PUT AND CALL OPTION AGREEMENT
Exhibit
2.5
THIS PUT AND CALL OPTION AGREEMENT is
made as of June 16, 2008 by and between MXL OPERATIONS, INC., a Pennsylvania
corporation, MXL REALTY LP, a Pennsylvania limited partnership, MXL
LEASING LP, a Pennsylvania limited partnership (jointly and severally
the “Buyer Entities”) and MXL INDUSTRIES, INC., a Delaware corporation (the
“Interest Holder”).
Background
The Interest Holder has a 19.9%
ownership interest in each of MXL Realty and MXL Leasing and, an initial 40.95%
interest in MXL Operations which, should MXL Operations issue and sell such
further shares as presently permitted under that certain Stockholder Agreement
of even date herewith, could be reduced, but in no event to less than to a 19.9%
interest. The Buyer Entities purchased that certain plastics molding business
operated immediately prior to the date of this Agreement by the
Interest Holder.
This Agreement provides for, among
other matters, conditions and provisions under which (a) the Interest Holder can
put its ownership interest in each of the Buyer Entities to said Buyer Entities
and (b) the Buyer Entities can call the Interest Holders ownership interest in
the Buyer Entities from the Interest Holder and sets forth their mutual
understandings, rights and obligations regarding the foregoing and the other
matters contained herein.
NOW, THEREFORE, in consideration of the
mutual promises and covenants herein and intending to be legally bound, the
parties hereto agree as follows:
ARTICLE
1
DEFINITIONS
1.1 Definitions. For
purposes of this Agreement, the following terms shall have the meanings set
forth below, except as otherwise specified or as the context may otherwise
require:
“Affiliate” shall have the meaning set
forth in Rule 12b-2 of the regulations promulgated under the Securities and
Exchange Act of 1934, as amended.
“Bank Agreement” shall mean the Credit
Agreements dated _______, 2008 by and between the Buyer Entities and Union
National Community Bank, as amended from time to time, or any other credit
agreements entered into from time to time by the Buyer Entities, or any one or
more of them.
“Business Day” shall mean a day on
which national banks operating in Pennsylvania and the primary depository bank
for the Partnership are open for business.
“Buyer Entities” shall mean the MXL
Operations, MXL Leasing and MXL Realty.
“Call Option Period” shall mean the
period commencing on the third anniversary of this Agreement and continuing
until the end of the Holding Period.
“Call Strike Price” shall mean an
amount equal to the greater of (i) five (5) times EBITDA less Indebtedness of
the Buyer Entities on the Computation Date plus any cash or cash equivalents
held by the Buyer Entities on the Computation Date, multiplied by the Interest
Holder’s Percentage Interest or (ii) $750,000 compounded monthly at an interest
rate of 5% per annum from the date of this Agreement to the Computation
Date.
“Computation Date” means the date the
Partnership or Interest Holder gives notice of the exercise of its rights under
Section 2.1 below.
“Corporate Interests” means an
interest, voting or non-voting, in the common stock of MXL Operations determined
in a manner consistent with Pennsylvania corporate law, unless stated to the
contrary herein, with no distinction between such voting or non-voting stock for
any purpose hereunder .
“EBITDA” shall mean for the
consolidated net income of the Buyer Entities for the most recent fiscal year
prior to the Computation Date, as computed from the consolidation of
the financial statements prepared by the independent accountants for the Buyer
Entities in accordance with generally accepted accounting principles,
consistently applied for each of such entities for the then latest fiscal year
with any payments made to any of the Buyer Entities by any of the other Buyer
Entities excluded in the consolidation of such income statements, plus the
provision for taxes based upon income to the extent included in consolidated net
income, plus interest expense paid or accrued, plus, without duplication, the
interest component of capitalized leases, plus depreciation and
amortization.
“Encumbrances” shall mean any mortgage,
pledge, lien, charge, security or other third party interest.
“Equity Interests” shall mean the
Partnership Interests of Interest Holder in MXL Realty and MXL Leasing and the
Corporate Interests of Interest Holder in MXL Operations.
“Holding Period” shall mean the period
commencing on the date of this Agreement and ending on the date upon which
Interest Holder no longer has beneficial ownership of any of the Equity
Interests
“Indebtedness” shall mean obligations
for borrowed money.
“MXL Leasing” shall mean MXL Leasing,
LP, a Pennsylvania limited partnership, and its successors
“MXL Operations” shall mean MXL
Operations, Inc., a Pennsylvania corporation, and its successors.
“MXL Realty” shall mean MXL Realty, LP,
a Pennsylvania limited partnership, and its successors
“Interest Holder” shall mean MXL
Industries, Inc., a Delaware corporation, and its successors.
“Partnership Interest” shall mean an
interest, limited or general in each of the Buying Entities which is a
partnership determined in a manner consistent with Treasury Regulations
1.704-1(b)(3), as amended or any successor thereto.
“Percentage Interest” shall be the
percentage of the total outstanding Equity Interests of each of the Buying
Entities held by Interest Holder which is 19.9% of each of MXL Leasing and MXL
Realty and 40.95% of MXL Operations as of the date of this
Agreement. The Percentage Interest of the Interest Holder shall be,
if different from the foregoing, absent manifest error, as set forth on the
books and records of the Buying Entities. In the event the Equity Interest of
Interest Holder is not identical for each of the Buyer Entities, Partnership
Interest shall be computed by averaging Interest Holder’s equity interest in
each of the Buyer Entities; with each such equity interest weighted based upon
the EBITDA of each of the Buyer Entities as determined at the relevant time
based upon the Computation Date.
“Person” shall mean any individual,
partnership, corporation, trust, limited liability partnership, or other
entity.
“Put Option Period” shall mean the
period commencing on the third anniversary of this Agreement and continuing
until the end of the Holding Period.
“Put Strike Price” shall mean an amount
equal to five (5) times EBITDA less Indebtedness of the Buyer Entities on the
Computation Date plus any cash or cash equivalents held by the Buyer Entities on
the Computation Date multiplied by the Interest Holders’ Percentage Interest on
the Computation Date.
ARTICLE
2
OPTION TO
CALL AND PUT EQUITY INTERESTS
2.1 Put and Call
Options. At anytime during the Put Option Period, Interest
Holder shall have the right, at its discretion, to sell to the Buyer Entities
all but not less than all of its Equity Interests at the Put Strike Price, and
subject to the terms of this Agreement, the Buyer Entities shall have the joint
and several obligation to purchase from Interest Holder all but not less than
all of Interest Holder’s Equity Interests at the Put Strike Price. At
anytime during the Call Option Period, the Buyer Entities, acting jointly, shall
have the right, at their discretion, to purchase from Interest Holder all but
not less than all of Interest Holder’s Equity Interests at the Call Strike
Price, and subject to the terms of this Agreement, Interest Holder shall have
the obligation to sell to the Buyer Entities all but not less than all of its
Equity Interests at the Call Strike Price. The rights of Interest
Holder and the Buyer Entities shall be subject to the restrictions of Section
2.3. The Buyer Entities shall, in their sole discretion, determine
which Buyer Entities shall purchase which Equity Interests.
2.2 Exercise. Either
Interest Holder or the Buyer Entities, acting jointly, may exercise its right to
sell and purchase, respectively, the Equity Interests pursuant to Section 2.1
above by giving the other Party a written notice of its intent to make such sale
or purchase of the Equity Interests. The notice shall set forth a
date for the sale and purchase of the Equity Interests which shall not be less
than thirty (30) nor more than sixty (60) Business Days from the date of the
notice. Upon the delivery of the notice referred to in this Section
2.2 and subject to Section 2.3, the Buyer Entities shall be jointly and
severally bound to take all necessary action to pay the Put Strike Price or Call
Strike Price, as applicable, for the Equity Interests, and Interest Holder shall
be bound to take all action necessary to deliver to the Buyer Entities the
certificate or certificates, if any, evidencing the Equity Interests, with such
documents transferring the Equity Interests as reasonably required by counsel to
the Buyer Entities. The act of Interest Holder in transferring
the Equity Interests to the Buyer Entities shall constitute a representation and
warranty by Interest Holder that the Equity Interests are being transferred free
of all Encumbrances.
2.3 Restrictions.
(a) Neither
Interest Holder nor the Buyer Entities may exercise its right to sell and
purchase, respectively, the Equity Interests pursuant to Section 2.1 unless the
same rights are exercised, in full, in connection with all of the Equity
Interests.
(b) The
Buyer Entities shall not have the right to deliver a notice to purchase the
Equity Interests pursuant to Section 2.1 above if any Bank Agreement does not
permit such purchase, unless the Buyer Entities obtain an appropriate waiver
under the Bank Agreement.
(c) In
the event that any Bank Agreement does not permit the Buyer Entities, or any one
or more of them, to purchase the Equity Interests in accordance with a notice
given by Interest Holder pursuant to Section 2.1 above, the Buyer Entities shall
(i) immediately notify Interest Holder indicating the provisions in the Bank
Agreement which it believes applicable and (ii) within ten (10) business days,
request a waiver of such provisions of the applicable Bank
Agreement. If the Buyer Entities are not successful in obtaining a
waiver under the Bank Agreement, (iii) the Buyer Entities shall be under no then
present obligation to purchase the Equity Interests and (iv) Interest Holder may
either withdraw its purchase request or, by further notice to the Buyer
Entities, or any one of them, require that such purchase request be considered a
continuing request which shall be acted upon at the first date thereafter when
such purchase would not be a violation of the Bank Agreement. If
Interest Holder elects that the request be considered of a continuing nature, it
may reasonably require the Buyer Entities to renew its request for a waiver
under the Bank Agreement from time to time. Provided, however, the
Buyer Entities shall not be deemed to be prevented from purchasing the Equity
Interests if the aggregate purchase price for such Equity Interests can be paid
by each of the Buyer Entities contributing the maximum consideration which said
Buyer Entity may contribute without said Buyer Entity breaching its Bank
Agreement or the maximum contribution which said Buyer Entity may make pursuant
to a Bank Agreement waiver obtained in accordance with the requirement of this
subsection.
(d) In
the event that the obligation of the Partnership to purchase the Partnership
Interests in accordance with a notice given by Interest Holder pursuant to
Section 2.1 shall, at anytime during the initial five years after the
commencement of the Put Option Period, prevent any Buyer Entity from pursuing or
completing a capital project (i) approved in the manner provided herein or in
the partnership or shareholder documents relating to a Buyer Entity other than
the Partnership and (ii) to cost more than the Put Strike Price (computed as of
the date of Interest Holder’s notification) and (iii) is material to the
expansion or success of any Buyer Entity and (iv) the General Partner has
notified Interest Holder of the pending capital project prior to the exercise of
the Put Option, (x) the Partnership shall be under no then present obligation to
purchase the Partnership Interests and (y) Interest Holder may either withdraw
its purchase request or, by further notice to the Partnership, require that such
purchase request be considered a continuing request which shall be acted upon at
the first date thereafter when such purchase will not be restricted by Section
2.3(c) or this subparagraph.
(e) The
Put Strike Price or Call Strike Price shall be paid by the Buyer Entities in
full by wire transfer of immediately available funds into a bank account as
designated by Interest Holder on the date established pursuant to Section 2.2;
provided that the Buyer Entities shall have the option, to be exercised in
writing delivered to Interest Holder, to pay its purchase money obligation in
connection with the Put Strike Price by paying an amount equal to twenty five
percent (25%) of the Put Strike Price on the date established pursuant to
Section 2.2 and the remainder of the Put Strike Price in thirty six (36) equal
monthly installments (or the remaining term of the Partnership if less than
three (3) years) with interest payable at the prime rate, as established from
time to time by Bank of America NA. The first installment shall be
due and payable on the first day of the month following the date for the sale
and purchase of the Partnership Interest, and subsequent monthly installments,
with accrued interest, shall be due and payable on the first day of each
succeeding month until the entire amount of the obligation is
paid. The Buyer Entities shall jointly and severally execute a
promissory note containing the principal and interest terms set forth herein and
a provision which provides for an acceleration of all of the obligations under
the promissory note in the event that the Buyer Entities (or any one of them)
fails to make any payment of principal and interest within five (5) Business
Days after due or upon the occurrence of any of the event causing the
dissolution and termination of any one or more of the Buyer
Entities. The promissory note shall have priority in payment and upon
the assets of the Buyer Entities as to all creditors except (i) under the Bank
Agreements and (ii) under any then existing agreements or future agreements
entered into in the ordinary course of business which create a valid, perfected
purchase money security interest, under applicable law. The Buyer
Entities shall have the right to prepay all or any part of the purchase money
obligation at any time without penalty. If the Buyer Entities
exercise the option to pay over time as provided in this Section 2.3(e), the
Buyer Entities agree to execute a promissory note and such other document as
counsel for Interest Holder reasonably believes necessary to reflect the terms
of this Section 2.3(e).
2.4 Put Strike
Price. Should the purchase of the Equity Interests be deferred
under Section 2.3(c) or 2.3 (d), the Put Strike Price shall be the higher of the
Put Strike Price applicable to the date of the original notice given by Interest
Holder under Section 2.1 or the Put Strike Price applicable to the date of the
actual purchase of the Equity Interests by the Buyer Entities.
ARTICLE
3
GENERAL
PROVISIONS
3.1 Binding Effect and Benefit
of This Agreement. This Agreement shall be binding upon, and
shall inure to the benefit of the parties hereto and their respective heirs,
successors and permitted assigns, as the case may be; including any Affiliate of
Interest Holder or any other entity in a sale or transfer involving (i) more
than 50% of the outstanding voting power of Interest Holder or (ii) a
substantial part of the assets of Interest Holder.
3.2 Notices,
etc. Except as otherwise expressly provided herein, all
notices which are required or contemplated by this Agreement shall be in
writing. Delivery of such notices shall be deemed to be made when the
same are either personally served upon the party entitled thereto or sent by
telecopy (fax) to such person (with receipt acknowledged by the person receiving
such telecopy) or three (3) days after being deposited in the mails, by
certified or registered mail, with postage prepaid, addressed to such party as
follows:
MXL Industries, Inc.
c/o
National Patent Development Corporation
00 Xxxx
00xx Xxxxxx, Xxxxx 0000
Xxx Xxxx,
XX 00000
Attention:
Vice President Finance
MXL Realty LP
0000
Xxxxxxxxxxx Xxxx
Xxxxxxxxx,
XX 00000
Attention:
Xxxxx X. Xxxxxx or M. Xxxxx Xxxx
MXL Leasing LP
0000
Xxxxxxxxxxx Xxxx
Xxxxxxxxx,
XX 00000
Attention:
Xxxxx X. Xxxxxx or M. Xxxxx Xxxx
MXL Operations, Inc.
0000
Xxxxxxxxxxx Xxxx
Xxxxxxxxx,
XX 00000
Attention:
Xxxxx X. Xxxxxx or M. Xxxxx Xxxx
3.3 Integration;
Termination. This Agreement represents the entire
understanding of the parties with respect to the subject matter hereof, and
supersedes all prior agreements, writings, documents, instruments, information
memoranda, etc. No termination or amendment of this Agreement shall
be binding unless in writing and signed by all of the parties
hereto.
3.4 Interpretation. This
Agreement shall be interpreted and construed in accordance with the laws of the
Commonwealth of Pennsylvania without regard to its choice of laws or conflicts
of laws provisions. As used in this Agreement, the masculine gender
shall include the feminine or neuter gender and the plural shall include the
singular wherever appropriate. The titles of the Articles and
Sections herein have been inserted as a matter of convenience of reference only
and shall not control or affect the meaning or construction of any of the terms
or provisions hereof. The word “including” is intended to be used in
its most expansive understanding, is not exclusive of any other possibility,
notwithstanding any contrary interpretation of statute or common law, and shall
be construed to mean “including, without limitation.”
3.5 Counterparts The
parties hereto may execute this Agreement and any document from time to time
executed in connection herewith in any number of counterparts, and by facsimile
or electronic transmission, each of which, when executed and delivered, shall be
an original; but all such counterparts shall constitute one and the same
instrument.
3.6 Severability of
Provisions. Each provision of this Agreement shall be
considered severable. If for any reason any provision or provisions
hereof are determined to be illegal or invalid, such illegality or invalidity
shall not impair the operation of or affect those portions of this Agreement
that are valid and this Agreement shall be construed in all respects as if such
invalid or illegal provision was omitted.
3.7 Matters Relating to
Disputes. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania, without regard to
its principles of choice of laws or conflict of laws. Each party
agrees that the venue for any dispute arising between the parties regarding this
Agreement shall be binding arbitration conducted by the American Arbitration
Association (AAA) in Philadelphia, Pennsylvania in accordance with the
Commercial Arbitration rules of the American Arbitration
Association. All disputes between the parties hereto shall be
determined solely and exclusively by arbitration in accordance with the
Commercial Rules then in effect of the American Arbitration Association, or any
successors hereto, in Philadelphia, Pennsylvania, unless the parties otherwise
agree in writing. The parties shall jointly select an
arbitrator. In the event the parties fail to agree upon an arbitrator
within ten (10) days, then each party shall select a party arbitrator within (7)
days and such arbitrators shall then select a third arbitrator to serve as the
sole arbitrator, provided that if either party through their party arbitrator
fails to select an arbitrator within seven (7) days, or the parties through
their party arbitrator fail to agree upon a sole arbitrator within seven (7)
days of appointment, such arbitrator shall be selected by the AAA upon
application of either party. Judgment upon the award of the agreed
upon arbitrator or the arbitrator selected by the AAA, as the case may be, shall
be binding and shall be entered into by a court of competent
jurisdiction. EACH PARTY HEREBY WAIVES THE RIGHT TO SUBMIT ANY
DISPUTE, CLAIM OR CAUSE OF ACTION THAT IT MAY HAVE AGAINST THE OTHER PARTY UNDER
THIS AGREEMENT TO A PUBLIC TRIBUNAL FOR JURY OR NON-JURY TRIAL, PROVIDED THAT
JUDGMENT ON THE AWARD RENDERED BY THE ARBITRATOR MAY BE ENTERED IN ANY COURT
HAVING JURISDICTION THEREOF.
IN WITNESS WHEREOF, the parties have
caused this Agreement to be executed as of the date set forth at the head
hereof.
[The remainder of this page is
intentionally blank. Signatures on next page.]
ATTEST/WITNESS:
| MXL REALTY, LP | ||||
|
/s/ Xxx
Xxxxxxxx
|
By:
|
/s/ Xxxxx X.
Xxxxxx
|
||
| MXL LEASING, LP | ||||
|
/s/ Xxx
Xxxxxxxx
|
By
|
/s/ Xxxxx X.
Xxxxxx
|
||
| MXL OPERATIONS, INC. | ||||
|
/s/ Xxx
Xxxxxxxx
|
By:
|
/s/ Xxxxx X.
Xxxxxx
|
||
| MXL INDUSTRIES, INC. | ||||
|
/s/ Xxxxxx
Xxxx
|
|
By:
|
/s/ Xxxx X.
Xxxxxxx
|
|
