March 5, 1999
Uniflex Acquisition Corp.
00 Xxxxx Xxxxxx
Xxx Xxxxxx, XX 00000
Ladies and Gentlemen:
Reference is made to the Agreement and Plan of Merger and Recapitalization
of even date herewith between Uniflex Acquisition Corp., a Delaware corporation
("Acquirer"), and Uniflex, Inc., a Delaware corporation (the "Company") (as such
agreement may be amended from time to time, the "Merger Agreement"; capitalized
terms used but not defined herein shall have the meanings set forth in the
Merger Agreement) pursuant to which (and subject to the terms and conditions
specified therein) Acquirer will be merged with and into the Company (the
"Merger").
As a condition to Acquirer entering into the Merger Agreement, Acquirer
has required that each Stockholder enter into, and each such Stockholder has
entered into, those Voting Agreements, dated as of the date hereof (the "Voting
Agreements").
Furthermore, as a condition to entering into a Voting Agreement, each of
the parties has required that the other parties execute and deliver this letter
agreement (this "Letter Agreement") setting forth certain expectations and
understandings of the parties.
For purposes hereof, the term "Stockholder" refers to any of the
Management Stockholders (as set forth on the signature pages hereto) and any of
the Sterling/Xxxx Xxxxx Investors (as set forth on the signature pages hereto).
To implement the foregoing and in consideration of the mutual agreements
contained herein, the parties hereby agree as follows:
1. Certain Understandings:
(a) Employment Agreements. Each of the parties hereby agrees that it is
contemplated that, at the Effective Time, each of the Employment Agreements,
dated as of the date hereof, between Acquirer and each of Xxxxxxx Xxxxx and
Xxxxxx X. Xxxxx (the "Employment Agreements"), shall remain in full force and
effect in accordance with their terms, unless previously terminated in
accordance with their respective terms.
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(b) Option Agreements. Each of the parties hereby agrees that at or
immediately after the Effective Time, the Surviving Corporation will grant the
83,221 options described below to each of the following persons in the amounts
set forth opposite such persons' respective names (so long as he or she is then
eligible to receive such options under the Surviving Corporation's Stock Option
Plan (the form of such Stock Option Plan and the form of option agreement for
the Management Stockholders having been circulated among the parties on or prior
to the date hereof)):
--------------------------------------------------------------------------------
Recipient No. Shares Vesting Exercise Price
--------- ---------- ------- --------------
--------------------------------------------------------------------------------
Xxxxxxx Xxxxx 11,884 Five Years - equal $7.57 (or 110%
Xxxxxx X. Xxxxx 11,844 monthly vesting thereof, if required
Xxxxxx Xxxxxx 11,884 for ISO treatment)
Xxx Xxxxxx 11,917
Xxxxxxx Xxxxxx 11,884
Xx Xxxxxxxxxx 11,884
Xxxx Xxxxx 11,884
--------------------------------------------------------------------------------
(c) Retained Shares. Each of the Stockholders acknowledges and agrees that
the shares designated as "Retained Shares" on Schedule I attached hereto shall
be treated as Retained Shares for purposes of the Merger Agreement, and, after
the Effective Time, shall represent shares of common stock of the Surviving
Corporation, all as more fully set forth in the Merger Agreement.
(d) Post-Closing Capitalization. Immediately after the Effective Time, the
capitalization of the Surviving Corporation will be as set forth on Schedule II
attached hereto.
(e) Post-Closing Shareholder Arrangements. Each of the parties hereto
acknowledges that the forms of stockholders agreement and registration rights
agreement of the Surviving Corporation, as circulated among the parties on or
prior to the date hereof, will be the stockholders agreement and registration
rights agreement among such parties and the Surviving Corporation immediately
after the Effective Time (subject to immaterial modifications which do not
disadvantage any particular party).
(f) Fee to SCM Management LLC. Each of the parties hereto acknowledges
that it is contemplated that at the Effective Time, the Surviving Corporation
will pay a fee of $499,999.00 to SCM Management LLC in consideration of its
services in connection with the Merger.
2. Representation of Acquirer to Stockholders. Acquirer represents and warrants
to each of the Management Stockholders as follows:
(a) Acquirer was formed solely for the purpose of engaging in the
transactions contemplated by the Merger Agreement.
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(b) As of the date hereof and immediately prior to the Effective Time,
except for (i) obligations or liabilities incurred in connection with its
incorporation or organization and the transactions contemplated by this Letter
Agreement, and (ii) the Merger Agreement and other agreements or arrangements
contemplated by the Merger Agreement or in furtherance of the transactions
contemplated thereby, Acquirer has not incurred, directly or indirectly, through
any Subsidiary or Affiliate, any obligations or liabilities or engaged in any
business activities of any type or kind whatsoever or entered into any
agreements or arrangements with any Person.
3. Information included in Securities Law Filings.
(a) Each party shall cooperate with the others in the preparation of the
Proxy Statement, the preparation by the appropriate filing parties of the
Schedule 13E-3 and the preparation by the appropriate filing parties of any
Schedule 13D required under the Exchange Act. Each party shall furnish all
information concerning him, her or it required to be included therein and, after
consultation with each other, shall respond promptly to any comments made by the
SEC with respect to any of the Proxy Statement, the Schedule 13E-3 and any
Schedule 13D.
(b) Each party agrees that the information supplied or to be supplied by
him, her or it in writing for inclusion in the Proxy Statement, the Schedule
13E-3 or any Schedule 13D shall not, at the time the Proxy Statement is mailed
or, in the case of any Schedule 13D, upon filing with the SEC, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading or, at the
time of the Special Meeting (as defined in the Merger Agreement), as then
amended or supplemented, or at the Effective Time, omit to state any material
fact necessary to correct any statement originally supplied by such party in
writing for inclusion in the Proxy Statement, the Schedule 13E-3 or any Schedule
13D which has become false or misleading. If at any time prior to the Effective
Time any event relating to any party or any of its Affiliates, or its
Affiliates' respective officers, directors, partners, managers, members or
shareholders should be discovered which should be set forth in an amendment of,
or a supplement to, such Proxy Statement, Schedule 13E-3 or Schedule 13D, such
party shall promptly so inform the Acquirer.
4. Confidentiality; No Hire.
(a) Each Management Stockholder agrees that for a period ending five years
after the Effective Time, such Management Stockholder will not disclose to any
other party (other than in connection with the performance of his duties for the
Company), unless required to do so by law, any Confidential Information relating
to the Company or to any Subsidiary or Affiliate thereof which information was
acquired during the course of such Management Stockholder's relationship with
the Company. As used in this Letter Agreement, the term "Confidential
Information" means information that is not generally known or available to the
public and that is used, developed or
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obtained by the Company or its Subsidiaries or Affiliates in connection with its
businesses, including but not limited to information relating to (i) products or
services; (ii) fees, costs or pricing structures; (iii) designs; (iv) computer
software, including operating systems, applications or program listings; (v)
flow charts, manuals or documentation; (vi) data bases; (vii) accounting or
business methods; (viii) inventions, devices, new developments, methods or
processes, whether patentable or unpatentable and whether or not reduced to
practice; (ix) customers or customer requirements, order levels or projections
and customer or client lists; (x) other copyrightable works; (xi) all technology
and trade secrets; and (xii) all similar or related information in whatever
form. Confidential Information will not include any information that has been
published or circulated in a form generally available to, or otherwise known by,
the public (other than through the fault of any Management Stockholder) prior to
the date any Management Stockholder proposes to disclose or use such
information.
(b) Each Management Stockholder agrees that for a period ending two years
after the Effective Time, without the prior written consent of the Company,
neither such Management Stockholder nor any business or enterprise with which
such Management Stockholder is associated as an officer, director or controlling
shareholder or other investor (in each case, with the power to direct or cause
the direction of the management of such business or enterprise) will employ or
attempt to employ any employee of the Company or any of its Subsidiaries or
joint ventures.
(c) For purposes of this Section 4, all references to the Company shall be
deemed to include the Surviving Corporation.
(d) This Section 4 shall not apply to Xxxxxxx Xxxxx and Xxxxxx Xxxxx,
whose Employment Agreements contain applicable provisions. To the extent that
this Section 4 is inconsistent with any written agreement between a Management
Stockholder and the Company (an "Existing Agreement"), the Existing Agreement
shall be controlling.
5. Further Assurances. From time to time, at the other parties' reasonable
request and without further consideration, each party hereto shall execute and
deliver such additional documents and take all such further reasonable action as
may be reasonably necessary or desirable to consummate and make effective, in
the most expeditious manner practicable, the transactions contemplated by this
Letter Agreement.
6. Termination. The obligations of the parties under this Letter Agreement
(other than the obligations under Sections 2, 3 and 4, which shall survive the
Effective Time) shall terminate upon the earlier of (i) the date the Merger
Agreement is terminated in accordance with its terms and (ii) immediately after
the Effective Time of the Merger. The termination of this Letter Agreement shall
not relieve any party from liability for any breach of this Letter Agreement,
any Voting Agreement, either of the Employment Agreements, or any other related
agreement or instrument.
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7. Miscellaneous.
(a) Entire Agreement; Assignment. This Letter Agreement (i) constitutes
the entire agreement among the parties with respect to the specific subject
matter hereof and supersedes all other prior agreements and understandings, both
written and oral (other than Existing Agreements referred to in Section 4),
among the parties with respect to the subject matter hereof and (ii) shall not
be assigned, by operation of law or otherwise, without the prior written consent
of the other parties. This Agreement shall inure to the benefit of the parties
hereto and their respective permitted successors and assigns and shall not inure
to the benefit of any other Person.
(b) Amendments. This Letter Agreement may not be modified, amended,
altered or supplemented except upon the execution and delivery of a written
agreement executed by (i) Acquirer, (ii) with respect to the Management
Stockholders, by Xxxxxxx Xxxxx and Xxxxxx Xxxxx, and (iii) the holders of a
majority of the shares of Common Stock of the Company held by the Sterling/Xxxx
Xxxxx Investors; provided that Acquirer, on the one hand, and any Stockholder,
on the other hand, may waive any of his, her or its rights hereunder without
obtaining the consent of any other party.
(c) Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by hand delivery, telegram, telex
or telecopy, or by mail (registered or certified mail, postage prepaid, return
receipt requested) or by any courier service, such as Federal Express, providing
proof of delivery. All communications hereunder shall be delivered to the
Stockholders at the addresses set forth in the Voting Agreements. All
communications hereunder shall be delivered to Acquirer as follows:
UNIFLEX ACQUISITION CORP.
c/o RFE Investment Partners
00 Xxxxx Xxxxxx
Xxx Xxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx
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c/o CMCO, Inc.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxxxx
copy to:
Battle Xxxxxx LLP
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxx Xxxxxxx, Esq.
copy to:
Xxxx Xxxxx & Xxxxxxx LLP
Xxx Xxxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx XXX, Esq.
Any notice to the Management Stockholders shall also be delivered to:
Xxxxxxxx Xxxxxx & Xxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxxx X. Xxxxxx, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
(d) Governing Law. This Letter Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
(e) Enforcement. The parties agree that irreparable damage would occur in
the event that any of the provisions of this Letter Agreement were not performed
in accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Letter Agreement and to enforce
specifically the terms and provisions of this Letter Agreement.
-7-
(f) Counterparts; Facsimile Signatures. This Letter Agreement may be
executed in two or more counterparts (which may be by facsimile), each of which
shall be deemed to be an original, but all of which shall constitute one and the
same Agreement.
(g) Descriptive Headings. The descriptive headings used herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Letter Agreement.
(h) Severability. Whenever possible, each provision or portion of any
provision of this Letter Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Letter Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or portion of any provision in such jurisdiction, and this
Letter Agreement will be reformed, construed and enforced in such jurisdiction
as if such invalid, illegal or unenforceable provision or portion of any
provision had never been contained herein.
8. Definitions; Construction. For purposes of this Letter Agreement:
"Affiliate" or "affiliate" shall mean, with respect to any Person, any
other Person that, directly or indirectly, controls or is controlled by or is
under common control with such Person. As used in this definition of
"affiliate", the term "control" and any derivatives thereof mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through ownership of voting
securities, by contract, or otherwise.
"Person" shall mean an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity.
9. Stockholder Capacity. Notwithstanding anything herein to the contrary, no
person executing this Letter Agreement who is, or becomes during the term
hereof, a director or officer of the Company makes any agreement or
understanding herein in his or her capacity as such director or officer, and the
agreements set forth herein shall in no way restrict any director or officer in
the exercise of his or her fiduciary duties as a director or officer of the
Company. Each Stockholder has executed this Letter Agreement solely in his or
her capacity as the record or beneficial holder of such Stockholder's Shares.
[Signature Pages Follow]
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IN WITNESS WHEREOF, Acquirer and each Stockholder have caused this Letter
Agreement to be duly executed as of the day and year first above written.
ACQUIRER:
UNIFLEX ACQUISITION CORP.
By: /s/ Xxxxx X. Xxxxxxx
Name: Xxxxx X. Xxxxxxx
Title: President
MANAGEMENT STOCKHOLDERS:
/s/ Xxxxxx X. Xxxxx
Xxxxxx X. Xxxxx
/s/ Xxxxxxx Xxxxx
Xxxxxxx Xxxxx
/s/ Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxx
/s/ Xxxxx X. Xxxxxx
Xxxxx X. Xxxxxx
/s/ Xxxxxxx X. Xxxxxx
Xxxxxxx X. Xxxxxx
/s/ Xxx X. Xxxxxx
Xxx X. Xxxxxx
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/s/ Xxxxxxx X. Xxxxxx
Xxxxxxx X. Xxxxxx
/s/ Xx X. Xxxxxxxxxx
Xx X. Xxxxxxxxxx
/s/ Xxxx X. Xxxxx
Xxxx X. Xxxxx
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XXXXXXXX/XXXX XXXXX INVESTORS:
CMNY CAPITAL, L.P.
By: /s/ Xxxxxx Xxxxxxxx
--------------------------
A General Partner
CMCO, INC.
By: /s/ Xxxxxx Xxxxxxxx
--------------------------
Name:
Title:
/s/ Xxxxxx Xxxxxxxx
------------------------------
Xxxxxx Xxxxxxxx
STERLING/XXXX XXXXX CAPITAL, INC.
By /s/ Xxxxxx Xxxxxx
Name: Xxxxxx Xxxxxx
Title: President
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Schedule I
Retained Shares
---------------
Xxxxxx X. Xxxxx 75,000
Xxxxxxx Xxxxx 75,000
Warner X. Xxxxxx 75,000
Xxxxx X. Xxxxxx 15,000
Xxxxxxx X. Xxxxxx 13,000
Xxx X. Xxxxxx 15,000
Xxxxxxx X. Xxxxxx 15,000
Xx X. Xxxxxxxxxx 13,000
Xxxx Xxxxx 26,000
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Schedule II
Capitalization Table
----------------------------------------------------------------
Voting Control Calculation
----------------------------------------------------------------
Fully Diluted Voting % Non-Voting % Total %
Investor Amount Price Shares Shares Voting Shares Non-voting Shares Ownership
--------------------------- ---------- ----- ------------- ------- ------- ---------- ---------- --------- ---------
RFE Investment Partners 5,250,000 7.57 693,527 246,729 39.80% 446,798 56.22% 693,527 49.0%
CMNY Capital, L.P. 1,834,211 7.57 242,300 86,201 13.90% 156,099 19.64% 242,300 17.1%
Sterling/Xxxx Xxxxx Capital 750,000 7.57 99,075 35,247 5.69% 63,828 8.03% 99,075 7.0%
CMCO, Inc. 415,684 7.57 54,912 19,535 3.15% 35,377 4.45% 54,912 3.9%
Xxxxxx Xxxxxxxx 22,301 7.57 2,946 1,048 0.17% 1,898 0.24% 2,946 0.2%
---------- ------------- ------- ------- ---------- ---------- --------- ---------
8,272,196 1,092,760 388,760 62.71% 704,000 88.58% 1,092,760 77.2%
Xxxxxxx Xxxxx 567,750 7.57 75,000 53,600 8.65% 21,400 2.69% 75,000 5.3%
Xxxxxx Xxxxx 567,750 7.57 75,000 49,400 7.97% 25,600 3.22% 75,000 5.3%
Xxxxxx Xxxxxx 567,750 7.57 75,000 51,800 8.36% 23,200 2.92% 75,000 5.3%
Xxxxxx Xxxxxx 98,410 7.57 13,000 8,200 1.32% 4,800 0.60% 13,000 0.9%
Xxxxx Xxxxxx 113,550 7.57 15,000 15,000 2.42% 0 0.00% 15,000 1.1%
Xxx Xxxxxx 113,550 7.57 15,000 7,100 1.15% 7,900 0.99% 15,000 1.1%
Xxxxxxx Xxxxxx 113,550 7.57 15,000 7,100 1.15% 7,900 0.99% 15,000 1.1%
Xx Xxxxxxxxxx 98,410 7.57 13,000 13,000 2.10% 0 0.00% 13,000 0.9%
Xxxx Xxxxx 196,820 7.57 26,000 26,000 4.19% 0 0.00% 26,000 1.8%
---------- ------------- ------- ------- ---------- ---------- --------- ---------
2,437,540 322,000 231,200 37.29% 90,800 11.42% 322,000 22.8%
----------
Subtotal 10,709,736
Allied Signal Pension Trust 7.57 0.00 0.00 0.0% 0 0 0 0
Management Options 7.57 0.00 0.00 0.0% 0 0 0 0
------------- ------- ------- ---------- ---------- --------- ---------
0.00 0.00 0.0% 0.00 0.00 0.00 0.00
Fully diluted shares 1,414,760 619,960 100.0% 794,800 100.0% 1,414,760 100.0%
============= ======= ======= ========== ========== ========= =========
SBIC Ownership 62.7%
Warrants 0.0%
Options 0.0%
Fully-Diluted
-------------------------------------------------------------
Voting Non-Voting Management Fully-diluted %
Inventor Shares Shares Options Shares Ownership
--------------------------- ----------- --------- ---------- ------------- ---------
RFE Investment Partners 246,729 446,798 0 693,527 41.7%
CMNY Capital, L.P. 86,201 156,099 0 242,300 14.6%
Sterling/Xxxx Xxxxx Capital 35,247 63,828 0 99,075 6.0%
CMCO, Inc. 19,535 35,377 0 54,912 3.3%
Xxxxxx Xxxxxxxx 1,048 1,898 0 2,946 0.2%
----------- --------- ---------- ------------- ---------
388,760 704,000 0.00 1,092,760 65.7%
Xxxxxxx Xxxxx 53,600 21,400 11,884 86,884 5.2%
Xxxxxx Xxxxx 49,400 25,600 11,884 86,884 5.2%
Xxxxxx Xxxxxx 51,800 23,200 0 75,000 4.5%
Xxxxxx Xxxxxx 8,200 4,800 11,884 24,884 1.5%
Xxxxx Xxxxxx 15,000 0 0 15,000 0.9%
Xxx Xxxxxx 7,100 7,900 11,917 26,917 1.6%
Xxxxxxx Xxxxxx 7,100 7,900 11,884 26,884 1.6%
Xx Xxxxxxxxxx 13,000 0.00 11,884 24,884 1.5%
Xxxx Xxxxx 26,000 0.00 11,884 37,884 2.3%
----------- --------- ---------- ------------- ---------
231,200 90,800 83,221 405,221 24.3%
---------
Subtotal 1,497,981
Allied Signal Pension Trust 0.00 0.00 0.00 83,221 5.0%
Management Options 0.00 0.00 0.00 83,221 5.0%
----------- --------- ---------- ------------- ---------
0.00 0.00 0.00 166,442 10.0%
Fully diluted shares 619,960 794,800 83,221 1,664,423 100.0%
=========== ========= ========== ============= =========
SBIC Ownership
Warrants 5.0%
Options 5.0%
