in Section
3.2(c) are in full force and effect.
(iv) confirmation of the exercise of all Options and payment therefor.
(v) stock certificates for all the Stock and the Stockholders Warrants.
(vi) the opinions, certificates and other documents or instruments
specified in Section 7.1 of this Agreement; and
(f) the Stockholders and the Company shall each execute
such other documents and instruments and take such action as may be necessary
or reasonably requested by the Purchaser to fully vest in Purchaser full
title to the Stock and the Stockholder Warrants and place the Purchaser in
possession and control of the Company, its Subsidiary and their assets.
3.3 Documents to be Delivered by the Purchaser.
(a) Upon execution of this Agreement, the Purchaser (i) shall
deliver the Deposit to the Escrow Agent; (ii) shall execute and deliver the
executed Escrow Agreement; (iii) shall deliver to the Stockholders a copy of
resolutions of the Board of Directors of the Purchaser authorizing the
execution, delivery and performance of this Agreement, the Employment Agreements
and the Escrow Agreement by the Purchaser, and a certificate of its secretary or
assistant secretary, to the effect that such resolutions were duly adopted and
are in full force and effect; and (iv) shall deliver to the Custodian the
Employment Agreements and the Non-Competition Agreements executed by the
Purchaser.
(b) At the Closing the Purchaser shall deliver to the
Stockholders:
(i) a certificate of the Purchaser's secretary or its assistant secretary
dated the Closing Date to the effect that the resolutions referred to in Section
3.3(a)(iii) are in full force and effect;
(ii) the opinions, certificates and other documents or instruments
specified in Section 7.2 of this Agreement; and
(iii) the Purchaser shall deliver to the Stockholders' Representative the
cash portion of the Purchase Price (i.e., $35,497,098), and Warrants for 400,000
shares of Purchaser Common Stock and 300,000 shares of unregistered Purchaser
Common Stock and shall deposit $590,000 into the Escrow Fund with the Escrow
Agent as specified in Section 2 above, provided if Purchaser exercised the
option to extend the Closing Date and termination date as provided in Section
3.1(b) the amount delivered to the Escrow Agent shall be $450,000.
3.4 Form of Documents.
Unless specifically otherwise provided herein, all documents to be
delivered pursuant to this Section 3 by one party to the other party to this
Agreement shall be in form and substance reasonably satisfactory to such other
party and its counsel.
4. Representations and Warranties of the Stockholders and the Company.
The Stockholders and the Company, jointly and severally, (except with
respect to Section 4.3 as it pertains to the legal capacity and actions of the
Stockholders, in which case the Stockholders severally, and not jointly)
represent and warrant to the Purchaser as of the date hereof and as of the
Closing Date, except as set forth in the Schedules delivered by the Stockholders
and the Company to the Purchaser on the date hereof, as follows:
4.1 Organization and Authority.
Each of the Company and the Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, with all requisite power and authority
(corporate and governmental) to own, operate and lease its properties and to
carry on its business as now being conducted, except where the failure to have
such power and authority would have an adverse effect of less than $15,000 in
the aggregate on the Company and the Subsidiary. Except as set forth in Schedule
4.1, the Company and the Subsidiary are duly licensed or qualified to do
business and are in good standing in each jurisdiction in which either of them
is required to be so licensed or qualified, except where the failure to be so
licensed or qualified would have an adverse effect of less than $15,000 in the
aggregate on the Company and the Subsidiary. Schedule 4.1 sets forth the
jurisdictions in which the Company and the Subsidiary are incorporated and
licensed or qualified to do business.
4.2 Subsidiary.
The Company owns all of the shares of the issued and outstanding
capital stock of MIC TECHNOLOGY SARL (the "Subsidiary") free and clear of any
security interest, claim, lien, pledge, option or encumbrance whatsoever, or any
restrictions except for restrictions under applicable securities laws or
provisions of French law. The Company has no subsidiaries except for the
Subsidiary. Neither the Company nor the Subsidiary has any direct or indirect
interest or interests by stock ownership or otherwise in any firm, association,
corporation or business enterprise, except for the Company's ownership of the
Subsidiary.
4.3 Authorization of Agreements.
The Stockholders have the legal capacity to execute, deliver and
perform their respective obligations under this Agreement. This Agreement has
been duly executed and delivered by each of the Stockholders and constitutes the
legal, valid and binding obligation of each of the Stockholders enforceable
against each of them in accordance with its terms, except as the enforcement
thereof may be subject to or limited by bankruptcy, insolvency, reorganization,
moratorium or other laws affecting the enforcement of creditors' rights
generally now or hereafter in effect and subject to the application of equitable
principles and the availability of equitable remedies. The Company has the power
and authority to execute, deliver and perform its obligations under this
Agreement. This Agreement has been duly executed and delivered by the Company
and constitutes the legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as the
enforcement thereof may be subject to or limited by bankruptcy, insolvency,
reorganization, moratorium or other laws affecting the enforcement of creditors'
rights generally now or hereafter in effect and subject to the application of
equitable principles and the availability of equitable remedies.
4.4 Capital Stock.
The authorized, issued and outstanding capital stock of all classes of
the Company and the Subsidiary are set forth on Schedule 4.4. All of the
outstanding capital stock of the Company and the Subsidiary has been duly
authorized and is validly issued, fully paid and nonassessable. All outstanding
capital stock and any other outstanding securities of the Company and the
Subsidiary (including any employee stock options and the Stockholder Warrants)
were issued in compliance with all federal and state securities laws. The
lawful, registered and beneficial owners (and their addresses) of all shares of
the capital stock of the Company and the Subsidiary and the Stockholder Warrants
and the number of shares and Stockholder Warrants held by each is as indicated
on Schedule 4.4 hereto. The Stockholders have, and on the Closing Date will
convey to the Purchaser, good title to the Stock and the Stockholder Warrants,
free and clear of any security interest, claim, lien, pledge, option, or
encumbrance whatsoever or any restrictions except for restrictions under
applicable securities laws. Except as set forth on Schedule 4.4, which sets
forth all of the Options and the Stockholder Warrants, including the holders and
exercise prices thereof, there are no rights, subscriptions, warrants, options,
conversion rights, commitments or agreements of any kind authorized or
outstanding to purchase or otherwise acquire from the Stockholders, the Company,
the Subsidiary or any other person, any shares of stock, or securities or
obligations of any kind convertible into or exchangeable for any shares of
stock, of any class of the Company or the Subsidiary or any other equity
interest in the Company or the Subsidiary. There is no proxy, or any agreement,
arrangement or understanding of any kind authorized or outstanding which
restricts, limits or otherwise affects the right to vote any share of Stock or
any share of capital stock issued by the Subsidiary.
4.5 No Conflicts.
The execution, delivery and performance of this Agreement, the
Employment Agreements, the Noncompetition Agreements, the Escrow Agreement and
any other agreement or document contemplated herein or therein and the
consummation of all of the transactions contemplated hereby and thereby: (i) do
not and will not require the consent, waiver, approval, license, designation or
authorization of, or declaration with, any court to which the Company is subject
or any governmental authority or agency; and (ii) do not and will not, with or
without the giving of notice or the passage of time or both, violate or conflict
with or result in a breach or termination of any provision of, or constitute a
default under, or accelerate or permit the acceleration of the performance
required by the terms of, or result in the creation of any mortgage, security
interest, claim, lien, charge or other encumbrance upon any of the assets of the
Company or the Subsidiary pursuant to, or otherwise give rise to any liability
or obligation under, the certificate of incorporation or bylaws of the Company
or the Subsidiary, any agreement, mortgage, deed of trust, indenture, license,
permit or any other agreement or instrument or any order, judgment, decree,
statute or regulation to which the Stockholders, the Company or the Subsidiary
is a party or by which the Stockholders, the Company or the Subsidiary or any of
their assets may be bound, except for any such violations, conflicts, breaches,
defaults or other occurrences which would not have a material adverse effect on
the Company and the Subsidiary, taken as a whole and (iii) do not and will not
require the consent of any natural person, firm, partnership, association,
corporation or trust, except for any such consent which would not have had a
material adverse effect on the Company and the Subsidiary, taken as a whole.
4.6 Financial Statements.
Schedule 4.6 sets forth the Financial Statements of the Company.
(a) Except as set forth on Schedule 4.6, for the relevant
periods, the Financial Statements: (1) are complete and correct in all material
respects; (2) present fairly the consolidated financial position of the Company
and the subsidiary at such dates and the results of operations and changes in
financial position for the respective periods ended on such dates; and (3) were
prepared in accordance with generally accepted accounting principles,
consistently applied during the periods, and are in accordance with the books
and records maintained by the Company and the Subsidiary in all material
respects.
(b) Except as set forth on Schedule 4.6, as of December 31, 1995,
neither of the Company nor the Subsidiary had any liabilities, commitments or
obligations of any nature, whether absolute, accrued, contingent or otherwise,
not shown and adequately provided for in the Financial Statements as of such
date or in the Schedules to this Agreement or in the Notes to the October 31,
1995 Financial Statements.
4.7 Taxes.
True and correct copies of the Company's consolidated federal and
state income tax returns for the years ended October 31, 1994, 1993, 1992 and
1991 have been delivered to the Purchaser. All tax returns (including
information returns) required by any jurisdiction to have been filed by or with
respect to the Company or the Subsidiary have been timely filed, except for
returns with respect to which extensions have been granted, and all taxes shown
due on such returns have been paid.
Except as set forth in Schedule 4.7, all liabilities of the Company or
the Subsidiary to any jurisdiction for taxes of every kind and nature, including
interest thereon and penalties with respect thereto, (collectively "Taxes")
relating to any period ending on or prior to December 31, 1995, have been timely
paid by the Company or are accrued and provided for in the Financial Statements
for the period ended December 31, 1995. Any liability for Taxes incurred by the
Company or the Subsidiary since December 31, 1995 was incurred in the ordinary
course of business.
Except as set forth in Schedule 4.7, the U.S. consolidated (or
separate, as the case may be) federal income tax returns and state and foreign
income tax returns of the Company and the Subsidiary have not been audited by
the Internal Revenue Service or other taxing authority within the past five
years. Neither the Internal Revenue Service nor any state, local or other taxing
authority has proposed any additional taxes, interest or penalties with respect
to the Company or the Subsidiary or any of their operations or business; there
are no pending or, to the knowledge of the Company and the Stockholders,
threatened tax claims or assessments; and there are no pending or, to the
knowledge of the Company and the Stockholders, threatened tax examinations by
any taxing authorities.
Neither the Company nor the Subsidiary has given any waivers of rights
(which are currently in effect) under applicable statutes of limitations with
respect to the federal income tax returns for any fiscal year. The Company has
not consented to the application of Section 341(f) of the Code.
Since November 1, 1994, the Company has been a "C" corporation, as
defined in Section 1361(a) of the Code.
4.8 No Adverse Changes.
Since October 31, 1995, except as set forth in Schedule 4.8 hereto:
(i) the business of the Company and the Subsidiary has been conducted only in
the ordinary course, except for the transactions contemplated by this Agreement;
(ii) there has been no change in the condition (financial or otherwise), assets,
liabilities, business, operations or affairs of the Company and the Subsidiary,
other than changes in the ordinary course of business, none of which singly and
no combination of which, in the aggregate, has been materially adverse; and
(iii) there has been no damage, destruction or loss or other occurrence or
development, whether or not insured against, which, either singly or in the
aggregate, materially adversely affects, and the Stockholders have no knowledge
of any threatened occurrence or development which would materially adversely
affect, the condition (financial or otherwise), assets, liabilities, business,
operations or affairs of the Company or the Subsidiary, taken as a whole.
4.9 Conduct of Business.
Except as disclosed on Schedule 4.9 hereto, and except for the
execution of this Agreement since October 31, 1995, neither the Company nor the
Subsidiary has: (i) created or incurred any liability (absolute, accrued,
contingent or otherwise) except unsecured current liabilities incurred in the
ordinary course of business consistent with past practice for other than money
borrowed; (ii) mortgaged, pledged or subjected to any lien or otherwise
encumbered any of its assets, tangible or intangible; (iii) discharged or
satisfied any lien or encumbrance or paid any obligation or liability (absolute,
accrued, contingent or otherwise) other than current liabilities shown on the
Financial Statements as of October 31, 1995 and taxes and current liabilities
incurred since October 31, 1995 in the ordinary course of business for other
than money borrowed or under contracts or agreements entered into in the
ordinary course of business (other than as a result of any default or breach of,
or penalty under, any such contracts of agreements); (iv) waived, released or
compromised any claims or rights of substantial value, or experienced any labor
trouble (including without limitation any actual or threatened strike or
lock-out) or lost, or been threatened with the loss of, any key employees or any
substantial number of employees; (v) entered into any settlement, compromise or
consent with respect to any claim, proceeding or investigation; (vi) made
capital expenditures or capital additions or betterments in excess of $200,000;
(vii) sold, assigned, transferred, leased or otherwise disposed of any of its
assets, tangible or intangible, or canceled any debts or claims except, in each
case, for fair consideration in the ordinary course of business; (viii) declared
or paid any dividends, or made any other distribution on or in respect of, or
directly or indirectly purchased, retired, redeemed or otherwise acquired any
shares of its capital stock, paid any notes or open accounts, or paid any amount
or transferred any asset to the Stockholders, any member of their families or
any other holder of any capital stock of the Company; (ix) made or become a
party to, or become bound by, any contract or commitment or renewed, extended,
amended, modified or terminated any contract or commitment which in any one case
involved an amount in excess of $100,000; (x) issued or sold any shares of its
capital stock; (xi) except in the ordinary course of business, granted any
increase in the compensation of, made any other change in employment terms for,
or adopted, amended, modified or terminated any bonus, profit-sharing,
incentive, severance or other plan, contract or commitment for the benefit of,
any of its directors, officers or employees; (xii) entered into any transaction
not in the ordinary course of business (except for this Agreement); (xiii)
changed any of its accounting methods or principles used in preparing the
Financial Statements; or (xiv) entered into any contract or commitment to do any
of the foregoing.
4.10 Title to Assets.
Except as set forth in Schedule 4.10, the Company or the Subsidiary
has valid title to all of its personal property and valid leasehold interests in
all real and personal property leased by it, free and clear of all claims,
liens, charges, mortgages, pledges, security interests, restrictions and other
encumbrances of any kind whatsoever, excluding (i) any such liens relating to
carriers, ware- housemen, real property lessors, mechanics, materialmen, and
similar persons, affecting leased real property, or arising as a matter of law,
which, in the aggregate, do not exceed $25,000; (ii) defects, zoning
restrictions, restrictions on use, irregularities, encumbrances or clouds on
title of real property, which do not materially impair the property affected
thereby for the purpose for which it was acquired or leased; and (iii) any
mortgages, pledges, security interests, restrictions and other encumbrances
caused by parties other than the Company or the Subsidiary or the Stockholders
relating to any leased real property, which, in the aggregate, do not materially
affect the use and enjoyment of such leased real property by the Company or the
Subsidiary. No instrument, easement, license or grant of record, applicable
zoning or building law, ordinance or administrative regulation or other
impediment of any kind prohibits or interferes with, limits or impairs, or
would, if not permitted by any prior nonconforming use, prohibit or interfere
with or limit or impair, the use, operation, maintenance of, or access to, or
the value of, the real or personal property owned or leased by the Company or
the Subsidiary as presently used, operated, maintained and accessed by the
Company or the Subsidiary to carry on its business as presently conducted. All
of the assets and properties owned or leased by the Company and the Subsidiary
are (i) sufficient and adequate to carry on their business as presently
conducted; (ii) are in as good condition and repair as necessary to carry on
their business as presently conducted, normal wear and tear excepted, and are in
a state of maintenance, repair and operating condition required for the proper
operation and use thereof as necessary to carry on their business as presently
conducted; and (iii) comply with all applicable federal, state or local laws,
ordinances, rules and regulations and with the terms and conditions of all
leases and other agreements affecting or relating to any such property, except
where the noncompliance with any of the foregoing does not have a material
adverse effect on the business of the Company and the Subsidiary, taken as a
whole.
4.11 Real Property.
Neither the Company nor the Subsidiary owns any real property.
Schedule 4.11 sets forth a true and complete list of all leases of real property
to which the Company or the Subsidiary is a party. Except as set forth in
Schedule 4.11, the Company and the Subsidiary enjoy quiet possession under all
of their leases of real property, each of which is enforceable in accordance
with its terms against the lessor thereunder and the Company and the Subsidiary
are not in default under the terms of any of said leases, except for any such
default which does not have an adverse effect of $15,000 or more on the Company
and the Subsidiary; and no condition exists and no event has occurred which,
with or without the passage of time or the giving of notice or both, could
constitute such a default.
4.12 Personal Property.
Schedule 4.12 hereto sets forth a true and complete list of all items
of personal property except inventory having an original cost of more than
$5,000, owned or leased by the Company and the Subsidiary and the location of
each such item. No shortage or damage exists in (i) any raw materials, supplies,
work in process or finished goods owned by customers or suppliers of the Company
and the Subsidiary and stored upon their premises of the business or (ii) any
other items of personal property owned by another for which the Company or the
Subsidiary is accountable to another, and any such items referred to in clauses
(i) or (ii) are described in Schedule 4.12 hereto.
4.13 Inventory
The inventory shown on the Company's consolidated balance sheet as of
October 31, 1995, and all additions thereto acquired since October 31, 1995 and
now on hand, consist of items which are in good condition, of a quantity and
quality usable and saleable in the ordinary course of business and are adequate
and appropriate for the business of the Company and the Subsidiary as now
conducted. Obsolete, discontinued, returned, damaged, overage or off-quality
items do not constitute a material part of such inventory. Finished goods in
such inventory conform to specifications, including without limitation all
applicable governmental regulations, are free from defects and are marketable in
their current condition.
4.14 Accounts Receivable.
All accounts receivable, net of reserves, shown on the consolidated
balance sheet as of December 31, 1995, and all accounts receivable acquired by
the Company or the Subsidiary since December 31, 1995, net of reserves
established consistent with the reserves shown on the consolidated balance sheet
as of December 31, 1995, have been collected or will be collected and are
subject to no known counterclaims or setoffs. All such accounts receivable have
been generated in the ordinary course of business and reflect a bona fide
obligation for the payment of goods or services provided by the Company or the
Subsidiary.
4.15 Material, Service Agreements; Other Contracts.
(a) Schedule 4.15(a) sets forth a complete list with regard to
the Company and the Subsidiary of (i) all bids, applications or proposals
submitted by any of them to provide materials or services with a value of
$50,000 or more to any Person and for which the award, approval or selection is
pending, (ii) all contracts or agreements for the provision of materials or
services with a value of $50,000 or more to which the Company or the Subsidiary
is a party and which has not yet been performed in full (the items referred to
in the foregoing clauses (i) and (ii) being herein collectively called the
"Material/Service Agreements"). All of such Material/Service Agreements are
fully performable by the Company or the Subsidiary in compliance with their
terms. To the knowledge of the Company and the Stockholders, no grounds exist
for the termination or cancellation of any Material/Service Agreement by the
other party thereto. Schedule 4.15(a) sets forth for each Material/Service
Agreement: (i) the branch of the Company responsible; and (ii) the customer.
(b) Except as disclosed in Schedule 4.15(b) hereto, other than as
disclosed on Schedule 4.15(a), neither the Company nor the Subsidiary is a party
to or bound by any oral or written contracts, obligations or commitments,
including without limitation any:
(i) contract, commitment or arrangement involving, in any one case, $30,000
or more;
(ii) contract with a term of, or requiring performance, more than six
months from its date; (iii) lease or lease purchase agreement, mortgage,
conditional sale or title retention agreement, indenture, security agreement,
credit agreement, pledge or option with respect to any property, real or
personal (tangible or intangible), in any capacity;
(iv) commitment, contract or undertaking for the purchase or use of
services, materials, supplies, inventory, machinery or equipment and involving
more than $50,000 in the aggregate;
(v) employment contracts or agreements;
(vi) contract or agreement with any labor union or other collective
bargaining group;
(vii) note, loan, credit or financing agreement or other contract for money
borrowed, and all related security agreements and collateral documents,
including any agreement for any commitment for future loans, credit or
financing;
(viii) guarantee;
(ix) contract or understanding regarding any capital expenditures in excess
of $25,000;
(x) agency (sales or otherwise), distribution, brokerage (including,
without limitation, any brokerage or finder's agreement or arrangement with
respect to any of the transactions contemplated by this Agreement) or
advertising agreement;
(xi) contract with investment bankers, accountants, attorneys, consultants
or other independent contractors;
(xii) shareholder agreement or contract with any Stockholder (or family
member thereof), director or officer of the Company or the Subsidiary or any
Affiliate of such persons, except agreements or contracts referred to herein
which relate to the transactions contemplated by this Agreement;
(xiii) contract, commitment or arrangement which would restrain the Company
or the Subsidiary from engaging or competing in any business or to maintain the
confidentiality of any matter, except agreements made in the ordinary course of
business to maintain confidentiality of their vendors and customers;
(xiv) contract, commitment or arrangement not made in the ordinary course
of business;
(xv) permit or franchise which is material to the business of the Company
and the Subsidiary, taken as a whole or license or royalty agreement requiring
an annual payment of $25,000 or more by the Company or the Subsidiary; and
(xvi) bonus, pension, savings, welfare, profit sharing, stock option,
retirement, commission, executive compensation, hospitalization, insurance or
similar plan providing for employee benefits or any other arrangement providing
for benefit or any former or current employees or for the remuneration, direct
or indirect, of the directors, officers or employees of the Company or the
Subsidiary.
(c) The Stockholders have made available to the Purchaser
correct and complete copies of all of the contracts, agreements and other
documents listed in Schedules 4.15(a) and 4.15(b) hereto and all
amendments thereto and any waivers granted thereunder (the "Scheduled
Contracts"). Except as specifically set forth on Schedules 4.15(a) and
4.15(b), the sale of the Stock and the Stockholder Warrants to the
Purchaser and the consummation of the other transactions contemplated
by this Agreement are not a violation of or grounds for the modification or
cancellation of any of the Scheduled Contracts or for the imposition of any
penalty or security interests thereunder. No unresolved disputes are pending
or, to the Stockholders' knowledge, threatened under or in respect of any such
Scheduled Contracts. Neither the Company nor the Subsidiary has any
outstanding power of attorney other than routine power of attorney
relating to representation before governmental agencies or given in
connection with qualification to do business in another jurisdiction.
Except as described in Schedule 4.15(a) and (b) hereto, all Scheduled
Contracts described in such Schedule 4.15(a) and (b) are valid and enforceable
in accordance with their respective terms, except as the enforcement thereof may
be subject to or limited by bankruptcy, insolvency, reorganization, moratorium
or other laws affecting the enforcement of creditors' rights generally now or
hereafter in effect and subject to the application of equitable principles and
the availability of equitable remedies; and there is not, under any of such
documents or agreements or any obligation, or covenant or condition contained
therein, any existing default by the Company or the Subsidiary, or to the
Stockholders knowledge by any other party, or any event which with notice, lapse
of time, or both, would constitute a default and which would have an adverse
effect of $15,000 or more on the Company and the Subsidiary.
4.16 Intellectual Property.
Schedule 4.16 hereto sets forth a true and complete list of all of
trademarks, service marks and trade names, and the federal, state and foreign
registrations and applications thereof, patents and patent applications and
extensions and renewals thereof and copyrights and copyright applications and
renewals thereof owned by the Company and the Subsidiary (the Intellectual
Property"). All the Intellectual Property is owned by the Company or the
Subsidiary free and clear of any and all licenses, liens, claims, security
interests, charges or other encumbrances or restrictions of any kind, and no
licenses for the use of any of such rights or Trade Secrets have been granted by
the Company or the Subsidiary to any third parties, except as set forth in
Schedule 4.16 hereto. All of the Intellectual Property and the Trade Secrets are
valid, enforceable and in good standing, and are sufficient and appropriate for
the conduct of business of the Company and the Subsidiary as currently
conducted. The sale of the Stock to the Purchaser and the consummation of the
other transactions contemplated hereby will not adversely affect any rights in
the Intellectual Property or Trade Secrets of the Company and the Subsidiary. To
the knowledge of the Company and the Stockholders, the operation of the business
of the Company and the Subsidiary does not infringe in any way on any patent,
trademark, trade name, copyright, trade secret, contract, license or other
similar right, of any person, and neither the Company nor the Subsidiary
licenses any such right from others except as set forth on Schedule 4.16. No
claim is pending or, to the knowledge of the Company and the Stockholders,
threatened, with respect to such infringement or conflict. To the knowledge of
the Company and the Stockholders, no other intellectual property or trade secret
other than those owned or licensed by the Company and the Subsidiary are
required by either of them for their business as presently conducted. The
Stockholders have no knowledge of any infringement by any third parties upon any
of the Intellectual Property.
4.17 Insurance.
Schedule 4.17 hereto contains a complete and correct list of all
insurance policies maintained by the Company and the Subsidiary together with a
schedule of required premiums, premium payment dates and any prepaid premiums
under each such policy. The Stockholders have made available to the Purchaser
complete and correct copies of all such policies together with all riders and
amendments thereto. Such policies are in full force and effect, and all premiums
due thereon have been paid. The Company and the Subsidiary have complied in all
material respects with the provisions of such policies. No notice has been
received canceling or threatening to cancel or refusing to renew any of such
insurance. The rights of the insured under such policies will not be terminated
or adversely affected by the Closing or the consummation of the other
transactions contemplated hereby. To the knowledge of the Company and the
Stockholders, there is currently no basis for any insurance claim by the Company
or the Subsidiary.
4.18 Customer and Supplier Relationships.
Attached as Schedule 4.18 is a complete and correct list of all
current customers of the Company and the Subsidiary showing the sales to each
for the year ended October 31, 1995 and of all suppliers whose sales to the
Company and the Subsidiary amounted to more than $100,000 during any of such
periods showing the sales of each. Except as set forth in Schedule 4.18, with
respect to any such customer or supplier or group of related customers or
suppliers listed thereon, the Stockholders have no knowledge that any such
customer, supplier or group of related customers or suppliers has terminated or
expects to terminate a material portion of its normal business with the Company
and the Subsidiary. Except as disclosed in Schedule 4.18 hereto, no Stockholders
or director or officer of the Company or the Subsidiary or any of their family
members or Affiliates has any direct or indirect interest, either by way of
stock ownership or otherwise, in any firm, corporation, association or business
enterprise, which competes with, is a supplier or customer of, or is a
distributor or sales agent for, or is a party to any contract with the Company
or the Subsidiary.
4.19 Employees.
The Stockholders have furnished to Purchaser a true and complete list
setting forth all of the employees and officers of the Company and the
Subsidiary whose annual salary and bonus is in the aggregate $50,000 or more
(listing each such person individually by name) with a description of their job
designations, compensation, benefits (including severance pay and bonuses),
outstanding loans to officers or employees and all understandings not in the
ordinary course of business relating to terms and conditions of employment.
Except as set forth on Schedule 4.19, proper and accurate amounts have been
withheld by the Company and the Subsidiary from their employees for all periods
in compliance with tax withholding provisions of applicable federal, state,
local or foreign law, except where failure to be in compliance would have an
adverse effect of less than $15,000 in the aggregate on the Company and the
Subsidiary. Proper and accurate federal, state, local and foreign returns have
been filed by the Company and the Subsidiary for all periods for which returns
were due with respect to employee income tax withholding, social security and
unemployment taxes, and the amounts shown thereon to be due and payable have
been paid.
4.20 Labor Relations.
Except as set forth on Schedule 4.20, there has been no material
violation of any federal, state or local statutes, laws, ordinances, rules,
regulations, orders or directives with respect to the employment of individuals
by, or the employment practices or work conditions of, the Company or the
Subsidiary, or their respective terms and conditions of employment, wages and
hours. To the knowledge of the Company and the Stockholders, neither the Company
nor the Subsidiary is engaged in any unfair labor practice or other unlawful
employment practice. There are no unfair labor practice charges or other
employee related complaints against the Company or the Subsidiary pending or, to
the knowledge of the Company and the Stockholders, threatened before the
National Labor Relations Board, the Equal Employment Opportunity Commission, the
Occupational Safety and Health Review Commission, the Department of Labor, or
any other federal, state, or local, or other governmental authority by or
concerning the employees of the Company and the Subsidiary. No representation
question, grievance or arbitration proceedings arising out of collective
bargaining agreements covering employees of the Company or the Subsidiary exists
or is pending or, to the knowledge of the Company and the Stockholders,
threatened respecting the employees of the Company or the Subsidiary. There is
no work stoppage, strike, slowdown, lockout, picketing or other labor problem
involving persons employed by the Company or the Subsidiary pending or, to the
knowledge of the Company and the Stockholders, threatened. There are no labor
union contracts or collective bargaining agreements relating to the business of
the Company and the Subsidiary.
4.21 Benefit Plans.
(a) Schedule 4.21(a) hereto sets forth a true and complete list
of each "employee welfare benefit plan" (as defined in Section 3(1) of ERISA)
maintained by the Company or an Affiliate or to which the Company or an
Affiliate contributes or is required to contribute, including any multiemployer
employee welfare benefit plan, on behalf of officers and employees of the
Company or an Affiliate (such multiemployer and other employee welfare benefit
plans being hereinafter collectively referred to as the "Welfare Benefit
Plans"). With respect to each Welfare Benefit Plan, all contributions or
premiums due by the Closing Date have been paid or accrued.
(b) Schedule 4.21(b) hereto sets forth a true and complete list
of each "employee pension benefit plan" (as defined in Section 3(2) of ERISA)
maintained by the Company or an Affiliate or to which the Company or an
Affiliate contributes or is required to contribute, including any multiemployer
employee pension benefit plan, on behalf of officers and employees of the
Company or an Affiliate (such multiemployer and other employee pension benefit
plans being hereinafter collectively referred to as the "Pension Benefit
Plans"). No Pension Benefit Plan is a "defined benefit plan" (as defined in
Section 3(35) of ERISA). With respect to each Pension Benefit Plan including an
"individual account plan" (as defined in Section 3(34) of ERISA), all
contributions due by the Closing Date have been made or will be made or accrued
prior to-the Closing Date.
(c) Each Pension Benefit Plan, each Welfare Benefit Plan and each
related trust agreement and annuity contract and insurance policy (and any other
funding instruments) com- plies and has complied, both as to form and operation,
with the provisions of (A) the Code in order to be tax qualified under Section
401(a) or 403(a) of the Code; (B) ERISA; and (C) all other applicable laws,
rules and regulations; all necessary government approvals for the Pension
Benefit Plans have been obtained; and favorable determination letters, copies of
which have been made available to the Purchaser, as to the qualification under
the Code of each of the Pension Benefit Plans and each amendment thereto have
been received from the Internal Revenue Service and no event has occurred or
condition exists which would adversely affect such determination.
(d) Each Welfare Benefit Plan and each Pension Benefit Plan has
been administered to date in material compliance with the requirements of the
Code, ERISA and all other applicable laws and all reports required by any
government agency with respect to each Welfare Benefit Plan and each Pension
Benefit Plan have been timely filed, except to the extent failure to so file
would not result in an aggregate cost, fine or penalty in excess of $5,000.
Future compliance with the requirements of the Code, ERISA or any other
applicable laws as in effect on the date of the Closing or any collective
bargaining agreements to which the Company or an Affiliate is a party will not
result in any increase in the rate of benefit accrual under any Pension Benefit
Plan.
(e) Neither the Company, nor any Affiliate, nor any plan
fiduciary of any Welfare Benefit Plan or Pension Benefit Plan has engaged in any
transaction in violation of Section 406 of ERISA or any "prohibited transaction"
(as described in Section 4975(c) of the Code), except to the extent that such
violation would not result in an aggregate cost, fine or penalty in excess of
$5,000.
(f) Schedule 4.21(f) lists each deferred compensation plan, bonus
plan, stock option plan, employee stock purchase plan and any other employee
benefit plan, agreement, arrangement or commitment not required under a previous
subsection to be listed on Schedule 4.21(a) or 4.21(b) maintained by the Company
or an Affiliate with respect to the compensation of any of their employees.
(g) No liability to the PBGC has been incurred by the Company or
the Subsidiary or other trade or business under common control with the Company
(as determined under Sections 414(b), 414(c), 414(m) or 414(o) of the Code)
("Common Control Entity") on account of any termination of an employee pension
benefit plan subject to Title IV of ERISA. No filing has been made by the
Company (or any Common Control Entity) with the PBGC (and no proceeding has been
commenced by the PBGC) to terminate any employee pension benefit plan subject to
Title IV of ERISA maintained, or wholly or partially funded, by the Company (or
any Common Control Entity). Neither the Company nor any Common Control Entity
has (i) ceased operations at a facility so as to become subject to the
provisions of Section 4062(e) of ERISA, (ii) withdrawn as a substantial employer
so as to become subject to the provisions of Section 4063 of ERISA, (iii) ceased
making contributions on or before the date of the Closing to any employee
pension benefit plan subject to Section 4064(a) of ERISA to which the Company
(or any Common Control Entity) made contributions during the five years prior to
the date of the Closing, or (iv) made a complete or partial withdrawal (as each
is defined in Sections 4203 and 4205, respectively, of ERISA) or a reduction in
contribution base units which if sustained for three years would constitute a
partial withdrawal under Section 4205 of ERISA, from a multiemployer plan (as
defined in Section 3(37) of ERISA) so as to incur withdrawal liability as
defined in Section 4201 of ERISA (without regard to subsequent reduction or
waiver of such liability under Section 4207 or 4208 of ERISA). Neither the
Company, any Affiliate nor any Common Control Entity, including both single
employer and multi-employer pension plans has engaged in a transaction designed
to avoid or evade liability until Title IV of ERISA within the five years
preceding the Closing Date.
(h) There are no actions, suits or claims (other than routine
claims for benefits) pending or which could reasonably be expected to be
asserted against any Pension Benefit Plan or Welfare Benefit Plan; there are no
civil or criminal actions pending or, to the knowledge of the Stockholders,
threatened against any fiduciary, Pension Benefit Plan or Welfare Benefit Plan
with respect to the plan; and no Pension Benefit Plan or Welfare Benefit Plan is
the direct or indirect subject of any audit, investigation or examination by any
governmental or quasi governmental agency, and no such completed audit,
investigation or examination, if any, has resulted in the imposition of any fine
or penalty on any person.
(i) True and complete copies of each Welfare Benefit Plan and
each Pension Benefit Plan, related trust agreements or annuity contracts (or any
other funding instruments), each plan, agreement, arrangement, and commitment
referred to in subsection (vi) of this Section 4.21, summary plan descriptions,
the most recent determination letter issued by the Internal Revenue Service with
respect to each Pension Benefit Plan, Annual Reports on Form 5500 Series
required to be filed with any governmental agency for each Welfare Benefit Plan
and each Pension Benefit Plan for the three most recent plan years, investment
management agreements and amendments thereto, all financial statements
reflecting plan assets other than group annuity and insurance contracts as of
the most recent valuation date, summaries of material modifications, any
material communication received by the Company or the Subsidiary from PBGC, the
United States Department of Labor ("DOL") and the U.S. Internal Revenue service
("IRS") regarding any of the Welfare Benefit Plans and Pension Benefit Plans,
and the trustee's report for the most recent plan year of each Pension Benefit
Plan have heretofore been made available by the Company to the Purchaser.
(j) All Welfare Benefit Plans, Pension Benefit Plans, related
trust agreements or annuity contracts (or any other funding instruments), and
all plans, agreements, arrangements and commitments referred to in subsection
(i) of this Section are legally valid and binding and in full force and effect.
(k) No Pension Benefit Plan containing a section 401(k) cash or
deferred arrangement in which employees of the Company or an Affiliate,
participated has been terminated on or after October, 1989.
4.22 Litigation; Compliance; Permits.
Except as disclosed in Schedule 4.22 hereto, there are no actions,
suits, proceedings, arbitrations or governmental investigations pending, or, to
the Stockholders' knowledge, threatened against, by or affecting the Company or
the Subsidiary in which, individually or in the aggregate, an unfavorable
determination could adversely affect by $15,000 or more the Company or the
Subsidiary, or result in any liability of $15,000 or more on the part of the
Company and the Subsidiary, or prevent, hinder or delay the execution and
performance of this Agreement or any of the transactions contemplated hereby, or
could declare this Agreement unlawful or cause the rescission of any of the
transactions hereunder, or require the Purchaser to divest itself of the Stock
and the Stockholder Warrants; nor has any such suit been pending within the two
years prior to the date hereof. Neither the Company nor the Subsidiary has been
charged with or received notice of any violation of any applicable federal,
state, local or foreign law, rule, regulation, ordinance, order or decree
relating to it, or the operation of its business, and the Stockholders are not
aware of any threatened claim of such violation (including any investigation) or
any basis therefor.
The Company and the Subsidiary have complied and are in compliance with,
all laws, rules, regulations, ordinances, orders, judgments, decrees, writs,
injunctions, building codes, safety, fire and health approvals, certificates of
occupancy or other governmental restrictions applicable to them, their assets,
employees and employment practices, except where the failure to so comply would
not have an adverse effect of $15,000 or more on them, their business, assets,
financial condition, employees and employment practices.
The Company and the Subsidiary have all material governmental licenses,
permits, approvals or other authorizations required for the conduct of their
business as now conducted, all of which are in full force and effect; there is
no action pending or, to the knowledge of the Stockholders, threatened, to
terminate any rights under any such governmental licenses, permits or
authorizations; and except as disclosed on Schedule 4.22 at the Closing, none of
such licenses, permits, approvals and authorizations will be materially
adversely affected by the sale of the Stock and the Stockholder Warrants to the
Purchaser or the consummation of the other transactions contemplated by this
Agreement.
4.23 Environmental Compliance.
Except as set forth in Schedule 4.23, (i) all of the assets and
properties presently owned, leased or operated by the Company and the Subsidiary
are in compliance with all Environmental Laws, except where the noncompliance
with any such Environmental Laws would have an adverse effect of $15,000 or less
in the aggregate on the Company and the Subsidiary, and are not subject to any
pending or, to the knowledge of the Stockholders or the Company, threatened
Environmental Actions; (ii) none of the assets and properties which have been or
are now owned, leased or operated by the Company and the Subsidiary have been
used by the Company or the Subsidiary for the generation, storage, manufacture,
use, transportation, disposal or treatment of Hazardous Substances in violation
of applicable Environmental Laws except where the violation would have an
adverse effect of $15,000 or less in the aggregate or the Company and the
Subsidiary; (iii) there has been no Hazardous Discharge by the Company and the
Subsidiary on or from any of the assets and properties presently or formerly
owned, leased or operated by the Company and the Subsidiary; (iv) there are no
outstanding, or to the knowledge of the Company and the Stockholders, threatened
Environmental Actions against the Company or the Subsidiary; and (v) neither the
Company nor the Subsidiary has owned, possessed or arranged for the
transportation of Hazardous Substances at any site where either the Company or
the Subsidiary has performed remediation services. No employee or other person
has ever made a claim or demand against the Company or the Subsidiary of which
the Company or the Subsidiary has received written notice based on alleged
damage to health caused by any Hazardous Substance. All services performed by
the Company and the Subsidiary in the conduct of their business, including,
without limitation, remediation activities, were and are in full compliance with
all Environmental Laws, except where the noncompliance with any of the foregoing
would have an adverse effect of $15,000 or less in the aggregate on the Company
and the Subsidiary.
4.24 Corporate Records.
The copy of the certificate of incorporation of the Company and the
Subsidiary, and all amendments thereof to date, certified by the Secretary of
State of their respective jurisdictions of incorporation and of the by-laws of
the Company and the Subsidiary, as amended to date, certified by the Secretary
or an Assistant Secretary of the Company or the Subsidiary, as applicable, all
under a date not more than five (5) days prior to the Closing Date which have
been delivered to the Purchaser are complete and correct, and the minute books
of the Company correctly reflect all material corporate actions taken at all
meetings of directors (including committees thereof) and Stockholders, and
correctly record all resolutions certified copies of which have been delivered
to other parties. The stock transfer books (with all canceled and unused stock
certificates attached) and stock ledgers are complete and correct and correctly
reflect all issuances and transfers of the capital stock of the Company and the
Subsidiary.
4.25 Bank Accounts; Power of Attorney.
Schedule 4.25 hereto correctly sets forth: (i) a list of all banks in
which the Company or the Subsidiary has an account or safety deposit box,
account number, purpose of such account or safety deposit box and the names of
all persons authorized to draw thereon or have access thereto; and (ii) the
names of all persons holding powers of attorney from the Company or the
Subsidiary and a description of the power of attorney.
4.26 Warranties.
Except as described in Schedule 4.26 hereto, during the past three
years neither the Company nor the Subsidiary has given any written warranties
with respect to any of their respective products or services. Schedule 4.26 also
sets forth a description of all claims in excess of $50,000 concerning product
liability or arising from services provided which have been made against the
Company or the subsidiary during the past three years.
4.27 Disclosure.
No representation or warranty by the Stockholders or the Company and
no written statement or certificate furnished or to be furnished at or before
the Closing by or on behalf of the Stockholders, the Company or the Subsidiary
to the Purchaser or its agents pursuant to this Agreement or in connection with
the transactions contemplated hereby, as qualified by the Schedules to this
Agreement, contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact necessary in order to make the
statements contained herein or therein not misleading.
As used in this Section 4.27 and elsewhere in this Agreement the term
"to the knowledge of the Stockholders" or means the actual knowledge of the
Stockholders or any executive officer or director of the Company or the
Subsidiary.
4.28 Foreign Corrupt Practices
To the knowledge of the Company and the Stockholders, neither the
Company nor its subsidiary has made, offered or agreed to offer anything of
value to any government official, political party or candidate for government
office nor has it taken any action which would cause the Company or its
Subsidiary to be in violation of any law of any foreign jurisdiction or the
United States, including the Foreign Corrupt Practices Act of 1977.
4.29 Investment Intent.
Those Stockholders who are acquiring the Warrants and the unregistered
Common Stock of Purchaser are doing so for investment purposes only and not with
a view to, or for sale in connection with, any distribution thereof within the
meaning of the Securities Act of 1933, as amended (the "Securities Act"); the
holders of the Warrants and the unregistered Common Stock of Purchaser
understand that none of the Warrants or the shares covered thereby and none of
the unregistered Common Stock have been registered under the Securities Act or
qualified under applicable state securities laws, and all of such Warrants and
shares are restricted securities within the meaning of the Securities Act and
may not be transferred or sold without registration under the Securities Act or
an exemption therefrom.
5. Representations and Warranties of Purchaser.
The Purchaser represents and warrants to the Stockholders and the Company
on the date hereof and on the Closing Date as follows:
5.1 Corporate Status.
The Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware with full corporate power
and authority to carry on its business as now conducted.
5.2 Authority for Agreements.
The Purchaser has the power and authority to execute and deliver this
Agreement, the Employment Agreements, the Warrants and the Escrow Agreement and
to carry out its obligations hereunder and thereunder. The execution, delivery
and performance by the Purchaser of this Agreement, the Employment Agreements,
the Warrants and the Escrow Agreement and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of the Purchaser. This Agreement, the Employment
Agreements and the Escrow Agreement have been and as of the Closing the Warrants
will have been, duly executed and delivered by the Purchaser and constitute the
legal, valid and binding obligations of the Purchaser enforceable against the
Purchaser in accordance with their terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization and similar laws of
general application relating to or affecting the rights and remedies of
creditors.
5.3 Investment Intent.
The Purchaser is acquiring the Stock and the Stockholder Warrants for
investment purposes only and not with a view to, or for sale in connection with,
any distribution thereof within the meaning of the Securities Act; the Purchaser
understands that none of the shares of the Stock and none of the Stockholder
Warrants have been registered under the Securities Act or qualified under
applicable state securities laws, and all of such shares are "restricted
securities" within the meaning of the Securities Act and may not be transferred
or sold without registration under the Securities Act or an exemption therefrom.
5.4. Warrants and Unregistered Common Stock.
The Warrants and the 300,000 shares of unregistered Common Stock have
been duly authorized, validly issued, and are fully paid and nonassessable, and
are free and clear of any tax, security interest, claim, lien, pledge or
encumbrance whatsoever; the representations, warranties, covenants and
agreements of the Purchaser set forth in the Warrants are true and correct; and
the shares of Common Stock of the Purchaser issuable upon exercise of the
Warrants, when so issued, will be duly authorized, validly issued, fully paid
and nonassessable, and shall be free and clear of any tax, security interest,
claim, lien, pledge or encumbrance whatsoever.
5.5 No Conflicts.
The execution, delivery and performance of this Agreement, the
Employment Agreements, the Escrow Agreement and the Warrants, and the issuance
of the Warrants, and the consummation of the other transactions contemplated
hereby and thereby, do not and will not (i) require the consent, waiver,
approval, license, designation or authorization of, or declaration with, any
court or any government authority or agency, except for listing on the New York
Stock Exchange of the Common Stock issuable upon exercise of the Warrants and
the 300,000 shares of Common Stock delivered at Closing and for the taking of
action necessary for applicable exemptions or registrations or qualifications
under federal and state securities laws for the issuance of the Warrants,
exercise of the Warrants and issuance of 300,000 shares of Common Stock at the
Closing; or (ii) with or without the giving of notice or the passage of time or
both, violate, conflict with or result in a breach or termination of, constitute
a default under, accelerate or permit the acceleration of the performance
required by the terms of, result in the creation of any mortgage, security
interest, claim, lien, charge or other encumbrance upon any of the assets of the
Purchaser pursuant to, or otherwise give rise to any liability or obligation
under, the certificate of incorporation or bylaws of the Purchaser or any
agreement, mortgage, deed of trust, indenture, license, permit or any other
agreement or instrument, or any order, judgment, decree, statute or regulation,
to which the Purchaser is a party or by which the Purchaser or any of its assets
may be bound, excluding liens created by Purchaser in connection with obtaining
debt financing to complete the transaction contemplated by this Agreement.
6. Covenants.
6.1 Operation of Business.
From the date hereof until the Closing Date (the "Pre-Closing
Period"), the Company shall and the Stockholders shall use their best efforts to
cause the Company and the Subsidiary to operate their business in the ordinary
course and in a manner consistent with past practice. The Stockholders and the
Company shall use all reasonable efforts to maintain and preserve the Company's
and the Subsidiary's present business organization, keep available the services
of their employees and preserve their relationships with customers, suppliers
and others having business dealings with them. The Company shall and the
Stockholders shall use their best efforts to cause the Company and the
Subsidiary to:
(a) maintain all its material structures, equipment and other
tangible personal property currently in use in good operating condition and
repair, except for ordinary wear and tear and damage by unavoidable casualty;
(b) keep in full force and effect insurance comparable in
amount and scope of coverage to insurance now carried by it;
(c) perform in all material respects all of its obligations
under agreements, contracts and instruments relating to or affecting its
properties, assets and business;
(d) maintain its books of account and records in the usual,
regular and ordinary manner; and
(e) effect no change in the accounting methods employed to
prepare the Financial Statements.
6.2 Access to Information; Confidentiality.
During the Pre-Closing Period, the Stockholders and the Company shall
cause the Purchaser and its counsel, accountants and other representatives
(collectively, its "Representatives") to be given reasonable access during
normal business hours to the assets, books, commitments, agreements, records and
files of the Company and the Subsidiary; and the Stockholders shall cause to be
furnished to the Purchaser or any of its Representatives during the Pre-Closing
Period all documents, or copies thereof, and information concerning the business
and affairs of the Company and the Subsidiary relating to that business as the
Purchaser or any of its Representatives may reasonably request. Until the sale
of the Stock is consummated in accordance with the terms of this Agreement, the
Purchaser shall hold, and cause its Representatives to hold, all information and
documents so obtained by the Purchaser or any of its Representatives
confidential, except that neither the Purchaser nor any of its Representatives
shall be required to keep confidential any information which (i) is or
subsequently may become, through no fault of the Purchaser, generally available
to the public, (ii) was available on a non-confidential basis to Purchaser prior
to its disclosure by the Company or the Stockholders or (iii) becomes available
to the Purchaser on a nonconfidential basis from a source not bound by any
obligation of confidentiality with respect to such information. If this
Agreement is terminated during the Pre-Closing Period or otherwise, the
Purchaser shall, and shall cause each of its Representatives to, promptly
deliver to the Company all information and documents (and copies thereof)
furnished to the Purchaser or its Representatives by or on behalf of the Company
or otherwise obtained by the Purchaser or any of its Representatives pursuant to
this Agreement, and all other information regarding the business and affairs of
the Company and the Subsidiary prepared by the Purchaser or its Representatives
shall be destroyed and no copy thereof shall be retained. Notwithstanding such
return or destruction of information, the Purchaser and its Representatives
shall continue to be bound by their respective obligations of confidentiality
hereunder for a period of three years after such termination. Pending the
Closing (or any earlier termination of this Agreement) the Company, the
Subsidiary and the Stockholders shall keep confidential and after the Closing
the Stockholders will not use (except while employed by the Company and for
Company purposes) or disclose to others and keep confidential any Trade Secrets
of the Company and the Subsidiary.
6.3 Conduct of the Business Pending the Closing.
Until the Closing the Stockholders and the Company:
(a) shall promptly notify the Purchaser in writing of, and
furnish any information that the Purchaser reasonably may request with respect
to, the occurrence of any event or the existence of any state of facts (whether
or not permitted by the provisions of this Agreement) that would result in any
of their representations and warranties not being true or his covenants not
fulfilled as of the Closing Date;
(b) shall not permit the amendment of, or the adoption of
resolutions increasing the amount to be funded or awarded under, any of the
Pension Benefit Plans, Welfare Benefit Plans or any of the plans, agreements or
arrangements described in Section 4.21, except as may otherwise be required by
law.
6.4 Other Action.
Except for action permitted by this Agreement (resulting from the
operation of business in the ordinary course), the Company and the Subsidiary
shall not and the Stockholders shall not and shall use their best efforts to
cause the Company and the Subsidiary not to take any action that is intended to
result in any of the Stockholders' and the Company's representations and
warranties not being true as of the Closing Date. Without limiting the
foregoing, the Company shall not and the Stockholders shall not permit the
Company or any Subsidiary to (i) incur any extraordinary expense or become a
party to or become obligated by any contract, commitment or agreement for the
sale, lease or other disposition of its assets having an aggregate fair market
value of $15,000 or more, except for any such sale, lease or disposition in the
ordinary course of business; (ii) create or incur any liability (absolute or
contingent) except unsecured current liabilities incurred for other than money
borrowed and liabilities under contracts entered into in the ordinary course of
business; (iii) discontinue the insurance in the amounts and of the types now
carried; (iv) enter into any compromise or settlement of any litigation,
proceeding or governmental investigation relating to its properties or business,
except settlements made by insurers which are fully covered by existing
insurance policies of the Company; (v) enter into any agreement or commitment to
make capital expenditures of more than $25,000 in any single instance or more
than $100,000 in the aggregate; and (vi) make any changes in its Certificate of
Incorporation or By-laws. The Stockholders, the Company and the Purchaser shall
each use their respective best efforts to cause the fulfillment at the earliest
practicable date of all of the conditions to their respective obligations to
consummate the sale and purchase and the other transactions contemplated by this
Agreement. The Stockholders holding at least 94% of the Company's outstanding
Stock as of the Closing shall consent to all the terms of the Employment
Agreements and the execution and delivery thereof by the Company and the
distribution of the Warrants and unregistered shares of Purchaser's Common Stock
as provided in the Allocation Agreement referred to in Section 2.1(i)(D).
6.5 Consents.
The Stockholders and the Company shall use their best efforts to
obtain at the earliest practicable date, by instruments in form and substance
reasonably satisfactory to the Purchaser, all consents and approvals, if any,
required by any governmental entity or under any of the Scheduled Contracts to
the sale of the Stock to the Purchaser.
6.6 Employment Agreements.
On the date of this Agreement, Messrs. Xxxxx X. Xxxxxxxx, Xxxxx X. Xxxxxxx
and Xxxxxxx X. Xxxx shall execute and deliver the Employment Agreements to be
effective contingent upon and only after the Closing.
6.7 Noncompetition Agreements.
On the date of this Agreement, Messrs. Xxxxxxx Xxxxx, Xxxxxx
Management Company, Xxxxxxx Xxxxxxxx and Xxxxxxxx Xxxxxx shall have executed and
delivered to the Purchaser the Noncompetition Agreements to be effective
contingent upon and only after the Closing.
6.8 Exercise of Employee Stock Options, Delivery of Stockholder
Warrants and Debt Due Certain Stockholders.
(a) The Stockholders and the Company shall secure on or before
the Closing the exercise of all of the Options and payment of the exercise price
therefor to the Company and the payment of any required withholding taxes.
(b) At the Closing, the Stockholder Warrants shall be delivered
to Purchaser.
(c) Prior to the Closing Date, the debt of $280,000 of the
Company due Xxxxxxxx X. Xxxxxx and Xxxxxxx X. Xxxxxxxx shall have been
contributed to the capital of the Company and canceled and the Company's
liability in respect of such indebtedness shall have been extinguished.
6.9 Interim Financial Statements.
Prior to the Closing Date, the Stockholders and the Company shall
provide the Purchaser after they are available in accordance with past practice
any financial statements or financial reports generated by the Company or the
Subsidiary.
6.10 Expenses.
The Purchaser and the Stockholders shall bear their own respective
expenses incurred in connection with this Agreement and the transaction
contemplated hereby and in connection with all obligations required to be
performed by each of them under this Agreement. Neither the Company nor the
Subsidiary shall pay any such expenses of the Stockholders, except that the
Company may expend up to $200,000 for accounting, legal, financial advisory,
investment banking and environmental expenses of the Stockholders in connection
with this Agreement, and the Purchaser agrees that an amount up to such limit
may be paid by the Company prior to or at the Closing. The Company will provide
releases from Xxxxxx X. Xxxxxx and Xxxxxx Xxxx Corporation and Wilson, Sonsini,
Xxxxxxxx & Xxxxxx, P.C to the Company at the Closing.
6.11 Resignations of Directors and Officers.
The Stockholders shall provide to the Purchaser written resignations
effective as of the Closing Date of all of the directors and officers, bank
signatories and trustees of any pension, profit-sharing or similar plan of the
Company and, if requested in writing by Purchaser at least fifteen (15) days
before Closing, of the Subsidiary. In the event that the Purchaser requests any
bank signatory resignations, the Stockholders and the Company shall cause to be
delivered to Purchaser written instructions to each bank at which the Company or
the Subsidiary has an account or credit facility or at which the Company or the
Subsidiary rents a safe deposit box informing such bank of the said resignations
and revoking the authority of said persons to act with respect to said account
or credit facility and to have access to said safe deposit box. The Stockholders
and the Company shall also cause to be delivered to the Purchaser effective the
Closing Date the written surrender by all persons holding powers of attorney
from the Company or the Subsidiary of their authority and power to act under
such powers of attorney.
6.12 Minute Books, Stock Books and Corporate Records.
The complete and correct minute books, certificate of incorporation,
by-laws, stock certificate and transfer books, stock ledgers, financial and
other corporate records and the corporate seal of the Company and the Subsidiary
shall be delivered to the Purchaser by the Company on or before the Closing
Date.
6.13 Taxes.
The Stockholders shall pay any federal, state or local sales, transfer
or stamp taxes payable in connection with the sale and transfer of the Stock and
the Stockholder Warrants pursuant to this Agreement.
6.14 Blue Sky Laws.
The Purchaser shall take such steps as may be necessary to comply with
the securities and Blue Sky laws of all applicable jurisdictions in connection
with the issuance and grant of the Warrants and the unregistered Common Stock to
the Stockholders.
6.15 Stock Exchange Listing.
The Purchaser shall promptly prepare and submit to the New York Stock
Exchange a listing application covering the shares of the Common Stock of the
Purchaser issuable upon exercise of the Warrants and the 300,000 shares of
unregistered Common Stock and use its best efforts to cause such shares to be
approved for listing on the New York Stock Exchange prior to the Closing Date.
6.16 Amendment of Lease.
Prior to the Closing, the Company will cause the lease dated August 6,
1992 between the Company and MIC Technology Partners Ltd. to be duly amended in
the form of Exhibit G hereto.
6.17 Cancellation of Lormar Agreement.
On or before the Closing, the Company will cause any agreement for
management services between the Company and Lormar Corporation to be terminated
without liability to the Company or the Stockholders.
6.18 Option to Purchase Real Estate.
Concurrently with the Closing, the Company and MIC Technology Partners
Limited shall enter into the Option to Purchase Real Estate in the form of
Exhibit H hereto.
6.19 Post-Closing Company Tax Returns.
Purchaser shall cause the Company, at the Company's expense, to
prepare and file the necessary tax returns for the tax year from November 1,
1995 to the Closing Date.
7. Conditions Precedent.
7.1 Conditions to Obligations of the Purchaser.
The obligation of the Purchaser to pay the Purchase Price to the
Stockholders and to satisfy its other obligations hereunder shall be subject to
the fulfillment (or waiver by the Purchaser) at or prior to the Closing, of the
following additional conditions:
(a) Representations, Performance. The representations and
warranties contained in Section 4 hereof shall be true at and as of the date
hereof and shall be repeated and shall be true at and as of the Closing Date
with the same effect as though made at and as of the Closing Date, except as
affected by the transactions contemplated hereby. The Stockholders and the
Company shall have each duly performed and complied with all covenants,
agreements and conditions required by this Agreement to be performed or complied
with by each prior to or on the Closing Date. The Stockholders' Representative
and the Company shall have delivered to the Purchaser a certificate dated the
Closing Date to the effect set forth above in this Section 7.1(a).
(b) Consents Under Scheduled Contracts. All required consents
to the sale of the Stock or any of the other transactions contemplated
hereby under any Scheduled Contracts shall have been obtained.
(c) Litigation. No suit, action or other proceeding or
investigation shall be threatened or pending before any court or governmental
agency in which it is sought to restrain or prohibit or to obtain material
damage or other material relief in connection with this Agreement or the
consummation of the transactions contemplated hereby or which is likely to
affect materially the value of the assets, business or condition (financial or
otherwise) of the Company or the Subsidiary.
(d) Exercise of Options, Delivery of Stockholder Warrants and
Payment of Certain Indebtedness of the Company. The Options shall have all been
exercised and payment of the exercise price therefor made to the Company, the
Stockholder Warrants shall have been delivered to the Purchaser, and the debt
referred to in Section 6.8(c) shall have been contributed to the capital of the
Company and canceled.
(e) Opinions of Counsel. The Purchaser shall have received a
favorable opinion, addressed to the Purchaser and dated the Closing Date, of
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, Professional Corporation, counsel for the
Company and the Stockholders, in the form annexed hereto as Exhibit C.
(f) Proceedings and Documentation. All corporate and other
proceedings of the Company and its Stockholders in connection with the
transactions contemplated by this Agreement, and all documents and instruments
incident to such corporate proceedings, shall be satisfactory in substance and
form to the Purchaser and the Purchaser's counsel, and the Purchaser and the
Purchaser's counsel shall have received all such receipts, documents and
instruments, or copies thereof, certified if requested, to which the Company is
entitled and as may be reasonably requested.
(g) Damage to Property. No portion of the plants, machinery or
equipment of or occupied by the Company or the Subsidiary material to the
operation of the business of the Company and the Subsidiary as a whole shall,
after the date hereof and before the Closing Date, be materially damaged,
destroyed or taken by condemnation or eminent domain.
(h) Consents and Approvals. All material licenses, permits,
consents, approvals, authorizations, qualifications and orders of governmental
or regulatory bodies which are necessary for the consummation of the
transactions contemplated hereby shall have been obtained.
(i) Employment Agreements. The Custodian shall have delivered
to the Company the Employment Agreements of Messrs. Xxxxx X. Xxxxxxxx, Xxxxx
X. Xxxxxxx and Xxxxxxx X. Xxxx.
(j) Noncompetition Agreements. The Custodian shall have
delivered to the Purchaser the Noncompetition Agreements of Messrs. Xxxxxxx
Xxxxx, Xxxxxx Management Company, Xxxxxxx Xxxxxxxx and Xxxxxxxx Xxxxxx.
(k) Good Standing Certificates. The Stockholders shall have
delivered to the Purchaser certificates as of a date not more than 5 days prior
to the Closing Date attesting to the good standing of the Company and the
Subsidiary as a corporation in their respective jurisdiction of incorporation by
the Secretary of State of the applicable jurisdiction.
(l) Delivery of Stock and Stockholder Warrants. The Custodian
shall have delivered the Stock and Stockholder Warrants to the Purchaser
pursuant to the letter to the Custody Agreement and Irrevocable Election to Sell
attached hereto as Exhibit A.
(m) Option to Purchase Real Estate. The Purchaser and MIC
Technology Partners Ltd. shall have executed and delivered the Option to
Purchase Real Estate.
7.2 Conditions to obligations of the Stockholders and the Company.
The obligation of the Stockholders and the Company to deliver the
Stock and the Stockholder Warrants and to satisfy their respective obligations
hereunder shall be subject to the fulfillment (or waiver by the Stockholders),
on or prior to the Closing Date, of the following conditions:
(a) Representations, Performance, Etc. The representations and
warranties of the Purchaser contained in Section 5 hereof shall be true at and
as of the date hereof and shall be repeated and shall be true at and as of the
Closing Date with the same effect as though made at and as of such time. The
Purchaser shall have duly performed and complied with all covenants, agreements
and conditions required by this Agreement to be performed or complied with by it
prior to or on the Closing Date. The Purchaser shall have delivered to the
Stockholders an officer's certificate dated the Closing Date to the effect set
forth above in this Section 7.2(a).
(b) Opinion of Counsel. The Stockholders shall have received a
favorable opinion, addressed to the Stockholders and dated the Closing Date, of
Blau, Kramer, Wactlar & Xxxxxxxxx, P.C., counsel for the Purchaser, in the form
annexed hereto as Exhibit D.
(c) Proceedings and Documentation. All corporate and other
proceedings in connection with the transactions contemplated by this Agreement,
and all documents and instruments incident thereto, shall be satisfactory in
substance and form to the Stockholders and Stockholders' counsel, and the
Stockholders and Stockholders' counsel shall have received all such receipts,
documents and instruments, or copies thereof, certified if requested, to which
the Stockholders is entitled and as may be reasonably requested.
(d) Employment Agreements. The Company and the Purchaser shall
have executed and delivered to each of Messrs. Xxxxx X. Xxxxxxxx, Xxxxx X.
Xxxxxxx and Xxxxxxx X. Xxxx the Employment Agreements.
(e) Escrow Agreement. The Escrow Agent, Stockholders and
the Purchaser shall have executed and delivered to each other the Escrow
Agreement.
8. Termination; Amendment; Waiver.
8.1 Termination.
This Agreement may be terminated at any time prior to the Closing
Date:
(a) by mutual consent of the parties.
(b) by the Purchaser by notice to the Company, (i) if any of the
conditions set forth in Section 7.1 hereof shall not have been fulfilled by
March 25, 1996, or (ii) if any material default under or material breach of any
covenant, agreement or condition of this Agreement, or any misrepresentation or
breach of any warranty contained herein, on the part of the Stockholders shall
have occurred and shall not have been cured to the satisfaction of the Purchaser
or (iii) at Purchaser's election for any reason prior to the Closing; or
(c) by the Stockholders by notice to the Purchaser, (i) if any of
the conditions set forth in Section 7.2 hereof shall not have been fulfilled by
March 25, 1996, or (ii) if any material default under or material breach of any
agreement or condition of this Agreement, or any misrepresentation or breach of
any warranty contained herein, on the part of the Purchaser shall have occurred
and shall not have been cured to the satisfaction of the Stockholders.
(d) The termination date of March 25, 1996, shall be extended to
April 4, 1996, if Purchaser exercises its option to extend the Closing Date and
termination date as provided in Section 3.1(b).
8.2 Effect of Termination; Failure to Close.
(a) Except as set forth in paragraphs (b) and (c) of this Section
8.2 and Section 6.2, in the event of the failure to close the transaction
contemplated hereby or termination of this Agreement pursuant to the provisions
of Section 8.1 hereof, this Agreement shall become void and have no effect,
without any liability on the part of any party hereto or its directors, officers
or stockholders in respect of this Agreement.
(b) The Deposit shall be distributed to the Company in accordance
with Escrow Agreement as liquidated damages to the Company and the Stockholders
if the Purchaser fails to consummate the transactions contemplated hereby by end
of the day New York time on March 25, 1996 for any reason other than (i) a
willful breach or willful default by the Company or any of the Stockholders, or
(ii) the Company's or any of the Stockholders' breach, default or failure to
comply with, or perform any of the representations, warranties, covenants and
conditions set forth in Sections 3.2(a), 4.3, 4.4, 7.1(i), 7.1(j) and 7.1(l).
(c) If the Company and the Stockholders fail to consummate the
transaction contemplated by end of the day New York time on March 25, 1996,
notwithstanding that the Purchaser has fulfilled or is prepared to fulfill all
of its obligations on the Closing Date, all of the conditions set forth in
Section 7.2 and is not in default under or in breach of any agreement,
condition, representation or warranty contained in this Agreement, the Purchaser
shall be entitled to either (i) seek and obtain injunctive and other equitable
relief to enforce the consummation and Closing of this Agreement in accordance
with the terms hereof, or (ii) receive a return of the Deposit from the Escrow
Agent in accordance with the Escrow Agreement and a payment from the Company of
$360,000 as liquidated damages to the Purchaser. If a court does not order
consummation and Closing of this Agreement pursuant to the Purchaser's request
under 8.2(c)(i) within one hundred and eighty (180) days or denies the
Purchaser's request for injunctive relief, the Purchaser shall receive the
remedy in Section 8.2(c)(ii) and this Agreement shall be terminated without any
other liability by the Company or its officers, directors or the Stockholders to
the Purchaser.
(d) The Company, the Stockholders and the Purchaser agree that
the remedies in Section 8.2(b) and 8.2(c) of the Agreement are intended to be
the sole and exclusive remedies of the parties for failure to close the
transaction contemplated hereby or termination of this Agreement pursuant to the
provisions of Section 8.1 hereof.
(e) If Purchaser exercises its option to extend the Closing Date
and termination date as provided in Section 3.1(b) then the Deposit referred to
in Section 8.2(b) and 8.2(c) shall include the increase of $140,000 and the
March 25, 1996, date shall be changed to April 4, 1996.
8.3 Amendment.
This Agreement may not be amended except by an instrument in writing
duly executed and delivered on behalf of each of the parties hereto.
9. Definitions; Miscellaneous.
9.1 Definition of Certain Terms.
As used herein, the following terms shall have the following meanings:
Affiliate: with respect to any Person, any Person which, directly or
indirectly, controls, is controlled by, or is under common control with, such
Person. The term "control" (including, with correlative meaning, the terms
"controlled by" and "under common control with"), as used with respect to any
Person, means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise.
Agreement: this Stock Purchase Agreement.
Allocation Agreement: as defined in Section 2.1(i)(D).
Closing: as defined in Section 3.1.
Closing Date: as defined in Section 3.1.
Company: as defined in the Preamble to this Agreement.
Company's Pension Benefit Plans: as defined in Section 4.21(b).
Code: the Internal Revenue Code of 1986, as amended, together with
the U.S.Treasury rulings and regulations promulgated thereunder.
Deposit: as defined in Section 2.3 hereof.
Employment Agreements: the Employment Agreements between each of
Messrs. Xxxxx X. Xxxxxxxx, Xxxxx X. Xxxxxxx and Xxxxxxx X. Xxxx and the
Company in the forms agreed to by such parties.
Employee Benefit Plan: any pension, retirement, profit-sharing,
deferred compensation, bonus or other incentive plan, or other employee benefit
program, arrangement, agreement or understanding, or medical, vision, dental or
other health plan, or life insurance or disability plan, or any other employee
benefit plan, including, without limitation, any Employee benefit plan" as
defined in Section 3(3) of ERISA to which the Company contributes or is a party
or is bound or under which it may have liability and which employees or former
employees of the Company (or their beneficiaries) are eligible to participate or
derive a benefit.
Environmental Actions: refers to any complaint, summons, citation,
notice, directive, order, claim, litigation, investigation, proceeding,
judgment, letter or other written communication from any federal, state, local
or municipal agency, department, bureau, office or other authority or any third
party involving a Hazardous Discharge or any violation of any environmental
order, environmental permit or Environmental Laws.
Environmental Laws: as defined in the definition of Hazardous
Substances.
ERISA: the Employee Retirement Income Security Act of 1974, as
amended.
Escrow Agent: the law firm of Hiersche, Martens, Hayward, Xxxxxxxx
& Xxxxxx, P.C., Dallas, Texas.
Escrow Agreement: the agreement among the Escrow Agent, Stockholders'
Representative (on behalf of the Stockholders), the Company and the Purchaser
in the form attached hereto as Exhibit F.
Escrow Fund: as defined in Section 2.1 hereof.
Expenditures: as defined in Section 10.l(b).
Financial Statements: the consolidated financial statements of the
Company and the Subsidiary, as at, and for the years ended October 31, 1993,
1994 and 1995, audited by KPMG Peat Marwick, L.L.P., certified public
accountants for the Company (for fiscal 1994 and 1995), and by Cohen, Friedman,
Xxxxxx, Xxxxxxx & Co., certified public accountants for the Company (for fiscal
1993), which financial statements include in each case a balance sheet, a
statement of earnings and accumulated earnings, and a statement of cash flows;
and the unaudited consolidated financial statements of the Company and the
Subsidiary as at and for the two-month period ended December 31, 1995, which
unaudited financial statements include in each case, a balance sheet, a
statement of earnings and accumulated earnings, and a statement of cash flows.
Hazardous Discharge: means any releasing, spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, disposing or dumping of Hazardous Substances in violation of
applicable Environmental Laws.
Hazardous Substance: means any substance, compound, chemical or
element which is (i) defined as a hazardous substance, hazardous material, toxic
substance, hazardous waste, pollutant or contaminant under any Environmental
Law, or (ii) a petroleum hydrocarbon, including crude oil or any fraction
thereof, regulated pursuant to any Environmental Law. The term "Environmental
Law" means each and every applicable federal, state, local and foreign law,
statute, ordinance, regulation, rule, judicial or administrative order or
decree, permit license, approval, authorization or similar requirement of each
and every federal, and pertinent state, local and foreign governmental agency or
other governmental authority, pertaining to the protection of human health and
safety or the environment including, without limitation, the Comprehensive
Environmental Response Compensation and Liability Act (CERCLA), 42 U.S.C. 9601
et seq, the Resource Conservation and Recovery Act (RCRA), 42 U.S.C. 6901 et
seq., the Toxic Substances Control Act (TSCA), 15 U.S.C. 2601 et seq., and the
Water Pollution Control Act (FWPCA), 33 U.S.C. 1251 et seq. The term "Hazardous
Substance" shall also include asbestos-containing materials and manufactured
products containing Hazardous Substances.
Indemnified Party: as defined in Section 10.1.
Indemnifying Party: as defined in Section 10.1.
Intellectual Property: as defined in Section 4.16.
Material/Service Agreements: as defined in Section 4.15(a).
Option to Purchase Real Estate: Exhibit H hereto.
Options: the Options set forth in Schedule 4.4 hereto.
Pension Benefit Guaranty Corporation: as defined in Section 4.21.
Person: any natural person, firm, partnership, association,
corporation, trust, public body or government.
Plan: each Pension Benefit Plan and each Welfare Benefit Plan.
Purchaser: as defined in the Preamble to the Agreement.
Purchase Price: as defined in Section 2.
Required Minimum: as defined in Section 10.1(b).
Stockholders: as defined in the Preamble to this Agreement.
Stockholders' Representative: as defined in Section 11.1.
Stockholder Warrants: the warrants to purchase Common Stock of the
Company held by Xxxxxxxx X. Xxxxxx and Xxxxxxx X. Xxxxxxxx as set
forth on Schedule 4.4.
Subsequent Environmental Claim: any claim that is based upon or
arises out of the representations and warranties set forth in Section
4.23, hereof which is made by Purchaser after the first anniversary
of the Closing Date and prior to the second anniversary of the
Closing Date.
Subsidiary: as defined in Section 4.2.
Taxes: as defined in Section 4.7.
Trade Secret: any proprietary or confidential information used by the
Company or the Subsidiary in its business, including a formula, pattern,
compilation, program, device, method, technique, or process, that has a material
independent economic value, actual or potential, not being generally known to,
and not being readily ascertainable by proper means by other Persons who can
obtain economic value by its disclosure or use.
Warrants: warrants to purchase 400,000 shares of the Common Stock,
$.10 par value, of the Purchaser pursuant to and in accordance with the Warrant
Certificate and Agreements attached hereto as Exhibit F-1 for 100,000 shares and
F-2 for 300,000 shares.
Welfare Benefit Plans: as defined in Section 4.21(a).
10. Indemnification; Survival.
10.1 Indemnification.
(a) The Stockholders severally will indemnify the Purchaser and
the Company against, and hold the Purchaser and the Company harmless from, any
and all liability, damage, deficiency, loss, cost or expense (including
reasonable attorneys' fees) that are based upon or that arise out of any
misrepresentation or breach of any representation, warranty, covenant or
agreement made by the Stockholders herein (it being agreed that such
representations and warranties are qualified by the Schedules as delivered on
the date of this Agreement and as updated as of the Closing for changes, events
or notice of claims occurring or received after the date of this Agreement and
prior to Closing) or in any certificate delivered pursuant hereto (individually,
any one such item being called a "Loss" and more than one such item, "Losses").
The Purchaser shall use its best efforts to notify any insurance carrier whose
coverage may be implicated or available in connection with Losses for which
Purchaser is seeking indemnification from the Stockholders. Thereafter Purchaser
shall use its best efforts to perfect such insurance claims ("Insurance Claims")
and to recover the proceeds therefrom ("Insurance Proceeds"). The Purchaser
shall not be obligated to institute and/or pursue any action or other proceeding
("Insurance Action") against any of its insurance carriers with regard to such
Insurance Claims unless instructed to do so in writing by the Stockholders, in
which event the Stockholders shall be required to pay all attorneys' and other
fees, costs and disbursements incurred in connection with such Insurance Action
and Purchaser shall conduct such Insurance Action as reasonably directed by the
Stockholders.
Only those insurance proceeds actually received by Purchaser shall
constitute an offset against indemnification to paid by the Stockholders,
including after any arbitration award finally rendered in favor of the Purchaser
in respect of such Losses. Any insurance proceeds recovered by Purchaser as a
result of an Insurance Action, after indemnification paid by the Stockholders,
including after an arbitration award in favor of Purchaser is paid in full by
the Stockholders, shall be paid to the Stockholders to the extent that such
payment does not exceed the indemnification payments made by the Stockholders to
the Purchaser.
The Purchaser shall not be required to waive or release any
subrogation rights the Purchaser's insurance carriers may have against the
Stockholders unless permitted by the terms of the insurance policy concerned.
(b) (i) No claim for indemnification shall be made by the
Purchaser under Section 10.1(a) unless and until, and only to the extent that,
the aggregate amount of Losses of the Purchaser in respect thereof shall exceed
$1,000,000 (the "Required Minimum") and such indemnification shall be by
recourse first to, and payable from, the Escrow Fund and then, subject to the
limitations on aggregate liability set forth in Section 10.3(b) hereof, by cash
payment from the Stockholders with respect to claims for Losses made prior to
the first anniversary of the Closing Date.
(ii) Notwithstanding (i) above, Losses based on Subsequent
Environmental Claims shall be paid by the Stockholders to the Purchaser in cash
to the extent that the aggregate Losses for all breaches exceed the Required
Minimum; provided, however, the aggregate liability of the Stockholders for
Losses based on Subsequent Environmental Claims shall not exceed $1,800,000, and
in any case shall be subject to the limitation on aggregate liability set forth
in Section 10.3(b) hereof.
(iii) If a Loss is based on the Company spending money or
compensating third parties (an "Expenditure"), 75% of any such Expenditure will
be paid from the Escrow Fund or the Stockholders, as the case may be, and 25% of
such Expenditure shall be paid by the Company.
(c) Notwithstanding anything to the contrary in Section 10.1(b)
above, the Stockholder's liability in respect of Losses that are based upon or
arise out of Sections 4.4, 6.8(a), 6.8(c), 6.10 and 11.8 shall not be subject
to, or limited by, the Required Minimum, nor any other monetary limitation set
forth in Section 10.1(b) above, including those relating to Expenditures, but
shall be subject to the limitations in Section 10.3(b).
(d) The Purchaser will indemnify the Stockholders against, and
hold the Stockholders harmless from, any and all liability, damage, deficiency,
loss, cost or expense (including reasonable attorneys' fees) that are based upon
or that arise out of the breach or default of any representation, warranty,
covenant or agreement made by the Purchaser herein or in any certificate
delivered pursuant hereto (individually, any one such item being called a "Loss"
and more than one such item, "Losses").
(e) Each party entitled to indemnification under this Agreement
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party (at its expense) to assume the defense of any
claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be reasonably satisfactory to the Indemnified Party, and the Indemnified
Party may participate in such defense, but only at such Indemnified Party's
expense, and provided, further, that the omission by any Indemnified Party to
give notice as provided herein shall not relieve the Indemnifying Party of its
indemnification obligations under this Agreement except and only to the extent
that the omission results in a failure of actual notice to the Indemnifying
Party and such Indemnifying Party is damaged as a result of the failure to give
notice. No Indemnifying Party, in the defense of any such claim or litigation,
shall, except with the consent of each Indemnified Party, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability with respect to such claim or
litigation. Notwithstanding the foregoing, the Indemnified Party shall have the
right at all times to take over and assume control of the defense, settlement,
negotiations or lawsuit relating to any claim or demand. In the event that the
Indemnifying Party does not accept the defense of any matter as above provided,
or after so accepting fails to diligently prosecute such defense, the
Indemnified Party shall have the full right to defend against any such claim or
demand, and shall be entitled to settle or agree to pay in full such claim or
demand, in its sole discretion. In any event, the Company, the Stockholders and
the Purchaser shall cooperate in the defense of such action and the records of
each shall be available to the other with respect to such defense.
(f) During the period between the Closing Date and the first
anniversary thereof, the Purchaser will use its best efforts to advise the
Stockholders' Representative (at least quarterly) of those claims which may
result in the first $1,000,000 of Losses.
(g) The Stockholders agree with Purchaser that if any of the
matters referred to in the Reports identified in Schedule 4.23 were caused by
the Company prior to the Closing Date then such matters shall be included in the
indemnification provided by the Stockholders subject to the limitations in this
Section 10 and provided that Purchaser shall only be entitled to submit a claim
during the Claims Period (as defined in Section 10.3(a)) related to a matter
referred to in such Reports if a reputable environmental consulting firm
indicated in writing (with a copy provided to the Stockholders' Representative)
that there is a reasonable basis for concluding that the environmental problem
was caused at least in part by the Company prior to the Closing Date.
(h) Except as set forth in this Section 10, the Purchaser hereby
waives and releases the Stockholders from all other claims or causes of action
of any nature relating to any Hazardous Substance, Environmental Law or
Hazardous Discharge.
10.2 Survival.
The representations, warranties, agreements and indemnities contained
in this Agreement shall survive the execution and delivery of this Agreement,
any examination by or on behalf of such parties, and the completion of the
transactions contemplated herein, provided that (i) all such representations,
warranties, agreements and indemnities of the Stockholders shall terminate one
(1) year after the Closing Date, except for representations and warranties in
Section 4.23 and related indemnities, which shall terminate two (2) years after
the Closing Date, and except for the representations and warranties in Sections
4.4 and 11.8, which shall survive indefinitely; and (ii) all such
representations, warranties, agreements and indemnities of the Purchaser shall
terminate two (2) years after the Closing Date, except for representations and
warranties and related indemnities for the Warrants which shall terminate when
all Warrants have been exercised or expired.
10.3 Claim Period; Liability Limitation.
(a) Except as provided in this Section 10.3, no claim for
indemnification under this Agreement may be asserted by an Indemnified Party
after the expiration of the appropriate claims period (the "Claims Period"),
which shall commence on the Closing Date and shall terminate on the first
anniversary of the Closing Date; provided, however, that the Claims Period with
respect to the Purchaser's Losses based on or arising from Subsequent
Environmental Claims shall terminate on the second anniversary of the Closing
Date and the Purchaser's Losses based on or arising under Sections 4.4, 6.8(a),
6.8(c), 6.10 and 11.8 shall remain in effect without limitation except as
limited by law, and the Claims Period for claims by the Stockholders with
respect to the Stockholders' Losses shall terminate two (2) years after the
Closing except with respect to the Warrants for which claims shall terminate
when all the Warrants have been exercised or have expired. No Indemnified Party
shall be entitled to make any claim for indemnification hereunder after the
appropriate Claims Period; provided, however, that if prior to the close of
business on the last day of the Claims Period an Indemnified Party shall have
been notified of a claim for indemnification hereunder and such claim shall not
have been finally resolved or disposed of at such date, the basis of such claim
shall continue to survive with respect to such claim until such claim is finally
resolved or disposed of in accordance with the terms hereof.
(b) The Stockholders' sole liability for breach of this
Agreement, or any certificate delivered pursuant hereto, shall be as provided in
this Section 10, and the obligations in this Section 10 shall not exceed in the
aggregate $3,600,000, whether for claims during the Escrow Period or for
Subsequent Environmental Claims, except for claims for breach of Sections 4.4,
6.8(a), 6.8(c), 6.10 and 11.8 for which the Stockholders' obligation in this
Section 10 shall not exceed the aggregate purchase price; provided, however,
that the indemnification obligation of each Stockholder with respect to any
claim or claims under this Section 10 shall be in the same proportion as that
which the Total Cash Proceeds for such Stockholder at Closing as set forth on
Schedule 4.4 hereto bears to the Total Cash Proceeds for all Stockholders at
Closing as set forth on Schedule 4.4 hereto, except that the indemnification
obligation of a Stockholder for any claim or claims arising out of a breach of
such Stockholder's several representations and warranties contained in Section
4.4 hereof shall not exceed such breaching Stockholder's share of the Total
Cash Proceeds, and the non-breaching Stockholders shall have no indemnification
obligation with respect to any such claim or claims under Section 4.4.
10.4 Effect of Purchaser Investigation. The rights of the Purchaser to
indemnification under Section 10 shall not be modified, waived or limited by any
examination or investigation conducted by the Purchaser of the books, records or
operations of the Company including any knowledge of Purchaser resulting
therefrom.
10.5 Right to Offset. The Purchaser shall be entitled to offset
against the Contingent Payment any Losses for which Purchaser is entitled to
recover from the Stockholders under this Section 10 only to the extent the
Purchaser has not recovered such Losses from the Escrow Fund or by a payment by
the Stockholders. If the Purchaser offsets any amount of the Contingent Payment,
and it is subsequently determined that such offset was in excess of the amount
of Losses the Purchaser was entitled to, then the Purchaser shall pay to the
Stockholders the attorneys fees and costs incurred by the Stockholders in
recovering such amount and interest thereon at the prime rate as adjusted from
time to time of Citibank plus 2% (or if such Bank is no longer providing a prime
rate then any equivalent national bank) computed from the date the Contingent
Payment should have been paid to the Stockholders.
11. Miscellaneous.
11.1 Stockholders' Representative.
(a) Appointment. The Stockholders, and each of them, hereby
appoint Xxxxxxxx X. Xxxxxx (the "Stockholders' Representative") as their agent
to (i) represent, act for and on behalf of, and bind each of the Stockholders in
the performance of all of their obligations arising from or relating to this
Agreement, including (A) the execution and delivery of any document, certificate
or agreement required under this Agreement to be delivered by the Stockholders
at the Closing and (B) the making, negotiation and settlement of claims of
either the Purchaser or the Stockholders for indemnification pursuant to Section
10 of this Agreement; (ii) accept delivery from the Purchaser of the cash
portion of the Purchase Price and the Warrants and the unregistered Common Stock
and to distribute such cash and Warrants and the unregistered Common Stock to
the Stockholders in the manner provided in or pursuant to this Agreement; (iii)
give and receive notices and receive service of process under or pursuant to
this Agreement; (iv) execute and deliver the Escrow Agreement on behalf of the
Stockholders, and to represent, act for, and bind each of the Stockholders in
the performance of all of their obligations and in securing all their rights
arising from or relating to the Escrow Agreement, including, without limitation,
(A) the settlement of claims made by the Purchaser during the Escrow Period (as
defined in the Escrow Agreement), or the making of any objection thereto, or the
representation of the Stockholders at any arbitration or litigation in respect
thereof, and (B) the giving and receiving of notices required under or pursuant
to the Escrow Agreement; (v) to represent, act for, and bind each of the
Stockholders in the performance of all of their obligation arising from or
related to indemnification in Section 10, including, without limitation, (A) the
settlement of claims made by Purchaser in excess of the Escrow Fund or after the
Escrow Period for Subsequent Environmental Claims; or the making of any
objection thereto, or the representation of the Stockholders in any arbitration
or litigation of the Stockholders' in any arbitration or litigation in respect
thereof; (vi) to deduct on a pro rata basis from the proceeds payable to the
Stockholders at Closing or upon termination of the Escrow Period or from any
Contingent Payment any amounts reasonably necessary to pay expenses of the
Stockholders incurred in connection with this Agreement including the amount of
estimated expenses provided any amount withheld shall be distributed on a pro
rata basis to the Stockholders when the Stockholders' Representative concludes
such retainer is no longer needed for anticipated expenses; (vii) if the
Stockholders' Representative determines legal action is necessary to enforce
rights of the Stockholders under this Agreement to assess each Stockholder for a
pro rata share of the expenses and if such Stockholder does not remit such
amounts within thirty (30) days of written request to exclude such Stockholder
entirely from any recovery notwithstanding anything to the contrary in this
Agreement, and (viii) to deduct from the proceeds payable to any Stockholder at
Closing an amount (A) required for any federal or state withholding or other tax
owed by such Stockholder and (B) required to assure payment of any Option
exercise price. For purposes of this Section 11.1 "pro rata" means the same
proportion as that which the Total Cash Proceeds for such Stockholder at Closing
as set forth on Schedule 4.4 hereto bears to the Total Cash Proceeds for all
Stockholders at Closing as set forth on Schedule 4.4 hereto. The Stockholders'
Representative hereby accepts such appointment.
(b) Successors; Compensation; Reliance. In the event that the
Stockholders' Representative shall die, become incapacitated, resign or
otherwise be unable to fulfill his duties hereunder, a successor Stockholders'
Representative shall be selected by the Stockholders receiving a majority of the
cash portion of the Purchase Price as soon as reasonably practicable thereafter.
If the Stockholders desire to remove or replace the Stockholders' Representative
for any reason, any such Stockholders' Representative may be so removed or
replaced by the Stockholders receiving a majority of the cash portion of the
Purchase Price. The Stockholders' Representative shall receive no compensation
from the Purchaser or the Stockholders for his services hereunder. Any decision,
act, consent or instruction of the Stockholders' Representative shall constitute
a decision of the Stockholders and shall be conclusive and binding upon the
Stockholders, and the Purchaser may rely upon any such decision, act, consent or
instruction of the Stockholders' Representative as being the decision, act,
consent or instruction of the Stockholders.
11.2 Arbitration.
All disputes or controversies of any nature arising from or relating
to this Agreement and the transactions contemplated hereby shall be decided by
arbitration by the American Arbitration Association (the "Association") in
accordance with the rules and regulations of the Association, except that either
party shall have the right in accordance with Section 11.3 hereof to seek
equitable relief independently, including, but not limited to, provisional
and/or permanent injunctive relief, specific performance or other equitable
remedy as may be appropriate to enforce or prevent the violation of, any of the
terms and conditions of this Agreement.
In the event a dispute or controversy arises, either party may submit
the dispute to the American Arbitration Association in Garden City, New York for
arbitration in accordance with and subject to the rules of the American
Arbitration Association then in effect, and, specifically, the Supplementary
Procedures for Large, Complex Disputes (the "Procedures"). The parties agree
that the arbitration shall be conducted before three (3) arbitrators. The
parties agree that prior to the conduct of hearings, they will cooperate in the
exchange of documents, exhibits and information pursuant to demands therefor,
and such other discovery as they may agree upon or the arbitrators may deem
appropriate.
The decision of a majority of the arbitrators so selected shall be
binding and conclusive upon the parties, and judgment upon any decision so
rendered by the arbitrators may be entered in any court of competent
jurisdiction. Each party required to participate shall be responsible for its or
his pro rata share of the fees and costs of arbitration, including the cost of a
stenographic record of the proceedings; provided, however, that the arbitrators
shall be authorized to award legal fees and costs to prevailing party, based
upon their consideration of the merits of the claims, the merits of the
defenses, and the results obtained from the arbitration.
At the request of either the Purchaser or the Stockholders'
Representative, arbitration proceedings shall be conducted confidentially; in
which case all documents, testimony and records shall be received, heard and
maintained by the arbitrators in confidence under seal, available for the
inspection only by the Association, the parties and their respective attorneys
and experts. Hearings in the arbitration proceeding shall commence within one
hundred twenty (120) days after the selection of the arbitrators.
11.3 Consent to Jurisdiction and Waivers For Injunctive Relief.
The Purchaser and the Stockholders each irrevocably consents that any
legal action or proceeding for equitable relief which may be brought against any
of them pursuant to the terms of this Agreement which arise out of or in any
manner related to, this Agreement may be brought in any court of the State of
New York located within Nassau County or in the United States District Court for
the Eastern District of New York. The Purchaser and the Stockholders by the
execution and delivery of this Agreement, expressly and irrevocably consent and
submit to the personal jurisdiction of any of such courts in any such action or
proceeding. The Purchaser and the Stockholders further irrevocably consent to
the service of any complaint, summons notice or other process relating to any
such action or proceeding by delivery thereof to it by hand or by any other
manner provided for in Section 11.5. The Purchaser and the Stockholders hereby
expressly and irrevocably waive any claim or defense in any such action or
proceeding based on any alleged lack of personal jurisdiction, improper venue or
forum non convenient or any similar basis. Nothing in this Section shall affect
or impair in any manner or to any extent the right of the Purchaser to commence
legal proceedings for equitable relief or otherwise proceed for equitable relief
against the Stockholders in any jurisdiction or to serve process in any manner
permitted by law.
11.4 Severability.
If any provision of this Agreement, and, in particular, if any
provision of the covenant not to compete, shall be held or deemed to be or
shall, in fact, be inoperative or unenforceable as applied in any particular
case because it conflicts with any other provision or provisions hereof or any
constitution or statute or rule of public policy, or for any other reason, such
circumstances shall not have the effect of rendering the provision in question
inoperative or unenforceable in any other case or circumstance, or of rendering
any other provision or provisions herein contained invalid, inoperative, or
unenforceable to any extent whatever. The invalidity of any one or more phrases,
sentences, clauses, sections, or subsections of this Agreement shall not affect
the remaining portions of this Agreement.
11.5 Notices.
All notices, consents, requests, instructions, approvals and other
communications provided for herein and all legal process in regard hereto shall
be validly given, made or served, if in writing and delivered personally or sent
by registered or certified mail (return receipt requested), postage prepaid,
recognized national or international air courier or by facsimile transmission
electronically confirmed:
if to Purchaser:
Aeroflex Incorporated
00 Xxxxx Xxxxxxx Xxxx
Xxxxxxxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Attn.: Xx. Xxxxxxx Xxxxx
President
with a copy to:
Xxxxxx X. Xxxxxx, Esq.
Blau, Kramer, Wactlar & Xxxxxxxxx, P.C.
000 Xxxxxxx Xxxxxxxxxx
Xxxxxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
if to the Company or Stockholders, to the Stockholder's Representative:
Xxxxxxxx X. Xxxxxx
000 Xxxxxxxx Xxxx Xxxx
Xxxxxxxx Xxxx, XX 00000
Facsimile: (000) 000-0000
with a copy to:
Xxxxx X. Xxxxxx, Esq.
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, P.C.
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000-0000
Fax: (000) 000-0000
(if to the Company prior to the Closing Date, to the Stockholders'
Representative, as aforesaid, and after the Closing Date, to the Purchaser, as
aforesaid) or, in each case, at such other address as may be specified in
writing to the other parties.
11.6 Waiver.
Any party may waive compliance by another with any of the provisions
of this agreement. No waiver of any provisions shall be construed as a waiver of
any other provision or a future waiver of any other provision hereof. Any waiver
must be in writing.
11.7 Publicity.
Until the Closing, none of the Purchaser, the Company or the
Stockholders shall issue any press release or public announcement of any kind
concerning the transactions contemplated by this Agreement without consulting
with the other.
11.8 Brokers, Finders, etc.
The Company, Stockholders and Purchaser represent and warrant to each
other that they have not dealt with or employed any broker, finder, investment
banker or financial advisor in connection with the negotiation, execution or
performance of this Agreement, except Xxxxxx X. Xxxxxx and Xxxxxx Roja
Corporation. The Stockholders agree to pay all such compensation which may be
due Xx. Xxxxxx and Xxxxxx Roja Corporation and to indemnify and hold harmless
the Purchaser and the Company therefrom.
11.9 Assignment.
Prior to the payment of the Contingent Payment under Section 2.2 of
this Agreement, the Purchaser may not assign any of its rights or obligations
hereunder without the prior written consent of the Stockholders' Representative,
except that such consent shall not be required for an assignment to a direct or
indirect wholly-owned subsidiary of the Purchaser, which subsidiary, at and
contemporaneously with the Closing, may be merged with the Company, provided
that in the event of any such assignment and/or merger with or without the
consent of the Stockholders' Representative, as the case may be, the Purchaser
and any such subsidiary or merged subsidiary shall remain subject to the
Purchaser's obligations hereunder. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective permitted
successors and assigns.
11.10 Miscellaneous.
The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. This Agreement constitutes the entire agreement and supersedes all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof. This Agreement may be executed in
several counterparts, each of which shall be deemed an original, and all of
which shall constitute one and the same instrument. This Agreement shall be
governed in all respects, including validity, interpretation and effect, by the
laws of the State of New York, applicable to contracts made and to be performed
in New York. This Agreement shall be binding upon and inure to the benefit of
the successors and assigns of the parties hereto. The rights and obligations
contained in this Agreement are solely for the benefit of the parties hereto and
are not intended to benefit or be enforceable by any other party, under the
third party beneficiary doctrine or otherwise.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
PURCHASER
Aeroflex Incorporated
By:
Title:
COMPANY
MIC Technology Corporation
By:
Title:
STOCKHOLDERS
Xxxxxx X. Xxxxxxx
Xxxxxxx X. Xxxxx
Xxxxx X. Xxxxxxx
Xxxxx X. Xxxxxxx
Xxxxxxxx Xxxxxxx
Xxxx Xxxxxxx
Xxxxxx Management Company
By:
Xxxxxxx X. Xxxxx
Xxxxx X. Xxxxxxxx
Xxxxxx X. Xxxxxx
Xxxx X. Xxxxxx
Xxxxxxx X. Xxxx
Xxx Xxxxxx
Xxxxxx Family Trust
By:
Xxxxxxxx X. Xxxxxx, Trustee
Xxxxxx X. Xxxxxx
Xxxxxxxx X. Xxxxxx
Lormar Corporation
By:
Xxxxxxxx X. Xxxxxx, President
Xxxxxx X. Xxxxxx
Xxxxx X. Xxxxxxxx
Xxxxxx X. Xxxxxx
Xxxxxxx X. Xxxxxxxx
Xxxxxx Xxxxxx
Xxxxx X. Xxxxx
Xxxxxx X. Xxxxxx
Xxxxx X. Xxxxxxx
EXHIBITS AND SCHEDULES
EXHIBITS
Exhibit A-1: Custody Agreement and Irrevocable Election to Sell
Exhibit A-2: Irrevocable Power of Attorney
Exhibit B: Noncompetition Agreements
Exhibit C: Opinion of Stockholders' Counsel
Exhibit D: Opinion of Purchaser's Counsel
Exhibit E: Escrow Agreement
Exhibit F-1: Warrant Agreement for 100,000 shares
Exhibit F-2: Warrant Agreement for 300,000 shares
Exhibit G: Lease Amendment
Exhibit H: Option to Purchase Real Estate
SCHEDULES
4.1 Organization and Authority
4.4 Capital Stock
4.5 No Conflicts
4.6 Financial Statements
4.7 Taxes
4.8 No Adverse Changes
4.9 Conduct of Business
4.10 Title to Assets
4.11 Real Property
4.12 Personal Property
4.15(a) Material, Service Agreements; Other Contracts
4.15(b) Other Contracts
4.16 Intellectual Property
4.17 Insurance
4.18 Customer and Supplier Relationships
4.19 Employees
4.20 Labor Relations
4.21 Benefit Plans
4.22 Litigation; Compliance; Permits
4.23 Environmental Compliance
4.25 Bank Accounts; Powers of Attorney
4.26 Warranties
