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EXHIBIT 10.2
STOCK PURCHASE AGREEMENT
This Agreement is made and entered into as of March 15, 1999 between
CMC Industries, Inc., a Delaware corporation ("CMC") and Xxxxx X. Xxx ("Xx.
Xxx").
RECITALS
A. CMC will receive 6,125,302 shares of common stock of Cortelco
Systems, Inc. ("CSI") in a distribution (the "Distribution") from Cortelco
Systems Holding Corp. ("CSHC") and will have the right to sell such shares ("CSI
Common shares") as a Selling Shareholder in the first firmly underwritten public
offering by CSI of CSI Common Shares pursuant to a registration statement
declared effective by the Securities and Exchange Commission (the "IPO"), in
accordance with that certain Stock Distribution Agreement and that certain
Registration Rights Agreement of even date herewith.
B. CMC also owns 1,000,000 shares of CSHC Series A Preferred Stock
(which, together with any CSHC common stock into which such shares may be
converted, are referred to as "CSHC Preferred shares").
C. Xx. Xxx, as a major shareholder in CSHC, in order to induce CMC
to facilitate the Distribution, is willing to ensure that CMC can realize an
agreed on value for its CSI common stock by agreeing to purchase CSI common
stock and CSHC Preferred Shares from CMC under the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the covenants and agreements set
forth herein, and for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and intending to be legally bound,
the parties agree as follows:
1. If the IPO has not been completed by December 1, 1999, CMC may at
its option sell to Xx. Xxx, and Xx. Xxx will purchase from CMC upon exercise of
such option, 2,602,524 CSI Common shares and 424,881 CSHC Preferred shares for
$2,500,000 in cash. The closing of such purchase and sale will take place at
such place and at such time as CMC may reasonably designate, and Xx. Xxx shall
at such closing pay the purchase price for such securities, against delivery
thereof, by cashiers check or by wire transfer of funds to such account or
accounts as CMC may designate.
2. If the IPO has not been completed by December 1, 2000, CMC may at
its option sell to Xx. Xxx, and Xx. Xxx will purchase from CMC upon exercise of
such option, an additional 2,602,524 CSI Common shares and 424,881 CSHC
Preferred shares from CMC for $2,500,000 in cash. The closing of such purchase
and sale will take place at such place and at such time as CMC may reasonably
designate, and Xx. Xxx shall at such closing pay the purchase price for such
securities, against delivery thereof, by cashiers check or by wire transfer of
funds to such account or accounts as CMC may designate.
3. If the IPO has not been completed by December 1, 2001, CMC may at
its option sell to Xx. Xxx, and Xx. Xxx will purchase from CMC upon exercise of
such option, the
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remaining 920,254 CSI Common shares and 78,638 CSHC Preferred shares from CMC
for $884,000 in cash. The closing of such purchase and sale will take place at
such place and at such time as CMC may reasonably designate, and Xx. Xxx shall
at such closing pay the purchase price for such securities, against delivery
thereof, by cashiers check or by wire transfer of funds to such account or
accounts as CMC may designate.
4. In the event an IPO is completed prior to December 1, 2001 and
through such IPO or a combination of such IPO and sales under paragraphs 1
and/or 2 above, CMC has received less than $5,884,000 in connection with the
sale of CSI Common shares received by it in the Distribution, then CMC may at
its option (the "Final CMC Option") sell to Xx. Xxx, and Xx. Xxx will purchase
from CMC upon exercise of such option, all of CMC's remaining CSHC Preferred
Shares (other than 71,600 CSHC Preferred shares) and all of CMC's remaining CSI
Common shares (if any) for the "Final Xxx Buyout Payment." The Final Xxx Buyout
Payment will equal $5,884,000 less all monies received by CMC from any sales of
CSI Common shares received in the Distribution and sales of CSHC Preferred
shares hereunder, but not less than $1.00. The closing of such purchase and sale
will take place at such place and at such time as CMC may reasonably designate,
and Xx. Xxx shall at such closing pay the purchase price for such securities,
against delivery thereof, by cashiers check or by wire transfer of funds to such
account or accounts as CMC may designate.
5. If CMC has received more than $5,884,000 from sales of CSI Common
Shares and CSHC Preferred shares or if CMC does not exercise the Final CMC
Option prior to February 1, 2002, Xx. Xxx will have the option to purchase the
remaining CSI Common shares and CSHC Preferred shares then held by CMC (other
than 71,600 CSHC Preferred shares) at any time prior to May 1, 2002 for the
"Final Xxx Buyout Payment." In addition, in the event CMC has received more than
$5,884,000 from such sales, Xx. Xxx will have the option to purchase, at any
time prior to May 1, 2002, the final 71,600 CSHC Preferred shares, less that
number of CSHC Preferred shares which, when multiplied by $12.50, represents the
amount in dollars that, when added to the monies actually received by CMC from
all such sales in excess of $5,884,000, would provide CMC with a cumulative
return of 8% per annum on the principal balance of $5,884,000 from March 1, 1999
to the date of payment, for a purchase price of $0.01 per share. The closing of
such purchase and sale will take place at such place and time as Xx. Xxx may
reasonably designate, and Xx. Xxx shall at such closing pay the purchase price
for such securities, against delivery thereof, by check.
6. Unless and until Xx. Xxx has defaulted in the performance of his
obligations hereunder (including without limitation the failure to make the
Final Xxx Buyout Payment), in the event CMC either (a) elects not to sell all
CSI Common shares that it has the right to sell in the IPO, despite having the
opportunity to do so or (b) sells or otherwise disposes of CSI Common shares at
any time prior to the IPO or of CSHC Preferred shares at any time (except for
such sales as are expressly contemplated by this Agreement or in connection with
a sale of all or substantially all of CMC's assets to a purchaser who assumes
this Agreement or upon a redemption of CSHC Preferred shares) without Xx. Xxx'x
consent, Xx. Xxx may by written notice to CMC terminate this Agreement. In
addition, unless and until Xx. Xxx has defaulted in the performance of his
obligations hereunder (including without limitation failure to make the Final
Xxx Buyout Payment), in the event CMC continues to hold any CSI Common shares
after the IPO, CMC shall provide Xx. Xxx 30 days prior written notice of its
intention to sell or
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dispose of all or any portion of such CSI Common shares and during such 30-day
period provide Xx. Xxx with the opportunity to assist in the placement of such
shares.
7. Xx. Xxx covenants and agrees to use his best efforts to cause the
Distribution to occur and to cause CSI to enter into a merger agreement with BCS
and to complete such merger within 30 days of the Distribution.
8. Share numbers used in this Agreement are subject to adjustment
from time to time to reflect stock splits, stock dividends and other changes in
the capitalization of CSI and CSHC, including in particular a pending
one-for-ten reverse stock split by CSI.
9. No modification or waiver of any provision of this Agreement or
consent to departure therefrom shall be effective unless in writing and signed
by the party against whom enforcement is sought.
10. Xx. Xxx may not assign or transfer any of his rights or
obligations hereunder to any other party otherwise than by will or by the laws
of descent or distribution without the prior consent of CMC, and any attempted
assignment in violation hereof shall be void and of no effect. CMC may assign
any or all of its rights and obligations hereunder to any other party. Subject
to the first sentence of this Section 9, all covenants and agreements of the
parties contained in this Agreement shall be binding upon and inure to the
benefit of their respective successors and assigns.
11. This Agreement shall in all respects be governed by the laws of
the State of California without regard to choice of law principles thereunder.
12. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original, and all of which together shall
constitute a single instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Stock
Purchase Agreement as of the date set forth above.
CMC INDUSTRIES, INC.
By: /s/ Xxxxxxx X. Xxxxx
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Name:
Title:
XXXXX X. XXX
/s/ Xxxxx X. Xxx
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