EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
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Parties:
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ADVANCED ELECTROMAGNETICS, INC.
a California corporation ("AEMI")
0000 Xxxxxxx Xxxxx Xxxx
Xxxxxx, XX 00000-0000
Sellers: ANECHOIC SYSTEMS, INC.
a Nevada corporation ("ANECHOIC")
0000 Xxxxxxx Xxxxx Xxxx
Xxxxxx, XX 00000-0000
XXXXXXX X. XXXXXXX ("XXXXXXX") and XXXXXXX X. XXXXXXX
("X.X. XXXXXXX")
0000 Xxxxxxx Xxxxx Xxxx
Xxxxxx, XX 00000-0000
Buyer: ORBIT/FR, INC.
a Delaware corporation ("BUYER")
000 Xxxxxxxxxx Xxxx
Xxxxxxx, XX 00000
Date: March 31, 1997
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Background: AEMI owns and operates a business (the "Business") specializing
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in the design, manufacturing, marketing and sale of absorbing materials
applications and goods and services related to such materials and to the testing
and application of microwave and related technology for the aerospace industry
as well as for other uses. Xxxxxxx, X.X. Xxxxxxx and Anechoic (collectively, the
"Sellers") own all of the issued and outstanding shares of capital stock of AEMI
("AEMI's Stock"). The parties desire that Sellers sell and Buyer buys all of
AEMI's Stock and the Business, subject to the terms and conditions stated in
this Agreement.
INTENDING TO BE LEGALLY BOUND, and in consideration of the mutual agreements
contained herein, AEMI, Sellers and Buyer agree as follows:
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SECTION 1: DEFINED TERMS
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All defined terms used in this Agreement and not specifically defined in
context are defined in this Section 1, as follows:
1.1 "Accounts Receivable" means (a) any right to payment for goods sold,
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leased or licensed or for services rendered, whether or not it has been earned
by performance, whether billed or unbilled, and whether or not it is evidenced
by any Contract, (b) any note receivable, or (c) any other receivable or right
to payment of any nature.
1.2 "Ancillary Agreements" means the agreements entered into incident to this
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Agreement.
1.3 "Asset" means any real, personal, mixed, tangible or intangible property
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of any nature, including Cash Assets, prepayments, deposits, escrows, Accounts
Receivable, Tangible Property, Real Property, Software, Contract Rights,
Intangibles and goodwill, and claims, causes of action and other legal rights
and remedies.
1.4 "Cash Asset" means any cash on hand, cash in bank or other accounts,
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marketable securities, and other cash-equivalent assets of any nature.
1.5 "Consent" means any consent, approval, order or authorization of, or any
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declaration, filing or registration with, or any application or report to, or
any waiver by, or any other action (whether similar or dissimilar to any of the
foregoing) of, by or with, any Person, which is necessary in order to take a
specified action or actions in a specified manner and/or to achieve a specified
result.
1.6 "Contract" means any written or oral contract, agreement, instrument,
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order, arrangement, commitment or understanding of any nature, including sales
orders, purchase orders, leases, subleases, data processing agreements,
maintenance agreements, license agreements, sublicense agreements, loan
agreements, promissory notes, security agreements, pledge agreements, deeds,
mortgages, guaranties, indemnities, warranties, employment agreements,
consulting agreements, sales representative agreements, joint venture
agreements, buy-sell agreements, options or warrants.
1.7 "Contract Right" means any right, power or remedy under any Contract,
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including rights to receive property or services or otherwise derive benefits
from the payment, satisfaction or performance of another party's Obligations,
rights to demand that another party accept property or services or take any
other actions, and rights to pursue or exercise remedies or options.
1.8 "Disclosure Letter" means the letter delivered by Sellers to Buyer
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contemporaneously with the execution and delivery of this Agreement that (i)
sets forth information called for by Sellers' representations and warranties,
and (ii) clearly identifies the particular provision pursuant to which such
information is furnished.
1.9 "Employee Benefit Plan" means any employee benefit plan or any employee
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benefit or fringe benefit arrangement of any nature, including bonus plans,
incentive compensation plans, severance pay plans, vacation pay plans, deferred
compensation plans, pension plans, profit sharing plans, retirement plans,
payroll savings plans, stock option plans, stock purchase plans, stock ownership
plans, hospitalization plans, medical plans,
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dental plans, disability plans, sick pay plans, group insurance plans, death
benefit plans, or employee welfare plans, but not including employment Contracts
with individual employees.
1.10 "Encumbrance" means any lien, security interest, pledge, mortgage,
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easement, covenant, restriction, reservation, conditional sale, prior
assignment, or other encumbrance, claim, burden or charge of any nature.
1.11 "GAAP" means generally accepted accounting principles under United States
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accounting rules and regulations, consistently applied.
1.12 "Hazardous Substances" means any substance, waste, contaminant, pollutant
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or material that has been determined by any federal governmental authority, or
any state or local government authority having jurisdiction over the property in
question, to be capable of posing a risk of injury or damage to health, safety,
property or the environment, including (i) all substances, wastes, contaminants,
pollutants and materials defined or designated as hazardous, dangerous or toxic
pursuant to any Law of any state in which any of AEMI's Real Property is located
or any United States Law, and (ii) asbestos, polychlorinated biphenyls ("PCBs")
and petroleum.
1.13 "Insurance Policy" means any public liability, product liability, general
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liability, comprehensive, property damage, vehicle, life, hospital, medical,
dental, disability, worker's compensation, key man, fidelity bond, theft,
forgery, errors and omissions, directors' and officers' liability, or other
insurance policy of any nature.
1.14 "Intangible" means any name, corporate name, fictitious name, trademark,
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trademark application, service xxxx, service xxxx application, trade name, brand
name, product name, slogan, trade secret, know-how, patent, patent application,
copyright, copyright application, design, logo, formula, invention, product
right or other intangible asset of any nature, whether in use, under development
or design, or inactive.
1.15 "Judgment" means any order, writ, injunction, citation, award, decree or
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other judgment of any nature of any foreign, federal, state or local court,
governmental body, administrative agency, regulatory authority or arbitration
tribunal.
1.16 "Law" means any provision of any foreign, federal, state or local law,
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statute, ordinance, charter, constitution, treaty, rule or regulation.
1.17 "Material" means, with respect to any Person, material, in a legal sense
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or in an accounting sense, to (i) the financial condition or financial
performance of such Person, or (ii) the Assets of such Person, or (iii) the
Assets of any other Person which are used by such Person and cannot be readily
replaced.
1.18 "Obligation" means any debt, liability or obligation of any nature,
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whether secured, unsecured, recourse, nonrecourse, liquidated, unliquidated,
accrued, absolute, fixed, contingent, ascertained, unascertained, known, unknown
or otherwise.
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1.19 "Offering Price" means the price at which the Buyer's common stock is
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valued for the purposes of the Buyer's initial public offering. This price will
be jointly determined by the Buyer and its underwriters immediately prior to the
first day of public trading of the Buyer's shares.
1.20 "Permit" means any license, permit, approval, waiver, order,
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authorization, right or privilege of any nature, granted, issued, approved or
allowed by any foreign, federal, state or local governmental body,
administrative agency or regulatory authority.
1.21 "Person" means any individual, sole proprietorship, joint venture,
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partnership, corporation, association, cooperative, trust, estate, governmental
body, administrative agency, regulatory authority or other entity of any nature.
1.22 "Prime Rate" means the prime rate of general application as set forth in
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the "Money Rates" section (or such future section as shall replace it) of The
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Wall Street Journal (Eastern Edition), as published on a specified date or
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dates, or, if no date(s) are specified, as the same shall be published from time
to time.
1.23 "Proceeding" means any demand, claim, suit, action, litigation,
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investigation, arbitration, administrative hearing or other proceeding of any
nature.
1.24 "Real Property" means any real estate, land, building, condominium,
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townhouse, structure or other real property of any nature, all shares of stock
or other ownership interests in cooperative or condominium associations or other
forms of ownership interest through which interests in real estate may be held,
and all appurtenant and ancillary rights thereto, including easements,
covenants, water rights, sewer rights and utility rights.
1.25 "Software" means any computer program, operating system, applications
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system, hardware or software of any nature, whether operational, under
development or inactive, including all object code, source code, technical
manuals, user manuals and other documentation therefor, whether in machine-
readable form, programming language or any other language or symbols, and
whether stored, encoded, recorded or written on disk, tape, film, memory device,
paper or other media of any nature.
1.26 "Tangible Property" means any furniture, fixtures, leasehold
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improvements, vehicles, office equipment, computer equipment, other equipment,
machinery, tools, forms, supplies or other tangible personal property of any
nature.
1.27 "Tax" means (i) any foreign, federal, state or local income, earnings,
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profits, gross receipts, franchise, capital stock, net worth, sales, use,
occupancy, general property, real property, personal property, intangible
property, transfer, fuel, excise, payroll, withholding, unemployment
compensation, social security or other tax of any nature, (ii) any foreign,
federal, state or local organization fee, qualification fee, annual report fee,
filing fee, occupation fee, assessment, sewer rent or other fee or charge of any
nature, or (iii) any deficiency, interest or penalty imposed with respect to any
of the foregoing.
SECTION 2: SALE AND PURCHASE OF AEMI'S STOCK
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2.1 Sale and Purchase. On the Closing Date (as defined in Section 10.1), and
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subject to the terms and conditions of this Agreement including, but not limited
to, completion by Buyer of its IPO as hereinafter defined, Sellers shall sell,
transfer, assign and convey to Buyer, and Buyer shall purchase from Sellers, all
right, title and interest in and to AEMI's Stock.
SECTION 3: CONSIDERATION FOR AEMI'S STOCK
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3.1 Purchase Price. The total purchase price ("Purchase Price") payable by
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Buyer to Sellers for AEMI's Stock shall be determined in accordance with the
formula set forth in Schedule 3.1.
3.2 Payment of Purchase Price. The Purchase Price shall be payable by Buyer
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to Sellers at Closing as follows:
(a) Buyer shall pay to Seller a dollar amount equal to one-half (1/2) of
the Purchase Price (the "Cash Payment").
(b) The balance of the Purchase Price shall be paid in certain
unregistered shares of common stock , par value $ .01 per share, of the Buyer
and shall be delivered to and held by Sellers, subject to the provisions of
Section 11.4 (the "Stock Payment"). For purposes hereof, the parties agree that
the total number of shares of Buyer payable to Sellers shall be determined by
dividing the balance of the Purchase Price by a number equal to the Offering
Price established as part of the initial public offering of stock of Buyer (the
"IPO") which Buyer contemplates completing contemporaneously with the Closing
Date and which is an expressed condition to the transaction contemplated
hereunder as more fully provided below.
(c) In the event the audited financial statements contemplated by
Schedule 3.1 are not available at or prior to Closing, then $450,000 of the Cash
Payment shall be paid at Closing, and the balance of the Purchase Price shall be
paid as soon as such audited financial statements are available and the Purchase
Price can be determined in accordance with Schedule 3.1. The parties agree to
cooperate fully with the auditor in the completion of the audited financial
statements contemplated hereunder.
3.3 Currency and Method of Payment. All dollar amounts stated in this
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Agreement are stated in United States currency, and all payments required under
this Agreement shall be paid in United States currency. All payments required
under this Agreement shall be made as follows: (i) any payment may be made by
wire transfer of United States funds; (ii) any payment exceeding $100,000 shall
be made by wire transfer of United States funds; (iii) any payment exceeding
$10,000, but not exceeding $100,000, may be made by bank certified, treasurer's
or cashier's check; and (iv) any payment not exceeding $10,000 may be made by
ordinary check.
3.4 Allocation of the Purchase Price. The Purchase Price shall be allocated
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among the Stock and the Covenants as set forth on Schedule 3.4. All parties
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hereto shall each file all required forms (and any amendments
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thereto) with the Internal Revenue Service ("IRS") on a timely basis and no
party hereto shall take any position on their respective tax returns that is
inconsistent with Schedule 3.4.
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SECTION 4: REPRESENTATIONS AND WARRANTIES OF SELLERS
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Knowing that Buyer is relying thereon, Sellers and AEMI, jointly and
severally, represent, warrant and covenant to Buyer, as of the Effective Date
and as follows:
4.1 Organization and Authority. AEMI is a corporation duly organized,
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validly existing and in good standing under the laws of the State of California,
the jurisdiction of its organization, and has the full corporate power and
authority to own its Assets, conduct its business as and where such business is
presently conducted, and enter into this Agreement, the Ancillary Agreements to
which it is a party and the transactions contemplated hereby and thereby. AEMI
is not required to be qualified as a foreign corporation in any other
jurisdiction except where the failure to be so qualified would not be Material
to AEMI. Sellers have the full legal right, power and capacity to enter into
and perform this Agreement, the Ancillary Agreements to which it is a party and
the transactions contemplated hereby and thereby. AEMI does not own any
subsidiaries or any interest in any other Person. The Disclosure Letter sets
forth a list of (i) all names under which, and all addresses at which, AEMI has
conducted any business at any time since its formation, and (ii) all fictitious
names, product names and other names used by AEMI in connection with the
Business during the five-year period ending on the date of this Agreement.
There are no predecessors to the business of AEMI.
4.2 Capital Structure of AEMI. The authorized capital stock of AEMI consists
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of 30,000,000 shares of common stock, no par value (the "Common Stock"), of
which 17,969,502 shares and 9,000,000 shares are issued, outstanding and owned
legally and beneficially by Xxxxxxx and Anechoic, respectively, free and clear
of any Encumbrances, as set forth in the Disclosure Letter. Sellers have the
full right to sell and transfer all of his right, title and interest in and to
AEMI's Stock, and upon delivery and payment for AEMI's Stock as provided herein,
Buyer will acquire good and marketable title thereto, free and clear of all
Encumbrances. All of the AEMI's issued shares of Common Stock are duly
authorized, validly issued and fully paid, with no liability attaching to the
Ownership thereof, are not subject to, and were not issued in violation of any
preemptive rights and, subject to the articles of incorporation or other
organizational documents of AEMI's, are not subject to any preemptive rights
except as otherwise waived. Except for this Agreement, there are no Contracts
relating to the issuance, sale, redemption, ownership, disposition or voting of
any of AEMI's Common Stock or other securities of AEMI.
4.3 Effect of Agreement. The execution, delivery and performance of this
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Agreement and the Ancillary Agreements by AEMI and Sellers and the consummation
by them of the transactions contemplated hereby and thereby, (a) have been duly
authorized by all necessary corporate action by AEMI and Anechoic, (b) do not
and will not constitute a breach or violation of, or a default under, the
articles of incorporation, by-laws or other organizational documents of AEMI and
Anechoic, (c) do not and will not, with or without notice and/or lapse of time,
constitute a breach or violation of, or a default under, any Contract to which
AEMI or Sellers are a party or by which AEMI or its Assets or Business is bound,
(d) do not and will not, with or without notice and/or lapse
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of time, constitute a violation of any Law or Judgment applicable to AEMI or
Sellers or to the Business or Assets of AEMI, (e) do not and will not, with or
without notice and/or lapse of time, constitute a violation of, and do not and
will not result in the revocation, restriction, suspension or modification of
any Permit of AEMI, (f) do not and will not, with or without notice and/or lapse
of time, accelerate or otherwise modify any Obligation of AEMI, (g) do not and
will not, with or without notice and/or lapse of time, result in the creation of
any Encumbrance upon, or give to any other Person any interest in, AEMI's Common
Stock or other securities of AEMI, or in the Business or Assets of AEMI, and (h)
do not require any Consent of any Person, except as listed in the Disclosure
Letter ("AEMI's Required Consents"). This Agreement and the Ancillary
Agreements constitute the valid and legally binding agreements of AEMI and
Sellers (to the extent they are a party thereto or bound thereby), enforceable
against each of them in accordance with their respective terms.
4.4 Financial and Corporate Records. AEMI's books and records are and have
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been properly prepared and maintained in form and substance adequate for
preparing audited financial statements in accordance with GAAP, and fairly and
accurately reflect, in all material respects, all of AEMI's Assets and
Obligations and all Contracts and transactions to which AEMI is or was a party
or by which any of AEMI's or its Business or Assets is or was affected. Copies
of the articles of incorporation, by-laws and other organizational documents
have been delivered to Buyer. AEMI's corporate minute books contain accurate
minutes of all meetings of AEMI's shareholders and board of directors (and
committees thereof) and accurate written statements of all actions taken by
AEMI's shareholders and board of directors (and committees thereof) without a
meeting and accurate and complete records of the issuance and transfer of stock
of AEMI since its date of incorporation. The Disclosure Letter sets forth a
list of (a) the names and titles of the directors and officers of AEMI, (b) all
bank accounts, securities accounts, other accounts, safe deposit boxes and safes
of AEMI; the names of the banks, securities firm or other financial institution
or Person where any such account, safe deposit box or safe is located; and the
names of all persons who have access thereto or who are authorized to make
withdrawals therefrom, and (c) the names of all Persons authorized by proxies,
powers of attorney or other instruments to act on behalf of AEMI concerning its
Business or Assets.
4.5 Compliance with Law. AEMI's operations, the conduct of AEMI's Business
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as and where such Business has been or presently is conducted, and AEMI's Assets
and their uses, comply with all Laws and Judgments applicable to AEMI, and its
Business or Assets, except where the failure to so comply would not be Material
to AEMI, and AEMI has not received any notice that it is not in compliance.
AEMI has obtained and holds all Permits required for the lawful operation of its
Business as and where such Business is presently conducted, except where the
failure to do so would not be Material to AEMI. All Permits held by AEMI that
are Material to AEMI are listed in the Disclosure Letter.
4.6 Financial Statements. Sellers have delivered or shall have delivered as
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soon as practicable to Buyer copies of the financial statements of AEMI as of
March 31, 1997, 1996 and 1995, and the related statements of operations of AEMI
for the years then ended, including the notes thereto, accompanied by the report
of independent certified public accountants to AEMI, if any ("AEMI's Annual
Financial Statements"). AEMI's Annual Financial Statements were prepared in
accordance with GAAP and fairly present the financial condition and results of
operations of AEMI as of the date and for the periods indicated.
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4.7 Conduct of Operations. Except as set forth in the Disclosure Letter,
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from March 31, 1996 to the date of this Agreement:
(a) Except in the ordinary course of its business consistent with its
past practices, AEMI has not (i) created or assumed any Encumbrance upon any of
its Business or Assets, (ii) incurred any Obligation, (iii) made any loan or
advance to any Person, (iv) assumed, guaranteed or otherwise become liable for
any Obligation of any Person, (v) committed for any capital expenditure, (vi)
sold, abandoned or otherwise disposed of any of its Business or Assets, (vii)
purchased, leased or otherwise acquired any business, Assets or capital stock of
any other Person, (viii) settled any dispute, waived any right or canceled any
Obligation, (ix) assumed, entered into or amended any Contract other than this
Agreement, or canceled or terminated any Contract other than in accordance with
its terms, (x) increased, or authorized an increase in, the compensation or
benefits paid or provided to any of its directors, officers, employees, agents
or representatives, or (xi) done anything outside the ordinary course of
business, whether or not specifically described in any of the foregoing clauses.
(b) Even in the ordinary course of its business consistent with its past
practices, AEMI has not (i) declared, paid or set aside for payment any dividend
or other distribution, or made any direct or indirect redemption, retirement or
acquisition of any shares of its capital stock, (ii) made any change in its
accounting policies or practices, (iii) paid directly or indirectly any of its
Obligations before it became due in accordance with its terms, (iv) issued, or
authorized the issuance, of any shares of capital or other securities or granted
any rights with respect to its shares of capital or other securities, (v)
amended its articles of incorporation, by-laws or other organizational
documents, or merged with or into, consolidated with, completely or partially
liquidated or dissolved, or was involved in any other business combination with
any other Person, (vi) changed, or authorized a change in, the rights of its
outstanding capital stock or the character of its Business, or (vii) adopted or
amended any Employee Benefit Plan.
(c) There has been no casualty loss (whether or not covered by insurance)
Material to AEMI, and there has been no event or occurrence Material to, or
which might be Material to, AEMI.
4.8 Current Assets. The Disclosure Letter sets forth a detailed list, as of
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the date of this Agreement, of all of AEMI's Accounts Receivable (the
"Receivables List"), including (i) billed and earned Accounts Receivable, (ii)
unbilled but earned Accounts Receivable, (iii) billed but unearned Accounts
Receivable (indicating whether collected), (iv) unearned customer deposits, and
(v) the rights to receive payments under Contracts that have not been billed or
earned, and all of AEMI's other current assets, grouped by balance sheet
account. As to all such Accounts Receivable, the Disclosure Letter sets forth
the customer names, individual invoice dates, individual invoice amounts and
allowances for doubtful accounts. None of AEMI's current assets, including
AEMI's Accounts Receivable, is subject to any Encumbrances.
4.9 Tangible Property. The Disclosure Letter sets forth a detailed list, as
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of the date of this Agreement, of all of AEMI's Tangible Property, grouped as to
type, including date of purchase, location, cost, accumulated depreciation and
net book value thereof. Except as set forth in the Disclosure Letter, AEMI has
good and
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marketable title to all of its Tangible Property, free and clear of any
Encumbrances. Except as set forth in the Disclosure Letter, all of AEMI's
Tangible Property is located at AEMI's Office Locations, and AEMI has the
unqualified right to require the immediate return of any of AEMI's Tangible
Property not located at AEMI's Office Locations. All Tangible Property owned or
used by AEMI is in good condition, ordinary wear and tear (other than that which
materially detracts from the value or impairs the present use of the property)
excepted, and is sufficient for the Business conducted by AEMI or proposed to be
conducted by it.
4.10 Real Property. Except for AEMI's Office Locations listed in the
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Disclosure Letter, there is no Real Property owned or leased by AEMI. None of
AEMI's Real Property, nor the occupancy, maintenance or use thereof by AEMI, is
in violation of any Contract or Law, and no notice from any lessor, governmental
body or other Person has been received by AEMI claiming any violation of any
Contract or Law, or requiring or calling attention to the need for any work,
repairs, construction, alteration or installations. All Real Property leased by
AEMI is in good condition, ordinary wear and tear (other than that which
materially detracts from the value or impairs the present use of the property)
excepted, and is sufficient for the business conducted by AEMI or proposed to be
conducted by it. AEMI has not placed or caused to be placed, and neither AEMI
nor any Seller has any knowledge or belief that there exists, any Hazardous
Substances (i) on or under any of AEMI's Real Property; or (ii) discharged,
spilled, disposed of or otherwise released by or at the discretion of AEMI or
Sellers which would provide a basis for any liability for personal injury,
property damage, environmental cleanup or natural resources damage.
4.11 Software and Intangibles. Except for Software which is readily available
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commercially, the Disclosure Letter sets forth a detailed list and description
of all Software and Intangibles owned or used by AEMI. Except as set forth in
the Disclosure Letter, AEMI has (i) good and marketable title to all of its
owned Software and Intangibles, free and clear of any Encumbrances, and (ii) the
right to use all non-owned Software and Intangibles used by it. The Software
and Intangibles owned or used by AEMI are adequate for the Business conducted by
it or proposed to be conducted by it. None of the Software or Intangibles owned
or used by AEMI, or their respective past or current uses, has violated or
infringed upon or is violating or infringing upon any Software or Intangible of
any Person, and to the knowledge of AEMI and Sellers, no Person is violating or
infringing upon any Software or Intangibles owned by AEMI. None of AEMI's owned
Software or Intangibles is owned by or registered in the name of any current or
former shareholder, director, officer, employee, salesman, agent, representative
or contractor of AEMI, nor does any such Person have any interest therein or
right thereto.
4.12 Obligations.
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(a) The Disclosure Letter sets forth a detailed list, as of the date of
this Agreement, of all of AEMI's accounts payable, accrued expenses and other
current and long-term liabilities, grouped by balance sheet account. Except as
set forth in the Disclosure Letter, AEMI has no Obligations other than (i)
Obligations listed in the Disclosure Letter, and (ii) Obligations under the
Specified Contracts listed in the Disclosure Letter.
(b) Anechoic has no Obligations other than Obligations listed in the
Disclosure Letter.
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4.13 Contracts.
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(a) The Disclosure Letter sets forth a detailed list of all of the
following types of Contracts to which AEMI is a party or by which AEMI or its
Business or Assets is bound (collectively, the "Specified Contracts"), grouped
into the following categories: (i) Contracts with customers, indicating whether
such Contracts are on fixed price basis, a cost plus basis or some other basis,
(ii) loan agreements, mortgages, notes, and other financing Contracts, (iii)
Contracts for the purchase, sale, lease or use of Real Property of any nature,
(iv) Contracts for the purchase, lease, license and/or maintenance of Tangible
Property, Intangibles or Software under which AEMI is the purchaser, licensee,
lessee or user, and other supplier Contracts that are Material to AEMI, (v)
Contracts with current or former shareholders, officers, directors, employees,
agents or representatives of AEMI, or any affiliates, associates or family
members of any current or former shareholder, officer or director of AEMI (other
than Contracts that constitute Employee Benefit Plans), (vi) Contracts under
which AEMI agrees to indemnify any Person, share the tax liability of any
Person, or guarantee any Obligation of any Person, or any similar Contract,
(vii) Contracts containing covenants of AEMI not to compete in any line of
business or with any Person in any geographical area, (viii) Contracts for joint
ventures, partnerships or strategic alliances, and (viii) other Contracts that
are Material to AEMI (other than Contracts that constitute Insurance Policies).
Copies of each written Specified Contract have been delivered to Buyer, and a
description of each oral Specified Contract is included in the Disclosure
Letter.
(b) With respect to the Specified Contracts, (i) AEMI is not in default
thereunder or would be in default thereunder, with or without notice and/or
lapse of time, (ii) to the knowledge of AEMI and Sellers, none of the other
parties to any Specified Contract is in default thereunder or would be in
default thereunder, with or without notice and/or lapse of time, and (iii) AEMI
has not given or received any notice of default or notice of termination with
respect to any Specified Contract, and each Specified Contract is in full force
and effect in accordance with its terms. With respect to the Specified
Contracts with customers, there are no burdensome or onerous provisions in any
such Specified Contract and, to the knowledge of AEMI and Sellers, there is no
fact or circumstance that would adversely affect AEMI's ability to perform any
such contract within budget and AEMI will be able to perform its obligations
under each such Specified Contract on a profitable basis. Except as set forth
in the Disclosure Letter, there are no currently outstanding proposals or offers
submitted by AEMI within (60) days of the date hereof to any customer, prospect,
supplier or other Person which, if accepted, would result in a legally binding
Contract of AEMI involving other than standard products quoted pursuant to a
standard price list.
4.14 Customers and Suppliers. The Disclosure Letter sets forth a list of all
------------------------
of AEMI's customers and suppliers. AEMI's relationship with each customer and
supplier is continuing on a good basis. No customer or supplier has given
notice of or otherwise indicated any intent to terminate or not renew its
Contracts with AEMI before its scheduled expiration or otherwise to terminate
its relationship with AEMI. Neither AEMI nor Sellers has any knowledge or
belief that the transactions contemplated by this Agreement will adversely
affect relations with any Customer or supplier.
-10-
4.15 Employees and Independent Contractors. The Disclosure Letter sets forth
-------------------------------------
a list of all of AEMI's employees, together with (i) their titles or
responsibilities, (ii) their social security numbers and states or countries of
residence, (iii) their current salaries or wages, (iv) their dates of hire, (v)
their last compensation changes and the dates on which such changes were made,
(v) any specific bonus, commission or incentive plans or agreements for or with
them, including all bonuses, commissions and incentives paid during the past
twelve months, and (vi) any outstanding loans or advances made to them. The
Disclosure Letter sets forth a list of all sales representatives and independent
contractors engaged by AEMI, their tax identification numbers and states or
countries of residence, their payment arrangements and a brief description of
their jobs or projects currently in progress. Except as limited by any
employment Contracts listed in the Disclosure Letter and except for any
limitations of general application which may be imposed under applicable
employment Laws, AEMI has the right to terminate the employment of each of its
employees at will and without incurring any penalty or liability other than
liability for severance pay in accordance with AEMI's disclosed severance pay
policy. AEMI is in full compliance with all Laws respecting employment
practices, except where the failure to so comply would not be Material to AEMI.
AEMI's relations with its employees are currently on a good and normal basis,
and there have been no strikes or labor disputes involving AEMI. AEMI is not
subject to any Contract with any labor union, and to the knowledge of AEMI and
the Sellers, no labor union has sought to represent any employees of AEMI. No
employee of AEMI has indicated an intention to terminate his or her employment
with AEMI. Neither AEMI nor any Seller has any knowledge or belief that the
transactions contemplated by this Agreement will adversely affect relations with
AEMI's employees.
4.16 Employee Benefit Plans. Except as set forth in the Disclosure Letter
----------------------
AEMI has not established, maintained or been required to contribute to any
Employee Benefit Plans and AEMI has not proposed any Employee Benefit Plans
which AEMI will establish, maintain, or to which AEMI will be obligated to
contribute, and AEMI has not proposed any changes to any Employee Benefit Plans
now in effect (all of the preceding referred to collectively hereinafter as
"AEMI's Employee Benefit Plans"). The Disclosure Letter includes a description
of each Employee Benefit Plan that is currently in effect or as to which AEMI
has any current or future Obligation, which description indicates the employees
covered or affected thereby and all of the Obligations of AEMI thereunder.
Copies of all Employee Benefit Plans are described in the Disclosure Letter and
all written materials used by AEMI to describe its Employee Benefit Plans to
employees have been delivered to Buyer. If permitted and/or required by
applicable Law, AEMI has properly submitted all of AEMI's Employee Benefit Plans
in good faith to meet the applicable requirements of ERISA and/or the Internal
Revenue Code to the IRS for its approval within the time prescribed therefore
under applicable federal regulations. Favorable letters of determination of such
tax-qualified status from the IRS are attached to the Disclosure Letter. With
respect to AEMI's Employee Benefit Plans, AEMI will have made, on or prior to
the Closing Date, all payments required to be made by it or on prior to the
Closing Date and will have accrued (in accordance with generally accepted
accounting principles consistently applied) as of the Closing Date all payments
due but not yet payable as of the Closing Date. AEMI has never been obligated to
contribute to a Multiemployer Plan (as defined in ERISA or the Code) or any
Employee Benefit Plan that is subject to the minimum funding standards of ERISA
or the Code or to Title IV of ERISA. AEMI has furnished Buyer with a true and
correct copy of the most current Form 5500 and any other form or filing required
to be submitted to any governmental agency with regard to any of AEMI's Employee
Benefit Plans. All of AEMI's Employee Benefit Plans are, and have been, operated
in full compliance with their provisions and with all applicable Laws. Neither
the execution and deliver of this Agreement nor the consummation of the
transactions contemplated hereby will
-11-
(i) result in any payment (including, without limitation, severance,
unemployment compensation, golden parachute or otherwise) becoming due from AEMI
under any of AEMI's Employee Benefit Plans, (ii) increase any benefits otherwise
payable under any of AEMI's Employee Benefit Plans or (iii) result in the
acceleration of the time of payment or vesting of any such benefits to any
extent. There are no pending actions, claims, or lawsuits which have been
asserted or instituted against any of AEMI's Employee Benefit Plans, the assets
of any of the trusts under such plans, the plan sponsor, the plan administrator
or against any fiduciary of any of AEMI's Employee Benefit Plans (other than
routine benefit claims) nor does AEMI have knowledge of facts which could form
the basis for any such action, claim or lawsuit. There are no investigations or
audits of any of AEMI's Employee Benefit Plans, any trusts under such plans, the
plan sponsor, the plan administrator or any fiduciary of any of AEMI's Employee
Benefit Plans which have been threatened or instituted nor does AEMI have
knowledge of facts which could form the basis for any such investigation or
audit. Except as set forth in the Disclosure Letter, no event has occurred or
will occur which will result in Liability to AEMI in connection with any
Employee Benefit Plan established, maintained, or contributed to (currently or
previously) by AEMI or by any other entity which, together with AEMI, constitute
elements of either (i) a controlled group of corporations (within the meaning of
Section 414 (b)(of the Code), (ii) a group of trades or businesses under common
control (within the meaning of Sections 414 (c) of the Code or 4001 of ERISA),
(iii) an affiliated service group (within the meaning of Section 414 (m) of the
Code) or (iv) another arrangement covered by Section 414 (o)(of the Code).
4.17 Taxes.
-----
(a) Tax Returns. AEMI has timely filed all returns, declarations,
-----------
reports and statements ("Tax Returns") required to be filed by it relating to
any Tax, all of which were accurately prepared. AEMI has duly paid all Taxes and
withholdings required to be paid by it in respect of such Tax Returns. AEMI has
properly withheld from payments to its employees, contractors, salesmen, agents,
representatives, vendors and other Persons all amounts required by Law to be
withheld, and AEMI has timely filed all Tax Returns required to be filed by it
with respect to such withholdings. Copies of all sales, use, excise, payroll,
withholding and similar Tax Returns filed by AEMI since January 1, 1993 have
been delivered to Buyer. No audit or similar Proceeding is pending or, to the
knowledge of Sellers, threatened against AEMI, no notice of deficiency or
adjustment has been received by AEMI, by or from any governmental taxing
authority, and no Tax is being contested by AEMI. All deficiencies asserted or
threatened by the IRS or any other governmental taxing authority relating to
AEMI have been paid, fully satisfied or adequately provided for on the books and
records of AEMI. There are no agreements or waivers in effect which provide for
an extension of time for the assessment of any Tax against AEMI.
4.18 Proceedings and Judgments. No Proceeding is currently pending or, to the
-------------------------
knowledge of the Sellers, threatened, nor has any Proceeding occurred at any
time since January 1, 1990, to which AEMI is or was a party, or by which AEMI's
Stock, business or Assets is or was affected, and there is no basis known to
AEMI and Sellers for any such Proceeding. No Proceeding is currently pending
or, to the knowledge of the Sellers, threatened against AEMI or any Seller,
relating to this Agreement, the Ancillary Agreements or the transactions
contemplated hereby or thereby. No Judgment is currently outstanding, nor has
any Judgment been outstanding at any time since January 1, 1990, against AEMI,
or by which AEMI's Stock, Business or Assets or the Assets of any other Person
which are used by AEMI, is or was affected. No breach of contract, breach of
warranty, tort, negligence; infringement, product liability, discrimination,
wrongful discharge or other claim of
-12-
any nature has been asserted or, to the knowledge of AEMI or any Seller,
threatened by or against AEMI except where such claim would not be Material to
AEMI, and there is no basis known to AEMI or any Seller to any such claim.
4.19 Insurance. The Disclosure Letter sets forth a list of the Insurance
---------
Policies currently owned or maintained by AEMI (excluding Insurance Policies
that constitute Employee Benefit Plans) and all liability and errors and
omissions Insurance Policies owned or maintained by AEMI at any time since
January 1, 1990. Except as indicated in the Disclosure Letter, all such
Insurance Policies are or were on an "occurrence" rather than a "claims made"
basis. Copies of all Insurance Policies described in the Disclosure Letter have
been delivered to Buyer. Each such Insurance Policy is or was (i) in full force
and effect during the period(s) of coverage indicated in the Disclosure Letter,
(ii) with financially sound and reputable insurance companies or associations,
and (iii) in amounts and covering such risks as were or are sufficient to allow
AEMI to replace any of its Assets that might be damaged or destroyed, protect it
and its Business from risks customarily insured against by companies engaged in
similar businesses in the same general areas without it becoming a co-insurer,
and comply with the requirements of all Laws, Contracts and Permits applicable
to it or its business or Assets. Except as described in the Disclosure Letter,
there are no claims pending under any of the Insurance Policies described in the
Disclosure Letter. AEMI has not received any notice of cancellation with
respect to any of its current Insurance Policies, and there is no basis for the
insurer thereunder to terminate any of AEMI's current Insurance Policies.
4.20 Questionable Payments. Neither AEMI, nor any Seller, nor any of AEMI's
---------------------
current or former shareholders, directors, officers, representatives, agents or
employees (when acting in such capacity or otherwise on behalf of Sellers or any
of its predecessors), (i) has used or is using any corporate funds for any
illegal contributions, gifts, entertainment or other unlawful expenses relating
to political activity, (ii) has used or is using any corporate funds for any
direct or indirect unlawful payments to any foreign or domestic government
officials or employees, (iii) has established or maintained, or is maintaining,
any unlawful or unrecorded fund of corporate monies or other properties, (iv)
has made any false or fictitious entries on the books and records of AEMI, (v)
has made any unlawful bribe, rebate, payoff, influence payment, kickback or
other unlawful payment of any nature, or (vi) made any material favor or gift
which is not deductible by AEMI for corporation tax purposes.
4.21 Related Party Transactions. Except as set forth on in the Disclosure
--------------------------
Letter, there are no Contracts under which AEMI has any current or future
Obligations, or any other arrangements or transactions of any nature, between
AEMI and (i) any current or former shareholder, partner, director, officer or
controlling Person of AEMI, (ii) any other Person affiliated or associated with
AEMI, or (iii) any affiliate, associate or family member of any Person listed in
clause (i) of this Section 4.21.
4.22 Brokerage Fees. No Person acting on behalf of AEMI or Sellers shall be
--------------
entitled to any brokerage or finder's fees in connection with the transactions
contemplated by this Agreement.
-13-
4.23 Full Disclosure. No representation or warranty made by AEMI or any
---------------
Seller in this Agreement or pursuant hereto contains any untrue statement of any
material fact or omits to state any material fact that is necessary to make the
statements made, in the context in which made, not false or misleading. The
Disclosure Letter and copies of documents attached thereto or otherwise
delivered to Buyer pursuant to or in connection with this Agreement are accurate
and complete and are not missing any amendments, modifications, correspondence
or other related papers which would be pertinent to Buyer's understanding
thereof. There is no fact known to Sellers that has not been disclosed to Buyer
in the Disclosure Letter that was or is, or so far as AEMI and Sellers can
reasonably foresee will be, Material to AEMI or to the ability of AEMI or any
Seller to perform their obligations under this Agreement.
SECTION 5: REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------------------
Knowing that Sellers are relying thereon, Buyer represents and warrants to
Sellers as follows:
5.1 Organization and Authority. Buyer is a corporation duly organized,
--------------------------
validly existing and in good standing under the laws of the State of Delaware,
the jurisdiction of its incorporation, and has the full corporate power and
authority to enter into and perform this Agreement, and the Ancillary Agreements
to which it is a party and the transactions contemplated hereby and thereby.
5.2 Effect of Agreement. Buyer's execution, delivery and performance of this
-------------------
Agreement, and the Ancillary Agreements to which it is a party and the
consummation of the transactions contemplated hereby and thereby (i) have been
duly authorized by all necessary corporate actions by Buyer, (ii) do not and
will not constitute a breach or violation of, or a default under, the articles
of incorporation and by-laws of Buyer (iii) do not and will not, with or without
notice and/or lapse of time, constitute a breach or violation of, or default
under, any Contract to which Buyer is a party or by which Buyer or its Assets or
Business, is bound, (iv) do not and will not, with or without notice and/or
lapse of time, constitute a violation of any Law or Judgment, applicable to
Buyer or its Business or Assets, and (v) do not require the Consent of any
Person. This Agreement, and the Ancillary Agreements to which it is a party
constitute the valid and legally binding agreements of Buyer, enforceable
against Buyer in accordance with their respective terms.
5.3 Proceedings. No Proceeding is currently pending or to the knowledge of
-----------
Buyer, threatened, against Buyer relating to this Agreement, the Ancillary
Agreements, or the transactions contemplated hereby or thereby.
5.4 Brokerage Fees. No Person acting on behalf of Buyer is entitled to any
--------------
brokerage or finder's fee in connection with the transactions contemplated by
this Agreement.
5.5 Full Disclosure. No representation or warranty made by Buyer in this
---------------
Agreement or pursuant hereto, contains any untrue statement of any material fact
and omits to state any material fact necessary to make the statements made, in
the context in which made, not false or misleading.
-14-
SECTION 6: CERTAIN OBLIGATIONS OF SELLERS PENDING CLOSING
----------------------------------------------------------
6.1 Investigation. During the period from the date of this Agreement to the
-------------
Closing Date, (i) to the extent reasonably requested by Buyer, AEMI shall permit
Buyer and its authorized representatives to have full access to its Office
Locations and other facilities during normal business hours, to observe the
Business operations, to meet with AEMI's employees, and to audit, examine and
copy all of AEMI's files, books and records, and other documents and papers
relating to the Business, and (ii) AEMI shall provide to Buyer and its
authorized representatives all information concerning the Business and its
Assets, and all information concerning the financial condition of AEMI, that is
reasonably requested by Buyer.
6.2 Conduct Pending Closing. During the period from the date of this
-----------------------
Agreement to the Closing Date, except with the express prior written consent of
Buyer:
(a) AEMI shall, and Sellers shall cause AEMI to, (i) conduct the Business
in a manner consistent with past practices, shall not make any change in its
business practices that is or would be Material to AEMI, and (ii) in good faith,
use its best efforts to preserve the Business organization intact, retaining the
services of its current employees, salesmen, contractors, agents and
representatives and maintaining the good will of its suppliers, customers and
other Persons having business relations with AEMI.
(b) Except in the ordinary course of its business consistent with its
past practices, AEMI shall not, and Sellers shall cause AEMI not to, (i) create
or assume any Encumbrance upon AEMI's Assets, (ii) incur any Obligation
involving an amount exceeding $5,000 in any single case or $10,000 in the
aggregate, (iii) make any loan or advance to any Person, (iv) assume, guarantee
or otherwise become liable for any Obligation of any Person, (v) commit for any
capital expenditure, (vi) purchase, lease, or otherwise acquire any business,
Assets or capital stock of any other Person, (vii) sell, abandon or otherwise
dispose of any of AEMI's Business or Assets, (viii) settle any dispute, waive
any right or cancel any Obligation of AEMI, (ix) assume or enter into or amend
any Contract involving an amount exceeding $5,000 in any single case or $10,000
in the aggregate, or cancel or terminate any Contract other than in accordance
with its terms, (x) increase, or authorize an increase in, the compensation or
benefits paid or provided to any of AEMI's directors, officers, employees,
agents or representatives, (xi) initiate any lawsuit or other Proceeding, or
(xii) undertake any transactions or reclassifications that would affect non-
current assets or non-current liabilities by more than $10,000, or (xiii) do
anything outside the ordinary course of business, whether or not specifically
described in any of the foregoing clauses.
(c) AEMI shall not, and Sellers shall cause AEMI not to, (i) do or omit
to do any act, or permit any act or omission to occur, which will cause a breach
or violation of, or a default under, any of its Contracts, Insurance Policies or
Permits, except where the breach or violation would not be Material to the AEMI,
(ii) completely or partially liquidate or dissolve, or (iii) terminate any part
of the Business.
(d) AEMI shall, and Sellers shall cause AEMI to, (i) maintain AEMI's
Office Locations in good condition and repair, (ii) maintain AEMI's Insurance
Policies and Permits in full force and effect, (iii) comply with all applicable
Contracts, Permits and Laws, except where the failure to so comply would not be
Material to AEMI, (iv) duly and timely withhold from payments to employees,
contractors, salesmen, agents,
-15-
representatives, vendors and other Persons involved in the Business all amounts
required by Law to be withheld and timely file all Tax Returns required to be
filed by it with respect to such withholdings.
(e) AEMI shall, and Sellers shall cause AEMI to, maintain its existence
and good standing in the State of California and its good standing as a foreign
corporation in each jurisdiction where it is currently qualified as a foreign
corporation.
(f) AEMI shall not, and Sellers shall cause AEMI not to, enter into any
Contract which requires or commits it to take any action or omit to take any
action which would be inconsistent with the foregoing provisions of this Section
6.2.
(g) AEMI shall, and Sellers shall cause AEMI to, have its independent
certified public accountants to prepare and forward to Buyer,, in a timely
manner, an annual financial statement for the fiscal year ending March 31, 1997
6.3 Acquisition Proposals. Neither AEMI nor any Seller, nor any of AEMI's
---------------------
officers, employees, representatives or agents, shall, directly or indirectly,
solicit, initiate or encourage inquiries or proposals from, or participate in
any discussions or negotiations with, or provide any non-public information to,
any Person (other than Buyer and its respective officers, employees,
representatives and agents) concerning any sale of any of AEMI's Assets, any
sale of capital stock or other securities of AEMI, or any merger, consolidation,
business combination or similar transaction involving AEMI or its Business or
Assets.
6.4 Material Consents. Between the date of this Agreement and the Closing
-----------------
Date, AEMI shall, and Sellers shall cause AEMI to, in good faith, use its best
efforts to obtain all of AEMI's Required Consents.
6.5 Advice of Changes. Between the date of this Agreement and the Closing
-----------------
Date, AEMI and Sellers shall promptly advise Buyer in writing of any fact of
which it obtains knowledge and which, if existing or known as of the date of
this Agreement, would have been required to be set forth or disclosed in or
pursuant to this Agreement (it being understood that any such advice shall not
be deemed to modify the representations, warranties and covenants of AEMI
contained in this Agreement).
6.6 Best Efforts. AEMI and Sellers shall use their best efforts to
------------
consummate the transactions contemplated by this Agreement in accordance
herewith, and AEMI and Sellers shall not take, cause to be taken, or to the best
of their ability permit to be taken, any action that would impair the prospect
of completing the transactions contemplated by this Agreement.
SECTION 7: CERTAIN OBLIGATIONS OF BUYER PENDING CLOSING
--------------------------------------------------------
7.1 Material Consents. Between the date of this Agreement and the Closing
-----------------
Date, Buyer shall in good faith cooperate with AEMI in its efforts to obtain all
of AEMI's Required Consents.
-16-
7.2 Advice of Changes. Between the date of this Agreement and the Closing
-----------------
Date, Buyer shall promptly advise AEMI in writing of any fact of which it
obtains knowledge and which, if existing or known as of the date of this
Agreement, would have been required to be set forth or disclosed in or pursuant
to this Agreement (it being understood that any such advice shall not be deemed
to modify the representations, warranties and covenants of Buyer contained in
this Agreement).
7.3 Best Efforts. Buyer shall use its best efforts to consummate the
------------
transactions contemplated by this Agreement in accordance herewith, and Buyer
shall not take, cause to be taken, or to the best of its ability permit to be
taken, any action that would impair the prospect of completing the transactions
contemplated by this Agreement.
SECTION 8: CONDITIONS PRECEDENT TO CLOSING BY SELLERS
------------------------------------------------------
Each obligation of Sellers to be performed on the Closing Date shall be
subject to the satisfaction of each of the following conditions, except to the
extent that such satisfaction is waived by Sellers in writing:
8.1 Representations of Buyer. All representations and warranties of Buyer
------------------------
contained in this Agreement shall be accurate on and as of the Closing Date,
with the same force and effect as though made on and as of the Closing Date.
8.2 Performance by Buyer. All of the covenants, terms and conditions of this
--------------------
Agreement to be satisfied or performed by Buyer on or before the Closing Date
shall have been substantially satisfied or performed.
8.3 Absence of Proceedings. No Proceeding shall have been instituted or
----------------------
threatened on or before the Closing Date by any Person (other than AEMI or
Sellers), no Judgment shall have been issued, and no new Law shall have been
enacted, that seeks to or does prohibit or restrain, or that seeks damages as a
result of, the consummation of the transactions contemplated by this Agreement.
SECTION 9: CONDITIONS PRECEDENT TO CLOSING BY BUYER
----------------------------------------------------
Each obligation of Buyer to be performed on the Closing Date shall be subject
to the satisfaction of each of the following conditions, except to the extent
that such satisfaction is waived by Buyer in writing:
9.1 Representations of Sellers. All of the representations and warranties of
--------------------------
Sellers contained in this Agreement shall be accurate on and as of the Closing
Date, with the same force and effect as though made on and as of the Closing
Date, and the Schedules and Disclosure Letter accompanying this Agreement shall
be complete, accurate and current on and as of the Closing Date, with only such
changes as are expressly permitted in and are consistent with the terms of this
Agreement.
-17-
9.2 Performance by AEMI and Sellers. All of the covenants, terms and
-------------------------------
conditions of this Agreement to be satisfied or performed by AEMI and Sellers on
or before the Closing Date shall have been substantially satisfied or performed.
9.3 Absence of Adverse Changes. There shall not have been any adverse
--------------------------
changes Material to AEMI between the date of this Agreement and the Closing
Date.
9.4 Absence of Proceedings. No Proceeding shall have been instituted or
----------------------
threatened on or before the Closing Date by any Person (other than Buyer), no
Judgment shall have been issued, and no new Law shall have been enacted, that
seeks to or does prohibit or restrain, or that seeks damages as a result of, the
consummation of the transactions contemplated by this Agreement.
9.5 Material Consents. AEMI and Sellers shall have obtained all of AEMI's
-----------------
Required Consents.
9.6 Initial Public Offering. Buyer shall have completed its IPO.
-----------------------
SECTION 10: CLOSING
--------------------
10.1 Closing. Unless this Agreement is terminated in accordance with Section
-------
13, the closing on the sale of AEMI's Stock by Sellers to Buyer and the other
transactions contemplated by this Agreement ("Closing") shall be held at 10:00
A.M. local time on June 12, 1997, or such other time and date as is agreed upon
by Sellers and Buyer ("Closing Date"), provided that the Closing shall not be
held later than September 30, 1997. The Closing shall be held at the offices of
Buyer's counsel, Blank, Rome, Xxxxxxx & XxXxxxxx, Four Xxxx Xxxxxx Xxxxx,
Xxxxxxxxxxxx, Xxxxxxxxxxxx, 00000, or such other location as is agreed upon by
Sellers and Buyer; provided, however, that if acceptable to Sellers and Buyer,
Closing may be effected by facsimile transmission of executed Closing Documents
(as defined in Section 10.2) and payment of the Purchase Price in the manner set
forth in Section 3.3 and by sending original copies of Closing Documents by
reputable overnight delivery service, postage or delivery charges prepaid, for
delivery to the parties at their addresses stated on the first page of this
Agreement by the fifth business day following the Closing Date. Except to the
extent prohibited by Law, the Closing shall be considered effective as of the
close of business on the Closing Date or such other effective date as is agreed
upon in writing by Sellers and Buyer ("Effective Date").
10.2 Obligations of Sellers at Closing. At the Closing, Sellers shall deliver
---------------------------------
to Buyer the following (collectively, with the documents required to be
delivered by Buyer pursuant to Section 10.3, the "Closing Documents"):
(a) AEMI's Stock. Certificates representing all of AEMI's Stock, with any
------------
required transfer stamps affixed, together with evidence of payment of any
transfer taxes relating thereto; and with assignments separate from certificates
duly executed by Sellers to transfer all of AEMI's Stock to Buyer.
(b) Resignations. Resignations of such directors and officers of AEMI as
------------
Buyer shall designate in writing to Sellers, effective on the Closing Date or
such other date as Buyer shall determine, duly executed by such officers and
directors.
-18-
(c) Resolutions. Copies of the resolutions duly adopted by the board of
-----------
directors or AEMI, the shareholders of AEMI, if applicable, the board of
directors of Anechoic and the shareholders of Anechoic, if applicable,
authorizing AEMI to enter into and perform this Agreement and the Ancillary
Agreements, certified by proper officers of AEMI as in full force and effect on
and as of the Closing Date.
(d) Good Standing Certificates of AEMI. Good standing certificates for
----------------------------------
AEMI from the State of California dated no earlier than fifteen (15) days before
the Closing Date.
(e) Good Standing Certificates of Anechoic. Good standing certificates
--------------------------------------
for Anechoic from the State of Nevada dated no earlier than fifteen (15) days
before the Closing Date.
(f) Incumbency Certificate. A certificate, dated the Closing Date,
----------------------
executed by the Secretary or Assistant Secretary of AEMI, certifying the names,
titles and signatures of all of AEMI's officers who execute this Agreement, and
the Ancillary Agreements and other documents on behalf of AEMI, and the
authority of such officers to do so, in form and substance acceptable to Buyer.
(g) Closing Certificate. A certificate ("Sellers' Closing Certificate"),
-------------------
dated the Closing Date and duly executed by Sellers in which Sellers represent
and warrant to Buyer that (i) all of the representations and warranties of
Sellers contained in this Agreement are accurate on and as of the Closing Date,
with the same force and effect as though made on and as of the Closing Date;
(ii) the Disclosure Letter is complete and accurate on and as of the Closing
Date, with only such changes as are expressly permitted in and are consistent
with the terms of this Agreement (all of which changes shall be set forth in an
attachment to Closing Certificate); (iii) all of the covenants, terms and
conditions of this Agreement to be satisfied or performed by AEMI and Sellers on
or before the Closing Date have been substantially satisfied or performed; (iv)
there have not been any adverse changes Material to AEMI between the date of
this Agreement and the Closing Date; and (v) as of the Closing Date, no
Proceeding has been instituted or threatened in writing against AEMI or either
Seller by any Person, and no Judgment has been issued against AEMI or either
Seller, that seeks to or does prohibit or restrain, or that seeks damages as a
result of, the consummation of the transactions contemplated by this Agreement.
(h) Minute Books. All of AEMI's minute books and stock books concerning
------------
all items described in Section 4.4.
(i) Consents. The original copies of all Required Consents obtained by
--------
AEMI and/or Sellers.
(j) Documents of Transfer. All instruments or documents necessary to
---------------------
change the names of individuals authorized to draw on or have access to the
accounts and safe deposit boxes described on Schedule 4.4, and all keys and
combinations to all safe, lock boxes and other depositories described on
Schedule 4.4.
(k) Other Documents. All other agreements, certificates, instruments and
---------------
documents reasonably requested by Buyer in order to fully consummate the
transactions contemplated by this Agreement and carry out the purposes and
intent of this Agreement.
10.3 Obligations of Buyer at Closing. At the Closing, Buyer shall deliver to
-------------------------------
Sellers the following:
- 19 -
(a) Closing Payment. Telephone confirmation of the wire transfer of
---------------
funds in the amount of the Closing Payment, in accordance with Sellers' proper
wire transfer instructions, and delivery of the Stock Payment.
(b) Resolutions. Copies of the resolutions duly adopted by the board of
-----------
directors of Buyer, authorizing Buyer to enter into and perform this Agreement,
and the Ancillary Agreements, certified by proper officers of Buyer as in full
force and effect on and as of the Closing Date.
(c) Good Standing Certificates. Good standing certificates for Buyer
--------------------------
from the State of Delaware, dated no earlier than fifteen (15) days before
Closing Date.
(d) Incumbency Certificate. A certificate, dated the Closing Date,
----------------------
executed by the Secretary or Assistant Secretary of Buyer, certifying the names,
titles and signatures of all of Buyer's officers who execute this Agreement, the
Ancillary Agreements and other documents on behalf of Buyer, and the authority
of such officers to do so, in form and substance acceptable to Sellers.
(e) Closing Certificate. A certificate ("Buyer's Closing Certificate"),
-------------------
dated the Closing Date and duly executed by Buyer, in which Buyer represents and
warrants to Sellers that: (i) all of the representations and warranties of
Buyer contained in this Agreement are true on and as of the Closing Date, with
the same force and effect as though made on and as of the Closing Date; (ii) all
of the covenants, terms and conditions of this Agreement to be satisfied or
performed by Buyer on or before the Closing Date have been substantially
satisfied or performed; and (iii) as of the Closing Date, no Proceeding has been
instituted or threatened in writing against Buyer by any Person, and no Judgment
has been issued against Buyer, that seeks to or does prohibit or restrain, or
that seeks damages as a result of, the consummation of the transactions
contemplated by this Agreement.
(f) Other Documents. All other agreements, certificates, instruments and
---------------
documents reasonably requested by Sellers in order to fully consummate the
transactions contemplated by this Agreement and carry out the purposes and
intent of this Agreement.
SECTION 11: CERTAIN OBLIGATIONS OF SELLERS AND BUYER AFTER CLOSING
-------------------------------------------------------------------
11.1 Cooperation with Buyer. From and after the Effective Date, (i) Sellers
----------------------
shall fully cooperate to place Buyer in full possession and enjoyment of all of
AEMI's Assets and to transfer to Buyer the full control and benefits of the
Business; (ii) Sellers shall not undertake any action, directly or indirectly,
alone or together with any other Person, which obstructs or impairs the smooth
assumption by Buyer of the Business; and (iii) all correspondence, papers,
documents and similar items and materials received by Sellers relating to the
Specified Assets, or otherwise relating to the Business, shall be immediately
forwarded to Buyer.
11.2 Further Assurances. At any time and from time to time after the date of
------------------
this Agreement, at Buyer's request and expense, and without further
consideration, AEMI and Sellers shall promptly execute and deliver all such
further agreements, certificates, instruments and documents, and perform such
further actions,
- 20 -
as Buyer may reasonably request in order to fully consummate the transactions
contemplated hereby and carry out the purposes and intent of this Agreement.
Without limiting the generality of the foregoing, AEMI shall timely file all Tax
returns and reports required to be filed with respect to the Assets and Business
for all periods ending on or before the Effective Date.
11.3 Nondisclosure. At all times after the Closing Date, except with Buyer's
-------------
express prior written consent, Sellers shall not, directly or indirectly
(through subsidiaries, affiliates, associates or otherwise), communicate,
disclose or divulge to any Person (other than Buyer), or use for the benefit of
any Person (other than Buyer), any confidential or proprietary knowledge or
information, no matter when or how acquired, concerning AEMI's Assets or the
conduct and details of the Business, including (a) the identity of customers,
prospects and suppliers, (b) names, addresses and telephone numbers of
individual contacts at customers and prospects, (c) fees, renewal dates, and
other details of customer contracts and proposals, (d) pricing policies,
marketing strategies, product strategies, technical know-how, trade secrets, and
methods of operations, (e) software designs and concepts, (f) budgets and other
nonpublic financial information, and (g) expansion plans, management policies,
and other business strategies and policies. For purposes of this Section 11.6,
confidential information shall not include any information that is now known by
the general public or becomes known by the general public other than as a result
of any improper act or omission of AEMI or any Sellers.
11.4 Holding Period and Request for Registration. Sellers agree that for a
-------------------------------------------
period of two (2) years following the Closing Date (the "Holding Period"),
neither of them, directly or indirectly, shall sell, offer to sell, contract to
sell (including, without limitation, any short sale), grant any option to
purchase or otherwise transfer or dispose of the securities of the Buyer
representing the Stock Payment. Buyer agrees that if at the conclusion of the
Holding Period, the securities of the Buyer representing the Stock Payment are
not freely tradeable as if registered under the Securities Act of 1933
(the"Act"), then Buyer, upon the written request of either of the Sellers agrees
to file or cause to be filed as soon thereafter as practicable with the United
States Securities and Exchange Commission a registration statement covering the
registration of such securities under the Act.
11.5 Debt Repayment. Buyer agrees that within thirteen months of the Closing
--------------
Date, it will cause AEMI to repay its outstanding long-term debt obligation to
Xxxxxxx inclusive of principal and interest . Until repaid, Buyer will endeavor
to cause accrued interest and $5,000 of principal to be paid to Xxxxxxx on a
monthly basis.
11.6 Noncompetition. Sellers acknowledge that the Business conducted by AEMI
--------------
and the business conducted by Buyer (referred to collectively, as "Buyer's
Business") are highly competitive, require substantial and continuous
expenditures of money and the time of skilled experts to develop, market and
support, and are marketed on a worldwide basis. Accordingly, for a period of
five years after the Closing Date, except with Buyer's express prior written
consent, Sellers shall not, directly or indirectly (through subsidiaries or
affiliates), in any capacity, for the benefit of any Person, at any location
worldwide:
(a) Communicate with or solicit any Person who is then a customer of
Buyer or the Business in any manner which interferes or might interfere with
such relationship between such Person and Buyer or the Business, or in an effort
to obtain such Person as a customer of any Person that conducts a business
competitive with or similar to Buyer's Business or the Business.
- 21 -
(b) Communicate with or solicit any Person who is then an employee,
salesman, agent or representative of Buyer or the Business in any manner which
interferes or might interfere with such relationship between such Person and
such Buyer Company or the Business, or in an effort to obtain such Person as an
employee, salesman, agent or representative of any Person that conducts a
business competitive with or similar to Buyer's Business or the Business.
(c) Establish, own, finance, manage, operate or control, or participate
in the establishment, ownership, financing, management, operation or control of,
any Person that conducts a business competitive with or similar to Buyer or the
Business except the following: j(i) the ownership interest of Xxxxxxx in
Anechoic; and (ii) the ownership interest of Xxxxxxx in Advanced
Electromagnetics Measurement, Inc., a Colorado corporation.
11.7 Consideration. Sellers expressly acknowledge that (i) the restrictive
-------------
covenants of this Section 11 ("Covenants") are a material part of the
consideration bargained for by Buyer, and (ii) without the agreement of Sellers
to be bound by the Covenants, Buyer would not have agreed to enter into this
Agreement and consummate the transactions contemplated hereby.
11.8 Enforcement. Sellers expressly acknowledge that any breach by either of
-----------
them of any of the Covenants will result in irreparable injury to Buyer for
which money damages could not adequately compensate. If there is such a breach,
Buyer shall be entitled, in addition to all other rights and remedies it may
have at law or in equity, to have an injunction issued by any competent court
enjoining and restraining Sellers and all other Persons involved therein from
continuing such breach. The existence of any claim or cause of action which
Sellers or any such other Person may have against Buyer shall not constitute a
defense or bar to the enforcement of any of the Covenants. If Buyer must resort
to litigation to enforce any of the Covenants that has a fixed term, then such
term shall be extended for a period of time equal to the period during which a
breach of such Covenant was occurring, beginning on the date of a final court
order (without further right of appeal) holding that such a breach occurred or,
if later, the last day of the original fixed term of such Covenant.
11.9 Scope. If any portion of any Covenant or its application is construed to
-----
be invalid, illegal or unenforceable, then the other portions and their
application shall not be affected thereby and shall be enforceable without
regard thereto. If any of the Covenants is determined to be unenforceable due
to its scope, duration, geographical area or similar factor, then the court
making such determination shall have the power to reduce or limit such scope,
duration, area or other factor, and such Covenant shall then be enforceable in
its reduced or limited form.
SECTION 12: INDEMNIFICATION AND SETOFF
---------------------------------------
12.1 Indemnification Obligations of Sellers. From and after the Closing Date,
--------------------------------------
Sellers shall, jointly and severally, indemnify and hold harmless Buyer, and its
successors and assigns, from and against any and all Proceedings, Judgments,
Obligations, losses, damages, deficiencies, settlements, assessments, charges,
costs and expenses (including, but not limited to, reasonable attorneys' fees,
investigation expenses, court costs, interest and penalties) arising out of or
in connection with, or caused by, directly or indirectly, any or all of the
following:
- 22 -
(a) Any misrepresentation, breach or failure of any warranty or
representation made by AEMI or Sellers in this Agreement.
(b) Any failure or refusal by AEMI or Sellers to satisfy or perform any
covenant, term or condition of this Agreement required to be satisfied or
performed by them.
(c) Any Obligation of AEMI for any Tax, including, but not limited to,
(i) any tax payable by AEMI, with respect to AEMI's business operations except
to the extent that any accruals or reserves therefor shall be clearly reflected
on AEMI's March 31, 1996 balance sheet for the period ending March 31, 1996
described in Section 4.6 ("March 31, 1996 Balance Sheet"), (ii) any Tax payable
by AEMI with respect to the ownership, possession, purchase, lease, sale,
disposition or use of any of AEMI's Assets at any time before the Effective Date
except to the extent that any accruals or reserves therefor shall be clearly
reflected on the March 31, 1996 Balance Sheet, and (iii) any tax resulting from
the sale of AEMI's Stock to Buyer and the other transactions contemplated
hereby. Any obligation of AEMI for any Tax shall be subject to indemnification
under this Section 12.1 notwithstanding that the same may be assessed against or
imposed upon Buyer.
(d) Any Proceeding against Buyer by or on behalf of any employee of AEMI
who is not hired by Buyer.
(e) Any Proceeding against Buyer by any Person based on any act or
omission occurring prior to the Closing Date relating to or arising in
connection with AEMI's operation of the Business.
(f) Any Proceeding against Buyer by a shareholder of Anechoic arising out
of a failure of Anechoic, its officers or directors, to discharge duties or
obligations owed to such shareholder.
12.2 Indemnification Obligations of Buyer. From and after the Closing Date,
------------------------------------
Buyer shall indemnify and hold harmless Sellers, and their successors, assigns,
heirs and personal representatives, from and against any and all Proceedings,
Judgments, Obligations, losses, damages, deficiencies, settlements, assessments,
charges, costs and expenses (including, but not limited to, reasonable
attorneys' fees, investigation expenses, court costs, interest and penalties)
arising out of or in connection with, or caused by, directly or indirectly, any
or all of the following:
(a) Any misrepresentation, breach or failure of any warranty or
representation made by Buyer in this Agreement.
(b) Any failure or refusal by Buyer to satisfy or perform any covenant,
term or condition of this Agreement required to be satisfied or performed by it.
(c) Any Proceeding against Sellers by any Person (other than Buyer) based
on any act or omission occurring after the Closing Date relating to or arising
in connection with Buyer's operation of the Business.
12.3 Indemnification Notice. With respect to each event, occurrence or matter
----------------------
("Indemnification Matter") as to which Buyer on the one hand, or Sellers on the
other hand (referred to as the "Indemnitee"), is
- 23 -
entitled to indemnification from the other (referred to as the "Indemnitor")
under this Section 12, within ten days after the Indemnitee receives any written
documents underlying the Indemnification Matter, or, if the Indemnification
Matter does not involve a third party action, suit, claim or demand, promptly
after the Indemnitee first has actual knowledge of the Indemnification Matter,
the Indemnitee shall give notice to the Indemnitor of the nature of the
Indemnification Matter and the amount demanded or claimed in connection
therewith ("Indemnification Notice").
12.4 Defense of Indemnification Matters. If an Indemnification Matter
----------------------------------
involves a third party action, suit, claim or demand, then, upon receipt of the
Indemnification Notice, the Indemnitor shall, at its expense and through counsel
of its choice, promptly assume and have sole control of the litigation, defense
or settlement of the Indemnification Matter (referred to as the "Defense"),
except that:
(a) The Indemnitee may, at its option and expense and through counsel of
its choice, participate in (but not control) the Defense.
(b) If the Indemnitee reasonably believes that the handling of the
Defense by the Indemnitor may have a material adverse effect on the Indemnitee's
business or its relationship with any customer, supplier, employee, contractor,
salesman, agent or representative, then the Indemnitee may, at its option and
expense and through counsel of its choice, assume control of the Defense;
provided that the Indemnitor shall continue to be obligated to indemnify the
Indemnitee with respect thereto and shall be entitled to participate in the
Defense at its expense and through counsel of its choice.
(c) The Indemnitor shall not consent to any Judgment or agree to any
settlement without the Indemnitee's prior written consent.
(d) If the Indemnitor does not promptly assume control over the Defense
or, after doing so, does not continue to prosecute the Defense in good faith,
the Indemnitee may, at its option and through counsel of its choice, but at the
Indemnitor's expense, assume control over the Defense; provided that the
Indemnitor shall continue to be obligated to indemnify the Indemnitee with
respect thereto.
(e) In any event, the Indemnitor and the Indemnitee shall fully cooperate
with each other in connection with the Defense, including, but not limited to,
furnishing all available documentary or other evidence as is reasonably
requested by the other.
12.5 Indemnification Payments. All amounts owed by the Indemnitor to the
------------------------
Indemnitee (if any) shall be paid in full within three business days after a
final settlement or agreement as to the amount owed is reached, or after a final
Judgment (without further right of appeal) determining the amount owed is
rendered.
12.6 Limits on Indemnification. Regardless of which party or parties is the
-------------------------
Indemnitor, and notwithstanding the other provisions of this Section 12, the
Indemnitor's liability under this Section 12 shall be limited as follows:
(a) Deductible. No amount shall be payable by the Indemnitor under
----------
this Section 12 unless and until the aggregate amount otherwise payable by the
Indemnitor under this Section 12 exceeds Fifty Thousand
- 24 -
Dollars ($50,000), in which event such aggregate amount and all future amounts
payable by the Indemnitor under this Section 12 shall be payable in full.
(b) Ceiling. The Indemnitor's total liability under this Section 12
-------
shall in no event exceed, in the aggregate, the Purchase Price.
(c) Time Limit. With respect to any Indemnification Matter, the
----------
Indemnitor shall have no liability unless the Indemnitee gives an
Indemnification Notice in accordance with Section 12.3 within 24 months after
the Closing Date.
(d) Exceptions. None of the foregoing limitations shall apply in
----------
the case of any Indemnification Matter involving recklessness, intentional
misrepresentation, fraud or criminal matters.
12.7 Setoff and Holdback. In addition to all other rights and remedies that
-------------------
the Indemnitee may have, the Indemnitee shall have the right to setoff, against
any monies or other amounts due, inclusive of the Stock Payment, to the
Indemnitor (whether under this Agreement or otherwise), any sums for which the
Indemnitee is entitled to indemnification under this Section 12 or any other
sums which the Indemnitor may owe to the Indemnitee (whether under this
Agreement or otherwise). The Indemnitee's rights to indemnification under this
Section 12 shall under no circumstances be in any manner limited by this right
of setoff. If any Indemnification Matters are pending at the time the
Indemnitee is required to make any payment to the Indemnitor (whether under this
Agreement or otherwise), then the Indemnitee shall have the right, upon notice
to the Indemnitor, to withhold from such payment, until final determination of
such Indemnification Matters, the total amount for which the Indemnitor may
become liable as a result thereof, determined by the Indemnitee reasonably and
in good faith, which amount shall be subject to revision (upward or downward)
from time to time upon the discovery of additional material information with
respect to such matter.
SECTION 13: TERMINATION, AMENDMENT AND WAIVER
----------------------------------------------
13.1 Termination. This Agreement may be terminated and the transactions
-----------
contemplated hereby abandoned at any time before Closing, in accordance with any
of the following methods:
(a) By the mutual written consent of Buyer and Sellers.
(b) By written notice from Buyer to Sellers, or from Sellers to Buyer, if
the Closing does not occur on or before September 30, 1997, for any reason other
than a breach of this Agreement by the party giving such notice.
(c) By written notice from Buyer to Sellers, if it becomes certain, for
all practical purposes, that any of the conditions to the closing obligations of
Buyer set forth in Section 9 cannot be satisfied for a reason other than Buyer's
breach of this Agreement, and Buyer is not willing to waive the satisfaction of
such condition.
- 25 -
(d) By written notice from Sellers to Buyer, if it becomes certain, for
all practical purposes, that any of the conditions to the closing obligations of
Sellers set forth in Section 8 cannot be satisfied for a reason other than
AEMI's or Sellers' breach of this Agreement, and Sellers are not willing to
waive the satisfaction of such condition.
(e) By written notice from Buyer to Sellers, if AEMI or Sellers breach
any of their representations, warranties, covenants or agreements contained in
this Agreement.
(f) By written notice from Sellers to Buyer, if Buyer breaches any of its
representations, warranties, covenants or agreements contained in this
Agreement.
13.2 Effect of Termination. Upon termination of this Agreement pursuant to
---------------------
Section 13.1, this Agreement shall be of no further force and effect, and there
shall be no liability on the part of any party hereto, except for the
obligations of the parties under Sections 14.1, 14.2 and 14.3, and except that
no such termination shall relieve any party from liability for any breach of
this Agreement prior to such termination.
13.3 Amendment. This Agreement may be amended, modified or supplemented by
---------
the parties hereto, whether before or after approval by Buyer's shareholders,
provided that any such amendment, modification or supplement shall be in writing
and signed by the parties hereto.
13.4 Waiver. No waiver with respect to this Agreement shall be enforceable
------
unless in writing and signed by the party against whom enforcement is sought.
Except as otherwise expressly provided herein, no failure to exercise, delay in
exercising, or single or partial exercise of any right, power or remedy by any
party, and no course of dealing between or among any of the parties, shall
constitute a waiver of, or shall preclude any other or further exercise of the
same or any other right, power or remedy.
SECTION 14: OTHER PROVISIONS
-----------------------------
14.1 Confidentiality. During the period from the date of this Agreement to
---------------
the Closing Date, (a) each of the parties shall maintain the confidentiality of
all information normally maintained as confidential and exchanged among them in
connection with this Agreement, in the same manner that the recipient of the
information maintains the confidentiality of its own confidential information,
and (b) none of the parties will discuss the existence or nature of this
Agreement or the transaction contemplated hereby with any of AEMI's customers,
prospects, suppliers, employees, contractors, salesmen, agents or
representatives, except in the manner reasonably determined by Buyer. If this
Agreement is terminated in accordance with Section 13 or by the written
agreement of Sellers and Buyer, then each party shall promptly return all
confidential information and materials of the other parties, and the provisions
of the foregoing sentence shall survive such termination indefinitely. Sellers
and Buyer each acknowledge that any breach of this Section 14.1 may cause
irreparable injury to the others for which money damages could not adequately
compensate. If there is such a breach, the aggrieved party shall be entitled,
in addition to all other rights and remedies they may have at law or in equity,
to have an injunction issued by any competent court enjoining and restraining
the breaching parties from continuing such
- 26 -
breach. The existence of any claim or cause of action which any of the
breaching parties may have against any of the aggrieved parties shall not
constitute a defense or bar to the enforcement of this Section 14.1.
14.2 Publicity. All voluntary public announcements concerning the
---------
transactions contemplated by this Agreement shall be mutually acceptable to both
Buyer and Sellers. Unless required by Law, neither party shall make any public
announcement or issue any press release concerning the transactions contemplated
by this Agreement without the prior written consent of the other party. With
respect to any announcement that any of the parties is required by Law to issue,
such party shall, to the extent possible under the circumstances, review the
necessity for and the contents of the announcement with the other party before
issuing the announcement.
14.3 Expenses. Each party shall pay all of the costs and expenses incurred by
--------
it in negotiating and preparing this Agreement (and all other agreements,
certificates, instruments and documents executed in connection herewith), in
performing its obligations under this Agreement, and in otherwise consummating
the transactions contemplated by this Agreement.
14.4 Notices. All notices, consents or other communications required or
-------
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been duly given (a) when delivered personally, (b) three business
days after being mailed by first class certified mail, return receipt requested,
postage prepaid, or (c) one business day after being sent by a reputable
overnight delivery service, postage or delivery charges prepaid, to the parties
at their respective addresses stated on the first page of this Agreement.
Notices may also be given by prepaid telegram or facsimile and shall be
effective on the date transmitted if confirmed within 72 hours thereafter by a
signed original sent in the manner provided in the preceding sentence. A copy of
each notice to AEMI or Sellers shall be simultaneously sent to Xxxxxx X.
Xxxxxxx, Esquire, 000 Xxxxxx Xxxxxx, Xxxxx 000, Xxx Xxxxx, XX 00000 and X. X.
Xxxxx and Company, 0000 Xxxxxx Xxxxxx Xxxxx, Xxxxx 000, Xxx Xxxxx, XX 00000-
4507, Attention: Xxxxxxx X. Xxxxx, Xx. A copy of each notice to Buyer shall be
simultaneously sent to Blank, Rome, Xxxxxxx & XxXxxxxx, 0000 Xxxx Xxxx Xxxxxx
Xxxxx, Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000, Attention: Xxxxxx X. Xxxxxx. Any
party may change its address for notice and the address to which copies must be
sent by giving notice of the new addresses to the other parties in accordance
with this Section 14.4, except that any such change of address notice shall not
be effective unless and until received.
14.5 Reliance by Buyer. Notwithstanding the right of Buyer to investigate the
-----------------
Business, AEMI's Assets and the financial condition of AEMI, Buyer has the
unqualified right to rely, and has relied, upon the representations and
warranties of AEMI and Sellers made in this Agreement.
14.6 Survival of Representations. All representations, warranties and
---------------------------
covenants made in or pursuant to this Agreement shall survive the date hereof,
the Effective Date and the consummation of the transactions contemplated hereby.
14.7 Interpretation of Representations. Each warranty and representation made
---------------------------------
by Sellers in this Agreement is independent of all other warranties and
representations made by Sellers (whether or not covering related or similar
matters) and must be independently and separately satisfied. Exceptions or
qualifications to any such warranty or representation shall not be construed as
exceptions or qualifications to any other warranty or representation.
- 27 -
14.8 Entire Understanding. This Agreement, together with the Exhibits,
--------------------
Schedules and the Disclosure Letter hereto, states the entire understanding
among the parties with respect to the subject matter hereof, and supersedes all
prior oral and written communications and agreements, and all contemporaneous
oral communications and agreements, with respect to the subject matter hereof.
14.9 Parties in Interest. This Agreement shall bind, benefit, and be
-------------------
enforceable by and against each party hereto and its successors and assigns. No
party shall in any manner assign any of its rights or obligations under this
Agreement without the express prior written consent of the other parties.
14.10 Severability. If any provision of this Agreement is construed to be
------------
invalid, illegal or unenforceable, then the remaining provisions hereof shall
not be affected thereby and shall be enforceable without regard thereto.
14.11 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which when so executed and delivered shall constitute an
original hereof, and it shall not be necessary in making proof of this Agreement
to produce or account for more than one original counterpart hereof.
14.12 Section Headings. The section and subsection headings in this
----------------
Agreement are for convenience of reference only, do not constitute a part of
this Agreement, and shall not affect its interpretation.
14.13 References. All words used in this Agreement shall be construed to be
----------
of such number and gender as the context requires or permits. Unless a
particular context clearly provides otherwise, (i) the words "hereof" and
"hereunder" and similar references refer to this Agreement in its entirety and
not to any specific section or subsection hereof, (ii) the word "including" and
similar references shall be construed to mean "including without limitation" or
"including but not limited to."
14.14 Controlling Law. This Agreement is made under, and shall be construed
---------------
and enforced in accordance with, the laws of the Commonwealth of Pennsylvania
applicable to agreements made and to be performed solely therein, without giving
effect to principles of conflicts of law. Any action arising out of this
Agreement or the transactions contemplated hereby shall be instituted in the
state or federal court located in Philadelphia, Pennsylvania and each party
waives any objection which such party may have to such venue, and irrevocably
submits to the jurisdiction of any such court in any such action. THE PARTIES
HERETO WAIVE THEIR RIGHTS TO TRIAL BY JURY AND AGREE THAT ANY DISPUTES HEREUNDER
SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY.
14.15 No Third Party Beneficiaries. No provision of this Agreement is
----------------------------
intended to or shall be construed to grant or confer any right to enforce this
Agreement, or any remedy for breach of this Agreement, to or upon any Person
other than the parties hereto, including any customer, prospect, supplier,
employee, contractor, salesman, agent or representative of AEMI.
14.16 Construction. The parties acknowledge that each has been
------------
represented by counsel in connection with this transaction, and each has had the
opportunity to fully consult with its advisors. Accordingly, when construing
this Agreement or the Ancillary Agreements, they shall be construed as prepared
by both the Buyer and the Sellers and shall not be construed more strictly
against the Buyer.
- 28 -
IN WITNESS WHEREOF, the parties have duly executed and delivered this
Agreement as of the date first stated above.
ORBIT/FR, INC.
By: /s/ Xxxxx Xxxxxxxx /s/ Xxxxxxx X. Xxxxxxx
---------------------------- ------------------------------------
Name: XXXXXXX X. XXXXXXX
Title: President
/s/ Xxxxxxx X. Xxxxxxx
------------------------------------
XXXXXXX X. XXXXXXX
ANECHOIC SYSTEMS, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
---------------------------------
Name:
Title: President
ADVANCED ELECTROMAGNETICS, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
---------------------------------
Name:
Title: President
- 29 -
SCHEDULE 3.1
DETERMINATION OF PURCHASE PRICE
1. The Purchase Price shall be equal to six (6) times the net weighted
average after tax profit ("Weighted Profit"), as calculated using the method on
pages 4 and 12 of the attached report prepared by the certified public
accountant of AEMI, and as adjusted to reflect Xxxxxxx' salary as US$120,000
instead of US$150,000.
2. The weighted profits shall be adjusted based upon AEMI's final reported
numbers as reflected in its audited financial statements as of March 31, 1995,
March 31, 1996 and March 31, 1997, as audited by Ernst & Young.
3. In no event shall the Purchase Price exceed $1,600,000.
4. The Purchase Price as determined above shall be subject to the greater of
the following negative adjustments:
(a) Equity Adjustment. The Purchase Price shall be adjusted, if
-----------------
necessary, based upon the final value of AEMI's net worth as of March 31, 1997
as audited by Ernst & Young. Specifically, any amount by which AEMI's net worth
exceeds US$549,213 shall be added to the Purchase Price and any amount by which
AEMI's net worth falls short of US$549,213 shall be subtracted from the Purchase
Price.
a. Working Capital Adjustment. The Purchase Price shall be adjusted, if
--------------------------
necessary, based upon the final value of AEMI's net working capital as of March
31, 1997 as audited by Ernst & Young which for purposes hereof is defined as
current assets minus current liabilities. Specifically, any amount by which
AEMI's working capital falls short of $500,000 shall be subtracted from the
Purchase Price.
5. In no event shall AEMI's long-term loan to Xxxxxxx (inclusive of
principal and interest) exceed $300,000 at March 31, 1997.
- 30 -
SCHEDULE 3.4
ALLOCATION OF PURCHASE PRICE
To be determined at or prior to Closing.
- 31 -
SCHEDULES
The following Schedules have been omitted pursuant to Item 601(b)(2) of
Regulations S-K:
Schedule 4.1 -Organization & Authority
Schedule 4.2 -Capital Structure
Schedule 4.3 -Effect of Agreement
Schedule 4.4 -Financial & Corporate
Schedule 4.5 -Compliance with Law
Schedule 4.7 -Conduct of Operations
Schedule 4.8 -Current Assets
Schedule 4.9 -Tangible Property
Schedule 4.10 -Real Property
Schedule 4.11 -Software & Intangibles
Schedule 4.12 -Obligations
Schedule 4.13 -Contracts
Schedule 4.14 -Customers & Suppliers
Schedule 4.15 -Employees & Independent Contractors
Schedule 4.16 -Employee Benefit Plans
Schedule 4.19 -Insurance
Schedule 4.21 -Related Party Transactions
The Registrant agrees to furnish supplementally a copy of any omitted
Schedule to the Commission upon request.
