EXHIBIT 10.17
STOCK PURCHASE AGREEMENT
BY AND AMONG
ADVANCED ELECTRONIC SUPPORT PRODUCTS, INC.,
COMMUNICATION COMPONENTS COMPANY, INC.
AND
XXXXXX X. DAILY, JR.
DATED AS OF MARCH 5, 1999
TABLE OF CONTENTS
PAGE
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TABLE OF CONTENTS............................................................i
RECITALS.....................................................................1
TERMS OF AGREEMENT...........................................................1
ARTICLE I
PURCHASE AND SALE OF SHARES............................................1
1.1 Purchase and Sale................................................1
1.2 The Closing......................................................1
1.3 Purchase Price...................................................2
1.4 Wholly-Owned Subsidiary..........................................3
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF AESP.................................3
2.1 Corporate Status.................................................3
2.2 Corporate Power and Authority....................................3
2.3 Enforceability...................................................3
2.4 Capitalization...................................................3
2.5 No Violation; Consents and Approval..............................4
2.6 Litigation.......................................................4
2.7 Financial Statements.............................................4
2.8 Changes Since the Current Balance Sheet Date.....................4
2.9 No Commissions...................................................5
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND
THE SHAREHOLDER........................................................5
3.1 Corporate Status.................................................5
3.2 Power and Authority..............................................5
3.3 Enforceability...................................................5
3.4 Capitalization...................................................5
3.5 Shareholders of the Company......................................6
3.6 No Violation; Consents and Approval..............................6
3.7 Records of the Company...........................................6
3.8 Subsidiaries.....................................................7
3.9 Financial Statements.............................................7
3.10 Changes Since the Current Balance Sheet Date.....................7
3.11 Liabilities of the Company.......................................8
3.12 Litigation.......................................................8
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3.13 Environmental Matters............................................8
3.14 Real Estate......................................................8
3.15 Good Title to and Condition of Assets............................9
3.16 Compliance with Laws.............................................9
3.17 Labor and Employment Matters....................................10
3.18 Employee Benefit Plans..........................................11
(a) Employee Benefit Plans..............................11
(b) Compliance with Law.................................11
3.19 Tax Matters.....................................................11
3.20 Insurance.......................................................12
3.21 Receivables.....................................................12
3.22 Licenses and Permits............................................12
3.23 Adequacy of the Assets; Relationships with Customers
and Suppliers; Affiliated Transactions..........................12
3.24 Intellectual Property...........................................13
3.25 Contracts.......................................................13
3.26 Customer Lists and Recurring Revenue............................14
3.27 Accuracy of Information Furnished by the Shareholder............14
3.28 Investment Intent; Accredited Investor Status; Securities
Documents.......................................................14
3.29 Bank Accounts; Business Locations...............................15
3.30 Names; Prior Acquisitions.......................................15
3.31 No Other Management.............................................15
3.32 No Commissions..................................................15
3.33 No Reliance on Forecasts........................................15
ARTICLE IV
ADDITIONAL AGREEMENTS.................................................15
4.1 Further Assurances; Compliance with Covenants...................15
4.2 Employment Agreement............................................16
4.3 Company Employees...............................................16
4.4 Cooperation.....................................................16
4.5 Other Actions...................................................16
4.6 Confidentiality; Publicity......................................16
4.7 Restrictive Covenants...........................................17
4.8 Certain Tax Matters.............................................17
4.9 Shareholder Vote................................................17
4.10 Payoff and Estoppel Letters.....................................17
4.11 Company Common Stock; Releases..................................17
ARTICLE V
CONDITIONS TO THE OBLIGATIONS OF AESP.................................17
5.1 Accuracy of Representations and Warranties and Compliance
with Obligations................................................17
5.2 Corporate Certificate...........................................18
5.3 Opinion of Counsel..............................................18
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5.4 Consents........................................................18
5.5 Company Common Stock............................................18
5.6 Employment Agreement............................................18
5.7 No Adverse Litigation...........................................19
5.8 Board Approval..................................................19
5.9 Bank Approval...................................................19
5.10 Due Diligence Review............................................19
5.11 Releases........................................................19
ARTICLE VI
CONDITIONS TO THE OBLIGATIONS OF
THE COMPANY AND THE SHAREHOLDER.......................................19
6.1 Accuracy of Representations and Warranties and Compliance
with Obligations................................................19
6.2 Corporate Certificate...........................................19
6.3 Opinion of Counsel..............................................20
6.4 Consents........................................................20
6.5 Employment Agreement............................................20
6.6 No Adverse Litigation...........................................20
6.7 Board Approval..................................................20
6.8 Purchase Price..................................................20
6.9 No Order or Injunction..........................................20
REGISTRATION RIGHTS.........................................................21
7.1 Piggy-Back Registration Rights..................................21
7.2 Demand Registration Rights for AESP Shares; Filing of
Registration Statement..........................................22
7.3 Amendments and Supplements......................................22
7.4 Duration........................................................22
7.5 Further Information.............................................22
7.6 Sales Under Rule 144............................................23
7.7 Blue Sky........................................................23
7.8 Expenses........................................................23
ARTICLE VIII
INDEMNIFICATION.......................................................23
8.1 Agreement by the Shareholder to Indemnify.......................23
8.2 Agreement by AESP to Indemnify..................................23
8.3 Survival of Representations and Warranties......................24
8.4 Threshold and Maximum Indemnification Amount....................24
8.5 No Bar; Waiver..................................................24
8.6 Sole Remedy.....................................................25
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ARTICLE IX
DEFINITIONS...........................................................25
9.1 Defined Terms...................................................25
9.2 Other Definitional Provisions...................................26
ARTICLE X
GENERAL PROVISIONS....................................................27
10.1 Notices.........................................................27
10.2 Entire Agreement................................................27
10.3 Expenses........................................................27
10.4 Amendment; Waiver...............................................28
10.5 Remedies Cumulative.............................................28
10.6 Binding Effect; Assignment......................................28
10.7 Counterparts....................................................28
10.8 Interpretation..................................................28
10.9 Construction....................................................28
10.10 Governing Law; Severability.....................................29
10.11 Attorneys' Fees; Jurisdiction and Venue.........................29
10.12 Arm's Length Negotiations.......................................29
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EXECUTION COPY
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and effective as
of March 5, 1999 by and among ADVANCED ELECTRONIC SUPPORT PRODUCTS, INC., a
Florida corporation ("AESP"); COMMUNICATION COMPONENTS COMPANY, INC., a
Pennsylvania corporation (the "Company"); and XXXXXX X. DAILY, JR., a resident
of the Commonwealth of Pennsylvania, who is the sole shareholder of the Company
(the "Shareholder"). Certain other capitalized terms used herein are defined in
ARTICLE IX and throughout this Agreement.
RECITALS
A. The Shareholder is the record and beneficial owner of 9,500 shares (the
"Shares") of common stock, no par value per share, of the Company (the "Common
Stock") constituting all of the issued and outstanding capital stock of the
Company.
B. The Shareholder desires to sell, and AESP desires to acquire, all of
the Shares, upon the terms and subject to the conditions set forth in this
Agreement (the "Stock Purchase").
C. The Boards of Directors of the Company and AESP, and the Shareholder,
have determined that it is in their respective best interests, for AESP to
acquire the Company upon the terms and subject to the conditions set forth in
this Agreement.
TERMS OF AGREEMENT
In consideration of the foregoing Recitals and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
PURCHASE AND SALE OF SHARES
1.1 PURCHASE AND SALE. Upon the terms and subject to the conditions set
forth in this Agreement, at the Closing (as defined below), the Shareholder will
sell, assign, transfer, convey and deliver to AESP, and AESP shall purchase,
acquire and accept from the Shareholder, the Shares, free and clear of any Liens
(as defined herein).
1.2 THE CLOSING. Subject to the terms and conditions of this Agreement,
the consummation of the Stock Purchase (the "Closing") shall take place as
promptly as practicable (and in any event within five (5) business days) after
satisfaction or waiver of the conditions set forth in
ARTICLES V AND VI, at the offices of AESP's counsel, Akerman, Senterfitt &
Xxxxxx, P.A., Xxx X.X. Xxxxx Xxxxxx, Xxxxx, Xxxxxxx 00000, unless another date,
time or place is agreed to in writing by the parties hereto. The date and time
at which the Closing occurs is referred to herein as the "Closing Date".
1.3 PURCHASE PRICE. The purchase price (the "Purchase Price") to be paid
by AESP to the Shareholder for the Shares shall be equal to $800,000.00. Unless
otherwise indicated, at the Closing and subject to performance of certain
agreements and covenants by Shareholder as set forth in SECTION 5 and the
delivery by the Shareholder of certificates representing the Shares to AESP,
AESP shall pay the Purchase Price to the Shareholder as follows:
(a) AESP shall (1) deliver a check from the Company to the
Shareholder in the amount of $233,450.57 to be drawn upon the Company's funds
and (2) deliver to the Shareholder $16,549.43 by wire transfer to an account of
the Shareholder pursuant to written wire instruction;
(b) AESP shall deliver an instruction letter to its transfer agent
(Continental Stock Transfer and Trust Co.) instructing the issuance of
certificates evidencing $150,000.00 in AESP Common Stock (as defined below) in
the name of the Shareholder (the "AESP Shares"). The $150,000.00 shall be
payable in an aggregate number of shares of common stock, $.001 par value per
share, of AESP ("AESP Common Stock") determined by dividing: (i) $150,000.00; by
(ii) the average closing price of a share of AESP Common Stock on the NASDAQ
SmallCap Market ("NASDAQ") for the twenty (20) consecutive trading days which
precede the Closing Date, as reported (absent manifest error in the printing
thereof) by the Wall Street Journal (Eastern Edition);
(c) AESP shall deliver into escrow, as provided below, a
Non-Negotiable Promissory Note in the form of EXHIBIT 1.3(C) (the "$125,000
Installment Note") in the principal amount of $125,000.00 which note shall be
payable commencing 60 days from the date thereof in thirty (36) equal monthly
installments subject to any claims for indemnification under this Agreement
pursuant to the Escrow Agreement referenced below in Section 1.3(f). The
$125,000 Installment Note shall be held in escrow pursuant to SECTION 1.3(F)
below; and
(d) AESP shall deliver to the Shareholder a Non-Negotiable
Promissory Note in the form of EXHIBIT 1.3(D) (the "$175,000 Installment Note")
in the principal amount of $175,000.00 which note shall be payable commencing 60
days from the date thereof in thirty (36) equal monthly installments; and
(e) AESP shall deliver $100,000 to the Shareholder as follows: Based
upon representations by the Shareholder that the Company has received at least
$225,000 from Assessment Systems Co. ("ASC") during February 1999, AESP shall
deliver to the Shareholder $50,000 at Closing by wire transfer to an account of
the Shareholder pursuant to written wire instruction. Upon receipt by the
Company of an additional $225,000 from ASC on or before the Payment Date (as
defined below), AESP shall deliver to the Shareholder a check in the amount of
$50,000. AESP shall use commercially reasonable efforts to collect all
outstanding receivables from ASC. To the extent the full $225,000 payment are
not received from ASC on or before the Payment Date, then AESP shall deliver the
$50,000 to the Shareholder in the form of a Non-Negotiable Term Note in
substantially similar form of Exhibit 1.3(d), payable in full 36 months from the
date of this Agreement,
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which note shall bear interest at the rate of 8% per annum. For purposes of this
Section 1.3(e), the "Payment Date" shall mean the date that is six (6) months
after the Closing Date.
(f) AESP shall deliver the $125,000 Installment Note to be held in
escrow pursuant to the terms of that certain Escrow Agreement dated as of the
date hereof between AESP, the Company, the Shareholder and Akerman, Senterfitt &
Xxxxxx, P.A., as Escrow Agent, substantially in the form of EXHIBIT 1.3(F).
1.4 WHOLLY-OWNED SUBSIDIARY. Immediately following the Closing, the
parties understand and agree that the Company shall become a wholly-owned
subsidiary of AESP. Subject to the Company's Board of Directors' control, the
Company will maintain a separate identity from AESP in the marketplace and will
use, among other intellectual property, the trade names and trademarks of the
Company. The Company will maintain its headquarters in the Philadelphia,
Pennsylvania region and initially operate in the geographic area in which the
Company operates as of the date hereof.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF AESP
As a material inducement to the Shareholder to enter into this Agreement
and to consummate the transactions contemplated hereby, AESP makes the following
representations and warranties to the Shareholder:
2.1 CORPORATE STATUS. AESP is a corporation duly organized, validly
existing and in good standing under the laws of the State of Florida. There is
no pending or threatened proceeding for the dissolution, liquidation, insolvency
or rehabilitation of AESP.
2.2 CORPORATE POWER AND AUTHORITY. AESP has the corporate power and
authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. AESP has taken
all corporate action necessary to authorize its execution and delivery of this
Agreement, the performance of its obligations hereunder and the consummation of
the transactions contemplated hereby.
2.3 ENFORCEABILITY. This Agreement has been duly executed and delivered by
AESP and constitutes a legal, valid and binding obligation of AESP, enforceable
against AESP in accordance with its terms, except as the same may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and general equitable
principles regardless of whether such enforceability is considered in a
proceeding at law or in equity.
2.4 CAPITALIZATION. As of the date hereof, the authorized capital stock of
AESP consists of: 20,000,000 shares of Common Stock, $.001 par value per share,
of which 2,282,201 shares are
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issued and outstanding and (as of June 30, 1998) 265,800 shares are reserved for
issuance upon exercise of outstanding options and warrants exclusive of certain
public warrants granted but not exercised in connection with AESP's initial
public offering; and 1,000,000 shares of Preferred Stock, $.001 par value per
share, of which no shares are issued and outstanding. As of the date hereof, all
of the outstanding shares of Purchaser's Common Stock are validly issued, fully
paid and non-assessable.
2.5 NO VIOLATION; CONSENTS AND APPROVAL. The execution and delivery of
this Agreement by AESP, the performance by it of its obligations hereunder and
the consummation by it of the transactions contemplated by this Agreement will
not (i) contravene any provision of the Articles of Incorporation or Bylaws of
AESP, (ii) violate or conflict with any law, statute, ordinance, rule,
regulation, decree, writ, injunction, judgment or order of any Governmental
Authority or of any arbitration award which is either applicable to, binding
upon or enforceable against AESP, (iii) conflict with, result in any material
breach of, or constitute a material default (or an event which would, with the
passage of time or the giving of notice or both, constitute a material default)
under, or give rise to a right to terminate, amend, modify, abandon or
accelerate, any Contract which is applicable to, binding upon or enforceable
against AESP, (iv) result in or require the creation or imposition of any Lien
upon or with respect to any of the property or assets of AESP, or (v) require
the consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Authority, any court or tribunal or any other
Person, except any SEC and other filings required to be made by AESP.
2.6 LITIGATION. To AESP's knowledge, there is no material action, suit, or
other legal or administrative proceeding or governmental investigation pending,
threatened, anticipated or contemplated against, by or affecting AESP, or any of
its properties or assets, or which questions the validity or enforceability of
this Agreement or the transactions contemplated hereby, and there is no basis
for any of the foregoing. There are no outstanding orders, decrees or
stipulations issued by any Governmental Authority in any proceeding to which
AESP is or was a party which have not been complied with in full or which
continue to impose any material obligations on AESP.
2.7 FINANCIAL STATEMENTS. AESP has delivered or made available to the
Shareholder the financial statements of AESP, which for the purposes hereof
shall be comprised of AESP's (i) Annual Report on Form 10-KSB for the year ended
December 31, 1997, and (ii) Quarterly Reports on Form 10-QSB for the quarters
ended March 31, 1998, June 30, 1998 and September 30, 1998 ("AESP Financial
Statements"). Copies of such financial statements have been filed with the SEC.
The balance sheet dated as of June 30, 1998 from AESP's Quarterly Report on Form
10-QSB for the quarter ended September 30, 1998 shall be referred to herein as
the "Current Balance Sheet". AESP's Financial Statements fairly present the
financial position of AESP at the Current Balance Sheet date and for the periods
covered thereby, and have been prepared in accordance with GAAP consistently
applied throughout the periods indicated. AESP's Financial Statements reflect
all adjustments necessary for a fair presentation of the financial information
contained therein.
2.8 CHANGES SINCE THE CURRENT BALANCE SHEET DATE. Since the date of AESP's
Current Balance Sheet, there have been no material events effecting AESP which
would have been required to be reported in a Current Report on Form 8-K other
than as AESP reported on such form
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subsequent to September 30, 1998. AESP has no current obligation to file a
Current Report on Form 8-K.
2.9 NO COMMISSIONS. AESP has not incurred any obligation for any
finder's or broker's or agent's fees or commissions or similar compensation in
connection with the transactions contemplated hereby.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND
THE SHAREHOLDER
As a material inducement to AESP to enter into this Agreement and to
consummate the transactions contemplated hereby, the Company and the
Shareholder, jointly and severally, make the following representations and
warranties to AESP:
3.1 CORPORATE STATUS. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the Commonwealth of Pennsylvania
and has the requisite power and authority to own or lease its properties and to
carry on its business as now being conducted. The Company is legally qualified
to transact business as a foreign corporation in each foreign jurisdiction where
failure to do so would have a Material Adverse Affect on the Company. Any
jurisdictions where the Company is so qualified are set forth in SCHEDULE 3.1.
The Company has fully complied with all of the requirements of any statute
governing the use and registration of fictitious names, and has the legal right
to use the names under which it operates its business. There is no pending or
threatened proceeding for the dissolution, liquidation, insolvency or
rehabilitation of the Company.
3.2 POWER AND AUTHORITY. The Company has the power and authority to
execute and deliver this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The Company has taken all
action necessary to authorize the execution and delivery of this Agreement, the
performance of its obligations hereunder and the consummation of the
transactions contemplated hereby. The Shareholder is an individual residing in
the Commonwealth of Pennsylvania, and has the requisite competence and authority
to execute and deliver this Agreement, to perform his obligations hereunder and
to consummate the transactions contemplated hereby.
3.3 ENFORCEABILITY. This Agreement has been duly executed and delivered by
the Company and the Shareholder, and constitutes the legal, valid and binding
obligation of each of them, enforceable against them in accordance with its
terms, except as the same may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and general equitable principles regardless of
whether such enforceability is considered in a proceeding at law or in equity.
3.4 CAPITALIZATION. SCHEDULE 3.4 sets forth the number of shares of each
class of the Company's capital stock, the number of shares of the Company's
capital stock issued and
5
outstanding, and the number of such shares of the Company's capital stock held
in treasury. All of the issued and outstanding shares of capital stock of the
Company (i) have been duly authorized and validly issued and are fully paid and
non-assessable, (ii) were issued in compliance with all applicable state and
federal securities laws, and (iii) were not issued in violation of any
preemptive rights or rights of first refusal. No preemptive rights or rights of
first refusal exist with respect to the shares of capital stock of the Company
and no such rights arise by virtue of or in connection with the transactions
contemplated hereby. There are no outstanding or authorized rights, options,
warrants, convertible securities, subscription rights, conversion rights,
exchange rights or other agreements or commitments of any kind that could
require the Company to issue or sell any shares of its capital stock (or
securities convertible into or exchangeable for shares of its capital stock).
There are no outstanding stock appreciation, phantom stock, profit participation
or other similar rights with respect to the Company. There are no proxies,
voting rights or other agreements or understandings with respect to the voting
or transfer of the capital stock of the Company. The Company is not obligated to
redeem or otherwise acquire any of its outstanding shares of capital stock.
3.5 SHAREHOLDERS OF THE COMPANY. SCHEDULE 3.5 sets forth, with respect to
the Company, the name, address and the number of outstanding shares of each
class of its capital stock owned of record and/or beneficially by, each
shareholder of the Company as of the close of business on the date of this
Agreement. As of the date hereof, the Shareholder constitutes the sole holder of
all issued and outstanding shares of capital stock of the Company, and the
Shareholder owns such shares free and clear of all Liens, restrictions and
claims of any kind, and AESP shall receive good and marketable title to such
shares at the Closing.
3.6 NO VIOLATION; CONSENTS AND APPROVAL. Except as set forth in SCHEDULE
3.6, the execution and delivery of this Agreement by the Company and the
Shareholder, the performance by them of their respective obligations hereunder
and the consummation by them of the transactions contemplated by this Agreement
will not (i) contravene any provision of the Articles of Incorporation or Bylaws
of the Company, (ii) violate or conflict with any law, statute, ordinance, rule,
regulation, decree, writ, injunction, judgment or order of any Governmental
Authority or of any arbitration award which is either applicable to, binding
upon or enforceable against the Company or the Shareholder, (iii) conflict with,
result in any material breach of, or constitute a material default (or an event
which would, with the passage of time or the giving of notice or both,
constitute a material default) under, or give rise to a right to terminate,
amend, modify, abandon or accelerate, any Designated Contract which is
applicable to, binding upon or enforceable against the Company or the
Shareholder, (iv) result in or require the creation or imposition of any Lien
upon or with respect to any of the property or assets of the Company, or (v)
require the consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Authority, any court or tribunal or any other
Person, except any SEC and other filings required to be made by AESP.
3.7 RECORDS OF THE COMPANY. The copies of the Articles of Incorporation
and Bylaws which have been provided to AESP as of the date hereof are true,
accurate and complete and reflect all amendments made through the date of this
Agreement. The minute books for the Company made available to AESP for review
were correct and complete in all material respects as of the date of such
review, no further entries have been made through the date of this Agreement,
such minute books contain the true signatures of the persons purporting to have
signed them, and such minute books contain an accurate record of all material
corporate actions of the shareholders and directors (and any committees thereof)
of the Company taken by written consent or at a meeting since incorporation. All
material corporate actions taken by the Company have been duly authorized or
ratified. All accounts, books and ledgers of the Company have been accurately
kept and completed in all material
6
respects, and there are no material inaccuracies or discrepancies of any kind
contained therein. The stock ledgers of the Company, attached hereto as SCHEDULE
3.7, contain accurate and complete records of all issuances, transfers and
cancellations of shares of the capital stock of the Company.
3.8 SUBSIDIARIES. The Company does not own, directly or indirectly, any
outstanding voting securities of or other interests in, or control, any other
corporation, partnership, joint venture or other business entity, except as set
forth in SCHEDULE 3.8.
3.9 FINANCIAL STATEMENTS. The Shareholder has delivered to AESP the
financial statements of the Company, including the notes thereto, for the twelve
(12) month period ended December 31, 1998 compiled by the Company, copies of
which are attached to SCHEDULE 3.9 hereto (collectively, the "Financial
Statements"). The balance sheet of the Company, dated as of January 31, 1999,
included in the Financial Statements is referred to herein as the "Current
Balance Sheet." The Financial Statements fairly present the financial position
of the Company at the balance sheet date and the results of operations for the
period covered thereby, and have been prepared in accordance with the Company's
past accounting practices, consistently applied throughout the periods
indicated. There are no extraordinary or material non-recurring items of income
or expense during the periods covered by the Financial Statements which are not
reflected therein and the balance sheets included in the Financial Statements do
not reflect any writeup or revaluation increasing the book value of any assets,
except as specifically disclosed in the notes thereto. The Financial Statements
reflect all adjustments necessary for a fair presentation of the financial
information contained therein.
3.10 CHANGES SINCE THE CURRENT BALANCE SHEET DATE. Except as set forth in
SCHEDULE 3.10, since the date of the Current Balance Sheet, the Company has not
(i) issued any capital stock or other securities; (ii) made any distribution of
or with respect to its capital stock or other securities or purchased or
redeemed any of its securities; (iii) paid any bonus to or increased the rate of
compensation of any of its officers or salaried employees or amended any other
terms of employment of such persons; (iv) sold, leased or transferred any of its
properties or assets other than in the ordinary course of business consistent
with past practice; (v) made or obligated itself to make capital expenditures
greater than $10,000 in the aggregate; (vi) made any payment greater than
$10,000 in the aggregate in respect of its liabilities other than in the
ordinary course of business consistent with past practice; (vii) incurred any
obligations or liabilities (including any indebtedness) or entered into any
transaction or series of transactions involving in excess of $10,000 in the
aggregate out of the ordinary course of business, except for this Agreement and
the transactions contemplated hereby; (viii) suffered any theft, damage,
destruction or casualty loss, not covered by insurance and for which a timely
claim was filed, in excess of $10,000 in the aggregate; (ix) suffered any losses
in excess of $10,000 in the aggregate (whether or not covered by insurance); (x)
waived, canceled, compromised or released any rights having a value in excess of
$10,000 in the aggregate; (xi) made or adopted any change in its accounting
practice or policies; (xii) made any adjustment to its books and records other
than in respect of the conduct of its business activities in the ordinary course
consistent with past practice; (xiii) entered into any transaction with any
Affiliate other than intercompany transactions in the ordinary course of
business consistent with past practice; (xiv) entered into any employment
agreement; (xv) terminated, amended or modified any agreement involving an
amount in excess of $10,000 in the aggregate; (xvi) imposed any security
interest or other Lien on any of its assets other than in the ordinary course of
business consistent with past
7
practice; (xvii) delayed paying any accounts payable which are due and payable
except to the extent being contested in good faith; (xviii) made or pledged any
charitable contributions in excess of $5,000 in the aggregate; (xix) entered
into any other transaction or been subject to any event which has or may have a
Material Adverse Effect on the Company; or (xx) agreed to do or authorized any
of the foregoing.
3.11 LIABILITIES OF THE COMPANY. The Company does not have any liabilities
or obligations, whether accrued, absolute, contingent or otherwise, except (a)
to the extent reflected or taken into account in the Current Balance Sheet and
not heretofore paid or discharged, (b) liabilities incurred in the ordinary
course of business consistent with past practice since the date of the Current
Balance Sheet (none of which relates to breach of contract, breach of warranty,
tort, infringement or violation of law, or which arose out of any action, suit,
claim, governmental investigation or arbitration proceeding), (c) normal
accruals, reclassifications, and audit adjustments which would be reflected on
an audited financial statement and which would not be material in the aggregate,
(d) liabilities incurred in the ordinary course of business prior to the date of
the Current Balance Sheet which, in accordance with the Company's past
accounting practices, consistently applied, were not recorded thereon.
3.12 LITIGATION. Except as set forth in SCHEDULE 3.12, there is no action,
suit, or other legal or administrative proceeding or governmental investigation
pending or threatened, or, to the best of the Company's or Shareholder's
knowledge, anticipated or contemplated against, by or affecting the Company, or
any of its properties or assets, or the Shareholder, or which questions the
validity or enforceability of this Agreement or the transactions contemplated
hereby, and there is no basis for any of the foregoing. There are no outstanding
orders, decrees or stipulations issued by any Governmental Authority in any
proceeding to which the Company is or was a party which have not been complied
with in full or which continue to impose any material obligations on the
Company.
3.13 ENVIRONMENTAL MATTERS. The Company has complied with all
environmental laws, rules and regulations applicable to its operations,
properties and assets which, if not complied with, would have a Material Adverse
Effect on the Company.
3.14 REAL ESTATE.
(a) The Company does not own any real property or any interest
therein; and
(b) SCHEDULE 3.14(B) sets forth a list of all leases, licenses or
similar agreements ("Leases") to which the Company is a party (copies of which
have previously been furnished to AESP), in each case setting forth (A) the
lessor and lessee thereof and the date and term of each of the Leases, (B) the
legal description, including street address, of each property covered thereby,
and (C) a brief description (including size and function) of the principal
improvements and buildings thereon (the "Leased Premises"). To the best of the
Company's or Shareholder's knowledge, the Leases are in full force and effect
and have not been amended, and no party thereto is in default or breach under
any such Lease. No event has occurred which, with the passage of time or the
giving of notice or both, would cause a material breach of or default under any
of such Leases. There is no breach or, to the best of the Company's or
Shareholder's knowledge, no anticipated breach by any other party to such
Leases. With respect to each such Leased Premises:
8
(i) The Company is the owner of all leasehold interests
purported to be granted by such leases.
(ii) The portions of the buildings located on the Leased
Premises that are used in the business of the Company are each in good
repair and condition, normal wear and tear excepted, and are in the
aggregate sufficient to satisfy the Company's current and reasonably
anticipated normal business activities as conducted thereat;
(iii) Each of the Leased Premises (a) has direct access to
public roads or access to public roads by means of a perpetual access
easement, such access being sufficient to satisfy the current and
reasonably anticipated normal transportation requirements of the Company's
business as presently conducted at such parcel; and (b) is served by all
utilities in such quantity and quality as are sufficient to satisfy the
current normal business activities as conducted at such parcel; and
(iv) The Company has not received notice of: (a) any
condemnation proceeding with respect to any portion of the Leased Premises
or any access thereto, and to the best of the Company's or Shareholder's
knowledge, no such proceeding is contemplated by any Governmental
Authority; or (b) any special assessment which may affect any of the
Leased Premises, and to the best of the Company's or Shareholder's
knowledge, no such special assessment is contemplated by any Governmental
Authority.
3.15 GOOD TITLE TO AND CONDITION OF ASSETS.
(a) Except as set forth on SCHEDULE 3.15(A), the Company has good
and marketable title to all of its Assets (as hereinafter defined), free and
clear of any Liens or restrictions on use. For purposes of this Agreement, the
term "Assets" means all of the properties and assets of the Company, other than
the Leased Premises, whether personal or mixed, tangible or intangible, wherever
located.
(b) The Fixed Assets (as hereinafter defined) currently in use or
necessary for the business and operations of the Company are in good operating
condition, normal wear and tear excepted. For purposes of this Agreement, the
term "Fixed Assets" means all vehicles, machinery, equipment, tools, supplies,
leasehold improvements, furniture and fixtures used by or located on the
premises of the Company or set forth on the Current Balance Sheet or acquired by
the Company since the date of the Current Balance Sheet. SCHEDULE 3.15(B) lists
the vehicles owned, leased or used by the Company, setting forth the make,
model, description of body and chassis, vehicle identification number, and year
of manufacture, and for each vehicle, whether it is owned or leased, and if
owned, the name of any lienholder and the amount of the lien, and if leased, the
name of the lessor.
3.16 COMPLIANCE WITH LAWS.
(a) Except as set forth in SCHEDULE 3.16(A), the Company is and has
been in compliance with, in all material respects, all laws, regulations and
orders applicable to it, its business
9
and operations (as conducted by it now and in the past), the Assets and the
Leased Premises and any other properties and assets (in each case owned or used
by it now or in the past). The Company has not been cited, fined or otherwise
notified of any asserted past or present failure to comply with any laws,
regulations or orders and no proceeding with respect to any such violation is
pending or threatened.
(b) Neither the Company, nor any of its employees or agents, has
made any payment of funds in connection with the business of the Company which
is prohibited by law, and no funds have been set aside to be used in connection
with the business of the Company for any payment prohibited by law.
(c) Except as set forth in SCHEDULE 3.16(C), the Company is and at
all times has been in full compliance with the terms and provisions of the
Immigration Reform and Control Act of 1986, as amended (the "Immigration Act").
With respect to each Employee (as defined in 8 C.F.R. 274a.1(f)) of the Company
for whom compliance with the Immigration Act is required, the Company has on
file a true, accurate and complete copy of (i) each Employee's Form I-9
(Employment Eligibility Verification Form) and (ii) all other records, documents
or other papers prepared, procured and/or retained by the Company pursuant to
the Immigration Act. The Company has not been cited, fined, served with a Notice
of Intent to Fine or with a Cease and Desist Order, nor has any action or
administrative proceeding been initiated or threatened against the Company, by
the Immigration and Naturalization Service by reason of any actual or alleged
failure to comply with the Immigration Act.
(d) The Company is not subject to any Contract, decree or injunction
to which the Company is a party which restricts the continued operation of any
business of the Company or the expansion thereof to other geographical areas,
customers and suppliers or lines of business.
3.17 LABOR AND EMPLOYMENT MATTERS. SCHEDULE 3.17 sets forth the name,
address, social security number and current rate of compensation of the
employees of the Company. The Company is not a party to or bound by any
collective bargaining agreement or any other agreement with a labor union, and,
to the best of the Company's or Shareholder's knowledge, there has been no
effort by any labor union during the twenty-four (24) months prior to the date
hereof to organize any employees of the Company into one or more collective
bargaining units. There is no pending or, to the best of the Company's or
Shareholder's knowledge, threatened labor dispute, strike or work stoppage which
affects or which may affect the business of the Company or which may interfere
with its continued operations. Neither the Company nor any agent, representative
or employee thereof has within the last twenty-four (24) months committed any
unfair labor practice as defined in the National Labor Relations Act, as
amended, and there is no pending or threatened charge or complaint against the
Company by or with the National Labor Relations Board or any representative
thereof. There has been no strike, walkout or work stoppage involving any of the
employees of the Company during the twenty-four (24) months prior to the date
hereof. The Shareholder is not aware that any executive or key employee or group
of employees has any plans to terminate his, her or their employment with the
Company as a result of the Stock Purchase or otherwise. The Company has
complied, in all material respects, with applicable laws, rules and regulations
relating to employment, civil rights and equal employment opportunities,
including but not limited to, the Civil Rights Act of 1964, the Fair Labor
Standards Act, and the Americans with Disabilities Act, as amended.
10
3.18 EMPLOYEE BENEFIT PLANS.
(a) EMPLOYEE BENEFIT PLANS. SCHEDULE 3.18(A) contains a list setting
forth each employee benefit plan or arrangement of the Company, including but
not limited to any pension, medical, health or other insurance, share incentive,
share option, deferred compensation or employee profit sharing or bonus plans,
in which employees, their spouses or dependents, of the Company participate
("Employee Benefit Plans"), copies of which, together with the most recent
annual reports on Form 5500 and summary plan descriptions with respect thereto,
were furnished to AESP. To the best of the Company's or Shareholder's knowledge,
there are no qualified Employee Benefit Plans or employee welfare benefit plans
as described under Section 3(1) of ERISA.
(b) COMPLIANCE WITH LAW. With respect to each Employee Benefit Plan
(i) each has been administered in all material respects in compliance with its
terms and with all applicable laws, (ii) no actions, suits, claims or disputes
are pending, or, to the best of the Company's or Shareholder's knowledge,
threatened; (iii) no audits, inquiries, reviews, proceedings, claims, or demands
are pending with any governmental or regulatory agency; (iv) to the knowledge of
the Company, there are no facts which could give rise to any material liability
in the event of any such investigation, claim, action, suit, audit, review, or
other proceeding; and (v) all material reports, returns, and similar documents
required to be filed with any governmental agency or distributed to any plan
participant have been duly or timely filed or distributed.
3.19 TAX MATTERS. All Tax Returns required to be filed prior to the date
hereof with respect to the Company or any of its income, properties, franchises
or operations have been timely filed (including, without limitation, Tax Returns
for the year ended 1998), each such Tax Return has been prepared in compliance
with all applicable laws and regulations, and all such Tax Returns are true and
accurate in all material respects. All Taxes due and payable by or with respect
to the Company have been paid, are accrued on the Current Balance Sheet or will
be accrued on its books and records as of the Closing. Except as set forth in
SCHEDULE 3.19 hereto: (i) with respect to each taxable period of the Company,
the Company has not has been audited by the relevant taxing authority; (ii) no
deficiency or proposed adjustment which has not been settled or otherwise
resolved for any amount of Taxes has been asserted or assessed by any taxing
authority against the Company; (iii) the Company has not consented to extend the
time in which any Taxes may be assessed or collected by any taxing authority;
(iv) the Company has not requested or been granted an extension of the time for
filing any Tax Return to a date later than the Closing Date; (v) there is no
action, suit, taxing authority proceeding, or audit or claim for refund now in
progress, pending or threatened against or with respect to the Company regarding
Taxes; (vi) there are no Liens for Taxes (other than for current Taxes not yet
due and payable) upon the assets of the Company; (vii) the Company will not be
required (a) as a result of a change in method of accounting for a taxable
period ending on or prior to the Closing Date, to include any adjustment under
any provision of law in taxable income for any taxable period (or portion
thereof) beginning after the Closing or (b) as a result of any provision of law
existing as of the date hereof, to include any item of income or exclude any
item of deduction from any taxable period (or portion thereof) beginning after
the Closing; (viii) the Company has not been a member of an affiliated group or
filed or been included in a combined, consolidated or unitary income Tax Return;
(ix) the Company is not a party to or bound by any tax allocation or tax sharing
agreement or has any current or potential contractual obligation to indemnify
any other Person with respect to Taxes; (x) no claim has ever been asserted
against the Company in writing by a taxing
11
authority in a jurisdiction where the Company does not file Tax Returns that the
Company is or may be subject to Taxes assessed by such jurisdiction; and (xi)
true, correct and complete copies of all income and sales Tax Returns filed by
or with respect to the Company for the years ending December 31, 1995, 1996 and
1997 have been furnished or made available to AESP.
3.20 INSURANCE. The Company is covered by the valid and enforceable
policies of insurance covering its respective properties, assets and businesses
set forth on SCHEDULE 3.20 hereto (the "Insurance Policies"). Such Insurance
Policies are in full force and effect, and all premiums due thereon have been
paid. As of the Closing Date, each of the Insurance Policies will be in full
force and effect. None of the Insurance Policies will lapse or terminate as a
result of the transactions contemplated by this Agreement. The Company has
complied in all material respects with the provisions of such Insurance
Policies. SCHEDULE 3.20 contains a brief description of each pending claim under
any of the Insurance Policies that relates to loss or damage to the properties,
assets or businesses of the Company. To the best of the Company's or
Shareholder's knowledge, the Company has not failed to give, in a timely manner,
any notice required under any of the Insurance Policies to preserve its rights
thereunder.
3.21 RECEIVABLES. All of the Receivables (as hereinafter defined) are
valid and legally binding, represent bona fide transactions and arose in the
ordinary course of business of the Company. All of the Receivables are good and
collectible receivables, and will be collected in full in accordance with the
terms of such receivables (and in any event within six (6) months following the
Closing), without setoff or counterclaims, subject to the allowance for doubtful
accounts, if any, set forth on the Current Balance Sheet as reasonably adjusted
since the date of the Current Balance Sheet in the ordinary course of business
consistent with past practice. For purposes of this Agreement, the term
"Receivables" means all receivables of the Company as of Closing Date, including
all trade account receivables (including, without limitation, receivables from
ASC) arising from the provision of services, sale of inventory and notes
receivable.
3.22 LICENSES AND PERMITS. To the best of the Company's or Shareholder's
knowledge, the Company possesses all licenses and required governmental or
official approvals, permits or authorizations (collectively, the "Permits")
which are material for its businesses and operations, and SCHEDULE 3.22 contains
a true and complete list of all such Permits. All such Permits are valid and in
full force and effect, the Company is in full compliance with the respective
requirements thereof, and no proceeding is pending or threatened to revoke or
amend any of them. None of such Permits is or will be impaired or in any way
affected by the execution and delivery of this Agreement or the consummation of
the transactions contemplated hereby.
3.23 ADEQUACY OF THE ASSETS; RELATIONSHIPS WITH CUSTOMERS AND SUPPLIERS;
AFFILIATED TRANSACTIONS. The Assets and Leased Premises constitute, in the
aggregate, all of the assets and properties necessary for the conduct of the
business of the Company in the manner in which and to the extent to which such
business is currently being conducted. To the best of the Company's or
Shareholder's knowledge, no current supplier to the Company of items essential
to the conduct of its business has threatened to terminate its business
relationship with it for any reason. The Company does not have any direct or
indirect interest in any customer, supplier or competitor of the Company, or in
any person from whom or to whom the Company leases real or personal property.
Except as set forth on SCHEDULE 3.23, no officer, director or shareholder of the
Company, nor any person related
12
by blood or marriage to any such person, nor any entity in which any such person
owns any beneficial interest, is a party to any Designated Contract or
transaction with the Company or has any interest in any property used by the
Company.
3.24 INTELLECTUAL PROPERTY. Except as set forth on SCHEDULE 3.24(B), the
Company has full legal right, title and interest in and to all trademarks,
service marks, trade names, copyrights, know-how, patents, trade secrets,
proprietary computer software, data bases and compilations, licenses (including
licenses for the use of computer software programs), and other intellectual
property used in the conduct of its business (the "Intellectual Property").
SCHEDULE 3.24(A) sets forth all of the Company's trademarks, service marks,
trade names, patents and licenses. Except as set forth in SCHEDULE 3.24(B), to
the best of the Company's or Shareholder's knowledge, the business of the
Company as presently conducted, and the unrestricted conduct and the
unrestricted use and exploitation of the Intellectual Property, does not
infringe or misappropriate any rights held or asserted by any Person, and no
Person is infringing on the Intellectual Property. Attachment 1 to SCHEDULE
3.24(B) is the Settlement, Release and License Agreement between the Company and
Superior Modular Products, Inc. (the "SMP License Agreement") which agreement
provides the Company with a full and final settlement and release for all claims
and damages relating to the Company's use of its Category 5 connector product
line and its alleged violation of U.S. Patent No. 5,299,956 and providing for a
license of the patented technology at a royalty not to exceed 15(cents) per
port. Except as set forth on SCHEDULE 3.24(B), no payments are required for the
continued use of the Intellectual Property. None of the Intellectual Property
has ever been declared invalid or unenforceable, or is the subject of any
pending or, to the best of the Company's or Shareholder's knowledge, threatened
action for opposition, cancellation, declaration, infringement, or invalidity,
unenforceability or misappropriation or like claim, action or proceeding.
3.25 CONTRACTS. SCHEDULE 3.25 sets forth a list of each Contract to which
the Company is a party or by which it or its properties and assets are bound and
which is material to its business, assets or properties (the "Designated
Contracts"), true and correct copies of which have been provided to AESP. The
copy of each Designated Contract furnished to AESP is a true and complete copy
of the document it purports to represent and reflects all amendments thereto
made through the date of this Agreement. The Company has not violated any of the
material terms or conditions of any Designated Contract or any term or condition
which would permit termination or material modification of any Designated
Contract, and all of the covenants to be performed by any other party thereto
have been fully performed and there are no claims for breach or indemnification
or notice of default or termination under any Designated Contract. No event has
occurred which constitutes, or after notice or the passage of time, or both,
would constitute, a default by the Company under any Designated Contract, and no
such event has occurred which constitutes or would constitute a default by any
other party. The Company is not subject to any liability or payment resulting
from renegotiation of amounts paid it under any Designated Contract. As used in
this Section, Designated Contracts shall include, without limitation, (a) loan
agreements, indentures, mortgages, pledges, hypothecations, deeds of trust,
conditional sale or title retention agreements, security agreements, equipment
financing obligations or guaranties, or other sources of contingent liability in
respect of any indebtedness or obligations to any other Person, or letters of
intent or commitment letters with respect to same; (b) contracts obligating the
Company to provide products or services for a period of one year or more; (c)
leases of real property, and leases of personal property not cancelable without
penalty on notice of sixty (60) days or less; (d) distribution, sales agency or
franchise or
13
similar agreements, or agreements providing for an independent contractor's
services, or letters of intent with respect to same; (e) employment agreements,
management service agreements, consulting agreements, confidentiality
agreements, non-competition agreements, any other agreements relating to any
employee, officer or director of the Company, and all employee handbooks, policy
statements and similar plans; (f) licenses, assignments or transfers of
trademarks, trade names, service marks, patents, copyrights, trade secrets or
know how, or other agreements regarding proprietary rights or intellectual
property; (g) any Contract relating to pending capital expenditures by the
Company; and (h) other material Contracts or understandings (which for the
purposes of this section only shall mean Contracts or understandings related to
obligations of $5,000.00 or more), irrespective of subject matter and whether or
not in writing not entered into in the ordinary course of business by the
Company and not otherwise disclosed on the Schedules.
3.26 CUSTOMER LISTS AND RECURRING REVENUE. SCHEDULE 3.26 is a true,
correct and complete list of all existing customers (collectively, the
"Customers") of the Company. Other than the Customers identified as such on
SCHEDULE 3.26, no customer of the Company as of the date of this Agreement
accounts for more than 1% of the Company's annual revenue. SCHEDULE 3.26 sets
forth each Customer's name, address and account number.
3.27 ACCURACY OF INFORMATION FURNISHED BY THE SHAREHOLDER. No
representation or warranties furnished by the Shareholder pursuant to this
Agreement, and no document, certificate, schedule or exhibit furnished to AESP
pursuant to this Agreement contains or shall contain any untrue statement of a
material fact or omits or shall omit any material fact necessary to make the
information contained therein not misleading. The Shareholder has provided AESP
with true, accurate and complete copies of all documents listed or described in
the various Schedules attached hereto.
3.28 INVESTMENT INTENT; ACCREDITED INVESTOR STATUS; SECURITIES DOCUMENTS.
The Shareholder is acquiring the AESP Shares and Notes hereunder for his own
account for investment and not with a view to, or for the sale in connection
with, any distribution of any of the Notes except in compliance with applicable
state and federal securities laws. The Shareholder has had the opportunity to
discuss the transactions contemplated hereby with AESP and has had the
opportunity to obtain such information pertaining to AESP as has been requested,
including but not limited to filings made by AESP with the SEC under the
Exchange Act, including the most recent filing by AESP on Form 10-K, and any
filings on Forms 10-Q or 8-K since the end of AESP's last fiscal year end. The
Shareholder has such knowledge and experience in business or financial matters
he is capable of evaluating the merits and risks of an investment in the AESP
Shares. The certificates representing the AESP Shares shall bear the following
legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF BY THE HOLDER EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), AND IN COMPLIANCE WITH
APPLICABLE SECURITIES LAWS OF ANY STATE WITH RESPECT THERETO, OR IN
ACCORDANCE WITH AN OPINION OF COUNSEL IN FORM AND
14
SUBSTANCE SATISFACTORY TO THE ISSUER THAT AN
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
AESP may, unless a Registration Statement is in effect covering such shares,
place stop transfer orders with its transfer agents with respect to such
certificates in accordance with federal securities laws.
3.29 BANK ACCOUNTS; BUSINESS LOCATIONS. SCHEDULE 3.29 sets forth all
accounts of the Company with any bank, broker or other depository institution,
and the names of all persons authorized to withdraw funds from each such
account. As of the date hereof, the Company has no office or place of business
other than as identified on SCHEDULES 3.29 and, except for equipment leased to
customers in the ordinary course of business, all locations where the equipment,
inventory, chattel paper and books and records of the Company is located as of
the date hereof are identified on SCHEDULE 3.29.
3.30 NAMES; PRIOR ACQUISITIONS. All names under which the Company does
business as of the date hereof are specified on SCHEDULE 3.30. Except as set
forth on SCHEDULE 3.30, the Company has not changed its name or used any assumed
or fictitious name, or been the surviving entity in a merger, acquired any
business or changed its principal place of business or chief executive office,
within the past three years.
3.31 NO OTHER MANAGEMENT. The Shareholder has been the primary person who
has operated the Company during the last five (5) years and has exercised final
executive decision making authority for the Company during the last five (5)
years. Subject to AESP's Board of Directors control (which shall be the Board of
the Company after the Closing Date), on an on-going basis, AESP shall not
require any other person beyond the Shareholder to operate the Company and
achieve the results which have been communicated to AESP.
3.32 NO COMMISSIONS. Neither the Company nor the Shareholder has incurred
any obligation for any finder's or broker's or agent's fees or commissions or
similar compensation in connection with the transactions contemplated hereby.
3.33 NO RELIANCE ON FORECASTS. The Company makes no representation or
warranty regarding any projections provided by it to AESP, including those that
may contain forecasts or projections of its future operating results.
ARTICLE IV
ADDITIONAL AGREEMENTS
4.1 FURTHER ASSURANCES; COMPLIANCE WITH COVENANTS. Each party shall
execute and deliver such additional instruments and other documents and shall
take such further actions as may be necessary or appropriate to effectuate,
carry out and comply with all of the terms of this Agreement and the
transactions contemplated hereby. The Shareholder shall cause the Company to
comply with all of the respective covenants of the Company under this Agreement.
At the Closing,
15
the Company and the Shareholder covenant and agree to deliver to AESP the
certificates, opinions and other documents required to be delivered to AESP
pursuant to ARTICLE V, and AESP covenants and agrees to deliver to the Company
and the Shareholder the certificates and other documents required to be
delivered to the Company and the Shareholder pursuant to ARTICLE VI.
4.2 EMPLOYMENT AGREEMENT. The Shareholder shall enter into an
Employment Agreement, in the form of EXHIBIT 4.2 attached hereto with AESP as
of, and as a condition to, Closing.
4.3 COMPANY EMPLOYEES. SCHEDULE 4.3 attached hereto sets forth the annual
salaries of certain employees of the Company which AESP (through the Company)
agrees to pay to such employees while employed by the Company following the
Closing.
4.4 COOPERATION. Each of the parties agrees to cooperate with the other in
the preparation and filing of all forms, notifications, reports and information,
if any, required or reasonably deemed advisable pursuant to any law, rule or
regulation or the rules of NASDAQ (or any exchange on which the AESP Common
Stock may be listed) in connection with the transactions contemplated by this
Agreement and to use their respective best efforts to agree jointly on a method
to overcome any objections by any Governmental Authority to any such
transactions.
4.5 OTHER ACTIONS. Each of the parties hereto shall take all appropriate
actions, and do, or cause to be done, all things necessary, proper or advisable
under any applicable laws, regulations and Contracts to consummate and make
effective the transactions contemplated herein, including, without limitation,
obtaining all licenses, permits, consents, approvals, authorizations,
qualifications and orders of any Governmental Authority and parties to Contracts
with the Company as are necessary for the consummation of the transactions
contemplated hereby. Each of parties shall make on a prompt and timely basis all
governmental or regulatory notifications and filings required to be made by it
for the consummation of the transactions contemplated hereby. The parties also
agree to use best efforts to defend all lawsuits or other legal proceedings
challenging this Agreement or the consummation of the transactions contemplated
hereby and to lift or rescind any injunction or restraining order or other order
adversely affecting the ability of the parties to consummate the transactions
contemplated hereby.
4.6 CONFIDENTIALITY; PUBLICITY. Except as may be required by law
(including, without limitation, rules for NASDAQ) or as otherwise permitted or
expressly contemplated herein, no party hereto or their respective Affiliates,
employees, agents and representatives (including attorneys and accountants
engaged by the parties in connection with the Stock Purchase), shall disclose to
any third party this Agreement or the subject matter or terms hereof without the
prior consent of the other parties hereto. No press release or other public
announcement related to this Agreement or the transactions contemplated hereby
shall be issued by any party hereto without the prior approval of the other
parties, except that AESP may make such public disclosure which it believes in
good faith to be required by law or by the terms of any listing agreement with
or requirements of a securities exchange (in which case AESP will inform an
officer of the Company prior to making such disclosure).
16
4.7 RESTRICTIVE COVENANTS. The Shareholder agrees to those covenants set
forth in the Employment Agreement which is incorporated herein by reference to
EXHIBIT 4.2.
4.8 CERTAIN TAX MATTERS. The parties agree that after the Closing, AESP
shall prepare, or cause to be prepared, and file, or cause to be filed, all Tax
Returns (including any amendments to previously filed Tax Returns) for the
Company for any period ending on or before the Closing. AESP shall provide such
Tax Returns to the Shareholder for review at least thirty (30) days prior to
their due date (including extensions where applicable). After the Closing, the
Shareholder shall provide AESP with such information and records and access to
such of its officers, directors, employees and agents as may be reasonably
requested by AESP in connection with the preparation of any tax return or any
audit or other proceeding relating to the Company.
4.9 SHAREHOLDER VOTE. The Shareholder, in executing this Agreement,
consents as a shareholder of the Company to the Stock Purchase and the
transactions contemplated hereby, and waives notice of any meeting in connection
therewith and hereby releases and waives all rights with respect to the
transactions contemplated hereby under any agreements relating to the sale,
purchase or voting of any capital stock of the Company.
4.10 PAYOFF AND ESTOPPEL LETTERS. Prior to the Closing, the Company shall
request and deliver to AESP payoff and estoppel letters from such holders of any
Indebtedness of the Company, which letters shall contain payoff amounts, per
diem interest, wire transfer instructions and an agreement to deliver to AESP,
upon full payment of any such Indebtedness, UCC-3 termination statements,
satisfactions of mortgage or other appropriate releases and any original
promissory notes or other evidences of indebtedness marked canceled.
4.11 COMPANY COMMON STOCK; RELEASES. At the Closing, the Shareholder
covenants and agrees to deliver to AESP: (i) all certificates evidencing shares
of capital stock of the Company held by him along with stock powers executed in
blank; and (ii) a release in such form as is reasonably satisfactory to AESP
releasing all claims of any nature against the Company, if any.
ARTICLE V
CONDITIONS TO THE OBLIGATIONS OF AESP
The obligations of AESP to effect the Stock Purchase shall be subject to
the fulfillment at or prior to the Closing of the following conditions, any or
all of which may be waived in whole or in part in writing by AESP:
5.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES AND COMPLIANCE WITH
OBLIGATIONS. The representations and warranties of the Shareholder contained in
this Agreement shall be true and correct at and as of the Closing Date with the
same force and effect as though made at and as of that time except (i) for
changes specifically permitted by or disclosed on any schedule to this
Agreement, and (ii) that those representations and warranties which address
matters only as of a particular date shall remain true and correct as of such
date. The Company and the Shareholder shall have performed and complied with all
of their respective obligations required by this Agreement to be
17
performed or complied with at or prior to the Closing. The Company and the
Shareholder shall have delivered to AESP a certificate, dated as of the Closing,
duly signed (in the case of the Company, by its President), certifying that such
representations and warranties are true and correct and that all such
obligations have been complied with and performed.
5.2 CORPORATE CERTIFICATE. The Shareholder shall have delivered to AESP
(i) copies of the articles of incorporation and bylaws of the Company as in
effect immediately prior to the Closing, (ii) copies of resolutions adopted by
the Board of Directors and Shareholder of the Company authorizing the
transactions contemplated by this Agreement, and (iii) a certificate of good
standing of the Company issued by the Secretary of State of the Commonwealth of
Pennsylvania as of a date not more than ten (10) days prior to the Closing Date,
certified in the case of subsections (i) and (ii) of this Section as of the
Closing Date by the Secretary of the Company as being true, correct and
complete.
5.3 OPINION OF COUNSEL. AESP shall have received an opinion dated as of
the Closing Date from counsel for the Company and the Shareholder, in form and
substance acceptable to AESP, to the effect that:
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the Commonwealth of Pennsylvania and is
authorized to carry on the business now conducted by it and to own or lease the
properties now owned or leased by it;
(b) The Company has obtained all necessary authorizations and
consents of its Board of Directors and the Shareholder to effect the Stock
Purchase;
(c) All issued and outstanding shares of capital stock of the
Company are owned as set forth on SCHEDULE 3.5 hereto; and
(d) This Agreement is a valid and binding obligation of the Company
and the Shareholder, and enforceable against the Company and the Shareholder in
accordance with its terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other laws affecting the enforcement
of creditors' rights generally or general equitable principles.
5.4 CONSENTS. The Company shall have received consents to the transactions
contemplated hereby and waivers of rights to terminate or modify any material
rights or obligations of the Company from any Person from whom such consent or
waiver is required under any Contract or instrument as of a date not more than
ten (10) days prior to the Closing Date, or who, as a result of the transactions
contemplated hereby, would have such rights to terminate or modify such
Contracts or instruments, either by the terms thereof or as a matter of law.
5.5 COMPANY COMMON STOCK. At the Closing, the Shareholder shall have
delivered to AESP all certificates evidencing the shares of capital stock of the
Company held by him, and duly executed stock powers with or other appropriate
transfer documents.
5.6 EMPLOYMENT AGREEMENT. The Shareholder shall have entered into an
employment agreement in the form of EXHIBIT 4.2 with AESP.
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5.7 NO ADVERSE LITIGATION. There shall not be pending or threatened any
action or proceeding by or before any court or other governmental body which
shall seek to restrain, prohibit, invalidate the Stock Purchase or collect
damages arising out of the Stock Purchase or any other transaction contemplated
hereby, and which, in the judgment of AESP, makes it inadvisable to proceed with
the Stock Purchase and other transactions contemplated hereby.
5.8 BOARD APPROVAL. The Boards of Directors of AESP and the Company
and the Shareholder shall have authorized and approved this Agreement, the Stock
Purchase and transactions contemplated hereby.
5.9 BANK APPROVAL. The institutional lenders of AESP's credit facility
shall have authorized and approved this Agreement, the Stock Purchase and
transactions contemplated hereby.
5.10 DUE DILIGENCE REVIEW. AESP shall be satisfied with the results
of its due diligence review.
5.11 RELEASES. The Shareholder shall deliver to AESP a release (the
"Release") in such form as is reasonably satisfactory to AESP releasing all
claims of any nature against the Company, if any.
ARTICLE VI
CONDITIONS TO THE OBLIGATIONS OF
THE COMPANY AND THE SHAREHOLDER
The obligations of the Company and the Shareholder to effect the Stock
Purchase shall be subject to the fulfillment at or prior to the Closing of the
following conditions, any or all of which may be waived in whole or in part in
writing by the Company and the Shareholder:
6.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES AND COMPLIANCE WITH
OBLIGATIONS. The representations and warranties of AESP contained in this
Agreement shall be true and correct at and as of the Closing Date with the same
force and effect as though made at and as of that time except (i) for changes
specifically permitted by or disclosed pursuant to this Agreement, and (ii) that
those representations and warranties which address matters only as of a
particular date shall remain true and correct as of such date. AESP shall have
performed and complied with all of its obligations required by this Agreement to
be performed or complied with at or prior to the Closing Date. AESP shall have
delivered to the Company and the Shareholder a certificate, dated as of the
Closing Date, and signed by an officer, certifying that such representations and
warranties are true and correct and that all such obligations have been complied
with and performed.
6.2 CORPORATE CERTIFICATE. AESP shall have delivered to the Shareholder
(i) copies of the articles of incorporation and bylaws of AESP as in effect
immediately prior to the Closing Date, (ii) copies of resolutions adopted by the
Board of Directors of AESP authorizing the transactions contemplated by this
Agreement, and (iii) a certificate of good standing of the Company issued by the
Secretary of State of the State of Florida as of a date not more than ten (10)
days prior to the
19
Closing Date, certified in the case of subsections (i) and (ii) of this Section
as of the Closing Date by the Secretary of AESP as being true, correct and
complete.
6.3 OPINION OF COUNSEL. The Shareholder shall have received an opinion
dated as of the Closing Date from counsel for AESP, in form and substance
acceptable to the Shareholder, to the effect that:
(a) AESP is a corporation duly organized, validly existing and in
good standing under the laws of the State of Florida and is authorized to carry
on the business now conducted by it and to own or lease the properties now owned
or leased by it;
(b) This Agreement and the transactions contemplated thereby have
been approved by all necessary corporate action; and
(c) This Agreement is a valid and legally binding instrument of and
enforceable against AESP in accordance with its terms, except as enforcement may
be limited by bankruptcy, insolvency, reorganization, moratorium or other laws
affecting the enforcement of creditors' right generally or general equitable
principals.
6.4 CONSENTS. AESP shall have received consents to the transactions
contemplated hereby and waivers of rights to terminate or modify any material
rights or obligations of AESP from any Person from whom such consent or waiver
is required under any Contract or instrument as of a date not more than ten (10)
days prior to the Closing Date, or who, as a result of the transactions
contemplated hereby, would have such rights to terminate or modify such
Contracts or instruments, either by the terms thereof or as a matter of law.
6.5 EMPLOYMENT AGREEMENT. AESP shall cause the Company to enter into an
Employment Agreement with the Shareholder in the form of EXHIBIT 4.2.
6.6 NO ADVERSE LITIGATION. There shall not be pending or threatened any
action or proceeding by or before any court or other governmental body which
shall seek to restrain, prohibit, invalidate the Stock Purchase or collect
damages arising out of the Stock Purchase or any other transaction contemplated
hereby, and which, in the judgment of Shareholder, makes it inadvisable to
proceed with the Stock Purchase and other transactions contemplated hereby.
6.7 BOARD APPROVAL. The Board of Directors of the Company and the
Shareholder shall
have authorized and approved this Agreement, the Stock Purchase and
transactions contemplated hereby.
6.8 PURCHASE PRICE. At the Closing, AESP shall have delivered the
Purchase Price to the Shareholder in accordance with SECTION 1.3.
6.9 NO ORDER OR INJUNCTION. No court of competent jurisdiction or other
governmental body shall have issued or entered any order or injunction
restraining or prohibiting the transactions contemplated hereby, which remains
in effect at the time of the Closing.
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ARTICLE VII
REGISTRATION RIGHTS
7.1 PIGGY-BACK REGISTRATION RIGHTS. The Shareholder shall have the
following piggyback registration rights with respect to the AESP Shares issued
to him hereunder:
(a) Within twelve (12) months from the Closing Date, whenever AESP
proposes to file a Registration Statement (as defined below), it will, prior to
such filing, give written notice to the Shareholder of its intention to do so
and, upon the written request of the Shareholder given within five (5) business
days after AESP provides such notice (which request shall state the intended
method of disposition of the Registrable Shares (defined below)), AESP shall use
its best efforts to cause all such AESP Shares (the "Registrable Shares"), which
AESP has been requested by the Shareholder to register, to be registered under
the Securities Act, to the extent necessary to permit their sale or other
disposition in accordance with the intended methods of distribution specified in
the request of the Shareholder; PROVIDED, HOWEVER, that AESP shall have the
right to postpone or withdraw any registration effected pursuant to this Section
without any obligation to the Shareholder whatsoever, although nothing herein
shall alter Shareholder's demand registration rights set forth in SECTION 7.2.
(b) In connection with any registration under this ARTICLE VII
involving an "underwritten offering," (which for the purposes of this Agreement
shall mean an offering whereby a third party, individually or as part of a
group, purchases AESP's securities in order to effect a public distribution of
such securities) AESP shall not be required to include any Registrable Shares in
such registration unless the holder thereof accepts the terms of the
underwriting as agreed upon between AESP and the underwriters of AESP. If, in
the opinion of the managing underwriter, it is appropriate because of marketing
factors to limit the number of Registrable Shares to be included in the
offering, then AESP shall be required to include in the registration only that
number of Registrable Shares, if any, which the managing underwriter believes
should be included therein, and shall be entitled to include before such
Registrable Shares up to the number of AESP Shares to be issued by AESP in the
offering. If the number of Registrable Shares to be included in the offering in
accordance with the foregoing is less than the total number of shares which the
holder of Registrable Shares has requested to be included, then the holder of
Registrable Shares who has requested registration and other holders of
securities entitled to be included in such registration shall participate in the
registration pro rata based upon their total ownership of shares of common stock
of AESP subject to the managing underwriter's discretion.
(c) For the purposes of this Section the term "Registration
Statement" means a registration statement filed by AESP with the SEC for a
public offering and sale of Common Stock of AESP (other than a Registration
Statement on Form S-4, or its successors, or any other form for a similar
limited purpose, or any registration statement covering only securities proposed
to be issued in exchange for securities or assets of another corporation). In no
event shall AESP be liable for any sales, broker's or underwriting commissions
or other selling expenses incurred upon sale by any holder of any of the AESP
Shares.
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7.2 DEMAND REGISTRATION RIGHTS FOR AESP SHARES; FILING OF REGISTRATION
STATEMENT. At any time after the twelve (12) month period following the Closing
Date and provided AESP has not filed a Registration Statement for the AESP
Shares, then the Shareholder shall have the right once to provide written notice
to AESP demanding AESP to file with the Securities and Exchange Commission (the
"SEC") within sixty (60) days after receipt of such written notice, a
registration statement under the Securities Act for an offering to be made on a
continuous or delayed basis covering the AESP Shares, subject to the following:
(a) Upon receipt of the written demand notice from the Shareholder
to register the AESP Shares , AESP will file a Registration Statement covering
the AESP Shares and will use reasonable efforts to cause the Registration
Statement to become effective and cause the AESP Shares to become registered
under the Securities Act. Notwithstanding the foregoing, AESP may delay (but in
no event in excess of 60 days) the filing of the Registration Statement, and may
withhold efforts to cause the Registration Statement to become effective, if
AESP's Board of Directors determines in good faith that such registration might
interfere with or affect the negotiation or completion of any transaction that
is being contemplated by AESP (whether or not a final decision has been made to
undertake such transaction) at the time the right to delay is exercised.
Notwithstanding the foregoing to the contrary, in no event may AESP delay the
filing of the Registration Statement with the SEC for more than 120 days from
the date of Shareholder's written demand notice as set forth above in this
Section 7.2.
(b) In no event shall AESP be liable for any sales, broker's or
underwriting commissions or other selling expenses incurred upon sale by any
holder of any of the AESP Shares."
7.3 AMENDMENTS AND SUPPLEMENTS. AESP shall prepare and promptly file with
the SEC, and promptly notify the Shareholder of such amendments or supplements
to the Registration Statement or prospectuses contained therein as may be
necessary to correct any statements or omissions if, at the time when a
prospectus relating to the AESP Shares is required to be delivered under the
Securities Act, any event shall have occurred as a result of which any such
prospectus or any other prospectus as then in effect would include an untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading. AESP shall also advise the Shareholder promptly after
it shall receive notice or obtain knowledge thereof, of the issuance of any stop
order by the SEC suspending the effectiveness of the Registration Statement or
the initiation or threatening of any proceeding for that purpose and promptly
use its reasonable best efforts to prevent the issuance of any stop order or to
obtain its withdrawal if such stop order should be issued. If, after a
Registration Statement becomes effective, AESP advises the Shareholder that AESP
considers it appropriate that the Registration Statement be amended, the
Shareholder shall suspend any further sales of the AESP Shares until AESP
advises the Shareholder that the Registration Statement has been amended.
7.4 DURATION. AESP shall maintain the effectiveness of the Registration
Statement until the earlier of: (i) the date when all of the AESP Shares have
been sold, or (ii) two (2) years after the Closing Date.
7.5 FURTHER INFORMATION. If AESP Shares owned by the Shareholder are
included in any registration, the Shareholder shall furnish Purchaser such
information regarding himself as AESP may
22
reasonably request and as shall be required in connection with any registration,
qualification or compliance referred to in this Agreement.
7.6 SALES UNDER RULE 144. Following the Closing, and for so long as
reasonably necessary in order to permit the Shareholder to sell the AESP Shares
pursuant to Rule 144 under the Securities Act, to the extent applicable, AESP
will use its best efforts to file on a timely basis all reports require to be
filed by it pursuant to Section 13 of the Exchange Act, and take all other
action which is reasonable and customary to permit the Shareholder to sell his
AESP Shares pursuant to the applicable provisions of Rule 144 to the extent not
registered by this ARTICLE VII.
7.7 BLUE SKY. At such time as AESP shall file a Registration Statement
AESP agrees to use reasonable efforts to register or qualify the AESP Shares
covered by the Registration Statement under the Blue Sky laws of New York to
permit the Shareholder to sell or otherwise dispose of any and all AESP Shares
in such state.
7.8 EXPENSES. AESP shall pay all expenses (except sales, broker's or
underwriting commissions or other selling expenses in connection with the sale
of the AESP Shares) incurred by AESP in connection with the preparation, filing
and execution of the Registration Statement and the New York State Blue Sky
filing.
ARTICLE VIII
INDEMNIFICATION
8.1 AGREEMENT BY THE SHAREHOLDER TO INDEMNIFY. Subject to the limitations
set forth in SECTIONS 8.3 AND 8.4, the Shareholder agrees to protect, defend,
indemnify and hold AESP, its shareholders, directors, officers, employees,
agents, representatives, consultants, attorneys and affiliates (the "AESP
Entities") harmless from and against the aggregate of all expenses, losses,
costs, deficiencies, liabilities and damages (including, without limitation,
related counsel and paralegal fees and expenses) incurred or suffered by any of
the AESP Entities arising out of or resulting from (i) any breach of a
representation or warranty made by the Company and/or Shareholder in or pursuant
to this Agreement, (ii) any breach of the covenants or agreements made by the
Company and/or Shareholder in or pursuant to this Agreement or (iii) any
inaccuracy in any certificate delivered by the Company and/or Shareholder
pursuant to this Agreement (collectively, "Indemnifiable Damages"). Without
limiting the generality of the foregoing, with respect to the measurement of
Indemnifiable Damages, AESP shall have the right to be put in the same pre-tax
consolidated financial position as it would have been in had each of the
representations and warranties of the Shareholder hereunder been true and
correct and had the covenants and agreements of the Company and the Shareholder
hereunder been performed in full.
8.2 AGREEMENT BY AESP TO INDEMNIFY. Subject to the limitations set forth
in SECTION 8.3, AESP agrees to protect, defend, indemnify and hold the
Shareholder, his agents, representatives, consultants, and attorneys (the
"Shareholder Entities") harmless from and against the aggregate of all expenses,
losses, costs, deficiencies, liabilities and damages (including, without
limitations, related counsel and paralegal fees and expenses) incurred or
suffered by any of the Shareholder Entities arising out of or resulting from (1)
any breach of a representation or warranty made by AESP in or
23
pursuant to this Agreement, (ii) any breach of the covenants or agreements made
by AESP in or pursuant to this Agreement, or (iii) any inaccuracy in any
certificate delivered by AESP pursuant to this Agreement (collectively,
"Indemnifiable Damages"). Without limiting the generality of the foregoing, with
respect to the measurement of Indemnifiable Damages, the Shareholder shall have
the right to be put in the same pre-tax consolidated financial position as it
would have been in had each of the representations and warranties of AESP
hereunder been true and correct and had the covenants and agreements of AESP
hereunder been performed in full.
8.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Each of the
representations, and warranties made by the Shareholder and AESP in this
Agreement or pursuant hereto shall survive for a period of thirty (30) months
after the date hereof. Notwithstanding any knowledge of facts determined or
determinable by any party by investigation, each party shall have the right to
fully rely on the representations, warranties, covenants and agreements of the
other parties contained in this Agreement or in any other documents or papers
delivered in connection herewith. No claim for the recovery of Indemnifiable
Damages may be asserted by either party against the other party after such
representations and warranties shall thus expire, PROVIDED, HOWEVER, that any
claims for Indemnifiable Damages first asserted within the applicable period
shall not thereafter be barred. Each of the representations and warranties made
by the Company shall expire at the Closing. Each representation, warranty,
covenant and agreement of the parties contained in this Agreement is independent
of each other representation, warranty, covenant and agreement.
8.4 THRESHOLD AND MAXIMUM INDEMNIFICATION AMOUNT. Notwithstanding anything
to the contrary contained in this Agreement (i) the party indemnifying the other
party under this ARTICLE 8 (the "Indemnifying Party") shall not be liable for
any amounts for which party entitled to indemnification under ARTICLE 8 (the
"Indemnified Party") is otherwise entitled to indemnification until the
aggregate amount of the Indemnifiable Damages for which the Indemnifying Party
may be liable hereunder exceeds the Threshold Indemnification Amount (as defined
below); provided, however, that once the aggregate amount of Indemnifiable
Damages exceeds the Threshold Indemnification Amount, the Indemnified Party
shall be entitled to indemnity for all such amounts of such claims (including
the first $12,500 of the Threshold Indemnification Amount), and (ii) the
Indemnifying Party shall not be liable for any amounts for which the Indemnified
Party is otherwise entitled to indemnification to the extent the aggregate
amount of Indemnifiable Damages for which the Indemnifying Party is otherwise
liable on account of Indemnifiable Damages hereunder would exceed an amount
equal to the Maximum Indemnification Amount (as defined below). For the purposes
hereof "Threshold Indemnification Amount" shall mean $12,500 and "Maximum
Indemnification Amount" shall mean $500,000. The parties agree and acknowledge
that each of the Threshold Indemnification and the Maximum Indemnification
Amounts shall be applied on an aggregate basis and not on a per claims basis.
8.5 NO BAR; WAIVER. If the amount evidenced by the Note held in escrow
hereunder is insufficient to set off any claim for Indemnifiable Damages made
hereunder (or has been delivered to the Shareholder prior to the making or
resolution of such claim), then AESP may take any action or exercise any remedy
available to it by appropriate legal proceedings to collect the Indemnifiable
Damages. The Shareholder hereby waives any rights to contribution or any similar
rights it may have against the Company as a result of their agreement to
indemnify the AESP Entities under this ARTICLE VIII or otherwise.
24
8.6 SOLE REMEDY. The indemnification provisions of this ARTICLE VIII,
secured in part by the Term Note and the Escrow Agreement shall constitute the
sole and exclusive remedy of the parties hereto with respect to claims for
monetary damages arising out of or related to this Agreement. Except as
aforesaid, each of the parties hereto will have and retain all other rights and
remedies existing in its favor in equity, including, without limitation, any
actions for specific performance and/or injunctive or other equitable relief to
enforce or prevent any violations of any provisions of this Agreement.
ARTICLE IX
DEFINITIONS
9.1 DEFINED TERMS. As used herein, the following terms shall have
the following meanings:
"Affiliate" shall have the meaning ascribed to it in Rule 12b-2 of
the General Rules and Regulations under the Exchange Act, as in effect on
the date hereof.
"Code" means the Internal Revenue Code of 1986, as amended, and
treasury regulations promulgated thereunder.
"Contract" means any agreement, contract, lease, note, mortgage,
indenture, loan agreement, franchise agreement, covenant, employment
agreement, license, instrument, purchase and sales order, commitment,
undertaking, obligation, whether written or oral, express or implied.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"GAAP" means generally accepted accounting principles in effect in
the United States of America from time to time.
"Governmental Authority" means any nation or government, any state,
regional, local or other political subdivision thereof, and any entity or
official exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including, but not limited to, any conditional
sale or other title retention agreement, any lease in the nature thereof,
and the filing of or agreement to give any financing statement under the
Uniform Commercial Code or comparable law or any jurisdiction in
connection with such mortgage, pledge, security interest, encumbrance,
lien or charge).
"Litigation Costs" shall mean any and all expenses, costs, damages,
liabilities, or obligations (including, without limitation, fees and
expenses of counsel) incurred in connection with any action, suit, or
other legal or administrative proceeding or
25
governmental investigation against the Shareholder and/or the Company
arising as a result of events occurring or facts or circumstances arising
or existing on or prior to the date hereof (whether or not in the ordinary
course of business).
"Material Adverse Change (or Effect)" means a change (or effect), in
the condition (financial or otherwise), properties, assets, liabilities,
rights, obligations, operations, business or prospects which change (or
effect) individually or in the aggregate, is materially adverse to such
condition, properties, assets, liabilities, rights, obligations,
operations, business or prospects.
"Person" means an individual, partnership, corporation, business
trust, joint stock company, estate, trust, unincorporated association,
joint venture, Governmental Authority or other entity, of whatever nature.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Tax Return" means any tax return, filing or information statement
required to be filed in connection with or with respect to any Taxes; and
"Taxes" means all taxes, fees or other assessments, including, but
not limited to, income, excise, property, sales, franchise, intangible,
withholding, social security and unemployment taxes imposed by any
federal, state, local or foreign governmental agency, and any interest or
penalties related thereto.
9.2 OTHER DEFINITIONAL PROVISIONS.
(a) All terms defined in this Agreement shall have the defined
meanings when used in any certificates, reports or other documents made or
delivered pursuant hereto or thereto, unless the context otherwise requires.
(b) Terms defined in the singular shall have a comparable meaning
when used in the plural, and vice versa.
(c) All matters of an accounting nature in connection with this
Agreement and the transactions contemplated hereby shall be determined in
accordance with GAAP applied on a basis consistent with prior periods, where
applicable.
(d) As used herein, the neuter gender shall also denote the
masculine and feminine, and the masculine gender shall also denote the neuter
and feminine, where the context so permits.
26
ARTICLE X
GENERAL PROVISIONS
10.1 NOTICES. All notices, requests, demands, claims, and other
communications hereunder shall be in writing and shall be delivered by certified
or registered mail (first class postage pre-paid), guaranteed overnight
delivery, or facsimile transmission if such transmission is confirmed by
delivery by certified or registered mail (first class postage pre-paid) or
guaranteed overnight delivery, to the following addresses and telecopy numbers
(or to such other addresses or telecopy numbers which such party shall designate
in writing to the other party):
IF TO AESP: WITH A COPY TO:
Advanced Electronic Support Products, Inc. Akerman, Senterfitt & Xxxxxx, P.A.
0000 X.X. 000xx Xxxxxx One X.X. 0xx Xxxxxx
Xxxxx Xxxxx, Xxxxxxx 00000 27th Floor
Attn: Xxxx Xxxxx Xxxxx, Xxxxxxx 00000
Telecopy: (000) 000-0000 Attn: Xxxxxx X. Xxxxxxxx, Esq.
Telecopy: (000) 000-0000
IF TO THE COMPANY AND/OR THE SHAREHOLDER TO: WITH A COPY TO:
Communication Components Co., Inc. XxXxxxxxxx, Keen & Xxxxxxx
Xxxxxxxx Industrial Xxxx Xxxxxx Xxxxx, Xxxxx 000
0000 Xxxxxx Xxxxxxxxx 000 Xxxxxx-Xxxxxxx Xxxx
Xxxxxxxx, XX 00000 Xxxxxx, XX 00000-0000
Attn: Xxxxxx Daily, President Attn: Xxxxx Xxxxxx Xxxxx, Esq.
Telecopy: ____________________ Telecopy: 610-341-1099
Notice shall be deemed given on the date sent if sent by facsimile
transmission and on the date delivered (or the date of refusal of delivery) if
sent by overnight delivery or certified or registered mail.
10.2 ENTIRE AGREEMENT. This Agreement (including the Exhibits and
Schedules attached hereto) and other documents delivered at the Closing pursuant
hereto, contains the entire understanding of the parties in respect of its
subject matter and supersedes all prior agreements and understandings (oral or
written) between or among the parties with respect to such subject matter. The
parties agree that prior drafts of this Agreement shall not be deemed to provide
any evidence as to the meaning of any provision hereof or the intent of the
parties with respect thereto. The Exhibits and Schedules constitute a part
hereof as though set forth in full above.
10.3 EXPENSES. Except as otherwise provided herein, the parties shall pay
their own fees and expenses for those expenses incurred prior to October 30,
1998 and the Buyer shall pay all expenses incurred after October 30, 1998,
including counsel fees, incurred in connection with this Agreement or
transaction contemplated hereby. The Shareholder shall pay all transaction costs
incurred by the Company in connection with the transactions contemplated by this
Agreement.
27
10.4 AMENDMENT; WAIVER. This Agreement may not be modified, amended,
supplemented, canceled or discharged, except by written instrument executed by
all parties. No failure to exercise, and no delay in exercising, any right,
power or privilege under this Agreement shall operate as a waiver, nor shall any
single or partial exercise of any right, power or privilege hereunder preclude
the exercise of any other right, power or privilege. No waiver of any breach of
any provision shall be deemed to be a waiver of any preceding or succeeding
breach of the same or any other provision, nor shall any waiver be implied from
any course of dealing between the parties. No extension of time for performance
of any obligations or other acts hereunder or under any other agreement shall be
deemed to be an extension of the time for performance of any other obligations
or any other acts. The rights and remedies of the parties under this Agreement
are in addition to all other rights and remedies, at law or equity, that they
may have against each other.
10.5 REMEDIES CUMULATIVE. The remedies provided in this Agreement shall be
cumulative and shall not preclude AESP or any of its shareholders from asserting
any other right, or seeking any other remedies or against the Shareholder.
10.6 BINDING EFFECT; ASSIGNMENT. The rights and obligations of this
Agreement shall bind and inure to the benefit of the parties and their
respective successors and assigns. Nothing expressed or implied herein shall be
construed to give any other person any legal or equitable rights hereunder. The
rights and obligations of this Agreement may be assigned by AESP to any
successor. Except as expressly provided herein, the rights and obligations of
this Agreement may not be assigned by the Company or the Shareholder without the
prior written consent of AESP.
10.7 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one and the same instrument. A telecopy signature of any party shall
be considered to have the same binding legal effect as an original signature.
10.8 INTERPRETATION. When a reference is made in this Agreement to an
article, section, paragraph, clause, schedule or exhibit, such reference shall
be deemed to be to this Agreement unless otherwise indicated. The headings
contained herein and on the schedules are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement or the
schedules. Time shall be of the essence in this Agreement.
10.9 CONSTRUCTION. The parties agree and acknowledge that they have
jointly participated in the negotiation and drafting of this Agreement. In the
event of an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties and no
presumptions or burdens of proof shall arise favoring any party by virtue of the
authorship of any of the provisions of this Agreement. Any reference to any
federal, state, local, or foreign statute or law shall be deemed also to refer
to all rules and regulations promulgated thereunder, unless the context requires
otherwise. If any party has breached any representation, warranty, or covenant
contained herein in any respect, the fact that there exists another
representation, warranty, or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the party has not
breached shall not detract from or mitigate the fact that the party is in breach
of the first representation, warranty, or covenant. The mere listing (or
inclusion of a copy) of a document or other item shall not be deemed adequate to
disclose an exception to a representation or warranty
28
made herein (unless the representation or warranty relates solely to the
existence of the document or other items itself).
10.10 GOVERNING LAW; SEVERABILITY. This Agreement shall be construed in
accordance with and governed for all purposes by the laws of the State of
Florida applicable to contracts executed and to be wholly performed within such
State. If any word, phrase, sentence, clause, section, subsection or provision
of this Agreement as applied to any party or to any circumstance is adjudged by
a court to be invalid or unenforceable, the same will in no way affect any other
circumstance or the validity or enforceability of any other word, phrase,
sentence, clause, section, subsection or provision of this Agreement. If any
provision of this Agreement, or any part thereof, is held to be unenforceable
because of the duration of such provision or the area covered thereby, the
parties agree that the court making such determination shall have the power to
reduce the duration and/or area of such provision, and/or to delete specific
words or phrases, and in its reduced form, such provision shall then be
enforceable and shall be enforced.
10.11 ATTORNEYS' FEES; JURISDICTION AND VENUE. Should it become necessary
for any party to institute legal action to enforce the terms and conditions of
this Agreement, the successful party will be awarded reasonable attorneys' fees
at all trial and appellate levels, expenses and costs. Any suit, action or
proceeding with respect to this Agreement shall be brought in the courts of Dade
County in the State of Florida or in the U.S. District Court for the Southern
District of Florida. The parties hereto hereby accept the exclusive jurisdiction
of those courts for the purpose of any such suit, action or proceeding. Venue
for any such action, in addition to any other venue permitted by statute, will
be Dade County, Florida. The parties hereto hereby irrevocably waive, to the
fullest extent permitted by law, any objection that any of them may now or
hereafter have to delaying of venue of any suit, action or proceeding arising
out of or relating to this Agreement or any judgment entered by any court in
respect thereof brought in Dade County, Florida, and hereby further irrevocably
waive any claim that any such suit, action or proceeding brought in Dade County,
Florida has been brought in an inconvenient forum.
10.12 ARM'S LENGTH NEGOTIATIONS. Each party herein expressly represents
and warrants to all other parties hereto that (a) before executing this
Agreement, said party has fully informed itself of the terms, contents,
conditions and effects of this Agreement; (b) said party has relied solely and
completely upon its own judgment in executing this Agreement; (c) said party has
had the opportunity to seek and has obtained the advice of counsel before
executing this Agreement; (d) said party has acted voluntarily and of its own
free will in executing this Agreement; (e) said party is not acting under
duress, whether economic or physical, in executing this Agreement; and (f) this
Agreement is the result of arm's length negotiations conducted by and among the
parties and their respective counsel.
[Signatures On Following Page]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
AESP:
ADVANCED ELECTRONIC SUPPORT PRODUCTS, Inc., a
Florida corporation
By: /s/ XXXX XXXXX
--------------------------------------------
Name: X. Xxxxx
---------------------------------------
Title: President and CEO
--------------------------------------
THE COMPANY:
COMMUNICATION COMPONENTS COMPANY INC., a
Pennsylvania corporation
By: /s/ XXXXXX X. DAILY, JR.
--------------------------------------------
Name: Xxxxxx X. Daily, Jr.
---------------------------------------
Title: President
--------------------------------------
SHAREHOLDER:
/s/ XXXXXX X. DAILY, JR.
-----------------------------------------------
Xxxxxx X. Daily, Jr., individually
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LIST OF EXHIBITS AND SCHEDULES
Exhibit 1.3(c) $125,000 Non-Negotiable Promissory Note
Exhibit 1.3(d) $175,000 Non-Negotiable Promissory Note
Exhibit 1.3(f) Escrow Agreement
Exhibit 4.2 Employment Agreement
Schedule 3.1 Jurisdictions
Schedule 3.4 Capitalization
Schedule 3.5 Shareholder
Schedule 3.6 Consents
Schedule 3.7 Stock Ledger
Schedule 3.8 Subsidiaries
Schedule 3.9 Financial Statements
Schedule 3.12 Litigation
Schedule 3.13 Environmental Matters
Schedule 3.14(b) Leased Premises
Schedule 3.15(a) Liens
Schedule 3.15(b) Vehicles
Schedule 3.16(c) Compliance with Law - Immigration
Schedule 3.17 Employees
Schedule 3.18 Employee Benefit Plans
Schedule 3.19 Tax Matters
Schedule 3.20 Insurance Matters
Schedule 3.22 Permits
Schedule 3.23 Affiliated Transactions
Schedule 3.24(a) Intellectual Property
Schedule 3.24(b) Disputes as to Intellectual Property
Schedule 3.25 Designated Contracts
Schedule 3.26 Material Customers
Schedule 3.29 Bank Accounts
Schedule 3.30 Names
Schedule 4.3 Company Employee Salaries
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EXHIBIT 1.3(C) FORM OF $125,000 NON-NEGOTIABLE PROMISSORY NOTE
(to Stock Purchase Agreement)
EXHIBIT 1.3(D) FORM OF $175,000 NON-NEGOTIABLE PROMISSORY NOTE
(to Stock Purchase Agreement)
EXHIBIT 1.3(F) FORM OF ESCROW AGREEMENT
(to Stock Purchase Agreement)
EXHIBIT 4.2 FORM OF EMPLOYMENT AGREEMENT
(to Stock Purchase Agreement)
32
