PURCHASE AGREEMENT
THIS AGREEMENT ("Agreement") is made as of the _______ day of
September, 1998, between GEN TRAK, INC., a Pennsylvania corporation (the
"Company"), with its principal place of business located at 0000 Xxxxxx Xxxxx,
Xxxxxxxx Xxxxxxx, XX 00000, the individuals listed as Sellers on the signature
page hereof (individually a "Seller" and collectively the "Sellers"), and
SUSQUEHANA HOLDINGS CORP., a Delaware corporation ("Purchaser") with an address
at 000 Xxxxxxx Xxxx, Xxxxxx, XX 00000.
NOW, THEREFORE, in consideration of the mutual premises and covenants
contained herein and for other good and valuable consideration, the parties
hereto, intending to be legally bound, agree as follows:
1. Sale of the Shares. The Sellers, collectively, hereby sell, transfer
and assign to Purchaser free and clear of all liens and encumbrances 6,701,774
shares ("Shares") of Common Stock, par value $.01 per share ("Common Stock") of
the Company for an aggregate purchase price of $2,500 paid by the Purchaser
simultaneously with the execution and delivery of this Agreement.
2. Line of Credit. Purchaser agrees to extend to the Company a line of
credit in the maximum aggregate principal amount of Three Hundred Thousand
($300,000) Dollars (the "Line of Credit"), and the Company has executed and is
delivering to Purchaser herewith the Company's Promissory Note in the maximum
principal amount of $300,000 ("Promissory Note"). The Company may take advances
under such Line of Credit by written request to Purchaser from time to time up
to September 30, 1999; provided, however, that no advances under the Line of
Credit may be taken if an Event of Default under this Agreement or the
Promissory Note shall have occurred. Subject to the foregoing, on each occasion
that the Company shall request an advance under the Line of Credit, Purchaser
shall transmit to the Company the proceeds of such advance by wire transfer to a
bank account designated by the Company or check payable to the order of the
Company, in each case accompanied by the Company's acknowledgment of receipt by
endorsement on the Promissory Note.
3. Representations and Warranties.
(a) The Company represents and warrants to the Purchaser, upon
which representations and warranties the Purchaser is relying, as follows:
(1) The Company is a corporation duly authorized,
validly existing, and in good standing under the laws of the Commonwealth of
Pennsylvania, and has all requisite power and authority to own, lease and
operate its properties, to carry on its business as it is now being conducted,
to enter into this Agreement, to issue the Promissory Note and to consummate the
transactions contemplated hereby and under the Promissory Note.
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(2) All actions of the Company necessary to authorize
it to execute, deliver and consummate this Agreement, and to perform its
obligations hereunder and under the Promissory Note have been duly and validly
taken and no other further actions or authorizations are required. This
Agreement and the Promissory Note constitute the valid, legally binding
obligations of the Company and are enforceable in accordance with their
respective terms.
(3) The execution and delivery of this Agreement and
the consummation of the transactions contemplated herein will not:
(i) result in any breach of, or constitute a
default under the Articles of Incorporation or By-Laws of the Company, or any
instrument or obligation to which the Company or any Seller is a party or by
which it or such Seller is bound; or
(ii) violate any existing statute, order,
writ, injunction or decree of any court, administrative agency or governmental
body.
(4) The authorized capital stock of the Company
consists of 100,000,000 shares of Common Stock, $.01 par value per share, of
which 22,339,245 shares of Common Stock are issued and outstanding; and 30,000
shares of Common Stock are subject to issuance in respect of all outstanding
options, warrants, and agreements of any kind relating to issuance of capital
stock of the Company. All of the outstanding shares of Common Stock of the
Company, including the Shares, are validly issued, fully paid and not
assessable. The Shares are not subject to any lien, security interest, voting
trust agreement, shareholders agreement or other encumbrance of any kind.
(5) The Company has delivered to Purchaser true and
correct copies of the Company's audited financial statements as at December 31,
1997 and 1996 and unaudited financial statements as at June 30, 1998 (the
"Financial Statements"). The unaudited Financial Statements present fairly the
financial condition, assets, liabilities, and stockholders' equity of the
Company as of, and the results of operations for the periods ending on June 30,
1998 in accordance with generally accepted accounting principles (applicable to
interim statements) consistently applied ("GAAP"). Since December 31, 1997,
except as disclosed by the Company to Purchaser, there has not been a material
adverse change in the financial condition, results of operations, business,
prospects, assets or liabilities of the Company.
(6) The Company's Business Plan previously delivered
to Purchaser, including the business projections of the Company (the "Business
Plan") does not contain any material misrepresentations and constitutes the good
faith effort of management of the Company, on the basis of facts known to the
Company as of the date of this Agreement, to take account of all material
contingencies affecting the business of the Company.
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(7) The Company is not a defendant or subject to any
counterclaim in any pending litigation, or the subject of any
administrative proceeding or governmental investigation, nor
does the Company have reason to believe that any material
suit, proceeding or investigation by any other party is
threatened or contemplated.
(8) The Company has paid all taxes of any kind
(collectively, the "Taxes") required to be paid with respect to the assets,
employees or operations of the Company. All federal, state and local tax returns
and reports to be filed by the Company with respect thereto as of the date of
this Agreement have been accurately prepared, duly executed and timely filed,
and all Taxes due with respect to such returns as filed have been paid by the
Company.
(b) Xxxxxx Xxxx and Xxxxxx Xxxxx each represents and warrants
to the Purchaser, upon which representation and warranty the Purchaser is
relying, that to his own actual knowledge, he does not know of any material
inaccuracy in any of the representations and warranties made by the Company in
Section (a), above. In the event that the foregoing representation and warranty
of either Xxxxxx Xxxx or Xxxxxx Xxxxx shall be found to be inaccurate, the
liability of the person making such inaccurate representation or warranty shall
be limited to his interest in the Company.
4. Representations and Warranties of Purchaser. Purchaser represents
and warrants to the Company, upon which representations and warranties the
Company relies, as follows:
(a) Purchaser is acquiring the Shares for investment for its
and its affiliates account, with no present intention of reselling or otherwise
participating, directly or indirectly, in a distribution of such Shares, and
shall not make any sale, transfer, or pledge thereof without registration under
the Securities Act of 1933, as amended (the "Securities Act") , and any
applicable securities laws of any state, or unless an exemption from such
registration is available under those laws in the opinion of counsel reasonably
acceptable the Company. Notwithstanding the foregoing, all of the parties hereto
acknowledge that Purchaser has agreed to transfer 1,116,962 of the Shares to
Xxxxxx Hamburg, to which transfer the Company and all of the Sellers have
consented.
(b) Purchaser acknowledges that the certificates for the
Shares will contain a legend substantially as follows:
THE SECURITIES WHICH ARE REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS
AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND
NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE
SOLD, TRANSFERRED, MADE SUBJECT TO A SECURITY INTEREST,
PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS AND
UNTIL REGISTERED UNDER THE ACT, OR APPLICABLE STATE SECURITIES
LAWS, OR AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE
COMPANY IS RECEIVED THAT REGISTRATION IS NOT REQUIRED
THEREUNDER.
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5. Covenants of the Company. The Company hereby covenants and agrees
with Purchaser that:
(a) The Company shall use its best efforts to give effect to
its Business Plan, including, without limitation:
(i) the execution of a contract of at least two years
duration providing for manufacturing of the Company's products by SFP Research
Inc. with which the Company has been negotiating; and
(ii) the write-down of the carrying value of the
Company's existing inventory to reflect improvements in the Company's products
resulting from new manufacturing procedures.
(b) The Company will employ the borrowings under the Line of Credit
solely for the purposes described in the Company's cash flow projections
attached hereto as Exhibit "A".
(c) In the event that the Company shall fail to pay in full, as and
when due, by acceleration or otherwise, all amounts of principal under the
Promissory Note within 30 days after demand in writing for such payment shall
have been made by Purchaser and delivered to the Company, each of the Sellers
hereby grants to Purchaser a right and proxy to vote all shares of Common Stock
of the Company registered in the name of such Seller for the purpose of
electing, in Purchaser's sole discretion, nominees of Purchaser as directors of
the Company constituting not less than 75% of the directors of the Company at
any annual meeting or special meeting (which shall be convened at Purchaser's
request) of the shareholders of the Company (the remaining voting power to elect
up to 25% of directors being reserved to the Sellers respectively). The right
granted to the Purchaser by the preceding sentence shall remain in effect until
all amounts of principal, interest and costs payable under the Promissory Note
shall have been paid to Purchaser in full, and each of the Sellers covenants and
agrees that he will not interfere with such right and will take all actions as
shareholder, director or officer of the Company (including, without limitation,
resignation from any position) as may lawfully be requested by Purchaser to give
effect to the foregoing voting right during such time as the right to vote such
Seller's shares of Common Stock shall be in effect.
(d) (1) The Company agrees that, at any time or times hereafter as and
when it intends to file a Registration Statement under the Securities Act with
respect to any shares of its Common Stock, whether for its own account and/or on
behalf of selling shareholders (except in connection with an offering on Form
S-8 or an offering solely related to an acquisition on a Form S-4 or any
subsequent similar form), the Company shall notify the Purchaser of such
intention and, upon Purchaser's request, shall cause the Shares designated by
such holder to be registered at the Company's expense under the Securities Act.
If the offering to be made pursuant to the registration is a firm commitment
underwritten offering, the quantity of the Shares to be included in such
offering may be reduced as provided in paragraph (2) below. The Company shall
keep each such Registration Statement current continuously until the first to
occur of (a) one year after such Registration Statement has been declared
effective or (b) the date on which all Shares included therein shall have been
sold.
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(2) If any of the Shares to be registered pursuant to
a Registration Statement filed pursuant to paragraph (b) are to be sold in a
firm commitment underwritten offering, and if the managing underwriter advises
the Company in writing that in its opinion the aggregate amount of underwritten
securities proposed to be sold in such firm commitment underwritten offering
exceed the amount of securities which can be sold in such underwritten offering,
there shall be included in such firm commitment underwritten offering only the
amount of such securities which in the opinion of such underwriters can be sold,
and the amount of such securities shall be allocated as follows: First, to the
Company based on the number of shares it desires to sell in the underwritten
offering for its own account; next to the Purchaser based on the number of the
Shares proposed to be included therein by the Purchaser; and thereafter, pro
rata among all other selling shareholders based on the number of shares
otherwise proposed to be included therein by such selling shareholders.
Notwithstanding the foregoing, the Company shall use its best efforts to cause
the managing underwriter to include the Shares in such offering.
(3) Purchaser agrees that the Company shall not be
obligated to register any of the Shares pursuant to this paragraph (b) if at
such time any holder receives an opinion from Company counsel, reasonably
satisfactory to it, that such holder may freely and immediately sell all such
Shares under Rule 144(k) of the rules and regulations promulgated under the
Securities Act, and under applicable state law.
(4) With respect to any Registration Statement
referred to in this paragraph (b): (i) Purchaser agrees to cooperate in
furnishing promptly to the Company in writing any information requested by the
Company in connection with the preparation, filing and processing of such
Registration Statement; (ii) the Company agrees to indemnify the Purchaser for
all costs, expenses (except for underwriters' compensation) and liabilities
arising out of the registration and sale of the Shares (except for such as may
arise solely in respect of information furnished by Purchaser) and shall furnish
to Purchaser such number of Prospectuses or other documents incident to such
registration as may from time to time be requested; and (iii) the Company shall
cause, at its expense, the Shares covered by such Registration Statement to be
registered or qualified under the securities or blue-sky laws of those states
where the Company qualifies its securities for sale; provided, that the Company
shall not be required in connection therewith to qualify as a foreign
corporation or to execute a general consent to service of process in any state.
(e) The Company, so long as any amount remains unpaid under
the Promissory Note will not issue any additional shares of capital stock (or
any option or warrant to purchase, or securities which are convertible into,
shares of its Common Stock) if after such issuance the outstanding shares of
capital stock of the Company (taking into account shares issuable in respect of
such options, warrants or convertible securities) will exceed 22,369,247 shares
of common stock (or such other number of shares as the presently outstanding
shares of Common Stock of the Company may be converted).
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6. Miscellaneous.
(a) An "Event of Default" under this Agreement shall mean and
refer to (i) any material inaccuracy or omission in any representation or
warranty made by the Company in this Agreement, (ii) any failure by the Company
to perform its agreements and covenants herein, or (iii) any Event of Default
under the Promissory Note.
(b) All notices hereunder shall be in writing and shall be
mailed by first class registered or certified mail, postage prepaid, return
receipt requested, or by telecopy with confirmation back, or by nationally
recognized overnight courier or hand delivery, and all communications shall be
addressed to the addresses of the Company and Purchaser as shown above (and of
the Sellers as shown on the signature page) or such other address (or telecopy
number) as the parties shall designate by notice to the other party hereunder.
(c) This Agreement and the Promissory Note contain the final,
complete and exclusive understanding of the parties with respect to its subject
matter, and all prior negotiations, discussions, commitments and understandings
heretofore between them are merged herein. This Agreement may not be modified or
amended except by an instrument in writing signed by the party to be charged
therewith.
(d) This Agreement shall inure to the benefit of and be
binding upon the successors and assigns of the parties, including transferees of
the Shares permitted pursuant to Section 4.
(e) The titles and headings of the sections of this Agreement
are included for the convenience of the parties only and are not part of this
Agreement.
(f) Whenever possible, each provision of this Agreement will
be interpreted in such manner so as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable under any applicable law or rule in any jurisdiction, provided,
that such provision will be ineffective only to the extent of such invalidity,
illegality or unenforceability in such jurisdiction, without invalidating the
remainder of this Agreement in such jurisdiction or any provision hereof in any
other jurisdiction.
(g) This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
shall constitute but one and the same document.
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(h) At any time, and from time to time, each party agrees, at
its own expense, to take such actions and to execute and deliver such documents
as may be reasonably necessary to effectuate the purposes of this Agreement.
(i) This Agreement shall be governed in all respects, whether
as to validity, construction, interpretation, capacity, performance or
otherwise, by the laws of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, the parties have duly executed this agreement the
date first written above.
GEN TRAK, INC.
By:_____________________________________
SUSQUEHANA HOLDINGS CORP.
By:_____________________________________
Number of
Shares Sold _____________ ________________________________________
Seller
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Address
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Seller
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Address
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Seller
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Address
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Seller
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Address
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Shares Sold _____________ ________________________________________
Seller
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Address
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Shares Sold _____________ ________________________________________
Seller
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Address
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Shares Sold _____________ ________________________________________
Seller
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Address
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Shares Sold _____________ ________________________________________
Seller
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Address
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Seller
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Address
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Number of
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Seller
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Address
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Seller
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Address
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