AGREEMENT
AMONG
EXTECH CORPORATION
XXXXXX X. XXXXXXXXX
XXX X. XXXX
XXXXX XXXX
AND
XXXXXXX XXXXXXXXX
As of May 8, 1998
TABLE OF CONTENTS
Page
RECITALS:.........................................................................................................2
ARTICLE I
DEFINED TERMS; SCHEDULES.................................................................................3
1.1 Defined Terms...................................................................................3
1.2 Schedules.......................................................................................3
---------
ARTICLE II
PURCHASE AND SALE; LOANS..........................................................................................3
2.1 Agreement to Sell...............................................................................3
2.2 Agreement to Purchase...........................................................................3
2.3 Purchase Price..................................................................................3
2.3.1 Purchase Price.........................................................................3
2.3.2 Delivery of Purchase Price.............................................................3
2.3.3 Allocation of Purchase Price...........................................................4
2.4 Additional Purchases............................................................................4
2.4.1 Purchases from EXTECH..................................................................4
2.4.2 Purchases from Xxxxxxxx Xxxxxx.........................................................5
2.5 Loans to DCAP and the Shareholders..............................................................5
2.5.1 $311,000 Loan..........................................................................5
2.5.2 Closing Loans..........................................................................6
2.5.3 Prior Loans............................................................................6
ARTICLE III
REPRESENTATIONS AND WARRANTIES THE SHAREHOLDERS.................................................7
3.1 Valid Existence; Qualification..................................................................7
3.2 Capitalization; Subsidiaries; Affiliated Entities...............................................8
3.3 Consents........................................................................................8
3.4 Authority; Binding Nature of Agreement..........................................................8
3.5 Financial Statements............................................................................9
3.6 Liabilities.....................................................................................9
3.7 Actions Since the Balance Sheet Date............................................................9
3.8 Adverse Developments...........................................................................10
3.9 Taxes..........................................................................................10
3.10 Ownership of Assets; Interest in Assets........................................................10
3.10.1 Assets Generally.......................................................................10
EXTECH CORPORATION
3.10.2 Interest in Assets....................................................................10
3.11 Insurance......................................................................................10
3.12 Litigation; Compliance with Law................................................................11
3.13 Real Property..................................................................................11
3.14 Agreements and Obligations; Performance........................................................12
3.15 Condition of Assets............................................................................12
3.16 Permits and Licenses...........................................................................12
3.17 Occupational Heath and Safety and Environmental Matters........................................13
3.18 Intellectual Property..........................................................................13
3.19 Compensation Information.......................................................................14
3.20 Employee Benefit Plans.........................................................................14
3.21 No Breach......................................................................................15
3.22 Brokers........................................................................................16
3.23 Employment Relations...........................................................................16
3.24 Prior Names and Addresses......................................................................17
3.25 Payments.......................................................................................17
3.26 Books and Records..............................................................................17
3.27 Americans with Disabilities Act Compliance.....................................................17
3.28 Proxy Statement................................................................................17
3.29 Untrue or Omitted Facts........................................................................18
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF EXTECH.........................................................................18
4.1 Valid Corporate Existence......................................................................18
4.2 Capitalization.................................................................................18
4.3 Consents.......................................................................................18
4.4 Corporate Authority; Binding Nature of Agreement...............................................19
4.5 SEC Report.....................................................................................19
4.6 No Breach......................................................................................19
4.7 Actions Since the Balance Sheet Date...........................................................19
4.8 Adverse Developments...........................................................................20
4.9 Taxes..........................................................................................20
4.10 Ownership of Assets; Interest in Assets........................................................21
4.10.1 Assets Generally.......................................................................21
4.10.2 Interest in Assets....................................................................21
4.11 Insurance......................................................................................21
4.12 Litigation; Compliance with Law................................................................21
4.13 Real Property..................................................................................21
4.14 Agreements and Obligations; Performance........................................................21
4.15 Condition of Assets............................................................................22
4.16 Permits and Licenses...........................................................................22
4.17 Occupational Heath and Safety and Environmental Matters........................................22
EXTECH CORPORATION
4.18 Intellectual Property..........................................................................23
4.19 Compensation Information.......................................................................23
4.20 Employee Benefit Plans.........................................................................23
4.21 Brokers........................................................................................25
4.22 Employment Relations...........................................................................25
4.23 Payments.......................................................................................26
4.24 Books and Records..............................................................................26
4.25 Americans with Disabilities Act Compliance.....................................................26
4.26 Proxy Statement................................................................................26
4.27 Untrue or Omitted Facts........................................................................26
ARTICLE V
PRE-CLOSING COVENANTS...................................................................................26
5.1 Shareholder Covenants..........................................................................26
5.2 EXTECH Covenants...............................................................................29
ARTICLE VI
ACQUISITION OF SHARES.................................................................31
6.1 Investment Intent; Qualification as Purchaser..................................................31
6.2 Restrictive Legend.............................................................................32
6.3 Certain Risk Factors...........................................................................33
ARTICLE VII
CONDITIONS PRECEDENT TO THE
OBLIGATION OF EXTECH TO CLOSE.........................................................33
7.1 Representations and Warranties.................................................................33
7.2 Covenants......................................................................................33
7.3 Certificate....................................................................................33
7.4 Shares; Purchase Price.........................................................................33
7.5 Xxxxxxxx Xxxxxx Purchases......................................................................33
7.6 Stockholder Approval...........................................................................33
7.7 DCAP Financial Statements......................................................................33
7.8 Employment Agreements..........................................................................34
7.9 Restrictive Covenant Agreements................................................................34
7.10 Fairness Opinion...............................................................................34
7.11 "Cold Comfort" Letter..........................................................................34
7.12 Closing Notes; Closing Pledge Agreements.......................................................34
7.13 Opinions of Counsel............................................................................34
7.14 Buy Out Agreement..............................................................................34
7.15 Size of Boards; Election as Members ...........................................................34
EXTECH CORPORATION
7.16 No Actions.....................................................................................34
7.17 Consents; Licenses and Permits.................................................................35
7.18 Sections 4(2) and 4(1) Compliance..............................................................35
7.19 Actions........................................................................................35
7.20 Additional Documents...........................................................................35
ARTICLE VIII
CONDITIONS PRECEDENT TO THE OBLIGATION OF
THE SHAREHOLDERS TO CLOSE......................................................................35
8.1 Representations and Warranties.................................................................36
8.2 Covenants......................................................................................36
8.3 Certificate....................................................................................36
8.4 EXTECH Shares..................................................................................36
8.5 Xxxxxxxx Xxxxxx Purchases......................................................................36
8.6 Stockholder Approval...........................................................................36
8.7 Employment Agreements; Stock Option Agreements.................................................36
8.8 Certilman and Haft Purchases...................................................................36
8.9 Closing Loans..................................................................................36
8.10 Size of Board and Committees; Election as Directors and Members................................36
8.11 Tax Opinion....................................................................................37
8.12 Opinion of Counsel.............................................................................37
8.13 Buy Out Agreement..............................................................................37
8.14 No Actions.....................................................................................37
8.15 Consents; Licenses and Permits.................................................................37
8.16 Corporate Actions..............................................................................37
8.17 Additional Documents...........................................................................37
ARTICLE IX
CONDITIONS PRECEDENT TO THE OBLIGATION OF
CERTILMAN AND HAFT TO CLOSE......................................................................................38
9.1 Shares/EXTECH Acquisition Shares...............................................................38
9.2 Xxxxxxxx Xxxxxx Purchases......................................................................38
9.3 Stockholder Approval...........................................................................38
9.4 EXTECH Additional Shares.......................................................................38
9.5 Shareholder Purchases..........................................................................38
9.6 Employment Agreements; Stock Option Agreements.................................................38
9.7 No Actions.....................................................................................38
9.8 Corporate Actions..............................................................................38
9.9 Additional Documents...........................................................................39
EXTECH CORPORATION
ARTICLE X
CLOSING..........................................................................................................39
10.1 Time and Location..............................................................................39
10.2 Items to be Delivered by the Shareholders......................................................39
10.3 Items to be Delivered by EXTECH................................................................40
10.4 Items to be Delivered by Certilman and Haft....................................................40
ARTICLE XI
POST-CLOSING MATTERS.............................................................................................40
11.1 Further Assurances.............................................................................40
11.2 Agreement as to Voting.........................................................................40
11.3 Sales of EXTECH Shares.........................................................................41
ARTICLE XII
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION.....................................................................41
12.1 Survival.......................................................................................41
12.2 Indemnification................................................................................41
12.2.1 General Indemnification Obligation of the Shareholders................................41
12.2.2 General Indemnification Obligation of EXTECH...........................................42
12.2.3 Method of Asserting Claims, Etc........................................................42
12.2.4 Limitations...........................................................................44
12.3 Arbitration....................................................................................44
12.4 Other Rights and Remedies Not Affected.........................................................45
ARTICLE XIII
TERMINATION AND WAIVER..................................................................................45
13.1 Termination....................................................................................45
13.2 Waiver.........................................................................................46
ARTICLE XIV
DEFINED TERMS....................................................................................................46
14.1 Defined Terms..................................................................................46
ARTICLE XV
MISCELLANEOUS PROVISIONS................................................................................52
15.1 Expenses.......................................................................................52
15.2 Confidential Information.......................................................................52
EXTECH CORPORATION
15.3 Equitable Relief...............................................................................53
15.4 Publicity......................................................................................53
15.5 Entire Agreement...............................................................................53
15.6 Notices........................................................................................53
15.7 Choice of Law; Severability....................................................................54
15.8 Successors and Assigns; No Assignment..........................................................54
15.9 Counterparts...................................................................................54
15.10 Facsimile Signatures...........................................................................55
15.11 Representation by Counsel; Interpretation......................................................55
15.12 Headings; Gender...............................................................................55
SCHEDULES
A Affiliated Companies
B Joint Ventures
2.5.1 Uses of Loan Proceeds
3.2(a) Liens
3.2(b) Investments
3.3 Consents
3.5 Financial Statements
3.7 Actions Since the Balance Sheet Date
3.8 Adverse Developments
3.10.1 Assets Generally
3.11 Insurance
3.12 Litigation; Compliance with Law
3.13 Real Property
3.14 Agreements and Obligations; Performance
3.15 Condition of Assets
3.16 Permits and Licenses
3.18 Intellectual Property
3.19 Compensation Information
3.20 Employee Benefits
3.21 No Breach
3.24 Prior Names and Addresses
4.3 Consents
4.7 Actions Since the Balance Sheet Date
4.8 Adverse Developments
4.11 Insurance
4.12 Litigation; Compliance with Law
4.13 Real Property
4.14 Agreements and Obligations; Performance
4.15 Condition of Assets
4.16 Permits and Licenses
4.18 Intellectual Property
4.19 Compensation Information
4.20 Employee Benefits
8 Excluded DCAP Entity Provisions
EXTECH CORPORATION
EXHIBITS
2.4.1(a) Additional Shares Note
2.4.1(b) Additional Shares Pledge Agreement
2.5.2(a) Closing Loan Note
2.5.2(b) Closing Loan Pledge Agreement
7.8 Employment Agreement
7.9 Restrictive Covenant Agreement
7.13 Opinion of Counsel
7.14 Buy Out Agreement
8.7 Stock Option Agreement
EXTECH CORPORATION
AGREEMENT, dated as of May 8, 1998 (the "Agreement"), by and among EXTECH
CORPORATION, a Delaware corporation ("EXTECH"), XXXXXX X. XXXXXXXXX
("Certilman"), XXX X. XXXX ("Haft"), XXXXX XXXX ("Xxxx") and XXXXXXX XXXXXXXXX
("Xxxxxxxxx" and together with Lang, individually, a "Shareholder" and
collectively, the "Shareholders").
RECITALS:
The Shareholders own (i) all of the outstanding Common Shares of Dealers
Choice Automotive Planning Inc. ("DCAP") and certain other corporations, as set
forth on Schedule A attached hereto (collectively with DCAP, the "Affiliated
Companies") (the "Company Shares") and (ii) certain of the outstanding Common
Shares of certain other corporations and certain membership interests in a
certain limited liability company, all as set forth on Schedule B attached
hereto (collectively, the "Joint Ventures" and together with the Affiliated
Companies, the "DCAP Entities") (the "Joint Venture Shares"). The Joint Venture
Shares and the Company Shares are referred to collectively as the "Shares".
The DCAP Entities are engaged in the following businesses: (i) retail
automotive, motorcycle and boat casualty and liability insurance brokerage
("Insurance Brokerage"); (ii) insurance premium finance ("Premium Finance");
(iii) income tax preparation ("Tax Preparation"); and (iv) automobile and travel
club ("Auto Club") (collectively, the "DCAP Business"), as identified for each
DCAP Entity on Schedules A and B attached hereto.
Subject to the terms and conditions hereof, at the Closing (as hereinafter
defined), the Shareholders desire to sell to EXTECH, and EXTECH desires to
purchase from the Shareholders, the Shares.
Subject to the terms and conditions hereof, at the Closing, each of Lang
and Xxxxxxxxx desires to purchase from EXTECH, and EXTECH desires to sell to
each of them, 475,000 shares of Common Stock (950,000 shares in the aggregate)
of EXTECH.
Subject to the terms and conditions hereof, at the Closing, each of
Certilman and Haft desires to purchase from EXTECH (directly or indirectly
through a retirement trust or designee), and EXTECH desires to sell to each of
them, 226,000 shares of Common Stock (452,000 shares in the aggregate) of
EXTECH.
Subject to the terms and conditions hereof, concurrently with the Closing,
each of Certilman, Haft, Lang and Xxxxxxxxx desires to purchase from Xxxxxxxx
Xxxxxx Holding Corp. 450,000 shares of Common Stock (1,800,000 shares in the
aggregate) of EXTECH currently registered in the name of Certilman, as voting
trustee.
The parties intend that the transactions contemplated hereby satisfy the
provisions of Section 351 of the Internal Revenue Code of 1986, as amended (the
"Code").
EXTECH CORPORATION
2
NOW, THEREFORE, in consideration of the recitals and the respective
covenants, representations, warranties and Agreements herein contained and
intending to be legally bound hereby, the parties hereby agree as follows:
ARTICLE I
DEFINED TERMS; SCHEDULES
1.1 Defined Terms. Capitalized terms used in this Agreement will have the
meanings given such terms in Article XIV hereof or elsewhere in the text of this
Agreement, and variants and derivatives of such terms shall have correlative
meanings.
1.2 Schedules. References to a Schedule will include any applicable disclosure
expressly set forth on the face of any other Schedule if specifically
cross-referenced to such other Schedule. Each Schedule and the information,
Agreements and documents expressly listed in each Schedule will be considered a
part of this Agreement as if set forth herein in full and will be deemed to
constitute representations and warranties under this Agreement, limited as set
forth in the applicable provision of this Agreement under which such Schedule is
delivered; provided, however, that the representations and warranties set forth
in this Agreement shall not be affected or deemed qualified, modified or limited
in any respect by the information provided in the Schedules except to the extent
that any qualification, modification or limitation to any representation and
warranty is expressly and conspicuously set forth on the face of such particular
Schedule.
ARTICLE II
PURCHASES AND SALES; LOANS
2.1 Agreement to Sell. At the Closing, upon and subject to the terms and
conditions of this Agreement, the Shareholders shall sell, assign and transfer
to EXTECH all of their right, title and interest in and to all of the Shares,
free and clear of all Liens.
2.2 Agreement to Purchase. At the Closing, upon and subject to the terms and
conditions of this Agreement, EXTECH shall purchase the respective Shares from
the Shareholders in exchange for the Acquisition Purchase Price.
2.3 Purchase Price.
2.3.1 Purchase Price. The aggregate purchase price for the Shares (the
"Acquisition Purchase Price") shall be Three Million Three Hundred Thousand
(3,300,000) shares of Common Stock of EXTECH (the "EXTECH Acquisition Shares").
2.3.2 Delivery of Purchase Price. At the Closing, subject to the terms and
conditions hereof, in payment of the Acquisition Purchase Price, EXTECH shall
EXTECH CORPORATION
3
deliver to each of the Shareholders a certificate representing one-half of the
EXTECH Acquisition Shares against delivery by the Shareholders of certificates
representing their respective Shares, duly endorsed or accompanied by stock
powers duly executed. The certificates representing the Shares shall also be
accompanied by evidence satisfactory to EXTECH of the Shareholders' payment of
all transfer taxes with respect thereto.
2.3.3 Allocation of Purchase Price. The Acquisition Purchase Price shall be
allocated among the Shares acquired hereunder as may be agreed to among the
parties hereto in order to properly reflect the respective fair market values of
the Shares. The Shareholders and EXTECH hereby covenant and agree that they will
not take a position on any income tax return, before any governmental agency
charged with the collection of any income tax, or in any judicial proceeding
that is in any way inconsistent with the terms of this Section 2.3.3.
2.4 Additional Purchases.
2.4.1 Purchases from EXTECH. (a) Subject to the terms and conditions
hereof, at the Closing, each of Certilman and Haft will purchase (or, to the
extent necessary to comply with the requirements of Section 351 of the Code,
will cause a retirement trust established for his benefit and/or other designee
to purchase) from EXTECH, and EXTECH shall issue and sell to each of them, Two
Hundred Twenty-Six Thousand (226,000) shares of Common Stock (452,000 shares in
the aggregate) of EXTECH (collectively, the "EXTECH Management Additional
Shares") at a purchase price of Twenty-Five Cents ($.25) per share (the "EXTECH
Additional Shares Purchase Price"). The EXTECH Additional Shares Purchase Price
shall be paid by certified check or, at the option of EXTECH, wire transfer to
EXTECH of immediately available funds.
(b) Subject to the terms and conditions hereof, at the Closing, each of
Lang and Xxxxxxxxx will purchase (or, in the case of Lang, will cause a
retirement trust established for his benefit to purchase) from EXTECH, and
EXTECH shall issue and sell to each of them, Four Hundred Seventy-Five Thousand
(475,000) shares of Common Stock (950,000 shares in the aggregate) of EXTECH
(collectively, the "950,000 Additional Shares" and together with the EXTECH
Management Additional Shares, the "EXTECH Additional Shares" and together
further with the EXTECH Acquisition Shares, the "EXTECH Shares") at the EXTECH
Additional Shares Purchase Price. The EXTECH Additional Shares Purchase Price
shall be paid as follows: (i) an amount in cash equal to the par value of the
950,000 Additional Shares ($.01 per share or an aggregate of $9,500) and (ii)
the balance thereof by the delivery by each of Lang and Xxxxxxxxx of a
promissory note in the principal amount of One Hundred Fourteen Thousand Dollars
($114,000) (an aggregate of $228,000) (collectively, the "Additional Shares
Notes") that will provide for, among other things, the following:
(i) interest at the rate of six percent (6%) per annum; and
(ii) payment of the principal amount thereof, together with accrued
interest thereon, in six (6) equal annual installments, commencing April
EXTECH CORPORATION
4
15, 2001 and continuing through April 15, 2006, in such annual amount as shall
be necessary to self-amortize the Additional Shares Note by April 15, 2006,
subject to acceleration to the extent the respective Shareholder receives any
proceeds from the sale or other disposition of any shares of Common Stock of
EXTECH.
The Additional Shares Notes shall be in, or substantially in, the form of
Exhibit 2.4.1(a) attached hereto.
The payment of all amounts due under the Additional Shares Notes shall be
secured by a pledge by each of the Shareholders to EXTECH of Five Hundred
Seventy Thousand (570,000) shares of Common Stock of EXTECH pursuant to pledge
agreements that will be entered into at the Closing (collectively, the
"Additional Shares Pledge Agreements"). The Additional Shares Pledge Agreements
shall be in, or substantially in, the form of Exhibit 2.4.1(b) attached hereto.
2.4.2 Purchases from Xxxxxxxx Xxxxxx. The parties acknowledge that One
Million Eight Hundred Thousand (1,800,000) shares of Common Stock of EXTECH (the
"Xxxxxxxx Xxxxxx Shares") are registered in the name of "Xxxxxx Xxxxxxxxx as
Voting Trustee U/A dated December 30, 1996" and are held pursuant to a Voting
Trust Agreement dated as of December 30, 1996 between Certilman and Xxxxxxxx
Xxxxxx Holding Corp. ("Xxxxxxxx Xxxxxx") (the "Voting Trust Agreement") pursuant
to which a voting trust certificate was issued to Xxxxxxxx Xxxxxx with regard to
the Xxxxxxxx Xxxxxx Shares. Subject to the terms and conditions hereof, each of
Certilman, Haft, Lang and Xxxxxxxxx shall use his best efforts to purchase,
contemporaneously with the Closing, Four Hundred Fifty Thousand (450,000) of the
Xxxxxxxx Xxxxxx Shares (1,800,000 shares in the aggregate) at a purchase price
of Twenty-Five Cents ($.25) per share (collectively, the "Xxxxxxxx Xxxxxx
Purchases"). The parties acknowledge and agree that any such purchase will be
conditioned upon the concurrent termination of the Voting Trust Agreement.
2.5 Loans to DCAP and the Shareholders.
2.5.1 $311,000 Loan. Simultaneously herewith, EXTECH is loaning to DCAP the
sum of Three Hundred Eleven Thousand Dollars ($311,000) (the "$311,000 Loan").
The $311,000 Loan is evidenced by a promissory note in such principal amount
(the "311,000 Note") that provides for, among other things, the following:
(i) payment of the principal amount thereof on September 30, 1998; and
(ii) interest at the rate of ten percent (10%) per annum, payable with
the principal payment.
The $311,000 Loan may be used by DCAP only for the purposes set forth on
Schedule 2.5.1 attached hereto, and for no other purpose.
The repayment of all amounts due under the $311,000 Note is secured by the
pledge by the Shareholders of the Shares pursuant to the terms of a certain
EXTECH CORPORATION
5
Pledge Agreement, dated as of November 26, 1997, by and among the Shareholders
and EXTECH, as amended by the terms hereof (the "Initial Pledge Agreement").
2.5.2 Closing Loans. Subject to the terms and conditions hereof, at the
Closing, EXTECH will loan to each of Lang and Xxxxxxxxx the amount of One
Hundred Twelve Thousand Five Hundred Dollars ($112,500) (an aggregate of
$225,000) (collectively, the "Closing Loans"). The proceeds of the Closing Loans
will be used by the Shareholders solely for the purpose of purchasing the
Xxxxxxxx Xxxxxx Shares from Xxxxxxxx Xxxxxx. The Closing Loans will be evidenced
by promissory notes of the respective Shareholders, each in the principal amount
of One Hundred Twelve Thousand Five Hundred Dollars ($112,500) ($225,000 in the
aggregate) (collectively, the "Closing Loan Notes" and together with the
Additional Shares Notes, the "Closing Notes"), that will provide for, among
other things, the following:
(i) interest at the rate of six percent (6%) per annum;
(ii) payment of the principal amount thereof, together with accrued
interest thereon, in six (6) equal annual installments, commencing April
15, 2001 and continuing through April 15, 2006, in such annual amount as
shall be necessary to self-amortize the Closing Loan Note by April 15,
2006, subject to acceleration to the extent the respective Shareholder
receives any proceeds from the sale or other disposition of any shares of
Common Stock of EXTECH;
(iii) non-recourse against the Shareholder; and
(iv) the right of the Shareholder to satisfy the amounts due under the
Closing Loan Note by delivering his respective shares of Common Stock of
EXTECH valued at the greater of (A) twenty-five cents ($.25) per share or
(B) the average Market Price (as such term is defined in the Closing Loan
Note) for the twenty (20) trading days immediately preceding the date of
delivery of the shares.
The Closing Loan Notes shall be in, or substantially in, the form of
Exhibit 2.5.2(a) attached hereto.
The repayment of all amounts due under the Closing Loan Notes shall be
secured by a pledge by each of the Shareholders to EXTECH of his respective
acquired Xxxxxxxx Xxxxxx Shares pursuant to pledge agreements that will be
entered into at the Closing (collectively, the "Closing Loan Pledge Agreements"
and together with the Additional Shares Pledge Agreements, the "Closing Pledge
Agreements"). The Closing Loan Pledge Agreements shall be in, or substantially
in, the form of Exhibit 2.5.2(b) attached hereto.
2.5.3 Prior Loans. (a) The parties acknowledge that, on November 26, 1997,
EXTECH loaned to DCAP Three Hundred Twenty-Five Thousand Dollars ($325,000) (the
"$325,000 Loan"). The $325,000 Loan is evidenced by a promissory note in such
principal amount (the "$325,000 Note"). The parties acknowledge further that, on
XXXXXX XXXXXXXXXXX
0
Xxxxx 00, 0000, XXXXXX loaned to DCAP the additional sum of One Hundred Fourteen
Thousand Dollars ($114,000) (the "$114,000 Loan"). The $114,000 Loan is
evidenced by a promissory note in such principal amount (the "$114,000 Note").
The repayment of all amounts due under the $325,000 Note and $114,000 Note is
secured by the pledge by the Shareholders of the Shares pursuant to the terms of
the Initial Pledge Agreement.
(b) The parties agree that the $325,000 Note is amended to provide that (i)
the principal amount thereof shall be payable on September 30, 1998, subject to
acceleration as set forth therein (except that the payment default occurring
prior to the date hereof is hereby waived by EXTECH), (ii) the reference in the
$325,000 Note to that certain letter of intent of even date therewith by and
among DCAP, Lang, Xxxxxxxxx and EXTECH (the "Letter of Intent") shall hereafter
refer instead to this Agreement and (iii) the payment of amounts due thereunder
shall be subject to no defense, counter-claim or right of offset or setoff (it
being understood that, in all other respects, the $325,000 Note shall continue
in full force and effect in accordance with its terms). The parties agree
further that the $114,000 Note is amended to provided that the reference therein
to the Letter of Intent shall hereafter refer instead to this Agreement (it
being understood that, in all other respects, the $114,000 Note shall continue
in full force and effect in accordance with its terms).
(c) The parties agree further that the Initial Pledge Agreement is hereby
amended to provide that all references therein to "Pledged Shares" as being
security for the performance by DCAP of all of its obligations under the Notes
(as defined therein, which shall be deemed to include the $325,000 Note, the
$114,000 Note and the $311,000 Note) shall be deemed to include (i) all proceeds
thereof (as such term is defined in Section 9-306 of the Code (as defined
therein)), including, without limitation, all dividends or other income from the
Pledged Shares, collections thereon and distributions with respect thereto,
whether arising before or after the date hereof and (ii) all shares, stock
certificates, options or rights of any nature whatsoever that may be issued, or
may have been issued, to either Shareholder with regard thereto, in substitution
or replacement thereof, as a conversion thereof, in exchange therefor or
otherwise in respect thereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE SHAREHOLDERS
The Shareholders, jointly and severally, make the following representations
and warranties to EXTECH, each of which shall be deemed material, and EXTECH, in
executing, delivering and consummating this Agreement, has relied upon the
correctness and completeness of each of such representations and warranties:
3.1 Valid Existence; Qualification. Each DCAP Entity (other than Tax Services)
is a corporation organized, validly existing and in good standing under the laws
of the state of its incorporation. Tax Services is a limited liability company
EXTECH CORPORATION
7
duly organized, validly existing and in good standing under the laws of New
York. Each DCAP Entity has the power to carry on its respective DCAP Business as
now conducted and to own its assets. No DCAP Entity is required to qualify in
any other jurisdiction in order to own its assets or to carry on its respective
DCAP Business as now conducted, and there has not been any claim by any other
jurisdiction to the effect that any DCAP Entity is required to qualify or
otherwise be authorized to do business as a foreign corporation or foreign
limited liability company therein. The copies of each DCAP Entity's Certificate
of Incorporation, as amended to date (certified by the Secretary of the State of
the state of its incorporation), and each DCAP Entity's By-Laws or, in the case
of Tax Services, Articles of Organization and Operating Agreement, as amended to
date (certified by the Secretary of the respective DCAP Entity), which have been
delivered to EXTECH, are true and complete copies of those documents as in
effect on the date hereof.
3.2 Capitalization; Subsidiaries; Affiliated Entities. (a) The Shareholders own
(i) all of the outstanding Common Shares of each of the Affiliated Companies and
(ii) the percentage of the outstanding Common Shares or, in the case of Tax
Services, membership interests of each of the Joint Ventures as is set forth on
Schedule B attached hereto, in each case free and clear of all Liens (except as
set forth on Schedule 3.2(a) attached hereto). All of the Shares are duly
authorized, validly issued, fully paid and nonassessable. No DCAP Entity is
authorized to issue any capital stock other than Common Shares, there are no
outstanding securities or evidences of indebtedness of any DCAP Entity that are
convertible into or exchangeable for any Common Shares of any DCAP Entity
("Derivative Securities") and there are no outstanding options, warrants or
other rights or commitments for the purchase or acquisition of any Common Shares
or Derivative Securities of any DCAP Entity. At the Closing, EXTECH will acquire
good and marketable title to the Shares, free and clear of all Liens.
(b) The DCAP Entities are engaged in the respective businesses identified
on Schedule B attached hereto. No DCAP Entity has made any investments in, or
owns, any of the capital stock of, or any other proprietary interest in, any
other Person.
(c) Except for the DCAP Entities or as set forth on Schedule 3.2(b)
attached hereto, neither Shareholder has made any investments in, or owns, any
of the capital stock of, or any other proprietary interest in, any other Person
engaged in any business which is similar to or competitive with the DCAP
Business.
3.3 Consents. Except as set forth on Schedule 3.3 attached hereto, no consent of
any Body or other Person was or is required to be received by or on the part of
any DCAP Entity or either of the Shareholders to enable either Shareholder to
enter into and carry out this Agreement and the transactions contemplated
hereby, including, without limitation, the transfer to EXTECH of all of the
right, title and interest of the Shareholders in and to the Shares. Except as
set forth on Schedule 3.3, all such consents have been obtained.
3.4 Authority; Binding Nature of Agreement. Each of the Shareholders has the
power to enter into this Agreement and to carry out his respective obligations
EXTECH CORPORATION
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hereunder. This Agreement constitutes the valid and binding obligation of each
of the Shareholders and is enforceable in accordance with its terms.
3.5 Financial Statements. The DCAP Financial Statements (i) are true and
complete, (ii) are in accordance with the Books and Records of the DCAP
Entities, (iii) fairly present the combined financial position of the DCAP
Entities and separate financial position of each DCAP Entity as of the DCAP
Balance Sheet Date and the combined and separate results of their operations for
the year then ended, and (iv) were prepared in conformity with generally
accepted accounting principles consistently applied throughout the periods
covered thereby.
3.6 Liabilities. As at the DCAP Balance Sheet Date, no DCAP Entity had any
Liabilities, other than those Liabilities reflected or reserved against in the
DCAP Balance Sheet, and there was no basis for the assertion against any DCAP
Entity of any material Liability not so reflected or reserved against therein.
As of the date hereof, the aggregate Liabilities of the Affiliated Companies to
the Joint Ventures do not exceed $104,000.
3.7 Actions Since the Balance Sheet Date. Except as otherwise expressly provided
or set forth in, or required by, this Agreement, or as set forth in Schedule 3.7
attached hereto, since the DCAP Balance Sheet Date, no DCAP Entity has (i)
incurred any material Liability, (ii) made any wage or salary increases or
granted any bonuses; (iii) mortgaged, pledged or subjected to any Lien any of
its assets, or permitted any of its assets to be subjected to any Lien; (iv)
sold, assigned or transferred any of its assets, except in the ordinary and
usual course of business consistent with past practice; (v) changed its
accounting methods, principles or practices; (vi) revalued any of its assets,
including, without limitation, writing down the value of inventory or writing
off notes or accounts receivable; (vii) incurred any damage, destruction or loss
(whether or not covered by insurance) adversely affecting its assets or business
which has had or could be reasonably expected to have a Material Adverse Effect;
(viii) cancelled any indebtedness or waived or released any right or claim which
has had or could be reasonably expected to have a Material Adverse Effect; (ix)
incurred any material adverse change in employee relations; (x) amended,
cancelled or terminated any Contract or Permit or entered into any Contract or
Permit which is not in the ordinary course of business consistent with past
practice; (xi) increased or changed its assumptions underlying, or methods of
calculating, any doubtful account contingency or other reserves; (xii) paid,
discharged or satisfied any Liabilities other than the payment, discharge or
satisfaction in the ordinary course of business of Liabilities set forth or
reserved for on the DCAP Balance Sheet or incurred in the ordinary course of
business; (xiii) made any capital expenditure, entered into any lease or
incurred any obligation to make any capital expenditure; (xiv) failed to pay or
satisfy when due any Liability; (xv) failed to carry on its business in the
ordinary course, consistent with the past practices, so as to reasonably keep
available the services of its employees, and to preserve its assets and business
and the goodwill of its suppliers, customers, distributors and others having
business relations with it; (xvi) disposed of or allowed the lapse of any
Proprietary Rights or disclosed to any person any Proprietary Rights not
theretofore a matter of public knowledge; or (xvii) other than this Agreement or
the transactions contemplated hereby, entered into any transaction or course of
conduct not in the ordinary and usual course of business and consistent with
past practice.
EXTECH CORPORATION
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3.8 Adverse Developments. Except as set forth on Schedule 3.8 attached hereto,
since the DCAP Balance Sheet Date, there has been no material adverse change in
the assets, business, operations (financial or otherwise), or prospects of any
DCAP Entity, there has been no act or omission on the part of any DCAP Entity or
others which would form the basis for the assertion against any DCAP Entity of
any material Liability, no other event has occurred which could be reasonably
expected to have a Material Adverse Effect and neither of the Shareholders knows
of any development or threatened development of a nature which could be
reasonably expected to have a Material Adverse Effect.
3.9 Taxes. All taxes, including, without limitation, income, property, sales,
use, utility, franchise, capital stock, excise, value added, employees'
withholding, social security and unemployment taxes imposed by the United
States, any state, locality or any foreign country, or by any other taxing
authority, which have or may become due or payable by each DCAP Entity, and all
interest and penalties thereon, whether disputed or not, have been paid in full
or adequately provided for by reserves shown in its Books and Records; all
deposits required by law to be made by each DCAP Entity or with respect to
estimated income, franchise and employees' withholding taxes have been duly
made; and all tax returns, including estimated tax returns, required to be filed
have been duly and timely filed. No extension of time for the assessment of
deficiencies for any year is in effect. No deficiency notice is proposed, or to
the knowledge of either Shareholder, threatened against any DCAP Entity. The tax
returns of the DCAP Entities have never been audited. No sales or use taxes are
required to be collected in connection with the operation of the DCAP Business.
3.10 Ownership of Assets; Interest in Assets.
3.10.1 Assets Generally. Except as set forth on Schedule 3.10.1 attached
hereto, the DCAP Entities own outright, and have good and marketable title to,
or lease pursuant to leases described on Schedule 3.14, all of their respective
assets (including all assets reflected in the DCAP Balance Sheet, except as the
same may have been disposed of in the ordinary and usual course of business
consistent with past practice since the DCAP Balance Sheet Date), free and clear
of all Liens. Upon consummation of the transactions contemplated by this
Agreement, except as set forth on Schedule 3.10.1, the DCAP Entities will own
their respective assets, free and clear of all Liens. The assets of the DCAP
Entities are sufficient to permit them to conduct the DCAP Business as now
conducted. None of the assets of the DCAP Entities are subject to any
restriction with regard to transferability. There are no Contracts with any
Person with respect to the acquisition of any of the assets of the DCAP Entities
or any rights or interests therein.
3.10.2 Interest in Assets. Neither Shareholder, directly or indirectly,
owns any property or rights, tangible or intangible, used in or related,
directly or indirectly, to the DCAP Business.
3.11 Insurance. Schedule 3.11 attached hereto sets forth a true and complete
list and brief description of all policies of fire, liability and other forms of
insurance held by each DCAP Entity. Except as set forth in Schedule 3.11, such
policies are valid, outstanding and enforceable policies, as to which premiums
EXTECH CORPORATION
10
have been paid currently, are with reputable insurers believed by the
Shareholders to be financially sound and are consistent with the practices of
similar concerns engaged in substantially similar operations as those currently
conducted by the DCAP Entities. Except as set forth in Schedule 3.11, there
exists no state of facts, and no event has occurred, which might reasonably (i)
form the basis for any claim against any DCAP Entity not fully covered by
insurance for liability on account of any express or implied warranty or
tortious omission or commission, or (ii) result in any material increase in
insurance premiums.
3.12 Litigation; Compliance with Law. Except as set forth on Schedule 3.12
attached hereto, there are no Actions relating to any DCAP Entity or any of its
assets or business pending or, to the knowledge of each of the Shareholders,
threatened, or any order, injunction, award or decree outstanding, against any
DCAP Entity or against or relating to any of its assets or business; and there
exists no basis for any such Action which would have a Material Adverse Effect.
No Affiliated Company and, to the knowledge of each of the Shareholders and
DCAP, no Joint Venture is in violation of any law, regulation, ordinance, order,
injunction, decree, award, or other requirement of any governmental or other
regulatory body, court or arbitrator relating to its assets or business, the
violation of which would have a Material Adverse Effect. Without limiting the
generality of the foregoing, each of the Affiliated Companies has complied in
all material respects with all laws, regulations and other requirements of all
government and other regulatory bodies with respect to franchises. Neither the
establishment nor operation of the Joint Ventures (including, without
limitation, the use by the Joint Ventures of the "DCAP" or "DCAP Insurance"
name) required or requires any filings with the New York State Department of
State or any other governmental or other regulatory body with respect to
franchising, or was or is subject to any laws, rules or regulations of the
States of New York or New Jersey or the Untied States of America with respect to
franchising. None of the DCAP Entities has any Liability to any franchisee, for
rescission or otherwise, in connection with the offering or sale of franchises.
DCAP Management Inc. ("Management") is the only DCAP Entity that has ever
offered or sold franchises. No DCAP Entity has ever offered or sold franchises
to any Person residing or doing business outside of the State of New York.
Management did not offer or sell franchises prior to the effective date of its
registration with the State of New York with respect thereto.
3.13 Real Property. Schedule 3.13 attached hereto sets forth a brief description
of all real properties which are leased to the DCAP Entities and the terms of
the respective leases, including the identity of the lessor, the rental rate and
other charges, and the term of the lease. No DCAP Entity owns outright the fee
simple title in and to any real property. The real property leases described in
Schedule 3.13 that relate to the leased properties described therein are in full
force and effect and all amounts payable thereunder have been paid. All uses of
such real properties by the Affiliated Companies and, to the knowledge of each
of the Shareholders and DCAP, the Joint Ventures conform in all material
respects to the terms of the leases relating thereto and conform in all material
respects to all applicable building and zoning ordinances, laws and regulations.
None of such leases may be expected to result in the expenditure of material
sums for the restoration of the premises upon the expiration of their respective
terms.
EXTECH CORPORATION
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3.14 Agreements and Obligations; Performance. Except as listed and briefly
described in Schedule 3.14 attached hereto (the "Listed Agreements"), no DCAP
Entity is a party to, or bound by, and neither Shareholder, with respect to any
DCAP Entity, is a party to, or bound by, any: (i) Contract which involves
aggregate payments or receipts in excess of $5,000 that cannot be terminated at
will without penalty or premium or any continuing Liability; (ii) Contract of
any kind with any officer, director, shareholder, manager, member or partner of
the DCAP Entity; (iii) Contract which is violation of applicable law; (iv)
Contract for the purchase, sale or lease of any materials, products, supplies or
services which contains, or which commits or will commit it for, a fixed term;
(v) Contract of employment not terminable at will without penalty or premium or
any continuing Liability; (vi) deferred compensation, bonus or incentive plan or
Contract not cancelable at will without penalty or premium or any continuing
obligation or liability; (vii) management or consulting Contract not terminable
at will without penalty or premium or any continuing Liability; (viii) except as
set forth in Schedule 3.13, lease for real or personal property; (ix) license or
royalty Contract; (x) Contract relating to indebtedness for borrowed money; (xi)
union or other collective bargaining Contract; (xii) Contract which, by its
terms, requires the consent of any party thereto to the consummation of the
transactions contemplated hereby; (xiii) Contract containing covenants limiting
the freedom of the DCAP Entity or any officer, employee, partner, manager or
member thereof to engage or compete in any line of business or with any Person
in any geographical area; (xiv) Contract or option relating to the acquisition
or sale of any business; (xv) voting agreement or similar Contract; (xvi) option
for the purchase of any asset, tangible or intangible; or (xvii) franchise,
license or advertising Contract; (xviii) Contract with the United States
government, any state, local or foreign government or any agency or department
thereof; (xix) Contract that grants any person any right of first refusal or
similar right; (xx) other Contract which materially affects any of its assets or
business, whether directly or indirectly, or which was entered into other than
in the ordinary and usual course of business consistent with past practice. A
true and correct copy of each of the written Listed Agreements has been
delivered, or made available, to EXTECH. Each DCAP Entity has in all material
respects performed all obligations required to be performed by it to date under
all of the Listed Agreements, is not in Default under any of the Listed
Agreements and has received no notice of any dispute, Default or alleged Default
thereunder which has not heretofore been cured or which notice has not
heretofore been withdrawn. Neither Shareholder knows of any Default under any of
the Listed Agreements by any other party thereto or by any other Person bound
thereunder.
3.15 Condition of Assets. Except as set forth on Schedule 3.15 attached hereto,
all machinery, equipment, vehicles and other assets used by the DCAP Entities in
the conduct of the DCAP Business are in good operating condition, ordinary wear
and tear excepted.
3.16 Permits and Licenses. Schedule 3.16 attached hereto sets forth a true and
complete list of all Permits from all Bodies held by the DCAP Entities. Each
DCAP Entity has all Permits of all Bodies required to carry on its business as
presently conducted and to offer and sell its products and services; all such
Permits are in full force and effect, and, to the knowledge of the Shareholders,
no suspension or cancellation of any of such Permits is threatened; and each
DCAP Entity is in compliance in all material respects with all requirements,
standards and procedures of the Bodies which have issued such Permits. Except as
EXTECH CORPORATION
12
set forth on schedule 3.16, no notice to, declaration, filing or registration
with, or Permit from, any Body or any other Person is required to be made or
obtained by any DCAP Entity or either Shareholder in connection with the
execution, delivery or performance of this Agreement and the consummation of the
transactions contemplated hereby.
3.17 Occupational Heath and Safety and Environmental Matters. The operations of
the DCAP Business do not require, and no DCAP Entity has, any Permits from any
Bodies relating to occupational health and safety or environmental matters to
lawfully conduct the DCAP Business. There is no litigation, investigation or
other proceeding pending or, to the knowledge of each of the Shareholders,
threatened or known to be contemplated by any Body in respect of or relating to
the DCAP Business or the assets of the DCAP Entities with respect to
occupational health and safety or environmental matters. All operations of the
DCAP Business have been conducted in compliance with all, and no DCAP Entity is
liable in any respect for any violation of any, applicable federal, state or
local laws or regulations pertaining to occupational health and safety and
environmental matters, including, without limitation, those relating to the
emission, discharge, storage, release or disposal of Materials of Environmental
Concern into ambient air, surface water, ground water or land surface or
sub-surface strata or otherwise relating to the manufacture, processing,
distribution, use, handling, disposal or transport of Materials of Environmental
Concern. No DCAP Entity nor either Shareholder has received any notice of a
possible claim or citation against or in respect of any real property leased by
any DCAP Entity, or with regard to its assets or business, relating to
occupational health and safety or environmental matters and neither of the
Shareholders is aware of any basis for any such Action.
3.18 Intellectual Property. Schedule 3.18 sets forth a true and complete list
and brief description of all Proprietary Rights which are owned by any DCAP
Entity or in which, or with regard to which, it has any right or interest
(including, without limitation, the identity of the DCAP Entity, each
application number, serial number or registration number, the class of goods or
services covered and the expiration date for each country in which Intellectual
Property has been registered). Except as set forth in Schedule 3.14 attached
hereto, DCAP owns all right, title and interest in and to all software utilized
by the DCAP Entities in the operation of their business (such software being
described on Schedule 3.18), free and clear of all Liens, subject only to
license agreements with the Joint Ventures as described on Schedule 3.14. No
other Person has any proprietary or other interest in any such Proprietary
Rights and no DCAP Entity is a party to or bound by any Contract requiring the
payment to any Person of any royalty. No DCAP Entity is infringing upon any
Proprietary Rights or otherwise is violating the rights of any third party with
respect thereto, and no proceedings have been instituted, and no claim has been
received by any DCAP Entity, and neither Shareholder is aware of any claim,
alleging any such violation. There are no pending applications with regard to
any Proprietary Right. Each DCAP Entity has taken all reasonable and prudent
steps to protect the Proprietary Rights from infringement by any other Person.
No other Person (i) has the right to use any Trademark of any DCAP Entity either
in identical form or in such near resemblance thereto as to be likely, when
applied to the goods or services of any such Person, to cause confusion with
such Trademarks or to cause a mistake or to deceive, (ii) has notified any DCAP
Entity that it is claiming any ownership of or right to use any Proprietary
Rights, or (iii) to the best of each Shareholder's knowledge, is infringing upon
any Proprietary Rights in any way.
EXTECH CORPORATION
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3.19 Compensation Information. Schedule 3.19 attached hereto contains a true and
complete list of the names and current salary rates of, bonus commitments to,
and other compensatory arrangements with, all officers and other persons
employed and/or retained by each DCAP Entity.
3.20 Employee Benefit Plans.
(a) Schedules 3.20 (a), (b) and (c) attached hereto list all of the
"pension" and "welfare" benefit plans (within the respective meanings of
sections 3(2) and 3(1) of the Employee Retirement Income Security Act of 1974,
as amended ["ERISA"]), maintained by each DCAP Entity, or to which it makes
employer contributions with respect to its employees, a complete and correct
copy of each of which has been delivered to EXTECH. There are no vested and
unfunded benefits under any such plans.
(b) All of the pension and profit sharing plans maintained by the DCAP
Entities (herein collectively referred to as the "Pension Plans") are listed in
Schedule 3.20(a). Each of the Pension Plans has received a favorable
determination letter as to its qualification under section 401(a) of the Code
(including, but not limited to, amendments made by ERISA), nothing has occurred
with respect to any such Pension Plan which would cause the loss of such
qualification, and the Shareholders have delivered to EXTECH true and correct
copies of all such determination letters.
(c) All of the pension plans not maintained by the DCAP Entities but to
which they make employer contributions with respect to their employees (herein
collectively referred to as the "Other Pension Plans") are listed in Schedule
3.20(b). Each of the Other Pension Plans is a "multi employer plan" (within the
meaning of section 3(37) of ERISA), but no DCAP Entity is a "substan tial
employer" (within the meaning of section 4001(a)(2) of ERISA) with respect to
any of the Other Pension Plans.
(d) All contributions required by law or required under the Pension Plans
with respect to plan years ended prior to the Closing Date have been made by
each DCAP Entity. With regard to the current plan year of each of the Other
Pension Plans, all contributions required to meet the employer contribution
obligations of each DCAP Entity, under section 412 of the Code, Part 3 of Title
I(B) of ERISA, such Other Pension Plan or any applicable collective bargaining
agreement, with respect to that portion of the current plan year ending on the
Closing Date, shall have been made on or prior to the Closing Date by such DCAP
Entity.
(e) No Pension Plan or related trust has terminated, and no "reportable
event" (within the meaning of section 4043(b) of ERISA) has occurred with
respect to any of the Pension Plans or the participation of any DCAP Entity in
any of the Other Pension Plans, other than the transactions contemplated by this
Agreement, since the effective date of ERISA.
(f) None of the Pension Plans which are subject to the provisions of
section 412 of the Code or Part 3 of Title I(B) of ERISA or their related trusts
EXTECH CORPORATION
14
has incurred any "accumulated funding deficiency" (within the meanings of
section 412(a) of the Code and section 302 of ERISA) since the effective date of
ERISA.
(g) No DCAP Entity has incurred any Liability (except for required premium
payments, which premium payments have been made for plan years ended prior to
the Closing Date, to the Pension Benefit Guaranty Corporation), with respect to
the Pension Plans.
(h) All of the welfare plans maintained by each DCAP Entity or to which it
makes employer contributions with respect to its employees (herein collectively
referred to as the "Welfare Plans" and together with the Pension Plans and Other
Pension Plans, the "Pension and Welfare Plans")) are listed in Schedule 3.20(c).
There are no Actions pending or, to the knowledge of either of the Shareholders,
threatened, and neither of the Shareholders has any knowledge of any facts which
could give rise to any Actions against any of the Pension Plans, or (with
respect to the participation of any DCAP Entity therein) against any of the
Other Pension Plans or Welfare Plans, or against any DCAP Entity with respect
thereto.
(i) Each DCAP Entity has satisfied in all material respects all reporting
and disclosure requirements applicable to it under ERISA, and the Department of
Labor and Internal Revenue Service regulations promulgated thereunder, with
respect to all of the Pension and Welfare Plans, and each DCAP Entity has
delivered to EXTECH true and complete copies of the most recently filed and
disclosed Forms EBS-1, Forms 5500 and 5500-C (with exhibits), 1976 "ERISA
Notices" and summary plan description for the Pension and Welfare Plans.
(j) None of the Pension and Welfare Plans or any of their related trusts,
or any DCAP Entity or any trustee, administrator or other "party in interest" or
"disqualified person" (within the meaning of section 3(14) of ERISA or section
4975(e)(2) of the Code, respectively) with respect to the Pension or Welfare
Plans, has engaged in any "prohibited transaction" (within the meaning of
section 408 of ERISA or section 4975(c)(23) or (d) of the Code), with respect to
the participation of any DCAP Entity therein, which could subject any of the
Pension or Welfare Plans or related trusts, or any trustee, administrator or
other fiduciary of any Plan, or any DCAP Entity or EXTECH, or any other party
dealing with the Pension or Welfare Plans, to the penalties or excise tax
imposed on prohibited transactions by section 502(i) of ERISA or section 4975 of
the Code.
(k) The Trustees of each of the Pension Plans have completed their required
annual accountings for the most recent plan years, such accountings accurately
reflect the financial positions of the Pension Plans as at such date, and true
and complete copies of the Trustees' reports or schedules of such accountings
have been delivered to EXTECH.
3.21 No Breach. Neither the execution and delivery of this Agreement nor
compliance by either of the Shareholders with any of the provisions hereof nor
the consummation of the transactions contemplated hereby, will:
EXTECH CORPORATION
15
(a) violate or conflict with any provision of the Certificate of
Incorporation, ByLaws or other organizational document of any DCAP Entity;
(b) except as set forth on Schedule 3.21 attached hereto (the "Required
Waivers"), (i) violate or, alone or with notice or the passage of time, or both,
result in a breach or termination of, or otherwise give any party the right to
terminate, or declare a Default under, or have any right of first refusal under,
the terms of any real property lease, license agreement or shareholders
agreement to which either Shareholder or any DCAP Entity is a party or is
otherwise bound or (ii) require either Shareholder to resign, or permit another
Person to require that either Shareholder resign, as an officer or director of
any DCAP Entity (it being represented and warranted that, except as set forth on
Schedule 3.21, all Required Waivers have been obtained);
(c) violate or, alone or with notice or the passage of time, or both,
result in the breach or termination of, or otherwise give any party the right to
terminate, or declare a Default under, the terms of any other Contract to which
any DCAP Entity or either of the Shareholders is a party or by which any of them
may be bound, the violation, breach or termination of which, or Default under
which, would have a Material Adverse Effect ;
(d) result in the creation of any Lien upon any of the assets of any DCAP
Entity;
(e) violate any judgment, order, injunction, decree or award against, or
binding upon, any DCAP Entity or either of the Shareholders or upon any of the
assets of any DCAP Entity; and/or
(f) violate any law or regulation of any jurisdiction relating to any
Affiliated Company, either of the Shareholders, or the DCAP Business, or, to the
knowledge of each of the Shareholders and DCAP, any Joint Venture, the violation
of which would have a Material Adverse Effect.
3.22 Brokers. No DCAP Entity nor either of the Shareholders has engaged,
consented to, or authorized any broker, finder, investment banker or other third
party to act on its or his behalf, directly or indirectly, as a broker or finder
in connection with the transactions contemplated by this Agreement.
3.23 Employment Relations. (a) Each DCAP Entity is in compliance with all
Federal, state and other applicable laws, rules and regulations respecting
employment and employment practices, terms and conditions of employment and
wages and hours, and has not engaged in any unfair labor practice which, in any
of the foregoing cases, could have a Material Adverse Effect; (b) there is not
pending, or, to the knowledge of each of the Shareholders, threatened, any
unfair labor practice charge or complaint against any DCAP Entity by or before
the National Labor Relations Board or any comparable state agency or authority;
(c) there is no labor strike, dispute, slowdown or stoppage pending or, to the
knowledge of each of the Shareholders, threatened against or involving any DCAP
Entity; (d) neither of the Shareholders is aware of any union organization
EXTECH CORPORATION
16
effort respecting the employees of any DCAP Entity; (e) no grievance which might
have a Material Adverse Effect on any DCAP Entity or the conduct of its
business, nor any arbitration proceeding arising out of or under any collective
bargaining agreement, is pending and no claim therefor has been asserted; (f) no
litigation, arbitration, administrative proceeding or governmental investigation
is now pending, and, to the knowledge of each of the Shareholders, no Person has
made any claim or has threatened litigation, arbitration, administrative
proceeding or governmental investigation against, arising out of any law
relating to discrimination against employees or employment practices; (g) no
collective bargaining agreement is currently being negotiated by any DCAP
Entity; and (h) no DCAP Entity has experienced any material labor difficulties
during the last three (3) years. There has not been, and neither of the
Shareholders anticipates, any material adverse change in relations with
employees of any DCAP Entity as a result of the announcement of the transactions
contemplated by this Agreement.
3.24 Prior Names and Addresses. Since inception, except as set forth on Schedule
3.24 attached hereto, no DCAP Entity has used any business name or had any
business address other than its current name and the business address set forth
in Schedule A and B attached hereto.
3.25 Payments. No Affiliated Company and, to the knowledge of each of the
Shareholders and DCAP, no Joint Venture has, directly or indirectly, paid or
delivered any fee, commission or other sum of money or item or property, however
characterized, to any finder, agent, client, customer, supplier, government
official or other Person, in the United States or any other country, which is
illegal under any federal, state or local laws of the United States (including,
without limitation, the U.S. Foreign Corrupt Practices Act).
3.26 Books and Records. Each Affiliated Company and, to the knowledge of each of
the Shareholders and DCAP, each Joint Venture has made and kept (and given
EXTECH access to) Books and Records and accounts, which, in reasonable detail,
accurately and fairly reflect the activities of its business. No DCAP Entity has
engaged in any material transaction, maintained any bank account or used any
corporate funds in connection with its business except for transactions, bank
accounts and funds which have been and are reflected in the normally maintained
books and records of the DCAP Entity.
3.27 Americans with Disabilities Act Compliance. All facilities owned, leased or
used by the Affiliated Companies and, to the knowledge of each of the
Shareholders and DCAP, the Joint Ventures (collectively "Facilities") have been
constructed and maintained in full compliance with the ADA. No Affiliated
Company and, to the knowledge of each of the Shareholders and DCAP, no Joint
Venture has received any notice to the effect, or otherwise been advised, that
any such Facilities are not in compliance with the ADA. Neither Shareholder has
any reason to anticipate that any existing circumstances at any of the
Facilities are likely to result in violation of the ADA.
3.28 Proxy Statement. The information to be furnished by the Shareholders and
each DCAP Entity for inclusion in the Proxy Statement, when furnished, and at
all times to and including the time of the stockholders' meeting convened for
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17
the purpose of obtaining Stockholder Approval, will not contain any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein contained not misleading.
3.29 Untrue or Omitted Facts. No representation, warranty or statement by the
Shareholders in this Agreement contains any untrue statement of a material fact,
or omits to state a fact necessary in order to make such representations,
warranties or statements not materially misleading. Without limiting the
generality of the foregoing, there is no fact known to either of the
Shareholders that has had, or which may be reasonably expected to have, a
Material Adverse Effect that has not been disclosed in this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF EXTECH
EXTECH makes the following representations and warranties to the
Shareholders, each of which shall be deemed material, and the Shareholders, in
executing, delivering and consummating this Agreement, have relied upon the
correctness and completeness of each of such representations and warranties:
4.1 Valid Corporate Existence. EXTECH is a corporation validly existing and in
good standing under the laws of the State of Delaware. EXTECH has the power to
carry on its business as now conducted and to own its assets. EXTECH is
qualified to do business in the State of New York, is not required to qualify in
any other jurisdiction in order to own its assets or to carry on its business as
now conducted, and there has not been any claim by any other jurisdiction to the
effect that EXTECH is required to qualify or otherwise be authorized to do
business as a foreign corporation therein. The copies of EXTECH's Certificate of
Incorporation, as amended to date (certified by the Secretary of the State of
Delaware) and By-Laws, as amended to date (certified by its Secretary), which
have been delivered to the Shareholders, are true and complete copies of those
documents as in effect on the date hereof.
4.2 Capitalization. The authorized capital stock of EXTECH consists of Ten
Million (10,000,000) shares of Common Stock, $.01 par value, of which Five
Million Five Hundred Ninety- One Thousand Three Hundred Sixty-Seven (5,591,367)
shares are issued and outstanding. All of such issued and outstanding shares of
Common Stock are duly authorized, validly issued, fully paid and nonassessable.
The EXTECH Shares to be issued and delivered to the Shareholders as contemplated
by Article II hereof will be duly and validly authorized and, when so issued and
delivered, will be duly and validly issued, fully paid and nonassessable.
4.3 Consents. Except as set forth on Schedule 4.3 attached hereto, no consent of
any Body or other Person is required to be received by or on the part of EXTECH
to enable it to enter into and carry out this Agreement and the transactions
contemplated hereby.
EXTECH CORPORATION
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4.4 Corporate Authority; Binding Nature of Agreement. EXTECH has the corporate
power to enter into this Agreement and to carry out its obligations hereunder.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by the Board of
Directors of EXTECH and, except for Stockholder Approval, no other corporate
proceedings on the part of EXTECH are necessary to authorize the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby. This Agreement constitutes the valid and binding obligation of EXTECH
and is enforceable in accordance with its terms.
4.5 SEC Report. EXTECH has previously delivered to the Shareholders a true and
complete copy, including exhibits, of its Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1997 (the "SEC Report"), such report being the
only report filed by EXTECH with the SEC since January 1, 1998. The SEC Report
does not contain any untrue statement of a material fact, or fail to state any
material fact required to be stated therein or necessary to make the statements
made therein not materially misleading.
4.6 No Breach. Neither the execution and delivery of this Agreement nor
compliance by EXTECH with any of the provisions hereof nor the consummation of
the transactions contemplated hereby, will:
(a) violate or conflict with any provision of the Certificate of
Incorporation or By- Laws of EXTECH;
(b) violate, or alone or with notice or the passage of time, or both,
result in the breach or termination of, or otherwise give any party the right to
terminate, or declare a Default under, the terms of any Contract to which EXTECH
is a party or by which it may be bound, the violation, breach or termination of
which, or Default under which, would have a Material Adverse Effect;
(c) result in the creation of any Lien upon any of the assets of EXTECH;
(d) violate any judgment, order, injunction, decree or award against, or
binding upon, EXTECH or upon any of its assets; or
(e) subject to the accuracy of the representations made by the Shareholders
in Article VI hereof, violate any law or regulation of any jurisdiction relating
to EXTECH, the violation of which would have a Material Adverse Effect.
4.7 Actions Since the Balance Sheet Date. Except as otherwise expressly provided
or set forth in, or required by, this Agreement, or as set forth in the SEC
Report or Schedule 4.7 attached hereto, since the EXTECH Balance Sheet Date,
EXTECH has not (i) incurred any material Liability, (ii) made any wage or salary
increases or granted any bonuses; (iii) mortgaged, pledged or subjected to any
Lien any of its assets, or permitted any of its assets to be subjected to any
EXTECH CORPORATION
19
Lien; (iv) sold, assigned or transferred any of its assets, except in the
ordinary and usual course of business consistent with past practice; (v) changed
its accounting methods, principles or practices; (vi) revalued any of its
assets, including, without limitation, writing down the value of inventory or
writing off notes or accounts receivable; (vii) incurred any damage, destruction
or loss (whether or not covered by insurance) adversely affecting its assets or
business which has had or could be reasonably expected to have a Material
Adverse Effect; (viii) cancelled any indebtedness or waived or released any
right or claim which has had or could be reasonably expected to have a Material
Adverse Effect; (ix) incurred any material adverse change in employee relations;
(x) amended, cancelled or terminated any Contract or Permit or entered into any
Contract or Permit which is not in the ordinary course of business consistent
with past practice; (xi) increased or changed its assumptions underlying, or
methods of calculating, any doubtful account contingency or other reserves;
(xii) paid, discharged or satisfied any Liabilities other than the payment,
discharge or satisfaction in the ordinary course of business of Liabilities set
forth or reserved for on the EXTECH Balance Sheet or incurred in the ordinary
course of business; (xiii) made any capital expenditure, entered into any lease
or incurred any obligation to make any capital expenditure; (xiv) failed to pay
or satisfy when due any Liability; (xv) failed to carry on its business in the
ordinary course, consistent with the past practices, so as to reasonably keep
available the services of its employees, and to preserve its assets and business
and the goodwill of its suppliers, customers, distributors and others having
business relations with it; (xvi) disposed of or allowed the lapse of any
Proprietary Rights or disclosed to any person any Proprietary Rights not
theretofore a matter of public knowledge; or (xvii) other than this Agreement or
the transactions contemplated hereby, entered into any transaction or course of
conduct not in the ordinary and usual course of business and consistent with
past practice..
4.8 Adverse Developments. Since the EXTECH Balance Sheet Date, there has been no
material adverse change in the assets, business, operations (financial or
otherwise), or prospects of EXTECH, there has been no act or omission on the
part of EXTECH or others which would form the basis for the assertion against
EXTECH of any material Liability, no other event has occurred which could be
reasonably expected to have a Material Adverse Effect and, except as set forth
in the SEC Report or set forth in Schedule 4.8 attached hereto, EXTECH does not
know of any development or threatened development of a nature which could be
reasonably expected to have a Material Adverse Effect.
4.9 Taxes. All taxes, including, without limitation, income, property, sales,
use, utility, franchise, capital stock, excise, value added, employees'
withholding, social security and unemployment taxes imposed by the United
States, any state, locality or any foreign country, or by any other taxing
authority, which have or may become due or payable by EXTECH, and all interest
and penalties thereon, whether disputed or not, have been paid in full or
adequately provided for by reserves shown in its Books and Records; all deposits
required by law to be made by EXTECH or with respect to estimated income,
franchise and employees' withholding taxes have been duly made; and all tax
returns, including estimated tax returns, required to be filed have been duly
and timely filed. No extension of time for the assessment of deficiencies for
any year is in effect. No deficiency notice is proposed, or to the knowledge of
EXTECH, threatened against EXTECH.
EXTECH CORPORATION
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4.10 Ownership of Assets; Interest in Assets. EXTECH owns outright or
indirectly, and has good and marketable title to, directly or indirectly, all of
its respective assets (including all assets reflected in the EXTECH Balance
Sheet, except as the same may have been disposed of in the ordinary and usual
course of business consistent with past practice since the EXTECH Balance Sheet
Date), free and clear of all Liens. The assets of EXTECH are sufficient to
permit it to conduct its business as now conducted. There are no Contracts with
any Person with respect to the acquisition of any of the assets of EXTECH or any
rights or interests therein.
4.11 Insurance. Schedule 4.11 attached hereto sets forth a true and complete
list and brief description of all policies of fire, liability and other forms of
insurance held by EXTECH. Except as set forth in Schedule 4.11, such policies
are valid, outstanding and enforceable policies, as to which premiums have been
paid currently, are with reputable insurers believed by EXTECH to be financially
sound and are consistent with the practices of similar concerns engaged in
substantially similar operations as those currently conducted by EXTECH. Except
as set forth in Schedule 4.11, there exists no state of facts, and no event has
occurred, which might reasonably (i) form the basis for any claim against EXTECH
not fully covered by insurance for liability on account of any express or
implied warranty or tortious omission or commission, or (ii) result in any
material increase in insurance premiums.
4.12 Litigation; Compliance with Law. Except as described in the SEC Report or
Schedule 4.12 attached hereto, there are no Actions relating to EXTECH or any of
its assets or business pending or, to the knowledge of EXTECH, threatened, or
any order, injunction, award or decree outstanding, against EXTECH or against or
relating to any of its assets or business; and there exists no basis for any
such Action which would have a Material Adverse Effect. EXTECH is not in
violation of any law, regulation, ordinance, order, injunction, decree, award,
or other requirement of any governmental or other regulatory body, court or
arbitrator relating to its assets or business, the violation of which would have
a Material Adverse Effect.
4.13 Real Property. The SEC Report sets forth a brief description of all real
properties which are leased to EXTECH and the terms of the respective leases,
including the identity of the lessor, the rental rate and other charges, and the
term of the lease. EXTECH does not own outright the fee simple title in and to
any real property. The real property leases described in Schedule 4.13 that
relate to the leased properties described therein are in full force and effect
and all amounts payable thereunder have been paid. All uses of such real
properties by EXTECH conform in all material respects to the terms of the leases
relating thereto and conform in all material respects to all applicable building
and zoning ordinances, laws and regulations. None of such leases may be expected
to result in the expenditure of material sums for the restoration of the
premises upon the expiration of their respective terms.
4.14 Agreements and Obligations; Performance. Except as listed and briefly
described in Schedule 4.14 attached hereto (the "Listed Agreements") or listed
in the SEC Report, EXTECH is not a party to, or bound by, any: (i) Contract
which involves aggregate payments or receipts in excess of $5,000 that cannot be
EXTECH CORPORATION
21
terminated at will without penalty or premium or any continuing Liability; (ii)
Contract of any kind with any officer, director or shareholder of EXTECH; (iii)
Contract which is violation of applicable law; (iv) Contract for the purchase,
sale or lease of any materials, products, supplies or services which contains,
or which commits or will commit it for, a fixed term; (v) Contract of employment
not terminable at will without penalty or premium or any continuing Liability;
(vi) deferred compensation, bonus or incentive plan or Contract not cancelable
at will without penalty or premium or any continuing obligation or liability;
(vii) management or consulting Contract not terminable at will without penalty
or premium or any continuing Liability; (viii) except as set forth in Schedule
4.13, lease for real or personal property; (ix) license or royalty Contract; (x)
Contract relating to indebtedness for borrowed money; (xi) union or other
collective bargaining Contract; (xii) Contract which, by its terms, requires the
consent of any party thereto to the consummation of the transactions
contemplated hereby; (xiii) Contract containing covenants limiting the freedom
of EXTECH or any officer or employee thereof to engage or compete in any line of
business or with any Person in any geographical area; (xiv) Contract or option
relating to the acquisition or sale of any business; (xv) voting agreement or
similar Contract; (xvi) option for the purchase of any asset, tangible or
intangible; or (xvii) franchise, license or advertising Contract; (xviii)
Contract with the United States government, any state, local or foreign
government or any agency or department thereof; (xix) other Contract which
materially affects any of its assets or business, whether directly or
indirectly, or which was entered into other than in the ordinary and usual
course of business consistent with past practice. A true and correct copy of
each of the written Listed Agreements has been delivered, or made available, to
the Shareholders. EXTECH has in all material respects performed all obligations
required to be performed by it to date under all of the Listed Agreements, is
not in Default under any of the Listed Agreements and has received no notice of
any dispute, Default or alleged Default thereunder which has not heretofore been
cured or which notice has not heretofore been withdrawn. EXTECH does not know of
any Default under any of the Listed Agreements by any other party thereto or by
any other Person bound thereunder.
4.15 Condition of Assets. Except as set forth on Schedule 4.15 attached hereto,
all machinery, equipment, vehicles and other assets used by EXTECH in the
conduct of its business are in good operating condition, ordinary wear and tear
excepted.
4.16 Permits and Licenses. Schedule 4.16 attached hereto sets forth a true and
complete list of all Permits from all Bodies held by EXTECH. EXTECH has all
Permits of all Bodies required to carry on its business as presently conducted
and to offer and sell its products and services; all such Permits are in full
force and effect, and, to the knowledge of EXTECH, no suspension or cancellation
of any of such Permits is threatened; and EXTECH is in compliance in all
material respects with all requirements, standards and procedures of the Bodies
which have issued such Permits. Except as set forth on Schedule 4.16, no notice
to, declaration, filing or registration with, or Permit from, any Body or any
other Person is required to be made or obtained by EXTECH in connection with the
execution, delivery or performance of this Agreement and the consummation of the
transactions contemplated hereby.
4.17 Occupational Heath and Safety and Environmental Matters. The operations of
EXTECH's business do not require, and EXTECH does not have, any Permits from any
EXTECH CORPORATION
22
Bodies relating to occupational health and safety or environmental matters to
lawfully conduct its business. There is no litigation, investigation or other
proceeding pending or, to the knowledge of EXTECH, threatened or known to be
contemplated by any Body in respect of or relating to EXTECH's business or the
assets of EXTECH with respect to occupational health and safety or environmental
matters. All operations of EXTECH's business have been conducted in compliance
with all, and EXTECH is not liable in any respect for any violation of any,
applicable federal, state or local laws or regulations pertaining to
occupational health and safety and environmental matters, including, without
limitation, those relating to the emission, discharge, storage, release or
disposal of Materials of Environmental Concern into ambient air, surface water,
ground water or land surface or sub- surface strata or otherwise relating to the
manufacture, processing, distribution, use, handling, disposal or transport of
Materials of Environmental Concern. EXTECH has not received any notice of a
possible claim or citation against or in respect of any real property leased by
EXTECH, or with regard to its assets or business, relating to occupational
health and safety or environmental matters and EXTECH is not aware of any basis
for any such Action.
4.18 Intellectual Property. Schedule 4.18 sets forth a true and complete list
and brief description of all Proprietary Rights which are owned by EXTECH or in
which, or with regard to which, it has any right or interest (including, without
limitation, each application number, serial number or registration number, the
class of goods or services covered and the expiration date for each country in
which Intellectual Property has been registered). Except as set forth on
Schedule 4.18, no other Person has any proprietary or other interest in any such
Proprietary Rights and EXTECH is not a party to or bound by any Contract
requiring the payment to any Person of any royalty. EXTECH is not infringing
upon any Proprietary Rights or otherwise is violating the rights of any third
party with respect thereto, and no proceedings have been instituted, and no
claim has been received by EXTECH, and EXTECH is not aware of any claim,
alleging any such violation. There are no pending applications with regard to
any Proprietary Right. EXTECH has taken all reasonable and prudent steps to
protect the Proprietary Rights from infringement by any other Person. No other
Person (i) has the right to use any Trademark of EXTECH either in identical form
or in such near resemblance thereto as to be likely, when applied to the goods
or services of any such Person, to cause confusion with such Trademarks or to
cause a mistake or to deceive, (ii) has notified EXTECH that it is claiming any
ownership of or right to use any Proprietary Rights, or (iii) to the best of
EXTECH's knowledge, is infringing upon any Proprietary Rights in any way.
4.19 Compensation Information. Schedule 4.19 attached hereto contains a true and
complete list of the names and current salary rates of, bonus commitments to,
and other compensatory arrangements with, all officers and other persons
employed and/or retained by EXTECH.
4.20 Employee Benefit Plans.
(a) Schedules 4.20 (a), (b) and (c) attached hereto list all of the
"pension" and "welfare" benefit plans (within the respective meanings of
sections 3(2) and 3(1) of ERISA), maintained by EXTECH, or to which it makes
employer contributions with respect to its employees, a complete and correct
copy of each of which has been delivered to the Shareholders. There are no
vested and unfunded benefits under any such plans.
EXTECH CORPORATION
23
(b) All of the pension and profit sharing plans maintained by EXTECH
(herein collectively referred to as the "Pension Plans") are listed in Schedule
4.20(a). Each of the Pension Plans has received a favorable determination letter
as to its qualification under section 401(a) of the Code (including, but not
limited to, amendments made by ERISA), nothing has occurred with respect to any
such Pension Plan which would cause the loss of such qualification, and EXTECH
has delivered to the Shareholders true and correct copies of all such
determination letters.
(c) All of the pension plans not maintained by EXTECH but to which it makes
employer contributions with respect to its employees (herein collectively
referred to as the "Other Pension Plans") are listed in Schedule 4.20(b). Each
of the Other Pension Plans is a "multiemployer plan" (within the meaning of
section 3(37) of ERISA), but EXTECH is not a "substantial employer" (within the
meaning of section 4001(a)(2) of ERISA) with respect to any of the Other Pension
Plans.
(d) All contributions required by law or required under the Pension Plans
with respect to plan years ended prior to the Closing Date have been made by
EXTECH. With regard to the current plan year of each of the Other Pension Plans,
all contributions required to meet the employer contribution obligations of
EXTECH, under section 412 of the Code, Part 3 of Title I(B) of ERISA, such Other
Pension Plan or any applicable collective bargaining agreement, with respect to
that portion of the current plan year ending on the Closing Date, shall have
been made on or prior to the Closing Date by EXTECH.
(e) No Pension Plan or related trust has terminated, and no "reportable
event" (within the meaning of section 4043(b) of ERISA) has occurred with
respect to any of the Pension Plans or the participation of EXTECH in any of the
Other Pension Plans, other than the transactions contemplated by this Agreement,
since the effective date of ERISA.
(f) None of the Pension Plans which are subject to the provisions of
section 412 of the Code or Part 3 of Title I(B) of ERISA or their related trusts
has incurred any "accumulated funding deficiency" (within the meanings of
section 412(a) of the Code and section 302 of ERISA) since the effective date of
ERISA.
(g) EXTECH has not incurred any Liability (except for required premium
payments, which premium payments have been made for plan years ended prior to
the Closing Date, to the Pension Benefit Guaranty Corporation), with respect to
the Pension Plans.
(h) All of the welfare plans maintained by EXTECH or to which it makes
employer contributions with respect to its employees (herein collectively
referred to as the "Welfare Plans" and together with the Pension Plans and Other
Pension Plans, the "Pension and Welfare Plans")) are listed in Schedule 4.20(c).
There are no Actions pending or, to the knowledge of EXTECH, threatened, and
EXTECH does not have any knowledge of any facts which could give rise to any
Actions against any of the Pension Plans, or (with respect to the participation
of EXTECH therein) against any of the Other Pension Plans or Welfare Plans, or
against EXTECH with respect thereto.
EXTECH CORPORATION
24
(i) EXTECH has satisfied in all material respects all reporting and
disclosure requirements applicable to it under ERISA, and the Department of
Labor and Internal Revenue Service regulations promulgated thereunder, with
respect to all of the Pension and Welfare Plans, and EXTECH has delivered to the
Shareholders true and complete copies of the most recently filed and disclosed
Forms EBS-1, Forms 5500 and 5500-C (with exhibits), 1976 "ERISA Notices" and
summary plan description for the Pension and Welfare Plans.
(j) None of the Pension and Welfare Plans or any of their related trusts,
or EXTECH, or any trustee, administrator or other "party in interest" or
"disqualified person" (within the meaning of section 3(14) of ERISA or section
4975(e)(2) of the Code, respectively) with respect to the Pension or Welfare
Plans, has engaged in any "prohibited transaction" (within the meaning of
section 408 of ERISA or section 4975(c)(23) or (d) of the Code), with respect to
the participation of EXTECH therein, which could subject any of the Pension or
Welfare Plans or related trusts, or any trustee, administrator or other
fiduciary of any Plan, or EXTECH, or any other party dealing with the Pension or
Welfare Plans, to the penalties or excise tax imposed on prohibited transactions
by section 502(i) of ERISA or section 4975 of the Code.
(k) The Trustees of each of the Pension Plans have completed their required
annual accountings for the most recent plan years, such accountings accurately
reflect the financial positions of the Pension Plans as at such date, and true
and complete copies of the Trustees' reports or schedules of such accountings
have been delivered to the Shareholders.
4.21 Brokers. EXTECH has not engaged, consented to, or authorized any broker,
finder, investment banker or other third party to act on its behalf, directly or
indirectly, as a broker or finder in connection with the transactions
contemplated by this Agreement.
4.22 Employment Relations. (a) EXTECH is in compliance with all Federal, state
and other applicable laws, rules and regulations respecting employment and
employment practices, terms and conditions of employment and wages and hours,
and has not engaged in any unfair labor practice which, in any of the foregoing
cases, could have a Material Adverse Effect; (b) there is not pending, or, to
the knowledge of EXTECH, threatened, any unfair labor practice charge or
complaint against EXTECH by or before the National Labor Relations Board or any
comparable state agency or authority; (c) there is no labor strike, dispute,
slowdown or stoppage pending or, to the knowledge of EXTECH, threatened against
or involving EXTECH; (d) EXTECH is not aware of any union organization effort
respecting the employees of EXTECH; (e) no grievance which might have a Material
Adverse Effect on EXTECH or on the conduct of its business, nor any arbitration
proceeding arising out of or under any collective bargaining agreement, is
pending and no claim therefor has been asserted; (f) no litigation, arbitration,
administrative proceeding or governmental investigation is now pending, and, to
the knowledge of EXTECH, no Person has made any claim or has threatened
litigation, arbitration, administrative proceeding or governmental investigation
against, arising out of any law relating to discrimination against employees or
employment practices; (g) no collective bargaining agreement is currently being
negotiated by EXTECH; and (h) EXTECH has not experienced any material labor
EXTECH CORPORATION
25
difficulties during the last three (3) years. There has not been, and EXTECH
does not anticipate, any material adverse change in relations with employees of
EXTECH as a result of the announcement of the transactions contemplated by this
Agreement.
4.23 Payments. EXTECH has not, directly or indirectly, paid or delivered any
fee, commission or other sum of money or item or property, however
characterized, to any finder, agent, client, customer, supplier, government
official or other Person, in the United States or any other country, which is
illegal under any federal, state or local laws of the United States (including,
without limitation, the U.S. Foreign Corrupt Practices Act).
4.24 Books and Records. EXTECH has made and kept (and given the Shareholders
access to) Books and Records and accounts, which, in reasonable detail,
accurately and fairly reflect the activities of its business. EXTECH has not
engaged in any material transaction, maintained any bank account or used any
corporate funds in connection with its business except for transactions, bank
accounts and funds which have been and are reflected in the normally maintained
books and records of EXTECH.
4.25 Americans with Disabilities Act Compliance. All facilities owned, leased or
used by EXTECH (collectively "Facilities") have been constructed and maintained
in full compliance with the ADA. EXTECH has not received any notice to the
effect, or otherwise been advised, that any such Facilities are not in
compliance with the ADA. EXTECH has no reason to anticipate that any existing
circumstances at any of the Facilities are likely to result in violation of the
ADA.
4.26 Proxy Statement. The Proxy Statement (excluding information to be furnished
by the Shareholders or any DCAP Entity to EXTECH for inclusion therein), when
furnished to the Company's stockholders, and at all times to and including the
time of the stockholders' meeting convened for the purpose of obtaining
Stockholder Approval, will not contain any untrue statement of a material fact
or omit to state any material fact necessary to make the statements therein
contained not misleading.
4.27 Untrue or Omitted Facts. No representation, warranty or statement by EXTECH
in this Agreement contains any untrue statement of a material fact, or omits to
state a fact necessary in order to make such representations, warranties or
statements not materially misleading. Without limiting the generality of the
foregoing, there is no fact known to EXTECH that has had, or which may be
reasonably expected to have, a Material Adverse Effect that has not been
disclosed in this Agreement.
ARTICLE V
PRE-CLOSING COVENANTS
5.1 Shareholder Covenants. The Shareholders, jointly and severally, hereby
covenant that, from and after the date hereof and until the Closing or earlier
termination of this Agreement:
EXTECH CORPORATION
26
(a) Access. The Shareholders shall cause the DCAP Entities to afford to the
officers, attorneys, accountants and other authorized representatives of EXTECH
free and full access, during regular business hours and upon reasonable notice,
to all of their Books and Records, personnel and properties so that EXTECH, at
its own expense, may have full opportunity to make such review, examination and
investigation as EXTECH may desire of the DCAP Entities and the DCAP Business.
The Shareholders will cause the employees, accountants, attorneys and other
agents and representatives of the DCAP Entities to cooperate fully with said
review, examination and investigation and to make full disclosure to EXTECH and
its representatives of all material facts affecting the DCAP Business. The
Shareholders acknowledge and agree that no review, examination or investigation
heretofore or hereafter undertaken by EXTECH or its representatives shall limit
or affect any representation or warranty made by the Shareholders in, or
otherwise relieve the Shareholders from any liability under, this Agreement.
(b) Conduct of Business. The Shareholders shall cause the DCAP Entities to
conduct their business only in the ordinary and usual course and make no change
in any of its business practices and policies without the prior written consent
of EXTECH. Without limiting the generality of the foregoing, and except as
otherwise expressly provided in this Agreement, prior to the Closing, the
Shareholders shall not cause or permit any DCAP Entity, without the prior
written consent of EXTECH, to:
(i) amend its Certificate of Incorporation, By-Laws or other
organizational document;
(ii) enter into, adopt or amend any bonus, profit sharing,
compensation, severance, termination, stock option, stock appreciation
right, restricted stock, performance unit, stock equivalent, stock
purchase, pension, retirement, deferred compensation, employment, severance
or other employee benefit Contract, trust, plan, fund or other arrangement
for the benefit or welfare of any director, officer, manager or employee,
or (except for normal increases in the ordinary course of business
consistent with past practice that, in the aggregate, do not result in a
material increase in benefits or compensation expense to the DCAP Entity)
increase in any manner the compensation or fringe benefits of any director,
officer, manager or employee or pay any benefit not required by any plan
and arrangement as in effect as of the date hereof;
(iii) acquire, sell, lease or dispose of any assets outside the
ordinary course of business consistent with past practice or any assets
which in the aggregate are material to the DCAP Entity;
(iv) acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership or other business organization or
division thereof;
(v) take any other action outside the ordinary course of business
consistent with past practice; or
EXTECH CORPORATION
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(vi) adopt any resolution, or enter into or amend any Contract, with
respect to any of the foregoing.
(c) Insurance. The Shareholders shall cause the DCAP Entities to maintain
in force the insurance policies listed in Schedule 4.11, except to the extent
that they may be replaced with equivalent policies at the same or lower rates.
If, in EXTECH's opinion, additional coverage is necessary to keep adequately
insured the DCAP Entities' properties, the Shareholders shall cause the DCAP
Entities to obtain (to the extent available) such additional insurance, at
EXTECH's expense, from financially sound and reputable insurers for a period
ending no sooner than the close of business on the Closing Date; provided that,
if the Closing shall fail to occur, the Shareholders shall cause the DCAP
Entities to promptly cancel such policies for additional insurance and return to
EXTECH any refunds of premiums paid by EXTECH on account thereof.
(d) Liabilities. The Shareholders shall not cause or permit any DCAP Entity
to incur any Liability, except for those incurred in the ordinary and usual
course of its business consistent with past practice, without the prior written
consent of EXTECH; nor shall the Share holders cause or permit any DCAP Entity
to pay any Liability other than: (i) the foregoing Liabili ties; (ii)
Liabilities set forth in the Balance Sheet; (iii) Liabilities arising after the
Balance Sheet Date in the ordinary and usual course of business consistent with
past practice; and (iv) Liabilities with respect to which the DCAP Entity shall
have received the prior written consent of EXTECH.
(e) Preservation of Business. The Shareholders shall cause the DCAP
Entities to use their best efforts to preserve intact their business
organization and keep available the services of their present officers,
managers, employees and consultants, maintain good relationships with customers
and suppliers and preserve their goodwill.
(f) No Breach.
(i) The Shareholders will each (A) use his best efforts to assure that
all of his representations and warranties contained herein are true and
correct as of the Closing as if repeated at and as of such time, that no
Default shall occur with respect to any of his covenants, representations
or warranties contained herein that has not been cured by the Closing and
that all conditions to EXTECH's obligation to enter into and complete the
Closing are satisfied in a timely manner; (B) not voluntarily take any
action or do anything which will cause a Default respecting such covenants,
representations or warranties or would impede the satisfaction of such
conditions; and (C) promptly notify EXTECH of any event or fact which
represents or is likely to cause such a Default or result in such an
impediment.
(ii) Without limiting the generality of the foregoing, each of the
Shareholders agrees to use his best efforts to take, or cause to be taken,
all actions, and to do, or cause to be done, all things reasonably
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this
EXTECH CORPORATION
28
Agreement, including, without limitation, taking such actions as reasonably
may be required to have the Proxy Statement cleared by the SEC as promptly
as practicable after filing.
(g)Consents. Promptly following the execution of this Agreement, each of
the Shareholders will use his best efforts, and will cause the DCAP Entities to
use their best efforts, to obtain consents of all Bodies and other Persons
necessary for the consummation of the transactions contemplated by this
Agreement.
(h)Unaudited Financial Statements. The Shareholders will cause the DCAP
Entities to provide EXTECH with such unaudited financial statements of, and
other financial information with respect to, the DCAP Entities up to and
including the Closing Date as EXTECH may reasonably request.
(i)No Negotiations. For so long as this Agreement shall remain in effect,
neither of the Shareholders will, nor will either of them cause or permit any
DCAP Entity to, directly or indirectly, (a) solicit or initiate discussions or
engage in negotiations with any Person ("Potential Offeror") (whether such
negotiations are initiated by them or otherwise), other than EXTECH, with
respect to the possible acquisition, financing or change of control of any DCAP
Entity, whether by way of merger, acquisition of stock, acquisition of assets,
or otherwise (a "Potential Transaction"); (b) provide any information with
respect to any DCAP Entity or any of their respective businesses or assets to
any Person, other than EXTECH, in connection with a Potential Transaction; (c)
EXTECH CORPORATION
29
enter into any Contract with any Person, other than EXTECH, concerning or
relating to a Potential Transaction; or (d) act in any way in response to a
Potential Transaction. If the Shareholders, the DCAP Entities, or any of them
receives any unsolicited offer or proposal to enter into negotiations relating
to a Potential Transaction, they shall immediately notify EXTECH of such fact
and shall return any such written offer to such Potential Offeror.
5.2 EXTECH Covenants. EXTECH hereby covenants that, from and after the date
hereof and until the Closing or earlier termination of this Agreement:
(a)Access. EXTECH shall afford to the officers, attorneys, accountants and
other authorized representatives of the Shareholders free and full access,
during regular business hours and upon reasonable notice, to all of its Books
and Records, personnel and properties so that the Shareholders, at their own
expense, may have full opportunity to make such review, examination and
investigation as they may desire of EXTECH and its business. EXTECH will cause
its employees, accountants, attorneys and other agents and representatives to
cooperate fully with said review, examination and investigation and to make full
disclosure to the Shareholders and their representatives of all material facts
affecting its business. EXTECH acknowledges and agrees that no review,
examination or investigation heretofore or hereafter undertaken by the
Shareholders or their representatives shall limit or affect any representation
or warranty made by EXTECH in, or otherwise relieve EXTECH from any liability
under, this Agreement.
(b)Conduct of Business. EXTECH will conduct its business only in the
ordinary and usual course and make no change in any of its business practices
and policies without the prior written consent of the Shareholders except that
EXTECH may, without such consent, take such actions with regard to its
subsidiary, IAH, Inc. ("IAH"), and/or the International Airport Hotel,
including, without limitation, the settlement of the pending lawsuit between the
Puerto Rico Ports Authority and IAH (unless the settlement provides for the
payment of monetary damages by IAH) and the sale, lease or other disposition of
the assets of IAH as it, in its sole discretion, deems necessary or proper.
Without limiting the generality of the foregoing, and except as otherwise
expressly provided in this Agreement, prior to the Closing, EXTECH will not,
without the prior written consent of the Shareholders:
(i) amend its Certificate of Incorporation or By-Laws (except that it
may amend it By-Laws to adopt provisions that are contemplated herein to be
included as an amendment to EXTECH's Certificate of Incorporation and
subject to Stockholder Approval);
(ii) enter into, adopt or amend any bonus, profit sharing,
compensation, severance, termination, stock option, stock appreciation
right, restricted stock, performance unit, stock equivalent, stock
purchase, pension, retirement, deferred compensation, employment, severance
or other employee benefit Contract, trust, plan, fund or other arrangement
for the benefit or welfare of any director, officer or employee, or (except
for normal increases in the ordinary course of business consistent with
past practice that, in the aggregate, do not result in a material increase
in benefits or compensation expense to EXTECH) increase in any manner the
EXTECH CORPORATION
30
compensation or fringe benefits of any director, officer or employee or pay
any benefit not required by any plan and arrangement as in effect as of the
date hereof;
(iii) acquire, sell, lease or dispose of any assets outside the
ordinary course of business consistent with past practice or any assets
which in the aggregate are material to EXTECH;
(iv) acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership or other business organization or
division thereof;
(v) take any other action outside the ordinary course of business
consistent with past practice; or
(vi) adopt any resolution, or enter into or amend any Contract, with
respect to any of the foregoing.
(c)Preservation of Business. Except as provided for in Section 5.2(b)
hereof, EXTECH will use its best efforts to preserve intact its business
organization and keep available the services of its present officers, employees
and consultants, maintain good relationships with customers and suppliers and
preserve its goodwill.
(d)No Breach.
(i) EXTECH will (A) use its best efforts to assure that all of its
representations and warranties contained herein are true and correct as of
the Closing as if repeated at and as of such time, that no Default shall
occur with respect to any of its covenants, representations or warranties
contained herein that has not been cured by the Closing and that all
conditions to the Shareholders' obligation to enter into and complete the
Closing are satisfied in a timely manner; (B) not voluntarily take any
action or do anything which will cause a Default respecting such covenants,
representations or warranties or would impede the satisfaction of such
conditions; and (C) promptly notify the Shareholders of any event or fact
which represents or is likely to cause such a Default or result in such an
impediment.
(ii) Without limiting the generality of the foregoing, EXTECH agrees
to use its best efforts to take, or cause to be taken, all actions, and to
do, or cause to be done, all things reasonably necessary, proper or
advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement, including,
without limitation, taking such actions as reasonably may be required to
have the Proxy Statement cleared by the SEC as promptly as practicable
after filing.
(e)Consents; Proxy Statement. Promptly following the execution of this
Agreement, EXTECH will use its best efforts to obtain consents of all Bodies and
other Persons necessary for the consummation of the transactions contemplated by
EXTECH CORPORATION
31
this Agreement. EXTECH will furnish the Shareholders with a copy of the Proxy
Statement for their review and comment at least two (2) days prior to the filing
thereof with the SEC.
ARTICLE VI
ACQUISITION OF SHARES
6.1 Investment Intent; Qualification as Purchaser.
(a)Certilman, Haft and each Shareholder represents and warrants that the
particular EXTECH Shares and Xxxxxxxx Xxxxxx Shares to be acquired pursuant to
the terms hereof are being acquired for his own account, for investment purposes
and not with a view to the distribution thereof. Certilman, Haft and each
Shareholder each agrees that he will not sell, assign, transfer, encumber or
otherwise dispose of any of the particular EXTECH Shares or Xxxxxxxx Xxxxxx
Shares unless (i) a registration statement under the Securities Act with respect
thereto is in effect and the prospectus included therein meets the requirements
of Section 10 of the Securities Act, or (ii) EXTECH has received a written
opinion of its counsel that, after an investigation of the relevant facts, such
counsel is of the opinion that such proposed sale, assignment, transfer,
encumbrance or disposition does not require registration under the Securities
Act.
(b)Certilman, Haft and each Shareholder understands that none of the EXTECH
Shares or Xxxxxxxx Xxxxxx Shares are being registered under the Securities Act
and must be held indefinitely unless they are subsequently registered thereunder
or an exemption from such registration is available.
(c)Certilman, Haft and each Shareholder represents and warrants that he and
his purchaser representative, if any, have reviewed the SEC Report. Certilman,
Haft and each Shareholder represents and warrants further that (i) he is either
an "accredited investor," as such term is defined in Rule 501(a) promulgated by
the SEC under the Securities Act, or that he, alone or with his purchaser
representative, if any, has such knowledge and experience in financial and
business matters that he is capable of evaluating the merits and risks of the
acquisition of the particular EXTECH Shares and Xxxxxxxx Xxxxxx Shares
contemplated hereby; (ii) he is able to bear the economic risk of an investment
in the particular EXTECH Shares and Xxxxxxxx Xxxxxx Shares, including, without
limitation, the risk of the loss of part or all of his investment and the
inability to sell or transfer the particular EXTECH Shares and Xxxxxxxx Xxxxxx
Shares for an indefinite period of time; (iii) he has adequate means of
providing for current needs and contingencies and has no need for liquidity in
his investment in the particular EXTECH Shares and Xxxxxxxx Xxxxxx Shares; and
(iv) he does not have an overall commitment to investments which are not readily
marketable that is excessive in proportion to his net worth and an investment in
the particular EXTECH Shares and Xxxxxxxx Xxxxxx Shares will not cause such
overall commitment to become excessive. Certilman, Haft and each Shareholder
will execute and deliver to EXTECH such documents as EXTECH may reasonably
request in order to confirm the accuracy of the foregoing.
EXTECH CORPORATION
32
6.2 Restrictive Legend. The EXTECH Shares and Xxxxxxxx Xxxxxx Shares to be
issued or transferred, as the case may be, to Certilman, Haft and the
Shareholders may not be sold, assigned, transferred, encumbered or disposed of
unless they are registered under the Securities Act or unless an exemption from
such registration is available. Accordingly, the following restrictive legend
will be placed on any instrument, certificate or other document evidencing the
EXTECH Shares and Xxxxxxxx Xxxxxx Shares:
"The shares represented by this certificate have not been registered under
the Securities Act of 1933, as amended. These shares have been acquired for
investment and not for distribution or resale. They may not be sold, assigned,
mortgaged, pledged, hypothecated or otherwise trans ferred or disposed of
without an effective registration statement for such shares under the Securities
Act of 1933, as amended or an opinion of counsel for the Company that
registration is not required under such Act. The shares represented by this
certificate are held subject to the terms and conditions of a certain Agreement,
dated May __, 1998, among the Company, Xxxxxx X. Xxxxxxxxx, Xxx X. Xxxx, Xxxxx
Xxxx and Xxxxxxx Xxxxxxxxx, a copy of which is available at the offices of the
Company."
6.3 Certain Risk Factors. Certilman, Haft and each of the Shareholders
acknowledges that there are significant risks relating to the acquisition of the
EXTECH Shares and Xxxxxxxx Xxxxxx Shares including, without limitation, as a
result of the matters described in the SEC Report.
ARTICLE VII
CONDITIONS PRECEDENT TO THE
OBLIGATION OF EXTECH TO CLOSE
The obligation of EXTECH to consummate the transactions contemplated hereby
is subject to the fulfillment, prior to or at the Closing, of each of the
following conditions, any one or more of which may be waived by EXTECH (except
when the fulfillment of such condition is a requirement of law):
7.1 Representations and Warranties. All representations and warranties of the
Shareholders contained in this Agreement and in any written statement (including
financial statements), exhibit, certificate, schedule or other document
delivered pursuant hereto or in connection with the transactions contemplated
hereby shall be true and correct in all material respects (except to the extent
that any such representation and warranty is already qualified as to
materiality, in which case such representation and warranty shall be true and
correct without further qualification) as at the Closing Date, as if made at the
Closing and as of the Closing Date.
7.2 Covenants. Each of the Shareholders shall have performed and complied in all
material respects with all covenants and agreements required by this Agreement
to be performed or complied with by him prior to or at the Closing.
EXTECH CORPORATION
33
7.3 Certificate. EXTECH shall have received a certificate, dated the Closing
Date, signed by each of the Shareholders, as to the satisfaction of the
conditions contained in Sections 7.1 and 7.2 hereof.
7.4 Shares; Purchase Price. The Shareholders shall have tendered to EXTECH the
Shares and their respective EXTECH Additional Shares Purchase Price in
accordance with the provisions of Sections 2.3.2 and 2.4.1 hereof, respectively.
7.5 Xxxxxxxx Xxxxxx Purchases. The Xxxxxxxx Xxxxxx Purchases shall have occurred
concurrently with the Closing as contemplated by Section 2.4.2 hereof.
7.6 Stockholder Approval. Stockholder Approval shall have occurred.
7.7 DCAP Financial Statements. EXTECH shall have received such historical
audited and unaudited financial statements for the DCAP Entities as are required
by the rules and regulations of the SEC to be included by EXTECH in a Current
Report on Form 8-K with regard to the transactions contemplated hereby,
including, without limitation, with respect to the audited financial statements,
an unqualified report thereon by certified public accountants who are
"independent" within the meaning ascribed to such term in Regulation S-X,
promulgated by the SEC.
7.8 Employment Agreements. Each of the Shareholders shall have executed and
tendered to EXTECH an employment agreement in, or substantially in, the form
attached hereto as Exhibit 7.8 (the "Employment Agreement").
7.9 Restrictive Covenant Agreements. Each of the Shareholders shall have
executed and tendered to EXTECH a restrictive covenant agreement in, or
substantially in, the form attached hereto as Exhibit 7.9 (the "Restrictive
Covenant Agreement").
7.10 Fairness Opinion. EXTECH shall have received an opinion from an investment
banking firm satisfactory to it to the effect that the transactions contemplated
hereby are fair, from a financial viewpoint, to the stockholders of EXTECH.
7.11 Cold Comfort Letter. EXTECH shall have received a "cold comfort" letter
from Deutsch Marin & Company, dated the Closing Date, in form and substance
reasonably satisfactory to EXTECH (the "Cold Comfort Letter").
7.12 Closing Notes; Closing Pledge Agreements. The Shareholders shall have
executed and tendered to EXTECH the Closing Notes and the Closing Pledge
Agreements.
7.13 Opinions of Counsel. EXTECH shall have received an opinion of counsel,
dated the Closing Date, from (a) Ruskin Moscou, Xxxxx & Faltischek, P.C.,
counsel to the Shareholders and the DCAP Entities, with respect to the
representations and
EXTECH CORPORATION
34
warranties set forth in Sections 3.1, 3.4 and 3.21 hereof and (b) Xxxxxx X.
Xxxxxxxxxx, P.C. in, or substantially in, the form attached hereto as Exhibit
7.13 (collectively, the "DCAP Opinions").
7.14 Buy Out Agreement. Each of the Shareholders shall have executed and
tendered to EXTECH a death buy out agreement in, or substantially in, the form
attached hereto as Exhibit 7.14 (the "Buy Out Agreement").
7.15 Size of Boards; Election as Members. The size of the Board of Directors of
each of the Affiliated Companies shall have been fixed at four (4) and Certilman
and Haft shall have been elected as members thereof.
7.16 No Actions. No Action shall have been instituted and be continuing before a
court or before or by Body, or shall have been threatened and be unresolved, to
restrain or prevent, or obtain any material amount of damages in respect of, the
carrying out of the transactions contemplated hereby, or which might materially
affect the right of EXTECH to own the Shares after the Closing Date, or which
might have a materially adverse effect thereon.
7.17 Consents; Licenses and Permits. The Shareholders and EXTECH shall have
obtained all consents, licenses and other Permits of Bodies and other Persons
necessary for the performance by each of them of all of their respective
obligations under this Agreement, including, without limitation, the transfer of
the Shares as contemplated hereby, and such other agreements, consents and
waivers, if any, including, without limitation, the Required Waivers, to prevent
the occurrence of a Default under any Contract to which any DCAP Entity or
either Shareholder is a party or is otherwise bound or to otherwise confirm the
representations set forth in Section 3.21 hereof without qualification.
7.18 Sections 4(2) and 4(1) Compliance. Each of the Shareholders shall have
delivered to EXTECH evidence reasonably satisfactory to EXTECH that his
representations set forth in Article VI hereof are true and correct.
7.19 Actions. All actions necessary to authorize the execution, delivery and
performance of this Agreement by the Shareholders and the consummation of the
transactions contemplated hereby shall have been duly and validly taken and the
Shareholders shall have full power and right to consummate the transactions
contemplated by this Agreement.
7.20 Additional Documents. The Shareholders shall have delivered all such
certified resolutions, certificates and documents with respect to the DCAP
Entities and the transactions contemplated hereby as EXTECH or its counsel may
have reasonably requested.
Notwithstanding the provisions of Sections 7.4, 7.16 and 7.17 hereof, in
the event of the institution of an Action with respect to one or more of the
DCAP Entities and/or the failure to obtain any consent, license or other Permit
of any Body or other Person with respect to one or more of the DCAP Entities,
then,
EXTECH CORPORATION
35
subject to the other conditions hereof, EXTECH shall be obligated to consummate
the transactions contemplated hereby if the Shareholders notify it that they are
willing to exclude the affected DCAP Entity or DCAP Entities from the purchase
and sale contemplated hereby. In such event, the number of EXTECH Acquisition
Shares shall not be reduced; however, at the Closing, the Shareholders and
EXTECH shall enter into an agreement with respect to the excluded DCAP Entity or
DCAP Entities containing substantially the terms provided for in Schedule 8
attached hereto.
ARTICLE VIII
CONDITIONS PRECEDENT TO THE OBLIGATION OF
THE SHAREHOLDERS TO CLOSE
The obligation of the Shareholders to consummate the transactions
contemplated hereby is subject to the fulfillment, prior to or at the Closing,
of each of the following conditions, any one or more of which may be waived by
the Shareholders (except when the fulfillment of such condition is a requirement
of law):
8.1 Representations and Warranties. All representations and warranties of EXTECH
contained in this Agreement and in any written statement (including financial
statements), exhibit, certificate, schedule or other document delivered pursuant
hereto or in connection with the transactions contemplated hereby shall be true
and correct in all material respects (except to the extent that any such
representation and warranty is already qualified as to materiality, in which
case such representation and warranty shall be true and correct without further
qualification) as at the Closing Date, as if made at the Closing and as of the
Closing Date.
8.2 Covenants. EXTECH shall have performed and complied in all material respects
with all covenants and agreements required by this Agreement to be performed or
complied with by it prior to or at the Closing.
8.3 Certificate. The Shareholders shall have received a certificate, dated the
Closing Date, signed by the Chairman of the Board or President of EXTECH, as to
the satisfaction of the conditions contained in Sections 8.1 and 8.2 hereof.
8.4 EXTECH Shares. EXTECH shall have tendered to the Shareholders certificates
evidencing the respective EXTECH Acquisition Shares and EXTECH Additional Shares
in accordance with the provisions of Section 2.3.2 and 2.4.1 hereof,
respectively.
8.5 Xxxxxxxx Xxxxxx Purchases. The Xxxxxxxx Xxxxxx Purchases shall have occurred
concurrently with the Closing as contemplated by Section 2.4.2 hereof.
8.6 Stockholder Approval. Stockholder Approval shall have occurred with regard
to the matters set forth as (i), (ii)(a) and (iii) under the definition thereof.
EXTECH CORPORATION
36
8.7 Employment Agreements; Stock Option Agreements. EXTECH shall have executed
and tendered to the Shareholders the Employment Agreements and stock option
agreements in, or substantially in, the forms attached hereto as Exhibits 7.8
and 8.7 (the "Stock Option Agreements"), respectively.
8.8 Certilman and Haft Purchases. Certilman and Haft shall have acquired their
respective EXTECH Additional Shares in accordance with the provisions of Section
2.4.1 hereof.
8.9 Closing Loans. EXTECH shall have tendered to the Shareholders the Closing
Loans in accordance with the provisions of Section 2.5.2 hereof.
8.10 Size of Board and Committees; Election as Directors and Members. The size
of the Board of Directors of EXTECH and any Audit and Finance Committees thereof
shall have been fixed at four (4) and the Shareholders shall have been elected
as members thereof.
8.11 Tax Opinion. The Shareholders shall have received an opinion of tax counsel
or other tax advisor to the effect that the receipt of the EXTECH Acquisition
Shares is not a taxable event to the Shareholders by reason of the provisions of
Section 351 of the Code.
8.12 Opinion of Counsel. The Shareholders shall have received an opinion of
counsel, dated the Closing Date, from Certilman Balin Xxxxx & Xxxxx, LLP with
respect to the representations and warranties set forth in Sections 4.1, 4.4 and
4.6 hereof (the "EXTECH Opinion").
8.13 Buy Out Agreement. EXTECH shall have executed and tendered to the
Shareholders the Buy Out Agreement in, or substantially in, the form attached
hereto as Exhibit 7.14.
8.14 No Actions. No Action shall have been instituted and be continuing before a
court or before or by a Body, or shall have been threatened and be unresolved,
to restrain or prevent, or obtain any material amount of damages in respect of,
the carrying out of the transactions contemplated hereby, or which might
materially affect the right of the Shareholders to own their EXTECH Shares after
the Closing Date, or which might have a materially adverse effect thereon.
8.15 Consents; Licenses and Permits. The Shareholders and EXTECH shall have
obtained all consents, licenses and other Permits of Bodies and other Persons
necessary for the performance by them of all of their respective obligations
under this Agreement, including, without limitation, the issuance of the
respective EXTECH Shares to the Shareholders as contemplated hereby, and such
other consents, if any, to prevent the occurrence of a Default under any
Contract to which EXTECH is a party or is otherwise bound.
8.16 Corporate Actions. All actions necessary to authorize the execution,
delivery and performance of this Agreement by EXTECH and the consummation of the
transactions contemplated hereby shall have been duly and validly taken and
EXTECH shall have full power and right to consummate the transactions
contemplated by this Agreement.
EXTECH CORPORATION
37
8.17 Additional Documents. EXTECH shall have delivered all such certified
resolutions, certificates and documents with respect to EXTECH and the
transactions contemplated hereby as the Shareholders or their counsel may have
reasonably requested.
Notwithstanding the provisions of Sections 8.14 and 8.15 hereof, in the
event of the institution of an Action with respect to one or more of the DCAP
Entities and/or the failure to obtain any consent, license or other Permit of
any Body or other Person with respect to one or more of the DCAP Entities, then,
subject to the other conditions hereof, the Shareholders shall be obligated to
consummate the transactions contemplated hereby if EXTECH notifies them that it
is willing to exclude the affected DCAP Entity or DCAP Entities from the
purchase and sale contemplated hereby. In such event, the number of EXTECH
Acquisition Shares shall not be reduced; however, at the Closing, the
Shareholders and EXTECH shall enter into an agreement with respect to the
excluded DCAP Entity or DCAP Entities containing substantially the terms
provided for in Schedule 8 attached hereto.
ARTICLE IX
CONDITIONS PRECEDENT TO THE
OBLIGATIONS OF CERTILMAN AND HAFT TO CLOSE
The obligation of Certilman and Haft to consummate the transactions
contemplated hereby is subject to the fulfillment, prior to at the Closing, of
each of the following conditions, any one or more of which may be waived by
Certilman and Haft (except when the fulfillment of such condition is a
requirement of law):
9.1 Shares/EXTECH Acquisition Shares. EXTECH shall have acquired the Shares in
consideration for the issuance of the EXTECH Acquisition Shares in accordance
with the provisions of Sections 2.1 and 2.2 hereof.
9.2 Xxxxxxxx Xxxxxx Purchases. The Xxxxxxxx Xxxxxx Purchases shall have occurred
concurrently with the Closing as contemplated by Section 2.4.2 hereof.
9.3 Stockholder Approval. Stockholder Approval shall have occurred.
9.4 EXTECH Additional Shares. EXTECH shall have tendered to Certilman and Haft
certificates evidencing their respective EXTECH Additional Shares in accordance
with the provisions of Section 2.4.1 hereof.
9.5 Shareholder Purchases. The Shareholders shall have acquired their respective
EXTECH Additional Shares in accordance with the provisions of Section 2.4.1
hereof.
EXTECH CORPORATION
38
9.6 Employment Agreements; Stock Option Agreements. EXTECH shall have executed
and tendered to Certilman and Haft Employment Agreements and Stock Option
Agreements in, or substantially in, the forms attached hereto as Exhibits 7.8
and 8.7, respectively.
9.7 No Actions. No Action shall have been instituted and be continuing before a
court or before or by a Body, or shall have been threatened and be unresolved,
to restrain or prevent, or obtain any material amount of damages in respect of,
the carrying out of the transactions contemplated hereby or which might
materially affect the right of Certilman and Haft to own their respective EXTECH
Additional Shares after the Closing Date, or which might have a materially
adverse effect thereon.
9.8 Corporate Actions. All actions necessary to authorize the execution,
delivery and performance of this Agreement by EXTECH and the consummation of the
transactions contemplated hereby shall have been duly and validly taken and
EXTECH shall have full power and right to consummate the transactions
contemplated by this Agreement.
9.9 Additional Documents. EXTECH shall have delivered all such certified
resolutions, certificates and documents with respect to EXTECH and the
transactions contemplated hereby as Certilman and Haft or their counsel may have
reasonably requested.
ARTICLE X
CLOSING
10.1 Time and Location. The closing (the "Closing") provided for herein shall
take place at the offices of Certilman Balin Xxxxx & Xxxxx, LLP, 00 Xxxxxxx
Xxxxxx, Xxxx Xxxxxx, Xxx Xxxx 00000 at 10:00 A.M. on the business day following
Stockholder Approval or, if, as of such date, any party shall not be obligated
to close and shall not have waived such closing condition(s), subject to the
provisions of Article XIII hereof, on the business day after such later date as
such party or parties shall be obligated to close or shall have waived such
closing condition(s), or at such time and place as may be mutually agreed to by
the parties. Such date is referred to in this Agreement as the "Closing Date."
10.2 Items to be Delivered by the Shareholders. At the Closing, the Shareholders
will deliver or cause to be delivered to EXTECH:
(a)the certificate required by Section 7.3 hereof;
(b)certificates representing the Shares, duly endorsed or accompanied by
stock powers duly executed, together with evidence satisfactory to EXTECH of the
Shareholders' payment of all transfer taxes with respect thereto;
(c)the EXTECH Additional Shares Purchase Price for their EXTECH Additional
Shares;
EXTECH CORPORATION
39
(d)their respective Employment Agreements and Stock Option Agreements;
(e)their respective Restrictive Covenant Agreements;
(f)the Cold Comfort Letter;
(g)their respective Closing Notes;
(h)their respective Closing Pledge Agreements;
(i)the DCAP Opinions; and
(j)such other certified resolutions, documents and certificates as are
required to be delivered by the Shareholders pursuant to the provisions of this
Agreement or which otherwise confirm that all of the conditions precedent to the
obligation of EXTECH and/or Certilman and Haft to close have been satisfied.
10.3 Items to be Delivered by EXTECH. At the Closing, EXTECH will deliver or
cause to be delivered to the Shareholders or Certilman and Haft (and/or their
designee(s)), as the case may be:
(a)the certificate required by Section 8.3 hereof;
(b)certificates representing the EXTECH Shares;
(c)the Employment Agreements and Stock Option Agreements for Certilman,
Haft and the Shareholders;
(d)the Closing Loans;
(e)the Closing Pledge Agreements;
(f)the EXTECH Opinion; and
(g)such other certified resolutions, documents and certificates as are
required to be delivered by EXTECH pursuant to the provisions of this Agreement
or otherwise confirm that all of the conditions precedent to the obligation of
the Shareholders and/or Certilman and Haft to close have been satisfied.
10.4 Items to be Delivered by Certilman and Haft. At the Closing, Certilman and
Haft will deliver or cause to be delivered to EXTECH or the Shareholders, as the
case may be:
(a)the EXTECH Additional Shares Purchase Price for their EXTECH Additional
Shares; and
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(b)their respective Employment Agreements and Stock Option Agreements.
ARTICLE XI
POST-CLOSING MATTERS
11.1 Further Assurances. On and after the Closing Date, the parties shall take
all such further actions and execute and deliver all such further instruments
and documents as may be necessary or appropriate to carry out the transactions
contemplated by this Agreement.
11.2 Agreement as to Voting. Each of Certilman, Haft and the Shareholders agree
that, during the eight (8) year period following the Closing, (i) he will vote
his respective shares of stock of EXTECH in favor of the others as a director of
EXTECH provided that the particular person in whose favor the vote would be
remains in the employ of EXTECH, (ii) in the event Certilman or Haft dies or
otherwise ceases to serve as a director of EXTECH, the Shareholders will vote
their respective shares of stock of EXTECH in favor of the designee of the
survivor of Certilman or Haft (or, in the case of a reason other than death, the
one remaining as a director), (iii) in the event Lang or Xxxxxxxxx dies or
otherwise ceases to serve as a director of EXTECH, Certilman and Haft will vote
their respective shares of stock of EXTECH in favor of the designee of the
survivor of Lang or Xxxxxxxxx (or, in the case of a reason other than death, the
one remaining as a director) and (iv) he will not vote his shares to (a)
increase the size of the Board of Directors of EXTECH or (b) amend the
Certificate of Incorporation or By-Laws of EXTECH, in each case without the
written approval of the others. In the event of the death or other cessation of
directorship of Certilman, Haft or either Shareholder during such period, unless
the Board vacancy is otherwise filled as provided for above, EXTECH will
promptly call a special meeting of stockholders to fill such vacancy.
11.3 Sales of EXTECH Shares. From time to time after the Closing and during any
time as any promissory note issued pursuant to either Shareholder's Employment
Agreement is outstanding, the particular Shareholder shall sell, as soon as
possible, the maximum number of shares of Common Stock of EXTECH that may be
permitted to be sold pursuant to any registration statement filed by EXTECH on
their behalf and/or pursuant to Rule 144, promulgated under the Securities Act,
and to use the proceeds thereof to satisfy in full his obligations thereunder.
Until the foregoing notes, the Additional Shares Notes and the Closing Loan
Notes have been satisfied in full, neither Shareholder shall sell or otherwise
dispose of any of his EXTECH Shares for less than Fair Market Value without the
prior written consent of EXTECH (which consent shall require the approval of the
Board of Directors of EXTECH) .
ARTICLE XII
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
12.1 Survival. The parties agree that their respective representations and
warranties contained in this Agreement shall survive the Closing for a period of
two (2) years, except that the
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representations and warranties set forth in Sections 3.1 (with respect to the
valid existence and good standing of the DCAP Entities), 3.2, 4.1 (with respect
to the valid existence and good standing of EXTECH) and 4.2 shall be of an
indefinite duration and the representations and warranties set forth in Sections
3.9 and 4.9 shall survive until the expiration of the applicable statute of
limitations period.
12.2 Indemnification.
12.2.1 General Indemnification Obligation of the Shareholders. From and
after the Closing, the Shareholders, jointly and severally, will reimburse,
indemnify and hold harmless EXTECH or any DCAP Entity, as the case may be (in
each case, an "Indemnified EXTECH Party"), against and in respect of:
(a) any and all damages, losses, deficiencies, liabilities, costs and
expenses incurred or suffered by any Indemnified EXTECH Party that result from,
relate to or arise out of:
(i) any misrepresentation, breach of warranty or nonfulfillment of any
agreement or covenant on the part of either Shareholder under this
Agreement, or from any misrepresentation in or omission from any
certificate, schedule, statement, document or instrument furnished to
EXTECH pursuant hereto or in connection with the negotiation, execution or
performance of this Agreement; and
(ii) any untrue statement or omission of a material fact in the Proxy
Statement which was based upon information furnished by either Shareholder
individually or on behalf of any DCAP Entity.
(b) any and all Actions, assessments, audits, fines, judgments, costs and
other expenses (including, without limitation, reasonable legal fees) incident
to any of the foregoing or to the enforcement of this Section 12.2.1.
12.2.2 General Indemnification Obligation of EXTECH. From and after the
Closing, EXTECH will reimburse, indemnify and hold harmless the Shareholders
against and in respect of:
(a) any and all damages, losses, deficiencies, liabilities, costs and
expenses incurred or suffered by the Shareholders that result from, relate to or
arise out of:
(i) any misrepresentation, breach of warranty or non-fulfillment of
any agreement or covenant on the part of EXTECH under this Agreement, or
from any misrepresentation in or omission from any certificate, schedule,
statement, document or instrument furnished to the Shareholders pursuant
hereto or in connection with the negotiation, execution or performance of
this Agreement; and
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(ii) any untrue statement or omission of a material fact in the Proxy
Statement except to the extent based upon information furnished by either
Shareholder individually or on behalf of any DCAP Entity.
(b) any and all Actions, assessments, audits, fines, judgments, costs and
other expenses (including, without limitation, reasonable legal fees) incident
to any of the foregoing or to the enforcement of this Section 12.2.2.
12.2.3 Method of Asserting Claims, Etc.
(a) In the event that any claim or demand for which either Shareholder
would be liable to an Indemnified EXTECH Party hereunder is asserted against or
sought to be collected from an Indemnified EXTECH Party by a third party, EXTECH
shall notify the Shareholders of such claim or demand, specifying the nature of
such claim or demand and the amount or the estimated amount thereof to the
extent then feasible (which estimate shall not be conclusive of the final amount
of such claim and demand) (the "Claim Notice"). The Shareholders shall
thereupon, at their sole cost and expense, defend the Indemnified EXTECH Party
against such claim or demand with counsel reasonably satisfactory to EXTECH.
(b) The Shareholders shall not, without the prior written consent of the
Indemnified EXTECH Party, consent to the entry of any judgment against the
Indemnified EXTECH Party or enter into any settlement or compromise which does
not include, as an unconditional term thereof (i.e., there being no requirement
that the Indemnified EXTECH Party pay any amount of money or give any other
consideration), the giving by the claimant or plaintiff to the Indemnified
EXTECH Party of a release, in form and substance satisfactory to the Indemnified
EXTECH Party, as the case may be, from all liability in respect of such claim or
litigation. If any Indemnified EXTECH Party desires to participate in, but not
control, any such defense or settlement, it may do so at its sole cost and
expense. If, in the reasonable opinion of the Indemnified EXTECH Party, any such
claim or demand or the litigation or resolution of any such claim or demand
involves an issue or matter which could have a materially adverse effect on the
business, operations, assets, properties or prospects of the Indemnified EXTECH
Party or its affiliates, then the Indemnified EXTECH Party shall have the right
to control the defense or settlement of any such claim or demand and its costs
and expenses shall be included as part of the indemnification obligation of the
Shareholders hereunder; provided, however, that the Indemnified EXTECH Party
shall not settle any such claim or demand without the prior written consent of
the Shareholders, which consent shall not be unreasonably withheld or delayed.
If the Indemnified EXTECH Party should elect to exercise such right, the
Shareholders shall have the right to participate in, but not control, the
defense or settlement of such claim or demand at their sole cost and expense.
(c)Notwithstanding anything hereinabove to the contrary, the Indemnified
EXTECH Party shall have the right to employ separate counsel (including local
counsel), and the Shareholders shall bear the reasonable fees, costs and
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expenses of such separate counsel (and local counsel) if (i) the use of counsel
chosen by the Shareholders to represent the Indemnified EXTECH Party would
present such counsel with a conflict of interest, (ii) the actual or potential
defendants in, or targets of, any such action include both the Indemnified
EXTECH Party and the Shareholders and the Indemnified EXTECH Party shall have
reasonably concluded that there may be legal defenses available to it which are
different from or additional to those available to the Shareholders, (iii) the
Shareholders shall not have employed counsel reasonably satisfactory to the
Indemnified EXTECH Party to represent the Indemnified EXTECH Party within a
reasonable time after notice of the institution of such action or (iv) the
Shareholders shall authorize the Indemnified EXTECH Party to employ separate
counsel at the expense of the Shareholders.
(d) In the event EXTECH should have a claim against the Shareholders
hereunder that does not involve a claim or demand being asserted against or
sought to be collected from it by a third party, EXTECH shall send a Claim
Notice with respect to such claim to the Shareholders. If the Shareholders
dispute their liability with respect to such claim or demand, such dispute shall
be resolved in accordance with Section 12.3 hereof; if the Shareholders do not
notify EXTECH, within twenty (20) days from receipt of the Claim Notice, that
they dispute such claim, the amount of such claim shall be conclusively deemed a
liability of the Shareholders hereunder.
(e) All claims for indemnification by the Shareholders under this Agreement
shall be asserted and resolved under the procedures set forth hereinabove by
substituting in the appropriate place "the Shareholders" for "the Indemnified
EXTECH Party" or "EXTECH", as the case may be, and "EXTECH" for "the
Shareholders".
12.2.4 Limitations.
(a) Notwithstanding anything herein to the contrary, as to matters which
are subject to indemnification pursuant to this Section 12.2, neither the
Shareholders, on the one hand, nor EXTECH, on the other hand, shall be liable
unless and until the aggregate claims, liabilities, losses, costs and expenses
to the Indemnified EXTECH Parties or the Shareholders, as the case may be,
resulting from such otherwise indemnifiable matters shall exceed a cumulative
aggregate of Twenty-Five Thousand Dollars ($25,000) (the "Indemnification
Threshold") and then shall only be liable for the excess above the
Indemnification Threshold. For purposes of this section only, in determining
whether there was any failure to disclose, breach or failure of observance or
performance or any untruth or incorrect statement with regard to any
representation, warranty, covenant, agreement or commitment, the terms
"material" and "materially," as used in such representations, warranties,
covenants, agreements and commitments, shall be deemed deleted therefrom.
(b)The total indemnification to which the Indemnified EXTECH Parties shall
be entitled under this Section 12.2 (exclusive of legal fees and expenses) shall
be limited to an amount not to exceed Nine Hundred Fifty Thousand Dollars
($950,000).
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(c)At the option of EXTECH, any indemnification obligation of EXTECH under
this Agreement may be satisfied in whole or in part through the issuance of
additional shares of EXTECH Common Stock to the Shareholders having an aggregate
Fair Market Value equal to such indemnification amount.
(d)At the option of the Shareholders, any indemnification obligation of the
Shareholders under this Agreement may be satisfied in whole or in part through
the redelivery to EXTECH of any of the EXTECH Shares or the delivery to EXTECH
of any other shares of Common Stock of EXTECH (including, without limitation,
the Xxxxxxxx Xxxxxx Shares), in each case having an aggregate Fair Market Value
equal to such indemnification amount.
12.3 Arbitration.
(a) All disputes under this Article XII shall be settled by binding
arbitration pursuant to the rules of the American Arbitration Association.
Arbitration may be commenced at any time by any party hereto giving written
notice to each other party to a dispute of its demand for arbitration, which
demand shall set forth the name and address of its arbitrator. Within twenty
(20) days of such notice, the other party shall select its arbitrator and so
notify the demanding party. Within twenty (20) days thereafter, the two
arbitrators so selected shall select the third arbitrator. In default of either
side naming its arbitrator as aforesaid or in default of the selection of the
third arbitrator as aforesaid, the American Arbitration Association shall
designate such arbitrator upon the application of either party. The arbitration
proceeding shall take place at a mutually agreeable location in Nassau County or
such other location as agreed to by the parties. The dispute shall be heard by
the arbitrators within thirty (30) days after selection of the third arbitrator.
The decision of the arbitrators shall be rendered within thirty (30) days after
the hearing. Each party shall pay its own expenses of arbitration and the
expenses of the arbitrators shall be equally shared; provided, however, that if,
in the opinion of the majority of the arbitrators, any claim for indemnification
or any defense or objection thereto was unreasonable, the arbitrators may
assess, as part of their award, all or any part of the arbitration expenses of
the other party (including reasonable attorneys' fees) and of the arbitrators
and the arbitration proceeding against the party raising such unreasonable
claim, defense or objection.
(b) To the extent that arbitration may not be legally permitted hereunder
and the parties to any dispute hereunder may not at the time of such dispute
mutually agree to submit such dispute to arbitration, any party may commence a
civil Action in a court of appropriate jurisdiction to resolve disputes
hereunder.
(c) The decision of a majority of the arbitrators shall be final, binding
and conclusive, shall be specifically enforceable, and judgment may be entered
upon it in accordance with applicable law in the appropriate court in the State
of New York with no right of appeal therefrom.
12.4 Other Rights and Remedies Not Affected. The indemnification rights of the
parties under this Article XII are independent of and in addition to such rights
EXTECH CORPORATION
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and remedies as the parties may have at law or in equity or otherwise for any
misrepresentation, breach of warranty or failure to fulfill any agreement or
covenant hereunder on the part of any party hereto, including without limitation
the right to seek specific performance, rescission or restitution, none of which
rights or remedies shall be affected or diminished hereby.
ARTICLE XIII
TERMINATION AND WAIVER
13.1 Termination.Anything herein or elsewhere to the contrary notwithstanding,
this Agreement may be terminated and the transactions provided for herein
abandoned at any time prior to the Closing:
(a)By mutual consent of the Board of Directors of EXTECH and the
Shareholders;
(b)By EXTECH if any of the conditions set forth in Article VII hereof shall
not have been fulfilled on or prior to the four month anniversary of the date
hereof, or shall have become incapable of fulfillment, in each case except as
such shall have been the result, directly or indirectly, of any action or
inaction by EXTECH, and shall not have been waived; or
(c)By the Shareholders, if any of the conditions set forth in Article VIII
hereof shall not have been fulfilled on or prior to the four month anniversary
of the date hereof, or shall have become incapable of fulfillment, in each case
except as such shall have been the result, directly or indirectly, of any action
or inaction by either Shareholder, and shall not have been waived.
If this Agreement is terminated as described above, this Agreement shall be
of no further force and effect, without any liability or obligation on the part
of any of the parties except for any liability which may arise pursuant to
Section 15.2 hereof or as a result of a party's willful failure to consummate
the transactions contemplated hereby or for any breach of any representation,
warranty or covenant.
13.2 Waiver. Any condition to the performance of the parties which legally may
be waived on or prior to the Closing Date may be waived at any time by the party
entitled to the benefit thereof by action taken or authorized by an instrument
in writing executed by the relevant party or parties. The failure of any party
at any time or times to require performance of any provision hereof shall in no
manner affect the right of such party at a later time to enforce the same. No
waiver by any party of the breach of any term, covenant, representation or
warranty contained in this Agreement as a condition to such party's obligations
hereunder shall release or affect any Liability resulting from such breach, and
no waiver of any nature, whether by conduct or otherwise, in any one or more
instances, shall be deemed to be or construed as a further or continuing waiver
of any such condition or of any breach of any other term, covenant,
representation or warranty of this Agreement.
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ARTICLE XIV
DEFINED TERMS
14.1 Defined Terms. As used herein, the terms below shall have the following
meanings. Any of such terms, unless the context otherwise requires, may be used
in the singular or plural, depending upon the reference.
"Action" shall mean any action, claim, suit, demand, litigation,
governmental or other proceeding, labor dispute, arbitral action, governmental
audit, inquiry, investigation, criminal prosecution, investigation or unfair
labor practice charge or complaint.
"Acquisition Purchase Price" shall have the meaning ascribed to it in
Section 2.3.1 hereof.
"ADA" shall mean the Americans with Disabilities Act of 1990.
"Additional Shares Notes" shall have the meaning ascribed to it in Section
2.4.1(b) hereof.
"Additional Shares Pledge Agreement" shall have the meaning ascribed to it
in Section 2.4.1(b) hereof.
"Auto Club" shall have the meaning ascribed to it in the Recitals hereof.
"Body" shall mean a federal, state, local, and foreign governmental or
other regulatory body.
"Books and Records" shall mean all books, ledgers, files, reports, plans,
drawings, records and lists, including, without limitation, all computer
programs and other software, of every kind relating to an entity's business,
operations, assets, liabilities, personnel, customers and suppliers.
"Buy Out Agreement" shall have the meaning ascribed to it in Section 7.14
hereof.
"Claim Notice" shall have the meaning ascribed to it in Section 12.2.3(a)
hereof.
"Closing" shall have the meaning ascribed to it in Section 10.1 hereof.
"Closing Date" shall have the meaning ascribed to it in Section 10.1
hereof.
"Closing Loans" shall have the meaning ascribed to it in Section 2.5.2
hereof.
"Closing Loan Notes" shall have the meaning ascribed to it in Section 2.5.2
hereof.
"Closing Notes" shall have the meaning ascribed to it in Section 2.4.1(b)
hereof.
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"Closing Pledge Agreements" shall have the meaning ascribed to it in
Section 2.5.2 hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Cold Comfort Letter" shall have the meaning ascribed to it in Section 7.11
hereof.
"Contract" shall mean any agreement, contract, note, lease, evidence of
indebtedness, purchase order, letter of credit, indenture, security or pledge
agreement, franchise agreement, undertaking, covenant not to compete, employment
agreement, license, instrument, obligation, commitment, course of dealing or
practice, understanding or arrangement, whether written or oral, to which a
particular Person is a party or is otherwise bound.
"Copyrights" shall mean registered copyrights, copyright applications and
unregistered copyrights.
"DCAP Balance Sheet" shall mean the combined balance sheet of the DCAP
Entities as of the DCAP Balance Sheet Date which is included as part of the DCAP
Financial Statements.
"DCAP Balance Sheet Date" shall mean December 31, 1997.
"DCAP Business" shall have the meaning set forth in the preamble hereof.
"DCAP Financial Statements" shall mean the combined financial statements of
the DCAP Entities and separate financial statements of each DCAP Entity, in each
case as of the Balance Sheet Date and for the year ended December 31, 1997,
attached hereto as Schedule 3.5.
"DCAP Opinions" shall have the meaning ascribed to it in Section 7.13
hereof.
"Default" shall mean any breach, default and/or other violation, and/or the
occurrence of any event that with or without the passage of time or the giving
of notice or both would constitute a breach, default or other violation, under,
or give any Person the right to accelerate, terminate or renegotiate, any
Contract.
"Derivative Securities" shall have the meaning ascribed to it in Section
3.2 hereof.
"Employment Agreement" shall have the meaning ascribed to it in Section 7.8
hereof.
"ERISA" shall have the meaning ascribed to it in Section 3.20(a) hereof.
"ERISA Notice" shall have the meaning ascribed to it in Section 3.20(i)
hereof.
"EXTECH Acquisition Shares" shall have the meaning ascribed to it in
Section 2.3.1 hereof.
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"EXTECH Management Additional Shares" shall have the meaning ascribed to it
in Section 2.4.1 hereof.
"EXTECH Additional Shares Purchase Price" shall have the meaning ascribed
to it in Section 2.4.1 hereof.
"EXTECH Balance Sheet" shall mean the consolidated balance sheet of EXTECH
as of the EXTECH Balance Sheet Date which is included as part of the SEC Report.
"EXTECH Balance Sheet Date" shall mean September 30, 1997.
"EXTECH Opinion" shall have the meaning ascribed to it in Section 8.12
hereof.
"EXTECH Shares" shall have the meaning ascribed to it in Section 2.4.1
hereof.
"Facilities" shall have the meaning ascribed to it in Section 3.27 hereof.
"Fair Market Value," when used with regard to EXTECH Common Stock, shall
mean Twenty- Five Cents ($.25) per share, subject to adjustment for stock
splits, reverse stock splits, stock dividends and like recapitalizations.
"IAH" shall have the meaning ascribed to it in Section 5.2 hereof.
"Indemnified EXTECH Party" shall have the meaning ascribed to it in Section
12.2.1 hereof.
"Information" shall have the meaning ascribed to it in Section 15.2 hereof.
"Initial Pledge Agreement" shall have the meaning ascribed to it in Section
2.5.1 hereof.
"Insurance Brokerage" shall have the meaning ascribed to it in the Recitals
hereof.
"Liability" shall mean any direct or indirect liability, obligation,
indebtedness, obligation, commitment, expense, claim, deficiency, guaranty or
endorsement of or by any Person of any type, whether accrued, absolute,
contingent, matured, unmatured or otherwise.
"Lien" shall mean any claim, lien, pledge, option, charge, restriction,
easement, security interest, deed of trust, mortgage, right-of-way,
encroachment, building or use restriction, conditional sales agreement,
encumbrance or other right of third parties, whether voluntarily incurred or
arising by operation of law, and includes, without limitation, any agreement to
give any of the foregoing in the future, and any contingent sale or other title
retention agreement or lease in the nature thereof.
"Listed Agreements" shall mean those Contracts described on Schedule 3.14.
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"Material Adverse Effect" shall mean any material adverse effect on the
business, properties, operations, assets, liabilities, condition (financial or
otherwise), or prospects of EXTECH, on the one hand, or the DCAP Entities, taken
as a whole, on the other hand.
"Materials of Environmental Concern" shall mean pollutants, contaminants,
hazardous or noxious or toxic materials or wastes.
"950,000 Additional Shares" shall have the meaning ascribed to it in
Section 2.4.1(b) hereof.
"$114,000 Loan" shall have the meaning ascribed to it in Section 2.5.3(a)
hereof.
"$114,000 Note" shall have the meaning ascribed to it in Section 2.5.3(a)
hereof.
"Other Pension Plans" shall have the meaning ascribed to it in Section
3.20(c) hereof.
"Patents" shall mean all patents, patent applications, registered designs
and registered design applications.
"Pension Plans" shall have the meaning ascribed to it in Section 3.20(b)
hereof.
"Pension and Welfare Plans" shall have the meaning ascribed to it in
Section 3.20(h) hereof.
"Permits" shall mean all licenses, permits, franchises, approvals,
authorizations, consents or orders of, or filings with, any and all Bodies.
"Person" shall mean and include an individual, a partnership, a joint
venture, a corporation, a limited liability company, a limited liability
partnership, a trust, an unincorporated organization and a government or other
department or agency thereof.
"Potential Offer" shall have the meaning ascribed to it in Section 5.1
hereof.
"Potential Transaction" shall have the meaning ascribed to it in Section
5.1 hereof.
"Premium Finance" shall have the meaning ascribed to it in the Recitals
hereof.
"Proprietary Rights" shall mean Copyrights, Patents, Trademarks, other
technology rights and licenses, computer software (including, without
limitation, any source or object codes thereof or documentation relating
thereto), trade secrets, franchises, inventions, designs, specifications, plans,
drawings, data bases, know-how, domain names, world wide web addresses and other
intellectual property rights used or under development.
"Proxy Statement" shall mean the proxy statement prepared by EXTECH in
connection with its seeking to obtain Stockholder Approval.
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"Restrictive Covenant Agreement" shall have the meaning ascribed to it in
Section 7.9 hereof.
"Required Waivers" shall have the meaning ascribed to it in Section 3.21(b)
hereof.
"SEC" shall mean the United States Securities and Exchange Commission.
"SEC Report" shall have the meaning ascribed to it in Section 4.5 hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Xxxxxxxx Xxxxxx" shall have the meaning ascribed to it in Section 2.4.2
hereof.
"Xxxxxxxx Xxxxxx Purchase" shall have the meaning ascribed to it in Section
2.4.2 hereof.
"Xxxxxxxx Xxxxxx Shares" shall have the meaning ascribed to it in Section
2.4.2 hereof.
"Stockholder Approval" shall mean approval by the stockholders of EXTECH of
(i) this Agreement and the transactions contemplated hereby, if required by
applicable law or otherwise sought by EXTECH; (ii) an amendment to the
Certificate of Incorporation of EXTECH pursuant to which (a) the number of
authorized shares of Common Stock of EXTECH is increased to at least 20,000,000,
(b) in the event the number of directors in office is less than four (4), then,
any action taken by the Board of Directors shall require the approval of all of
the directors then in office, and (c) no action required or permitted to be
taken at any annual or special meeting of stockholders of EXTECH may be taken
without a meeting, except upon the written consent of the holders of one hundred
percent (100%) of the shares of capital stock of the Company entitled to vote on
such action, unless such action has been authorized by the Board of Directors,
in which event such action may be taken by the written consent of the holders of
not less than a majority of the shares of capital stock entitled to vote on such
action; and (iii) an amendment to EXTECH's Amended and Restated 1990 Stock
Option Plan pursuant to which the number of shares of Common Stock authorized to
be issued thereunder is increased to at least 500,000 or the adoption of a new
stock option plan by EXTECH that provides for, among other things, the
authorization of at least 500,000 shares of Common Stock to be issued
thereunder.
"$311,000 Loan" shall have the meaning ascribed to it in Section 2.5.1
hereof.
"$311,000 Note" shall have the meaning ascribed to it in 2.5.1 hereof.
"$325,000 Loan" shall have the meaning ascribed to it in Section 2.5.3
hereof.
"$325,000 Note" shall have the meaning ascribed to it in Section 2.5.3
hereof.
"Tax Preparation" shall have the meaning ascribed to it in the Recitals
hereof.
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"Tax Services" shall mean DCAP Income Tax Services LLC.
"Trademarks" shall mean registered trademarks, registered service marks,
trademark and service xxxx applications and unregistered trademarks and service
marks.
"Voting Trust Agreement" shall have the meaning ascribed to it in Section
2.4.2 hereof.
"Welfare Plans" shall have the meaning ascribed to it in Section 3.20(h)
hereof.
ARTICLE XV
MISCELLANEOUS PROVISIONS
15.1 Expenses. Each of the parties shall bear its or his own expenses in
connection herewith.
15.2 Confidential Information. All information that a disclosing party furnishes
in connection with the transactions contemplated hereby (the "Information") will
be kept confidential, will be used solely in connection with the contemplated
transactions and will not, without prior written consent of the disclosing
party, be used or disclosed, directly or indirectly, in any manner whatsoever,
in whole or in part.
Notwithstanding anything hereinabove to the contrary, the obligations
imposed upon the parties herein shall not apply to Information:
(a)which is publicly available prior to the date hereof; or
(b)which hereafter becomes available to the public through no wrongful act
of the receiving party; or
(c)which was in the possession of the receiving party prior to the
commencement of negotiations between the parties with regard to the transactions
contemplated hereby and not subject to an existing agreement of confidence
between the parties; or
(d)which is received from a third party without restriction, not in
violation of an agreement of confidence and without breach of this Agreement;
(e)which is independently developed by the receiving party; or
(f)which is disclosed pursuant to a requirement or request of a government
agency, arbitrator or court.
Upon the request of a disclosing party, which may be made at any time
following any termination of this Agreement in accordance with the terms hereof,
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the receiving party will redeliver to the disclosing party any and all written
Information furnished to the receiving party and will not retain any copies
thereof.
15.3 Equitable Relief. The parties agree that the remedy at law for any breach
or threatened breach of the provisions of Section 15.2 will be inadequate and
the aggrieved party shall be entitled to injunctive relief to compel the
breaching party to perform or refrain from action required or prohibited
thereunder.
15.4 Publicity. Neither EXTECH, or the one hand, nor the Shareholders, directly
or through any DCAP Entity on the other hand, will issue any report, statement,
release or other public announcement pertaining to the matters contemplated by
this Agreement without the prior written consent of the other. Notwithstanding
the foregoing, EXTECH is permitted to make any disclosures or public
announcements of the transactions contemplated hereby and/or the terms thereof
without the prior written consent and approval of the Shareholders if it shall
determine that such disclosure is required in order for EXTECH to comply with
applicable securities laws and regulations.
15.5 Entire Agreement. This Agreement, including the schedules and exhibits
attached hereto, which are a part hereof, constitutes the entire agreement of
the parties with respect to the subject matter hereof. The representations,
warranties, covenants and agreements set forth in this Agreement and in the
financial statements, schedules or exhibits delivered pursuant hereto constitute
all the representations, warranties, covenants and agreements of the parties and
upon which the parties have relied, shall not be deemed waived or otherwise
affected by any investigation made by any party hereto and, except as may be
specifically provided herein, no change, modification, amendment, addition or
termination of this Agreement or any part thereof shall be valid unless in
writing and signed by or on behalf of the party to be charged therewith.
15.6 Notices. Any and all notices or other communications or deliveries required
or permitted to be given or made pursuant to any of the provisions of this
Agreement shall be deemed to have been duly given or made for all purposes when
in writing and hand delivered or sent by certified or registered mail, return
receipt requested and postage prepaid, overnight mail, nationally recognized
overnight courier or telecopier as follows:
If to EXTECH:
00 Xxxxxxx Xxxxxx
Xxxx Xxxxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxxxx, President
Telecopier Number: (000) 000-0000
EXTECH CORPORATION
53
With a copy to:
Certilman Balin Xxxxx & Xxxxx, LLP
00 Xxxxxxx Xxxxxx
Xxxx Xxxxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxxxxx, Esq.
Telecopier Number: (000) 000-0000
If to either Shareholder:
c/o DCAP
0000 Xxxxxxxxx Xxxxxxxx
Xxxxx 000
Xxxx Xxxxxx, Xxx Xxxx 00000
Telecopier: (000) 000-0000
With a copy to:
Ruskin, Moscou, Xxxxx & Faltischek, P.C.
000 Xxx Xxxxxxx Xxxx
Xxxxxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
Telecopier: (000) 000-0000
or at such other address as any party may specify by notice given to the other
party in accordance with this Section 15.6.
15.7 Choice of Law; Severability. This Agreement shall be governed by, and
interpreted and construed in accordance with, the laws of the State of New York,
excluding choice of law principles thereof. In the event any clause, section or
part of this Agreement shall be held or declared to be void, illegal or invalid
for any reason, all other clauses, sections or parts of this Agreement which can
be effected without such void, illegal or invalid clause, section or part shall
nevertheless continue in full force and effect.
15.8 Successors and Assigns; No Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
assigns; provided, however, that neither Shareholder nor EXTECH may assign any
of its rights or delegate any of its duties under this Agreement without the
prior written consent of the other, except that EXTECH shall have the right to
assign any or all of its rights hereunder to a wholly-owned subsidiary thereof.
15.9 Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, and all of which taken together shall
constitute one and the same instrument.
EXTECH CORPORATION
54
15.10 Facsimile Signatures. Signatures hereon which are transmitted via
facsimile shall be deemed original signatures.
15.11 Representation by Counsel; Interpretation. Each party acknowledges that he
or it has been represented by counsel in connection with this Agreement and the
transactions contemplated hereby. Accordingly, any rule or law or any legal
decision that would require the interpretation of any claimed ambiguities in
this Agreement against the party that drafted it has no application and is
expressly waived by the parties. The provisions of this Agreement shall be
interpreted in a reasonable manner to give effect to the intent of the parties
hereto.
15.12 Headings; Gender. The headings, captions and/or use of a particular gender
under sections of this Agreement are for convenience of reference only and do
not in any way modify, interpret or construe the intent of the parties or affect
any of the provisions of this Agreement.
EXTECH CORPORATION
55
WITNESS the execution of this Agreement as of the date first above written.
EXTECH CORPORATION
By:/s/ Xxxxxx X. Xxxxxxxxx
Xxxxxx X. Xxxxxxxxx, President
/s/ Xxxxxx X. Xxxxxxxxx
Xxxxxx X. Xxxxxxxxx
/s/ Xxx X. Xxxx
Xxx X. Xxxx
/s/ Xxxxx Xxxx
Xxxxx Xxxx
/s/ Xxxxxxx Xxxxxxxxx
Xxxxxxx Xxxxxxxxx
Agreed to:
DEALERS CHOICE AUTOMOTIVE
PLANNING INC.
By:/s/ Xxxxx Xxxx
Xxxxx Xxxx, President
EXTECH CORPORATION
