AGREEMENT OF PURCHASE AND SALE
THIS AGREEMENT dated as of the 23rd day of December, 1997 by and among
Service Assembly, Inc., a Massachusetts corporation (the "Company"), EA
Industries, Inc. a New Jersey corporation ("EAI" or the "Purchaser"), and the
shareholders listed on the signature pages hereof (the "Shareholders").
W I T N E S S E T H:
WHEREAS, the Company is engaged in the business of providing contract
manufacturing services, including designing and building electronic prototypes,
and quick turn assembly and testing of a wide range of products at a facility in
Wareham, Massachusetts (the "Facility") (such activities being hereinafter
referred to as the "Business");
WHEREAS, the Purchaser through its subsidiary Tanon Manufacturing, Inc., a
California corporation ("Tanon") is engaged in the business of providing
contract manufacturing services (including assembly and testing of a wide range
of products) at facilities in California and New Jersey (such activities being
hereinafter referred to as the "Purchaser's Business");
WHEREAS, the Shareholders are the holders of 935,600 shares of the common
stock, no par value (the "Common Stock"), of the Company, which shares
constitute all of the issued and outstanding shares of capital stock of the
Company (all such shares of Common Stock held by the Shareholders being
hereinafter referred to as the "Shares"). The two largest shareholders, Xxx X.
XxXxxxxx and Xxxxx Xxxxx (the "Management Shareholders") own 500,000 of the
Shares in the aggregate;
WHEREAS, effective on the date of the Closing (as hereinafter defined), the
Purchaser desires to acquire from the Shareholders all of the Shares, and the
Shareholders desire to sell the Shares to the Purchaser, on the terms and
subject to the conditions hereinafter set forth; and
WHEREAS, to induce the Purchaser to enter into this Agreement and perform
its obligations hereunder, the Shareholders have agreed to make the
representations, warranties, covenants and agreements of the Shareholders set
forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements hereinafter set forth, and intending to be legally bound, the
parties hereto hereby agree as follows:
SECTION I
PURCHASE AND SALE OF THE SHARES
A. Purchase and Sale of the Shares. Subject to the terms and conditions of
this Agreement and on the basis of the representations, warranties, covenants
and agreements herein contained each of the Shareholders hereby sells, assigns
and conveys to the Purchaser and the Purchaser hereby purchases, acquires and
accepts from each of the Shareholders, the number of Shares listed next to the
name of such Shareholder on Schedule 1 attached hereto and made a part hereof.
B. Purchase Price. The aggregate purchase price (the "Purchase Price") for
the Shares shall be three million seven hundred forty two thousand and four
hundred dollars ($3,742,400) payable at the price of four dollars ($4.00) for
each of the Shares by delivery of shares of common stock no par value of EAI
("EAI Common Stock"). The number of shares of EAI Common Stock to be delivered
shall be determined pursuant to Section V(G) of this Agreement.
C. Continued Employment. Xxxxx Xxxxx shall become an employee of the
Purchaser or a subsidiary of Purchaser at Closing pursuant to an employment
agreement in the form attached as Exhibit VI(B)(i)(b) attached hereto. Xxx X.
XxXxxxxx shall become a part-time employee of the Purchaser or a subsidiary of
Purchaser at Closing pursuant to a consulting agreement in the form attached as
Exhibit VI(B)(i)(b) attached hereto.
SECTION II
REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS OF THE COMPANY AND THE MANAGEMENT SHAREHOLDERS
The Company and the Management Shareholders, jointly and severally, hereby
represent and warrant to, and covenant and agree with, the Purchaser, as of the
date of the Closing that:
A. Organization and Qualification. The Company is duly organized, validly
existing and in good standing under the laws of the State of Massachusetts and
has full corporate power and authority to own its properties and to conduct the
business in which it is now engaged. The Company is in good standing in each
other jurisdiction wherein the failure to so qualify would have a material
adverse effect on its businesses or properties. The Company has no subsidiaries,
owns no capital stock or other proprietary interest, directly or indirectly, in
any other corporation, association, trust, partnership, joint venture or other
entity and has no agreement with any person, firm or corporation to acquire any
such capital stock or other proprietary interest. The Company has full corporate
power and authority, and all necessary approvals, permits, licenses and
authorizations to own its properties and to conduct the Business as currently
conducted and to enter into and consummate the transactions contemplated under
this Agreement. The copies of the Articles of Incorporation, By-Laws and minutes
of meetings of the Board of Directors of the Company which have been delivered
to the Purchaser are complete and correct.
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B. Authority. The execution and delivery of this Agreement by the Company,
the performance by the Company of its covenants and agreements hereunder and the
consummation by the Company of the transactions contemplated hereby have been
duly authorized by all necessary corporate action. This Agreement constitutes a
valid and legally binding obligation of the Company, enforceable against the
Company in accordance with its terms.
C. No Legal Bar; Conflicts. Neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated hereby,
violates any provision of the Articles of Incorporation or By-Laws of the
Company as amended or any statute, ordinance, regulation, order, judgment or
decree of any court or governmental agency or board, or conflicts with or will
result in any breach of any of the terms of or constitute a default under or
result in the termination of or the creation of any lien pursuant to the terms
of any contract or agreement to which the Company is a party or by which the
Company or any of its assets are bound. No consents, approvals or authorizations
of, or filings with, any governmental authority or any other person or entity
are required in connection with the execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby, except for required
consents, if any, to assignment of permits, certificates, contracts, leases and
other agreements as set forth in Schedule II(C) attached hereto.
D. Capitalization. The authorized capital stock of the Company consists of
1,000,000 shares of Common Stock, no par value, of which 935,600 shares are
issued and outstanding. All of the issued and outstanding shares of Common Stock
of the Company have been duly and validly authorized and issued and are fully
paid and non-assessable and are owned beneficially and of record by the
Shareholders as listed on Schedule I free and clear of any lien, encumbrance,
charge, security interest or claim whatsoever. There are no outstanding
subscriptions, warrants, options, calls, commitments or other rights or
agreements to which the Company or any of the Shareholders is bound relating to
the issuance, sale or redemption of shares of Common Stock or other securities
of the Company. There are no outstanding or authorized stock appreciation,
phantom stock, profit participation, or similar rights with respect to the
Company. There are no voting trusts, proxies or other agreements or
understandings with respect to the voting of the capital stock of the Company.
No shares of Capital Stock or other securities of the Company are reserved for
any purpose.
E. Financial Statements; No Undisclosed Liabilities. The Company and the
Shareholders have delivered to the Purchaser balance sheets of the Company as of
October 31, 1995, October 31, 1996 and October 31, 1997 and the related
statements of income, retained earnings and cash flows and the notes thereto, if
any, for the periods then ended (hereinafter referred to as the "Financial
Statements"). The Financial Statements are true and correct in all material
respects and have been prepared in accordance with generally accepted accounting
principles applied consistently throughout the periods involved. The Financial
Statements fully and fairly present in all material respects the financial
condition of the Company as at the dates thereof and the results of the
operations of the Company for the periods indicated and are consistent with the
books and records of the Company. The balance sheets contained in the Financial
Statements fairly reflect all liabilities of the Company of the types normally
reflected in balance sheets prepared in accordance with generally accepted
accounting principles or required
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to be reflected by accepted business practices as at the dates thereof. Except
to the extent set forth in or provided for in the balance sheet of the Company
as of October 31, 1997 included in the Financial Statements (the "1997 Balance
Sheet"), and except for current liabilities incurred in the ordinary course of
business on or after October 31, 1997 consistent with past practices (and not
materially different in type or amount), the Company has no liabilities or
obligations of any nature, whether accrued, absolute, contingent or otherwise,
whether due or to become due, whether properly reflected under generally
accepted accounting principles as a liability or a charge or reserve against an
asset or equity account, and whether the amount thereof is readily ascertainable
or not. A true and correct copy of the Financial Statements is attached hereto
as Schedule II(E).
F. Absence of Certain Changes. Subsequent to August 31, 1997, there has not
been any material adverse or, to the best knowledge of each of the Management
Shareholders, any prospective adverse change in the condition of the Business,
financial or otherwise, or in the results of the operations of the Company.
Without limiting the generality of the foregoing, since such date; (i) there has
not been a labor dispute or, to the best knowledge of each of the Management
Shareholders, any threatened labor dispute involving the employees of the
Company or any resignations or, to the best knowledge of each of the Management
Shareholders, any threatened resignations of key employees; (ii) there have been
no actual or, to the best knowledge of each of the Management Shareholders, any
threatened disputes pertaining to the Business with any major accounts of the
Company, or actual or, to the best knowledge of each of the Management
Shareholders, any threatened loss of business from any of the major accounts of
the Company; (iii) there has been no change in the methods or procedures for
billing or collection of customer accounts or recording of customer accounts
receivable or reserves for doubtful accounts with respect to the Company; or
(iv) the Company has not sold, leased, transferred, or assigned any of its
assets, tangible or intangible, other than for a fair consideration in the
ordinary course of business; (v) the Company has not entered into any agreement,
contract, lease, or license (or series of related agreements, contracts, leases,
and licenses) either involving more than $50,000 or outside the ordinary course
of business, other than for the sale of products or the purchase of supplies or
inventory; (vi) no party (including the Company) has accelerated, terminated,
modified, or canceled any agreement, contract, lease, or license (or series of
related agreements, contracts, leases, and licenses) involving more than $50,000
to which the Company is a party or by which the Company or its assets is bound,
except for change orders in the ordinary course of business; (vii) the Company
has not made any capital expenditure (or series of related capital expenditures)
either involving more than $50,000 or outside the ordinary course of business;
(viii) the Company has not made any capital investment in, any loan to, or any
acquisition of the securities or assets of, any other person (or series of
related capital investments, loans, and acquisitions) either involving more than
$10,000 or outside the ordinary course of business; (ix) the Company has not
delayed or postponed the payment of accounts payable and other liabilities; (x)
the Company has not canceled, compromised, waived, or released any right or
claim (or series of related rights and claims) either involving more than
$50,000 or outside the ordinary course of business; (xi) the Company has not
granted any license or sublicense of any rights under or with respect to any
Intellectual Property, except to the extent of any license implied in the sale
of a product; (xii) the Company has not experienced any damage, destruction, or
loss (whether or not covered by insurance) to its property; (xiii) the Company
has not
4
committed to do any of the foregoing; and (xiv) there has been no other event or
condition of any character, known to the Company or the Management Shareholders
or which in the exercise of reasonable diligence should be known to the Company
or the Management Shareholders, not disclosed in this Agreement pertaining to
and materially adversely affecting the Company or the Business.
G. Liabilities. The obligations of the Company represented on the balance
sheet of the Company as of the Closing Date, in accordance with generally
accepted accounting principles, as Mortgage Payable Plymouth, shall not exceed
$441,384 less the scheduled payments thereon between October 31, 1997 and
Closing. Subsequent to August 31, 1997, the Company has not (i) incurred any
bank indebtedness, entered into any leases, loan agreements or contracts,
obligations or arrangements of any kind, including, without limitation, for the
payment of money or property to any person, or (ii) permitted any liens or
encumbrances to attach to any of its assets, except for draws made in the
ordinary course of business under the Company's line of credit with Plymouth
Savings Bank.
H. No Dividends, Loans, etc. Except as disclosed in Schedule II(H),
subsequent to August 31, 1997, the Company has not declared or paid any dividend
or made any other distribution in respect of its capital stock or, directly or
indirectly, purchased, redeemed or otherwise acquired or disposed of any shares
of its capital stock; and the Company has not, except in the ordinary course of
business paid or discharged any outstanding indebtedness. Subsequent to August
31, 1997, the Company has paid all normal and recurring installments when due
and payable (i) of bank indebtedness, (ii) under leases and contractual
obligations and (iii) of other amounts due and payable to any persons. Except as
disclosed in Schedule II (H), subsequent to August 31, 1997, the Company has not
(i) made any loans or advances to the Shareholders or members of the families of
the Shareholders, (ii) except as set forth in Schedule II(H), repaid the
principal of or interest on any indebtedness of the Company to the Shareholders
or members of the families of the Shareholders, (iii) forgiven any principal of
or interest on any indebtedness of the Shareholders or members of the families
of the Shareholders to the Company, or (iv) paid or agreed to make any payments
(whether characterized as bonus payments or otherwise) other than normal
recurring payments of base salaries to any of the Shareholders or members of the
families of the Shareholders.
I. Real Property Owned or Leased. A list and description of all real
property owned by or leased to or by the Company or in which the Company has any
interest is set forth in Schedule II(I). All such leased real property is held
subject to written leases or other agreements which are valid and legal
enforceable in accordance with their respective terms, and, to the best
knowledge of each of the Management Shareholders, there are no existing defaults
or events of default, or events which with notice or lapse of time or both would
constitute defaults, thereunder on the part of the Company. Neither the Company
nor any of the Management Shareholders has any knowledge of any default or
claimed or purported or alleged default or state of facts which with notice or
lapse of time or both would constitute a default on the part of any other party
in the performance of any obligation to be performed or paid by such other party
under any lease referred to in Schedule II(I). Neither the Company nor any of
the Shareholders have received any
5
written or oral notice to the effect that any lease will not be renewed at the
termination of the term thereof or that any such lease will be renewed only at a
substantially higher rent.
J. Title to Assets; Condition of Property. Except as noted on Schedule
II(J) the Company has good and valid title to all Assets used in the Business
(the "Assets"), including, without limitation, the properties and assets
reflected in the 1997 Balance Sheet (except for assets leased under leases set
forth in Schedule II(J)). Except as noted on Schedule II(J) all of the Assets
currently used in the operation of the Business are owned by the Company or held
under valid leases with the Company as lessee. All such properties and assets
are in good condition and repair, are adequate and sufficient for all operations
conducted by the Company and have been maintained and serviced in accordance
with normal industry practice. None of the Assets is subject to any liens,
charges, encumbrances or security interests. To the best knowledge of each of
the Management Shareholders, none of the Assets (or uses to which they are put)
fails to conform with any applicable agreement, law, ordinance or regulation.
Except as set forth in Schedule II(J), the Company owns all the properties and
assets which have been located at or on any of the premises of the Company at
any time since December 31, 1995. The Facility and the other buildings owned by
the Company are located on a parcel of land containing approximately 1.72 acres
on Xxxxxxxx Road in Wareham (the land, the buildings, structures and other
improvements located on such parcel of land are referred to hereinafter as the
"Property"). The Company has good, indefeasible and marketable title in fee
simple to the Property, free and clear of all security interests, liens,
encumbrances, mortgages, pledges, equities, charges, assessments, easements,
covenants, restrictions, reservations, defects in title, encroachments, and
other burdens except as set forth on Schedule II(J). The Company has all
easements and rights of ingress and egress with respect to the Property and for
utilities and services necessary for all of its operations thereon.
K. Taxes. The Company has filed or caused to be filed on a timely basis all
federal, state, local, foreign and other tax returns, reports and declarations
(collectively, "Tax Returns") required to be filed by it. All Tax Returns filed
by or on behalf of the Company are true, complete and correct in all material
respects. The Company has paid all income, estimated, excise, franchise, gross
receipts, capital stock, profits, stamp, occupation, sales, use, transfer, value
added, property (whether real, personal or mixed), employment, unemployment,
disability, withholding, social security, workers' compensation and other taxes,
and interest, penalties, fines, costs and assessments (collectively, "Taxes"),
due and payable with respect to the periods covered by such Tax Returns (whether
or not reflected thereon). There are no tax liens on any of the properties or
assets, real, personal or mixed, tangible or intangible, of the Company. The
accrual for Taxes reflected in the Financial Statements accurately reflects the
total amount of all unpaid Taxes, whether or not disputed and whether or not
presently due and payable, of the Company as of the close of the period covered
by the Financial Statements. Except as set forth on Schedule II(K), since the
date the Company was incorporated, the Company has not incurred any tax
liability other than in the ordinary course of business. No Tax Return of the
Company has ever been audited. Except as set forth on Schedule II(K), no
deficiency in Taxes for any period has been asserted by any taxing authority
which remains unpaid at the date hereof (the results of any settlement being set
forth on Schedule II(K)), no written inquiries or notices have been received by
the Company from any taxing authority with respect to possible claims for
6
Taxes, the Company has no reason to believe that such an inquiry or notice is
pending or threatened, and there is no basis for any additional claims or
assessments for Taxes. The Company has not agreed to the extension of the
statute of limitations with respect to any Tax Return or tax period. The Company
has delivered to the Purchaser copies of the federal and state income Tax
Returns filed by the Company for the past three years and for all other past
periods as to which the appropriate statute of limitations has not lapsed.
The Company and the Shareholders have not filed a consent pursuant to
Section 341(f) of the Internal Revenue Code of 1986, as amended (the "Code"),
relating to collapsible corporations.
L. Permits; Compliance with Applicable Law.
(i) General. The Company is not in default under any, and, to the best
knowledge of each of the Management Shareholders, has complied with all,
statutes, ordinances, regulations and laws, orders, judgments and decrees of any
court or governmental entity or agency, relating to the Company, the Business or
the Assets as to which a default or failure to comply might result in a material
adverse affect on the Company or the Business. Neither the Company nor any of
the Management Shareholders have any knowledge of any basis for assertion of any
violation of the foregoing or for any claim for compensation or damages or
otherwise arising out of any violation of the foregoing. Neither the Company nor
any of the Management Shareholders have received any notification of any
asserted present or past failure to comply with any of the foregoing which has
not been satisfactorily responded to in the time period required thereunder.
(ii) Permits; Intellectual Property. Set forth in Schedule II(L) is a
complete and accurate list of all permits, licenses, approvals, franchises,
patents, registered and common law trademarks, service marks, tradenames,
copyrights (and applications for each of the foregoing), notices and
authorizations issued by governmental entities or other regulatory authorities,
federal, state or local (collectively the "Permits"), held by the Company in
connection with the Business. The Permits set forth in Schedule II(L) are all
the Permits required for the conduct of the Business in its present form. All
the Permits set forth in Schedule II(L) are in full force and effect, and
neither the Company nor any of the Management Shareholders has engaged in any
activity which would cause or permit revocation or suspension of any such
Permit, and no action or proceeding looking to or contemplating the revocation
or suspension of any such Permit is pending or, to the best knowledge of each of
the Management Shareholders, threatened. To the best knowledge of each of the
Management Shareholders, there are no existing defaults or events of default or
event or state of facts which with notice or lapse of time or both would
constitute a default by the Company or the Shareholder under any such Permit.
Neither the Company nor any of the Management Shareholders have any knowledge of
any default or claimed or purported or alleged default or state of facts which
with notice or lapse of time or both would constitute a default on the part of
any other party in the performance of any obligation to be performed or paid by
any other party under any Permit set forth in Schedule II(L). To the best
knowledge of each of the Management Shareholders, the use by the Company of any
proprietary rights relating to any Permits does not involve any claimed
infringement of such Permit or rights.
8
The consummation of the transactions contemplated hereby will in no way affect
the continuation, validity or effectiveness of the Permits set forth in Schedule
II(L) or require the consent of any person. Except as set forth on Schedule
II(L), the Company is not required to be licensed by, nor is it subject to the
regulation of, any governmental or regulatory body by reason of the conduct of
the Business in its present form.
(iii) Environmental.
(i) "Environmental, Health, and Safety laws" means the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
the Resource Conservation and Recovery Act of 1976, and the Occupational Safety
and Health Act of 1970, each as amended, together with all other laws (including
rules, regulations codes, plans, injunctions, judgments, orders, decrees,
rulings, and charges thereunder) of federal, state, local, and foreign
governments (and all agencies thereof) concerning pollution or protection of the
environment, public health and safety, or employee health and safety, including
laws relating to emissions, discharges, releases, or threatened releases of
pollutants, contaminants, or chemical, industrial, hazardous, or toxic materials
or wastes into ambient air, surface water, ground water, or lands or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants, or chemical,
industrial, hazardous, or toxic materials or wastes. The Company, the Property
and the Facility are in material compliance with all Environmental, Health, and
Safety Laws. The Company has not been notified that any action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand, or notice
has been filed or commenced against it alleging any failure so to comply.
Without limiting the generality of the preceding sentence, the Company has
obtained and is in compliance with all of the terms and conditions of all
permits, licenses, and other authorizations which are required under, and is in
compliance with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules, and timetables which are
contained in, all Environmental, Health, and Safety Laws.
(ii) To the best knowledge of each of the Management Shareholders,
neither the Company nor any lessee (each a "Lessee") of any portion of the
Property has any liability (and none of such parties has handled or disposed of
any substance, arranged for the disposal of any substance, exposed any employee
or other individual to any substance or condition, or owned or operated any
property or facility in any manner that could form the basis for any present or
future action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand against the Company giving rise to any material liability) for
damage to any site, location, or body of water (surface or subsurface), for any
illness of or personal injury to any employee or other individual, or for any
reason under any Environmental, Health, and Safety Law.
(iii) To the best knowledge of each of the Management
Shareholders, other than pursuant to legal disposal procedures, neither the
Company nor any Lessee has introduced into the environment any asbestos, PCB's,
methylene chloride, trichloroethylene, 1, 2-trans-dichloroethylene, dioxins,
dibenzofurans, or Extremely Hazardous Substances as defined in Section 302 of
the Emergency Planning and Community Right to Know Act of 1986, as amended.
8
M. Accounts Receivable; Inventories; Accounts Payable.
(i) The accounts receivable of the Company are in their entirety valid
accounts receivable, arising in the ordinary course of business, collectable at
their recorded amounts, and are not subject to set-off or counterclaims.
(ii) The accounts and notes payable and other accrued expenses reflected
in the Financial Statements, and the accounts and notes payable and accrued
expenses incurred by the Business subsequent to August 31, 1997, are in all
respects valid claims that arose in the ordinary course of business. Since
August 31, 1997, the accounts and notes payable and other accrued expenses of
the Business have been paid in a manner consistent with past practice and
industry standard practice.
(iii) The inventory of the Company consists of raw materials and
supplies, manufactured and purchased parts, goods in process, and finished
goods, all of which are fit for the purpose for which they were procured or
manufactured, and none of which is slow-moving, obsolete, or damaged, adjusted
for the passage of time through the Closing Date in accordance with the past
custom and practice of the Company, and generally accepted accounting
principles. The finished goods inventory is merchantable.
N. Contractual and Other Obligations. Set forth in Schedule II(N) is a list
and brief description of all (i) contracts, agreements, licenses, leases,
arrangements (written or oral) and other documents to which the Company is a
party or by which the Company or any of the Assets is bound and which involve
more than $50,000 (including, in the case of loan agreements, a description of
the amounts of any outstanding borrowings thereunder and the collateral, if any,
for such borrowings); (ii) all obligations and liabilities of the Company
pursuant to uncompleted orders for the purchase of materials, supplies,
equipment and services for the requirements of the Business with respect to
which the remaining obligation of the Company is in excess of $50,000; and (iii)
material contingent obligations and liabilities of the Company; all of the
foregoing being hereinafter referred to as the "Contracts". To the best
knowledge of each of the Management Shareholders, neither the Company nor any
other party is in default in the performance of any covenant or condition under
any Contract and no claim of such a default has been made and no event has
occurred which with the giving of notice or the lapse of time would constitute a
default under any covenant or condition under any Contract. The Company is not a
party to any Contract which would terminate or be materially adversely affected
by consummation of the transactions contemplated by this Agreement. To the best
knowledge of each of the Management Shareholders, the Company is not a party to
any Contract expected to be performed at a loss. Originals or true, correct and
complete copies of all written Contracts have been provided to the Purchaser.
O. Compensation. Set forth in Schedule II(O) attached hereto is a list of
all agreements between the Company and each person employed by or independently
contracting with the Company with regard to compensation, whether individually
or collectively, and set forth in Schedule II(O) is a list of all employees of
the Company their respective salaries and any
9
bonuses paid or payable to such employees since January 1, 1997. The
transactions contemplated by this Agreement will not result in any liability for
severance pay to any employee or independent contractor of the Company. The
Company has not informed any employee or independent contractor providing
services to the Company that such person will receive any increase in
compensation or benefits or any ownership interest in the Company or the
Business. The Company and the Shareholders acknowledge that the decision as to
whether to employ some or all the employees of the Company after Closing shall
be made by the Purchaser in its sole discretion and that neither the Company nor
the Management Shareholders have informed any person to the contrary.
P. Employee Benefit Plans. Except as set forth in Schedule II(P) attached
hereto, the Company does not maintain or sponsor, or contribute to, any pension,
profit-sharing, savings, bonus, incentive or deferred compensation, stock
option, stock purchase, severance pay, medical, life insurance, welfare, or any
other "employee benefit plan" within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), in which the
employees participate (such plans and related trusts, insurance and annuity
contracts, funding media and related agreements and arrangements hereinafter
referred to as the "Benefit Plans"). To the best knowledge of each of the
Management Shareholders, all Benefit Plans comply with all requirements of the
Department of Labor and the Internal Revenue Service, and with all other
applicable law, and the Company has not taken or failed to take any action with
respect to the Benefit Plans which might create any liability on the part of the
Company or the Purchaser. To the best knowledge of each of the Management
Shareholders, each "fiduciary" (within the meaning of Section 3(21)(A) of ERISA)
as to each Benefit Plan has complied in all material respects with the
requirements of ERISA and all other applicable laws in respect to each such
Plan. The Company has furnished to the Purchaser copies of all Benefit Plans and
all financial statements, actuarial reports and annual reports and returns filed
with the Internal Revenue Service with respect to such Benefit Plans for a
period of three years prior to the date hereof. Such financial statements,
actuarial reports and annual reports and returns are true and correct in all
material respects, and none of the actuarial assumptions, if any, underlying
such documents have changed since the respective dates thereof. In addition:
(i) Each Benefit Plan has received a favorable determination letter from
the Internal Revenue Service as to its qualification under Section 401(a) of the
Code, if required;
(ii) The Company has not withdrawn as a contributing sponsor (partially
or totally within the meaning of ERISA) from any Benefit Plan or any
Multiemployer Plan; and neither the execution and delivery of this Agreement or
the consummation of the transactions contemplated herein will result in the
withdrawal (partially or totally within the meaning of ERISA) from any Benefit
Plan or Multiemployer Plan, or in any withdrawal or other liability of any
nature to the Company or the Purchaser under any Benefit Plan or Multiemployer
Plan;
(iii) No "prohibited transaction" (within the meaning of Section 406 of
ERISA or Section 4975(c) of the Code) has occurred with respect to any Benefit
Plan;
(iv) No provision of any Benefit Plan or of any agreement, and no act or
omission of the Company, in any way limits, impairs, modifies or otherwise
affects the right of
10
the Company or the Purchaser unilaterally to amend or terminate any Benefit Plan
after the Closing, subject to the requirements of applicable law;
(v) There are no contributions which are or hereafter will be required
to be made to trusts in connection with any Benefit Plan that would constitute a
"defined contribution plan" (within the meaning of Section(34) of ERISA);
(vi) To the best knowledge of each of the Management Shareholders, all
reports, returns and similar documents with respect to the Benefit Plans
required to be filed with any governmental agency have been so filed;
(vii) To the best knowledge of each of the Management Shareholders, the
Company has not incurred any liability to the Pension Benefit Guaranty
Corporation. No notice of termination has been filed by the plan administrator
(pursuant to Section 4041 of ERISA) or issued by the Pension Benefit Guaranty
Corporation (pursuant to Section 4042 of ERISA) with respect to any Benefit Plan
subject to ERISA. There has been no termination of any Defined Benefit Plan or
any related trust by the Company;
(viii) None of the provisions of the Company's 401(k) Plan (the "Plan"),
the operation of the Plan or the investments made by the Plan would prevent the
transfer of any assets from the Plan into a qualified plan maintained by the
Purchaser, the existing investments from being liquidated (at no cost to
participants or the Company) and participants' account balances invested as
provided under the terms of the Purchaser's 401(k) plan, or another plan
maintained by the Purchaser for or on behalf of the participants of the Plan.
The Shareholders agree to make all required final contributions to the Plan
before Closing. After Closing, Purchaser at its option shall (i) take any and
all steps necessary to effectuate promptly the termination of the Plan,
including, but not limited to, the filing of an Application for Determination
Upon Termination, or take any and all steps necessary to effectuate promptly the
merger of the Plan with the 401(K) plan of the Purchaser, (ii) prepare, file and
deliver all required forms with the Internal Revenue Service ("IRS") and
Department of Labor ("DOL") and any notices required to be delivered to
employees and to the trustees of the Plan in connection with the termination or
merger of the Plan, and (iii) continue to file any and all information reports,
including annual reports, required with respect to the Plan until the completion
of the termination of the Plan.
The Shareholders and the Company agree that any contributions now due or
that may become due to the Plan before Closing shall be the sole responsibility
of the Shareholders and shall be paid, when due, by the Shareholders.
The current trustees of the Plan shall be replaced by designees of the
Purchaser as trustees of the Plan promptly after Closing.
(ix) The Company does not maintain, sponsor or contribute to, and has
never maintained, sponsored or contributed to a "defined benefit plan" (within
the meaning of Section 3(35) of ERISA) or a "Multiemployer plan" (within the
meaning of Section 3(37) of ERISA);
11
(x) Other than claims in the ordinary course for benefits with respect
to the Benefit Plans, there are no actions, suits or claims (including claims
for income taxes, interest, penalties, fines or excise taxes with respect
thereto) pending with respect to any Benefit Plan, or any circumstances which
might give rise to any such action, suit or claim (including claims for income
taxes, interest, penalties, fines or excise taxes with respect thereto); and
(xi) The Company has no obligation to provide health or other welfare
benefits to former, retired or terminated employees, except as specifically
required under Section 4980B of the Code and Section 601 of ERISA. The Company
has complied with the notice and continuation requirements of Section 4980B of
the Code and Section 601 of ERISA.
Q. Labor Relations. To the best knowledge of each of the Management
Shareholders, there have been no violations of any federal, state or local
statutes, laws, ordinances, rules, regulations, orders or directives with
respect to the employment of individuals by, or the employment practices or work
conditions of, the Company, or the terms and conditions of employment, wages and
hours. To the best knowledge of each of the Management Shareholders, the Company
is not engaged in any unfair labor practice or other unlawful employment
practice. There are no charges of unfair labor practices or other
employee-related complaints pending or To the best knowledge of each of the
Management Shareholders, threatened against the Company before the National
Labor Relations Board, the Equal Employment Opportunity Commission, the
Occupational Safety and Health Review Commission, the Department of Labor or any
other federal, state, local or other governmental authority. There is no strike,
picketing, slowdown or work stoppage or organizational attempt pending, or to
the best knowledge of each of the Management Shareholders, threatened against or
involving the Business. No issue with respect to union representation is pending
or to the best knowledge of each of the Management Shareholders threatened with
respect to the employees of the Company. No union or collective bargaining unit
or other labor organization has ever been certified or recognized by the Company
as the representative of any of the employees of the Company.
R. Increases in Compensation or Benefits. Except as set forth in Schedule
II(R), subsequent to August 31, 1997, there have been no increases in the
compensation payable or to become payable to any of the employees of the Company
and there have been no payments or provisions for any awards, bonuses, loans,
profit sharing, pension, retirement or welfare plans or similar or other
disbursements or arrangements for or on behalf of such employees (or related
parties thereof), in each case, other than pursuant to currently existing plans
or arrangements, if any, set forth in Schedule II(R). All bonuses heretofore
granted to employees of the Company have been paid in full to such employees.
The vacation policy of the Company is set forth in Schedule II(R). Except as set
forth in Schedule II(R), no employee of the Company is entitled to vacation time
during the current calendar year and no employee of the Company has any accrued
vacation or sick time with respect to any prior period.
S. Insurance. Schedule II(S) sets forth the following information with
respect to each insurance policy (including policies providing property,
casualty, liability, and workers' compensation coverage and bond and surety
arrangements but excluding health, life, dental and
12
disability insurance) to which the Company has been a party, a named insured, or
otherwise the beneficiary of coverage at any item within the past 3 years: (i)
the name of the insurer, the name of the policyholder, and the name of each
covered insured; (ii) the policy number and the period of coverage; (iii) the
scope (including an indication of whether the coverage was on a claims made,
occurrence, or other basis) and amount (including a description of how
deductibles and ceilings are calculated and operate) of coverage; (iv) a
description of any retroactive premium adjustments or other loss-sharing
arrangements and (v) the name and agency of the insurance agent who sold such
policy to the Company. With respect to each such insurance policy, to the best
knowledge of each of the Management Shareholders (a) the policy is legally
enforceable; (b) the policy will continue to be legally enforceable on identical
terms following the consummation of the transactions contemplated hereby; (c)
neither the Company nor any other party to the policy is in breach or default
(including with respect to the payment of premiums or the giving of notices),
and no event has occurred which, with notice or the lapse of time, would
constitute such a breach or default, or permit termination, modification, or
acceleration, under the policy; and (d) no party to the policy (including the
Company) has repudiated any provision thereof. The Company has been covered
during the past 3 years by insurance in scope and amount customary and
reasonable for the business in which it has engaged during such period.
T. Conduct of Business. Neither the Company nor any of the Shareholders are
restricted from conducting the Business in any location by agreement or court
decree.
U. Use of Names. All names under which the Company currently conducts the
Business are listed in Schedule II(U). To the best knowledge of each of the
Management Shareholders, there are no other persons or businesses conducting
businesses similar to those of the Company in the Commonwealth of Massachusetts
having the right to use or using the names set forth in Schedule II(U) or any
variants of such names; and no other person or business has ever attempted to
restrain the Company or the Shareholders from using such names or any variant
thereof.
V. Power of Attorney. Except for powers granted pursuant to this Agreement,
neither the Company nor any of the Management Shareholders has granted any power
of attorney (revocable or irrevocable) to any person, firm or corporation for
any purpose whatsoever.
W. Litigation; Disputes. Except as set forth in Schedule II(W), there are
no claims, disputes, actions, suits, investigations or proceedings pending or to
the best knowledge of each of the Management Shareholders, threatened against
the Company, the Shareholders, the Business or any of the Assets, no such claim,
dispute, action, suit, proceeding or investigation has been pending or to the
best knowledge of each of the Management Shareholders threatened during the
five-year period preceding the date of the Closing and, to the best of the
knowledge of the Company and the Management Shareholders, there is no basis for
any such claim, dispute, action, suit, investigation or proceeding. Neither the
Company nor any of the Management Shareholders have any knowledge of any default
under any such action, suit or proceeding. The Company is not in default in
respect of any judgment, order, writ, injunction or decree of any court or of
any federal, state, municipal or other government department, commission,
bureau, agency or instrumentality or any arbitrator.
13
X. Location of Business and Assets. Set forth in Schedule II(X) is each
location (specifying state, county and city) where the Company (i) has a place
of business, (ii) owns or leases real property and (iii) owns or leases any
other property, including inventory, equipment and furniture.
Y. Disclosure. No representation or warranty made under any Section hereof
and none of the information furnished by the Company or the Shareholders set
forth herein, in the exhibits hereto or in any document delivered by the Company
or the Shareholders to the Purchaser, or any authorized representative of the
Purchaser, pursuant to this Agreement contains any untrue statement of a
material fact or omits to state a material fact necessary to make the statements
herein or therein not misleading.
Z. No Foreign Person. None of the Shareholders is a foreign person within
the meaning of Section 1445(b)(2) of the Code.
AA. Bank Accounts. Set forth in Schedule II(AA) is a list of all bank
accounts maintained in the name of the Company and a brief description of
persons having power to sign on behalf of the Company with respect to each such
account.
14
SECTION III
REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS OF THE SHAREHOLDERS
The Shareholders hereby each individually represent and warrant to, and
covenant and agree with, the Purchaser, as of the date of the Closing, that:
A. Authority. Each of the Shareholders is fully able to execute and deliver
this Agreement and to perform his, her, or its covenants and agreements
hereunder, and this Agreement constitutes a valid and legally binding obligation
of each of the Shareholders, enforceable against each of the Shareholders in
accordance with its terms.
B. Ownership of Shares, etc. Each of the Shareholders represents that he,
she or it owns the number of shares of Common Stock of the Company set forth
opposite his, her or its name on Schedule I hereof, free and clear of any lien,
encumbrance, charge, security interest or claim whatsoever (including any
restriction on the right to vote, sell or otherwise dispose of the Shares), and
that he, she or it has the right to transfer such Shares to the Purchaser and,
upon transfer of the Shares to the Purchaser hereunder, the Purchaser will
acquire good and marketable title to the Shares, free and clear of any lien,
encumbrance, charge, security interest or claim whatsoever.
C. No Legal Bar; Conflicts. Neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated hereby,
violates any statute, ordinance, regulation, order, judgment or decree of any
court or governmental agency, or conflicts with or will result in any breach of
any of the terms of or constitute a default under or result in the termination
of or the creation of any lien pursuant to the terms of any contract or
agreement to which the Company or any of the Shareholders is a party or by which
any of the Shareholders or any of the Shareholders' assets is bound.
D. Investment. Each of the Shareholders is acquiring the EAI Common Stock
for its own account without a view to the distribution thereof within the
meaning of the Securities Act, and will not directly or indirectly offer or sell
the shares or solicit any offer to purchase the shares, other than in conformity
with the Securities Act. Each of the Shareholders acknowledges that the EAI
Common Stock has not been registered under the Securities Act, and such
Shareholder shall not transfer any of the EAI Common Stock except in compliance
with the Securities Act or an opinion that registration is not required under
the Securities Act, and a legend to that effect may be placed on the
certificates representing the shares.
15
SECTION IV
REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS OF EAI
EAI represents and warrants to the Shareholders and the Company that the
statements contained in this Section IV are correct and complete as of the date
of this Agreement:
A. Organization. EAI is a corporation duly incorporated, validly existing,
and in good standing under the laws of the State of New Jersey. EAI is duly
authorized to conduct business and is in good standing under the laws of each
jurisdiction where such qualification is required and where the failure to so
qualify would have a material adverse effect on its business.
B. Authorization of Transaction. The Purchaser has full corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. This Agreement constitutes a valid and legal binding obligation of
the Purchaser, enforceable against it in accordance with its terms. EAI is not
required to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency in
order to consummate the transactions contemplated by this Agreement, other than
the filings and qualifications regarding the EAI Stock as set forth in the
Registration Agreement and obtaining official approval of listing of the EAI
Stock on the New York Stock Exchange, subject to official notice of issuance,
required of EAI.
C. Non-Contravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Purchaser is subject or any provision
of its charter or By-Laws, or (ii) except as set forth on Exhibit (IV)(C)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any agreement, contract, lease, license,
instrument or other arrangement to which the Purchaser is bound or to which any
of its assets is subject.
D. Investment. The Purchaser is acquiring the Shares for its own account
without a view to the distribution thereof within the meaning of the Securities
Act, and will not directly or indirectly offer or sell the Shares or solicit any
offer to purchase the Shares, other than in conformity with the Securities Act.
The Purchaser acknowledges that the Shares have not been registered under the
Securities Act, and the Purchaser shall not transfer any of the Shares except in
compliance with the Securities Act or an opinion that registration is not
required under the Securities Act, and a legend to that effect may be placed on
the certificates representing the Shares.
16
SECTION V
ADDITIONAL REPRESENTATIONS, WARRANTIES
AND COVENANTS OF THE COMPANY, THE MANAGEMENT SHAREHOLDERS,
THE SHAREHOLDERS AND THE PURCHASER
A. Publicity. The Company and the Management Shareholders covenant and
agree that any and all publicity (whether written or oral) and notices to third
parties concerning the sale of the Shares and other transactions contemplated by
this Agreement shall be subject to the prior written approval of the Purchaser,
which approval may be withheld in the sole discretion of the Purchaser.
B. Notices and Consents. EAI, the Company, Tanon and the Management
Shareholders will give notices to third parties, will use their respective best
efforts to obtain any third-party consents, authorizations and approvals, and
will make any filings with any governmental agencies, in connection with the
matters referred to in Section III and IV above or elsewhere in this Agreement.
C. Operation of Business. Neither the Company nor the Management
Shareholders will engage in any practice, take any action, or enter into any
transaction outside the ordinary course of business between the date hereof and
the Closing. In consideration of the substantial expenditures of time, effort
and expense to be undertaken by EAI and Tanon in connection with the preparation
and execution of this Agreement, and the various investigations and due
diligence reviews the Management Shareholders agree that neither they nor the
Company shall, directly or indirectly, for the period until Closing or the
termination hereof as set forth below, (i) solicit, encourage (including
furnishing any information to any third party or group), consider, respond to or
assist in any manner any other offers, bids, proposals, inquiries or expressions
of interest for the acquisition of all or part of the business, assets or
securities of the Company or (ii) enter into any agreement or understanding with
any third party for the acquisition of all or part of the business, assets or
securities of the Company.
D. Preservation of Business. The Company and the Management Shareholders
will each use their best efforts to keep the Business substantially intact,
including its present operations, physical facilities, working conditions, and
relationships with lessors, licensers, suppliers, customers, and employees
between the date hereof and the Closing.
E. Full Access; Physical Inventory. The Company and EAI will each permit
the other party's representatives to have full access to all premises,
properties, personnel, books, records (including Tax records), contracts,
customers, and documents of or pertaining to their business between the date
hereof and the Closing.
F. Post Closing Cooperation. In case at any time after the Closing any
further action is necessary or desirable to carry out the purposes of this
Agreement, each of the parties will take such further action (including the
execution and delivery of such further instruments and documents) as any other
Party may request, all at the sole cost and expense of the requesting
17
party (unless the requesting party is entitled to indemnification therefor under
Section IX), so long as such documents do not increase the liability or risk of
liability of the Party of whom action is requested. The Company and Shareholders
acknowledge and agree that from and after the Closing, the Purchaser will be
entitled to possession of all documents, books, records (including Tax records),
agreements, and financial data of any sort relating to the Company.
G. Registration/Purchase Price Adjustment. The shares of EAI Common Stock
issued in payment of the Purchase Price will be issued in a private placement
and will consist of restricted securities only tradable subject to the
restrictions of Rule 144 under the Securities Act of 1944, as amended (the
"Act"). The sales of such stock will also be subject to restrictions to the
extent that the xxxxxxx xxxxxxx rules are applicable and to the extent that the
seller is then subject to restrictions under Section 16 of the Securities
Exchange Act of 1934. EAI covenants and agrees to file a Registration Statement
(the "Registration Statement") on Form S-3 under the Act within fifteen days
after the date hereof registering for resale by the Shareholders all of the
shares of Common Stock of EAI issued at Closing in payment of the Purchase
Price. The Purchaser shall use its best efforts to have the Registration
Statement declared effective by the Securities and Exchange Commission ("SEC")
as promptly thereafter as practicable and shall notify the Shareholders' Agent
promptly after the SEC has completed its review and comment on the Registration
Statement.
The period of time beginning on the date the Registration Statement is
declared effective by the SEC (the "Effective Date") and ending at the end of
the twentieth day thereafter on which the NYSE was open for trading is referred
to as the "Grace Period". At least two days before Closing, the Shareholders'
Agent shall deliver a notice to the Purchaser telling the Purchaser the
aggregate percentage of the Purchase Price (the "Grace Period Purchase Price")
to be delivered in EA Shares that the Shareholders intend to sell during the
Grace Period. At Closing the Purchaser shall deliver to the Escrow Agent (as
defined in Section VI(B)(i)(c)), that number of EA Shares (the "Grace Period
Shares") determined by dividing the Grace Period Purchase Price by $3.50. In
addition, at Closing the Purchaser shall deliver to the Escrow Agent, that
number of EA Shares (the "NonSale Shares) determined by dividing (x)$3,742,000
minus the Grace Period Purchase Price by (y) the arithmetic average of the
volume weighted average price per share of EAI Common Stock for the two trading
days immediately preceding the day of Closing, as reported by Bloomberg Business
Services in its Volume at Price Service (the "Closing Market Price").
During the Grace Period (i) any sales of Common Stock of EA held by any of
the Shareholders, directly or indirectly, shall be effected on their behalf by
the Shareholders' Agent, (ii) the Shareholders' Agent shall use his best efforts
to effectuate the sale of all of the Grace Period Shares at the highest price
that he can obtain, (iii) the Shareholders' Agent shall not sell any of the
Grace Period Shares for less than $3.50 per share, and (iv) the Shareholders'
Agent shall notify (the "Notification") the Purchaser at the time that the
aggregate proceeds of sales of the Grace Period Shares equal or exceed the Grace
Period Purchase Price.
At the earlier of the end of the Grace Period or the receipt of the
Notification by the Purchaser the Escrow shall be terminated. If at such time
the aggregate proceeds of sales of the
18
Grace Period Shares equal or exceed the Grace Period Purchase Price, the Escrow
Agent shall deliver the remaining Grace Period Shares to the Purchaser and shall
deliver the NonSale Shares to the Shareholders' Agent. If at such time the
aggregate proceeds of sales of the Grace Period Shares do not equal or exceed
the Grace Period Purchase Price the Shareholders' Agent may declare the sale of
the Shares rescinded or may elect to have the remaining EA Shares distributed to
the Shareholders' Agent in full satisfaction of payment of the Purchase Price.
If the transaction is rescinded, the Shareholders' Agent shall deliver to
the Escrow Agent the aggregate proceeds of sales of the Grace Period Shares.
Upon receipt of such funds, the Escrow Agent shall deliver to the Purchaser (i)
such proceeds, (ii) the remaining Grace Period Shares, and (iii) the NonSale
Shares. At such time the Escrow Agent shall deliver to the Shareholders' Agent
the Shares.
If after the Grace Period any of the Shareholders desire to sell or
otherwise transfer any of his shares of EAI Stock pursuant to the Registration
Statement, the Shareholder shall notify EAI of the Shareholder's intention to do
so by written notice received by EAI at least five business days prior to the
proposed date of such sale or transfer. The Shareholder may effect such sale or
transfer after five business days following the delivery of such notice unless,
prior to the end of such five business day period, EAI shall furnish the
Shareholder a written notice stating that in the good faith judgment of EAI's
President, the sale or transfer of the shares of EAI Stock pursuant to the
Registration Statement would, at such time, require the disclosure of material
information that EAI has a bona fide business purpose for preserving as
confidential or EAI is unable to comply with SEC requirements. In such event
EAI's obligation to prepare a prospectus to be used in connection with the sale
or transfer or to amend the Registration Statement shall be suspended for a
reasonable period (but not in excess of 60 days or 15 days after the providing
or disclosure of any information causing such deferral) until such confidential
information is disclosed or EAI is able to provide any information required by
the SEC or the Securities Act. Each Shareholder agrees to keep confidential any
notification EAI provides to the Shareholder pursuant to the above provisions.
Each of the Shareholders agrees that, in connection with any sale or transfer of
shares of EAI Stock acquired pursuant to the Purchase Agreement, the Shareholder
will comply with any legal requirement the Shareholder may have to deliver a
prospectus. The Shareholder also agrees not to offer or sell any shares of EAI
Stock in any offering or sale that would require EAI to amend or supplement any
prospectus solely due to a change in the description of the plan of distribution
of such shares of EAI Stock contained in such prospectus.
EAI covenants that the Registration Statement and the prospectus contained
therein, as amended and supplemented by any prospectus filed pursuant to Rule
424 under the Securities Act, will contain at all times all statements which are
required under the Securities Act and the rules and regulations of the SEC under
the Securities Act, and the Registration Statement and such prospectus will not
at any time contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
Each of the Shareholders covenants that he or she shall provide all
information and materials and take all actions as may be required in order to
permit EAI to comply with all
19
applicable requirements of the Securities Act, the Exchange Act, and the SEC,
and to comply with all requirements of applicable Blue Sky Laws or other
applicable rules and regulations of any administrative agency of any state of
the United States.
In connection with the offering of EA Shares, the Shareholders, jointly and
severally, agree to indemnify and hold harmless EAI, each of its officers and
directors and each person, if any, who controls EAI within the meaning of the
Securities Act from and against, the entirety of any Adverse Consequences
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, Liabilities, obligations, Taxes, liens, losses, expenses, and
fees, including court costs and attorneys fees and expenses, and any action in
respect thereof, to which any such party may become subject, under the
Securities Act or any other statute or common law or otherwise, insofar as such
Adverse Consequences arise out of or are based upon, (A) any untrue statement or
alleged untrue statement of a material fact contained in the Shelf Registration
Statement or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading or (B) any untrue statement or alleged untrue statement of material
fact contained in any preliminary prospectus, together with the documents
incorporated by reference therein (as amended or supplemented if EAI shall have
filed with the SEC any amendment thereof or supplement thereto), if used prior
to the effective date of such registration statement, or contained in the
prospectus, together with the documents incorporated by reference therein (as
amended or supplemented if EAI shall have filed with the SEC any amendment
thereof or supplement thereto), or the omission or alleged omission to state
therein a 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, if, in each case, that statement or omission was made in
reliance upon and in conformity with written information furnished to EAI by the
Shareholders or on behalf of the Shareholders or by SAI (if furnished prior to
the Closing) specifically for use in connection with the preparation of the
Shelf Registration Statement or any preliminary prospectus or prospectus
contained in the Shelf Registration Statement or any amendment thereof or
supplement thereto. The foregoing indemnity is in addition to any liability that
the Shareholder may otherwise have to EAI or any of its officers, directors and
controlling persons.
In the case of each offering registered pursuant to this Agreement, EAI
agrees to indemnify and hold harmless each of the Shareholders from and against
any Adverse Consequences, and any action in respect thereof, to which the
Shareholder may become subject, under the Securities Act or any other statute or
common law or otherwise, insofar as such Adverse Consequence arises out of, or
is based upon (A) any untrue statement or alleged untrue statement of a material
fact contained in the Shelf Registration Statement or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein no misleading, or (B) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus, together with the documents incorporated by reference
therein (as amended or supplemented if EAI shall have filed with the SEC any
amendment thereof or supplement thereto), if used prior to the effective date of
such registration statement, or contained in the prospectus, together with the
documents incorporated by reference therein (as amended or supplemented if EAI
shall have filed with the SEC any amendment thereof or supplement thereto), or
the omission or
20
alleged omission to state therein a 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; provided, however,
that the indemnity by EAI contained in this paragraph shall not apply to the
Shareholder for any such Adverse Consequence which arises out of, or is based
upon, any sale of Shareholder's EAI Stock if that Adverse Consequence shall
arise out of, or is based upon, any untrue statement or alleged untrue statement
or omission or alleged omission, if such statement or such omission shall have
been (i) made in reliance upon and in conformity with written information
furnished to EAI by the Shareholder or on behalf of the Shareholder or by
Tri-Star (if furnished prior to the Closing) specifically for use in connection
with the preparation of the registration statement or any preliminary prospectus
or prospectus contained in the registration statement or any amendment thereof
or supplement thereto or (ii) made in any prospectus and such statement or
omission shall have been corrected in any amendment or supplement thereto, if
the Shareholder shall have been sent or given a copy of such amendment or
supplement at or prior to the consummation of such sale. The foregoing indemnity
is in addition to any liability that EAI may otherwise have to any of the
Shareholder.
SECTION VI
CLOSING AND DELIVERIES
A. Time and Place of Closing. The closing of the purchase and sale of the
Shares as set forth herein (the "Closing") shall be held at the offices of
Mesirov Xxxxxx Xxxxx Xxxxxx & Xxxxxxxx, 0000 Xxxxxx Xxxxxx, Xxxxxxxxxxxx, XX
00000 or at such other place upon which EAI and the Shareholders' Representative
may mutually agree. The Closing shall commence at 10:00 a.m. local time on
February 12, 1998(the "Closing Date") or such other date upon which EAI and the
Shareholders' Agent shall mutually agree following the satisfaction or waiver of
all conditions to the obligations of the Parties to consummate the transactions
contemplated hereby (other than conditions with respect to actions the
respective Parties will take at the Closing itself) (the "Closing Date").
B. Deliveries.
(i) At the Closing, the Purchaser shall deliver to the Escrow Agent the
following:
a. The Grace Period Shares and the NonSale Shares
b. Employment Agreements (the "Employment Agreements") executed by
the Purchaser or a subsidiary of the Purchaser, substantially in the form of
Exhibit VI(B)(i)(b) attached hereto.
c. An escrow agreement (the "Escrow Agreement") substantially in
the form of Exhibit VI(B)(i)(c) attached hereto appointing Mesirov Xxxxxx Xxxxx
Xxxxxx & Xxxxxxxx as the Escrow Agent
21
(ii) At the Closing, the Company and the Shareholders shall deliver to
the Escrow Agent, as a condition to Closing, the following:
a. Certificates in negotiable form representing the Shares, each
such certificate to be accompanied by any requisite documentary or stock
transfer taxes;
b. Written resignations of all directors and officers of the
Company.
c Such certificates, instruments and other documents, in form and
substance satisfactory to the Purchaser and its counsel, as they shall have
reasonably requested in connection with the transactions contemplated hereby;
d. An opinion of Cameron & Xxxxxxxxx, counsel for the Company and
the Shareholders, delivered to the Purchaser pursuant to the instructions of the
Company and the Shareholders, dated the date of the Closing, substantially in
the form set forth in Exhibit VI(B)(ii)(d) attached hereto;
e. All necessary consents of third parties under the contracts,
agreements, leases, insurance policies and other instruments of the Company to
the consummation of the transactions contemplated hereby, which consents shall
not provide for the acceleration of any liabilities or any other detriment to
the Purchaser or the Company;
f. The Employment Agreements executed by Xxxxx Xxxxx and Xxx X.
XxXxxxxx.
g. Non-Competition Agreements executed by each of Xxx X. XxXxxxxx,
Xxxxx Xxxxx, Xxxxx X. Xxxxx and Xxxxx X. Xxxxx substantially in the form of
Exhibit VI(B)(ii)(g) attached hereto.
h. The Escrow Agreement
22
SECTION VII
ADDITIONAL COVENANTS
A. Conduct of Business. During the period commencing on the date hereof and
ending on the Closing Date:
(a) The Management Shareholders shall cause the Company to continue to
conduct its business prudently and diligently in the ordinary course in
substantially the same manner as heretofore conducted, and to use its best
efforts to preserve intact the business organization of the Company, to keep
available the services of its present officers and employees, and to preserve
the good will of those having business relationships with the Company; and
(b) Except for the transactions expressly contemplated by this Agreement
or with the specific prior written consent of Purchaser, the Management
Shareholders shall not permit the Company to:
(i) amend its character document or By-Laws;
(ii) declare, set aside or pay any dividend or make any
distribution on or with respect to shares of its capital stock;
(iii) issue, grant, sell or pledge any shares of, or rights of any
kind to acquire any shares of, the capital stock of the Company, or
purchase, redeem or otherwise acquire any shares of such capital stock;
(iv) acquire any assets or properties, other than in the ordinary
course of business;
(v) sell, lease, transfer, dispose of, encumber or mortgage any
assets or properties, other than in the ordinary course of business;
(vi) enter into any merger, consolidation, recapitalization or
other business combination or reorganization.
(vii) create, incur or assume any indebtedness for borrowed money
except in the ordinary course of business, or prepay any part of the
principal or interest of any existing indebtedness prior to the due date
thereof;
(viii) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the
obligations of any other person or entity.
(ix) make any loans, advances, or capital contributions to or
investments in any person or entity;
23
(x) incur, assume or pay any management fee, interest or any other
similar charge.
(xi) cause or permit any of the Company's current insurance (or
reinsurance) policies to be canceled or terminated or any of the
coverage thereunder to lapse, unless simultaneously with such
termination, cancellation or lapse, the Company obtains replacement
policies from the same or comparable insurers providing coverage which
is the same as or comparable to that provided under the canceled,
terminated or lapsed policies.
(xii) sell, transfer, license or otherwise dispose of any of its
assets, other than in the ordinary course of business.
(xiii) waive, release, grant or transfer any rights of value or
modify or change in any material respect any existing license, lease,
contract or other document, other than in the ordinary course of
business;
(xiv) make aggregate capital expenditures and commitments therefor,
which when taken together with all other capital expenditures and
commitments of the Company during such period, would exceed $50,000.
(xv) make any change in any method of accounting or accounting
practice, except as may be required by law and after written notice to
Purchaser;
(xvi) increase the compensation payable or to become payable by it
to any of its employees except for normal periodic increases in the
ordinary course of business that are made in accordance with the
established compensation policies of the Company.
(xvii) make any payment or provision with respect to any employee
benefit or welfare plan, except in the ordinary course of the
administration of such plans consistent with the established
compensation policies of the Company.
(xviii) grant any stock options, restricted stock grants or stock
appreciation rights;
(xix) enter into any employee agreement or other contract or
arrangement with respect to the performance of personal services which
is not terminable without liability by the Company on thirty days notice
(or less);
(xx) make any payment (other than normal recurring payments of base
salaries) or loan to, or enter into any written contract, lease or
commitment with, any shareholder, officer or director of the Company;
24
(xxi) adopt any new employee benefit plan or program or amend to
increase materially the compensation or benefits payable under any of
the employee welfare or benefit plans, or grant any severance or
termination pay or benefit otherwise than pursuant to policies of the
Company in effect on the date of this Agreement; or
(xxii) enter into any oral or written agreement, contract,
commitment, arrangement or understanding with respect to any of the
foregoing.
SECTION VIII
CLOSING CONDITIONS
A. Conditions to Obligations of EA and the Purchaser. The obligation of EAI
to consummate the purchase of the Shares is subject to the following conditions,
which may be waived , in whole or in part, by EAI in its sole and absolute
discretion:
(i) the representations and warranties of the Company and the
Shareholders set forth in this Agreement shall be true and correct in all
material respects at and as of the Closing Date;
(ii) the Company and the Shareholders shall have performed and complied
with all of their covenants hereunder in all material respects through the
Closing;
(iii) no action, suit, or proceeding shall be pending before any court
or quasi-judicial or administrative agency of any federal, state, local, or
foreign jurisdiction or before any arbitrator wherein an unfavorable injunction,
judgment, order decree, ruling, or charge would (a) prevent consummation of any
of the transactions contemplated by this Agreement, (b) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation, or (c) affect adversely the right of EA to own the Shares and to
control the Company;
(iv) the parties shall have received all authorizations, consents, and
approvals of governments and governmental agencies required to effectuate the
transactions contemplated by this Agreement;
(v) all actions to be taken by the Shareholders in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to EA;
(vi) the Company and Shareholders shall have made the deliveries
specified in Section VI(b)(ii);
(vii) all assets used in the Business since December 31, 1995, shall
have been transferred to the Company before Closing without payment by the
Company or shall be subject to a legally enforceable lease agreement with an
unrelated third party; and
25
(viii) at Closing, the debt obligations of the Company represented on
the balance sheet of the Company in accordance with generally accepted
accounting principles shall not exceed $441,384 less the scheduled payments
thereon between October 31, 1997 and Closing.
B. Conditions to Obligation of the Company and the Shareholders. The
obligation of the Company and the Shareholders to consummate the transactions to
be performed by them in connection with this Agreement is subject to
satisfaction of the following conditions, which may be waived , in whole or in
part, by the Company and the Shareholders in their sole and absolute discretion:
(i) the representations and warranties of EAI set forth in this
Agreement shall be true and correct in all material respects at and as of the
Closing Date;
(ii) EA shall have performed and complied with all of its covenants
hereunder in all material respects through the Closing;
(iii) no action, suit, or proceeding shall be pending before any court
or quasi-judicial or administrative agency of any federal, state, local, or
foreign jurisdiction wherein an unfavorable injunction, judgment, order, decree,
ruling, or charge would (a) prevent consummation of any of the transactions
contemplated by this Agreement or (b) cause any of the transactions contemplated
by this Agreement to be rescinded following consummation (nor shall any such
injunction, judgment, order, decree, ruling, or charge be in effect);
(iv) the parties shall have received all authorizations, consents, and
approvals of governments and governmental agencies required to effectuate the
transactions contemplated by this Agreement;
(v) EAI shall have made the deliveries specified in Section (VI)(b)(i);
(vi) all certificates, opinions, instruments, and other documents
required to effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Company and the Management
Shareholders. The Company and the Shareholders may waive any condition specified
in this Section VIII by executing a writing so stating at or prior to the
Closing; and
(vii) EA has notified the Shareholders' Agent that (i) the listing of
the EA Shares on the NYSE has been completed and (ii) the SEC has completed its
review of the Registration Statement and that there is no reason that the
Registration Statement can not be declared effective.
SECTION IX
INDEMNIFICATION
A. Indemnification by the Management Shareholders. The Management
Shareholders shall, jointly and severally, indemnify and hold harmless Tanon,
the Company and
26
the Purchaser and their successors and assigns, directors, officers, employees,
agents and representatives, from and against any and all losses, claims,
assessments, actions, suits, claims, demands, debts, liabilities, obligations,
losses, damages, costs and expenses, including without limitation the cost of
investigation and reasonable attorney's fees and court costs, arising out of,
resulting from, related to, or caused by, directly or indirectly, in whole or in
part any or all of the following (hereinafter referred to collectively as
"Damages"):
(i) any inaccuracy in or breach or nonfulfillment of any of the
representations, warranties and covenants made by the Company or any of the
Shareholders in this Agreement;
(ii) Damages arising out of or attributable to the operations prior to
the Closing Date of the Company, and/or to the acts or omissions prior to the
Closing Date of any of its current or former shareholders, directors, officers,
employees or agents, including without limitation Damages arising out of claims
(a) for violation of federal or state insurance, antitrust, securities, unfair
trade practice or other laws, (b) personal injury claims, (c) claims of any
nature by past or present directors, officers, employees or agents of the
Company (including workers' compensation claims to the extent not fully insured
against and claims under federal or state employment statutes and judicial
decisions), (d) claims based on breach of warranty, products liability or
defective or omitted service, and (e) any other liability not disclosed to the
Purchaser in this Agreement or in the Schedules hereto. It is understood and
agreed that the acts, omissions or events for which Purchaser is entitled to
indemnification hereunder include, but are not limited to, claims asserted after
the Closing (whether such claims are tort claims, contract claims or otherwise)
which are based in whole or in part upon (1) alleged defects in products or
services which were either sold, delivered or rendered by the Company on or
before the Closing, (2) alleged defects in products which were in the inventory
of the Company at the time of the Closing and sold or delivered thereafter by
the Purchaser or (3) alleged defects in services which were rendered by the
Company at the time of Closing and were completed thereafter by the Purchaser.
It is further understood and agreed that the acts, omissions and events for
which Purchaser is entitled to indemnification hereunder include claims (whether
tort, contract or otherwise) which are based upon any injury to any Person or
any damage to any property which occurs after the Closing and which results in
whole or in part from acts, omissions and events which occurred at or before the
Closing; the Shareholders or Company's lack of knowledge of such act, omission
or event, or the fact that such act, omission or event was unknowable by such
person, shall not be a defense to the claim for indemnity.
(iii) any liability for Taxes (as defined in Section II(K)) heretofore
or hereafter imposed by any taxing authority (including penalties and interest)
owed by, relating to, resulting from or attributable to the business or
operations of the Company or the acts or omissions of any of the Shareholders on
or before the Closing Date, including interest and penalties related to such
Taxes.
In addition to the right of the Company and the Purchaser to indemnification
hereunder, the Purchaser and its subsidiaries and affiliates shall have the
right from time to time to set off the amount of any Damages against any
payments due and payable to any of the Shareholder from the Company, the
Purchaser or such subsidiaries or affiliates.
27
B. Indemnification by the Purchaser. The Purchaser shall indemnify and hold
harmless the Shareholders, their heirs, representatives, successors, assigns,
directors, officers, employees and agents from and against any and all (i)
Damages sustained or incurred by the Shareholders by reason of the breach of any
of the obligations, covenants or provisions of, or the inaccuracy of any of the
representations or warranties made by the Purchaser herein, (ii) Damages arising
out of or attributable to the operations after the Closing Date of the Company,
including without limitation Damages arising out of claims (a) for violation of
federal or state insurance, antitrust, securities, unfair trade practice or
other laws, (b) personal injury claims and (b) claims based on breach of
warranty, products liability or defective or omitted service; and (iii) any
liability for Taxes (as defined in Section II(K)) heretofore or hereafter
imposed by any taxing authority (including penalties and interest) owed by,
relating to, resulting from or attributable to the business or operations of the
Company after the Closing Date, including interest and penalties related to such
Taxes.
C. Procedure for Indemnification. If a claim by a third party is made
against any party hereto, and such party (the "Indemnified Party") intends to
seek indemnity with respect to such claim under this Section IX, such
Indemnified Party shall promptly notify the party from whom such indemnity may
be sought (the "Indemnifying Party") of such claim. The Indemnifying Party shall
have thirty (30) days after receipt of the above-mentioned notice to undertake,
conduct and control, through counsel of such party's own choosing (subject to
the consent of the Indemnified Party, such consent not to be unreasonably
withheld) and at such party's expense, the settlement or defense of it, and the
Indemnified Party shall cooperate with the Indemnifying Party in connection with
such efforts; provided that: (i) the Indemnifying Party shall not by this
Agreement permit to exist any lien, encumbrance or other adverse charge upon any
asset of any Indemnified Party, (ii) the Indemnifying Party shall permit the
Indemnified Party to participate in such settlement or defense through counsel
chosen by the Indemnified Party, provided that the fees and expenses of such
counsel shall be borne by the Indemnified Party, and (iii) the Indemnifying
Party shall agree promptly to reimburse the Indemnified Party for the full
amount of any loss resulting from such claim and all related expense incurred by
the Indemnified Party pursuant to this Section IX. So long as the Indemnifying
Party is reasonably contesting any such claim in good faith, the Indemnified
Party shall not pay or settle any such claim. If the Indemnified Party does not
notify the Indemnified Party within thirty (30) days after receipt of the
Indemnified Party's notice of a claim of indemnify under this Section IX that
such party elects to undertake the defense of such claim, the Indemnified Party
shall have the right to contest, settle or compromise the claim in the exercise
of the Indemnified Party's exclusive discretion at the expense of the
Indemnifying Party, and the Indemnifying Party shall within 30 days after
receipt of notice of such settlement or compromise pay to the Indemnified Party
the amount of expenses and damages as a result of contesting, settling or
compromising such claim. In the event that any party hereto shall incur any
Damages in respect of which indemnity may be sought by such party pursuant to
this Section IX, the party from whom such indemnity may be sought (the
"Indemnifying Party") shall be given written notice thereof by the party seeking
such indemnity (the "Indemnified Party"), which notice shall specify the amount
and nature of such Damages and include the request of the Indemnified Party for
indemnification of such amount.
28
The Indemnifying party shall within 30 days pay to the Indemnified Party the
amount of the Damages so specified.
D. Disclosure Not a Defense. The disclosure of any act, omission or event
in this Agreement, or in any Schedule or exhibit of this Agreement, or in any
agreement executed in connection herewith, shall not be a defense to claims for
indemnification hereunder.
E. Limitations. The amount of Damages payable to an Indemnified Party
pursuant to this Section IX shall be reduced by the actual amount of proceeds
received by such party from an insurance carrier on account of such Damages. No
party to this Agreement shall make a claim for indemnification hereunder, until
the total amount of the Damages suffered by that party, and its subsidiaries and
affiliates exceeds $50,000. Once that threshold amount is reached, such party
may recover the full amount of its Damages, including the threshold amount. The
maximum liability of the Shareholders for indemnification pursuant to Section IX
shall be the Purchase Price. No party to this Agreement shall make a claim for
indemnification hereunder more than two years after the Closing Date.
SECTION X
BROKERS AND FINDERS
A. The Shareholders' Obligation. The Purchaser shall not have any
obligation to pay any fee or other compensation to any person, firm or
corporation engaged by the Company or any of the Shareholders in connection with
this Agreement and the transactions contemplated hereby, and the Management
Shareholders, hereby agree to jointly and severally indemnify and save the
Purchaser harmless from any liability, damage, cost or expense arising from any
claim for any such fee or other compensation.
B. The Purchaser's Obligation. The Shareholders shall not have any
obligation to pay any fee or other compensation to any person, firm or
corporation engaged by the Purchaser in connection with this Agreement and the
transactions contemplated hereby, and the Purchaser hereby agrees to indemnify
and save the Shareholders harmless from any liability, damage, cost or expense
arising from any claim for any such fee or other compensation.
SECTION XI
REPRESENTATION OF SHAREHOLDERS BY
SHAREHOLDERS' AGENT
A. Appointment of Agent. Each of the Shareholders hereby irrevocably
appoints Xxxxxx X. XxXxxxxx (herein called the "Shareholders' Agent") as his
agent and attorney-in-fact to take any action required or permitted to be taken
by such Shareholder under the terms of this Agreement, including, without
limiting the generality of the foregoing, the giving and receipt of any notices
to be delivered or received by or on behalf of any or all of the Shareholders,
the sale of the EA Shares by the Shareholders pursuant to the Registration
Statement, the payment of expenses relating to the transactions contemplated by
this Agreement, the representation of the
29
Shareholders in indemnification proceedings hereunder, and the right to waive,
modify or amend any of the terms of this Agreement, and agrees to be bound by
any and all actions taken by such agent on his behalf. The Shareholders agree
jointly and severally to indemnify the Shareholders' Agent from and against and
in respect of any and all liabilities, damages, claims, costs and expenses,
including but not limited to attorneys' fees, arising out of or due to any
action as Shareholders' Agent and any and all actions, proceedings, demands,
assessments or judgments, costs and expenses incidental thereto, except to the
extent that the same result from bad faith or gross negligence on the part of
the Shareholders' Agent.
The Purchaser shall be entitled to rely exclusively upon any communications
given by the Shareholders' Agent and shall not be liable in any manner
whatsoever for any action taken or not taken in reliance upon the actions taken
or not taken or communications given or made by the Selling Shareholders' Agent.
The Purchaser shall be entitled to disregard any notices or communications not
given or made through the Shareholders' Agent, except as provided in paragraph B
below.
B. Successor Agent. Subsequent to the Closing Date, in the event of the
death of the Shareholders' Agent or his inability to perform his functions
hereunder, the Shareholders shall promptly appoint a new agent or agents as
attorney-in-fact or attorneys-in-fact, and such appointment or appointments
shall be deemed to have been made when communicated to the Buyer in writing
signed by the former holders (or the personal representatives thereof) of at
least 51% of the Shares immediately prior to the Closing Date. If the
Shareholders do not within fifteen days appoint a new agent or agents, then the
Shareholder then living who previously owned the greatest number of shares
outstanding immediately prior to the Closing Date shall serve as Shareholders'
Agent if he is able and willing to do so, until a successor agent or agents
shall have been appointed in accordance with the provisions hereof.
C. Shareholders' Actions. The manner and form by which the Shareholders
shall decide upon any new agent and attorney-in-fact shall be decided solely by
the former holders (or the personal representatives thereof) of at least 51% of
the Shares outstanding immediately prior to the Closing Date. The Shareholders
recognize, and hereby acknowledge, that the Shareholders' Agent has an interest
in the subject matter of this Agreement and that the appointment of such Agent
[which shall include any person who becomes the Shareholders' Agent pursuant to
the provisions of the subparagraph B above] as the Shareholders' Agent
constitutes an irrevocable power-of-attorney coupled with an interest.
SECTION XII
MISCELLANEOUS
A. Notices. All notices, requests or instructions hereunder shall be in
writing and delivered personally, sent by telecopy, sent by nationally
recognized courier service, or sent by registered or certified mail, postage
prepaid, as follows:
If to the Company, the Shareholders' Agent or any of the Shareholders:
30
Service Assembly, Inc.
00 Xxxxxxxx Xxxx
Xxxxxxx, XX 00000
Attention: Xxx X. XxXxxxxx, President
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
with a copy to:
E. Xxxxx Xxxxxxx, Esq.
Cameron & Xxxxxxxxx
00 Xxxxxxxx Xxxxxxx
Xxxxxxxxxx, XX 00000
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
Telephone No.: (508)
If to the Purchaser:
EAI Industries, Inc.
000 Xxxxxxxx Xxxxxxx
Xxxx Xxxx Xxxxxx, XX 00000
Attention: Xxxxx Xxxxxxxxxxx., President
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
with a copy to:
Mesirov Xxxxxx Xxxxx Xxxxxx & Xxxxxxxx
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx, Esquire
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
Any of the above addresses may be changed at any time by notice given as
provided above; provided, however, that any such notice of change of address
shall be effective only upon receipt. All notices, requests or instructions
given in accordance herewith shall be effective on the earlier of (i) the date
of delivery to the addressee or (ii), four business days after it has been
mailed, telecopied or delivered to such nationally recognized courier service.
B. Survival of Representations. Each representation, warranty, covenant and
agreement of the parties hereto herein contained shall survive closing,
notwithstanding any investigation at any time made by or on behalf of any party
hereto.
31
C. Entire Agreement. This Agreement and the documents referred to herein
contain the entire agreement among the parties hereto with respect to the
transactions contemplated hereby, and no modification hereof shall be effective
unless in writing and signed by the party against which it is sought to be
enforced.
D. Arbitration. Any controversy or claim arising out of or relating to this
Agreement, or any breach hereof, shall be settled by arbitration before a sole
arbitrator in accordance with the rules of the American Arbitration Association
then in effect and judgment upon the award rendered by the arbitrator may be
entered in any court having jurisdiction thereof. The arbitration shall be held
in the Philadelphia, Pennsylvania area.
E. Invalidity. Should any provision of this Agreement be held by a court or
arbitration panel of competent jurisdiction to be enforceable only if modified,
such holding shall not affect the validity of the remainder of this Agreement,
the balance of which shall continue to be binding upon the parties hereto with
any such modification to become a part hereof and treated as though originally
set forth in this Agreement. The parties further agree that any such court or
arbitration panel is expressly authorized to modify any such unenforceable
provision of this Agreement in lieu of severing such unenforceable provision
from this Agreement in its entirety, whether by rewriting the offending
provision, deleting any or all of the offending provision, adding additional
language to this Agreement, or by making such other modifications as it deems
warranted to carry out the intent and agreement of the parties as embodied
herein to the maximum extent permitted by law. The parties expressly agree that
this Agreement as modified by the court or the arbitration panel shall be
binding upon and enforceable against each of them. In any event, should one or
more of the provisions of this Agreement be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions hereof, and if such provision or
provisions are not modified as provided above, this Agreement shall be construed
as if such invalid, illegal or unenforceable provisions had never been set forth
herein.
F. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the successors and assigns of EAI, the Company and the
Purchaser, respectively, and the legal representatives and heirs of the
Shareholders. No Party may assign either this Agreement or any of his or its
rights, interests, or obligations hereunder without the prior written approval
of the other parties hereto.
G. No Third-Party Beneficiaries. This Agreement shall not confer any rights
or remedies upon any person other than the Parties and their respective
successors and permitted assigns.
H. Headings. The section headings contained in this Agreement are inserted
for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
I. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New Jersey without giving
effect to any choice or conflict of
32
law provision or rule (whether of the State of New Jersey or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of New Jersey.
J. Amendments and Waivers. No amendment, modification or termination of any
provision of this Agreement shall be valid unless the same shall be in writing
and signed by the Parties hereto. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
K. Expenses. Each of the Parties will bear his or its own costs and
expenses (including legal and accounting fees and expenses) incurred in
connection with this Agreement and the transactions contemplated hereby.
L. Construction. The Parties have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the Parties and no presumption or burden of proof shall arise
favoring or disfavoring any Party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. The Parties intend
that each representation, warranty, and covenant contained herein shall have
independent significance. If any Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant.
M. Specific Performance. Each of the Parties acknowledges and agrees that
the other Parties would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the Parties agrees that
the other Parties shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof in any action instituted in any
court of the United States or any state thereof having jurisdiction over the
Parties and the matter, in addition to any other remedy to which they may be
entitled, at law or in equity.
N. Materiality. As used in this Agreement, the terms "material" or
"materiality" shall mean an item or items which would affect the net income of
the Company during any fiscal year by $10,000 or more or which would affect its
shareholder's equity by $25,000 or more, during any fiscal year, provided,
however, that if a specific dollar amount is set forth elsewhere in a specific
provision of this Agreement, for purposes of that section that amount shall be
deemed material.
O. Gender. In this Agreement, unless the context requires otherwise, the
masculine, feminine and neuter gender and the singular and the plural include
one another.
33
P. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto as of the date first above written.
COMPANY: SERVICE ASSEMBLY, INC.
By: /s/ Xxx X XxXxxxxx
-------------------------------
Xxx X. XxXxxxxx, President
PURCHASER: EA INDUSTRIES, INC.
By: /s/ Xxxxx Xxxxxxxxxxx
-------------------------------
Xxxxx Xxxxxxxxxxx, President
and Chief Executive Officer
[signatures continued on next page]
34
SHAREHOLDERS:
/s/ Xxx X. XxXxxxxx
----------------------------------
Xxx X. XxXxxxxx
/s/ Xxxxx Xxxxx
----------------------------------
Xxxxx Xxxxx
COMTEC Information Systems, Inc.
By: /s/ Xxxxxx X Xxxxxxxxx
----------------------------------
Xxxxxx X. Xxxxxxxxx, President
/s/ Xxxxx X. Xxxxx
----------------------------------
Xxxxx X. Xxxxx
/s/ Xxxxx X. Xxxxx
----------------------------------
Xxxxx X. Xxxxx
/s/ Xxxxxxx X. Xxxxxxx
----------------------------------
Xxxxxxx X. Xxxxxxx
/s/ Xxxxxx X. Xxxxxxxx
----------------------------------
Xxxxxx X. Xxxxxxxx
/s/ Xxxxx Xxxxxxx
----------------------------------
Xxxxx Xxxxxxx
/s/ Xxxxxxx X. Xxxxxxxx
----------------------------------
Xxxxxxx X. Xxxxxxxx
[signatures continued on next page]
35
/s/ Xxxxx Xxxxxxxx
----------------------------------
Xxxxx Xxxxxxxx
/s/ Xxxxx Xxxxxxxxx
----------------------------------
Xxxxx Xxxxxxxxx
/s/ Xxxxx Xxxx
----------------------------------
Xxxxx Xxxx
/s/ Xxxxxxx Xxxxxx
----------------------------------
Xxxxxxx Xxxxxx
/s/ Xxxxxxxx Xxxx
----------------------------------
Xxxxxxxx Xxxx
/s/ Xxxxxxxxx X. Xxxxxxxx
----------------------------------
Xxxxxxxxx X. Xxxxxxxx
/s/ Xxxxxx Xxxxxxxx
----------------------------------
Xxxxxx, Xxxxxxxx
36
Schedule I
----------
Name of Shareholder Number of Shares
------------------- ----------------
Xxx X. XxXxxxxx 250,000
Xxxxx Xxxxx 250,000
COMTEC Information Systems, Inc. 250,000
Xxxxx X. Xxxxx 100,000
Xxxxx X. Xxxxx 55,000
Xxxxxx Xxxxxxxx 5,000
Xxxxxxx X. Xxxxxxx 7,000
Xxxxxx X. Xxxxxxxx 2,000
Xxxxx Xxxxxxx 2,000
Xxxxxxx X. Xxxxxxxx 2,600
Xxxxx Xxxxxxxx 2,000
Xxxxx Xxxxxxxxx 2,000
Xxxxx Xxxx 2,000
Xxxxxxx Xxxxxx 2,000
Xxxxxxxx Xxxx 2,000
Xxxxxxxxx X. Xxxxxxxx 2,000
37
February __, 1998
Xxx X. XxXxxxxx
00 Xxx Xxx
Xxxxxxxx, XX 00000
Dear Don:
The following describes the terms of your employment:
1. Tanon Manufacturing, Inc. (the "Company") hereby employs Xxx X. XxXxxxxx (the
"Executive), and the Executive agrees to serve in the employ of the Company, for
a term commencing on the date hereof and continuing through December 31, 2001.
2. The Executive shall serve the Company as General Manager of Service Assembly,
Inc. ("SAI"). The Executive shall devote at least ten hours per week to the
performance of his duties and responsibilities hereunder. The Executive hereby
represents that he is not bound by any confidentiality agreements or restrictive
covenants which restrict or may restrict his ability to perform his duties
hereunder.
3. The Company shall pay the Executive, and the Executive shall accept, a salary
at the rate of $60,000 per annum, payable in accordance with the standard
payroll practices of the Company.
4. During the term of this Agreement the Executive shall be entitled to
customary medical insurance on the same terms as are available to such similarly
situated employees, it being understood that (i) for purposes of eligibility for
such benefits, the Executive shall be treated as a full-time employee, to the
extent allowed by law and (ii) the Executive shall be required to make the same
contributions and payments in order to receive any of such benefits as may be
required of such similarly situated employees.
5. The Executive shall be granted options under the 1994 Equity Incentive Plan
of EA Industries, Inc. ("EA") to purchase seven thousand five hundred (7,500)
shares of the Common Stock of EA. The exercise price of these options shall be
the fair market value of such stock at the time the option grant is made by the
Compensation Committee or Board of Directors of EA, the options shall have a
term of ten years, shall vest 1/4 per year beginning on the first anniversary or
the date hereof, and shall have such other terms as are approved by the
Compensation Committee or Board of Directors of EA.
6. If the Executive shall become incapacitated by reason of sickness, accident
or other physical or mental disability and shall for a period of sixty (60)
consecutive days, or for a cumulative total of ninety (90) days during any
twelve month period, be unable to perform his normal duties hereunder, the
employment of the Executive hereunder may be terminated by the Company upon ten
(10) days' prior written notice to the Executive. Within thirty (30) days after
such termination, the Company shall pay to the Executive the salary provided for
in paragraph 3 accrued to the date of such termination and not theretofore paid.
7. The employment of the Executive hereunder may be terminated by the Company at
any time during the term of this Agreement for Due Cause (as hereinafter
defined). In the event of such termination, the Company shall pay to the
Executive the salary provided for in Section 3 (at the annual rate then in
effect) accrued to the date of such termination and not theretofore paid to the
Executive, and, after the satisfaction of any claim of the Company against the
Executive arising as a direct and proximate result of such Due Cause, neither
the Executive nor the Company shall have any further rights or obligations under
this Agreement. For purposes hereof, "Due Cause" shall mean (a) a material
breach of any of the Executive's obligations hereunder or under the
Non-Competition and Confidentiality Agreement dated the date hereof, or (b)
performance which, in the good faith judgment of the Company, is unsatisfactory;
or (c) that the Executive, in carrying out his duties hereunder, has been guilty
of (i) willful or gross neglect or (ii) willful or gross misconduct, resulting
in either case in harm to any member of the Company Group (as hereinafter
defined); or (d) that the Executive has been charged with (i) a felony or (ii)
any crime or offense involving moral turpitude. In the event of an occurrence
under this paragraph 7, the Executive shall be given written notice by the
Company that it intends to terminate the Executive's employment for Due Cause
under this Section, which written notice shall specify the act or acts upon the
basis of which the Company intends so to terminate the Executive's employment.
If the basis for such written notice is an act or acts described in clause (a)
or (b) above and not involving moral turpitude, the Executive shall be given ten
(10) days to cease or correct the performance (or nonperformance) giving rise to
such written notice and, upon failure of the Executive within such ten (10) days
to cease or correct such performance (or nonperformance), the Executive's
employment by the Company shall automatically be terminated hereunder for Due
Cause.
8. The Company may terminate the Executive's employment prior to the expiration
of the term of this Agreement for whatever reason it deems appropriate;
provided, however, that in the event that such termination is not pursuant to
Section 7, the Company shall pay to the Executive (i)on the date of termination,
the base salary provided for in paragraph 10 accrued to the date of termination
and not theretofore paid to the Executive, (ii) severance pay, in the form of
salary continuation for the lesser of (a) the remaining term of this Agreement
or (b) a period of one year commencing on the date of termination, at a rate
equal to the base salary provided for in paragraph 3. During the severance pay
period, the Employee shall diligently seek other full-time employment which is
suitable and appropriate in light of his background, experience, seniority and
stature. Amounts payable to the Employee pursuant to this paragraph and shall be
offset by amounts earned from other employment (whether as an employee, a
consultant or otherwise) during the severance pay period.
9. This Agreement contains the entire agreement among the parties hereto with
respect to the matters contemplated hereby, and no modification hereof shall be
effective unless in writing and signed by the party against which it is sought
to be enforced.
2
If this letter accurately reflects your understanding of the terms of your
employment please sign and return one copy to me.
Sincerely,
Xxxxx Xxxxxxxxxxx, President
Agreed to and accepted this ____ day of February, 1998
----------------------
Xxx X. XxXxxxxx
0
Xxxxxxx XX(X)(x)(x)
EMPLOYMENT AGREEMENT
AGREEMENT made the ____th day of February, 1998 by and between Tanon
Manufacturing, Inc., a California corporation (the "Company") and Xxxxx Xxxxx
(the "Executive").
W I T N E S S E T H:
WHEREAS, the Company wishes to assure itself of the services of the
Executive, and the Executive wishes to serve in the employ of the Company, upon
the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
hereinafter set forth, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Employment, Term.
1.1 The Company agrees to employ the Executive, and the Executive agrees
to serve in the employ of the Company, for the term set forth in Section 1.2, in
the position and with the responsibilities, duties and authority set forth in
Section 2 and on the other terms and conditions set forth in this Agreement.
1.2 The term of the Executive's employment under this Agreement shall be
the period commencing on the date hereof and continuing through December 31,
2001, unless sooner terminated in accordance with this Agreement.
2. Position, Duties. The Executive shall serve the Company as Vice
President of Sales and Marketing of the East Coast Division of the Company, or
such other position or positions as directed by the president of Tanon and at
the request of the Board of Directors shall serve as an officer and director of
the Company, its parents, subsidiaries and/or affiliates without payment of any
additional compensation. The Executive shall have such duties and
responsibilities, appropriate to said positions as the President of the Company
or his designees shall assign to the Executive. The Executive shall perform his
duties and responsibilities hereunder, faithfully and diligently and shall
report to the President of East Coast Division of the Company. The Executive
shall devote his full business time and attention to the performance of his
duties and responsibilities hereunder. The Executive hereby represents that he
is not bound by any confidentiality agreements or restrictive covenants which
restrict or may restrict his ability to perform his duties hereunder, and agrees
that he will not enter into any such agreements or covenants during the term of
his employment hereunder, except such restrictive covenants or confidentiality
agreements which are required by the Company.
3. Base Salary. During the term of this Agreement, in consideration of the
performance by the Executive of the services set forth in Section 2 and his
observance of the other covenants set forth herein, the Company shall pay the
Executive, and the Executive shall accept, a salary at the rate of $120,000 per
annum, payable in accordance with the standard payroll practices of the Company.
In addition to the salary payable hereunder, the Executive may
2
be entitled to receive merit increases in salary during the term hereof in
amounts and at such times as shall be determined by the President of the Company
in his sole discretion. In no event shall the failure to grant any such increase
(or the amount of any such increase) give rise to a claim by the Executive under
this Agreement.
4. Bonus Payments. The Company shall maintain a separate profit and loss
statement reflecting the operations of the business currently known as Service
Assembly, Inc. (the "Division"), of the business currently known as the Western
Division of the Company ("Tanon West") and of the business currently known as
the Eastern Division of the Company ("Tanon East"). The bonus payments for the
Executive shall be based on the results of operations for (i) the twelve month
period beginning on January 1, 1998 and ending on December 31, 1998 (the "1998
Bonus Year), (ii) the twelve month period beginning on January 1, 1999 and
ending on December 31, 1999 (the "1999 Bonus Year), (iii) the twelve month
period beginning on January 1, 2000 and ending on December 31, 2000 (the "2000
Bonus Year), and (iv) the twelve month period beginning on January 1, 2001 and
ending on December 31, 2001 (the "2001 Bonus Year). During the term of this
Agreement the Executive shall be paid an amount (the "Estimated Bonus") equal to
$10,000 per month. Within 15 days after determination of the bonus payable for
each Bonus Year, if such bonus payable exceeds the Estimated Bonus amounts paid
with respect to that Bonus Year, the difference shall be paid by the Company to
the Executive. Within 15 days after determination of the bonus payable for each
Bonus Year, if the Estimated Bonus amounts paid with respect to that Bonus Year
exceeds the bonus payable for that Bonus Year, the difference shall be paid to
the Company by the Executive.
The Company shall within 45 days after the end of each calendar quarter,
and within 90 days after its fiscal year end compute the Net Revenue and Net
Income of the Division, Tanon West and Tanon East for such period. The Executive
shall have twenty days from the date of delivery of such computations to dispute
such computations and on the twenty-first day after of such computations is
delivered Pursuant to the procedure set forth in Section XII(A) of the Purchase
Agreement they shall be deemed accepted. The amounts so computed, subject to
such adjustments as may be made thereto in the course of performing audit
procedures by the Company's independent public accountants, shall be the Net
Revenue and Net Income for purposes of determining whether or not the bonus
payments set forth in this Agreement shall be due and payable. Notwithstanding
the determination of Net Revenue and Net Income for any applicable period, the
Executive shall have the right to receive the information upon which such
determination was made, and shall, in the event of a dispute as to the amount or
method of calculation of such Net Revenue and Net Income, have the right to
review all work papers relating to the determination of Net Revenue and Net
Income. In the event that the Executive disputes such determination, the Company
and the Executive shall have the right to designate an independent certified
public accountant, as mutually agreed, to review such determination. Failing
such agreement, the parties shall apply to the American Arbitration Association
for the designation of such accountant. The final determination of such
independent certified public accountant shall be deemed conclusive. Set forth on
Schedule 1 attached hereto are hypothetical examples of computations of the
additional payments set forth herein.
"Net Revenue" of the Division, Tanon West, or Tanon East shall mean the
gross revenues derived from services provided, or products sold, by the
Division, Tanon West or Tanon East, as
2
applicable, net of any volume or other discounts applicable to such revenues,
and net of any uncollectable portion of such revenues for the applicable period
as determined in accordance with generally accepted accounting principles, and
excluding revenues from or attributable to other companies or businesses
purchased by the Company after the date hereof.
"Net Income" shall mean Net Revenue less cost of sales, selling, general
and administrative expenses, Interest expense, and any other expenses of the
applicable entity.
(a) During the term of this Agreement, the Executive shall be entitled to
annual bonuses as follows:
o an amount equal to 2% of the Net Revenues of the Division for the
1998 Bonus Year.
o an amount equal to 2% of the Net Revenues of the Division for the
1999 Bonus Year.
o an amount equal to 2% of the Net Revenues of the Division for the
2000 Bonus Year.
o an amount equal to 2% of the Net Revenues of the Division for the
2001 Bonus Year.
(b) During the term of this Agreement, the Executive shall be entitled to
annual bonuses as follows:
o an amount equal to 3% of the Net Income of the Division for the
1998 Bonus Year.
o an amount equal to 3% of the Net Income of the Division for the
1999 Bonus Year.
o an amount equal to 3% of the Net Income of the Division for the
2000 Bonus Year.
o an amount equal to 3% of the Net Income of the Division for the
2001 Bonus Year.
(c) During the term of this Agreement, the Executive shall be entitled to
annual bonuses as follows:
o an amount equal to 0.5% of (x) the Net Revenues of Tanon East for the
1998 Bonus Year less (y) $32,000,000.
o an amount equal to 0.5% of (x) the Net Revenues of Tanon East for the
1999 Bonus Year less (y) $32,000,000.
o an amount equal to 0.5% of (x) the Net Revenues of Tanon East for the
2000 Bonus Year less (y) $32,000,000.
o an amount equal to 0.5% of (x) the Net Revenues of Tanon East for the
2001 Bonus Year less (y) $32,000,000.
(d) At the end of each quarter during the term of this Agreement, the
Executive and the president of the Tanon East shall compile a list of all
customers (the "Customers") of Tanon West which were introduced to the Company
by the Executive during the quarter. During the term of this Agreement, the
Executive shall be entitled to annual bonuses as follows:
o an amount equal to 0.5% of the Net Revenues of Tanon West derived from the
Customers during the 1998 Bonus Year.
o an amount equal to 0.5% of the Net Revenues of Tanon West derived from the
Customers during the 1999 Bonus Year.
3
o an amount equal to 0.5% of the Net Revenues of Tanon West derived from the
Customers during the 2000 Bonus Year.
o an amount equal to 0.5% of the Net Revenues of Tanon West derived from the
Customers during the 2001 Bonus Year.
5. Expense Reimbursement. During the term of this Agreement, consistent
with the Company's policies and procedures as may be in effect from time to
time, the Company shall reimburse the Executive for all reasonable and necessary
out-of-pocket expenses incurred by him in connection with the performance of his
duties hereunder, upon the presentation of proper accounts therefor in
accordance with the Company's policies.
6. Other Benefits. (a) During the term of this Agreement, the Executive
shall be entitled to receive three (3) weeks paid vacation time per annum and
such other benefits, including, subject to meeting standard eligibility
requirements, participation in any 401(k) plan in which the Company's executives
are eligible to participate, customary medical insurance and continuing
education benefits, as are from time to time made available to other similarly
situated employees of the Company on the same terms as are available to such
similarly situated employees, it being understood that the Executive shall be
required to make the same contributions and payments in order to receive any of
such benefits as may be required of such similarly situated employees.
(b) The Company shall pay the Executive $400 per month as an automobile
allowance during the term of his employment. The Company shall reimburse the
Executive for any fuel costs incurred on Company business. All vehicle
maintenance costs, costs for customary insurance coverage, vehicle registration
charges, and any other costs associated with operating a vehicle shall be paid
by the Executive.
7. Termination of Employment.
7.1 Death. In the event of the death of the Executive during the term of
this Agreement, the Company shall pay to the estate or other legal
representative of the Executive the salary provided for in Section 3 (at the
annual rate then in effect) accrued to the Executive's date of death and not
theretofore paid, and the estate or other legal representative of the Executive
shall have no further rights under this Agreement. Rights and benefits of the
Executive, his estate or other legal representative under the Executive benefit
plans and programs of the Company, if any, will be determined in accordance with
the terms and provisions of such plans and programs.
7.2 Disability. If the Executive shall become incapacitated by reason of
sickness, accident or other physical or mental disability and shall for a period
of sixty (60) consecutive days, or for a cumulative total of ninety (90) days
during any twelve month period, be unable to perform his normal duties
hereunder, the employment of the Executive hereunder may be terminated by the
Company upon ten (10) days' prior written notice to the Executive. Within thirty
(30) days after such termination, the Company shall pay to the Executive the
salary provided for in Section 3 (at the annual rate then in effect) accrued to
the date of such termination and not theretofore paid. Rights and benefits of
the Executive, his estate or other
4
legal representative under the employee benefit plans and programs of the
Company, if any, will be determined in accordance with the terms and provisions
of such plans and programs. Neither the Executive nor the Company shall have
further rights or obligations under this Agreement.
7.3 Due Cause. The employment of the Executive hereunder may be
terminated by the Company at any time during the term of this Agreement for Due
Cause (as hereinafter defined). In the event of such termination, the Company
shall pay to the Executive the salary provided for in Section 3 (at the annual
rate then in effect) accrued to the date of such termination and not theretofore
paid to the Executive, and, after the satisfaction of any claim of the Company
against the Executive arising as a direct and proximate result of such Due
Cause, neither the Executive nor the Company shall have any further rights or
obligations under this Agreement. Rights and benefits of the Executive, his
estate or other legal representative under the employee benefit plans and
programs of the Company, if any, will be determined in accordance with the terms
and provisions of such plans and programs. For purposes hereof, "Due Cause"
shall mean (a) a material breach of any of the Executive's obligations hereunder
(it being understood that any breach of the provisions of Section 2 hereof shall
be considered material) or under the Non-Competition and Confidentiality
Agreement dated the date hereof, or (b) performance which, in the good faith
judgment of the President of the Company, is unsatisfactory; or (c) that the
Executive, in carrying out his duties hereunder, has been guilty of (i) willful
or gross neglect or (ii) willful or gross misconduct, resulting in either case
in harm to any member of the Company Group (as hereinafter defined); or (d) that
the Executive has been charged with (i) a felony or (ii) any crime or offense
involving moral turpitude. In the event of an occurrence under this Section 7.3,
the Executive shall be given written notice by the Company that it intends to
terminate the Executive's employment for Due Cause under this Section, which
written notice shall specify the act or acts upon the basis of which the Company
intends so to terminate the Executive's employment. If the basis for such
written notice is an act or acts described in clause (a) or (b) above and not
involving moral turpitude, the Executive shall be given ten (10) days to cease
or correct the performance (or nonperformance) giving rise to such written
notice and, upon failure of the Executive within such ten (10) days to cease or
correct such performance (or nonperformance), the Executive's employment by the
Company shall automatically be terminated hereunder for Due Cause.
7.4 Other Termination. (a) The Company may terminate the Executive's
employment prior to the expiration of the term of this Agreement for whatever
reason it deems appropriate; provided, however, that in the event that such
termination is not pursuant to Sections 7.1, 7.2 or 7.3, the Company shall pay
to the Executive:
(i) on the date of termination, the base salary provided for in
Section 3 (at the annual rate then in effect) accrued to the date of
termination and not theretofore paid to the Executive:
(ii) severance pay, in the form of salary continuation for the lesser
of (i) the remaining term of this Agreement or (ii) a period of twenty four
months commencing on the date of termination, at a rate equal to the base salary
provided for in Section 3 (at the annual rate then in effect). In addition, the
Executive shall be entitled to payment of bonuses computed in accordance with
the provisions of Section 4 of this Agreement based on the
5
results of operations of the Division, Tanon West and Tanon East for a period
equal to the lesser of (i) the remaining term of this Agreement or (ii) a period
of twenty four months commencing on the date of termination, and provided that
for purposes of computing such bonuses Net Revenue shall only include entities
which were customers of Tanon, or to which Tanon had made a formal proposal or
quote to provide services, before the date of such termination. During the
severance pay period, the Employee shall diligently seek other full-time
employment which is suitable and appropriate in light of his background,
experience, seniority and stature. Amounts payable to the Employee pursuant to
Section 7.4(a) (ii) shall be offset by amounts earned from other employment
(whether as an employee, a consultant or otherwise) during the severance pay
period.
(c) In the event of a termination pursuant to this paragraph 7.4(a),
rights and benefits of the Executive, his estate or other legal representative
under the employee benefit plans and programs of the Company, if any, will be
determined in accordance with the terms and provisions of such plans and
programs and neither the Executive nor the Company shall have any further rights
or obligations under this Agreement.
8. Successors and Assigns.
8.1 Assignment by the Company. The Company shall require any successors
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Company to assume
and agree to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform if no such succession had taken
place. As used in this Section, the "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which otherwise becomes bound by all the terms and provisions of this
Agreement by operation of law and this Agreement shall be binding upon, and
inure to the benefit of, the Company, as so defined.
8.2 Assignment by the Executive. The Executive may not assign this
Agreement or any part thereof without the prior written consent of the President
of the Board of the Company; provided, however, that nothing herein shall
preclude one or more beneficiaries of the Executive from receiving any amount
that may be payable following the occurrence of his legal incompetency or his
death and shall not preclude the legal representative of his estate from
receiving such amount or from assigning any right hereunder to the person or
persons entitled thereto under his will or, in the case of intestacy, to the
person or persons entitled thereto under the laws of intestacy applicable to his
estate. The term "beneficiaries," as used in this Agreement, shall mean a
beneficiary or beneficiaries so designated to receive any such amount or, if no
beneficiary has been so designated, the legal representative of the Executive
(in the event of his incompetency) or the Executive's estate.
9. Notices. All notices, requests or instructions hereunder shall be in
writing and delivered personally, sent by telecopy, sent by nationally
recognized courier service, or sent by registered or certified mail, postage
prepaid, as follows:
6
If to the Executive:
00 Xxxxx Xxxxxx Xxxx
Xxxxxx, XX 00000
Telecopy No.: (508)__________
Telephone No.: (000) 000-0000
with a copy to:
Telephone No.: (508)
If to the Company:
Tanon Manufacturing, Inc.
000 Xxxxxxxx Xxxxxxx
Xxxx Xxxx Xxxxxx, XX 00000
Attention: Xxxxx Xxxxxxxxxxx., President
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
with a copy to:
Mesirov Xxxxxx Xxxxx Xxxxxx & Xxxxxxxx
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx, Esquire
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
Any of the above addresses may be changed at any time by notice given as
provided above; provided, however, that any such notice of change of address
shall be effective only upon receipt. All notices, requests or instructions
given in accordance herewith shall be effective on the earlier of (i) the date
of delivery to the addressee or (ii), four business days after it has been
mailed, telecopied or delivered to such nationally recognized courier service.
10. Entire Agreement. This Agreement contains the entire agreement among
the parties hereto with respect to the matters contemplated hereby, and no
modification hereof shall be effective unless in writing and signed by the party
against which it is sought to be enforced.
11. Arbitration. Any controversy or claim arising out of or relating to
this Agreement, or any breach hereof, shall be settled by arbitration in
accordance with the rules of the American Arbitration Association then in effect
and judgment upon the award rendered by the arbitrator may be entered in any
court having jurisdiction thereof. The arbitration shall be held in the
7
Philadelphia, Pennsylvania area. THE UNDERSIGNED MUTUALLY CONSENT TO THE
RESOLUTION BY FINAL AND BINDING ARBITRATION OF ALL CLAIMS OF ANY NATURE (I)
RELATED TO THIS AGREEMENT OR (II) ARISING OUT OF, CONNECTED WITH, OR RELATING TO
THE EMPLOYMENT BY THE EXECUTIVE BY THE COMPANY, ITS PARENTS, SUBSIDIARIES OR
AFFILIATES, INCLUDING BUT NOT LIMITED TO CLAIMS RELATING TO TERMINATION, AGE,
SEX OR OTHER ALLEGED DISCRIMINATION, SEXUAL HARASSMENT, CIVIL RIGHTS VIOLATIONS,
AND QUESTIONS OF ARBITRABILITY. BOTH PARTIES WAIVE ANY RIGHT TO JURY TRIAL OF
ALL CLAIMS OF ANY NATURE (I) RELATED TO THIS AGREEMENT OR (II) ARISING OUT OF,
CONNECTED WITH, OR RELATING TO THE EMPLOYMENT BY THE EXECUTIVE BY THE COMPANY,
ITS PARENTS, SUBSIDIARIES OR AFFILIATES, INCLUDING BUT NOT LIMITED TO CLAIMS
RELATING TO TERMINATION, AGE, SEX OR OTHER ALLEGED DISCRIMINATION, SEXUAL
HARASSMENT, CIVIL RIGHTS VIOLATIONS, AND QUESTIONS OF ARBITRABILITY. The
prevailing part in any such arbitration, shall be entitled to reimbursement of
all of its out of pocket expenses and reasonable attorneys' fees, incurred in
connection with such proceeding.
12. Invalidity. Should any provision of this Agreement be held by a court
or arbitration panel of competent jurisdiction to be enforceable only if
modified, such holding shall not affect the validity of the remainder of this
Agreement, the balance of which shall continue to be binding upon the parties
hereto with any such modification to become a part hereof and treated as though
originally set forth in this Agreement. The parties further agree that any such
court or arbitration panel is expressly authorized to modify any such
unenforceable provision of this Agreement in lieu of severing such unenforceable
provision from this Agreement in its entirety, whether by rewriting the
offending provision, deleting any or all of the offending provision, adding
additional language to this Agreement, or by making such other modifications as
it deems warranted to carry out the intent and agreement of the parties as
embodied herein to the maximum extent permitted by law. The parties expressly
agree that this Agreement as modified by the court or the arbitration panel
shall be binding upon and enforceable against each of them. In any event, should
one or more of the provisions of this Agreement be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions hereof, and if such provision or
provisions are not modified as provided above, this Agreement shall be construed
as if such invalid, illegal or unenforceable provisions had never been set forth
herein.
13. No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns.
14. Headings. The section headings contained in this Agreement are inserted
for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
15. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New Jersey without giving
effect to any choice or conflict of
8
law provision or rule (whether of the State of New Jersey or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of New Jersey.
16. Amendments and Waivers. No amendment, modification or termination of
any provision of this Agreement shall be valid unless the same shall be in
writing and signed by the Parties hereto. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
17. Expenses. Each of the Parties will bear his or its own costs and
expenses (including legal and accounting fees and expenses) incurred in
connection with this Agreement and the transactions contemplated hereby.
18. Construction. The Parties have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the Parties and no presumption or burden of proof shall arise
favoring or disfavoring any Party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. The Parties intend
that each representation, warranty, and covenant contained herein shall have
independent significance. If any Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant.
19. Cooperation. Both during and after the term of this Agreement, the
Executive shall cooperate with the Company and with any legal counsel, expert
or consultant it may retain to assist it in connection with any judicial
proceeding, governmental investigation or inquiry or internal audit in which
Company, its parents, subsidiaries or affiliates may be or become involved,
including full disclosure to the Company of all relevant information, and
testifying at Company's request in connection with any such proceeding or
investigation.
20. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
21. Withholding. Anything to the contrary notwithstanding, all payments
required to be made by the Company hereunder to the Executive or his
beneficiaries, including his estate, shall be subject to withholding of such
amounts relating to taxes as the Company may reasonably determine it should
withhold pursuant to any applicable law or regulation. In lieu of withholding
such amounts, in whole or in part, the Company, may, in its sole discretion,
accept other provision for payment of taxes as permitted by law, provided it is
satisfied in its sole discretion
9
that all requirements of law affecting its responsibilities to withhold such
taxes have been satisfied.
22. Survivorship. The respective rights and obligations of the parties
hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.
* * *
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first above written.
Tanon Manufacturing, Inc.
By:
-------------------------------
Xxxxx Xxxxxxxxxxx, President
-------------------------------
Xxxxx Xxxxx
10
EXHIBIT VI (B)(i)(c)
ESCROW AGREEMENT
ESCROW AGREEMENT (this "Agreement"), dated as of February__, 1998, by and
among EA Industries, Inc. (the "Company"), Xxx XxXxxxxx (the "Shareholders'
Agent"), and Mesirov Xxxxxx Xxxxx Xxxxxx & Xxxxxxxx (the "Escrow Agent").
Recitals
A. Simultaneously with the execution of this Agreement, the Company and the
shareholders of Service Assembly, Inc. ("SAI") have entered into an Agreement of
Purchase and Sale, dated as of the date hereof (the "Purchase Agreement"),
pursuant to which the Company has purchased all of the issued and outstanding
shares of SAI. All initially capitalized terms not otherwise defined herein
shall have the meanings as set forth in the Purchase Agreement.
B. The Escrow Agent is willing to act as escrow agent pursuant to the terms
of this Agreement.
NOW, THEREFORE, IT IS AGREED:
1. A. Deposits by the Company. The Company has delivered to the Escrow Agent
(i)__________shares of its Common Stock, which constitutes the Grace Period
Shares, and (ii) __________shares of its Common Stock, which constitutes the
NonSale Shares.
B. Deposits by the Shareholders' Agent. The Shareholders' Agent has
delivered to the Escrow Agent 935,600 shares of the Common Stock of SAI,
constituting the Shares, together with a fully executed assignment separate from
certificate for each stock certificate.
C. Joint Deposits. The Shareholders' Agent and the Company have deposits
with the Escrow Agent at least two fully executed copies of employment
agreements executed by Xxxxx Xxxxx and Xxx X. XxXxxxxx, Non-Competition
Agreements executed by each of Xxxxx Xxxxx, Xxx X. XxXxxxxx, Xxxxx X Xxxxx and
Xxxxx X. Xxxxx (collectively, the "Agreements").
2. Terms of Escrow.
A. Upon receipt of a written request or requests from time to time signed
by an officer of the Company and by the Shareholders' Agent, the Escrow Agent
shall deliver the number of the Grace Period Shares specified in the request in
the manner specified in the request.
B. Upon receipt of a written notice signed by an officer of the Company and
by the Shareholders' Agent, certifying that (i) the Grace Period has ended or
the Company has received the Notification and (ii) the aggregate proceeds of
sales of the Grace Period Shares equal or exceed the Grace Period Purchase
Price, the Escrow Agent shall deliver (a) the remaining Grace Period Shares to
the Company, (b) the NonSale Shares to the Shareholders'
Agent, (c) the Shares to the Company, and (d) at least one copy of each of the
Agreements to the Company and to the Shareholders' Agent.
C. Upon receipt of a written notice signed by an officer of the Company and
by the Shareholders' Agent, certifying that (i) the Grace Period has ended or
the Company has received the Notification, (ii) the aggregate proceeds of sales
of the Grace Period Shares do not equal or exceed the Grace Period Purchase
Price, and (iii) the Shareholders' Agent has elected not to rescind the sale of
the Shares, the Escrow Agent shall deliver (a) the remaining Grace Period Shares
to the Shareholders' Agent, (b) the NonSale Shares to the Shareholders' Agent,
(c) the Shares to the Company and (d) at least one copy of each of the
Agreements to the Company and to the Shareholders' Agent.
D. If the Shareholders' Agent elects to rescind the share of the Shares as
permitted by the terms of the Purchase Agreement, the Shareholders' Agent shall
deliver to the Escrow Agent the amount of the aggregate proceeds of sales of the
Grace Period Shares (hereinafter, the "Funds") by wire transfer to a bank
account designated in writing by the Escrow Agent. Upon receipt of a written
notice signed by an officer of the Company and by the Shareholders' Agent,
certifying that (i) the Grace Period has ended or the Company has received the
Notification, (ii) the amount of the aggregate proceeds of sales of the Grace
Period Shares, (iii) the Funds do not equal or exceed the Grace Period Purchase
Price, and (iv) the Shareholders' Agent has elected to rescind the sale of the
Shares, and upon receipt of the Funds, the Escrow Agent shall deliver (a) the
remaining Grace Period Shares to the Company, (b) the NonSale Shares to the
Company, (c) the Funds to the Company and (d) the Shares to the Shareholders'
Agent and the Escrow Agent shall destroy all copies of each of the Agreements.
E. If the Escrow Agent, prior to delivering or causing to be delivered the
deliveries set forth in B, C or D in accordance herewith, receives notice of
objection, dispute, or other assertion in accordance with any of the provisions
of this Agreement, the Escrow Agent shall continue to hold everything he then
holds until such time as the Escrow Agent shall receive (i) written instructions
jointly executed by the Shareholders' Agent and the Company, directing
distribution of such items, or (ii) a certified copy of a judgment, order or
decree of a court of competent jurisdiction, final beyond the right of appeal,
directing the Escrow Agent to distribute said items to any party hereto or as
such judgment, order or decree shall otherwise specify (including any such order
directing the Escrow Agent to deposit such items into the court rendering such
order, pending determination of any dispute between any of the parties). In
addition, the Escrow Agent shall have the right to deposit any of the items with
a court of competent jurisdiction pursuant to applicable law without liability
to any party, if said dispute is not resolved within 30 days of receipt of any
such notice of objection, dispute or otherwise.
3. Duties and Obligations of the Escrow Agent.
The parties hereto agree that the duties and obligations of the Escrow
Agent are only such as are herein specifically provided and no other. The Escrow
Agent's duties are as a depository only, and the Escrow Agent shall incur no
liability whatsoever, except as a direct result of its willful misconduct or
gross negligence.
2
A. The Escrow Agent may consult with counsel of its choice, at the
Company's expense, and shall not be liable for any action taken, suffered or
omitted by it in accordance with the advice of such counsel.
B. The Escrow Agent shall not be bound in any way by the terms of any other
agreement to which the Shareholders' Agent and the Company are parties, whether
or not it has knowledge thereof, and the Escrow Agent shall not in any way be
required to determine whether or not any other agreement has been complied with
by the Shareholders' Agent and the Company, or any other party thereto. The
Escrow Agent shall not be bound by any modification, amendment, termination,
cancellation, rescission or suppression of this Agreement unless the same shall
be in writing and signed jointly by each of the Shareholders' Agent and the
Company, and agreed to in writing by the Escrow Agent.
C. In the event that the Escrow Agent shall be uncertain as to its duties
or rights hereunder or shall receive instructions, claims or demands which, in
its opinion, are in conflict with any of the provisions of this Agreement, it
shall be entitled to refrain from taking any action, other than to keep safely,
all property held in escrow until it shall jointly be directed otherwise in
writing by the Shareholders' Agent and the Company or by a final judgment of a
court of competent jurisdiction.
D. The Escrow Agent shall be fully protected in relying upon any written
notice, demand, certificate or document which it, in good faith, believes to be
genuine. The Escrow Agent shall not be responsible for the sufficiency or
accuracy of the form, execution, validity or genuineness of documents or
securities now or hereafter deposited hereunder, or of any endorsement thereon,
or for any lack of endorsement thereon, or for any description therein; nor
shall the Escrow Agent be responsible or liable in any respect on account of the
identity, authority or rights of the persons executing or delivering or
purporting to execute or deliver any such document, security or endorsement.
E. The Escrow Agent shall not be required to institute legal proceedings of
any kind and shall not be required to defend any legal proceedings which may be
instituted against it or in respect of the items it holds in escrow.
F. If the Escrow Agent at any time, in its sole discretion, deems it
necessary or advisable to relinquish custody of the items it holds in escrow, it
may do so by delivering the same to any other escrow agent mutually agreeable to
the Shareholders' Agent and the Company and, if no such escrow agent shall be
selected within three days of the Escrow Agent's notification to the
Shareholders' Agent and the Company of its desire to so relinquish custody of
the items it holds in escrow, then the Escrow Agent may do so by delivering the
items it holds in escrow (a) to any bank or trust company in the City of
Philadelphia, which is willing to act as escrow agent thereunder in place and
instead of the Escrow Agent, or (b) to the clerk or other proper officer of a
court of competent jurisdiction as may be permitted by law within the City of
Philadelphia. The fee of any such bank or trust company or court officer shall
be borne by one-half by the Shareholders' Agent and one-half by the Company.
Upon such delivery, the Escrow Agent shall be discharged from any and all
responsibility or liability with respect to the items it holds in escrow and the
Company and the Shareholders' Agent shall promptly pay to the
3
Escrow Agent all monies which may be owed it for its services hereunder,
including, but not limited to, reimbursement of its out-of-pocket expenses
pursuant to paragraph (i) below.
G. This Agreement shall not create any fiduciary duty on the Escrow Agent's
part to the Shareholders, the Shareholders' Agent or the Company, nor disqualify
the Escrow Agent from representing either party hereto in any dispute with the
other, including any dispute with respect to the items it holds in escrow. The
parties understand that the Escrow Agent has acted and will continue to act as
counsel to the Company.
H. The reasonable out-of-pocket expenses paid or incurred by the Escrow
Agent in the administration of its duties hereunder, including, but not limited
to, all counsel and advisors' and agents' fees and all taxes or other
governmental charges, if any, shall be paid by one-half by the Shareholders'
Agent and one-half by the Company.
4. Indemnification. The Shareholders' Agent and the Company, jointly and
severally, hereby indemnify and hold the Escrow Agent harmless from and against
any and all losses, damages, taxes, liabilities and expenses that may be
incurred by the Escrow Agent, arising out of or in connection with its
acceptance of appointment as the Escrow Agent hereunder and/or the performance
of its duties pursuant to this Agreement, including, but not limited to, all
legal costs and expenses of the Escrow Agent incurred defending itself against
any claim or liability in connection with its performance hereunder.
5. Miscellaneous.
A. Notices. All notices, requests or instructions hereunder shall be in
writing and delivered.
The parties hereto agree that the duties and obligations of the Escrow
Agent are only such as are herein specifically provided and no other. The Escrow
Agent's duties are as a depository only, and the Escrow Agent shall incur no
liability whatsoever, except as a direct result of its willful misconduct or
gross negligence.
If to the Shareholders' Agent
Service Assembly, Inc.
00 Xxxxxxxx Xxxx
Xxxxxxx, XX 00000
Attention: Xxxxxx X. XxXxxxxx, President
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
4
with a copy to:
E. Xxxxx Xxxxxxx, Esq.
Cameron & Xxxxxxxxx
00 Xxxxxxxx Xxxxxxx
Xxxxxxxxxx, XX 00000
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
If to the Company:
EAI Industries, Inc.
000 Xxxxxxxx Xxxxxxx
Xxxx Xxxx Xxxxxx, XX 00000
Attention: Xxxxx Xxxxxxxxxxx., President
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
If to the Escrow Agent:
Mesirov Xxxxxx Xxxxx Xxxxxx & Xxxxxxxx
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx, Esquire
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
Any of the above addresses may be changed at any time by notice given as
provided above; provided, however, that any such notice of change of address
shall be effective only upon receipt. All notices, requests or instructions
given in accordance herewith shall be effective on the earlier of (i) the date
of delivery to the addressee or (ii), four business days after it has been
mailed, telecopied or delivered to such nationally recognized courier service.
B. Entire Agreement. This Agreement and the documents referred to herein
contain the entire agreement among the parties hereto with respect to the
transactions contemplated hereby, and no modification hereof shall be effective
unless in writing and signed by the party against which it is sought to be
enforced.
C. No Third-Party Beneficiaries. This Agreement shall not confer any rights
or remedies upon any person other than the Parties and their respective
successors and permitted assigns.
D. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New Jersey without giving
effect to any choice or conflict of law provision or rule (whether of the State
of New Jersey or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of New Jersey.
5
E. Amendments and Waivers. No amendment, modification or termination of any
provision of this Agreement shall be valid unless the same shall be in writing
and signed by the Parties hereto. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
F. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed the day and year first above written.
COMPANY EA INDUSTRIES, INC.
By:
------------------------------------
Xxxxx Xxxxxxxxxxx, President
and Chief Executive Officer
SHAREHOLDERS' AGENT
-----------------------------------
Xxx X. XxXxxxxx
ESCROW AGENT MESIROV XXXXXX XXXXX XXXXXX & XXXXXXXX
By:
------------------------------------
A Member of the Firm
6
Exhibit VI(B)(ii)(g)
NON-COMPETITION AND CONFIDENTIALITY AGREEMENT
THIS NON-COMPETITION AND CONFIDENTIALITY AGREEMENT (this "Agreement"), made
and effective as of this _____ day of ______, 1998, by and among EA Industries,
Inc., a New Jersey corporation ("EA"), Tanon Manufacturing, Inc., a California
corporation ("Tanon"), Xxxxxx X. XxXxxxxx ("XxXxxxxx"), Xxxxx Xxxxx ("Reddy"),
Xxxxx X. Xxxxx ("Xxxxx"), and Xxxxx X. Xxxxx ("Xxxxx").
BACKGROUND
Pursuant to the terms of an Acquisition Agreement by and among EA, Tanon,
Service Assembly, Inc., a Massachusetts corporation ("SAI") and all of the
shareholders of SAI, dated the date hereof (the "Acquisition Agreement"),
effective as of the date hereof, EA has acquired all of the issued and
outstanding shares of stock of SAI. SAI, EA and Tanon are sometimes hereafter
collectively referred to as the "Company". Any term not otherwise defined herein
shall have the meaning ascribed to such term in the Acquisition Agreement.
SAI is engaged in the business of providing contract manufacturing
services, including designing and building electronic prototypes, and quick turn
assembly and testing of a wide range of products at a facility (the "Facility")
in Wareham, Massachusetts (such activities being hereinafter referred to as the
"SAI Business").
Tanon is engaged in the business of providing contract manufacturing
services (including assembly and testing of a wide range of products) at
facilities in California and New Jersey (such activities being hereinafter
referred to as the "Tanon Business"); Pursuant to the terms of the Acquisition
Agreement, the SAI Business and the Tanon Business will be operated as an
integrated business (hereinafter the "Business"). DeSantis, Reddy, Xxxxx and
Xxxxx (collectively, the "Executives") were key executives of, and major
shareholders in, SAI prior to the Closing and, pursuant to and following the
closing, shall continue to be key executives of the Business.
The Executives each possess unique knowledge of the business and operations
of the SAI and the future prospects of the Business and of SAI are dependent in
significant part on the knowledge, contacts and efforts of the Executives. The
Executives, in the course of their employment with SAI, represented SAI, and
will continue to represent SAI and/or Tanon, in their dealings with customers,
suppliers and employees, and the competitive survival and goodwill of SAI and
its successors with respect to the Business will be dependent upon its
maintaining favorable relations with customers, suppliers and employees. The
provisions contained in this Agreement are required to preserve for EA, Tanon
and SAI the substantial rights and goodwill acquired upon consummation of the
acquisition of SAI. The execution and delivery of this Agreement is a condition
to Tanon and EA's obligations under the Acquisition Agreement.
NOW, THEREFORE, as a material inducement for EA and Tanon to enter into the
Acquisition Agreement, and to carry out the transactions contemplated thereby,
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged by each of the Executives, and intending to be
legally bound, the parties agree as follows:
Section 1. Company Information and Customer Information.
1.1 During the term of and the two year period following the date of the
termination of his employment with Tanon or SAI, each of the Executives agrees
that he shall not, directly or indirectly, disclose or use in any manner
whatsoever, except as may be required by law, any Company Information or
Customer Information, as defined below, that he may possess on the date hereof
or at any time hereafter.
1.2 The term "Company Information" as used in this Non-Competition
Agreement means secret, confidential, or proprietary information not released to
the public by the Company in the ordinary course of its business, including,
without limitation, technical, financial, compensation and marketing information
and information respecting customers (including customer lists), prices,
strategies, markets, methods of operation or doing business, suppliers, business
forecasts, selling procedures, "know-how", software, drawings, and new product
and engineering information and any other technical data relating to the Company
or the Business, all of the above including, without limitation, information
received from third parties under confidential conditions; provided, however,
that "Company Information" does not include information that has become publicly
known other than as a result of a breach of this Non-Competition Agreement by
any of the Executives, or information that has been disclosed by the Company to
a third party without a similar restriction on the third party.
1.3 The term "Customer Information" as used in this Agreement means secret,
confidential, or proprietary information, relating to the customers of the
Company not released to the public by the Company in the ordinary course of its
business, including, without limitation, technical, marketing and financial
information and customer lists, received by the Company or any of the Executives
from any person or entity who, during the one year prior to the date hereof or
at any time during the period covered by this Agreement, was a customer or with
or to whom SAI, EA, Tanon or any of the Executives made a proposal or offer as a
potential customer of the Company; provided, however, that the term "Customer
Information" does not include information that has become publicly known other
than as a result of a breach by any of the Executives of this Non-Competition
Agreement, or information that has been disclosed by the Company to a third
party without a similar restriction on the third party.
Section 2. Non-Competition; Customer and Employee Solicitation. Except as
provided below, for a period commencing on the date hereof and ending, with
respect to each Executive, on the second anniversary of the date such Executive
ceases to be an employee of EA, Tanon, SAI and their subsidiaries, successors,
and assigns (the "Termination Date"), such Executive shall not, without the
prior written consent of the President of EA, either directly, indirectly,
separately or in association with others:
(A) within a one hundred and fifty mile (150 mile) radius of the Facility
and any other location or facility operated by the Company at which the
Executive provided services or had an office (either on or before the date
hereof or on or before the Termination Date) engage in the operation of or have
any financial interest in, whether as an officer, employee, partner, owner,
lender, shareholder, operator, consultant or otherwise, any person, firm,
corporation or
2
business that itself engages in, or through a subsidiary or affiliate engages
in, the Business as conducted on the date hereof or on the Termination Date; or
(B) solicit, accept, or conduct any business of the type or nature
described in clause (A) above with any person or entity who, during the one year
prior to the date hereof or at any time during the period covered by this
Agreement, was a customer or with or to whom SAI, EA, Tanon or any of the
Executives made a proposal or offer as a potential customer of the Company; or
(C) employ, attempt to employ or otherwise interfere or attempt to
interfere, directly or indirectly, with the employment, contractual or other
business relationships between the Company on the one hand, and any of its
officers, directors, employees, customers, suppliers or agents, on the other
hand for the purpose of engaging in the geographic area described in clause (A)
above, in any business of the type or nature described in clause (A) above.
Nothing in this Agreement shall prohibit any of the Executives from each owning
one percent (1%) or less of the issued and outstanding securities of a company
which is engaged in the business described in clause (A) above whose securities
are listed on a national securities exchange or listed on the NASDAQ National
Market System;
If any portion of the covenants set forth in Subsection 2(A)(B) or (C) above
shall be held unreasonable because of the term, geographic zones, activities or
services, or other matters covered thereby, the covenants shall nevertheless be
enforced in such reduced scope or form as may be determined by an arbitrator
appointed as specified in Section 10 hereof or by a court of competent
jurisdiction.
Section 3. Remedy. It is acknowledged and agreed that each of the
Executives talents, knowledge and background are unusual and extraordinary and
that the restrictions contained in Sections 1 and 2 of this Non-Competition
Agreement are necessary and reasonable in order to protect the legitimate
interests of EA, Tanon and SAI. Therefore, the parties agree that any violation
thereof would result in irreparable injury to the Company and that therefore the
remedy at law for the breach of any covenants contained in this Non-Competition
Agreement would be inadequate and that the Company shall be entitled to
injunctive relief with respect to any such breach in addition to any other
rights or remedies to which the Company may be entitled, and each of the
Executives hereby waives any argument that an adequate remedy exists at law for
the Company for any breach of Sections 1 and 2 of this Non-Competition
Agreement.
Section 4. Assignment. This Non-Competition Agreement may be assigned by EA
and/or Tanon to any successor in interest of EA or Tanon or any position of
either, by merger, consolidation, stock sale, transfer of assets or otherwise,
without the consent of any of the Executives.
Section 5. Binding Effect. This Non-Competition Agreement shall be binding
upon and inure to the benefit of the parties hereto, their respective heirs,
executors, administrators, successors and assigns.
3
Section 6. Delivery of Material. Promptly upon the request of the Company
after the Termination Date, each of the Executives shall deliver to EA all
Company Information or Customer Information in his possession without retaining
a copy thereof, unless, in the opinion of counsel for EA either returning such
confidential material or failing to retain a copy thereof would violate any
applicable Federal, state, local or foreign law, in which event such material
shall be returned without retaining any copies thereof as soon as practicable
after such counsel advises that the same may be lawfully done.
Section 7. Response to Subpoena. In the event that any of the Executives is
required, by oral questions, interrogatories, requests for information or
documents, subpoena, civil investigative demand or similar process, to disclose
any Company Information or Customer Information, such Executive shall provide EA
with prompt notice thereof so that EA may seek an appropriate protective order
and/or waive compliance by such Executive with the provisions hereof; provided,
however, that if in the absence of a protective order or the receipt of such a
waiver, such Executives is, in the opinion of counsel for EA, compelled to
disclose confidential material not otherwise disclosable hereunder to any
legislative, judicial or regulatory body, agency or authority, or else be
exposed to liability for contempt, fine or penalty or to other censure, such
material may be so disclosed.
Section 8. Specific Performance. Each of the Parties acknowledges and
agrees that the other Parties would be damaged irreparably in the event any of
the provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the Parties
agrees that the other Parties shall be entitled to an injunction or injunctions
to prevent breaches of the provisions of this Agreement and to enforce
specifically this Agreement and the terms and provisions hereof in any action
instituted in any court of the United States or any state thereof having
jurisdiction over the Parties and the matter, in addition to any other remedy to
which they may be entitled, at law or in equity.
Section 9. Notices. All notices, requests or instructions hereunder shall
be in writing and delivered personally, sent by telecopy, sent by nationally
recognized courier service, or sent by registered or certified mail, postage
prepaid, as follows:
If to any of the Executives:
Service Assembly, Inc.
00 Xxxxxxxx Xxxx
Xxxxxxx, XX 00000
Attention: Xxxxxx X. XxXxxxxx, President
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
4
with a copy to:
Telephone No.: (508)
If to EA or Tanon:
EAI Industries, Inc.
000 Xxxxxxxx Xxxxxxx
Xxxx Xxxx Xxxxxx, XX 00000
Attention: Xxxxx Xxxxxxxxxxx., President
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
with a copy to:
Mesirov Xxxxxx Xxxxx Xxxxxx & Xxxxxxxx
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx, Esquire
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
Any of the above addresses may be changed at any time by notice given as
provided above; provided, however, that any such notice of change of address
shall be effective only upon receipt. All notices, requests or instructions
given in accordance herewith shall be effective on the earlier of (i) the date
of delivery to the addressee or (ii), four business days after it has been
mailed, telecopied or delivered to such nationally recognized courier service.
Section 10. Arbitration. Any controversy or claim arising out of or
relating to this Agreement, or any breach hereof, shall be settled by
arbitration in accordance with the rules of the American Arbitration Association
then in effect and judgment upon the award rendered by the arbitrator may be
entered in any court having jurisdiction thereof. The arbitration shall be held
in the Philadelphia, Pennsylvania area.
Section 11. Invalidity. Should any provision of this Agreement be held by a
court or arbitration panel of competent jurisdiction to be enforceable only if
modified, such holding shall not affect the validity of the remainder of this
Agreement, the balance of which shall continue to be binding upon the parties
hereto with any such modification to become a part hereof and treated as though
originally set forth in this Agreement. The parties further agree that any such
court or arbitration panel is expressly authorized to modify any such
unenforceable provision of this Agreement in lieu of severing such unenforceable
provision from this Agreement in its entirety, whether by rewriting the
offending provision, deleting any or all of the offending provision, adding
additional language to this Agreement, or by making such other modifications as
it deems warranted to carry out the intent and agreement of the parties as
embodied herein to the maximum extent permitted by law. The parties expressly
agree that this Agreement as
5
modified by the court or the arbitration panel shall be binding upon and
enforceable against each of them. In any event, should one or more of the
provisions of this Agreement be held to be invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability shall not affect
any other provisions hereof, and if such provision or provisions are not
modified as provided above, this Agreement shall be construed as if such
invalid, illegal or unenforceable provisions had never been set forth herein.
Section 11. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the successors and assigns of EA, SAI, and Tanon,
respectively, and the legal representatives and heirs of the Executives. None of
the Executives Party may assign either this Agreement or any of his or its
rights, interests, or obligations hereunder without the prior written approval
of EA and Tanon.
Section 12. No Third-Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any person other than the Parties and their
respective successors and permitted assigns.
Section 13. Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 14. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New Jersey
without giving effect to any choice or conflict of law provision or rule
(whether of the State of New Jersey or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of New
Jersey.
Section 15. Amendments and Waivers. No amendment, modification or
termination of any provision of this Agreement shall be valid unless the same
shall be in writing and signed by the Parties hereto. No waiver by any Party of
any default, misrepresentation, or breach of warranty or covenant hereunder,
whether intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
Section 16. Expenses. Each of the Parties will bear his or its own costs
and expenses (including legal and accounting fees and expenses) incurred in
connection with this Agreement and the transactions contemplated hereby.
Section 17. Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. The Parties intend
that each representation, warranty, and covenant contained herein shall have
independent significance. If any Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the
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same subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant.
Section 18. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
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IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto as of the date first above written.
TANON MANUFACTURING, INC. EA INDUSTRIES, INC.
By: By:
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Xxxxx Xxxxxxxxxxx, President Xxxxx Xxxxxxxxxxx, President
EXECUTIVES
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Xxxxxx X. XxXxxxxx
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Xxxxx Xxxxx
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Xxxxx X. Xxxxx
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Xxxxx X. Xxxxx
