EXHIBIT 10.44
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is entered into as of June 28,
1996, by Letronix Acquisition Corp., a Nevada corporation ("Buyer"), and
Polyphase Corporation, a Nevada corporation ("Seller").
RECITALS
Seller desires to sell, and Buyer desires to purchase, 1,020,000 shares
(the "Shares") of capital stock of PC Networx America, Inc., a Nevada
corporation (the "Company"), being fifty-one percent (51%) of the outstanding
shares of the Common Stock, par value $.001 per share, of the Company (the
"Common Stock"), for the consideration and on the terms set forth in this
Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. SALE AND TRANSFER OF SHARES; CLOSING.
------------------------------------
1.1 SHARES. Subject to the terms and conditions of this Agreement, at
------
the Closing, Seller will sell and transfer the Shares to Buyer, and Buyer will
purchase the Shares from Seller.
1.2 PURCHASE PRICE. The purchase price (the "Purchase Price") for the
--------------
Shares will be equal to 51% of the book value of the outstanding shares of
Common Stock of the Company as of March 31, 1996, which is hereby deemed to be
equal to $2,500,000. The Purchase Price shall be subject to a post-Closing
adjustment as set forth in SECTION 1.5 hereof.
1.3 CLOSING. The purchase and sale (the "Closing") provided for in this
------
Agreement will take place at the offices of Seller at 00000 Xxxxxx Xxxxxxx, 0xx
Xxxxx, Xxxxxx, Xxxxx, at 10:00 a.m. (local time) on June 28, 1996 or at such
other time and place as the parties may agree (the "Closing Date"). Subject to
the provisions of SECTION 9, failure to consummate the purchase and sale
provided for in this Agreement on the date and time and at the place determined
pursuant to this SECTION 1.3 will not result in the termination of this
Agreement and will not relieve any party of any obligation under this Agreement.
1.4 CLOSING OBLIGATIONS. At the Closing:
-------------------
(a) Seller will deliver to Buyer:
(i) certificates representing the Shares, duly endorsed (or
accompanied by duly executed stock powers) (which Buyer will return to Seller as
collateral as hereinafter described);
(ii) a certificate executed by Seller to the effect that, except as
otherwise stated in such certificate, each of Seller's representations and
warranties in this Agreement was accurate
in all material respects as of the date of this Agreement and is accurate in all
material respects as of the Closing Date as if made on the Closing Date (giving
full effect to any supplements to the Disclosure Schedule (as hereinafter
defined) that were delivered by Seller to Buyer at or prior to the Closing
Date);
(b) Buyer will deliver to Seller the Purchase Price at Closing, as follows:
(i) cash in the amount of Four Hundred Seventy Five Thousand
Dollars ($475,000) by bank cashier's or certified check payable to the order of
Seller, or, at Seller's election, by wire transfer to accounts specified by
Seller;
(ii) One Million One Hundred Seventy Five Thousand (1,175,000)
shares of the Buyer's Class A Preferred Stock, par value $1.00 per share (the
"Preferred Stock"), having the designations, preferences and relative,
participating, optional and other rights as set forth on the Designation of
Class A Preferred Stock attached hereto as ANNEX A;
(iii) A secured promissory note in the amount of $850,000 (the
"Note") having the terms and provisions set forth in the form thereof attached
hereto as ANNEX B; and
(iv) a certificate executed by Buyer to the effect that, except as
otherwise stated in such certificate, each of Buyer's representations and
warranties in this Agreement was accurate in all material respects as of the
date of this Agreement and is accurate in all material respects as of the
Closing Date as if made on the Closing Date.
1.5 POST-CLOSING ADJUSTMENT. The Note issued to Seller at Closing shall
-----------------------
be subject to increase or decrease after the Closing, based upon the book value
of the Common Stock of the Company as of June 30, 1996, as set forth in this
SECTION 1.5. Promptly following the Closing, an auditor of nationally
recognized standing reasonably acceptable to both Seller and Buyer shall audit
the consolidated balance sheet of the Company and its subsidiaries as of June
30, 1996 and shall determine therefrom the book value of the outstanding shares
of Common Stock as of June 30, 1996 (the "Book Value") and shall report its
finding to both Seller and Buyer. The report of such auditor shall be final and
binding on both Seller and Buyer. In the event that the Book Value multiplied
by 51%, as such figure is rounded to the nearest whole number (the "Pro Rata
Book Value"), is less than $2,500,000, then the Seller shall promptly surrender
to Buyer the Note referred to in SECTION 1.4(b)(iii) above in exchange for a new
promissory note (the "New Note") with terms identical to the Note except that
the principal amount of such New Note shall be reduced to equal (i) $850,000
less (ii) the difference between the Pro Rata Book Value and $2,500,000;
provided, however, that in no event shall Seller be required to pay money to
Buyer as a result of the adjustment, if any, hereunder. In the event that the
Pro Rata Book Value is more than $2,500,000, then Seller shall promptly
surrender the Note referred to in SECTION 1.4(b)(iii) above in exchange for a
new promissory note (the "Alternate New Note") with terms identical to the Note
except that the principal amount of such Alternate New Note shall be increased
to equal (i) $850,000 plus (ii) the difference between $2,500,000 and the Pro
Rata Book Value. For purposes of this Agreement, if the New Note or the
Alternate New Note are issued, the capitalized
2
term "Note" as used herein shall be interpreted to mean the "New Note" or the
"Alternate New Note" where the context requires.
2. SPECIAL POST-CLOSING ITEMS.
--------------------------
(a) In connection with the acquisition contemplated hereby, Seller agrees
that following the Closing, it will use its best efforts to effect the
distribution to its public shareholders of shares of Common Stock representing
thirty percent (30%) of the outstanding shares of Common Stock (the "Spinoff"),
and that it will register such distribution with the Securities and Exchange
Commission and use its best efforts to cause the registration statement for such
distribution to be declared effective. If the registration statement relating
to the Spinoff is not declared effective by the Securities and Exchange
Commission on or prior to the date that is six (6) months following the Closing
Date (the "Termination Date"), Seller hereby grants Buyer an option (the
"Spinoff Option") to purchase such shares representing thirty percent (30%) of
the outstanding shares of Common Stock (the "Option Shares"). Such Spinoff
Option shall be exercisable by Buyer by written notice to Seller on or prior to
the date that is ten (10) days after the Termination Date. Assuming Buyer gives
written notice as described above, the closing of the purchase and sale of the
Option Shares shall be held no later than sixty days following the Termination
Date. The purchase price for the Option Shares shall be 30% of the Book Value
as of June 30, 1996 (as defined in Section 1.5), and such purchase price shall
consist of 20% of the purchase price in cash, a promissory note from Buyer to
Seller in original principal amount of 30% of the such purchase price (but
otherwise on substantially the same terms as the Note), and the remaining 50% of
such purchase price shall be payable by issuance of shares of Buyer's Preferred
Stock with a deemed value of $1.00 per share (but the number of such shares
issued shall be appropriately adjusted to account for any stock splits,
dividends and recapitalizations). Buyer covenants and agrees with Seller that
Seller shall not be obligated to sell Buyer the Option Shares unless Buyer (i)
enters into a purchase agreement containing representations and warranties
substantially similar to those made by the Buyer contained herein, (ii) enters
into a purchase agreement containing such other terms and provisions as are
necessary, in the opinion of counsel for the Seller, to comply with applicable
law, and (iii) agrees that the Option Shares shall become subject to the same
restrictions and other provisions provided for the Shares in Section 11.16
hereof. In such purchase agreement, (i) Seller shall not be obligated to make
representations and warranties to Seller , other than such representations and
warranties as are substantially similar to those contained in Sections 3.1, 3.2,
3.3 and 3.4 hereof and (ii) such representations and warranties of Seller shall
survive for a period not to exceed two (2) years after the closing of the
purchase and sale of the Option Shares.
(b) Seller agrees that it will cause its Affiliates that own shares of
Common Stock, to grant to Buyer the option to acquire the shares of Common Stock
owned by Seller and such Affiliates upon the terms and conditions set forth in
the form of the Option Agreement attached hereto as ANNEX C.
3. REPRESENTATIONS AND WARRANTIES OF SELLER.
----------------------------------------
Seller represents and warrants to Buyer as follows:
3
3.1 ORGANIZATION AND GOOD STANDING. PART 3.1 of the Disclosure Schedule
------------------------------
delivered by Seller to Buyer at or prior to the Closing Date (the "Disclosure
Schedule") contains a complete and accurate list for each of the Company and
each of its subsidiaries (collectively, the "Acquired Companies") of its name,
its federal employer identification number, its jurisdiction of incorporation
and the other jurisdictions in which it is authorized to do business. Each
Acquired Company is a corporation duly organized, validly existing, and in good
standing under the laws of its jurisdiction of incorporation, with full
corporate power and authority to conduct its business as it is now being
conducted, to own or use the properties and assets that it purports to own or
use. Each Acquired Company is duly qualified to do business as a foreign
corporation and is in good standing under the laws of each state or other
jurisdiction in which either the ownership or use of the properties owned or
used by it, or the nature of the activities conducted by it, requires such
qualification.
3.2 AUTHORITY; NO CONFLICT.
----------------------
(a) This Agreement constitutes the legal, valid, and binding obligation of
Seller, enforceable against Seller in accordance with its terms. Seller has the
absolute and unrestricted right, power, authority, and capacity to execute,
deliver and perform this Agreement.
(b) Neither the execution and delivery of this Agreement nor the
consummation or performance of any of the transactions contemplated by this
Agreement will, directly or indirectly (with or without notice or lapse of
time):
(i) contravene, conflict with, or result in a violation of any
provision of the certificate of incorporation or bylaws of the Acquired
Companies;
(ii) contravene, conflict with, or result in a violation of, or
give any governmental body or other person the right to challenge any of the
transactions contemplated by this Agreement or to exercise any remedy or obtain
any relief under, any federal, state or local order, law, ordinance or
regulation or any injunction, judgment, order or decree of any court,
administrative agency or other governmental body to which any Acquired Company,
or any of the assets owned or used by any Acquired Company, may be subject;
(iii) contravene, conflict with, or result in a violation or
breach of any provision of, or give any person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of, or
to cancel, terminate, or modify, any contracts applicable to the Acquired
Companies that would have a material adverse effect on the Acquired Companies;
or
(iv) result in the imposition or creation of any charge, claim,
lien, option, pledge, security interest or restriction of any kind upon or with
respect to any of the assets owned or used by any Acquired Company.
3.3 OWNERSHIP; CAPITALIZATION.
-------------------------
4
(a) Seller is or will be on the Closing Date the record and beneficial
owner and holder of all the Shares, free and clear of any charge, claim, lien,
option, pledge, security interest or restriction of any kind.
(b) The authorized equity securities of the Company consist of (i)
100,000,000 shares of common stock, par value $.001 per share, of which
2,000,000 shares are issued and outstanding and (ii) 50,000,000 shares of
preferred stock, par value $.001 per share, of which no shares are issued and
outstanding. The Shares represent all of the issued and outstanding capital
stock of the Company on the Closing Date. Upon transfer of the Shares to Buyer
at the Closing, Buyer will own the entire legal and beneficial interest in the
Shares, free and clear of all liens, claims and encumbrances and subject to no
legal or equitable restriction of any kind. With the exception of the Company,
all of the outstanding equity securities and other securities of each Acquired
Company are owned of record and beneficially by one or more of the Acquired
Companies, free and clear of any charge, claim, lien, option, pledge, security
interest or restriction of any kind. All of the outstanding equity securities of
each Acquired Company have been duly authorized and validly issued and are fully
paid and nonassessable. Except as set forth in PART 3.3 of the Disclosure
Schedule, there are no agreements, contracts, obligations, promises or
undertakings relating to the issuance, sale, or transfer of any equity
securities or other securities of any Acquired Company.
3.4 FINANCIAL MATTERS. Seller has delivered to Buyer: (i) the pro forma
-----------------
consolidated balance sheets of the Acquired Companies as at the years September
30, 1995, and the related pro forma consolidated statements of income, changes
in stockholders' equity, and cash flow for each of the fiscal years then ended
(the "Financial Statements"), and (ii) an unaudited pro forma consolidated
balance sheet of the Acquired Companies as at March 31, 1996, and the related
unaudited consolidated statements of income, changes in stockholders' equity,
and cash flow for the six months then ended, including in each case the notes
thereto (the "Interim Financial Statements"). Such Financial Statements fairly
present in all material respects the financial condition and the results of
operations, changes in stockholders' equity, and cash flow of the Acquired
Companies as at the respective dates of and for the periods referred to in such
financial statements, all in accordance with generally accepted accounting
principles, subject, in the case of the Interim Financial Statements, to normal
recurring year-end adjustments (the effect of which will not, individually or in
the aggregate, be materially adverse) and the absence of notes (which, if
presented, would not differ materially from those included in the Financial
Statements); the financial statements referred to in this SECTION 3.4 reflect
the consistent application of such accounting principles throughout the periods
involved, except as disclosed in the notes to such Financial Statements.
3.5 BOOKS AND RECORDS. The books of account, minute books, stock record
-----------------
books, and other records of the Acquired Companies, all of which have been made
available to Buyer, are complete and correct in all material respects. The
minute books of the Acquired Companies contain accurate and complete records of
all meetings held of, and corporate action taken by, the stockholders and the
Boards of Directors. At the Closing, all of those books and records will be in
the possession of the Acquired Companies.
5
3.6 TITLE TO PROPERTIES. The Acquired Companies own (with good and
-------------------
marketable title in the case of real property, subject only to the matters
permitted by the following sentence) all the properties and assets (whether
real, personal, or mixed and whether tangible or intangible) that they purport
to own, including all of the properties and assets reflected in the Financial
Statements and the Interim Financial Statements (except for assets held under
capitalized leases and personal property sold since the date of the Financial
Statements and the Interim Financial Statements, as the case may be, in the
ordinary course of business), and all of the properties and assets purchased or
otherwise acquired by the Acquired Companies since the date of the Financial
Statements (except for personal property acquired and sold since the date of the
Financial Statements in the ordinary course of business and consistent with past
practice).
3.7 CONDITION AND SUFFICIENCY OF ASSETS. The buildings, structures, and
-----------------------------------
equipment of the Acquired Companies are structurally sound, are in good
operating condition and repair, and are adequate for the uses to which they are
being put, and none of such buildings, structures, or equipment is in need of
maintenance or repairs except for ordinary, routine maintenance and repairs that
are not material in nature or cost. The building, structures, and equipment of
the Acquired Companies are sufficient for the continued conduct of the Acquired
Companies' businesses after the Closing in substantially the same manner as
conducted prior to the Closing.
3.8 NO UNDISCLOSED LIABILITIES. The Acquired Companies have no material
--------------------------
liabilities or obligations of any nature (whether known or unknown and whether
absolute, accrued, contingent, or otherwise) except for liabilities or
obligations reflected or reserved against in the Financial Statements or the
Interim Financial Statements and current liabilities incurred in the ordinary
course of business since the respective dates thereof.
3.9 TAXES. (a) Except as set forth on PART 3.9 of the Disclosure
-----
Schedule, all federal, state and local tax returns, reports, declarations,
information returns and estimates that the Acquired Companies were required to
file ("Tax Returns") have been filed for the Acquired Companies for all periods
for which such were due. All Taxes (as defined below) of the Acquired
Companies, whether or not disclosed in the Tax Returns, have been paid in full
and all such Tax Returns are true, correct and complete in all material
respects. The federal income tax returns of the Acquired Companies have not
been audited by the Internal Revenue Service. There is not in force any
extension of the date on which any Tax Return was or is due to be filed by or
with respect to the Acquired Companies, or any waiver or agreement by them for
the extension of time for the payment of any Tax. The reserve for Tax liability
(rather than any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) shown on the Financial Statements is
adequate to cover the liability of the Acquired Companies for all Taxes
(including employee income tax withholding, social security and unemployment
taxes) to the date thereof.
(b) There is no claim against any of the Acquired Companies with respect to
any Taxes and no assessment, deficiency or adjustment has been asserted or
proposed with respect to any Tax Return which would, if determined adversely to
the Acquired Companies, have a material adverse effect on the Acquired
Companies. All prior audits and examinations of the Acquired Companies have
been disclosed to Buyer.
6
(c) Each Acquired Company has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder or other third party.
(d) For purposes of this Agreement, "Tax" (and, with correlative meaning,
"Taxes") shall mean any federal, state, local or foreign income, gross receipts,
windfall profit, severance, property, alternative minimum or add-on minimum
production, sales, use, license, excise, franchise, employment, payroll,
withholding, ad valorem, or other taxes, assessments, duties, fees, levies or
other governmental charges, together with any interest, penalty or addition to
tax, or additional amount imposed by any governmental authority.
3.10 EMPLOYEE BENEFITS. PART 3.10 of the Disclosure Schedule contains a
-----------------
complete and accurate list of all plans or other obligations, arrangements, or
customary practices, whether or not legally enforceable, to provide benefits,
other than salary, as compensation for services rendered, to present or former
officers, directors, employees, or agents ("Benefits"). The Acquired Companies,
with respect to all Benefits are, and each Benefit is, in material compliance
with the Employee Retirement Income Security Act of 1974 ("ERISA"), the IRC, and
other applicable laws.
3.11 PROCEEDINGS. There are currently no pending lawsuits,
-----------
administrative proceedings or investigations ("Proceedings") against any of the
Acquired Companies or to which any of their assets is subject and Seller is not
aware of any threatened Proceedings. None of the Acquired Companies is subject
to any currently existing order, writ, injunction or decree relating to its
operations.
3.12 ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as set forth in PART
-------------------------------------
3.12 of the Disclosure Schedule, since the date of the Financial Statements,
there has not been any material adverse change in the financial condition,
results of operation, business, prospects, assets or liabilities, of any of the
Acquired Companies, except for changes in the ordinary course of business
consistent with historical experience.
3.13 CONTRACTS. PART 3.13 of the Disclosure Schedule contains a complete
---------
and accurate list of (i) all current or pending contracts, commitments and
leases (of real or personal property), written or otherwise, between any of the
Acquired Companies and any party which are material to the operations of the
Acquired Companies and that cannot be canceled without penalty upon thirty (30)
days' notice (collectively, the "Material Contracts"); (ii) all patents,
copyrights, trade names, trademarks and service marks used or owned by any of
the Acquired Companies, and all licenses or agreements relating thereto; (iii) a
list of all leases, contracts or agreements for which consents of any private
persons or governmental bodies is required for the consummation of the
transactions contemplated by this Agreement, or for the preventing of any
termination of any material right, privilege, license or agreement of, or any
loss or disadvantage to, any of the Acquired Companies or Buyer upon
consummation of the transactions contemplated by this Agreement; and (iv) all
real property owned or leased by the Acquired Companies.
3.14 ENVIRONMENTAL MATTERS. To Seller's knowledge, each Acquired Company
---------------------
is, and at all times has been, in material compliance with, and has not been and
is not in material
7
violation of or liable under, any environmental law. To Seller's knowledge, no
toxic chemicals or hazardous wastes have been deposited or disposed of on any
property owned by the Acquired Companies and none of such property has suffered
any material environmental damage due to the Acquired Companies operations.
3.15 EMPLOYEES. PART 3.15 of the Disclosure Schedule contains a complete
---------
and accurate list of the following information for each employee of the Acquired
Companies, including each employee on leave of absence or layoff status:
employer; name; job title; current compensation paid or payable and any change
in compensation since September 30, 1995.
3.16 CERTAIN PAYMENTS. To Seller's knowledge, no Acquired Company or
----------------
director, officer, agent, or employee of any Acquired Company, or any other
person associated with or acting for or on behalf of any Acquired Company, has
directly or indirectly (a) made any contribution, gift, bribe, rebate, payoff,
influence payment, kickback, or other payment to any person, private or public,
regardless of form, whether in money, property, or services (i) to obtain
favorable treatment in securing business, (ii) to pay for favorable treatment
for business secured, (iii) to obtain special concessions or for special
concessions already obtained, for or in respect of any Acquired Company or any
Affiliate (as defined in the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) of an Acquired Company, or (iv) in violation of any federal,
state or local order, law, ordinance or regulation, (b) established or
maintained any fund or asset that has not been recorded in the books and records
of the Acquired Companies.
3.17 DISCLOSURE.
----------
(a) The Company has filed with the Securities and Exchange Commission all
reports required to be filed by the Exchange Act since at least October 1, 1995
and none of such filings contains any misstatement of a material fact or omits
to state a material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, as regards the
Acquired Companies, as the case may be.
(b) The Company has delivered to Buyer true and correct copies of all
reports filed with the Securities and Exchange Commission by the Company
pursuant to the Exchange Act since October 1, 1995.
3.18 NO MISSTATEMENTS OR OMISSIONS. No representation or warranty of
-----------------------------
Seller in this Agreement and no statement in the Disclosure Schedule omits to
state a material fact necessary to make the statements herein or therein, in
light of the circumstances under which they were made, not misleading.
3.19 RELATIONSHIPS WITH AFFILIATES. Except as set forth in PART 3.19 of
-----------------------------
the Disclosure Schedule:
(a) No Seller or any Affiliate of Seller or of any Acquired Company has, or
since January 1, 1995, has had, any interest in any property (whether real,
personal, or mixed and whether tangible or intangible), used in or pertaining to
the Acquired Companies' businesses.
8
(b) No Seller or any Affiliate of Seller or of any Acquired Company is, or
since January 1, 1995, has owned (of record or as a beneficial owner) an equity
interest or any other financial or profit interest in, a person that has had
business dealings or a material financial interest in any transaction with any
Acquired Company other than business dealings or transactions conducted in the
ordinary course of business with the Acquired Companies at substantially
prevailing market prices and on substantially prevailing market terms. Except
as set forth in PART 3.19 of the Disclosure Schedule, no Seller or any Affiliate
of Seller or of any Acquired Company is a party to any agreement, contract,
obligation, promise or undertaking with, or has any claim or right against, any
Acquired Company.
3.20 BROKERS OR FINDERS. Seller and its agents have incurred no
------------------
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payment in connection with this
Agreement.
4. REPRESENTATIONS AND WARRANTIES OF BUYER.
---------------------------------------
Buyer represents and warrants to Seller as follows:
4.1 ORGANIZATION AND GOOD STANDING. Buyer is a corporation duly
------------------------------
organized, validly existing, and in good standing under the laws of the State of
Nevada.
4.2 AUTHORITY; NO CONFLICT.
----------------------
(a) This Agreement constitutes the legal, valid, and binding obligation of
Buyer, enforceable against Buyer in accordance with its terms. Buyer has the
absolute and unrestricted right, power, and authority to execute, deliver and
perform its obligations under this Agreement.
(b) Neither the execution and delivery of this Agreement by Buyer nor the
consummation or performance of any of the transactions contemplated by this
Agreement by Buyer will give any person the right to prevent, delay, or
otherwise interfere with any of the transactions contemplated by this Agreement
pursuant to:
(i) any provision of Buyer's certificate of incorporation or
bylaws;
(ii) any resolution adopted by the board of directors or the
stockholders of Buyer;
(iii) any federal, state or local order, law, ordinance or
regulation or injunction, judgment, order or decree of any court, administrative
agency or other governmental body to which Buyer may be subject; or
(iv) any agreement, contract, obligation, promise or undertaking to
which Buyer is a party or by which Buyer may be bound.
9
(c) Buyer is not and will not be required to obtain any consent from any
person in connection with the execution and delivery of this Agreement or the
consummation or performance of any of the transactions contemplated by this
Agreement.
4.3 INVESTMENT IN SHARES.
--------------------
(a) Buyer is acquiring the Shares for its own account and not with a
view to their distribution within the meaning of Section 2(11) of the Securities
Act.
(b) Buyer has received all information it believes necessary to make
an informed decision about its acquisition of the Shares.
(c) Each of the equity owners of Buyer is an "accredited investor" as
such term is defined in Rule 501(a) under the Securities Act.
(d) Buyer understands that the Shares are not registered under federal
or state securities laws and may not be offered, sold, transferred or otherwise
disposed of except pursuant to a registration statement or an exemption from
registration under those laws.
(e) Buyer acknowledges that the certificates representing the Shares
may bear a legend substantially as follows:
THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
UNDER ANY APPLICABLE STATE LAW. THEY MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR PLEDGED WITHOUT (1) REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY APPLICABLE STATE LAW, OR (2) AN OPINION OF COUNSEL
(SATISFACTORY TO THE COMPANY) THAT REGISTRATION IS NOT REQUIRED.
4.4 CERTAIN PROCEEDINGS. There is no pending proceeding against Buyer
-------------------
that challenges, or may have the effect of preventing, delaying, making illegal,
or otherwise interfering with, any of the transactions contemplated by this
Agreement. To Buyer's knowledge, no such proceeding has been threatened.
4.5 BROKERS OR FINDERS. Buyer and its officers and agents have incurred
------------------
no obligation or liability, contingent or otherwise, for brokerage or finders'
fees or agents' commissions or other similar payment in connection with this
Agreement and will indemnify and hold Seller harmless from any such payment
alleged to be due by or through Buyer as a result of the action of Buyer or its
officers or agents.
5. COVENANTS OF SELLER PRIOR TO CLOSING DATE.
-----------------------------------------
5.1 ACCESS AND INVESTIGATION. Between the date of this Agreement and the
------------------------
Closing Date, Seller will, and will cause each Acquired Company and its
directors, officers and agents to,
10
(a) afford Buyer and its directors, officers and agents and prospective lenders
and their representatives (collectively, "Buyer's Advisors") full and free
access to each Acquired Company's personnel, properties, contracts, books and
records, and other documents and data, (b) furnish Buyer and Buyer's Advisors
with copies of all such contracts, books and records, and other existing
documents and data as Buyer may reasonably request, and (c) furnish Buyer and
Buyer's Advisors with such additional financial, operating, and other data and
information as Buyer may reasonably request.
5.2 OPERATION OF THE BUSINESSES OF THE ACQUIRED COMPANIES. Between the
-----------------------------------------------------
date of this Agreement and the Closing Date, Seller will, and will cause each
Acquired Company to conduct the business of such Acquired Company only in the
ordinary course of business and in material compliance with all applicable laws,
rules and regulations.
5.3 NEGATIVE COVENANTS. Between the date of this Agreement and the
------------------
Closing Date, Seller will not, and will cause each Acquired Company not to,
without prior notice to Buyer: (i) make any changes in its capital structure,
(ii) incur any liability or obligation other than current liabilities incurred
in the ordinary and usual course of business, (iii) incur any indebtedness for
borrowed money, (iv) make any loans or advances other than advances to employees
and owner-operators, in the ordinary and usual course of business, (v) mortgage,
pledge or subject to any encumbrance any of its assets or properties, (vi) sell
or transfer any of its assets or properties except in the ordinary and usual
course of business, (vii) make any investment of a capital nature, except in the
ordinary and usual course of business, (viii) adopt or amend in any material
respect any collective bargaining agreement or employee benefit plan, or (ix)
enter into any contract, agreement, or other commitment which is material to the
business, assets, properties, or financial position of the Acquired Companies.
5.4 BEST EFFORTS. Between the date of this Agreement and the Closing
------------
Date, Seller will use its best efforts to cause the conditions in SECTIONS 7 and
8 to be satisfied.
6. COVENANTS OF BUYER.
------------------
6.1 APPROVALS OF GOVERNMENTAL BODIES. As promptly as practicable after
--------------------------------
the date of this Agreement, Buyer will, and will cause each of its Affiliates
to, make all filings required by federal, state or local laws, orders,
ordinances or regulations to be made by them to consummate the transactions
contemplated by this Agreement. Between the date of this Agreement and the
Closing Date, Buyer will, and will cause each Affiliate to, (i) cooperate with
Seller with respect to all filings that Seller is required by federal, state or
local laws, orders, ordinances or regulations to make in connection with the
transactions contemplated by this Agreement, and (ii) cooperate with Seller in
obtaining all consents identified in PART 3.13 of the Disclosure Schedule.
6.2 BEST EFFORTS. Between the date of this Agreement and the Closing
------------
Date, Buyer will use its best efforts to cause the conditions in SECTIONS 7 and
8 to be satisfied.
11
6.3 ACTIONS WITH RESPECT TO THE ACQUIRED COMPANIES AND BUYER. Buyer
--------------------------------------------------------
covenants and agrees that, after the Closing and for so long as any shares of
Preferred Stock issued to Polyphase or any amounts under the Note remain
outstanding:
(a) it will comply, and cause the persons it elects or causes to be elected
as directors and officers of the Company and the Acquired Companies to comply,
with its and their obligations under federal and state securities laws and its
and their fiduciary duties to the Company's shareholders;
(b) it will acquire shares, receive payments and otherwise engage in
transactions with the Acquired Companies only on terms that are fair to the
Company and its shareholders;
(c) it will, and it will cause each of the Acquired Companies, to:
(i) preserve and maintain in full force and effect its corporate
existence and good standing under the laws of its state of incorporation or
organization and all other states where it is legally required to be qualified
to do business as a foreign corporation;
(ii) preserve and maintain in full force and effect all material
rights, privileges, qualifications, licenses and franchises necessary in the
normal conduct of its business;
(iii) use its reasonable efforts, in the ordinary course, to
preserve its business organization and preserve the goodwill and business of the
customers, suppliers and others having business relations with it;
(iv) maintain and preserve all its property and the property of the
Acquired Companies in good working order and condition, ordinary wear and tear
excepted, except where failure to do so would not have a material adverse
effect.
(v) maintain, and shall cause each Acquired Company to maintain,
with financially sound insurance companies, insurance with respect to its
properties and business, against such casualties and contingencies, of the
kinds, covering the risks, and in the relative proportionate amounts, usually
carried by companies engaged in businesses similar to that of the Company;
(vi) except to the extent that the failure to do so would have a
material adverse effect, it will and it will cause the Acquired Companies to,
pay and discharge as the same shall become due and payable, all their respective
obligations and liabilities, including without limitation:
(A) all tax liabilities, assessments and governmental charges
or levies upon it or its properties or assets, unless the same are being
contested in good faith by appropriate proceedings and adequate reserves in
accordance with GAAP are being maintained by the Company or such Subsidiary; and
12
(B) all lawful claims which any of Buyer or the Acquired
Companies is obligated to pay, which are due and which, if unpaid, would likely
by law become a Lien upon its property;
(vii) comply, and will cause each Acquired Company to, comply, in
all material respects with all requirements of law and with the directions of
any governmental authority having jurisdiction over it or its business, except
such
(A) as may be contested in good faith or as to which a bona
fide dispute may exist, and
(B) as to which such failure to comply would not have a
material adverse effect on Buyer or the Acquired Companies.
(d) neither it nor any Acquired Company will, merge, consolidate with or
into, or convey, transfer, lease or otherwise dispose of (whether in one
transaction or in a series of transactions) all or substantially all of its
assets (whether now owned or hereafter acquired)
(e) neither it nor the Company will declare, pay or make a dividend or
other distribution on its capital stock;
(f) neither it nor any Acquired Company will create any stock option,
bonus, profit sharing, stock purchase, deferred compensation, retainer, pension,
retirement or other compensation, benefit, welfare or incentive plans or
contracts without the prior approval of Seller, which approval shall not be
unreasonably withheld;
(g) no Acquired Company will, without the prior written consent of Seller
(which consent will not be unreasonably withheld), organize any subsidiary or
acquire any interest in or control of another person, whether by merger,
consolidation or purchase of the stock, assets or inventories of another person;
(h) neither it nor any Acquired Company will, without the prior written
consent of Seller (i) amend its Articles of Incorporation (including by a
Certificate of Designation), (ii) amend its Bylaws in a manner which would
result in such Bylaws conflicting with any provisions of this Agreement or of
the Shareholders' Agreement, or (iii) effect a reclassification or
recapitalization of its outstanding capital stock;
(i) neither it nor any Acquired Company will lend money to any person;
(j) neither it nor any Acquired Company will take any action to place it in
dissolution, liquidation or receivership.
13
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE.
---------------------------------------------------
Buyer's obligation to purchase the Shares and to take the other actions
required to be taken by Buyer at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may
be waived by Buyer, in whole or in part):
7.1 ACCURACY OF REPRESENTATIONS. All of Seller's representations and
---------------------------
warranties in this Agreement must have been accurate in all material respects as
of the date of this Agreement, and must be accurate in all material respects as
of the Closing Date as if made on the Closing Date.
7.2 SELLER'S PERFORMANCE.
--------------------
(a) All of the covenants and obligations that Seller is required to perform
or to comply with pursuant to this Agreement at or prior to the Closing, must
have been duly performed and complied with in all material respects.
(b) Each document required to be delivered pursuant to SECTION 1.4 must
have been delivered.
7.3 CONSENTS. Each of the consents identified in PART 3.13 of the
--------
Disclosure Schedule must have been obtained and must be in full force and
effect.
7.4 ADDITIONAL DOCUMENTS. Each of the following documents must have been
--------------------
delivered to Buyer:
(a) the documents necessary to effect the resignation of each of the
noncontinuing directors and officers of each of the Acquired Companies, to be
effective not later than the Closing Date;
(b) the documents necessary to effect the election of one (1) director
designated by Buyer to the Board of Directors of the Company; and
(c) such other documents as Buyer may reasonably request for the purpose of
(i) evidencing the accuracy of any of Seller's representations and warranties,
(ii) evidencing the performance by Seller of, or the compliance by Seller with,
any covenant or obligation required to be performed or complied with by Seller,
or (iii) evidencing the satisfaction of any condition referred to in this
SECTION 7.
7.5 NO PROCEEDINGS. Since the date of this Agreement, there must not have
--------------
been with respect to Buyer (i) any effective injunction, writ, or temporary
restraining order of any nature issued by a court or governmental agency of
competent jurisdiction directing that the proposed acquisition not be
consummated or (ii) any action, suit, or proceeding pending or threatened by or
before any court or governmental body in which it is or may be sought to
prohibit, substantially
14
delay, or rescind the proposed acquisition, or to limit in any way Buyer's right
to acquire the Acquired Companies.
8. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE.
-----------------------------------------------------
Seller's obligation to sell the Shares and to take the other actions
required to be taken by Seller at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may
be waived by Seller, in whole or in part):
8.1 ACCURACY OF REPRESENTATIONS. All of Buyer's representations and
---------------------------
warranties in this Agreement must have been accurate in all material respects as
of the date of this Agreement and must be accurate in all material respects as
of the Closing Date as if made on the Closing Date.
8.2 BUYER'S PERFORMANCE.
-------------------
(a) All of the covenants and obligations that Buyer is required to perform
or to comply with pursuant to this Agreement at or prior to the Closing must
have been performed and complied with in all material respects.
(b) Buyer must have delivered each of the documents required to be
delivered by Buyer pursuant to SECTION 1.4 and must have paid the Purchase Price
required to be made by Buyer pursuant to SECTION 1.4(b).
8.3 CONSENTS. Each of the consents identified in PART 3.13 of the
--------
Disclosure Schedule must have been obtained and must be in full force and
effect.
8.4 ADDITIONAL DOCUMENTS. Buyer must have caused the following documents
--------------------
to be delivered to Seller:
(a) such documents as Seller may reasonably request for the purpose of (i)
evidencing the accuracy of any representation or warranty of Buyer, (ii)
evidencing the performance by Buyer of, or the compliance by Buyer with, any
covenant or obligation required to be performed or complied with by Buyer, or
(iii) evidencing the satisfaction of any condition referred to in this SECTION
8.
8.5 NO PROCEEDINGS. Since the date of this Agreement, there must not have
--------------
been with respect to Seller (i) any effective injunction, writ, or temporary
restraining order of any nature issued by a court or governmental agency of
competent jurisdiction directing that the proposed acquisition not be
consummated or (ii) any action, suit, or proceeding pending or threatened by or
before any court or governmental body in which it is or may be sought to
prohibit, substantially delay, or rescind the proposed acquisition, or to limit
in any way Seller's right to sell the Acquired Companies.
15
9. TERMINATION.
-----------
9.1 TERMINATION EVENTS. This Agreement may, by notice given prior to or
------------------
at the Closing, be terminated:
(a) by either Buyer or Seller if a material breach of any provision of this
Agreement has been committed by the other party and such breach has not been
waived;
(b) (i) by Buyer if any of the conditions in SECTION 7 has not been
satisfied as of the Closing Date or if satisfaction of such a condition is or
becomes impossible (other than through the failure of Buyer to comply with its
obligations under this Agreement) and Buyer has not waived such condition on or
before the Closing Date; or (ii) by Seller, if any of the conditions in SECTION
8 has not been satisfied of the Closing Date or if satisfaction of such a
condition is or becomes impossible (other than through the failure of Seller to
comply with its obligations under this Agreement) and Seller has not waived such
condition on or before the Closing Date;
(c) by mutual consent of Buyer and Seller; or
(d) by either Buyer or Seller if the Closing has not occurred (other than
through the failure of any party seeking to terminate this Agreement to comply
fully with its obligations under this Agreement) on or before July 15, 1996, or
such later date as the parties may agree upon.
9.2 EFFECT OF TERMINATION. Each party's right of termination under
---------------------
SECTION 9.1 is in addition to any other rights it may have under this Agreement
or otherwise, and the exercise of a right of termination will not be an election
of remedies. If this Agreement is terminated pursuant to SECTION 9.1, all
further obligations of the parties under this Agreement will terminate, except
that the obligations in SECTIONS 11.1 and 11.3 will survive; provided, however,
that if this Agreement is terminated by a party because of the breach of the
Agreement by the other party or because one or more of the conditions to the
terminating party's obligations under this Agreement is not satisfied as a
result of the other party's failure to comply with its obligations under this
Agreement, the terminating party's right to pursue all legal remedies will
survive such termination unimpaired.
10. INDEMNIFICATION; REMEDIES.
-------------------------
10.1 SURVIVAL. The representations of Seller contained in SECTION 3
--------
hereof will survive the Closing for a period of two (2) years.
10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLER. Seller will
------------------------------------------------
indemnify and hold harmless Buyer, the Acquired Companies, and their respective
directors, officers, stockholders, controlling persons, and affiliates
(collectively, the "Indemnified Persons") for, and will pay to the Indemnified
Persons the amount of, any loss, liability, claim, damage, expense (including
costs of investigation and defense and reasonable attorneys' fees) or diminution
of value, whether or not involving a third-party claim (collectively,
"Damages"), arising, directly or indirectly, from or in connection with any
breach of the representations made in SECTIONS 3.17 and 3.19.
16
The remedies provided in this SECTION 10.2 will be the exclusive remedies
available to Buyer or the other Indemnified Persons for any breach of this
Agreement or the conduct of the business of the Acquired Companies prior to the
Closing Date.
10.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER. Buyer will
-----------------------------------------------
indemnify and hold harmless Seller from and will pay to Seller the amount of any
Damages arising, directly or indirectly, from or in connection with any breach
of the representations made in SECTIONS 4.2(a), 4.3 or 4.5.
The remedies provided in this SECTION 10.3 will be the exclusive remedies
available to Seller for any breach of this Agreement.
10.4 TIME LIMITATIONS. If the Closing occurs, neither party will have
----------------
liability (for indemnification or otherwise) with respect to any representation,
unless on or before the first anniversary of the Closing Date the other party
notifies the party of a claim specifying the factual basis of that claim in
reasonable detail to the extent then known by the other party.
10.5 FLOOR ON AMOUNT--SELLER. Seller will have no liability (for
-----------------------
indemnification or otherwise) to Buyer unless the amount of Damages sought is in
the aggregate at least $50,000.
10.6 [INTENTIONALLY LEFT BLANK].
--------------------------
10.7 PROCEDURE FOR INDEMNIFICATION--THIRD PARTY CLAIMS.
-------------------------------------------------
(a) Promptly after receipt by an indemnified party of notice of the
commencement of any proceeding against it, such indemnified party will, if a
claim is to be made against an indemnifying party, give notice to the
indemnifying party of the commencement of such claim, but the failure to notify
the indemnifying party will not relieve the indemnifying party of any liability
that it may have to any indemnified party, except to the extent that the
indemnifying party demonstrates that the defense of such action is prejudiced by
the indemnifying party's failure to give such notice.
(b) If any proceeding referred to in SECTION 10.9(a) is brought against an
indemnified party and it gives notice to the indemnifying party of the
commencement of such proceeding, the indemnifying party will be entitled to
participate in such proceeding and, to the extent that it wishes (unless (i) the
indemnifying party is also a party to such proceeding and the indemnified party
determines in good faith that joint representation would be inappropriate, or
(ii) the indemnifying party fails to provide reasonable assurance to the
indemnified party of its financial capacity to defend such proceeding and
provide indemnification with respect to such proceeding), to assume the defense
of such proceeding with counsel satisfactory to the indemnified party and, after
notice from the indemnifying party to the indemnified party of its election to
assume the defense of such proceeding, the indemnifying party will not, as long
as it diligently conducts such defense, be liable to the indemnified party under
this SECTION 10 for any fees of other counsel or any other expenses with respect
to the defense of such proceeding, in each case subsequently incurred by the
indemnified party in connection with the defense of such proceeding, other than
17
reasonable costs of investigation. If the indemnifying party assumes the defense
of a proceeding, (i) no compromise or settlement of such claims may be effected
by the indemnifying party without the indemnified party's consent unless (A)
there is no finding or admission of any violation of federal, state or local
laws, orders, ordinances or regulations or any violation of the rights of any
person and no effect on any other claims that may be made against the
indemnified party, and (B) the sole relief provided is monetary damages that are
paid in full by the indemnifying party; and (ii) the indemnified party will have
no liability with respect to any compromise or settlement of such claims
effected without its consent. If notice is given to an indemnifying party of the
commencement of any proceeding and the indemnifying party does not, within ten
days after the indemnified party's notice is given, give notice to the
indemnified party of its election to assume the defense of such proceeding, the
indemnifying party will be bound by any determination made in such proceeding or
any compromise or settlement effected by the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified party determines in
good faith that there is a reasonable probability that a proceeding may
adversely affect it or its affiliates other than as a result of monetary damages
for which it would be entitled to indemnification under this Agreement, the
indemnified party may, at its own expense, participate in the defense,
compromise, or settlement of such proceeding, but the indemnifying party will
not be bound by any determination of a proceeding so defended or any compromise
or settlement effected without its consent (which may not be unreasonably
withheld).
10.8 PROCEDURE FOR INDEMNIFICATION--OTHER CLAIMS. A claim for
-------------------------------------------
indemnification for any matter not involving a third-party claim may be asserted
by notice to the party from whom indemnification is sought.
11. GENERAL PROVISIONS.
------------------
11.1 EXPENSES. Except as otherwise expressly provided in this Agreement,
--------
each party to this Agreement will bear its respective expenses incurred in
connection with the preparation, execution, and performance of this Agreement
and the transactions contemplated by this Agreement, including all fees and
expenses of agents, representatives, counsel, and accountants.
11.2 PUBLIC ANNOUNCEMENTS. Buyer will keep this Agreement strictly
--------------------
confidential and may not make any disclosure of this Agreement or the
transactions contemplated by this Agreement to any person. The Company will
issue any press release or other publicity, if at all, at such time and in such
manner as it shall determine in its sole discretion. Buyer will not contact or
have any dealings with the Acquired Companies' employees, customers, and
suppliers without the consent of Seller.
11.3 CONFIDENTIALITY. Between the date of this Agreement and the
---------------
Closing Date, Buyer and Seller will maintain in confidence, and will cause the
directors, officers, employees, agents, and advisors of Buyer and the Acquired
Companies to maintain in confidence, and not use to the detriment of another
party or an Acquired Company any written, oral, or other information obtained in
confidence from another party or an Acquired Company in connection with this
18
Agreement or the transactions contemplated by this Agreement, unless (a) such
information is already known to such party or to others not bound by a duty of
confidentiality or such information becomes publicly available through no fault
of such party, (b) the use of such information is necessary or appropriate in
making any filing or obtaining any consent or approval required for the
consummation of the transactions contemplated by this Agreement, or (c) the
furnishing or use of such information is required by legal proceedings.
If the transactions contemplated by this Agreement are not consummated,
each party will return all of such written information as the other party has
provided.
11.4 NOTICES. All notices, consents, waivers, and other communications
-------
under this Agreement must be in writing and will be deemed to have been duly
given when (a) delivered by hand (with written confirmation of receipt), (b)
sent by telecopier (with written confirmation of receipt), provided that a copy
is mailed by registered mail, return receipt requested, or (c) when received by
the addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):
Seller:
Polyphase Corporation
00000 Xxxxxx Xxxxxxx
0xx Xxxxx
Xxxxxx, Xxxxx 00000
Attention: Xxxx X. Xxxxxx
Facsimile No.: (000) 000-0000
with a copy to:
Jenkens & Xxxxxxxxx,
A Professional Corporation
0000 Xxxx Xxx.
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxxxxx
Facsimile No.: (000) 000-0000
19
Buyer:
Letronix Acquisition Corp.
0000 Xxxxx Xxxxxxxx Xxxxxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxx 00000
Attention: President
Facsimile No.: (000) 000-0000
with a copy to:
Xx Xxxxx, Esq.
2 Galleria Tower
00000 Xxxx Xxxx
Xxx 00, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Facsimile No.:
11.5 JURISDICTION; SERVICE OF PROCESS. Any action or proceeding seeking to
--------------------------------
enforce any provision of, or based on any right arising out of, this Agreement
may be brought against any of the parties in the courts of the State of Texas,
County of Dallas, and each of the parties consents to the jurisdiction of such
courts (and of the appropriate appellate courts) in any such action or
proceeding and waives any objection to venue laid therein. Process in any action
or proceeding referred to in the preceding sentence may be served on any party
anywhere in the world.
11.6 FURTHER ASSURANCES. The parties agree (a) to furnish upon request
------------------
to each other such further information, (b) to execute and deliver to each other
such other documents, and (c) to do such other acts and things, all as the other
party may reasonably request for the purpose of carrying out the intent of this
Agreement and the documents referred to in this Agreement.
11.7 WAIVER. The rights and remedies of the parties to this Agreement
------
are cumulative and not alternative. Neither the failure nor any delay by any
party in exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right, power,
or privilege will preclude any other or further exercise of such right, power,
or privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (a) no claim or right arising out of
this Agreement or the documents referred to in this Agreement can be discharged
by one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; (b) no waiver that may be
given by a party will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on one party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.
20
11.8 ENTIRE AGREEMENT AND MODIFICATION. This Agreement supersedes all
---------------------------------
prior agreements between the parties with respect to its subject matter and
constitutes (along with the documents referred to in this Agreement) a complete
and exclusive statement of the terms of the agreement between the parties with
respect to its subject matter. This Agreement may not be amended except by a
written agreement executed by the party to be charged with the amendment.
11.9 DISCLOSURE SCHEDULE. The Disclosure Schedule is incorporated into
-------------------
and shall be part of this Agreement.
11.10 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS. No party may
--------------------------------------------------
assign any of its rights under this Agreement without the prior consent of the
other parties, except that Buyer may assign any of its rights under this
Agreement to any subsidiary of Buyer. Subject to the preceding sentence, this
Agreement will apply to, be binding in all respects upon, and inure to the
benefit of the successors and permitted assigns of the parties. Nothing
expressed or referred to in this Agreement will be construed to give any person
other than the parties to this Agreement any legal or equitable right, remedy,
or claim under or with respect to this Agreement or any provision of this
Agreement. This Agreement and all of its provisions and conditions are for the
sole and exclusive benefit of the parties to this Agreement and their successors
and assigns.
11.11 SEVERABILITY. If any provision of this Agreement is held invalid
------------
or unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
11.12 SECTION HEADINGS, CONSTRUCTION. The headings of Sections in this
------------------------------
Agreement are provided for convenience only and will not affect its construction
or interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms.
11.13 TIME OF ESSENCE. With regard to all dates and time periods set
---------------
forth or referred to in this Agreement, time is of the essence.
11.14 GOVERNING LAW. This Agreement will be governed by the laws of
-------------
the State of Texas without regard to conflicts of laws principles.
11.15 COUNTERPARTS. This Agreement may be executed in one or more
------------
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
11.16 FURTHER COVENANTS OF BUYER AND THE COMPANY.
------------------------------------------
(a) Until the Termination Date, the Company shall not, and Buyer
shall not allow the Company to, issue common stock or other
21
securities convertible into or exchangeable for common stock
which represent more than 5% of its common stock on a fully
diluted basis.
(b) The Buyer covenants and agrees that, it in any election of
directors of the Company, it shall vote all shares of common
stock of the Company then held by Buyer ("Buyer Shares") to
elect a board of directors comprised of not less than three (3)
directors and not more than seven (7) directors, one (1) of
which shall be designated by Seller. In the event of any vacancy
in the board of directors of the Company, Buyer covenants and
agrees to vote all Buyer Shares and to otherwise use its best
efforts to fill such vacancy so that the board of directors will
include directors designated as provided above.
(c) Buyer agrees that the face of each certificate evidencing
shares of common stock held or to be held by Buyer shall bear an
endorsement (which shall be made conspicuous using capital
letters, bold face or contrasting type, underlining or similar
means) in substantially the following form:
"AS SET FORTH ON THE REVERSE HEREOF, THE SHARES
EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS AS CONTAINED IN A STOCK PURCHASE AGREEMENT,
DATED AS OF JUNE 28, 1996."
The reverse of each such certificate shall bear an endorsement
substantially as follows:
"THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS, INCLUDING A VOTING AGREEMENT, AS SET FORTH
IN A STOCK PURCHASE AGREEMENT, DATED AS OF JUNE 28,
1996, A COPY OF WHICH HAS BEEN DEPOSITED AT THE
PRINCIPAL OFFICE OF THE COMPANY."
(d) Buyer shall not, and the Company shall not recognize any
attempted, transfer, voluntarily or involuntarily, of Buyer
Shares unless such proposed transferee agrees to be bound by the
terms of this Agreement as a holder of Buyer Shares, and
specifically this Section 11.16 . Any attempted transfer in
violation of this Section 11.16 shall be void ab initio.
22
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first written above.
Seller:
POLYPHASE CORPORATION
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
Buyer:
LETRONIX ACQUISITION CORP.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
23
